Elephant set to dance despite getting enormous We see Usha Martin (UML) steel business acquisition as a smart move given the attractive discount of 30% to greenfield cost for a well-integrated asset providing product diversification and synergy benefits. We see that Net Debt/EBITDA for consolidated operations including both Bhushan (BSL) and UML (excl. European business which is getting shifted to JV) is likely to remain in a comfortable zone of 3.1x in FY20E (vs 2.9x at FY18 end) led by strong cash flows of domestic business given the favorable steel cycle and low cost metrics. We expect TSL to abandon...
Hero's Xtreme 200R has been launched recently across India and the company has started dispatching the bike to dealerships in a phased manner. This bike is first among the new range of Hero's premium motorcycles and marks Hero' re-entry in the premium bike market. First launched in North Eastern states in July, recently the bike got launched across India in a phased manner at a price of Rs89,900 exshowroom. Xtreme 200R is the most affordable bike in the 200cc segment. Our channel check with the dealers/experts indicates that the bike is getting positive response and consumers are happy with the bike's performance after taking test drive. Towards the end of this month, people across India will start getting the...
We upgrade Tata Sponge (TSIL) to Buy with a revised TP of Rs1220 as we expect strong operational performance to be maintained led by better pricing, solid volumes and tight control on conversion costs leading to further improvement in spreads. TSIL has received a much needed relief by getting its related party resolutions passed in the re-voting which would help maintain status-quo in running of operations in the most efficient manner. Clarity on capex towards the build-up of new steel complex is still elusive but strong cash rich balance sheet...
We maintain our Hold rating on Sun Pharma (SPIL) with TP of Rs580 (earlier Rs580) based on 26x March'20E EPS of Rs22.4. SPIL has developed a strong pipeline of specialty products for the US. It has received US FDA approval for Xelpros used in the treatment of glaucoma and ocular hypertension. We expect $22mn (Rs1.58bn) revenues from Xelpros in FY20. Key upside risks to our assumption include higher revenues from the US market and key downside risk includes regulatory risks for...
KLD mine loss a blessing in disguise; maintain Buy Kirloskar Ferrous (KFIL) lost M/s Kanhaiyalal Duhderia (KLD mine) in the re-auction to MSPL which won the mine at 111% offer price. Earlier KFIL had won the mine at 110% offer price but the auction was revoked and mine was put for re-auction by the auction authorities due to some technical issues in bidding. KFIL was not expected to realise any material savings due to the high offer price paid by it in the auctions and we had infact estimated negative contribution in our calculations (refer our 10 Sep note Issues of ore, no more). We see the losing of KLD mine as a...
We maintain our Buy rating on Aurobindo Pharma (APL) and revise TP to Rs1,270 (earlier Rs1,010) based on 18x March'20E EPS of Rs70.4. APL has agreed to acquire the dermatology and oral solid business of Sandoz-a division of...
Our detailed interaction with Orient Refractories (ORL) & RHI Magnesita management on the side-lines of ORL AGM pointed towards i) increased focus of the group in transitioning to a bigger entity in India with substantial market share, ii) addition of production capability for meeting both domestic and export demand and iii) reduction in margins from a high base of FY18 at both ORL and RHI India led by RM cost inflation. Revenue growth is expected to remain solid but earnings growth would be lower due to normalisation of margins. Though we remain structurally positive on ORL led by best in class capital as well as operational costs,...
Strong revenue growth: Pfizer's revenues are likely to grow faster than the market growth due to strong growth of its major brands. The growth was contributed by its major brands namely: Becosules, Ovral-L, Corex-Dx,Wysolone, Magnex, Neksium and Dolonex. We expect the company to report better revenue growth in FY19, led by the launch of a series of products as line extensions under the Corex brand name and the recent launch of Meronem and Neksium in India. The management indicated the launch of 3-4 new products per annum. Pfizer's 17 brands are in No.1 position in the...
Kirloskar Ferrous (KFIL) won two key iron ore mining assets in the Karnataka auctions which is a long term positive event for the company given the 100% captive integration for pig iron business with good quality ore, close proximity of mines to KFIL plant, cost savings v/s open market purchase and improved efficiency due to better value in use. We remain positive on KFIL's prospects as it features i) increasing share of high-margin casting business which has spare capacity, ii) cost efficiencies from upcoming low-payback projects albeit slightly delayed, iii) an enviable track record of converting cash profits to cash flows...
(valued at 1.7x FY20E ABV). IndoStar has embarked on a transformational journey and with the right mix of people, product portfolio, processes and the required infrastructure, we believe the business model is on the right growth path. We expect IndoStar Capital to report (a) strong earnings profile (38% / 22% CAGR in revenue / earnings over FY18-20E), (b) limited asset quality risks (given the history of near zero NPAs), and (c) superior returns profile (RoA at 2.7%, RoE at 10%+ by end-FY20E). Healthy capital position (CAR at 28%+) will supplment sturdy 45% CAGR in AuM over FY18-20E. Further, proficient senior management with an element of skin in the game through ESOPs and superior board...
