Broker Research reports: Sell reports for all reports

Heidelberg Cement: We maintain our REDUCE rating on Heidelberg Cement (HEIM), with a revised target price of INR 190/share (8.5x Mar-24E EBITDA). In the absence of any major planned expansion for the next three years, we expect subdued volume growth and loss in market share, as other players expand in HEIM's core markets. In Q4FY22, the company's QoQ volume recovery in the peak quarter remained muted at 9% (-1% YoY). Adjusted for prior-period incentives, unitary EBITDA recovered 24% QoQ to INR 751/MT. Since there was no major Capex outgo, the balance sheet continues to be firm: net cash on the books almost doubled YoY in Mar-22 to INR 1.5bn. Karur Vysya Bank: Karur Vysya Bank (KVB) reported a significant beat on our estimates, led by better NIMs and lower credit cost (1.1% annualised). Asset quality improved, with GNPA at ~6%, led by negative net slippages, while the restructured pool remained largely steady at ~2.8% of loans. Overall loan growth (+9% YoY) was driven by commercial (+12%), agri (+13%) and home loans (+9%). KVB is incrementally focused on driving granular growth (LAP, commercial banking, and other retail) and has guided for a 12% loan growth in FY23. With a steady NIM trajectory and improving line of sight on lower credit costs, KVB is well-placed to inch closer to its ~1% RoA target. We trim our FY23/FY24E earnings estimates by 1%/3% to factor in lower loan growth, partly offset by lower credit costs. Maintain ADD with a revised TP of INR63. JK Cement: We maintain our REDUCE rating...

Heidelberg Cement: We maintain our REDUCE rating on Heidelberg Cement (HEIM), with a revised target price of INR 190/share (8.5x Mar-24E EBITDA). In the absence of any major planned expansion for the next three years, we expect subdued volume growth and loss in market share, as other players expand in HEIM's core markets. In Q4FY22, the company's QoQ volume recovery in the peak quarter remained muted at 9% (-1% YoY). Adjusted for prior-period incentives, unitary EBITDA recovered 24% QoQ to INR 751/MT. Since there was no major Capex outgo, the balance sheet continues to be firm: net cash on the books almost doubled YoY in Mar-22 to INR 1.5bn. Karur Vysya Bank: Karur Vysya Bank (KVB) reported a significant beat on our estimates, led by better NIMs and lower credit cost (1.1% annualised). Asset quality improved, with GNPA at ~6%, led by negative net slippages, while the restructured pool remained largely steady at ~2.8% of loans. Overall loan growth (+9% YoY) was driven by commercial (+12%), agri (+13%) and home loans (+9%). KVB is incrementally focused on driving granular growth (LAP, commercial banking, and other retail) and has guided for a 12% loan growth in FY23. With a steady NIM trajectory and improving line of sight on lower credit costs, KVB is well-placed to inch closer to its ~1% RoA target. We trim our FY23/FY24E earnings estimates by 1%/3% to factor in lower loan growth, partly offset by lower credit costs. Maintain ADD with a revised TP of INR63. JK Cement: We maintain our REDUCE rating...

Sobha: Sobha (SDL) reported the highest-ever annual presales of 4.9msf (+22% YoY), valued at INR 38.7bn. Bengaluru accounted for 68% of total presales volume (vs 67% in FY23). SDL expects contribution from Bengaluru to come down to 55% over the next few years. The residential launch pipeline stands at 13.2msf, with 61% of launches planned for the Bengaluru market. SDL recorded the best-ever cash inflow of INR 12.9bn (+32%/+22% YoY/QoQ) on the back of best-ever residential cash collection of INR 10.6bn. This resulted in overall net debt reduction by 13% QoQ to INR 23.4bn. In FY22, SDL took an average price hike of 6% YoY and it expects a similar hike in FY23. On the back of this and increasing interest rate, it expects volume to remain flat in FY23, with presales value growth in low double digits. Currently, ~80% of its customers opt for housing loans. We maintain BUY, with a reduced TP of INR 902/sh to factor in rising cost of capital resulting in higher WACC. NTPC: Generation/sales increased 3.0%/2.4% YoY to 79.9/73.9bn units in Q4FY22 on higher YoY base, led by improved demand. Coal PAF improved marginally in Q4 to 89.6%, vs 89.1% YoY, but coal PLF was down at 76.1%, vs 77.1% YoY. Under-recovery came in at INR4.5bn, vs INR6.0bn YoY, while surcharge income declined to INR1.6bn, vs INR6.2bn YoY. Consequently, after adjusting for one-offs, adj PAT increased 19% YoY to INR45.6bn, above our estimate. Overdue reduced to INR42.7bn vs INR56.6bn YoY and INR45bn QoQ. NTPC has 3.4GW of RES capacity under...

LPC booked a loss of Rs. 5.2 bn in Q4 with weak operating performance and contraction in margins, EBITDA was ~50% below consensus

Prince Pipes: We maintain BUY on Prince Pipes with a revised target price of INR 875/sh (18.5x its Mar-24E EBITDA). In Q4FY22, volume rebounded 9% YoY and moderated the EBITDA/APAT fall (amid gross margin compression) to 4/9% YoY. We continue to like Prince for its large product portfolio and robust pan-India distribution (unit EBITDA at an all-time high of INR 30/kg in FY22). Despite the temporary surge in resin inventory, leverage remains comfortable. Ashok Leyland: In Q4, Ashok Leyland's (AL) margin improved 130bps YoY to 8.9%, led by (1) 11% YoY volume growth and (2) 13% YoY realisation growth. On account of improved margin, PAT (adjusted for one-off gains) came in ahead of estimate at INR4.3bn. CV demand continues to be upbeat and we expect the MHCV goods industry to post 25% growth in FY23. However, AL may find it difficult to recoup lost market share in CVs since the industry mix is shifting to ILCV segment and CNG (within ILCVs), and the company has been traditionally weak in this segment and late in launching CNG variants. Also, we do not expect margin to revert to the previous peak, as the top-3 players fight for gaining market share in each of the key segments (both TTMT and AL target to outperform industry growth in FY23). Intense competition in the industry is also visible in the fact that despite demand recovering extremely well in H2FY22, discounts remain at record high levels. On account of expensive valuation, we reiterate SELL on AL. Alkyl Amines: We maintain SELL on...

Prince Pipes: We maintain BUY on Prince Pipes with a revised target price of INR 875/sh (18.5x its Mar-24E EBITDA). In Q4FY22, volume rebounded 9% YoY and moderated the EBITDA/APAT fall (amid gross margin compression) to 4/9% YoY. We continue to like Prince for its large product portfolio and robust pan-India distribution (unit EBITDA at an all-time high of INR 30/kg in FY22). Despite the temporary surge in resin inventory, leverage remains comfortable. Ashok Leyland: In Q4, Ashok Leyland's (AL) margin improved 130bps YoY to 8.9%, led by (1) 11% YoY volume growth and (2) 13% YoY realisation growth. On account of improved margin, PAT (adjusted for one-off gains) came in ahead of estimate at INR4.3bn. CV demand continues to be upbeat and we expect the MHCV goods industry to post 25% growth in FY23. However, AL may find it difficult to recoup lost market share in CVs since the industry mix is shifting to ILCV segment and CNG (within ILCVs), and the company has been traditionally weak in this segment and late in launching CNG variants. Also, we do not expect margin to revert to the previous peak, as the top-3 players fight for gaining market share in each of the key segments (both TTMT and AL target to outperform industry growth in FY23). Intense competition in the industry is also visible in the fact that despite demand recovering extremely well in H2FY22, discounts remain at record high levels. On account of expensive valuation, we reiterate SELL on AL. Alkyl Amines: We maintain SELL on...

Consolidated Q4 net revenue increased 12% YoY to Rs 25bn as the C&B/B2B segments grew 11%/21%

Neogen Chemicals: Our BUY recommendation on Neogen Chemicals (NCL) with a target price of INR 1,900/sh is premised on (1) increasing contribution of the high-margin CSM business to revenue, (2) entry into the new-age electrolyte manufacturing business, (3) capacity-led expansion growth opportunity, (4) constant focus on R&D, and (5) improving return ratios and strong balance sheet, going forward. Q4 EBITDA/APAT were 6/7% above our estimates, owing to a 30% rise in revenue and lower-than-expected tax outgo, but were offset by higher-than-expected raw material cost and other expenses. JMC Projects: JMC Projects (JMC) reported revenue/EBITDA/APAT of INR 15.6/1.3/0.6bn, beat at all levels (13.2/4/26% beat). The EBITDA margin was muted at 8.5%, affected by high commodity prices and supply chain issues. Wainganga Expressway restructuring has got delayed and is now expected by H1FY23, as consent from majority of lenders has been received. Vindhyachal asset refinancing is expected to be completed by H1FY23. The loss funding requirement for these assets, including Agra-Aligarh, is INR 700-800mn. The FY22 order inflow (OI) was at INR 101bn, taking the order book (OB) to INR 171bn. We maintain BUY with a revised target price of INR 142 (11x Mar-24E EPS). We cut our FY23/24 EPS estimate by (10.9)/(17.2)% to factor in elevated commodity prices. Avenue Supermarts: D-MART's unit economics remains subpar. Revenue grew 18% YoY in Q4 (in-line; FY19-22 CAGR: 15%). Our thesis, which penciled in pressure on sales density and its make-up, seems to be playing out, courtesy heightened competitive intensity by horizontal/quick e-commerce. More revealing is the decline in bill cuts...

Neogen Chemicals: Our BUY recommendation on Neogen Chemicals (NCL) with a target price of INR 1,900/sh is premised on (1) increasing contribution of the high-margin CSM business to revenue, (2) entry into the new-age electrolyte manufacturing business, (3) capacity-led expansion growth opportunity, (4) constant focus on R&D, and (5) improving return ratios and strong balance sheet, going forward. Q4 EBITDA/APAT were 6/7% above our estimates, owing to a 30% rise in revenue and lower-than-expected tax outgo, but were offset by higher-than-expected raw material cost and other expenses. JMC Projects: JMC Projects (JMC) reported revenue/EBITDA/APAT of INR 15.6/1.3/0.6bn, beat at all levels (13.2/4/26% beat). The EBITDA margin was muted at 8.5%, affected by high commodity prices and supply chain issues. Wainganga Expressway restructuring has got delayed and is now expected by H1FY23, as consent from majority of lenders has been received. Vindhyachal asset refinancing is expected to be completed by H1FY23. The loss funding requirement for these assets, including Agra-Aligarh, is INR 700-800mn. The FY22 order inflow (OI) was at INR 101bn, taking the order book (OB) to INR 171bn. We maintain BUY with a revised target price of INR 142 (11x Mar-24E EPS). We cut our FY23/24 EPS estimate by (10.9)/(17.2)% to factor in elevated commodity prices. Avenue Supermarts: D-MART's unit economics remains subpar. Revenue grew 18% YoY in Q4 (in-line; FY19-22 CAGR: 15%). Our thesis, which penciled in pressure on sales density and its make-up, seems to be playing out, courtesy heightened competitive intensity by horizontal/quick e-commerce. More revealing is the decline in bill cuts...

Neogen Chemicals: Our BUY recommendation on Neogen Chemicals (NCL) with a target price of INR 1,900/sh is premised on (1) increasing contribution of the high-margin CSM business to revenue, (2) entry into the new-age electrolyte manufacturing business, (3) capacity-led expansion growth opportunity, (4) constant focus on R&D, and (5) improving return ratios and strong balance sheet, going forward. Q4 EBITDA/APAT were 6/7% above our estimates, owing to a 30% rise in revenue and lower-than-expected tax outgo, but were offset by higher-than-expected raw material cost and other expenses. JMC Projects: JMC Projects (JMC) reported revenue/EBITDA/APAT of INR 15.6/1.3/0.6bn, beat at all levels (13.2/4/26% beat). The EBITDA margin was muted at 8.5%, affected by high commodity prices and supply chain issues. Wainganga Expressway restructuring has got delayed and is now expected by H1FY23, as consent from majority of lenders has been received. Vindhyachal asset refinancing is expected to be completed by H1FY23. The loss funding requirement for these assets, including Agra-Aligarh, is INR 700-800mn. The FY22 order inflow (OI) was at INR 101bn, taking the order book (OB) to INR 171bn. We maintain BUY with a revised target price of INR 142 (11x Mar-24E EPS). We cut our FY23/24 EPS estimate by (10.9)/(17.2)% to factor in elevated commodity prices. Avenue Supermarts: D-MART's unit economics remains subpar. Revenue grew 18% YoY in Q4 (in-line; FY19-22 CAGR: 15%). Our thesis, which penciled in pressure on sales density and its make-up, seems to be playing out, courtesy heightened competitive intensity by horizontal/quick e-commerce. More revealing is the decline in bill cuts...

Retain SELL with a revised TP of Rs. 2,900/share.

CreditAccess Grameen: CreditAccess Grameen (CREDAG) continued to deliver an all-round strong performance, with earnings ~8% ahead of our estimates. Portfolio stress has largely receded, with PAR-0 now at 3.6% (from peak of 30.6% in Q1FY22) and GNPA for the consolidated entity at 3.6%, indicating near-normalised credit costs from FY23. Loan growth remained strong (+22.2% YoY), driven largely by the MFI book (including MMFL). Net new customer additions were positive after several quarters and are likely to gain further traction, although average exposure per borrower may remain elevated. The management guidance of 24-25% loan growth appears conservative to us as we believe the company is well poised for market share gains, albeit with back-ended growth on account of the implementation of new MFI guidelines. We tweak our FY23E/FY24E earnings estimates and maintain BUY, with a revised TP of INR963 (2.8x Mar-24 ABVPS). Our implied multiple reflects CREDAG's high cross-cycle potential RoE and a very conservative approach to an inherently risky business. Brigade Enterprises: Brigade Enterprises Ltd (BEL) reported resilient presales of 1.5msf (-10%/+37.7% YoY/QoQ), valued at INR 10.3bn (+1%/+50.2% YoY/QoQ), backed by decent response from Brigade Cornerstone Utopia and Brigade EI Dorado. The average realisation came in at INR 6,853/sq.ft. (+11.8%/+9.1% YoY/QoQ). Retail segment consumption exceeded the pre-COVID level in Q4FY20. The hospitality segment witnessed robust recovery despite the COVID-19 waves, with occupancy and ARR at 94%/72% of the pre-COVID level. BEL is evaluating options to monetise this segment. Given BEL's strong cash position of INR 15.8bn, robust business development pipeline (added ~8.5mn sq.ft. of land in...

RBL Bank: Despite a healthy NIM (~5%) and a positive loan growth (+2.4% YoY), RBL Bank (RBK) missed our estimates, with PAT at INR1.9bn, due to higher credit cost (2.7%). Slippages remained elevated at 4.8% (annualised), predominantly from the MFI and cards businesses. Deposit growth (in line with guidance) was reassuring - the management has guided for a pick-up in loan growth, led by retail. Given its single-engine concentration risk on the credit card portfolio (22% of loans and 56% of fee income), we believe that retail diversification is a necessary strategy. However, we argue that the expected scale and time-to-maturity are likely to take longer and call for elevated investments that back-end the 1% RoA narrative further into FY24. We also flag uncertainty around management succession and transition as a major overhang, with implications for these portfolio strategy decisions. We hack our FY23E and FY24E earnings forecasts by 9%/11% respectively and maintain REDUCE with a revised TP of INR113, implying 0.5x Mar-24 ABVPS (earlier TP at INR160). Orient Cement: In Q4, Orient's consolidated volume/revenue/EBITDA/APAT fell 12/3/24/27% YoY, dragged by weak demand and rising energy costs. High share of AFR and domestic coal usage cushioned margin contraction to healthy level of INR 946/MT (-14/-2% YoY/QoQ). Healthy cash flow has cooled off its net debt/EBITDA to 0.4x, boosting its capability to take up next round of expansions. The recent fall in the stock price also makes the valuation attractive. Thus, we upgrade our rating on Orient to BUY from ADD earlier, with an unchanged TP of INR...

RBL Bank: Despite a healthy NIM (~5%) and a positive loan growth (+2.4% YoY), RBL Bank (RBK) missed our estimates, with PAT at INR1.9bn, due to higher credit cost (2.7%). Slippages remained elevated at 4.8% (annualised), predominantly from the MFI and cards businesses. Deposit growth (in line with guidance) was reassuring - the management has guided for a pick-up in loan growth, led by retail. Given its single-engine concentration risk on the credit card portfolio (22% of loans and 56% of fee income), we believe that retail diversification is a necessary strategy. However, we argue that the expected scale and time-to-maturity are likely to take longer and call for elevated investments that back-end the 1% RoA narrative further into FY24. We also flag uncertainty around management succession and transition as a major overhang, with implications for these portfolio strategy decisions. We hack our FY23E and FY24E earnings forecasts by 9%/11% respectively and maintain REDUCE with a revised TP of INR113, implying 0.5x Mar-24 ABVPS (earlier TP at INR160). Orient Cement: In Q4, Orient's consolidated volume/revenue/EBITDA/APAT fell 12/3/24/27% YoY, dragged by weak demand and rising energy costs. High share of AFR and domestic coal usage cushioned margin contraction to healthy level of INR 946/MT (-14/-2% YoY/QoQ). Healthy cash flow has cooled off its net debt/EBITDA to 0.4x, boosting its capability to take up next round of expansions. The recent fall in the stock price also makes the valuation attractive. Thus, we upgrade our rating on Orient to BUY from ADD earlier, with an unchanged TP of INR...

RBL Bank: Despite a healthy NIM (~5%) and a positive loan growth (+2.4% YoY), RBL Bank (RBK) missed our estimates, with PAT at INR1.9bn, due to higher credit cost (2.7%). Slippages remained elevated at 4.8% (annualised), predominantly from the MFI and cards businesses. Deposit growth (in line with guidance) was reassuring - the management has guided for a pick-up in loan growth, led by retail. Given its single-engine concentration risk on the credit card portfolio (22% of loans and 56% of fee income), we believe that retail diversification is a necessary strategy. However, we argue that the expected scale and time-to-maturity are likely to take longer and call for elevated investments that back-end the 1% RoA narrative further into FY24. We also flag uncertainty around management succession and transition as a major overhang, with implications for these portfolio strategy decisions. We hack our FY23E and FY24E earnings forecasts by 9%/11% respectively and maintain REDUCE with a revised TP of INR113, implying 0.5x Mar-24 ABVPS (earlier TP at INR160). Orient Cement: In Q4, Orient's consolidated volume/revenue/EBITDA/APAT fell 12/3/24/27% YoY, dragged by weak demand and rising energy costs. High share of AFR and domestic coal usage cushioned margin contraction to healthy level of INR 946/MT (-14/-2% YoY/QoQ). Healthy cash flow has cooled off its net debt/EBITDA to 0.4x, boosting its capability to take up next round of expansions. The recent fall in the stock price also makes the valuation attractive. Thus, we upgrade our rating on Orient to BUY from ADD earlier, with an unchanged TP of INR...

Dalmia Bharat: Dalmia Bharat reported strong Q4FY22 result, led by a healthy rebound in its cement realisation, leading to a ~25% EBITDA beat vs ours and consensus estimates. While consolidated revenue rose 7% YoY on both realisation and volume uptick, EBITDA fell 11% on sharp energy cost inflation. Unitary EBITDA rebound 44% QoQ to INR 1,035/MT due to a healthy cement price recovery in the east, rise in share of trade sales, and op-lev gains. Continued gains in its IEX investments turned balance sheet net cash in Mar-22. Dalmia noted that its plans to expand capacity to 49mn MT by FY24E is on track. Owing to its attractive valuation, we maintain our BUY rating, with a revised TP of INR 2,030/sh (13x its Mar-24E consolidated EBITDA). Max Financial: MAXL disappointed on total APE (15% below our estimates); however, the shift in product mix towards NPAR and group credit-life resulted in higher-than-anticipated VNB margin at 31.9% (+648bps vs. estimate), leading to VNB clocking in at INR5.86bn (two-year CAGR of 35%). We flag MAXL's 500bps loss in AXSB wallet share as a key business concern and believe that maintaining/recouping this wallet share remains a key monitorable in the near to medium term. We lower our VNB estimates by 5-6% for FY23E-24E to factor in growth slowdown in banca channel and expect MAXL to deliver APE CAGR of 13%, VNB CAGR of 11%, and operating RoEVs in the range of 20-21% over FY23-24E. We retain our ADD rating, with a revised target price of INR1,030 (Sep-22E EV + 16.4x...