Results Review For UltraTech Cement, SBI Cards and Payment Services, Shriram Fin

Published 01-05-2023, 03:24 pm
MBFL
-
SBI
-
ULTC
-
SBIC
-
INMR
-
STAU
-

UltraTech Cement (NS:ULTC): We maintain BUY on UltraTech (UTCEM) with an unchanged target price of INR 8,670 (16x Mar-25E consolidated EBITDA). We continue to like the company for its robust growth and margin outlook and balance sheet management. UTCEM delivered strong 14/23% YoY/QoQ volume growth, led by healthy demand and a gain in market share. Unit EBITDA recovered INR 150/MT QoQ to INR 1,050 per MT, led by op-lev gains and lower fuel cost. The company also tightened its working capital (to net cash in Mar-23) during H2FY23, which bloated in Sep-22. UTCEM’s phase-2 expansion is expected to be completed by FY26E.

SBI Cards and Payment Services (NS:SBIC): SBI (NS:SBI) Cards’ (SBICARD) earnings were marginally below our estimates due to higher-than-expected credit costs, partially offset by healthy traction in fee income. While the QoQ receivables mix remained steady with Revolve/EMI loans at 24%/37%, NIMs declined 10bps QoQ (11.5%) and are close to bottoming out with renewed management focus on raising the share of installment loans. Business momentum remained strong in terms of card acquisitions (+22% YoY) as well as retail per-card spending (+11% YoY). Asset quality witnessed marginal deterioration with GS-III at 2.4% and credit costs at 6.3% (20bps one-off impact from the change in ECL estimates). We marginally reduce our FY24/FY25 earnings estimates to factor in lower revolve share, partly offset by lower credit costs, and maintain BUY with a revised TP of INR960 (implied 25x FY25 EPS). We remain bullish on the overall credit card opportunity and the ability of SBICARD to deliver consistently superior profitability (5%+ RoA, 25%+ RoE).

Shriram Finance: Shriram Finance’s (SHFL) Q4FY23 earnings were impacted by merger-related expenses and higher provisioning. Balance sheet growth was robust with AUM growth of 15.9%/4.6% YoY/QoQ, driven by PV, 2W, and PL, with steady growth in the CV portfolio (+13% YoY). However, P&L outcomes were impacted by the impairment of intangibles (INR3bn) and higher credit costs (INR3bn) due to an increase in the probability of default for various product categories. Asset quality witnessed marginal deterioration with high write-offs (INR8.1bn). SHFL’s incremental efforts to drive revenue synergies through cross-sell remains in the early stages. We tweak our FY24/FY25 estimates to factor in higher loan growth, partially offset by impairment of intangibles, and maintain ADD with a revised SoTP-based TP of INR1,645 (earlier INR 1,717), implying 1.3x Mar-25 ABVPS.

Star Health and Allied Insurance (NS:STAU): STARHEAL printed soft NEP growth (+11% YoY, 4% below our estimates), impacted by a slowdown in group business, however, loss ratios clocked in at 62% (-1.8pps QoQ, in-line) driving COR to 91.4% (-3.4pps QoQ). While FY23 RoE was sub-optimal at ~12% due to soft growth (+15% YoY), we expect STARHEAL to deliver a rebound in growth (~22% CAGR over FY23-25E) and stable loss ratios, supported by a price hike in its flagship product and tighter underwriting and claims review process. As the largest standalone health insurer (FY23 retail GDPI market share of 34%), our thesis on STARHEAL is anchored in a very strong distribution network, retail-dominated business mix, and best-in-class opex ratios. We expect STARHEAL to deliver revenue/APAT CAGR of 22/41% over FY23-25E and RoEs in the range of 17/18% for FY24E/25E and maintain BUY with an unchanged TP of INR795 (DCF derived multiple at 38x Mar-25E P/E and 6x Mar-25E P/ABV).

Mphasis (NS:MBFL): Mphasis (MPHL) posted weak revenue print, yet maintained its margin. FY23 growth of 9.7% CC was impacted by -4% from a decline in Digital Risk and -1.6% from a decline in DXC business. The residual business of Digital Risk and DXC still accounts for 10.5% of revenue, which remains in a state of decline and will be a drag on overall growth even for FY24E (4.5% drag even if business remains at Q4 rate). Even the stronger Direct International (ex-Digital Risk) declined and the outlook is for soft Q1 and sequential recovery subsequently. While MPHL has historically gained a share from peers (especially in BFSI), the tighter spending and lower conversions limit the share gains and increase the ask rate for bookings (which was lower in Q4 adj. for large deals). The increase in deal pipeline by 35% YoY including higher growth in non-BFSI deal pipeline is a sign of portfolio diversification and/or relative stress in BFSI (60% of revenue). Despite continued risk on Digital Risk and DXC combined (USD 173mn on Q4 annualized run-rate), net new TCV bookings average of >USD 1bn+ (5Y avg) can support USD 120mn+ incremental revenue over FY23-25E. Maintain ADD with a TP of INR 2,010, based on 20x Dec-24E EPS.

IndiaMART (NS:INMR) InterMESH: IndiaMART posted a strong 4Q with better-than-expected revenue growth (+6.9% QoQ) and impressive cash collections (+31% YoY). The growth was led by strong supplier addition (~9K) and improving realizations (+2.3% QoQ). The company invested in a sales engine in FY23, which has moderated margins but accelerated growth. The strong cash collections provide visibility for >25% YoY growth in FY24E. The margin will gradually expand to >30% as most investments are behind and headcount growth will be in line with paid supplier growth. The management expects that paid supplier addition will be maintained at ~8-9K per quarter and ARPU will continue to improve as customers move up the value chain. We maintain our positive view on IndiaMart based on (1) better growth visibility led by strong collections (2) lower churn across client buckets (3) margin expansion possibility and (4) an increase in realization led by platinum clients. We maintain our EPS estimates and have a BUY rating with a DCF-based TP of INR 5,960 (~34x Dec-24E EV/EBITDA), supported by revenue CAGR of 24% over FY23-25E.

Click on the PDF to read the full report:

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2025 - Fusion Media Limited. All Rights Reserved.