Results Review for L&T, BPCL, Dr Reddy’s, Petronet LNG, M&M Financial Services

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Larsen & Toubro (NS: LART ): Larsen & Toubro (LT) reported a margin miss, with revenue/EBITDA/APAT at INR 551.3/57.6/29.5bn, a beat/(miss) of 5.4/(3.8)/(11.8)%. Higher execution of legacy order book and slower margin threshold hit on new order book led to core P&M margins coming in at 7.6% (-90bps/+20bps YoY/QoQ). Strong order booking, improvement in NWC/sales, and a robust prospects pipeline were some of the key wins in Q3FY24. This resulted in revenue, order inflows and NWC/sales guidance upgrades whilst a slight downgrade in margins. LT expects FY25 execution to have a high share of new orders with better margins and signalled that margins will improve in the ensuing quarters on a YoY basis. Given: (1) the record-high order book (OB) of INR 4.7trn, (2) likely bottoming out of infra margins, (3) improvement in subsidiary performance, and (4) higher public capex towards a green economy, we maintain our BUY stance with an increased SOTP based target price of INR 4,238/sh.

Bharat Petroleum (NS: BPCL ) Corporation: We maintain our REDUCE rating on Bharat Petroleum (BPCL), with a target price of INR 500, owing to the risk of (1) lower auto-fuel marketing margins because of either a bounce-back in crude oil price or retail price cuts ahead of general elections and (2) moderation in refining margins. Q3FY24 EBITDA came broadly in line at INR 62.3bn, while APAT, at INR 34bn, was marginally above our estimate. Earnings were supported by higher-than-estimated other income and lower interest costs. Reported GRMs came in at USD 13.4/bbl (-USD 2.6/bbl YoY, -USD 5.1/bbl QoQ).

Dr Reddy’s Laboratories (NS: REDY ): EBITDA was muted (+4% YoY) as +7% YoY sales growth (+6% QoQ US, +16% YoY in EU, and +16% YoY in RoW, +5% YoY in India) was offset by lower gross margin (-59 bps YoY, price erosion in key products and adverse mix) and higher costs (staff/ R&D up 9%/15% YoY). DRRD expects to sustain growth in the US over the next few years (gRevlimid to be a meaningful contributor for the next two years), price erosion was stable in Q3. The company expects India formulation to see double-digit growth in FY25. Its R&D focus is on long-term differentiated assets for the global markets (NCEs, biosimilars, OTC, peptides, speciality, etc.), their monetization can take 2-3 years. Factoring Q3, we have marginally tweaked estimates. We believe the gRevlimid opportunity will play out, but we are cautious about base business performance, given intense competition and escalating costs (especially R&D). We have a REDUCE rating with a TP of INR 5,650 (24x Dec’25E of a core EPS + INR 150/ share from gRevlimid).

Petronet LNG (NS: PLNG ): Our REDUCE recommendation on Petronet LNG (PLNG) with a TP of INR 236 is based on: (1) limited visibility of near-term earnings growth, (2) an increased capex outlook, and (3) subdued return ratios resulting from a high capex cycle anticipated over the next five years. In Q3, the reported EBITDA stood at INR 17.1bn (+2% YoY, +40% QoQ) while PAT came in at INR 11.9bn (+1% YoY, +46% QoQ), surpassing our estimates. This outperformance is attributed to the company recognising Use or Pay charges for CY23 in other operating income, arising from lower capacity utilization by its customers. Volumes were at 232tbtu (+39% YoY, +4% QoQ), broadly aligning with expectations.

Mahindra and Mahindra (NS: MAHM ) Financial Services (NS: MMFS ): MMFS reported a mixed quarter with steady asset quality and healthy loan growth (+25% YoY), offset by sustained pressure on NIMs (~6.6%) and subdued disbursements (+7% YoY). Credit costs normalised in Q3 to ~1.5% and remain on track at ~1.5-1.7% in FY24, although the volatility in credit costs remains a concern. MMFS remains focused on building customer (greater affluence) and product diversification (SME, etc.), along with forging partnerships to drive fee income. However, the rising cost of funds amidst a tight liquidity environment and investments in tech and distribution are likely to provide a downside risk to a RoA of ~2.5% by FY25. We reduce our FY24/FY25E earnings estimates by 14%/4% to factor in NIM compression and higher credit costs and maintain ADD with a revised SOTP-based TP of INR290 (standalone at 1.7x Sep-25 ABVPS).

Indraprastha Gas (NS: IGAS ): We maintain our BUY recommendation on Indraprastha Gas (IGL) with a target price of INR 490, given (1) strong volume growth of ~11% CAGR over FY24-26E, (2) healthy margins supported by higher allocation of gas from the high-pressure, high-temperature (HPHT) fields to the priority sector, and (3) a strong portfolio of new geographical areas (GAs) ensuring volume growth visibility. Q3FY24 EBITDA/APAT at INR 5.6/3.9bn were up 32/41% YoY respectively but below our estimates, owing to lower-than-expected margins, partially offset by the higher-than-expected volume of 8.5mmscmd (+4% YoY, +2% QoQ).

Nuvoco Vistas (NS: NUVO ) Corporation: We reiterate a BUY rating for Nuvoco Vistas, maintaining an unchanged TP of INR 515/share (based on 10x its consolidated Mar-26E EBITDA). In Q3FY24, Nuvoco’s volume decline accelerated to 10% YoY due to weak demand and market share loss in the east. Despite this, healthy pricing gains, increasing share of low-cost linkage coal, and other cost controls contributed to a 10-quarter high unit EBITDA of INR 991/MT. Although consolidated revenue fell 7% YoY, the EBITDA rebounded 53% YoY, leading to an APAT of INR 310mn (vs a net loss YoY). Nuvoco’s net debt to EBITDA ratio further improved to 3x vs 3.5x QoQ.

Symphony (NS: SYMP ): Symphony’s domestic business disappointed as revenue fell both YoY/QoQ by 20/17% on account of delayed inventory pick-up by trade as channel inventory of cooling products remains higher than usual. However, given healthy bookings and expectation of a harsh summer, Symphony remains optimistic about the domestic demand outlook and is focusing on (1) product innovation, (2) enhancing distribution (semi-urban and rural), and (3) increasing presence in alternate channels (30% vs. 10% pre-COVID). RoW business performed relatively better with IMPCO Mexico and GSK China recording strong performance. While CT Australia remains impacted by macro headwinds, management’s strategic steps have led to the narrowing of losses. Although we remain positive that domestic business will scale up, we expect only a gradual recovery in RoW execution, which is still WIP. The upcoming summer season and sustained execution of RoW turnaround remain the key monitorable. We cut our FY25/FY26 earnings by 3/2% and valued the stock at 30x P/E on Dec’25E EPS to derive a TP of INR 925. Maintain REDUCE.

Teamlease Services (NS: TLSV ): Teamlease reported 7.6% QoQ revenue growth and margins expanded for the second consecutive quarter. The margin expansion was led by a gradual improvement in PAPM, stable core employee costs, recovery in DA, and better profitability in HR services (ed-tech). The general staffing volume growth was strong (+20% YoY), given festive demand in the consumer and BFSI verticals. The degree apprenticeship (DA) headcount registered a 2.5% QoQ growth (despite a decline in NEEM), following four quarters of decline. We expect DA volume growth to resume, DA ex-NEEM has a lower PAPM but a better GM. Specialised staffing volume remains under pressure due to a slowdown in IT hiring, partially offset by GCCs. The volume growth in specialised staffing will recover with the return of IT sector hiring. The overall growth will be supported by (1) volume growth in general staffing, (2) the addition of new logos, (3) growth in DA, and (4) the recovery in IT sector hiring. The EBITDA margin will gradually improve to ~1.7%, led by improving PAPM, lower wage inflation, stable core cost, and better specialised and HR margins. We increase our EPS estimates for FY25/26E by ~1/3% and maintain ADD with a TP of INR 3,180, based on 25x FY26E EPS. The stock is trading at a P/E of 29/22x FY25/26E EPS.

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