We expect domestic demand to improve from H2FY24 onwards. We also expect the tile export momentum to sustain, which will further help the industry to pass on the cost inflation, leading to margin expansion YoY in FY24E. We maintain our BUY rating on Somany Ceramics (TP of INR 780/sh: 12x FY25E EV/EBITDA, implying 23x FY25PE) and ADD rating on Kajaria Ceramics (TP of INR 1,310/sh: 21x FY25E EV/EBITDA implying 33x FY25 PE). We met the management of Orient Bell (OBL). The management highlighted that domestic demand remains muted in Q2 (similar to Q1), however, it expects things to firm up, going ahead, led by robust real estate demand. Exports from Morbi continue to firm up. As many plants have already shut down last year and as exports continue to firm up in Q2FY24, Morbi has not resorted to any shutdown (as it had in the previous years). Tile prices fell MoM in July but have remained stable thereafter. LNG prices bottomed out in June/July and have rebounded a bit in August (still down YoY and QoQ).
While valuation remains inexpensive relative to peers, the company's inability to regain market share despite repeated attempts may keep it under pressure. Reiterate REDUCE with an unchanged TP of INR 2,672 valued at 14x June 2025 EPS. In the current fiscal, HMC's motorcycle market share further slipped by 380 bps to 44.5%. This is despite its multiple launches in H1, which include Passion Plus, new Glamor, Xtreme160R 4V, X440, and Karizma. In the 125cc segment, it has consistently lost market share to rival launches since FY20, despite multiple attempts to regain share, and this fiscal has been no different. Also, the recent launch of Xtreme160R 4V has not helped it revive any share in the premium segment. We also believe that it is likely to take time for HMC to establish itself as a serious player in the premium segment, given its traditionally weak presence here. Even in scooters, its market share has remained static YoY despite the launch of the Xoom110. The current monsoon deficit across India, especially in the key motorcycle markets, is likely to be an incremental deterrent to the hopes of a demand revival in the entry motorcycle segment, which doesn't bode well for HMC.
We believe our estimates are already in line; however if Dabur can achieve the margin and growth targets it would justify our rerating argument. We do not expect price cuts to impact Dabur's revenue growth in FY24 unlike its peers. We maintain our EPS estimates and value the stock at 45x P/E on Sep-25EPS to derive a target price of INR 650. Maintain ADD. We attended the analyst meet of Dabur India previously hosted in 2019 when the newly-appointed CEO Mr. Mohit Malhotra laid down the new strategic roadmap. This analyst meet was a recap of strategies along with their outcomes during 2019-2023 (FY15-19 revenue CAGR was 2% vs. 8% during FY19-23). We could also meet Mr. Philipe Haydon who was recently appointed as the head of Dabur's healthcare business and who was earlier the CEO of Himalaya Wellness (1980-2020). Using his rich experience Dabur can capitalise on its backend strength for the healthcare business (revenue mix at c.30% currently). The company is aiming for double-digit growth in the medium term (unlike the ~7% 10-year CAGR) through (1) focus on power brands (now eight vs. seven earlier) to achieve greater scale (focus marketing penetration brand extension etc.); (2) healthcare achieving c.15% CAGR led by additional focus to add allopathic doctor network to drive health-disorder medicines; and (3) premiumisation across categories. We model a 10% revenue CAGR for FY23-26E in our estimates. Dabur is also looking to recoup its +20% EBITDA margin during FY24-26 (18.8% in FY23 21% in FY21); we model a similar improvement.
Banking & money flow: Fastag collections, credit growth and UPI transactions robust however IMPS transactions and currency availability weak Rural sector: Rural employment rises on back of service sector whereas reservoir level, fertilizer sales remain muted Capital market: Trading volume and no. of demat account grows strongly Macroeconomy: GST collections and PMI (mfg & services) remain healthy but CPI figures are outside comfort zone External sector: FII inflows revive but exports and FDI are weak Industrial activity: Strong power demand along with robust petroleum, steel and coal consumption; E-way bill generation growth healthy as well Demand & consumption: Air passengers traffic and credit card transaction remained buoyant but life insurance premium collection and rail traffic subdued
The incremental expansion will be slower (expect sequential expansion in Q2) as the company is also passing off benefits to consumers. Moreover, A&P spending will also step up along with a royalty rate increase in FY24. We cut our EPS estimates for FY24-FY26 by 2%. We value HUL at 47x P/E on Sep-25 EPS to arrive at a TP of INR 2,550. Maintain REDUCE. Our interaction with HUL management reinforced our thesis that demand pick-up will be gradual and meaningful volume recovery will not be visible in the near term. The rural trend remains stable, with no further improvement or deterioration over the last quarter. Urban demand sustained recovery. With HUL initiating price cuts to adjust for a softening commodity basket, value growth will continue to tail off, thereby reducing the divergence between volume and value growth. As per HUL, it takes 3 to 4 quarters between price cuts and demand upticks, thereby recovery will be more back-ended. Retailers too continue to keep lower inventory (price cut phase), impacting primary growth in the near term (a similar trend in Q1). With falling RM inflation, regional and unorganised players are also becoming competitive (vs. last two years). Inadequate pricing action (18% vs. 30% cost inflation) negatively impacted GM (-600bps last two years), HUL has already recouped c.400bps of the GM.
We expect AOL's PAT to grow at a 25% CAGR over FY23-26E, led by a 27% CAGR in EBITDA. We retain our ADD rating on Ami Organics Ltd (AOL), with a target price of INR 1,360 (WACC 11%, terminal growth 6%), on the back of (1) expansion of its speciality chemicals portfolio, (2) Fermion contract revenue accruing from Q4FY24, and (3) strong advanced pharma intermediates product pipeline. The stock is currently trading at 37x FY25E EPS. We expect the EBITDA margin to improve by 222bps, from 20% in FY23 to 22% in FY26E, owing to a ramp-up in capacity utilisation in the speciality chemicals business and an increase in the value-added items in the product portfolio.
Outlook and valuation: In the long term, JUBI remains focused on mid-teen revenue growth (5-6% LFL) on the back of (1) stepping up store expansion and store format innovation (e.g. container stores), (2) plugging product gaps and strengthening value offering, (3) improving cost efficiency and productivity, (4) elevating customer experience (reimaging stores, 20min delivery), and (5) long-term strategic initiatives (commissary). We maintain our EPS estimates and value Jubilant at 55x P/E on Sep'25 EPS to arrive at a TP of INR 500. Maintain ADD. We interacted with Mr. Sameer Khetarpal, the CEO of Jubilant FoodWorks, to understand industry demand and company strategy. According to him, the QSR industry demand continues to decelerate and recent trends are tougher than witnessed during the last six months. The pressure is across markets, brands, and formats. Signs of stress on demand are witnessed even in tier 2/3 cities with mall food courts wearing a deserted look. Moreover, one additional month of Sawan is expected to further dampen SSSG in Q2FY24. However, the industry remains hopeful of a bounce-back in demand in H2FY24 on the back of (1) softening inflation, (2) expected pick-up in the festive season, and (3) the cricket World Cup. In the ongoing challenges, Jubilant remained focused on further strengthening its core (customer acquisition, menu, 20-minute delivery, etc.).
Issue Snapshot: Issue Open: Sep 13 Sep 15, 2023 Price Band: Rs. 983 1035 (Discount of Rs 98 per share for all eligible employees) *Issue Size: 1,89,75,938 eq sh (including employee reservation of Rs 10.8 cr) (Fresh Issue of Rs 180.0 cr + Offer for sale of 17,236,808 eq sh) Reservation for: QIB upto 50% eq sh Non-Institutional atleast 15% eq sh ((including 1/3rd for applications between Rs.2 lakhs to Rs.10 lakhs)) Retail atleast 35% eq sh Face Value: Rs 5 Book value: Rs 134.57 (June 30, 2023) Bid size: - 14 equity shares and in multiples thereof 100% Book built Issue IPO Note-R R Kabel Limited 13092023
We maintain BUY and increase our captive land price assumption by 10-15% (in-line with market) resulting in our NAV/sh increase to INR 1,024/sh. Over the last year, SOBHA Ltd. (SDL) has underperformed the Nifty Realty Index by 38% and peers Brigade and Prestige Estates by 33%/53%. Whilst negative news flow on enforcement agencies' (ED/IT) actions (during FY23) has led to de-rating, SDL judiciously strengthened its balance sheet by reducing INR 15bn net debt. SDL scale/size has lagged peers over FY20-23 with the Bengaluru presales CAGR of 16% vs. 29%/34% for Brigade/Prestige. With the regulatory overhang largely behind, the robust financial health of the parent, and a strong demand undercurrent in Bengaluru market, SDL has hit the Reset-Restart button. There is a clear refocus on deleveraging, tying up new business development (15msf new launch pipeline, 20msf advance stage tie-up), and ramping up new launches (with minimal incremental INR 8-10bn of residual capex). The SDL brand enjoys huge client loyalty, differentiated design/architecture in premium offerings, in-house construction, novelty factor and 15-25% brand premium. Valuation comfort, robust FCF generation, and likely deleveraging are key near-term triggers for rerating.
Issue Snapshot: Issue Open: Sep 06 Sep 08, 2023 Price Band: Rs. 695 735 *Issue Size: 11,824,163 eq sh (Fresh Issue of Rs 542.0 cr + Offer for sale of 4,450,000 eq sh) Reservation for: QIB upto 50% eq sh Non-Institutional atleast 15% eq sh ((including 1/3rd for applications between Rs.2 lakhs to Rs.10 lakhs)) Retail atleast 35% eq sh Face Value: Rs 10 Book value: Rs 64.39 (March 31, 2023) Bid size: - 20 equity shares and in multiples thereof 100% Book built Issue IPO Note - Jupiter Life Line Hospitals Limited
We, therefore, upgrade our recommendation on MGL to a BUY with a target price of INR 1,210/sh. Mahanagar Gas (MGL) stock price has corrected ~12% from the highs of August 2023 owing to weaker-than-expected volume growth. However, we expect the implementation of Kirit Parikh Committee recommendations from April 2023 and a decline in input gas costs to improve MGL's volume growth. Additionally, with the rise in crude oil prices sequentially, the risk of CNG price discount to petrol and diesel prices narrowing has declined. The company's acquisition of Unison Enviro's (UEPL) three geographical areas (GAs) should also add to its overall volume growth. At the current price, MGL's valuation at 9.8x Sep-24E EPS, a ~24% discount to its five-year average multiple of 12.9x, remains attractive and provides favourable risk-reward as CMP implies only 2.5% volume growth.
The growth momentum in the legacy business will remain intact, owing to (1) ramp-up in the recently commissioned capacity in the organic chemicals business and (2) impending capacity augmentation in the organic and inorganic chemicals business. NCL's EBITDA/APAT will grow at a CAGR of 39/45% over FY23-28E while RoE will improve from 11% in FY23 to 31% in FY28E. We are maintaining BUY recommendation with Sep-24E based target price of INR 2,130. Along with its legacy business, Neogen Chemicals' (NCL) structural drivers include entering into electrolyte manufacturing and acquiring BuLi Chemicals. The electrolyte business will make structural changes in the company's product mix, customer base, and total addressable market. BuLi Chemicals' expertise in lithiation reactions shall enable NCL to offer value propositions to its advanced intermediates and custom synthesis manufacturing (CSM) customers.
We maintain our BUY rating with an unchanged TP of INR 475/share. We met up with the management of Nuvoco Vistas. The management noted a healthy cement demand trend. On the cost front, in addition to its ongoing efforts to further squeeze its fuel costs, it expects more savings from WHRS ramp-up, railways sidings, a rising share of AFR, and the resumption of Nimbhol CPP. Nuvoco is targeting to reduce net debt to EBITDA to below 2x before taking up major expansions. Existing capacities can support ~7% volume CAGR during FY23-FY26E. It would take up brownfield clinker expansion in the north first, followed by a greenfield project in Karnataka. We continue to like Nuvoco for its strong retail focus, premium brand presence, and improving balance sheet. We maintain our EBITDA estimates (28% CAGR during FY23-25E), leading to net debt to EBITDA cooling off to 1.8x in FY25 (from 3.8x in FY23).
Issue Snapshot: Issue Open: Aug 30 Sep 01, 2023 Price Band: Rs. 418 441 *Issue Size: 11,128,858 eq sh (Fresh Issue of Rs. 75 cr + Offer for Sale of up to 9,428,178 eq sh) Reservation for: QIB upto 50% eq sh Non-Institutional atleast 15% eq sh ((including 1/3rd for applications between Rs.2 lakhs to Rs.10 lakhs)) Retail atleast 35% eq sh Face Value: Rs 10 Book value: Rs 109.98 (March 31, 2023) Bid size: - 34 equity shares and in multiples thereof 100% Book built Issue IPO Note- Rishabh Instruments Limited
We increase our EPS estimates by ~7/11% for FY24/25E, increase core multiple to 28x (vs 25x), and upgrade rating to BUY. We assign a SoTP-based target price of INR 1,230, based on 28x core Sep-25E PAT + CDSL stake + net cash ex SGF. BSE has witnessed initial success in the much larger equity derivatives segment, currently dominated by NSE, driven by the launch of a weekly index options contract (SENSEX) in May 2023. Impressively, BSE market share in the equity derivatives segment reached 3.4% in August (vs. zero in April). BSE expiry day market share has reached ~11% without any liquidity enhancement scheme (LES). The derivatives volume is organic and is driven by 219 members (proprietary and retail) and the active UCCs on the BSE derivatives platform have reached 0.17mn, from nearly zero in three months. We expect BSE derivative market share to reach ~10% in Q4FY24E, driven by the on-boarding of large member brokers, the launch of new weekly index contracts, hedging activity and a continued increase in active traders. The increase in derivatives volume will boost cash volumes. The steps taken by the new management are yielding results and will boost growth and margin. We expect a revenue/EPS CAGR of ~19/25% over FY23-26E, led by a revival in transaction revenue
We estimate Prince will deliver 11% plumbing volume CAGR during FY23-26E. Riding on its improving product mix and strong distribution, we model in healthy unit EBITDA of INR 20-23/kg. Thus, we estimate revenue/EBITDA/APAT CAGRs of 9/25/34% respectively. We estimate its balance sheet will remain net cash positive despite the planned eastern expansion. Subsequently, we estimate RoCE (pre-tax) will rebound to 20% in FY25/26E. We broadly maintain our FY24/25 estimates. We have introduced FY26 estimates and rolled forward our valuation to 30x Sep-25E PE vs. Mar-25 earlier. We maintain our ADD rating with a revised TP INR 745/sh. We recently met with the Prince Pipes' management. Despite reporting a weak Q1FY24 (low sales of high-margin fitting sales and inventory losses), the company is confident the worst is over. The demand outlook remains strong and fitting sales have normalised. With stabilisation in resin prices, we do not expect inventory losses to impact profits on full year basis. Prince is setting up a large piping plant in Bihar (in two phases), which will bolster its presence in the high-growth east region. It is also expanding its sales and after-sales teams in the recently forayed bathware segment. We maintain an ADD rating on Prince with a revised TP of INR 745/sh (30x Sep-25E EPS).
Maintain ADD on MPHL, with a TP of INR 2,460, based on 22x Sep-25E EPS Mphasis' (MPHL) growth trajectory is expected to improve, supported by large non-BFS deal wins, bottoming out of the BFS portfolio (biggest vertical), and traction in new client acquisition. MPHL, at its Analyst Meet, indicated to some revival in BFS, which has been a headwind recently. MPHL's growth is expected to recover ahead, supported by (1) stellar deal bookings in Q1FY24, (2) lower dent from DXC/Digital Risk, and (3) broadening of growth mix beyond large BFS accounts (TMT, Healthcare, Canada geography). We marginally increase revenue estimates to factor stronger FY24E exit.
