28 July 2020 Nestl (NEST)s revenues for the quarter disappointed, weighed by ephemeral lockdown issues, which impacted manufacturing. We believe this would not pose much of a challenge going forward. EBITDA margins were in-line likely due to ad spend cuts, aligned with peers that have reported their results thus far. NEST remains among the best structural plays in the Indian Consumer and (b) the evident revival in topline and earnings momentum ahead of peers in recent years. Valuations are, however, rich at 67.2x CY21 EPS and 56.6x CY22 EPS. Maintain Domestic sales grew 2.6% YoY during the quarter, whereas export sales declined 9.3% YoY. particularly the cost of milk and its derivatives. Higher staff costs as a percentage of sales (+170bp YoY to 12.1%) and lower other expenses as a percentage of sales (-440bp YoY to 19.
28 July 2020 UltraTech Cement (UTCEM)s result highlights the execution of its planned cost rationalization and de-leveraging roadmap. Despite negative operating leverage (volumes down 32% YoY), the company reported the highest ever EBITDA/t of INR1,416, led by cost reduction across heads of expenditure. Net debt also declined by INR22b (13%) QoQ to INR147b (1.7x EBITDA). We raise our consolidated PAT estimate by 23%/11% for FY21/FY22 after factoring lower operating costs as well as lower finance cost (on account of faster de-leveraging). Besides strong FCF, non-core asset sales should further aid de-leveraging. Reiterate FCF generation stood at INR22.0b, achieved through a working capital release of INR7.9b. However, management does not foresee further reduction in working capital in FY21. Cement prices have declined 45% MoM in July due to seasonal weakness. Century assets recorded EBITDA/t of >INR900/t, with cost reduction of INR105/t QoQ and utilization at >70% in May and June.
28 July 2020 United Spirits (UNSP) declared dismal 1QFY21 EBITDA/net loss (albeit lower than our expectations). Further, Premium & Above segment (P&A;) is likely to underperform (unlike previous years) leading to mix deterioration. Also, the full impact of the sharp excise hikes by various states would be felt 2QFY21 onwards. All these factors lead to weak earnings expectations though we do not expect EBITDA losses 2QFY21 onwards. Our DCF-based calculations and P/E multiples of 47x FY22E EPS indicate that valuations seem currently lofty given the uncertainty prevailing over earnings growth in the sector. We had downgraded the UNSP stock to due to rising concerns on the Alcobev sectors earnings growth in the COVID and immediate post-COVID era. After adjusting for one-time bulk Scotch sales last year, underlying net sales declined 51%. P&A; and Popular volumes declined 51.5% and 46.
Energy revenue also declined by 8.1% QoQ to INR12.6b (16% beat); we anticipated it would be lower due to falling crude prices. The average sharing factor stood at 1.82x v/s 1.84x WFH model being the new norm would open up demand for new technologies such as 5G, and BHIN is equipped and concerns of an increase in receivables, which should be considered in conjunction with unbilled revenues (which have seen only a marginal increase). Management highlighted the business is on track on a normal basis and has largely recovered from the revenue/profitability losses due The board has declared dividend of INR2.3/share as it received dividend from Indus, in line with the companys policy of passing on the dividends received from associates to shareholders.
28 July 2020 IndusInd Bank (IIB) reported a stable quarter as lower fee income and higher provisions (credit cost of 4.5% annualized) impacted earnings. On the other hand, lower opex and modest improvement in margins were a surprise. PCR improved to 66.6%, while the bank increased the COVID-19 provisioning buffer to INR12b. Loan growth remains under pressure, while deposit growth is showing signs of stabilizing. The moratorium book has also declined to ~16% at Jun20-end from ~50% as of Apr20-end; the bank suggested GNPA / credit cost impact of 92b/65bp due to COVID-19. We largely maintain our estimates as softness in other income is compensated by lower opex and provisions. Maintain IIB reported PAT of INR5.1b (-64% YoY/+62% QoQ), affected by lower fee income and higher provisions of INR22.64b (credit cost stood at 4.5% annualized). The increase in provisions was on account of the bank creating INR9.2b COVID-19 provisions. NII grew 16% YoY to INR33.
27 July 2020 KMB reported a mixed quarter with weak earnings performance, affected by lower fee income, 32bp QoQ decline in margins and sharp sequential decline in loan growth. On the asset quality front, slippages were elevated, driving 45bp QoQ increase in GNPA ratio while provision coverage remained broadly stable. On the business front, loan book declined 7% QoQ, affected by the (a) lockdown, and (b) banks cautious approach in a weak macro environment. SA deposits growth was steady, driving further improvement in CASA mix to 56.7%. We have cut our PAT estimate for FY21/22E by 10%/11%, primarily to factor in higher credit cost, lower growth and other income. Maintain KMB reported 9% YoY decline in 1QFY21 standalone PAT to INR12.4b (6% below our estimates), affected by higher decline in other income and elevated provisions toward COVID-19 of INR6.2b. KMB, thus, has total COVID-19 provisions of INR12.
27 July 2020 TechMs resilience in revenue (-5% QoQ, CC), especially in Enterprise, is encouraging given the current context. Decline in Communications (8.2% QoQ) was on expected lines given the overhang in Network Services. The margin surprise was led by better-than-expected control on SG&A; costs. Understandably, net new deal wins (USD290m) were weaker than the usual run-rate. Despite the elongated decision-making cycles, the company hinted at improving deal pipeline. Revenue and margins are expected to improve from hereon. Ramp-up in recently won mega deals was largely on track, a key positive. We upgrade our EPS estimates over FY2122E by 17% as we revisit our growth and margin trajectory in light of the surprise in 1QFY21 and optimistic commentary. TechM reported revenue (USD) / EBIT / PAT growth of -3%/-8%/1% YoY v/s our estimate of -5%/-18%/-23% YoY. Revenue declined 6.3% QoQ (CC), lower than the consensus expectation of 7.
is likely to continue the momentum as medium-term macro The company remains cautious on the business outlook, but would be aggressive on cost management to enable it to tide over challenging MRCO is cautious on the near-term outlook for the business, but expects to protect the core franchise of Ethnic Hair Care and Healthcare future business prospects as it incubates new geographies to expand the The company would be comfortable maintaining the operating margin at 19% plus over the medium term. Growth in Saffola (edible oil brand) has tapered off in recent years, partly as a result of strategic mistakes in terms of pricing and partly due to the company being unable to cater to the recently emerged Super Premium market segment. both topline growth and margin is optimistic v/s prior fears of EPS decline in While the jury is still out on success achieved in terms of new product trajectory as well as valuation multiples, the stock at 36.8x FY22 EPS appears to still provide healthy upside over the next year, with superior outlook than most peers and a far less volatile international business.
27 July 2020 While revenue decline of 45% YoY was in line with our expectations, aggressive cost rationalization measures led to a strong beat in earnings. Employee costs were also lower by 27% YoY on account of certain voluntary actions, which should normalize from 2QFY21. As demand recovers, we expect the large part of these cost elements to scale back. However, the outlook remains hazy due to the local lockdowns; hence, the management appears cautious on extrapolating the June run-rate to the coming quarters. The results of peers suggest that with a demand level of 8085% v/s last year in July, Factoring cost savings in 1QFY21, we increase our FY21/FY22 EPS estimates by 14%/4%. The deterioration in working capital was disappointing, but this should normalize in the coming quarters. Maintain Revenue declined 45% to INR14.8b and was in line with our expectation.
27 July 2020 Coromandel International (CRIN) reported robust performance, led by higher manufacturing volumes (+61% YoY), higher crop protection revenue (off a lower base), and operating leverage. PAT more than quadrupled on higher EBITDA (2.1x YoY), lower tax rate, and lower interest cost. CRIN reported numbers in line with our estimates; thus, we maintain our earnings estimates for FY21/FY22E. Maintain 1QFY21 revenue grew 51% YoY. Overall fertilizer volumes grew 54% YoY on higher manufacturing volumes (+61% YoY) and trading volumes (+25% YoY). Thus, higher manufacturing fertilizer volumes and operating leverage led to a sharp 370bp EBITDA margin expansion to 12.8%. Nutrient and Other Allied segment revenues grew 49% YoY (to INR28.1b), with 240bp EBIT margin expansion (to 13.2%); segmental EBIT grew 83% YoY to INR3.7b. According to our calculations (assuming EBITDA/MT of INR300 for traded fertilizer), EBITDA/MT for manufacturing fertilizer stood at INR4,039/MT (+15% YoY; +8% QoQ) in 1QFY21. Plant Protection revenue grew 55% YoY (to INR4.
