23 october 2020 hsie results daily hsie results daily
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23 October 2020 HSIE Results Daily
HSIE Results Daily
HSIE Research is also available on Bloomberg ERH HDF <GO> & Thomson Reuters
Contents
Results Review
Asian Paints: Delivering growth along with improving profitability and
untouched free cash generation during a pandemic, especially when top
cities are yet to fire (70-80% of base quarter sales) is a testimony to APNT’s
distribution and product portfolio heft. That said, the recovery is more than
priced in at 54x Sept-22 P/E. We revise our FY22/23 EPS estimates
marginally (2/4% resp) and, consequently, our DCF-based TP to Rs. 1,850/sh
(earlier TP: Rs. 1,800/sh) implying 50x Sep-22 P/E.
Bajaj Auto: Bajaj’s 2QFY21 results were above estimates as EBITDA margin
came in at 17.7% (+110bp YoY). The demand is reviving across overseas
geographies (80-90% of pre-COVID levels) and domestic markets, with
festive sales equivalent to that of last year. The high margin domestic 3W
segment will witness a gradual pick-up in sales as cities gradually
normalise. We raise our FY21/22 estimates by 8/2% to factor in a healthy 2Q
performance and set a revised target price of Rs 3,270 at 18x Sep-22E EPS (at
a 5% premium to the 10-year historic average trading multiple). The key
risks are slower-than-expected recovery on the downside and firming up of
oil prices on the upside.
Ambuja Cements: During 3QCY20, Ambuja Cements (ACEM) reported
strong results. Standalone net sales/EBITDA/APAT rose 9/55/88% YoY to Rs
28.53/6.80/4.41bn respectively. Volumes jumped 8% YoY on strong retail
demand. Opex fell 8% YoY on robust (and structural) cost controls and low
fuel prices, driving a 44% jump in unitary EBITDA to Rs 1,200/MT. In a
positive surprise, ACEM announced Rs 17/share dividends, thus paying off
60% of its large cash pile up on books. We maintain BUY with a higher
target price (SOTP-based) of Rs 283/share, owing to increased volume
growth and robust unitary EBITDA visibility, and a leaner balance sheet,
post the large dividend payout.
HSIE Research Team
Page | 2
HSIE Results Daily
Asian Paints
Standing tall
Delivering growth along with improving profitability and untouched free
cash generation during a pandemic, especially when top cities are yet to fire
(70-80% of base quarter sales) is a testimony to APNT’s distribution and
product portfolio heft. That said, the recovery is more than priced in at 54x
Sept-22 P/E. We revise our FY22/23 EPS estimates marginally (2/4% resp) and,
consequently, our DCF-based TP to Rs. 1,850/sh (earlier TP: Rs. 1,800/sh)
implying 50x Sep-22 P/E.
2QFY21 highlights: Revenue grew 5.9% YoY to Rs. 53.5bn (HSIE: Rs. 52.4bn)
as recovery was stronger than expected. Decorative business volume grew
11% YoY underpinned by encouraging pick up in Emulsions (low-end and
Luxury alike), Undercoats and Waterproofing. Demand in Tier 2/3/4 towns
have passed the pre-COVID19 level, and metros/Tier 1 cities continue to
improve progressively (70-80% of pre-COVID sales). GMs expanded 197bp
to 44.4% (in-line), aided by benign RM prices and better sourcing efficiency.
EBITDA grew 32.5% YoY to Rs. 12.65bn (HSIE: Rs. 11.3bn). EBITDAM
expanded 474bp YoY to 23.6% (HSIE: 21.5%) as GM savings trickled down
and management continued to keep a tight leash on marketing, travelling,
and other SG&A expenses. International revenue grew 7.8%/-9% YoY to Rs.
6.6/10.56bn in 2Q/1HFY21 and PBT grew 44.3/-5% YoY to Rs. 690/730mn
respectively in 2Q/1H. Industrial Paints continues to witness gradual
recovery. Kitchen & Bath business nearly touched the pre-COVID level with
improving profitability.
Outlook: APNT’s 2QFY21 recovery is a testimony to its dominance across
distribution and product portfolio. However, at 54x Sept-22 P/E, pluses seem
more than priced in. We maintain our REDUCE recommendation with a
revised target price of Rs. 1,850/sh (earlier TP: 1,800/sh), implying 50x Sep-22
P/E. Note: TP change is a function of EPS change (2/4% for FY22/23).
Quarterly financial summary
(Rs mn) 2Q
FY21
2Q
FY20
YoY
(%)
1Q
FY21
QoQ
(%) FY19 FY20 FY21E FY22E FY23E
Net Revenue 53,502 50,507 5.9 29,227 83.1 193,415 202,113 195,321 232,453 260,590
EBITDA 12,652 9,548 32.5 4,843 161.3 35,245 41,618 42,288 49,625 55,057
APAT 8,519 8,450 0.8 2,196 287.9 21,595 27,101 26,813 32,712 37,578
EPS (Rs) 8.9 8.8 1.2 2.29 287.9 22.5 28.3 28.0 34.1 39.2
P/E (x)
86.9 69.2 70.0 57.4 49.9
EV/EBITDA (x)
53.3 45.0 43.9 37.1 33.1
Core RoCE(%)
25.2 27.7 25.7 31.5 36.1
Source: Company, HSIE Research, Standalone Financials
Change in estimates
(Rs mn)
FY21E FY22E FY23E
New Old Change
(%) New Old
Change
(%) New Old
Change
(%)
Revenue 195,321 188,760 3.5 232,453 230,410 0.9 260,590 256,587 1.6
Gross Profit 86,765 85,208 1.8 101,163 100,503 0.7 112,781 111,389 1.3
Gross Profit Margin
(%) 44.4 45.1 (72 bps) 43.5 43.6 (10 bps) 43.3 43.4 (13 bps)
EBITDA 42,288 38,689 9.3 49,625 48,500 2.3 55,057 53,015 3.9
EBITDA margin (%) 21.7 20.5 115 bps 21.3 21.0 30 bps 21.1 20.7 47 bps
APAT 26,813 24,211 10.7 32,712 32,032 2.1 37,578 36,148 4.0
APAT margin (%) 13.7 12.8 90 bps 14.1 13.9 17 bps 14.4 14.1 33 bps
EPS (Rs) 28.0 25.2 10.7 34.1 33.4 2.1 39.2 37.7 4.0
Source: Company, HSIE Research
REDUCE
CMP (as on 22 Oct 2020) Rs 2,100
Target Price Rs 1,850
NIFTY 11,896
KEY
CHANGES OLD NEW
Rating REDUCE REDUCE
Price Target Rs 1,800 Rs 1,850
EPS % FY22E FY23E
+2.1 +4.0
KEY STOCK DATA
Bloomberg code APNT IN
No. of Shares (mn) 959
MCap (Rs bn) / ($ mn) 2,014/27,350
6m avg traded value (Rs mn) 4,855
52 Week high / low Rs 2,144/1,431
STOCK PERFORMANCE (%)
3M 6M 12M
Absolute (%) 23.8 15.8 18.0
Relative (%) 16.7 (13.4) 13.9
SHAREHOLDING PATTERN (%)
Jun-20 Sep-20
Promoters 52.79 52.79
FIs & Local MFs 3.94 3.23
FPIs 18.21 19.84
Public & Others 25.06 24.14
Pledged Shares 6.18 6.26
Source : BSE
Pledged shares as % of total shares
Varun Lohchab
+91-22-6171-7334
Jay Gandhi
jay.gandhi @hdfcsec.com
+91-22-6171-7320
Page | 3
HSIE Results Daily
Bajaj Auto
Margin beat
Bajaj’s 2QFY21 results were above estimates as EBITDA margin came in at
17.7% (+110bp YoY). The demand is reviving across overseas geographies (80-
90% of pre-COVID levels) and domestic markets, with festive sales equivalent
to that of last year. The high margin domestic 3W segment will witness a
gradual pick-up in sales as cities gradually normalise. We raise our FY21/22
estimates by 8/2% to factor in a healthy 2Q performance and set a revised
target price of Rs 3,270 at 18x Sep-22E EPS (at a 5% premium to the 10-year
historic average trading multiple). The key risks are slower-than-expected
recovery on the downside and firming up of oil prices on the upside.
2QFY21 financials: Volumes declined 10% YoY to ~1mn units (vs. 440K
QoQ). However, realisations grew 3% YoY (-2% QoQ) due to BSVI
transition. Revenue at Rs 71.5bn came in line with estimates (-7% YoY).
EBITDA margin at 17.7% surprised positively and expanded 100/440bps
YoY/QoQ. Other expenses declined 23% YoY due to delayed festive season,
lower marketing spends, and operating cost controls. PAT at Rs 11.3bn
increased more than 2x QoQ (-19% YoY).
Key takeaways: Domestic segment: Management’s strategy of launching a
downsized Pulsar 125 (ahead of the BSVI rollout) is now bearing fruit as the
OEM recorded healthy sales of this variant. In the ongoing festive season,
2W sales have been equivalent to last year. While 3W domestic demand has
bottomed, the pick-up is expected to be gradual. Export markets:
Internationally, the company is gaining market share and has achieved its
highest exports in Sep-20. Demand has recovered to 80-90% of pre-COVID
levels for 2Ws and 75-80% for 3Ws. However, frontier markets such as
Nigeria have witnessed social unrest recently. While the situation is
expected to normalise, we will monitor the demand trends in this key
market. Any further rise in oil prices will lead to a faster recovery in the
African region.
Financial Summary (Standalone)
YE Mar (Rs mn) 2Q
FY21
2Q
FY20
YoY
(%)
1Q
FY21
QoQ
(%) FY19 FY20 FY21E FY22E FY23E
Net Sales 71,559 77,073 (7.2) 30,792 132.4 303,576 299,187 261,567 294,469 338,502
EBITDA 12,663 12,781 (0.9) 4,085 210.0 51,925 50,962 43,943 49,647 58,730
APAT 11,382 14,024 (18.8) 5,280 115.6 44,366 51,000 43,550 48,637 56,326
Adj. EPS (Rs) 39.3 48.5 (18.8) 18.2 115.6 153.3 176.2 150.5 168.1 194.6
APAT Growth(%)
8.5 15.0 (14.6) 11.7 15.8
P/E (x)
19.5 17.0 19.9 17.8 15.4
RoE (%)
21.7 24.5 20.8 21.1 22.1
Source: Company, HSIE Research
Change in estimates
Rs mn New Old Change (%)
FY21E FY22E FY23E FY21E FY22E FY23E FY21E FY22E FY23E
Revenue 261,567 294,469 338,502 261,491 294,353 338,353 0 0 0
EBITDA 43,943 49,647 58,730 38,962 46,979 55,997 13 6 5
EBITDA margin (%) 16.8 16.9 17.4 14.9 16.0 16.6 190 bps 90 bps 80 bps
PAT 43,550 48,637 56,326 40,435 47,838 55,890 8 2 1
EPS 150.5 168.1 194.6 139.7 165.3 193.1 8 2 1
Source: Company, HSIE Research
ADD
CMP (as on 22 Oct 2020) Rs 3,006
Target Price Rs 3,270
NIFTY 11,896
KEY
CHANGES OLD NEW
Rating ADD ADD
Price Target Rs 3,230 Rs 3,270
EPS % FY21E FY22E
8% 2%
KEY STOCK DATA
Bloomberg code BJAUT IN
No. of Shares (mn) 289
MCap (Rs bn) / ($ mn) 870/11,811
6m avg traded value (Rs mn) 2,822
52 Week high / low Rs 3,315/1,789
STOCK PERFORMANCE (%)
3M 6M 12M
Absolute (%) 0.7 26.3 (3.7)
Relative (%) (6.4) (2.9) (7.8)
SHAREHOLDING PATTERN (%)
Jun-20 Sep-20
Promoters 53.7 53.7
FIs & Local MFs 9.1 10.4
FPIs 13.7 13.6
Public & Others 23.5 22.3
Pledged Shares 0.0 0.0
Source : BSE
Aditya Makharia
+91-22-6171-7316
Mansi Lall
+91-22-6171-7357
Page | 4
HSIE Results Daily
Ambuja Cements
Stellar show yet again; dividend bonanza announced
During 3QCY20, Ambuja Cements (ACEM) reported strong results.
Standalone net sales/EBITDA/APAT rose 9/55/88% YoY to Rs 28.53/6.80/4.41bn
respectively. Volumes jumped 8% YoY on strong retail demand. Opex fell 8%
YoY on robust (and structural) cost controls and low fuel prices, driving a 44%
jump in unitary EBITDA to Rs 1,200/MT. In a positive surprise, ACEM
announced Rs 17/share dividends, thus paying off 60% of its large cash pile
up on books. We maintain BUY with a higher target price (SOTP-based) of
Rs 283/share, owing to increased volume growth and robust unitary EBITDA
visibility, and a leaner balance sheet, post the large dividend payout.
Strong 3QCY20 results, large dividend payout: Riding on robust retail
demand in north, central and east markets, ACEM printed 8% YoY volume
rise. NSR also remained solid at +1% YoY. Opex reduction accelerated to 8%
YoY, benefitting from structural metrics (fixed cost controls, logistics
optimization and Material Supply Agreement with ACC) and lower fuel
prices. Thus, its unitary EBITDA soared 44% YoY to Rs 1,200/MT. It also
announced Rs 17/share dividend (60% of its cash balance, 7% pre-tax yield).
Outlook: Buoyed by structural opex reduction and healthy pricing, we
expect ACEM’s unitary EBITDA to rebound to a 13-year high of Rs 1,176/MT
in CY20E and to sustain during CY21/22E. Its upcoming expansion in
Rajasthan by 2QCY21 will boost volume growth during CY21-23E. We raise
our EBITDA estimates for CY20/21/22E by 6/7/6% factoring in the cost
controls benefits. Robust margin, high growth visibility and leaner balance
sheet (large dividend payout) should drive rerating. We raise our valuation
multiple for standalone business to 12x Sep’22E EBITDA (earlier 11x), inline
its 10-year mean. We value its 50% holding in ACC at a 20% discount, thus
leading to a SOTP target price of Rs 283/share with a BUY rating.
Standalone Quarterly/Annual Financial summary YE Dec
(Rs mn)
3Q
CY20
3Q
CY19
YoY
(%)
2Q
CY20
QoQ
(%) CY18 CY19 CY20E CY21E CY22E
Sales (mn MT) 5.7 5.3 7.8 4.2 35.3 24.2 24.0 22.5 25.3 27.5
NSR (Rs/MT) 5,031 4,992 0.8 5,195 (3.2) 4,697 4,870 4,997 5,040 5,111
Opex (Rs/MT) 3,831 4,156 (7.8) 3,775 1.5 3,913 3,973 3,821 3,881 3,951
EBITDA (Rs/MT) 1,200 836 43.5 1,421 (15.5) 784 897 1,176 1,158 1,160
Net Sales 28,525 26,258 8.6 21,768 31.0 113,568 116,679 112,680 127,277 140,695
EBITDA 6,803 4,398 54.7 5,952 14.3 18,953 21,489 26,524 29,253 31,927
APAT 4,405 2,346 87.8 4,534 (2.8) 12,129 14,770 18,199 19,635 20,807
AEPS (Rs) 2.2 1.2 87.8 2.3 (2.8) 6.1 7.4 9.2 9.9 10.5
EV/EBITDA (x)
18.6 15.8 13.5 12.0 10.4
EV/MT (Rs bn)
11.96 11.50 12.11 11.20 10.64
P/E (x)
41.6 34.1 27.7 25.7 24.2
RoE (%)
5.9 6.8 8.5 9.2 9.1
Source: Company, HSIE Research, Standalone Financials
Estimates revision
Rs Bn CY20E
Old
CY20E
Revised
Change
%
CY21E
Old
CY21E
Revised
Change
%
CY22E
Old
CY22E
Revised
Change
%
Net Sales 109.8 112.7 2.6 124.0 127.3 2.6 137.1 140.7 2.6
EBITDA 24.9 26.5 6.4 27.4 29.3 6.9 30.0 31.9 6.3
APAT 16.2 18.2 12.6 17.4 19.6 12.7 19.3 20.8 7.7
AEPS (Rs) 8.1 9.2 12.6 8.8 9.9 12.7 9.7 10.5 7.7
Source: Company, HSIE Research
BUY
CMP (as on 22 Oct 2020) Rs 254
Target Price Rs 283
NIFTY 11,896
KEY
CHANGES OLD NEW
Rating BUY BUY
Price Target Rs 260 Rs 283
EBITDA % CY20E CY21E
6.4 6.9
KEY STOCK DATA
Bloomberg code ACEM IN
No. of Shares (mn) 1,986
MCap (Rs bn) / ($ mn) 504/6,838
6m avg traded value (Rs mn) 1,082
52 Week high / low Rs 256/137
STOCK PERFORMANCE (%)
3M 6M 12M
Absolute (%) 26.2 43.7 29.5
Relative (%) 19.1 14.4 25.4
SHAREHOLDING PATTERN (%)
Jun-20 Sep-20
Promoters 63.27 63.27
FIs & Local MFs 13.60 13.29
FPIs 16.25 16.79
Public & Others 6.88 6.65
Pledged Shares - -
Source : BSE
Pledged shares as % of total shares
Rajesh Ravi
+91-22-6171-7352
Saurabh Dugar
+91-22-6171-7353
Page | 5
HSIE Results Daily
Rating Criteria
BUY: >+15% return potential
ADD: +5% to +15% return potential
REDUCE: -10% to +5% return potential
SELL: > 10% Downside return potential
Disclosure:
Analyst Company Covered Qualification Any holding in the stock
Varun Lohchab Asian Paints PGDM NO
Jay Gandhi Asian Paints MBA NO
Aditya Makharia Bajaj Auto CA NO
Mansi Lall Bajaj Auto MBA NO
Rajesh Ravi Ambuja Cements MBA NO
Saurabh Dugar Ambuja Cements MBA NO
Page | 6
HSIE Results Daily
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