In today’s briefing:
- India Channel Insight #35 | ITC, Britannia, Nestle India, Dabur, Marico
- TVS Motor (TVSL IN) | Supply Issues & EV Ramp Up the Key
- Morning Views Asia: Delta Dunia Makmur, Indika Energy, JSW Steel Ltd, Medco Energi, Pakuwon Jati
- JK Cements: Growth Visibility Intact. Maintain BUY
- JK Cement Ltd – In-Line Results; New Capex to Drive Volume Growth from FY24
- Advanced Enzyme Technologies – Near Term Challenges Continue
- Power Mech Projects – Result Above Expectations; Rs36bn Revenue Guidance Given
- The Ramco Cement Ltd – Good Sequential Improvement in Profitability
- Rossari Biotech – Complete Pass-Through Is a Challenge in Formulations Biz
- Thermax – Weak Profitability Offsets Strong Topline Growth; Strong Order Inflow
India Channel Insight #35 | ITC, Britannia, Nestle India, Dabur, Marico
- Our checks primary done over North of India suggest a stable to improving rural environment
- There is a sense of aggression in ITC Ltd (ITC IN), Britannia Industries (BRIT IN) is well placed to grow volumes & Nestle India (NEST IN) is expected to be a steady performer.
- Dabur India Ltd (DABUR IN)’ s image at the distributor level is quite shocking and Marico Ltd (MRCO IN)‘s products are more prone to volatility.
TVS Motor (TVSL IN) | Supply Issues & EV Ramp Up the Key
- TVS Motor (TVSL IN)’s market share gains in the premium segment can further accelerate in case of easing supply issues and rural recovery.
- While EV may not materially move the volumes in the near term, the ramp-up of the newly launched TVS iQube (EV) will determine the sentiment around the stock.
- The sector view is positive, but current valuations are not lucrative enough to ignore capital allocation issues that have been a concern for TVSL.
Morning Views Asia: Delta Dunia Makmur, Indika Energy, JSW Steel Ltd, Medco Energi, Pakuwon Jati
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.
JK Cements: Growth Visibility Intact. Maintain BUY
- JK Cement reported satisfactory volume and revenue growth in Q4FY22, supported by better demand and higher realization in its key markets.
- The stock is currently trading at 15x/12x FY23E/FY24E EV/EBITDA
- We value JKCL at 13x FY24E EV/EBITDA to arrive at a TP of Rs 2,800 (Rs 3100 earlier) implying an upside of 15% from the CMP and maintaining our BUY rating on the stock.
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JK Cement Ltd – In-Line Results; New Capex to Drive Volume Growth from FY24
- 4QFY22 performance: JKCE reported revenue of Rs22.7bn, up 10.5% YoY, driven by 1% YoY growth in volume and 9.5% YoY growth in realization.
- Capex plans: Work on the Panna project has started in full swing. Work at both the locations of the integrated plant and grinding units is progressing as per schedule.
- White cement pricing can increase from hereon: For the past several quarters, white cement realizations have been hovering between Rs11,500/mt and Rs12,000/mt with very limited growth.
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Advanced Enzyme Technologies – Near Term Challenges Continue
- 4QFY22 earnings performance: ADVENZY’s 4QFY22 revenue declined by ~1% YoY. The Human Nutrition segment, which contributes ~66% to the overall revenue, declined by ~6% YoY whereas the Bio-processing segment declined by ~5% YoY.
- The Animal Nutrition segment grew by ~15% YoY. Region-wise, overall performance was subdued; however, Europe business was impacted more and declined by 43% YoY.
- India business, which contributes 45% to the topline, reported ~2% YoY growth. EBITDA declined by ~27% YoY mainly on account of higher other expenses on account of increase in the costs of power & fuel, sales promotion, consulting, freight etc.
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Power Mech Projects – Result Above Expectations; Rs36bn Revenue Guidance Given
- Strong ordering pipeline, margins to improve going forward: The company has received two orders worth Rs2.97bn in 1QFY23.
- Working capital position: Working capital days at the end of 4QFY22 saw an improvement to 145 days vs 194 days at the end of 4QFY21 and 180 days at the end of 3QFY22.
- Outlook: We expect revenue/earnings CAGR of 29.3%/42.4% over FY22-FY24E. Current valuation is inexpensive considering the company’s healthy order book, low D/E and decent RoCE (18% in FY20).
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The Ramco Cement Ltd – Good Sequential Improvement in Profitability
- 4QFY22 performance: TRCL has reported decent set of numbers for 4QFY22, given the cost inflation and pressure on demand & pricing in the market.
- Capex update: TRCL had earlier commissioned the Jayanthipuram clinker line 3 of the 1.5mn mt clinker unit in June’21 while 9MW WHRS will be commissioned soon.
- Outlook: Cost environment remains volatile and increased competition has made passing on the increased costs difficult, resulting in relatively lower profitability.
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Rossari Biotech – Complete Pass-Through Is a Challenge in Formulations Biz
- 4QFY22 earnings performance: ROSSARI’s 4QFY22 consolidated revenue growth of 101% YoY was broadly in line with our estimate.
- HPPC/TSC/AHN grew by 180%/25%/17% YoY, including acquisitions. Unitop and Tristar revenue came in at Rs1,240mn and Rs495mn, respectively in 4QFY22, with EBITDA margin coming in at ~15% and ~12%, respectively.
- The share of HPPC revenue increased from 50% in 4QFY21 to 69% in 4QFY22.
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Thermax – Weak Profitability Offsets Strong Topline Growth; Strong Order Inflow
- Strong order inflow indicates broad-based recovery: Thermax posted consolidated order inflow of Rs33.96bn, up 127% YoY, aided by a broad-based industrial recovery.
- Other business updates: (1) Chemicals segment margins were affected due to the company’s inability to pass on elevated costs through sufficient price hikes and geopolitical tensions.
- Outlook and valuation: We expect Thermax to report 34%/46.2% revenue/earnings CAGR over FY22- FY24E. The stock is currently trading at 46.5x FY23E EPS.
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