Our TP is Rs. 329/sh, based on 17x Dec-20 EPS. We met Petronet LNG (PLNG) recently. Capital allocation and competition from new LNG terminals are the legitimate concerns. However, we believe that 100% take or pay contracts (running till 2028), contractual 5% escalation in regas tariff and sensible capital allocation is likely to protect shareholder value. Valuations are reasonable at 12.7x FY20E and 10.7x FY21E EPS, in view of PLNGs de-risked business profile and earnings visibility.
A Low-cost Call Option On Longevity And Higher Margins Contrary to our lukewarm stance earlier, we are turning structurally more positive on HCL Technologies (HCLT) post announcement of its purchase of seven select IBM IPs for US$1.8 bn on 7 December 2018. We believe this stance may be non-consensus. We also believe the cumulative investment of ~US$3.1bn in acquiring the IPs over the past two-and-a- half years to be the price of a low-cost call option on longevity and higher margins. At ~6x EBITDA (for the cumulative IP), we believe these acquisitions do not have much downside. But it opens up the potential for a large upside in terms of the enterprise software opportunity which has hitherto not been addressed...
Muthoot Finance's Q2FY19 has seen revival in momentum of its core business with AUM growth of 17% YoY as against 11% during last quarter. NII at Rs4.8bn (growth of 9% YoY) and PAT at Rs11bn (de-growth of 5% YoY) has narrowly missed our estimate of Rs4.9bn and Rs11.3bn respectively. Stage III loan assets have eased by 94bps sequentially to 1.9%. All the subsidiaries are witnessing healthy traction, accounting for 10% of the overall loan book. On the back of higher loan growth, we raise our TP to...
Muthoot Finance (MFL) reported its 2QFY19 results with the key takeaways being: (1) Margin contracted 75 bps QoQ but MFL has taken a 100 bps gold lending rate hike post 2QFY19 (2) Gold loan AUM grew 5% QoQ indicating return to growth of gold business has sustained (3) Traction for non-gold loans continues to be strong with share of non-gold AUM standing at 10% of total AUM. (See comprehensive conference call takeaways below; see initiating coverage report here). Per se, on the results front, MFL posted NII de-growth of 4.7% YoY at Rs10,962mn, PPOP de-growth of 13% YoY at Rs7,473mn and PAT growth of 8.6% YoY at Rs4,838mn. We have revised our estimates for FY18/FY19 and retained Buy...
We expect this to not only drive further growth and profitability, but also reduce dependence on single blockbusters (like Niraparib), leading to lower earnings risk. We re-iterate our positive stance on the company and maintain BUY with a TP of Rs 355 (15x Sep'20E EPS). One of DCALs US based clients is preparing to commercialize an antibiotic product in Feb-19. The product was approved by the US FDA in Oct-18 for the indication of community-acquired bacterial pneumonia (CABP) and acute bacterial skin infection (ABSSSI). This will be the third commercial launch from DCALs pipeline over FY18-19. We believe DCAL could generate annual revenue of US$ 4-5mn in the initial years.
disbursements; yet management expects 15% AUM growth for FY19. Margins shrank ~300bp YoY to 14.1%, driven by a similar decline in yields. However, the decline was due to a high base (one-off income in 2QFY18). MUTH has recently increased yields to offset the rise in borrowing cost. Opex increased 18% YoY, largely driven by a 35% YoY increase in nonemployee expenses, largely due to advertising expenses. Asset quality improved on a sequential basis stage 3 loans declined ~100bp QoQ to 1.9%. This was against a sequential increase of 230bp in 2QFY18. As a result, credit costs declined sharply to INR25m from INR1.2b in...
HCLT has moved beyond partnering with IBM to acquiring some of the latter's product IPs, which it believes are a reflection of its focus on the strategic segments and efforts to expand services to a gamut of clients across industries and markets. In this note, we highlight the key specifics of HCLT's announced deal with IBM.
We project revenue/PAT to grow at 20%/19% CAGR over FY18-20E owing to continued traction in commercialisation of molecules, scale-up of exports, healthy R&D; pipeline, additional capacity with the commissioning of new plants and robust order book position Hence, we continue to maintain our positive stance on the stock and recommend...
According to management, the domestic market for the 0-30MW Turbine Generators (TG) segment has bottomed out in FY18 and is likely to grow at 10-12% for the next few years. The bulk of the incremental domestic demand in the 0-30MW TG segment was derived from process cogeneration and is attributable to Sugar, Food, Agro and Allied Industries, Chemicals, and Textiles. Going forward, the company expects steady demand for TG from the upcoming ethanol manufacturing facilities. While order intake in the international segment declined 7% yoy in 1HFY19, the company is expecting to close FY19 with marginal growth in the international inflows....
HUL growth prospects and will be earnings accretive: The board of Hindustan Unilever Limited (HUL) has approved the merger of 100% Glaxo SmithKline Consumer (GSK Consumer) with itself for a transaction cost of Rs. 31,700 crore (price to sales of 6.5x) and subject to regulatory and shareholder approvals. The transaction is an all-equity merger with 4.39...
The deal will add 12/14% revenue/APAT and is EPS accretive (~6%) in FY21. Despite richer multiples vs. Zydus-Heinz deal (Complan), we believe this deal is worth the buck considering market leadership position of Horlicks. Our earnings revises by 5%, we don't change multiples and value HUL at 45x P/E on Dec-20 EPS (earlier Sep-20) with TP of Rs 1,855 (earlier Rs 1691). HUL announced merger with GSK Consumer India (GSK CH) with an all equity deal, valuing GSK CH at Rs 317bn. Every share of GSK CH will be exchanged with 4.39 shares of HUL. GSK CH is the category leader (value/volume share of 54/63%) in the Health Food Drinks (HFD) market in India (at Rs 77bn; largest globally), with brands like Horlicks, Boost, Viva and Maltova.
In an encouraging sign, wedding season demand is scaling up well for TTAN. This should uplift management confidence as it had guided for healthy growth (25-30%) for 3QFY19 but refrained from commenting on the fourth quarter performance. In our view, if consumers continue flocking to its stores in the wedding season, Jewelry sales growth of 25% for the full year is achievable (note that TTAN had guided for Jewelry sales growth of 25% at the start of the year but lowered it to ~20% later).
JLS reported revenue of INR44b, EBITDA margin of 20.4% and PAT of INR4.1bin 1HFY19. Management reiterated that it is well placed to improve on this performance in 2HFY19.
In March 2018, GlaxoSmithKline Plc had announced a strategic review of GSK Consumer Healthcare's (GSKCH) consumer nutrition business, including brands like Horlicks & Boost as the company was exploring a partial or full sale of its stake in GSKCH by end of 2018. This was triggered by GSK looking to help fund its $13 billion buyout of the Novartis stake in...
In March 2018, GlaxoSmithKline Plc had announced a strategic review of GSK Consumer Healthcare's (GSKCH) consumer nutrition business, including brands like Horlicks & Boost as the company was exploring a partial or full sale of its stake in GSKCH by end of 2018. This was triggered by GSK looking to help fund its $13 billion buyout of the Novartis stake in...
Hindustan Unilever's big bet on health drinks with GSK acquisition appears positive and we estimate EPS accretion of ~6% from the deal. Management's positive commentary on category growth and synergy benefit targets can drive more upsides we believe. HUL believes category offers strong long term growth given low penetration and huge opportunity for market development and premiumisation. It believes higher distribution...
We remain positive on HUVR's acquisition of Glaxo Consumer Healthcare given that it will be 1) EPS accretive by 5% in FY20 and ~7.75% in FY21 2) market leading brands like Horlicks and boost with more than 63.4% volume share in Rs77bn MFD industry 3) strong R&D; and pipeline of nutritional products and 3) scalability to foods and refreshment business as combined sales exceed Rs100bn. HUVR expects significant scalability and synergy benefits from 1) 3x distribution and direct reach than GSK 2) distribution gains in pharma channel which is HUVR's weak point 3) cost reduction in...
We believe HUVR has obtained a good deal, which is EPS accretive from the beginning. The company also benefits because (a) the merger is at a reasonable valuation, (b) GSKCH has agreed to a share-swap deal, (c) HUVR has not been saddled with the global business, and (d) being listed, transparency of GSKCH is extremely high. While we continue to have our reservations on category growth in malt-based beverages (MFD), we appreciate what HUVR can bring to the table on premiumization, low unit packs, increased distribution and marketing strength.
According to Stratistics MRC, a leading global market research company, global LPG market accounting for 285.9 mn tons in 20152015 is expected to reach 390.13 mn tons by 2022, growing at a CAGR of 4.5% during the forecast period (2015-2022).. Consumption of LPG is surging across the globe, majorly on account of rise in number of vehicles using auto gas and increasing government initiatives to boost LPG consumption, surging LPG...
