In today’s briefing:
- Life Insurance Corporation of India IPO – Valuation Is Ok but Its Not the Best Deal Structure
- Axis Bank-Citi India M&A; The Devil Is in the Client Retention and Integration Detail
- Bajaj Finance: Business Momentum Strong, Outlook Remains Encouraging
- Privi Speciality Chemicals: Forensic Analysis
- Bajaj Finance – In Line Performance; Strengthening Itself for a Stronger FY23
- Gateway Distriparks – Gains Market Share in EXIM Rail Container Volumes
- HDFC Life Insurance – In Line Result; VNB Margin Stood Robust
- HDFC Life Insurance – Year Ends Well; Confident Outlook for FY23
- Mahindra CIE – All-Round Beat, Expect Improvement to Continue
- Ambuja Cements – Emphasizing on Growth, Efficiency and Sustainability
Life Insurance Corporation of India IPO – Valuation Is Ok but Its Not the Best Deal Structure
- Government of India (GoI) is looking to raise around US$2.7bn via selling a 3.5% stake in Life Insurance Corporation of India (LIC) in its upcoming India IPO.
- This is less than half of its initial plans in terms of fundraising target and comes at less than half of its initial valuation target.
- In this note, we will talk about the final deal terms and structure, RHP updates and do a quick valuation refresh.
Axis Bank-Citi India M&A; The Devil Is in the Client Retention and Integration Detail
- Axis Bank’s acquisition of the Indian Citi consumer banking franchise makes strategic sense, bolstering its market share and scale especially in credit cards, wealth management and incrementally in core deposits
- Strategy aside, Axis management’s execution needs to be totally on point to retain Citi clients and minimise the loss of key personnel given the acquisition’s seemingly full price tag
- Axis Bank tops the year-to-date share performance among the large cap Indian bank peers; yet we believe that, with regard to the Citi deal, management still has to deliver
Bajaj Finance: Business Momentum Strong, Outlook Remains Encouraging
- Bajaj Finance (BAF) reported a strong set of numbers in Q4FY22 which were ahead of our expectations, led by robust AUM growth of 29/9% YoY/QoQ and a strong PAT growth of 21/14% YoY/QoQ aided by lower provisions.
- The company’s AUM growth was driven by strong traction across products (except auto financing which de-grew by 16%)
- On the back of a recent correction in the stock, we revise our rating to BUY from HOLD with a revised target price of Rs 8,200 (7.8x FY24E ABV), implying an upside of 13% from the CMP.
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Privi Speciality Chemicals: Forensic Analysis
- Privi Speciality Chemicals (PRIVISCL IN) is a manufacturer, supplier, and exporter of aroma and fragrance chemicals.
- Promoter group and business restructuring took place last year where the Privi promoters bought majority stake from Fairchem, however, the source of funding remains unclear and yet to be observed.
- Even after restructuring of the business where oleochemicals was demerged into a seperate entity, Privi continues to have several discomforts in its balance sheet.
Bajaj Finance – In Line Performance; Strengthening Itself for a Stronger FY23
- BAF’s 4QFY22 earnings were in line, with a reported PAT of INR24.2b, led by healthy core AUM growth of 26% YoY and a pristine asset quality (GS3/NS3 stood at 1.6%/0.7% and credit cost moderated by ~150bp, despite having to provide INR1b on a large commercial account).
- BAF delivered an in line performance, despite a 7% miss on our NII estimate.
- NIM is likely to compress in FY23, driven by a pressure on yields, absence of large IPO financing (under new RBI guidelines), and expectations of an increase in borrowing cost.
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Gateway Distriparks – Gains Market Share in EXIM Rail Container Volumes
- GDL achieved EXIM volume increase of ~19% YoY in Q4FY22 while rail and port EXIM container volumes have increased by 2-5%.
- Management is confident of passing on the cost impact on account of removal of Indian Railway rebates.
- Maintain BUY with a revised target price of Rs102/share.
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HDFC Life Insurance – In Line Result; VNB Margin Stood Robust
- Persistency trends steady – HDFCLIFE reported a 11% YoY growth in premium, led by a 16% growth in renewal premium and an 8% growth each in single/first-year premium.
Net premium grows 11% YoY; VNB beats our estimate – HDFCLIFE reported an 11% YoY growth in net premium income (in line).
- Highlights from the management commentary – With the merger with Exide Life, the management aims to remain margin neutral.
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HDFC Life Insurance – Year Ends Well; Confident Outlook for FY23
- Robust performance amid challenging external environment: HDFCLIFE reported 17% YoY growth in APE in FY22 to Rs97.6.bn and 22% YoY growth in VNB to Rs26.8bn on a standalone basis.
- Board approves Rs3.5bn sub-debt raise to boost solvency: Solvency margins for FY22 stood at 176% (vs. 190% at 9MFY22 and 201% at FY21).
- Management confident about FY23 growth and margin outlook: Management sounded confident about achieving APE growth that is 2x the real GDP growth while gradually expanding standalone margins.
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Mahindra CIE – All-Round Beat, Expect Improvement to Continue
- MACA’s 1QCY22 performance was an all-round beat, led by strong revenue and profitability in the EU and robust margin in India
- We raise our CY22/CY23 EPS estimate by 29%/12% to account for an improvement in revenue and EBITDA margin in India and the EU business
- Consolidated revenue grew 18% YoY to INR25.9b (est. INR22.8b), EBITDA rose 3.5% to INR3b (est. INR2.24b), and adjusted PAT increased by 6% to INR1.6b (est. INR0.9b) in 1QCY22.
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Ambuja Cements – Emphasizing on Growth, Efficiency and Sustainability
- Capacity additions to drive volume growth – Ambuja Cements (ACEM) is a leading cement player with an installed cement capacity of 31.5mtpa as of CY21.
- Announces capacity expansion in the East, timely completion is vital.
- Robust volume growth and efficiency measure to drive profitability.
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