Results Review for ONGC, Apollo Hospitals, Ashok Leyland, Sundram Fasteners

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Oil And Natural Gas Corporation Ltd (NS: ONGC ): Our BUY recommendation on ONGC with a price target of INR 143 is premised on ((1) increase in crude price realization and (2) improvement in domestic gas price realization (at USD 2.5/mmbtu). We expect oil price realization to increase to ~USD 59/bbl in FY22E and USD 61/bbl in FY23E vs. USD 44/bbl in FY21, given the expected global economic rebound, post-COVID. Q1FY22 revenue was 2% below our estimate, owing to a lower-than-expected crude oil price realization of USD 67.1/bbl (vs the estimated USD 68.7/bbl). EBITDA in Q1 was 2% below our estimate, while APAT was 15% below, owing to higher-than-expected employee cost, higher-than-expected depreciation, lower-than-expected other income, and higher tax rate, partially offset by lower-than-expected other expenses and exploration cost.

Apollo Hospitals Enterprises Ltd. (NS: APLH ): Apollo’s Q1 EBITDA beat estimates by ~25%, driven by robust growth across business segments. Despite COVID, the core hospital business posted a strong trend (+26% QoQ) and it is likely to witness healthy growth and margin expansion across mature and new units. Its diagnostics business continues to see a steady ramp-up and it is on track to achieve INR5bn revenue by FY23, growing at ~68% CAGR over FY21-23e. With multiple growth drivers in place, we expect Apollo to report strong revenue/EBITDA CAGRs of 31%/52% over the next two years. Also, the potential value unlocking of Apollo 24/7, the largest omnichannel healthcare platform in India, will be a key catalyst in the near to medium term. Apollo’s balance sheet remains strong with net debt/EBITDA at 1.4x/0.9x in FY22/23e. We revise our estimates by +4-6% for FY22/23e to factor in improved growth/margin visibility across segments. Our TP is revised to INR4,410/sh, implying ~25x FY23e EV/EBITDA. Maintain ADD.

Ashok Leyland Ltd. (NS: ASOK ): Ashok Leyland reported a Q1 loss of INR 2.80bn due to the adverse impact of the COVID second wave. The management expects a recovery in H2FY22, which will be driven by tippers and ICVs (which account for 28/25% of industry sales). In the medium term, the implementation of the voluntary scrappage scheme will aid demand. However, the current recovery in the CV cycle will coincide with the commissioning of the Dedicated Freight Corridor (Rewari to Mundra route to be operational this quarter). We maintain REDUCE with a target price of INR 115 (we value at 11x EV/EBITDA Jun-23E).

Sundram Fasteners Ltd (NS: SNFS ): Sundram Fasteners’ (SF) Q1FY22 standalone EBITDA margin, at 19.5% (flat QoQ), surprised positively, as the company benefitted from higher exports, led by the opening up of the western geographies. We reiterate that SF’s growth in FY22-23E will be driven by exports as the new plant ramps up (which can potentially add 6-8% to the topline). We reiterate our ADD rating and are raising estimates by ~6% over FY22-24E to factor in the improved earnings outlook. Our target price is revised to INR 860 as we value the stock at 28x Jun-23E EPS. We recommend accumulating the stock on declines.

Dilip Buildcon Ltd (NS: DIBL ): Dilip Buildcon (DBL) reported an in-line revenue at INR 21.5bn and EBITDA/APAT at INR 2.8/0.3bn, 21/61% below our estimates, on account of higher input cost and fixed costs under absorption. For FY22, DBL has guided an order inflow (OI) of INR 100-120bn and revenue of INR100-150bn with a 15-15.5% EBITDA margin. Networking capital (NWC) rose to 100 days from 82 in Mar-21. Standalone net debt increased by INR 3bn to INR 33.8bn sequentially and is expected to reduce by INR 8bn on the back of proceeds from asset monetization in FY22 (INR 10bn). DBL does not expect any early completion bonus for this year and, with NHAI tightening the execution timeline, such bonuses will be highly unlikely in the future. We maintain BUY, with an increased target price of INR 669/sh (roll forward to Jun-23E), given its (1) diversified and robust OB (~2.7x FY21 revenue) and (2) higher proceeds from asset recycling than estimated in Q4FY21.

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  • Seema Gadekar @Seema Gadekar
    BUYED ONGC at 115 for target 🎯 143 upto Jan 2022
    Like 0

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