Author - Amruta Deherkar

23 Aug

Bluestar (BLSTR): Company takes a cautious approach in the troubled times

Dated:- 22nd August 2019

Update on the Indian market:

In the past few days, all eyes are towards the government, expecting to announce stimulus measures for the economy to rekindle the risk appetite of investors. The Chief Economic Adviser (CEA) Krishnamurthy Subramanian’s comments reduced such a possibility, leading to a sell-off in the markets. NIFTY fell by 1.6%. Amongst the NSE 50, worst performers were Yes Bank (-12.2%), Vedanta Limited (-7.6%), Bajaj Finance Ltd (-5.2%) and Indiabulls Housing Finance Limited (-5.2%). While the best performers were Britannia (+1.7%) and Tech Mahindra (+1.5%). In the sectoral indices, the realty sector was the worst performer (-6.7%); followed by Metal (-3.6%), PSU Bank (-3.6%).

Bluestar (BLSTR): Company takes a cautious approach in the troubled times

In an interview on CNBC-TV18 on 21st August 2019, Bluestar MD, Mr B Thiagarajan talked about industry scenario. Key highlights are below:

·       The performance of the Electro-Mechanical Projects and Packaged Air Conditioning Systems (EMP) was a conscious decision made by the management. The order inflows from across the segments remain healthy. BLSTR reported 34% YoY increase in the order book at ~Rs 28,410 mn.  BLSTR delayed the order execution with the focus on controlling working capital.

·       BLSTR reported ~9% YoY growth in 1QFY20 in the Unitary Products segment revenues. The Room Air Conditioners (RAC) revenues grew by ~25% YoY while the commercial refrigeration product revenues de-grew by ~22% YoY. The decline in the commercial refrigeration products sale was a result of efforts for migration to a new technology product range. The commercial refrigeration product sales peaked in 4QFY19 and were muted in 1QFY20. BLSTR is seeing improved demand in 2QFY20.

·       ~40% of the air conditioner sales are through consumer finance schemes. The payback period is ~10 months and currently, no repayment issues have been noticed. BLSTR deals through financers like Bajaj Finance.  The demand is higher for the lower end products.

·       The floods in certain parts of India may lead to subdued demand in the festive season. BLSTR expects ~10-15% growth in the unitary products segment for FY20E. The Rupee depreciation will put stress on costs. 

·       BLSTR intends to focus on margins and cash. The cash position has been improving at BLSTR. In 1QFY20, it became ~Rs 10 mn net cash company from a borrowing level of Rs 4,050 mn in 1QFY19.

Consensus Estimate (Source: market screener website)

·       The closing stock price of BLSTR was Rs 710/- as of 22-August-19. It traded at 31x / 25x / 22x the consensus EPS for FY 20E / FY 21E / FY 22E EPS of Rs 23.0 / 28.3/ 32.8 respectively.

·       Consensus target price of Rs 779/- implies a PE of 24x on FY22E EPS of Rs 32.8

By Blue star, Consumer durable 0 Comments Read more...
19 Aug

Time Technoplast Ltd (TIME IN): 1QFY20 – A Stable Outlook.

Dated – 16 August 2019

1QFY20 Results

  • Time Technoplast Ltd (TIME) reported 11% YoY growth in consolidated revenues at Rs 8,684 Mn. The revenues in both the segments – Polymer products and Composite products increased by ~10.9% and ~11.5% YoY to Rs 6,158 Mn and Rs 2,523 Mn respectively. Share of Polymer Products in total revenue was 71% whereas share of Composite products was 29%. The Value-added products grew by 15% in Q1FY20
  • The EBITDA increased by 4.9% YoY to Rs 1,267 mn and the EBITDA margin remained stable at 14.6%.  
  • Segment EBIT margins for polymer Products and composite products were 10.1% and 9.8% respectively.
  • Time reported PAT of Rs 438 Mn with YoY growth of ~1.15%.

Management Commentary

  • 11% revenue growth was led by volume growth of ~14% YoY in 1QFY20.
  • Pipe segment continuous to have a healthy order book. The pipes/ducts have substantial business potential especially in Smart cities.
  • In industrial packaging segment, The Greenfield manufacturing facility at Bengaluru is completed and production started in Q1 of FY20.
  • Time did a capex of Rs202 Mn on established products and Rs 102 Mn on Value added products in Q1FY20.
  • Overall capacity utilization is 80% (India – 83%; Overseas – 74%).
  • Ongoing tension between US and china can benefit company’s IBC business.
  • Company is expecting a tax rate of 26% for FY20.

Consensus Estimate (Source: market screener website)

  • The closing price of TIME was Rs 65/- as of 14-August-2019. It traded at 5.7x/5.2x consensus EPS for FY20E and FY21E is Rs 11.3 & Rs 12.5 respectively.
  • Consensus target price of Rs 187/- implies a PE of 14.9x on FY21E EPS of Rs 12.5.

For more visit www.assetmultiplier.co.in

By Packaging, Time Technoplast 0 Comments Read more...
19 Aug

Bluestar: 1QFY20 – Increase in raw material prices impact profitability

Dated:- 16th August 2019

1QFY20 Results

·       Bluestar (BLSTR) reported consolidated revenue growth of 4% YoY to Rs 15,755 mn in 1QFY20. The Electro-Mechanical Projects and Packaged Air Conditioning Systems (EMP) segment reported muted revenues at Rs 6,239 mn impacted by a slowdown in the execution of projects business. The Main business of ACs – Unitary Products (UP) – segment revenues grew by 9% YoY to Rs 9,069 mn. The Professional Electronics and Industrial Systems (PEIS) segment revenues declined by 23% YoY to Rs 446 mn on a higher base of 1QFY19.

·       The EBITDA declined by 16% YoY to Rs 1,149 mn. The raw material costs increased by ~440 bps YoY while the other expenses reduced by ~325 bps YoY. The EBITDA margin contracted by ~180 bps YoY to 7.3%.

·       All segmental margins were lower YoY. In the UP segment, the EBIT margins declined by ~50bps YoY to 10.9%. The EMP segment margins declined by ~100 bps YoY to 5.4%. The PEIS segment margins declined by ~450 bps to 9.9% impacted by the variation in the mix of new orders.

·       The other income was higher at Rs 217 mn on account of receipt of an industrial promotion subsidy for the manufacturing facility at Wada.  The finance costs were lower at Rs 82 mn (v/s Rs 121 mn in 1QFY19) due to the effective management of working capital and consequently lower borrowings in Q1FY20. Consolidated PAT stood at Rs 768 mn v/s Rs 916 mn in 1QFY19.

Management Commentary

·       Rs 140 mn industrial promotion subsidy received for the manufacturing facility at Wada; includes Rs 84 mn allocated to the EMP segment and Balance Rs 56 mn allocated towards the UP segment.

·       For the EMP Segment, the order book reported a growth of 34% Yoy to Rs 28,410 mn and the order intake increased by ~55% YoY at ~Rs 9,669 mn

·       The UP-segment margins were impacted due to the adverse product mix. In 1QFY20, there was an increase in the demand for 2 Star – 3Star fixed speed ACs which are comparatively lower margin products.

·       Management guided for 12-15% YoY revenue growth for the Room AC segment for FY20E and margin guidance of ~9.5%-10%. BLSTR’s current market share is ~12.5% and the management expects to reach 13.5% by FY20E end.

·       The Market size of Room ACs is ~Rs 110 -120 bn with annual volumes of 5.5 mn-6 mn units. The industry market share of inverter AC segment was ~60% in Q1FY20, BLSTR’s inverter share was 52% during the quarter.

Consensus Estimate (Source: market screener website)

·       The closing price of BLSTR was Rs 702/- as of 16-August-19. It traded at 30x / 25x the consensus EPS for FY 20E / FY 21E EPS of Rs 23.3 / 28.3 respectively.

·       Consensus target price of Rs 776/- implies a PE of 27x on FY21E EPS of Rs 28.3.

By Blue star, Consumer durable 0 Comments Read more...
16 Aug

Visaka Industries Ltd (VSKI IN): Demand pickup seen from the beginning of 2Q

Dated:- 14th August 2019

Visaka Industries Ltd (VSKI IN): Demand pickup seen from the beginning of 2Q   

1QFY20 Results

·       Visaka Industries Ltd reported ~2% YoY growth in revenues at Rs 3,528 mn in 1QFY20. The Building Products (BP) segment revenues remained stable YoY at Rs 2,960/- and the Synthetic Yarn (Yarn) segment revenues grew ~13% YoY to Rs 568 mn.

·       The EBITDA margins declined YoY to 13.8% v/s 15.4% in 1QFY19 impacted by an increase in material costs by ~200 bps YoY to 49%.

·       The segmental EBIT margins in BP declined by ~340 bps YoY to ~13.7% while in Yarn; the margins increased by ~225 bps to ~11%.

·       VSKI reported a YoY decline in other income at Rs 15 mn v/s Rs 69 mn in 1QFY19; which included a one-time income from an insurance claim. This resulted in a decline of ~24% YoY in PAT at Rs 231 mn v/s Rs 303 mn in 1QFY19.

Management Commentary

·       The BP segment performance was impacted due to lower sales of cement asbestos sheets in May 2019. The long span of general elections and adverse weather conditions led to lower demand. The cement asbestos sheets reported a 4% YoY volume decline and 150 bps margin decline in 1QFY20.

·       The roofing industry volumes reported a decline of ~5.6% YoY in 1QFY20 while VSKI dropped by 2% YoY.

·       The volumes of the boards and panel products grew by ~28% YoY. The Jhajjar plant is operating at ~45% capacity and is expected to scale up to ~70-80% utilisation level in FY20E.

·       The ATUM roofs reported ~Rs 8.4 mn revenues in 1QFY20. Management expects to close orders of ~Rs 35 mn in 2QFY20 which will scale up subsequently.

·       The Yarn segment volumes grew by 6.6% YoY and the effective price increase was ~7% YoY for 1QFY20.     

·       Management guides for a recovery in all the segments in the rest of FY20E. As per their commentary; the cement asbestos roofs reported better volumes June 2019 onwards while the boards and panels and Yarn products continued to grow.

Consensus Estimate (Source: market screener website)

·       The closing price of VSKI was Rs 311/- as of 14-Aug-2019. It traded at 7x / 6x the consensus EPS for 20E /21E EPS of Rs 45.1/ 51.8 respectively.

·       Consensus target price of Rs 487.5/- implies a PE of 9x on FY21E EPS of Rs 51.8/-

By Housing Ancillary, Visaka Industries 0 Comments Read more...
13 Aug

Voltas Ltd (VOLT IN): Unitary cooling products performance takes the heat off in 1QFY20.

Dated:- 9th August 2019

1QFY20 Results

·       Voltas reported a 24% YoY growth in consolidated revenues to Rs 26,540 mn. The revenue growth was driven by 47% YoY growth in the Unitary Cooling Products (UCP) (main revenue earning air conditioners) segment at Rs 17,488 mn. The Electro-Mechanical Projects (EMP) segment revenues declined by 5% YoY to Rs 8,241 mn and the Engineering Product Services (EPS) segment revenues declined by 4% YoY to Rs 740 mn.

·       The EBITDA margin declined by 35 bps YoY in 1QFY20 to 11% from 11.35% in 1QFY19.

·       Voltas reported EBIT margin expansion of ~60 bps YoY in UCP to 13.1%. The EBIT margins declined by ~220 bps YoY and ~230 bps YoY in EMP (8%) and EPS (32.4%) respectively.

·       Voltas reported a one-time expenditure of ~Rs 430 mn towards a Voluntary Retirement Benefits Scheme. The adjusted Consolidated PAT for 1QFY20 stood at Rs 1,941 mn v/s Rs 1,839 mn in 1QFY19. The profit share in the joint ventures including was Rs 213 mn in this quarter v/s Rs 193 mn in 4QFY19.

Management Commentary

·       Voltas continues to be the market leader in Room Air conditioner business with a market share of 24.1% for 1QFY20 (25.3% for June 2019) at Multi-Brand Outlets. The Air Conditioning industry grew by 36% YoY; Voltas grew higher than the industry YoY growth of ~47%. The inverter ACs accounted for more than 50% of the total revenues.

·       Commercial Refrigeration products and Air Coolers witnessed increased demand in the quarter. The air purifiers too received an encouraging response.

·       Management guided for UCP segment EBIT margins to remain in the range of 11-12% for FY20E.

·       In the EMP segment, the order book stood at Rs 47,560 mn, higher by ~3% YoY. The domestic order intake during 1QFY20 was Rs 4,490 mn v/s Rs 1,500 mn in 1QFY19. On the International front, Voltas continues to be cautious.

Consensus Estimate (Source: market screener website)

·       The closing price of VOLT was Rs 606/- as of 09-Aug-2019. It traded at 33x / 28 x / 24x the consensus EPS for 20E /21E /22E EPS of Rs 18.2 / 21.8 / 25.1 respectively.

· Consensus target price of Rs 630/- implies a PE of 25 x on FY22E EPS of Rs 25.1/-

By Consumer durable, Voltas 0 Comments Read more...
05 Aug

ERIS LIFESCIENCES LTD (ERIS IN): 1QFY20 – Increase in YPM* drives the margin expansion

Dated: 30th July 2019

1QFY20 Results

  • ERIS Lifesciences (ERIS) reported revenues 9% YoY at Rs 2,743 mn. In 1QFY20, the Base business revenues (includes UTH products) grew by 10% YoY, the Strides revenues reported a 16% YoY growth. Kinetix now part of the standalone entity, reported a decline of 9% YoY in the revenues.  In the subsidiary, Aprica revenues increased by 15% YoY.
  • The EBITDA increased by 18% YoY to Rs 1,045 mn v/s Rs 886 mn in 1QFY19. The margins improved by ~280 bps to 37.1% due to lower employee costs and other expenses. The employee costs were lower in the quarter due to a one-off adjustment of the leave encashment liability on the assimilation of the Kinedex books.
  • The PAT grew by 18% YoY to Rs 840 mn v/s Rs 713 mn in 1QFY19. The effective tax rate was higher at ~11.5% during 1QFY20 (Effective tax rate was ~8% YoY)

Management Commentary

  • Chronic and subchronic therapies constituted ~84% of the total consolidated sales of ERIS and acute therapies constituted ~16% in 1QFY20. The Indian Pharmaceutical Market (IPM) sales composition stood at 55% from chronic and subchronic therapies and 45% from acute therapies during the quarter.
  • The increase in the YPM* to Rs 0.44 mn per month in 1QFY20 led to the EBITDA margin expansion.  The YPM was Rs 0.41 mn per month in 4QFY29. The number of Medical Representatives (MR) increased to 2075 by June 2019.
  • Management indicated that prescription sales are intact. The working capital pressure and increased competition from the online pharmacy; led to a decrease in inventory at the pharmacies. The lower inventory levels are now becoming a new norm for the sector.
  • Management guided for the tax rate to remain in the 8-10% range. In FY19, 61% of the total manufacturing was done at the Guwahati Plant in Assam which is eligible to avail certain tax incentives including income tax exemption and GST subsidies. ERIS intends to increase the manufacturing of this plant.

Consensus Estimate (Source: market screener website)

  • The close price of ERIS is Rs 395/- on 29-Jul-19. It traded at 16x / 13x the consensus EPS for FY 20E / 21E EPS of Rs 24.5 / Rs 30.2 respectively.
  • Consensus target price is Rs 670/- implies a PE multiple of 22x on FY21E EPS of Rs 30.2

By Eris Lifsciences, Pharmaceuticals 0 Comments Read more...
05 Aug

HDFC Bank (HDFCBANK IN): Stable performance but higher provisions are worrisome

Dated: 22nd July 2019

1QFY20 Results

  • Net Interest Income (NII) increased 23% YoY to Rs 1,32,943 mn. The NII margins improved by 21 bps YoY to 4.4%.
  • Operating Profit before Provisions and Contingencies (PPOP) increased by 29% YoY to Rs 1,11,472 mn. The provisions other than tax increased 60% YoY to Rs 26,137 mn which included specific loan loss provisions of Rs 24,135 mn (+69% YoY).
  • Reported PAT grew by 21% YoY to Rs 55,682 mn.
  • The advances grew by 17% YoY to Rs 82,97,298 mn driven by 20% YoY growth in the corporate & other loans to Rs 38,16,757 mn. The retail loans increased by 15% YoY to Rs 44,80,541 mn. The domestic loan mix between retail: wholesale stood at 54:46.
  • The asset quality as of 30th June 2019 deteriorated with GNPAs at 1.4% (v/s 1.36% as of 31st March 2019) and NNPAs at 0.43% (v/s 0.39% as of 31st March 2019).
  • HDFC Bank reported 18% YoY growth in deposits with 13% YoY growth in CASA to Rs 37,90,010 mn and 23% YoY growth in term deposits to Rs 57,55,530 mn.

Management Commentary

  • The Capital Adequacy ratio as of 30th June 2019 stood at ~16.9%; as against the regulatory requirement of ~11%.
  • Total provisions (comprising specific provisions, general provisions and floating provisions) were ~115% of the gross NPAs as of 30th June 2019 v/s 117% as of 31st March 2019. The Bank held floating provisions of Rs 14,510 mn as of 30th June 2019.
  • GNPAs ex-Agri stood at 1.17% as of 30th June 2019 v/s 1.09% as of 30th June 2018.
  • The Board of Directors has declared a special interim dividend of Rs 5 per equity share of Rs 2 to commemorate 25 years of the Bank’s operations.

Consensus Estimate (Source: market screener website)

  • The closing price of HDFC Bank is Rs 2,303/- on 22-Jul-19. It traded at 3.5x / 3.1x the consensus book value for FY20E /21E of Rs 650/ 751 respectively.
  • Consensus target price of Rs 2,717/- implies a P/B of 3.6 x on the FY21E book value of Rs 751/-.
By Bank, HDFC Bank 0 Comments Read more...
05 Aug

Rallis: Revamped channel policies and improved price realisation drives performance

Dated: 19th July 2019

1QFY20 Results

  • Rallis reported a 9% YoY increase in consolidated revenues at Rs 6,232 mn. The Standalone revenues of Rs 3,631 mn (+3% YoY) were driven by 12% YoY growth in exports. The seeds business (Metahelix subsidiary) revenues grew by 18% YoY to Rs 2,601 mn.
  • EBITDA margins improved by 70bps YoY to 15.2%. Increase in raw material costs was offset by savings in other expenses. EBITDA was up 14% YoY to Rs 948 mn.
  • The Effective tax rate for 1QFY20 was lower at 22% v/s 28% in 1QFY19. The Consolidated PAT grew by 24% YoY to Rs 678 mn v/s Rs 547 mn in 1QFY19.  

Management Commentary

  • Despite the delayed monsoon and impacted sowings; the revamped channel policies and improved price realisation led to a satisfactory performance both the agrochemicals and seeds segment in the domestic market.
  • International Crop Protection chemical business at Rs 1,416 mn grew by 12% YoY and contributed 39% of the standalone revenues.
  • The effective tax rate was lower during the quarter due to the classification of a part of the business as agriculture income for taxation purpose.
  • Other expenses declined due to the pushover of the product launch expenses into 2QFY20.
  • The Capex plans for FY20E stand at ~Rs 2,000 mn including backward integration for 2 of the molecules.
  • The Board of Directors of the Company had approved the Scheme of Amalgamation of Metahelix life Sciences Limited (a wholly-owned subsidiary) with the Company.

Consensus Estimate (Source: market screener website)

  • The closing price of Rallis is Rs 154/- on 19-Jul-19. It traded at 16x / 13x the consensus EPS for FY 20E / FY 21E EPS of Rs 9.6 / 11.5 respectively.
  • Consensus target price of Rs 180/- implies a PE of 16x on FY21E EPS of Rs 11.5.
By Agro chemicals, Rallis 0 Comments Read more...
05 Aug

Infosys (INFY IN): Constant currency growth rate pick-up in 1QFY20, management ups revenue guidance for FY20

1QFY20 Results

Dated: 15th July 2019

Infosys (INFY) reported 10.6% YoY revenue growth in USD terms; highest in last 10 quarters, to USD 3,131 mn in 1QFY20. The digital business revenues (36% of the total company revenues) increased by 39% YoY to USD 1,119 mn while core business revenues declined by 0.8% YoY to USD 2,012 mn. 
• The revenues in INR terms increased by 14% YoY to Rs 2,15,390 mn. Appreciation of INR v/s USD impacted the revenue growth during the period.
• Depreciation increased by 56% YoY to Rs 6,810 mn (v/s Rs 4,360 mn in 1QFY19) and financial interest stood at Rs 400mn on account of the adoption of IFRS 16-Leases effective April 1, 2019.
• The operating margins declined by ~320 bps YoY to 20.5%. Consolidated PAT grew by 5% YoY to Rs 37,980 mn

Management Commentary

• The management has raised the revenue growth guidance for FY20E from 7.5%-9.5% to 8.5%-10% YoY. It maintained operating margins guidance of 21%-23% for FY20 v/s 22.8% in FY19.
• INFY has till date bought back shares worth Rs 59.34 bn of its previously announced share buyback of Rs 82.60 bn. 
• INFY revised Capital Allocation Policy of the Company after taking into consideration the strategic and operational cash requirements. It increased the pay-out from 70% of Free Cash Flow (FCF) to ~85% of FCF cumulatively for over a 5-year period through a combination of semi-annual dividends/share buyback / special dividends.

Consensus Estimate (Source: market screener website)

• The closing price of INFY was Rs 727/- on 15-Jul-19. It traded at 19.0x / 17.0x the consensus EPS for FY 20E / FY 21E EPS of Rs 38.2 / 42.7 respectively. 
• Consensus target price of Rs 792/- implies a PE of 18.5x on FY21E EPS of Rs 42.7.

By Infosys, IT 0 Comments Read more...
05 Aug

Eicher Motors (EICHERMOT IN): 1QFY20 Volume decline increases the margin pressure

Dated: 1st August 2019

1QFY20 Results
• Eicher Motors (EICHER) reported a ~7% YoY decline in revenues in 1QFY20 at Rs 23,819 mn (v/s Rs 25,478 mn in 1QFY19). The volumes declined by 18% YoY to 1,83,589 units. The effective realisation increased by 14% YoY from Rs 1,12,455 per unit in 1QFY19 to Rs 1,28,616 per unit.
• EBITDA declined by 24% YoY to Rs 6,145 mn and EBITDA margin declined by ~600 bps YoY to 25.8%. The margins were impacted by the increase in costs related to the ABS (Anti-Lock Braking System) conversion. 
• The effective tax rate was lower by ~290 bps YoY to 33% for 1QFY20. The consolidated PAT stood at Rs 4,518 mn, lower by 22% YoY. 
• The Volvo Eicher JV performance: The volumes in 1QFY20 were lower by ~18% YoY. The revenues reported a lower decline of 14% YoY to Rs 22,550 mn due to the realisation growth by ~5% YoY. The EBITDA margins declined by ~360 bps YoY to 5.6%. The JV reported lower profits of Rs 383 mn in 1QFY20 v/s Rs 1,182 mn in 1QFY19. EICHER’s share in JV profits stood at Rs 209 mn, a decline by ~68% YoY.

Management Commentary

• EICHER increased the dealer network by 13 dealers to 928 from 915 in 4QFY19. EICHER management is keen on focussing on increasing reach in rural areas by adding more touchpoints. Eicher also intends to expand its international presence by increasing the exclusive international store count from 48 now to 80 over the next 18 – 24 months.
• Management maintained the CAPEX plans of ~Rs 7,000 mn for FY20 for Phase-2 of Vallam Vadagal plant, construction of the Technology Centre, development of new products and to expand RE’s portfolio for global markets. The production will start in 1-1.5 months.
• Management maintained the production guidance for FY20E is 9,50,000 units. EICHER mentioned that the festive season sales will be key monitorable and the industry may also benefit from the pre-buying before the BS-VI implementation in April 2020.

Consensus Estimate (Source: market screener website)

• The closing price of Eicher was Rs 16,570/- as of 01-Aug-2019. It traded at 19x / 18x / 17x the consensus EPS for 20E /21E /22E EPS of Rs 852/ 943 / 991 respectively. 
• Consensus target price of Rs 19,441/- implies a PE of 20x on FY22E EPS of Rs 991/-

By Auto, Eicher Motors 0 Comments Read more...