We recently met Mr. Ravneet Gill, CEO of Yes Bank (YBL) and gleaned incremental Sector: Banking insight into the strategy of the company. We share our detailed takeaways below. We revise our estimates for FY20/FY21 and maintain Buy rating, revising our target price to CMP: Rs140...

With GIC, IRB has secured means to partly fund its balance equity requirement of Rs 29.5bn. The free cash flow potential of the portfolio is Rs 880bn over the project lifecycle (~20yrs), with Rs 2bn/yr IRB share from first year. IRB will leverage this partnership to bid for upcoming BOT and TOT projects, though it will have to bring 51% of equity share. We maintain BUY. Key risks (1) Declining toll revenues in certain projects, (2) Market acceptability for BOT projects and (3) Delay in appointed dates in remaining HAM projects, contributing 25% to order book by value. IRB delivered strong 18/28% 1QFY20 EBIDTA/APAT beat. Private InvIT announcement with GIC (Rs 44bn investment for 49% stake, ~1x P/BV) removes BOT asset recycling overhang. We maintain BUY with a TP of Rs 212/Sh.

NCC has seen significant de-rating post the AP Govt order cancellation and uncertainty of execution on balance Rs 125bn of AP order book. Our channel checks will local Govt officials suggest work of significant importance will start in next 3months. We ascribe low probability of further project cancellation for NCC in AP. Debt levels may remain at current levels, though AP receivable realization may take time. Sembcorp arbitration will unlock Rs 4-5bn of cash inflow. With inexpensive valuation (6.3x Core EPC FY21E EPS) and receding headwinds we maintain BUY. Key risks (1) Adverse ruling on ongoing arbitrations; (2) Slow down in government capex; (3) Deterioration in NWC days; and (4) Weak real estate monetization. NCC reported inline 1QFY20 performance with Rev/EBIDTA/APAT beat of (4.5)/2.5/1.6%. We expect AP projects execution to resume from Oct-19. Core EPC valuation is inexpensive at 6.3x FY21E EPS. Maintain BUY with a TP of Rs 154/Sh (EPC business at 15x FY21E EPS).

Our constructive stance on INDOSTAR is driven by increasing retailisation and opportunistic caution on the corporate segment. Indostar's talent is unquestionable, but it faces a severe reality check. We've adjusted growth and LLP assumptions to reflect macro stress, resulting in a ~13% earnings cut. Lumpy stress and losses in the RE book are not ruled out. These, and systemic liquidity issues, pose further risk. In spite of striking asset quality deterioration and an earnings miss, we maintain BUY on INDOSTAR with a TP of Rs 506 (1.5x Mar-21E ABV). Worse than expected asset quality outcomes appear to be priced in.

The volatile quarterly performance is inherent to CRAMS business models. So, it would be inappropriate to extrapolate this quarter's performance to the full year of FY20E. Historically, both in FY18 & FY19, operational performance has recovered strongly in 2H. This year too, on the back of higher commercial orders in India and Swiss coupled with the new development capacity, we expect the company to overshoot its guidance of 10% YoY revenue growth and 26-27% EBITDA margin. Expect 19% EPS CAGR over FY19-21E. Unlike generic pharma companies, this business is more sustainable and insulated from pricing pressure until patent expiry. Hence, DCAL merits a higher multiple as it is trading at 10.1/7.9x FY20/21E EPS, a ~60% discount to peers. We maintain a BUY on DCAL following a disappointing quarter. Our TP is revised to Rs 355 (15x FY21E EPS) with a 5% cut to FY21E EPS (higher depreciation expectation).

SIPL's asset monetization brings in the much needed liquidity flush to the Sadbhav Group. The cash infusion will lead to SEL net D/E reducing from 0.7x to 0.2x (FY19/20E). Balance sheet strengthening makes a case of credit rating upgrade. With IndInfravit's backing, SIPL is well placed to bid for upcoming HAMs/BOTs and SEL in turn stands to benefit from captive ordering. We believe SEL is well placed to deliver 20.3/26.5% FY19-21E Rev/APAT CAGR. Maintain positive stance. We maintain BUY with a reduced SOTP of Rs 340/sh (vs Rs 353/sh earlier). We value SELs EPC business at 15x FY21E EPS and assign a 20% hold co discount to SIPL stakes market value. We have downgraded FY20/21E EPS by 1/2%.

We remain constructive on DCAL owing to strong visibility on its order book, 15+ late phase 3 molecules, expanded development capacity, ability to work on new molecules like ADCs, and favorable currency. Improvement in BS driven by reduced debt and working capital release would be one of the important parameters to drive re-rating of the stock. At CMP, the stock is trading at 10.1/7.8 FY19/20E, a ~60% discount to peers like Divi's Labs. Maintain BUY with a TP of Rs 350 (15x FY21E EPS). DCALs FY19 annual report reflects pleasing YoY progress on key P&L; metrics like revenue (+22%), EBITDA margin (+50bps) and earnings (+26%), which is attributed to the surge in revenues from India CRAMS and Vitamin D segments. The operational performance of FY19 was largely in-line with our estimates at the beginning of the fiscal. However, improvement in the BS and CF remained slow as the elevated capex and higher working capital led to negative free cash flows and only a 6% reduction in net debt. DCAL is expected to compensate for the lack of dividend over the last two years in FY20E.

CRAMS business revenue (Rs3,774mn) is down 20.0% QoQ but up 11.9% YoY. CRAMS business performance is volatile due to timing of orders / shipment. The marketable molecule revenue (Rs1,239 mn) is down 11.2% QoQ but up 11.3% YoY. Within the marketable molecule space, the cholesterol business, which has relatively lower margins, gained larger proportion of the mix and hence EBITDA margin was lower during the quarter. Focus in the marketable molecule category is to expand Vitamin D analogue business which is high margin. EBITDA stood at Rs1,194mn, which is 8.1%/32.5% below our/consensus estimate, respectively. EBITDA declined by 29.5% QoQ and 1.1% YoY. EBITDA was adversely impacted by higher COGS...

DCAL Q1FY20 revenue came below our estimate at INR 5,219mn (est. INR5,461mn) Up 8.2% YoY due to flat revenue growth from Carbogen Amcis AG with 52% contribution in Q1 revenues. CRAMS India revenues grew by 28% YoY and accounted for 15% of the revenue. Carbogen Amcis BV revenues increased by 8.6% YoY on account of better sales of Vitamin D analogues and cholesterol....

IRB GIC deal is a game changer for company, IRB has secured means to partly fund its balance equity requirement of Rs 27.6bn. The free cash flow potential of the portfolio is Rs 880bn over the project lifecycle (~20yrs), with Rs 2bn/yr IRB share from first year. IRB will leverage this partnership to bid for upcoming BOT and TOT projects, though it will have to bring 51% of equity share. We maintain BUY. Key risks (1) Declining toll revenues in certain projects, (2) Market acceptability for BOT projects and (3) Delay in appointed dates in remaining HAM projects, contributing 25% to order book by value. IRB delivered strong 9/15/28% 2QFY20 Rev/EBIDTA/APAT beat. With limited visibility on NHAI BOT project awards we cut IRB EPC multiple from 6x to 4x 1-yr forward. We maintain BUY with a reduced TP of Rs 172/Sh.

Indian bank is a mid-sized bank in the public sector with loan book size of ~ Rs1,87,900cr. The bank operates through a network of 2,875 branches largely distributed across the Southern states like Tamil Nadu, Karnataka, Andhra Pradesh and Kerala. The bank has rebalanced the loan portfolio from corporate to retail, agriculture and MSME segments to reduce credit risk. Strong CASA ratio at 35.5% act as a major strength which helps to keep the cost of funds at a lower level....

Stake sale complete focus shifts to execution Sadbhav Infrastructure Projects (SIPL), a 69.6% subsidiary of Sadbhav Engineering (SADE), has concluded its 100% stake sale in nine operational road assets to IndInfravit Trust at an EV of Rs 66.1bn. The equity value of the deal stands at Rs 25.5bn (~1.7x invested capital) to be paid out in two parts: Rs 19bn in cash and the balance as 10% of units in IndInfravit Trust. Divestment will help deleverage SADE's consolidated balance sheet and give...

Sadbhav Infrastructure Projects (SIPL), a 69.6% subsidiary of Sadbhav Engineering (SADE), has concluded its 100% stake sale in nine operational road assets to IndInfravit Trust at an EV of Rs 66.1bn. The equity value of the deal stands at Rs 25.5bn (~1.7x invested capital) to be paid out in two parts: Rs 19bn in cash and the balance as 10% of units in IndInfravit Trust. Divestment will help deleverage SADE's consolidated balance sheet and give SIPL access to capital for funding existing and new projects....

Extended monsoon, delays in water division payment from Telangana Govt and resurvey/change in scope of electrical division orders impacted 2QFY20 execution. AP orders resumption remains a black box. Despite this, we believe that 2QFY20 is an execution bottom for NCC. We have built in Rs 23/32bn revenue for NCC during 3Q/4QFY20. We are now entering bid heavy 2HFY20 and NCC stands to gain from the same. Resumption in AP order execution (from 3QFY20) and likely favorable Sembcorp settlement by Mar-20 (unlocking Rs 4-5bn of cash inflow) are key re-rating tailwinds. We have cut FY20/21E EPS by 22.4/18.2%. Maintain BUY with reduced TP of Rs 127/sh. Key risks (1) Adverse ruling on ongoing arbitrations; (2) Slow down in government capex; (3) Deterioration in NWC days; and (4) Weak real estate monetization. NCC reported a weak headline 2QFY20 performance, Rev/EBIDTA/APAT miss of 22/11/38%. With tailwinds like (1) Resumption of stuck AP orders (Rs 110bn, 33% order book) (2) Pick-up in new order inflow & (3) Sembcorp settlement, NCC de-rating may have settled for now. We maintain BUY with reduced TP of Rs 127/Sh (EPC business at 15x FY21E EPS) vs. Rs 154/sh earlier.

Over last 3M, ABL has underperformed CNXINFRA by 18%. The concerns surrounding SBIM stake sale and likely event of ABL giving cash exit (in case of distress valuation) may have led to this underperformance. ABL as per exit term has no mandatory cash settlement clause. At best there could be asset transfer which may be stake dilutive for ABL and result in investment write down. Going by consensus ACL valuation impact could be Rs 7.3bn (Rs 26/sh). We maintain BUY. Key risks (1) Delay in SBI Macquarie deal closure; (2) Dip in traffic revenue from BOT projects; (3) Delay in ADs. We maintain BUY on ABL with reduced SOTP of Rs 220/sh. We have cut our standalone EPC multiple from 15x to 12x to factor in concerns surrounding ACL monetization and likely impact on ABL stake dilution in ACL below 61%, in case of suboptimal valuation bids.

Structure of the deal and proceeds from the transaction On July 1, 2019, Sadbhav Infrastructure Project Ltd. (SIPL), a subsidiary of Sadbhav Engineering Ltd. (SEL), and IndInfravit Trust executed definitive agreements wherein the latter has agreed to purchase SIPL's 9 (out of 12) operational road projects at an enterprise value (EV) of | 6,611.2 crore. Equity valuation of these nine assets is | 2,550 crore, implying 1.7x P/BV (SIPL's initial investment in these 9 assets: | 1,550 crore). SIPL will receive | 2,550 crore equity in form of | 1,900 crore cash & | 650 crore (10%)...

Poor Performance on Soft Execution & Projects Disruption in AP NCC (NJCC) has reported a poor performance in 1QFY20, as projects cancellation, reassessment of projects and payment delays impacted its revenue booking. Resultantly, revenue declined by 7% YoY and 35% QoQ to Rs21.8bn. EBITDA broadly stood flat on YoY basis at Rs2.66bn, while EBITDA margin stood at strong 12.2% (+84bps YoY and +45bps QoQ) mainly led by settlement of claims with the clients during the quarter. Dismal revenue booking along with higher finance cost (+24% YoY and +8% QoQ) and lower other income (-15% YoY and -31% QoQ) led to steep 21% YoY decline in net profit to Rs813mn. A high exposure in AP and political shift in the state along with general slowdown led by...

Our recent interactions with RBK suggest less than commensurate credit risk, achieved via tight (and differentiated) credit policies. RBL Banks (RBK) focus on niche credit segments (credit cards and micro finance) gives it better spreads, system-beating growth and a multi-year addressable opportunity that enables it to outperform peers. Our positive stance is reflected in consistently robust operating metrics. RBKs scorching pace of growth along with its unconventional (but consciously chosen) evolution has invited skepticism. Maintain BUY with a TP of Rs 803 (3x FY21E ABV of Rs 268).

Sadbhav Engineering Limited (SEL) entered into definitive agreement with IndInfravit Trust for a 100% stake sale in nine operational projects held under listed subsidiary Sadbhav Infrastructure Projects (SIPL). The assets sold at an EV of Rs. 6612 crore and equity value of Rs. 2550 crore valuing the assets at 1.7x book value and 8.4x EV/ EBITDA on FY2019 earnings. The equity value will be received as Rs. 1900 in cash and 10% stake in IndInfravit trust. The deal will aid in Rs. 4000 crore O&M; contract for SIPL, more than halving leverage...

Sadbhav Engineering Limited (SEL) has received a credit rating downgrade for its Rohtak-Hisar project (executed under Sadbhav Infrastructure Project Limited, SIPL) on account of delay in debt servicing. The project commenced tolling (FY2019 tolling revenue of Rs. 65 crore) since July 2016, which has not been sufficient enough for debt obligations (interest plus principal payment, Rs. 110 crore for FY2019). SIPL has infused Rs. 277 crore, including equity in the project till FY2019, and has been intimating NHAI about the presence...