Wipro (WPRO) reported an in line 4QFY21 revenue growth of 3% QoQ in CC terms in IT Services, near the higher end of its guidance band (1.5-3.5%). EBIT margin dipped 70bp to 21% due to a partial wage hike, but was ahead of our expectation of 20.4% on better cost control. It reported 12 large deals (over USD30m) and a TCV of USD1.4b in 4QFY21, including one large deal of over USD0.5bn in Americas (expandable to...
Infosys (INFO) reported 4QFY21 constant currency (CC) USD revenue growth of 2% QoQ, below our estimate of 3.1%, as a higher offshore revenue share (100bp) partially offset the strong volume growth of 4.6% QoQ. 4QFY21 EBIT margin declined 90bp QoQ, marginally below our estimate, due to a 130bp wage hike impact and higher subcontracting expenses (+50bp QoQ, highest in the last five years), despite more offshoring and cost optimization. In FY21, revenue (USD)/EBIT/PAT grew 6.1%/30.7%/17.5%. The management guided at FY22 USD revenue growth/EBIT margin of 1214% CC YoY/22-24%. It also characterized the current demand environment...
Tata Consultancy Services (TCS) reported revenue growth of 4.2% QoQ CC in 4QFY21 (v/s our estimate of 3.4%), delivering its third consecutive quarter of broad based (over 4% QoQ) growth. It marginally improved its EBIT margin to 26.8% (+20bp QoQ/+170bp YoY). The same was below our estimate (27.2%) on ramp up of large deals. Deal wins in 4QFY21 stood at USD9.2b, the highest in its history, with a book-to-bill ratio of 1.5x. A good 4Q helped it report sales (USD)/EBIT/PAT growth of 0.6%/10%/0.4% in FY21. Strong recovery from TCS, post the initial phases of the COVID-19 pandemic,...
The recent spike in COVID-19 cases in India weighs heavily on the Aviation sector, with flyers confidence tanking, leading to further delays in the recovery of demand. Daily passenger demand dropped by ~13% to ~246,600 passengers in the last week of Mar'21 (v/s the last week of Feb'21 when the peak was recorded), resulting in no MoM improvement in traffic (still down ~37% to pre-COVID levels)....
IPCA has reported sales of ~INR3.8b (7% of sales) in the Branded export segment over the past 12M (down 5% YoY), largely due to the COVID-led disruption. However, with a reduction in daily new cases in the Middle East / West Africa, the segment is expected to see growth recovery....
Overall Fertilizer industry volumes grew 8% YoY in FY21 on the back of 19% volume growth in MOP; NPKS and SSP volumes grew 17% each for FY21. Urea, which accounted for 53% of the Fertilizer industry's volumes, was up by 5% YoY in FY21 (refer to Exhibit 1). CRIN's overall fertilizer volumes grew 11% YoY in FY21 on the back of 35%/20%/16% volume growth in urea/MOP/SSP. NPKS volumes were up 8%, while DAP volumes came in flat. CRIN leads the market in the NPKS Fertilizer segment and commands market...
Amid the rising second wave of COVID cases, Maharashtra has imposed stringent restrictions from 5th to 30th Apr'21. Accordingly, restaurant players have been directed to stop dine-ins, though deliveries are permitted 24x7....
Strong structural opportunity: BRIT's opportunity for growth is significant, with the overall Biscuits category estimated to grow in the mid-single digits. Furthermore, the opportunity in terms of market share gains is even greater BRIT's market share is only in the mid-30s despite the company being the largest player in the Biscuits space. The broad Packaged Foods market (estimated at USD4050b) presents the strongest structural opportunity in India's consumption space. BRIT's FY21E revenue of ~USD1.8b is a fraction of this addressable market....
Strong structural opportunity: BRIT's opportunity for growth is significant, with the overall Biscuits category estimated to grow in the mid-single digits. Furthermore, the opportunity in terms of market share gains is even greater BRIT's market share is only in the mid-30s despite the company being the largest player in the Biscuits space. The broad Packaged Foods market (estimated at USD4050b) presents the strongest structural opportunity in India's consumption space. BRIT's FY21E revenue of ~USD1.8b is a fraction of this addressable market....
The recent INR8b QIP may keep the liquidity situation manageable and avoid any further dilution, though leverage at 0.8x (FY21E D/E) could rise further. The continued restrictions on Cinema operations is certainly fuelling the OTT market, which could put pressure on occupancies. At FY22E EV/EBITDA, the stock trades 10% lower to pre-COVID historical valuations,...
We are raising our FY22-23E EPS for JSW Steel (JSTL) by 42-48% to factor in improved Steel price outlook and accretion from the acquired assets of Bhushan Power and Steel (BPSL). We reiterate a Buy on JSTL as the best play on volume growth in the Indian Steel sector. Over FY21-23E, we estimate 16% volume CAGR (excluding BPSL), which should drive 22%/37% EBITDA/EPS CAGR. We also estimate net debt to fall by 26% over FY21-23E to INR483b (1.7x FY23E EBITDA) despite an ongoing capex program to expand its upstream and downstream Steel capacities....
The valuation of 6x EV/FY21 sales (estimated at INR1.2b) is attractive as it is at a ~50% discount to leading CDMO players such as DIVI. We raise the Pharma segment EBITDA of Piramal Enterprises (PIEL) by 5%/6% for FY22/FY23E after factoring in the acquisition. Accordingly, we raise PIEL's SOTP-based target price to INR2,210. We remain positive on PIEL on the back of superior execution in the Contract Development and Manufacturing (CDMO), complex hospital generics (CHG), and India Consumer...
Valuation and view: The transition to BS-VI led to further market share loss in CVs as well as a continuous decline in its stronghold PV diesel, although the 2W segment has opened up for BOS (one of the 3-4 players in 2W EFI). Valuations have corrected in line with muted earnings over the last four years, dilution in its competitive positioning, as well as on concerns due to EVs. While it is too early to assess the competitive landscape in EVs, BOS is very well-prepared to leverage electrification in 2Ws. We expect it to outperform underlying industry volumes, barring the substantial divergence in segmental trends, driven by an increase in content under BS-VI as well as additional revenue from 2W EFI. The stock trades ~29.3x/25.4x FY22E/FY23E EPS. The stock price largely reflects all the negatives, but a re-rating catalyst may emerge in 2-3 quarters. We...
Demand for Passenger Vehicles was stronger than expected once COVID-related lockdown restrictions were lifted due to shift in preference towards personal mobility. This was reflected in strong demand with first-time buyer (FTB) share increasing to 50% in FY21 YTD (from 45% in FY20) of domestic volumes. Domestic volumes for the industry have been higher than FY19 levels (previous peak) since Sep'20 onwards. Recovery in the PV demand would have been better, but for a sharp rise in fuel prices (~30% increase in the last eight months). This, resulted in an increase in sales of CNG vehicles....
Divi's Labs (DIVI), in addition to having a robust base business, is enhancing its product offerings in the generic API space at least sixteen molecules are under various phases of development and in the subsequent DMF filing stage. Particularly, we find DIVI's work interesting in the Contrast Media segment. While there is complexity associated with Iodine-based products, DIVI's strong chemistry skill set and experience in the Contrast Media space have enabled it to bring the Iohexol API to the validation phase. We believe DIVI is well-placed to capitalize on the carotenoid opportunity, with a...
Global trends catching on faster in emerging markets: Technology is accelerating global trends in the developing markets. The management believes global trends toward lower/no alcohol products could be at play in India as well....
We see Steel Authority of India (SAIL) as the best play on higher steel prices as it: 1) is backward integrated with captive iron ore, 2) has a higher operating leverage due to high conversion cost, and 3) has a higher financial leverage. With limited capex, higher pricing should drive significant deleveraging and boost equity value. We estimate net debt to decline by INR232b (INR56/sh, 76% of CMP) over FY20-23E to INR305b. We also expect higher dividend payouts going forward (implying ~5% yield), supported by strong FCF of INR19/sh (25% yield). We are raising our FY22E/FY23E EBITDA estimate by 34%/37% and TP by 28% on expectation of higher realization and volumes. The...
Additionally, MTCL has filled all the recent gaps in leadership (post major attrition since the management change), largely from Tier 1 IT. This has made the company ready to compete for larger deals in the market. Successfully transitioning from project- to annuity-based approach Mr Chatterjee has changed the company's focus from more of discretionary work to a healthy mix of discretionary and lights on services. This further translates to extended deal tenures and hence offers higher visibility in terms of revenues. MTCL's four key service lines are also structured in a way that targets multiple...
HCLT remains one the most attractive stocks in our coverage, trading at 15x FY23E P/E (38%/26% discount to TCS/Infosys), despite delivering 20% earnings growth in FY21 YTD. We expect this discount to narrow as it benefits from increasing Cloud spend, given its large exposure to IT infrastructure. It can potentially re-rate if it continues to deliver growth in the Software Product business, which remains a key overhang on the stock price, despite outperforming expectations over the last two quarters....
