In today’s briefing:
- Aarti Drugs: Price Hike and New Capacity to Aid in Growth
- Asian Paints: Surprise on Margin Front; Maintain BUY
- HSIE Results Daily: Asian Paints, SRF, Gujarat Gas, Dalmia Bharat, Max Financial
- Bharat Petroleum – Tear Sheet – Lucror Analytics
- Welspun India: No Respite from Margin Pressure Pain; Weak Outlook. Maintain Buy
- Zensar Tech: Robust Recovery; Superior Outlook
Aarti Drugs: Price Hike and New Capacity to Aid in Growth
- We believe the company’s profitability might be hit due to the above factors, prompting us to recommend a HOLD rating on the stock with TP Rs 450/share.
- Aarti Drugs Q4FY22 reported revenue grew 38% YoY which stood above our expectations, led by healthy growth in Chronic therapies, especially in the anti- diabetic segment.
- Domestic revenue grew ~37% on a YoY basis while exports grew by around 50% YoY and API volumes grew 23% on a YoY basis.
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Asian Paints: Surprise on Margin Front; Maintain BUY
- Asian Paints delivered a strong set of numbers in Q4FY22 with revenue up ~21% YoY to Rs 7,893 Cr, led by a combination of volume growth (up 8%) and price mix.
- However, the near-term challenge still persists and we would wait to see if the visibility of the near term performance sustains before we change our rating to BUY
- We continue to maintain our HOLD rating with an unchanged TP of Rs 3,200 (57x FY24E EPS).
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HSIE Results Daily: Asian Paints, SRF, Gujarat Gas, Dalmia Bharat, Max Financial
- Asian Paints: Asian Paints’ (APNT) Q4 performance was broadly in line.
- SRF: We retain our ADD rating on SRF, with a target price of INR 2,330, on the back of (1) continued healthy performance from speciality chemicals business and packaging films business; (2) strong balance sheet; and (3) deployment of Capex for high-growth speciality chemicals business over the next 3-4 years to tap opportunities emerging from agrochemical and pharmaceutical industries.
- Gujarat Gas: Our BUY recommendation on Gujarat Gas (GGL), with a price target of INR 625, is premised on (1) margin improvement; (2) portfolio of mature, semi- mature, and new geographical areas (GAs); and (3) compelling valuations, given superior return ratios among the city gas distribution players. Q4FY22 EBITDA was 19% above our estimate and APAT was 18% above, owing to 27% above expectation per unit EBITDA margin.
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Bharat Petroleum – Tear Sheet – Lucror Analytics
We view Bharat Petroleum Corporation Limited (BPCL) as “Low Risk” on our LARA scale, primarily due to its strategic importance to India and its SOE status (52.98% government-owned). It is the Indian government’s vehicle to manage retail fuel prices. Thus, BPCL enjoys significant credit uplift. We like the company’s large scale and leading position in the oil & gas downstream sector. It owns many of the country’s refineries, fuel stations and gas pipelines. However, BPCL remains exposed to volatility in crack spreads and crude prices, which affect its profitability. Capex requirements in its refinery, marketing and petrochemicals operations remain significant. BPCL’s credit metrics are quite healthy.
Our Credit Bias is “Negative” given India’s intended sale of its BPCL stake. The divestment is expected to be concluded in 2023, which could end the company’s SOE status and trigger the Change of Control clause for its debt. Uncertainty over the buyer and hence the strength of BPCL’s new parent is a potential negative for the credit.
We initiate coverage with a “Hold” recommendation on the BPCLIN notes.
Welspun India: No Respite from Margin Pressure Pain; Weak Outlook. Maintain Buy
- Welspun India Ltd (WIL) posted its worst quarterly numbers in the last two years as company continues to face severe headwinds on cost front and which is also beginning to weaken demand environment.
- The numbers were a complete miss on all fronts. WILs revenue for the quarter stood at Rs 2,227 Cr (down 10% from our estimate of Rs 2,477 Cr), up 4.3% YoY
- Effectively, we change our rating from BUY to HOLD with a revised target price of Rs 70 (from Rs 133 earlier), valuing the company at 9x FY24 EPS of Rs 7.8 per share, implying an upside of ~2% from the CMP 69.
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Zensar Tech: Robust Recovery; Superior Outlook
- We recommend a BUY on Zensar, aided by strong revenue growth momentum and better recovery
- Zensar Q4FY22 performance beat our expectations on the revenue front.
- We assign 14.8x P/E multiple to its FY24E earnings of Rs 24.25 per share to arrive at a TP of Rs 360 per share, implying an upside of 25% from CMP.
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