Results Review For UltraTech Cement, Kansai Nerolac, Navin Fluorine International

  • Stock Market Analysis
  • Editors Pick

UltraTech Cement (NS: ULTC ): UTCEM delivered yet another stellar quarter, as its 4QFY21 consolidated net sales/EBITDA/APAT soared 18/19/15% QoQ (33/51/61% YoY) to INR 144.1/36.9/18.1bn respectively. It is driven by robust 16/30% QoQ/YoY volume growth. UTCEM has further reduced debt, resulting in net debt/EBITDA of 0.55x (vs 1.8x YoY). We continue to like UTCEM for its strong volume focus along with superior margin delivery and WC controls. We maintain BUY with a higher target price of INR 7,425/share (16x Mar’23E consolidated EBITDA).

Cholamandalam (NS: CHLA ) Investment and Finance Company: CIFC’s 4QFY21 PPOP growth (35% YoY) was below our expectations due to a steep increase in operating expenses (28% YoY). Disbursements witnessed a slowdown (2% QoQ), after registering strong growth in the previous two quarters. Asset quality witnessed marginal deterioration (GNPA up by 21bps to 3.96%), although it is adequately provided for (PCR at 44.3%). We revise our FY22/FY23E earnings estimates downward by 2.6/2.9% on account of higher opex and provisioning due to the second wave of the pandemic. Maintain BUY with a revised TP of INR613. CIFC remains our top pick among NBFCs.

Kansai Nerolac Paints Ltd (NS: KANE ): KNPL’s 4Q top line grew 34.7% to INR13.3bn (in-line). The decorative segment is estimated to have clocked volume/value growth of +37/32%. Performance is likely to lag market leader APNT. Industrial Coating is estimated to have clocked 39% (off a low base). GMs contracted ~410bp YoY to 34.4% (HSIE: 36%). GM miss was largely a function of the higher-than-expected impact of rising commodity prices. Strong cost control cushioned the impact on EBITDAM (15.3%; in-line). We’ve tapered down FY22/23 EPS expectations (-10/-5% resp) to account for (1) the second wave’s impact on demand and (2) lower GMs due to rising RM inflation. While KNPL did take price hikes in Mar-21, they remain inadequate to cover the RM spike. Our DCF-based TP stands revised to INR625/sh (earlier INR650/sh, implying 50x FY23 P/E). Maintain BUY.

Navin Fluorine International Ltd (NS: NAFL ): We retain our ADD rating on NFIL with a TP of INR 3,400 on the back of (1) earnings visibility, given long-term contracts, and (2) tilt in sales mix towards high-margin high-value business. EBITDA/APAT were 13/14% below our estimates, owing to a 15% lower revenue, higher-than-expected tax outgo, offset by lower-than-expected operating expenses.

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