We like the ICICIGI franchise given its granular retail portfolio, strong underwriting and robust return ratios. The 4th largest non-life insurer is on track to leverage its presence in 90% of the districts across India through on-boarding of experienced agents, scaling up of its digital assets and making further improvements to its best-in-class claims management process. Thus, ICICI Lombard is positioned to be a major beneficiary of the...
Look beyond the rates; significant improvement in profitability ahead Key takeaways from our meeting with Mahindra Finance (MMFS) management: i) Disbursement growth remains strong for July/August at c.30%. Management expects 20%+ AUM growth in FY19 (vs. 18% in FY18) which could accelerate to 25% in FY20 ii) Asset quality is significantly improving and company has witnessed 5% improvement in collection efficiency during July/August; Management expects GNPL to reduce to 7% by FY19 (vs. 9.4% in Q1) iii) MMFS expects 15bps increase in average outstanding cost of funds (incremental cost of funds up 75bps) which will be passed on via higher lending rate; iv) NPLs...
Cyclical low multiples and asset turns make a strong BUY case ABB India is trading at -1 standard deviation of its median forward PE multiple and fixed asset turns are at a 15-year low (4.1x vs high of 10.9x), thus creating headroom for outperformance as operating leverage benefits are likely to drive strong profitability growth. Further, a bulk of order inflow in 1HCY18 is driven by high margin segments of exports (+14%) and service (+47%) orders, presenting a healthy sales mix for CY18-19. Order inflow outlook remains steady as multiple digitalisation orders with longer conversion cycle are underway and are preceded by pilot projects in industries like cement, paint, F&B; and oil &...
LIC Housing Finance (LICHF) reported 1Q19 earnings of INR 5.68bn, up 18% YoY on IndAS basis. Key highlights i) Disbursement grew by 10% YoY while Loan book grew 15% YoY supported by non-core segments - LAP (42% YoY) and developer segment (50% YoY) while individual segment remained muted 9% YoY. Proportion of non-core segments has now increased to 21% vs. 16.7% YoY. ii) There was some pressure on asset quality as GNPL ratio (Stage 3) increased 48bps YoY/42bps QoQ to 1.2% while coverage ratio declined to 25% (vs 48% in 1Q18 and 52% in 4Q18). iii) Pressure on spreads continued as calculated spreads declined to 1.31% (vs. 1.50% in 4Q18 and 1.48% in 1Q18). Company has increased its...
Our conversations with the L&T; Technology Services' (LTTS) management indicate ramp-up in the recent deal wins are on track and deal pipeline is healthy. It hasn't seen any impact so far of the on-going global trade conflicts on the clients' R&D; spend and has been getting billingrate hikes selectively in contract renewals. This should help offset the margin impact of annual wage revision in 2QFY19; a 2% QTD INR depreciation is an additional lever. We believe our current 21% FY19 USD revenue growth forecast should be achievable and there...
Legacy stressed provisions done; profitability set to improve Magma Fincorp (Magma) recorded a healthy performance in a seasonally weak quarter with PAT of INR 681mn (up 75% YoY) on IndAS basis. Magma has adjusted one-time provisions of INR 6.2bn with its net worth (of which c.INR 3bn is on account of legacy stressed loans originated prior to Dec'15). This will substantially reduce provisions going forward and boost RoEs to 14-16% range. Key highlights: i) GNPL ratio reduced to 9.5% (vs. 11.7% in 1QFY19) while coverage ratio strengthened to 56% vs. 43% YoY. ii) Disbursement growth remained strong (25% YoY) driven by used assets, commercial vehicles and SME. iii) Margins...
Legacy stressed provisions done; profitability set to improve Magma Fincorp (Magma) recorded a healthy performance in a seasonally weak quarter with PAT of INR 681mn (up 75% YoY) on IndAS basis. Magma has adjusted one-time provisions of INR 6.2bn with its net worth (of which c.INR 3bn is on account of legacy stressed loans originated prior to Dec'15). This will substantially reduce provisions going forward and boost RoEs to 14-16% range. Key highlights: i) GNPL ratio reduced to 9.5% (vs. 11.7% in 1QFY19) while coverage ratio strengthened to 56% vs. 43% YoY. ii) Disbursement growth remained strong (25% YoY) driven by used assets, commercial vehicles and SME. iii) Margins...
GTPL reported consolidated quarterly financials for the first time since listing. 1QFY19 topline growth of 15.4% yoy was led by video subscription revenue [VSR: +30% yoy], while broadband growth was muted [+3.2%]. 1Q EBITDA growth of c.19% was on the lower side versus full-year expectations, because of muted activation revenues [-3%] and higher growth in content cost [+18%]. Nonetheless, growth in adjusted EBITDA (i.e. ex-activation) was fairly robust at 31%. Net profit [-16%] was impacted by FX losses and higher tax rate. We raise VSR forecasts assuming higher STB additions, but reduce BB revenues based on lower ARPU assumptions; we conservatively forecast BB ARPU of INR 400 in FY20 and beyond, down 12.5% from INR 457 in FY18. Our medium-term capex forecasts are also...
Inline quarter; East expansion will be a key monitorable Dalmia Bharat (DBEL) reported 1QFY19 results In-line with expectation. DBEL reported revenue growth of 16% YoY, led by volume growth (13% YoY) on rising demand in key markets. Blended realisations grew by 3.7% on a sequential basis and was 2.5% higher YoY. Cement EBITDA/t at INR1,135/t declined 19% YoY as variable cost escalations more than offset the realisations improvement. Net debt at INR 34.28bn, declined by INR 850mn in 1Q. Subsequently net debt-to-EBITDA remained stable at 1.71x and cost of debt remained stable at 8% (8.3% in 1QFY18). Company's 7.8MTPA expansion in Eastern India is on track and...
Buoyed by exports, margins post positive surprise Cummins India 1QFY19 results were in-line with estimates. Net sales declined by 1% YoY (7% below JMFe) as domestic sales registered a 7% decline (high base effect), while exports reported healthy growth of 12% YoY. However, operating profits grew by 10% YoY (in-line with JMFe), as operating margins grew by 160bps YoY to 16.2%, buoyed by currency tailwinds and favourable sales mix. Being cautiously optimistic, management maintain its annual sales growth guidance (domestic: 8-10%, exports: 0-5%) as it suspected that the bump in exports may be due to inventory correction. Adjusted net profit growth was stunted...
