Reliance Securities Broker Research reports

ff Upside Risks: (1) Higher consumption leading better-than-expected demand; (2) significant better pricing growth despite benign raw material prices; (3) higher-than-expected synergy benefit of from GSK integration....

Soft Performance; Healthy Recovery on the Cards KNR Constructions (KNRC) has reported a soft performance in 1QFY20, mainly led by delay in AD for its key HAM projects and general slowdown in execution due to elections. Revenue declined by 17% YoY and 35% QoQ to Rs4.6bn, while EBITDA stood at Rs900mn (-18% YoY and -38% QoQ) vs. our estimate of Rs1bn. EBITDA margin continued to remain healthy at 19.4% mainly supported by higher revenue contribution from near-completion projects having highmargin components and the impact of IndAS 116. However, soft revenue booking along with higher finance cost and higher tax resulted in steep 36% YoY decline in net profit to Rs477mn. Current order book at Rs46.3bn (2.3x of TTM revenue) compared to Rs40bn in FY19 provides...

NBCC reported a poor performance in 1QFY20, with its reported revenue declining by a steep 23% YoY to Rs12.5bn, while EBITDA pummelled by 97% YoY to mere Rs19mn. PMC revenue declined by ~13% YoY, while RE and EPC revenue declined significantly by 96% and 69%, respectively. Net profit declined by 63% YoY to Rs253mn and net margin stood at 2% as against 4.1% in 1QFY19 and 6.4% in 4QFY19. While the Management did not give any convincing reason for sharp decline in revenue, it exuded confidence that revenue should recover in the ensuing quarters. We understand that slowdown in governments' expenditure, pending clearances for the key projects and general liquidity crunch impacted the execution of the company. Notably, current...

Subdued Performance on Execution Slowdown; Maintain BUY Ahluwalia Contracts (AHLU) has delivered a subdued performance in 1QFY20, mainly marred by persistent delay in two key projects (Rs10bn), delay in bills certification and execution slowdown due to General Elections. Revenue declined by 22% YoY to Rs3.2bn, while EBITDA and PAT declined by 26% YoY and 37% YoY, respectively. EBITDA margin stood at 12.4% (-65bps YoY and +73bps QoQ). Further, AHLU added orders worth Rs4.3bn during the quarter and is in L1 position for projects worth ~Rs7bn. Current order backlog stands at Rs60bn (3.6x of TTM revenue), which continues to remain impressive. Despite soft revenue booking in 1Q, the Management maintained...

MetLife Go-Live Drags Revenue; Long Term Op-Lev Potential Majesco Limited (MJCO) reported a poor 1QFY20 performance on revenue, which grew 1.2% QoQ in USD terms to US$37.2mn. In INR terms, MJCO's revenue declined by 1% QoQ to Rs2.59bn. YoY USD revenue growth slipped below 10% (9.8%), the lowest since 3QFY18. Revenue was 1.5% below our estimate, with Professional Services continuing to see revenue decline (-4.7% QoQ, 6th successive quarter of decline). YoY Professional Services revenue dipped ~20% (USD), 10th successive quarter of decline. On the other hand, owing to the IBM MetLife deal going live, Cloud implementation revenue (-18.9% QoQ) came off steeply, while Cloud subscription revenue...

No Meaningful Upside in Sight; Maintain HOLD Glenmark Pharmaceuticals (GNP) has delivered disappointing performance on all metrics in 1QFY20 due to weak growth across all geographies barring India. Its revenue/EBITDA missed our estimate by 6%/10%, respectively while EBITDA margin came in line with our estimate. Revenue declined by 9% QoQ to Rs23.2bn. US business fell by 4% QoQ to US$105mn, while India Business grew by 13% (both on YoY and QoQ basis) to Rs7.5bn. It recorded 12% growth vs. IPM growth of ~10% (IQVIA MAT Jun'19), while consumer business grew by 27% YoY to Rs556mn. GNP's Baddi formulation facility classified as (inspection 15-20th Apr'19) Official Action Indicated...

Blue Star (BLSTR) has reported a muted performance in 1QFY20 with its adjusted PAT growing by 1% YoY to Rs768mn due to muted revenue growth and lower margin across segments. Blended EBITDA margin declined by 184bps YoY to 7.3%. Its revenue grew by 4% YoY to Rs15.8bn led by 9% YoY growth in unitary products segment, while revenue of project business remained flat. Order book rose by 34% YoY to Rs28.4bn, while order inflow grew by 55% YoY to Rs9.7bn. We continue to remain positive on BLSTR on the back of improving margin profile, healthy balance sheet and healthy market share. We maintain our BUY recommendation on the stock with...

Consultancy Biz Drives Healthy Performance; Maintain BUY Engineers India (ENGR) has reported a healthy performance in 1QFY20 with its PAT surging by 43% YoY to Rs1.24 bn vs. our estimate of Rs1.05 bn. Its revenue grew by 28% YoY to Rs7.3bn led by 38% YoY jump in revenue of consultancy segment to Rs4.4bn, while turnkey project's revenue grew by 16% YoY to Rs2.9bn. EBITDA increased by 62% YoY to Rs1.4bn, while EBITDA margin expanded by 390bps YoY to 19% led by 1,135bps YoY improvement in margin of consultancy business. Margin of turnkey projects fell by 310bps YoY to 2.7%. The Company has provided one-time Rs260mn in other expenses for impairment loss for oil block. As major chunk of its...

SUNP has reported a strong performance in 1QFY19 on the back of healthy growth across geographies. On positive note, it completed the transition in distribution in India business from AML to WOS, following which it reported 12% YoY underlining growth and expects better-thancovered-market growth of 9-10%. Though SUNP had addressed some corporate governance issues raised by the investors, we see the SEBI-related issues continue to remain event-specific risk for the stock in the near-term. Owing to increasing visibility in India and other businesses,...

We remain positive on the medium to long-term growth prospects of Alkem on the back of stable revenue growth from high-margin domestic business (outpace IPM growth). However, EBITDA margin is expected to reel under pressure in FY20E/FY21E owing to robust growth in low-margin US business (last 6 quarters average growth at 36%+ YoY) and large number of field force addition (2,000 added in FY17-19 and 1,000 in 1QFY20). At CMP, the stock trades at a PE of 23.7x and 20.3x of FY20E and FY21E earnings, respectively. As we expect the stock to command premium over its peers owing to healthy return ratios and higher exposure to India business, we maintain...