Avenue Supermarts Ltd (NS: AVEU ): D-MART’s unit economics remain subpar. Revenue grew 18% YoY in Q4 (in-line; FY19-22 CAGR: 15%). Our thesis, which penciled in pressure on sales density and its make-up, seems to be playing out, courtesy of heightened competitive intensity by horizontal/quick e-commerce. More revealing is the decline in bill cuts (down from ~1mn to ~0.7mn per store over FY-19-22). EBITDAM at 8.6/8.2% for 4Q/FY22 remains sup-optimal, courtesy the inferior mix. Investors may have to brace for another round of dilution soon, as QIP money + C-WIP = 1-year expansion. We have toned down our FY23/24 estimates by 16/11% to account for lower bill cuts/store and maintain our SELL rating with a revised DCF-based TP of INR2,500/sh (earlier INR2,700/sh), implying 33x FY24E for the standalone business + 4x FY24E sales for DMART Ready.
Relaxo Footwears Ltd (NS: RLXO ): Relaxo was disappointed with its Q4FY22 print. The double whammy of inflation-led pressure on consumer demand and costs is palpable. Revenue declined 6.6% YoY to INR6.98bn in Q4 (a three-year CAGR: 3%; HSIE: INR6.92bn). FY19-22 volume/net realization CAGR stands at -2/+7% - a function of the increasing skew of closed footwear in the mix. Profitability remains sub-optimal as RM inflation in key inputs remains rampant. Price hikes continue to lag RM inflation. We’ve cut our estimates by 10/9% each for FY23/24 to account for lower profitability. Our DCF-based TP stands revised at INR850/sh (earlier INR970/sh); implying 50x FY24E P/E. Maintain SELL.
Vinati Organics Ltd (NS: VNTI ): Our SELL recommendation on Vinati Organics with a discounted cash flow-based target price of INR 1,750 (WACC 10%, terminal growth 4.5%) is driven by a shift in the revenue mix towards lower-margin isobutyl benzene (IBB), butyl phenol and other products as compared to ATBS, which has a higher margin. We believe the current valuation is contextually high at ~35x FY24E EPS. Q4 EBITDA/APAT was 48/23% above our estimates, owing to a 23% rise in revenue, and lower-than-expected other expenses, offset by higher-than-anticipated raw material costs and tax outgo.
Kalpataru Power (NS: KAPT ) Transmission: Kalpataru Power (KPTL) reported revenue/EBITDA/APAT of INR 20/1.7/0.87bn, with in-line revenue and EBITDA and APAT beat. EBITDA margin shrunk both sequentially and annually to 8.5% on account of higher commodity prices and supply chain & logistics challenges but was partly aided by INR 280mn of CTC provision reversal. KPTL secured new orders worth INR 81.5bn in FY22, taking the order book (OB) to INR 158bn. It is well on track to achieve standalone net cash status with net debt at INR 4.1bn (vs INR 5.5bn as of Dec-21). The pending cash flow to be realized from the Indore real estate project is INR 2.5bn, with INR 1.2bn expected in FY23. This shall help deleverage the balance sheet further. We maintain BUY with a SOTP TP of INR 476 (rollover to Mar-24E).
Neogen Chemicals Ltd (NS: NEOE ): Our BUY recommendation on Neogen Chemicals (NCL) with a target price of INR 1,900/sh is premised on (1) increasing contribution of the high-margin CSM business to revenue, (2) entry into the new-age electrolyte manufacturing business, (3) capacity-led expansion growth opportunity, (4) constant focus on R&D, and (5) improving return ratios and strong balance sheet, going forward. Q4 EBITDA/APAT was 6/7% above our estimates, owing to a 30% rise in revenue and lower-than-expected tax outgo, but were offset by higher-than-expected raw material costs and other expenses.
JMC Projects (NS: JMCP ): JMC Projects (JMC) reported revenue/EBITDA/APAT of INR 15.6/1.3/0.6bn, beat at all levels (13.2/4/26% beat). The EBITDA margin was muted at 8.5%, affected by high commodity prices and supply chain issues. Wainganga Expressway restructuring has got delayed and is now expected by H1FY23, as consent from the majority of lenders has been received. Vindhyachal asset refinancing is expected to be completed by H1FY23. The loss funding requirement for these assets, including Agra-Aligarh, is INR 700-800mn. The FY22 order inflow (OI) was at INR 101bn, taking the order book (OB) to INR 171bn. We maintain BUY with a revised target price of INR 142 (11x Mar-24E EPS). We cut our FY23/24 EPS estimate by (10.9)/(17.2)% to factor in elevated commodity prices.
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