Sell

Large deal TCV saw a decent qoq rise to US$1.1bn v/s US$0.9bn in Q4FY18. However, we believe that the number is still small relative to its size and TCS' large deal wins (Infosys book to bill at 0.4 v/s ~1.0 for TCS). For the first time ever, Infosys is choosing growth over profitability, but frequent change in CEO/strategy would not translate into growth revival soon Stability' scenario to stay and Momentum and Accelerate' phase will take time. Maintain our SELL rating with a...

Hexaware went up by over 20% in yesterday's trade (closed 8% high) without any filling or announcement. The likely factor in our opinion could be possible expectations of upward revision in guidance and strong Q2CY18 numbers. However, we do not see these valuations sustainable and should cool off in the subsequent sessions....

Ester Industries (Ester) reported a healthy Q4FY18 performance. Net sales for the quarter were at | 220 crore, up 11.7% YoY. EBITDA in Q4FY18 was at | 22.7 crore with corresponding EBITDA margin of 10.3%. Consequent PAT in Q4FY18 was at | 5.6 crore. Q4FY18 marks a turnaround quarter resurfacing double digit EBITDA margins, best in the last 10 quarters. PAT of ~| 6 crore is also the highest in the last 12 quarters. However, the management has revised its downward its guidance in the quite essential speciality polymer segment, which was the key driver of growth for Ester...

TMD Segment to Recover Gradually: LMW revenue grew by 10.1% YoY on the back of good numbers from machinery and foundry division. The textile machine division degrew by 33% due to lower orders from textile players.

PAT grew by 18%, supported by 17% YoY growth in loan book. NIM increased by 16bps to 4.36% in Q4FY18 against 4.20% in Q4FY17. Deposit grew by 9% YoY in Q4FY18....

No Reprieve in Denim Demand Outlook: Proportion of Denim sales to the overall revenue mix has continuously been the low in FY17 (Q1 69.7%, Q2- 67.1%, Q3 63.2% and Q4 64%), indicating the supply-demand gap continues to be large. We expected recovery towards2HFY18, as industry and economy in general recovered from the double impact of demonetization and GST.

However, PAT grew 358% to | 17 crore (I-direct estimate: | 3 crore), mainly due to higher other income (| 15 crore in Q4FY18 vs | 6 crore in Q4FY17) and lower tax rate (15% in Q4FY18 vs 36% in Q4FY17) EBITDA growth revival visible in FY18 For FY18, revenues were flattish with growth of 1% to | 592 crore vs. | 586 crore in FY17. However, the EBITDA margin has improved 280 bps YoY to 22.8% in FY18. The improvement in EBITDA margin has been owing to fuel expense as a percentage of sales declining 200 bps from...

Revenues impacted by GST and sale of brands: Revenues for the quarter at Rs 7486 mn were below our estimates of Rs8245mn. The operating margins at 20.7% in Q4FY18 were below our estimates of 22.9 %, however increased by 324bps y-o-y.

Reiterate SELL, with a TP of Rs 2,848 (40x FY20E EPS). UNSPs 4QFY18 revenue and gross profit were better than expected. Healthy volume growth of 16% in P&A; segment led to outperformance. However, this was offset by increased employee costs (+53%) and A&P; spends (34%).

Refer to important disclosures at the end of this report Revenue guidance and Halol restart a positive; events factored in earnings Q4FY18 results had a number of one-offs, including higher operating income (milestone from Almirall), significantly higher non-operating income and tax write-backs. Adjusting for these, operating revenue and EBITDA largely stood in line with expectations. FY19 revenue guidance at low teens growth, significant incremental investments in R&D; & building of front-end marketing for the Branded business. The US Branded business...