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

REC Limited's Signed MoU with PNB Sparks 6.38% Surge in Share Price:

REC Limited’s Signed MoU with PNB Sparks 6.38% Surge in Share Price:

Company Overview:

Rural Electrification Corporation LTD (RECL) is a significant player in the Indian power and infrastructure sector, serving both state-owned utilities and private companies. It plays a pivotal role in the nation’s electrification efforts and has witnessed substantial growth over the past five years. This analysis delves into the company’s activities, financial performance, and key trends.

REC Limited’s Signed MoU with PNB Sparks 6.38% Surge in Share Price:

On September 26, 2023, REC Limited made a significant stride in the financial world by forging a strategic Memorandum of Understanding (MoU) with Punjab National Bank (PNB). This landmark agreement paves the way for both entities to co-finance an impressive sum of Rs. 55,000 Crore over the next three years, dedicated to fueling infrastructure, power, and logistics projects under consortium arrangements. This exciting development sent shockwaves through the market, causing REC Limited’s share price to skyrocket by 6.38% in a single day, marking a remarkable 17-point jump to reach a trading price of 284 Rs. Investors and stakeholders alike are buzzing with anticipation as REC and PNB unite to power India’s growth and development in the coming years.

Funding Allocation and Growth:

RECL’s core function involves providing interest-bearing loans to various segments of the power sector, including generation, transmission, distribution, logistics, and renewables. In FY23, the company experienced remarkable growth, with total sanctions increasing by an impressive 393% year-on-year (YoY) to 2,68,461 Cr compared to 54,421 Cr in FY22. The highest sector-wise allocation of these funds was in logistics and infrastructure at 32%, followed by transmission and distribution at 30%.

Loan Disbursements and Portfolio Composition:

In terms of disbursements, generation accounted for 26%, distribution 25%, renewables 13%, and transmission 31%. In FY23, total disbursements grew by 51% YoY to 96,846 Cr compared to 64,150 Cr in FY22. Notably, over 90% of RECL’s loans are extended to state entities, resulting in a low likelihood of asset conversion into non-performing assets (NPAs).

Q1FY24 Results Update:

In Q1FY24, RECL experienced a 12% YoY decrease in net interest income, which amounted to 3,412 Cr compared to 3,880 Cr in Q1FY23. This decline can be attributed to a 50 bps increase in the cost of funds and a 25 bps decrease in the yield on loans. However, the pre-provision operating profit (PPOP) increased by 9% to 3,770 Cr, primarily due to operational efficiency improvements, including a reduction in operating expenses.

Asset Quality and Capital Adequacy & Key Ratios:

Asset quality improved significantly in Q1FY24, with gross NPAs declining to 3.28% from 4.41% in Q1FY23, a 1.13% YoY decrease. Net NPAs also saw a reduction, decreasing by 0.44% YoY to 0.97% in Q1FY24 compared to 1.41% in Q1FY23. The provision coverage ratio increased to 70.46% in Q1FY24 from 68.08% in Q1FY23. The capital adequacy ratio stood strong at 27.67% in Q1FY24, comprising tier 1 capital at 24.67% and tier 2 at 2.93%. Return on equity (ROE) also improved, reaching 19.98% in Q1FY24 compared to 18.9% in Q1FY23, reflecting a 1.08% YoY increase.

Margin and Spread Challenges:

RECL faced challenges in its core lending business, as the net interest margin (NIMS) declined by approximately 80 bps to 3.28% in Q1FY24, significantly lower than the industry average. The company’s cost of funds increased by 50 bps YoY to 7.23%, while the yield on funds decreased by 25 bps to 9.82% in Q1FY24, affecting the spread.

Conclusions:

RECL continues to play a crucial role in funding India’s power and infrastructure sectors. While facing challenges in its lending business, the company has shown resilience and adaptability, particularly in focusing on renewable energy sources. The improving asset quality and robust capital position bode well for its future endeavors.

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Syngene International Ltd Q1FY24 results updates

Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - September 26, 2023

Syngene International Ltd's PAT up 2.87% YoY to 753 mn

Syngene International Ltd’s PAT up 2.87% YoY to 753 mn

Company Overview:

Syngene International Ltd, founded in 1993, is a leading contract research organization (CRO) offering comprehensive research and development services to pharmaceuticals, biotechnology, medical devices, and various other industries on a contractual basis. Over time, the company has expanded its services to include integrated manufacturing services along with research and development, catering to diverse sectors such as pharmaceuticals, animal health, agrochemicals, consumer products, and chemical polymers.

Geographic Footprint and Campus Sites:

Syngene operates across four countries, including the USA, Europe, and Japan, and its home base in India, supported by a wholly-owned subsidiary, Syngene USA International. With a dedicated workforce of over 8,500 employees, including more than 6,000 scientists, and a vast network of 2,900+ suppliers, Syngene effectively serves 400+ clients worldwide. The company’s primary research, development, and manufacturing hubs are located in three campuses in Bangalore, with plans for expansion into Hyderabad and Mangalore, focusing on research operations and pharmaceutical ingredient manufacturing, respectively.

Business Divisions:

Discovery Services: This division focuses on early-stage research, spanning the identification of relevant biological targets in patient populations to delivering drug candidates for further development.
Development Services: Offering a range of services from pre-clinical to clinical trials, this division encompasses drug substance and drug product development, along with associated services, to demonstrate the safety, tolerability, and efficacy of drugs.
Manufacturing Services: Syngene’s Manufacturing Services handles commercial-scale manufacturing of small molecules from a cGMP-compliant API manufacturing campus in Mangalore and provides development and manufacturing services for large molecules from a biologics manufacturing facility in Bangalore.
R&D Centers: These multi-disciplinary teams, housed in dedicated facilities, focus on biopharmaceutical research for clients that include major players like BMS, Amgen, and Baxter.

Valuation and Key Ratios:

As of the most recent data, Syngene is trading at a multiple of 64.1x FY23 EPS of 12 Rs, with a current market price of 771 Rs, surpassing the industry PE ratio of 28x. The stock is trading at 8.56x its book value of 90 Rs per share. The company boasts healthy return ratios, with a ROE of 13.4% and a ROCE of 14.5%. The interest coverage ratio is robust at 14.5%, indicating the company’s strong ability to service its debt. The EV/EBITDA ratio stands at 29.7x.

Q1FY24 Results Update: Consolidated

In the first quarter of FY24, Syngene exhibited robust performance, primarily driven by its development and manufacturing services, with continued growth in the research division, including Discovery Services and dedicated centers. The company achieved a significant milestone with the successful US Food and Drug Administration (US FDA) approval for its API facility in Mangalore, a crucial development for its small molecule commercial manufacturing capabilities. Moreover, Syngene acquired 17 acres of land in Genome Valley, Hyderabad, to support its long-term growth in the research business.

Despite facing a 28.02% QoQ decline, Q1FY24 revenue grew impressively by 11.06% YoY, reaching 7,158 Cr mn. However, the EBITDA decreased by 4.94% YoY, dropping to 1,634 mn, primarily due to a substantial increase in raw material costs (34.68% YoY) and operating expenses (7.68% YoY). EBITDA margins declined by 380 bps YoY, settling at 22.83% due to the heightened operating expenditure. On the bright side, the bottom line improved, with PAT growing by 2.87% YoY to 753 mn, driven by a 35% YoY decrease in interest costs and a 47.74% YoY increase in other income, offsetting the impact of higher raw material costs and OPEX. The PAT margin remained flat at 10.52% (PQ-11.36%). EPS for the quarter stood at 1.88 Rs (PQ-1.84 Rs), reflecting a 2.87% YoY increase, despite a 60.16% QoQ dip.

Conclusions:

Syngene International Ltd continues to exhibit strong performance in its core business divisions, with significant growth prospects driven by expansions in research and manufacturing capabilities. The successful US FDA approval for its API facility in Mangalore and the acquisition of land in Hyderabad signifies the company’s commitment to long-term growth. Despite some short-term challenges related to increased costs, Syngene maintains a healthy financial position, making it a formidable player in the contract research and development industry.

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Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - September 25, 2023

Tata Motors Ltd's EBITDA up 326% YoY to 13,560 Cr

Tata Motors Ltd’s EBITDA up 326% YoY to 13,560 Cr

Company Overview:

Tata Motors Group, a prominent global automobile manufacturer, boasts a diverse product portfolio encompassing cars, sports utilities, trucks, buses, and defense vehicles. The company holds a commanding presence in commercial vehicles (CV) and electric vehicles (EV), ranking third in personal vehicles (PV). Tata Motors commands a substantial market share, with 39% in CV and 35.5% in PV, positioning it as a market leader.

Geographic Presence and Manufacturing Sites:

Tata Motors’ global reach extends across 125 countries, including key markets in North America, Europe, the UK, India, and China. The company’s extensive global network comprises subsidiaries, associate companies, and joint ventures, such as Jaguar Land Rover in the UK and Tata Daewoo in South Korea. With 15 manufacturing sites in India and an additional 10 abroad, Tata Motors demonstrates a robust global manufacturing footprint. Furthermore, the company operates 8 research and development (R&D) facilities, with three situated in India.

Business Performance Across Segments:

Jaguar Land Rover (JLR) experienced a noteworthy performance in Q1FY24, with revenue surging by 57% YoY to 6.9 billion. This growth can be attributed to increased volume, pricing adjustments, and favorable foreign exchange revaluation. Despite inflation and supplier claims, profitability improved, with EBIT margins rising by 200 bps QoQ to 8.6%. A strong order book, standing at 185k units, underscores promising future earnings prospects, with Range Rover, Range Rover Sport, and Defender representing a significant share.

In the Commercial Vehicles (CV) segment, Q1FY24 witnessed a 4.4% YoY revenue increase to 17k Cr, primarily driven by an improved product mix and better market operating prices, offsetting volume decreases. Despite domestic wholesale and retail volume drops of 14.1% and 14.3% YoY, respectively, robust EBITDA and EBIT margins of 9.4% (+390 bps QoQ) and 6.5% (+370 bps QoQ) were reported.

Passenger Vehicles (PV) demonstrated positive results in Q1FY24, with revenue up 11.1% YoY to 12.8k Cr, driven by improved pricing and robust demand. PV volumes showed growth in both wholesale and retail, increasing by 7.6% and 6.1% YoY, respectively, reaching 140k units and 132.5k units. EBITDA margins were impacted by a higher mix of EVs and increased fixed expenses, dropping by 80 bps YoY to 5.3%, while EBIT margins increased by 10 bps to 1%, thanks to operating leverage.

Valuation and Key Ratios:

Tata Motors’ stock is currently trading at 20.5 times FY23 EPS of 32 Rs, with a market price of 620, while the industry PE stands at 32.3. The stock is valued at 4.5 times its book value of 136. Notably, the company reports a favorable interest coverage ratio of 2.13, indicating double the earnings compared to interest costs. The EV/EBITDA ratio stands at 6.78x.

Q1FY24 Results Update: Consolidated

Consolidated revenue surged by an impressive 42% YoY to 102.2k Cr, primarily driven by improvements in the JLR and CV segments, while the PV segment remained steady. EBITDA witnessed a remarkable 326% YoY increase (+6% QoQ) to 14.7k Cr, attributed to operating leverage. EBITDA margins climbed by 700 bps YoY to 14.4% and increased by 120 bps QoQ. EBIT recorded a remarkable 360% YoY growth (+20.5% QoQ) to 8.3k Cr, with EBIT margins rising by 140 bps QoQ and a staggering 1047 bps YoY. Despite a decline of 40.8% QoQ, PAT increased by 164% YoY to 3.2k Cr, with PAT margins decreasing by 190 bps to 3.1%. The EPS for the quarter stood at 8.4 Rs, compared to the previous quarter’s 14.1 Rs.

Conclusions:

Tata Motors Group’s performance in Q1FY24 demonstrates significant growth in revenue and profitability across its key segments. The company’s strong market presence and strategic global footprint, along with favorable financial ratios, suggest a promising outlook. However, it’s crucial to monitor factors such as inflation and the evolving EV landscape as they may impact future performance and valuation.

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L&T Finance Holding Ltd Q1FY24 results updates

Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - September 25, 2023

L&T Finance Holding Ltd's NII surged by 14.3% YoY to 1,743 Cr

L&T Finance Holding Ltd’s NII surged by 14.3% YoY to 1,743 Cr

Company Overview:

As of Q1FY24, L&T Finance Holding (LTFH) continues to establish its position as a prominent Non-Banking Financial Company (NBFC) with a robust focus on both urban and rural financing needs. The company boasts a diverse portfolio of financial products and services, catering to a wide spectrum of customers, including those underserved, across various segments. LTFH’s comprehensive portfolio encompasses key segments such as Farm Equipment Finance, Two-Wheeler Finance, Micro Loans, Consumer Loans, Home Loans, Loans Against Property (LAP), Real Estate Finance, and Infrastructure Finance. Additionally, the company has ventured into innovative financial offerings, including the Infrastructure Debt Fund, further bolstering its diverse offerings.

Strategic Shift to Retail Focus:

LTFH’s strategic approach to transition from a wholesale-dominated portfolio to a retail-oriented one has yielded notable results. Over the past four quarters, there has been a remarkable increase in the proportion of retail loans, surging from 51% to an impressive 75%, with an even more significant achievement of approximately 82% by June 2023. Simultaneously, the wholesale loan book has seen a reduction from 49% to approximately 18%, showcasing a remarkable shift in the lending mix.

Strong Distribution Network:

LTFH’s expansive distribution network is a testament to its market reach and penetration. With over 2,500 dealers in the farm equipment segment and more than 6500 tie-ups in the two-wheeler segment, the company’s presence is felt across 21 states and a union territory. This robust network, combined with a customer database of 2.1 crores, positions LTFH as a reliable financial partner across diverse regions.

Portfolio Diversity:

LTFH’s portfolio is characterized by its diverse loan segments. As of FY23, the portfolio distribution comprised Micro Loans (13%), Farm Equipment (12%), Two-Wheeler (8%), Home Loans/LAP (12%), and Consumer Loans (1%), with the remaining 55% dedicated to wholesale segments. The wholesale segment includes Real Estate Finance (14%), Infrastructure Finance (38%), and a defocused book (3%).

Q1FY24 Results Update: Consolidated

The Q1FY24 consolidated earnings reflect LTFH’s continued growth trajectory. Interest income exhibited a 5.8% YoY growth, amounting to INR 3,116 Cr, while interest expenses demonstrated a decrease of 3.5% YoY, totaling INR 1,364 Cr. This led to a substantial increase in Net Interest Income (NII), which surged by 14.3% YoY, reaching INR 1,743 Cr.

The strategic retail focus was evident in the financials, with the retail segment’s Profit After Tax (PAT) surging by an impressive 176.2% YoY to INR 533 Cr. This growth was fueled by a steady retail Net Interest Margin (NIM) of 11.7%, an increase of 10bps YoY. The reduction in credit costs by 220bps YoY, bringing it down to 2.8%, also significantly contributed to the retail PAT growth. The consolidated Return on Equity (RoE) experienced a remarkable improvement of 450bps YoY, standing at 9.7%. The retail RoE, an indicator of retail segment profitability, saw an even more remarkable increase of 680bps YoY, reaching 15.7%.

Asset quality demonstrated a notable enhancement, with Gross Non-Performing Asset (GNPA) and Net Non-Performing Asset (NNPA) ratios declining to 4.0% and 1.2%, respectively, from their Q4FY23 levels. The provision coverage ratio remained robust at 71.0%, and the capital adequacy ratio stood at an impressive 25.8%, well above the RBI norms of 15%. In line with these impressive financials, the Earnings Per Share (EPS) for the quarter surged to INR 2.1, showcasing a substantial increase of 135% YoY and 5.9% QoQ.

Conclusions:

In summary, L&T Finance Holding’s Q1FY24 performance underscores its successful transition to a predominantly retail-focused lending model. The company’s robust financials, enhanced asset quality, and strategic approach position it well for sustained growth and market leadership in the NBFC sector.

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Hindalco Industries Ltd Q1FY24 results updates

Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - September 22, 2023

Hindalco Industries Ltd's PAT down 40.4% YoY

Hindalco Industries Ltd’s PAT down 40.4% YoY

Company Overview:

Hindalco Industries Ltd, a part of the Aditya Birla Group, has been a significant player in the metal industry since its incorporation in 1958. The company’s diverse portfolio includes aluminum, copper, and specialty alumina (chemicals). Its operations span across bauxite and coal mining, aluminum rolling, and electricity generation through captive plants. Hindalco is renowned as the largest aluminum manufacturer in India and stands as Asia’s primary producer of primary aluminum, excluding China.

Global Presence and Manufacturing Capacity:

With a robust presence in both the Indian and international markets, Hindalco operates in 10 countries, boasting 19 manufacturing units, 21 mining operations, and 33 overseas manufacturing facilities, with 17 of them featuring recycling capabilities. The company’s extensive operations are supported by a dedicated workforce exceeding 76,800 employees.

Domestic Aluminium and Copper Industry:

In Q1FY24, the domestic demand for the aluminum industry is projected to reach 1141 kt, showing a robust 14% YoY growth. This growth is driven by strong demand in electrical, building & construction, and consumer durables, although packaging and auto sectors faced challenges due to weak export markets. The copper market exhibited strong demand, with a 10% YoY increase at 190 kt compared to 173 kt in Q1FY23.

Performance Across Business Verticals:

Hindalco’s subsidiary, Novelis Business, reported a decrease in shipments to 879 kt in Q1FY24, primarily due to lower beverage can and specialties shipments, particularly in building & construction. However, EBITDA/t improved by 11% QoQ to 479 $/ton due to effective cost control, a favorable product mix, and record automotive shipments. Net sales decreased by 7% QoQ to $4.1 billion due to lower average aluminum prices and shipments. The shipment breakdown comprises 54% for cans, 23% for automotive, 20% for specialties, and 3% for aerospace.

In the Aluminum Upstream Business, production and shipments both grew by 1% and 5% QoQ to 331 kt and 341 kt, respectively. Revenue remained nearly flat at 8,064 Cr due to lower metal prices offset by higher shipments, while EBITDA decreased by 12% QoQ to 1,935 Cr with margins at 24%.

The Aluminum Downstream Business reported flat production at 84 kt and a 9% QoQ decrease in shipments due to a slow start in April. Revenue fell by 11% QoQ to 2,435 Cr, while EBITDA increased by 31% QoQ to 147 Cr, attributed to a better product mix.

In the Copper Business, cathode production decreased by 32% QoQ to 71 kt due to scheduled maintenance shutdowns, while copper rod production increased by 5% QoQ to 95 kt, with record-high metal shipments of 118 kt. Revenue increased by 3% QoQ to 11,502 Cr, driven by higher shipments, while EBITDA decreased by 11% QoQ due to lower cathode production during maintenance shutdowns.

Valuation and Key Ratios:

The company’s stock is currently trading at a multiple of 12.7x FY23 at 37.5 Rs, with a current market price of 478 Rs, while the industry PE stands at 22 Rs. The stock is trading at 1.13 times its book value of 422 per share. Hindalco demonstrates moderate return ratios, with ROE at 11.7% and ROCE at 11.3%. The interest coverage ratio is strong at 3.76x, indicating high solvency efficiency, with earnings three times higher than interest costs. EV/EBITDA stands at 7.17x.

Q1FY24 Results Update: Consolidated

Consolidated revenue decreased by 8.7% YoY (-5.1% QoQ) to 52,991 Cr due to declines in three verticals, except for copper, which saw a 9.2% YoY growth. EBITDA grew by 5% QoQ to 6,109 Cr, with EBITDA margins up by 110 bps to 11.5% due to improved cost control and a favorable product mix. EBIT decreased by 37.3% YoY but increased by 9.1% QoQ to 4,323 Cr, primarily due to lower depreciation costs. PAT decreased by 40.4% YoY (+1.8% QoQ) to 2,454 Cr, influenced by a 101% QoQ increase in taxes and reported exceptional items of 41 Cr. Earnings per share for the quarter stood at 11.1 Rs (PQ-10.8 Rs), marking a 40% YoY decline (+2.3% QoQ).

Conclusions:

Hindalco Industries Ltd. continues to be a dominant player in the metal industry, with a significant presence both domestically and internationally. While facing challenges in certain sectors, the company has displayed resilience and adaptability in its Q1FY24 results. Hindalco’s ability to manage costs, maintain a strong workforce, and navigate changing market dynamics will likely be key factors in its future performance and valuation.

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Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - September 22, 2023

Tata Steel Ltd's EBITDA declined 32.49% YoY due to higher OPEX

Tata Steel Ltd’s EBITDA declined 32.49% YoY due to higher OPEX

Company Overview:

Tata Steel Ltd, founded in 1907, currently holds the distinction of being the world’s largest steel manufacturer. Operating across the entire steel manufacturing value chain, from mining and processing raw materials like iron ore and coal to the production and distribution of finished goods, Tata Steel has ambitious growth plans. With a current production capacity of 21.6 million tonnes per annum (MnTPA), the company aims to double this figure to 40 MnTPA by 2030. This expansion aligns with its goal of maintaining its global leadership in the steel industry.

Manufacturing Site and Product Portfolio:

Tata Steel’s manufacturing operations are spread across five locations, with Jamshedpur leading the way with an 11 MnTPA capacity, followed by Kalinganagar (3 MnTPA), Meramandali (5.6 MnTPA), Gamharia (1 MnTPA), and another Kalinganagar unit (1 MnTPA). The company boasts a diverse product portfolio, including special steel used in critical applications like automotive components, construction, and capital goods. Additionally, they produce sponge iron/DRI, a key raw material for electric arc and induction furnaces. Tata Steel’s robust global presence is fortified by a vast distributor network of 285, supported by 15,422 dealers, and a workforce of 77,000 employees.

Acquisition of Neelachal Ispat Nigam Limited (NINL):

Tata Steel’s strategic move to acquire a 93.7% stake in NINL for 12,100 crores is a significant development. NINL possesses a 1 MTPA steelmaking capacity, 2,500 acres of land, and substantial iron ore reserves totaling 100 million tonnes. This acquisition positions NINL as a key growth driver, with plans to expand its capacity to 10 MTPA by 2030. To fund this acquisition, Tata Steel has successfully raised 12,700 crores by issuing Non-Convertible Redeemable Preference Shares.

Production and Deliveries: Consolidated

As of June 2023, Tata Steel faced a 7.88% YoY decline in steel production, largely attributed to a slowdown in the European market. The European Central Bank’s 400 bps interest rate hike within the past two months impacted this market negatively. However, India’s steel consumption witnessed an impressive 10% YoY growth in Q1FY24. On the delivery front, Tata Steel saw an 8.76% YoY increase, totaling 7.2 million tonnes.

Valuation and Key Ratios:

Currently, Tata Steel’s stock is trading at a multiple of 76.5x FY23 EPS of 1.33 Rs, with a market price of 128. This contrasts with the industry’s PE ratio of 22.4, indicating a premium valuation. The stock is also trading at 1.52 times its book value of 84.3 per share. In terms of return ratios, Tata Steel reports a moderate ROE of 7.28% and ROCE of 12.6%. The EV/EBITDA ratio stands at 9.43x.

Q1FY24 Results Update: Standalone

In Q1FY24, Tata Steel’s standalone revenue remained stable, with a marginal 1% YoY growth. This stability was influenced by a slowdown in the European market due to a 400 bps rate hike by the ECB in the past 12 months. Conversely, strong steel consumption in India, showing a 10% YoY increase, provided a counterbalance. However, EBITDA faced a significant decline of 32.49% YoY, primarily due to rising raw material costs and operating expenditures. This reduced EBITDA margins by 10% YoY to 20% in Q1FY24. PAT decreased by 30.15% YoY but showed a positive 6.21% QoQ growth, reaching 4,270 crores. The PAT margin also improved by 147 bps QoQ to 13.20%, primarily due to a substantial increase in other income by 146% QoQ. Q1FY24’s EPS stood at 3.49 Rs, marking a 6% QoQ growth compared to the previous quarter.

Conclusions:

Tata Steel, as the world’s largest steel manufacturer, is strategically positioned for future growth with ambitious production expansion plans and acquisitions like NINL. While facing challenges in the European market, the company benefits from strong steel consumption in India. Its premium valuation, moderate return ratios, and evolving financial performance in Q1FY24 suggest a mixed outlook. Maintaining a keen eye on market dynamics and cost management will be crucial for Tata Steel’s continued success in a competitive global steel industry.

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

India Home Loan Ltd NII down 59% YoY

Company Overview:

India Home Loan Ltd was incorporated in 1990, it is a non-deposit-taking housing finance company registered with the National Housing Bank for carrying out the business of housing finance. The company offers retail home loan products for the affordable housing segment. India home loan offered the following loan products: 1) home loan, 2) loan against property, and 3) developer financing.

Product portfolio:

Home Loan: IHLL offers loans to ready-to-move homes as well as those under construction across Maharashtra, Gujarat, and Rajasthan with an average loan value of 5 to 10 lakh. As of the end of FY2023, the home loans business had an AUM of 89.24 crores.
Loan against property: IHLL offers loan against property (LAP) against mortgage of their properties across Maharashtra, Gujarat, and Rajasthan with an average loan value of 5 to 15 lakh. As of the end of FY2023, the LAP business had an AUM of 7.87 crores. It is very safe and secure lending.
Developer loan: IHLL offers construction finance to small and mid-size developers to those who have a strong track record of timely delivery of projects and loan repayments. A developer relationship helps the company to acquire a retail customer for a home loan. The total AUM of this segment was 4.58 crores at the end of FY23.

Moderate improvement in Asset Quality and Robust Capital Adequacy:

The company reported a moderate improvement in asset quality as of June 2023, with Gross Non-Performing Assets (GNPA) at 4.78% and Net Non-Performing Assets (NNPA) at 3.45%. IHLL maintains a healthy capital adequacy ratio of 57%, well above the RBI norms (15%), and a Provision Coverage Ratio (PCR) of 99.1% in Q1FY24, indicating strong financial stability.

Valuations and Key Ratios:

IHLL’s stock is currently trading at 0.87 times the FY23 (TTM) book value of 31.2 per share, with a market price of 27.3 Rs. The company reports moderate return ratios, with Return on Equity (ROE) at 1.38% and Return on Capital Employed (ROCE) at 9.09%, suggesting high leverage. Return on Assets (ROA) stands at 0.39%, and the interest coverage ratio is at 1.02%.

Loan Book:

As of June 2023, IHLL’s loan book amounted to 85.08 crores, showing a 42% YoY and 16% QoQ decrease. The breakdown of the loan book includes home loans at 88%, LAP at 8%, and project funding at 4%. Both home loans and LAP experienced a 40% decrease in the loan book YoY, while project funding decreased by 62% YoY. The gross loan disbursement also declined significantly, down 60% YoY to 4 lakhs as of Q1FY24.

Q1FY24 Results Updates:

IHLL’s Q1FY24 results revealed a 33.71% YoY decrease in interest income and a 21.04% decrease in interest expenses. Net Interest Income (NII) decreased by 52.86% YoY due to a decline in Net Interest Margins (NIMs) by 130 bps YoY and increased borrowing costs by 140 bps YoY. Pre-Provision Operating Profit (POPP) decreased by 106.27% YoY to -0.03 crores due to high operating expenses of 0.88 crores. Net profit declined significantly, down by 2.8 times YoY to -0.26 crores, resulting in an EPS of -0.19 Rs (PQ~0).

Conclusion:

India Home Loan Ltd faces challenges with declining loan books, a decrease in profitability, and deteriorating asset quality. While the company maintains a robust capital adequacy ratio and provision coverage, investors should carefully assess the company’s ability to navigate these challenges and its prospects for future growth before considering an investment.

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Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - September 20, 2023

Bharat Petroleum Corporation Limited PAT up 2.6x YoY led by operating efficiency

Company Overview:

Bharat Petroleum Corporation Limited (BPCL) is a prominent public sector company operating in the refining of crude oil and marketing of petroleum products. The company operates in two main segments: downstream petroleum, encompassing refining, storage, distribution, and marketing, and exploration and production of hydrocarbons. BPCL holds a significant position in the Indian petroleum industry with a refining capacity that includes three refineries in Mumbai, Kochi, and Bina, with respective capacities of 12 MMTPA, 15.5 MMTPA, and 7.8 MMT. Notably, BPCL ranks as the third-largest refining capacity holder in India, contributing to 13.90% of the nation’s refining capacity.

Market Presence and Distribution:

BPCL commands a substantial presence in the Indian market, operating through 21,142 retail outlets and 83 retail depots across the country. The company holds a notable market share of 27.2% in the retail segment, offering a diverse range of petroleum products. In the LPG business, BPCL’s market share is 27.3%, boasting a robust network of 6,245 distributors and 53 LPG bottling plants. The company’s strategic footprint extends to the aviation sector, with 61 aviation service stations across Indian airports and a domestic market share of 23.4% in ATF (Aviation Turbine Fuel).

Infrastructure and Global Operations:

BPCL’s infrastructure includes a comprehensive pipeline network spanning 3,536 kilometers, designed to accommodate a capacity of 29 MMTPA. The company’s subsidiary, Bharat Petro Resources Ltd, holds Participating Interest (PI) in eighteen blocks, with a balanced distribution between Indian and overseas operations. Additionally, BPCL has equity stakes in two Russian entities, which are license holders for four productive blocks in Russia.

Q1FY24 Results Updates: Standalone

In the first quarter of the fiscal year 2023-24, BPCL’s financial performance displayed noteworthy improvements. The company’s revenue experienced a decline of 6.67% YoY (-4.35% QoQ) to INR 1,12,978 Crore. Notably, gross profit surged significantly, growing by 6.5x YoY (+23.5%) to INR 22,091 Crore. This remarkable growth was attributed to effective cost of goods sold (COGS) management, leading to a 23% YoY decline in COGS. EBITDA also demonstrated substantial growth, increasing 3x YoY to INR 15,810 Crore, primarily due to a 33% reduction in other expenses. Consequently, EBITDA margins improved by approximately 9% to 14% in Q1FY24. EBIT witnessed a growth of 2.8x, reaching INR 14,200 Crore, supported by controlled depreciation costs, resulting in EBIT margins expanding by 7% YoY to 13% in the same period. Notably, PAT exhibited remarkable growth of 2.6x YoY to INR 10,551 Crore, attributed to robust operational efficiency and meticulous cost management, leading to a 400 basis points expansion in PAT margins to 9.3% in Q1FY24. The quarter’s earnings per share (EPS) stood at INR 48.62, a noteworthy improvement compared to the EPS of -28.86 in Q1FY23

conclusion:

Bharat Petroleum Corporation Limited’s operations span critical segments of the Indian petroleum industry. Despite facing challenges in some financial parameters in FY23, the company exhibited substantial growth and improved operational efficiency in Q1FY24. The strategic positioning, extensive distribution network, and focus on cost management position BPCL as a significant player in the Indian petroleum sector.

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Rail Vikas Nigam Ltd (RVNL) Q1FY24 results updates

Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - September 20, 2023

Rail Vikas Nigam Ltd EBITDA up 24.35% YoY boosted by higher operating leverage

Company Overview:

Rail Vikas Nigam Ltd (RVNL), established in 2003 by the Government of India, operates as a prominent player in the realm of rail infrastructure development. The company is entrusted with the implementation of diverse rail projects, encompassing tasks such as doubling, gauge conversion, new line construction, railway electrification, significant bridge construction, establishment of workshops and production units, and the sharing of freight revenue as per concession agreements with the Ministry of Railways (MoR). Furthermore, RVNL has made strategic inroads into various infrastructure segments, including the metro and highways sectors, through competitive bidding processes.

Clientele and Expansion:

RVNL’s principal client is the Indian Railways, underscored by an expanding client portfolio encompassing central and state government ministries, departments, and public sector undertakings. With a commitment to growth and diversification, RVNL’s engagement now spans beyond railways, as evidenced by its participation in the metro, highway, and other infrastructure domains. Such endeavors are characterized by the company’s competitive pursuit of opportunities and successful bid wins, propelling its expansion into broader sectors.

New project and order book:

As of June 30, 2023, RVNL’s financial landscape demonstrates notable achievements and promising prospects. The company’s robust order book, valued at over Rs. 65,000 crores, serves as a testament to its operational prowess and growth trajectory. Notably, RVNL maintains a forward-looking perspective, aiming to further enhance its order book to a range of Rs. 75,000 crores to Rs.1 lakh crores. A significant catalyst for this optimism lies in the company’s impressive track record of securing railway tendering opportunities, marked by successful bids totaling more than Rs. 30,000 crores.

Valuation and return ratios:

The company is currently trading at a price-to-earnings (P/E) ratio of 18.6, while the industry average P/E ratio stands higher at 30.6. This suggests that the company’s stock price is relatively lower in relation to its earnings compared to its industry peers. company reports a healthy return ratio, return on equity stands at 20.7% where return on capital employed (ROCE) is at 17.8%. Return on assets stands at 7.42% as of 30 June 2023. The company reports a healthy interest coverage ratio standing at 4.35. Debt to equity stands at 0.88.

Financial Results – Q1FY24:Consolidated

The revenue breakup for Q1FY24 includes Rs. 838 crores from metro projects and Rs. 3,941 crores from non-metro projects. The financial results for the first quarter of the fiscal year 2023-24 reflect RVNL’s steadfast performance. The company recorded a remarkable 20.06% Year-on-Year (YoY) growth in revenue, amounting to Rs. 5,571 crores, attributing this achievement to a robust and well-structured order book. Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) demonstrated a notable YoY surge of 24.35%, reaching Rs. 349 crores, while EBITDA margins remained consistent at 6.27%, aligned with the preceding quarter’s figures.

Further analysis of the financials reveals a 25.05% YoY increase in Earnings Before Interest and Taxes (EBIT), totaling Rs. 343 crores. This growth is attributed in part to a reduction in depreciation costs by 7.72%, alongside consistent EBIT margins of 6.17%, mirroring the previous quarter’s performance.

RVNL’s net profit exhibited a strong upward trajectory, registering a YoY surge of 15.26%, culminating in Rs. 343 crores. Notably, the company’s diligent management of operating expenses and associated costs contributed to this positive outcome. Additionally, the Earnings Per Share (EPS) for the quarter amounted to Rs. 1.65, signifying a commendable 15% YoY growth.

conclusion:

RVNL’s financial results for Q1FY24 underscore the company’s operational resilience and strategic acumen, positioning it for continued growth and value creation. The consistent pursuit of railway tendering opportunities, coupled with a robust order book, augurs well for its sustained positive trajectory across diverse infrastructure sectors.

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Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - September 19, 2023

Fine Organic Industries LTD Result update Q1FY24

Fine Organic Industries LTD Result update: Q1FY24

Company Overview:

Fine Organic Industries LTD, founded in 1970 by Mr. Ramesh Shah and Mr. Prakash Kamat, is a leading player in the field of oleochemical-based additives used in various industries including food, plastics, cosmetics, and coatings. As the largest organized manufacturer of oleochemical-based niche additives in India, Fine Organic has expanded its global presence. The company boasts a diverse product portfolio comprising food additives, polymer additives, additives for coatings, and feed nutrition additives.

Distribution and Clientele:

Fine Organic operates strategically with warehouses in the USA and Europe, maintaining a robust network of over 180 distributors serving 850 direct customers and 5,000 end users worldwide. The company’s reach extends to more than 80 countries, distributing a wide range of 470+ products. Manufacturing facilities are located across seven sites in Maharashtra, including Patalganga, Badlapur, Dombivli, and Ambernath. Notable clients of Fine Organic include industry giants like Coca-Cola, Britannia, Asian Paints, Parle, Pidilite, Berger Paints, among others.

Company Performance in Numbers (FY18-FY23):

Over the past five years, Fine Organic has exhibited remarkable growth:
Revenue from operations surged at an impressive CAGR of 31%, reaching ₹3,029.15 Cr in FY23 from ₹1,043.97 Cr in FY18. EBITDA experienced a robust CAGR of 37%, climbing to ₹781.28 Cr in FY23 from ₹222.25 Cr in FY18, with EBITDA margins improving from 21.30% to 25.79% in FY23.
PAT (Profit After Tax) nearly doubled, achieving a CAGR of 46% YoY, increasing from ₹129 Cr in FY18 to ₹590.60 Cr in FY23. This growth was driven by enhanced operating efficiency and margin expansion, with PAT margin improving from 12.4% to 19.5% in FY23. Despite high profit growth, Fine Organic maintained moderate return on equity and capital employed, growing at 11% and 10% CAGR respectively.

Key Ratios and Valuations (FY23):

In FY23, Fine Organic demonstrated strong financial health and attractive valuations:
The company’s PE ratio stands at 26.5, while the industry PE is higher at 31.8, indicating a favorable valuation. Additionally, it trades at 9.5 times its book value. The interest coverage ratio improved significantly to 164.18 in FY23 from 63.13 in FY22, reflecting improved debt management. The current ratio increased to 5.5% in FY23 from 3.56 in FY22, indicating strong liquidity. Fine Organic reduced its debt-to-equity ratio by 67%, achieving a nearly debt-free status at 0.02% in FY23 from 0.06% in FY22.The return on equity for FY23 reached an impressive 47.62%, showcasing strong profitability. Debtor turnover remained stable at 7.49% (48 debtor days), indicating efficient receivables management. EBIT margins improved to 24.21% in FY23 from 16.61% in FY22, and net profit margins increased from 13.49% to 19.5%, highlighting improved operational efficiency.

Q1FY24 Results Updates: Standalone

Standalone In Q1FY24, Fine Organic faced some challenges:
Revenue decreased by 29.2% YoY and 23.8% QoQ to ₹532.13 Cr, with exports contributing 54% and the domestic market 46%. Gross profit declined by 26.5% YoY and 16.4% QoQ to ₹228.11 Cr, but gross margins improved by 160 bps YoY to 42.87% due to a significant decrease in COGS by 31.23% YoY and 28.55% QoQ. EBITDA decreased by 26.12% YoY and 18.90% QoQ to ₹151.86 Cr. EBITDA margins improved by 120 bps to 28.54% due to reduced operating expenses. PAT declined by 27.38% YoY and 17.2% QoQ to ₹114.21 Cr, with margins remaining relatively flat at 21.4% YoY and 19.76% PQ. Earnings per share (EPS) for the quarter stood at ₹37.20, down from ₹44.98 in the previous quarter.

conclusion:

Fine Organic Industries LTD has been on a remarkable growth trajectory over the past few years, demonstrating strong financial performance and expanding its global presence. Despite facing challenges in the recent quarter, the company’s solid fundamentals and attractive valuations make it a compelling player in the industry.

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