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We expect changing regulations in motor to drive down both claims and tariffs, creating supernormal profitability in the short term. We believe that this period (of super-normal profitability) will be short lived, as we expect IRDAI to clamp down on TP pricing restricting profitability. We believe market is not factoring this risk, accordingly we rate ICICIGI a SELL with a reduced TP of Rs 1,126 (Dec-21E P/E of 26x and a P/ABV of 5.7x). ICICIGIs 3QFY20 saw NEP growth of 16.4% YoY (ex crop 22.2% YoY, +10.3% vs. est.) to Rs 24.5bn, decline in COR (calc.) to 99.5% was also better than est., but investment yield of ~7.3% (-80/-114bps YoY/QoQ), weighed on APAT, which at Rs 2.94bn grew +23.0/-14.9% YoY/QoQ, (-2.6% vs. est.)
13 January 2020 DMART delivered another strong quarter in a consumption slowdown context, albeit with an inline but a decelerating revenue growth print. High capex and moderating revenue growth could crimp return ratios and compress the stretched valuation multiples. DMARTs standalone 3QFY20 revenue/EBITDA/PAT grew 24%/26%/55% YoY to INR67.5b/INR5.7b/INR4b (pre IND-AS 116 basis). Footprint addition was a healthy 9% YoY in 3QFY20; the company added 7 stores/0.47m sqft to reach a total of 196 stores/6.97m sqft area. 9MFY20 saw addition of 20 stores (v/s est. Revenue growth came in at 24% each for 3QFY20/9MFY20, but has slowed considerably compared to 33% each in the corresponding period. For 9MFY20, our same store sales growth (SSSG) estimate was in low double- digit (v/s 18% in FY19). Gross profit was up 26% YoY at INR10.
We remain sellers on the counter as we believe 1) D-MART's throughput, cost and working capital efficiencies are near peak. 2) Cost of retailing is inching up. 3) Well capitalized e-grocers/online biggies (Amazon /Flipkart) are getting price-war-ready as can be seen from the significant bump up in their authorized capital. (This could increase cost of retailing in general for the industry over the medium to long term as offline retailers may be arm-twisted into taking fulfillment cost on their books not factored in). We largely maintain our estimates/TP and we bake Revenue/EBITDA/LTL APAT CAGR of 26/30/30% CAGR over FY19-22 and currently have a DCF-based TP of Rs. 1,250/sh, implying 24x Dec-21 EV/EBITDA. Stock currently trades at 42/34x FY21/F22 EV/EBITDA. While D-MART posted healthy growth in 3Q, the pace of growth has come off consistently over 9MFY20 courtesy 1. A heavier base, 2. Ever-heightening competitive intensity. What is more worrying is the dip in the anchor variable - sales velocity (revenue per sq. ft) over the last 9m partly due to larger-sized stores. This certainly warrants a closer look to assess how close is D-MART to its peak on throughput, cost and working capital efficiencies.
We believe Ilumya will face stiff tough competition from AbbVie's Skyrizi (Risankizumab) and J&J;'s Tremfya (Guselkumab) because of the lower efficacy level with PASI (Psoriasis Area Severity Index) score of 75 in week 28 versus Skyrizi & Tremfya PASI of 90 in just 16 weeks. With more than 15 months' post launch of Ilumya in US, its market share has been lower than 2% in interleukin (IL) treatment for psoriasis/psoriatic arthritis, while Skyrizi and Tremfya have gained market share of more than 2% and 5% respectively. Although market expects Ilumya peak sales of US$300-350mn, we believe...
Several observations related to lapses in injectable formulation SUNP's Halol (Baroda) facility underwent a routine cGMP(Current Good Manufacturing Practice) audit by USFDA during 3rd-13th December, and the inspection concluded with 8 observations in Form-483.We believe that few observations are critical in nature and there is likely possibility of conversion into WL post 90 days. The observations indicated lack of authenticity of data pertaining to microbiology tests, contaminations, and...
