Adjusting for taxes and debt, the company is likely to garner net cash inflow of USD1.4b as proceeds. originally announced, and even until the days preceding the COVID-19 outbreak, we expected the proceeds to be utilized for buybacks or put toward a one-time special dividend of INR7080/sh. However, COVID-19 has posed various challenges, including the risk of funding requirements in non-core businesses such as L&T; Finance and Hyderabad Metro. the nature of use of the proceeds may be against the original expectation; however, this has more to do with COVID-19-led risks than any change in the managements intention to return excess cash to shareholders. Owing to the proceeds, L&T; is likely to maintain a strong liquidity position and does not have to depend on debt on a net basis to support core business execution. had already communicated that it may utilize part of the funds to restructure the capital structure of the Hyderabad Metro by replacing external debt.
Contents: Indian Energy Exchange | Long-term play in Short-Term market Summary .................................................................................................................. 3 India's ST Power market accounts for 1011% share................................................ 7 ST market: An inherent dependence remains........................................................... 9 Exchanges v/s other platforms: Flexibility an advantage........................................ 13 Expect PAT growth of 19% CAGR as volumes rise ................................................... 22 Diversifying into gas markets and other products .................................................. 27 Valuation: Buy, with TP of INR250/sh..................................................................... 28...
(%) Margins (%) P&G; Hygiene and Healthcare (PGHH) reported flat sales in 4QFY20 (June year-end), which came as a pleasant surprise given the lockdown-related disruptions seen during the quarter. Operating margins also bucked the trend of very steep decline in margins in 4Q v/s the preceding three quarters, something that was witnessed in FY18 and FY19. Accordingly, significant EBITDA and PAT beat was reported v/s expectations. While the structural opportunity remains attractive in both the Feminine Hygiene and Healthcare segments, valuations are fair at 51.8x June FY22 EPS. Ad spends declined 41.5% YoY to INR411m, employee expenses grew 43.6% YoY to INR381m, whereas other expenses were flat YoY at INR2.1b. As a percentage of sales, ad spends declined by 450bp YoY to 6.5%, employee costs rose by 180bp YoY to 6%, and other expenses were down by 30bp YoY to 33.4%. This led to a FY20 sales/EBITDA/PAT grew by +1.
25 August 2020 Albuterol Sulfate sales for two innovators (GSK/Teva) for their brands Ventolin/Proair stood at USD600m/USD275m for 12M-ended Jun20. Considering 15% market share / 30% price erosion for LPC, we believe Albuterol Sulfate could add up to USD8090m to LPCs annualized revenues. US revenues are expected to be driven in the near term by the launch of g- Proair, ramp-up in Levothyroxine sales, better traction in g-Apriso, relaunch of g-Glumetza, and new launches from 158 ANDAs pending approval. Compared with 5% compounded decline over FY1820, we expect a 7% sales CAGR in the US over FY2022. LPC would also launch Biosimilar-Enbrel in the EU market in 2HFY21. (a) niche launches (g-Albuterol to be launched in Sep20; Biosimilar-Enbrel/g- Fostair in the EU), (b) improving market share for Levothryoxin, (c) better-than- industry growth in DF, and (d) partly the low base of FY20 (21% compounded decline in earnings over FY1820).
25 August 2020 LICHF reported 34% YoY growth in 1QFY21 PAT to INR8.2b (60% beat). The beat was driven by better-than-expected NII as well as lower credit costs. This is a key monitorable for us. This was largely driven by smaller cities (share of disbursements in the Top 7 cities declined from an average of 45% to 35%). The loan book was largely stable at INR2.1t. Note that the loan mix has been largely stable for the past six quarters. Incremental cost of funds was down ~100bp to 6.8%, in line with the rates in the economy. Overall cost of funds declined 20bp QoQ to 7.9%. Operating expenses were up 28% YoY to INR1.37b, largely driven by a 30% YoY increase in employee expenses to INR796m. However, the company did not make any large COVID-19-related provisions this quarter.
19 August 2020 Muthoot Finances (MUTH) 1QFY21 PAT increased ~60% YoY to INR8.4b (2% miss). However, according to management, the cost reduction is one-off and unlikely to sustain. As the company opened branches in May20, it witnessed more collections than disbursements. Hence, its loan book declined marginally QoQ. Standalone AUM moderated 1% QoQ to INR413b, driven by stronger collections. However, disbursements picked up toward end-1QFY21 and have sustained in 2QFY21 too. A key factor was the online disbursements (wherein the company is offering cash-backs), which have jumped 4x since the start of the lockdown. Over the past year, the company has enhanced liquidity on its Balance Sheet from INR9b in 1QFY20 to INR85 in 1QFY21. The higher liquidity weighed down on margins as borrowings have grown 38% YoY (v/s 15% YoY growth in the loan book). Management has guided to keep liquidity on the balance sheet at 10%.
19 August 2020 KNR Construction (KNR) outperformed in terms of execution by reporting revenue growth v/s our expectation of 35% YoY decline. The EBITDA margin expanded YoY on account of the rising share of higher margin irrigation projects, resulting in a strong beat on earnings. Including L1 orders, the order book (OB) stood strong at INR78.5b, implying OB/rev at 3.5x and providing healthy revenue visibility. KNR continues to surprise with its steady performance. However, the working capital cycle has witnessed marginal deterioration. This is primarily on account of pending dues from the Telangana government, which have been stalled since Feb20 and currently stand at INR6.8b. The management hopes to receive INR4.4b within the next few weeks. Factoring the strong performance in 1QFY21, we increase our FY21/FY22E EPS by 28%/7%. We maintain our (b) the book value of road assets.
19 August 2020 Tata Power (TPWR) highlighted its focus on addressing legacy issues with Over the past few months, the co.s deleveraging process has been preferential issue to Tata Sons. plans to continue with its asset monetization plans by exiting non-core assets and InvIT for renewables. expects the InvIT transaction to be completed this year. TPWR plans to reduce net debt to INR250b by the end of FY21 and sustain it at these levels. plans to simplify its holding structure and generate synergies from the merger of CGPL, Tata Power Solar, and Aftaab with TPWR. The process for the same requires the NCLTs approval (which could take 412 months). plans to reduce its debt by INR40b using preference and divestment-related proceeds, in turn generating interest cost savings of INR3.8b. In terms of the PPA amendment for CGPL, the benefit of compensatory tariff at current prices stands at INR2.5b.
18 August 2020 According to the recent IMF estimates (Jun20), Indias GDP growth for 2021 is estimated at ~6.0%, higher than the global economic growth of ~5.4% for 2021. INDIGO has highlighted that medium-to long-term growth prospects for the Indian economy remain robust, and the return of normalcy in airline travel Under-penetration of airline travel in India currently Rise in the working-class population Expansion in the middle-income demographic group in the country In FY20, for INDIGO, ASK growth stood at +19% YoY and RPK growth at +18% YoY. initiatives, liquidity enhancement and improvement in the fleet mix. Most of the new aircraft would be financed through an operating lessor model, generating significant liquidity in FY21-FY22. Employee cost was up 47% YoY to INR47b in FY20. The company expects employee cost to be 30% lower v/s pre-COVID-19 levels by the end of FY21 with the undertaken payroll control initiatives.
Voltas gained further market share in the RAC (Room Air Conditioner) business and emerged as market leader in the Inverter category as well. It has also maintained a leadership position in Inverter ACs. Company-level inventory stood at 140 days, while that in the channel stood at 4045 days. The response for DC refrigerators has been encouraging, with the company accelerating its production post Unlock 1.0 owing to higher We expect system-level inventory to normalize by NovDec20; hence, FY22E should turn out to be a normal year. With a strong distribution network, coupled with less reliance on imports, we expect VOLT to continue its leadership position in the form a JV with the Beko brand to cater to a wider audience in the Consumer Durables space (beyond ACs) has come at the right time.
