Larsen & Toubro (NS:LART): Larsen & Toubro (LT) reported an in-line performance, with revenue/EBITDA/APAT at INR 670.8/72.3/43bn, a beat/(miss) of 1.3/(7.4)/(1.2)%. P&M margins came in weaker than expected which resulted in LT achieving the lower end of FY24 margin guidance of 8.25-8.5% at 8.2%. LT gave 15/10% revenue/order inflow guidance for FY25 which is better than expected. P&M margin guidance was weak at 8.2% vs. 9% expectation. We have recalibrated our estimates lower to factor in the same. LT expects FY25 execution to have a higher share of lower margin export orders, it guided margin rerating to be driven by infra segment margins improvement, largely led by internal efficiency. 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 a reduced SOTP based target price of INR 4,033/sh.
TVS Motor (NS:TVSM): TVS Motors’ Q4 EBITDA at INR 9.3bn came in ahead of our estimates of INR 8.8 bn aided by improvement in realisation and benign commodity prices. TVS continues to outperform the industry on the back of healthy demand for its products like Raider, i-Qube, Jupiter125, etc. In exports, having established its presence in Africa, its outperformance is likely to be driven by its focus on penetrating Latin America in the coming years. Even in 2W EVs, TVS is putting the right building blocks in place to emerge as a leading player. Its investments in e-bikes in Europe, Norton and the extension of tie-up with BMW Motorrad are expected to deliver strong returns over a 2-3 year horizon. Given its steady margin improvement in FY24 and continued market share improvement, we have raised our estimates by 2% each for FY25-26E. We maintain BUY with a revised TP of INR 2,262/sh (earlier INR 2,211), based on 29x EPS for Mar-26.
Hero Motocorp (NS:HROM): Hero MotoCorp’s Q4 margin, at 14.3%, was ahead of our estimate of 13%, led by better realisation and benign commodity prices. With better consumer sentiment aided by marriage dates and festivals in April, there was recovery seen in the entry-level segment. HMC expects this momentum to continue with the expectation of a normal monsoon. To cater to this segment, it has planned launches of Xoom 125R and Xoom 160 in 1HFY25. The change in distribution strategy (Hero 2.0) and scaling up of Premia showrooms coupled with the ramp-up of new premium launches are expected to drive market share gains for HMC in FY25. With the scale-up of distribution of premium models (HD X440, Mavrick 440, Karizma), HMC is confident of a double-digit revenue growth in FY25. While it is firing on all segments – domestic and export, we remain cautious, given its patchy track record of new launches in these segments. Maintain REDUCE with a revised TP of INR 3,876 (from INR 3,535), based on SOTP valuation.
Bharat Forge (NS:BFRG): Bharat Forge’s consolidated EBITDA at INR 6.4bn was below our estimate due to higher other expenses. PAT significantly missed the estimate due to higher-than-expected interest and tax. Post Q3FY24, management highlighted growth moderation in FY25 in both the domestic and export markets. However, it has highlighted a significantly better outlook from customers. The impact of the Red Sea crisis on operations is turning out to be lesser than previously expected by the management. BHFC is also winning market share in its existing products and new products in new areas. Despite expectations of subdued demand in certain segments, we expect 15% revenue growth (CAGR FY23-26E), to be driven by factors like (1) significant executable defence order book of INR 51.9bn, (2) ramp-up potential at JS-Auto Cast, given there is a huge demand for castings, both in India and abroad, and (3) strong order backlog in aerospace, which would boost this segment’s revenue to INR 5bn over the next four years, from INR 1.7bn. We revise the TP to INR 1,380 (from INR 1286 earlier), based on 30x Mar-26 EPS, and downgrade to ADD.
Gujarat Gas (NS:GGAS): Our ADD recommendation on Gujarat Gas (GGL), with a price target of INR 580/sh, is premised on (1) volume growth of only ~11% CAGR over FY24-26E compared to ~18% volume growth seen over FY19-22 and (2) increased pricing competition from alternate fuel in the industrial/commercial segment. Q4FY24 EBITDA/Adj. PAT at INR 5.9/3.7bn came in above our estimates, owing to higher realization and lower-than-expected gas cost. Volumes stood at 9.7mmscmd (+9% YoY, +6% QoQ), coming below the estimate.
Indraprastha Gas (NS:IGAS): We maintain our BUY recommendation on Indraprastha Gas (IGL) with a target price of INR 520, 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. Q4FY24 EBITDA/APAT at INR 5.2/3.8bn were up 13/16% YoY respectively but came in below our estimates, owing to higher-than-expected opex. However, this was partially offset by the higher-than-expected volume of 8.73mmscmd (+6% YoY, +3% QoQ).
KEC International (NS:KECL): KEC reported Q4FY24 consolidated numbers with a muted EBITDA margin profile. Its revenue/EBITDA/APAT miss stood at 9.2/12.2/23.6%. The standalone (~86% revenue) EBITDA margin also remained weak at 5.4%. The miss on FY24 order inflow, which came in at INR 181bn (i.e. 72% of FY24 guidance of INR 250bn), poses a risk to the FY25 revenue growth guidance of 15%. With L1 orders, the order book (OB) as of Mar’24 stood at INR 366bn (~1.8x FY24 revenue). KEC has cumulatively collected INR 4.2bn from Afghanistan with pending collection at INR 3bn. Although the consolidated net debt, including interest-bearing acceptances, reduced by INR 9.6bn to INR 50.9bn (from INR 60.5bn as of Dec’23), it remains our key concern as peak debt may still be INR 60bn. The NWC days as of Mar’24 stood at 112 vs. ~129 for Q3FY24-end (KEC expects
Kajaria Ceramics (NS:KAJR): We maintain ADD on Kajaria Ceramics (KJC) with a lower target price of INR 1,180/share (35x its Mar’26E consolidated EPS). Kajaria’s Q4FY24 topline was in line, but the bottom line missed our estimate on higher dealer incentives (to push volumes). Consolidated revenue grew by 3% YoY (volume-led). It reported 13.9% EBITDAM, the lowest in the last five quarters (down 70/160bps YoY/QoQ). Management expects demand to look up in FY25 driven by the real estate uptick of the past two years. For FY25, management expects low double-digit volume growth with a 15-17% EBITDA margin. It also guided for stable fuel prices QoQ in Q1FY25.
Gujarat State Petronet (NS:GSPT): Our ADD rating on Gujarat State Petronet with a TP of INR 320/sh is premised on (1) volume growth of ~9% CAGR over FY24-26E, (2) cut in transmission tariff by the regulator, and (2) limited upside triggers in the near term. Hence, we believe that, at present, the stock is fairly valued with an RoE of 13.7/13.8% in FY25/26E and a combined FCF of INR 30bn over FY24-26E.
Click on the PDF to read the full report: