Results Review For Avenue Supermarts, L&T Infotech, & ICICI Prudential Life

Avenue Supermarts (NS: AVEU ): Higher bill sizes + lower footfalls aid FMCG profitability/productivity but are a sign of more targeted shopping with little room for discovery-based purchases (courtesy inflationary pressures), which in turn make a dent on the more profitable GM & apparel sales (constituted

L&T Infotech: L&T Infotech’s (LTI) revenue and margin came in line in Q2FY23. Revenue growth of 4.6% QoQ and 21.6% YoY CC and flat margin sequentially supported the 23% YoY growth in profit. Key growth drivers include (1) continuity in net-new large deal TCV at USD 80mn (similar to 4QFY22/1QFY23 rate), including a new logo F500 win (Hi-Tech vertical); (2) strong H2 seasonality of LTI ahead; (3) 4.5% QoQ increase in headcount (crossing 50k); and (4) steady large deal pipeline with higher deal tenure and strong outlook of core vertical BFSI (no exposure to mortgage segment). Integration with Mindtree (NS: MINT ) will create service-line and vertical revenue synergies and we believe that the foundation for growth leadership in ‘tier-1’ IT has been set. Maintain BUY on LTI with a TP of INR 5,215, based on 29x Jun-24E EPS.

ICICI Prudential (LON: PRU ) Life: ICICI Prudential Life (IPRU) reported a weak APE growth (+1.7% 3-year CAGR, in line with estimates); however, VNB margins, at 31%, surprised (200bps ahead of estimates), translating into 21% YoY VNB growth. We like the company’s reengineered business model, which is focused on a more diversified product and channel mix, industry-leading share in sum assured (H1FY23: 15.7%), and rising share of traditional products. Although we remain skeptical of the profitability and sustainability of the group protection business, we are encouraged to see sustained momentum from the non-ICICIBC channel to aid future growth. We expect VNB to clock a 15% CAGR over FY22-25E. We retain ADD with a target price of INR690 (2.2x Sep-24E EV). The stock is currently trading at 1.8x P/EV and 13x P/VNB on Mar-24 estimates.

Angel One (NS: ANGO ): ANGELONE printed a strong 8.5% sequential growth in its top line, driven by all-time high retail derivatives ADTVs coupled with healthy ancillary transaction revenues (+19% QoQ). Staff costs are expected to remain elevated on the back of the management’s continued focus on scaling up and investing in additional tech talent. We are encouraged by ANGELONE’s intent to align marketing dollars with the pace of customer adds (make marketing spend variable), thereby protecting margins; we continue to monitor these expenses in a soft customer-add environment. While derivatives volumes have exhibited strong resilience in volatile markets, we continue to closely monitor retail market share in this segment. Given the flat-fee model, ANGELONE is one of the best plays on the secular growth story in Indian capital markets and remains a high-conviction BUY with a target price of INR2,020 (17x Sep-24E EPS).

L&T Infotech

All’s well

L&T Infotech’s (LTI) revenue and margin came in line in Q2FY23. Revenue growth of 4.6% QoQ and 21.6% YoY CC and flat margin sequentially supported the 23% YoY growth in profit. Key growth drivers include (1) continuity in net- new large deal TCV at USD 80mn (similar to 4QFY22/1QFY23 rate), including a new logo F500 win (Hi-Tech vertical); (2) strong H2 seasonality of LTI ahead; (3) 4.5% QoQ increase in headcount (crossing 50k); and (4) steady large deal pipeline with higher deal tenure and strong outlook of core vertical BFSI (no exposure to mortgage segment). Integration with Mindtree will create service-line and vertical revenue synergies and we believe that the foundation for growth leadership in ‘tier-1’ IT has been set. Maintain BUY on LTI with a TP of INR 5,215, based on 29x Jun-24E EPS.

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