Not Immune to Macroeconomic Risks; Valuations appear Stretched Kotak Mahindra Bank's (KMB) 2QFY20 operating metrics were largely in line with our estimates, with NII, PPoP, and PBT growing by 25%, 20%, and 21% YoY respectively. However, reported PAT was 20% ahead of estimates owing to lower than expected tax rate at 18%. Nonetheless, the bank's performance wasn't immune to macroeconomic risks with moderation loan growth at 15% YoY and rise in GNPAs (13 bps QoQ). Growth in fee-based income moderated to 14% YoY mainly led by weaker growth in advances. Margin improved to 4.6% driven by decline in cost of funds, improved pricing power, and sequentially higher CD ratio. CASA deposits grew...
Better Operating Performance amid Muted Volume; Maintain BUY Sagar Cements (SGC) reported better-than-estimated operating performance despite steeper -than-expected decline in average realisation. Reported consolidated EBITDA stood at Rs424mn (+101% YoY and -46% QoQ), which was higher than expectations of Rs403mn, while EBITDA/ tonne stood at Rs596 vs. Rs294 in last year and Rs959 in 1QFY20. We note that better-thanexpected improvement in opex/tonne at Rs3,138 (-4.9% YoY and -3.1% QoQ) led to performance beat, despite average realisation declining by a steep 11% QoQ. A significant reduction in input cost/tonne (-2.7% YoY and -5.9% QoQ) mainly owing to reduction in power & fuel cost led to improved opex. Sales volume broadly remained muted at 0.71mnT (-0.9% YoY and -13.4% QoQ)....
We expect revenue to grow by 13.4%/13.5% YoY in FY20E/FY21E. We estimate LTL EBITDA margin to compress by 67bps/87bps YoY to 16.5%/15.7% for FY20/21E mainly due to higher employee cost inflation and lower operating leverage. LTL EBITDA growth rate is likely to remain in high single digit mainly led by moderation in growth rates going ahead. Incorporating the improved profitability and turnaround time for stores along with the improvement in ROE due to tax cuts, we revise our PE multiple valuation to 40x (vs. 37x earlier). Our revised target price of Rs1,340...
Revenue, Margin Performance Heartening; Improved Disclosure Key Positive Tata Elxsi (TEL) posted improved performance in 2QFY20, with revenue up by a healthy 6.7% QoQ to Rs3.86bn. The key SDS segment saw a solid 6.1% QoQ revenue growth, which comes after two successive sequential declines. On the other hand, SIS revenue rose 28.5% QoQ on a low base. Within SDS, EPD revenue rose 5.3% QoQ, while IDV rose 11.3% QoQ. TEL has started disclosing more detailed operating metrics in terms of verticals, geographies, delivery-wise revenue, employee and client data, which we believe enabled a more granular understanding of its business. Within EPD, growth was led by the key Transportation vertical, which rose 9.2%...
Central Depository Services (CDSL) reported disappointing revenue in 2QFY20, which saw a steep 9.8% QoQ decline, while revenue dipped 1.9% YoY. 2QFY20 revenue came in at Rs527mn, with Depository Services revenue flattish QoQ at Rs406mn (-1% YoY), while the Data Processing segment clocked a steep 23.8% QoQ revenue decline (3.3% YoY growth). CDSL's net beneficial owner (BO) accounts touched 18.7mn (17.9mn in 1QFY20), implying 74% incremental market share. Slow revenue growth was mainly on account of decline in Transaction Charges (-10.7% YoY), IPO/Corporate Action Charges (-21.1% YoY) and KYC/Online Data Charges (-20.3% YoY), even as Annual Issuer Charges revenue grew by a healthy 20.1% YoY aided by income earned...
UltraTech Cement (UTCEM) has reported a lower-than-expected performance in 2QFY20 mainly led by subdued performance of Century assets and lower-than-expected sales volume. Reported EBITDA (restated with corresponding period) grew by 29% YoY (-35% QoQ) to Rs18.1bn vs. our estimate of Rs19bn, as Century assets generated a mere Rs60 unitary EBITDA. However, at the company level, EBITDA/tonne stood at Rs1,020 compared to Rs776 in 2QFY19 and Rs1,364 in 1QFY20. Its sales volume (including Century assets of 1.74mnT) declined by 2% YoY to 17.77mnT vs. our estimate of 19mnT. Opex/tonne deteriorated by 1.3% YoY and 4% QoQ to Rs4,188 mainly led by higher-than-expected increase in other expenditure/tonne (+11% YoY and +4% QoQ) on...
A Weak Quarter; Performance Likely to Improve in 2HFY20 DCB Bank has delivered a weak performance in 2QFY20 led by elevated annualised slippages of 2.7% along with continued pressure on NIM (-25bps YoY) and weak loan growth (+12% YoY). PAT grew by 13% YoY (marginally ahead of our estimate), largely aided by higher treasury gains. Gross NPAs increased by 13bps QoQ and 25bps YoY, with rise in segmental NPAs across CV, MSME, mortgage and gold portfolio. CASA grew by a muted 7% YoY, though growth in retail deposits stood at healthy 26% YoY. The Management's endeavor to further granularise its deposit profile should aid the Bank's NIM over the longer-term. We believe unless the advances...
Another Stable Quarter Amidst a Sluggish Environment HDFC Bank reported a healthy set of numbers in 2QFY20 with NII and net profit growing by 15% and 27% YoY respectively. Gross NPAs was stable sequentially at 1.38%, with slippages contained at 1.8% (annualized) for the quarter. CASA grew by a healthy 15% YoY, with 13% YoY growth in SA deposits. High growth in employee expenses at 23% YoY was mainly owing to rise in emp base and higher gratuity related provisions. Fee-based income grew by a healthy 23% YoY, with 26% growth excluding MF distribution fee. Loan growth during the quarter was driven by home, agri and corporate loans. The lending subsidiary, HDB Financial Services, continued...
Completely defying the realisation challenges witnessed in 2QFY20, Shree Cement (SRCM) has reported a super performance in 2QFY20. While EBITDA zoomed by a stellar 62% YoY (-6% QoQ) to Rs8.4bn (vs. our estimate of Rs6.7bn), cement EBITDA/tonne stood at strong Rs1,451 (Rs314 higher than our estimate) as against Rs946 in 2QFY19 and Rs1,443 in 1QFY20. Higher than expected EBITDA/tonne is attributable to: (a) Rs100 lower opex/tonne than estimated; and (b) Rs213/tonne higher realisation than estimated. Sales volume remained soft as per expectations at 5.72mnT (+1.5% QoQ and -5.5% QoQ), while average cement realisation improved by 9% YoY (-1.1% QoQ) to Rs4,356/tonne despite having significant presence in Eastern region. Cement...
Strong Performance Continues Despite Tepid Volume Growth Notwithstanding dismal sale volume, ACC has reported a strong performance in 3QCY19 aided by higher-than-estimated average realisation and reduction in unitary opex. Its core operating profit grew by a strong 32% YoY to Rs4.9bn. EBITDA/tonne stood at ~Rs747 (as against Rs547 in 3QCY18 and Rs943 in 2QCY19), which is ~Rs200/tonne higher than our estimate. The variance is primarily led by: (a) higher realisation (Rs80/tonne above our estimate); and (b) lower opex (~Rs110/ tonne below our estimate). Notably, higher sales in North and Central regions (~40% of total) and persistent volume traction in premium and value added products were the prime reasons for better...
