India

In today’s briefing:

India Channel Insight #39 | Maruti, Hyundai
India near Support and Bear Targets
Orient Electric – Market Share in Odisha and Bihar Doubles Under Direct-To-Dealer Approach
Tcs – Healthy Demand Environment; H1 Likely to See Usual Seasonality

India Channel Insight #39 | Maruti, Hyundai

Maruti Suzuki India (MSIL IN) ‘s dealers are optimistic, expecting easing supply, new launches and the Maruti brand promise to drive back some of the lost market share.
Kia Motors Corp (000270 KS) is gaining when it comes to fighting with its big brother Hyundai Motor Co (005380 KS).
There is a set of customers that now prefers Indian brands giving a good tailwind for Tata Motors Ltd (TTMT IN) & Mahindra & Mahindra (MM IN).

India near Support and Bear Targets

By Thomas Schroeder

Nifty short bet from 16,750 is panning out. Gap lower and downside impulse calls for further weakness.
India remains vulnerable to spill over from the global cycle after holding up over recent months. Any break below lower wedge line support would be a bigger negative structurally.
Watch for bounce just under 15k near lower wedge support w RSI near 25. 15,800 fresh sell resistance stands out.

Orient Electric – Market Share in Odisha and Bihar Doubles Under Direct-To-Dealer Approach

The management highlighted that demand has softened mainly on account of early onset of monsoon in South India and inflationary pressure on consumer spending.
However, it expects the subdued trend to be transitory as Orient operates mainly in small-ticket items that are relatively less affected by an inflationary environment.
The management had employed a Direct-to-Dealer approach vs the Master Distributor approach in Odisha and Bihar as it was unable to find strong master distributors in these states.

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Tcs – Healthy Demand Environment; H1 Likely to See Usual Seasonality

By Emkay

Optimistic about sustaining revenue growth momentum in FY23: TCS has implemented a new organization structure to enhance its customer centricity in order to capture Horizon 2 and Horizon 3 demand and to drive sustained revenue growth.
The new structure retains the atomicity of its earlier architecture, and its three dimensions – industry verticals, horizontal service lines and geography-based sales.
TCS has now added a fourth dimension, the stage of the customer’s relationship journey with TCS, wherein it has rearranged existing units into three business groups, each aligned to a particular phase in the customer relationship journey

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Before it’s here, it’s on Smartkarma

Jun 16

0

India: RPSG Ventures Limited, Wynn Macau Ltd, Gateway Distriparks, Ashoka Buildcon, Tata Communications, Maruti Suzuki India, Bharat Petroleum Corp and more

In today’s briefing:

RPSG Ventures: IPL Media Rights Auction Update
Morning Views Asia: Country Garden Holdings Co, JSW Steel Ltd, China Datang Corp Renewable Power
Gateway Distripark Ltd – Strong Rail Performance Amid Partial Commissioning of DFC Route
Ashoka Buildcon Ltd – EPC Business Outlook Robust; Transitioning to Asset-Light Model
Tata Communications – Wait Continues for Double Digit Revenue Growth
Maruti Suzuki – Return of Product Lifecycle to Drive Market Share
Bharat Petroleum Corporation – BPCL Management Meeting

RPSG Ventures: IPL Media Rights Auction Update

We had highlighted in our prior note that IPL Media Rights for next 5Y (2023-27) could fetch a value of over INR 40,000cr.
The bidding concluded recently. Total value of IPL Media Rights came in at INR 48,390cr, well above the INR 40,000cr expectation and closer to our optimistic scenario of INR 50,000cr.
RPSGV’s IPL team will receive INR 480cr+ per year from its share in media rights vs INR 300-350cr projected earlier. This improves IRR for RPSGV’s investment in IPL team substantially.

Morning Views Asia: Country Garden Holdings Co, JSW Steel Ltd, China Datang Corp Renewable Power

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

Country Garden Holdings Co
JSW Steel Ltd
China Datang Corp Renewable Power
Wynn Macau Ltd

Gateway Distripark Ltd – Strong Rail Performance Amid Partial Commissioning of DFC Route

Increase in freight volume post commissioning of partial western DFC route

Company is able to deliver timely cargo by leveraging its strong infrastructure

Strong and sustained market share in North India: Gateway Distriparks indicated that their market share grew at a faster rate compared to industry.in NCR region.

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Ashoka Buildcon Ltd – EPC Business Outlook Robust; Transitioning to Asset-Light Model

Healthy Portfolio: ASBL currently has a sizeable order book of Rs155bn.

CGD business: CGD business is Performing well vis-à-vis its competitors; company has already invested Rs1.4bn and has plans to invest total of Rs8.5bn within a span of 3-4 years.

Resilient EPC performance; robust outlook: Company recorded 20% growth in EPC business in FY22 and margins in the range of 11-12%. In terms of pecking order, management has indicated that it would continue to focus on roads and highways, followed by power and railway projects.

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Tata Communications – Wait Continues for Double Digit Revenue Growth

By Emkay

Key highlights: Management reiterated its strategy with a focus on: 1) enabling borderless growth; 2) enhancing products and efficiency; 3) building agility; 4) boosting product innovation and customer experience; 5) managing risk.

Outlook: In the last two years, although the company has delivered on its financial fitness goals, revenue recovery has seen a delay.

Key Risks: 1) increased losses in incubation services; 2) inability to close large deals; 3) continued delays in revenue recovery; and 4) higher competitive intensity.

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Maruti Suzuki – Return of Product Lifecycle to Drive Market Share

After a gap of almost three years, MSIL’s product pipeline has just kick- started with an exciting line-up of launches over the next 2-2.5 years.
It has launched upgraded Celerio, and mid-cycle refresh of Baleno as well as XL6.
Going forward, MSIL would be launching: new models (four SUVs), platform upgrade (Alto) and mid-cycle refresh (Brezza).

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Bharat Petroleum Corporation – BPCL Management Meeting

Refining crack spread over crude: HSD crack stood at US$22/bbl in 4QFY22 vs US$12.61/bbl in 3QFY22.

Retail prices/margins: The management expects retail price revision to take place if the current geopolitical situation turns out to be a prolonged one.

BPCL envisages to become net zero by 2040 – Bina refinery plans to produce 1GW of green hydrogen in 5 years – will require capex of Rs5,000mn; long-term target of 10GW by 2040.

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Before it’s here, it’s on Smartkarma

Jun 15

0

India: Go Air Limited, HDFC Bank, Fosun International, Trent Ltd, Muthoot Finance, Shree Cement, State Bank Of India and more

In today’s briefing:

Go Air (Go First) Pre-IPO – The Positives – Was Flying Reasonably High Pre-COVID
The Puzzle of HDFC Bank’s Rapidly-Growing MSME Loans
Morning Views Asia: Adani Transmission, Bharti Airtel, Fosun International, Lenovo
Go Air (Go First) Pre-IPO – The Negatives – Competition Is About to Pick-Up Again
Trent – Pursuing Aggressive Growth
Muthoot Finance – Channel Checks in Southern India: A Few Interesting Insights
Shree Cements Ltd. – Sluggish Demand in April’22; Cost Inflation Remains an Overhang
State Bank of India – Well Poised to Sustain the Growth Momentum

Go Air (Go First) Pre-IPO – The Positives – Was Flying Reasonably High Pre-COVID

By Sumeet Singh

GoAir (Go First) is looking to raise up to US$500m in its upcoming India IPO. The company is owned by the Wadia family, who also own Britannia Industries (BRIT IN).
Go Air is an ultra-low-cost carrier (ULCC) primarily operating in India. It had a market share of 10.8% in FY20 in the domestic market.
In this note, we will talk about the positive aspects of the deal.

The Puzzle of HDFC Bank’s Rapidly-Growing MSME Loans

By Hemindra Hazari

Issues with HDFC Bank’s Head-MSME statements which analysts and shareholders need to consider.
In MSME lending based on cash credit system verfication of stock statement is extremely important but there is no mention of it in his speech
HDFC Bank’s MSME loans growing at a rapid pace but asset quality remain sound. It appears HDFC Bank’s customers are very different as compared to the industry.

Morning Views Asia: Adani Transmission, Bharti Airtel, Fosun International, Lenovo

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

Adani Transmission
Bharti Airtel
Fosun International
Lenovo

Go Air (Go First) Pre-IPO – The Negatives – Competition Is About to Pick-Up Again

By Sumeet Singh

GoAir (Go First) is looking to raise up to US$500m in its upcoming India IPO. The company is owned by the Wadia family, who also own Britannia.
Go Air is an ultra-low-cost carrier (ULCC) primarily operating in India. It had a market share of 10.8% in FY20 in the domestic market.
In this note, we talk about the not so positive aspects of the deal.

Trent – Pursuing Aggressive Growth

Despite the adverse impact of COVID-19 over the last two years, Trent’s standalone revenue/PAT reported an encouraging CAGR of 11%/27% over FY20 to reach INR39b/INR2.5b, respectively, which was by far the best among peers.
However, due to the increased losses in its subsidiary (Booker India), Trent’s consolidated PAT (post-minority interest) contracted to INR346m in FY22 from INR1.0b in FY20.
Consolidated EBITDA (Pre IND-AS 116) posted a 7% CAGR to INR2.3b over FY20-22.

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Muthoot Finance – Channel Checks in Southern India: A Few Interesting Insights

Teaser rates have not gone away – 6.9% replaced with 9.9%-11.9% rates
We agree with consensus to the extent that the 6.9% p.a. (0.57%p.m.) products have been withdrawn by the gold loan NBFCs and that disbursement yields in 1QFY23-QTD are much better than the insanity that was evident in the gold lending segment in 4QFY22.
However,westillchoosetocallthe9.9%-11.9%goldloanproductsasteaser- rate products since: a) these products are being offered at ticket sizes above INR50K (albeit with a lower LTV of 65%), and b) we believe that if MUTH continues to offer these interest rate products, there is a risk to the compression in the blended portfolio yields (in FY23E) despite the sequentially higher disbursement yields in 1QFY23E.

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Shree Cements Ltd. – Sluggish Demand in April’22; Cost Inflation Remains an Overhang

Eastern region poised to grow: Eastern states are comparatively under-developed and in the last few years, new cement companies have entered these markets and existing players have added capacities to capitalize on the potential boom in the region in the medium to long term.
SRCM has commissioned a third clinker line at Chhattisgarh (4mn mt), which will supply clinker to the recently commissioned grinding units in the Eastern markets.
The recent clinker capacity additions by SRCM and UTCEM are likely to result in higher supply in the near term.

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State Bank of India – Well Poised to Sustain the Growth Momentum

Digital penetration improving; remains watchful of rising rate environment

Loan growth gaining traction; utilization levels improving

Deposit share steady; high mix of floating loans to support NII growth

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Before it’s here, it’s on Smartkarma

Jun 13

0

India: La Opala Rg Ltd, Siemens Ltd, V-Guard Industries Ltd and more

In today’s briefing:

La Opala RG – Positive Demand Outlook; Bright Prospects for Borosilicate
Siemens – Robust Topline Growth
V-Guard Industries – Expects ECD Segment Margin to Improve Gradually

La Opala RG – Positive Demand Outlook; Bright Prospects for Borosilicate

Strong underlying demand, shift towards premium range and rising salience of e- commerce:
4QFY22 revenue was well above pre-covid level and similar momentum has continued in 1QFY23, led by growth across channels

LOG has an edge in Borosilicate despite being a late entrant: Borosilicate capacity is expected to be commissioned in 2HFY24 and should start contributing to revenue meaningfully from FY25 (peak revenue potential of Rs1.25bn).

Revamping distribution strategy: Appointment of dedicated persons to lead the channels has led to improvement overall total distribution reach (19,000 outlets compared to 14,000 a couple of years ago) as well as its quality.

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Siemens – Robust Topline Growth

Q2FY22 highlights: Revenue: INR 36.3bn (+8.2%/+12% YoY/QoQ, 8.3% miss) driven largely by the digital industries (DI), energy (SE), mobility (MO) and smart infra (SI).

All segments other than mobility recorded sequential growth with SE/ SI/DI/portfolio companies/others recording sequential growth of 9.8%/21%/- 10%/11%/18%80% respectively.
EBITDA: INR 4.5bn (+0.9%/+34.2% YoY/QoQ, 0.6% miss). EBITDA margin: 12.3%(-88/+203bps YoY/QoQ) vs. estimate of 11.3%.

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V-Guard Industries – Expects ECD Segment Margin to Improve Gradually

The management highlighted that VIL has a strong brand equity, vast established distribution and good brand recall in South India.
VIL also uses South markets for incubating new categories.
It highlighted that it is working on expanding distribution and improving brand awareness in the Non-South region

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Before it’s here, it’s on Smartkarma

Jun 11

0

India: Ashok Leyland, Nesco Ltd, Rajshree Polypack, Sino Ocean Land, RPSG Ventures Limited and more

In today’s briefing:

India Channel Insight #38 | Ashok Leyland, Tata Motors (MHCV)
Nesco: IT Park Occupancy Continues to Improve; BEC Recovery on Track
RPPL: Set to Fire on All Cylinders
Weekly Wrap – 10 Jun 2022
RPSG Ventures (RPSGV): FMCG Business Gaining Traction; IPL Media Rights Auction – A Key Monitorable
Weekly Wrap – 10 Jun 2022

India Channel Insight #38 | Ashok Leyland, Tata Motors (MHCV)

Infrastructure and E-commerce are core drivers of the MHCV recovery
The market for Retail fleet operators (1-5 trucks) has shrunk.
Ashok Leyland (AL IN) ‘s market share gain has been on the back of discounting and is unlikely to sustain.

Nesco: IT Park Occupancy Continues to Improve; BEC Recovery on Track

IT Park occupancy has been steadily rising over the past few quarters. Q4FY22 IT Park revenue grew 3.3% QoQ.
Bombay Exhibition Center (BEC) business is on track to normalize as COVID restrictions have been removed completely.
With the BEC business normalizing, Nesco Foods business is also ripe to scale up.

RPPL: Set to Fire on All Cylinders

RPPL posted a decent FY22 despite significant rise in the raw material costs. Sales volume grew 30%+ and EBITDA per kg improved by 11%.
FY23 is likely to be robust for RPPL. Revenue growth is likely to be strong at 20%+. Margins are guided to expand to 15%+ level from current 13.5%.
RPPL is consistently improving the mix of value-added products like Barrier Packaging and Tube Laminates. Contribution from Barrier Packaging is likely to grow to 10-15% in FY23 from 5% currently.

Weekly Wrap – 10 Jun 2022

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

and more…

RPSG Ventures (RPSGV): FMCG Business Gaining Traction; IPL Media Rights Auction – A Key Monitorable

The FMCG Business reported Q4FY22 revenues, in line with the recent annualized revenue run-rate of around INR 400cr.
The relatively new Naturali brand was advertised prominently at the IPL and its products are becoming increasingly visible at department stores.
A key monitorable for RPSGV’s sports business is the IPL Media Rights Auction that is scheduled to be held on Jun 12.

Weekly Wrap – 10 Jun 2022

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

and more…

Before it’s here, it’s on Smartkarma

Jun 10

0

India: PayMate India Ltd, PSP Projects, Sino Ocean Land, Blue Dart Express, Max India Ltd, Bharat Forge, Sqs India Bfsi and more

In today’s briefing:

PayMate India Pre-IPO Tearsheet
PSP Projects: Key Takeaways from the PSP Management Meet on 8th June 2022
Morning Views Asia: Sino-Ocean Service, UPL Ltd
Blue Dart Express – Outlook Robust; Capacity Expansion on the Cards
Max Financial – Well-Positioned for Profitable Growth Despite Temporary ‘noises’
Bharat Forge – CY22 Outlook Strong; Moderate Growth Expectations in CY23
BFSI – New Normal Rate Cycle; Brace for Transmission Effects

PayMate India Pre-IPO Tearsheet

By Ethan Aw

PayMate India Ltd (935383Z IN) is looking to raise about US$193mn in its upcoming India IPO. The deal will be run by ICICI Securities, JM Financial, HSBC and SBI Caps.
PayMate India is a leading business to business (“B2B”) payments and services provider that digitizes, automates and streamlines B2B payments in supply chains.
It is one of the fastest-growing providers of on-line, card-based payment-processing services in India, in terms of total payment volume (TPV) processed in 9M22 using commercial credit cards.

PSP Projects: Key Takeaways from the PSP Management Meet on 8th June 2022

By Axis Direct

With favourable attributes such as strong and diversified order book position, healthy bidding pipeline and order inflows, asset-light model, emerging opportunities in the construction space, efficient and timely execution supported by high ROE and ROCE above 20% with the majority of Capex over, we expect the company to generate healthy free cash moving ahead and deliver Revenue/EBITDA/APAT growth of 27%/37%/40% CAGR over FY21-FY24E.
Currently, the stock is trading at 11x and 8x FY23E and FY24E EPS.
We value the company at 10.5x FY24E EPS to arrive at the target price of Rs 665/share, implying an upside potential of 26% from the current levels.

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Morning Views Asia: Sino-Ocean Service, UPL Ltd

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

Sino-Ocean Service
UPL Ltd

Blue Dart Express – Outlook Robust; Capacity Expansion on the Cards

BDE ended FY22 with a volume growth of ~30% YoY at 932.7kt, led by strong growth in the e-commerce vertical, which now constitutes ~25% of the business.
Other segments like document shipment have been performing well for BDE.
With the Education and BFSI sectors opening up, volumes are improving and have almost reached pre-COVID levels.

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Max Financial – Well-Positioned for Profitable Growth Despite Temporary ‘noises’

By Emkay

Corporate structure simplification ongoing: The simplification of the corporate structure has been one of the stated objectives of MAXF management.

The promoter is committed to bringing down pledge level: The high pledge of promoter’s holding in MAXF has been one of the key investor concerns.

Counter share and growth in the Axis Bank channel to normalize in H2 as base effects kick in

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Bharat Forge – CY22 Outlook Strong; Moderate Growth Expectations in CY23

By Emkay

HCV volume growth outlook intact in CY22; moderation in expectations for CY23

CY22 PV demand outlook positive, but supply issues persist: Volkswagen and Mercedes expect up to 10% growth in CY22 in their global businesses, led by pending order books and low channel inventories.

Robust CY22 outlook for industrials: Volvo and John Deere expect the construction equipment (CE) and tractor segments to grow by 5-20% in the North America and Europe regions in CY22, driven by higher commodity prices and infra spends.

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BFSI – New Normal Rate Cycle; Brace for Transmission Effects

Accelerated rate hike; more in the offing: In its response to a stubborn and elevated inflation print, the RBI has now effected an accelerated cumulative 90bps repo rate hike over the past few weeks.
Near-total pass-through a surprise; near-term margin-accretive: Unlike earlier up-cycles in the past, the sharp pace of rate normalisation is margin- accretive for banks in the near-term, especially given early-stage monetary transmission.
MCLR transmission to significantly lag EBLR transmission: At a system- wide level, ~20-30% of the aggregate loans are currently anchored to MCLR while 40% of the loans are anchored to EBLR.

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Before it’s here, it’s on Smartkarma

Jun 09

0

India: Escorts Ltd, Hindustan Unilever, Mahindra & Mahindra and more

In today’s briefing:

Escorts Ltd (ESC IN) | Expected to Grow Slower than Industry
Hindustan Unilever – Widening Its Leadership Position
Mahindra & Mahindra – On Track to Achieve Long Term Targets

Escorts Ltd (ESC IN) | Expected to Grow Slower than Industry

Escorts Ltd (ESC IN) has been losing market share. As per management, “there are no “big” problems and they will regain the market share”, but we do not think so.
Some flash channel checks are suggesting issues with some of the company’s products. These issues still remain unaddressed as per some dealers and customers.
While the export opportunity and overall industry dynamics are positive unless the market share is regained, growth is likely to be slower than industry.

Hindustan Unilever – Widening Its Leadership Position

Gaining market share: HUVR now has 16 brands with over INR10b in annual sales (v/s 14 brands in FY21). In FY22, its gain in market share was the highest in more than a decade.
Strengthening its technological backbone: HUVR continues to evolve as a digitally capable enterprise, catering to emerging consumer needs.
The core business continues to use analytics and machine learning to improve efficiency.

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Mahindra & Mahindra – On Track to Achieve Long Term Targets

The company is seeing strong demand for its products and expects growth momentum to continue, backed by a robust order book.
It will launch new Scorpio N at the end of June’22 and it will be sold alongside the old Scorpio model.
The company expects single digit growth in tractor volume going ahead, mainly driven by a good monsoon season and improving rural cash flows.

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Before it’s here, it’s on Smartkarma

Jun 08

0

India: Escorts Ltd, Metropolis Healthcare Limited, IFB Industries, Kansai Nerolac Paints, Marksans Pharma, Rossari Biotech, Sobha Ltd, Gland Pharma Ltd and more

In today’s briefing:

India Channel Insight #37 | Escorts & Mahindra & Mahindra (Tractors)
Metropolis Healthcare (METROHL IN): Adani & Apollo Eyeing Majority Stake? Could Outperform Dr Lal
IFB Industries – Margin Pressures Impacts Profitability; Confident of Healthy Demand in Future
Kansai Nerolac – Results Reviews – Weakest Among Peers; Pain Seems Priced In
Marksans Pharma- Management Meet Update
Rossari Biotech: Complete Pass-Through Is a Challenge in Formulations Biz
Sobha – Steady Operating Performance; Deleveraging Balance Sheet
Gland Pharma- Management Meet Update

India Channel Insight #37 | Escorts & Mahindra & Mahindra (Tractors)

Consumer sentiment and demand environment is stable in Rural India.
There is a bit of optimism and hope of breaching FY20 volumes in FY23, supported with some pricing action.
Technical/Product issues are leading to a loss of market share for Escorts Ltd (ESC IN)

Metropolis Healthcare (METROHL IN): Adani & Apollo Eyeing Majority Stake? Could Outperform Dr Lal

By Janaghan Jeyakumar, CFA

Several press reports regarding potential takeover speculations related to Indian diagnostics company Metropolis Healthcare Limited (METROHL IN) have emerged in the Indian press over the last few days.
Metropolis Healthcare Limited currently has a total market capitalization of US$1bn.
Below is a closer look at the details of the situation.

IFB Industries – Margin Pressures Impacts Profitability; Confident of Healthy Demand in Future

Front-load Washing Machine update: Front-load Washing Machine revenue grew by 2.8% YoY in 4QFY22 to Rs2.38bn. Sales were affected in Dec’21 and Jan’22 due to the third covid wave.

Top-load Washing Machine update: Sales of top-load Washing Machines increased by 33.6% YoY in 4QFY22 to Rs972mn.

Outlook: Over FY21-FY24E, we expect IFB to post 22.4% revenue CAGR. With the commissioning of self- manufacturing plant, addition of AC OEMs and scale-up in other categories, we expect earnings CAGR of 45.2% over FY21-FY24E.

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Kansai Nerolac – Results Reviews – Weakest Among Peers; Pain Seems Priced In

Q4FY22 highlights: Standalone revenue grew 6% YoY to INR 14.1bn (in-line).
In decorative segment, volume declined 7-8%/value remained flat YoY in Q4; performance continued to lag the top two.
FY22 price hikes in decorative/industrial coatings stood at ~21/18%.

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Marksans Pharma- Management Meet Update

Efforts around portfolio selection and disciplined R&D has helped the company profitably build its export formulations business

Outlook: The company will incur capital expenditure on its existing facility upgradation; and it is also open to pursuing an acquisition (~Rs2,000mn is the allocation).

Targeting customer acquisition and geographic expansion in the US market: The company has added new retailers in the US market with an intention to penetrate tier 2 & tier 3 cities.

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Rossari Biotech: Complete Pass-Through Is a Challenge in Formulations Biz

ROSSARI has taken some price hikes from March’22 in order to cope with the ongoing inflationary challenges.
Formulations business is the core strength of ROSSARI’s business model and inability to pass on the cost impact would mean margin pressure for two more quarters

On a consolidated basis, the management has guided for Rs20bn revenue and Rs2.5bn EBITDA for FY23.

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Sobha – Steady Operating Performance; Deleveraging Balance Sheet

Sales volume increases by 1.5% QoQ and by 0.4% YoY: Average sales volume increased by 1.5% QoQ from ~1.32mn sqft in 3QFY22 to ~1.34mn sqft in 4QFY22 and realization increased by 4.4% QoQ to Rs 8,265/sqft.
In 4QFY22, the Bangaluru market was the key contributor, with sales volume of 0.93mn sqft and contributed 69% to total volume. Bangaluru was followed by Gurgaon, with sales volume of 0.23mn sqft, which was up by 22% QoQ and contributed 17% to total sales volume.
The company launched Sobha Brooklyn Tower Wing 3 in Bengaluru with a built up area of ~0.20mn sqft.

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Gland Pharma- Management Meet Update

Shortages that affected US business are resolved: Gland Pharma faced challenges in the US business on account of key component shortages like syringes, vials, stoppers & needles etc. as its major USFDA-approved supplier rooted its capacity for vaccine manufacturing, leading to residual orders getting piled up.

Levers for EBITDA margin enhancement going forward: Gland Pharma will have a single- minded focus on EBITDA margin rather than gross margin.

Effect of thrust on the CDMO business: Gland Pharma does not see significant enhancement in opex on account of CDMO business going forward given that costs have already been absorbed in 4QFY22.

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Before it’s here, it’s on Smartkarma

Jun 07

0

India: Biocon Ltd, Camlin Fine Sciences, CCL Products India, Dr. Reddy’s Laboratories, Hero Motocorp, Indoco Remedies, J.B. Chemicals & Pharmaceuticals, Kansai Nerolac Paints, Oil India Ltd and more

In today’s briefing:

Biocon- Management Meet Update
Camlin Fine Sciences – Execution Is the Key
CCL Products (India) – Spray-Dried Demand Visibility Remains Strong
Dr. Reddy’s Laboratories – Management Meet Update
Hero MotoCorp – Improving Rural Sentiments to Support Volume Recovery; Growth Drivers in Place
Indoco Remedies- Management Meet Update
J B Chemicals and Pharmaceuticals – Management Meet Update
Kansai Nerolac – Weakest Among Peers; Pain Seems Priced In
Oil India – Lower Dry Wells and DD&A Drive PAT Beat; Production Grows

Biocon- Management Meet Update

Biosimilar Business: If all goes well, the closure of Viatris transaction (acquisition of its biosimilar portfolio) may happen as early as 2HFY23.
The acquired business would have a topline of US$800mn and EBITDA of US$175mn.
Biocon will be able to build on the Viatris acquisition as it has multiple launches lined up in the biosimilar space and the same should help it to build on the base.

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Camlin Fine Sciences – Execution Is the Key

The management indicated that in their diphenols capacity, mix between HQ and Catechol cannot be skewed beyond a point (say, 55:45) and hence it has to produce Catechol, which is undergoing demand and pricing pressure.
Currently, CFIN is operating at US$1.5/kg loss in Catechol.
Vanillin capacity is expected to be commissioned in July’22, post which Catechol would be used for captive use and the same would arrest margin pressure.

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CCL Products (India) – Spray-Dried Demand Visibility Remains Strong

Management indicated that decline in EBITDA/kg in FY22 was mainly on account of mix change in favour of spray-dried and increase in cost items like power & fuel, freight etc. 30% of the contracts in the B2B business are on CIF basis.

Small packs capacity expansion (increase by >3x) has been completed and management believes that ~50% capacity would be utilized for captive purposes while the rest will be used for exports.

Demand for freeze-dried coffee remains soft on account of downtrading in different regions globally and capacity addition at the industry level.

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Dr. Reddy’s Laboratories – Management Meet Update

Russia Business: DRL’s business was strong in 4QFY22, partially due to overstocking, which should normalize in 1QFY23.

India Branded Prescription Business: DRL is aiming to keep improving its ranking in the IPM.

Novartis brands’ acquisition: The acquired brands will be promoted with a mix of existing field force and addition of new salesforce.

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Hero MotoCorp – Improving Rural Sentiments to Support Volume Recovery; Growth Drivers in Place

The company sees the overall demand sentiment improving and is experiencing some early signs of demand recovery in both Rural as well as Urban areas.
It expects double- digit growth in volume as all medium term and long term triggers are in place.

Demand is recovering on the back of festive and marriage season, which is going really well, and retail volume has outdone wholesale volume, leading to correction in inventory levels, which are lower than 6 weeks now.

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Indoco Remedies- Management Meet Update

Domestic Business: The domestic business growth should be driven by new launches, price increase (6%) and volume growth.

US Business: Indoco’s solid oral dosage portfolio has not seen much price erosion.

Inflationary pressures are easing, but still not fully normalised: The company acts as a contract manufacturer for several of its products in Europe and it has been able to pass on the cost increases in these products.

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J B Chemicals and Pharmaceuticals – Management Meet Update

CMO Business: JB Chemicals is the largest lozenges manufacturer in India with a capacity of 150cr units.

Reiteration of FY23 guidance: Expected future revenue growth in mid-teens and EBITDA margin expansion to 24-26%. R&D expense as a % of sales should not exceed 3%.

Domestic Market Reach: The company reaches out to a doctor base of 3,00,000 and a sales force of ~2,500 MRs with a large presence in Tier 2 and Tier 3 cities/towns, which make up ~40% of domestic sales.

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Kansai Nerolac – Weakest Among Peers; Pain Seems Priced In

Q4FY22 highlights: Standalone revenue grew 6% YoY to INR 14.1bn (in-line).
In decorative segment, volume declined 7-8%/value remained flat YoY in Q4; performance continued to lag the top two.
FY22 price hikes in decorative/industrial coatings stood at ~21/18%. Product portfolio continued to expand. Distribution grew 10% YoY in FY22.

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Oil India – Lower Dry Wells and DD&A Drive PAT Beat; Production Grows

By Emkay

Highlights: Standalone employee costs were 29% below our est. (down 22% yoy/9% qoq), but Other Expenditure was 20% above our estimate due to higher sundry expenses and provisions (down 5%/8%) in Q4FY22.
DD&A was down due to a 70% decline in depletion. Other Income fell 63% yoy to Rs4.9bn, a 34% miss (from lower dividends).
The tax rate was lower at 20%. For FY22, OIL reported S/A EBITDA/PAT of Rs53.7bn/Rs38.9bn, up over 4x/2x, driven by higher realizations.

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Before it’s here, it’s on Smartkarma

Jun 05

0

India: Havells India and more

In today’s briefing:

Havells India (HAVL IN) | Instant Gratification?

Havells India (HAVL IN) | Instant Gratification?

We believe Havells India (HAVL IN) has chosen the route of instant gratification by not increasing prices and gaining market share for Lloyd this AC Season.
After-Sales Service and aspirational value for the Lloyd brand is poor, there is no brand loyalty in the segments Lloyd operates in and is price sensitive.
Increased prices and course correction by Voltas Ltd (VOLT IN) could result in HAVL giving up some of its recent market share gains building a stronger Bear case for HAVL.

Before it’s here, it’s on Smartkarma