India

In today’s briefing:

India Channel Insight #35 | ITC, Britannia, Nestle India, Dabur, Marico
TVS Motor (TVSL IN) | Supply Issues & EV Ramp Up the Key
Morning Views Asia: Delta Dunia Makmur, Indika Energy, JSW Steel Ltd, Medco Energi, Pakuwon Jati
JK Cements: Growth Visibility Intact. Maintain BUY
JK Cement Ltd – In-Line Results; New Capex to Drive Volume Growth from FY24
Advanced Enzyme Technologies – Near Term Challenges Continue
Power Mech Projects – Result Above Expectations; Rs36bn Revenue Guidance Given
The Ramco Cement Ltd – Good Sequential Improvement in Profitability
Rossari Biotech – Complete Pass-Through Is a Challenge in Formulations Biz
Thermax – Weak Profitability Offsets Strong Topline Growth; Strong Order Inflow

India Channel Insight #35 | ITC, Britannia, Nestle India, Dabur, Marico

Our checks primary done over North of India suggest a stable to improving rural environment
There is a sense of aggression in ITC Ltd (ITC IN), Britannia Industries (BRIT IN) is well placed to grow volumes & Nestle India (NEST IN) is expected to be a steady performer.
Dabur India Ltd (DABUR IN)’ s image at the distributor level is quite shocking and Marico Ltd (MRCO IN)‘s products are more prone to volatility.

TVS Motor (TVSL IN) | Supply Issues & EV Ramp Up the Key

TVS Motor (TVSL IN)’s market share gains in the premium segment can further accelerate in case of easing supply issues and rural recovery.
While EV may not materially move the volumes in the near term, the ramp-up of the newly launched TVS iQube (EV) will determine the sentiment around the stock.
The sector view is positive, but current valuations are not lucrative enough to ignore capital allocation issues that have been a concern for TVSL.

Morning Views Asia: Delta Dunia Makmur, Indika Energy, JSW Steel Ltd, Medco Energi, Pakuwon Jati

By Charles Macgregor

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.

Delta Dunia Makmur
Indika Energy
JSW Steel Ltd
Medco Energi
Pakuwon Jati
UPL Ltd

JK Cements: Growth Visibility Intact. Maintain BUY

JK Cement reported satisfactory volume and revenue growth in Q4FY22, supported by better demand and higher realization in its key markets.
The stock is currently trading at 15x/12x FY23E/FY24E EV/EBITDA
We value JKCL at 13x FY24E EV/EBITDA to arrive at a TP of Rs 2,800 (Rs 3100 earlier) implying an upside of 15% from the CMP and maintaining our BUY rating on the stock.

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JK Cement Ltd – In-Line Results; New Capex to Drive Volume Growth from FY24

4QFY22 performance: JKCE reported revenue of Rs22.7bn, up 10.5% YoY, driven by 1% YoY growth in volume and 9.5% YoY growth in realization.

Capex plans: Work on the Panna project has started in full swing. Work at both the locations of the integrated plant and grinding units is progressing as per schedule.

White cement pricing can increase from hereon: For the past several quarters, white cement realizations have been hovering between Rs11,500/mt and Rs12,000/mt with very limited growth.

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Advanced Enzyme Technologies – Near Term Challenges Continue

4QFY22 earnings performance: ADVENZY’s 4QFY22 revenue declined by ~1% YoY. The Human Nutrition segment, which contributes ~66% to the overall revenue, declined by ~6% YoY whereas the Bio-processing segment declined by ~5% YoY.

The Animal Nutrition segment grew by ~15% YoY. Region-wise, overall performance was subdued; however, Europe business was impacted more and declined by 43% YoY.

India business, which contributes 45% to the topline, reported ~2% YoY growth. EBITDA declined by ~27% YoY mainly on account of higher other expenses on account of increase in the costs of power & fuel, sales promotion, consulting, freight etc.

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Power Mech Projects – Result Above Expectations; Rs36bn Revenue Guidance Given

Strong ordering pipeline, margins to improve going forward: The company has received two orders worth Rs2.97bn in 1QFY23.

Working capital position: Working capital days at the end of 4QFY22 saw an improvement to 145 days vs 194 days at the end of 4QFY21 and 180 days at the end of 3QFY22.

Outlook: We expect revenue/earnings CAGR of 29.3%/42.4% over FY22-FY24E. Current valuation is inexpensive considering the company’s healthy order book, low D/E and decent RoCE (18% in FY20).

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The Ramco Cement Ltd – Good Sequential Improvement in Profitability

4QFY22 performance: TRCL has reported decent set of numbers for 4QFY22, given the cost inflation and pressure on demand & pricing in the market.

Capex update: TRCL had earlier commissioned the Jayanthipuram clinker line 3 of the 1.5mn mt clinker unit in June’21 while 9MW WHRS will be commissioned soon.

Outlook: Cost environment remains volatile and increased competition has made passing on the increased costs difficult, resulting in relatively lower profitability.

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

4QFY22 earnings performance: ROSSARI’s 4QFY22 consolidated revenue growth of 101% YoY was broadly in line with our estimate.

HPPC/TSC/AHN grew by 180%/25%/17% YoY, including acquisitions. Unitop and Tristar revenue came in at Rs1,240mn and Rs495mn, respectively in 4QFY22, with EBITDA margin coming in at ~15% and ~12%, respectively.

The share of HPPC revenue increased from 50% in 4QFY21 to 69% in 4QFY22.

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Thermax – Weak Profitability Offsets Strong Topline Growth; Strong Order Inflow

Strong order inflow indicates broad-based recovery: Thermax posted consolidated order inflow of Rs33.96bn, up 127% YoY, aided by a broad-based industrial recovery.

Other business updates: (1) Chemicals segment margins were affected due to the company’s inability to pass on elevated costs through sufficient price hikes and geopolitical tensions.

Outlook and valuation: We expect Thermax to report 34%/46.2% revenue/earnings CAGR over FY22- FY24E. The stock is currently trading at 46.5x FY23E EPS.

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Before it’s here, it’s on Smartkarma

May 24

0

India: Delhivery, Mindtree Ltd, Jamna Auto Industries, Camlin Fine Sciences, Endurance Technologies Ltd, Krishna Institute of Medical Sciences, Pfizer Limited, Pi Industries, Shree Cement and more

In today’s briefing:

Delhivery IPO Trading – Anchor Book Was Good but Overall Demand Was Still Tepid
S&P BSE Indices: No Changes for SENSEX; 7 ADDs/DELs for BSE 100 in June 2022
Jamna Auto Industries – Ideal Play on CV Upcycle; Resume with Buy
Camlin Fine Sciences: RM Pressure Weighs on Performance; Structural Change Underway
Result Update – Endurance Tech
Endurance Technologies – Multiple Growth Levers to Drive Industry Outperformance
Result Update – Krishna Institute of Medical Sciences LTD
Pfizer India – Beat on Margins
PI Industries: Executional & Operational Improvement. Positive Outlook!
Shree Cements Ltd – Lower Pricing Impacts EBITDA; Costs Remain in Control

Delhivery IPO Trading – Anchor Book Was Good but Overall Demand Was Still Tepid

By Sumeet Singh

Delhivery raised around US$680m in its India IPO, the company is backed by a host of financial investors, the largest being Softbank.
Delhivery is an online logistics service provider which covers express parcel delivery, heavy goods delivery, part truckload (PTL) freight, truckload (TL) freight, supply chain solutions, cross border solutions etc.
We have covered various aspects of the deal in our earlier notes. In this note, we talk about the demand and trading dynamics.

S&P BSE Indices: No Changes for SENSEX; 7 ADDs/DELs for BSE 100 in June 2022

By Janaghan Jeyakumar, CFA

After market close on Friday 20th May 2022, the constituency changes for S&P BSE 100, SENSEX 50, and SENSEX Next 50 Indices were announced.
There will be no changes for S&P BSE SENSEX and S&P BSE BANKEX Indices in the June 2022 Rebalance.
These changes will become effective at the open of Monday 20th June 2022. Below is a closer look at each of the names involved in the June 2022 Rebalance.

Jamna Auto Industries – Ideal Play on CV Upcycle; Resume with Buy

Revenue ahead of estimate driven by improving product mix and higher realisation
Key beneficiary of a multi-year CV upcycle: We see strong multi-year CV upcycle over the next 2-3 years

Rising share of high-margin products & cost-control initiatives to drive margins: Increasing share of more rofitable Parabolic Springs (share of Parabolic Springs has risen to ~37-40% in the last two quarters vs. ~22% FY19) due to vehicle premiumisation should lead to improvement in product mix and profitability.

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Camlin Fine Sciences: RM Pressure Weighs on Performance; Structural Change Underway

Camlin Fine Sciences (CFS) Q4 FY22 performance was lower than our expectations as the company witnessed severe raw material inflation as increased gas prices affected the CFS Euro subsidiary due to the ongoing Russia-Ukraine conflict.
Consolidated Revenues stood at Rs 389 Cr, up 19% YoY (our estimate: Rs 377 Cr).
With regards to the Lockheed Martin deal, the pilot project with a 1,500-ton capacity has the potential to generate Rs 120-140 Cr revenue with contribution kicking in from FY24 onwards.

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Result Update – Endurance Tech

Domestic business: The standalone revenue declined 3% YoY, impacted by weak 2W industry demand especially in the entry-level segment while production of premium motorcycles was impacted by the shortage of ABS ECUs

EU business: Europe’s business reported a strong beat on both topline and margin despite multiple headwinds (weak PV production, RM pressures, and elevated energy costs, among others.).

Healthy Order Wins: During FY22, the company won new orders worth Rs 742 Cr from the top domestic OEMs such as HMSI, HMCL, RE, Ather and others (this is excluding order wins from Bajaj Auto) while receiving RFQ of Rs 2,034 Cr. It includes EV orders worth Rs 160 Cr (including Rs 53 Cr for 2W brakes from Ather and Rs 70 Cr for suspension and brakes from Polarity).

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Endurance Technologies – Multiple Growth Levers to Drive Industry Outperformance

Endurance Technologies’ (ENDU) consolidated revenue came in above our estimate by ~15%, mainly on the back of higher realizations following price hikes.

Increase in content per vehicle due to premiumisation in the suspension business, new growth opportunities due to import substitution & regulatory tailwinds (alloy wheels and disc brakes), new products like ABS, growing orders in fully machined casting from automotive & non-auto companies and a sharper focus on aftermarket (recently entered tyre distribution business) are the growth levers going forward. ENDU’s wallet share across OEMs has been gradually rising via cross-selling of new products.

EV order wins remain key: ENDU is in an advanced stage of discussion with start-ups, in addition to the existing OEMs, to supply them EV products

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Result Update – Krishna Institute of Medical Sciences LTD

The company’s occupancy rate reduced to 590bps YOY due to COVID 3.0 in Jan’22 but it has since picked up momentum.

ARPOB improved to Rs 25,144., led by speciality surgeries into the lungs and heart segment.

The business has almost reached the pre-Covid levels with In-Patient (IP) volumes increasing by 25% on a YoY basis.

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Pfizer India – Beat on Margins

Resurgence of Covid and potential launch of anti-covid pill Paxlovid in India

Potential generic competition in Eliquis in 2HFY23 – we estimate Eliquis sales to be ~Rs1,500mn for Pfizer in India.

Impact of Universal Immunization Program on Prevnar sales in Private Markets – Prevnar penetration in the target markets is currently in low single digit and hence we currently are not building in a material decline in the Prevnar opportunity.

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PI Industries: Executional & Operational Improvement. Positive Outlook!

PI Industries (PIIND) posted a steady quarter in line with our estimates as the company proved its execution & operational capabilities in this volatile environment. The company reported revenue of Rs. 1395 cr higher by 17.7% / 3% YoY/QoQ.
EBITDA Margin came in at 22% which was 101 bps higher YoY, led by favourable product mix in export & domestic market and ISAGRO performance, coupled with improved operating leverage
The stock currently trades at 47x at FY22 EPS, given strong performance on the export and domestic front we value PIIND at 35x (its FY24E EPS) coming at a Target Price of Rs 3161.

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Shree Cements Ltd – Lower Pricing Impacts EBITDA; Costs Remain in Control

4QFY22 performance: SRCM reported revenue of Rs41bn, up 3.6% YoY and 7% below our estimate.

Capex plans: The company has commissioned 3rd clinker line at Chhattisgarh recently, which has total capacity of 4mn mt.

This plant will supply clinker for the recently commissioned grinding units in East. SRCM had earlier announced a capex plan, which includes: (1) Setting up of an integrated cement plant in Nawalgarh tehsil of Rajasthan with clinker capacity of 3.8mn mt and cement grinding capacity of 3.5mn mt (2) Setting up of grinding unit in the Purulia district in West Bengal with 3mn mt capacity and (3) Setting up of 106MW solar power plant at various locations.

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Before it’s here, it’s on Smartkarma

May 23

0

India: Dr. Reddy’s Laboratories, Bharti Airtel, Dlf Ltd, Equitas Small Finance Bank , Galaxy Surfactants Ltd, Gland Pharma Ltd, Indraprastha Gas, ITC Ltd, Jk Lakshmi Cement and more

In today’s briefing:

Dr. Reddy’s Laboratories (DRRD IN) 4QFY22: Double-Digit Sales Growth; One-Off Charge Impacted Profit
4QFY22 Results Update – Bharti Airtel
DLF – Rising Interest Rate Risk Overshadows Strong Performance
Dr. Reddy’s Laboratories – Strong Growth Across Business Segments
Equitas Small Finance Bank – MD & CEO Resignation to Be an Overhang near Term
4QFY22 Results Update – Galaxy Surfactants
Gland Pharma Ltd. – In-Line with Estimates; Upgrade to Buy on Valuation Comfort
4QFY22 Results Update -Indraprastha Gas
4QFY22 Results Update – ITC
JK Lakshmi Cement Ltd.- Exceptional Results; Strong Rerating Candidate

Dr. Reddy’s Laboratories (DRRD IN) 4QFY22: Double-Digit Sales Growth; One-Off Charge Impacted Profit

By Tina Banerjee

Dr. Reddy’s Laboratories (DRRD IN) reported 15% y/y growth in revenue in Q4, driven by strong performance across all the markets. Adjusted for one-offs, net profit grew 54% y/y.
Despite pricing pressure, the U.S. business should continue its growth momentum with better traction in key products launched in FY22 and upcoming new launches, including generic version of Revlimid.
Inflationary pressure (raw material, freight), lower offtake of COVID-related products in India, and currency headwinds in emerging markets are some downside risks for the company.

4QFY22 Results Update – Bharti Airtel

Continues to deliver strong EBITDA and FCF growth – Bharti Airtel (Airtel) witnessed strong EBITDA growth of 9% QoQ and healthy FCF generation driven by 9% ARPU improvement and healthy incremental margin.

Tariff hikes drive strong India Mobile EBITDA growth of 12% QoQ – Airtel’s consolidated revenue/EBITDA rose 6%/9% QoQ (3% above est.) to INR315b/INR160b, respectively, on strong performances of India Mobile and the Home segment.

Key highlights from the management call – Management expects the next round of hike, which could take place in the current fiscal to help reach INR200 target.

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DLF – Rising Interest Rate Risk Overshadows Strong Performance

Strong launch pipeline will continue to drive its sales performance – Sales bookings grew by 2.6x YoY to INR27b (est. INR24b) in 4QFY22. It ended FY22 on a high, with the best ever pre-sales of INR73b (up 136% YoY).

Office portfolio on track to deliver 19% rental CAGR over FY22-24 – Occupancy in DCCDL’s Office portfolio increased by 200bp QoQ to 88%, but sustained at 97% in Retail, resulting in a marginal rise in portfolio occupancy to 89%.

Key highlights from the management call – Cash flow: DLF is generating an FCF of INR5-7b per quarter and is confident about maintaining a similar run-rate.

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Dr. Reddy’s Laboratories – Strong Growth Across Business Segments

Dr. Reddy’s reported revenue at Rs54,368mn, up 15% YoY and 2.2% QoQ. EBITDA stood at Rs12,981mn, up 14.6% YoY and 2.5% QoQ.
EBITDA margin stood at 23.9%, down 9bps YoY, but up 8bps QoQ.
Profit After Tax (PAT) stood at Rs875mn, down 84.2% YoY and 87.6% QoQ.

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Equitas Small Finance Bank – MD & CEO Resignation to Be an Overhang near Term

Will change in MD & CEO impact reverse merger or application for universal bank license?

Strong management team to drive growth and profitability: Mr. Murali Vaidyanathan, Head of Liabilities and Mr Rohit Phadke, Head of Assets have been promoted to Executive Director’s position (subject to RBI and shareholders’ approval).

Valuation: We have a BUY rating on Equitas Small Finance Bank with a target price (TP) of Rs84.

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4QFY22 Results Update – Galaxy Surfactants

Inventory gain and improvement in product mix aids margin – GALSURF reported a beat on our 4QFY22 estimates, with EBITDA (INR/kg) at INR25.2 (98% higher than our estimate, +35% YoY) on inventory gains, new contract terms, and improvement in the product mix.

Margin rebounds sharply; revenue marginally above our estimate – Revenue stood at INR10.5b (up 34% YoY and 13% QoQ).

Valuation and view – maintain Buy – In FY22, realization stood at INR157/kg, with gross margin at INR46.8/kg (+10% YoY) and EBITDA/kg at INR17.1 (down 10% from INR19/kg in FY21).

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Gland Pharma Ltd. – In-Line with Estimates; Upgrade to Buy on Valuation Comfort

The company has guided for a capex of Rs3,000mn in FY23, which will be invested in the Pashmelyaram facility, API expansion and expansion of Enoxaparin production capacity.
The company expects 9-10% revenue growth from new product launches. New product launches are expected to deliver better margins than the existing portfolio.
Gland is looking at acquiring late stage complex injectable assets / fermentation API assets.

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4QFY22 Results Update -Indraprastha Gas

Concerns remain despite a decent performance in 4QFY22 – IGL reported a beat on our EBITDA estimate, although volumes were strong YoY.

Volumes in line; margin is above our estimate – Total volumes were in line at 7.74mmscmd (up 14% YoY and 1% QoQ).

Valuation and view – maintain Neutral – IGL can increase its sales volume from new areas such as Rewari, Karnal, and Muzzafarnagar; Haryana City Gas; and the newly awarded GAs in the 10th round — a) Kaithal (Haryana), (b) Ajmer, Pali, and Rajsamand (Rajasthan), and c) Kanpur, Fatehpur, and Hamirpur (Uttar Pradesh).

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4QFY22 Results Update – ITC

EBITDA and PAT in line; cigarette volumes resilient – ITC’s 4QFY22 EBITDA and PAT growth came in line with our estimates.

Sales beat led by Agri business and Paperboards – ITC’s revenue grew 16.8% YoY to INR155.3b (est. INR138.4b) in 4QFY22.

Valuation and view – ITC’s re-rating would depend on sustained earnings growth going back to the high-teens levels witnessed in the first half of the last decade (at 18% CAGR) which had slowed down to 6.6% CAGR over the latter half of the decade.

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JK Lakshmi Cement Ltd.- Exceptional Results; Strong Rerating Candidate

4QFY22 performance: JK Lakshmi reported exceptional numbers, with EBITDA coming in at Rs2.76bn, up 3% YoY and 73% ahead of our estimate.

Substantial control in costs: The company has been diligently working on optimizing its cost structure and believes that the same has started bearing fruits.

Capex plans: Udaipur Cement Work Ltd.’s (UCWL) expansion plan worth Rs16.5bn to add 2.5mn mt capacity in Rajasthan (Rs7bn in the first year and Rs9.5bn in the second year) is expected to be commissioned by FY24.

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Before it’s here, it’s on Smartkarma

May 22

0

India: TVS Motor , Hero Motocorp and more

In today’s briefing:

TVS Motors- Forensic Analysis
Hero Motocorp (HMCL IN) | Structural Problems Persist

TVS Motors- Forensic Analysis

By Nitin Mangal

TVS Motor (TVSL IN) primary setback is in the form of poor capital allocation
In TVS Motors: Analysis Of Various Investments , we had briefed on the investment policy of the company and how the non-core investments/subsidiaries are dragging the profits.
This insight is an extension of the previous one; we update on the various investments the company has undergone and how it impacts the capital allocation.

Hero Motocorp (HMCL IN) | Structural Problems Persist

We anticipate the uptick in retail primarily aided by the wedding season to be short-lived for Hero Motocorp (HMCL IN).
HMCL has not been able to keep pace with changing consumer preferences, the limited success in premium segment and scooters is likely to remain an overhang even on new launches.
Inventory correction at the dealer’s end could aid wholesales supporting valuations, but the company remains structurally unattractive.

Before it’s here, it’s on Smartkarma

May 21

0

India: Eicher Motors, Dr. Reddy’s Laboratories, Gland Pharma Ltd, Jk Lakshmi Cement, V.I.P. Industries, Xiaomi Corp and more

In today’s briefing:

Eicher Motors (EIM IN) | The “Twins” (New Models & Exports) Are Firing
Dr Reddys Labs: Stable Results Despite Industry Headwinds; Maintain BUY
Gland Pharma Ltd: Strong Growth Across Geographies to Drive Profitability
JK Lakshmi Cement: Robust Performance in Challenging Time; Maintain Buy
VIP Industries.: Returning Normalcy, Rewired Business & Regaining Market Share
Weekly Wrap – 20 May 2022

Eicher Motors (EIM IN) | The “Twins” (New Models & Exports) Are Firing

Eicher Motors (EIM IN) is well-positioned to offset margin pressures due to its aspirational brand, the success of its new models and exports.
Easing supply issues along with newer export markets provide a compelling runway for revenue growth.
While our estimates are in line with consensus, we believe the YTD outperformance is likely to continue and any opportunities presented amidst market volatility must be exploited.

Dr Reddys Labs: Stable Results Despite Industry Headwinds; Maintain BUY

Dr Reddy Q4FY22 reported revenue growth of 14.8% YoY (vs. our expectations of 8.0% YoY), led by strong performance in geographies such as the US, India, and Emerging Markets.
The company is building a global pipeline of biosimilars, developments of NCE for Immuno-oncology, and building up a Neutraceuticals portfolio, vaccines, CDMO, and digital healthcare platforms
However, high inflation could decrease margins prompting us to reduce TP to Rs 4,500/share.

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Gland Pharma Ltd: Strong Growth Across Geographies to Drive Profitability

Gland Pharma reported a good set of numbers with revenue for the Q4FY22 growing by 24.3% on a YoY basis.
We believe stock trades at rich valuations of PE of 36.2x and 30.4x for FY23E and FY24E respectively
We, therefore, recommend a HOLD rating on the stock with a target price of Rs 3,300/share.

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JK Lakshmi Cement: Robust Performance in Challenging Time; Maintain Buy

JKLC reported strong Volume/Revenue/EBITDA/APAT growth of 8%/13%/3%/26% YoY and 28%/25%/89%/190% QoQ.
The encouraging growth on all fronts was on account of higher volume, superior realization, stringent cost management, and lower tax
We retain our BUY rating on the stock and roll over our estimate to FY24 and value the company at 7x of its FY24E EV/EBITDA to arrive at a target price of Rs 620/share, implying an upside of 48% from the CMP.

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VIP Industries.: Returning Normalcy, Rewired Business & Regaining Market Share

VIP Industries (VIP) Q4 FY22 results reported a weak set of numbers given the seasonally weak quarter.
Revenue stood at Rs 356 Cr up 46% YoY on account of the low base & down 13% QoQ due to the 3rd wave of Covid-19 Omnicron variant
Revising our FY23/24 estimates adjusting for the new cost environment we revise our recommendation from Buy to HOLD with a revised TP of Rs 596/share (earlier: Rs 600/share) valuing the stock at 47x FY24E EPS.

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Weekly Wrap – 20 May 2022

By Charles Macgregor

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

May 20

0

India: INR 10Y, Indraprastha Gas, ITC Ltd, Kajaria Ceramics, Manappuram Finance, Multi Commodity Exchange India, Pi Industries, Star Cement Ltd and more

In today’s briefing:

Yields in Asia Are Far from the Peak – Part II
Indraprastha Gas – PAT Beat of 26.9% on Lower Gas Cost
ITC: Healthy OverallPerformance
ITC Ltd – Robust Operating Performance- Dividend Yield Improves Further
HSIE Results Daily: Kajaria Ceramics
Manappuram Finance – Customer Acquisition Weak Amid High Competition, Weak Demand
4QFY22 Results Update – MCX
PI Industries – Domestic Revenue Growth Outpaces Exports
Star Cement: Encouraging Volume Growth; Better Cost Management
Star Cement Ltd – Volume Growth Finally Kicks In, Driving Earnings Beat

Yields in Asia Are Far from the Peak – Part II

By Gautam Jain, PhD, CFA

Even as the US 10y yield has come off the peak, rates in emerging markets – including in Asia – have been selling off as they remain under pressure.
Rates in Asia are vulnerable as they are expensive vis-à-vis the rest of EM, rising inflation should result in further rate hikes in the region, and debt profiles have deteriorated.
I thus expect rates in Asia to underperform and prefer selling bonds in the region paired with long bond positions in countries in other regions.

Indraprastha Gas – PAT Beat of 26.9% on Lower Gas Cost

Revenue grew by 55.2% YoY to Rs24.06bn vs NBIE estimate of Rs24.56bn, a 2.1% miss on our estimate and 0.38% miss vs street estimate.

Gross margin came in at 36.9% vs our estimate of 32% as COGS was 9.1% below our estimate while revenue miss was 2.1%.

PBT was up 33.2% vs NBIE estimate at Rs4.95bn; Share of JV/Associates was a 11.8% beat at Rs723mn.

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ITC: Healthy OverallPerformance

ITC reported a healthy set of numbers in Q4FY22with Revenue of Rs 15,331Cr (our estimate – Rs16,205Cr), down 2.2%QoQ but up ~16.5% YoY, led by a strong 8% volume growth in Cigarettes (in line with our estimates).
Gross Margins at 52.5% was 132bps lower YoY on account of unprecedented RM inflation
Benign taxation, inexpensive valuations (20x FY24E EPS), 5% dividend yield makes us BUYers of the stock. Our TP is revised to Rs 295 (earlier Rs 280).

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ITC Ltd – Robust Operating Performance- Dividend Yield Improves Further

4QFY22 headline performance: ITC’s 4QFY22 standalone topline (adjusted for excise duty) was up 16.8% YoY at Rs155bn vs our est. of 21.9% YoY growth to Rs162bn.

4QFY22 segmental performance: Cigarette revenue grew by 10% YoY to Rs64.4bn (vs our est. of Rs65.3bn), up ~12% on a two-year CAGR basis.

FY22 performance: Standalone Revenue, EBITDA and APAT grew by 23.9%, 22% and 15.5%, respectively.

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HSIE Results Daily: Kajaria Ceramics

By HDFC Securities

Q4FY22 performance: Kajaria posted lower-than-estimated margin (~200bps miss) in Q4FY22, as margin compressed QoQ on rising gas prices (crude linked).

Tiles sales volumes/revenue rose 2/16% YoY (2-year CAGR 19/29%). Outsourced volume continues to lead growth (+12% YoY, 2-year CAGR 39%).

Outlook: For FY23, KJC targets volume/revenue growth of ~15-20%/20-25%.

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Manappuram Finance – Customer Acquisition Weak Amid High Competition, Weak Demand

Yields remain under pressure; likely to recover: Net yield in 4QFY22 declined to 18.8% from 20.3% in 3QFY22 and 25.3% in 2QFY22 amid high competition from other lenders.

Gold loan AUM down QoQ; uptick in NPA not worrisome: Total gold loans AUM declined 1.4% QoQ while gold holdings/collateral declined by 2.9% QoQ.

MFI growth revive in FY23: In 4QFY22, the company scaled back growth in the MFI business as it prioritized improvement in asset quality and collections.

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4QFY22 Results Update – MCX

Strong operational performance, an exceptional item impacts PAT –Overall futures ADT improved by 4% QoQ and options ADT jumped by 70%, which resulted in a 19% rise in revenue ahead of our estimate.
Healthy volume growth driven by Crude Oil – Total volumes grew 29% YoY and 21% QoQ to INR26t in 4QFY22.

Key takeaways from the management commentary – MCX is awaiting approval from the regulators (Sebi and CERC) to launch Electricity derivatives.

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PI Industries – Domestic Revenue Growth Outpaces Exports

Key positives: (i) PI added 8 new customers in FY22 (ii) New thrust on non-agrochem CSM – 35% of its 36 enquiries (iii) PI’s goal is to develop high-value CSM services in Agrochem/Pharma/Specialty Chemicals, based on cost leadership and sustainable manufacturing through differentiated technology/synthesis.

We see a bull case/bear case valuation of Rs3,318/Rs2,943 based on 100%/nil impact of the DCF value of a potential M&A deal for a Pharma asset.

4QFY22 results are lower than our estimates. Revenue at Rs13.95bn was a miss of 1.1% vs NBIE estimate, but a beat of 2% vs street estimate.

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Star Cement: Encouraging Volume Growth; Better Cost Management

Star Cement (SCL) reported robust revenue/volume growth of 27%/24%YoY in Q4FY22, driven by higher demand in its operating region. However, lower realization impacted the company’s margins
The stock is currently trading at 8x FY23E and 7x FY24E EV/EBITDA
We retain our BUY rating on the stock and value the company at 8x FY24E EV/EBITDA to arrive at a target price of Rs 105/share, implying an upside of 14% from the CMP.

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Star Cement Ltd – Volume Growth Finally Kicks In, Driving Earnings Beat

4QFY22 performance: In 4QFY22, the company reported volume growth of 27% YoY (up by 33% QoQ) at 1.15mn mt, which was 20.1% above our estimate.

Higher domestic coal sourcing will keep costs lower for STRCEM: The company has used low-cost coal inventory, which was available from CIL (~200k mt). It has a long-term FSA with CIL for 150k mt of coal on an annual basis at a fixed price, which will mitigate the risk of price hikes in the future.

Capex and expansion plan: A 3mn mt clinker unit in Meghalaya and a 2mn mt grinding unit in Guwahati are expected to be commissioned by the end of CY23.

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Before it’s here, it’s on Smartkarma

May 19

0

India: Paradeep Phosphates, Eicher Motors, Bharat Petroleum Corp, Kajaria Ceramics, Minda Corp Ltd, Bajaj Electricals, Steel Strips Wheels, Indian Oil Corp, Indoco Remedies and more

In today’s briefing:

Paradeep Phosphates IPO – Smallest of the Lot and Fairly Valued as Well
India Channel Insight #34 | Eicher (Royal Enfield), TVS Motors, Hero MotoCorp
Morning Views Asia: Bharat Petroleum Corp
Kajaria Ceramics – Soaring Gas Prices Dent Margins
Minda Corporation – Sustains Healthy Growth; Maintain Accumulate
4QFY22 Result Update – Bajaj Electricals
Steel Strips Wheels: Well-Placed to Capitalize on Auto Revival; Outlook Remains Positive
IOC- Refining Gain Offset by Marketing Pain
Indoco Remedies – Strong Growth in Regulated Markets

Paradeep Phosphates IPO – Smallest of the Lot and Fairly Valued as Well

By Clarence Chu

Paradeep Phosphates (75690Z IN) is looking to raise up to US$194m in its India IPO. The IPO will consist of a mix of primary and secondary shares.
Paradeep Phosphates (PP) is a fertilizer manufacturing company based in India. The firm engages in manufacturing, trading, distribution and sales of a variety of complex fertilizers.
At listing, while PP would be the smallest peer on the revenue and mcap fronts, it trails our identified peer set on the margin front as well.

India Channel Insight #34 | Eicher (Royal Enfield), TVS Motors, Hero MotoCorp

We speak to channels across West, North and South to understand the 2W demand environment
Mid segment is still not seeing recovery, premium and lower end segment is stabilising / doing relatively better.
Restoration of supplies and aggressive marketing strategies can aid volume recovery for TVS Motor (TVSL IN) and Eicher Motors (EIM IN)

Morning Views Asia: Bharat Petroleum Corp

By Charles Macgregor

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.

Bharat Petroleum Corp

Kajaria Ceramics – Soaring Gas Prices Dent Margins

By HDFC Securities

Q4FY22 performance: Kajaria posted lower-than-estimated margin (~200bps miss) in Q4FY22, as margin compressed QoQ on rising gas prices (crude linked).

Outlook: For FY23, KJC targets volume/revenue growth of ~15-20%/20-25%.

It expects India’s tiles export to increase by ~35% YoY, as sharp spikes in gas and electricity prices in European countries have increased Indian tile’s competitiveness.

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Minda Corporation – Sustains Healthy Growth; Maintain Accumulate

Revenue ahead of estimate; decent operating margin: Revenue for 4QFY22 stood at Rs9.48bn (our est. Rs7.6bn) and was up by 19.4% YoY and 28.4% QoQ, mainly due to consolidation of MIL figures in this quarter (MIL revenue stood at Rs1.38bn).

Revenue share from the 2W segment declined slightly, which was in line with the decline in the 2W industry as a whole.

Mechatronics, AM & others revenue grew by 6% YoY with 13.4% margin while margin in the ICS segment came in flattish at 7.4%. EBITDA grew by 36.9% QoQ to Rs1,077mn.

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4QFY22 Result Update – Bajaj Electricals

Consumer Product segment update: For 4QFY22, Appliance revenue declined by 5.3% YoY due to a high base.

EPC Segment Update: EPC sales grew by 5% YoY, mainly due to calibrated and value-accretive scaling.

OCF and debt position: BJE generated positive cash flow from operations (CFO) of Rs2.6bn in FY22, making it 12th consecutive quarter of positive CFO.

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Steel Strips Wheels: Well-Placed to Capitalize on Auto Revival; Outlook Remains Positive

We retain our BUY rating on the stock valuing it at 5.5x FY24E EV/EBIDTA arriving at a target price of Rs 1,000/share, (Rs 1,075/ share earlier) implying an upside of 30% from CMP.
Steel Strip Wheels Ltd (SSWL) reported a mixed set of numbers in Q4FY22 supported by the improvement in alloy wheels and the PV segment.
Revenue for the quarter improved by 24% QoQ to Rs 1,063 Cr (our estimate – Rs 990 Cr).

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IOC- Refining Gain Offset by Marketing Pain

Net revenue came in at Rs1,772.9bn vs NBIE estimate of Rs2,071.6bn and a 9% miss vs street; it was up 43.3% YoY.

EBITDA stood at Rs116.3bn vs. NBIE estimate of Rs121.8bn and 2.9% miss vs street; it was down 13.8% YoY.

4QFY22 Petchem segment performance was also under pressure – segment revenue was up from Rs63.82bn in 4QFY21 to Rs80

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Indoco Remedies – Strong Growth in Regulated Markets

The company expects to launch 6-7 ophthalmic products in the US. We expect IRL to be the third generic player to launch gCombigan, which has a market size of ~US$400mn in the US market.
IRL has enough API and excipients inventory to last for the next two month.
Launched 6 new products in the Indian market in FY22, including Subitral, which was the fastest brand to reach Rs10mn sales within just 40 days of its launch

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Before it’s here, it’s on Smartkarma

May 18

0

India: Tata Motors Ltd, Poonawalla Fincorp, Bharat Forge, Eris Lifesciences, Glaxosmithkline Pharmaceuticals, Kalpataru Power Transmission, Triveni Turbine, Affle (India) Limited and more

In today’s briefing:

Tata Motors – Earnings Flash – Q4 FY 2021-22 Results – Lucror Analytics
Poonawalla Fincorp – Execution & Asset Quality Improve; Upgrade to Buy
Bharat Forge – Strong All-Round Performance Drives Beat
Bharat Forge (Initiating Coverage): Multiple Growth Drivers in Place. BUY
Result Update – Bharat Forge
Eris Lifesciences – Niche Launches to Aid Growth over the Medium Term
GSK Pharma – Muted 4QFY22; Focus Remains on Key Brands to Revitalize Growth
Kalpataru Power – All Eyes on Merger
4QFY22 Result Update – Triveni Turbine
Affle India: Seasonally Weak Quarter; Outlook Remains Healthy

Tata Motors – Earnings Flash – Q4 FY 2021-22 Results – Lucror Analytics

By Trung Nguyen

Tata Motors’ Q4 and FY 2021-22 results were better than expected. The company delivered lower than estimated losses and q-o-q improvement in cash flows. That said, the financial risk profile deteriorated significantly due to decreased earnings, albeit partly cushioned by lower debt (driven by cash release from working capital). Liquidity remains sound.

We expect the operating environment to remain difficult in and perhaps even beyond FY 2022-23. We derive comfort from the increasing order book, even though it currently only accounts for c. 50% of full-year deliveries and is hence insufficient for firm revenue visibility. That said, the expanding order book indicates that demand for Jaguar Land Rover exceeds the company’s ability to deliver.

Poonawalla Fincorp – Execution & Asset Quality Improve; Upgrade to Buy

Organic disbursements at Rs22bn and inorganic disbursements stood at Rs11.4bn.

March’22 disbursement of pre-owned cars stood at Rs1.65bn (entered leadership position); LTP March’22 disbursements stood at Rs1bn (entered leadership position) and SME LAP March’22 disbursement stood at Rs1bn.

Added digital consumption loan product to the retail product portfolio through the partnership mode.

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Bharat Forge – Strong All-Round Performance Drives Beat

Core businesses to see sustained recovery in FY23; geographical expansion on the cards

Non-auto business grows both in the domestic and export markets

Highlights from the management interaction – In FY22, the Indian operations have received new orders of ~INR10b p.a. and the US operations have won new orders worth USD150m p.a.

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Bharat Forge (Initiating Coverage): Multiple Growth Drivers in Place. BUY

By HDFC Securities

Domestic business sees strong growth momentum in key segments

New order wins to drive strong export growth – BHFC’s strong export momentum is likely to continue over FY22-24E, (1) strong demand in CV segment, both in the US and Europe, which would be visible in BHFC numbers as the chip shortage impact gradually wanes away in the coming quarters; (2) new order wins in PVs (management has guided for 30% growth in FY23E); (3) huge opportunities in renewable business globally in multiple sectors and stable demand from oil and gas segment.

Subsidiary business performance likely to improve further – Post the restructuring of overseas subsidiaries, its margin has improved to 10% in FY22, from 5% in FY21.

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Result Update – Bharat Forge

By Emkay

What we like? 1) In FY22, the Indian operations secured new orders worth ~Rs10bn across automotive and industrial applications.

EBITDA above estimates: Revenue grew by 28% yoy to Rs16.7bn (est.: Rs15bn), above estimates due to higher sales in the domestic industrials and overseas auto segments.

Maintain Buy with a TP of Rs810, based on 24x P/E for the standalone business on Jun’24E EPS.

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Eris Lifesciences – Niche Launches to Aid Growth over the Medium Term

Promising start for Drolute and Xsulin – The Dydrogesterone market is at an interesting phase, with an improvement in demand due to better access, affordability, and technical superiority over Progesterone.

Favorable demand-supply and marketing efforts to drive ‘Drolute’ sales for ERIS

Well-positioned to gain market share in the Insulin market – ERIS has expanded its Anti-Diabetic offering, with the recent launch of human/premix Insulin

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GSK Pharma – Muted 4QFY22; Focus Remains on Key Brands to Revitalize Growth

Slower offtake witnessed in the Vaccine segment – GLXO delivered a lower-than-expected performance in 4QFY22. Subdued YoY growth in sales and higher raw material cost affected profitability.

One-off tax provision leads to a quarterly loss – Revenue was up 9% YoY to INR8.1b (est. of INR9.2b).

Key takeaways – Secondary sales data from AIOCD indicates that Pain therapy/Anti-Infective/ Dermatology (~12%/~25%/~28% of overall sales) saw a growth of ~39%/ 21%/5% YoY in 4QFY22, driving the outperformance against IPM.

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Kalpataru Power – All Eyes on Merger

By Emkay

KPTL results highlights: A lower order book and delays in dispatch led to an 8% revenue decline in FY22, with a margin decline of ~130bps.

JMC Projects results highlights: JMC Projects delivered 45% revenue growth on the back of a very strong order book (Book-to-bill of ~4x), better than management’s guidance of 20% growth.

Large projects: KPTL has been bidding for large projects in the recent past and recently bagged a large HVDC order worth Rs32bn.

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4QFY22 Result Update – Triveni Turbine

Domestic market update: In FY22, the domestic market under 30MW is estimated to have grown by 71% YoY in MW terms.

Exports update: The international market under 30MW is estimated to have declined by 24% YoY in FY22 in MW terms.

mpact of Russia-Ukraine conflict: TTL has reduced orderbook by Rs400mn due to the Russia-Ukraine conflict as it took out certain orders from steel mills in Ukraine due to lack of visibility.

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Affle India: Seasonally Weak Quarter; Outlook Remains Healthy

Affle Ltd. (Affle) reported a strong growth backed by robust device addition. The company’s Q4FY21 revenue stood at Rs 315 Cr, decline 7.2% QoQ and grew 123% YoY due to seasonally weak demand during the quarter.
Its Operating Margins decline by 130bps QoQ to 18.6% (in line with the management expectations) due higher inventory and data cost
We recommend a BUY on the stock and assign a 32x P/E multiple to its FY24E earnings of Rs 35.94/share which gives a TP of Rs 1,140/share, implying an upside potential of 18% from CMP.

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Before it’s here, it’s on Smartkarma

May 17

0

India: Bharat Electronics, Life Insurance Corp of India (LIC), Paradeep Phosphates, Escorts Ltd, Relaxo Footwears, State Bank Of India, Amber Enterprises India, Vinati Organics and more

In today’s briefing:

NIFTY100 Index Rebalance Preview: Five Potential Changes in September
Life Insurance Corporation IPO Trading – Demand Shored up by Policyholders, Trading Won’t Be
Paradeep Phosphates IPO – Operates in a Regulated Industry and Hasn’t Done Much over the past Decade
Result Update – Bandhan Bank
Result Update- Escorts
Result Update – Relaxo Footwear
Result Update – State Bank of India
Result Update – State Bank of India
Result Update – Amber Enterprises
Vinati Organics – Existing Products to Drive FY23 Growth

NIFTY100 Index Rebalance Preview: Five Potential Changes in September

By Brian Freitas

We are past the halfway mark in the review period for the September rebalance of the NIFTY100 Index. We see five potential changes which should be announced end August.
There is a high probability of Tata Power (TPWR IN), Indian Railway Catering and Tourism (IRCTC IN), Bharat Electronics (BHE IN) and Mphasis Ltd (MPHL IN) being added to the index.
High probability deletions are Lupin Ltd (LPC IN), Jubilant Foodworks (JUBI IN), Zydus Lifesciences Ltd (ZYDUSLIF IN), Punjab National Bank (PNB IN) and Steel Authority of India (SAIL IN).

Life Insurance Corporation IPO Trading – Demand Shored up by Policyholders, Trading Won’t Be

By Sumeet Singh

Government of India (GoI) raised around US$2.7bn via selling a 3.5% stake in Life Insurance Corporation of India (LIC) in its India IPO.
As of FY21, LIC was the largest life insurer in India with a 64.1% market share in terms of gross written premium (GWP).
In this note, we will talk about the demand and trading dynamics.

Paradeep Phosphates IPO – Operates in a Regulated Industry and Hasn’t Done Much over the past Decade

By Clarence Chu

Paradeep Phosphates (75690Z IN) is looking to raise up to US$194m in its India IPO. The IPO will consist of a mix of primary and secondary shares.
Paradeep Phosphates (PP) is a fertilizer manufacturing company based in India. The firm engages in manufacturing, trading, distribution and sales of a variety of complex fertilizers.
While profitability improved, margins have fluctuated over the track period. Subsidies provide some downside risk protection from a raw mat price squeeze, however, MRP also limits the firm’s pricing power.

Result Update – Bandhan Bank

By Emkay

MFI growth prospects improving, while bank remains determinant to accelerate non- MFI growth

Sharp run-down in GNPA ratio; higher specific PCR and recovery to contain incremental LLP

Outlook and valuations: Factoring in a better growth trajectory and lower LLP, we raise our FY23E/FY24E earnings by 16-17% and expect RoE to return to 20-23% by FY24-25E.

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Result Update- Escorts

Demand Outlook: The management expects the tractor industry volume to grow by ~20% in Q1FY23E on account of normal monsoon expectations and higher food grain prices.

Margin outlook: To mitigate the impact of higher input cost, company took a price hike of ~2% in Apr’22 and would further take a price hike of ~2% in Q2FY23 as well.

Railway Equipment Division (RED): The segment revenue stood at Rs 173 Cr for the quarter as against Rs 146 Cr in Q4FY21.

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Result Update – Relaxo Footwear

Mgmt has undertaken 25% price hike across categories, to counterRM inflation and GST hike& remains cautious on further price hikes depending on demand scenario.
The Margins are impacted due to high base, Covid, GST rate differential & inflation (leading to substantial increase in raw material prices and normalisation of selling, marketing and admin expenses).
Good growth is observed in athleisure and sports category in line with industry.

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Result Update – State Bank of India

By Emkay

System-beating credit growth; surpasses expectations: Overall credit growth improved to 11% yoy/6% qoq, led by continued strong traction in retail (up 15% yoy) and resurging corporate book.

Steady improvement in asset quality, higher PCR to contain incremental LLP

Outlook and valuation: SBI remains one of our preferred picks, given its healthy growth trajectory and improving RoA/RoRWA/RoE profile.

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Result Update – State Bank of India

Strong Loan growth Performance: On the business front, the bank’s loan growth reamined strong and was up by 11%/6% YoY/QoQ compared to 9%/5.5% YoY/QoQ in Q3FY22.

Continued Strong Asset quality:Asset quality improved with G/NNPAs declining by 53bps/32bps QoQ to 3.97%/1.02%.

Operating performance: Domestic NIM remained flat QoQ to 3.4% and improved 29bps YoY.

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Result Update – Amber Enterprises

Strong overall performance,however RAC volumes impacted due to supply chain constraints : RAC revenues stood at Rs 1,002 Cr, contributing 52% to the company’s total revenues during the quarter.

The RAC volumes stood at ~15 Lc/26 Lc for Q4FY22 /FY22 which were impacted due to supply chain issues.

Thus volume impact , due to supply chain issues, are expected to recover in Q1FY23.

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Vinati Organics – Existing Products to Drive FY23 Growth

4QFY22 earnings performance: Key products like ATBS, IBB and Butyl Phenol delivered strong volume-led growth for VO in 4QFY22.

Update on new growth drivers: Management has already announced further expansion of the Butyl Phenol capacity through a brownfield expansion (~14KTPA incremental capacity, capex of Rs1.5bn), which will be largely be used captively for AOs.

Demand as well as pricing for AOs has increased and hence after considering additional lube additives, management expects peak revenue of Rs7bn from AOs.

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Before it’s here, it’s on Smartkarma

May 16

0

India: Adani Enterprises, Aurobindo Pharma, HDFC Bank, Tech Mahindra, Balkrishna Industries, Bandhan Bank Ltd, Bank Of Baroda, Coforge, Eicher Motors, Emami Ltd and more

In today’s briefing:

NIFTY50 Index Rebalance Preview: High Probability Add; Impact Higher than the Headline Numbers
Aurobindo Pharma (ARBP IN): Regulatory Issues Continue to Haunt the Company
When Bank ESOPs Go Under Water, Expect Senior Management to Be Distracted or Departing
Tech Mahindra – Margin Pressure Higher; Reduce Target Multiple on Vulnerability
Balkrishna Industries – Margin Pressure to Sustain; Valuation Remains Attractive
Bandhan Bank – Stress Levels Down on the Back of Improving Collections, Recoveries
Bank of Baroda – Raises Credit Growth Guidance
Coforge Ltd (COFORGE) – Strong Results; Outlook Remains Healthy
Eicher Motors – New Launches and Exports to Drive Volume Growth; BUY
Emami Ltd – Subdued Operating Performance; Undemanding Valuation

NIFTY50 Index Rebalance Preview: High Probability Add; Impact Higher than the Headline Numbers

By Brian Freitas

We are past the halfway mark in the review period of the NIFTY Index (NIFTY INDEX) September rebalance. We see one potential change which should be announced end August.
There is a high probability of Adani Enterprises (ADE IN) being included in the index, while either Shree Cement (SRCM IN) or Hero Motocorp (HMCL IN) will be deleted.
The impact of passive fund trading on the stocks is high in terms of days of ADV, but very high in terms of delivery volume.

Aurobindo Pharma (ARBP IN): Regulatory Issues Continue to Haunt the Company

By Tina Banerjee

Aurobindo Pharma (ARBP IN) has been issued six observations for its oral manufacturing unit by the FDA, which will further impact its business. The company closed its New Jersey facility.
Aurobindo’s recent acquisition of Veritaz Health for INR1.7 billion does not really fit for the company’s high hope for the domestic formulation business.
Aurobindo shares are trading at a forward P/E of 10.9x, which is cheaper than the peers. However, the company is not expected to see multiple expansion in near future.

When Bank ESOPs Go Under Water, Expect Senior Management to Be Distracted or Departing

By Hemindra Hazari

When stocks languish, or spiral downwards, it is not just shareholders whose wealth erodes. Senior executives, also suffer, as much of their personal wealth may be tied up in ESOPs.
Few HDFC Bank ESOPs may be of concern to executives while many ESOPs of RBL Bank and Bandhan Bank are under water
ESOPs are a major retention tool for holding onto executives. If ESOPs are under water it may accelerate senior executive attrition worsening the situation

Tech Mahindra – Margin Pressure Higher; Reduce Target Multiple on Vulnerability

Need to see how 5G spending holds up in a stagflationary environment: 5G related demand is one of the reasons why we and the street have been bullish on TML.

While we are at the beginning of the 5G spend cycle (which could play out over a longer time compared to the 4G cycle, according to industry), we think the spends may be a bit cyclically constrained in 2HFY23 and in FY24 before they recover eventually – quite similar to how we expect the digital spends to behave.

However, unlike in Digital, we believe that TML has a better right to win in the this area because of its long-standing relationships has with >150 Telcos, to which it has likely added a lot of value over the years.

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Balkrishna Industries – Margin Pressure to Sustain; Valuation Remains Attractive

Demand holds reasonably well: Demand continued to hold strong across segments and regions.

Cost pressures to persist in the near term; reiterates sustainable margin guidance

Rs22.5bn capex to cater to medium term demand: BKT has decided to keep on hold investment of Rs3.5bn to continue operating the old Walunj plant and operations in the plant will continue, taking its total capacity to 360k MT by the end of FY23. Project capex for FY23 will likely be at ~Rs9bn each.

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Bandhan Bank – Stress Levels Down on the Back of Improving Collections, Recoveries

Strong growth across segments: Overall loans increased by 15.1% YoY and 17.1% QoQ

NII growth was strong; aided by margin expansion: NII increased by 44.6% YoY and 19.5% QoQ.

Deposits growth steady: Overall deposits increased by 23.5% YoY and 14% QoQ. CASA deposits increased by 18.5% YoY and 4% QoQ.

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Bank of Baroda – Raises Credit Growth Guidance

Guiding for 10-12% credit growth: Gross advances increased by 8.9% YoY and 6% QoQ. Domestic loan book increased by 6.7% YoY and 4.6% QoQ, led by 16.8% YoY growth in retail loans.

Asset quality improves: Overall asset quality improved, with the GNPA ratio falling to 6.61% in 4QFY22 from 7.25% in 3QFY22 and 8.87% in 4QFY21.

NII growth led by margin expansion: NII growth at 21.2% YoY came in higher on the back of 36bps YoY expansion in NIM.

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Coforge Ltd (COFORGE) – Strong Results; Outlook Remains Healthy

Encouraging growth across verticles – On the vertical front, the BFS vertical exhibited a robust growth of 3% QoQ.

Outlook & Valuation – Coforge has a robust business structure coupled with multiple long-term contracts spread across verticals which will help it generate sustainable growth momentum moving ahead.

We recommend a BUY rating on the stock and assign a 24x P/E multiple to its FY24E earnings of Rs 177.8/share which gives a TP of Rs 4,200 /share.

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Eicher Motors – New Launches and Exports to Drive Volume Growth; BUY

Revenue and margins in line – displaying good improvement: Standalone revenue came in at Rs31.9bn, up ~9% YoY, which was in line with our estimate, led by ASP growth and an optimum product mix.

Valuation turns favorable: We value RE (standalone) at 24x FY24E EPS and VECV at 12x EV/EBITDA on FY24E to arrive at a TP of Rs2,939.

We expect demand to remain strong and drive volume growth going ahead in both domestic as well as export markets, leading to 21% volume growth.

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Emami Ltd – Subdued Operating Performance; Undemanding Valuation

4QFY22 headline performance: Emami’s 4QFY22 consolidated revenue grew by 5.4% YoY to Rs7.7bn (vs our est. Rs7.7bn).

FY22 performance: Revenue, EBITDA, PBT and APAT (before Amortization) grew by 10.8%, 7.7%, 12.2% and 49.2% YoY, respectively.

Other highlights: (1) LUP’s contribute 23-24% to the overall portfolio. (2) The company added additional 8,000 rural towns in FY22 through Project Khoj, taking the total to 40,000 towns.

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