Refer to important disclosures at the end of this report Mindtree deal: Not a win for anyone The deal: Larsen & Toubro (LT, the parent company of LTI) held an investor call to address the concerns relating to: 1) the purchase of a 20.4% stake in Mindtree from Mr. VG Siddhartha and his Coffee Day Enterprises; and 2) an attempt to gain up to 66% controlling stake in the company 20% from Siddhartha, 15% via market purchases, and...
We attended Axis Bank's Analyst Day, in which Mr. Amitabh Chaudhary, the new MD and CEO, reiterated his stance on undertaking a major overhaul of business verticals, focusing on three pillars (Growth/Scalability, Profitability, and Sustainability), and achieving 18% RoE in the medium term (we believe by FY22) on a sustainable basis. The current corporate stress pool of 2.8% of loans may have some inter-quarter volatility, but largely factors in corporate stress, and there are no worrying signs of stress in the retail...
The MHCV industry volumes are expected to remain weak in the near term due to high base, surplus capacity with fleet operators, deferred purchases during elections and rising cost of ownership, according to our channel checks. North/West regions are witnessing steep declines, while the South is seeing positive growth. Volume growth is expected to recover in FY20, led by pre-buying before the transition to BS6 emission norms. After the transition, volumes are likely to decline due to high base...
Our channel checks indicate that Jubilant FoodWorks (JUBI) is working on a faster pizza delivery guarantee option (in 20 mins vs. 30 mins currently), which in our view, should aid customer acquisition from other QSRs and aggregators. We believe that this faster delivery option should further enhance its competitiveness and sustain strong SSSG trends Faster delivery guarantee (of 15 mins and 20 mins) launched by Domino's in Australia and...
Despite a significant improvement in its balance sheet, execution pick up and robust order inflows, L&T;'s P/E multiple has not changed over the last three years. We believe that this is due to persistent concerns on at least one out of the four key parameters on which investors evaluate L&T;: 1) execution pick up; 2) balance sheet/ROE; 3) order inflow momentum; and 4) margins. Although L&T; has partially delivered on strengthening its balance sheet over FY16-18, execution improvement in the core domestic infrastructure is also evident over FY18-19. To...
DELTA will invest Rs700m to acquire over 25% stake in Jalesh Cruise (promoted by Mr. Amit Goenka of Essel Group). Jalesh will commence operations with one cruise ship from April 2019. The first cruise comprises 837 cabins with capacity of 1,689 passengers. The cruise will be operational full year with routes across India, the Middle East and South East Asia. It...
Exide has garnered market share with its renewed strategy under the leadership of new MD and CEO, Gautam Chatterjee, and this is expected to continue. Market share gains have been aided by focus on improvements in service/warranty initiatives, rising penetration of...
Movie exhibitors should record another quarter with a strong set of numbers, driven by robust footfall growth with content performance surpassing expectations. Bollywood box office collections for QTD Q4FY19 are up 41% yoy despite a higher base from Q4FY18. So far during the quarter, 4 movies crossed the >Rs1bn mark in net box office collections (NBOC) compared with 2 in the prior-year quarter. March'19 has started on a strong note and the momentum is expected to continue with a strong content line-up....
Refer to important disclosures at the end of this report NGT order on closure of coal gasifiers likely to accelerate switch to PNG Click here to: Polling for Institutional Investor's 2019 Asia Research Team The National Green Tribunal (NGT) has ordered an immediate closure of coal gasifiers at Morbi ceramic cluster or switch to natural gas to continue operations, according to media reports. This comes in response to a petition filed for causing environmental damage, which was affirmed by the NEERI (plant modifications and zero discharge recommendations not...
ICICI Bank has been undergoing various structural changes in areas such as credit culture/pricing, customer engagement, role-based employee designations, and performance evaluation system with a clear focus on improving customer experience, productivity and business profitability. The bank believes that the lumpy asset-quality stress is now a thing of the past and credit cost should gradually gravitate toward 20% of the operating profits. The bank has maintained its June 2020 guidance of 15% RoE, which could be revised upward as it gains more confidence on financial performance and credit cost....
Refer to important disclosures at the end of this report An emerging pure-play EPC player; Disciplined execution, healthy order book, and strong client reputation the hallmarks of a strong franchise This report is solely produced by Emkay Global. The following person(s)...
Our comparative analysis of the business model of Future Lifestyle Fashions' (FLFL) Brand factory with similar leading global off-price retailers suggests that this format offers FLFL a strong growth opportunity and an upper edge over peers with department store formats. In addition, these formats offer good profitability metrics that indicate Brand Factory can achieve higher margins and ROCE. Value retailers are witnessing faster & consistent growth, better profitability and market...
We expect Rs40-50/t savings in energy costs in Q4FY19 due to the decline in petcoke prices. After Q2FY19, pet coke prices were down by 20-22% in the US/Saudi Arabia and 8% in the domestic market. Note that 40% of petcoke used by the industry is imported. We would wait for the price hikes in the South region to stabilize as the prices remain volatile there. Our preferred picks in the sector are ACC, UltraTech and JK Cement. Though South-based companies would see earnings upgrades if current cement prices...
In our recent interaction with VIL's top management, they reinforced the stance on fasterthan-expected delivery of cost synergies, keep treading in the right direction on network integration, data capacity expansion, raising customer realization with minimum ARPU plans, and focusing on incremental 4G subscriber share. Management's focus remains on generating incremental revenues by increasing 4G coverage and creating additional data capacity. Although incremental data subscribers...
We met Essel Propack's (ESEL) management to understand the traction in its non-oral care business and the progress on commercial orders from European customers. management's commentary. We believe that its investments in non-oral care customers in Europe should pay off gradually as trials get translated into commercial orders. growth. Europe should ramp up faster given with new facility in Russia and the shift of nonoral care customers to ESEL's laminated packaging solutions. ESEL has recovered Rs650m from a related party out of the total of Rs1.1bn as of Mar18. Management said that the company will receive the balance by Mar-19. The proceeds will be utilized to pay off debt. We maintain our Hold rating with a revised TP of Rs120, valuing it at 15x FY21E EPS. The...
RE's domestic volumes declined 5% yoy in Q3, led by declines in major states such as Tamil Nadu (-37%), Kerala (-24%), Gujarat (-25%), Maharashtra (-15%), Karnataka (-9%), and Andhra Pradesh (-11%). The number of states witnessing a decline has increased...
We reduce CY19/20 EBITDA estimates by 11.7%/11.9% as we have assumed lower sales volume/realization. We await clarity on the timeline for expansion plans in the North region. We maintain our Hold rating, with a revised target price of Rs206. In the cement...
The new territories are in South and West regions and should generate superior ROCEs due to better seasonality. The deal size is Rs18bn, valuing the acquiring business at 1x EV/Sales and 4.5x EV/EBITDA on a 1-year forward basis. VBL plans to raise new equity capital to partly fund the deal. We have not factored this into our forecasts as we await further details. The deal is expected to be EPS-accretive by CY20. We expect ROE to rise to 19.5% in CY20 from 15% in CY18. In our view, VBL should command valuations similar to other consumer franchise...
Simplex Infrastructure's (SINF) sales grew marginally by 3.2% yoy to about Rs14bn in Q3FY19, lower than our estimates mainly due to social unrest in the North East and a delay in getting approvals for few projects. PAT totaled Rs363mn, on account of better operating performance, lower depreciation costs (down 10% yoy) and lower interest costs (down 1.1%yoy).It was marginally lower than our estimate . SINF's order book stood at about Rs168bn (2.8x TTM revenues). Management is eyeing...
