High intrinsic profitability (RoIC 20%+), market share gains in Methyl Amines, and a prudent management make AACL an attractive bet at 13.6/11.6 FY21/22E EPS. While margins may remain flat as Methyl Amines share in the mix rises, fresh capacities of Amine Derivatives will help them recover. We value AACL at 22x Jun-21E EPS and maintain BUY with a TP of Rs 1,369. Post a blowout (but unsustainable) performance in 1QFY20, we maintain faith in Alkyl Amines owing to the upcoming expansion in Methyl Amines. Maintain BUY
We reiterate BUY on JK Cement with a TP of Rs 1,314 (10x FY21 consolidated EBITDA). JKCE is strengthening its grey cement business through expansions and up-gradation. In white/putty segment, its steady expansions in near duopolistic market (in India) will continue boost profits. We reiterate BUY with a higher TP of Rs 1,314 at 10x its FY21E consolidated EBITDA (implied EV of USD 96/MT). The stock trades at attractive valuations of 8.2x FY21E EBIITDA and at EV of USD 85/MT.
While this transaction simplifies corporate structure paving way for potential M&A or folding up of MAXL into MAXF and is value accretive for minority shareholders, management was unable to clearly spell out its end game. This adds an additional layer of uncertainty to the one that already exists- renewability of partnership with Axis Bank. We rate MAXF a BUY with TP of Rs 589 (MAXL: FY20E EV + 21.9x FY21E VNB). We have increased our holding company discount to 30% (vs. 15%), and continue with a 22% discount on VNB for Axis Bank deal, and a 10x multiple to annual leakage at the holding co level. Key risks include lower growth, higher cost over-runs, and supply overhang as a result of promoter pledges. Despite an increasing share of NPAR savings (15% share, +3.7x YoY), and change in assumption which helped margins expand 160bps YoY, VNB margins disappointed at just 19.6% (+150bps YoY).
While there is no questioning the execution skills of the outfit, its no See's Candy as Titan operates in a put-up-more-to-earn-more' industry. The entire cumulative CFO (ex-working capital) has gone towards working capital and capex needs over FY14-19. All Plausible tailwinds baked. Our DCF bakes an 18%+ market share in jewellery in FY30 already! TTAN has corrected nearly 25% from its peak and it could well be on its way to more palatable valuations; the stock isn't there yet, though. We maintain our Neutral stance on the name. Growth hits a pit-stop. Back-ended expansion increases want from productivity increase if Titan has to scrape through its guided 22% growth This may be a stretch even for Titan given elevated gold prices and weak consumer sentiments. We have a DCF-based TP of Rs. 1020/sh.
KPDL has shown resilience in face of sectoral headwinds. Subvention schemes are about Rs 800mn in value and not material. Launch pipeline in Pune looks strong, Mumbai projects are closing in on approvals, debt repayment is playing out and stake consolidation is adding to cashflows. KPDL is in sweet spot with near dominance in Pune market and strong project pipeline in Mumbai. We remain constructive and maintain BUY. Key Risks: (1) Aggressive competition, (2) High interest rates and (3) Debt bloat up. KPDL financial performance under POCM was below our estimates. Despite this strong pre-sales, robust collections and debt reduction are key positives. We maintain BUY with SOTP based TP of Rs 311/sh.
With GIC, IRB has secured means to partly fund its balance equity requirement of Rs 29.5bn. The free cash flow potential of the portfolio is Rs 880bn over the project lifecycle (~20yrs), with Rs 2bn/yr IRB share from first year. IRB will leverage this partnership to bid for upcoming BOT and TOT projects, though it will have to bring 51% of equity share. We maintain BUY. Key risks (1) Declining toll revenues in certain projects, (2) Market acceptability for BOT projects and (3) Delay in appointed dates in remaining HAM projects, contributing 25% to order book by value. IRB delivered strong 18/28% 1QFY20 EBIDTA/APAT beat. Private InvIT announcement with GIC (Rs 44bn investment for 49% stake, ~1x P/BV) removes BOT asset recycling overhang. We maintain BUY with a TP of Rs 212/Sh.
While growth in the core segment accelerated slightly, it remains contextually unimpressive. Growth driven by the riskier non-core segment (~24% vs. ~16% in FY17) has not been a positive trade off. Higher yields from the rising share of the non-core segment were negated by weakening pricing power in the core segment while asset quality has deteriorated, led by the non-core segment. Except for the spike in provisions (+58/141%), operating performance was in line, and asset quality deteriorated QoQ as per seasonal trends. Maintain NEUTRAL with a TP of Rs 554 (1.5x Jun21E ABV of Rs 370).
Laurus is sitting on ~40% underutilized gross block (~Rs 0.9bn) spread across formulations, CRAMS and API segments. With a sharp jump witnessed in formulations and higher visibility of CRAMS orders for FY20, we are confident that the operating/ financial leverage story will unfold from FY20. Assuming formulations revenues/ EBITDA at US$ 85/ 25mn in FY21E, earnings are likely to grow 2.5x over FY19-21E. With all four ARV formulation approvals (TLD, TLE 400, TLE 600, TEE) in place by 1HFY21, addressing >US$ 1.2bn opportunity, the estimates could be breached easily. Maintain BUY. We maintain a BUY on Laurus despite poor operational performance in 1QFY20. After adjusting for lack of scale up in ARV APIs and buoyancy in formulation segment, we have cut our FY20/21E numbers by 5-8% to arrive at a TP of Rs 470/sh (18x FY21E EPS).
We like the GSPL owing to the (1) Robust volume outlook on the back of strong demand from CGD entities and the power sector (2) Smoothening of cyclicality in its earnings, post acquisition of a controlling stake in Gujarat Gas (3) Steady cash flows (FCF of Rs 38.73 bn over FY20-23E) from transmission business which will turn the company's position to a net cash one. We value the transmission business using Discounted Cash Flow (DCF) at Rs 150/sh. To this, we add Rs 97/sh as value of its investments in Gujarat Gas, Sabarmati Gas and other investments to arrive at the target price of Rs 247/sh. We maintain BUY on GSPL post a better than estimated performance in 1QFY20. We expect benign spot LNG prices (1) To drive strong volume growth from industrial customers and (2) Encourage RIL to continue to using LNG. We raise our volume estimates for FY20/21 by 11.4/13%, thus our SOTP based TP to Rs 247/share.
