JM Financial Broker Research reports

INOX is India’s largest manufacturer of cryogenic equipment with 30+ years of experience in cryogenic equipment and systems. It operates in three business divisions – Industrial Gas, LNG, and Cryo Scientific Division (CSD).

JSW Infrastructure (JSWIL), India’s second largest private port player, is well positioned to capture the opportunities arising from the government of India’s (GoI) thrust on infrastructure spending and privatisation of port terminals.

Over the years, ASK has successfully demonstrated its technical, designing, and engineering capabilities to develop new and customised solutions with an astute focus on QCD. This is a testament to the fact that all the leading 2W OEMs in India are its longstanding customers.

Dalmia Bharat (Dalmia) reported inline EBITDA, as sharper than expected drop in realisations was offset by cost control measures. Volumes reported marginal growth of 4% QoQ (+6% YoY), as the core markets were impacted by heavy monsoons. Cement realisations declined by 7% QoQ (+2.5% YoY; -2% vs. JMFe), owing to sharp drop in prices in East/South.

TTK Prestige (TTK) reported another steady quarter with revenue/EBITDA/adj. net income growth of 7%/6%/10% YoY despite a) Kerala floods (INR 150mn impact on sales) and b) high base (GST restocking). The company hopes to sustain the current growth momentum with a 14% EBITDA margin trajectory on the back of distribution expansion (deeper rural penetration) and product expansion (cleaning solutions, water purifiers, etc.). We appreciate the improved growth momentum (especially cookers led by the Ujjwala scheme); the recent correction in the stock provides an attractive price point for entry/addition, in our view. We introduce FY21 forecasts and roll forward with an SOTP-based Sep'19 TP of INR 7100 and...

Kotak Bank reported a steady operational quarter in 2QFY19 with PPoP for the standalone bank up 21.5% YoY. However, provisions remained slightly elevated in 2QFY19 as the bank continued to shore up its PCR (up 200bps sequentially to 63%), as well as due to elevated MTM provisions on the investments book. As a result, standalone PAT growth was moderate (+15% YoY), although growth in consol. PAT was healthy at 21%. We believe that the reduction in margin for KMB (down 10bps QoQ to 4.2%), could well be transient, as the loan book (predominantly linked to 6-m MCLR) gets re-priced. Management indicated that the outlook for risk-adjusted margins for KMB seems to be positive, driven by a reduction in...

MMFS recorded a strong performance with PAT of INR 3.8bn (up 133% YoY) on IndAS basis. Comparable IGAAP PAT for 2QFY19 is INR 3.9bn vs. INR0.8bn in 2QFY18, a 5x YoY growth. Other key highlights are: i) acceleration in disbursement growth (44% YoY); this led to AUM growth improving to 26% YoY from 8% last year. ii) GNPA ratio reduced 410bps YoY to 9% while coverage ratio stable YoY at 35%. iii) Management is confident of achieving 3% RoA driven by improvement in credit cost and operational efficiency. In the current situation, we believe strong promoter backed NBFCs will get disproportionate share of funding going forward. Moreover, competition from new, small and PE backed NBFCs will come down...

Wipro (WPRO) reported 2QFY19 that was a tad above expectations; the 0-2% QoQ USD revenue growth guidance (JMFe, adjusted for incremental revenues in the USD 1.5bn/10-years Alight Solutions deal) was on expected lines. Organic digital revenues grew 11% QoQ (30% YoY), on our estimates; management indicated a strong demand for cloud migration services. However, the presence of multiple moving parts divestment of data center business, Alight acquisition and the planned carving out of domestic public sector business lower the visibility of the internal construct. Further, the outlook for Healthcare vertical (13% of revenues) remains uncertain. Thus, we stay neutral. That said, we believe the stock's modest...

We move Asian Paints to BUY from HOLD as we now find valuation to be in a reasonable zone after two years of near-zero return. The stock price has swung from its 52-week high of INR1,467 on the day of its 1QFY19 result to near-52-week low level post a 5% fall today in possibly a reaction to a weak 2QFY19 earnings report, due in part to some once-off factors that impacted the quarter's profitability. We are quite confident, though, that margin performance going forward will be much better vs 2QFY19's, given elements of constraint (deferral of price-hike to avoid attracting anti-profiteering provisions) and once-off rebating (on transition stocks at the time of GST rate cut) present in the latter - issues that are unlikely...

Beat on margins; multiple disruptions cloud growth visibility In 2QFY19, TVS Motor (TVS) reported EBITDA margin of 8.6% (-35bps YoY, +90bps QoQ), surpassing JMFe and street expectations owing to higher volumes, price increase and a favourable exchange rate. Without sharing a number, the management indicated moderate' growth during the Navratri period (including Dusshera), impacted by the increase/confusion on insurance premium. However, the Company expects strong pick-up in sales during the traditionally robust phase of Dhanteras' and Diwali', driven by positive response to new models. With increase in fuel price, hike in insurance premium and heightened competitive...

Ambuja Cement (Ambuja)'s 3QCY18 EBITDA missed the expectations primarily on higher other expenses. Revenues rose 13% YoY on volume growth of 9%. Realisations improved by 3.6% on a YoY basis; sequential growth of 1%. EBITDA grew by 15.6% on a YoY basis. EBITDA/t was reported at INR 648/t (vs. INR 609/t in 3QCY17), grew as realisation improvement and lower other expenses was partially offset by increase in operating costs. We believe Ambuja's long-term growth is constrained by its clinker capacity and limited expansion plans (phase 1 expansion of 1.7MTPA of clinker at Marwar Mundwa expected by 2HCY20). As a result, we expect Ambuja's market share to decline in the interim. While the...

Stellar quarter; well positioned on ALM and liquidity Bajaj Finance (BAF) reported 2QFY19 net profit of INR 9.24bn (up 55% YoY ) as per IndAS. As per IGAAP, net profit was up 83% YoY at INR 10.2bn. Key highlights: i) AUM growth remained strong at 38% YoY driven by all the segments. As per company, consumer demand remained strong, however given the current environment, company would be slightly cautious for quarter or so in the lumpy exposure in SME, LAS and commercial lending. ii) Customer acquisition remained healthy, with the company acquiring 1.8 million new customers (up 34% YoY) in 2QFY19. iii) Margins increased 33bps YoY to 11.1% on a 47bps...

Strong performance by BAF offsets weak quarter for BAGIC; BALIC on track Bajaj FinServ reported consolidated PAT of INR 7.0 billion, up 1% YoY as the strong performance in Bajaj Finance (IndAS PAT up 55% YoY in 2QFY19) was offset by a) Kerala flood losses at BAGIC which negatively impacted combined ratio by 360bps and b) investment related provisions and losses at BALIC which negatively impacted shareholders' net income. A key point to note is that Bajaj FinServ continues to be a debt-free company with surplus liquidity (ex-group investments) at INR 8.4 billion as of Sep'18. All three of Bajaj FinServ's (BJFIN) businesses are well-poised to post strong profitability going forward. We...

Steady Operations; well placed in current environment Oberoi reported steady operations with pre-sales value at INR 5.7bn (INR 3.5bn 2QFY18) primarily on improvement in pre-sales across projects. Oberoi recognised Eternia revenues in 2QFY19 as project crossed 25% construction threshold. While company's performance continues to improve post RERA/GST implementation, Mulund projects remain slow moving. Collections remained stable at INR 5.6bn (INR 5.7bn in 1QFY19). Net debt was reported at INR 4.1bn. Operating cash flows declined on TDR payments and higher construction spends. Company has received 97% lease commitment in Commerz II (63% at present). We believe...

Bajaj Corp reported a very subdued revenue performance in 2QFY19 with domestic volumes being flattish as per our workings .This is probably attributable to channel inventory clearance prior to the re-launch of its flagship Bajaj Almond Drops brand and some destocking in the rural wholesale channel. Management remains quite confident of delivering a sharp improvement in volume growth from next quarter onwards aided by higher media activation post re-launch of BAD and the festive season demand. Interestingly, as per Nielsen, retail offtakes grew in excess of 25% (of a weaker base though as volumes were merely 5% higher on a sequential basis) and BAD was able to further enhance market share in both...

Persistent (PSYS) reported a 4% QoQ decline in USD revenue in 2QFY19 below estimates as seasonal weakness in IP business was exacerbated by an unanticipated project foreclosure (USD c.1mn impact). Management exuded confidence in growth recovering over 2HFY19 3Q is seasonally strong for the IP business. However, we expect the quarterly volatility to continue given the weak trajectory in the core services business (43% of revenues); growing reliance on the IBM ecosystem is an added risk. Thus, while the currency tailwinds have helped minimise the flow-through of 2QFY19 revenue miss on margins/EPS changes to our FY19/FY20 EPS estimates are minor (1.7%/-0.5%) the low predictability of revenues could...

Asian Paints' 2QFY19 report was a clear disappointment more from a mix/margin angle, even as volume growth of low double-digit' turned out to be tad higher vs our forecast of c.8%. What is not clear, though, is how a double-digit volume growth translated into a mere 8.5% growth in revenue, considering the cumulative price-hike of 3.5% effected thus far (1.5% in Mar'18 plus 2% in May'18; the pricing action in Jul'18 was realisation-neutral, i.e. price-cut was effected to entirely pass on the 10ppt cut in GST rate). This apparent deterioration in mix further pressured margin which seems to have compressed much more than warranted by the inflation in RM prices. One possible explanation could be additional...

Hindustan Zinc reported an EBITDA of INR 23.3bn, in-line with JMFe. EBITDA declined 23% YoY, driven by lower zinc volumes (17% YoY) and higher CoP. Zinc volumes declined, driven by transition to underground mining leading to lower grades and higher strip ratio. CoP increased YoY, driven by lower zinc volumes, higher thermal coal costs and INR depreciation. Near term zinc price outlook remains steady, driven by a) ILZSG deficit forecast of 322kt in CY18 and b) multi-year low warehouse inventory (224kt of LME+SHFE inventory). The company has declared a strong interim dividend of INR 20/sh (div. yield of 7.1%). We remain positive on HZL given its presence in the lower end of the global cost curve facilitated by high...

Reducing price target to reflect impact of digital and OTT; retain BUY Incorporating our revised outlook on TV ad spend growth, based on rapidly rising OTT video consumption, we cut our target price for Sun to INR 780 (Dec-19) from 975 (Sep-19) previously. We maintain 11-12% annual ad revenue growth forecast for FY19 and FY20, but bring down YoY ad growth rate by 100bps each year beyond FY20. This results in a lower terminal FCF growth (5.0-5.5%), driving a 29% cut in implied exit EV/EBITDA multiple in our...

ZEEL is India's #1 TV network for non-sports entertainment with a 20% share of all-India viewership in 2QFY19 (+160bps YoY). In the last 6years, Zee has delivered 18% CAGR in domestic ad revenues vs. 12% CAGR in TV ad spends. Zee has now embarked on a transformational journey with the launch of the Zee5 video platform; it is already #1 in original...