In today’s briefing:
- Edelweiss: On Track for Strong FY23
- Dilip Buildcon Ltd – Fixed Cost Projects Affect Margins
- Aarti Industries – Growth Outlook Backed by Expansion Plans in Growing Chemistries
- Infosys – Thrust Should Have Been on Core Services and ‘essential’ Digital
- Stove Kraft Limited – Margin Pressure Offsets Topline Growth; Exports Situation
- Sundaram Finance: Demand Pick-Up Encouraging, Asset Quality Improves
- Fine Organic Industries (4QFY22): Blockbuster Quarter!
Edelweiss: On Track for Strong FY23
- After a tough 3Y since the IL&FS crisis, Edelweiss’ credit business is now getting back on track. Asset quality has normalized to <2% Net NPA.
- Edelweiss’ other businesses continue to post robust growth. ARC, Asset Management and Insurance businesses are scaling up well. Wealth Management business is on track for listing by Feb 2023.
- At a market cap of INR 5200cr, Edelweiss is trading cheap even if one ascribes zero valuation to its Credit business.
Dilip Buildcon Ltd – Fixed Cost Projects Affect Margins
- Operational performance and guidance: For FY22, DBL reported revenue of Rs90bn, down 2.2% YoY.
- Asset monetization: The management had signed a term sheet for the sale of 10 HAM assets to Shrem InVIT.
- Order book: The current orderbook stands at Rs255bn, with 45% contribution from Roads, 17% from Irrigation, 22.5% from Mining, 9% from Tunnel, 5% from Special Bridges and the balance from Airport & Metros.
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Aarti Industries – Growth Outlook Backed by Expansion Plans in Growing Chemistries
- Expansion Led Growth: The management has also guided for a Capex of Rs 3,000 Cr for the next 2 years.
- The Capex will be majorly for adding more downstream products in the current benzene chain, new Chloro Toluene chain, and debottlenecking of the existing products.
- All capacities set up during FY22 should ramp up and clock utilisation of ~70-90% by the end of FY24.
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Infosys – Thrust Should Have Been on Core Services and ‘essential’ Digital
- Some metrics worth tracking: As indicated in our 4QFY22 results note (Downgrade cycle upon us), the net new TCV number (down 60% YoY in FY22 due to mega-deals in the base year) and the unbilled revenue growth were some of the things that stood out.
- Things to watch out for in the coming days: (1) Whether the worsening profit picture of the US corporate sector – earlier than expected in the March quarter 2022 in certain consumer-facing sectors – spreads further (2) Whether those to whom offer letters are/were given are on-boarded as indicated (3) Whether hiring materially weakens from here on by the Indian service providers, especially if utilization is high (4) Will there be an upward revision in the guidance if we see a strong QoQ growth in 1HFY23 (5) Order inflow and commentary by Accenture as it releases its results in the latter half of June 2022; especially surrounding the discretionary spending on consulting.
- We expect no deterioration as of this point. (6) Commentary on demand from the cloud hyper scalers and the Saas eco-system in the US (7) A stricter implementation of work from office rules – meaning companies are open to living with higher attrition as they see weakness in demand into the future.
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Stove Kraft Limited – Margin Pressure Offsets Topline Growth; Exports Situation
- Segment-wise performance: Revenue breakdown stands at: Pressure Cooker – 22.8%; LED – 7.5%; Induction Cooktop – 14.2%; Gas Cooktop – 9.6%; Non-stick Cookware – 16.1% and Mixer/Small Appliances – 29.8%.
- In 4QFY22, Pressure Cooker volume declined by 9.3% YoY, Gas Cooktop volume declined by 48% YoY, Induction Cooktop volume grew by 83.3% YoY
- Non-stick Cookware volume declined by 19.5% YoY, LED volume declined by 5.6% YoY and Small Appliances/Mixer/Others volume declined by 1.5% YoY.
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Sundaram Finance: Demand Pick-Up Encouraging, Asset Quality Improves
- Sundaram Finance’s (SUF) management indicated an overall improvement in the economic activity with demand regaining strength across segments and geographies in the first 2 months of FY23.
- However, rising oil prices and high inflationary pressure coupled with rising interest rates, may lead to some downward pressure on demand in the near-term
- We upgrade our rating from HOLD to BUY with a target price of Rs 2,195/share (based on SOTP valuation), implying an upside of 20% from the CMP.
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Fine Organic Industries (4QFY22): Blockbuster Quarter!
- Financial performance: Revenue grew 33/91% QoQ/YoY to INR 6.2bn in Q4 on the back of higher realisations, courtesy full pass-through of input cost price hikes, on boarding of new customers, repeat orders, better product mix, foreign exchange gains, and inability of competitors to supply their products, owing to non-availability of raw materials.
- The contribution of exports to total revenue was 60% in FY22. EBITDA came in at INR 1.6bn, +100/+230% QoQ/YoY, with EBITDA margin improving significantly to 26% (+868/+1,090bps QoQ/YoY), owing to shift in the product mix towards high- margin value-added products, new customers, and new approvals in Q4.
- APAT came in at INR 1.2bn (+135/+283% QoQ/YoY).
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