ICICI Securities Limited Broker Research reports

Apollo Hospitals Enterprise’s (AHEL) Q4FY23 performance was muted due to tepid performance in the hospital segment and losses of online pharmacy (Apollo 24x7). Hospital occupancy declined to 64% vs 65% in Q3FY23 while margins too dipped 30bps QoQ to 24.4% despite lower institutional patient admission.

Arvind Fashions (ARVINDFA) reported decent set of headline numbers. Revenue from power brands (~80% of revenue) grew at 5% 4Y CAGR, led by (1) continued strong growth in USPA brand (~60% of power brand revenue; NSV of ~Rs18bn in FY23) due to outperformance in departmental stores and lower discounting.

Greenply Industries (MTLM) reported consolidated revenue growth of 4.6% YoY (4-year CAGR 4.6%) in Q4FY23, with India plywood business (including Sandila subsidiary) growing at 3.1% YoY while plywood volumes were flat YoY (4-year CAGR of 2.2%).

We believe there are three key factors which will likely help to drive rerating of V Guard: (1) successful integration with Sunflame and synergy benefits, (2) improvement in market shares of both these businesses as there will be higher resources available for brand building efforts post integration of Sunflame and (3) improvement in margins of V Guard (mainly Consumer durables segment).

Sundaram Finance (Sundaram) reported strong FY23 earnings in key parameters such as standalone AUM growth (up 17% YoY), home finance AUM growth (up 18% YoY), standalone NIMs (5.3%) sustenance in rising interest rate regime and better asset quality (gross stage 3 as on Mar’23 stood at 1.66% vs 2.2% in Mar’22).

We enlist some transactions from non-life insurance space over the past 5-6 years. Notable implications include: (1) Private transactions have happened at a premium to listed valuations. This could be driven by the control premium (like acquirers could get a Board representation) usually available in private deals.

LIC is treading well towards increasing VNB by pushing product mix towards non-participating segment (8.9% in FY23 individual APE mix vs 7.1% in FY22) and sharp focus on improving persistency (improvement in all cohorts except 25M in FY23). Volume growth outperformed the industry in 9MFY23 (27% YoY growth for LIC vs 20% growth for private insurers in terms of total weighted APE) but Q4FY23 witnessed a decline of 16% YoY vs private insurers witnessing a growth of 18% YoY.

ISGEC Heavy Engineering’s (ISGEC) Q4FY23 standalone revenue increased 4% YoY to Rs14bn aided by EPC revenue growth of 8% YoY whereas manufacturing segment revenue declined 4% YoY. Improvement in the share of high-margin manufacturing business led to marginal improvement in EBIDTA margin by 247bps YoY to 7.4%.

India’s imports declined in each of the first four months of CY23, shrinking 6.2% YoY in Jan-Apr’23, including a big decline of 14.8% YoY in Apr’23. This has led some commentators to conclude that the import decline is attributable to a contraction in
domestic demand.

Natco Pharma’s (Natco) Q4FY23 revenue growth of 50% and margins were driven by higher sales in the export market. Company is confident of gaining further traction in the export business in the next couple of quarters.

Mishra Dhatu Nigam’s (Midhani) Q4FY23 performance was impacted by higher raw
material costs. Key takeaways: 1) EBITDA margin rose 70bps QoQ to 29.1% despite firm raw material and power costs, owing to higher scrap utilisation; 2) orderbook at Mar’23-end was at Rs13.3 bn, aided by an inflow of Rs9bn during the quarter Q4FY23

Vijaya Diagnostic Centre’s (Vijaya) Q4FY23 performance was driven by a steady 22.4% YoY growth in non-covid business, while covid business’ contribution fell to 1% (15% in Q4FY22). Overheads of new centres impacted EBITDA margin to a small extent though, at 40.6% in Q4, it continues to be better than that of most of listed peers.

Torrent Pharma’s (Torrent) Q4FY23 India performance was boosted by acquisition of Curatio (~5% of its India sales) while its gross margin at 71.7% was better due to solid traction in the branded generic business.

JK Cement’s (JKCE) Q4FY23 performance was impressive on multiple counts: a) grey cement volumes surged 17% YoY (similar to FY23); b) grey cement realisations rose 1.6% QoQ (~3% QoQ for the standalone entity) defying the industry trend of a marginal decline.

We attended the analyst concall organised by Garden Reach Shipbuilders & Engineers’ (GRSE) to discuss the company’s Q4FY23 performance and outlook on the future.

Coal India’s (CIL) board of directors has approved a price hike of 8% on higher- grade coal (G2-G10) w.e.f. 31st May’23, translating into a benefit of Rs27.03bn for the remaining part of FY24. Despite the high-grade coal production being limited to subsidiaries such as BCCL and CCL, we believe the price hike is likely to partially allay investor concerns about the adverse impact of the recent wage hike on profitability.

3M India reported 5th consecutive quarter of EBITDA growth higher than 23% YoY. Strong revival in manufacturing, infrastructure and automotive sectors has resulted in healthy growth for 3M India. Correction in crude oil prices, other commodities and stable forex rates also offer margin tailwinds.

Commodity profit pool contraction seen in FY23 is set to reverse in FY24. Commodity profit pool within the listed space dipped YoY by a staggering Rs1.3trn during FY23 to reach Rs2.5trn, thereby, resulting in the aggregate PAT/GDP ratio dipping to 4.3%.

Gokaldas Exports’ (GEXP) Q4FY23 consolidated EBITDA at Rs701mn, although down 8.5% YoY, was above our / consensus expectations. Revenue at Rs5.2bn was flat QoQ (down 11% YoY) due to soft demand scenario in the company’s end-market (US).

LIC is treading well towards increasing VNB by pushing product mix towards non- participating segment (8.9% in FY23 individual APE mix vs 7.1% in FY22) and sharp focus on improving persistency (improvement in all cohorts except 25M in FY23).