Results Review for Cummins, Oil India, Phoenix Mills, Emami, Fine Organic Ind

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Cummins: Cummins India (NS: CUMM ) Ltd (CIL) delivered a positive surprise with quarterly revenue/EBITDA/PAT at INR 19.2/3.3/3.2bn, beating our estimates by 7/15/33%. On a full-year basis, these were the highest ever. CIL is seeing strong pre-buy for its below 800kW power gensets as the CPCB 4+ norm will become effective from 1 July 2023. CIL, however, has only 20% of its portfolio above the 800kW rating. All its products under 800kW are undergoing significant change with electric components and better power density and system control than their mechanical counterpart. These products are expected to cost 20-50% higher. The export market is also robust with lower HP product sales in FY23 recording a growth of 40% YoY compared to 11% YoY growth in High HP products. Also, CIL has introduced its next iteration of Fit-For-Market 3.0 products, catering to the region and application-specific products for the export market. In CY24, CIL expects to ramp up its manned capacity, which is currently at a utilisation level of 90% as against its installed capacity utilisation of 60-65%. CIL has multiple tailwinds, namely, stringent upcoming norms, Capex cycle recovery, adoption of alternative fuels with lesser carbon footprint, revival in industrials and supporting manufacturing policies. We maintain BUY, with an unchanged SOTP of INR 1,880 (35x Mar-25 EPS).

Oil India (NS: OILI ): Our ADD recommendation on Oil India with a target price of INR 290 is premised on oil and gas production growth at 4% CAGR over FY23-25E, attractive valuations of 4.3x FY24 EPS—a 30% discount to long-term average P/E of 6.2x, 0.6x FY24 P/Bv with RoE of ~16% and a dividend yield of ~7%. However, this is offset by limited earnings potential owing to the levy of a windfall tax on crude oil prices and a decline in the price of domestically produced APM gas. Q4FY23 EBITDA stood at INR 24bn, coming broadly in line however, APAT at INR 18bn, beat our estimate due to higher-than-expected other income, lower depreciation and interest cost. Oil and gas production was marginally above estimates.

Phoenix Mills: Phoenix Mills (PHNX) reported revenue/EBITDA/APAT at INR 7.3/4.3/1.8bn, (missing)/beating our estimates by (1)/2/0%. Retail consumption stood at INR 22bn, at 59% growth over the pre-Covid level. Excluding new malls, growth was 37% over pre-Covid levels. Consumption was supported by higher growth in jewellery, fashion, electronics and entertainment categories. For FY23, consumption was the highest ever at INR 92bn, beating the guidance of INR 90bn. For FY24, PHNX expects to achieve INR 115bn in consumption (a growth of +25%), with INR 25bn contribution coming from new operational malls i.e. Citadel Indore and Palladium Ahmedabad. The overall trading occupancy excluding new malls stood at ~90%. PHNX expects to bring the overall trading occupancy (including new malls) to 93-95% before Diwali 2023. PHNX is also ramping up its office portfolio with an aim to achieve 7.1msf of the leased assets by FY26 from 2.1msf of the current operational portfolio. In FY24, 0.9msf of the office assets in Hebbal, Bengaluru, will become operational. Given strong traction in consumption, captive mall expansion, the addition of office space, a strong business development pipeline and lower net debt, we maintain BUY, with an unchanged SOTP of INR 1,800/sh.

Emami (NS: EMAM ): Emami’s 4QFY23 revenue grew by 9% YoY (on Dermicool and Helios consolidation). Domestic/international revenues grew by 5/19% YoY, with organic domestic revenue declining by c.8%. While male grooming/ Kesh King grew 29/1%, there was sustained pressure on all other brands as Boroplus/Navratana/Healthcare/Pain Management declined by 25/3/13/9%. GM improved on softening input costs (+60bps YoY) while EBITDAM expanded by 260bps to 23.9%, aided by lower A&P spends (-395bps YoY). Emami remains cautiously optimistic about demand recovery, given (1) softening inflation to aid rural demand (2) increased brand investments and (3) a favourable base. However, the summer season remains the key monitorable. We remain cautious about core business growth, given the limited scope to add new consumers in niche categories. We maintain our estimates and value the stock at 20x P/E on Mar-25E EPS to derive a TP of INR 385. Maintain REDUCE.

Fine Organic (NS: FINO ) Industries: Our ADD recommendation on Fine Organics with a TP of INR 4,694 is premised on (1) leadership in oleo-chemical-based additives in the domestic and global markets with a loyal customer base (2) unique business model with high entry barriers (3) diversified product portfolio and (4) pricing power. Q3 EBITDA/APAT were 57/78% above our estimates, owing to significantly lower-than-expected raw material costs, lower-than-expected operating expenses, and lower-than-expected tax rates.

Brigade Enterprises (NS: BRIG ): Brigade Enterprises Ltd (BEL) reported the highest-ever annual presales of 6.3msf (+35% YoY), valued at INR 41bn (+36% YoY). This was on the back of robust launches of 5.5msf (3.8msf in FY22), with 3.02msf launched in Q4FY23. Over 60% of the residential presales came from new launches in Q4FY23. In FY24, BEL plans to launch 7.5msf in the residential segment, with a GDV potential of INR 60bn, most of which will be launched in Q3/Q4FY24. 25% of these launches will be from the Mount Road Chennai project (i.e. TVS land). The average price hike stood at 7%, excluding newly-forayed plotted development presales. In terms of BD, BEL added INR 50bn worth of GDV with an area of 8.7msf. The retail segment saw healthy rental of INR 1.6bn (+60% YoY) with footfalls increasing by 106% YoY. The weighted average rental also increased by 13% YoY. Within the office segment, non-SEZ assets are all leased out with muted leasing in the SEZ assets i.e. WTC Chennai, Tech Garden and Financial Center, GIFT. Given BEL’s strong cash position of INR 17bn, a robust business development pipeline, and a healthy balance sheet, we remain constructive. We reiterate BUY, with an unchanged TP of INR 632/sh.

TTK Prestige (NS: TTKL ): TTK Prestige’s Q4FY23 print disappointed on all counts with revenue/EBITDA/PAT declining by 13/25/25% YoY respectively. Domestic revenue fell 11% YoY on account of (1) demand softness due to an inflationary environment (2) consumer wallet share moving away from kitchen appliances and (3) pricing-led competitive intensity (more so in the mid-economy segment). Moreover, export revenue declined by 50% due to weak global cues. Demand softness was seen across categories with cookers/cookware/appliances revenues falling 20/13/8%. Gross margins contracted by 210bps YoY. In Q4, TTK took a write-off on its obsolete inventory (115bps impact on GM c.INR600mn). EBITDAM contracted by 230bps despite lower A&P spending. With demand expected to remain soft in the near term and a high base (H1FY23 21% YoY growth), we expect demand recovery only in H2FY24 for TTK and cut our FY24/25 EPS by 5% each. We value the stock on 30x Mar-25 EPS to derive a TP of INR 725. Maintain REDUCE.

ITD Cementation (NS: ITCM ): ITD Cementation (ITD) reported revenue/EBITDA/APAT of INR 16.3/1.5/0.4bn, beating/(missing) our estimates by 13.7/23.5/(15.2)%. The miss is largely due to the share of losses from JVs. With an order inflow (OI) of INR 80.8bn in FY23, the order book (OB) as of Mar’23 stood at INR 200bn (~4x FY23 revenue, ex L1-INR16bn). The OB is well-diversified, providing a natural hedge from a slowdown in any particular business segment. The net D/E as of Mar’23 stood at 0.22x. ITD guided for FY24 revenue at INR 65-68bn with an EBITDA margin above 9% and OI of INR 80bn+. FY24 capex will be at ~INR 1bn. We have recalibrated our estimates higher to factor in strong execution and better margins. We reiterate BUY, with an increased TP of INR 170/sh (10x Mar-25E EPS).

Ashoka Buildcon Ltd (NS: ABDL ): Ashoka Buildcon (ASBL) reported an operationally strong quarter with revenue/EBITDA/APAT beating our estimates on all fronts. On the back of strong order inflows (OI), the FYTD24 order book (OB) stands at INR 181bn (~2.8x FY23 revenue). The standalone gross/net debt stood at INR 8.8/5.9bn as of Mar’23 vs. INR 8.5/5.8bn as of Dec’22. The balance equity requirement for HAM assets as of Mar’23 stands at INR 1.7bn, of which INR 1.1/0.6bn would be infused in FY24/25. ASBL has guided for an FY24 capex of ~INR 1bn. It also guided that FY24 revenue will grow 20-25% YoY while guiding for an EBITDA margin of 8.75-9.25% and OI of INR 80-100bn. It expects to close FY24 OB at INR 200bn+. We maintain BUY, with a TP of INR 135/sh (9x Mar-25E EPS rollover).

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