HSIE Results Daily: Maruti Suzuki, SBI Cards and Payment Services, TVS Motor, Colgate Palmolive, Supreme Industries, Sonata Software, Zensar Technologies
Supreme Industries: We maintain ADD on Supreme Industries (SIL) with an unchanged TP of INR 2,580/share (SOTP-based). Supreme reported healthy performance in Q3FY23, driven by a strong volume uptick (in pipes and industrial segments) and stabilisation in resin prices. The pipe segment margin was 13.5% in Q3 (suffered 2% due to inventory loss); in Q4, an inventory gain is expected. For FY23, SIL has increased its overall volume growth guidance to 25% (pipes: ~35%) with a ~12.5% EBITDA margin. We expect the recent cool-off in resin prices (which is getting passed on) to boost demand. Sonata Software: Sonata delivered a better-than-expected IT services (IITS) growth (+3.9% QoQ CC) and investments in the business will sustain the momentum. The growth was led by Microsoft (ISV and Dynamics) and deal ramp-up. The management remains optimistic and plans to double IITS revenue (hit half a billion) in four years (organic CAGR of ~15%), supported by higher investments in new verticals and geographies and expanding partnerships beyond Microsoft. The focus is to pivot to large annuity-based managed services contracts and build a large deal pipeline; the recent deal wins indicate improved sales focus. The IITS EBITDA margin contracted 172bps QoQ to 21.8% (missed estimate) due to investments. The margins will continue to be under pressure due to wage hikes (Q4) and continued sales investments; the operating leverage will be visible in H2FY24E. DPS growth was strong (+21% YoY), supported by growth in cloud licenses and annuity revenue. We increase our IITS revenue estimate by 4/5% for FY24/25E but lower IITS...