Strong execution traction in Thermax continued with the highest-ever quarterly sales of Rs20.7bn in 4QFY19, up 44% YoY, aided by energy and chemical segments. The top-line was 22%/17% above our/consensus estimate, respectively. Gross margin was down 590bps YoY at 39.5%. EBITDA margin fell 140bps YoY to 8.2%, below our/consensus estimate of 8.8%/9.5%, respectively. Losses at international subsidiary Danstoker as well as pricing pressure in energy segment (especially in two large projects) led to lower profitability. Relatively lower tax rate, lower losses from associates and higher other income led to 68% YoY rise in PAT at Rs1.3bn. Consolidated order inflow in 4QFY19 was down 28% YoY at Rs11.6bn while order backlog fell 6% YoY and 17% QoQ to Rs53.7bn. For FY20,...

Sagar Cements (SGC) reported a healthy performance in 4QFY19 (in line with our expectation) following contribution from realisation gains and volume jump. Strong jump in cement prices in SGC's key markets (Andhra Pradesh & Telangana) led to realisation jump of ~5% YoYat Rs3,874/tn. Volume jumped by a strong ~18% YoY to 0.94mt, indicating SGC balancing despatches (in eastern region) and realisation gains in key home markets. Effectively, revenues grew 24% YoY to Rs3.65bn (our estimate Rs3.65bn). Costs/tn stayed flat YoY at Rs3,221/tn, leading to ~60% jump in EBITDA to Rs6108mn (Rs387mn in 4QFY18). EBITDA margin gained 380bpsat 16.9%, while EBITDA/tn increased to Rs654 from Rs485 in 4QFY18. Higher interest costs and depreciation because of commissioning of additional capacity at Bayyavaram (1.5mt from 0.3mt) dragged...

Early economic indicators suggest that 66.7% of the indicators were in positive territory in April teresa.john@nirmalbang.com 2019, slightly better than 58.5% in March 2019. However, clear signs of a turnaround remain +91 22 6273 8114 elusive. Discretionary spending remained under pressure, with passenger vehicle, two-wheeler and tractor sales continuing to slacken. Commercial vehicle sales, which performed relatively better until recently, are also facing a slowdown. Survey-based indicators continue to soften. The Nikkei manufacturing PMI stood at 51.8 in April 2019, down from 52.6 earlier. Manufacturing output, as measured by the Index of Industrial Production or IIP declined 0.4%YoY in March 2019, same as in the previous month. Export growth in April 2019 was also muted at 0.6%YoY....

Bank of Baroda (BoB) reported its 4QFY19 results with the key strategic pointers being: (1) Despite slight uptick in slippages on account of IL&FS;, SME and agri, overall NPA accretion has remained in relative control after 4QFY18 with fresh slippages in 4QFY19 contained at Rs31.92bn. Continued conservative provisioning has further strengthened the ability to absorb haircuts (2) Strong business traction sustains with 14.2% growth in domestic advances, led by home and auto loans (3) Global NIM expanded 21 bps QoQ to 2.90% driven by a global yield expansion of 16 bps and domestic yield expansion of 31 bps. (See comprehensive analyst meet takeaways on page 2 for significant incremental colour). Per se, on the key P&L; items, BoB posted NII growth of 27% YoY at Rs50.7bn, PPOP growth of 45% YoY at Rs38.6bn and loss of Rs9.9bn compared to a loss of...

Following are some of the important takeaways from our interaction: Top-line sluggish: Growth challenges still persist amid the slowdown witnessed by the industry and it may take some time to recover, but the management expects these challenges to be of transient nature and that we can expect a revival in the second-half of FY20. Factors like liquidity constraints and farmer distress have impacted consumer sentiment, but the underlying fundamentals remain intact. Adding to the above, the management is of the opinion that although it is a countrywide slowdown it does not expect the growth rate in FMCG to remain in low single digit for too long. The management appeared confident that the moderation witnessed in BRIT's growth rate which dropped to single digit should see some improvement in FY20. Further, it mentioned that the focus is going to be on driving...

IndusInd Bank (IBL) reported its 4QFY19 results with the key takeaways being: (1) IBL took provision cover on IL&FS; parent exposure to ~70%, disclosed exposure to key stressed corporates and guided for credit costs of <60 bps for FY20 (2) Interest reversal on IL&FS; exposure compressed NIM to 3.59%, down 24 bps QoQ but was flat excluding this impact (3) Growth was broad-based with vehicle finance, other core consumer finance and corporate loans ex MFI all growing within a range of 20-31%. (See detailed analyst meet takeaways from page 2) Per se, on the key P&L; items, IBL delivered NII growth of 11% at Rs 22,324mn, PPOP growth of 17% at Rs 20,677mn and PAT decline of 62% YoY to Rs3,601mn, respectively. We have revised...

Cipla's revenues of Rs44,040mn in 4QFY19 were up 19.1% YoY and 9.9% QoQ and above our/consensus estimate by 7.6%/11.1%, respectively. Revenues showed good growth YoY and QoQ as North America business witnessed a steep growth of 69.3% YoY. The growth was driven by strong differentiated product launches and at-risk launch of Cinacalcet (Sensispar generic). The US trajectory should remain strong as Cinacalcet revenues will sustain for a while and the company continues to guide for one limited-competition launch per quarter. To ensure sustained growth on a growing US base, Cipla is accelerating investments in respiratory assets and specialty drugs which can add up meaningfully on a...

Consumer Products Stay Healthy; E&P; Margin Weakens Bajaj Electricals (BJE) reported 4QFY19 revenues of Rs17.7bn, up 10% YoY and 7%/10% below our/consensus estimate, respectively. Consumer product sales grew 15% YoY to Rs7.4bn (42% of total revenues) aided by growth in appliances and fan categories. E&P; segment revenues grew 7% YoY to Rs10.3bn (58% of total revenues). Gross margin fell 540bps YoY to 22% (FY18 gross margin was 27.5%) owing to large contribution from a rural electrification project of Uttar Pradesh (UP). EBITDA declined 49% YoY to Rs694mn, translating to EBITDA margin of 3.9%, down 450bps YoY. EBITDA margin was below our/consensus estimate of 5.8%/6.4%, respectively. EBIT margin of...

Meets Expectations; Long-term Business Strategy In Place The Ramco Cements' (TRCL) operating performance in 4QFY19 was in line with expectations as the company focused on maximising its reach (into eastern region) by pushing up volume but foregoing realisation gains. Revenues grew by a healthy 22% to Rs15.3bn (78% capacity utilisation in 4QFY19) driven by volume growth of 20% YoY as it expanded its access in the eastern region (contributing 25% to volume). However, this meant that realisation was lower than expectation with 1% growth at Rs4,618/tn in 4QFY19 (our estimate Rs4,828/tn). Costs continued to remain firm because of higher energy costs and other expenditure (Rs2.05bn, largely because of non-recurring expenses). Logistic costs declined marginally YoY...

We recently met with Mr. Shyam Srinivasan, CEO of Federal Bank (FBL) and gleaned Sector: Banking incremental insight into the strategy of the company. We share our detailed takeaways below. We revise our estimates for FY20/FY21 and retain Buy rating, revising our target CMP: Rs103...

United Breweries (UBBL) top-line growth in 4QFY19 was 11%, which was largely in line with our expectation. Net sales growth at 11% was driven by a healthy volume growth of 13%. State mix has deteriorated to some extent causing pricing to decline by 2%. Although cost challenges relating to glass and barley have exceeded expectations, we have observed in the past that these tend to be cyclical in nature and we expect them to moderate in the second-half of the year. Marketing expenses also have remained on the higher side following the launch of Radler last quarter. EBITDA and net earnings experienced a decline of 18% and 25% YoY, respectively, because of cost challenges witnessed in 4QFY19 but given that the top-line growth trajectory is...

growth is likely to come in at 5.9% in 4QFY19, down from 6.3% in the previous quarter, while GDP +91 22 6273 8114 growth is likely to come in at 6.2% from 6.6% earlier. We have also revised downwards our annual GVA estimate for FY19 to 6.6% and GDP estimate to 6.8%. The growth slowdown will likely persist, at least in 1HFY20, and may not see a significant improvement in 1QFY20. Consequently, we have revised downwards our GVA and GDP estimates by 20bps each to 6.6% and 6.8%, respectively, for FY20. Agricultural growth in 4QFY19 is likely to come in at around 3%YoY supported by a modest increase in rabi crop production and stable growth in allied sectors such as forestry, dairy and fishing. Industry, excluding construction, is likely to witness a slump on account of the slowdown in...

Revenues Broadly In Line; Weak Margins Not Structural In Nature BUY Triveni Turbine (TTL) reported 4QFY19 consolidated revenues of Rs2.4bn, down 2% YoY and marginally below our/consensus estimate of Rs2.5bn each. Turbine revenues were up 1% YoY at Rs1.9bn, while after-market services sales declined 13% YoY to Rs464mn. Raw material costs rose 17% YoY to Rs1.4bn owing to: (a) One-time costs towards new product development (Rs220mn spent in 2HFY19 for R&D;, setting up a laboratory for product testing and value engineering for material cost reduction). (b) Increase in finished goods inventory owing to client-led delay in shipment. Consequently, EBITDA fell 33% YoY to Rs400mn, leading to a 770bps YoY decline in...

Sanghi Industries' (SNGI) performance in 4QFY19 was steady with revenue growth of 9% YoYat Rs2.8bn as volume jumped 13%. Realisation, however, fell 4% YoY to Rs3,866/tn as dominant sales (~68%) were in the non-trade segment (adjusted to ready-mix concrete revenues of Rs69mn). SNGI's key market continues to be Gujarat with 83% of sales volume contributed by the state. Cement volume jumped 13% YoY (including domestic and export cement sales and small quantity of clinker sales) to 0.70mt in 4QFY19. Operating costs were well controlled, staying flat YoY at Rs3,304/tn, largely because of lower energy and logistic costs. However, this was negated by the jump in other expenditure by 75% to Rs298mn driven by higher advertising and technology-related expenses. Effectively, EBITDA margin...

cement realisation gain and volume growth. Additionally, cost inflation controlled well helped improve performance. JKCE's grey cement volume (including clinker sales) grew ~8% YoY to 2.53mt. CMP: Rs944 Grey cement realisation also rose by a healthy 5.5%YoY/5.8%QoQto Rs4,193/tn. White cement segment's (including putty) volume also posted a healthy growth of ~19% at 0.35mt. White cement Target Price: Rs928 segment's realisation, however, was flat YoY/QoQ at Rs11,751/tn (combined putty and white cement). Overall revenues grew ~12.0 YoY to ~Rs14.7bn (in line with our estimate of ~Rs14.5bn). JKCE's Downside: 1% operating costs were well controlled as they remained flat YoY at Rs4,212/tn on account of falling energy and logistic costs, but higher other expenditure growth capped further benefits. Effectively, Milind Raginwar...

Indian Oil Corporation (IOCL) reported earnings of Rs60bn in 4QFY19, up 522% QoQ and 9% YoY, primarily because of: 1) Improved gross refining margin or GRM of US$4.09/bbl in 4QFY19 versus US$1.15/bbl in 3QFY19. 2) Marketing margin contribution to EBITDA standing at Rs65.4bn in 4QFY19 as compared to (Rs3.9)bn in 3QFY19 and up 129% as compared to 4QFY18. 3) Inventory gain of Rs23.9bn in 4QFY19 as compared to inventory loss of Rs80.8bn in 3QFY19 and inventory gain of Rs24.5bn in 4QFY18. 4) Other income at Rs10.9bn in 4QFY19 rising 230% QoQ and 484% YoY. 5) Cost of goods standing at Rs1,235bn, down 18% QoQ and up 6% YoY. However, net sales in 4QFY19 at Rs1,471bn...

Hindustan Petroleum Corporation's (HPCL) 4QFY19 profit increased 1,100% QoQ and 70% YoY to Rs29.7bn. The increase in earnings was because of: 1) Higher gross refining margin or GRM of US$4.53/bbl in 4QFY19 versus US$3.65/bbl in 3QFY19. 2) Refining throughput increased from 4.56mmt in 3QFY19 to 4.60mmt in 4QFY19. 3) Pipeline throughput increased from 5.22mmt in 3QFY19 and 5.27mmt in 4QFY18 to 5.61mmt in 4QFY19. 4) Cost of goods declined 13% QoQ. 5) Other income at Rs5.25bn in 4QFY19 increased 33%QoQ and 53% YoY. However, the revenues declined 5.2% QoQ to Rs731.5bn in 4QFY19 because of: 1) Decline in...

The audit report of the Comptroller and Audit General of India (CAG) has raised concerns teresa.john@nirmalbang.com over rising off-balance sheet financing by the central government. We analysed the historical +91 22 6273 8114 trend in off-balance sheet financing and found that borrowing by public sector entities shot up in FY12 as the United Progressive Alliance-II government went all out with fiscal expansion to tackle slowing growth. At the same time, rising commodity prices resulted in a surge in deferred subsidies. From FY14 onwards, off-balance sheet borrowing by public sector entities has been used to offset fiscal consolidation, and also to take advantage of lower interest rates. In our view, borrowing by public sector entities to fund capital...

Shree Cement's (SRCM) revenue growth of ~17% YoY in 4QFY19 at Rs32.8bn was largely in line with our estimate. The performance was driven by volume growth (13% YoY jump including clinker sales) from eastern and northern regions and realisation gain of ~ 1.9% YoY backed by all its key markets. SRCM has tactically shifted its focus to realisation gain over volume push in FY19. Further, costs remained flat YoY (marginal decline) driven by raw material and logistic cost savings. Overall EBITDA grew ~37% to Rs8.5bn driven by the strong power segment's performance compared with cement segment. EBITDA margin grew 240bps YoY to 25.8% compared with 22.4% in 4QFY18. The power segment's performance was steady with ~10% YoY jump in external power sales to ~380mn units and power revenues jumped...

City Union Bank (CUBL) reported 4QFY19 results with the key strategic pointers being: (1) NIM remained stable, declining 1 bp QoQ to a still industry-leading 4.40%, continuing to belie management's continued conservativeness with regard to NIM guidance (2) Underlying asset quality remains well under control and management guided for a slippage ratio of 1.75-2% for FY20 (3) Overall loan growth was 17% YoY and management guided for 18-20% growth for FY20, which is adequate for CUBL. (See comprehensive conference call takeaways on page 2 for significant incremental colour;). Per se, on the key P&L; items, CUBL posted NII growth of 14% YoY at Rs4,206mn, PPOP growth of 15% YoY at Rs3,378mn and PAT growth of 15% YoY at Rs1,751mn....