In today’s briefing:
- Smartkarma Webinar | Myth Vs Reality: Corporate Governance in India’s Financial Sector
- Life Insurance Corp of India IPO: Valuation Insights
- Bajaj Auto – Exports Growing on Strong Footing; Focus Shifting to EVs
- Embassy Office Parks REIT – New Lease Momentum Starting to Pick Up
- Hindustan Unilever – Near-Term Headwinds Temper Earnings Expectations
- Indian Hotels – Business Travel Rebounds; FTAs to Provide Further Boost…
- Macrotech Developers – Ticking the Right Boxes
- Macrotech Developers Limited – Record Year for Sales, Outlook Remains Strong
- Mahindra Logistics – Non-Auto Segment Driving Volume Growth
- PNB Housing Finance – Still Weak; Recovery Depends on Capital Raise
Smartkarma Webinar | Myth Vs Reality: Corporate Governance in India’s Financial Sector
In our next Webinar, we welcome back Analyst Hemindra Hazari , who will outline his views on recent corporate governance developments in Indian financial institutions, separating the narrative from the reality on the ground.
The webinar will be hosted on Wednesday, 4 May 2022, 17:00 SGT/HKT.
Hemindra Hazari is a SEBI-registered research analyst with over 25 years of experience in the Indian capital markets, specialising in banking and economy research. He has managerial experience in establishing profitable equities business, leading, and mentoring analysts. He has worked with prominent foreign and domestic capital market firms such as UBS, Societe Generale, HSBC, ASK Raymond James, and Karvy Stock Broking, and is a regular guest on business media channels and is respected for his non-consensus view on stocks and the market.
Life Insurance Corp of India IPO: Valuation Insights
- Life Insurance Corp of India (LIC) (1248Z IN) is the largest life insurer in India. At the IPO price range of Rs902-904, the Indian government aims to raise $2.6-2.7 billion.
- In Life Insurance Corp of India IPO: Key Takeaways from the RHP, we outlined the latest developments from the Red Herring Prospectus.
- In this note, we look at LIC’s valuation metrics. In light of the challenging market conditions, the IPO price range is reasonable.
Bajaj Auto – Exports Growing on Strong Footing; Focus Shifting to EVs
- Results beat expectations; gross margin ahead of our estimate: Reported revenue at Rs79.7bn was ahead of broader expectations.
- Initial signs of demand recovery in 2Ws; Management remains cautious
- Valuation and outlook: At CMP, the company is trading at 16x FY24E core EPS, which is broadly in line with its long-term mean multiple.
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Embassy Office Parks REIT – New Lease Momentum Starting to Pick Up
- Revenue up ~1.4% YoY and 1% QoQ at Rs7,488mn in 4QFY22: In 4QFY22, EOPR reported revenue of Rs7,488mn, up 1.4% YoY and 1% QoQ.
- EBITDA margin down by 190bps QoQ but up by 480bps YoY at 76.7%: EBITDA in 4QFY22 increased by 480bps YoY to 76.7% due to: (1) Increase in revenue by 1.4% YoY (2) Decline in other expenses by 22.4% YoY primarily due to (a) decline in rates and taxes by 92.4%YoY (b) decline in valuation expenses by 42.4% YoY (c) decline in miscellaneous charges by 18.7% YoY.
- Rise in depreciation expenses: Depreciation expenses rose by 1.8% QoQ to Rs2,024mn due to acquisition of fixed assets for the CAM services business.
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Hindustan Unilever – Near-Term Headwinds Temper Earnings Expectations
- While4QFY22resultswereaboveexpectations, management did highlight the likely sequential margin pressures over the next 2-3 quarters.
- Two factors that constrained HUVR’s earnings growth (ex-GSK) over the past two years were escalating material costs and lower-than-expected premiumization.
- Nevertheless, positive factors can emerge from rural recovery fueled by: a) good Rabi crop, b) good monsoon, and c) sustained agri commodity inflation, unless offset by input cost pressures for farmers.
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Indian Hotels – Business Travel Rebounds; FTAs to Provide Further Boost…
- About the stock: With room inventory of 20,581 rooms, Indian Hotels is a diversified player in the hotel industry through brands such as Taj, Vivanta, SeleQtions and Ginger brands.
- Q4FY22 Results: IHCL’s operational performance for Q4FY22 remained below estimates, impacted by the omicron wave.
- What should investors do? Along with the improved outlook, the company is also focusing on driving more efficiencies through cost optimisation.
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Macrotech Developers – Ticking the Right Boxes
- LODHA reported an improved performance in 4QFY22 across all metrics, with its best-ever quarterly and yearly bookings and strong collections, leading to a steady reduction (INR6b) in net debt to INR93b.
- As it closed FY22 on a high note, the management has set a pre-sales target of INR115b in FY23, up 27% YoY. It aims to generate INR60b of operating cash flows, which will help it reduce its net debt to sub-INR60b.
- We lower our FY23 pre-sales marginally (2%) to incorporate lower than estimated launches, but improve our collections and operating cash flows by 15% and 30%, respectively, on better collection efficiency
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Macrotech Developers Limited – Record Year for Sales, Outlook Remains Strong
- Record quarter/year for sales bookings: LODHA clocked Q4FY22 India business sales bookings worth Rs34.6bn vs. Isec estimate of Rs32.5bn (up 37% YoY and 33% QoQ) and it is the highest quarterly sales booking clocked by the company till date.
- Net debt reduced by Rs6.2bn QoQ to Rs93.1bn: The company’s India business net debt reduced by Rs25.5bn QoQ to Rs99.3bn in Dec’21 from Rs125bn in Sep’21.
- On track to achieve over Rs100bn of annual sales bookings over FY23-24E
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Mahindra Logistics – Non-Auto Segment Driving Volume Growth
- Improved utilization levels drive margin improvement – MLL delivered a revenue growth of 10% YoY in 4QFY22 (6% below our estimate), driven by 25% growth in the non-Auto vertical. The Auto segment reported flattish growth YoY.
- Volumes improve YoY; high depreciation impacts PAT – Revenue grew 10% YoY to ~INR10.7b; 6% below our estimates.
- Highlights from the management commentary – Revenue growth was driven by the non-Auto vertical. MLL saw good traction in freight forwarding and e-commerce.
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PNB Housing Finance – Still Weak; Recovery Depends on Capital Raise
- Sequential uptick led by retail loans: Overall loan assets increased by 0.2% QoQ, but declined by 8.6% YoY.
- Corporate asset quality deteriorates: Gross stage 3 loans, although down QoQ, remained elevated at 8.12% compared to 4.74% as of March’21.
- NIM impacted on multiple counts: NII was weak, declining by 31% YoY and 10.3% QoQ.
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Before it’s here, it’s on Smartkarma