Astral Limited (NS:ASTL): We maintain REDUCE on Astral, as we believe its valuation is expensive, and we revise the target price to INR 1,480/sh (30x its Mar-25E consolidated EBITDA implied P/E 50x Mar-25E). We believe Astral’s foray into new businesses (paints and bath ware) will reduce its valuation premium. In Q4FY23, its consolidated revenue rose 8/19% YoY/QoQ (strong growth across both plumbing and adhesives), while EBITDA/APAT grew by 43/47%, as margin expanded across plumbing/paints and adhesives (P&A) segments by 600/410bps YoY. Astral’s Bhubaneswar plumbing plant has become operational, and it will drive volume growth in the east. The adhesive plant in Dahej is under a trial run. Astral is adding plumbing plants in Guwahati (15K MT) and Hyderabad (70K MT).
Oberoi Realty (NS:OEBO): Oberoi Realty (ORL) registered presales of INR 25.5bn (including 360W INR 18.7bn under Oasis, +176% YoY). ORL has a strong launch pipeline for FY24, with a new tower expected to open up in Goregaon and a project launch in Thane (Pokhran and Kolshet) that is expected by Q3/Q4FY24 (3-4msf in Phase 1). Commerz 3 and Borivali Mall are expected to start operation by Mar/Jun’24 resp., with rental potential of INR c.5bn in Commerz 3 and INR c.3.5bn in the mall. The gross debt inched up to INR 39bn (INR 30bn in Dec’22), mainly to finance the unit sale transaction with Oasis Realty. Whilst the results seemed a bit tepid, we believe ORL will generate robust cash flows from ready-to-move-in inventory in the 360W and Mulund projects. Besides new business development outside MMR shall aid further rerating. We remain constructive on ORL and maintain BUY, with an unchanged NAV-based TP of INR 1,158/sh.
Jubilant FoodWorks (NS:JUBI): Jubilant reported an operationally in-line Q4 performance. Revenue growth of 8% was largely store addition-led as LFL growth was at -0.6% (four-year CAGR improved to 4%). Pressure on margins sustained, given dual headwinds of a firm RM basket (milk and cheese) and soft consumption trend. While GM fell by 160/20bps YoY/QoQ, the impact of negative oplev was more profound on the EBITDA margin, which fell by 490/190bps YoY/QoQ to 20.1% (the lowest of the last 11 quarters). Given lower discretionary spending, we expect the margin to remain under pressure for QSR companies in the near term. On a relative basis, we prefer Jubilant and expect it to recover the fastest, given management’s focus on (1) driving LFL growth by strengthening value offering (2) improving cost efficiency and productivity (project Vijay) (3) elevating customer experience (particularly dine-in) (4) long-term strategic initiatives (commissary) and (5) calibrated network expansion. All the same, near-term weakness will sustain. We maintain our EPS estimates and value Jubilant at 55x P/E on Jun’25 EPS to arrive at a TP of INR 475. Maintain ADD.
Devyani International (NS:DEVY): Mirroring its sister franchisee, Devyani reported an operationally weak Q4FY23 performance on moderating SSSG. Revenue growth of 28% YoY was led by 33% store addition. SSSG was weak for both KFC/PH at +2/-3% (Sapphire: +2/-4%) due to a tough demand environment. Negative oplev due to weak SSSG led to margin pressure across the business. Devyani’s KFC/PH ROM fell 220/490bps QoQ to 17.5/9.3% (Sapphire 110/530bps to 19/8.6% JUBI 230bps to c.18%). Management has maintained its medium-term guidance of mid-single-digit SSSG growth and 300 stores addition. In the near term, we expect decelerating trend to continue with sustained pressure on operating margin. We maintain our EPS estimates and value Devyani at 50x P/E on Jun’25 EPS to arrive at a TP of INR 115. Maintain REDUCE.
LIC Housing Finance (NS:LICH): LICHF reported a mixed set of results with sharp reflation in margins driving a beat on our earnings estimates, partly offset by muted disbursals in individual home loans and a rise in early delinquencies. NIMs reflated sharply (50bps QoQ) to 2.93% (FY23: 2.41%), primarily driven by improving spreads (210bps loan repricing benefit during FY23). While the GS-III declined sequentially by ~40bps, early delinquencies shot up, and are likely to stabilise by Q1FY24, as guided by the management. Disbursals were muted (-17% YoY, -0.5% QoQ), as weakness in individual home loans (-24% YoY) was offset by strong traction in project loan disbursals. LICHF is likely to continue facing a trade-off between growth and margins in an elevated competitive intensity environment. We marginally revise our FY24E earnings estimates upwards to factor in stronger margins and maintain REDUCE, with a revised RI-based TP of INR360 (0.8x Mar-25 ABVPS).
Kajaria Ceramics (NS:KAJR): We maintain BUY on Kajaria Ceramics (KJC) with an unchanged target price of INR 1,310/share (21x its Mar’25E consolidated EBITDA, 35x implied PE). We believe KJC will continue to get a premium valuation, driven by its strong brand positioning and distribution, which are driving its market share gain. Gas price cool-off should also lead to a margin rebound in FY24E. In Q4FY23, KJC delivered a healthy 8% YoY tiles volume growth (5-year CAGR: +7%). Gas price correction drove 240bps EBITDA margin recovery QoQ to 14.6%.
Teamlease Services Ltd (NS:TLSV): Teamlease reported revenue growth of 0.9% QoQ (-0.8% vs estimate), with margin growing ~9bps QoQ (+16bps vs estimate). The closure of the NEEM program in Dec-22 impacted the NETAP trainee headcount, the full impact of which will be visible by Q2FY24. The general staffing volume growth (net addition of ~29k in FY23) was led by a strong hiring uptick in the consumer goods and financial services sectors, a trend that is likely to continue in FY24E. General staffing PAPM has been under pressure (Q4FY23: INR 680, a decline of 4% YoY) due to the fixed markup model. However, we expect PAPM to stabilise at current levels. Specialised staffing is impacted by the hiring freeze in the IT sector and the HR services margin is in a recovery mode. The company will rationalise its core headcount and realign the cost structure to offset the NETAP impact. We cut our EPS estimates by ~4/3% for FY24/25E, but have raised the multiple, given continued volume growth (ex-NETAP), margin stability and buyback support. We maintain ADD, with a TP of INR 2,400, based on 25x Dec-24E EPS (vs. 23x earlier).
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