TVS Motor: With the auto sector going through turbulent times, this company managed to report a 6% YoY rise in total revenues to Rs 5,706 crore and a 9% rise in net profit to Rs 288 crore. Even with the ongoing semiconductor shortage and supply chain issues, TVS Motor’s material costs were flat on a YoY basis but rose majorly by 7.2% on a QoQ basis to Rs 4,088 crore. This is a major feat for the company as it led to EBITDA margins seeing a growth of 50 bps to 10%. While brokerages Prabhudas Lilladher and Axis Direct continue to remain positive on the stock, Motilal Oswal is sceptical. Motilal Oswal expects a shit EVs to cause a major disruption in the scooter market.
TVS Motor created a new subsidiary for EVs and acquired a Switzerland-based company, Ego Movement. It also signed an MoU with the Tamil Nadu government of Rs 1,200 crore to set up a plant for the production of EVs. However, Motilal Oswal is of the opinion that the company earns nearly 40% of EBITDA from the domestic scooter business. So, even with an increase in EV production, sales and revenues are likely to take a hit in FY23. Other analysts, like Axis Direct and Prabhudas Lilladher remain positive because of increased earnings, especially from the export side as demand improves with African and Latin American markets opening up.
Narayana Hrudayalaya: This multispecialty healthcare service provider, which initially focused on cardiac and renal specialisations, has expanded to over 30 specialties over the years. These include cancer and neurosurgery. However, the cardiology-focused flagship hospitals continue to be the major revenue contributor. The company’s Q3FY22 consolidated net profit rose 2.4 times YoY to Rs 97 crore despite a revenue increase of 28% to Rs 966 crore as the operating profit margin increased by 425 bps YoY to 18.5%.
The rise in profit was mainly led by higher profitability at flagship hospitals amid recovery in high-end cardiac elective surgeries. The waning of Covid-19 wave in the beginning of Q3FY22, and an increase in footfalls for medical tourism, helped flagship hospitals to post a robust profit growth. Though revenue from newly launched hospitals increased 21.5% YoY to Rs 90.4 crore, losses widened by 17% to Rs 48 crore. The new hospitals, which are based in Mumbai, Delhi, and Gurugram constitute 13% of the total revenues while the older hospitals contribute the rest. The company’s overall patients’ footfalls in India increased by 48.5% to 5.7 lakh mainly driven by an increase in outpatient (OP) footfalls.
The increase in revenue is partly attributable to the pent-up demand for specialised elective surgeries after the second wave of the pandemic waned. With the stock hitting a new one-year high in the past week, brokerages like ICICI Securities and HDFC Securities continue to be positive on this company as they see profits rising led by a turnaround in new units. Another Covid-19 wave and a delayed breakeven of newer hospitals pose a risk for the company while the flagship hospitals continue to boost profits.
Bata India: The company delivered a stellar Q3 backed by a robust festive season, but does it hold a promise beyond its seasonally strong quarter? The company reported revenue growth of 37% YoY to Rs 841.3 crore. According to ICICI Direct, the revenue recovery rate is at 101% of pre-Covid levels indicating a good quarter for the footwear company. Gross margins also improved 114 bps YoY to 52.7% because of a change in product mix, but this is still below pre-Covid numbers. Although net profits tripled to Rs 72 crore, the highest profit reported in the last eight quarters, total expenses also rose 28.9% YoY to Rs 758 crore. Expenses rose because of a 19% YoY increase in employee costs to Rs 105 crore and an increase in raw materials expense by 34% to Rs 398 crore. Employee costs increased because of variable incentives given by the company and input cost inflation has hit almost every sector in the economy. However, even with such robust numbers, ICICI Direct reduced its target price for Bata India. The brokerage is cautious as the rise in revenue and profit may be seasonal, as consumer demand rose in Q2FY22 because of the festive season. Investors and analysts will wait to see how the company performs with the shift in customer sentiment in absence of festive demand. The third wave could also play spoilsport with footfalls reducing in January 2022. Hence, it will be interesting to see how the company copes in Q4FY22.
Minda Industries:Shares of Minda Industries fell by more than 3% after the company’s Q3FY22 profit fell 13% YoY to Rs 118 crore despite a 7% rise in revenues to Rs 2,181 crore. Rising input costs hit the company’s bottom line. However, despite the disappointing quarterly results, Axis Direct upgraded its rating on the company’s stock to ‘Buy’ from ‘Hold’ and upgraded its target price of Rs 1,250 compared to Rs 1,000 earlier. The brokerage remains bullish on the stock as the company’s revenue growth is coming from entering into new markets by expanding its product portfolio and increasing its client base. The company has a diversified product portfolio, which helped it to benefit from an increase in content per vehicle.
The addition of new customers and products, and growth across segments coupled with new order wins bodes well. A Joint Venture agreement with FRIWO AG gives Minda Industries an early mover advantage in the EV segment, which led to an order book with an aggregate annual peak sales value of Rs 400 crore from new-age EV OEMs. The company's client base grew by adding two more EV OEMs. Order wins in the switches, alloy wheels and lighting segments also remain robust. Minda Industries is well positioned to benefit from the recovery in manufacturing activity by original equipment makers, and with the new product addition in EV two-wheelers, revenue is expected to increase in the coming years.
InterGlobe Aviation (IndiGo):The market leader of the aviation sector sprung a positive surprise for investors in Q3FY22. The stock of InterGlobe Aviation is up nearly 15% in the past week. IndiGo generated a net profit of Rs 129.8 crore in Q3FY22 as against a net loss of Rs 620 crore in Q3FY21. The company achieved this feat after 7 quarters owing to a massive jump of 86% in its Q3 revenues. IndiGo’s passenger ticket revenues rose nearly 2X to Rs 8,073 crore in Q3 owing to a robust holiday and festive season. Notably, the government also withdrew the cap imposed on airline capacity from October 18, 2021. While the company deployed 50% more capacity (at 88% of pre-Covid levels) in terms of available seat kilometres in Q3, its passenger load factor improved by 7.7 percentage points backed by higher passenger influx. Company’s yield/km also rose 19% YoY to Rs 4.41 owing to pent-up leisure travel demand as well as recovery in the international travel segment. Amidst these positive developments, a 186% YoY spike in fuel costs stuck out as a sore thumb. To meet the current inflationary trends, the company plans to replace most of its A320 Ceo aircrafts with the fuel efficient A320 Neo series by end of FY22.
While the going was good in Q3, IndiGo witnessed travel bookings fall on a daily basis between mid-December and mid-January. Hence, the third Covid-19 wave is likely to weigh heavily on the company’s Q4FY22 performance. IndiGo is certainly hopeful of a better FY23 with the new Managing Director Rahul Bhatia’s astute focus on the high-margin international travel segment and smaller cities in India. Bhatia also happens to be one of the co-promoters of the company and his presence at helm of affairs at IndiGo signifies his clear win in the long standing conflict between him and Mr. Gangwal.
