Oil India (NS:OILI): Our ADD recommendation on Oil India with a target price of INR 680 is premised on oil production growth at 9% CAGR and gas production growth at 26% CAGR over FY24-26E. Q4FY24 EBITDA stood at INR 23bn (-1% YoY, +11% QoQ), and PAT at INR 20bn (+14% YoY, +28% QoQ) came in above our estimate, driven by higher-than-expected realisations and higher other income. Oil and gas production stood at 1.65mmtoe (+5% YoY, -1% QoQ), below our estimates.
Astral (NS:ASTL): We downgrade Astral to ADD owing to its expensive valuation. Our target price remains unchanged at INR 2,040/sh (60x its Mar-26E EPS). Following strong demand during Q4FY24, plumbing volume grew 23/27% YoY/QoQ. NSR declined 3% QoQ due to the CPVC pipes prices decline (lower cost pass-on). In our view, adjusted for inventory gain or loss, EBITDA/kg for plumbing is INR 38 per kg in Q4 vs INR 45/36 per kg YoY/QoQ. In Q4FY24, adhesives and paints reported poor revenue growth of 5% YoY with sub-par 12.9% EBITDAM. Plumbing demand continues to stay strong in the market. The adhesive UK operations have normalised and the Dahej plant is ramping up well. The bathware segment is also gaining pace and the company is expected to break even on the EBITDA front in FY25.
Eris Lifesciences (NS:ERIS): EBITDA grew (25% YoY) with +38% YoY sales growth, led by 23% YoY growth in domestic business (15% organic, additional sales from M&A of Dr Reddy’s derma/Biocon’s Nephro and derma brands) and incremental sales from Swiss parental integration (of INR 550 mn). Lower gross margin (-339 bps YoY), higher costs, and higher depreciation/interest led to muted PAT growth. The company guides for 12-14% organic growth in its domestic business and for a sustainable margin of 36% in FY25. Gross margin was lower in Q4 due to sales mix which it expects will normalize in H1FY25. MJ Biopharma (JV) saw a reduction in burn from a loss of INR 201 mn in FY23 to a loss of INR 80 mn in FY24 (near breakeven as Q4FY24 loss was at INR 12 mn). It has improved the EBITDA margin for the derma segment to ~35% in FY24 from 27% in FY23 and expects to sustain it. Integration of Swiss Parentals and Biocon (NS:BION) India formulation business on track – expects to complete in Q1FY25. Targets to reduce debt to INR 20 bn by FY26 (Debt/EBITDA 1.6x) from INR 30 bn (3.5x Debt/EBITDA). Looking to maintain OCF to EBITDA conversion at 70-75% in FY25/26. Target to launch 20+ products through its own R&D pipeline in FY25. Factoring FY24, we have cut FY25 EPS by 2% but almost retained FY26E EPS. We maintain BUY with a TP of INR 1,050 (25x FY26E EPS) as we remain positive on Eris with its chronic focus strategy and scale-up in M&As.
Aether Industries (NS:AETH): We retain our BUY rating on Aether Industries, with a target price of INR 1,110, on the back of (1) capacity expansion-led growth, (2) advanced R&D capabilities, (3) technocratic management, (4) market leading position in most of its products, (5) strong product pipeline, and (6) marquee customer base. EBITDA/APAT was 73/105% below estimates owing to lower-than-expected revenue. It was lower due to the closure of site 2. The company reported an exceptional item of INR 74mn in Q4 towards the amount paid to the families of the deceased, medical expenses of the injured, and penalty paid to GPCB.
Ujjivan Small Finance Bank (NS:UJJI): UJJIVAN beat estimates on the back of margin reflation, boosted by a one-time interest reversal post- the reverse merger and healthy growth (+26% YoY), offset by higher opex and credit costs. Deposit growth was healthy (+6% QoQ), as the CASA ratio improved 102bps QoQ to 26.5%, with seasonal pick-up in CASA and retail deposits. GNPA was stable at 2.2% as slippages stayed steady at 1.3%. On the succession front, the RBI has approved the appointment of Mr. Sanjeev Nautiyal as the MD and CEO effective July 1, 2024. With a higher mix of secured loans and potential impact of rate cuts during H2FY25, we expect NIM compression, going forward. We tweak our FY25E/26E estimates to factor in marginally higher growth, offset by higher credit costs and maintain BUY with a TP of INR70 (1.6x Mar-26 ABVPS).
Sudarshan Chemical (NS:SDCH): We maintain REDUCE on Sudarshan Chemical (SCIL), with a price target of INR 759 (WACC 11%, terminal growth 3.5%). Plant utilisation to increase owing to robust demand in all export markets except the European one. German pigment maker Heubach has filed for insolvency. This could act as a tailwind for the pigment industry in the near term. SCIL’s balance sheet is improving gradually with (i) a reduction in net debt by ~INR4bn to INR3.8bn in FY24 and (ii) a cash conversion cycle. We expect SCIL to continue to hold interesting growth prospectus. The shift in product mix could expand the margin. However, valuation is demanding. The stock is trading at 27/21 FY25/26E EPS, which we believe is contextually high (RoIC of 13/16% for FY25/FY26E). Q4 EBITDA/APAT was 47/95% above our estimate, owing to higher-than-expected revenue.
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