first call 11nov21
TRANSCRIPT
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Petronet LNG - Result Update - Modest quarter; sustenance in question Petronet LNG (PLNG) reported Q2FY22 EBITDA of INR12.9bn (-4.9% YoY, +23% QoQ)
ahead of our estimate due to high marketing margin (2x YoY), partially offset by
modest volumes (-5.5% YoY).
J Kumar Infraprojects - Result Update - Healthy performance J Kumar Infraprojects (JKIL) posted a 62% YoY jump in Q2FY22 top line (up 14% QoQ)
as execution recovered post the second wave. EBITDA margin rose ~100bp YoY to
14.3% resulting in a PAT surge of 478% YoY (28% QoQ). Order book declined
sequentially to INR112bn (~3.4x TTM revenue). The company has won/emerged L1
in ~INR2.7bn projects during Q3FY22.
V-Mart Retail - Result Update - Good showing; inflation overhang V-Mart Retail (VMart) reported impressive revenue/SSSG recovery of 100%/85% (of
Q2FY20). Including Unlimited (consolidated for Sep-21), revenue recovery stood at
108%. The pace of store expansion improved: VMart added 12 (excluding
Unlimited). The company also took price hikes to mitigate the impact of recent
inflation.
Bank of Baroda - Result Update - Core soft; momentum build-up key Bank of Baroda (BoB) posted Q2FY22 PAT of INR20.9bn topping estimates on lower
credit cost and higher other income even as core was soft. Slippages were elevated
driven by a corporate account (already known), but otherwise lower across
segments. Business momentum remained soft; this with lower NIMs impacted core
profit.
Max Financial - Result Update - Steady showing; growth resumption in H2 Max Financial Services (MFS; Max Life Insurance’s holding company) posted an 11%
YoY uptick in APE to INR12.8bn for Q2FY22, below private industry growth. Its
market share thus dipped to 10% within private industry. By business mix,
participating products posted robust growth while sales of individual protection
lagged due to supply-side challenges. Non-par savings and ULIPs posted marginal
growth YoY. Hence, VNB margin improved 110bps YoY to 25.3%.
India Equity Research November 11, 2021
FIRST CALL DAILY REPORT
Edelweiss Research +91 22 4009 4400 [email protected]
Sectoral Movements %Change Ticker 10-Nov-21 1 D 1 M 3 M 1 Y
Nifty 18,044 -0.1 0.8 10.8 42.9
Banking 44,945 -0.3 4.5 9.4 37.2
IT 35,815 0.1 -1.6 12.9 70.7
Pharmaceuticals 25,301 0.5 -3.4 -4.0 33.7
Oil 18,985 0.9 0.1 22.9 48.4
Power 3,520 0.3 7.0 35.1 93.7
Auto 26,342 1.0 5.9 15.5 44.0
Metals 20,498 -0.9 0.9 1.2 129.0
Real Estate 4,425 0.0 6.9 41.2 138.4
FMCG 14,256 -0.3 -3.1 5.0 26.5
Capital Goods 28,833 1.1 9.5 23.2 86.7
MARKETS Change in % 10-Nov-21 1D 1M 1Y
Nifty 50 18,044 -0.1 0.8 42.9 Nifty 200 9,602 0.1 1.1 48.2 Nifty 500 15,542 0.1 1.2 51.3
INDIA STOCK PERFORMANCE
GLOBAL 10-Nov-21 1D 1M 1Y
Dow 36,320 -0.3 4.5 23.4
China 3,483 -0.7 -3.0 3.7
EM Index 1,273 0.3 1.3 7.9
UPCOMING EVENTS CALENDER
MACRO Change in %
10-Nov-21 1D 1M 1Y
Fx (INR/USD)
74.0 0.0 1.8 0.2
!0-yr G-sec 6.3 -0.1 -0.4 7.1 Oil (USD) 85.4 0.8 3.7 95.9
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Sales Traders Says Currency Conversations
Bond Vectors Valuation Vista
40,000
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58,000
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85,000
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Nifty Index MSCI EM Index - Local Currency (RHS)
EventDate
Affle India Results12-11-21
Balkrishna Industries Results12-11-21
Natco pharma Results12-11-21
Bharat forge Results12-11-21
FIRST CALL
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India Cements - Result Update - Subdued quarter; debt concerns persist India Cements (ICEM) posted Q2FY22 EBITDA of INR1.3bn (down 43% YoY/18%
QoQ), missing our estimate by 15% (and consensus by 12%). Realisation led the
disappointment, falling >4% QoQ (versus our expectation of a 2.5% drop) even as
volumes and overall costs came broadly in line. Factoring in H1FY22 performance as
well as rising fuel cost, we are cutting FY22E EBITDA by ~10%, but maintaining
FY23E’s.
Firstsource Solutions - Result Update - Revenue misses; margin beats
estimates Firstsource reported revenue growth of 20.3% YoY to USD193mn, missing our
estimate of USD206mn as well as Street’s forecast of USD199mn. EBIT margin came
in at 12.5%, higher than our estimate of 11.7% and Street’s 11.8%. Net profit at
INR1.35bn beat our estimate, but came in line with Street’s.
EPL Ltd - Result Update - Sales intact; margin under pressure
EPL (erstwhile Essel Propack) reported in-line sales with 13% YoY growth in Q2FY22.
All regions barring Europe clocked growth, while Europe continued seeing a dip
owing to softness in the personal care portfolio. Raw material price volatility and
higher freight costs resulted in a 4% YoY dip in EBITDA (10% below estimate).
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KEY DATA
Rating HOLD Sector relative Neutral Price (INR) 236 12 month price target (INR) 248 Market cap (INR bn/USD bn) 353/4.8 Free float/Foreign ownership (%) 50.0/28.1
What’s Changed
Target Price ⚊
Rating/Risk Rating ⚊
QUICK TAKE
Above In line Below
Profit
Margins
Revenue Growth
Overall
Modest quarter; sustenance in question
Petronet LNG (PLNG) reported Q2FY22 EBITDA of INR12.9bn (-4.9% YoY, +23% QoQ) ahead of our estimate due to high marketing margin (2x YoY), partially offset by modest volumes (-5.5% YoY).
Takeaways: i) The Dahej terminal clocked modest utilisation of 99%. Management refrained from giving H2 guidance given high and
volatile spot LNG prices. Recent start of the Kochi-Mangalore pipeline will lift the Kochi terminal utilisation to 35% by FY22-end and to 60% by FY24, once the Bangalore leg is connected. ii) We perceive risk to 5% p.a. tariff hike as 15-20mtpa of upcoming new LNG capacities are nearly 2x of demand growth. iii) PLNG plans a foray into LNG retailing–1,000 outlets by FY25 at high capex of INR80bn—a long-haul prospect.
FINANCIALS (INR mn)
Year to March FY21A FY22E FY23E FY24E
Revenue 2,60,229 2,91,369 3,39,513 3,86,124
EBITDA 46,995 54,654 65,205 72,516
Adjusted profit 29,494 35,634 42,351 46,646
Diluted EPS (INR) 19.7 23.8 28.2 31.1
EPS growth (%) 5.9 20.8 18.8 10.1
RoAE (%) 26.1 28.1 28.1 29.0
P/E (x) 12.0 9.9 8.3 7.6
EV/EBITDA (x) 6.3 5.2 4.4 3.3
Dividend yield (%) 1.5 1.3 1.6 1.8
PRICE PERFORMANCE
Volume momentum would take time to gather steam amid high spot
Modest volumes at 4.6MMT (-5.5% YoY, 14.8% QoQ) were primarily a result of high
spot LNG prices, which jumped ~5x YoY, and covid-led restrictions. Notably, spot LNG
prices are now ~50% higher QoQ at ~USD30/mmbtu, which would keep a check on
volumes in 2HFY22 as well. While spot LNG prices remained high, PLNG earned a
higher marketing margin of USD6.9/mmbtu (~2x YoY). Dahej volume fell 7.4% YoY
led by a modest terminal utilisation of 99%, but Kochi volumes rose 36% YoY with a
terminal utilisation of 23%.
Aggressive expansion target; execution awaited
Management expects Dahej expansion to 20mtpa by FY24 and to 22.5mtpa by FY27.
Kochi sales likely to double to peak utilisation of 35% once customers fully offtake
gas along the recently commissioned Kochi-Mangalore pipeline. The Kochi-
Bangalore pipeline, when fully commissioned (by FY24), will increase Kochi’s
utilisation to ~60%. It is also in the process of adding two tanks at Dahej at INR12bn
and a jetty at INR17bn by FY25, which will be value-accretive. The company has tied
up with Gujarat Gas to set up five LNG stations between Mumbai and Delhi
highways. Besides, it has set up four LNG stations with IOC and one each with IGL
and Sabarmati Gas. PLNG declared a special interim dividend of INR7/share.
Explore:
Outlook and valuation: Risk-reward priced in; maintain ‘HOLD’
We continue to believe there is limited scope for further sharp tariff hikes in the long
term given significant upcoming LNG capacity. Meanwhile, PLNG enjoys net cash
position along with strong OCF/ FCF. We maintain ‘HOLD/SN’ with an unchanged
TP of INR248 at 8.3x FY23E PER.
Financials Year to March Q2FY22 Q2FY21 % Change Q1FY22 % Change
Net Revenue 1,08,131 62,358 73.4 85,979 25.8
EBITDA 12,969 13,632 (4.9) 10,543 23.0
Adjusted Profit 8,230 9,273 (11.2) 6,357 29.5
Diluted EPS (INR) 5.5 6.2 (11.2) 4.2 29.5
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Nov-20 Feb-21 May-21 Aug-21 Nov-21
PLNG IN Equity Sensex
India Equity Research Oil & Gas November 10, 2021
PETRONET LNG RESULT UPDATE
Jal Irani Shubham Mittal Iqbal Khan +91 (22) 6620 3087 +91 (22) 4063 5459 [email protected] [email protected] [email protected]
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KEY DATA
Rating BUY Sector relative Neutral Price (INR) 183 12 month price target (INR) 256 Market cap (INR bn/USD bn) 14/0.2 Free float/Foreign ownership (%) 54.7/8.2
What’s Changed Target Price
Rating/Risk Rating ⚊
QUICK TAKE
Healthy performance
J Kumar Infraprojects (JKIL) posted a 62% YoY jump in Q2FY22 top line (up 14% QoQ) as execution recovered post the second wave. EBITDA margin rose ~100bp YoY to 14.3% resulting in a PAT surge of 478% YoY (28% QoQ). Order book declined sequentially to INR112bn (~3.4x TTM revenue). The company has won/emerged L1 in ~INR2.7bn projects during Q3FY22.
Robust opportunities in the metro rail segment (refer to INFRA SCAPE' - Metrolution: No signs of abating) bode well for JKIL. We believe order intake will be the key stock driver going ahead. Retain ‘BUY’ with a revised TP of INR256 (INR251 earlier) while rolling forward the valuation to Mar-23E.
FINANCIALS (INR mn)
Year to March FY20A FY21E FY22E FY23E
Revenue 29,705 25,708 33,621 35,900
EBITDA 4,289 3,114 4,829 5,371
Adjusted profit 1,836 639 1,818 2,155
Diluted EPS (INR) 24.3 8.4 24.0 28.5
EPS growth (%) 3.7 (65.2) 184.5 18.5
RoAE (%) 10.5 3.4 9.4 10.3
P/E (x) 7.5 21.6 7.6 6.4
EV/EBITDA (x) 3.6 4.2 3.1 2.6
Dividend yield (%) 0.7 0.5 0.7 0.7
PRICE PERFORMANCE
Execution and margins rise YoY; working capital improves
Top line jumped 62% YoY as the pandemic’s impact faded. EBITDA margin shot up
~100bp YoY (flat QoQ). Despite interest cost rising 9% YoY, the company posted PAT
of INR411mn during the quarter. Working capital cycle improved to 122 days (from
135 in Q1FY22); consequently, net debt declined QoQ to ~INR0.5bn (~INR1bn at end-
Q1FY22). For FY22E, JKIL has guided for top line of INR32–35bn and EBITDA margin
of 14–16%. The company is targeting INR50bn in top line by FY25.
Order book remains healthy
JKIL ended the quarter with an order book of ~INR112bn (book-to-bill of 3.4x); since
the end of Q2FY22, the company has won/emerged L1 in ~INR2.7bn projects. Order
intake during Q2FY22 stood at INR3.4bn. Management is targeting upcoming
opportunities in: i) the Mumbai–Ahmedabad High Speed Rail project (refer to INFRA
SCAPE' - Inter-city rail: Set for hi-speed rush); ii) metro rail projects in Chennai, Delhi,
Kanpur, Nagpur and Agra; iii) transport projects in the MMR and building projects in
the NCR. In all, It has bid for INR110bn worth of projects (share at INR45-50bn); in
addition, it has a bid pipeline of INR150bn in the future. JKIL expects to win INR20–
25bn fresh orders during the rest of the fiscal, and to end the year with an order
book of ~INR120bn.
Explore:
Outlook and valuation: Attractive; maintain ‘BUY’
JKIL’s healthy order book and low leverage (net debt to equity at 0.03x) are the key
positives. We maintain earnings and believe fresh order accretion will determine the
stock’s trajectory going ahead. Maintain ‘BUY/SN’ with a TP of INR256 (9x EPS) while
rolling forward the valuation to Mar-23E.
Financials Year to March Q2FY22 Q2FY21 % Change Q1FY22 % Change
Net Revenue 7,720 4,774 61.7 6,751 14.4
EBITDA 1,100 632 74.1 968 13.7
Adjusted Profit 411 71 477.7 321 27.9
Diluted EPS (INR) 5.4 0.9 477.7 4.2 27.9
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Nov-20 Feb-21 May-21 Aug-21 Nov-21
JKIL IN Equity Sensex
India Equity Research Infrastructure November 10, 2021
J KUMAR INFRAPROJECTS RESULT UPDATE
Parvez Qazi +91 (22) 4063 5405 [email protected]
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KEY DATA
Rating BUY Sector relative Neutral Price (INR) 4,216 12 month price target (INR) 4,701 Market cap (INR bn/USD bn) 83/1.1 Free float/Foreign ownership (%) 34.5/22.1
What’s Changed Target Price
Rating/Risk Rating ⚊
QUICK TAKE
Good showing; inflation overhang
V-Mart Retail (VMart) reported impressive revenue/SSSG recovery of 100%/85% (of Q2FY20). Including Unlimited (consolidated for Sep-21), revenue recovery stood at 108%. The pace of store expansion improved: VMart added 12 (excluding Unlimited). The company also took price hikes to mitigate the impact of recent inflation.
Overall, we remain constructive on VMart given its long-term growth visibility along with a cash-rich balance sheet. Maintain ‘BUY’ with a revised TP of INR4,701 (30x FY23E EV/EBITDA). The next re-rating trigger would be Unlimited’s operational turnaround. Impending risks remain current inflation and potential GST hike, which could impact affordability quotient for retailers such as VMart.
FINANCIALS (INR mn)
Year to March FY21A FY22E FY23E FY24E
Revenue 10,755 15,664 23,092 25,775
EBITDA 1,312 2,083 3,210 3,686
Adjusted profit (62) 210 918 1,165
Diluted EPS (INR) (3.1) 10.7 46.6 59.1
EPS growth (%) nm nm 336.2 26.9
RoAE (%) (1.0) 2.5 10.3 11.8
P/E (x) nm 325.9 74.7 58.9
EV/EBITDA (x) 50.5 32.4 21.0 18.1
Dividend yield (%) 0 0 0.1 0.1
PRICE PERFORMANCE
Solid performance; Unlimited business improve recovery
VMart reported 93% YoY growth in revenue to INR3.4bn (Q1FY22: 127%), i.e. a
recovery of 108% of Q2FY20. This includes the benefit of consolidation of Arvind
Fashion’s Unlimited business for one month, without which recovery stood at 100%
of pre covid levels. Decoding the growth, while footfalls were up 89% YoY (6.6mn
versus 3.5mn), a higher conversion rate (65% versus 60%) along with a similar
transaction size (INR838 versus INR844) contributed to revenue growth. ASP
improved by 8% YoY for Q2FY22 with VMart having taken an average hike of 8%. The
company opened 86 new stores during the quarter, including the 74 Unlimited stores
acquired in South India. Overall, the company reported a marginal EBITDA of
INR206mn (INR83mn due to rental waivers), with margin at 6% (Q2FY20:8.4%).
Q2FY22: Conference call takeaways
i) 95% operational days during the quarter, but it was impacted by limited
operational hours and footfalls were close to 80% of 2019. ii) The company has taken
an 8% price hike to mitigate cost inflation and has been able to pass it on entirely.
iii) The target of 20–25% store addition remains. The plan is to open 40+ stores, out
of which 24 have already opened. iv) H2FY22 capex includes new store addition and
INR200–250mn for the warehouse.
Explore:
Outlook and valuation: Integration next lever; maintain ‘BUY’
We are rolling forward the valuation to FY23E, keeping our target EV/EBITDA
unchanged at 30x, which yields a revised TP of INR4,701 (INR4,142 earlier). Maintain
‘BUY’. The rext re-rating trigger would be the turnaround of Unlimited’s operations.
We have not yet consolidated the acquisition of Unlimited stores.
Financials Year to March Q2FY22 Q2FY21 % Change Q1FY22 % Change
Net Revenue 3,380 1,755 92.6 1,774 90.5
EBITDA 206 ( 3) NM ( 20) NM
Adjusted Profit ( 141) ( 190) NM ( 287) NM
Diluted EPS (INR) ( 7.8) ( 10.4) NM ( 15.8) NM
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Nov-20 Feb-21 May-21 Aug-21 Nov-21
VMART IN Equity Sensex
India Equity Research Retail November 10, 2021
V-MART RETAIL RESULT UPDATE
Nihal Mahesh Jham Abneesh Roy Yash Mehta +91 (22) 6623 3352 +91 (22) 6620 3141 [email protected] [email protected] [email protected]
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KEY DATA
Rating BUY Sector relative Neutral Price (INR) 101 12 month price target (INR) 130 Market cap (INR bn/USD bn) 521/7.0 Free float/Foreign ownership (%) 28.4/11.7
What’s Changed Target Price
Rating/Risk Rating ⚊
QUICK TAKE
Above In line Below
Profit
Margins
Revenue Growth
Overall
Core soft; momentum build-up key
Bank of Baroda (BoB) posted Q2FY22 PAT of INR20.9bn topping estimates on lower credit cost and higher other income even as core was soft. Slippages were elevated driven by a corporate account (already known), but otherwise lower across segments. Business momentum remained soft; this with lower NIMs impacted core profit.
Even though uncertainty over subsequent covid waves and their potential impact persists, we believe lower probability (versus earlier), better recovery and a reducing stress pool imply lower earnings volatility. This coupled with 0.5x FY23E P/BV lends comfort. Factoring in better recovery, we are revising the target to 0.7x P/BV (from 0.5x), leading to a revised TP of INR130 (earlier INR98). Maintain ‘BUY’.
FINANCIALS (INR mn)
Year to March FY20A FY21A FY22E FY23E
Revenue 274503 288090 319193 365732
PPoP 196901 206298 243470 273668
Adjusted profit 5448 8289 85912 112656
Diluted EPS (INR) 1.2 1.6 16.6 21.8
EPS growth (%) nm 36.0 936.4 31.1
RoAE (%) 0.8 1.1 10.8 12.6
P/E (x) 85.5 62.9 6.1 4.6
P/ABV (x) 0.9 0.9 0.8 0.6
Dividend yield (%) 0 0 0 0
PRICE PERFORMANCE
Asset quality improves; sustenance key
Slippages though elevated at INR58bn (3.5%), it was largely driven by corporate (one
account), excluding which slippages were much lower. Within segments, slippages
improved all over—retail, MSME and agriculture. This coupled with higher
recoveries/upgrades pushed GNPLs down to 8.11% (8.86% QoQ). The restructuring
pool stands at sub-3% with >30% coming from MSME. Also, the SMA pools (1 and 2,
for exposure above INR50mn) dipped to 1.9% from 2.7% in Q1FY22, taking overall
stress pool at a lower level. Going forward, given uncertainty on subsequent covid
waves, absence of a material provision buffer and impending provisions on slipped
NBFC (50% provided for as of now) will likely lead to elevated credit cost, in our view.
Lower NIM impacts core; business momentum improvement key
BoB reported softer traction in business with loan growth of sub-4% YoY and deposit
growth of sub-1% YoY. Add to that, lower NIMs (down 19bps QoQ, impact of higher
interest income reversal pertaining to an NBFC account) and higher opex (up >6% QoQ)
impacted core profitability. That said, recovery from Dewan (INR9bn) supported
overall profitability. Armed with a strong franchise and slackened competition, BoB
aspires for an ambitious build-up. However, we need more evidence of sustained
execution and successful integration before conviction truly sets in.
Explore:
Outlook and valuation: Valuation comfort; maintain ‘BUY’
Demonstration of the merger value-add and, indeed, getting through the current
crisis without deep earnings erosion are key. Promised rationalisation benefits post-
merger are not a foregone conclusion given complexity of the task at hand. Valuation
at 0.5x FY23E P/BV lends some comfort. We maintain ‘BUY/SN’.
Financials Year to March Q2FY22 Q2FY21 % Change Q1FY22 % Change
Net Revenue 1,11,452 1,03,098 8.1 1,08,615 2.6
Pre-provisioning Profits 56,696 55,518 2.1 57,074 (0.7)
Reported Profits 20,879 16,786 24.4 12,086 72.7
EPS 4.0 3.6 2.3
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Nov-20 Feb-21 May-21 Aug-21 Nov-21
BOB IN Equity Sensex
India Equity Research Banks November 10, 2021
BANK OF BARODA RESULT UPDATE
Prakhar Agarwal Parth Sanghvi +91 (22) 6620 3076 [email protected] [email protected]
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KEY DATA
Rating BUY Sector relative Outperformer Price (INR) 1,001 12 month price target (INR) 1,360 Market cap (INR bn/USD bn) 345/4.7 Free float/Foreign ownership (%) 85.3/28.7
What’s Changed Target Price
Rating/Risk Rating ⚊
QUICK TAKE
Steady showing; growth resumption in H2
Max Financial Services (MFS; Max Life Insurance’s holding company) posted an 11% YoY uptick in APE to INR12.8bn for Q2FY22, below private industry growth. Its market share thus dipped to 10% within private industry. By business mix, participating products posted robust growth while sales of individual protection lagged due to supply-side challenges. Non-par savings and ULIPs posted marginal growth YoY.
Hence, VNB margin improved 110bps YoY to 25.3%.
In light of slow APE growth, we are cutting FY22 and FY23 estimates by 4–5% each; however we remain hopeful of a pickup as MFS launches products over the next few quarters. Maintain ‘BUY’ with a TP of INR1,360 (up from INR1,290) as we roll over the valuation to Dec-22E.
FINANCIALS (INR mn)
Year to March FY20A FY21E FY22E FY23E
APE 41,490 49,570 70,094 80,432
EV 99,780 1,18,350 1,41,096 1,67,746
PAT 5,394 5,230 8,034 9,432
Diluted EPS (INR) 12.8 12.4 19.0 22.4
EPS growth (%) (3.1) (3.0) 53.6 17.4
VNB margin (%) 21.6 25.2 25.2 25.4
RoEV (%) 20.3 18.6 24.1 23.7
P/E (x) 77.5 79.9 52.0 44.3
P/EV (x) 4.2 3.5 3.0 2.5
PRICE PERFORMANCE
Steady business performance
MFS reported growth of 11% YoY in APE to INR12.8bn in Q2FY22 driven by an uptick
in primarily participating products offset by weak sales in individual protection. Non-
par savings and ULIPs logged moderate growth. Business mix improved in favour of
higher-margin products such as non-par savings and participating. However,
individual protection’s share came down due to supply-side challenges. As these
abate, this segment should come back strongly given medium-term opportunity.
VNB margin was back at 25% after a temporary hit in Q1. Persistency ratio saw
marginal improvements in key cohorts of 13M/61M.
Growth and margins should pick up in H2
After consistently outperforming industry over the last few quarters, MFS
underperformed in Q2. As a result, its market share among private insurers came
down to 10%. However, given several product launches are planned over the next
few quarters, we expect growth and market share gains to be back. Agency channel
has come back strongly in Q2 as Q1 was affected by the second covid wave Usually,
agency channel has sharper focus on traditional products and protection, and
therefore this should further boost margins in H2. Willingness to underwrite
protection is also improving as the trajectory of covid cases comes down.
Explore:
Outlook and valuation: Growth at reasonable price; maintain ‘BUY’
Crystallisation of merger with Axis Bank is likely to yield multiple benefits on
distribution and branding This along with several product launches expected over
the next few quarters should help to recoup market share loss. Valuation at 2.5x
FY23E P/EV appears reasonable. Maintain ‘BUY/SO’.
Financials Year to March Q2FY22 Q2FY21 % Change Q1FY22 % Change
APE 12,830 11,540 11.2 8,750 46.6
PAT 477 811 (41.2) 358 33.1
Diluted EPS (INR) 1.2 2.1 (45.2) 0.6 91.7
VNB margin – YTD (%) 25.3 24.2 19.7
Above In line Below
Profit
Margins
Revenue Growth
Overall
42,000
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Nov-20 Feb-21 May-21 Aug-21 Nov-21
MAXF IN Equity Sensex
India Equity Research Insurance November 10, 2021
MAX FINANCIAL RESULT UPDATE
Prakhar Agarwal Vinayak Agarwal +91 (22) 6620 3076 +91 (22) 6620 3020 [email protected] [email protected]
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KEY DATA
Rating REDUCE Sector relative Underperformer Price (INR) 210 12 month price target (INR) 152 Market cap (INR bn/USD bn) 65/0.9 Free float/Foreign ownership (%) 71.6/12.0
What’s Changed Target Price
Rating/Risk Rating ⚊
QUICK TAKE
Above In line Below
Profit
Margins
Revenue Growth
Overall
Subdued quarter; debt concerns persist
India Cements (ICEM) posted Q2FY22 EBITDA of INR1.3bn (down 43% YoY/18% QoQ), missing our estimate by 15% (and consensus by 12%). Realisation led the disappointment, falling >4% QoQ (versus our expectation of a 2.5% drop) even as volumes and overall costs came broadly in line. Factoring in H1FY22 performance as well as rising fuel cost, we are cutting FY22E EBITDA by ~10%, but maintaining FY23E’s.
We maintain ‘REDUCE’ on ICEM owing to long-standing concerns of a low future RoE (5–6% range) and high net debt/EBITDA (>3x for FY22E). Rolling over the valuation to Q4FY23E yields a TP of INR152 (up from INR145), valuing the stock at 7.5x EV/EBITDA.
FINANCIALS (INR mn)
Year to March FY20A FY21A FY22E FY23E
Revenue 50,575 44,367 55,116 60,716
EBITDA 5,852 8,061 7,954 9,875
Adjusted profit 164 2,232 2,661 3,767
Diluted EPS (INR) 0.5 7.2 8.6 12.2
EPS growth (%) (76.4) 1,259.5 19.2 41.5
RoAE (%) 0.3 4.2 4.8 6.4
P/E (x) 396.4 29.2 24.5 17.3
EV/EBITDA (x) 16.9 11.8 11.6 8.9
Dividend yield (%) 0.3 0.5 0.5 0.5
PRICE PERFORMANCE
A seasonally weak quarter
Q2 is a seasonally weak quarter owing to monsoon, and rising cost as well as weak
cement prices amplified the impact this year. On a low base, while volumes rose 12%
YoY/21% QoQ (broadly in line), realisation plunged 4% QoQ (down 1% YoY)
undershooting the estimate by ~1.5%. With variable cost/t rising 15% YoY (3.5%
QoQ) and fixed cost normalising, blended EBITDA/t at INR566 is the lowest in past
six quarters (down 49% YoY/32% QoQ). While EBITDA dipped 43% YoY, reported PAT
plunged 69% YoY.
Pruning FY22E EBITDA, retaining FY23 estimates
While rising fuel cost remains a concern, management appeared confident of passing
it on to consumers. However, factoring in the H1FY22 performance as well as the
impact of North-East monsoons in the state of Tamil Nadu in Q3FY22, we are
lowering our FY22 EBITDA estimate by ~10%. Even so, we are retaining FY23
estimates assuming moderation in energy cost.
Meanwhile, EBITDA/t for H1FY22 stands at INR687 versus our estimates of INR780
for FY22 and INR896 for FY23.
Explore:
Outlook and valuation: Debt concerns persist; maintain ‘REDUCE’
While ICEM is unlikely to pursue any capacity expansion in the immediate future, its
debt is likely to stay elevated. Increase in working capital (compared with Q4FY21)
and rising fuel cost raise concerns over management guidance of paring debt by
INR5bn in FY22. All in all, we maintain ‘REDUCE/SU’ with a TP of INR152.
Financials Year to March Q2FY22 Q2FY21 % Change Q1FY22 % Change
Net Revenue 11,902 10,697 11.3 10,225 16.4
EBITDA 1,336 2,347 (43.1) 1,620 (17.5)
Adjusted Profit 220 714 (69.2) 374 (41.3)
Diluted EPS (INR) 0.7 2.3 (69.2) 1.2 (41.3)
43,000
46,800
50,600
54,400
58,200
62,000
100
125
150
175
200
225
Nov-20 Feb-21 May-21 Aug-21 Nov-21
ICEM IN Equity Sensex
India Equity Research Cement November 10, 2021
INDIA CEMENTS RESULT UPDATE
Navin Rameshwar Sahadeo Shubham Mittal +91 (22) 4088 6242 +91 (22) 4063 5459 [email protected] [email protected]
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KEY DATA
Rating BUY Sector relative Outperformer Price (INR) 180 12 month price target (INR) 251 Market cap (INR bn/USD bn) 125/1.7 Free float/Foreign ownership (%) 43.4/10.6
What’s Changed Target Price
Rating/Risk Rating ⚊
QUICK TAKE
Revenue misses; margin beats estimates
Firstsource reported revenue growth of 20.3% YoY to USD193mn, missing our estimate of USD206mn as well as Street’s forecast of USD199mn. EBIT margin came in at 12.5%, higher than our estimate of 11.7% and Street’s 11.8%. Net profit at INR1.35bn beat our estimate, but came in line with Street’s.
The miss on revenue growth to our estimate is due to lower refinancing volume, which is unpredictable on a quarterly basis, and talent shortages in global markets. We reiterate Firstsource remains on track to transform its business from pure-play BPM to a digital and platform company. We are keeping the TP at INR251 as the long-term story remains intact and on a rollover to Q4FY23E. Retain ‘BUY’.
FINANCIALS (INR mn)
Year to March FY21A FY22E FY23E FY24E
Revenue 50,780 58,995 72,967 80,264
EBITDA 8,042 10,078 13,996 13,565
Adjusted profit 3,617 5,756 8,633 8,813
Diluted EPS (INR) 5.1 8.2 12.2 12.5
EPS growth (%) 4.9 59.2 50.0 2.1
RoAE (%) 13.0 19.8 26.5 23.9
P/E (x) 35.1 22.1 14.7 14.4
EV/EBITDA (x) 16.1 12.5 8.6 8.6
Dividend yield (%) 1.6 1.9 2.7 3.3
PRICE PERFORMANCE
Healthcare and Communication segments drive growth
Firstsource delivered revenue growth of 18.5% YoY in cc. It was driven by the Healthcare vertical (32% YoY in cc), followed by CMT (18.3% YoY in cc) and BFSI (12.3% YoY in cc). Revenue growth in Healthcare was strong despite public health emergency continues to remain in effect in the US, which is impacting elective procedure volumes at hospitals. Additionally, the company won its first USD100mn deal in healthcare segment—to be precise, a USD110mn multiyear deal, which will contribute USD15-16mn in revenue each year. Revenue growth in BFS was weaker due to lower refinancing volume, which depends on prevailing interest rates, although the company continues to gain market share in this category.
Revenue growth outlook revised down
Firstsource has revised down revenue growth outlook to 14.5–15.5% YoY in cc from 15–18% YoY in cc. This comes in the wake of challenges in collection business and talent shortage in onshore markets. Margin guidance remains the same at 11.8–12.3% for FY22. We believe the challenges in mortgage business are transitory and talent shortage will impact it in the short term, however, it will lead to higher offshoring going forward, which would be margin accretive. The company continues to progress towards its digital journey as 17% of deal-wins this quarters were digital in nature.
Explore:
Outlook and valuation: Favourable tailwinds; maintain ‘BUY’
FSOL is trading at a sharp discount to IT mid-caps, and an increase in digital revenue contribution would drive multiple re-rating for the stock. The stock is trading at 14.7x FY23E. Retain ‘BUY/SO’ with a TP of INR251 (20x Q4FY23E) based on strong growth and the rollover to Q4FY23E.
Financials Year to March Q2FY22 Q2FY21 % Change Q1FY22 % Change
Net Revenue 14,286 11,877 20.3 14,848 (3.8)
EBITDA 2,388 1,876 27.3 2,383 0.2
Adjusted Profit 1,350 1,053 28.2 1,336 10.3
Diluted EPS (INR) 2.0 1.5 30.7 1.9 2.6
Above In line Below
Profit
Margins
Revenue Growth
Overall
43,000
46,800
50,600
54,400
58,200
62,000
50
90
130
170
210
250
Nov-20 Feb-21 May-21 Aug-21 Nov-21
FSOL IN EQUITY Sensex
India Equity Research IT November 10, 2021
FIRSTSOURCE SOLUTIONS RESULT UPDATE
Sandip Agarwal Pranav Kshatriya Nikhil Choudhary Ayur Bohra +91 (22) 6623 3474 +91 (22) 4040 7495 [email protected] [email protected] [email protected] [email protected]
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KEY DATA
Rating BUY Sector relative Outperformer Price (INR) 222 12 month price target (INR) 271 Market cap (INR bn/USD bn) 70/0.9 Free float/Foreign ownership (%) 18.5/15.3
What’s Changed Target Price
Rating/Risk Rating ⚊
QUICK TAKE
Sales intact; margin under pressure
EPL (erstwhile Essel Propack) reported in-line sales with 13% YoY growth in Q2FY22. All regions barring Europe clocked growth, while Europe continued seeing a dip owing to softness in the personal care portfolio. Raw material price volatility and higher freight costs resulted in a 4% YoY dip in EBITDA (10% below estimate).
Despite a slightly weak H1FY22, pipeline across geographies remains strong. While cost headwinds remain, hikes across the portfolio will gradually mitigate impact on margins. In the interim, with sales and margin pressure in Europe (24% of sales), we are cutting FY22/23E EPS by 10%/4%. However, in light of a 14% EPS CAGR over FY21–23E, we retain ‘BUY’ with a revised TP of INR271 (12.6x Dec-22E EV/EBITDA).
FINANCIALS (INR mn)
Year to March FY21A FY22E FY23E FY24E
Revenue 30,916 33,886 36,795 39,636
EBITDA 6,111 6,270 7,187 7,852
Adjusted profit 2,514 2,505 3,091 3,496
Diluted EPS (INR) 8.0 7.9 9.7 11.0
EPS growth (%) 14.3 (1.1) 23.4 13.1
RoAE (%) 14.9 14.2 16.1 16.5
P/E (x) 27.8 28.1 22.8 20.2
EV/EBITDA (x) 6.3 6.0 4.9 4.2
Dividend yield (%) 1.8 1.7 1.8 2.0
PRICE PERFORMANCE
Headwinds impact profitability
Q2FY22 revenue rose 13% YoY (10% organic), however, EBITDA dipped 4% YoY,
although EPL delivered a sequential improvement of 20bps on margins—despite
challenges on raw materials and supply chains exacerbated by labour shortages in
Americas and Europe. AMESA: Revenue jumped 19% YoY with the acquisition of
Creative StyloPacks. EBIT margin contracted 338bps YoY. EAP: Revenue grew 12%
YoY, while EBIT margin dipped 418bps YoY. Europe: Revenue again declined 3% YoY
due to closure of Russia plant and EBIT margin dipped 416bps YoY. Americas:
Revenue rose healthy 22% YoY, while EBIT margin contracted 111bps YoY due to
covid-related expenses.
Margin improvement measures in place
While H1FY22 has seen the impact of raw material price volatility and supply chain
challenges, the sharp increase remains a concern. Thus, the company’s focus
remains on prioritising service to customers over cost and management. Under the
new MD, Mr. Anand Kripalu, EPL has a comprehensive mitigation plan including
further price hikes, product mix improvement and cost optimisation initiatives. By
partnering an oral MNC for 100% usage of Platina, sustainability remains at the core
of EPL’s strategy for competitive advantage, along with delivering top-line growth.
ever Explore:
Outlook and valuation: Growth trajectory intact; maintain ‘BUY’
EPL’s growth prospects remain firm with management’s commitment to double-digit
market leading sales and capital efficient earnings growth. We estimate 9%/8%/14%
CAGR over FY21–23E in revenue/EBITDA/EPS. Maintain ‘BUY’ with a revised TP of
INR271 (INR280 earlier), valuing the stock at 12.6x Q3FY22E EV/EBITDA.
Financials Year to March Q2FY22 Q2FY21 % Change Q1FY22 % Change
Net Revenue 8,701 7,703 13.0 7,991 8.9
EBITDA 1,594 1,662 (4.1) 1,449 10.0
Adjusted Profit 507 664 (23.7) 579 (12.4)
Diluted EPS (INR) 1.6 2.1 (23.7) 1.8 (12.4)
Above In line Below
Profit
Margins
Revenue Growth
Overall
43,000
46,800
50,600
54,400
58,200
62,000
200
220
240
260
280
300
Nov-20 Feb-21 May-21 Aug-21 Nov-21
EPLL IN EQUITY Sensex
India Equity Research Miscellaneous November 10, 2021
EPL LTD RESULT UPDATE
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