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PremiumSensex Today | Market Highlights: Indian benchmark indices ended the day deep in the red following the RBI's decision to keep rates unchanged at 6.5%.
At close, Sensex was down 723.57 points, or 1%, at 71,428.43 and Nifty was down 212.55 points, or 0.97%, at 21,717.95.
Among sectoral indices, Nifty FMCG and Private Bank were the biggest losers, down 2.06% and 2.59%, respectively, while PSU Bank was up 2%. Even broader market indices ended the day in red while the volatility index was up 1.67%.
European shares opened flat on Thursday, as losses in shipping giant Maersk and drugmaker Astrazeneca following dour results partially countered strong performances by consumer staples including Unilever.
The pan-European STOXX 600 index held its ground at 485.55 points, as of 0827 GMT.
Elsewhere, a rally in Chinese shares lost momentum as markets headed for the Lunar New Year holidays, a sign of lingering skepticism among investors as authorities show a stronger resolve to stem the equity market’s rout.
The CSI 300 Index rose 0.6% on Thursday after Beijing announced that Wu Qing, a banking and regulation veteran, will replace Yi Huiman as chairman of the China Securities Regulatory Commission. The onshore benchmark surged 4.5% in the previous two sessions, with its gain on Tuesday being the biggest in more than a year.
Stock trading on the mainland will be shut until the end of next week while the Hong Kong bourse will conduct half-day trading on Friday. An index tracking Hong Kong-listed Chinese firms was down 1.2% in late trading.
Meanwhile, confidence in an economic soft landing over in the US has pushed the S&P 500 to new highs. Elsewhere, a global artificial intelligence boom has supported tech-reliant markets like Taiwan while India — seen a China alternative with its huge consumer base — is powering ahead.
Indian benchmark indices ended the day deep in the red following the RBI's decision to keep rates unchanged at 6.5%.
At close, Sensex was down 723.57 points, or 1%, at 71,428.43 and Nifty was down 212.55 points, or 0.97%, at 21,717.95.
Among sectoral indices, Nifty FMCG and Private Bank were the biggest losers, down 2.06% and 2.59%, respectively, while PSU Bank was up 2%. Even broader market indices ended the day in red while the volatility index was up 1.67%.
European shares opened flat on Thursday, as losses in shipping giant Maersk and drugmaker Astrazeneca following dour results partially countered strong performances by consumer staples including Unilever.
The pan-European STOXX 600 index held its ground at 485.55 points, as of 0827 GMT.
China shares closed up on Thursday after Beijing appointed a veteran regulator as the new securities watchdog head and policymakers took measures to stabilise the sluggish stock markets.
China's blue-chip CSI 300 Index was up 0.6% at market close to log a fourth straight session of rebound, while the Shanghai Composite Index climbed 1.3%.
For the week, the CSI300 jumped 5.8% and the Shanghai Index advanced 5%, both booking their biggest weekly gain since November 2022. The markets will be closed for the long Lunar New Year holiday from Friday.
Hong Kong's Hang Seng Index, however, lost 1.3%, dragged by a 6.1% decline in Alibaba Group Holding, after the internet giant missed analysts' estimates for third-quarter revenue.
China's cabinet replaced Yi Huiman as chairman of the China Securities Regulatory Commission (CSRC) with Wu Qing, a veteran regulator with a reputation for tough action.
Mutual Fund Industry’s Net AUM stands at ₹ 52,74,000.70 crores for the month of January 2024 while for the month of December 2023 was ₹ 50,77,900.36 crores.
While for the AAUM for January 2024 ₹ 52,89,007.72 crores and for December 2023 was ₹ 51,09,071.77 crores.
Number of new SIPs registered has attained a milestone in January 2024 as it reaches 51,84,057.
The SIP AUM stood at ₹ 10,26,996.23 crores for January 2024 compared to 9,95,925.39 crores for December 2023
Mutual Fund Folios reached an all-time high of 16,95,59,182 compared to 16,48,90,272 in the month of December 2023
Retail MF Folios (Equity + Hybrid + Solution Oriented Schemes) also hit an all-time high at 13,56,80,462 for the month of January 2024 compared to 13,18,55,261 for the month of December 2023
35 months of positive equity inflows, starting from March 2021
Retail AUM (Equity + Hybrid + Solution Oriented Schemes) stood at ₹ 29,88,347 crores for January 2024 with an Average AUM of ₹ 29,56,393 crores.
A total of 20 schemes were launched in the month of January 2024, in the category of both open ended and close ended scheme, raising a total of ₹ 6,817 crores.
SIP contribution stood at an all-time high of ₹ 18,838.33 crores in January 2024
The number of SIP accounts stood at highest ever 7,91,71,394 in January 2024 compared to 7,63,65,924 in December 2023
Speaking on January 2024 monthly data, Mr. Venkat Chalasani, Chief Executive, AMFI said:
"As we reflect on the latest data within the mutual fund industry, it is abundantly clear that we are in an era of growth and participation through financial savings instruments. The surge in SIP accounts to an unprecedented 7.92 crores in January 2024, coupled with the milestone of 51.84 lakhs new SIP registrations, underscores the unwavering commitment of investors towards disciplined wealth creation. Moreover, the industry's net AUM soaring to ₹ 52.74 crores further accentuates the resilience and potential of mutual funds as a preferred investment avenue.
What truly inspires confidence is the sustained retail participation across the country. This trend not only reflects the increasing financial literacy but also highlights the invaluable role played by the AMCs and our dedicated distributor fraternity in fostering a culture of informed investment. As we navigate through regulatory reforms and embrace the shift towards SIPs, it's evident that the Indian Mutual Fund Industry is charting a trajectory of sustained growth and relevance."
The RBI has navigated the hard times ably, steering the economy through the roughs of the pandemic and continued volatility over the past 4 years. The question now arises is that whether this oasis of sound growth and declining inflation can be durably sustained through monetary policy. The RBI’s answer to this has been to stay focused on the risks, resisting from reveling in the exuberance, nimbly balancing inflation-targeting, currency stability, systemic risk, and growth. The fruits of these efforts to ensure macroprudential stability will bear fruit in the times to come. This was the theme of the Feb’24 policy, where we could observe cautious optimism on growth, and optimistic caution on inflation.
No changes were expected in the rates, and accordingly, the MPC decided to keep its policy repo rate unchanged at 6.50%. It is important to note that the vote this time was 5-1, and not unanimous, indicating that some in the MPC are ready for a cut. All other policy rates such as MSF, bank rate, and SDF also remained unchanged. Besides domestic factors, playing on the MPCs mind will be the trajectory of global Central Banks in CY24, particularly the US Fed – the current market projections of 2-3 cuts in CY24 give RBI sufficient wiggle-room. We now expect the first rate cut not before Aug’24, given the inflation-growth dynamics currently expected.
The MPC retained its stance of being focused on withdrawal of accommodation, by a similar 5-1 vote as last time. The Governor also made an important caveat that the stance primarily refers to the MPC’s intent on controlling inflation and with reference to ongoing transmission of rates, and not necessarily to liquidity conditions. This is consistent with the actions of the RBI, which has resorted to nimble operations to maintain liquidity and short-term rates in a small range, especially in recent weeks when a pickup in government spending ensued. Currently, policy transmission to lending rates remains incomplete and the RBI’s inflation projections do not indicate quick alignment with 4%. Thus, by disjointing the stance from liquidity concerns, the MPC has effectively paved the way to keep it unchanged until inflation and transmission align – this impacts expectations of the timing of a stance change.
Accordingly, the tone on inflation was cautious, with the primary focus on food prices, which could generalize and cause havoc. The RBI remains vigilant of continued geopolitical shocks, supply chain disruptions, and erratic weather. Nevertheless, it kept its FY24 CPI estimate unchanged at 5.4%, inching down its Q4 forecast. Importantly, it projects FY25 CPI at 4.5%, which is above the oft-repeated target of 4%. The downward revision in quarterly trajectory, however, will be a positive for the markets. Further, it is important not to overstate the case for tightness, as the RBI is by no means tied down, given positive real rates prevail, and considerable progress has been made on core inflation. Rather, RBI’s actions must be interpreted in its desire to build considerable countercyclical buffers.
The RBI was sanguine on growth prospects, pencilling in 7% y/y real GDP growth for FY25, pulling up the projections for Q1 and Q2 sharply. Confidence was shown in structural drivers of domestic growth, backed by consumption. While acknowledging the role of government capex, the Governor pointed out that investment intention of the private sector remains upbeat. India thus remains the polestar even in a firmament where the stars have aligned more favourably for global growth. The latter is based on the continued impact of pandemic era relief efforts, and thus the optimism was laced with a word of caution on the as the high debt/GDP of many countries poses a major risk to their fiscal maneuverability, and thus, their ability to consume.
The global positivity will help the external sector. India is expected to be the largest recipient of inward remittances, at USD 135 bn in CY24. Further, with 10.2% share in the global software market, net balances in services and remittances is expected to be in a large surplus, offsetting merchandise trade deficit. Thus, the RBI expects current account deficit to be eminently manageable in FY24 and FY25. We expect CAD to close at 1% of nominal GDP in FY24, in line with our earlier estimate. The meaty forex buffers would largely take care of any fluctuations in global prices impact merchandise imports or a slowing of software exports.
Indian benchmark extended their losses following the RBI's decision to keep rates unchanged at 6.5%.
At 3 pm, Sensex was down 844.35 points, or 1.17%, at 71,307.65 and Nifty was down 244.95 points, or 1.12%, at 21,685.655.
Among sectoral indices, Nifty FMCG and Private Bank were the biggest losers, down 2.24% and 2.37%, respectively, while PSU Bank was up 2.14%.
"The stance to keep the rate unchanged by RBI comes with a strong backdrop of keeping pragmatic control over inflation and at the same time, enabling steady economic growth. The RBI has pegged the GDP growth at 7% for FY24-25 that showcases the resilient recovery of the Indian economy and forecasts a coveted growth going forward, with the overarching goal to keep the inflation arrested within 4%. The RBI is cautious of the global headwinds and has defined a new risk brewing in form of elevated debt levels in advanced economies.
With the RBI highlighting residential housing as the growth propeller for construction activity, we foresee a strong growth-led demand across real estate markets, especially within and around key cities undergoing major infrastructural transformations. The pause of the repo rate will empower the masses with strengthened purchasing power, thus providing momentum towards residential purchases and overall, contributing to the economic growth of the country."
"RBI’s policy was on expected lines with focus on bringing inflation towards targeted range of 4 per cent. Monetary policy stance and steady rates over last one year have helped maintain healthy growth momentum while lowering inflationary pressures. Going forward we believe as inflation nears RBI’s 4 per cent goal, space for monetary easing would open up in the coming quarters, to support lower interest rates and credit demand."
Investing in building a perfect mix
JBCP continued its growth momentum in the domestic market with market-beating revenue growth of 14% y-y in 3QFY24 which beat our estimate. EBITDA margin of 26.4% beat BNPPEe/ consensus by 60/130 bp on better gross margin. We retain Outperform on JBCP, considering its continued focus on improving business mix by scaling up domestic formulations and CDMO businesses.
Domestic formulations business surprised positively; exports were muted.
JBCP’s 3QFY24 revenue growth of 7% y-y was in-line with our estimates, but domestic formulations growth of 14% y-y beat our estimate of 10% on outperformance of key brands in chronic products. As per IQVIA, JBCP 3QFY24 India revenue grew 13% y-y vs IPM growth of 8%. International formulations revenue fell 1% y-y due to weak tendering activity in South Africa and CDMO businesses while RoW posted mid-teens growth. Performance in Russia was steady with volume growth. EBITDA margin beat Bloomberg consensus/our estimate by 130bp/60bp due to better gross margin of 67.6% (+c140bps q-q) which we think was on account of higher share of Chronics in India revenue and lower share of public business in the South Africa market. Sales contribution from domestic formulations and CDMO was 65.2% (BNPPEe for FY26: 69.2%).
Earnings growth remains on track; JBCP is our top pick in our pharma coverage:
The key to success of JBCP’s new management has been its constant effort to enhance revenue share of segments which offer sustainable revenue growth and margins. Identifying gaps in the existing business and introduction of new products, using both organic and inorganic routes, have played out well for JBCP. We think its recent foray into Ophthalmic segments should further improve the business mix. Our target multiple remains unchanged at 25x, 2SD above its 5-year mean NTM P/E. Retain Outperform on JBCP. We lower our FY24-26E EBITDA by c1% as we tweak our assumptions for the export market. Our TP rises to INR2,030 from INR1,892 as we now value the stock at 25x FY26E EV/EBITDA vs 25x Sep-25E EV/EBITDA earlier.
“The MPC meeting today maintained the status quo on policy rates and the monetary policy stance. Some sections of the market were expecting a change in stance which did not materialize though, in our view, the policy was dovish as Prof Jayant Varma voted for a rate cut and with the governor highlighting the underlying financial stability and FY25 Inflation forecast at 4.50% which is 200 bps below the policy repo rate. We think the monetary policy stance will be changed in the next MPC Policy in April 2024."
Indian benchmark indices remained deep in the red territory following the RBI's decision to keep rates unchanged at 6.5%.
At 2 pm, Sensex was down 630.97 points, or 0.87%, at 71,521.15 and Nifty was down 159.85 points, or 0.73%, at 21,770.65.
Among sectoral indices, Nifty FMCG and Private Bank were the biggest losers, down 2.27% and 1.71%, respectively, while PSU Bank was up 2.76%.
"The decision to pause along with no change in stance was in line with our expectation. Expectedly, the focus of the MPC remained on ensuring disinflation on a sustained basis in order to achieve their medium term inflation target of 4%. The RBI does not seem to be too worried about the liquidity situation while asserting that it stands ready to use durable and frictional liquidity management tools to anchor the money market rates around the repo rate. We expect the RBI to continue to focus on fine-tuning of liquidity conditions through VRR/VRRR auctions, in order to gradually align the overnight rates with the repo rate.
The RBI has enough space for holding the repo rate steady, with its FY2025 GDP growth being quite strong at 7% (up from earlier estimate of 6.5%), in order to target the 4% inflation mark. The tone of the MPC was fairly balanced, with adequate focus on reaching the inflation target with a fair degree of comfort on GDP growth. We continue to expect the RBI MPC to change the stance to neutral towards the end of Q1FY25. This is likely to be followed by a shallow rate cut cycle from Q3FY25 onwards."
After the Reserve Bank of India's (RBI's) announcement to keep key rates unchanged post-monetary policy meeting, the Indian stock market witnessed strong selling pressure on Thursday.
The Nifty 50 index lost to the tune of 1%, touched an intraday low of 21,709 and logged near 225 points during Thursday deals.
After RBI's announcement to keep repo rates unchanged at 6.5%, the BSE Sensex today witnessed a sharp sell-off touched an intraday low of 71,405 mark and recorded near 750 points loss in a single day. Likewise, Bank Nifty index today lost around 600 points while touching the intraday low of 45,227 level.
One reason for stock market crash post-RBI MPC meeting, Sunil Nyati, Managing Director of Swastika Investmart said, “The RBI keeps interest rates unchanged, as expected, but the tone is still cautious about inflation, and there are no indications of an interest rate cut in the near term, while the market was expecting a dovish stance after the government kept the fiscal deficit at 5.1% in the budget. The market didn't react much to it, but the bias is bullish, so we can expect the Bank Nifty to catch up in the medium term." (Read the full story here.)
"We appreciate the RBI’s prudent decision to keep the repo rate unchanged at 6.5% and maintain their stance on ‘withdrawal of accommodation’ to align with the evolving growth-inflation dynamics and remaining focussed on ensuring sustainable growth for the Indian economy. This may keep interest rates slightly elevated in the economy and on credit to small businesses. We remain optimistic on gold loan demand, credit demand from MSMEs, Micro loans and demand for housing loans, given India’s resilient domestic economy, government thrust on capex, strong urban consumption and pick up in rural demand.
The RBI has further announced an important measure to ensure greater transparency for the retail and MSME borrowers. The regulated entities are required to share a detailed document called Key Fact Statement (KFS), listing all the key information regarding a loan agreement. As an NBFC adhering to compliance, corporate governance and taking proactive measures to safeguard the interest of our customers is of prime importance to us, and we welcome this move as it will encourage and enable the borrowers to take informed decisions."
The Reserve Bank of India’s (RBI) restrictions on Paytm Payments Bank’s business was a result of persistent non-compliance of the regulatory norms, while the central bank will release FAQ related to the actions taken on the fintech giant, said RBI top officials.
In its first reaction on the Paytm crisis, RBI Deputy Governor Swaminathan J said that the central bank will take suitable steps as warranted going ahead. (Read the full story here.)
"The RBI continued to maintain its "status quo" on policy rates and no change in “withdrawal of accommodation" stance for sixth consecutive policy review of no rate action. The RBI stated that global narrative is getting benign as global growth is expected to remain steady in 2024 with global trade showing signs of recovery and inflation softening considerably. On the domestic side as well momentum in economic activity continue to remain strong. The FY25 GDP growth is estimated at 7% with risk evenly balanced. On the other hand, RBI expects CPI at 5.4% for FY24 and that for FY25 at 4.5% assuming normal monsoon. The RBI is comfortable with the current liquidity conditions and stated that it will continue to remain nimble and flexible in liquidity management through Repo and Reverse Repo transactions. It is looking to review the regulatory framework for electronic trading platforms (last updated in 2018) and the revised norms will be shared with stakeholders for feedback. This will help the customers make an informed decision and make lending process more transparent. It has also decided to allow resident entities to hedge price of gold in OTC segment in IFSC. Overall, the commentary was balanced with adequate focus on inflation while maintaining the growth outlook. We believe the RBI has enough space for holding rates at current levels and may not cut rates in at least first half of FY25."
“The RBI's prudent decision to maintain the repo rate at 6.5% underscores a judicious approach towards India's economic trajectory, particularly benefiting NBFCs. This unwavering policy stance alleviates any additional financial burden on customers, fostering a conducive environment for sustained sectoral growth."
Indian benchmark indices remained deep in the red territory following the RBI's decision to keep rates unchanged at 6.5%.
At 1 pm, Sensex was down 468.85 points, or 0.65%, at 71,683.15 and Nifty was down 122.70 points, or 0.56%, at 21,807.80.
Among sectoral indices, Nifty FMCG and Private Bank were the biggest losers, both down over 1%, while PSU Bank was up 2.76%.
Rating: ACCUMULATE
Target Price : INR 1,900
Upside : 9%
CMP : INR 1745 (as on 07 February 2024)
Double-digit volume growth continues
Premiumisation drives growth
Radico Khaitan (RDCK IN) posted yet another strong quarter, with 20.1% YoY volume growth in prestige & above (P&A), led by: 1) adoption of luxury portfolio and 2) healthy growth in existing brands (lower prestige segment). RDCK continues to drive a wide portfolio of premium brands across various categories of spirits. Brands such as Rampur Single Malt, Jaisalmer Gin, Royal Ranthambore, 1965 Rum and 8PM Black have paved way for strong consistent growth in the luxury/P&A segment, which also propped realisation growth as product mix change was a major driver. Pressures persist in the regular segment, as its volumes declined 11.6% YoY, due to a deliberate attempt by the management to scale down volumes in order to avoid the hit from lower margin and no price hikes in some states. Expect this segment to bounce back, near-to-medium term with volume growth of 5-6% YoY. Going ahead, drivers for P&A growth are launches of existing luxury brands in more states and launch of more new brands in the portfolio.
EBITDA margin hit by high grain prices
Gross margin for RDCK grew 52bps YoY, but was 230bps lower QoQ at 41.8%, as grain prices increased sharply hitting overall profitability. Backward integration measures have started, and the management expects to use entire ENA produced for captive use over a period of next three years. We continue to maintain our view that with cool off in grain prices, EBITDA margin could potentially see an uptick by 300-350bps in the medium term. Further, higher growth in the luxury portfolio too is a driver for better profitability overall.
Valuations: Maintain Accumulate; TP raised to INR 1,900
RDCK’s revenue contribution from P&A (as % of IMFL revenue) may grow to 75% in FY26E (66% in 9MFY24; 52% in FY22), which may help command better valuations. Higher revenue contribution from P&A may also drive better realisations and in turn improve EBITDA margin. We believe this will potentially take RDCK closer to larger peer UNSP, which saw 85% revenue contribution from P&A in 9MFY24. We up FY25E/26E earnings estimate 16.8%/11.0%, factoring in: 1) sale of extra neutral alcohol (ENA) externally, near term, which may be phased off, medium-to-long term, 2) higher revenue from country liquor due to volume (Q3 volume up 31% YoY) and price increase and 3) higher realisation growth in P&A. We roll forward to March-25E TP and retain Accumulate with higher TP of INR 1,900 on 42x one year forward P/E.
Bouncing back
January 2024 was the strongest month for private life insurers this financial year with growth bouncing back to 23% from 10% in December 2023; LIC was strong for the second consecutive month (up 14% yoy). Most large players fared well: Aditya Birla up 23%, Bajaj up 33%, ICICI Prudential up 20%, Max Life up 52%, SBI Life up 33% yoy, except HDFC Life, which was up moderately at 14%. The aggression is getting reflected as we approach the end of the year and companies challenge the high base of March 2023.
Growth strong across players
Industry APE was up 19% yoy in January 2024 compared to a muted 1-6% yoy growth reported during 1QFY24-3QFY24. LIC bounced back, reporting 14% APE growth in January 2024 compared to 8% decline in 9MFY24. Private players fared better, reporting 23% yoy APE growth (9% in 3QFY24). While Top-4 players were up 28% yoy in January 2024 (up 10% yoy in 3QFY24), select tier-II players reported lower 25% yoy APE growth (up 14% yoy in 3QFY24).
Player-wise comments
Max Life reported strong 52% yoy APE growth in January 2024, higher than peers (14-33%). Max Life has consistently reported 2X industry growth at 33% and 19% yoy in 2QFY24 and 3QFY24, respectively, driven by pickup in the agency channel.
SBI Life reported 33% yoy growth in January 2024. Monthly growth trends tend to be volatile for SBI Life (-6 to +40% during April 2023-December 2023). SBI Life is likely to report 18% yoy growth for full year FY2024E (up 16% in 9MFY24).
ICICI Prudential Life’s APE growth picked up 20% yoy in January 2024 (up 5% in 9MFY24), reflecting benefits of some of its distribution investments. The company has aggressive guidance of double-digit growth on elevated unadjusted base of 4QFY23. In order to meet its guidance, ICICI Prudential would have to deliver APE of Rs24.9 bn in the next two months compared to Rs5.5-7.4 bn collected in the past five months.
HDFC Life reported muted 14% yoy APE growth, lowest among peers. APE growth has been weak at 10% in 2QFY24 and flat yoy in 3QFY24. Lower investments in agency channel and lower growth at HDFC Bank channel have also impacted overall growth, while peers have picked up.
Bajaj Allianz Life reported strong 33% yoy growth, maintaining its momentum (up 22% yoy in 3QFY24 and 19% in 9MFY24).
Tata AIA has reported lower 19% yoy growth in January 2024. Aditya Birla was up 23%—strong but a tad lower than top players. It looks like all partners of HDFC Bank remain sluggish.
LIC reported 14% yoy APE growth in January 2024 and 31% yoy in December 2023 compared to -25% to +3% reported during the first eight months of the year. LIC launched two new non-par and one ULIP products in the past three months, likely resulting in higher growth. Increase in share of non-par may augur well for margins.
Rating: BUY | CMP: Rs1,800 | TP:Rs1,920
Q3FY24 Result Update – Gross margin surprise
Quick Pointers:
Domestic growth was 12% adjusted for Razel franchise
Adj for ESOP ( ₹120mn), OPM came in at 27.8%.
J.B. Chemicals & Pharmaceuticals (JBCP) Q3FY24 EBITDA growth of 28% YoY was in line with our estimate. Revenue growth across domestic formulation was healthy at 14% YoY while contract manufacturing business growth should recover from FY25. We believe JBCP will continue with its growth momentum driven by 1) geographical expansion of legacy brands 2) improvement in MR productivity 3) scale up in Sanzyme, Azmarda and Razel franchise 4) launch of new products & therapies 5) scaling up contract manufacturing business and 6) improvement in FCF generation. Our FY24/25E EPS stands broadly remains unchanged. We expect EPS CAGR of 26% over FY24-26E. At CMP, the stock is trading at 30x FY26E P/E adjusted for ESOP and amortization charges. We maintain our ‘BUY’ rating with revised TP of Rs1,920/share (Rs1,800 earlier), valuing at 32x FY26E EPS adjusted for ESOP and amortization charges.
In-line revenues aided by domestic formulation: JBCP revenues grew by 7% YoY to Rs8.5bn, in line with our estimates. Domestic formulation sales continued to show double digit growth of 14% YoY to ₹4.62bn. Recovery was witnessed in acute brands whereas chronic brands continued its strong momentum. Export formulations declined by 1% YoY at ₹2.65bn, impacted by decline in South Africa tender biz. Ex- South Africa growth remained in single digit. CDMO delivered muted performance of 7% YoY at ₹890mn. API sales were up 26% YoY.
EBITDA in line; margins at 27.8% adj for ESOP: EBITDA came in at ₹2.23bn up 28% YoY, in line with our estimates. Margins came at 26.4%. Adjusted for ESOP (Rs120mn), EBITDA was Rs2.35bn with OPM of 27.8%; up 350 bps YoY. GM came in higher at 67.6%; improved 140 bps QoQ and up 530 bps YoY. Cost optimization and favorable product mix aided margins. PAT came in at Rs1.34bn up 26%YoY. EPS was ₹8.6 in Q3FY24. Adj for ESOP and amortization charges, EPS came in at ₹10/share for the quarter.
Key concall takeaways: Domestic: Overall strong performance across its key brands. Cilacar, Rantac, Nicardia and Azmarda witnessed improvement in gross margins. Chronic portfolio delivered sustained performance complemented by recovery in acute portfolio. Expects new product contribution to be around 3-4% annually. Focus remains in increasing market share & prescription gains in acquired portfolio. Covered market for JBCP is growing at 12% while JBCP is growing at 15-16%. Sporlac franchise have almost grown 2x over last 2 years as per IQVIA. Mgmt cited about launching new products, including a pediatric version of Sporlac in Q4FY24. The company is looking to rationalize its portfolio to improve the product margin mix. Company has done restructuring in SouthAfrica market related to its tender business. Intend to focus more on private market which is slightly better margin in nature. CDMO segment is likely to recover from FY25 given healthy order book. Domestic biz and CDMO largely to contribute 75-80% of the overall business. The recently acquired opthal portfolio will be consolidated from Q4FY24.
Rating: HOLD | CMP: ₹5,078 | TP: ₹5,157
Q3FY24 Result Update – Price cuts prop volumes, margins peaked out
Quick Pointers:
Volumes up ~5.5% as high grammage and 3% price cuts pushed volumes
New launches gain traction; market share gains in Hindi-belt continue
We are cutting FY24/25/26 EPS estimates by 2.5/2.3/5.8% on account of near term pressure on sales amidst rising competition from regional and smaller players and 90bps decline in EBIDTA margins over FY24-26 from a peak of 18.7% in FY24E. BRIT has undertaken 2-3% price cuts and increased grammage across several key brands which enabled it to post 5.5% volume growth and maintain margins due to deflation in input costs led by Palmoil, packaging etc. New innovations like Jim Jam Pops, Golmaal, Makhana and Laughing cow cheese continue to gain traction while key segments like cake, rusk and bread are back to growth path.
We expect tepid profit growth in 4Q24 as base quarter had one time PLI gains which might come off by Rs700mn. We expect softer input costs of Packaging and Palmoil to sustain while wheat and sugar are expected to firm up in medium term. BRIT’s long term growth drivers are intact with 1) rising distribution 2) improving innovation and entry in faster growing adjacencies 3) higher growth in focus states (2.4x in 3Q) and 4) cost efficiency gains in manufacturing, distribution and procurement (7x since 2014). We estimate 7.8%/10.2% sales and PAT CAGR over FY23-26. We value the stock at 48x FY26EPS and assign a target price of Rs5157 (Rs5130 earlier). Retain Hold.
3Q volumes up 5.5% on lower realization and promotions: Consolidated Revenues grew by 1.4% YoY to Rs42.6bn(PLe: Rs45.3bn) Gross margins expanded by 21bps YoY to 43.9%.(Ple: 42.5%), other operating income declined 29% to Rs710mn as base quarter had high inflows from PLI EBITDA grew by 0.4% YoY to Rs8.2bn (PLe:Rs8.6bn); Margins contracted by -19bps YoY to 19.3% (PLe:19%) PBT declined by -1.3% YoY to ₹7.6bn(PLe: ₹7.8bn). Adjusted PAT grew by 0.8% YoY to Rs5.6bn (PLe:Rs5.8bn) Imputed Subsidiary Sales declined by -23.6% YoY to Rs1.4bn; PAT declined by -940% YoY to 170.5mn.
Concall Takeaways: 1) BRIT reduced prices by ~2/3% amid increase in competitive intensity from local/regional players & sequential RM deflation 2) Focus states grew 2.4x compared to other states,Co gained market share in the Hindi belt 3) IBD delivered double digit growth with Nepal & Egypt performing well 4) Overall reach has increased to 27.6L outlets & 29k rural distributors in 3Q 5) BRIT’s new product launches continue to perform well with innovation gaining good traction 6) Significant dip in Palm Oil & Corrugated boxes led to GM expansion 6)Rural market expansion continues however rural is still a concern 7) Inflation cooled faster than co’s anticipation which aided consumption growth 8) 10% of Cheese Revenue is from innovative products & holds a high growth potential 10) Adjacencies are growing 50% higher than base business & expect contribution to go up 12) Co to set up & expand existing capacities in Bihar/UP 13) Two additional lines set up for Jim Jam to meet rising demand.
Indian benchmarks pares some of its loses but remained in the red territory following the RBI's decision to keep rates unchanged at 6.5%.
At 12 pm, Sensex was down 490.63 points, or 0.68%, at 71,661.37 and Nifty was down 137.45 points, or 0.63%, at 21,793.05.
Rating: ACCUMULATE | CMP: Rs2,500 | TP:Rs2,699
Q4CY23 Result Update – Robust performance in challenging environment
Quick Pointers:
Strong growth across all categories with beverage being fastest growing
CY23 capex at Rs13.7bn, new Odisha plant being planned
We tweak CY24/25 EPS estimates by -0.3%/-1.6% as we factor in higher margins but slightly slower growth rate in Prepared dishes segment following rising competition from regional and smaller players in Instant Noodles segment. 4Q23 sales missed estimates as expected pick up did not materialize in festival season (despite Diwali being in 4QCY23). NEST continues to report broad based growth across segments, markets (Metros, T1-6 cities & rural markets) and channels (MT, OOH and E-commerce). Expansion plans are on track with Rs13.7bn capex in CY23 and land allotment for 10th unit in Odisha.
Long term drivers remain intact, led by 1) sustained expansion in rural reach (~20-25% of sales) 2) healthy innovation pipeline (Maggi Professional’s plant based range in 4Q23, Masala Millet, KitKat premium portfolio in 3Q23), 3) huge scope of growth in coffee, RTD & Chocolates and 4) higher growth in channels like E-Com and MT and 5) strong traction in Pet care segment
We believe most of the gains from soft RM has been derived and incremental margin expansion will come at a tepid pace as shortfall in production is likely to keep prices of edible oils, Coffee, sugar, spices and wheat firm in the near to medium term. We factor in EBITDA margin expansion of 50bps over CY23-25 and estimate 10.6% PAT CAGR. We remain constructive in long term, however expect back ended returns given rich valuations of 64.8x CY25 EPS. Maintain ‘Accumulate’.
Sales up by 9.5%, PAT up by 20.7%: > Revenues grew by 8.1% YoY to Rs46bn (PLe: Rs48.7bn) with domestic sales up by 8.9% Gross margins expanded by 374bps YoY to 58.6% (Ple: 56.2%) EBITDA grew by 13.9% YoY to Rs11.1bn (PLe: ₹11.75bn); Margins expanded by 124bps YoY to 24.2% (PLe:24.1%) Adjusted PAT grew by 6.6% YoY to Rs6.7bn (PLe: ₹7.4bn) Board declares a third interim dividend of Rs7/share
Strong growth across key brands, input: KITKAT, MUNCH, MILKMAID, NESCAFÉ Classic, Sunrise and GOLD reported strong growth led by 1) media campaigns, 2) innovations and 3) increased engagement. NEST will continue to benefit from innovations in Metros & Tier 1 cities and sustained distribution expansion in rural India (~20-25% of sales). Innovation & Renovation remain key components of its business strategy
GM expansion continues, expect to be range bound in medium term: NEST may see higher commodity prices across maize, sugar, oil seeds and spice due to rainfall deficit while Robusta coffee continue to remain volatile due to limited availability. Other commodities such as milk, wheat & rice are expected to be stable
Rating: ACCUMULATE
Target Price : INR 1740
Upside : 14%
CMP : INR 1529 (as on 07 February 2024)
Banking on incentive from Mukutban unit
In-line revenue, EBITDA above estimates
Birla Corporation (BCORP IN) reported a mixed performance, with in-line revenue but better EBITDA, primarily aided by lower-than-expected operating cost. Thus, EBITDA rose ~162% YoY and ~31% QoQ to ~INR 3.8bn, slightly ahead of our and Consensus estimates of ~INR 3.4bn each. Net sales grew ~15% YoY and 1% QoQ to ~INR 23bn, in line with our estimates of ~INR 22bn and Consensus’ INR 23bn. Adjusted PAT stood at ~INR 1.1bn vs a loss of INR 499mn in Q3FY23 and PAT of INR 585mn in Q2FY24.
Cement EBITDA per tonne up ~140% YoY and ~32% QoQ
Cement sales volume was up ~13% YoY but remains flat QoQ at 4.2mn tonne, ~5% ahead of our estimates, primarily led by the ramp-up of Maharashtra-based Mukutban unit. The Mukutban unit consistently achieved positive EBITDA throughout Q3FY24 and surpassed sales of 0.2mn tonne in January, ahead of management’s expectations of achieving this milestone by March 2024. Cement realization rose ~2% YoY and 4% QoQ to INR 5,278/tonne, in line with our expectations. Blended operating cost fell ~9% YoY and 4% QoQ to INR 4,604/tonne, ~2% below our estimates, led by the rising share of the captive power plant to 60% in Q3FY24 vs 12% in Q3FY23 and savings from increased operational efficiency under the Project Shikhar, leading to cost savings of INR 55/tonne. Thus, cement EBITDA/tonne rose ~140% YoY and 32% QoQ to INR 903.
Valuation: reiterate Accumulate with a higher TP of INR 1,740
We expect performance to remain healthy, led by further ramp-up of Maharashtra-based Mukutban unit and its incentive income is likely to accrue from Q4FY24. Also, focus on premiumization and cost savings measures, such as: 1) fall in operating cost of the Mukutban unit with further stabilization, 2) continued focus on increasing captive coal use which will meet 60% of BCORP’s fuel requirement and is likely to be available >INR 1.25/kcal vs Q3FY24 blended fuel cost of INR 1.58/kcal, and 3) higher share of renewable power should bolster margin. Thus, we reiterate Accumulate. We cut our EBITDA ~3% for FY24E but retain it for FY25E and raise it ~8% for FY26E. We rollover to December from September 2025E. We raise our TP to INR 1,740 from INR 1,457 on 8x (unchanged) December 2025E EV/EBITDA.
"RBI’s easy going, accommodative policy laid no jolts on D-Street. The rates remained unchanged for the 6th consecutive time and there were no further surprises. With a similar stance as the last time, we feel the interest rates have peaked and there are higher chances that this accommodative stance would shift in the latter half of the year, by when the interest rate cuts would begin. Despite the global headwinds, growth in the Indian economy has remained resilient above 7% and with this balanced fiscal status, we expect huge inflows into India in the coming months."
Indian benchmarks turned red following the RBI's decision to keep rates unchanged at 6.5%.
At 11 am, Sensex was down 406.09 points, or 0.56%, at 71,745.91 and Nifty was up 105.95 points, or 0.48%, at 21,824.55.
Das said this is being done to ensure customers availing loans know the annualised interest they are paying
Das says a new framework will be put in public domain for consultations
Q1 at 7.2%
Q2 at 6.8%
Q3 at 7%
Q4 at 9%
Adds, risks evenly balanced
RBI keeps repo rate unchanged at 6.5%; maintains stance as 'withdrawal of accommodation' with 5:1 majority
The pharmaceutical major posted a massive surge of 300% in consolidated net profit at ₹613 crore in Q3FY24, compared to ₹153.4 crore in the year-ago period, driven by record-high sales on strong growth across geographies. This is the fourth straight quarter when profit has more than doubled for the company. Lupin's total revenue from operations for the quarter rose 20.2% to ₹5,197.4 crore, compared to ₹4,322 crore in the same period last year. On the operating front, Lupin's earnings before interest, taxes, depreciation, and amortization (EBITDA) during the December quarter rose 95% to ₹1,038 crore, compared to ₹533 crore in the year-ago period.
Indian benchmark were in the green ahead of RBI's policy announcement.
Sensex was up 95.61 points, or 0.13%, at 72,274.61 and Nifty was up 43.80 points, or 0.20%, at 21,974.39.
The FMCG firm on Wednesday reported a 17.26% decline in its consolidated net profit to ₹301.51 crore in the December quarter on account of lower contributions by associate and joint venture firms. The consolidated profit before exceptional items and tax of the Tata Group FMCG arm was up 27.12% to ₹513.27 crore in the October-December period against ₹403.75 crore of the corresponding quarter a year ago. The company had posted a consolidated net profit of ₹364.43 crore in the December quarter a year ago. Its revenue from operations rose 9.47% to ₹3,803.92 crore during the quarter under review against ₹3,474.55 crore in the year-ago period.
Online food delivery firm Zomato will be reporting its financial results on February 8 for the quarter ended on December 31, 2023. As per brokerages, the food delivery platform is expected to post resilient numbers. According to brokerage firm Kotak Institutional Equities, revenue is likely to have grown 61% year-on-year (YoY). “ We expect 3QFY24 revenue growth to come in at 61% YoY, driven by 45% YoY growth in food delivery revenues (29% YoY growth in GMV and 70 bps yoy take rate expansion), 89% YoY growth in Hyperpure revenues and 106% YoY growth in Blinkit revenues. Our food delivery GMV growth assumption implies 8% sequential growth," it said. Meanwhile, brokerage company JM Financial projects a sequential GOV growth of 7 percent in food delivery.
