In today’s briefing:
- Delhivery IPO – Peer Comparison, What It Gains in Growth It Gives up in Margins
- Delhivery (RHD Updates): Unit Economics Have Taken a Beat
- India’s “Surprise” Rate Hike Was Overdue
- Indian Quick Commerce Startup Nears Unicorn Status with $200m Round
- 4QFY22 Result Update – Kotak Mahindra Bank
- Result Update – Kotak Mahindra Bank
- Kotak Mahindra Bank: Accelerating on Growth Engines; Speed Bumps Ahead
- Tata Steel: Strong Q4FY22 Performance; Deleveraging and Growth to Continue
- Titan – Underwhelming Print!
- KEC International: Higher Costs Dent Margins; Order Book Robust
Delhivery IPO – Peer Comparison, What It Gains in Growth It Gives up in Margins
- Delhivery is now looking to raise around US$700m in its upcoming India IPO, the company is backed by a host of financial investors, the largest being Softbank.
- Delhivery is an online logistics service provider which covers express parcel delivery, heavy goods delivery, part truckload (PTL) freight, truckload (TL) freight, supply chain solutions, cross border solutions etc.
- We have covered various aspects of the deal in our earlier notes. In this note, we will undertake a peer comparison.
Delhivery (RHD Updates): Unit Economics Have Taken a Beat
- Delhivery (1058656D IN) is a fully integrated logistics player in India. The company’s application for a listing has been approved by the regulators.
- The IPO will be open from 11-13th May and the company has downsized the IPO from INR7,460 crore to INR5,235 crores, with existing shareholders offloading shares worth of INR1,235 crores.
- This insight focuses on new data points from the company’s Red Herring Document (RHD).
India’s “Surprise” Rate Hike Was Overdue
- The Reserve Bank of India roiled the market yesterday with an unexpected inter-meeting policy rate increase, leading to rates moving higher across the curve.
- I have been arguing for a few months that the RBI needs to start raising rates based on the high inflation and narrowing rate differential with the US.
- Despite the move higher in rates in India, I continue to like paying rates in India, particularly against receivers in other countries to hedge against the volatile US rates.
Indian Quick Commerce Startup Nears Unicorn Status with $200m Round
- India’s quick commerce market is estimated to grow 15x by 2025 to hit a market size of nearly US$5.5 billion – large enough to propel prominent investors’ interest and gain the early-mover advantage.
- One of the companies at the helm of this nascent yet flourishing industry is Zepto, a startup launched by two Stanford University dropouts, Aadit Palicha and Kaivalya Vohra.
- The Y Combinator-backed startup promises 10-minute grocery deliveries, outpacing the delivery speeds of several ecommerce companies
4QFY22 Result Update – Kotak Mahindra Bank
- Credit growth aided by retail loans: Overall loans increased by 21.3% YoY and 7.2% QoQ.
- NII growth led by NIM expansion and strong loan growth: Calc. NIM expanded by 28bps YoY and 7bps QoQ.
- Stepping up efforts on SA sourcing: Overall deposits increased by 11.3% YoY and 2.1% QoQ, implying improving credit/deposit ratio, which directly translated into better margins for 4QFY22.
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Result Update – Kotak Mahindra Bank
- Sustained strong delivery on growth/NIMs; outlook remains positive
- Bank draws down contingent buffer given better asset quality outcomes
- Outlook and valuation: We revise our earnings estimates for FY23 by 4% but largely retain FY24 estimates.
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Kotak Mahindra Bank: Accelerating on Growth Engines; Speed Bumps Ahead
- Multiple tailwinds drive a strong quarter: KMB reported a strong set of earnings (NII growth of 18% YoY, RoA of 2.7%) on the back of reflating NIM (4.8% – best-in-class), strong loan growth, and negative credit costs (-0.5%) as asset quality continues to remain impressive (slippages at 1.2%; SMA II at 0.1%).
- Growth vs. margins – watch out for trade-offs ahead: With its formidable leadership in cost of funds (3.2%), KMB, from here on, is fully geared to accelerate growth in its secured and unsecured book further, supporting its large floating rate book (~68%) in a rising interest rate scenario.
- Subsidiary businesses continue to scale; maintain ADD: KMB’s subsidiaries continue to deliver a strong performance, contributing ~30% of the consolidated PAT on a steady basis.
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Tata Steel: Strong Q4FY22 Performance; Deleveraging and Growth to Continue
- Tata Steel reported a strong Q4FY22 performance which stood largely in line with our estimates.
- The company’s revenue increased by 39% YoY and 14% QoQ (in line with our estimate with a slight beat by 1%) but ahead of consensus by 5% at Rs 69,324 Cr
- We ascribe 6.0x, 5.0x and 3.5x multiple to India standalone, other operations (excl standalone) and Europe on FY24E EBITDA to arrive at a 1-year forward TP of Rs 1,700/share (unchanged from our previous TP), implying an upside potential of 35% from the CMP.
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Titan – Underwhelming Print!
- Q4FY22 highlights: Consol. revenue grew 4% YoY to INR 77.9bn. Ex-bullion, jewelry sales declined 3% YoY to INR64.7bn (three-year CAGR for Q4FY22
- Outlook: While Titan’s recovery execution has been on point, a tougher demand environment awaits (courtesy volatile gold prices).
- Financial highlights: Revenue came in at INR 13.3bn (+3.1x/+4.8x YoY/QoQ, a beat of 77%).
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KEC International: Higher Costs Dent Margins; Order Book Robust
- KEC International (KEC Int) reported a poor set of numbers in Q4FY22 with revenues at Rs 4,275 Cr (down 2% YoY), EBIDTA of Rs 252 Cr ( down 29% YoY), and PAT of Rs 112 Cr (down 42% YoY)
- The company’s EBIDTA Margins declined to 5.9% in Q4FY22 from 7.2% in Q3FY22 and 8.1% in Q4FY21, primarily owing to an increase in material costs as well as interest costs during the quarter
- We value KEC International at 12.5x (14x earlier) FY24E EPS to arrive at a target price of Rs 385/share (Rs.555 earlier) implying an upside of 3% from the CMP and revise our rating from BUY to HOLD.
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