Results Review for Tata Elxsi, Oberoi Realty, JK Cement, Route Mobile, Can Fin Hom

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Tata Elxsi (NS: TTEX ): Tata Elxsi (TELX) delivered an in-line quarter both on revenue and margin. While the growth print was resilient despite the Q3 seasonality/furlough impact, the growth deceleration has been steep in TELX’s EPD business (from 35%/24% growth in FY22/23 to 9% YoY in 9MFY24). TELX has lost market share in the transportation vertical (39% of revenue) to peers on account of a lower mix of OEM customers vs Tier-1s, increased captive intensity by Tier-1s and delays in program ramp-up. The media & communication vertical (32% of revenue) recovery remains protracted, impacted by lower discretionary spending and revenue/cost pressure on enterprise clients (TELX’s revenue run-rate nearly unchanged in the last seven quarters). Medical devices and healthcare, however, are likely to recover ahead based on de-risking the portfolio from a skew towards MDR programs. The industrial design and visualization segment (12% of revenue) continues to grow well but has historically been cyclical. TELX’s ER&D credentials/niche remain strong but the hyper-accelerated growth trajectory (both revenue/margin) is behind. We factor 20% EPS CAGR over FY24-26E following single-digit EPS growth in FY24E and doubling of earnings over FY21-23. Maintain SELL on TELX, based on 38x FY26E EPS, TELX is trading at 54x and 44x FY25/26E.

Oberoi Realty (NS: OEBO ): Oberoi Realty (ORL) registered muted presales of INR 7.9bn (+25.2%/-18% YoY/QoQ), the new Kolshet Launch Forestville contributed INR 2.1bn. Muted presales were on the back of weak sales in the 360W project (1 vs 4 units QoQ) as well as the Mulund and Borivali projects. 360W partner inventory is exhausted and ORL expects to sell out the entire INR 65bn own inventory over the next 18-24 months. On 19th Jan 2024, ORL opened a new Elysian Tower and recorded INR 8.8bn of sales. Pokhran launch timeline shifts to Q3FY24, and construction is in full swing. Commerz 3 and Borivali Mall are expected to start operation by Apr /Jun 2024, with a rental potential of INR c.7bn in Commerz 3 and INR c.3.5bn in the mall. ORL expects all assets including hospitality to clock INR 18bn of NOI from FY26/27E. In terms of Business Development (BD), ORL has announced the closure of 14.8 acres of land in Sec-58 Gurugram from IREO, marking its foray into the NCR market. We expect INR 90bn+ GDV. In MMR, it expects to close a large land transaction by early FY25. Given the expected robust cash flows from ready-to-move-in inventory in the 360W and Mulund projects along with new business development, we remain constructive on ORL and maintain BUY, with an unchanged TP of INR 1,533/sh.

JK Cement (NS: JKCE ): We maintain our REDUCE rating on JK Cement (JKCE), with a revised TP of INR 3,765 (12x Mar-26E consolidated EBITDA), owing to its expensive valuation. In Q3FY24, JKCE’s consolidated volumes rose 17% YoY and NSR improved by 3% QoQ. Further, lower fuel costs, increasing green power share and Panna cost stabilization buoyed blended unit EBITDA to industry-leading INR 1,334/MT (+INR 300/MT QoQ, +720/MT YoY). Consolidated revenue/EBITDA/APAT rose 21/153/628% YoY. We estimate JKCE’s grey cement profitability will continue to benefit from its healthy ramp-up and accelerated expansion (targeting 30mn MT grey cement capacity by FY26 end), cool-off in fuel cost, large incentive accruals FY24 onwards, and increasing share of low-cost green power. JKCE guided its paint business will turn EBITDA positive in FY26.

Route Mobile (NS: ROUT ): Route reported a muted revenue growth of 1% in a seasonally strong quarter due to a slowdown in ILD volumes and a delay in deal ramp-up. The ILD billable transaction was impacted for two months in the quarter due to cost-saving initiatives by large e-commerce and OTT players. The VI firewall deal rollout timeline has shifted by one quarter to April 2024. The management has cut the growth guidance for FY24E to 15-20% from 20-25% due to the ILD slowdown and shift in VI deal timelines. This implies ~7% QoQ growth for the lower end of the band. The VI A2P SMS firewall deal has a revenue potential of ~USD 100mn. The revival in ILD volume (e-commerce deal in Europe), new wins in the domestic market, and contribution from VI will aid growth for FY25E. The deal with Proximus Group is expected to close in Q1CY24. The combined entity will bring synergies of USD 100mn and the target is to reach USD 1bn revenue with a 15% EBITDA margin to become the third largest CPaaS player globally. We cut our revenue/EPS estimate for FY26E by ~4% due to a delay in deal ramp-up. We maintain our BUY rating with a TP of INR 1,950, based on 22x FY26E EPS. The stock is trading at 22/18x FY25/26E EPS.

Can Fin Homes (NS: CNFH ): Can Fin Homes (CANF) reported a mixed set of results with sub-par loan growth (+13% YoY), offset by sustained NIM reflation (3.9%), driving ~10% beat on earnings. Disbursals continued to disappoint (-23% YoY) due to moderation in demand, greater competitive intensity, and process tweaks. The management has reduced its loan growth guidance to ~12% for FY24 and expects a pick-up from FY25 onwards. Investments in branches (five branches opened in Q3) and widening of the customer funnel (digital sourcing, APF, etc.) are likely to augment loan growth. As highlighted in our recent Company Update, the new management is looking to strengthen its governance framework and add new pillars for the next leg of sustainable and profitable growth. We tweak our FY24/FY25 earnings estimates for lower loan growth, offset by higher margins, and maintain BUY with a revised RI-based TP of INR900 (2.2x Sep-25 ABVPS).

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