Robust TCV Growth Signals Strong Biz Momentum; Margin Disappoints Tata Consultancy Services (TCS) has reported a decent CC revenue growth of 1.8% QoQ in 3QFY19, while USD revenue came in softer-than-expected at US$5,250mn (+0.7% QoQ, below our estimate by 0.8%) owing to a higher-than-expected adverse cross-currency impact. Its TCV order bookings grew by a robust >20% QoQ to US$5.9bn (vs. US$4.9bn in 2QFY19), with bookto-bill rising strongly to 1.12x (vs. 0.94x in 2QFY19), which signals a strong traction in underlying business growth. On the flip side, its EBIT margin declined by 90bps QoQ to 25.6% (missing our estimate by 73bps) owing to higher wage cost and SG&A; expenses. Net profit rose by 2.6%...

ff It made additional contingency provisioning to the tune of Rs2.6bn towards exposure to IL&FS; Holdco (exposure at Rs20bn), taking the total provisioning on this account to 30%. Further, haircuts could be ~40-50% on this exposure and the Bank will make additional...

Whilst PMPL's EBITDA margin marginally declined by 25bps YoY to 12.8% owing to sales mix, it remains healthy due to higher contribution of international projects, high-margin Civil & Other Works and O&M; business. Looking ahead, the Management expects margin to improve owing to shift in revenue-mix to high-margin O&M; business and growth in non-power business. Its reported PAT grew by 67% YoY to Rs284mn. Total consolidated debt stood at Rs2.8bn as of 2QFY19-end vs. Rs 3.1bn as of 1QFY19-end with net debt/equity ratio coming in at 0.2x, which provides a significant headroom for growth. As the Management is confident of utilising internal...

NBCC reported a mixed performance in 2QFY19 with a better-than-expected growth in revenue booking and disappointing EBITDA margin. Beating our estimate, its reported revenue grew by 37% YoY to Rs15.4bn mainly led by 39% YoY increase in PMC revenue and 266% YoY rise in real estate revenue. PMC revenue accounted for 90% of its total revenue. A significant increase in other income (+207% YoY and +70% QoQ) resulted in 16% YoY growth in PAT to Rs859mn. NBCC stated that change in accounting rules to IndAS resulted in deferment of revenue booking especially for upfront fees under PMC contracts. Earlier, these incomes used to be reported in P&L;, which are shown under liabilities as advances received. These incomes would be booked...

Better Operating Performance on Lower Freight Cost JK Lakshmi Cement (JKLC) has reported a better-than-expected performance in 2QFY19 with its EBITDA coming in at Rs916mn (-4% YoY and -2% QoQ) vs. our estimate of Rs824mn led by unexpected decline in freight cost (-1% YoY and -18% QoQ) owing to ~30kms reduction in lead distance. EBITDA/tonne stood at Rs431 vs. Rs505 and Rs410 in 2QFY18 and 1QFY19, respectively. While operating cost/tonne stood at Rs3,572 (-0.9% YoY and -1.7% QoQ), input cost/tonne increased by 7% YoY and 2% QoQ to Rs1,944 mainly due to increase in Power & Fuel cost. Average NSR declined by 2.6% YoY and 0.9% QoQ at Rs4003/tonne, while sales volume grew...

Ahluwalia Contracts (AHLU) has reported a strong performance in 2QFY19 mainly led by rampup in execution in recently bagged projects. While revenue grew by a strong 31% YoY to Rs4.4bn (+9% QoQ) vs. our estimate of Rs3.8bn, EBITDA rose by 15% YoY to Rs574mn (+9% QoQ) and EBITDA margin stood at 13.1% vs. 14.9% and 13% in 2QFY18 and 1QFY19, respectively. Net profit grew by 21% YoY and 11% QoQ to Rs312mn vs. our estimate of Rs256mn. AHLU received order inflow of Rs31bn in FY19 YTD taking its total order backlog to Rs53bn (3.2x of FY18 revenue). Upgrading order inflow guidance to Rs40bn from Rs24bn, the Management has maintained revenue growth guidance of 15-20% with EBITDA margin of >13% for FY19 and >30% revenue growth in FY20E. We continue to maintain our positive stance on AHLU on the back of healthy...

CESC's net profit grew by 9.7% YoY to Rs2.7bn in 2QFY19 primarily owing to recognition of regulatory revenue of Rs370mn along with 7.3% YoY growth in unit sales to 2,964mn units. While its revenue grew by 6.3% YoY to Rs22bn, EBITDA grew marginally by 1.1% YoY to Rs5.5bn. Realisation remained flat at Rs7.5/kwh. Valuing CESC's power business on FCFE methodology, we maintain our BUY recommendation on the stock with a revised Target Price of Rs775...

Mangalam Cement (MGC) continued to deliver disappointing performance in 2QFY19 as well with adjusted EBITDA declining by 67% YoY to Rs92mn, while EBITDA/tonne coming in at mere Rs127. While sales volume remained robust at 0.72mnT (+20% YoY and +12% QoQ), steady NSR at Rs3929/tonne (+0.8% YoY and +1.3% QoQ) led to 21% YoY growth in revenue to Rs2.9bn broadly in-line with our estimates. Adjusted for prior period rebate in railway freight, operating cost/tonne surged by 9% YoY to Rs3,775 (-1.7% QoQ) mainly led by increase in Power & Fuel cost. Adjusted net loss stood at ~Rs14mn vs. Rs11mn profit in last year. Looking ahead, we expect higher PPC production, WHRS capacity and recent softening of fuel prices along with likely...

Led by sustained acceleration in project execution especially in Metro projects, JKIL's revenue grew by a stellar 62% YoY (-17% QoQ) to Rs5.1bn. Mumbai Metro Line-3, Metro Line-2&7 and JNPT contributed Rs1.85bn, Rs1bn and Rs0.75bn, respectively to its total quarterly revenue, while Rs400mn revenue was booked from Delhi Metro project. Further, JKIL looks forward to book Rs8bn from Metro Line-3, Rs3.5bn from JNPT and Rs3bn from Metro Line-2&7 in FY19E....

Glenmark Pharmaceuticals (GNP) has delivered a better-than-expected performance on all metrics in 2QFY19. Aided by growth in all geographies (except LatAm), its revenue/EBITDA/PAT exceeded our estimate by 4%/7%/12%, respectively. Its revenue grew by 14.4% YoY to Rs25.8bn led by healthy growth in US (+11.5%) to Rs8.1bn, India (+9.5%), RoW (+21.1%) and Europe business (+30.4%), while LatAm sales declined by 5.9% YoY. Gross margin contracted by 83bps YoY to 65.9% due to adverse product-mix, while EBITDA margin remained YoY flat at 17%. Its EBITDA and PAT grew by 13.3% YoY and 16.4% YoY to Rs4.4bn and Rs2.4bn, respectively. We maintain...

ff India Biz (27% of Sales): Weak sales (-16.3% YoY) in domestic business is attributable to one-time inventory reduction in supply chain and high YoY base, excluding which , SUNP could have reported a low single-digit decline. SUNP launched 13 new products in 2QFY19. ff R&D; Spend: SUNP's R&D; spend stood at 6.4% vs. 6.8% in 1QFY19). The Management expects R&D; spend to increase in 2HFY19E owing to specialty clinical development programme. SUNP is focussing on calibrating R&D; investments of generic portfolio (low value). ff SUNP provided Rs12.1bn towards Modafinil anti-trust litigation (Rs9.5bn in 1QFY18). As this is...

Engineers India (ENGR) has posted Rs978mn net profit in 2QFY19 (vs. our estimate of Rs1.06bn) mainly due to lower margin and dismal performance of high-margin consultancy business. However, its revenue grew by a healthy 59% YoY to Rs6.8bn led by 3.6x jump revenue from turnkey projects to Rs3.5bn, while consultancy business reported flat sales of Rs3.3bn. Despite strong revenue growth, EBITDA declined by 34% YoY to Rs915mn, while operating margin declined to 13.4% from 32.4% in 2QFY18 due to higher revenue-mix (51% vs. 22% in 2QFY18) of low-margin turnkey projects and one-off in 2QFY18. The margin of consultancy business fell by 275bps YoY to 29%. Order backlog rose by 37% YoY to Rs121.6bn, while order inflow...

NCC Ltd. (NJCC) reported a stellar performance in 2QFY19 as well with its revenue and adjusted PAT growing by 138% YoY and 167% YoY, respectively mainly underpinned by better execution and higher-than-expected operating margin. Its reported revenue stood at Rs31bn (+32% QoQ). While EBITDA grew by 194% YoY to Rs3.65bn, EBITDA margin rose by 220bps YoY and 41bps QoQ to 11.8%. The Company secured orders worth Rs83.6bn during the 1HFY19 taking its total order book to Rs330bn (4.4x of FY18 revenue). While finance cost increased by 22% YoY to Rs1bn led by ~Rs3.6bn increase in gross debt during 1HFY19 and higher interest on mobilisation advances. APAT grew by 164% YoY to Rs1.57bn mainly led by strong operating...

Poor Performance Continues; Recovery Likely in Next Quarter Skipper continued to deliver a very poor performance in 2QFY19 as well, with its PAT declining by 89% YoY to Rs25mn. Its revenue grew by 1.6% YoY to Rs5.2bn led by 16% de-growth in Polymer division and lower execution in Engineering Products business. Looking ahead, we continue to believe that a sizeable order book, huge imminent opportunity and diversification into PVC business firmly place Skipper on a higher growth trajectory. Further, the stock is available at attractive valuation following a sharp correction during last 6 months. We maintain our BUY recommendation on the stock with a revised Target Price of Rs147 (from Rs214 earlier)....

Shree Cement (SRCM) has reported a healthy operating performance in 2QFY19 mainly on account of healthy realisation, stronger volume and improved performance of power division. Its EBITDA adjusted for Rs840mn MTM loss and Rs304mn freight rebate stood at Rs5.73bn exceeding our estimate of Rs4.83bn. Cement EBITDA/tonne came at Rs946 vs. Rs1,133 and Rs863 in 2QFY18 and 1QFY19, respectively. Cement operating cost/tonne stood at Rs3,268 vs. Rs3,037 and Rs3,244 in 2QFY18 and 1QFY19, respectively mainly due to higher fuel prices. Sales volume including clinker of 0.21mnT stood at 5.64mnT (+16% YoY and -19% QoQ). Average realisation grew unexpectedly by 3.9% QoQ to Rs4,268/tonne. SRCM has also provided Rs1.78bn total...

Injectable Portfolio & New Launches to Drive US Biz; Maintain BUY Aurobindo Pharma (ARBP) has delivered a better-than-expected performance on all metrics in 2QFY19. Aided by strong sequential growth in the US, ARV and RoW business (barring Europe), its revenue/EBITDA/PAT exceeded our estimate by 3%/8%/15%, respectively. Its revenue grew by 11.8% QoQ to Rs47.5bn led by healthy US business (+17.8% to US$318mn), ARV (+57%), RoW (+20%) and API business (+9%), while Europe sales declined by 3.6%. Despite recovery in high margin injectable biz and sales from NBO, gross margin contracted by 314bps YoY (+188bps QoQ) due to change in business-mix (higher growth in ARV and RoW business)....

Reported EBITDA grew by 378% YoY to Rs39.1bn, while EBIDTA margin improved by 1,312bps YoY to 17.6% led by 2.2% YoY decline in employee expenses to Rs89.5bn vs. Rs91.5bn in 2QFY18. Notably, employee cost peaked to Rs426.3bn in FY18, as CIL provided for increase in gratuity limit from Rs1mn to Rs2mn and wage hike for executives and non-executives. We expect CIL's employee cost to normalise at Rs360-370bn in FY19E. Other operating income increased to Rs20.1bn (vs.Rs10.2bn in 2QFY18) owing introduction of evacuation charges facility of Rs50/tonne on all coal dispatches (except rapid loading system) in Dec'17. Its consolidated reported PAT...

At a broader level, eClerx continues to face revenue growth headwinds owing to issues such as project roll offs. This is being witnessed in legacy projects (>5 year old projects), where roll offs in the near-term will continue to pressurise offshore revenue, which will be offset by robust onshore revenue growth led by managed services, analytics and RPA. Outlook remains healthy in these areas, with client demand strong and focus on cost cutting. However, from a margin perspective, new business in these areas comes at lower margins initially, and higher share of this business along with higher onshore revenue is likely to pressurise the margin profile in the short-term, till such time as offshore revenue sees a revival. INR depreciation is the biggest...

Kalpataru Power Transmission (KPTL) has delivered a strong performance in 2QFY19 led by better-than-expected execution in Railway, Oil & Gas Pipeline and T&D; business. We continue to believe that KPTL is well-placed to benefit from continued spending in T&D;, railway and pipeline segments. Considering the strong visibility on revenue and order flow front, sustained earnings momentum and likely improvement in return ratios in next 2 years, we maintain our...

ff US Biz (32% of Sales): The Management expects the US sales to report strong growth in 2HFY19E led by new launches (gLevothyroxine & gRanexa), pick-up in gTamiflu/ Cephalosporin sales led by upcoming flu season and ramp-up in Solosec sales. With lower sales in 1HFY19, LPC expects its US sales at lower end of earlier guidance of US$800-850mn in FY19E. On positive note, the Management indicated that pricing pressure has been moderated in the US due to exit of MNCs in unviable products. Notably, gLevothyroxine launch is postponed to 4QFY19 vs. earlier guidance of 3QFY19. ff Women's care brand i.e. Solosec contributed US$3mn to sales, LPC aims to achieve 15-20%...