07 February 2024 HSIE Results Daily

HSIE Results Daily

Contents
Results Reviews
▪ Godrej Properties: Godrej Properties Ltd (GPL) reported the highest-ever
quarterly presales worth INR 57.2bn (+76/+14% YoY/QoQ), with a booking
area of 4.3msf (-2/-17% YoY/QoQ). On the back of the strong presales, GPL
has achieved ~93% of INR 140bn+ of targeted presales in FY24; we now expect
INR 50bn+ presales during Q4FY24, taking FY24 presales to INR 175-180bn.
GPL added one new project with a gross development value (GDV) of INR
12.5bn in Q3FY24, taking the total YTD GDV addition to INR 84bn. GPL
expects to achieve INR 150bn of GDV addition in FY24. However, given a
strong launch pipeline of ~18msf and growth visibility of 2-3 years, GPL will
be adding projects on a replacement basis in most of the existing markets.
Repair expense for the Gurugram project has been under INR 250mn till now
(expected total repair expense is INR 1.6bn). In addition to this, GPL has
bought back 100 units for INR 850mn and expects INR 1-2bn worth of total
buybacks (100-200 units out of 1,100 total units). We reiterate ADD with SOTP
valuation of INR 2,077/sh.
▪ Ashok Leyland: Ashok Leyland’s Q3 PAT at INR 5.8bn and margin at 12%
were both higher than our estimates. With a high base in Q4 and the likely
impact of upcoming general elections, we expect the MHCV industry to post
mid-single-digit growth for FY24. We are of the view that the best of the CV
industry is now behind us, after two years of very strong growth. The stock
is likely to remain range-bound from here on, given (1) a decelerating growth
trend in CVs; (2) the need to support Switch in the foreseeable future, which
is likely to hurt returns (AL to invest INR 12bn in Switch in FY24); and (3) the
resultant rise in debt. Although AL hopes to achieve EBITDA margins in the
mid-teens over the medium term, increasing financing costs will likely offset
the benefit of higher margins. Reiterate SELL with a revised TP of INR 151
(from INR 155 earlier), as we roll forward to Mar-26 EPS.
▪ Fsn E-commerce Ventures (Nykaa): Nykaa’s Q3 top line grew 22.3% YoY to
INR17.89bn (HSIE: INR17.98bn). BPC growth continues to moderate (22.8%
YoY for 9MFY24; vs 42% CAGR over FY19-23). BPC/Fashion revenue grew
19/20% respectively, lower than their respective GMV growth (24/40%), as (1)
higher brand discounts put downward pressure on take rates (lower GMV-
to-NSV conversion) and (2) ad/service income was lower (note: ad income is
estimated to have declined by ~150bps YoY for 9MFY24). Given the rising
skew of non-BPC GMV; contribution margins continued to contract (-72bps).
EBITDAM for Q3 stood at 5.5% (HSIE: 5.8%). We largely maintain our
FY25/26 EBITDA estimates and REDUCE rating with a DCF-based TP of
INR145/sh (implying 68x FY26 EV/EBITDA).

▪ Sundaram Finance: Sundaram Finance (SUF) earnings were largely in line

with our estimates with healthy AUM growth (+26% YoY) and pristine asset
quality, partially offset by NIM compression. AUM growth was driven by
non-M&HCV segments, particularly retail CV (+56% YoY). SUF continues to
be focused on product and geographic diversification strategy to sustain its
growth momentum and drive margins. However, the rising cost of funds,
HSIE Research Team
concomitant with high competitive intensity, is likely to continue weighing in
[email protected]
on margins. Further, loan growth is likely to taper off (AUM CAGR of ~19%
during FY24E-FY26E) with a softening CV and PV industry outlook, which is
evident in moderation of disbursements (+15% YoY vs. 35% in Q2FY24).

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HSIE Results Daily
While the asset quality continues to be pristine, driving healthy profitability
(core RoE of ~17-18%), the 60% valuation re-rating over the past year leaves
very little margin of safety. We downgrade SUF to ADD (from BUY) with a
revised SoTP-based TP of INR3,610 (standalone entity at 3.7x Sep-25 ABVPS).

▪ Bata India: Revenue was flat YoY at INR9.03bn (four-year CAGR: 2.2%; HSIE:
INR10bn), led by mid-single digits, while premiumization continues to
backstop revenue decline. EBITDAM contracted 270bps to 20.2% (HSIE:
25.8%) despite premiumization-led GM gains as (1) Bata stepped up brand
and IT investments (impact: 300 bps in Q3) and (2) negative operating
leverage kicked in. We’ve cut our FY25/26 EPS estimates by 7/4% respectively
(to account for a slower pick-up in sales momentum) and maintain a REDUCE
rating with a DCF-based TP of INR1,450/sh, implying 36x FY26 P/E.
▪ Navin Fluorine International: We retain a BUY on Navin Fluorine
International Ltd (NFIL), with a target price of INR 4,014, on the back of (1)
earnings visibility, given long-term contracts; (2) tilt in sales mix towards
high-margin high-value business; (3) capacity expansion led growth; and (4)
strong R&D infrastructure. EBITDA/APAT were 39/44% below our estimates,
owing to a 4% fall in revenue, higher-than-expected raw material cost, other
operation expenses, and employee expenses.

▪ Fine Organic Industries: Our SELL recommendation on Fine Organics with

a TP of INR 3,842 is premised on (1) the delay in capacity addition; (2) sluggish
demand in the US and European markets; and (3) a sharp fall in finished
product prices. Q3 EBITDA/APAT were 7/5% below our estimates, owing to
lower-than-expected total revenue, offset by higher-than-expected operating
expenses.

▪ PNC Infratech: PNC Infratech (PNC) reported Q3FY24

revenue/EBITDA/APAT of INR 18/2.4/1.5bn, missing our estimates by
2/2.7/2%. PNC announced a stake sale in 12 assets to KKR for a total equity
value of INR 29bn vs equity investment of INR 17.4bn. The deal is expected
to close by March 2025. The order book (OB) as of Dec’23 stood at INR 173.8bn
(~2.5x FY23 revenue, including L1 of INR 55.9bn excluding GST), with the
road EPC segment contributing 75% of it. It cut its FY24 revenue growth
guidance to 10% YoY (vs 15% earlier), with an EBITDA margin of 13.3-13.5%,
an order inflow (OI) of INR 80bn and capex of INR 0.5bn. The company plans
to infuse INR 1.2/4.5/3.6bn in Q4FY24/25/26. PNC has a net cash position of
INR 0.4bn as of Dec’23. Given better margins and a robust balance sheet, we
maintain BUY, with an unchanged TP of INR 520/sh (14x Dec-25E, 1.6x P/BV
for HAM equity investment).

▪ TTK Prestige: TTK Prestige (TTKPT) reported a soft 3Q performance as post

a decent festive season sale (below expectation), the channel resorted to de-
stocking, given the prevalent challenging demand environment. Weakness in
general trade persisted while e-comm, MT and exclusive stores fared better.
In addition to the shift in consumer wallet, the category is witnessing a return
of small/regional players, given moderating RM inflation, which has
increased the competitive intensity (both online/offline channels) with brands
offering discounts, especially for entry-level products. Despite higher sales
promotion, TTKPT maintained its GM while growing EBITDA by 10% on
better cost control/mix. However, we expect competitive pressure (more in
the mid-economy segment) and slow demand to continue to impact
performance in the near term. We cut our earnings by 0-4% over FY24-26 and
value the stock on 30x Dec-25 EPS to derive a TP of INR 750. Maintain
REDUCE.

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HSIE Results Daily
▪ Prince Pipes and Fittings: We maintain our ADD rating on Prince Pipes, with
a lower target price of INR 675/sh (30x its Mar-26E EPS). In Q3FY24, Prince
reported sub-par volume, down 2% YoY, and continued to lose market share
while its peers delivered double-digit volume growth. Adjusted for inventory
losses, unitary EBITDA fell to INR 20/kg in Q3 vs INR 22/21 per kg YoY/QoQ.
Management is hopeful of arresting its market share loss from Q1FY25
onwards, on the back of various corrective actions it has taken so far. Prince
is setting up a greenfield pipe plant in Bihar (~50K MT expected in Q4FY25,
Capex INR 2.2bn), which will expand its plumbing capacity by 15%. In
bathware, it is ramping up its sales and distribution network and expects
EBITDA to break even in the next two years.
▪ Orient Cement: We maintain our REDUCE rating on Orient Cement with a
revised TP of INR 205/share (7.5x Mar-26E EBITDA). In Q3FY24, cement
volume declined 3% YoY owing to weak demand (especially B2C). NSR
rebounded 7% QoQ (+5% YoY). Unit opex rose 3% QoQ on higher unit fixed
and freight costs. This moderated the margin recovery. Thus, unitary EBITDA
increased INR 220/MT QoQ to INR 628/MT (up INR 200/MT YoY).
Management expects 5% YoY volume growth in Q4 to 1.8mn MT (Jan sales
were weak). Management aims to commission the planned brownfield 2/3mn
MT clinker/cement Chittapur expansion (for a capex of INR 15bn) by the end
of FY26.

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HSIE Results Daily

Godrej Properties
Premium launches to drive rerating ADD
Godrej Properties Ltd (GPL) reported the highest-ever quarterly presales worth
CMP (as on 06 Feb 2024) INR 2,300
INR 57.2bn (+76/+14% YoY/QoQ), with a booking area of 4.3msf (-2/-17%
YoY/QoQ). On the back of the strong presales, GPL has achieved ~93% of INR Target Price INR 2,077
140bn+ of targeted presales in FY24; we now expect INR 50bn+ presales during NIFTY 21,929
Q4FY24, taking FY24 presales to INR 175-180bn. GPL added one new project
with a gross development value (GDV) of INR 12.5bn in Q3FY24, taking the KEY
OLD NEW
total YTD GDV addition to INR 84bn. GPL expects to achieve INR 150bn of CHANGES

GDV addition in FY24. However, given a strong launch pipeline of ~18msf and Rating ADD ADD

growth visibility of 2-3 years, GPL will be adding projects on a replacement Price Target INR 2,077 INR 2,077
basis in most of the existing markets. Repair expense for the Gurugram project FY24E FY25E FY26E
EPS Change
has been under INR 250mn till now (expected total repair expense is INR 1.6bn). % - - -
In addition to this, GPL has bought back 100 units for INR 850mn and expects
INR 1-2bn worth of total buybacks (100-200 units out of 1,100 total units). We
KEY STOCK DATA
reiterate ADD with SOTP valuation of INR 2,077/sh.
▪ Q3FY24 financial highlights: Revenue came in at INR 3.3bn (+68%/-4% Bloomberg code GPL IN

YoY/QoQ, a 49% miss). There was no new project delivery resulting in No. of Shares (mn) 278
revenue underperformance. EBITDA: loss of INR 416mn (vs INR MCap (INR bn) / ($ mn) 640/7,821
168mn/(617)mn Q3FY23/Q2FY24) against an estimated loss of INR 40mn.
6m avg traded value (INR mn) 1,378
APAT: INR 627mn (+11%/-14% YoY/QoQ, a 52% miss). GPL is targeting
12.5msf of deliveries for FY24 with 6.5msf delivered 9MFY24. 52 Week high / low INR 2,457/1,005

▪ Record quarterly presales; guiding for stronger 4QFY24: Presales for

Q3FY24 were the highest-ever quarterly presales worth INR 57.2bn (+76/+14% STOCK PERFORMANCE (%)
YoY/QoQ), with a booking area of 4.3msf (-2/-17% YoY/QoQ). This was on the 3M 6M 12M
back of mainly two projects: Godrej Aristocrat, Gurugram, which was GPL’s
Absolute (%) 26.2 49.8 98.9
most successful launch ever achieving a booking value of INR 26.7bn from
Relative (%) 15.0 39.9 79.6
1.35msf of area sold and Godrej Ananda, Bengaluru, achieving a booking
value of INR 5.7bn from 0.84msf of area sold. The overall average price
realisation for the quarter was INR 13,180psf (+79%/+37%, YoY/QoQ). GPL SHAREHOLDING PATTERN (%)
has launched 13.53msf of projects so far in the year and plans to launch a total Sep-23 Dec-23
of 26msf for the full year FY24. The Ashok Vihar project Ph1 and Worli project
Promoters 58.48 58.48
are expected to launch in H1FY25. For FY24, GPL expects to cross its presales
FIs & Local MFs 4.61 4.69
guidance of INR 140bn to INR 175-180bn.
▪ BD activity has been below expectation during 9MFY24, given accelerated FPIs 29.25 29.73

land bank addition in the last two years: In Q3FY24, GPL added one new Public & Others 7.66 7.10
project with a GDV of INR 12.5bn, taking the total YTD GDV addition to INR Pledged Shares - -
84bn (56% of INR 150bn targeted for full-year FY24). Given its strong launch
Source: BSE
pipeline, GPL has growth visibility of 2-3 years and will add projects on a
replacement basis rather than having a lumpy transaction (except for new
potential markets like Hyderabad). Collections in Q3FY24 were strong and
stood at INR 24.1bn (+43/+1% YoY/QoQ), resulting in a net operating cash
flow of INR 7.9bn. Net debt, however, rose to INR 69bn (INR 62bn in Sep'23)
with net D/E at 0.72x owing to investment in land and approvals cost.
Consolidated financial summary (INR mn)
YE March (INR mn) 3QFY24 3QFY23 YoY (%) 2QFY24 QoQ (%) FY23 FY24E FY25E FY26E
Net Sales 3,304 1,962 68 3,430 (4) 22,523 25,901 29,786 34,254
EBITDA (416) (168) 148 (617) (33) 2,476 3,692 4,767 6,025
APAT 627 564 11 726 (14) 5,714 6,316 6,630 7,370
Diluted EPS (INR) 2.3 2.0 11.2 2.6 (13.7) 20.6 22.7 23.9 26.5
P/E (x) 111.9 101.3 96.5 86.8
EV / EBITDA (x) 260.5 177.7 135.7 107.9 Parikshit D Kandpal, CFA
RoE (%) 6.4 6.6 5.8 5.0 [email protected]
Source: Company, HSIE Research +91-22-6171-7317
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HSIE Results Daily

Ashok Leyland
Moderating demand to weigh on multiples SELL
Ashok Leyland’s Q3 PAT at INR 5.8bn and margin at 12% were both higher CMP (on 06 Feb 2024) INR 180
than our estimates. With a high base in Q4 and the likely impact of upcoming
Target Price INR 151
general elections, we expect the MHCV industry to post mid-single-digit
growth for FY24. We are of the view that the best of the CV industry is now NIFTY 21,929
behind us, after two years of very strong growth. The stock is likely to remain
range-bound from here on, given (1) a decelerating growth trend in CVs; (2) the KEY
OLD NEW
CHANGES
need to support Switch in the foreseeable future, which is likely to hurt returns
Rating SELL SELL
(AL to invest INR 12bn in Switch in FY24); and (3) the resultant rise in debt.
Although AL hopes to achieve EBITDA margins in the mid-teens over the Price Target INR 155 INR 151
medium term, increasing financing costs will likely offset the benefit of higher FY24E FY25E
margins. Reiterate SELL with a revised TP of INR 151 (from INR 155 earlier), as EPS %
-0.6% -0.6%
we roll forward to Mar-26 EPS.
▪ Q3 earnings ahead of our estimates: Ashok Leyland’s Q3 PAT at INR 5.8bn KEY STOCK DATA
was higher than our estimates. Notwithstanding lower volumes, gross
Bloomberg code AL IN
margins expanded 130bps QoQ, aided by better realizations. The margin at
12% was higher than our estimate of 10.8%, aided by softer commodity prices. No. of Shares (mn) 2,936

The tax rate in Q3 remained elevated at 36% due to deferred tax adjustment. MCap (INR bn) / ($ mn) 528/6,461

▪ Call takeaways: (1) Truck demand is currently being driven by tractor-trailers 6m avg traded value (INR mn) 2,586
and tippers. (2) Domestic M&HCV industry grew 10%/9% in 52 Week high / low INR 192/133
H1FY24/9MFY24 respectively. Growth in Q3 was subdued due to elections in
key states. Q4 is likely to remain subdued due to the high base of Q4FY23 and STOCK PERFORMANCE (%)
union elections. Recovery is expected in 2HFY25. (3) In the M&HCV segment, 3M 6M 12M
AL's market share has increased to 35% in 9MFY24 (31.4% in 1HFY24). With
Absolute (%) 6.4 (1.4) 17.7
a significant competition reaction expected, AL will focus on profitability and
Relative (%) (4.8) (11.2) (1.6)
not offer aggressive discounts to gain further market share. (4) The demand
for buses is being driven by the replacement of existing fleets and increasing
SHAREHOLDING PATTERN (%)
demand for school and staff transportation. (5) The earlier double-digit
EBITDA margin guidance has been revised to mid-teens EBITDA margin for Sep-23 Dec-23

the medium term. (6) Its order book in the e-bus segment stands at 1,000 units. Promoters 51.53 51.53
It plans to launch its first LCV EV by Q4FY24 and it has already received LoIs FIs & Local MFs 16.38 14.66
for about 12-13k e-LCVs from multiple customers. (7) AL is seeing very good
FPIs 20.05 20.49
traction from the defence segment and it expects to end FY24 with INR 9-10bn
Public & Others 12.04 13.25
revenue from this segment (INR 3bn done in H1). (8) As a part of the equity
infusion plan of INR 12bn in Switch Mobility announced earlier, AL has Source : BSE

invested INR 6.6bn in Q3. The balance will be invested in one or more Pledged shares as % of total shares

tranches over the next few months. (9) Capex incurred for 9MFY24 is INR
2.9bn (INR 0.9bn incurred in 3QFY24). (10) Net debt stood at INR 17.5bn, an
increase of INR 6bn QoQ after fund infusion in Switch mobility.

Quarterly/annual financial summary

Q3 Q3 YoY Q2 QoQ
YE Mar (INR mn) FY23 FY24E FY25E FY26E
FY24 FY23 (%) FY24 (%)
Net Sales 92,730 90,297 2.7 96,380 -3.8 361,441 385,164 405,086 429,317
EBITDA 11,139 7,973 39.7 10,798 3.2 29,307 40,635 41,319 43,790
APAT 5,806 3,544 63.8 5,839 -0.6 12,955 21,415 20,596 22,130
Diluted EPS (INR) 2.0 1.2 63.8 1.99 -0.6 4.4 7.3 7.0 7.5
P/E (x) 39.4 24.6 25.6 23.8
EV / EBITDA (x) 16.0 11.5 10.9 10.4
RoCE (%) 19.1 25.1 22.4 23.7
Source: Company, HSIE Research Maitreyee Vaishampayan
[email protected]
+91-22-6171-7308

Page | 5
HSIE Results Daily

Fsn E-commerce Ventures (Nykaa)

Broadly in-line performance; thesis remains on track REDUCE
Nykaa’s Q3 top line grew 22.3% YoY to INR17.89bn (HSIE: INR17.98bn). BPC CMP(as on 06 Feb 2024) INR 160
growth continues to moderate (22.8% YoY for 9MFY24; vs 42% CAGR over
Target Price INR 145
FY19-23). BPC/Fashion revenue grew 19/20% respectively, lower than their
respective GMV growth (24/40%), as (1) higher brand discounts put downward NIFTY 21,929
pressure on take rates (lower GMV-to-NSV conversion) and (2) ad/service
KEY
income was lower (note: ad income is estimated to have declined by ~150bps OLD NEW
CHANGES
YoY for 9MFY24). Given the rising skew of non-BPC GMV; contribution
Rating REDUCE REDUCE
margins continued to contract (-72bps). EBITDAM for Q3 stood at 5.5% (HSIE:
Price
5.8%). We largely maintain our FY25/26 EBITDA estimates and REDUCE rating Target
INR 145 INR 145
with a DCF-based TP of INR145/sh (implying 68x FY26 EV/EBITDA). FY25E FY26E
▪ Q3FY24 highlights: Revenue grew 22.3% to INR17.89bn (vs HSIE: EBITDA%
-0.5 +0.4
INR17.98bn). BPC AUTC/orders grew 15.6/16.8% YoY respectively in Q3 (to
11.1mn each) and Fashion AUTC/orders grew 20.8/17.6% YoY respectively in
KEY STOCK DATA
Q3 (to 2.9/2mn resp). BPC/Fashion revenue grew 19/20% (HSIE:
INR15.05/1.53bn respectively), lower than their respective GMV growth Bloomberg code NYKAA IN
(24/40%) as (1) higher brand discounts put downward pressure on take rates No. of Shares (mn) 2,855
(lower GMV-to-NSV conversion) and (2) ad/service income was lower (note:
MCap (INR bn) / ($ mn) 458/5,601
ad income is estimated to have declined by ~150bps YoY for 9MFY24). CAC
for non-BPC segments (Fashion/eB2B) reduced meaningfully as Nykaa 6m avg traded value (INR mn) 1,284
improved its order-to-visit conversion rates. Interestingly, in BPC, despite the 52 Week high / low INR 196/114
higher salience of existing customers in GMV, CAC increased 90bps YoY to
8.9% in 9MFY24—could this mean the cost of retaining existing BPC traffic is STOCK PERFORMANCE (%)
getting more expensive? It certainly warrants closer monitoring. GM
3M 6M 12M
contracted 86bps YoY to 42.5% (HSIE: 43.5%) due to (1) rising non-BPC skew
and (2) lower ad/service income. Despite this, EBITDAM expanded 18bps Absolute (%) 8.9 8.7 16.3
YoY to 5.5% (HSIE: 5.8%) as Nykaa improved on its fixed cost absorption. Relative (%) (2.2) (1.1) (3.0)
EBITDA/APAT grew 26/106% to INR988/175mn (HSIE: INR1,035/215mn).
▪ Outlook: Ex-ad income, the lack of non-linear monetisation levers forces us SHAREHOLDING PATTERN (%)
to keep our valuation compass somewhere between a linear business and a
Sep-23 Dec-23
pure platform. We largely maintain our FY25/26 EBITDA estimates and our
REDUCE rating with a DCF-based TP of INR145/sh (implying 68x FY26 Promoters 52.26 52.24
EV/EBITDA). FIs & Local MFs 10.73 10.88
Quarterly financial summary
FPIs 9.84 10.65
3Q 3Q YoY 2Q QoQ
(Rs mn) FY22 FY23 FY24E FY25E FY26E
FY24 FY23 (%) FY24 (%) Public & Others 27.17 26.23
Net Revenue 17,888 14,628 22.3 15,070 18.7 37,739 51,438 62,992 81,787 1,02,805
Pledged Shares
EBITDA 988 782 26.4 806 22.5 1,633 2,560 2,918 5,540 8,134
APAT 175 85 105.7 78 123.8 413 248 67 1,807 3,620 Source : BSE
EPS (Rs) 0.1 0.0 105.5 0.0 123.8 0.9 0.1 0.0 0.6 1.3
Pledged shares as % of total shares
P/E (x) 183.1 1,844.5 6,835.7 253.4 126.5
EV/EBITDA (x) 519.6 390.7 273.1 117.0 75.1
Core RoCE(%) 4.4 2.6 1.4 8.1 12.0
Source: Company, HSIE Research, Standalone Financials
Change in estimates
FY24E FY25E FY26E
(Rs mn) Change Change Change
New Old New Old New Old
(%) (%) (%)
Revenue 62,992 63,377 (0.6) 81,787 83,233 (1.7) 1,02,805 1,05,162 (2.2)
Jay Gandhi
Gross Profit 27,013 27,460 (1.6) 34,870 35,582 (2.0) 43,341 44,487 (2.6)
jay.gandhi @hdfcsec.com
Gross Profit Margin(%) 42.9 43.3 (44 bps) 42.6 42.7 (11 bps) 42.2 42.3 (15 bps)
EBITDA 2,918 2,797 4.3 5,540 5,568 (0.5) 8,134 8,232 (1.2) +91-22-6171-7320
EBITDA margin (%) 4.6 4.4 22 bps 6.8 6.7 8 bps 7.9 7.8 8 bps
APAT 67 8 695.3 1,807 1,816 (0.5) 3,620 3,606 0.4
APAT margin (%) 0.1 0.0 9 bps 2.2 2.2 3 bps 3.5 3.4 9 bps Riddhi Shah
EPS (Rs) 0.02 0.00 695.3 0.63 0.64 (0.5) 1.27 1.26 0.4 riddhi.shah @hdfcsec.com
Source: Company, HSIE Research +91-22-6171-7359
Page | 6
HSIE Results Daily

Sundaram Finance
Growth tailwinds receding; downgrade to ADD ADD
Sundaram Finance (SUF) earnings were largely in line with our estimates with
CMP (as on 05 Feb 2024) INR3,698
healthy AUM growth (+26% YoY) and pristine asset quality, partially offset by
NIM compression. AUM growth was driven by non-M&HCV segments, Target Price INR3,610
particularly retail CV (+56% YoY). SUF continues to be focused on product and NIFTY 21,772
geographic diversification strategy to sustain its growth momentum and drive
margins. However, the rising cost of funds, concomitant with high competitive KEY
OLD NEW
intensity, is likely to continue weighing in on margins. Further, loan growth is CHANGES

likely to taper off (AUM CAGR of ~19% during FY24E-FY26E) with a softening Rating BUY ADD

CV and PV industry outlook, which is evident in moderation of disbursements Price Target INR 3500 INR 3610
(+15% YoY vs. 35% in Q2FY24). While the asset quality continues to be pristine, FY24E FY25E
driving healthy profitability (core RoE of ~17-18%), the 60% valuation re-rating EPS %
0.0% 2.0%
over the past year leaves very little margin of safety. We downgrade SUF to
ADD (from BUY) with a revised SoTP-based TP of INR3,610 (standalone entity
at 3.7x Sep-25 ABVPS). KEY STOCK DATA

▪ Product diversification drives loan growth; expect moderation ahead: SUF’s Bloomberg code SUF IN
product and geographic diversification strategy has helped drive loan growth No. of Shares (mn) 111
with the non-M&HCV segment’s loan growth at ~33% YoY, while the north
MCap (INR bn) / ($ mn) 411/5,024
region AUM grew by 29% YoY. Although this strategy is likely to sustain the
growth momentum going ahead, a softer outlook on CV and PV segments is 6m avg traded value (INR mn) 239

likely to moderate loan growth closer to ~17-18%. 52 Week high / low INR 3,865/2,190
▪ Yield reflation partly offsets NIM compression: NIMs (calculated) declined
10bps QoQ to 4.9%, driven by the rising cost of funds (7.1%; +30bps QoQ). STOCK PERFORMANCE (%)
The cost of funds is likely to inch up further, given the tight liquidity 3M 6M 12M
environment, and limited levers (CP exposure at 11%), although SUF’s cost of
Absolute (%) 14.8 43.4 60.6
funds remains best-in-class. However, the shift in loan mix towards retail CVs
and used vehicles has driven a marginal yield reflation and is expected to help Relative (%) 3.3 34.3 42.7
stabilise NIMs going ahead.
▪ HFC subsidiary - turning the corner on growth: SUF’s HFC subsidiary SHAREHOLDING PATTERN (%)
continues to sustain its business momentum, with disbursals/AUM growth of Sep-23 Dec-23
30%/23% YoY, driven by the non-housing portfolio. Investments in branches
Promoters 38.5 37.9
(33 added during Sep-22) and headcount are likely to sustain the growth
momentum. The AMC subsidiary delivered steady AUM growth (+18.5% FIs & Local MFs 13.1 13.5

YoY), and better profitability (+50% YoY). The GI business continues to FPIs 13.2 13.0
grapple with a high COR (116%), while GWP growth has moderated to ~4% Public & Others 35.2 35.6
YoY.
Pledged Shares 0.0
▪ Robust franchise; limited margin of safety: SUF remains a robust franchise
with strong profitability (core RoE of ~17-18%) and pristine asset quality Source: BSE

(cross-cycle credit costs of ~50bps). The company’s diversification strategy Pledged shares as % of total shares
has further helped SUF solve for growth. However, most of the positives are
factored into the current stock price, especially given the current stage of the
cycle, driving our downgrade to ADD. Deepak Shinde
Financial Summary [email protected]
(INR bn) Q3FY24 Q3FY23 YoY (%) Q2FY24 QoQ (%) FY23 FY24E FY25E FY26E
+91-22-6171-7323
NII 5.0 4.4 14.2 4.9 3.2 16.9 19.5 23.7 27.9
PPOP 4.1 3.6 15.4 5.3 (22.0) 15.5 18.6 22.7 26.9
PAT 3.0 2.4 23.6 3.7 (18.1) 10.9 12.9 15.4 18.2
Krishnan ASV
EPS (INR) 27.0 21.8 23.7 33.0 (18.1) 98.0 116.4 138.6 164.2 [email protected]
ROAE (%) 14.9 15.7 16.4 16.9 +91-22-6171-7314
ROAA (%) 2.9 2.8 2.8 2.8
ABVPS (INR) 479.3 564.4 671.8 800.3 Akshay Badlani
P/ABV (x) 5.8 5.0 4.2 3.5 [email protected]
P/E (x) 28.6 24.1 20.2 17.1 +91-22-6171-7325
Source: Company, HSIE Research
Page | 7
HSIE Results Daily

Bata India
Continues to be a laggard REDUCE
Revenue was flat YoY at INR9.03bn (four-year CAGR: 2.2%; HSIE: INR10bn), CMP(as on 06 Feb 2024) INR 1,442
led by weak consumer demand. Off-take in <INR1,000 product range remains
Target Price INR 1,450
weak. Volume declined by mid-single digits, while premiumization continues
to backstop revenue decline. EBITDAM contracted 270bps to 20.2% (HSIE: NIFTY 21,929
25.8%) despite premiumization-led GM gains as (1) Bata stepped up brand and
IT investments (impact: 300 bps in Q3) and (2) negative operating leverage KEY
OLD NEW
CHANGES
kicked in. We’ve cut our FY25/26 EPS estimates by 7/4% respectively (to account
Rating REDUCE REDUCE
for a slower pick-up in sales momentum) and maintain a REDUCE rating with
a DCF-based TP of INR1,450/sh, implying 36x FY26 P/E. Price Target Rs 1,500 Rs 1,450

▪ Q3FY24 highlights: Revenue grew 0.4% YoY to INR9.03bn (HSIE: EBITDA %

FY25E FY26E

INR10bn), led by weak consumer demand post the festive season. The sub- -6.7 -3.8
INR1,000 product range (~34% of sales for 9MFY24) continues to remain
under pressure while premium categories continue to grow. Volume declined KEY STOCK DATA
by mid-single digits for the quarter. SSSG is likely to be negative over Bloomberg code BATA IN
9MFY24. Bata added 54 stores (net) in Q3 (franchisee/total store count:
No. of Shares (mn) 129
509/1,835). Digital sales contribution from Bata.in/B2C/B2B stood at 6/34/60%
in Q3. Significant store refreshment has been done in last 18 months and it is MCap (INR bn) / ($ mn) 185/2,267
expected to continue for next 1-2 quarters. Premiumization aided GMs (up 6m avg traded value (INR mn) 486
129bps YoY at 56.1%). However, (1) a step-up in brand and tech investments
52 Week high / low INR 1,771/1,381
(300bps) and (2) low sales density-led negative operating leverage resulted in
an EBIDTAM contraction of 270bps (20.2% vs HSIE: 25.8%). Reported
STOCK PERFORMANCE (%)
EBITDA/APAT declined 11.5/30.3% YoY in Q3 to INR1.82/0.58bn (HSIE:
INR2.6/1.19bn). 3M 6M 12M

▪ Outlook: Treading the growth-margin equation while pivoting to different

Absolute (%) (7.6) (18.0) (5.3)

growth channels (wholesale, franchise) and realigning assortment isn’t a walk Relative (%) (18.7) (27.8) (24.6)
in the park. Execution so far has been weak as expected. We’ve cut our
FY25/26 EBITDA estimates by 6/4% respectively and maintain our REDUCE SHAREHOLDING PATTERN (%)
rating on Bata with a DCF-based TP of INR1,450/sh, implying 36x Sep-25 P/E. Sep-23 Dec-23
Quarterly financial summary Promoters 50.16 50.16
Q3 Q3 YoY Q2 QoQ
(Rs mn) FY22 FY23 FY24E FY25E FY26E FIs & Local MFs 19.89 19.05
FY24 FY23 (%) FY24 (%)
Net Revenue 9,035 9,002 0.4 8,191 10.3 23,877 34,516 35,163 39,670 44,691 FPIs 7.51 10.61
EBITDA 1,824 2,061 (11.5) 1,817 0.4 1,318 4,822 4,862 5,618 6,709
APAT 580 832 (30.3) 340 70.6 1,030 3,230 3,189 4,061 5,111 Public & Others 22.44 20.18
EPS (Rs) 4.5 6.5 (30.3) 2.64 70.6 8.0 25.1 24.8 31.6 39.8 Pledged Shares 0 0
P/E (x) 179.9 57.4 58.1 45.6 36.2
Source : BSE
EV/EBITDA (x) 133.2 37.3 36.2 30.6 24.9
Core RoCE(%) 6.0 31.9 26.1 28.7 33.2 Pledged shares as % of total shares
Source: Company, HSIE Research, Standalone Financials

Change in estimates
FY24E FY25E FY26E
(Rs mn) Change Change Change
New Old New Old New Old
(%) (%) (%)
Revenue 35,163 36,425 (3.5) 39,670 41,118 (3.5) 44,691 46,341 (3.6)
Gross Profit 19,823 20,379 (2.7) 21,711 22,314 (2.7) 24,118 24,784 (2.7)
Gross Profit Margin
56.4 55.9 43 bps 54.7 54.3 46 bps 54.0 53.5 49 bps Jay Gandhi
(%)
Pre-IND AS EBITDA 4,862 5,435 (10.5) 5,618 6,151 (8.7) 6,709 7,264 (7.6) jay.gandhi @hdfcsec.com
Pre-IND AS EBITDA +91-22-6171-7320
13.8 14.9 (109 bps) 14.2 15.0 (80 bps) 15.0 15.7 (66 bps)
margin (%)
APAT 3,189 3,644 (12.5) 4,061 4,352 (6.7) 5,111 5,313 (3.8)
Riddhi Shah
APAT margin (%) 9.1 10.0 (94 bps) 10.2 10.6 (35 bps) 11.4 11.5 (3 bps)
[email protected]
EPS 24.8 28.4 (12.5) 31.6 33.9 (6.7) 39.8 41.3 (3.8)
Source: Company, HSIE Research
+91-22-6171-7359

Page | 8
HSIE Results Daily

Navin Fluorine International

Long-term contracts to drive growth BUY
We retain a BUY on Navin Fluorine International Ltd (NFIL), with a target price
CMP (as on 06 Feb 2024) INR 3,262
of INR 4,014, on the back of (1) earnings visibility, given long-term contracts;
(2) tilt in sales mix towards high-margin high-value business; (3) capacity Target Price INR 4,014
expansion led growth; and (4) strong R&D infrastructure. EBITDA/APAT were NIFTY 21,929
39/44% below our estimates, owing to a 4% fall in revenue, higher-than-
expected raw material cost, other operation expenses, and employee expenses. KEY
OLD NEW
▪ Financial Q3 performance: Revenue fell 6% sequentially to INR 5,018mn,
CHANGES
Rating BUY BUY
mainly owing to a weak performance of specialty chemicals and CDMO
business unit (BU). Sales were lower due to (1) sales of a campaign in CDMO Price Target INR 4,354 INR 4,014
deferred to Q3 due to a change in product specification and method of FY24E FY25E
analysis and (2) the deferral of sales of two new products in specialty EPS %
(11.2) (10.3)
chemicals BU. The cost of goods sold increased because of higher-value
inventory destocking. Other operating expenses increased owing to one-time
expenses. EBITDA came in at INR 757mn (-23/+51% QoQ/YoY), with EBITDA KEY STOCK DATA

margin deteriorating to ~15% (-576/-1253bps QoQ/ YoY). Management Bloomberg code NFIL IN
expects improved revenue visibility in FY25 on the back of a ramp-up in No. of Shares (mn) 50
utilisation of the HFO plant and MPP-1 plant.
MCap (INR bn) / ($ mn) 162/1,977
▪ Segmental Q3 performance: Speciality chemicals BU (35% of revenue mix)
6m avg traded value (INR mn) 879
fell 5% QoQ to INR 1.77bn owing to deferral of two campaigns at Dahej and
inventory destocking. HPP BU (50% of revenue mix) was up by 5.5% QoQ to 52 Week high / low INR 4,946/3,203
INR 2.5bn. Refrigerant gas prices remained under pressure in the
international market owing to dumping by Chinese producers. The R32 plant STOCK PERFORMANCE (%)
has stabilised and is currently operating at optimum capacity. CDMO BU
3M 6M 12M
(14% of revenue mix) increased 52% QoQ to INR 0.73bn. The company will
incur a capex of INR 4.5 bn for the set-up of new HF capacity at Dahej and Absolute (%) (10.2) (27.6) (20.6)

INR 0.84 bn for capacity expansion of R32, to be commissioned by Q4FY25. Relative (%) (21.4) (37.4) (39.9)
Also, the company will incur a capex for cGMP4 amounting to INR2.88 bn, of
which it will incur a capex of INR1.6 bn in phase-I which will support MSA SHAREHOLDING PATTERN (%)
with European API customer and will be commissioned by the end of CY2025. Sep-23 Dec-23
▪ Change in estimates: We cut our FY24/25 EPS estimates by 11/10% to INR Promoters 28.81 28.81
47/80 owing to a slower-than-expected ramp-up in the Honeywell plant and
FIs & Local MFs 26.02 28.92
weak performance of Q3FY24.
▪ DCF-based valuation: Our target price is INR 4,014 (WACC 11%, terminal
FPIs 19.20 15.92

growth 5.5%). The stock is trading at 36x FY25E EPS. Public & Others 25.98 26.35
Financial summary (consolidated) Pledged Shares 3.15 3.15
INR mn 2QFY24 1QFY24 QoQ(%) 2QFY23 YoY(%) FY22 FY23 FY24E FY25E FY26E
Source : BSE
Net Sales 5,018 4,718 6.4 5,636 (11.0) 14,534 20,774 20,440 27,646 36,311
EBITDA 757 983 (23.1) 1,556 (51.4) 3,548 5,503 4,213 7,036 10,017
Nilesh Ghuge
APAT 780 606 28.8 1,066 (26.8) 2,606 3,702 2,318 3,932 6,045
[email protected]
AEPS (INR) 15.8 12.2 28.8 21.5 (26.8) 52.6 74.7 46.8 79.4 122.1
+91-22-6171-7342
P/E (x) 67.1 47.2 75.4 44.5 28.9
EV/EBITDA(x) 45.3 30.8 41.2 25.2 17.7
RoE (%) 15.0 18.4 10.1 15.4 20.7 Harshad Katkar
Source: Company, HSIE Research [email protected]
+91-22-6171-7319
Change in estimates (consolidated)
FY24E FY24E FY25E FY25E Prasad Vadnere
Y/E Mar % Ch % Ch
Old New Old New
[email protected]
EBITDA (INR mn) 4,726 4,213 (10.9) 7,579 7,036 (7.2)
Adj. EPS (INR/sh) 52.7 46.8 (11.2) 88.5 79.4 (10.3)
+91-22-6171-7356
Source: Company, HSIE Research
Akshay Mane
akshay.mane @hdfcsec.com
+91-22-6171-7338
Page | 9
HSIE Results Daily

Fine Organic Industries

Subdued demand SELL
Our SELL recommendation on Fine Organics with a TP of INR 3,842 is CMP (as on 06 Feb 2024) INR 4,495
premised on (1) the delay in capacity addition; (2) sluggish demand in the US
Target Price INR 3,842
and European markets; and (3) a sharp fall in finished product prices. Q3
EBITDA/APAT were 7/5% below our estimates, owing to lower-than-expected NIFTY 21,929
total revenue, offset by higher-than-expected operating expenses.
▪ Financial performance in Q3: The fall in revenue by 10/36% QoQ/YoY to
KEY
CHANGES
OLD NEW
INR4.88bn is attributed to the fall in exports by 12/57/% QoQ/YoY. The Rating SELL SELL
exports were low courtesy sluggish demand in the US and European markets.
Price Target INR 3,835 INR 3,842
Other operating expenses declined by 10/12% QoQ/YoY to INR 644mn owing
FY24E FY25E
to (1) an increase in the proportion of sales in the domestic market to 49% EPS %
(+100bps QoQ) and (2) a change in product mix. EBITDA margin remains flat -1.5% +1.0%
at 24.2%. EBITDA came in at INR1.18bn (-9.8/-26% QoQ/YoY) and APAT
came in at INR942mn (-8.9/-11.3% QoQ/YoY). KEY STOCK DATA

▪ Con call highlights: (1) Sequentially, raw material prices have remained Bloomberg code FINEORG IN
flattish while management expects them to reduce in coming quarters. (2) No. of Shares (mn) 31
Renewal of long-term contracts is still in the rolling process. (2) The MCap (INR bn) / ($ mn) 138/1,685
contribution of exports to total revenue has fallen further to 51% in Q3FY24
6m avg traded value (INR mn) 184
(vs. 69% in Q4FY23), owing to demand slowdown in the US and European
52 Week high / low INR 5,244/4,031
markets. (3) All plants (excluding the Patalganga plant) are running at
optimum utilisation, courtesy strong product demand in the domestic
market. (4) FO has applied for land in a SEZ in Maharashtra. Land allocation STOCK PERFORMANCE (%)

and approvals are expected to be in place by March 2024. Commercial 3M 6M 12M

production shall commence 18 months after receiving the Environmental Absolute (%) 5.3 (2.3) (4.8)
Clearance (EC). (5) The domestic market has shown robust growth in Q3FY24 Relative (%) (5.8) (12.2) (24.1)
and the company has changed its product mix accordingly. (6) The Red Sea
crises have increased freight costs, impacting shipping costs to the US/UK.
SHAREHOLDING PATTERN (%)
▪ Change in estimates: We change our FY24/25 EPS estimates by -1.5/+1% to
Sep-23 Dec-23
INR 130/132 to factor in the Q3 performance.
Promoters 75.00 75.00
▪ DCF-based valuation: Our target price is INR 3,842 (WACC 12%, terminal
FIs & Local MFs 12.17 11.85
growth 6.0%). The stock is trading at 34x FY25E EPS.
Financial summary (consolidated) FPIs 3.78 3.59
3Q 2Q QoQ 3Q YoY Public & Others 9.05 9.57
INR mn FY22 FY23 FY24E FY25E FY26E
FY24 FY24 (%) FY23 (%)
Net Sales 4,884 5,405 (9.6) 7,595 (35.7) 18,763 30,231 21,068 21,972 26,280 Pledged Shares 0.00 0.00
EBITDA 1,182 1,311 (9.8) 1,601 (26.1) 3,645 8,311 5,184 5,104 6,234 Source: BSE
APAT 942 1,034 (8.9) 1,062 (11.3) 2,597 6,181 3,992 4,056 4,871
AEPS (INR) 30.7 33.7 (8.9) 34.6 (11.3) 84.7 201.6 130.2 132.3 158.9
P/E (x) 53.1 22.3 34.5 34.0 28.3
EV/EBITDA(x) 37.3 16.0 24.4 24.1 19.9
Nilesh Ghuge
RoE (%) 30.7 49.4 23.0 19.2 21.1 [email protected]
Source: Company, HSIE Research +91-22-6171-7342

Change in estimates (consolidated) Harshad Katkar

FY24E FY24E FY25E FY25E FY26E FY26E [email protected]
Y/E Mar % Ch % Ch % Ch
Old New Old New Old New
EBITDA (INR mn) 5,313 5,184 -2.4% 5,153 5,104 -1.0% 6,291 6,234 -0.9%
+91-22-6171-7319
Adj. EPS (INR/sh) 132.2 130.2 -1.5% 131.0 132.3 1.0% 157.7 158.9 0.7%
Source: Company, HSIE Research Prasad Vadnere
[email protected]
+91-22-6171-7356

Akshay Mane
akshay.mane @hdfcsec.com
+91-22-6171-7338

Page | 10
HSIE Results Daily

PNC Infratech
BUY
Asset monetisation announced; in-line performance
CMP (as on 06 Feb 2024) INR 444
PNC Infratech (PNC) reported Q3FY24 revenue/EBITDA/APAT of INR
18/2.4/1.5bn, missing our estimates by 2/2.7/2%. PNC announced a stake sale in Target Price INR 520
12 assets to KKR for a total equity value of INR 29bn vs equity investment of NIFTY 21,929
INR 17.4bn. The deal is expected to close by March 2025. The order book (OB)
as of Dec’23 stood at INR 173.8bn (~2.5x FY23 revenue, including L1 of INR KEY
OLD NEW
55.9bn excluding GST), with the road EPC segment contributing 75% of it. It CHANGES
cut its FY24 revenue growth guidance to 10% YoY (vs 15% earlier), with an Rating BUY BUY
EBITDA margin of 13.3-13.5%, an order inflow (OI) of INR 80bn and capex of Price Target INR 520 INR 520
INR 0.5bn. The company plans to infuse INR 1.2/4.5/3.6bn in Q4FY24/25/26.
EPS Change FY24E FY25E FY26E
PNC has a net cash position of INR 0.4bn as of Dec’23. Given better margins
% - - -
and a robust balance sheet, we maintain BUY, with an unchanged TP of INR
520/sh (14x Dec-25E, 1.6x P/BV for HAM equity investment).
▪ Q3FY24 financial highlights: Revenue: INR 18bn (+11/7% YoY/QoQ, a miss KEY STOCK DATA
of 2%; INR 5.3bn revenue from water segment). EBITDA: INR 2.4bn (+15/+5% Bloomberg code PNCL IN
YoY/QoQ, a miss of 2.7%). EBITDA margin: 13.3% (+50/-16bps YoY/QoQ, vs.
No. of Shares (mn) 257
our estimate of 13.4%, owing to higher raw material prices; largely offset by
lower employee expenses). Depreciation: INR 261mn (-6/+2% YoY/QoQ). MCap (INR bn) / ($ mn) 114/1,394
Interest cost: INR 172mn, (+6/-8% YoY/QoQ). Other income: INR 42mn (-57/- 6m avg traded value (INR mn) 251
26% YoY/QoQ). RPAT/APAT: INR 1.5bn (+17/+8% YoY/QoQ, a miss of 2%).
52 Week high / low INR 463/261
PNC has cut its FY24 revenue growth guidance of 15% YoY to 10% (HSIE
estimate 7%) with an EBITDA margin of 13-13.5%. Further, with INR 13.5bn
STOCK PERFORMANCE (%)
revenue from the water segment in 9MFY24, it maintained its guidance for
FY24 revenue from the segment at INR 20bn+. 3M 6M 12M
▪ Weak order inflows lend limited growth visibility: The executable OB as of Absolute (%) 33.4 26.2 30.9
Dec’23 stood at INR 118bn. The value of five HAM projects yet to be included
Relative (%) 22.3 16.4 11.6
in OB is INR 55.9bn (excluding GST), which would take the OB to INR 173.8bn
(~2.5x FY23 revenue). The road EPC segment constitutes 75% of the total OB
SHAREHOLDING PATTERN (%)
whilst water projects constitute 25% of it. The appointed date (AD) for the
new HAM projects is expected by FY24-end. Further, the company cut its Sep-23 Dec-23
FY24 OI guidance to INR 80bn (vs INR 100bn). It is also looking for non-road Promoters 56.07 56.07
opportunities in metro rail, railways, and water segments.
FIs & Local MFs 28.10 27.24
▪ Robust balance sheet; 12 HAM assets stake sale to KKR announced: With a
cash balance of INR 3.2bn and gross debt of INR 2.8bn, PNC has a net cash FPIs 10.78 10.98

position of INR 0.4bn as of Sep’23 vs. INR 2bn net debt as of Sep’23. The NWC Public & Others 5.06 5.72
days stood at 73 vs. 79 as of Sep’23. Out of INR 30bn, PNC has already infused Pledged Shares - -
INR 18.8bn as of Dec’23 and has a residual equity requirement of INR 10.6bn
Source: BSE
for all the HAM projects in the portfolio, of which INR 1.2/4.5/3.6bn will be
done in Q4FY24/25/26. PNC has announced a stake sale in 11/1 HAM/BOT Pledged shares as % of total shares

projects to KKR and the deal is expected to close by FY25-end. PNC expects
to receive INR 29bn for the book value of equity invested at INR 17.4bn.
Standalone Financial Summary (INR mn)
YE Mar (INR mn) 3QFY24 3QFY23 YoY (%) 2QFY24 QoQ (%) FY23 FY24E FY25E FY26E
Net Sales 18,027 16,270 10.8 16,930 6.5 70,608 75,158 81,546 89,701
EBITDA 2,395 2,081 15.1 2,276 5.2 9,539 9,688 10,766 12,193
APAT 1,511 1,294 16.7 1,398 8.1 5,838 6,071 6,727 7,656
EPS (INR) 5.9 5.0 16.7 5.4 8.1 22.8 23.7 26.2 29.8
P/E (x) 19.5 18.8 16.9 14.9
EV/EBITDA (x) 12.0 11.4 10.3 9.1
RoE (%) 16.0 14.5 14.2 14.1
Source: Company, HSIE Research
Parikshit D Kandpal, CFA
[email protected]
+91-22-6171-7317

Page | 11
HSIE Results Daily

TTK Prestige
Challenging demand environment REDUCE
TTK Prestige (TTKPT) reported a soft 3Q performance as post a decent festive
CMP (as on 6 Feb 2024) INR 789
season sale (below expectation), the channel resorted to de-stocking, given the
prevalent challenging demand environment. Weakness in general trade Target Price INR 750
persisted while e-comm, MT and exclusive stores fared better. In addition to NIFTY 21,929
the shift in consumer wallet, the category is witnessing a return of
small/regional players, given moderating RM inflation, which has increased KEY
OLD NEW
CHANGES
the competitive intensity (both online/offline channels) with brands offering
discounts, especially for entry-level products. Despite higher sales promotion, Rating REDUCE REDUCE

TTKPT maintained its GM while growing EBITDA by 10% on better cost Price Target INR 750 INR 750
control/mix. However, we expect competitive pressure (more in the mid- FY25E FY26E
economy segment) and slow demand to continue to impact performance in the EPS %
-1% 0%
near term. We cut our earnings by 0-4% over FY24-26 and value the stock on 30x
Dec-25 EPS to derive a TP of INR 750. Maintain REDUCE.
KEY STOCK DATA
▪ Demand environment continues to remain weak: Revenue grew by 5% YoY Bloomberg code TTKPT IN
to INR 6.9bn (Hawkins/Bajaj/BGAL/Sunflame:+6%/LSD-decline/-4%/+2%) as
No. of Shares (mn) 139
cooker/cookware/appliances revenue grew 2/6/5%. Domestic revenue grew by
5% YoY as demand weakened in December post a reasonable festive season. MCap (INR bn) / ($ mn) 109/1,337
Export revenue grew 21% YoY (low base). The kitchen appliances industry 6m avg traded value (INR mn) 75
continued to witness increased competitive intensity (more in the mid-
52 Week high / low INR 833/652
economy segment) as there was increased discounting by most brands and
online channels. All channels were active during the quarter with online
STOCK PERFORMANCE (%)
channels growing faster. With weakening demand sentiment, the channel
decided to destock post-festive season. TTK introduced 25 new SKUs across 3M 6M 12M

all categories. Prestige Xclusive chain stood strong at 705 stores in 378 towns. Absolute (%) 0.8 (0.2) 7.9
We model an 8% revenue CAGR over FY23-26E. Relative (%) (10.4) (10.0) (11.4)

▪GM stable, EBITDA grew by 10%: Despite higher sales promotion, GM

remained stable YoY at 40.3% (HSIE 41%), aided by a stable RM environment SHAREHOLDING PATTERN (%)

and a favourable channel mix. While employee expenses grew 17% YoY, other Sep-23 Dec-23
expenses fell 2% YoY on better cost control. As a result, EBITDA grew by 10%
Promoters 70.41 70.41
YoY while EBITDAM expanded by 50bps/30bps YoY/QoQ. PAT grew by 10%
FIs & Local MFs 13.42 14.62
YoY to INR 630mn. We expect EBITDAM to hover at the lower end of the
guidance band (14-16%) during FY24/25/26. FPIs 8.00 6.72

▪ Earnings call takeaways: (1) With the festive season shifted by a month this Public & Others 8.17 8.25

year, Q3 started on an encouraging note before the optimism dissipated in Pledged Shares 0.00 0.00
December. (2) Positive outlook on Q4 as initial trends show single-digit Source : BSE
growth. (3) Repositioning of Judge brand is on track with benefits expected to Pledged shares as % of total shares
accrue in FY25. New packaging, SKUs and expanded distribution network in
place. (4) While the general trade channel was weak, exclusive stores, e-com
and MT did well. (5) The mass premium segment contributes 80%+ of
revenue. (6) Free cash stood at INR 9.4bn as of 31 Dec’23.
Quarterly/annual financial summary
Q3 Q3 YoY Q2 QoQ
(INR mn) FY22 FY23 FY24E FY25E FY26E
FY24 FY23 (%) FY24 (%)
Net Sales 6,866 6,521 5.3 6,837 0.4 27,225 27,771 27,546 30,807 34,296
Paarth Gala
EBITDA 850 776 9.6 829 2.6 4,259 3,585 3,525 4,149 4,786
[email protected]
APAT 630 575 9.7 622 1.4 3,054 2,550 2,648 3,128 3,616
+91-22-6171-7336
EPS (INR) 4.5 4.1 9.7 4.5 1.3 22.0 18.4 19.1 22.6 26.1
P/E (x) 35.8 42.9 41.3 35.0 30.2
EV / EBITDA
24.0 28.3 28.4 23.7 20.2 Riddhi Shah
(x)
RoCE (%) 29.8 21.7 19.8 23.0 25.2
[email protected]
Source: Company, HSIE Research +91-22-6171-7359

Page | 12
HSIE Results Daily

Prince Pipes and Fittings

Weak performance continues ADD
We maintain our ADD rating on Prince Pipes, with a lower target price of INR CMP (as on 06 Feb 2024) INR 675
675/sh (30x its Mar-26E EPS). In Q3FY24, Prince reported sub-par volume, down
Target Price INR 675
2% YoY, and continued to lose market share while its peers delivered double-
digit volume growth. Adjusted for inventory losses, unitary EBITDA fell to NIFTY 21,929
INR 20/kg in Q3 vs INR 22/21 per kg YoY/QoQ. Management is hopeful of
arresting its market share loss from Q1FY25 onwards, on the back of various KEY
OLD NEW
CHANGES
corrective actions it has taken so far. Prince is setting up a greenfield pipe plant
Rating ADD ADD
in Bihar (~50K MT expected in Q4FY25, Capex INR 2.2bn), which will expand
its plumbing capacity by 15%. In bathware, it is ramping up its sales and Price Target INR 790 INR 675
distribution network and expects EBITDA to break even in the next two years. FY24E FY25E
EPS
▪ Q3FY24 performance: Prince reported weak offtake (lost market share), and revision % (13.4) (14.4)
volume declined 2% YoY (+3% QoQ). Realisation fell 8/10% QoQ/YoY to INR
145/kg owing to falling resin prices across both CPVC and PVC. Unitary opex KEY STOCK DATA
declined 6/13% QoQ/YoY to INR 127/kg. Inventory losses and bathware
Bloomberg code PRINCPIP IN
expenses moderated the opex decline, impacting the margin. Unitary EBITDA
contracted INR 5/kg QoQ to INR 18/kg. In Q3, inventory loss was INR 100mn No. of Shares (mn) 111
(1.6% of sales). If we adjust for inventory loss for all periods, unitary MCap (INR bn) / ($ mn) 75/911
EBITDA/kg declined to INR 20 per kg in Q3 vs INR 22/21 per kg YoY/QoQ. In
6m avg traded value (INR mn) 251
Q3, Prince bathware revenue was INR 60mn.
52 Week high / low INR 776/532
▪ Con call KTAs and outlook: Management mentioned it has rolled back prices
in a few categories to align it with market trend, in a bid to arrest market share
STOCK PERFORMANCE (%)
loss. It has also expanded HDPE pipe capacity to speed up volume growth. It
3M 6M 12M
expects a 12-14% EBITDA margin in the long term. Prince is setting up an
integrated greenfield pipes plant in Bihar (~50K MT capacity, CoD in Q4FY25, Absolute (%) 8.9 1.8 10.3
capex INR 2.2bn), which will increase its total capacity by 15%. The project Relative (%) (2.2) (8.0) (9.0)
size is increased by INR 0.7bn as this facility will also manufacture fittings
under the revised plan. The company had forayed into bathware in June 2023 SHAREHOLDING PATTERN (%)
and is ramping up distribution currently. It aims to break even at EBITDA Sep-23 Dec-23
level in the next two years. Factoring weak performance in Q3 and another
Promoters 60.94 60.94
quarter of losing market share, we cut our APAT estimates by 15/13/14% for
FIs & Local MFs 18.56 18.40
FY24/25/26E. We lower our TP to INR 675/sh (30x Mar-26E EPS) and maintain
the ADD rating. FPIs 5.01 5.74

Public & Others 15.49 14.92

Quarterly/annual financial summary
YE Mar Q3 Q3 YoY Q2 QoQ Pledged Shares - -
FY22 FY23 FY24E FY25E FY26E
(INR mn) FY24 FY23 (%) FY24 (%)
Source : BSE
Pipes sales (K
42.7 43.7 -2.4 41.5 2.7 139.0 157.7 170.3 190.8 209.9
MT) Pledged shares as % of total shares
NSR (INR/kg) 145 162 -10.3 158 -8.3 191 172 149 155 158
EBITDA (INR/kg) 18 16 11.5 23 -21.8 30 16 18 20 21
Net Sales 6,186 7,059 -12.4 6,564 -5.8 26,568 27,109 25,325 29,499 33,162
EBITDA 757 695 8.9 942 -19.7 4,157 2,503 3,087 3,904 4,443
EBITDAM (%) 12.2 9.8 14.3 15.6 9.2 12.2 13.2 13.4
APAT 376 354 6.3 527 -28.6 2,495 1,214 1,664 2,217 2,495
Diluted EPS (INR) 3.4 3.2 6.9 4.8 -28.6 22.6 11.0 15.0 20.1 22.6 Rajesh Ravi
EV / EBITDA (x) 18.1 29.2 23.2 18.6 16.1 [email protected]
P/E (x) 29.9 61.5 44.9 33.7 29.9 +91-22-6171-7352
RoE (%) 21.6 9.2 11.5 13.6 13.6
Source: Company, HSIE Research
Keshav Lahoti
[email protected]
+91-22-6171-7353

Page | 13
HSIE Results Daily

Orient Cement
Volume declines; margin rebounds REDUCE
We maintain our REDUCE rating on Orient Cement with a revised TP of CMP (as on 06 Feb 2024) INR 277
INR 205/share (7.5x Mar-26E EBITDA). In Q3FY24, cement volume declined 3%
Target Price INR 205
YoY owing to weak demand (especially B2C). NSR rebounded 7% QoQ (+5%
YoY). Unit opex rose 3% QoQ on higher unit fixed and freight costs. This NIFTY 21,929
moderated the margin recovery. Thus, unitary EBITDA increased INR 220/MT
QoQ to INR 628/MT (up INR 200/MT YoY). Management expects 5% YoY KEY
OLD NEW
CHANGES
volume growth in Q4 to 1.8mn MT (Jan sales were weak). Management aims to
Rating REDUCE REDUCE
commission the planned brownfield 2/3mn MT clinker/cement Chittapur
expansion (for a capex of INR 15bn) by the end of FY26. Price Target INR 180 INR 205

▪ Q3FY24: Orient missed ours/consensus EBITDA estimates by 8/10% EBITDA FY24E FY25E

respectively owing to weak volumes. The company noted that state elections revision % (9.4) (8.5)
led to subdued sales, resulting in a 2/3% QoQ/YoY volume fall. Orient’s trade
sales were weak both in Telangana (down 29% YoY) and Maharashtra. KEY STOCK DATA
Utilisation stood at 66% vs 67/67% QoQ/YoY. While volumes were weak, NSR
Bloomberg code ORCMNT IN
rebounded 7% QoQ (+5% YoY). In Q3, for the first five weeks, prices were
higher; however, they corrected later. Sep-23 and Dec-23 exit prices are No. of Shares (mn) 205

similar. Unit opex rose 3% QoQ on higher unit fixed and freight costs. Fixed MCap (INR bn) / ($ mn) 57/695
cost rose INR 55/MT (op-lev loss) and freight cost rose ~INR 55/MT QoQ. This 6m avg traded value (INR mn) 381
moderated the margin recovery. Unitary EBITDA increased INR 220/MT QoQ
52 Week high / low INR 294/105
to INR 628/MT (up INR 200/MT YoY).
▪ Con-call KTAs and outlook: Management expects 5% YoY volume growth in STOCK PERFORMANCE (%)
Q4 to 1.8mn MT (Jan sales were weak). In Jan, realisation is stable. For Orient’s
3M 6M 12M
10MW WHRS, the maximum benefit was visible in Q3FY24 (~80% benefit)
and the entire benefit will accrue in Q1FY25 (~INR 70/MT saving). It is also Absolute (%) 33.4 76.5 129.3
adding solar power. The rising share of renewable power should drive Relative (%) 22.3 66.7 110.0
margins. Management aims to commission 2/3mn MT clinker/cement
Chittapur expansion costing INR 16bn by FY26 (delayed owing to SHAREHOLDING PATTERN (%)
environment clearance). Additionally, a 2mn MT SGU in MP (for INR 5bn
Sep-23 Dec-23
capex) and a brownfield clinker expansion at Devapur are in the pipeline. As
expansion plans have been delayed due to pending government clearances, Promoters 37.90 37.90

we have cut the capex estimates for FY25/26E. Factoring in the weak Q3FY24 FIs & Local MFs 12.89 13.15
results, we cut FY24/25/26E EBITDA estimates by 9/9/10%. However, our TP
FPIs 6.30 6.71
is revised upwards to INR 205/sh, as the capex has been deferred.
Public & Others 42.90 42.25
Quarterly/annual financial summary
YE Mar Q3 Q3 YoY Q2 QoQ
Pledged Shares - -
FY22 FY23 FY24E FY25E FY26E
(INR bn) FY24 FY23 (%) FY24 (%) Source : BSE
Sales Vol (mn MT) 1.39 1.43 (2.7) 1.43 (2.3) 5.48 5.76 6.05 6.41 6.80
Pledged shares as % of total shares
NSR (INR/MT) 5,397 5,121 5.4 5,057 6.7 4,973 5,100 5,151 5,202 5,306
Opex (INR/MT) 4,568 4,489 1.8 4,449 2.7 3,895 4,467 4,416 4,400 4,459
EBITDA(INR/MT) 828 632 31.1 607 36.4 1,079 633 735 803 848
Net Sales 7.51 7.32 2.6 7.21 4.3 27.25 29.38 31.15 33.35 36.06
EBITDA 1.15 0.90 27.6 0.87 33.2 5.91 3.65 4.45 5.15 5.76
APAT 0.45 0.28 63.1 0.25 82.3 2.63 1.23 1.74 2.25 2.68
AEPS (INR) 2.2 1.3 63.1 1.2 82.3 12.8 6.0 8.5 11.0 13.1
EV/EBITDA (x) 10.0 16.3 12.8 11.1 10.1
Keshav Lahoti
EV/MT (INR bn) 7.0 7.0 6.7 6.7 6.9
P/E (x) 21.6 46.2 32.7 25.3 21.2
[email protected]
RoE (%) 18.6 7.8 10.4 12.3 13.2 +91-22-6171-7353
Source: Company, HSIE Research

Rajesh Ravi
[email protected]
+91-22-6171-7352

Page | 14
HSIE Results Daily

Rating Criteria
BUY: >+15% return potential
ADD: +5% to +15% return potential
REDUCE: -10% to +5% return potential
SELL: > 10% Downside return potential

Disclosure:
Analyst Company Covered Qualification Any holding in the stock
Parikshit Kandpal Godrej Properties, PNC Infratech CFA NO
Maitreyee Vaishampayan Ashok Leyland MSC NO
Jay Gandhi Fsn E-commerce Ventures (Nykaa), Bata India MBA NO
Riddhi Shah Fsn E-commerce Ventures (Nykaa), Bata India, TTK Prestige MBA NO
Krishnan ASV Sundaram Finance PGDM NO
Deepak Shinde Sundaram Finance PGDM NO
Akshay Badlani Sundaram Finance CA NO
Nilesh Ghuge Navin Fluorine International, Fine Organic Industries MMS NO
Harshad Katkar Navin Fluorine International, Fine Organic Industries MBA NO
Prasad Vadnere Navin Fluorine International, Fine Organic Industries MSC NO
Akshay Mane Navin Fluorine International, Fine Organic Industries PGDM NO
Paarth Gala TTK Prestige Bcom NO
Keshav Lahoti Prince Pipes and Fittings, Orient Cement CA NO
Rajesh Ravi Prince Pipes and Fittings, Orient Cement MBA NO

1 Yr Price movement
Godrej Properties PNC Infratech Ashok Leyland
3000 600 200

150
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100
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50

0 0 0
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NYKAA Bata Ttk Prestige

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Sundaram Finance Navin Fluro Fine Organics

4,000.00 6000 6000

3,000.00
4000 4000
2,000.00
2000 2000
1,000.00

0.00 0 0
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Prince Pipes Orient Cement

800 400

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200 100

0 0
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Page | 15
HSIE Results Daily
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Page | 16