ONGC (NS:ONGC):
We maintain our REDUCE rating on ONGC, with a target price of INR 286, given: (1) limited upside potential for ONGC’s crude price realisation in the current environment with a levy of windfall tax, (2) gas price realisation too unlikely to change significantly, as APM gas price is frozen until March 2025 and 95% of ONGC’s gas sales fall under APM and (3) slower ramp-up in oil & gas production.
In Q1FY25, reported EBITDA stood at INR 186bn (-4% YoY, +7% QoQ), coming in above our estimate owing to lower-than-expected statutory levies. PAT at INR 89bn (-11% YoY, -9% QoQ) was below our estimate, mainly driven by higher-than-expected depreciation and depletion costs. Total crude oil and gas production came below our estimates.
TVS Motor (NS:TVSM):
TVS Motors’ Q1 PAT at INR 5.6bn (+19% YoY/+15% QoQ) came in line with our estimates. The impact of higher investments in digital and marketing was offset by sustained material cost reduction and better product and geographic mix. TVS continues to outperform the industry on the back of healthy demand for its products like Raider, i-Qube, Jupiter125, etc. It believes Latin America and Middle East markets provide significant opportunities to grow its exports in the coming years.
The 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. We maintain our ADD rating with a TP of Rs 2,434/sh, premised on (a) rural markets for TVSM doing slightly better than urban markets and (b) sustained margin improvement.
NCC (NS:NCCL):
NCC reported a robust Q1FY25, with revenue/EBITDA/PAT beat of 8.0/4.8/17.3%. Order inflow was muted at INR 4.1bn during Q1FY25 as L1 orders of INR 85bn LOA are awaited. OB as of Jun’24 stands at INR 526.2bn (~2.8x FY24 revenue). On the back of this robust OB, the company has given FY25 revenue growth guidance of 15%+. EBITDA margin guidance stands at 9.5-10%, and we believe margins will be drifting lower toward 9.5%. NCC expects new order inflows at INR 200-220bn (25% decline YoY), though this OI is excluding the Andhra orders which may materialize in coming quarters. It expects FY25 NWC at 76+-3 days.
NWC improvement is a factor of (1) the Sembcorp settlement, (2) TAQA arbitration, and (3) focus on collection efficiency. Standalone gross debt increased by INR 8bn on the back of delayed collection due to election and increased execution. Gross debt is expected to reduce to INR 5bn by FY25-end vs. INR 18bn as of Q1FY25. Given the robust order pipeline, execution ramp-up and robust balance sheet, we maintain BUY. We increase our TP to INR 365/sh (16x Sep-26E EPS).
Bajaj Electricals (NS:BJEL):
Bajaj Electricals’ (BEL) Q1 print was in line with our soft expectations as revenue grew by 4% while EBITDA fell by 2%, impacted by the muted demand environment for kitchen appliances, soft rural demand and lower oplev. The consumer product segment bucked the trend of declining revenue (after three quarters), growing by 4%. Moreover, bottoming out of demand along with early green shoots in rural demand bodes well for coming quarters. Lighting margins at 10.5% (up 240bps YoY) surprised positively, aided by gross margin improvement and closure of legacy B2B projects.
Notwithstanding exit of its MD (Anuj Poddar), with a strong executive management team in place (Vishal Chadha for CP and Rajesh Naik for Lighting guided), we expect BEL to continue implementing its strategic initiatives under Horizon 2 where focus will be on industry-leading growth through (1) refreshing the product portfolio (NPD contribution at 40%+), (2) offering products across the consumer value chain via a multi-brand strategy, and (3) stepping up investments in branding and innovation. We maintain our estimates and value BEL at 40x Jun’26 EPS to arrive at a target price of INR 1,200. Maintain BUY.
Symphony (NS:SYMP):
Symphony reported a scorching Q1 print with revenue/EBITDA/PAT growing by 1.8x/4.3x/3.4x. This was led by the domestic business which saw revenues more than double, given the harsh summer season coupled with heatwaves witnessed across the country. Consequently, with operating leverage kicking in, domestic margins expanded by 13.9ppt to 23.9%. Symphony has announced its foray into storage water heaters in a phased manner and will initially look to leverage its existing channel (20-30% overlap). In India, Symphony remains focused on (1) product innovation, (2) enhancing distribution (semi-urban and rural), and (3) increasing presence in alternate channels.
RoW revenue growth of 22% was led by strong performance in IMPCO Mexico and GSK China while CT Australia remains plagued by the macro headwinds. However, management’s strategic initiatives are slowly bearing fruit with the narrowing of losses in CT Australia. We increase our FY25/26 EPS estimates by 14% each to reflect Q1 performance and value the stock in line with its three-year average at 33x P/E (earlier 30x) on Jun’26E EPS to derive a TP of INR 1,300. Maintain REDUCE.
Syrma SGS Technology (NS:SYRM):
Syrma reported a mixed Q1 print with revenue growing by 93% YoY while gross margin contracted by 710bps YoY (-220bps QoQ), which restricted EBITDA growth to 21%. Gross margin contraction was largely due to the increasing mix of lower-margin business (consumer mix up +14.5ppt/+710bps YoY/QoQ). With order book visibility remaining strong (INR 45bn) and pick-up in higher margin segments for balance 9M, Syrma remains confident of clocking 45% revenue growth in FY25 with a 7% operating margin (incl forex and PLI income).
We expect gradual expansion in margins, led by (1) rising exports (+20-25% in FY25), (2) increasing share of higher-margin business (healthcare) while restricting consumer mix between 38-40%, and (3) better asset sweating. We cut our FY25/26 earnings by 5/4% to reflect Q1 performance and value the stock at 40x P/E on Jun’26 EPS to derive a revised TP of INR 580. Maintain BUY.
Orient Cement (NS:ORCE):
We maintain our REDUCE rating on Orient Cement with an unchanged TP of INR 175/share (7.5x Sep-26E EBITDA). In Q1FY25, cement volume declined 15/21% YoY/QoQ, owing to weak demand and loss in market share. Management emphasised that their focus on margin over volume led to flattish NSR QoQ (down 1% YoY) despite weak pricing across its markets. Unit opex rose 3% QoQ (-3% YoY), mainly owing to op-lev loss. Thus, unitary EBITDA declined INR 150/MT QoQ.
Orient expects to reduce its opex by INR 70-80/MT in FY25 through internal initiatives and a rise in green power consumption. Meanwhile, Capex is progressing at a slow pace, with no significant developments in Q1. The planned expansions in Karnataka and Maharashtra are further pushed away due to delays in clearances.
V-MART Retail (NS:VMAR):
V-Mart KPIs mean reverting from the bottom continues to play out, led by – (1) paring down of Limeroad losses, (2) profitability improvement led by the closure of non-performing stores, and (3) recovery in footfalls/sales density. Revenue grew 15.9% YoY to INR7.86bn. Core V-MART operations grew 19.8% YoY to INR6.5bn (in-line). Q1 SSSG came in at 11% (volume-led). Sales densities grew 9.8% YoY.
GM/EBITDAM came in at 35.2/5.6% (HSIE: 34.8/5.7%). Inventory days reduced to 88 (vs. 107 in Q1FY24). We cut our FY26/27 EBITDA estimates (4-5%) to account for a more linear improvement in the cost of retailing from here (vs earlier expected). Maintain ADD rating on VMART with a DCF-based TP of INR3,100/sh (implying 26x Jun-26 EV/EBITDA).