India

In today’s briefing:

Biocon- Management Meet Update
Camlin Fine Sciences – Execution Is the Key
CCL Products (India) – Spray-Dried Demand Visibility Remains Strong
Dr. Reddy’s Laboratories – Management Meet Update
Hero MotoCorp – Improving Rural Sentiments to Support Volume Recovery; Growth Drivers in Place
Indoco Remedies- Management Meet Update
J B Chemicals and Pharmaceuticals – Management Meet Update
Kansai Nerolac – Weakest Among Peers; Pain Seems Priced In
Oil India – Lower Dry Wells and DD&A Drive PAT Beat; Production Grows

Biocon- Management Meet Update

Biosimilar Business: If all goes well, the closure of Viatris transaction (acquisition of its biosimilar portfolio) may happen as early as 2HFY23.
The acquired business would have a topline of US$800mn and EBITDA of US$175mn.
Biocon will be able to build on the Viatris acquisition as it has multiple launches lined up in the biosimilar space and the same should help it to build on the base.

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Camlin Fine Sciences – Execution Is the Key

The management indicated that in their diphenols capacity, mix between HQ and Catechol cannot be skewed beyond a point (say, 55:45) and hence it has to produce Catechol, which is undergoing demand and pricing pressure.
Currently, CFIN is operating at US$1.5/kg loss in Catechol.
Vanillin capacity is expected to be commissioned in July’22, post which Catechol would be used for captive use and the same would arrest margin pressure.

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CCL Products (India) – Spray-Dried Demand Visibility Remains Strong

Management indicated that decline in EBITDA/kg in FY22 was mainly on account of mix change in favour of spray-dried and increase in cost items like power & fuel, freight etc. 30% of the contracts in the B2B business are on CIF basis.

Small packs capacity expansion (increase by >3x) has been completed and management believes that ~50% capacity would be utilized for captive purposes while the rest will be used for exports.

Demand for freeze-dried coffee remains soft on account of downtrading in different regions globally and capacity addition at the industry level.

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Dr. Reddy’s Laboratories – Management Meet Update

Russia Business: DRL’s business was strong in 4QFY22, partially due to overstocking, which should normalize in 1QFY23.

India Branded Prescription Business: DRL is aiming to keep improving its ranking in the IPM.

Novartis brands’ acquisition: The acquired brands will be promoted with a mix of existing field force and addition of new salesforce.

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Hero MotoCorp – Improving Rural Sentiments to Support Volume Recovery; Growth Drivers in Place

The company sees the overall demand sentiment improving and is experiencing some early signs of demand recovery in both Rural as well as Urban areas.
It expects double- digit growth in volume as all medium term and long term triggers are in place.

Demand is recovering on the back of festive and marriage season, which is going really well, and retail volume has outdone wholesale volume, leading to correction in inventory levels, which are lower than 6 weeks now.

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Indoco Remedies- Management Meet Update

Domestic Business: The domestic business growth should be driven by new launches, price increase (6%) and volume growth.

US Business: Indoco’s solid oral dosage portfolio has not seen much price erosion.

Inflationary pressures are easing, but still not fully normalised: The company acts as a contract manufacturer for several of its products in Europe and it has been able to pass on the cost increases in these products.

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J B Chemicals and Pharmaceuticals – Management Meet Update

CMO Business: JB Chemicals is the largest lozenges manufacturer in India with a capacity of 150cr units.

Reiteration of FY23 guidance: Expected future revenue growth in mid-teens and EBITDA margin expansion to 24-26%. R&D expense as a % of sales should not exceed 3%.

Domestic Market Reach: The company reaches out to a doctor base of 3,00,000 and a sales force of ~2,500 MRs with a large presence in Tier 2 and Tier 3 cities/towns, which make up ~40% of domestic sales.

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Kansai Nerolac – Weakest Among Peers; Pain Seems Priced In

Q4FY22 highlights: Standalone revenue grew 6% YoY to INR 14.1bn (in-line).
In decorative segment, volume declined 7-8%/value remained flat YoY in Q4; performance continued to lag the top two.
FY22 price hikes in decorative/industrial coatings stood at ~21/18%. Product portfolio continued to expand. Distribution grew 10% YoY in FY22.

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Oil India – Lower Dry Wells and DD&A Drive PAT Beat; Production Grows

By Emkay

Highlights: Standalone employee costs were 29% below our est. (down 22% yoy/9% qoq), but Other Expenditure was 20% above our estimate due to higher sundry expenses and provisions (down 5%/8%) in Q4FY22.
DD&A was down due to a 70% decline in depletion. Other Income fell 63% yoy to Rs4.9bn, a 34% miss (from lower dividends).
The tax rate was lower at 20%. For FY22, OIL reported S/A EBITDA/PAT of Rs53.7bn/Rs38.9bn, up over 4x/2x, driven by higher realizations.

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Before it’s here, it’s on Smartkarma

Jun 05

0

India: Havells India and more

In today’s briefing:

Havells India (HAVL IN) | Instant Gratification?

Havells India (HAVL IN) | Instant Gratification?

We believe Havells India (HAVL IN) has chosen the route of instant gratification by not increasing prices and gaining market share for Lloyd this AC Season.
After-Sales Service and aspirational value for the Lloyd brand is poor, there is no brand loyalty in the segments Lloyd operates in and is price sensitive.
Increased prices and course correction by Voltas Ltd (VOLT IN) could result in HAVL giving up some of its recent market share gains building a stronger Bear case for HAVL.

Before it’s here, it’s on Smartkarma

Jun 04

0

India: Voltas Ltd, Country Garden Holdings Co and more

In today’s briefing:

Voltas Ltd (VOLT IN) | Expected to Fight Back
Weekly Wrap – 03 Jun 2022

Voltas Ltd (VOLT IN) | Expected to Fight Back

Voltas Ltd (VOLT IN) had a brutal Q4FY24 especially for its UPC segment where it lost market share to rival Havells India (HAVL IN).
There is a possibility of regaining some of the lost market share with some pricing interventions and high brand equity, however, it will be at cost of margins.
The sector view remains bearish, however, relative to HAVL, the downside would be limited with market share gains in Air-Conditioners (ACs) as key monitorable.

Weekly Wrap – 03 Jun 2022

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

and more…

Before it’s here, it’s on Smartkarma

Jun 03

0

India: Edelweiss Financial Services, Dilip Buildcon Ltd, Aarti Industries, Infosys Ltd, Stove Kraft, Sundaram Finance, Fine Organic Industries Ltd and more

In today’s briefing:

Edelweiss: On Track for Strong FY23
Dilip Buildcon Ltd – Fixed Cost Projects Affect Margins
Aarti Industries – Growth Outlook Backed by Expansion Plans in Growing Chemistries
Infosys – Thrust Should Have Been on Core Services and ‘essential’ Digital
Stove Kraft Limited – Margin Pressure Offsets Topline Growth; Exports Situation
Sundaram Finance: Demand Pick-Up Encouraging, Asset Quality Improves
Fine Organic Industries (4QFY22): Blockbuster Quarter!

Edelweiss: On Track for Strong FY23

By Ankit Agrawal, CFA

After a tough 3Y since the IL&FS crisis, Edelweiss’ credit business is now getting back on track. Asset quality has normalized to <2% Net NPA.
Edelweiss’ other businesses continue to post robust growth. ARC, Asset Management and Insurance businesses are scaling up well. Wealth Management business is on track for listing by Feb 2023.
At a market cap of INR 5200cr, Edelweiss is trading cheap even if one ascribes zero valuation to its Credit business.

Dilip Buildcon Ltd – Fixed Cost Projects Affect Margins

Operational performance and guidance: For FY22, DBL reported revenue of Rs90bn, down 2.2% YoY.

Asset monetization: The management had signed a term sheet for the sale of 10 HAM assets to Shrem InVIT.

Order book: The current orderbook stands at Rs255bn, with 45% contribution from Roads, 17% from Irrigation, 22.5% from Mining, 9% from Tunnel, 5% from Special Bridges and the balance from Airport & Metros.

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Aarti Industries – Growth Outlook Backed by Expansion Plans in Growing Chemistries

Expansion Led Growth: The management has also guided for a Capex of Rs 3,000 Cr for the next 2 years.
The Capex will be majorly for adding more downstream products in the current benzene chain, new Chloro Toluene chain, and debottlenecking of the existing products.
All capacities set up during FY22 should ramp up and clock utilisation of ~70-90% by the end of FY24.

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Infosys – Thrust Should Have Been on Core Services and ‘essential’ Digital

Some metrics worth tracking: As indicated in our 4QFY22 results note (Downgrade cycle upon us), the net new TCV number (down 60% YoY in FY22 due to mega-deals in the base year) and the unbilled revenue growth were some of the things that stood out.

Things to watch out for in the coming days: (1) Whether the worsening profit picture of the US corporate sector – earlier than expected in the March quarter 2022 in certain consumer-facing sectors – spreads further (2) Whether those to whom offer letters are/were given are on-boarded as indicated (3) Whether hiring materially weakens from here on by the Indian service providers, especially if utilization is high (4) Will there be an upward revision in the guidance if we see a strong QoQ growth in 1HFY23 (5) Order inflow and commentary by Accenture as it releases its results in the latter half of June 2022; especially surrounding the discretionary spending on consulting.
We expect no deterioration as of this point. (6) Commentary on demand from the cloud hyper scalers and the Saas eco-system in the US (7) A stricter implementation of work from office rules – meaning companies are open to living with higher attrition as they see weakness in demand into the future.

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Stove Kraft Limited – Margin Pressure Offsets Topline Growth; Exports Situation

Segment-wise performance: Revenue breakdown stands at: Pressure Cooker – 22.8%; LED – 7.5%; Induction Cooktop – 14.2%; Gas Cooktop – 9.6%; Non-stick Cookware – 16.1% and Mixer/Small Appliances – 29.8%.

In 4QFY22, Pressure Cooker volume declined by 9.3% YoY, Gas Cooktop volume declined by 48% YoY, Induction Cooktop volume grew by 83.3% YoY
Non-stick Cookware volume declined by 19.5% YoY, LED volume declined by 5.6% YoY and Small Appliances/Mixer/Others volume declined by 1.5% YoY.

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Sundaram Finance: Demand Pick-Up Encouraging, Asset Quality Improves

Sundaram Finance’s (SUF) management indicated an overall improvement in the economic activity with demand regaining strength across segments and geographies in the first 2 months of FY23.
However, rising oil prices and high inflationary pressure coupled with rising interest rates, may lead to some downward pressure on demand in the near-term
We upgrade our rating from HOLD to BUY with a target price of Rs 2,195/share (based on SOTP valuation), implying an upside of 20% from the CMP.

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Fine Organic Industries (4QFY22): Blockbuster Quarter!

Financial performance: Revenue grew 33/91% QoQ/YoY to INR 6.2bn in Q4 on the back of higher realisations, courtesy full pass-through of input cost price hikes, on boarding of new customers, repeat orders, better product mix, foreign exchange gains, and inability of competitors to supply their products, owing to non-availability of raw materials.
The contribution of exports to total revenue was 60% in FY22. EBITDA came in at INR 1.6bn, +100/+230% QoQ/YoY, with EBITDA margin improving significantly to 26% (+868/+1,090bps QoQ/YoY), owing to shift in the product mix towards high- margin value-added products, new customers, and new approvals in Q4.
APAT came in at INR 1.2bn (+135/+283% QoQ/YoY).

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Before it’s here, it’s on Smartkarma

Jun 02

0

India: ABM Investama, Prestige Estates Projects, NIFTY Index, United Spirits, Berger Paints India, Jubilant Foodworks, Fine Organic Industries Ltd, La Opala Rg Ltd, Bharat Petroleum Corp, Restaurant Brands Asia and more

In today’s briefing:

Asia HY Monthly – Indonesian Bankruptcy Regime Revisited – Lucror Analytics
Prestige Estates Projects – Blackstone Deal Conclusion Should Boost Liquidity and Reduce Debt
Nifty Sub 17k Barrier Short Zone
United Spirits – Robust Operating Performance; Strategic Review a Positive for Medium-Term
Berger Paints India Ltd – Disappointing Quarter; Management Not Unduly Worried by New Competition
Jubilant FoodWorks – Operating Performance In-Line; Mr. Khetarpal Comes in as CEO & MD from Amazon
Fine Organic Industries – Blockbuster Quarter!
La Opala RG – Tracking Expectations; Demand Outlook Is Positive
Morning Views Asia: Bharat Petroleum Corp, Central China Securities, Tata Motors ADR
Restaurant Brands Asia – Slight Miss; Guidance Upped for India Business

Asia HY Monthly – Indonesian Bankruptcy Regime Revisited – Lucror Analytics

This month, we provide an update on developments related to the Indonesian bankruptcy regime since November 2017.

The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the “In-Focus” section. The Asia Monthly is intended to broaden investors’ understanding of the Asian USD high-yield market.

Prestige Estates Projects – Blackstone Deal Conclusion Should Boost Liquidity and Reduce Debt

We maintain our Buy rating on PEPL with a revised target price (TP) of Rs514 (earlier Rs 617) based on the FY24E NAV.
We have increased cap rate from 7.5% to 8.5% given the increase in interest rate.
Also, we have increased inflation rate of cost component from 5% to 5.5% given the increase in input costs.

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Nifty Sub 17k Barrier Short Zone

By Thomas Schroeder

India is a market (like Taiwan) that faces a shakeout into summer turbulence after holding the top end of the range since late 2021 albeit amid a drifting decline.
Nifty met the gap resistance to test the short side with a higher conviction sell zone closer to that 17k of support (now pivotal resistance).
USD/INR bull triangle maturing and did not blink during the USD pullback in Asia. 76.50/70 buy support if we do get a dip.

United Spirits – Robust Operating Performance; Strategic Review a Positive for Medium-Term

4QFY22 headline performance: Standalone net sales grew by 9.5% YoY to Rs24.4bn (v/s est. Rs25bn).

FY22 performance: Revenue and EBITDA grew by 18.9% (led by ~12% volume growth) and >50%, respectively.

Other highlights: (1) ENA and Glass are ~2/3rd of the company’s raw material basket and both the commodities are under inflationary pressure, witnessing inflation in double digits. (2) Recently received price increases from Assam, Rajasthan and Madhya Pradesh. (3) UNSP maintained its guidance to deliver mid to high teen operating margin.

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Berger Paints India Ltd – Disappointing Quarter; Management Not Unduly Worried by New Competition

4QFY22 consolidated headline performance: Revenue grew by 8% YoY to Rs21.9bn (vs our est. of Rs25.1bn). Consolidated gross margin was down by 480bps YoY at 38.9% (+220bps QoQ; vs our est. of 40.1%).

Standalone 4QFY22 Revenue, EBITDA and APAT grew by 7.3%, 3.8% and 1.6% YoY, respectively.

International & subsidiary business performance: Polish subsidiary Bolix S.A had a robust topline growth, aided by improved sales in the UK and France.

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Jubilant FoodWorks – Operating Performance In-Line; Mr. Khetarpal Comes in as CEO & MD from Amazon

4QFY22 headline performance: Standalone topline was up 12.9% YoY at Rs11.6bn, in-line with our estimate of Rs11.4bn.

Store additions in 4QFY22: The company again created a new all-time record with the opening of 80 new Domino’s stores, taking the network strength to 1,567 stores as of 31st March’22.

FY22 standalone performance: Revenue, EBITDA and APAT grew by 32.5%, 44.1% and 89.6% YoY, respectively.

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Fine Organic Industries – Blockbuster Quarter!

Financial performance: Revenue grew 33/91% QoQ/YoY to INR 6.2bn in Q4 on the back of higher realisations, courtesy full pass-through of input cost price hikes, on boarding of new customers, repeat orders, better product mix, foreign exchange gains, and inability of competitors to supply their products, owing to non-availability of raw materials.

Con call highlights: (1) Currently, all plants are running at their optimum capacities.

Change in estimates: We raise our FY23/24 EPS estimates by 30.4/24.9% to INR 112.5/124.3, to factor in higher realisations and better margins, owing to a better product mix, new customers, and capacity ramp-up.

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La Opala RG – Tracking Expectations; Demand Outlook Is Positive

4QFY22 performance: LOG’s 4QFY22 revenue at Rs896mn (up 12% YoY) came in line with our estimate.
Revenue was well ahead of pre-Covid level. The management indicated that growth was equally strong across channels.
EBITDA margin witnessed 520bps QoQ moderation despite strong gross margin, mainly on account of higher other expenses (4Q other expenses are always high on account of director commissions and channel partners incentives etc.)

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Morning Views Asia: Bharat Petroleum Corp, Central China Securities, Tata Motors ADR

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

Bharat Petroleum Corp
Central China Securities
Tata Motors ADR

Restaurant Brands Asia – Slight Miss; Guidance Upped for India Business

4QFY22 standalone topline grew by 37% YoY to Rs2.7bn (vs est. Rs2.8bn).

4QFY22 consolidated topline grew by 24.4% YoY to Rs4bn. Gross margin expanded by 100bps YoY to 63.6% (down 30bps QoQ).

FY22 performance: Standalone revenue and EBITDA grew by 90.9% YoY and 175.7% YoY, respectively.

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Before it’s here, it’s on Smartkarma

Jun 01

0

India: Daikin Industries, Life Insurance Corp of India (LIC), Clean Science and Technology, G R Infraprojects, United Spirits, PNC Infratech Ltd, Sun Pharmaceutical Industries, Aarti Industries, Apar Industries and more

In today’s briefing:

India Channel Insight #36 | Daikin, Havells, Voltas
Life Insurance Corporation of India: Time to Think About Scope 3 “Financed Emissions”
Clean Science & Technology – 4Q Ahead of Estimates; Continues to Gain Customer
G R Infraprojects: Efficient Execution to Drive Growth; Maintain BUY
United Spirits Update: All Round Progress
PNC Infratech – Monetization of HAM Portfolio a Key Monitorable
Sun Pharma Industries – One-Time Costs Hit Earnings
Aarti Industries – In-Line Quarter
United Spirits (4QFY22): Uptrend Story Continues; Uninspiring Brand Sale. Maintain ADD
Apar Industries – Strong Quarter; Outlook Mixed

India Channel Insight #36 | Daikin, Havells, Voltas

The overall Air Condition (AC) season has been good, with volumes up by more than +20% compared to the last two years.
Daikin Industries (6367 JP) & Voltas Ltd (VOLT IN) have performed below expectations with stiff pricing and poor dealer support.
Havells India (HAVL IN) (Lloyd) market share gain is on the back of lower prices. The focus has moved from premiumizing brand & expanding margins to gaining market share.

Life Insurance Corporation of India: Time to Think About Scope 3 “Financed Emissions”

By Kyle Rudden

For better or for worse, the Life Insurance Corporation of India (LICI IN) IPO is done. Maybe we should start thinking about LIC’s Scope 3 “financed emissions” (aka “portfolio emissions”).
Financed emissions are investors’ “shares” of investees’ Scopes 1 and 2. A bit like someone else pulling the trigger, but being sent to the gallows for selling them the gun.
Portfolio emissions are major source of climate-related financial risks, often “hidden” because financed emissions are grossly under-reported (or, quite commonly, un-reported).

Clean Science & Technology – 4Q Ahead of Estimates; Continues to Gain Customer

We are comfortable with everything but valuation: Implementation of sustainable chemistry practices and ongoing process improvement (to cut down or eliminate the use of toxic materials such as KSMs, Efflux) is the need of the hour.
While many companies are increasingly taking initiatives on that front, CLEAN is the pioneer in the same and is the classic example of why the chemical industry should shift to these practices in order to protect the environment without compromising their operational performance.
Hence, valuation premium vis-à-vis like-to-like peers as well as chemicals industry should persist, in our view.

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G R Infraprojects: Efficient Execution to Drive Growth; Maintain BUY

GR Infraprojects Ltd (GRIL) reported a decent set of numbers in Q4FY22. The company reported revenue of Rs 2,268 Cr, better than our estimate of Rs 2,103 Cr, down 13.7% YoY
It registered EBITDA Margins of 17.8% in Q4FY22 (our estimate: 14.9%) as against 15.6% in Q4FY21
We maintain a BUY on GRIL and value the EPC business at 15x FY24E EPS and HAM portfolio at 1x Book Value to arrive at a target price of Rs 1,765/share, implying an upside of 26% from the CMP.

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United Spirits Update: All Round Progress

By Nitin Mangal

United Spirits (UNSP IN) Q4F22 results have shown some good improvement.
There is all round progress witnessed, including debt reduction, focus on gaining market share, better scope of working capital management. There is an intent of supporting premiumization as well.
The results and strategic decision making reinforces our bullish stance on United Spirits; the cherry on top is that there is further room for improvement in the short-mid term.

PNC Infratech – Monetization of HAM Portfolio a Key Monitorable

Comfortable order book position: As on 31st March’22, the unexecuted orderbook stood at Rs146bn.

FY23 guidance: The management has given guidance of 15% revenue growth for FY23 and 13-13.5% EBITDA margin.

Asset monetization update: PNC has concluded the deal to sell the Ghaziabad-Aligarh project to Cube Highways on 29th May, 2022.

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Sun Pharma Industries – One-Time Costs Hit Earnings

Sun Pharma reported revenue at Rs94,468mn, up 10.8% YoY but the same was down 4.2% QoQ.

India Branded Generics business reported sales at Rs30,956mn, up 15.9% YoY, but down 2.3% QoQ

US Formulations business reported sales at Rs29,246mn, up 8.5% YoY but down 1.6% QoQ.

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Aarti Industries – In-Line Quarter

4QFY22 performance highlights: ARTO’s consolidated adjusted revenue grew by ~45% YoY in 3QFY22 wherein Specialty Chemicals and Pharma segments grew by ~45% YoY and ~73% YoY, respectively.

Growth guidance: ARTO incurred ~Rs13bn capex in FY22 and management has guided for >Rs30bn capex over the next 2 years.

Update on long term contracts, Pharma demerger: Capacity for 1st long term contract, which got terminated, is expected to ramp up over the next 2 years and management is mulling a fresh capex of ~Rs10bn in order to offer the complete Dicamba chain.

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United Spirits (4QFY22): Uptrend Story Continues; Uninspiring Brand Sale. Maintain ADD

P&A continues its growth momentum: Net revenue was up by 9% YoY (+12% in Q4FY21 and +16% in Q3FY22) vs. HSIE’s 13%.

Total volume was up by 5% to 20.7mn cases (+8% in Q4FY21, +4% in Q3FY22) vs. HSIE 20.6mn cases. P&A revenue up by 15% YoY (+26% in Q4FY21, +20% in Q3FY22, HSIE 17%).

P&A realisation was up 6% YoY (+5% in Q4FY21 and +11% in Q3FY22) to INR 1,617/case.

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Apar Industries – Strong Quarter; Outlook Mixed

Conductors segment update: The Conductors segment’s revenue increased by 28% YoY to Rs15.03bn (48.3% of total sales)

Oil segment update: Oil segment’s revenue grew by 29.2% YoY to Rs9.28bn (29.8% of total sales).

Outlook: We expect 8.1%/2.6% revenue/earnings CAGR over FY22-FY24E.

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Before it’s here, it’s on Smartkarma

May 31

0

India: Kolte Patil Developers, HealthCare Global Enterprises, JSW Steel Ltd, Bata India Ltd, Lumax Industries, Brigade Enterprises, CCL Products India and more

In today’s briefing:

Kolte Patil: Reported Stellar FY22 Earnings; All Is Set To Post Even Better FY23
HCG: Consolidation Continues to Boost Profitability
JSW Steel – Earnings Flash – FY 2021-22 Results – Lucror Analytics
Bata India: Showing Resilience Amidst Challenging Times; Maintain BUY
Lumax Industries: Strong Beat on Estimates; Long-Term Outlook Positive
Brigade Enterprises – Strong Launch Pipeline Amid Healthy Residential Demand
CCL Products: Decent Performance Despite Prevailing Uncertainties

Kolte Patil: Reported Stellar FY22 Earnings; All Is Set To Post Even Better FY23

By Ankit Agrawal, CFA

Kolte Patil reported a strong FY22 and guided for even a stronger FY23. FY22 closed with highest ever sales value and collections.
FY23 is set to fire on all cylinders – new launches, business development aka new project acquisitions and delivery of under-construction projects.
FY23 sales value is expected to be 2200cr, implying PAT potential of 220cr. At current market cap of 1800cr, Kolte Patil is trading cheap at 8x P/E per FY23E PAT.

HCG: Consolidation Continues to Boost Profitability

By Ankit Agrawal, CFA

HCG’s continued focus on consolidation is leading to improving profitability. Furthermore, with the normalization of post-COVID environment, elective surgeries and international footfalls are inching back to pre-COVID levels.
Since the onboarding of CVC Capital as the majority shareholder, HCG’s capex discipline has been noteworthy. Capex is focused now on driving growth in existing centers vs opening new centers.
We project HCG’s PAT to grow to INR 170cr+ by FY25. Valuing HCG at FY25 exit P/E of 47x suggests an IRR potential of 27% over the next 3Y.

JSW Steel – Earnings Flash – FY 2021-22 Results – Lucror Analytics

By Trung Nguyen

In our view, JSW Steel’s Q4 and FY 2021-22 results were robust, with strong growth in production volumes, revenues and earnings. The financial risk profile has improved and is healthy. Liquidity is sound.

However, we believe that JSW has experienced the peak of the cycle and profitability will likely reduce from current levels, driven by multiple factors including the Russia-Ukraine war which drove up key raw material prices (coking coal and iron ore). In addition, the recent export duty will likely also hurt India’s domestic steel players (particularly JSW), whose exports as a percentage of sales volumes were roughly double that of the industry. Hence, we foresee significantly lower earnings despite healthy growth in volumes and revenues in FY 2022-23. We expect a double-digit increase in volumes, driven by the capacity expansion programmes at Dolvi and Vijayanagar. We also project double-digit growth in revenues (c. 20%) in FY 2022-23, on account of the volume expansion and prices.

Bata India: Showing Resilience Amidst Challenging Times; Maintain BUY

Bata India (BATA) reported Q4FY22 revenue at Rs 665 Cr as against Rs 590 Cr in Q4FY21, registering a growth of 12.8% despite Omicron disruptions.
We remain positive on the stock from a long-term perspective given its immense growth potential
Maintain BUY with revised TP of Rs 2,200/share and assign a PE of 43x FY24E EPS.

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Lumax Industries: Strong Beat on Estimates; Long-Term Outlook Positive

Lumax Industries (Lumax Inds) reported a stellar set of results which was ahead of our estimates.
The revenue for the quarter stood at Rs 549 Cr (our estimate – Rs 496 Cr), reporting a 9% YoY growth
We maintain a BUY rating on the stock with a revised target price of Rs 1,450/share (Rs 1,350 earlier) valuing it at 13x of FY24E P/E, implying an upside of 25% from the CMP.

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Brigade Enterprises – Strong Launch Pipeline Amid Healthy Residential Demand

Revenue grows by 19.1% YoY and 2.3% QoQ in 4QFY22 to Rs9,423mn: In 4QFY22, revenue grew by 19.1% YoY and 2.3% QoQ to Rs9,423mn.

Strong demand in residential segment: Revenue from the residential segment grew by 2% QoQ and 12% YoY to Rs7,186mn in 4QFY22.

Residential volume continues to remain strong in 4QFY22: The company sold 1.5mn sqft in 4QFY22, down by 9.6% YoY and up by 36% QoQ in 4QFY22.

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CCL Products: Decent Performance Despite Prevailing Uncertainties

CCL Products (CCLP) delivered a decent performance in Q4FY22 with consolidated revenue of Rs 376 Cr (Our est: Rs 381 Cr), up 13% YoY on account of ~7% volume growth and higher realizations.
However, the company’s GPM came in at 51.2% and declined by 642bps YoY mainly on account of the deferment of large consignments (500-600 tonnes) to Russia on account of the war
CCL Products is one of our high conviction BUY with a revised TP of Rs 560/share (Rs 585/share earlier), as we continue to value it at a target P/E multiple of 23x its FY24E EPS.

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Before it’s here, it’s on Smartkarma

May 30

0

India: Adani Enterprises, IOL Chemicals And Pharmaceuticals Ltd, City Union Bank, Colgate Palmolive (India), Container Corp of India, Hindalco Industries, Hitachi Home & Life Solutions India Ltd, Muthoot Finance, Page Industries, Praj Industries and more

In today’s briefing:

NIFTY Indices: Quiddity Leaderboard for September 2022
J B Chemicals and Pharmaceuticals – Strong Growth in Contract Manufacturing Bus
City Union Bank – Credit Growth +ve; Lower Treasury Gains to Cap ROE
Colgate-Palmolive (India) – Margin Surprises but Growth Disappoints
Container Corporation of India – No Clarity yet on Land Licence Fees; Higher Ca
Hindalco Industries Ltd – Prudent Capex Amidst Macro Risks; Retain BUY with Lower TP
Johnson Controls-Hitachi Air Conditioning India – Margin Pressure Offsets Topline Growth
Muthoot Finance – Competition Impact Visible
Page Industries – Strong Set of Numbers; Long-Term Growth Visible
Praj Industries Ltd – Growth Engines Fired, Aided by Strong Execution

NIFTY Indices: Quiddity Leaderboard for September 2022

By Janaghan Jeyakumar, CFA

The NIFTY Index Family has a series of broad equity indices that represents large, mid and small market capitalisation segments of the Indian public equity market.
The review of broad market indices will be done on a semi-annual basis and the changes will be implemented at the end of March and September every year.
Below is a look at the names leading the race to become Adds and Deletes for NIFTY 50, NIFTY 100, and NIFTY 500 in September 2022.

J B Chemicals and Pharmaceuticals – Strong Growth in Contract Manufacturing Bus

JB Chem reported revenue at Rs6,246mn, up 18.2% YoY and 4% QoQ. EBITDA stood at Rs1,249mn, up .8% YoY but down 2.5% QoQ.
EBITDA margin stood at 20%, down 344bps YoY and 133bps QoQ. PAT stood at Rs849mn, down 15.7% YoY but up 1.2% QoQ.
Domestic Formulations sales at Rs2,870mn grew by 29.9% YoY and 3.2% QoQ.

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City Union Bank – Credit Growth +ve; Lower Treasury Gains to Cap ROE

Guiding for low-to-mid double digit credit growth: Overall loan book increased by 11.6% YoY and 7.1% QoQ.

Recoveries remain strong; repayment trends improving: Absolute GNPA declined by Rs0.65bn (down 3.3% QoQ) to Rs19.3bn.

NIM stable QoQ; weak treasury outlook to impact profit: NII growth for 4QFY22 was 16.8% YoY and 2.2% QoQ.

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Colgate-Palmolive (India) – Margin Surprises but Growth Disappoints

4QFY22 headline performance: CLGT’s 4QFY22 revenue (including other operating income) grew by 1.4% YoY to Rs13bn (vs est. Rs13.6bn).

FY22 performance: Sales, EBITDA and APAT grew by 5.3%, 3.7% and 4.1% YoY, respectively.

Other highlights: (1) India is identified as the key emerging market to contribute to the overall growth of the parent, so the focus on growth will remain.

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Container Corporation of India – No Clarity yet on Land Licence Fees; Higher Ca

(1) The company has paid LLF of Rs4.65bn in FY22 against expectation of Rs4.50bn (as stated by management).

(2) Export volume grew marginally by 0.5% QoQ in 4QFY22 due to container shortage amid the Russia- Ukraine crisis and higher freight costs.

(3) The land policy is still under discussion with the government.

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Hindalco Industries Ltd – Prudent Capex Amidst Macro Risks; Retain BUY with Lower TP

Novelis (Results reported on 11th May): EBITDA/tonne declined to $437/tonne (Q3FY22 at $544 and Q4FY21 at $514/tonne).
Aluminium India: EBITDA stood at a record high at Rs 4,050 Cr, up 123% YoY and 20% QoQ and stood ahead of our estimate by 5% led by higher realised prices, higher sales volume (Q4FY22: 336kt, Q3FY22 at 325kt and Q4FY21 at 329kt and higher VAP sales (Q4FY22: 93kt, Q3FY22 at 86kt and Q4FY21 at 92kt).
Copper India: EBITDA stood at Rs 387 Cr up 20% YoY and flat QoQ due to operational efficiencies and improved by-product realizations.

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Johnson Controls-Hitachi Air Conditioning India – Margin Pressure Offsets Topline Growth

Strong performance expected in 1QFY23: JCH-IN has grown by 60.4% over the 4QFY20 base.

Expect margins to improve going forward: EBITDA margin contracted by 770bps YoY to 5.7% in 4QFY22 mainly due to commodity cost pressures (raw material costs were up 40.7% YoY).

Capital employed increased: Capital employed for Cooling Products rose to Rs5.53bn in 4QFY22 from Rs4.39bn in 4QFY21.

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Muthoot Finance – Competition Impact Visible

Volume growth slows; guiding for 12-15% growth in FY23: Overall gold loan AUM increased by 10.8% YoY and 6.1% QoQ.

While we note the growth in absolute value, underlying trends indicate this was driven by a higher ticket size and increasing customer leverage while customer growth indicators weakened, possibly due to heightened competition from smaller NBFCs and banks.

Total stock of gold holding (in tonnes) increased to 187, up 9.4% YoY and 5.1% QoQ.

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Page Industries – Strong Set of Numbers; Long-Term Growth Visible

Healthy demand outlook: Demand for consumer discretionary remains intact for PAGE even though it is tepid for others – due to value for money products with reasonable prices to hold on to consumers.

Margins: The management undertook price hikes by ~8% during Dec ’21 in response to input cost increases, the effect of which can be attributed to this quarter.

Distribution reach expansion: PAGE will continue to maintain the pace of outlet expansion both across EBOs and MBOs and is looking to reach ~1,50,000 MBO outlets in the next couple of years and double the EBO count from 1,000 EBOs in the next 4 years.

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Praj Industries Ltd – Growth Engines Fired, Aided by Strong Execution

Strong Demand for Domestic Grain: During Q4FY22,66% of the new orderbook was for Grain-based capacity(starchy feedstock), indicating momentum in Grain-based distilleries.
Key Business Updates: India has achieved the highest-ever Ethanol blend of ~10% in 2022.
Strong Execution: The company is witnessing more growth in Grain-based distilleries which has reduced the seasonality of the business which was predominantly based on the sugar cycle.

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Before it’s here, it’s on Smartkarma

May 29

0

India: Dabur India Ltd, ITD Cementation India and more

In today’s briefing:

Dabur India Ltd (DABUR IN) | Some Things Never Change
ITD Cementation- Forensic Analysis

Dabur India Ltd (DABUR IN) | Some Things Never Change

Dabur India Ltd (DABUR IN) is over-exposed to rural India where the recovery is uncertain and slow.
Channel feedback with regards to relationships with distributors and the company’s strategic direction has been poor.
A weak operating environment coupled with a weak on-ground execution suggests underperformance may continue.

ITD Cementation- Forensic Analysis

By Nitin Mangal

ITD Cementation India (ITCE IN) is one of the players engaged in the construction sector, especially for projects like Metros and Marines.
Upon analysing the annual reports it was found that the company faces a plethora of forensic alarms.
This includes re-statement of key line items, high growth of unbilled revenues, cash generation issues among others as highlighted in the insight.

Before it’s here, it’s on Smartkarma

May 28

0

India: Oyo, Lenovo and more

In today’s briefing:

Oyo Pre-IPO – The Negatives – Muddied by Controversies and Operates a Cash Burning Machine
Weekly Wrap – 27 May 2022

Oyo Pre-IPO – The Negatives – Muddied by Controversies and Operates a Cash Burning Machine

By Clarence Chu

Oyo (1698548D IN) is looking to raise around US$700m in its upcoming India IPO. The IPO will consist of both a primary and secondary portion.
Oyo runs a digital platform that serves as a hotel and home aggregator between patrons, which include owners and lessors, and customers, such as travelers and guests booking for accommodation.
The firm’s business remains far from being profitable and is running on a cash-burning model. Also, it’s listing is muddied by a host of controversies in the past and present.

Weekly Wrap – 27 May 2022

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

and more…

Before it’s here, it’s on Smartkarma