HCL Technologies (HCLT) delivered strong revenue growth (3.5% QoQ CC) in 3QFY21, above our expectation and its guidance, led by stronger than expected seasonality in the Products and Platforms vertical (P&P;, +8.3% QoQ in CC) and continued traction in Mode 2 services (+10.9% QoQ in CC). We expect HCLT to return to mid-teens growth in FY22 (14% YoY in CC USD) as continued strength in P&P; due to improving deal wins and new client additions complements improving demand environment in IT Services and R&D; verticals. The P&P; business should deliver low teen USD revenue...
HDFC Bank (HDFCB) reported a strong performance, with advances growth driven by both corporate and revival in the Retail segment. Operating performance remained steady, led by healthy business growth, sequential margin improvement, and cost control. The bank further shored up provisions, providing INR24b toward potential NPAs (not declared due to the SC order) and other contingent provisions. Asset quality remained stable, while total restructuring stood at 0.5% of loans. Proforma slippages stood at INR49b; the bank holds a sufficient...
EBITDA loss increased 34% QoQ to INR1.1b (v/s our estimate of a loss of INR537m), despite reopening to cinemas as 50% capacity restrictions and lack of fresh content, led to meager (~1%) occupancy. We roll forward our estimates to FY23E and revise down our FY22E EBITDA/PAT estimates by 3%/12% on the back of slower recovery, thriving OTT market, and changing consumer behavior that could pose a risk to long term occupancies and business economics. We downgrade to Neutral. PVR's 3QFY21 revenue fell 93% YoY to INR634m (49% below our estimate)...
Wipro (WPRO) reported better-than-expected revenue growth of 3.4% QoQ CC, on the higher end of the guidance band (1.53% QoQ CC). Growth was broad-based across verticals, with five of seven verticals showing good QoQ growth. WPRO's continued margin improvement (+250bp QoQ / +330bp YoY) and strong cash generation (FCF/PAT at 133%) were the key positives in 3Q. In 9MFY21, IT Services reported revenue (USD)/EBIT/PAT of 3.2%/10.2%/6.9%. Wipro reported 12 deal closures and deal TCV of USD1.2b in 3Q, including USD700m from Metro AG. It further guided for USD CC revenue growth of...
Infosys (INFO) reported constant currency (CC) USD revenue growth of 5.3% QoQ (v/s our estimate of 3.2%) in 3QFY21. This is its best QoQ growth in the last eight years. Growth was broad-based across verticals and regions. In 9MFY21, revenue (USD)/EBIT/PAT grew by 3.8%/26%/16.4%. The company reported its best ever TCV of USD 7.1b (net new wins of 73%), 2x book-to-bill, and above the combined TCV of the last three quarters....
Order inflow environment improving: The momentum of order wins has continued in this quarter, with KECI winning ~INR25b worth of orders, including the recently won order worth ~INR10b. Notably, order inflows have commenced in the Railways segment and are likely to pick up hereafter. 9MFY21 order wins (to date) amount to ~INR68b. Although this is below INR98b worth of orders won in 9MFY20, we attribute the wins to large firsttime orders in the Civil segment in the base year as the company had forayed into metros (Kochi and Delhi metro orders). The order inflow momentum is picking up as we enter a busy season in terms of construction...
CESC's 3Q results highlight volume recovery in the S/A business. Volumes in S/A were just 1% YoY lower (v/s 1H: -21% YoY). S/A PAT was up 3% YoY. Consol. PAT, on the other hand, grew 21% YoY, partly led by profit at Dhariwal and improved performance at Crescent & Surya. Performances at Dhariwal and distribution franchises (DFs) would continue to improve. Furthermore, the co. has declared an interim dividend of INR45/sh, highlighting the co.'s willingness to return excess cash. Despite factoring in the tightening of norms at Haldia and S/A, the stock trades...
Tata Consultancy Services (TCS) reported revenue growth of 4.1% QoQ CC in 3Q (v/s est. 2.3% QoQ CC). This is the best QoQ growth posted by the company since FY11 in a seasonally weak 3Q it was led by broad-based delivery across sectors and regions. Moreover, TCS improved its EBIT margin to 26.6% (+40bp QoQ; +100bp v/s our estimate) despite absorbing the full impact of a wage hike (160bps impact). Deal wins (ex-Postbank at ~USD0.5b) were USD6.8b, down QoQ on tough comps, but were up 13% from Q3 FY20. TCS reported OCF/PAT of 137% and FCF/PAT of 122%, boasting a strong...
LTI is up ~130% since its inclusion in our model portfolio (in 3QFY20) and is currently the most expensive (28x FY23 EPS) IT company within our Coverage Universe. While we continue to deem it among the best-in-class IT services companies on execution and management quality, we believe the stock more than factors in the potential; hence, we...
Near monopoly in PepsiCos India business ............................................................ 7 Improving mix in line with long-term strategy ...................................................... 12 More room for growth in soft-drink segment ....................................................... 15 Newly acquired territories to drive growth .......................................................... 19 Beverage Industry ................................................................................................ 21 SWOT analysis ..................................................................................................... 25 Expect EBITDA CAGR of 15% to ~INR22b over CY19-22E ....................................... 25 Valuation and view .............................................................................................. 29...
Robust supply chain set up from scratch ............................................................19 Restaurant operating margins (ROM) .................................................................22 In charts: WLDL v/s JUBI and BKI ........................................................................23 Assumptions and financial analysis ....................................................................26 Valuation and view ............................................................................................28 Risks to our investment case ..............................................................................29 SWOT analysis ...................................................................................................30 Bull and Bear Case .............................................................................................31...
Four products launched; INR500m disbursements in the first month The company launched four retail lending products in Nov'20 LAP, affordable housing finance, mass housing finance, and small business loans (refer Exhibit 1). It also plans to reduce the focus on affluent housing finance. The idea is to have products that banks typically do not focus on and where NBFCs have higher pricing power due to their niche capabilities. PIEL is currently present in 40 locations (14 hub and 26 spoke locations), with an employee strength of over 400 people. Half of its employees are frontline sales persons. In the first month, it disbursed INR500m across these four products....
Demand recovery has been good and driven by: a) first-time buyers and second car sales (due to the COVID-19 pandemic), b) pent-up demand, and c) rural markets aided by government stimulus....
Owing to the huge demand supply mismatch across the globe on the path of normalization in the post COVID world, spot LNG prices and petchem margins are trending at multi-year highs. GAIL has reported concerns in its Gas trading and Petchem segment in 1HFY21, which are now likely to see some gains. GAIL has outperformed the Nifty by ~30% (rallying ~36%) over the last one-month...
As part of the increased Cloud and Products focus, LTI is planning to increase investment in its sales and marketing team. Increased investment is necessary for it to establish its presence in front of customers and should benefit in the long term. However, we are skeptical of its ability to generate outsized revenue growth from these businesses in the medium term due to elevated competition, and expect these investments to continue over the next few years....
The swift ~20% recovery in the stock after the recent fall has triggered deliberations on its earnings outlook, the possibility of a tariff hike, and capex intensity. Based on our recent channel checks, we note that: BHARTI's earnings outlook remains strong, given the steady 4G subscriber...
Over the last five years, RIL has seen a huge transformation from being an energy company to becoming a market leader in both the Digital and Retail space. The contribution from its standalone business to consolidated EBITDA has declined to ~60% in FY20 from ~85% in FY15, and is likely to decrease to ~45% in FY23E. On a segmental standalone basis, petchem's contribution to EBIDTA stood ~35% in FY15 and is likely to grow to ~53% in FY23E on the back of various augmentation/upgrades the company has undertaken to integrate and form an Oil-to-Chemicals (O2C) business (with a total capex spend of ~INR2.4t since FY15)....
We attended ICICI Bank (ICICIBC)'s Analyst Day, wherein the bank highlighted the progress in its different businesses and how the bank is positioned to capitalize on the exciting opportunities in the space. The topics of discussion constituted (a) how the management is trying to build a strong bank with best-in-class digital capabilities, (b) using technology to accelerate growth across business verticals and maintaining healthy operating metrics, (c) focusing on identifying potential micro markets for expansion, (d) strong demand recovery in consumption loans, with disbursements in secured loans surpassing pre-COVID levels, and (e) how asset...
Growth trajectory healthy; confident of beating AUM growth guidance in FY21 Despite increasing competition from banks, MUTH has witnessed robust growth in the past few months. Given the short duration as well as low ticket size of the product, the absolute interest cost in INR terms to the borrower does not increase much with higher yield; hence, players such as MUTH are able to compete with banks that offer much lower interest rates. The management further clarified growth comes regardless of gold prices in times of decline in gold prices, borrowers pledge more gold and vice-versa. Hence, despite the stated guidance of 15% YoY loan growth, management is confident...
UltraTech (UTCEM)'s announcement today of organic expansion of 19.5mtpa (19%) by FY23 is positive on multiple counts 1) it provides visibility on aboveindustry volumes at a 10% CAGR over FY2124E, 2) it is incrementally positive for ROCE as expansion is at a cost of only ~USD55/t, implying ROCE of ~14% (v/s 10% currently), and 3) it addresses capital allocation concerns as cash flows over the next two years are deployed in the core business. Despite the expansion, we estimate UTCEM to turn net cash by 1HFY23. Reiterate Buy and the top-pick status in the Cement sector. Announces pan-India expansion at 100b p.a. from FY22. Announced capex of INR25b in...
