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
- 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
- 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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