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Results Review of Siemens, Deepak Nitrite, Century Plyboards India, Sobha, ITD

Published 09-08-2023, 01:39 pm
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Siemens (NS:SIEM)

Siemens India Ltd (SIL) delivered weak Q1FY24 revenue/EBITDA/APAT of INR 44.7/5.05/4.2bn, missing our estimates by 5/16/23%. SIL received new orders worth INR 52.9bn (+5.9/-7.1% YoY/QoQ). Supported by a healthy mix of orders both from the government and private sector, especially in infrastructure and railways. With this, the implied order book stands at INR 210bn (+4% QoQ). During Q4FY23, SIL announced carving out of its low-voltage motors and geared motors business, which is a part of the digital industries business, on a slump sale basis, to a subsidiary of Siemens AG (ETR:SIEGn) for a cash consideration of INR 22bn at a valuation of 2.1x the FY22 revenue and 15.5x the FY22 EBITDA.

SIL shareholders subsequent to postal ballot voting did not approve this transaction. In another corporate action, SIL in Jul’23 completed the acquisition of the EV division of Mass-Tech Controls Pvt. Ltd., a Mumbai-based company, for INR 380mn. This will be integrated into an e-mobility business unit of Smart Infra business. This EV division will provide EV charging infra and will be engaged in the design, engineering, and manufacturing of AC chargers and 30 to 300kW DC chargers. Given the strength in order inflows and robust order backlog, we maintain ADD rating, with an increased TP of INR 3,979 (rolled over to 50x Jun-25 EPS).

Deepak Nitrite (NS:DPNT)

We maintain SELL on Deepak Nitrite (DNL), with a price target of INR 1,403 (WACC 12%, terminal growth 4%). The stock is currently trading at 24x FY25E EPS. We believe that (1) high input, utility, and logistic costs will continue to put pressure on the company’s margin and (2) further growth in DPL is capped as the phenol plant is already running at over full capacity. EBITDA/APAT was 37/32% below our estimates, owing to a 6% fall in revenue, higher-than-expected raw material costs, and higher-than-expected other expenses, offset by lower-than-expected depreciation and higher-than-expected other income.

Century Plyboards India (NS:CNTP)

We maintain our BUY rating on Century Ply, with a lower target price of INR 700/sh (20x its Mar’25E consolidated EBITDA implies 34x P/E). We like Century for its strong franchise (pan-India distribution, aggressive marketing, and a wide range of SKUs), leadership presence in most wood segments, market share gains, and healthy return ratios. Century Ply reported weak performance in Q1FY24, owing to muted demand, rising timber prices and one-off expense in the laminates segment for the new catalog launch.

Century reported flattish volume YoY across ply and laminate segments. The ramp-up of the recently commissioned Hoshiarpur plant in Mar-23 drove MDF volumes by 6% YoY. Owing to weak Q1 performance, management has cut its volume growth guidance for ply, laminates, and MDF segments for FY24. However, margin guidance is intact for all segments.

Sobha (NS:SOBH)

Sobha’s (SDL) reported the highest-ever quarterly presales in value terms at INR 14.6bn (+28%/+0.1% YoY/QoQ) without any new launches. While presales volume was 1.4msf (+2.6%/-5.7% YoY/QoQ), average price realization stood at the highest ever INR 10,506/sf (+25%/+6%, YoY/QoQ). The total launch pipeline for the next two years is 15msf, of which 6-7msf launch is planned for FY24, and 5/1/1msf is planned for Bengaluru/NCR/other markets. As a result, SDL expects to clock presales growth of 15-20% in FY24.

EBITDA margin continues to be a pain point clocking 7.2% (-569/-235bps YoY/QoQ). This was because legacy real estate projects sold pre-Covid were getting recognized in revenues at elevated construction costs. SDL expects a turnaround in EBITDA margin from 1QFY25 as the revenue recognition mix starts tilting towards premium projects. In terms of business development (BD), SDL expects to spend INR 2.5-3bn in FY24. JD/JVA route will be preferred whilst outright land purchases would be funded by robust internal accruals. Net debt at the consolidated level inched further downward to INR 15.7bn (INR 16.4bn in Q4FY23) on the back of a decent collection of INR 13.6bn. We maintain BUY with an unchanged TP of INR 935.

ITD Cementation (NS:ITCM)

ITD Cementation (ITD) reported its highest-ever quarterly revenue of INR 18.3bn, beating our estimates on all fronts. EBITDA margin: 8.8% (+66/-17bps YoY/QoQ), vs. our estimate of 9.0%, owing to under-absorption of overheads, partly offset due to lower input and raw material prices and lower employee expenses. With an order inflow (OI) of INR 2.5bn in Q1FY24 (-96/-65% YoY/QoQ, vs. FY24 guidance of INR 80bn+), the order book (OB), as of Jun’23, stood at INR 185.2bn (~3.6x FY23 revenue).

The OB is well-diversified, providing a natural hedge from a slowdown in any particular business segment. The net D/E, as of Jun’23, stood at 0.49x vs. 0.22x as of Mar’23. ITD guided for FY24 revenue of INR 70bn+ (vs. INR 65-68bn earlier) with an EBITDA margin above 9%. With a capex of INR 0.9bn in Q1FY24 towards construction plants and equipment, FY24 capex will be at ~INR 1.5-2bn. Given the better margin profile and stronger execution, we have recalibrated our estimates higher and increased our PE multiple from 10x to 11x. We reiterate BUY, with an increased TP of INR 230/sh (11x Jun-25E EPS).

Repco Home Finance Ltd (NS:RHFL)

REPCO’s Q1FY24 earnings were marginally ahead of our estimates due to sustained NIM reflation and lower provisioning (16bps). NIM remained steady sequentially at 5.1% with the impact of incremental rate hikes and a shift towards non-home loans offsetting the rise in cost of funds. Asset quality continued to improve gradually (GS-III at 5.5% vs. 5.8% in Q4FY23) with increasing intensity in collection and recovery efforts and is likely to improve further, driving lower credit costs. Portfolio growth, while remaining tepid (+6.7% YoY), remains on an improving trajectory and is on course for 12% loan growth for FY24, as per management.

The ongoing investments in tech and gradual re-jigging of organization structure (sales/collections/credit verticals etc.) are likely to reflect in improving throughput and hence loan growth, which remains subdued, compared to peers. We increase our FY24/FY25 forecasts higher to factor in sustained NIM reflation and lower credit costs and maintain ADD with a revised RI-based TP of INR 360 (implying 0.8x Mar-25 ABVPS). Healthy loan growth is likely to drive the next leg of rerating for REPCO.

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