Result Review for Berger Paints, Info Edge, Astral, Voltas, Apollo Tyres, Bata

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Berger Paints (NS: BRGR )

BRGR grew 9.8% growth YoY to INR30.3bn (broadly in-line HSIE: INR30bn). Decorative business grew 11.4% (~14% volume growth). Industrial businesses performed well, aided by improved realization. Distribution expansion remains healthy (added 1.5k retail outlets/1.3k tinting machines in Q1).

The auto business registered modest growth, courtesy of subdued growth in the two-wheeler industry. GM/EBITDAM expanded 407/371bps YoY to 39.8/18.4% (HSIE: 40/18.3%), courtesy (1) moderating RM prices, (2) an increase in the salience of decorative segment in the overall mix, and (3) market share gains. We maintained our FY25 EPS estimates and an ADD rating with a DCF-based TP of INR700/sh (implying 42x Sep-25 P/E).

Info Edge India Ltd (NS: INED )

Info Edge reported a modest quarter, with 3.6% QoQ revenue growth and lower advertisement spending. The core recruitment segment billing growth (-4% YoY) was weak due to the continued slowdown in IT hiring (~35% of Naukri revenue) and delay in renewals offset by traction in non-IT sectors like BFSI, travel, auto, construction, etc. Recruitment billings have witnessed two strong years of >30% YoY growth, which is slowing down in FY24E due to the base effect and lower hiring activity.

The margin for the recruitment segment continues to be ~60%, which is impressive. 99acres and Jeevansathi continue to witness growth with a focus on improving profitability. The combined loss of 99acres and Jeevansathi stood at INR 0.42bn, which is down 32% YoY due to lower ad spending. We expect growth to be led by Naukri, 99 acres and Shiksha. The recruitment margin will be in the range of 58-60% and continued focus on spend efficiency will drive margins. We maintain our BUY rating with a SoTP-based TP of INR 5,275, valuing Naukri at 38x EV/EBITDA, 99acres/Jeevansathi+Shiksha at 5/3x P/S, while Zomato (NS: ZOMT ) and Policybazaar (NS: PBFI ) have been assigned the market value (~15% discount). The core recruitment business is trading at 29x FY25E EV/EBITDA.

Astral Limited (NS: ASTL )

We maintain REDUCE on Astral, as we believe its valuation remains expensive. We revise our target price to INR 1,820/sh (58x its Mar-25E EPS). Astral continues to deliver a strong show in plumbing. It also expects to scale up its adhesives & paints (A&P) margin performance. The bathware segment is gaining traction and Astral expects to turn EBITDA positive by Q4FY24. In Q1FY24, its consolidated revenue/EBITDA/APAT rose 6/18/35% YoY, due to a strong show in the plumbing segment (robust volume and margin performance). Astral is adding plumbing capacities in Guwahati, Hyderabad and Kanpur over the next two years and its adhesive plant will become operational by Sep-23.

Fsn E-commerce Ventures (Nykaa (NS: FSNE ))

Nykaa’s Q1 top line grew 23.8% YoY to INR14.22bn (HSIE: INR14.38bn). BPC growth continues to moderate (19.5% YoY in Q1 vs 42% CAGR over FY19-23). BPC AUTC (20% YoY in Q1 vs 30% CAGR clocked over FY19-23) continues to moderate. The reliance of growth on existing customers continues to rise. The struggle for the fashion foray continues (AUTC growth lags order growth in BPC as well as fashion). GM contracted 89bps YoY to 43.5% (HSIE: 44.0%) due to an increase in the mix of eB2B business.

PBT margin remained flat YoY (0.7% HSIE: 1.8%). Our thesis remains on track in Q1 as (1) BPC AUTC continues to moderate and (2) ad income as a percentage of revenue dropped 270bps+ YoY. We’ve cut our FY25/26 EBITDA estimates by 4-7% and maintained our REDUCE rating with a TP of INR130/sh (implying 72x Sep-25 EV/EBITDA).

Voltas (NS: VOLT )

Voltas’s Q1FY24 print was a mixed bag as UCP revenue surprised positively growing 16% (HSIE: 5%) despite unseasonal rains in April/May. However, continued slippages in collections (leading to provisions) in its EMPS business led to a miss in overall earnings. RAC industry recovery in June (after poor April/May) was very strong, leading to c.20% growth in secondary volume in Q1.

It is leading into normal channel inventory at the end of Q1. Voltas’s Jun’23 exit market share at 20.6% remains lower by c.350bps YoY (average quarter market share also down 350bps YoY to 19%). Although Voltas continues to focus on recovering its lost market share (additional thrust on south and east regions) but we believe overall share recovery will be tough as well as slower.

We continue to model a 9% UCP EBIT margin. We raise our UCP estimates given a healthy beat, but we cut overall earnings by 4% for FY24 to reflect weak EMPS profitability. Our SoTP (UCP/EMPS/EPS P/E at 32/15/15x and Volt-Beko P/S of 4x) on Jun-25 derive a revised TP of INR 775 due to an increase in UCP value. Maintain REDUCE.

Apollo Tyres (NS: APLO )

Apollo Tyres’ consolidated earnings at INR 4.1 bn beat our estimate of INR 3.7bn, led by a better-than-expected performance in India. In India, Apollo continues to work on profitable growth that has seen it raise prices ahead of the industry. Its focus on profitable growth is visible in the fact that it has let go of some market share in both PCR and TBR segments to maintain pricing. As a result, its operating performance has been well ahead of its Indian peers. In Europe, it continues to outperform the PCR segment in a weak demand macro.

Going ahead, in India, management expects replacement demand to continue to drive growth. Pricing discipline is likely to sustain as no new major capacity is expected to come on stream in the near term and input costs remain low. Also, while the demand outlook in Europe remains challenging, management expects the same to pick up from H2 onwards. Further, management expects to hit the mid-term RoCE target of 15% in FY24 itself, provided operating conditions remain favorable. Reiterate ADD with a revised TP of INR404/sh (from INR 394 earlier) as we roll forward to June-25 EPS.

Endurance Technologies Ltd (NS: ENDU )

Endurance’s Q1 PAT at INR 1.6 bn was ahead of our estimate of INR 1.4bn, led by a better-than-expected performance in Europe even as the standalone performance was in line with estimates. While Endurance standalone outperformed the domestic auto industry, its Europe business underperformed the Europe auto industry for the second consecutive quarter. Going ahead, domestic 2W OEMs continue to see weak demand in both domestic and export markets and are likely to remain a key concern for Endurance.

Further, while supply chain challenges seem to have eased out globally, the demand outlook remains weak in Europe, given the record-high inflation and rising interest rates in the region. On the back of a gradual decline in input costs and a reduction in energy costs in Europe, we factor in consolidated margin improvement to 14% by FY25E (from 11.8% in FY23). While we have factored in most of the key positives, the valuation at 28.8x FY25E earnings appears expensive. Reiterate REDUCE with a revised target of INR 1,467 (earlier INR 1,426), as we roll forward to June-25 EPS (unchanged target multiple of 25x).

Bata India (NS: BATA

Revenue grew 1.6% YoY (four-year CAGR: 2.1% INR9.58bn vs HSIE: INR10.56bn). Revenue growth remains subdued despite (1) the early launch of the end-of-season sale (EOSS), (2) an 11% YoY increase in the number of retail points, and (3) Floatz (Sneaker brand) registering good traction. This implies that core product sales are declining.

We expect SSSG to be meaningful in the negative. GM/EBIDTAM contracted 186/95bps YoY to 54.7/25% (HSIE: 55.5/25%). We suspect the rising skew of distribution/online sales may have played a role, along with the early onset of EOS sales. While we remain watchful of how Bata treads the growth-margin equation across its volume drivers we’ve cut our FY24/25 EBITDA estimates by 5-7% (to account for lower growth and margins) and downgrade Bata to a REDUCE rating with a DCF-based TP of INR1,500/sh, implying 25/Sep-25 EV/EBITDA/35x Sep-25 P/E.

City Union Bank (NS: CTBK

City Union Bank’s (CUBK) earnings beat estimates, mainly on account of stable margins on a QoQ basis at ~3.7%. However, moderation in loan growth (-1.5% QoQ), 54bps QoQ increase in GNPA to 4.9% and a lower other income have turned out to be disappointing. The bank chose to improve its PCR to 50% by reallocating provisions from the Spice Jet account, which offers a bit of comfort on credit costs, for the rest of FY24.

The management continues to be optimistic about its original loan growth guidance (~12-14%), led by incremental efforts in co-lending, digital initiatives and its core MSME segment, and has guided for steady return ratios on the back of accelerated recoveries in NPAs and written-off accounts. In addition to the impending NIM compression from Q2FY24 onwards, we believe that medium-term opex is likely to stay elevated. We tweak our FY24/25E numbers to factor in moderation in growth and higher opex maintain BUY, with a TP of INR160 (1.4x Mar-25 ABVPS).

PNC Infratech (NS: PNCI )

PNC Infratech (PNC) reported Q1FY24 revenue/EBITDA/APAT of INR 18.6/2.5/1.6bn, a marginal beat vs. our estimates. EBITDA margin: 13.2% (+34/-12bps YoY/QoQ, vs. our estimate of 13%, owing to better absorption of overheads, partly offset by higher employee expenses and raw material prices). The executable order book (OB) as of Jun’23 stood at INR 149.2bn (~2.1x FY23 revenue), with EPC/water segments contributing 72/28% of the OB. It reiterated its FY24 revenue growth guidance of 15% YoY (INR 20bn+ from the water segment), with an EBITDA margin of 13.3-13.5%, a reduced order inflow (OI) of INR 100bn and capex of INR1-1.2bn.

The company plans to infuse INR 0.8/4.5/3.5/3.5bn in the balance part of FY24/25/26/27. The monetization plan of 11/1 HAM/BOT assets is expected to materialize by FY24-end. PNC has a net debt position of INR 3bn as of Jun’23. Given better margins and a robust balance sheet, we maintain BUY, with an increased TP of INR 399/sh (13x Jun-25E rolled over, 0.9x P/BV for HAM equity investment).

V-MART Retail (NS: VMAR )

V-MART reported 15.4% growth YoY (INR 6.79 bn in-line). Organic business (ex-Unlimited/Limeroad) grew 15% in Q1 (INR5.42bn in-line). Footfall density grew 4% YoY while transaction size declined by 2% to INR977. Note former still remains 40% lower than pre-pandemic times. Profitability was much weaker than expected (7.7% vs HSIE: 11.8%) due to the recalibration of the product mix downwards (resulting in a 6% ASP correction) and discounting of high-priced inventory. Limeroad expenses continue to drag margins.

We’ve cut our FY25/26 EBITDA estimates by 23/7% respectively to account for higher Limeroad expenses. Consequently, our TP is revised downwards to INR2,050/sh (earlier: INR2,400/sh implying 25x Sep-25 EV/EBITDA). Downgrade to REDUCE.

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  • Pinku Kumar @Pinku Kumar
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