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Strong focus on PCR, 2W and OHT bodes well for margins We met CEAT's MD Mr Anant Vardhan Goenka and CFO Mr Kumar Subbiah at the RPG Annual Investor Conference 2018. Key takeaways: CEAT plans to invest INR35-40b over the next 3-5 years to expand its capacity. This would lead to its capacity increasing by ~50% post full ramp-up in FY21. Majority of this capex is directed toward its focus areas of passenger car radial tyres...
As Digital scales up, profitability should follow suit Approach to Digital reaping dividends: Digital has been growing at more than 30% and now contributes 41% of ZENT's total revenue. More than 80% of the business has been home-grown; the company will continue developing new solutions to further strengthen this segment. Marked by Return on Digital' proposition: ZENT's Return on Digital (ROD) framework is now part of every deal, with everything being native digital, mobile and cloud. The suite has various platforms that are made for distinct...
We believe FY19 may see a gradual comeback for large cap pharma companies, driven by (1) Actual and likely regulatory resolutions, (2) Moderating price erosion and (3) Several product launches across generic and specialty categories in 2HFY19. We believe earnings have bottomed out, while the base is favourable. Upgrade Sun Pharma to BUY. Beleaguered by regulatory clampdowns, channel consolidation in the US and increased competition, earnings of US-focused Indian pharma companies dropped 30% over FY18. Despite the all-too-visible business challenges, they persisted with higher R&D; activity (related to complex generics and specialty business), which aggravated the pain. As a result, the NIFTY Pharma index has corrected ~30% over three years (after 30% CAGR over FY11-15).
We recently met the CEO of Federal Bank (FBL), Mr Shyam Srinivasan and gleaned incremental insight into the performance and outlook for FBL. (Also, see Detailed Management Meeting Takeways on page 2). Given its outlook and FY19E/20E RoE profile of 11%/12.8%, FBL is a prime re-rating candidate, currently trading at 1.1x FY20E P/BV. It may, also, be noted that 4QFY18 results were mispriced by the market (See results note). Also, see our Initiating Coverage Report. We retain Buy rating on FBL with a target price to Rs116, valuing the stock at 1.5x FY20E P/BV. The CEO explained that the pensioning cost of Federal Bank is on the higher side since most of their employees are still on Defined Benefit Plan. The impact of this will not fade off till FY22/FY23. From 1st...
Proxy to the MHCV cycle, Jamna to participate in the up move MHCV cycle has turned positive since Q2 FY18 and has grown at 19% for Q4 FY18, which has driven sales for Jamna. Also the higher tonnage industry has grown at 26%, higher than the overall MHCV industry. Jamna having a 72% OEM market share and being a significant vendor...
Spike in execution from 2HFY19E post dip in 1HFY19E KNR's revenue grew 29.5% YoY in Q4FY18 to `6.2bn (19.2% above estimates) led by better execution. The EBITDA margin expanded 435bps YoY to 22.3% (135bps above estimates) due to lower subcontracting costs and few projects nearing completion having better margins. Depreciation has increased sharply by 152% YoY (up 32.2% QoQ) to `491mn due to higher asset utilization for couple of irrigation projects with shorter execution period. Adj. PAT grew sharply by 52.1% YoY to `797mn (81.7% above...
Supreme Industries Ltd (SIL) reported healthy set of numbers for Q4FY18. While revenue growth of 14.7% YoY was in line with our projections, the company surprised positively on the profit front with a strong growth of 19.5% & 21.8% in operating profit & PAT respectively. EBITDA margin expansion of 78bps YoY (at 19.5%), led by improved product mix and operating leverage, was encouraging.
The Byke Hospitality reported decent set of numbers for Q4FY18, with net revenue growth of 11.9% yoy. Further its EBITDA and PAT margins improved by 289 bps yoy and 324 bps yoy, respectively.
S Chand and Company (SCL) reported strong set of numbers in Q4FY18 which were ahead of our estimates. SCL standalone net revenue and PAT for the quarter grew at 22% and 29.4% respectively. On a consolidated basis for FY18, its Revenue and PAT grew at strong pace of 21% and 75% respectively.
Suven Life Sciences (SVLS) is a compelling play on the recovery being witnessed in global R&D; spending, as reflected in strong fund raising by biotech start-ups as well as a fastgrowing research pipeline across multiple stages of clinical trials. Also, the global Clinical Development & Manufacturing Organizations (CDMO) industry has undergone significant consolidation, both at the Clinical Research Organizations (CRO) level as well as at the API manufacturing level. As a result, fewer and only niche players are left in both clinical services and API manufacturing. SVLS enjoys a strong margin profile with EBITDA margin of 30%+. Earnings CAGR over FY18-20E is estimated at 19% and ROIC of 28%. We initiate coverage on SVLS with a...
6 March 2018 The Halol facility received 23 483 observations post US FDA inspection in September 2014. Later, in December 2015, US FDA had issued a warning letter for the facility. In November/December 2016, US FDA re- inspected the facility and issued nine 483 observations and maintained OAI status. In February 2018, US FDA re-inspected the facility, and this time, issued three 483 observations, with no data integrity issue and no repeat observation, following which it received VAI status today (Link). SUNPs US business has been under pressure since the warning letter, as it has not received any product approval from this facility in three and a half years. The facility contributes 8-10% of US sales for SUNP, currently down from >15% at the time of warning letter. Resolution of the Halol issue is critical for the company, as it would provide visibility on key approvals including Xelpros, Elepsia, Vagifem, etc.
Automobiles JLRs wholesale volumes grew 3.5% YoY (16.4% MoM) to 48.8k units (including China JVs 7k units) in May 2018. Jaguar volumes grew 21.1% YoY to 15.3k units (in-line) while Land Rover volumes declined 2.9% YoY to 33.5k units (in-line). JLRs retail volumes increased 6.1% YoY (6.9% MoM) to 48.3k units, as Jaguar retails grew 6.6% YoY (9.2% MoM) to 14.
KNR constructions (KNR), one of best managed road constructer with light balance sheet, low working capital and one of the highest RoCE among peers, reported its Q4FY18 numbers.
Net net, high valuations are justified, considering consistent market share gain, margin expansion and a hungry management not willing to lower its guard. Our TP rises to Rs 1,701 on 45x Jun-20E EPS (earlier Mar-20). Maintain BUY. We attended HULs annual investor meet. Our interaction with the companys senior management has further increased our confidence on its earnings trajectory over the next two to three years.
We re-initiate coverage on Byke Hospitality (Byke) with a BUY recommendation and a Price Objective of ?351 (target Adj P/E multiple of 20x) implying an upside potential of ~109%. At the CMP of ?168, the stock is trading at a PE of 9.6x FY21E EPS and this compares favorably with peers of a similar size.
