Sell

Tata Steel (TATA) reported disappointing set of Q3FY20 earnings with consolidated Adj. EBITDA below our/consensus estimates by 33%/22%. Except better volumes in domestic operations, company missed on rest of all fronts. Adjusted domestic EBITDA/t fell 18% QoQ to Rs9,640 (PLe:11,460) due to sharp fall in realisations. TSE posted EBITDA loss of Rs9.6bn (PLe:+Rs1.7bn) after a gap of 15 quarters. This came as a big disappointment...

MRPL reported a weak set of Q3FY20 numbers on the profitability front. Revenues increased 9.7% QoQ to | 16744.6 crore on account of higher oil throughput. Oil throughput at 4.1 MMT was up 11.4% QoQ. Core GRMs disappointed and were at US$2.7/bbl in the quarter vs. US$3.6/bbl in FY19 and US$6.5/bbl in FY18. EBITDA for the quarter was at | 299.7 crore....

Sun Pharma (SUNP) reported a 6% EBITDA miss, largely driven by higher other expense (up 8% QoQ) and despite better gross margins (up 110bps QoQ) & lower R&D; (6.4% of sales).

Hero Moto (HMCL) posted an operational beat in Q3FY20 led by healthy gross margins.

V-Mart Retail (VMART) reported below-expected Q3FY20 revenue growth of 21% YoY to Rs 5.6bn, with SSSg of 1%.

TVSL: Margins resilient; outlook challenging. CPBI: In-line quarter

TVS Motor's (TVSL) Q3 EBITDA beat estimates by ~11% led by resilient margins at 8.8% (+70bps YoY, flat QoQ), despite a sharp 17% YoY drop in volumes.

1) Languishing throughput, 2) rising cost of retailing and 3) shrinking cost arbitrage between this off-line pipe' (read: department stores) and online folks make us wary about the long-term vitals of this format. Ergo, we downgrade the counter to SELL (earlier NEUTRAL). Note: The de-rating cycle for global department stores has been quite severe and we fail to see why Indian counterparts buck the trend. We revise our DCF-based TP marginally upwards to Rs. 370/sh (earlier Rs. 360) largely mimicking revision in FY21/FY22 EBITDA estimates (+4% each) to factor in better SSSG and revenue per sq. ft on low base. Industry pioneer STOPs performance continues to be lackluster as 1) the department format continues to lose footfalls courtesy struggling legacy standalone stores. 2) Private label-led upside in top-line/profitability is expected to be gradual, if at all as the apparel space continues to fragment, 3) Cost of retailing is inching up (up 96bp/260bp YoY over 9MFY20/2 years), 4) Working capital continues to balloon, 5) Cost arbitrage between this off-line pipe and online folks continues to shrink.

Taro had weakest sales in 22 quarters with 16% YoY (and 8% QoQ) decline to US$148m in Q3FY20. Higher intensity of competitive pricing and lack of volume growth in derma portfolio were key reasons for strong erosion in sales. Gross profit was US$94m, declined by 20% YoY and 8% QoQ, while gross margin was 63.7% compared to 66.6% in Q3FY19 and 63.1% in Q2FY20. EBITDA declined by 24% YoY (and 14% QoQ) to $63.6mn, while EBITDA...

JSW Steel Ltd is the largest private sector steel manufacturer in terms of installed capacity. It is also one of the lowest cost steel producers in the world. It offers a wide range of steel products like Hot Rolled, Cold Rolled, Galvanized, Galvalume, Pre-painted Galvanised, Pre-painted Galvalume, TMT Rebars, Wire Rods & Special Steel Bars, Rounds &...