Initiate coverage with a BUY (TP of Rs 549, 1.5xMar-21E ABV of Rs 366). Promoted and run by professionals, Indostar Capital Finance (INDOSTAR) is an NBFC, with a presence spanning multiple segments (unlike other NBFCs with a monoline business). After commencing operations as a special situation corporate and developer financier, INDOSTAR managed to pull off a transition to retail lending (fashionable).
We set a revised PT of Rs.7,350 based on 22x PE (on FY21 EPS). The Toyota Suzuki - Maruti relationship has moved a step further with the two Japanese OEMs announcing joint development initiatives both in India and for global markets. We expect the synergies from this relationship to be visible over the medium term. While Maruti will gain access to hybrid technology, which will ensure their continued market dominance, they will now be sharing one fourth of their portfolio by volumes with Toyota. We re-iterate our BUY on Maruti as we believe that it is well positioned to benefit from the transition post the introduction of BSVI in Apr20.
Maintain BUY with a revised SOTP TP of Rs 894 (2.8x FY21E ABV of Rs 308 + Rs 32 for subs). Our recent interaction with the top management of AXSB bolsters our belief of meaningful change led by an astute top mgt revamp. This is evidenced by the following changes/ data points (anecdotal): (1) Material change in corporate credit/ risk practices with credit/risk heads reporting to the MD instead of business heads. (2) These heads are no longer bound by NII/ Fee targets, reducing the chances of 'trigger-happy lending' (3) A sustained decline in the share of the BB and below rated corporate book (4) Clear focus on profitable growth, driven by a well-articulated strategy. (5) Conscious efforts to trim costs evidenced by declining branch size (down ~60% in the last 5 years) and superior efficiency metrics (AXSB has the lowest avg employees/branch). (6) The entire PL book consists of salaried customers.
Maintain BUY with TP Rs 309(17xDec-20E EPS). The Subros management shared the future road map post the recent increase in stake by Denso to 20% (from 13% earlier). The focus of the Japanese parts maker will increase as Subros will now be an affiliate company. While the relationship scope will be confined to the thermal products domain, they will benefit from new product introductions.
Given this context, we recently hosted Mr. Nithin Kamath, founder and CEO of Zerodha to meet with institutional investors. Additionally we also spoke with 5 PAISA on their plans. Our interactions gave us valuable insights on the industry. The equity broking industry is getting disrupted with the rapid rise of discount brokers in general and Zerodha in particular. Within just 5 years Zerodha has clocked 15% volume market share. 5 PAISA, the second largest discount broker is now around 1.3% of the overall market. Zerodha now has the largest active customer base of ~0.9mn
Given its healthy balance sheet, consistent dividend payout (+20%), and efficient working capital cycle (15 days), we maintain our positive view on the stock. We have reduced EPS estimates by 17% over FY19-21E to factor in the impact due to the SMT business. We Maintain BUY with a revised TP of Rs 180 at 16x FY21E EPS. Despite the recent developments, we expect Lumax to benefit from 1) Sustained revenue growth from existing product lines such as lighting and sheet metals 2) incremental revenue from new products including Urea tanks and oxygen sensors (~Rs 1bn in next 2-3 years) 3) Revenue and margin expansion in the aftermarket business (the company is launching several new products across its existing product range). We expect +20% CAGR growth over the next 3-5 years.
Initiate with a BUY on DBCL with a TP of Rs 282 (+41%) and JAGP with a TP of Rs 148 (+33%), both at a modest 12x FY21E EPS (35/25% discount to historic average). We have assumed a revenue CAGR of 5.5/6% for DBCL/JAGP over FY19-21E. Our EBITDA/earnings CAGR is 21.5/25% for DBCL and 16/21% for JAGP are led by a decline in NP prices. FY17-19 washout years: Indian print media had been caught up in the crossfire of demonetisation, GST, an economic slowdown, govt clampdown on classified ads and a steep rise in newsprint prices. Consequently, 9MFY19 EBITDA margin have declined by 400-600bps to 21-22% vs. the 5yr trailing avg of 26-27% (and peak margins of 30-32%).
IPO note Embassy Offer Parks REIT Issue Open: Mar 18 - Mar 20, 2019, Price Band: Rs. 299 - 300, Total Issue Size: 15.833cr units, Net Issue Size: 12.91245cr units (Net of Issue to strategic investors of 2.9208cr units)
We reinstate coverage with a SELL and have a target price of Rs 21,000 based on SOTP. Multiple factors are likely to impact the growth outlook at Eicher. After witnessing robust growth over CY12-FY18, when earnings grew at 46% CAGR, we believe earnings growth will moderate to 10% CAGR over FY19-21E as lifestyle segment growth normalizes in India, competition steps in and export initiatives take time to pay off.
We value GSPL's transmission business using Discounted Cash Flow (DCF) at Rs 120/sh. To this, we add Rs 87/sh as value of its investments in GGL, Sabarmati Gas (30% discount to EV/EBTDA valuation) and other investments (at book value) to arrive at the target price of Rs 207/sh. We initiate with BUY. In the wake of the Modi era, starting May-14 up to Dec-17, Gujarat State Petronets (GSPL) stock soared 237% to Rs 226 driven by a positive surprise in transmission volume (+11.5% CAGR). This led to EBITDA expanding at 11.1% CAGR and APAT at 22.4%.
We model 18/11/10% SSG growth during FY19E/FY20E/FY21E. We value JFL at 46x on Mar-21 EPS, arriving at a TP of Rs 1,750. Reiterate BUY. JFL announced its entry in Chinese cuisine with a home grown brand Hongs Kitchen. It will be a fast casual Chinese restaurant with focus on dine-in and delivery. Chinese is the 2nd largest cuisine in India (after North India). The brand will address the vast gap between street vendors and fine dining. The first store (1,400 sq. ft) is launched in Eros Mall, Gurugram. JFL will initially look to expand stores in the NCR region.
Equity market trading volumes continue to be dominated by F&O volumes as share of F&O in the mix has increased to 95.9% +150/-40bps YoY/MoM and total market ADTVs (ex-prop) increased 21.3/-0.9% YoY/MoM to Rs 6.3tn in Feb-19. Private life insurers individual NBPs grew 19% YoY to Rs 43bn in Feb-19 (FY19TD growth 16%). Mutual fund equity (ex. arbitrage and ETF) net inflows on the other hand declined to a 32-month low of Rs 40bn in Feb-19 i.e. 60% below FY19TD monthly average of Rs 100bn.
We initiate coverage with a NEUTRAL rating and SoTP of Rs 611 (+7.6%). Motilal Oswal Financial Services (MOFS) runs Indias largest PMS (AUM Rs 150bn), is an emerging MF (rank 16) and is 8th among retail brokers. The group has investments of Rs 19.8bn, of which ~82% is invested in own funds. MOFS has a differentiated client franchise and will gain from financialisation of savings.
While we don't actively cover JBCP, a fair value of Rs 470/sh (at 14x FY21E EPS, 5-year avg P/E) is apparent to us. We recently met the management of J B Chemicals & Pharmaceuticals (JBCP), an Indian pharma company with legacy brands like Rantac and Metrogyl. It is also present in markets like Russia and South Africa. Cos track-record has been mostly steady with ~10/15/18% rev/EBITDA/PAT CAGR over FY15-19E, driven by 15% growth in the India segment (~45% of revenues in FY19E).
Top picks: TCS, Mphasis, L&T Tech, Zensar and Majesco Indian IT has hit refresh with reinvention across multiple tech cycles and is now tuned to the all-encompassing and ubiquitous Digital shift. Initial success in transitioning to a new business model is evident in growth leadership vs. global peers (who led the cycle). We believe that even as digital portfolio and industry penetration is maturing, Indian ITs investments (re-skilling, platforms & partnerships, acquisitions) will open up a larger addressable market with better pricing power.
We maintain our BUY rating and expect a re-rating in the stock. Emamis stock was under pressure due to consistent weak operating performance and rising promoter share pledge. Although recovery in operating performance is delayed, the pressure on the stock w.r.t. share pledging is now behind after promoter divested 10% stake for Rs 16bn @Rs 355/share. With this, the promoter share pledge will decline from 48% as of now.
We value Voltas based on SOTP, valuing EMPS/EPS/UCP at Dec-20 P/E at 17/20/35x with TP of Rs 650 (Rs 640 earlier). Voltas reported a weak quarter led by muted off-season RAC performance. Net Revenues grew by 9% driven by healthy execution in the project biz (up 16% vs. exp. of 22%). Weak RAC sales (-3% vs. exp. of 5%) was owing to high channel inventory, modest festive season offtake and heavy base (32% in 3QFY18; rating change led pre-buying).
We are now compelled to downgrade LTHL to Neutral with a TP of Rs 68 (30x EV/e on Dec-20E on proportionate ownership). Lemon Trees (LTHL) 3QFY19 performance was in-line but weak. Revenue/EBITDA grew by 8.3/14.5% YoY to Rs 1.43/0.49bn. PAT of Rs 125mn was up by 34% YoY owing to higher other income. Modest 4.8% ARR growth and flat RevPAR YoY were key negatives.
We are also reducing our target multiple to 13x and set a revised TP of Rs 90 (13x Dec-20E EPS) Ashok Leylands 3Q PAT (Rs.3.8bn, -20% YoY) was ahead of expectations owing to the benefits from the merger of the LCV business plus cost cutting initiatives. Still, we are downgrading AL to NEUTRAL as (1) Management has provided a lower than expected industry growth outlook and is now guiding for flat sales in FY21, (2) Product mix is weakening. Post the axle norm changes, the share of more profitable high tonnage vehicles has reduced, (3) ALs market share has likely peaked in the M/HCV segment, driven by this shift.
Maintain BUY with a reduced TP of Rs 168/sh. ITD Cementations (ITD) APAT came in 23% ahead of our estimate at Rs 343mn. Consolidated/Standalone EBIDTA stood at 16.9/13.3% (aided by JNPT provision reversals). Bengaluru metro project contributed Rs 1.9bn revenue and Rs 93mn EBIDTA (4.8% EBIDTA margin). ITD expects lower margins from Bengaluru Metro project (Rs 11bn residual value) owing to a 20% reduction in scope. ITD will file claims for same.
