Results Review for Nestle, Trent, Britannia, CDSL, Birla Corp, V-MART Retail

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Nestle (NS: NEST ) India: Nestle posted a resilient operating performance with EBITDA growing by 14% (HSIE: +10%) due to a 370bps GM expansion to 58.6% (the highest in the last 20 quarters). Domestic revenue grew by 9% YoY (HSIE 12%) on the back of pricing and mix growth (around low to mid-single-digit volume growth). Coffee prices remain volatile while healthy milk flush in winter is expected to keep milk prices stable. However, rain deficit may impact the production of maize, sugar, oil seeds, and spices. EBITDA margin expansion was limited to 120bps YoY to 24.5% as Nestle increased brand investments in all product groups. It continues to focus on distribution strengthening, category expansion, and capacity building. We remain positive on OOH products and sustain growth for in-home products. We incorporate changes related to the change in the financial year from Jan-Dec to Apr-Mar (FY24 to be 15 months). We value Nestle at 52x P/E on Dec-25E EPS to derive a TP of INR 2,100. With a rich valuation, the absolute upside is limited in the medium term. Maintain REDUCE.

Trent (NS: TREN ): Amidst the apparel slowdown, Trent remains an anomaly. Standalone revenue grew 52.5% YoY to INR33.12bn (HSIE: INR30.5bn). Zudio continues to anchor this exceptional growth. SSSG across all fashion formats stood at 10% in Q3. The F&G format Star continues to improve its value proposition/sales density and scale well (up 26% YoY, growth almost entirely SSSG-led). EBITDAM expanded 336bps to 18.8% (HSIE 15.5%) as scale-led operating leverage gains kicked in. Note Pre-IND AS EBITM expanded 450bps to 13%. We’ve revised our FY25/26 EBITDA estimates by 8/6% to account for higher growth. Maintain SELL with a SOTP-based TP of INR2,350/sh (includes 45x FY26 P/adj PBT for the standalone business).

Britannia Industries (NS: BRIT ): Britannia’s Q3FY24 print was largely in line with our estimates as revenue grew by 2% while EBITDA was flat YoY. Volume growth at 5.5% stood ahead of transactions (number of packets: +3-3.5%) as Britannia took pricing action (3-4% YoY) to defend its market share amidst heightened local competitive intensity on cooling inflation. Britannia’s EBITDAM remained above 19% (fourth instance in the last five quarters) on improving GM and better cost control. Going ahead, Britannia will focus on driving high single-digit volume growth and defend/gain its market share through calibrated pricing actions. We expect revenue growth to be volume-led, which will require additional push (consumer offers, marketing, etc.), thus, the operating margin will have limited room for expansion. We cut our EPS estimates for FY24-26 by 1% and value Britannia at 42x P/E on Dec-25 EPS to derive a target price of INR 4,700. Maintain REDUCE.

Endurance Technologies (NS: ENDU ): Endurance’s Q3 consolidated EBITDA/PAT at INR 3/1.5bn came in below our estimates. The Europe business margin was flat QoQ at 15.5%. In India, while the premium segment in 2Ws is seeing good demand, growth prospects for entry 2W segment appear bleak, given the incremental impact of sub-par monsoon expected on rural sentiment. Further, consumer sentiment in Europe has sharply deteriorated, given the geopolitical issues and recessionary trends in the region. The weak consumer sentiment is visible in the slower run rate of Endurance’s business wins in Europe for 9M. However, given the reduction in energy costs in Europe, we factor in that the consolidated margin will improve to 14% by FY25E (from 11.8% in FY23). While we have factored in most of the key positives, the valuation at 31x FY26E earnings appears expensive. The stock is now rated SELL with a revised target of INR 1,599 (earlier INR 1,508), as we roll forward to Mar-26 EPS (unchanged target multiple of 25x).

Brigade Enterprises (NS: BRIG ): Brigade Enterprises Ltd (BEL) posted strong presales of 1.7msf (+11%/+2% YoY/QoQ), valued at INR 15.2bn (+51%/+22% YoY/QoQ) with average realisation touching an all-time high of INR 8,994 per sq ft (+36%/+21% YoY/QoQ). This was on the back of four projects of 2.7msf launched in the quarter, which contributed 50% to presales in Q3FY24. BEL has a total launch pipeline of 10.8msf for the next four quarters. The Mount Road Chennai project (i.e. TVS land) is expected to be launched in Q1FY25 (vs. Q4FY24 earlier). BEL is planning for 5msf of new office projects in Bengaluru, Hyderabad and Chennai and 1msf of hotels. This will entail a new capex of INR 30bn over FY25-28. The total land cost payable is INR 11.9bn as of Dec’23. After the INR 2.5bn land payout in Q4FY24, the pending cost is INR 9.4bn. Given BEL’s strong cash position of INR 15.6bn, a robust business development pipeline, and a healthy balance sheet, we remain constructive. We reiterate BUY, raising the TP to INR 1,179/sh to account for (1) inclusion of new projects in Hyderabad, Bengaluru, and Chennai, (2) expansion in the office/hospitality segment, and (3) incorporation of a 5-10% price hike across projects.

Radico Khaitan (NS: RADC ): Radico reported a better-than-expected Q3 print, largely on account of higher non-IMFL revenue, which grew by 174% (HSIE 60%), led by (1) an increase in liquor prices, (2) higher country liquor volumes, and (3) alcohol sales post commissioning of Sitapur facility. IMFL revenue was up 15% with volume growing by 4% YoY to 7.24mn cases (4-year CAGR at 3%). P&A saw sustained momentum with volume growing by 20% (in-line) while the regular portfolio remained impacted as volume fell by 12%. Radico expects the momentum in its P&A portfolio to sustain with all core brands exhibiting healthy growth. Despite commodity inflation in glass and grain prices (500/370bps impact YoY/QoQ), GM sustained due to higher premium mix and price hikes in the IMFL business. Whilst we remain positive about Radico’s success in product innovation and luxury portfolio scale-up, we remain cautious about margin recovery (RM volatility, growth in regular portfolio) and expect costs related to capex to impact earnings. We increase our FY24-26 earnings by 4-5% (largely non-IMFL led) and value Radico at 30x P/E on Dec-25 EPS to arrive at a TP of INR 1,100. Maintain REDUCE.

CDSL (NS: CENA ): CDSL posted another quarter of strong growth (+52% YoY), led by growth in market-linked revenue and a stable annuity stream. The growth was driven by a jump in transaction revenue, IPO/corporate action, and KYC fetch/creation, offset by seasonally weak e-voting revenue. The Demat account addition is breaking all records, CDSL added ~8.5mn accounts in the quarter (+88% YoY) and the Jan-24 run rate is 28% higher than the peak of Oct-21. CDSL maintains its leadership position with a 75.6% market share and 90% incremental share. We expect strong growth, supported by (1) strong BO account addition, (2) higher transaction revenue, and (3) stable annuity revenue. The insurance opportunity remains an option value and will aid growth subject to regulatory push. The compulsory Demat of non-small private limited companies will aid issuer growth. Higher investment in technology, increasing employee cost and regulatory compliance are leading to higher costs (+30% in 9MFY24), and EBITDA margins will be in the range of 60-63%. We increase our growth/EPS and multiple to adjust for better growth and market share gain. We maintain our BUY rating with a target price of INR 2,170, based on 40x FY26E EPS. Stock trades at a P/E of 42/36x FY25/26E EPS, generating RoE/RoIC of 33/80%.

Birla Corporation (NS: BRLC ): We maintain BUY on Birla Corporation (BCORP), with a higher target price of INR 1,770/share (8.5x Mar-26E consolidated EBITDA). Cement sales volume grew 13% YoY (+1% QoQ) in Q3. Cement NSR rose 2% QoQ. Cement opex cooled off 3% QoQ owing to reduction in input/freight costs. Thus, unitary EBITDA rebounded to a 10-quarter high of INR 899/MT (+INR 220/MT QoQ). The greenfield SGU of 1.4mn MT in Prayagraj, UP, is expected to be commissioned by FY25 end. Maihar line-2 clinker expansion is expected to be commissioned by FY27. We expect a recovery in margins on Mukutban’s ramp-up and its incentive accrual from Q4FY24 onwards, and other ongoing cost rationalisation initiatives, which will be partially set off by the expiry of Kundanganj incentives from FY24-end. We continue to like BCORP for its large retail presence in the lucrative north/central regions.

V-MART Retail (NS: VMAR ): In our recent upgrade note, we highlighted the bottoming out of V-MART KPIs. While still early days, green shoots can be seen. Revenue grew 14.4% YoY to INR8.89bn (in-line). Core V-MART operations grew 17% YoY to INR7.28bn (in-line). 9M SSSG remained flat (Q3FY24: 4%). Footfalls/sales densities (footfalls/sq. ft) continue to recover. Limeroad losses continue to ebb (down 29% QoQ to INR141mn). FY25 is likely to be the year of efficiency wherein management focuses on (1) weeding out unprofitable stores and (2) sharpening product range in freshness and price points (factored in). We largely maintain our FY25/26 EBITDA estimates and maintain our BUY rating on VMART with a DCF-based TP of INR2,550/sh (implying 22x FY26 EV/EBITDA).

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