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PremiumSensex Today | Market Highlights: A small-caps crash. Dizzying rebounds. And cooling gains. Yet another wild week for Chinese stocks has left investors yearning for more policy support as they remain unconvinced the market has reached a bottom.
Beijing’s intensified efforts to halt the equity rout helped the benchmark CSI 300 Index stage a sharp rebound but its gains slowed before the market shut for the Lunar New Year break. A slide in Hong Kong-listed Chinese shares on Friday further signaled that skepticism is still running high, dampening the holiday spirit.
Investors are bracing for more losses once the onshore market reopens on Feb. 19 unless authorities offer reassurance that further support will ensue. The rescue steps taken so far — from state fund purchases to restrictions on short selling — have been more of band-aid measures than fundamental fixes to economic woes, traders say.
The moves have worked, to some extent. The CSI 300 capped its best week since late 2022, thanks largely to a 3.5% surge on Tuesday. Small-cap equities — which have led the selloff in the new year — bounced back more strongly, with the CSI 1000 Index advancing 9% in its biggest weekly jump since 2020. Overall, the Chinese market added more than $450 billion in value.
Europe's main stock markets were mixed at the start of trading Friday, as traders digested more annual earnings from leading companies and looked ahead to US inflation data.
London's benchmark FTSE 100 index gained 0.1 percent to 7,599.43 points.
In the eurozone, the Paris CAC 40 fell 0.2 percent to 7,651.01 points and Frankfurt's DAX index grew 0.1 percent to 16,976.15.
Capping a day of tumultuous trading, India's benchmark indices climbed from the day's lows to close in the green for the weekend. Across the market, broader market indices closed down around 1%, while among sector indices, Metal and Oil & gas indices were closed down over 1%.
At close, Sensex was up 167.06 points, or 0.23%, at 71,595.49, and Nifty was up 64.55 points, or 0.3%, at 21,782.50.
Global shares stood their ground on Friday after Wall Street scaled new heights, with looming U.S. inflation data set to help investors update their bets on interest rate cuts and steer the dollar's direction.
Oil was on track for weekly gains of about 5%, the market watching events in the Middle East after Israel rejected a ceasefire offer from Hamas.
The MSCI All Country stock index was little changed, and up 2.5% for the year.
The mood in stocks was buoyed by Wall Street, where the S&P 500 index rose above 5,000 points for the first time ever on Thursday, capping a 21% surge since October.
In Europe, the STOXX index of 600 companies was flat.
S&P stock index futures were slightly weaker ahead of Wall Street's open, with U.S. inflation revisions later on closely watched for any sign that market assumptions that price pressure is in retreat needs re-calibration.
Rating: ACCUMULATE
Target Price : INR 1599
Upside : 12%
CMP : INR 1431 (as on 08 February 2024)
Embarking on expansion
Q3 sales and realization: Touching zenith backed by launches
Sobha (SOBHA IN) achieved its highest-ever sales in Q3FY24, encompassing sales value of INR 19.5bn with an area of 1.66mn sft. Sales in Bengaluru soared to a peak, with sales value of ~INR 15bn and sales volume of 1.25msf. This strong sales performance was supported by the successful launch of SOBHA Neopolis in Bengaluru, which contributed 53.9% to overall sales value. Bengaluru overall contributed ~75% to the total sales value, followed by NCR at 20.6%.
Average price realization saw sharp quarterly improvement of 15%, reaching INR 11,732 per sqft, mainly due to change in sales mix. The contribution of products exceeding INR 30mn surged from 25% in 9MFY23 to 31% in 9MFY24, supported by the launch of the third phase of luxury project, SOBHA Metropolis in Thrissur in Q3.
Navigating towards FY24 sales targets
Sobha has a forthcoming residential launch pipeline of 16.77msf, of which its share is ~81%. For Q4FY24 specifically, Sobha has a launch pipeline of seven projects, with 3msf offering convincing visibility. This robust pipeline may support Sobha in surpassing its FY24 sales guidance of 20% YoY growth on FY23 sales (~INR 52bn). In the first nine months of FY24 alone, Sobha already achieved sales of INR 51.40bn.
Chasing next growth wave
Sobha targets an annual sales run-rate of 10msf beyond the next few fiscal years. To achieve this, Sobha is constructing a project pipeline beyond the forthcoming launches, totaling ~20msf, mainly utilizing its existing land bank and some JV projects, giving it a stake of >90%. Additionally, Sobha plans to raise a Rights Issue to capture future growth opportunities.
Valuations: Revise to Accumulate with higher TP of INR 1,599
The current pipeline of launches, unsold inventory and landbank show good operational visibility. Although timely launches are vital, comfortable debt position offers room for new business development. Due to ~2x run-up in the stock price in the past three months, we revise Sobha to Accumulate from Buy, but with higher TP of INR 1,599 from INR 964, on 1.0x one-year forward NAV.
Rating: BUY | CMP: Rs444 | TP:Rs480
Q3FY24 Result Update – In line hospital EBITDA; margin and occupancy to scale up
Quick Pointers:
Reiterated margin guidance at 20% with occupancy of 70% in FY25.
On track with a total expansion plan of 2,200 beds over 4 years.
Fortis Healthcare (FORH) Q3FY24 hospital EBITDA was in-line with our estimate. Though hospital margins saw 150 bps YoY improvement in Q3, we see further margin improvement in hospital segment aided by 1) improving case and payor mix 2) cost rationalization initiatives and 3) divestment of non-profitable assets. Our FY25E and FY26E hospital EBITDA stands increased by 4-5%. We expect 19% Pre IND AS EBITDA CAGR over FY24-26E. At CMP, stock is trading at 21x EV/EBITDA on FY25E, adjusted for Agilus stake. Maintain ‘Buy’ rating with revised TP of ₹480/share (Rs. 400 earlier); valuing hospital segment at 22x and diagnostic at 20x EV/EBITDA on FY26E. Resolution of legal issues and timely IPO of Agilus would be a key additional trigger for re-rating.
Steady ARPOB; Occupancy dip QoQ due to seasonality and new bed addition: Hospital business revenue increased 10% YoY (declined 4% QoQ) to Rs.13.9bn; in line with our estimates. Diagnostic business saw a flat YoY revenue growth (de-growth of 8% QoQ) to Rs. 2.9bn. Hospital occupancy declined to 64% vs 68.7% in Q2; led by seasonality impact and commencement of 70 beds in Ludhiana during the quarter. ARPOB further improved by 10% YoY and 1% QoQ to Rs.61.1K largely aided by case mix.
In line EBITDA; hospital margin at 18.4%: FORH’s consolidated EBITDA increased 3% YoY and down 14% QoQ to ₹2.8bn; vs our estimate of Rs3.2bn as there were one offs in diagnostic segment. Hospital business EBITDA came in at ₹2.5bn (In line with our estimates), up by 19% YoY. Overall hospital OPM came in at 18.1% (down 30 bps QoQ). Diagnostic biz EBITDA was down sharply by 50% YoY to ₹330m. International patients contributed 7.7% to total hospital revenues while surgical mix was at 58% vs 59% in Q2. Net debt increased by Rs. 1.25bn QoQ to ₹5.2bn.
Key con-call takeaways: (1) FORH is on track to add ~2200 beds in 4 years; of which 700 (including total 300 beds in Manesar) beds will be operational in Kolkata, Bangalore and Faridabad in FY25. (2) FORH added UP's first advanced cath labs at Noida, Neuro ICU and advanced Lab at Faridabad and surgical robots at Anandpur Hospital. Manesar unit will be break-even on immediate basis (3) Margins improvement would be driven from divestment of Malar unit, scale up in occupancy and operational cost optimization. (4) Cost savings expected in the tune of Rs. 50mn in FY25 which pertains to delisting of RHT entity in Singapore. (5) Out of top nine hospitals operating below 15% margin, mgmt guided four hospitals (Faridabad, Jaipur and Ludhiana) will likely see faster EBITDA margin improvement. (6) Reiterated margin and occupancy guidance at 20% and 70% by FY25; respectively. (7) Capex was at Rs. 4.5bn for 9MFY24; pertains to investments in advanced medical equipment such as da Vinci Robert, robotic surgery (Artho robot) and orthodox robot etc. (7) ARPOB growth guided at 5-6% YoY. ARPOB growth in Q3 was attributable to higher complexity procedures. YoY Price increase at consol level was at only 1- 1.5%. (8) There were certain one offs related to services rendered to Mohalla Clinics issues which impacted profitability in diagnostic segment in Q3.
Rating: HOLD | CMP: Rs2,585 | TP:Rs2,480
Q3FY24 Result Update – Robust quarter led by strong domestic market
Quick Pointers:
Strong domestic sales growth of ~36% YoY to Rs21.8bn.
Management maintained long-term guidance of growing at 2x GDP growth.
We revise or FY24/25/26E EPS estimates by +18.3%/13.3%/16.2% factoring in strong domestic market and better margins. Cummins India (KKC) reported healthy quarterly performance with revenue growing 16.2%, due to strong domestic sales and EBITDA margin expanding by 232bps YoY to 21.2%. Traction in the domestic powergen market continues to remain strong, led by data centers, infrastructure, manufacturing and commercial & residential realty. Data centers constitute a Rs5bn+ annual opportunity for the company. CPCB IV+ accounts for <25% of genset sales, but demand should pick up in Q1FY25 as CPCB II gets phased out. Although China & Europe remain soft, overall weakness in exports has likely bottomed out. Meanwhile, Cummins is improving its Distribution business offerings and is entering niche areas such as Reconditioning in order to grow faster than its historical rate of 6-8%.
We expect Cummins’ outlook to remain intact given 1) strong domestic demand in power gen across sectors with CPCB-IV product witnessing traction 2) improving margin profile and 3) ample room for growth in distribution business. The stock is trading at a P/E of 44.1x/38.3x FY25/26E. We roll forward to Dec-25 and maintain ‘Hold’ rating with a revised TP of Rs2,480 (Rs1,811 earlier) valuing it at 38x Dec-25E (33x Sep-25E earlier).
Strong domestic sales and softening RM costs drive beat on estimates: Standalone revenue grew 16.2% YoY to Rs25.3bn (PLe: Rs23.8bn) driven by strong growth in Domestic sales (up ~36% YoY to Rs21.8bn), while Export sales declined by ~40% YoY to Rs3.3bn. Domestic/Export mix stood at 87%/13% (vs 75%/25% in Q3FY23). Gross margin expanded by 322bps YoY to 37.0% (PLe: 34.5%) owing to stable pricing, softer commodity costs, better product mix and delivery of a large data center order. EBITDA rose 30.5% YoY to Rs5.4bn (PLe: Rs4.2bn). EBITDA margin increased by 232bps YoY to 21.2% (PLe: 17.5%) with gross margin expansion partly offset by a jump in employee costs (up 29.8% YoY to Rs2.1bn). Adj. PAT grew 26.7% YoY to Rs4.6bn (PLe: Rs3.5bn) driven by the strong operating performance and margin expansion.
Healthy growth across domestic segments, while exports lag: Domestic powergen business grew 51% YoY to Rs10.7bn, with High HP sales up 67% YoY to Rs7.7bn, High Density sales up 71% YoY to Rs1.3bn, Medium HP sales up 6% YoY to Rs1.3bn and Low HP sales down 16% YoY to Rs430mn. Industrial business was up 20% YoY to Rs4.1bn, led by Compressors (+213% YoY to Rs470mn), Construction (+52% YoY to Rs1.5bn) and Railways (+19% YoY to Rs920mn), while Mining was down 45% YoY to Rs180mn. Distribution business also grew 26% YoY to Rs6.6bn. Exports slid 40% YoY to Rs3.3bn due to softening of markets across the globe and end-of-year inventory correction. Low HP exports declined 38% YoY to Rs1.4bn and High HP exports fell 44% YoY to Rs1.5bn.
Rating: HOLD | CMP: ₹1,606 | TP: ₹1,600
Q3FY24 Result Update – Strong all round performance
Quick Pointers:
Expect margin to sustain at 19-20%.
Guided for 200-300bps outperformance to IPM in domestic formulation market.
We revise our FY25/26E EPS estimates by 12%/22%, as we factor in higher India sales and margins. Lupin’s (LPC) Q3FY24 EBITDA of Rs10.2bn (up 11% QoQ) was 12% above our estimate aided by higher India sales and gross margin. Margins are likely to remain heathy in the near term with better product mix in US. Any competition in gSpiriva and delay in new launches in US will be key risk to our estimates. At CMP, the stock is trading at 25x FY25E EPS and we have factored margin recovery and certain niche launches in US. Maintain ‘Hold’ rating with revised TP of Rs1,600/share (Rs1,200 earlier), 25x FY26E EPS as we roll forward.
Strong revenue growth across markets: Revenues grew 20% YoY to ₹52bn. US business remained flat QoQ at $212mn, largely aided by gSpiriva. India formulation business grew 13% YoY to ₹17.3bn. EMEA and growth markets continued to show healthy growth of 36% and 71% YoY respectively. API sales declined by 1% YoY.
EBITDA beat aided by higher revenues and GMs: Company reported EBIDTA (adj for forex) of Rs10.2bn; above our est of ₹9.2bn. Adjusted OPM came in at 19.7% expanded by 140bps QoQ. GM came in higher at 65.2%; up 40 bps QoQ and 600bps YoY mainly due to change in product mix and softening of input prices. However other expenses continue to remain elevated at ₹15.6bn; up 17% YoY (flat QoQ). Ex R&D cost other expenses were up 2% QoQ. R&D expenses came in at 7.2% of sales; up 23% YoY. Tax came in lower at 16%. Reported PAT came in at Rs6.1bn vs our est of Rs4.7bn.
Key concall takeaways: India business: Launched 21 products in CY23; highest among its peers. Therapies such as Respiratory, GI and Gynaec performed well. Chronic share contributed ~62% of the overall mix. Guided to outperform 200-300bps IPM. Contribution from in-licensed products will continue to go down and thereby improve profitability. US market – Ramp up in market share has been seen in gSpiriva. Will continue to enjoy limited competition given complexity of product over next 1-2 years. Impact of competition will be more seen in Q4 in gSuprep. gProlensa - launched in 4QFY24 with 6-month exclusivity. The company has seen a low single-digit price erosion in the quarter for oral solids portfolio, offset by volume growth. Currently inhalation products contributed 40% to total US sales. Expect US qtrly run-rate to sustain +$200mn and can grow in double digit based on favorable litigation outcomes. Ramp up in Fostair aided sales across EU markets. Net debt stood at ₹10.4bn as of Q3FY24 vs Rs18bn in Q2. PLI benefits led to increased other income. ETR guidance at 20% for FY24. Expects margin to sustain at 19.5-20.5% and may go up to 22-23% in medium term based on certain niche products launch in US market. Will continue to look out for acquisitions in respiratory and neurology segments.
“RBI's decision to keep the repo rate steady at 6.5% signals stability, creating an environment that supports economic growth and investment. The alignment between the RBI's accommodative stance and the current market conditions bodes well for the economy, encouraging lower interest rates and increased investments. This sets the stage for sustainable growth and financial resilience.
The softening of inflation is a positive sign for both consumers and businesses, suggesting potential relief from cost pressures.
It's encouraging to see the emphasis on good governance, robust risk management, compliance culture, and customer protection within financial institutions. Prioritizing these aspects will contribute to the overall stability of the financial sector."
Key takeaways:
3Q review - small misses, large reactions
A litany of minor disappointments:
The minor but almost ubiquitous disappointments from 3QFY24 bank earnings were mainly driven by NIMs. In most cases, loan growths were satisfactory, credit costs moderated further from already low levels and operating costs remained in-line. The disappointment in margins was due to 1) lower-than-expected CASA accretion, which had adverse impact on blended cost of funds; 2) softer-than-expected asset yields despite across-the-board reductions in balance sheet liquidity; and 3) mix shift towards higher yield credit segments. Stocks reacted sharply to the minor disappointments.
Margins the key to earnings outlook:
The incremental pressure point on margins (till rates remain high) are repricing of TD stock and higher TD proportion in NDTL. We expect the first factor to get phased out by 1QFY25 as TD rates have peaked and bulk of the repricing is behind. This ensures that 1Y forward earnings look throughs appear rosier, the deeper we travel into FY25. Interestingly, the two quarters following rate cuts (assumed in Aug-24), should see repo-rate linked loan repricing as the key driver of margin pressure. In any case, margin in late FY25 should be on a mild upswing from asset mix and liability mix/pricing benefits. With no spikes expected in credit costs, earnings growth can potentially exceed loan growth.
Minor revision to our earnings estimates for large banks:
We trim our FY25-26 earnings estimates for our large cap coverage by 1-6% mostly through NIM due to weaker-than-expected CASA momentum and greater probability of mid-CY24 rate cuts. Our FY25/26 credit cost estimates are mostly higher than consensus.
Attractive risk-reward in large cap private banks:
With a deep correction in HDFC Bank and a lukewarm response to the positive surprise in ICICI Bank, our top two ideas look even more attractive. AXSB, our third preference, remains most geared to liability easing as rates ease due to higher proportion of short-term borrowing.
Continuing their tumultuous ride since opening bell, Indian benchmark indices were up at 3 pm, while broader market indices were down over 1%. Among sector indices, Metal and Oil & gas indices were the biggest losers.
At 3 pm, Sensex was up 188.58 points, or 0.26%, at 71,617.01, and Nifty was up 62.60 points, or 0.29%, at 21,780.55.
Rating: ACCUMULATE
Target Price : INR 165
Upside : 15%
CMP : INR 144 (as on 08 February 2024)
Superior execution on all fronts
Cricket World Cup and festive season led Q3 beat
Zomato (ZOMATO IN) reported an in-line Q3 as regards food delivery gross order value (GOV), up 27% YoY, led by the positive impact from Cricket World Cup (CWC) and festive season (refer ‘Consumption to wax with Cricket World Cup dated 18 September 2023). ZOMATO was the biggest beneficiary of CWC 2023, as global QSR chains saw an SSSG dip of 7% YoY (average of KFC, PH, McD and Dominos). GOV growth may continue in 16-18% range, medium term, on: 1) increased users and 2) higher frequency due to Gold programme. Adjusted revenue growth for the food business was healthy at 29.4% YoY, on spiked take rate (up 70bps YoY to 20.1%), given: 1) higher ad revenue and 2) raised platform fee (to INR 3 by August end; full impact in Q3).
Blinkit – Yet another surprise in profitability
Revenue from Blinkit too surged 114% YoY, led by positive impact from festive season and CWC 2023. Growth was led more by increased transacting customers (74% YoY). AOV too grew 14.8% YoY. GOV per dark store surged 39.3% YoY due to change in product mix, which likely led to more throughput per store. Contribution margin was positive for second consecutive quarter, as it almost doubled QoQ to 2.4% (as a percentage of GOV), despite healthy new store addition (24.6% YoY). Levers such as ad revenue and product mix contributed to higher margin. ZOMATO is confident of ample room (double up store count) to grow its quick commerce business in top eight cities due to increased penetration opportunity. Top eight cities accounted for 90% of GOV for Blinkit. Hyperpure too saw healthy growth of 104% YoY, with adjusted EBITDA losses same at INR 340mn.
Valuations: Downgrade to Accumulate; TP raised to INR 165
ZOMATO’s food segment is trading at fair 42x FY26E EV/EBITDA. There seems a potential for adjusted EBITDA to grow 23% YoY post FY26E too, which may drive share price performance, medium-to-long term. For quick commerce segment, path to profitability has intensified at a faster clip, but 1) the scale of business (beyond metros) and 2) potential competitive intensity in future are key monitorables. We downgrade ZOMATO to Accumulate from Buy (stock has moved up by 50% in the last six months, largely factoring healthy growth and profitability) with raised SOTP-TP of INR 165 from INR 150, as we have raised the target one-year fwd. EV/EBITDA of food delivery to 50x (from 47x). Good execution on growth and profitability in the food/quick commerce businesses are key monitorables. We have assigned one-year fwd. EV/sales of 6x (unchanged) and 2.5x (unchanged) to Blinkit and Hyperpure, respectively.
Rating: ACCUMULATE
Target Price : INR 1820
Upside : 13%
CMP : INR 1606 (as on 08 February 2024)
gSpiriva sees quick ramp-up
Strong beat in Q3FY24
Lupin’s (LPC IN) Q3 results were well ahead of our expectations – Revenue, EBITDA and PAT beat our estimates by 7%, 41% and 92%, respectively. The upside came in mostly from faster ramp-up in gSpiriva product in the US, but also supported by stronger growth in most other geographies. We estimate ~USD 25mn high-margin gSpiriva sales in Q3.
US generics – Momentum to continue
Prescription share in gSpiriva has quickly ramped up to ~30%. LPC targets to take it to ~40%. It does not expect additional competition in the product till FY27. Entry of authorized generic in the market could be a major risk though. Ramp-up in recently-launched gNascobal and gProlensa could also contribute to growth. gMyrbetriq with 180-day exclusivity could be another major product that could add to growth in FY25. The management also highlighted other interesting products such as gJynarque and gRisperdal Consta that could add to revenues in the next two years.
Other businesses – On strong footing
India business growth at 13.4% YoY surprised positively. We expect 10% sustainable growth in this business. EMEA business growth at 36% YoY and RoW business growth at 26% YoY also were ahead of our estimates – we expect these to grow at 9-11% on a sustainable basis.
Margin improvement to sustain
LPC surpassed its margin guidance to register 19.7% EBITDA margin in Q3. The management has not guided for further sharp improvements hereon, but may target to sustain the levels and gradually improve.
Valuations: Reiterate Accumulate with a higher TP of INR 1,820
We raise FY24E core EPS by 20% and FY25E-26E core EPS by 7-8%. LPC trades at 32.4x our FY25E core earnings. We raise TP to INR 1,820 from INR 1,383, on 33x FY26E core EPS plus cash per share. Potential authorized generic competition in gSpiriva is the key risk.
Rating: ACCUMULATE
Target Price : INR 154
Upside : 11%
CMP : INR 138 (as on 08 February 2024)
Spotlight on occupancy ramp-up for Aurika
Q3 average room rate up 10%
Lemon Tree Hotels (LEMONTRE IN) reported a topline growth of 24% to INR 2.9bn, driven by 189% growth in revenue from Aurika branded hotels led by operationalization of Aurika Skycity at Mumbai. Occupancy decreased 170bps to 65.9% and average revenue rate (ARR) grew 10% to INR 6,333. LEMONTRE clocked 88% YoY growth in management fees to INR 472mn. EBITDA margin contracted 575bps YoY owing to planned increase in renovation expenses by INR 55mn YoY and inferior segment mix in occupancy at Aurika Skycity, Mumbai because of the management’s endeavor to shore up base level (minimum) occupancy by having crew demand. Consequently, APAT declined 11.3% to INR 354mn versus our estimate of INR 627mn.
Keys portfolio undergoing major renovation
The Keys portfolio is undergoing major renovation as it saw no renovation in the past 12 years. Post makeover, Keys portfolio may provide better guest experience, which will improve its capability to significantly reprise the hotel, thus driving EBITDA. Renovation expenses increased by INR 18mn QoQ for the brand, which dragged portfolio EBITDA by 900bps QoQ. Overall LEMONTRE plans to spend INR 1bn in FY25 and INR 400mn in FY26 on renovation.
Valuation: Reiterate Accumulate with a higher TP of INR 154
As the tourism market expands with improving infrastructure, LEMONTRE is penetrating deeper into India’s hinterland and reaching tier II/III cities. Related benefits may flow through by increasing occupancy and higher ARRs for the next few years but the chunky flow-through of benefits to EBITDA may come FY26 onwards as LEMONTRE’s majority hotels are undergoing major makeover till FY25.
Hence, we trim EBITDA/PAT estimates by 10%/30% for FY24E and by 10%/15% for FY25E. We introduce FY26E estimates and roll forward valuation to FY26E financials. Reiterate Accumulate with higher TP of INR 154 (from INR 121 earlier), on 17x (15x earlier) FY26E EV/EBITDA.
Rating: BUY
Target Price : INR 1414
Upside : 24%
CMP : INR 1142 (as on 08 February 2024)
Premiumization trend to continue
Growth led by premiumization
Mrs Bectors Food Specialities’ (BECTORS IN) Q3 sales rose 16.6% YoY to INR 4.3bn, led by 22.4% YoY growth in the biscuits segment and 15% in the bakery segment. Strong premiumization trend was observed in both the segments of domestic biscuits and branded bakery. Premium and mid-premium offerings such as creams, cracker biscuits, whole wheat bread, multigrain bread, and foot-long bread boosted revenues. The premium share in domestic biscuits rose to ~34-35% compared with 30-31% last year. Existing outlets contributed two-thirds to growth for biscuits. The management is targeting overall sales growth in mid-teens.
Reach expansion and capacity building on track
BECTORS continued to prioritize distribution as a key strategy. In the domestic biscuits sector, BECTORS is expanding its direct reach to 0.32mn outlets by FY24. In emerging markets of North and South, the biscuits business has expanded to 12 cities from three previously, while in the North, BECTORS has strengthened its presence from 269 districts to 350. Also, BECTORS is venturing into the lucrative Punjab region in the branded bakery segment. In Q3, it inaugurated its bakery plant at Bhiwadi (NCR), with plans to launch bakery and biscuits plants in Khopoli and Dhar, respectively by FY25. It is also adding two additional lines in Rajpura plant in H1FY25.
Margin guidance maintained at 14-15%
Q3 EBITDA margin contracted 130bps QoQ to 14.3% due to increased promotions in domestic biscuits from heightened competition and inferior mix of exports. BECTORS expects to achieve 14%+ EBITDA margin in the near term despite increased competition in biscuits.
Valuations: Revise to Buy with TP of INR 1,414
We cut FY25E/26E earnings estimates 7%/10%, to factor in slower growth in domestic biscuits business and lower margin. We revise to Buy from Accumulate as the stock has corrected 6% in the past two months, with TP unchanged at INR 1,414, as we assign 40x (unchanged) and roll forward to March FY26E.
Continuing their volatile trend since opening bell, Indian benchmark indices were up at 2 pm, while broader market indices were down over 1%.
At 2 pm, Sensex was up 55.91 points, or 0.08%, at 71,484.84, and Nifty was up 25.45 points, or 0.12%, at 21,743.40.
"The RBI's commendable decision to extend the Key Fact Statement (KFS) mandate to encompass all regulated entities marks a pivotal stride towards fostering transparency in lending. From personal loans to MSME financing, this move ensures that borrowers are empowered with crucial information in a standardized format. By disclosing comprehensive details such as Annual Percentage Rate, processing fees, penalties, and other charges, the KFS becomes a beacon of transparency, eliminating hidden costs. This inclusive approach not only levels the playing field between traditional and digital lenders but also instills trust, enabling borrowers to make well-informed decisions about their financial commitments."
Biocon Limited reported net profit of ₹660 crore in Q3FY24, compared to a net loss of ₹42 crore in the same quarter of the previous year. Apart from this, the firm reported a 34% rise in revenue at ₹3,954 crore, compared to ₹2,941 crore in the same quarter of the previous year. EBITDA came in at ₹926 crore, up from ₹644.3 crore in the year-ago period, while EBITDA margin was at 23.4% against 21.9% in the year-ago period.
L&T Electrolysers Ltd and Matrix Gas and Renewables Ltd have been awarded subsidies under New Delhi’s flagship green hydrogen promotion scheme following a last-minute withdrawal by Jindal India Ltd, a BC Jindal Group company, said one person familiar with the development.
The decision was taken Thursday after Jindal India missed the deadline of 3 February to furnish the bank guarantees required to formally sign up for the scheme, this person said, asking not to be named.
The incentives are part of the ₹17,490-crore Strategic Interventions for Green Hydrogen Transition (Sight) scheme, which grants subsidies to companies for setting up electrolyser manufacturing plants in India. (Read the full story here.)
Global brokerage firm Jefferies delves deeply into Bharti Airtel's 70% subsidiary, Bharti Hexacom, which filed its Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India (SEBI) for an Initial Public Offering (IPO) last month. For those Bharti Airtel investors who are interested in knowing more about the subsidiary's operations, Jefferies has compiled a list of important details on Bharti Hexacom's business in its most recent research.
“We take a closer look at Bharti Hexacom, which forms 7% of Bharti's India ops. that in turn form c.90% of our SOTP," said Jefferies in its report. (Read the full story here.)
Share prices of Airlines as InterGlobe Aviation, SpiceJet and even Jet Airways declined 2-5% on Friday. The news flow remained strong around route-specific capping of airfares being suggested by a parliamentary panel.
CNBC- TV 18 referring to PTI report has said that Parliamentary panel proposes route-specific capping of airfares, the panel proposes setting up of a separate entity to control air ticket prices.
The Parliamentary Standing Committee on Transport, Tourism and Culture in its report tabled on Thursday is said to have spelt out the measures that can be taken by the government on its recommendations and observations on the issue of fixing airfares. (Read the full story here.)
Continuing their volatile trend since opening bell, Indian benchmark indices were up at 1 pm, while broader market indices were down over 1%.
At 1 pm, Sensex was up 78.44 points, or 0.11%, at 71,506.87, and Nifty was up 34.90 points, or 0.16%, at 21,752.85.
The public sector undertaking reported a decline of 6.2% in net profit at ₹358.6 crore in Q3FY24, compared to ₹382.4 crore in the yar-ago period. RVNL's revenue from operations in the quarter fell 6.4% to ₹4,689.3 crore, compared to ₹5,012.1 crore in the same period last year. On a sequential basis, the company's net profit fell 9.1 per cent from ₹394.4 crore during the quarter ending September 2023. Revenue from operations also declined 4.6 per cent quarter-on-quarter from ₹4,914.32 crore during the September quarter. On the operating front, RVNL's EBITDA during the quarter declined 9.6% to ₹249 crore, compared to ₹275 crore in the year-ago period, while EBIT margin came in at 5.3 per cent compared to 5.5 per cent in the same period last year.
The Indian tractor maker reported a smaller-than-expected third-quarter profit on Thursday, as lower demand offset the fall in costs. Escorts Kubota's standalone net profit rose nearly 49% to ₹2.77 billion (about $33 million) for Q3FY24, but fell short of analysts' expectations of ₹2.82 billion, per LSEG data. Revenue rose 2.5% to ₹23.20 billion, the slowest growth since at least March 2022.
The company reported a rise of 29% in its consolidated net profit at ₹244 crore in Q3FY24, compared to ₹190 crore in the year-ago period. The state-run engineering and construction firm's revenue from operations for the quarter rose 23% at ₹2,884 crore, compared to ₹2,346 crore in the same period last year. It also declared an interim dividend of Rs.1.80 per equity share on the face value of ₹2 each (90 per cent of the paid up equity share capital) for the financial year 2023-24. The company's EBITDA during the December quarter rose 63.2 per cent to Rs.378.1 crore, compared to Rs.231.7 crore in the year-ago period, while EBITDA margin stood at 12.6 per cent.
Indian benchmark indices continued thier topsy-turvy ride on Friday, while broader market indices dropped around 2%.
At 12 pm, Sensex was down 65.51 points, or 0.09%, at 71,493.94 and Nifty was down 16.40 points, or 0.08%, at 21,734.35.
India’s retail inflation may have eased from 5.7% in December to a three-month low of 5.0% in January, primarily on account of cooling food inflation, according to the median estimate of 18 economists in the latest Mint poll.
While this moderation may provide some relief to Reserve Bank of India which expressed concern in its monetary policy review on Wednesday about significant uncertainty in food prices due to “the possibility of adverse weather events" it said supply-side measures will be required to control them. Official data is scheduled to be released on 12 February. (Read full story here.)
Apollo Hospitals: Beating market expectations, Apollo Hospitals Enterprises reported a whopping 60% rise in consolidated net profit (attributable to shareholders) at ₹245 crore in the quarter ending December FY24, compared to a net profit of ₹153.5 crore in the year-ago period. Apollo Hospitals also declared an interim dividend of ₹6 per share on Thursday. Its consolidated revenue from operations increased by 13.8% YoY to ₹4850.6 crore in Q3FY24 against ₹4263.6 crore in Q3FY23.
The Indian realty-to-textile company reported a consolidated profit of ₹30.54 billion ($368 million) in the Q3FY24, compared to a loss of ₹1.01 billion rupees last year. Total expenses fell by 39.4% to ₹4.60 billion, largely due to a nearly 99% fall in inventories of finished goods, while its input costs also dropped 4.3%. This helped the company to reduce its loss before exceptional item by 27.2% to 731.6 million rupees. The Mumbai-based company's primary revenue-generating segment, polyester, which accounted for about 95% of its revenue, fell by 11%. This resulted in a 43.4% decline in its revenue from operations at 3.69 billion rupees.
Rating: ACCUMULATE
Target Price : INR 488
Upside : 11%
CMP : INR 441 (as on 08 February 2024)
Hospitals strong; Diagnostics drag
Diagnostics – Margin drags again
Fortis Healthcare’s (FORH IN) Q3 revenue and EBITDA missed our estimates by 7% and 10%, respectively. The Hospitals segment performed marginally better than our estimates, while poor performance by the Diagnostics segment led to an overall miss.
Hospitals – Margin stabilizes; looking up
Revenue for the Hospital segment grew 9.6% YoY, marginally slower than our expectations, with near-equal contribution from occupancy and ARPOB. Sustained high margin (18% at EBITDA level) led to Q3 EBITDA 5% better than our estimate. We share management’s confidence of gradual margin improvement– we are building in 200bps margin improvement in the next few years.
Better clarity on large brownfield expansion plan
The management, for the first time, shared a detailed plan around its large, brownfield, 2,200-bed expansion plan in the next four years. Except for the 350 beds acquired at Medeor, Manesar, this is entirely brownfield. On the back of this expansion and better margin visibility, we raise our FY24E-26E EBITDA estimate for the hospital segment by 4-11%.
Diagnostics: Performance, a concern; await Agilus Diagnostics’ IPO
Revenue for the Diagnostics business was flat YoY and EBITDA margin was 10% versus 17.3% in Q2FY24 and 19.7% in Q3FY23. The management refused to comment in detail given the limitations imposed by the proposed IPO of the entity but still mentioned that there are some one-off hits to margin. Still, we lower our EBITDA estimate by ~20% for FY24E-26E, on lower growth and margin assumptions.
Valuations: Maintain Accumulate with higher TP of INR 488
We trim FY24E core EPS by 2% but raise FY25E-26E core EPS by 5-8%. FORH trades at 48.5x FY25E core earnings. We raise our TP from INR 390 to INR 488, which is 42x FY26E core EPS plus cash per share. High earnings growth from brownfield expansion and margin improvement in the hospital segment justify high multiple. Delay in bed additions and further cost escalation are key risks.
As I started browsing for my daily dose of morning news, headlines about the possible acquisition of Paytm wallet were everywhere. After the RBI banned Paytm Payments Bank from offering all kinds of banking services for non-compliance, the stock has plummeted by over 40% in just three days.
Paytm's role in the fintech economy is commendable, and the company is almost synonymous with cashless transactions. As a user, I couldn’t be more thankful. It's such a convenience to not have to bother with cash when travelling, and functional ATMs are hard to find. (Read the full report here.)
Strong digital capabilities laying foundation for the leap ahead
Motilal Oswal attended the Analyst Day of Aditya Birla Capital – Finance Simplified – and returned pleasantly surprised with the kind of digital capabilities that ABCL’s respective businesses and Aditya Birla Capital Digital (ABCD) has built over a course of time. Unlike other Analyst Meets, ABCL’s meet shifted its focus from outcomes to means (or capabilities). This approach aims to fortify ABCL’s businesses with a strong foundation for sustained execution.
Among non-banks, ABCL is rapidly emerging as one of the most adept in terms of capabilities across sourcing (prospecting), underwriting (onboarding), and collections (renewals) within in its lending (protection) businesses. It has clearly made healthy
progress toward its vision of “One ABC, One Customer, One Experience," positioning itself to take rapid strides toward driving higher cross-sell across its business.
As strategic priorities, it will continue to work on the simplification of the financial needs of the customers, drive the data/analytics centric organizational culture, scale up its digital platforms – both B2B and D2C and further build out its omni-channel based distribution.
Key takeaways from the meet
ABCL has made great progress on its omni-channel architecture, leveraging its strong network of physical branches alongside agile and interoperable digital platforms, such as Udyog Plus (B2B platform for MSMEs), ABCD-D2C platform, and an evolving B2D platform for channel partners.
The company is using data and analytics as its building blocks, harnessing the power of Google Cloud (GCP). With over 100 analytical models currently in use, it plans to scale up this number to over 400 by FY25. Furthermore, there is a comprehensive initiative underway for the organization-wide adoption of automated dashboard tools, aimed at reimagining the customer experience across all its individual business units.
D2C App (ABCD) is a full-fledged app (rather than an app-in-app) and will be launched in Mar’24. It has many industry firsts and has been meticulously built and enriched with customer insights to offer products across lending, investments, insurance, and payments. My Track will provide value-added services such as Credit Score, Financial Portfolio, Spend Analyzer and more. This can empower the workforce of ABCL as multi-product specialists.
Payments offering (including UPI and bill payments) will make ABCL a ‘full stack’ financial services provider. It has already applied to the regulator for a PPI license and expects to start merchant acqusitions (Pay by UPI QR or handle) and wallet services in FY25.
ABCL is now much better equipped today with strong support from each of its horizontals such as Technology, Analytics and the D2C App. These divisionshave developed capabilities (much of it in-house) to ensure sustained execution across the company’s diverse portfolio of lending, protection and investment businesses.
Indian benchmark indices continued to sink lower on Friday, while broader market indices like Midcap and Smallcap fell over 2%.
At 11 am, Sensex was down 64.96 points, or 0.09%, at 71,363.47 and Nifty was down 54.15 points, or 0.25%, at 21,663.80.
Ramco Cements share price slumped more than 8% on Friday's session, missing the Street's projections for its profit for the quarter that ended in December (Q3 FY23) on Thursday. This was due to weaker demand and pricing, particularly in its primary market in south India. Ramco Cements share price today opened at an intraday high of ₹939.85 apiece on the BSE.
The company noted in its exchange filing that the demand for cement in Tamil Nadu and Andhra Pradesh was impacted during the quarter by the very high rainfall and the flooding that followed typhoon "Michaung." (Read the full story here.)
After State Bank of India's (SBI's) strong rebuttal against the profit-booking reports in Yes Bank, shares of the private lender attracted strong buying interest in the early morning session on Friday. Extending its rally for the fourth straight session, Yes Bank shares opened upside and went on to touch an intraday high of ₹31.75 apiece on NSE, logging over 5 percent rise on Friday.
According to stock market experts, Yes Bank shares have been on an uptrend and some profit-booking was witnessed on Thursday after some news reports of SBI booking profit in the private lender. (Read the full story here.)
JK Lakshmi Cement, a manufacturer and supplier of cement and related products, jumped sharply in today's trading session to hit an all-time high of ₹999.90 apiece with a gain of 9% after the company reported a good set of numbers for the December-ending quarter.
The company on Thursday reported a 68.50% rise in its net profit to ₹124 crore for Q3 FY24, compared to a net profit of ₹73.59 crore in the same period last year. Total revenue for the quarter came in at ₹1,589 crore, an increase of 7% from ₹1,489 crore.
During the quarter, the company achieved a capacity utilisation of 79% and a Clinker capacity utilisation of 105% in Q3 FY24. Notably, its power and fuel costs decreased to ₹327 crore from ₹434.4 crore in Q3 FY23, marking a significant 25% year-on-year decline. (Read the full story here.)
The online food delivery platform reported a consolidated net profit of ₹138 crore, compared to a net loss of ₹347 crore in the year-ago period. Zomato's revenue from operations for the quarter came in at ₹3,288 crore, up 69% from ₹1,948 crore in the year-ago period. Total expenses were higher at ₹3,383 crore, compared to ₹2,485 crore in the corresponding period a year ago, the company said. Revenue from its mainstay food delivery business grew 48% for the quarter, while revenue from its quick commerce division more than doubled. Zomato's contribution margin - a key profit metric - expanded to 7.1% in Q3FY24 from 6.6 per cent in Q2FY24 due to the introduction of a fee for customers to use the food delivery platform.
Indian benchmark indices continued their downward spiral on Friday, following Thursday's dismal performance.
At 10 am, Sensex was down 54.32 points, or 0.08%, at 71,374.11 and Nifty was down 54.55 points, or 0.25%, at 21,663.40.
The flagship company of Aditya Birla Group reported a 39.80% decline in its consolidated net profit for Q3FY24 at ₹1,514.44 crore, down from ₹2,515.78 crore a year ago. “Financials from previous period are not comparable on account of the acquisition of a 9.99% stake by ADIA entities in Aditya Birla Health Insurance," the company said in an exchange filing. Consolidated operating revenue rose 11.61% to ₹31,965.48 crore in Q3FY24, from ₹28,637.86 crore in Q3FY23, driven by the performance of key subsidiaries UltraTech Cement and Aditya Birla Capital. On a standalone basis, the textile manufacturer reported a decline of 8.17% in net profit from ₹257 crore a year earlier to ₹236 crore.Stand-alone revenue from operations rose 3% to ₹6,400 crore from ₹6,196 crore a year earlier.
The company saw a 49% year-on-year increase in net profit during the December quarter of FY24 at ₹9,444.4 crore compared to ₹6,334.2 crore during the same period last year. It was mainly driven by an increase in net income from investments and growth in net premium income. India’s largest insurer’s net premium income grew by 4.6% to ₹1.17 trillion compared to ₹1.11 trillion in Q3FY24. The company's board proposed an interim dividend of ₹4 per share for FY24, with the record date set for 21 February 2024. Additionally, LIC's net income from investments during the December quarter rose by 12% year-on-year to ₹95,266.8 crore from ₹84,869 crore in Q3FY2023, while management expenses increased by 32% year-on-year to ₹18,193.8 crore.
