In today’s briefing:
- Edelweiss: Cheap Valuation; Scaling Up The Credit Business Is Key
- KPIT Tech: Earnings and Growth Visibility Remain Strong
- Indian Social Commerce Firm Nets $45m More in Series E Money
- LICHF: Strong Earnings In Line With Our Thesis
- Rising cost a challenge; new capex plans announced
- Ambuja Cements: Higher Cost Impacts Margins; New Capex Announced
- POWERing ahead by leveraging its core strengths
- HCG: Sustained Improvement In Growth and Profitability
- Hikal Ltd: Crop Protection Drives Growth; Tracking Compliance
Edelweiss: Cheap Valuation; Scaling Up The Credit Business Is Key
- Excluding one-off gains, Edelweiss reported weak Q3FY22 earnings, led by the credit business that has been adversely impacted by operational de-leverage from declining AUM.
- However, barring the credit business, Edelweiss’ rest of the businesses continue to post strong growth and profitability.
- There are material headwinds in the credit business currently; however, these are poised to recede as the business scales up over the next 2Y.
KPIT Tech: Earnings and Growth Visibility Remain Strong
- Despite the elevated valuation, KPIT remains a high conviction idea for us as we see potential for 21%+ earnings CAGR over the next decade.
- Given the strong growth visibility, KPIT can sustain its current elevated valuation of 12x P/B and thus an investment in it can offer 21%+ CAGR over the next decade.
- Even if its exit valuations were to decline by 1/3rd at the end of the decade, it can still offer 16%+ CAGR.
Indian Social Commerce Firm Nets $45m More in Series E Money
- DealShare, an India-based social commerce firm, has raised US$45 million as part of its series E round from the Abu Dhabi Investment Authority.
- This is in addition to the US$165 million it raised for the same round last month, when it secured a coveted spot in the unicorn club after its valuation reached US$1.6 billion
- DealShare founder and CEO Vineet Rao told Tech in Asia that the company is preparing to expand its footprint overseas
LICHF: Strong Earnings In Line With Our Thesis
- LICHF reported strong Q3FY22 earnings on the back of improving asset quality leading to limited provisioning and limited interest reversal impact from OTR.
- Disbursement in Q3FY22 was 135% of pre-COVID level i.e. vs Q3FY20. This growth momentum has continued from Q2FY22 when also it was 132% that in Q2FY20.
- Given our FY23 earnings (PAT) projection of INR 3,600cr+, LICHF with current market cap of around INR 20,000cr is available at an attractive valuation of <6x P/E on FY23E PAT.
Rising cost a challenge; new capex plans announced
- As expected, increased opex (up 14% YoY) dented profitability.
- EBITDA fell 26% YoY, while adjusted profit (adjusted for an additional charge on restructuring cost) fell 40% YoY.
- We reduce our CY22E/CY23E EBITDA estimate by 15%/5%, considering a steep increase in energy costs.
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Ambuja Cements: Higher Cost Impacts Margins; New Capex Announced
- ACL reported Volume/Revenue growth of 2%/6% YoY however EBITDA/APAT saw de-growth of 26%/49% respectively on a YoY basis in Q4CY21
- The company’s operating performance was impacted during the quarter owing to higher costs led by increased power/fuel costs
- We value ACL at 13x CY23E EV/EBITDA (including Ambuja stake in ACC with no holding company discount) to arrive at TP of Rs 365/share
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POWERing ahead by leveraging its core strengths
- Potential for sustained double-digit topline growth; attractive at current levels We reiterate our BUY rating on DABUR with a TP of INR705, implying 29% potential upside.
- Our investment thesis on DABUR is premised on the following key attributes: highest topline growth visibility among peers, consistent market share gains across categories, and potential to record even faster earnings growth post-completion of its ongoing investment phase.
- The key catalysts that underpin a sustained double-digit topline growth for DABUR include: a) an impressive performance in the Ayurvedic healthcare space,.
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HCG: Sustained Improvement In Growth and Profitability
- HCG continues to improve its profitability led by 1) Scaling up of new centers and 2) Improving operational efficiency in its existing centers.
- HCG reported revenue growth of 1.7% QoQ in Q3FY22, despite Q3 being a seasonally weak quarter and despite fell off of COVID related revenues.
- As per our projections, HCG has potential to generate annual earnings of 170cr+ by FY25, suggesting an IRR potential of 23%+ over the next 3Y.
Hikal Ltd: Crop Protection Drives Growth; Tracking Compliance
- Hikal is predominantly a B2B player that provides intermediates and active ingredients to global pharmaceutical, animal health, crop protection and specialty chemical companies.
- Maintain BUY on account of consistency in offtake for crop protection CDMO, expected recovery in Pharma, Visibility capex.
- That said we continue to monitor developments on recent critical issues- 1) Surat (Gujrat) GIDC incident and 2) MPCB notice for Taloja.
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