In today’s briefing:
- HDFC BANK: Steady As She Goes
- Rajshree Polypack (RPPL): Margin Expansion Led The Q3FY22 Earnings Growth
- Aurobindo Pharma (ARBP IN): Pain Continues in the U.S. Formulation Business
- Nesco: IT Park Sees Improved Occupancy; BEC Recovery In Sight
- RPSG Ventures: Tepid FMCG Growth, But Long-Term Prospects Intact
- Kolte Patil: Record Pre-Sales In Q3FY22; New Project Acquisition Likely in Mumbai
- Biosimilar deal with Viatris completes the value chain in its Biologics business
- Huhtamaki India: Higher Input Cost Drags Bottomline
- Entry in foods business: A DCF accretive move
HDFC BANK: Steady As She Goes
- HDFC Bank continues to make steady efforts on the digitization front as it gears up to be a digitally savvy bank. It has been revamping its apps, PayZapp and Smartbuy.
- HDFC Bank (HDFCB) posted steady growth and improvement in asset quality in Q3FY22. The growth focus and risk-on stance is back in the retail book with normalization of the environment.
- While HDFCB’s stock has been under pressure over the past 1Y, we believe apprehensions around its restructuring book and the impact on its payments led fee business are overdone.
Rajshree Polypack (RPPL): Margin Expansion Led The Q3FY22 Earnings Growth
- RPPL reported decent Q3FY22 earnings as gross margins expanded to 36.9% vs 33.7% QoQ and EBITDA margins expanded to 13.7% vs 13.5% QoQ.
- The margin expansion seems to have been led by higher utilization of finished goods and WIP inventory which helped in curtailing adverse impact of volatility in raw material pricing.
- The material decline in depreciation and amortization expenses by 13% QoQ is likely due to consolidation of the Unit 1 and Unit 3 facilities.
Aurobindo Pharma (ARBP IN): Pain Continues in the U.S. Formulation Business
- Aurobindo Pharma (ARBP IN) shares have corrected more than 40% from peak and are trading at discount to peers. The company’s U.S. business is under pressure, resulting in deteriorating profitability.
- We are not seeing any immediate respite in the U.S. formulation business. Hence, investors can avoid Aurobindo Pharma shares.
- However, value unlocking through stake sale in injectable business can be a near-term catalyst, resulting in relief rally in the stock.
Nesco: IT Park Sees Improved Occupancy; BEC Recovery In Sight
- Nesco reported decent Q3FY22 earnings led by improvement in occupancy in the IT Park business as well pick up in the exhibition business.
- With environment normalizing, exhibitions are likely to resume which should help Bombay Exhibition Center (BEC) revenues to come back.
- The indabrator business also reported strong revenue growth of 30%+ QoQ and 55%+ YoY.
RPSG Ventures: Tepid FMCG Growth, But Long-Term Prospects Intact
- RPSG Ventures reported strong Q3FY22 earnings, led by the BPO business where revenues grew 5% QoQ in INR terms and EBIT grew ~20% QoQ.
- The FMCG business however saw tepid performance with revenues declining to INR 95cr vs INR 100cr QoQ, due to temporary headwinds, however, the long-term prospects remain promising.
- The sports business is in nascent stage currently but the newly acquired IPL Lucknow franchise holds good promise.
Kolte Patil: Record Pre-Sales In Q3FY22; New Project Acquisition Likely in Mumbai
- Residential real estate sector continues to be on an upcycle in line with our thesis. Kolte Patil is benefitting from this trend and reported record quarterly pre-sales of INR 561cr.
- Kolte Patil continues to maintain its FY22 guidance at 2.5mm+ sq.ft. sales and FY23 projection at 3mm+ sq.ft. alongside continued improvement in realization as the contribution from Mumbai increases.
- Given strong balance sheet, Kolte Patil has been also bidding for new projects and is confident that it may acquire a large new project in Mumbai in the near-term.
Biosimilar deal with Viatris completes the value chain in its Biologics business
- BBL (a subsidiary of BIOS) will acquire Viatris’ Biosimilar business to create a vertically integrated company in the Biologics segment.
- With this acquisition, BBL will acquire the commercial infrastructure in developed/emerging markets, rights for all Biosimilar assets (including the in-licensed portfolio), and the option to acquire rights of bAflibercept.
- This also fills BBL’s gap in regulatory development and supply chain management of Biosimilars in the developed market.
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Huhtamaki India: Higher Input Cost Drags Bottomline
- Huhtamaki India’s (HIL) Q4CY21 performance was severally hit by a sharp rise in raw material costs and delay in taking price hikes
- Gross margins declined ~683 bps YoY, mainly due to a sharp rise in raw material costs dragging down EBITDA margins by 473 bps YoY to 1.6%
- On the topline front, revenues increased ~19% YoY to ~| 662 crore helped by a lower base
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Entry in foods business: A DCF accretive move
- Varun will start contract manufacturing for Pepsi’s snack brand Kurkure Puffcorn and we believe it is a step in right direction.
- Depending on the Varun’s progress in Kurkure Puffcorn business, we expect Pepsi to offer more products and regions to Varun.
- As of now Varun will set up a plant in Uttar Pradesh for Rs200-250mn and will produce Kurkure Puffcorn.
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