Results Review for Gail, Phoenix Mills, Balkrishna Industries, Bandhan Bank, Amber

  • Stock Market Analysis
  • Editors Pick

Gail (India) (NS: GAIL ): Our BUY recommendation for GAIL with a target price of INR 212 is based on (1) an increase in gas transmission volume to 132/142mmscmd by FY25/26 on the back of an increase in domestic gas production, (2) completion of major pipelines in eastern and southern India, and (3) expectation of improvement in earnings from the petchem segment. Q4FY24 reported EBITDA stood at INR 36bn (+11.6x YoY, -7% QoQ), which came broadly in line with our estimate, however, PAT at INR 22bn (+3.6x YoY, -23% QoQ), came below our estimate, impacted by higher depreciation and interest cost and lower other income. Depreciation was higher at INR 12bn (+80% YoY, +48% QoQ) due to the revision in the residual value of pipelines resulting in an additional depreciation of INR 1.7bn in Q4. Interest cost was at INR 1.9bn (+2.1x YoY, +24% QoQ).

Phoenix Mills (NS: PHOE ): Phoenix Mills’ (PHNX) reported revenue/EBITDA/APAT at INR 13.05/6.2/3.3bn, beating our estimates by 24/5/12%. Strong residential sales, improving ARR in hospitality and pick-up in office leasing also contributed positively to profitability. PHNX plans to replicate the success achieved from the recently opened mall in Lucknow with an occupancy rate of >90% to its new malls at Ahmedabad, Pune and Bengaluru. F&B and entertainment mix has increased from 15% to 30% in new malls, and PHNX expects to replicate it in existing malls. The mall densification in Chennai and Bengaluru is projected to be completed in FY25, adding 1msf in the leasable area for both the malls in Phase 1. Beyond this, it is in active discussions on 3-4 land transactions for growth. We have reduced our estimates to factor in delayed office leasing. Given stable 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 increased SOTP of INR 3,600/sh.

Balkrishna Industries (NS: BLKI ): Balkrishna Industries (BKT) Q4 FY24 PAT, at INR4.8bn (HSIE INR 3.3bn), came in higher than our estimate supported by double-digit volume growth. Management has indicated that the ongoing Red Sea crisis has led to an increase in freight costs. While demand has held up in Q4FY24, given the uncertain global macro, management has refrained from giving any volume guidance for FY25. The company expects to maintain a margin in a similar range as FY24. India is going to be a focus market for BKT with the replacement market driving the growth. Given the uncertain outlook, the stock at 25x FY25E appears expensive. Maintain REDUCE with a revised TP of INR2,277 (earlier INR 2,228), based on 22x FY26 EPS.

Bandhan Bank (NS: BANH ): Bandhan Bank’s earnings missed estimates, owing to a one-time accelerated write-off of CGFMU claims and EEB backbook-related stress, coupled with a one-off in operating expenses. GNPAs clocked in at 3.8% (Q3FY24: 7.02%), on the back of elevated technical write-offs (INR38.5bn). Slippages, although improving, continue to be elevated (FY24: 4.9%), largely stemming from the EEB portfolio. Deposit growth (+25% YoY) benefitted from stronger traction in non-retail TD (+23% QoQ) and seasonal pick-up in current accounts as CASA stood at 37.1% (+97bps QoQ). With an elevated LDR (~89%), BANDHAN needs to sustain its franchise-building investments to up its deposit mobilization and maintain its growth trajectory. Given a rising mix of secured loans, incremental deposit re-pricing and potential rate cut in H2FY25, we expect incremental pressure on margins. We build in 70% cumulative recovery from the accelerated write-off pool over FY25E-26E. We maintain ADD with a revised TP of INR185 (implied 1.1x Mar-26 ABVPS), reflecting high earnings volatility.

Amber Enterprises (NS: AMBE ): Amber reported an encouraging operating print with its EBITDAM expanding by 110bps YoY to 7.9% on increasing components mix in the consumer durable segment (margin up 180bps YoY to 8.1%). However, on expected lines, given the shift in the RAC industry landscape (more in-sourcing from brands), the consumer durable segment revenue fell by 11%. Amber holds a 27.3% value market share in the RAC industry and expects to grow in tandem with the industry growth, going ahead. Within the electronics segment, propelled by its acquisition of Ascent Circuits (bare PCB manufacturing), it is diversifying into new segments and customers (consumer durable mix now at 72% vs 100% three years back). The railway subsystem & mobility segment remains on track for an accelerated growth phase on the back of increasing wallet share (c.20% of BoM). Given the increasing mix of higher margin components and mobility segment along with margin expansion in the electronics segment, we bake in 100bps improvement in overall margins over FY24-26E. We value the stock at 38x Mar’26 EPS to arrive at a target price of INR 4,350. Maintain BUY.

City Union Bank (NS: CTBK ): City Union Bank’s (CUBK) earnings marginally beat estimates, on the back of lower credit costs and a modest pick-up in growth, offset by elevated opex and softer traction in other income. The management bolstered its operations in the MSME and secured retail segments via digital initiatives. CUBK continued to witness negative net slippages, with annualized slippage at ~2%, enabling GNPA% to further improve to 4.0% (9MFY24: 4.5%). With the management strategy of continuing its investments in technology and people, opex is expected to stay elevated at current levels. Despite a marginal uptick (+6% QoQ), a recovery in loan growth momentum is crucial for operating leverage benefits and any potential re-rating. Hence, we believe that CUBK needs to solve for growth, given the pressure on margins from deposit repricing and the potential rate cut cycle in H2FY25. We tweak our FY25/26E to factor in higher loan growth, partly offset by lower credit costs. Maintain BUY, with a revised TP of INR175 (1.3x Mar-26 ABVPS).

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