Dabur (NS:DABU): Dabur delivered consolidated revenue/domestic volume growth of 6/1% YoY vs. the expectation of 7/1%. The domestic business grew by 4.7% while the international business posted a 1% growth (10% cc growth). While primary sales were impacted by trade destocking, secondary sales grew by double digits. Dabur’s healthcare/HPC/F&B grew -5/-4/+29% YoY. The healthcare segment was impacted by the high base of the previous year (omicron-led) homecare continued to lead growth in the HPC segment. F&B continued to grow at a fast clip with management aiming to double the business over the next 4-5 years. GM contracted by 160bps YoY (+30bps QoQ) to 45.8% (HSIE 46%), owing to RM inflation and product mix. Although A&P spending remained flat YoY, one-off expenses (INR 200-250mn) led to 270bps YoY EBITDA margin compression to 15.3% (HSIE 15.8%). EBITDA declined by 10% YoY (HSIE -6%). The rural market continues to witness downtrading and is still in the recovery phase, although early signs of green shoots are visible. We cut our FY24 EPS by 2% to reflect higher marketing spending while keeping FY25 EPS unchanged. We value the stock at 42x P/E on Mar-25EPS to derive a target price of INR 560. Maintain ADD.
Tata Power (NS:TTPW): In Q4FY23, Tata Power’s consolidated revenue increased 4.1% YoY to INR124bn, below the consensus estimate of INR130bn (-5.0%). Strong operational performance across its regulated, standalone (including Mundra), coal SPV and renewable businesses were the key underpinnings. EBITDA grew materially by 45.5% YoY on the back of higher availability at Mundra, capacity addition in renewables, and higher efficiencies in the distribution business. Profit improved significantly in the Indonesian coal business (+40.5% YoY), led by high coal prices. Accordingly, adjusted PAT increased 54.5% YoY to INR7.7bn. Odisha discoms’ AT&C losses reduced to 30% in Q4FY23 and it reported a PAT of INR2.5bn for FY23. We have maintained our estimates and SoTP of INR243, factoring in margin restoration in its EPC business, healthy demand in its distribution circles, lower AT&C losses across Odisha circle, and the growing renewable business. Accordingly, we maintain our ADD rating.
Cholamandalam (NS:CHLA) Investment and Finance Company: Chola reported a stellar quarter with P&L outcomes significantly ahead of our estimates on the back of an extraordinary surge in AUM growth (+38.5% YoY), 20bps reflation in NIMs (7.8%), and improving asset quality. It maintained its strong disbursal momentum (+65% YoY +20% QoQ), led by a contribution from across product segments. The management remains upbeat about growth prospects despite a high base with increased portfolio diversification (share of vehicle finance at 63%) and increasing penetration of non-vehicle segments in existing branches. While the management has indicated maintaining stringent credit filters in its new businesses (target pre-tax RoA of ~3.5%), we continue to monitor potential segmental profitability from these businesses. We increase our FY24/FY25 earnings estimates by 9% to factor in higher AUM CAGR, offset by higher opex intensity from new businesses maintaining BUY with a revised TP of INR1,055 (4.5x Mar-25 ABVPS).
TVS Motor: TVS Motors’ Q4 adjusted PAT at INR 3.64bn came ahead of our estimate of INR 3.3bn, led by the better-than-expected margin. TVS was able to improve margin QoQ despite the ramp-up of iQube in the quarter and that is commendable. TVS continued to outperform peers even in FY23: (1) it gained a 100bps market share in motorcycles to touch a record-high level of 8.9% (2) in scooters, it is the biggest gainer and its market share is up 220bps to 23.6% (3) even in 2W EVs, TVS has now emerged as the second-largest player and sold 97k units of iQube in FY23. With supply challenges now largely over, we expect TVS’ outperformance to continue on the back of the ramp-up of its launches, including the new Ronin and Raider. Even in EVs, it seems to be ahead of its listed peers with a strong product pipeline in place for the next 24 months it has signed up with industry experts and JV partners to emerge as a leading player in EVs. We maintain BUY with a revised TP of INR 1,342/sh (earlier INR 1275), as we roll forward to FY25 EPS (target multiple unchanged at 28x).
KEC International (NS:KECL): KEC reported Q4FY23 numbers with a slight recovery in the consolidated margins. However, the standalone margin continues to be at multi-year low levels. With FY23 order inflow (OI) of INR 223.8bn (vs. revised guidance of INR 180-190bn) and L1 on INR 35bn, the order book (OB) as of Mar’23 stood at INR 340bn (~2x FY23 revenue). There has been movement in collections from Afghanistan as KEC received INR 500mn in Q4FY24 and it expects another INR 2bn by May-23 end. The consolidated net debt, including the interest-bearing acceptances, stood at INR 49.9bn, a decrease of INR 6.3bn from INR 56.2bn, as of Dec’22. The interest cost for FY23 came in at 3.12% (vs. 2.3% YoY) of revenue. KEC expects the interest cost to reduce from Q1FY24 onwards. KEC guided for FY24 revenue to grow by 15% YoY with the EBITDA margin at ~7% and OI of INR 250bn. Given the debt-heavy balance sheet, elevated working capital, and weak profitability, we maintain REDUCE with a TP of INR 400/share (13x Mar-25E EPS). Rerating depends on debt reduction and margin recovery.
Click on the PDF to read the full report: