Sell

ACC reported weak 1QCY19 numbers, again, driven by higher raw material costs and weaker than expected realizations. While net sales at Rs39.2bn were in line with our estimates, EBITDA at Rs5.3 bn was 2.5% below ours and 8% below consensus estimates. Key driver for this variance has been higher raw material costs (including purchase of stock in trade) at Rs949/mt, up 19% YoY. Higher slag and fly ash prices coupled with higher purchases possibly from Ambuja as a part of synergy drive, have resulted in this increase in our view. Cement volumes grew by 5.5% YoY at 7.5mn mt whereas realizations were flat QoQ. RMC division reported relatively better numbers with 19% volume growth....

of 4.2% QoQ USD inline with our estimates at USD262mn. MTCL posted CC revenue growth of 3.9% QoQ (Ple:3.2%, Cons:3%). Mindtree posted EBITDA margins better than we expected at 15.2% (PLe:15.5%) erosion of (-61bps...

Inline operating performance; FY20 outlook no surprise Mindtree (MTCL) posted above-estimated revenue growth but below-par EBITDA margins in Q4FY19, making for an in-line operating performance. Q4 deal wins were soft. Management is targeting growth in the low teens and 100-120bps margin expansion in FY20 (vs. 13.3% CC growth and +80bps estimated). We trim FY20E/FY21E EPS by ~2% on lower other income and cut our rating from ADD to REDUCE on risks of operational performance slippage amid L&T;'s unsolicited...

Mindtree (MTCL) posted above-estimated revenue growth but below-par EBITDA margins in Q4FY19, making for an in-line operating performance. Q4 deal wins were soft. Management is targeting growth in the low teens and 100120bps margin expansion in FY20 (vs. 13.3% CC growth and +80bps estimated). We trim FY20E/FY21E EPS by ~2% on lower other income and cut our rating from ADD to REDUCE on risks of operational performance slippage amid L&T;'s unsolicited bid. Rolling valuations over, we have a Mar'20 target of Rs 990 (vs. Rs 1000)....

Q1FY20 guidance of IT services revenue growth of -1.4% to +0.6% is a miss. However, share buyback of Rs105 bn for 323.1mn shares (5.4% of equity capital) is positive and especially the buyback extremely attractive. We factor weak EBIT margin in Q4FY19 and muted guidance for Q1FY20. However, it would be more than offset by benefit of share buyback, resulting in a 2.9% increase in our FY20E EPS. We introduce FY21E financials. We forecast IT services revenue (in US$) and EPS CAGR of 6.1% and 4.9% respectively over FY19-21E. We roll-over to FY21E and...

Wipro has grown the slowest (2.9% YoY in FY19) in the Tier-1 IT pack. The key revenue driver for FY19 (BFSI) is easing. Challenges in Communications (client specific) and Healthcare (HPS) seem sticky. The soft guidance for 1QFY20 tells us that the lag is entrenched. Margin recovery and buyback drove recent outperformance (+16% vs NIFTY IT +8% in 6m). We downgrade WIPRO to SELL (from Neutral), post the insipid 4QFY19 show and weak guidance. Revenue growth remains challenged and margins are peaking. The recent security breach raises questions about clients data security and is a setback to Wipros reputation. The much awaited buyback (5.4% of equity at Rs 325/sh, 16% premium to CMP) kicks up FY21E EPS by ~2%. At 14x FY21E EPS, our TP is Rs 250 (~11% downside from CMP).

Wipro (WPRO) reported a largely in-line operating performance in Q4FY19 with 1% QoQ CC revenue growth and 19.2% EBIT margins in IT services. But Jun'19 quarter guidance was subdued and implies a slow start to the financial year. Likely moderation in BFSI growth (32% of revenue) and a soft outlook for the healthcare and manufacturing verticals (together 21% of revenue) pose the risk of another slow-growth year. We tweak estimates to bake in the share buyback and Q4...

View: Margin concern continues; downgrade to SELL We believe that higher sub-contracting cost, higher attrition, implied investment and localisation in the medium term will lead to margin pressure in FY20 for INFY. We expect INFY to report margins towards the mid-point of its guidance in FY20. We downgrade our earnings estimates by 12%/11.5% for FY20/FY21, primarily because of rupee appreciation and margin headwinds going ahead. We change our rupee assumption to ` 70 for FY20/FY21 as compared to ` 74/` 76 earlier which led to major...

We met the management of Maharashtra Natural Gas (MNGL), where Indraprastha Gas (IGL) owns 50% stake. Key takeaways: Surge in volumes from existing areas of operations: MNGL's volumes from existing areas (primarily Pune city/Chakan) are currently trending at ~0.85mmscmd (+40% YoY), dominated by CNG (63% of total volumes). MNGL has commissioned ~20 new CNG stations in FY19 (taking the count to 72), and plans to ramp up the station count to 100 by FY22 in existing areas. Similarly, domestic PNG volumes have ample scope for expansion. MNGL sees...

Exim volumes underperform: Container Corporation of India (CCRI) posted 2.5% YoY growth in EXIM volumes in Q4FY19, below our estimate of 9.6% YoY. This represents the second consecutive quarter of muted growth, after a subdued Q3FY19 (+6.3% YoY). We believe this underperformance stems from tepid EXIM cargo movement, soft growth in Indian Railways' container traffic (+6.7% YoY during Jan-Feb'19) and a high base of Q4FY18 (EXIM volume...