CSL Strategizes to Shield Lifesaving Therapies from Tariff Impacts

Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - December 28, 2023

API & Intermediates Fuel 58% Growth in Q2FY24 for Aarti Pharmalabs

Company Overview:

Aarti Pharmalabs Ltd is a subsidiary of Aarti Industries Ltd, involved in the manufacturing and distribution of pharmaceuticals and chemicals. The company operates in three business verticals: API & Intermediaries, CDMO & CMO Services, and Xanthine derivatives & allied. It is the largest Indian manufacturer of Xanthine Derivatives, widely used in beverages, cosmetics, and pharmaceuticals. The company boasts 150+ products, including 52+ patented files, and operates six manufacturing units in Gujarat and Maharashtra.

Topline dipped due to price reductions in certain products

In the recent quarter, the standalone revenue of the company declined by 11.96% YoY (-0.56% QoQ) to 356 Cr. This dip was attributed to the decrease in prices of certain products. However, the decline in selling prices was offset by an increase in volume and a decrease in raw material costs, resulting in an overall margin improvement across earnings levels.

Q2 EBITDA dips YoY, yet margins expand by 85 bps

The company witnessed an 8.18% YoY decrease in EBITDA, amounting to 74 Cr compared to the previous quarter’s 71 Cr. Surprisingly, the EBITDA margin expanded by 85 bps, reaching 20.72%. This margin growth, despite a drop in EBITDA, was fueled by increased volume and reduced raw material costs. On a QoQ basis, EBITDA increased by 3.19%, driven by lower raw material costs and operating expenditures.

APIs and Intermediates drive impressive 58% growth in Q2

Among the three business verticals, API & Intermediate emerged as the primary growth driver, contributing 58% to the revenue in Q2FY24. The remaining 42% was attributed to other verticals, such as CDMO & CMO Services and Xanthine derivatives & allied. The company foresees a robust growth trajectory in the CDMO / CMO pipeline, maintaining its significance in overall revenue.

Promising Future Outlook: Anticipated Growth Opportunities Ahead

The company is actively progressing on greenfield projects in Atali, Gujarat, expecting completion in H2 of FY 24-25. This project, with a total Capex plan of 350-500 Cr in phase 1, is set to increase capacity and introduce 40+ value-added products annually. Anticipating operating leverage in FY26, the company projects an EBITDA growth of 10-15% in FY24.

Valuation and Key Ratios

As of now, the stock trades at a multiple of 23.3x EPS (TTM) of Rs 20.9, with a market price of 488. The industry PE stands at 33.6x, while the company values the stock at 2.66 times its book value of Rs 183 per share. The EV/EBITDA multiple is at 13.47x, compared to the industry median of 18.62x. The trailing twelve months ROE and ROCE are 13.2% and 16.1%, respectively, with a robust interest coverage ratio of 14.2x, indicating strong solvency.

Q2FY24 Result Update: Standalone

➡️Standalone revenue witnessed an 11.96% YoY decline (-0.56% QoQ) to 356 Cr in Q2FY24 due to a drop in product prices.

➡️Gross profit decreased by 6.41% YoY (-1.48% QoQ) to 165 Cr, with gross margin expanding 275 bps YoY due to lower raw material costs.

➡️EBITDA decreased by 8.18% YoY but grew 3.19% QoQ to 74 Cr, driven by margin expansion. EBITDA margin expanded 85 bps YoY and 75 bps QoQ to 20.72% due to operating leverage.

➡️Operating profit (EBIT) decreased by 12.67% YoY (+2.50% QoQ) to 57 Cr, with EBIT margin expanding by 13 bps YoY and 48 bps QoQ to 16.14%.

➡️PAT decreased by 9.21% YoY (-1.44% QoQ) to 41 Cr, while the PAT margin expanded by 35 bps YoY to 11.73%.

➡️Earnings per share (EPS) for the quarter stood at 4.61 Rs, compared to 4.68 Rs in the previous quarter.

Conclusion

Aarti Pharmalabs Ltd, despite facing a decline in standalone revenue attributed to product price drops, showcased resilience with strategic measures. The focus on API & Intermediate business, upcoming greenfield projects, and favorable margins position the company for future growth. The financial indicators, along with ongoing expansion plans, suggest a promising trajectory, making Aarti Pharmalabs a noteworthy player in the pharmaceutical and chemical industry.

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Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - December 28, 2023

LG Balakrishnan's Solid Profitability Amid Margin Pressures

LG Balakrishnan’s Solid Profitability Amid Margin Pressures

Company Overview:

LG Balakrishnan & Bros Ltd specializes in manufacturing chains, sprockets, and metal formed parts for automotive applications. The company operates in two business segments: transmission and metal forming. In the transmission segment, products include chains, sprockets, tensioners, belts, and brake shoes. Metal forming products encompass metal sheet parts, machined components, and wire drawing products.

Q2 Sees Growth in Transmission, Metal Forming Lags

In Q2, the transmission segment exhibited strong performance with a robust 15.64% QoQ revenue growth (+4.47% YoY), while the metal forming segment faced challenges, experiencing a moderate decline of 0.36% QoQ (+8.86% YoY). Overall, standalone revenue witnessed a growth of 12.66% QoQ (+5.17% YoY).

Revenue up, but Year-over-Year margins dip

Despite a 5.17% YoY increase in revenue, margins faced pressure due to a significant rise in raw material costs and operating expenditure by 5.36% and 5.29%, respectively. EBITDA margins dropped by 13 bps YoY, and gross margins decreased by 9 bps YoY and 91 bps QoQ.

37% QoQ PAT Soars: Strong Topline and Operational Efficiency Drive Growth

Profit After Tax (PAT) surged impressively by 37.2% QoQ (+16.72% YoY), driven by robust topline growth and stable interest costs and depreciation. Interest costs remained stable, growing by 0.26% QoQ, while depreciation increased moderately by 0.50%.

Valuation and Key Ratios

The stock currently trades at a multiple of 16.5x Earnings Per Share (EPS) (TTM) of Rs 82, with a market price of 1,315. The industry PE stands at 32.2x, and the company values the stock at 2.81 times its book value of Rs 468 per share. The EV/EBITDA multiple is at 8.63x, compared to the industry median of 13.19x. The trailing twelve months ROE and ROCE are 19% and 24.2%, respectively, with a robust interest coverage ratio of 46.4x, indicating strong solvency.

Q2FY24 Result Update: Standalone

➡️Standalone revenue witnessed a 5.17% YoY growth (+12.66% QoQ) to 573 Cr, driven by robust growth in the Metal Formation segment.

➡️Transmission segment revenue grew by 4.47% YoY (+15.64% QoQ) to 478 Cr, while the metal formation segment surged by 8.86% YoY (-0.3% QoQ) to 95 Cr.

➡️Gross profit increased by 5% YoY (+10.77% QoQ) to 305 Cr, but gross margins dropped by 9 bps YoY and 91 bps QoQ to 53.29%.

➡️EBITDA grew by 4.41% YoY (+19.08% QoQ) to 102 Cr, with EBITDA margin down by 13 bps YoY and up 96 bps QoQ to 17.87% due to operating leverage.

➡️Operating profit (EBIT) increased by 6.52% YoY (+23.74% QoQ) to 85 Cr, with EBIT margin expanding by 19 bps YoY and 133 bps QoQ to 14.84%.

➡️PAT surged by 16.72% YoY (+37.2% QoQ) to 76 Cr, while the PAT margin expanded by 130 bps YoY and 236 bps QoQ to 13.21%.

➡️Earnings per share (EPS) for the quarter stood at 24.11 Rs, compared to 17.57 Rs in the previous quarter.

Conclusion

LG Balakrishnan & Bro’s Ltd demonstrated a mixed performance in Q2, with robust growth in the transmission segment but challenges in metal forming. While revenue showed a positive trend, margins faced pressure due to increased costs. Despite this, the company exhibited strong profitability with a significant surge in Profit After Tax. The valuation metrics and key ratios indicate a solid financial position, suggesting a potential for sustained growth. Investors may closely monitor the company’s strategies to address margin challenges in the metal forming segment.

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Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - December 21, 2023

Q2FY24 Snapshot: Roto Pump's Stellar Rise in Revenue and Profits

Q2FY24 Snapshot: Roto Pump’s Stellar Rise in Revenue and Profits

Company Overview:

Roto Pump Ltd is dedicated to the manufacturing of Progressive Cavity Pumps, offering efficient and reliable pumping solutions across diverse industries, including wastewater, sugar, paper, paint, and more. The product portfolio encompasses Progressive Cavity Pumps (PCP), Twin Screws Pumps, and additional Positive Displacement (PD) pumps such as AODD and Gear pumps. The company boasts a global presence, exporting products to 55+ countries and achieving installations of 2,75,000 pumps worldwide.

Q2 Demonstrates Resilient and Impressive Topline Expansion

In the second quarter, the company experienced substantial consolidated revenue growth of 45.06% YoY (+49.48% QoQ), reaching 81.4 Cr. However, a simultaneous increase of 72.44% YoY (+87.28% QoQ) in raw material costs resulted in a gross profit of 49.8 Cr, accompanied by a contraction in gross margin by 600 bps YoY and 780 bps QoQ.

First-half struggles: Cash conversion lags behind expectations

During the first half of the year, the company faced a significant challenge in cash conversion, standing at 60% of the cash profit (EBITDA). Despite reporting an EBITDA earning of 33 Cr in H1FY24, operating cash from activities amounted to only 21 Cr, reflecting a 60% conversion of EBITDA. This indicates a notable decline from the previous year’s cash conversion rate of 98%, primarily attributed to an increase in trade receivables in the first half.

First-Half Gross Debt Sees Decline

In H1FY24, gross debt decreased by 21%, reaching 30 Cr compared to 38 Cr in H1FY23. However, net debt (gross debt-cash) increased by 46.32% in the first half compared to the previous year, standing at 15 Cr. Cash equivalents declined by 47% to 15 Cr in H1FY24 compared to the same period in the previous year.

EBITDA Skyrockets 78% YoY on Strong Margin Growth

In Q2FY24, consolidated EBITDA demonstrated an impressive growth of 78.55% YoY (+63.11% QoQ), reaching 20 Cr. This surge was propelled by margin expansion, with EBITDA margin expanding by 470 bps YoY and 211 bps QoQ to 25.24%, showcasing strong operating leverage. The company’s EBITDA margin surpasses that of its peer companies.

Valuation and Key Ratios

The stock is presently trading at a multiple of 30.4x EPS (TTM) of Rs 12.9, with a market price of 391, and an industry PE at 30.4x. The company values the stock at 1.02 times its book value. The EV/EBITDA multiple stands at 17.8x, while the industry median is at 20.5x. The trailing twelve months ROE and ROCE are 22.4% and 30.4%, respectively, and the interest coverage ratio is a robust 14.9x, indicating strong solvency.

Q2FY24 Result Update: Consolidated

➡️Consolidated revenue grew 45.06% YoY (+49.48% QoQ) to 81 Cr in Q2FY24 vs. 54 Cr in the previous quarter.

➡️Gross profit increased 31.81% YoY (+32.54% QoQ) to 50 Cr, with gross margin dropping 600 bps YoY and 780 bps QoQ due to higher raw material costs.

➡️EBITDA grew 78.55% YoY (+63.11% QoQ) to 20 Cr driven by margin expansion. EBITDA margin expanded 470 bps YoY and 211 bps QoQ to 25.24% led by operating leverage.

➡️Operating profit (EBIT) increased 83.14% YoY (+74.36% QoQ) to 17 Cr, with EBIT margin expanding by 440 bps YoY and 300 bps QoQ to 21.21%.

➡️PAT surged 77.98% YoY (+70.47% QoQ) to 13 Cr, and the PAT margin expanded by 290 bps YoY and 193 bps QoQ to 15.71%.

➡️Earnings per share (EPS) for the quarter stood at 4.07 Rs, compared to 2.39 Rs in the previous quarter.

Conclusion

Roto Pump Ltd demonstrated robust topline growth in Q2FY24, driven by an impressive surge in consolidated revenue and EBITDA. Despite poor cash conversion in the first half, the company showcased resilience with a decline in gross debt and notable margin expansion. The stock’s valuation appears favorable, and strong financial ratios, including ROE and ROCE, underscore the company’s solid performance. Overall, Roto Pump Ltd presents a promising outlook with a strategic focus on diverse industries and a global footprint.

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Zomato Q3FY25: Strong GOV Growth Amid Profitability Pressures

Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - December 18, 2023

Record-breaking CPCU Conversions Propel Affle India's 21.06% Revenue Growth

Record-breaking CPCU Conversions Propel Affle India’s 21.06% Revenue Growth

Company Overview:

Affle India is a leading IT company engaged in providing mobile advertisement and software development services. The company operates in two business segments: Consumer Platform, delivering consumer recommendations and conversions through relevant mobile advertising, and Enterprise Platform, enabling offline businesses to go online through app development, O2O commerce, and data analytics. Affle India has a robust global reach in North America, Japan, Korea, and Australia.

Consumer Platform Thrives, Enterprise Platform Faces Challenges

In Q2FY24, the cost per converted user (CPCU) business model drove 92.9% of revenue, with the Consumer Platform segment growing 16.61% YoY. The Enterprise Platform revenue declined by 23.24% YoY, resulting in a standalone revenue surge of 15.51% YoY. The robust growth in the CPCU business model offset the slowdown in the enterprise platform segment during the quarter.

Record-breaking CPCU Conversions Propel Revenue Growth

During the quarter, the CPCU business achieved 72 Mn conversions, compared to 64.7 Mn in the same quarter last year. The average CPCU rate was 55.6 Rs, contributing to robust revenue growth of 21.06% YoY, reaching 400 Cr in Q2FY24.

Resilience Amid Challenges: Impact of Online Gaming and Fintech

Despite a combined impact of about Rs. 250 million from online gaming in India and the Fintech vertical in developed markets, the company delivered its highest revenue and EBITDA ever in this quarter and in the CPCU business. Regulatory changes towards the applicability of GST in the online gaming industry in India caused a pullback effect of about Rs. 110 million.

Valuation and Key Ratios

As of now, the stock trades at a multiple of 66x earnings per share (EPS) (TTM) of Rs 19.8, with a market price of Rs 1,244. The stock is valued at 10.4 times its book value of Rs 120 per share. In terms of EV/EBITDA, the company ranks 4th with a multiple of 46.61x, compared to the industry median of 17.88x. The trailing twelve-month return on equity (ROE) and return on capital employed (ROCE) stand at 18.5% and 20.2%, respectively. The interest coverage ratio is robust at 20.2x, indicating the company’s solvency.

Q2FY24 Result Update: Standalone

➡️In Q2FY24, standalone revenue grew 15.51% YoY (-2.41% QoQ) to 134Cr, driven by robust growth in the CPCU business.

➡️Consumer platform segment reported revenue of 131 Cr, growing 16.61% YoY, while the enterprise segment showed a slowdown in revenue by 23.24% YoY, resulting in a 15.51% growth in standalone revenue.

➡️EBITDA surged 25.16% YoY (+20.39% QoQ) to 21 Cr, driven by the consumer platform segment. EBITDA margin improved 120 bps YoY and 300 bps QoQ to 15.86%.

➡️Operating profit (EBIT) increased by 27.59% YoY (+22.83% QoQ) to 19 Cr, with an EBIT margin jumping by 130 bps YoY and 290 bps QoQ to 14.33%.

➡️Profit after tax (PAT) saw a remarkable surge of 22.69% YoY (+16.63% QoQ) to 18 Cr, and the PAT margin expanded by 80 bps YoY and 220 bps QoQ to 13.58%.

➡️Earnings per share (EPS) for the quarter stood at 1.30 Rs, compared to 1.11 Rs in the previous quarter.

Conclusion

Affle India’s Q2FY24 results reflect a strong performance driven by the robust growth in the CPCU business model, offsetting challenges in the enterprise platform segment. Despite external impacts from online gaming and Fintech, the company achieved its highest revenue and EBITDA, showcasing resilience and adaptability. The valuation and key ratios underscore the company’s solid financial standing. Affle India continues to demonstrate its position as a leading player in mobile advertising and software development services.

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BHEL Secures Major Power Project Contracts from Adani Group

Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - December 15, 2023

BDL Lands Massive Rs 750 Cr Army Missile Order

Company Overview:

Bharat Dynamics Ltd is a government entity under the Ministry of Defence, Government of India. The company is actively involved in manufacturing and supplying guided missiles, underwater weapons, airborne products, and other allied defense equipment for the Indian Army. Currently, it operates three manufacturing facilities in Hyderabad, Telangana, Bhanur, and Vishakhapatnam, Andhra Pradesh. Recently, BDL secured a significant supply order of Anti-Tank Guided Missiles (ATGM) worth Rs 750 Cr from the Indian Army.

Robust New Order Book in Q2:

In Q2FY24, Bharat Dynamics Ltd experienced a surge in new orders, totaling Rs 1,659 Cr from April 23 to September 30, 2023. This strengthened the company’s total order book to an impressive Rs 20,766 Cr as of September 30, 2023. Notable orders include the ATGM order (Rs 750 Cr), upgraded version of Akash Missiles (Rs 247 Cr), LBRM (Rs 254 Cr), and ULPGM (Rs 105 Cr).

Robust Sequential Revenue Growth

During Q2FY24, the standalone revenue from operations witnessed remarkable growth, increasing by 106.84% QoQ and 15.15% YoY, reaching Rs 616 Cr. This substantial revenue growth was attributed to the higher order book of Rs 1,659 Cr in Q2FY24. While the Cost of Goods Sold (COGS) rose by 118.41% QoQ and 13.88% YoY to Rs 271 Cr, the gross profit for the quarter surged by 98.55% QoQ and 16.17% YoY, amounting to Rs 344 Cr. The gross margin experienced a YoY increase of 50 basis points but declined by 230 basis points QoQ.

Improved Performance QoQ:

BDL’s Q2FY24 performance was impressive, partially attributed to the realization of some lagged revenue from FY23. Key highlights include a 42.8% YoY increase in EBITDA to INR 1.3 billion, with an EBITDA margin improvement of 422 basis points to 21.8%. Other expenses rose by 41% YoY due to repairs and provisions. Billed receivables increased, offset by a decline in unbilled receivables. Other income rose by 74% YoY to INR 783 million. The order book at end-September 2023 stood at INR 200 billion, indicating a robust book-to-bill ratio of 9.3x.

Valuation and Key Ratios

As of now, the stock trades at a multiple of 59.4x earnings per share (EPS) (TTM) of Rs 23.2, with a market price of Rs 1,381. The stock is valued at 7.47 times its book value of Rs 184 per share. In terms of EV/EBITDA, the company ranks 3rd with a multiple of 33.9x, compared to the industry median of 22.4x. The trailing twelve-month return on equity (ROE) and return on capital employed (ROCE) stand at 11.3% and 15.6%, respectively. The interest coverage ratio is robust at 175x, indicating the company’s solvency.

Q2FY24 Result Update: Consolidated

➡️In Q2FY24, standalone revenue grew 15.15% YoY (+106.84% QoQ) to 616 Cr, driven by the strong new order book in the quarter.

➡️Gross profit increased 16.17% YoY (+98.55% QoQ) to 344 Cr, while gross margin dropped 230 bps QoQ (+50 bps YoY) to 55.92%.

➡️EBITDA surged 42.82% YoY (-510.66% QoQ) to 134 Cr, driven by robust growth in topline and margin improvement. EBITDA margin improved 400 bps YoY to 21.77%.

➡️Operating profit (EBIT) increased by 60.75% YoY (-335.44% QoQ) to 116 Cr, with an EBIT margin jumping by 530 bps YoY to 18.94%.

➡️Profit after tax (PAT) saw a remarkable surge of 94.02% YoY (+251.76% QoQ) to 147 Cr, and the PAT margin expanded by 970 bps YoY and 980 bps QoQ to 23.89%.

➡️Earnings per share (EPS) for the quarter stood at 8.04 Rs, compared to 2.28 Rs in the previous quarter.

Conclusion

Bharat Dynamics Ltd demonstrated a robust performance in Q2FY24, marked by substantial revenue growth, a strengthened order book, and improved margins. The company’s strategic positioning in the defense sector, coupled with a solid financial foundation, reflects positively in its valuation metrics. With a significant order pipeline and efficient financial management, BDL remains well-positioned for sustained growth in the defense manufacturing sector.

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Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - December 14, 2023

Digital Services Propel Zensar's Q2 Growth to 1,240 Cr

Digital Services Propel Zensar’s Q2 Growth to 1,240 Cr

Company Overview:

Zensar Technology, a member of the RPG group, specializes in providing IT services and solutions. The company’s offerings encompass experience services, advanced engineering services, data engineering and analytics, application services, and foundation services. Zensar focuses on industry verticals such as Hitech & Manufacturing, Consumer Services, Banking & Financial Services, and Insurance.

Business Segment: Digital Application & Digital Foundation Services

Digital Application services contribute 81.8% to the company’s revenue, including custom applications management services spanning development, maintenance, support, modernization, and testing across various technologies and industry verticals. Digital Foundation services make up the remaining 18.2%, offering infrastructure management services through a managed service platform employing automation, autonomics, and machine learning.

Moderate Revenue as Hitech and Healthcare Verticals Decline

The revenue exhibited stability, experiencing a marginal 0.5% year-over-year (YoY) growth and a more notable 1.11% quarter-over-quarter (QoQ) increase, reaching 1,240 Cr. This performance was influenced by a slowdown in sectors like Hitech and Healthcare. Notably, Banking and Financial Services demonstrated a robust sequential QoQ revenue growth of 3.1% and an impressive quarterly YoY growth of 7.8% in constant currency.
On the other hand, Manufacturing and Consumer Services showcased a noteworthy sequential QoQ growth of 6.7%, but experienced a slight quarterly YoY decline of 0.7% in constant currency. In contrast, Hitech and Healthcare encountered challenges, with an 8% QoQ decline (-16.9% YoY) and a 1.5% QoQ decrease (-4.7% YoY) respectively.

Geographical Revenue Breakdown in Q2FY24

South Africa experienced a 7.9% QoQ growth in constant currency, contributing 12.2% to total revenue. UK/EU exhibited an 11.3% QoQ growth, representing 21.6% of total revenue. The USA, despite being the major contributor at 66.2%, reported a 4.3% QoQ decline in revenue.

Client Concentration Risk Reduction

In Q2FY24, the top 5 clients accounted for 31.5% of total revenue, compared to 34.6% in Q2FY23. Similarly, the contribution of the top 10 clients decreased from 45.5% in Q2FY23 to 42.2% in Q2FY24, and the top 20 clients contributed 58.3% in Q2FY24 compared to 60.7% in Q2FY23. This indicates a decline in revenue concentration among the top clients, suggesting a positive trend for revenue growth.

Services Performance in Q2

On a QoQ basis, Advanced Engineering Services recorded a growth of 7.8%, Experience Services grew by 3.1%, Application Services and Enterprise Application Services grew by 0.2%, while Foundation Services remained flat. Data Engineering and Analytics experienced a decline. These key service lines collectively constituted 34.0% of total revenues.

Valuation and Key Ratios

Currently, the stock trades at a multiple of 22.4x earnings per share (EPS) (TTM) of 23.2 Rs, with a market price of 519 Rs. The company’s stock is valued at 3.63 times its book value of 144 Rs per share. In EV/EBITDA, the company ranks 7th with a multiple of 12.53x, compared to the industry median of 17.37x. The trailing twelve-month return on equity (ROE) and return on capital employed (ROCE) stand at 11.2% and 14.5%, respectively. The interest coverage ratio is robust at 28.4x, indicating the company’s solvency.

Q2FY24 Result Update: Consolidated

➡️In Q2FY24, revenue remained moderate, growing 0.5% YoY (+1.11% QoQ) to 1,240 Cr due to the slowdown in the Hitech and Healthcare verticals.

➡️EBITDA surged 119.07% YoY (+0.35% QoQ) to 230 Cr, driven by a decline in operating expenditure. The EBITDA margin expanded significantly by 1000 bps YoY to 18.61%.

➡️Operating profit (EBIT) increased by 245.73% YoY (+3.46% QoQ) to 194 Cr, with an EBIT margin jumping by 11.1% YoY and 36 bps QoQ to 15.66%.

➡️Profit after tax (PAT) saw a remarkable surge of 206.16% YoY (+11.3% QoQ) to 174 Cr, and the PAT margin expanded by 940 bps YoY and 130 bps QoQ to 14.02%.

➡️Earnings per share (EPS) for the quarter stood at 7.69 Rs, compared to 6.91 Rs in the previous quarter.

Conclusion

Zensar Technology reported stable Q2FY24 results with a 0.5% YoY revenue increase, despite challenges in Hitech and Healthcare sectors. The company demonstrated resilience in diversified geographical and client revenue streams. Notable growth in EBITDA, operating profit, and PAT reflects operational efficiency, contributing to positive market valuation and improved financial ratios.

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KPMG US and UK units buy 33% stake in India’s KGS for $210 million

Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - December 13, 2023

Paper Price Surge Hits Q2 Profits: Navneet Education Adapts with Price Adjustments

Company Overview:

Navneet Education is a key player in the manufacturing and trading of educational books, reference materials, and stationery, with a significant market presence in both paper and non-paper categories. The company commands a dominant market share of 65% in western India and exports its stationary products to over 30 countries, with a focus on the US. Navneet Education operates three manufacturing sites in Dadra & Nagar Haveli, Palghar, and Gandhinagar.

Paper Price Surge Causes 20% Quarterly Revenue Drop:

In Q2FY24, the company experienced a 20% quarter-on-quarter (QoQ) revenue decline, primarily attributed to a surge in paper prices. The quarterly revenue plummeted by 66.42% year-on-year (YoY) and 19.41% QoQ due to increased paper costs. To counteract this rise, the company raised prices on some publication products, leading to decreased demand. Furthermore, changes in the paper pattern for certain standards resulted in the postponement of related examination book releases to the third quarter.

Resilient Stationary Business in Q2:

Despite challenges in the publication segment, the stationary business demonstrated resilience with a marginal decline of 0.79% QoQ and a substantial 46.65% YoY decrease. The domestic stationary market usually performs well in Q4 and Q1, and the company anticipates achieving a growth of 12%-15% in this segment for FY24. In H1FY24, the overall stationary business recorded revenue of Rs. 547 crores and EBIT of Rs. 71 crores, reflecting a margin of approximately 12.9%.

Segment-Wise Performance in Q2:

For Q2, consolidated revenue contracted by 66.42% YoY, reaching 266 Crores, primarily due to the slowdown in the publication business. The publication segment was significantly impacted, with an 83.08% YoY decrease in revenue to 73 Crores, while the stationary business remained resilient, declining by 0.79% QoQ and 46.65% YoY to 190 Crores.

Valuation and key ratio

As of now, the stock trades at a multiple of 26.5x earnings per share (EPS) (TTM) of 10.4 Rs, with a market price of 143 Rs. The industry price-to-earnings (PE) ratio is at 28.7x. The company’s stock is valued at 2.54 times its book value of 56.3 Rs per share. In terms of enterprise value/earnings before interest, taxes, depreciation, and amortization (EV/EBITDA), the company ranks 6th with a multiple of 11.39x, compared to the industry median of 18.11x. The trailing twelve-month return on equity (ROE) and return on capital employed (ROCE) stand at 15% and 19.4%, respectively, with a healthy interest coverage ratio of 12x.

Q2FY24 Result Update – Consolidated

➡️In Q2FY24, consolidated revenue declined by 66.42% (-19.41% QoQ) to 266 Crores, primarily attributed to challenges in the publication business stemming from the rise in paper prices.

➡️Gross profit decreased by 63.56% YoY, reaching 134 Crores, while gross margin improved by 400 basis points YoY to 50.56%, driven by a decline in raw material costs by 68.91% YoY.

➡️EBITDA experienced a significant downturn, decreasing by 102.06% YoY to -4.30 Crores, mainly due to challenges in the publication business. EBITDA margin stood at -1.62% in Q2FY24 compared to 26.39% in Q2FY23.

➡️Operating profit (EBIT) decreased by 109.65% YoY to -18.9 Crores in Q2FY24, with an EBIT margin of -7.11%, contrasting with 24.74% in Q2FY23.

➡️Profit after tax (PAT) decreased by 75.44% YoY to 35.6 Crores, supported by a one-time gain from the sale of a plant worth 68 Crores. PAT margin dropped by 500 basis points YoY to 13.39%.

➡️Earnings per share (EPS) for the quarter stood at 1.58 Rs, a significant improvement compared to -0.10 Rs in the previous quarter.

Conclusion:

Navneet Education faced significant challenges in Q2FY24, marked by a substantial decline in consolidated revenue, primarily attributed to the impact of rising paper prices on the publication business. While the stationary segment exhibited resilience, the company navigated the downturn by adjusting prices and strategizing for a rebound. The focus on cost management, evident in improved gross margins, showcases the company’s adaptability. With a strong market presence and strategic manufacturing capabilities, Navneet Education aims to overcome challenges, emphasizing growth prospects in the stationary business for the remainder of FY24. Investors should monitor the company’s efforts to mitigate the impact of external factors on its financial performance.

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Navneet Education Q1FY25: Exceptional Gains Boost Profits Amid Sector Challenges

Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - December 12, 2023

EdTech and MarTech: CL Educate's Strategic Shift Towards Higher Margins

EdTech and MarTech: CL Educate’s Strategic Shift Towards Higher Margins

Company Overview:

CL Educate is a prominent player in the Indian EdTech and MarTech segments, providing education and test preparation training programs, including tuition for school students and coaching for entrance exams. The company has a presence in over 90 cities in India and globally in the UAE. Under the MarTech segment, CL Educate offers Event management, Digital, and CEP services. The company boasts a 35%+ market share in MBA and Law Test preparation.

EdTech Business Revenue Remains Stable as EBITDA Surges 17% YoY

In Q2FY24, EdTech business revenue showed a nearly flat growth of 6.63% YoY, while EBITDA in this segment surged by 17%. The flatness in EdTech revenue is attributed to academic seasonality, with the CLAT (Law Exam) moving from a summer exam to December. The platform business in the EdTech segment grew by 30% in H1, adding 42 new clients. Publishing revenue increased by 18%, with improved margins due to a decrease in paper prices by 18%-20%. The repeat customer strike rate increased by 90%, billing grew by 30%, and collections increased by 40%.

MarTech Business Topline Growth Stalls, but EBITDA Grows 60% – Margins Expand:

While MarTech business topline growth declined by 10.6%, EBITDA in this segment grew by an impressive 60%. The company strategically let go of lower-margin businesses, such as support services, focusing instead on high-margin marketing and B2B demand generation. New customers were added in sectors such as Fintech, FMCG, Financial services, and Automobiles.

PAT Jumps 26.2% YoY on Lower Interest Cost and Tax Rate:

In Q2FY24, Profit After Tax (PAT) increased by 26.2% YoY (1.54% QoQ) to 5.56 Cr, despite flat revenue for the quarter. The growth in PAT was driven by a 14.82% YoY decrease in interest costs to 0.54 Cr and a 16.19% YoY decrease in tax expenses to 1.88 Cr. The tax rate declined by 8.48% YoY to 25.33% in Q2FY24, compared to 33.81% in Q2FY23.

Q2FY4 Concall Highlights:

➡️The CLAT exam’s move to December led to increased sales of long-duration courses, contributing to higher ARPU and margins.

➡️The company will focus on CUET for 2024 test prep and the IPM crash season in H2.

➡️The increasing number of CAT takers, now at 3.3 lakhs, compared to 2.2 & 2.6 lakhs in the last 5-7 years, is expected to bring more business, where the company holds a 25%-30% market share in CAT test prep.

Valuation and key ratio

The stock is currently trading at a multiple of 15.3x EPS (TTM) of 3.13 Rs at a market price of 80.9, with an industry PE at 76x. The company’s stock is valued at 1.56 times its book value of 51.9 Rs per share. In EV/EBITDA multiple, the company holds the 7th position with a multiple of 10.57x, while the industry median stands at 29.63x. Trailing twelve-month ROE and ROCE stood at 8.16% and 6.81%, respectively, while the interest coverage ratio demonstrated the company’s solvency at 6.13x in Q2FY24.

Q2FY24 Result Update – Consolidated

➡️In Q2FY24, consolidated revenue growth was nearly flat, down by 0.58% YoY (-1.08% QoQ) to 89 Cr, primarily due to a decline in the MarTech business segment. The company’s strategic focus on higher-margin services, such as marketing and B2B business, offset the decline.

➡️Consolidated EBITDA declined by 15.52% YoY (-24.05% QoQ) to 6.72 Cr due to lower margins in the EdTech business. EBITDA margins were down 130 bps YoY and 228 bps QoQ to 7.55%.

➡️Operating profit (EBIT) decreased by 41.08% YoY (-39.49% QoQ) to 3.32 Cr due to higher depreciation, with EBIT margin declining by 250 bps YoY and 237 bps QoQ to 3.74%.

➡️PAT surged by 26.2% YoY (+1.54% QoQ) to 5.56 Cr, driven by lower interest costs and tax expenses, leading to a PAT margin increase of 133 bps YoY and 16 bps QoQ to 6.25%.

➡️EPS for the quarter stood at 1.01 Rs compared to the previous quarter’s 0.99 Rs.

Conclusion:

CL Educate demonstrates resilience in its EdTech and MarTech businesses, navigating seasonality challenges and strategically optimizing its service portfolio for higher margins. Despite flat revenue, the company’s focus on long-duration courses and strategic adjustments positions it well for future growth. The positive trajectory of key financial indicators and a strong market share in critical test preparation segments contribute to a promising outlook for CL Educate.

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D-Mart's Q3 Results Miss Estimates, Faces Margin Pressure and Leadership Change

Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - December 11, 2023

DMart Q2FY24 Working Capital Boost: Inventory and Payable Days Decrease

Company Overview:

Avenue Supermart is primarily engaged in the business of retail supermarts under the brand name “D-Mart.” The company offers products in three categories at its stores: Food, Non-food, and Merchandise & Apparel. The Food category includes groceries, dairy, staples, beverages, fruits, and vegetables. Non-food comprises home care, personal care, toiletries, and general merchandise, while Merchandise & Apparel includes bed & bath, toys & games, garments, and footwear. Over the last year, the number of stores increased by 34, bringing the total count to 336, with a presence across 22 cities in India as of September 2023.

Q2 Sees Surge in Topline Growth Despite 9.09% YoY Dip in PAT

In Q2FY24, D-Mart reported an 18.67% YoY growth in topline, while PAT was down 9.09% YoY to 623. The slowdown in PAT was attributed to an increase in operating expenditure (up 18.2% YoY) and tax rate (up 18.5% YoY). This led to a decline in PAT margin by 150 bps YoY and 60 bps QoQ to 4.94% in Q2FY24. The sudden increase in tax expenses is due to the absence of a tax benefit in Q2FY23.

Q2 Maintains EBITDA Stability Amid Margin Decline

The company reported an EBITDA of 1,005 Cr, growing 12.66% YoY but declining 2.93% QoQ. The EBITDA margin during the quarter dropped 42 bps YoY and 75 bps QoQ, primarily due to higher COGS and operating expenditure. Purchase stock increased by 19.3% YoY to 10,771 Cr, while operating expenditure grew 18.2% QoQ to 847 Cr.

Accelerate Working Capital: Optimize Inventory and Payable Days

Lower inventory and payable days led to a faster working capital cycle. Inventory days reduced by 2.1 days to 30.3 days in Q2FY24, and payable days declined 1.2 days to 6.4%. This resulted in a Net working capital day (Inventory days – Payable days) of 23.9 days in H1FY24 compared to 24.8 days in H1FY23, indicating improved working capital efficiency.

Key Operating Metrics

Total bill cuts grew 36% half-yearly to 14.7 Cr in H1FY24. Revenue from sales per retail business area sq ft increased by 5% half-yearly to 16,729 in H1FY24. Like-for-like growth, representing the growth in revenue from the sale of the same store, stood at 8.6% in H1FY24 compared to 41.6% in H1FY23.

Valuation and key ratio

The stock is currently trading at a multiple of 113x EPS (TTM) 35.9 Rs, at the current market price 4,062 with an industry PE at 61.7x. The company’s stock is valued at 15.2 times its book value of 268 Rs per share. In EV/EBITDA multiple, the company holds the 1st position with a multiple of 67.43x, surpassing the industry median of 27.64x. Trailing twelve-month ROE and ROCE stood at 16% and 20.1%, respectively, while the interest coverage ratio demonstrated the company’s solvency at 53.3x in Q2FY24.

Q2FY24 Results Updates – Consolidated

➡️In Q2FY24, Revenue grew 18.67% YoY (+6.4% QoQ) to 12,624 Cr, driven by an increase in volumes.

➡️Gross profit increased 15.13% YoY (+2.8% QoQ) to 1,852 Cr, while gross margin declined 45 bps YoY and 50 bps QoQ to 14.67%.

➡️EBITDA surged 12.66% YoY (-2.93% QoQ) to 1,005 Cr, driven by increased revenue, with EBITDA margin dropping 42 bps YoY and 75 bps QoQ to 7.96%.

➡️Operating profit (EBIT) increased 13.77% YoY (-4.87% QoQ) to 831 Cr, while EBIT margin declined 28 bps YoY and 78 bps QoQ to 6.58%.

➡️PAT was down 9.09% YoY (-5.37% QoQ) to 623 Cr due to the decline in margins, with PAT margin dropping 150 bps YoY and 60 bps QoQ to 4.95%.

➡️EPS for the quarter stood at 9.58 Rs compared to the previous quarter at 10.12 Rs.

Conclusion:

D-Mart showed growth in Q2FY24 with an 18.67% YoY increase in revenue, but PAT declined by 9.09% due to higher operating expenses and tax rates. EBITDA remained robust, although margins dipped. The company demonstrated improved working capital efficiency, and key metrics like total bill cuts and like-for-like growth exhibited positive trends. Valuation metrics suggest a premium stock, and Q2FY24 results indicate a focus on volume-driven revenue growth.

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British Fashion Titan ASOS Makes Exclusive Indian Debut Through Ajio

Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - December 8, 2023

Strategic Expansion: Trident Plans 14,470 Mn CAPEX by March 2024

Company Overview:

Trident Ltd is a textile company engaged in the manufacturing, trading, and selling of textile products such as yarn, terry towels, and bed sheets. Additionally, the company also manufactures paper and chemicals. It operates in three revenue segments: Bath & Bed Linen, Yarn, and Paper. With a presence in 150+ countries globally and a workforce of 13,000+, Trident Ltd is a prominent player in the industry.

Robust Revenue Growth Driven by Increased Demand

In Q2FY24, the company experienced a significant revenue growth of 24.1% YoY (+20.06% QoQ), reaching 1,761 Cr. This surge was attributed to the rising demand for textile and paper products. The Textile segment’s revenue grew by 21.48% YoY to 1,465 Cr, while the Paper segment witnessed a 13.43% YoY increase, reaching 296 Cr. Notably, Bed & Bath Linen contributed 57% to the total revenue, with Yarn and Paper contributing 27% and 17%, respectively.

Margin Improvement – EBITDA/EBIT/PAT – 350 bps/390 bps/445 bps YoY

The company’s profitability margins saw improvement in Q2FY24, driven by strategic initiatives such as higher retail price points, a focus on specific product categories, increased plant capacity utilization, and the development of new products. EBITDA margin jumped 350 bps YoY to 13.6%, while EBIT and PAT margins expanded by 390 bps YoY to 8.6% and 445 bps YoY to 7.25%, respectively.

Company Plans CAPEX of 14,470 Mn to Increase Capacity in All Segments by March 2024

Trident Ltd plans a substantial capital expenditure of 14,470 Mn to boost capacity across its segments. In the Yarn segment, there is a targeted increase in capacity by adding 98,496 spindles by December 2023 and 94,848 spindles by March 2024. Bath Linen and Chemical segments also have planned capacity expansions, requiring investments of 11,000 Mn and 1,000 Mn, respectively.

Profitability Grew 222% YoY (+41% QoQ) Led by Lower Input Prices and Demand Scenario

The company reported a remarkable 222% YoY growth and 41% QoQ growth in profitability (PAT), reaching 127 Cr during Q2FY24. This robust performance was fueled by margin improvement, lower input prices, and increased demand. PAT margin increased by 445 bps YoY and 110 bps QoQ, reaching 7.25% in Q2FY24, with a one-time exceptional gain of 36 Cr impacting the quarter.

Valuation and key ratio

As of now, the stock is trading at a multiple of 40.4x EPS (TTM) at the current market price of 36.2, with an industry PE at 27x. The company’s stock is valued at 4.4 times its book value of 8.14 Rs per share. In EV/EBITDA multiple, Trident holds the 4th position with a multiple of 18.65x, surpassing the industry median of 15.21x. In H1FY24, the ROE and ROCE stood at 10.5% and 11.1%, respectively, while the interest coverage ratio demonstrated the company’s solvency at 7.52x.

Q2FY24 Results Update: Standalone

➡️In Q2FY24, the company witnessed a revenue growth of 24.1% YoY (+20.06% QoQ) to 1,761 Cr, driven by an increase in the retail price point. Textile revenue increased by 21.48% YoY, while paper revenue increased by 13.43% YoY.

➡️Gross profit increased by 42.5% YoY (+13.84% QoQ) to 847 Cr due to a moderate rise in raw material costs. While gross margin improved by 620 bps YoY, it declined by 260 bps QoQ to 48.08% due to an increase in COGS QoQ.

➡️EBITDA surged by 67.54% YoY (+5.05% QoQ) to 240 Cr, with EBITDA margin expanding by 350 bps YoY but declining by 190 bps QoQ to 13.6% in Q2FY24.

➡️Operating profit (EBIT) grew by 131.13% YoY (+7.7% QoQ) to 152 Cr, with EBIT margin increasing by 395 bps YoY but declining by 99 bps to 8.6% in Q2FY24.

➡️PAT grew by 221.89% YoY (+41.36% QoQ) to 127 Cr, driven by margin improvement and an increase in prices. PAT margin jumped by 445 bps YoY and 110 bps QoQ to 7.25%.

➡️EPS for the quarter stood at 0.25 Rs, compared to the previous quarter’s 0.18 Rs.

Conclusion:

Trident Ltd showcased robust Q2FY24 results, marked by substantial revenue growth, margin improvement, and strategic expansion plans. With a strong global presence, diversified product portfolio, and prudent financial metrics, the company is poised for continued success in the textile industry. Investors may find the stock’s current valuation and key ratios favorable, reflecting Trident’s solid performance and growth prospects.

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