Cement News

Results Review For Infoedge, Bharat Forge, JK Cement, Brigade Enterprises, Aether

Info Edge India Ltd (NS:): Infoedge posted a good quarter, with both revenue (+4.8% QoQ) and margin coming ahead of estimates. The growth was led by the core recruitment segment (+8% QoQ) and 99acres (+5.1%) while Jeevansathi continued to drag. The recruitment billings (earlier boosted by strong IT hiring) are showing signs of softness, offset by better hiring in non-IT sectors like BFSI, travel, infra, and hospitality. Naukri is an undisputed leader, with ~80% traffic share, and enjoys long-term contracts with pricing power. The real estate portal (99acres) registered 44% YoY growth and will continue to be a focus vertical with higher investments. The strategy reset in the matchmaking business (Jeevansathi) is showing results, traffic and customer engagement has increased on the platform. We expect growth will be led by recruitment and the 99acres segment and the margin for recruitment will remain in the 58-60% range. We reduce the FY24E estimate by ~2% and maintain BUY with a SoTP-based TP of INR 5,100, valuing the flagship recruitment business at 45x EV/EBITDA, assigning 5x EV/sales multiple to 99acres and 3x to Jeevansathi and Shiksha, while Zomato (NS:) and Policybazaar have been assigned the market value (~15% discount).

Bharat Forge (NS:): BHFC Q2 earnings were lower than expected as: (1) standalone EBITDA margin declined 180bps QoQ to 24.3% vs our estimate of 26%; (2) overseas subsidiaries posted an EBITDA loss due to weak utilization at Al forgings plants, both in Europe and US. We expect margins for both India and overseas subsidiaries to normalize by Q4, given: (1) softening inflation, both in input costs and energy prices; (2) ramp-up of AL forgings facilities, both in Europe and US. Going forward, we expect standalone demand momentum to remain strong for BHFC, led by: (1) sustained recovery in domestic demand, both in auto and non-auto segments; (2) strong export demand in PVs and huge growth opportunities in aerospace and defense segments. Incremental positives include: (1) the US Class8 outlook being much better than earlier envisaged; (2) a new export order win in defense worth USD155.5mn, which is a testimony of BHFC’s capabilities in the segment and is likely to have a rub-off effect for new wins in the segment; (3) new order wins worth INR1bn at JS Auto; we see huge outsourcing opportunities to BHFC in the renewables segment on the back of these recent acquisitions. Given the current adverse macro in Europe, we lower our FY23 estimates by 15%, while maintaining our FY24-25 earnings, given the healthy outlook across key segments. Reiterate BUY with a revised TP of INR 928 (from INR867 earlier) as we roll forward to Sep-24 estimates.

JK Cement (NS:): We maintain our REDUCE rating on JK Cement (JKCE) with a revised TP of INR 2,675 (11.5x Sep-24E consolidated EBITDA) on an expensive valuation. In Q2FY23, total volume grew 2% QoQ (+9% YoY) in a seasonally weak quarter. While rising fuel cost dented grey cement margin to ~INR 500/MT (down ~INR 400 QoQ, in our view), the white & putty EBITDAM rebounded ~3pp QoQ to ~23%. Fuel cost is expected to cool off from Q4FY23 onwards. JKCE’s central expansion of 4mn MT is on track by the Q3FY23 end. The company will further add 5.5mn MT of grey cement capacity spread across north, central, and south and 0.66mn MT clinker across central (Panna) by FY25E to strengthen its distribution reach.

Brigade Enterprises (NS:): Brigade Enterprises Ltd (BEL) reported presales of 1.2msf (-8%/0% YoY/QoQ), valued at INR 7.9bn (-4.3%/-2.3% YoY/QoQ). Of this, 50% of the presales were contributed by new launches and 80% of the overall presales were from the Bengaluru market. The contribution from the non-Bengaluru market will increase, with new launches in Chennai and Hyderabad markets. For FY23, the company expects to clock total presales of INR 40bn on the back of INR 36-39bn worth of new launches planned for H2FY23. The Mount road mixed-use project in Chennai has a developable area of 1msf (~0.5mn sq ft residential with INR 15bn GDV is expected to launch in Q2FY24 and 0.5mn sq ft will be commercial for lease). With the hospitality segment doing well again, the monetization plan is back and BEL is in the preliminary stages of discussions with investors. The leasing segment, with 1msf of the active pipeline, is expected to get an impetus with the implementation of the DESH bill, which will be tabled in the winter session of the parliament. Given BEL’s strong cash position of INR 18bn, a robust business development pipeline, and a healthy balance sheet, we remain constructive. We reiterate BUY, with an increased TP to INR 632/sh (rollover to Sep-24E).

Aether Industries (NS:): We retain our BUY rating on Aether Industries, with a target price of INR 1,070 on the back of (1) capacity expansion-led growth, (2) advanced R&D capabilities, (3) technocratic management, (4) market leading position in most of its products, (5) strong product pipeline, and (6) marquee customer base. EBITDA/APAT was 13/13% below our estimates, mainly owing to a 13% fall in revenue.

CESC (NS:): CESC’s consolidated PAT in Q2FY23 declined by 6.2% YoY to INR3.2bn due to lower profit across the Haldia project (under-recovery of O&M and fuel cost) and higher losses across the distribution franchisee (DF) segment. Dhariwal though reported 29% YoY growth in PAT (INR440mn vs INR340mn YoY), it declined 38% QoQ led by lower merchant realization across its untied capacity. These were partially offset by increased demand and earnings across its standalone (PAT up 3.8% YoY) and Noida business (PAT up 78% YoY). On Chandigarh discom, CESC is yet to receive an LoI and hence we have not included it in our valuation. We have revised our consolidated earnings estimates downward by 5.5%/3.9% for FY23/24, factoring under recovery across Haldia stations and normalcy in future RoE of 20%-22% vs earlier reporting of +30% RoE. Accordingly, we revise our TP downward to INR108 (vs INR113 earlier). However, we retain our BUY rating on CESC as the company continues to trade at an attractive valuation of 6.6xFY25P/E and 0.7xFY25 P/BV.

V-MART Retail (NS:): V-MART reported 50% growth YoY (in-line). Organic business (ex-Unlimited acquisition) recovered fully from the pandemic blues in Q2FY23 (INR4bn; 3-year CAGR: 8%; HSIE: 3.8bn). Note: Unit economics has yet some catching up to do. Footfall density is at 69%, while transaction sizes were up 136% from pre-pandemic levels. Profitability beat (10.6% vs HSIE: 7.8%) was a function of (1) 17-18% price hikes in H2FY22 and (2) higher full-price sales. We’ve cut FY24/25 EBITDA estimates marginally by 1% each to account for a more gradual convergence of Unlimited financials toward the portfolio. But maintain our BUY rating with a DCF-based TP of INR3,300/sh (unchanged, implying 25x Sep-24 EV/EBITDA).

TCNS Clothing (NS:): TCNS’ journey to pre-pandemic sales remains underwhelming, partly given category-specific idiosyncrasies. Q2 operational performance was broadly in-line overall but lags behind peers. Revenue grew at 3% CAGR to INR3.5bn over three years (HSIE: INR3.4bn; Trent/Madura clocked 30/11%). Offline channels’ sales just about crossed pre-pandemic sales (1.7% CAGR). However, channels’ sales densities remain sub-par, unlike peers. Growth continues to demand more channel incentives (contribution margin: 39.6% vs pre-pandemic base of 43.1%, as expected). We largely maintain our FY24/25 EBITDA estimates and our SELL recommendation with a DCF-based TP of INR510/sh, implying 19x Sep-24 EV/EBITDA.

Dilip Buildcon (NS:): Dilip Buildcon (DBL) reported revenue/EBITDA/PAT of INR 22.6/2.6/0.3bn; revenue missed our estimate while EBITDA/APAT beat our estimates. EBITDA margin, at 11.6%, exceeded our estimate of 8.9% due to lower revenue contribution from legacy low-margin projects (nearing completion) in the mix. The order book (OB), as of Sep’22, stood at INR 263.4bn (~2.9x FY22 revenue). The standalone net debt reduced further to INR 27.1bn, with net D/E at 0.61x, as of Sep’22. DBL received INR 2bn on the transfer of four projects to Shrem InvIT with INR 2.6/1.6bn receivable as units in Shrem InvIT/on the occurrence of certain events. DBL is targeting FY23 debt to be lower by INR 4-5bn vs FY22. DBL expects to receive INR 3-5bn through monetization during the rest of H2FY23. The cash component has increased from INR 6.2bn to INR 7-7.5bn in the Shrem InVIT deal. We have recalibrated our EPS estimates higher to factor in margin recovery, robust OB growth, and debt reduction. As we roll over our estimates, we maintain BUY with SOTP-based TP of INR 340/sh (12x Sep-24E EPS).

Ashoka Buildcon: Ashoka Buildcon (ASBL) reported revenue/EBITDA/APAT of INR 12.8/1.1/0.7bn, missing our estimates on all fronts. The Chennai ORR and 5 BOT assets sale deals are expected to be closed by Q4FY23 along with the Jaora BOT asset sale. ASBL has received orders worth ~INR 30bn FYTD23, taking the FYTD23 order book (OB) to INR 149bn (~3.3x FY22 revenue). The standalone gross/net debt increased marginally to INR 8.7/6.5bn, as of Sep’22. The balance equity requirement for HAM assets as of Sep’22 stands at INR 2.5bn, of which INR 1.4bn would be funded in the remaining year FY23 and INR 0.8/0.3bn in FY24/25. ASBL has guided for a CAPEX of INR 240-250mn in H2FY23. It also guided for H2FY23 revenue to grow at 20-25% YoY. We maintain BUY, with a reduced TP of INR 134/sh (9x Sep-24E EPS rollover).

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