While we are constructive on the long-term growth prospects of the LI sector, we believe major tectonic shifts will create near-term challenges, albeit preparing the industry for a cleaner insurance penetration. Contrary to expectations of relief in the Union Budget, life insurers are expected to be adversely impacted by the first-order and second-order changes proposed in the Finance Act'23. Conversation with industry experts suggest that the top four private life insurers are likely to witness 20-27% adverse impact on FY24E APE predominantly on account of the impending transition to the new tax regime. We flag high ceding charges in guaranteed NPAR savings as the next potential target as policymakers look to protect policyholder interest and improve life insurance (LI) penetration. While the demand for retail term protection remains subdued and the Apr-23 growth print was soft, we await evidence of medium-term growth momentum.

In Q4FY23, Emmbi witnessed a 30.9% QoQ growth in revenue, amounting to INR 1002mn. Although there was an 8.2% YoY decline, this can be attributed to the challenging global macroeconomic conditions, particularly in the European market. To counteract these difficulties, Emmbi has strategically shifted its focus towards other geographic regions, led to sequential growth.

V-Guard Industries: V-Guard continued to deliver a weak operating print with revenue (organic) up by 3% (HSIE 7%) and EBITDA contracting by 13% YoY (HSIE -9%), adjusting for Sunflame acquisition-related cost (INR 100mn). Electronics/Electrical revenue grew by 12/2%. ECD fell 3% YoY (impact of fan rating change) in comparison, Crompton/Havells/Orient reported +8/-14/-20%. South revenue fell by 3% while non-south grew 10% YoY. We believe V-Guard's aspiration of clocking 15% organic growth in FY24 looks stretched, given (1) weak consumer demand (2) disrupted summer season sales and (3) single-digit growth in the south market (55% of sales) as V-Guard is fully indexed there. The company is aggressively driving Sunflame sales in MT/E-com channels (under-indexed vs industry). Stability in RM prices and liquidation of high-cost inventory shall aid GM expansion. Still achieving a 10% EBITDA margin looks difficult due to high competition in non-south, slow south growth and continuous reinvestment. We cut EPS by 4/2% for FY24/FY25. We value the stock at 30x P/E on Mar-25E EPS to derive a TP of INR 235. Maintain REDUCE. Prestige Estates: Prestige Estates (PEPL) registered the highest-ever annual presales of INR 129bn (+24% YoY) on the back of 16msf of launches and robust presales in MMR at INR 27bn. On the back of this, non-Bengaluru sales increased to 41%, from 20% in FY22. For FY24, it expects to achieve 25% growth in annual presales over FY23. It expects to achieve this on the back of a strong launch pipeline of 76msf with higher contribution expected from Mumbai MMR and Hyderabad along...

Lemon Tree Hotels (LTH) clocked its best-ever quarter in Q4FY23, and with the company having achieved FY23 revenue and EBITDA of Rs8.8bn and Rs4.5bn respectively, the company has exceeded its FY23 guidance of revenue growing 100% YoY to Rs8.0bn at an EBITDA margin of 50%.

Strong RevPAR, healthy room additions drive growth

Greenply Industries (MTLM) reported consolidated revenue growth of 4.6% YoY (4-year CAGR 4.6%) in Q4FY23, with India plywood business (including Sandila subsidiary) growing at 3.1% YoY while plywood volumes were flat YoY (4-year CAGR of 2.2%).

Heidelberg Cement: We maintain our REDUCE rating on Heidelberg Cement (HEIM), with an unchanged target price of INR 160/share (7x Mar-25E EBITDA). In the absence of any major planned expansion for the next few years, we expect HEIM to continue to lose market share. In Q4FY23, volume fell 4% YoY (the sixth consecutive quarter of YoY decline). While unit EBITDA recovers ~INR 245/MT QoQ (from its nine-year low) to INR 583/MT, it remains weak and is down INR 380/MT YoY. Deccan Cements: We maintain our ADD rating on Deccan Cements (DCL), with a lower target price of INR 450/sh (6x its Mar-25E EBITDA). DCL reported an all-around weak performance in Q4FY23 owing to subdued volume, realisation and elevated opex. Its revenue grew by 5% YoY in Q4FY23. However, higher fuel prices led to a decline in EBITDA by 15% YoY. Further, lower EBITDA along with higher capital charges and tax rates led to a steep decline in APAT by 48% YoY. DCL is working on a 2mn MT integrated capacity increase by FY25E-end. Capex more than doubled YoY in FY23 to INR 2.28bn (picked up in H2FY23). We expect volume growth to pick up from FY26 onwards (remain muted during FY24/25). JK Cement: We maintain our REDUCE rating on JK Cement (JKCE), with a revised TP of INR 2,755 (11x Mar-25E consolidated EBITDA). In Q4FY23, JKCE reported 16% YoY consolidated volume growth led by the fast ramp-up of Panna IU in the central region. Consolidated unitary EBITDA recovered ~INR 150/MT QoQ on fuel cost reduction and...

Heidelberg Cement: We maintain our REDUCE rating on Heidelberg Cement (HEIM), with an unchanged target price of INR 160/share (7x Mar-25E EBITDA). In the absence of any major planned expansion for the next few years, we expect HEIM to continue to lose market share. In Q4FY23, volume fell 4% YoY (the sixth consecutive quarter of YoY decline). While unit EBITDA recovers ~INR 245/MT QoQ (from its nine-year low) to INR 583/MT, it remains weak and is down INR 380/MT YoY. Deccan Cements: We maintain our ADD rating on Deccan Cements (DCL), with a lower target price of INR 450/sh (6x its Mar-25E EBITDA). DCL reported an all-around weak performance in Q4FY23 owing to subdued volume, realisation and elevated opex. Its revenue grew by 5% YoY in Q4FY23. However, higher fuel prices led to a decline in EBITDA by 15% YoY. Further, lower EBITDA along with higher capital charges and tax rates led to a steep decline in APAT by 48% YoY. DCL is working on a 2mn MT integrated capacity increase by FY25E-end. Capex more than doubled YoY in FY23 to INR 2.28bn (picked up in H2FY23). We expect volume growth to pick up from FY26 onwards (remain muted during FY24/25). JK Cement: We maintain our REDUCE rating on JK Cement (JKCE), with a revised TP of INR 2,755 (11x Mar-25E consolidated EBITDA). In Q4FY23, JKCE reported 16% YoY consolidated volume growth led by the fast ramp-up of Panna IU in the central region. Consolidated unitary EBITDA recovered ~INR 150/MT QoQ on fuel cost reduction and...