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Results Review For Aurobindo Pharma, Alkyl Amines, Aditya Birla Fashion and Retail


Aurobindo Pharma (NS:): Q4 revenue/EBITDA was a tad lower than our estimates. Barring strong performance in ARV (+29% YoY), most markets reported sluggish growth. Despite the sharp increase in R&D spends (7.6%, +150bps QoQ), the EBITDA margin was largely in line with estimates at 21.2% (-30bps QoQ). Aurobindo’s progress on complex pipeline (2 biosimilars filing in FY22/FY23, filings of depot injectables in FY23) provides good growth visibility over the medium to long term. The monetisation of COVID vaccine opportunity (Viral and UB-612) and potential value unlocking of injectables business are the key near-term triggers. We tweak our estimates and revise TP to INR1,075/sh, based on 16x FY23e EPS and NPV of INR50 for the PLI opportunity. Maintain BUY.

Alkyl Amines Chemicals Ltd (NS:): We downgrade Alkyl Amines from ADD to SELL with the revised target price of INR 2,655. The downgrade is largely on the back of a ~85% increase in the stock price in the past three months. The stock is currently trading at 49.1x FY23E EPS (EPS CAGR of 15% over FY21-24E, RoE will be 34.7/32.4/28.5% in FY22/23/24) while Balaji Amines is trading at 31.5x FY23E EPS (EPS CAGR of 12.4% over FY21-24E, RoE will be 22.1/20.3/19.1% in FY22/23/24). We like Alkyl Amines owing to (1) robust demand from pharma and agrochemical industry that comprise more than 75% of its revenue mix; (2) doubling of Acetonitrile capacity to ~26ktpa in FY22; (3) 30-40% additional capacities (of the current 80-90 ktpa) of Aliphatic amines by FY23; and (4) production linked incentive scheme that provides the right tailwinds for long-term volume growth. However, we believe the current stock price is pricing in these positives.

Aditya Birla Fashion and Retail Ltd (NS:): ABFRL delivered an on-par topline performance (recovery hit 98%). Madura/Pantaloons recovered 99/95% resp. (HSIE: 98/93%). Gross margin recoup (53.3%) was sharper than expected, led by (1) lower inventory provisioning and discounting levels and (2) lower wholesale mix in Lifestyle brands’ sales. EBITDAM expanded 582bp YoY to 14.4% (HSIE: 10.6%). A nimbler ABFRL is a welcome change and should help the retailer navigate the second wave better (gross debt is down from INR 28bn in FY20 to INR 11.2bn in FY21, while net debt/equity is down from 2.3x to 0.4x YoY). We maintain our BUY rating on ABFRL with a revised SOTP-based TP of INR 225/sh (earlier 200/sh), implying 14x FY23 EV/EBITDA (we have assigned 14x FY 23 EV/EBITDA to Madura/Pantaloons each + 1.5x FY23 sales to other businesses).

The Phoenix Mills Ltd. (NS:): Phoenix Mills (PHNX) reported a strong recovery as consumption reached 90% of 4QFY20 on a like to like basis. Retail rental income during the year was 55% of FY20, better than the guidance of 45-50%. The hospitality business also saw a strong recovery as it benefitted from social events and staycation trend. The residential segment continued on the recovery path with sales of INR 630mn. However, lockdown following the second wave halted the recovery. Despite the near-term challenges, PHNX is on track to achieve its target of 12msf retail and 6msf commercial GLA by FY24 and will look to add 1msf every year. We remain positive on PHNX, given the strong liquidity and reiterate BUY with a reduced target price of INR 973/sh. We have tweaked our FY22/FY23 EPS estimates by -44/+1% to account for the impact of the second wave.

Dilip Buildcon Ltd (NS:): Dilip Buildcon (DBL) reported revenue/adj.EBITDA/APAT at INR 29.2/5.1/1.6bn, 9/21/29% ahead of our estimates on execution and margin out-performance. FY21 saw a record order inflow of INR 220bn, taking the order book (OB) to INR 274bn. Working capital rose to 127 days from 120 days in Mar-20. Standalone net debt reduced INR 3bn to INR 31bn sequentially and is expected to reduce by at least INR 5bn on the back of QIP proceeds in FY22. DBL has guided for 10-15% topline growth and INR 100-120 order inflow for FY22. We maintain BUY, with an unchanged target price of INR 640/sh, given its (1) diversified and robust OB (~3x FY21 revenue) and (2) continued to focus on asset recycling. We have cut our FY22/FY23 EPS estimates by 7.5/1.2% to account for the impact of lockdown, higher commodity prices, and QIP.

Heidelberg Cement Bangladesh Ltd (DH:): In 4QFY21, Heidelberg Cement’s (HEIM) revenue/EBITDA/APAT grew 1/27//120% QoQ (18/19/111% YoY) to INR 6.0/1.5/1.4bn respectively. While it reported a strong unitary EBITDA of INR 1,215/MT (led by GST benefits and superior opex controls), its volume fell 1% QoQ (+15% YoY on a low base), thus muting the gains. We continue to like HEIM for its retail presence in the lucrative central market, increased volume growth visibility, and net cash balance sheet. We maintain BUY with an unchanged target price of INR 276/share (8.5x Mar’23E EBITDA).

NCC (NS:): NCC reported in-line revenue/EBITDA/APAT at INR 26.2/2.9/1.2bn, (1)/(4.5)/(0.1)% (below)/ahead our estimate. NCC ended FY21 on a strong note with robust order inflows of INR 189bn and an order book of INR 379bn (5.2x FY21 revenue). Gross debt reduced by INR 1.2bn YoY to INR 17.9bn. NCC expects debt to further reduce by INR 2bn in FY22E on the back of likely real estate monetisation of INR 3bn and realisation of INR 2.3bn net current exposure in stuck AP projects. We maintain BUY on NCC with a target price of INR 114/sh (INR 115/sh earlier), given (1) improved earnings visibility on robust order book; (2) abating AP risk, and (3) stable balance sheet.

Karur Vysya Bank (NS:): Karur Vysya Bank’s (KVB) 4QFY21 PPOP disappointed our estimates on account of higher employee expenses, while lower provisioning drove the beat on earnings. Employee expenses (+64% YoY) were elevated due to wage arrears and are likely to further drag profitability as ~90% of employees continue under the IBA regime. Asset quality held up surprisingly well with full-year slippages at 2% and restructured portfolio at 1.9%, with predominant stress stemming from the commercial portfolio. The complete run-down of COVID buffer, high asset-side concentration, and a steep wage bill are likely to defer the 1% ROA journey beyond FY23. Maintain REDUCE with revised TP of INR 49 (earlier INR 46).

Sudarshan Chemical Industries Ltd (NS:): We maintain a BUY recommendation on Sudarshan Chemical (SCIL) with a target price of INR 800/share. We expect SCIL’s PAT to grow at a 32% CAGR over FY21-23E, led by a 20% CAGR in revenue. Two major global players shifting away from the pigment business could act as a tailwind for Indian pigment manufacturers. We believe SCIL is in a sweet spot to seize this opportunity by offering products similar to those of global players. 4Q EBITDA/APAT were 36/31% above our estimates, mainly due to a 27% higher revenue, lower-than-expected employee cost, offset by higher-than-expected tax outgo.

Gulf Oil Lubricants India Ltd (NS:): Gulf Oil’s 4QFY21 EBITDA margin at 15.1% (-220bp QoQ) was impacted by higher base oil prices. While it is taking price hikes to offset the same, the margins should remain impacted in the near term. The management is confident of outperforming the industry growth by 2-3x. We maintain BUY and revise the target price to INR 840, based on FY23E EPS. We now value the company at 19x forward PE (vs 20x earlier) to factor in the margin headwinds. Key risks: increased competition and a slower-than-anticipated recovery.

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