ICICI Securities Limited Broker Research reports

Nominal GDP grew 19.1% in CY21, while real GDP was reported to have grown only 8.3% (still the fastest in the G20, the fourth year India was the world’s fastest-growing large economy in the past 7 and 75 years)

The Ramco Cements’ (TRCL) Q4FY22 EBITDA at Rs2.95bn (down 34% YoY) was in line with consensus estimates. Cement volumes were flat YoY at 3.19mnte owing to negligible dispatches in East in Jan’22 due to weak pricing and subdued demand.

R-22 prices dipped slightly to Rs242/kg (down 5.8% QoQ / up 36.4%) in Q4FY22, but volumes were down 34% YoY to just 3.7kte, which suggests pressure on prices will continue. This means SRF’s ref-gas revenue and EBIT margin benefits are coming entirely from the HFC portfolio. Some volume impact is due to shutdown of Gujarat Fluorochemicals’ (GFL) plant, but we are not worried as companies sell their entire quota allocated for full year.

ZF CV India’s (ZFI, formerly WABCO) Q4FY22 operating performance was a beat as EBITDA margin came in at 11.4% (up 240bps QoQ) driven primarily by operating leverage benefits. Receding RM cost pressures ahead and governmental push towards higher infra spends augur well for the company as it has a dominant share in the M&HCV braking solutions market.

Rossari Biotech’s Q4FY22 standalone EBITDA dipped 20% YoY to Rs275mn, and standalone HPPC revenues fell 13% QoQ – which were unimpressive. However, the performance of acquired companies was steady, and this helped consolidated EBITDA growth of 49% YoY to Rs523mn.

Kaveri reported revenue growth of 3.6% YoY. EBITDA and adj. PAT were at –Rs109mn and –Rs118mn during the quarter. As Mar quarter is the leanest quarter for farming in India, Kaveri reports limited revenues in Q4. Lower staff cost and other expenses as a % of sales resulted in lower losses YoY. Lower effective tax rate further reduced the pressure on PAT margin.

The strong growth was led by the custom synthesis division most likely due to higher than expected revenues from Molnupiravir. API segment continues its weak performance due to intense pricing pressures.

Hindustan Aeronautics’ (HAL) management has maintained 6% revenue growth guidance for FY23. While FY24 growth guidance is revised down to single digits, a strong EBITDA margin outlook at 25-26%, on the back of 55-60% Repair overhaul and spares (ROH) execution in the medium term leads to earnings upgrades.

Bharat Heavy Electricals’ (BHEL) Q4FY22 performance was ahead of our estimates as revenues grew 12.4% YoY to Rs81bn led by 24% YoY growth in power segment. Raw material cost to sales remained elevated at 72% due to increase in commodity prices, impacting the gross margin.

Q4FY22 was a disappointing quarter for Manappuram Finance (Manappuram) as yield in the gold loan business continued to decline (24.0% / 20.3% / 18.8% yield to AUM in Q2/Q3/Q4FY22) along with core gold and MFI businesses’ AUMs declining (1.4%/3% QoQ decline in gold/MFI AUMs). Consolidated pre-provisioning profit (PPOP) was up 12% QoQ despite lower yields due to lower opex and one-time direct assignment income.

Cigarette volume rose 9% YoY in 4QFY22 (our view), implying 1.9% growth on 3-year CAGR basis – disruption in the month of January was managed well. FMCG revenues grew 12% YoY with management using multiple levers to offset inflationary pressure; performance in discretionary and OOH categories recovered well.

Westlife of today is a result of great execution (a real turnaround when compared to say ~8 years back). WLDL was not in the top-tier of ‘great executor’ back then. The journey has been long and it’s all adding up now.

Polycab reported strong revenue growth of 34.9% YoY in Q4FY22, but gross margins contracted 354bps YoY due to higher input inflation and limited price hikes. The company continues to steadily expand its distribution network, which will likely result in continued volume growth.

Novelis reported lower-than-expected adjusted EBITDA of US$431mn (down 15% YoY). While one-off expenses of US$70mn were fairly guided, operational cost increase (North American operations in particular) led to a 6% EBITDA disappointment. Outlook commentary suggested that Q1FY23E adjusted EBITDA will return to US$500+ as one-time operational cost incidence is behind the company.

Vodafone Idea’s (VIL) Q4FY22 cash EBITDA at Rs21.2bn was higher than our estimate due to a one-off gain, while revenues came in-line. ARPU rose 7.8% QoQ to Rs124 and VIL said most part of tariff hikes taken in Nov’21 is captured in the revenues. Future ARPU growth will depend on 4G net sub-add, monetisation of digital properties and more tariff hikes.

Zensar Technologies (ZENT) reported its best quarterly revenues – at US$153.2mn, up 4.1% QoQ USD, beating our estimate of 3%. In CC terms, revenues grew 4.2% QoQ and 28.5% YoY. FY22 growth was 15.3% YoY. Though inorganic growth was not called out separately, management stated that at the time of acquisition, M3bi had a quarterly revenue run-rate of US$7.5mn so it translates into organic growth of 11% YoY in FY22.

Kalyan reported a decent operating performance in 4Q. Stronger growth in nonsouth markets (base were different though) and higher studded aided good gross margin print (15.6%) – we note that these are natural tailwinds for Kalyan’s margin profile and the benefit should continue to accrue for next few years. We like the increased focus on low-value studded to uptrade new consumers.

We liked the intent to (1) drive investments (on tech., A&P (maybe a slight increase), building another (small) warehouse to drive efficiencies) and not be complacent, (2) comfort on margins (price increases taken), (3) continued thrust on EBO store addition (intent is to add 120-130 stores each year going forward), and (4) active (RM) inventory management given the challenges.

Takeaways from Q4FY22: (1) Strong volume growth and market share gains resulted in higher YoY growth of international business; India business grew 62.6% YoY, (2) gross and EBITDA margin were up 369bps and 78bps YoY, respectively, and (3) Europe business grew only 2% YoY due to adverse impact
from Russia-Ukraine conflict.

Voltas reported a muted 0.6% YoY revenue growth in Q4FY22 to Rs26.7bn due to 37.3% YoY decline in EMP segment. However, UCP segment delivered strong YoY revenue growth of 26.6% led by pick-up in RAC sales. The company lost market share in FY22 due to lower sales in south India.