SPA Research Broker Research reports

Ashok Leyland (AL) Standalone revenue declined 89% YoY at INR 6.5 bn. Realizations improved ~19% YoY at INR 1.7 mn led by higher spare sales. Volume declined ~90% YoY/ 85% QoQ to 3.8k units. Share of MHCV sales declined to 27% (v/s 67.5% in Q1FY20). Better gross margins at 35.9% (+580 bps YoY) were offset by higher other cost at INR 2.1 bn resulting in higher EBITDA loss at INR 3.3 bn (INR +5.4 bn in Q1FY20). Adjusted loss for the quarter came higher at INR 3.9 bn (+INR 2.4 bn in Q1FY20) led by higher interest cost at INR 768 mn. The domestic MHCV industry has been in a downturn since Nov'18, and FY20 has been the worst year in the past 20 years. M&HCV; sub-segment, in particular, continued to remain subdued during last couple of months. With manufacturing and economic activity still muted in the 'unlock' phase, freight movement remains well below previous levels (fleet utilisation at ~50-55%)...

performance on all fronts during 2QFY20. The reported profit jumped by 21% YoY to Rs2,550mn levels and could be considered as a one-off. The management claims demand recovery, but looks on account of a) lower effective tax rate of 17.8% in Q2FY20 vis--vis 31.0% in Q2FY19, b) better unsustainable as discretionary spends majorly depend on how Covid situation evolves, which...

operational performance, c) higher other income and d) exceptional gains of Rs760mn. 2HFY20 towards lower priced 2Ws, where TVS presence is minimal. Sales expectations from its most is expected to be better than 1HFY20 with reasonable growth in exports and presence of levers profitable segments (3W & exports) also remain blurry. This, along with frequent local level for margin improvement. However, we believe current valuations already discount most of the lockdowns is creating supply side issues. We believe, in FY21e, TVS would grow lower than the...

Escorts Ltd. (EL) reported net sales of INR 10.6 bn in 1Q FY21 (~25.4% decline over INR 14.2 bn YoY) and a PAT of INR 922 mn (up 5.3% YoY). Escorts Farm Equipment (EFE) segment volume declined 13.8% while Escorts Construction Equipment (ECE) segment volume a declined 78.1%. EBITDAM (excluding other income) improved by 126 bps YoY (-282 bps QoQ) on the back of improving product mix, benign commodity prices and various cost cutting measures despite negative operating leverage and no price increases taken during the quarter. RM cost as % of sales decreased 185 bps while Operating & Manufacturing Expenses decreased 268 bps while employee expenses as % of sales increased 327 bps. Nationwide lockdown due to pandemic of Covid19 dragged volumes in both ECE and EFE divisions led de-growth....

On the back of COVID impact, Revenue remained flat YoY at INR 8,574mn. But for COVID impact, revenue would have grown 19%. During Q1FY21, Dixon got approved by ICMR for manufacturing testing devices for 27 diseases including COVID & TB marking its entry into medical electronics segment. However, EBITDA jumped 50% to INR 561mn despite absorbing INR 100mn impact of COVID as well as INR 45mn impact of Forex loss. Gross margins rose by an impressive 340bps to 15.8%. PAT registered a steep increase of 68% to INR 275mn despite COVID impact of INR 70mn during the quarter....

DCB reported advance degrowth of 0.37% for Q4FY20 on a QOQ basis while deposits registered a QOQ growth of 2.14%, even though Q4 usually has historically been the strongest quarter for the bank. NIMS for the quarter stood at 3.64% against 3.71% in Q3FY20. GNPA's stood at 2.46% against 2.20% in Q3FY20 while NNPA stood at 1.16% against 1.03% in Q3FY20. The provision coverage ratio was at 70.81% against 76.99% in Q3FY20. Advances growth to pick up pace from Q3FY21 as COVID induced pain eases and the economy returns to normalcy. GNPA's increase - upgrades delayed On a QOQ basis GNPA'S registered an increase of INR 795 mn as upgrades were affected by the lockdown. Within GNPA's the highest...

Parag Milk Foods (PMF) reported net sales of INR 6,722mn in 4Q FY19 (29.8% jump over INR 5,178mnYoY) and a PAT of INR 313mn (20% jump over INR 262mnYoY).Revenue from Value Added Products (VAPs) rose 25% YoY to INR 4227mn.Gross margins fell236 bps YoYled by increase in contribution of Skimmed Milk Powder (SMP) by 500 bps to 19.3% as well as lag effect in passing milk price increase to consumers. In April'19 Company has taken price hike of 1%.EBITDAM (excluding...

DCB Bank reported NII of INR 3.0bn (14% y-o-y & 2% q-o-q) led by loan book growth of (16% y-o-y & 3% q-o-q) to INR 236bn. Margin for the quarter remained stable at 3.78% (-38bps y-o-y & -5bps q-o-q). Higher Other Income (17% y-o-y & 5% q-oq) and moderation in opex (4% y-o-y & 0% q-o-q) resulted in 31% y-o-y & 7% q-o-q growth in PPOP to INR 1.85bn. GNPA / NNPA declined marginally to 1.8% / 0.65% (-8bps / -6bps q-o-q) respectively. We continue to believe that RoA expansion for DCB Bank will depend upon opex moderation going ahead....

Dominant player across business lines at global scale Apar is 3rd largest manufacturer of Conductors and 4th largest manufacturer of transformer oil in the world. In conductors business, its market share stands at 23% in domestic market with installed capacities of 1.8lac MT. It is the largest manufacturer and exporter of conductors from India. In case of specialty oils, its market share stood at 45% with 5.4lac KL installed capacity (including 1lac KL capacity overseas at Sharjah). In FY'18,...

(19% of revenue), UPS (12%), C&W; ( 30%), Pumps (12%), Water Strong return ratios & Debt free BS to aid inorganic growth heaters (12%), and Fans (10%). Revenues are growing consistently V-Guard's return ratios are strong with ROE in 18-22% range driven at 15% annually very much in line with mgt. Guidance. In H1FY'19, by a combination of asset-light business model with it outsourcing due to exceptional event of heavy floods in Kerala, revenue growth ~ 60% of its production. At the same time, its gross margins are...

Dominant player across business lines at global scale Apar is 3rd largest manufacturer of Conductors and 4th largest manufacturer of transformer oil in the world. In conductors business, its market share stands at 23% in domestic market with installed capacities of 1.8lac MT. It is the largest manufacturer and exporter of conductors from India. In case of specialty oils, its market share stood at 45% with 5.4lac KL installed capacity (including 1lac KL capacity overseas at Sharjah). In FY'18,...

(19% of revenue), UPS (12%), C&W; ( 30%), Pumps (12%), Water Strong return ratios & Debt free BS to aid inorganic growth heaters (12%), and Fans (10%). Revenues are growing consistently V-Guard's return ratios are strong with ROE in 18-22% range driven at 15% annually very much in line with mgt. Guidance. In H1FY'19, by a combination of asset-light business model with it outsourcing due to exceptional event of heavy floods in Kerala, revenue growth ~ 60% of its production. At the same time, its gross margins are...

We recently met CFO of Escorts Ltd. (EL), which is the fourth-largest player in the tractor segment in India (after Mahindra & Mahindra Ltd, Tractors and Farm Equipment Ltd. and Interactional Tractors Limited) with a market share of 11%. The Farm Equipment (EFE) division which contributes 79% to the top line, offers a wide range of tractors - 10-75HP - primarily under the Farmtrac, Powertrac and Steeltrac brands. Construction and material handling equipment (15% of revenue) and railway equipment (6% of revenue) are other businesses that company operates....

We recently met CFO of Escorts Ltd. (EL), which is the fourth-largest player in the tractor segment in India (after Mahindra & Mahindra Ltd, Tractors and Farm Equipment Ltd. and Interactional Tractors Limited) with a market share of 11%. The Farm Equipment (EFE) division which contributes 79% to the top line, offers a wide range of tractors - 10-75HP - primarily under the Farmtrac, Powertrac and Steeltrac brands. Construction and material handling equipment (15% of revenue) and railway equipment (6% of revenue) are other businesses that company operates....

Canara Bank reported NII of INR 32.8bn (-15% q-o-q & 18% y-o-y) largely due to one-off lumpy interest recovery of INR 5.2bn from resolution of Bhushan steel in Q1 FY19. Net total Income stood at INR 48.3bn (-15% q-o-q & 2% y-o-y) largely due to lower other income of INR 15.55bn (-15% q-o-q & -20% y-o-y). Elevated provision of INR 28.4bn (10% q-o-q & 31% y-o-y) and a tax write back of INR 8.1bn resulted positive PAT of INR 3bn (6% q-o-q & 15% y-o-y). Loan book for the quarter stood...

Ramkrishna Forgings Ltd. (RKFL) reported net sales of INR 4615 mn in 2Q FY19 (36.4% jump over INR 3382 mn YoY) and a PAT of INR 328 mn (INR 235 mn YoY) on the back of pickup in both domestic and export volumes. Domestic/Export/Total realization for the quarter has improved by 15.3%/18.3%/15.8% while export contribution has decreased by 95 bps YoY to 21.3% (flat QoQ). EBITDAM has improved by 181 bps YoY despite lower contribution of high margin export business. RM cost as % of sales increased by 315 bps. Operating & Manufacturing Expenses as % of sales declined 274 bps YoY on the back of positive operating leverage. Results are largely in line with our estimates. We expect RKFL to register Revenue/PAT growth 19.9%/30.7% from FY18 to FY20E. At CMP of INR 558 the stock is trading at 5x FY20E EBITDA. We have reduced our FY20 EBITDA and EPS estimates by 5.6% and 6.1% respectively. We have valued RKFLs stock at 8x FY20E EBITDA and recommend BUY with a TP of INR 710 (INR 882 earlier) in 18 months....

Ashok Leyland Ltd. (ASHLEY) reported ~25.2% YoY jump in net sales in 2QFY19 to INR 76080 mn due to 22.2%/41.6% growth in M&HCV;/SCV volume. EBITDA (excl. other income) has grown by 32.2% to INR 8059 mn, while EBITDAM improved by 56.8 bps despite increase in RM cost on the back of change in accounting norms for warranty and tighter cost control. PAT for the quarter stood at INR 4596 mn (Up 37.5% YoY). We expect ASHLEY to register Revenue/EBITDA/PAT growth of 8.4%/12.2%/14.1% between FY18 and FY20. At CMP of INR 110, the stock is trading at 8.6x FY20E EV/EBITDA. We have valued standalone business at 12x FY20 EBITDA and assigned INR 4 for the stake in HLFL and recommend BUY with target price of INR 147. Revenue growth driven by spike in volumes M&HCV;/LCV/total volume of ASHLEY grew by 22.2%/41.6%/26.8%...

Indian Bank (IB) reported NII of INR 17.3bn (12% y-o-y & -4% q-o-q) led by loan book growth of (19% y-o-y & 5% q-o-q) to INR 1.7bn. Margins for the quarters stood at 2.97% (12bps y-o-y & -17bps q-o-q). Weak treasury gains led to decline in other income to INR 4.3bn (-40% y-o-y & -3% q-o-q) and PPOP income of INR 11.9bn (-13% y-o-y & -8% q-o-q). Elevated provision of INR 10bn (35% y-o-y & -2% q-o-q) resulted in lower PAT of INR 1.5bn (-67% y-o-y & -28% q-o-q). GNPA / NNPA stood at 7.2% / 4.2% for the quarter respectively. Asset Quality disappoints; PCR declines by 356bps q-o-q to 61%. Asset quality deteriorated on a sequential basis with GNPA / NNPA in absolute terms stood at INR 123.3bn / 70.6bn (4% / 18% q-o-q)...

NIIT Tech reported steady 2.6%/12.4% QoQ growth in revenue/PAT in Q3FY18. New management based across geographies is expected to result in client additions across the segments. Management has indicated strong deal pipeline in coming quarters. We expect steady double digit revenue growth in FY19 on account of growth across BU's, strong executable pipeline and large order wins. All the positives have already factored in price, hence we recommend to sell the stock with target price of INR 740. Conference call highlights Management indicated Q4FY18 and FY19 to report strong double digit growth on the back of strong order intake and deal pipeline. NIIT Tech now has a decentralized presence with one EVP Europe,...