Daily

Institutional Research
India
7 August 2023

Morning Wrap Nifty 50: 19,517

BSE Sensex: 65,721

Market commentary Financial Indicator

CMP 1D (%) 1m (%) 6m (%)
Wall Street stocks notched their longest daily losing streak in three months, sliding on
S&P 500 4,478.03 -0.5 1.8 7.5
Friday as investors weighed weaker-than-expected US jobs growth and earnings from
Nifty 19,517.00 0.7 1.0 10.1
Big Tech “megacaps”. S&P 500 and Nasdaq had their fourth consecutive session of
declines, their longest losing streaks since early May. On Monday last week, the S&P VIX 10.57 -5.5 -8.3 -25.2

500 notched a 3.1 per cent rise in July for its longest monthly winning streak in two MIBOR 6.40 0.2 -0.5 4.2

years. But the benchmark slipped in subsequent days, largely against a backdrop of Sensex 65,721.25 0.7 0.7 9.0

rising Treasury yields, BOJ policy reberal , Fitch US downgrade which that prompted FTSE 100 7,564.37 0.5 4.2 -3.8

investors to reconsider the effect higher borrowing costs could have on risky assets. Stoxx 50 4,332.91 0.7 2.3 2.9
The non-farm payrolls report released on Friday showed the US economy added DAX Index 15,951.86 0.4 2.2 4.1
187,000 jobs in July, fewer than the 200,000 forecast of economists polled by Nikkei 32,192.75 0.1 -0.6 16.3
Reuters.Investors on Friday also reacted to corporate earnings from “megacaps” Hang Seng 19,539.46 0.6 6.4 -8.3
Amazon and Apple, which reported results after Thursday’s closing bell. OF which Dow Jones 35,065.62 -0.4 3.9 2.7
Apple reported lower than consensus results. Furthermore Oil prices rose after Saudi Stoxx 600 459.28 0.3 2.6 0.2
Arabia on Thursday said it would extend its production cut of 1mn barrels of oil a day US 10y yield (%) 4.03 -3.4 4.7 14.4
for at least another month. International benchmark Brent crude settled 1.3 per cent UK 10y yield (%) 4.38 -2.0 -0.8 43.4
higher at $86.24 a barrel, VIX again rose sharply to 17pts [2month high]. The Index is JAPAN 10y yield (%) 0.65 -0.6 68.1 30.8
up by 30% in a matter of 10days
India: We have seen a downward journey in the equity markets for the second Currency Market
consecutive week ended August 4 as the US credit rating downgrade news, consistent Currency Market CMP 1D (%) 1m (%) 6m (%)

FII selling with rising US bond yields, and disappointing factory data by China & USDINR 82.84 -0.1 -1.0 -0.1
Eurozone weighed on the sentiment. The BSE Sensex corrected 439 points to close the USDYEN 7.19 -0.1 0.6 -5.3
week at 65,721, and the Nifty50 declined 129 points to 19,517, as selling was seen in USDJPY 141.76 0.6 1.9 -6.4
auto, banking & financial services, FMCG, and oil & gas stocks, whereas the buying in GBPUSD 1.27 0.3 0.3 6.1
technology stocks limited losses. The broader markets performed better than EURUSD 1.10 0.5 1.2 2.6
benchmarks, with the Nifty Midcap 100 and Smallcap 100 indices gaining 0.7 percent DXY 102.02 -0.5 -0.9 -0.9
and 0.8 percent respectively. Next week would be crucial from the domestic point of
view as the RBI is set to announce its interest rate decision. Thus, markets are likely to Commodity Market
move in a broader range with some volatility CMP 1D (%) 1m (%) 6m (%)

1st month of FIIs selling on all days of August, FIIs have net sold Rs 3,546 crore worth Brent Crude Oil ($/bl) 86.24 1.3 13.1 7.9

of shares in the first week of August Copper ($/tn) 386.75 -0.8 2.3 -4.7
Gold ($/oz) 1,942.91 0.5 0.9 4.0
Aluminium ($/t) 2,166.00 0.9 3.0 -15.4

Our research releases Silver ($/oz) 23.63 0.3 2.9 6.1

Zinc ($/t) 2,506.50 0.7 4.3 -23.3
Results Update
Natural Gas ($/mmbtu) 2.58 0.5 -4.9 6.9
1. Solar Industries India l Realization falters; healthy growth outlook sustained
2. Orient Electric l Healthy revenues; investment in brand & people hits margin
3. Cera Sanitaryware l Steady state quarter; maintains growth guidance
4. KEC International l Strong execution; in-line margins; guidance retained
5. Mahanagar Gas Ltd l Supernormal margins in Q1, tepid volumes growth
6. Devyani International l Stretched consumer spends hold weak SSSG
7. Mold-Tek Packaging l Volume growth muted led by paints segment
8. Venus Pipes & Tubes l Robust performance; growth prospects brigthens
The Centrum Daily

9. Blue Star l In-line performance; planning for long growth runway

Company Update
10. Ambuja Cement l Sanghi acquisition to address near term growth issues

Centrum Equity Research

+91 4215 9000

Please see Disclaimer for analyst certifications and all other important disclosures.
 Morning WrapMorning Wrap 7 August 2023
Nifty Sectors
CMP 1D (%)1m (%)6m (%) Management commentaries
Nifty Mid Cap 37,630.60 0.8 4.3 22.7 Maruti Suzuki India
NSEAUTO INDEX 15,328.40 -0.3 -1.1 15.9
Shashank Srivastava
NSEBANK INDEX 44,879.50 0.8 -0.1 8.2
 UV performance has been very good. UVs can be broken into two parts: MPV: with
NSEFIN INDEX 19,988.55 0.8 -0.5 8.7
Ertiga and XL6 & SUV with 4 brands there.
NSEREAL INDEX 539.15 0.1 1.5 31.0
NSEIT INDEX 30,436.10 1.6 3.0 0.4  MPV have seen a very good spurt as the company saw a good production with the
NSEPSBK INDEX 4,419.10 -0.7 -0.9 13.6 increase availability in semi conductors.
NSEPHRM INDEX 15,241.00 0.9 10.7 25.0  In SUV: both the availability and introduction of all 4 models including Fronx and
NSEFMCG INDEX 52,050.65 0.0 -1.7 13.8 Jimny along with Brezza and Vitaara lead MSIL become the biggest SUV mfg in the
NSEMETAL INDEX 6,622.90 0.3 5.5 15.0 country.
 The company aims to be number 1 in SUV category in India with the increased
Nifty-50 top-5 gainers
portfolio.
Stock LTP (INR) Chng (%) Vol (‘000)
CIPLA 1,207 3.53 8,359
 The order book was 335k. The semi conductor issues is behind and therefore the
INDUSINDBK 1,406 3.01 4,063
company will go full swing leading to falling waiting period.
TECHM 1,173 2.65 3,580  There has been 27% contraction in the PV segment- however much of the decline is
WIPRO 409 2.29 6,240 due to discontinuation of ALto. Further Alto K10 has not been able to make up for the
BHARTIARTL 890 2.05 7,066 shortfall of Alto 800
Source: NSE (Data as of 4 August 2023) Link: https://www.youtube.com/watch?v=uVvInJx6cbc
Nifty-50 top-5 losers
Stock LTP (INR) Chng (%) Vol (‘000)
SBIN 573 -2.93 52,725 Thermax
BAJAJ-AUTO 4,704 -2.53 451 Ashish Bhandari
BPCL 361 -2.04 3,278
 There maybe not lower proportion of bigger orders however there will be healthy
MARUTI 9,447 -1.01 540
pipeline of small orders cross segmental.
NTPC 218 -0.95 12,879
Source: NSE (Data as of 4 August 2023)  Almost across all of the thermax products, water, waste water, environemntal and
pollution control, boilers, heating , waste to energy everywhere the company has
How sectoral indices fared seen stength
NSE BSE
 The biggest orders company get of Rs 5bn which come from O&G - has been muted
Broad* 0.70% 0.74%
however smaller orders keep seeing an inflow.
Capital Goods 0.66%
Metals 0.31% 0.46%
 The company has some amount of confidence that Thermax will sustain come thru
Cons Disc 0.49% across verticals
Cons Stapl -0.02% 0.07%  The ROCE profile is mix of the business and the cash on boks. The cash on books
Healthcare 0.59% today is Rs 20bn which is invested in low risk debt- which impacts the Consol ROCE.
Financials 0.79% 0.83%  The company is also investing in chemical, new water plant, Hydrogen and new
IT 1.55% 1.47% energy. Along with it the company is also heavy investing in growing green utility and
Telecom 1.45% related solutions segment.
Auto -0.33% -0.42%
 Currently the company is on an initial stage of investing - which lead to lower roces in
Media 0.12%
coming year.
Banking 0.82% 0.66%
Energy 0.12% 0.41%
Link: https://www.youtube.com/watch?v=gqgsfGd8Q5w
Source: NSE/BSE, Centrum Broking
* Nifty 50 / BSE Sensex

Centrum Institutional Research

 Result Update

Institutional Research
India I Capital Goods
04 August, 2023

Solar Industries India BUY

Price: Rs3,798
Realization falters; healthy growth outlook sustained Target Price: Rs4,700
Forecast return: 24%

SOIL reported better than expected performance in Q1FY24 despite facing headwinds Market Data
of lower realization and currency fluctuation (Rs410mn impact). Consolidated sales Bloomberg: SOIL IN
grew 4% YoY to Rs16.8bn. Domestic explosives sales fell 8% YoY to Rs7.6bn as 13% YoY 52 week H/L: 4,538/2,700
volume growth at 129,362 MT was off-set by 18% YoY fall in realization to Market cap: Rs343.7bn
Rs58,600/MT (due to falling AN prices). Initiating systems sales rose 43% YoY to Shares Outstanding: 90.5mn
Rs1.7bn. Export and overseas sales grew 2% YoY to Rs6bn led by 12-13% volume Free float: 26.9%
growth. Defence sales was at quarterly high level of Rs1.5bn, up 142% YoY and 39.4% Avg. daily vol. 3mth: 65,730
QoQ. Gross margin was up 880bps YoY/450bps QoQ to 42.8%. EBITDA grew 14% YoY Source: Bloomberg

to Rs3.2bn, leading to operating margin of 19.2%, up 170bps YoY. PAT grew 16% YoY Changes in the report
to Rs1.9bn, above our estimate of Rs1.5bn as we had factored in lower realization Rating: BUY; Unchanged
(Rs55,000/MT). Management guidance for 15-20% volume growth remains intact; Target price: Rs4,700; Unchanged
however, value growth will be impacted due to falling AN prices. While Q2FY24 will FY24E: Rs97.2; down 3.6%
EPS:
see even lower realization, but it is likely to improve in H2FY24 as AN prices have FY25E: Rs117.5, up 0.1%
Source: Centrum Broking
bottomed-out and started to rise in international markets. The operating margin will
also sustain in 20-21% range. We marginally tweak our estimates and retain BUY rating Shareholding pattern
with unchanged target of Rs4,700 based on 40x FY25E EPS. Jun-23 Mar-23 Dec-22 Sep-22
Promoter 73.2 73.2 73.2 73.2
Domestic market update
FIIs 5.8 6.6 6.7 6.6
Domestic sales fell 8% YoY to Rs7.6bn, due to lower realizations (at Rs58,600/MT, down
DIIs 14.7 14.0 14.1 14.3
18% YoY) while volumes grew 13% YoY to 129,362MT. Initiating systems grew 43% YoY
Public/other 6.4 6.3 6.0 5.9
to Rs1.7bn with improved realization due to better product mix. Customer wise sales mix
Source: BSE
was Coal India (+7% YoY to Rs2.7bn), institutional sales (+1% YoY to Rs2.9bn) and Infra &
housing (down 12% YoY to Rs3.5bn). Domestic explosives order book fell 11% QoQ to Centrum estimates vs Actual results
Rs16.2bn, partly due to lower AN prices. New RFPs for CIL is likely in September. Housing YE Mar Centrum Actual Variance
(Rs mn) Q1FY24 Q1FY24 (%)
& infra demand was impacted by unseasonal rains and is likely to revive in H2FY24.
Revenue 13,627 16,822 23.4
Exports and overseas market update EBITDA 2,691 3,231 20.1
Exports and overseas volume grew 12-13% YoY, but lower realization led to 2% value EBITDA margin % 19.7 19.2 (50bps)
growth at Rs6bn. Australia and Indonesia plants are set-up and volume booking will start PAT 1,495 1,974 32.1
from Q2/Q3FY24 with breakeven expected in FY24. EPS 16.5 21.8 32.1
Defence segment update Source: Company Data, Centrum Broking

Defence sales were at highest quarterly level of Rs1.5bn forming 9% of total sales.
Defence order book fell 6% QoQ to Rs10.5bn. Final trials of Pinaka rockets is likely to
start in August and conclude in 2-3 months, post which order process will start. Supply
of MMHG order is fully completed and recurring orders of similar quantum are expected.
Retain Buy with unchanged target price of Rs4,700
Over FY23-25E, revenue CAGR is likely at 9% due to lower AN prices, but margin
expansion will ensure 18% EPS CAGR. The valuation will be aided by (1) market
leadership in licensed-controlled explosive industry with high entry barriers, (2) strong
overseas growth prospects led by foray in large countries and (3) defence scale-up.

Financial and valuation summary

YE Mar (Rs mn) 1QFY24A 1QFY23A YoY (%) 4QFY23A QoQ (%) FY23A FY24E FY25E
Revenues 16,822 16,156 4.1 19,285 (12.8) 69,225 71,337 82,520
EBITDA 3,231 2,830 14.2 3,575 (9.6) 12,889 14,553 17,247
Chirag Muchhala
EBITDA margin (%) 19.2 17.5 170bps 18.5 70bps 18.6 20.4 20.9
Capital Goods

Research Analyst, Capital Goods

Adj. Net profit 1,974 1,702 16.0 2,061 (4.2) 7,572 8,794 10,633 +91-22-42159203
Adj. EPS (Rs) 21.8 18.8 16.0 22.8 (4.2) 83.7 97.2 117.5 chirag.muchhala@centrum.co.in

EPS growth (%) 71.6 16.1 20.9

PE (x) 45.4 39.1 32.3
EV/EBITDA (x) 27.4 24.2 20.5
PBV (x) 13.2 10.2 8.0 Rahul Kumar Mishra
RoE (%) 33.5 29.4 27.7 Research Associate, Capital Goods
+91-22-42159265
RoCE (%) 25.8 22.8 22.0
rahulkumar.mishra@centrum.co.in
Source: Company, Centrum Broking

Please see Disclaimer for analyst certifications and all other important disclosures.
 Result Update

Institutional Research
India I Consumer Electricals
04 August, 2023

Orient Electric ADD

Price: Rs240
Healthy revenues; investment in brand & people hits margin Target Price: Rs245
Forecast return: 2%

ORIENTEL’s sales grew 13.5% YoY to Rs7.1bn, 7% above our/consensus estimate, Market Data
primarily driven by 15.5% growth in ECD segment. While digital sales rose 58% YoY, Bloomberg: ORIENTEL IN
exports grew 38% YoY. Gross margin expanded by 290bps YoY to 30.7% driven by 52 week H/L: 291/216
softer commodity costs, better product mix and cost savings through Sanchay Market cap: Rs51.2bn
programme. EBITDA grew 15% YoY to Rs440mn. However, EBITDA margin was flat YoY Shares Outstanding: 213.4mn
at 6.2% due to investments in brand building, capability and people (staff cost up 43% Free float: 59.8%
YoY to Rs671mn, likely to rise 25% YoY in FY24 to Rs2.4bn). Basis which EBITDA margin Avg. daily vol. 3mth: 4,18,354
was below our/consensus estimate of 7.4% each. Consequently, PAT grew only 4% YoY Source: Bloomberg
to Rs197mn, lower than our/consensus estimate of Rs263mn/Rs226mn. ORIENTEL
Changes in the report
aims to (1) focus on emphasizing premium and differentiated products, (2) improve
Rating: ADD; downgrade from BUY
gross margin through sales mix and premiumization, and (3) strengthen R&D
Target price: Rs245; down 5.8%
capabilities and after sales service as it aims to achieve $1bn sales in next 5-6 years.
FY24E: Rs6.0; down 7.4%
We cut our FY24/25 estimates by 7% each to factor in increased staff cost/other exp. EPS:
FY25E: Rs8.1; down 7.1%
We downgrade our rating to ADD (from BUY earlier) with a revised target price of Source: Centrum Broking
Rs245 (Rs260 earlier) based on unchanged P/E of 30x FY25E EPS. Shareholding pattern
ECD: Healthy broad based growth; DTM strategy bearing fruits for fans category Jun-23 Mar-23 Dec-22 Sep-22
ECD sales grew 16% YoY to Rs5.2bn, driven by broad based growth across categories. Promoter 38.3 38.4 38.4 38.4
Fans reported healthy growth at 16% YoY (10% volume growth), ably supported by FIIs 5.5 5.7 6.1 6.1
channel inventory liquidation. In Q1FY24, premium fans constituted 32% of fans DIIs 27.7 27.3 26.4 26.7
portfolio. Fans sales in the states where ORIENTEL implemented its DTM strategy surged Public/other 28.5 28.6 29.1 28.8
107% YoY and gained healthy market share. Non-rated fans inventory is largely sold out Source: BSE

in the market, and transition to rated fans is on the anvil. Water heater sales were up Centrum estimates vs Actual results
23% YoY, while sales of air coolers were impacted due to unseasonal rains in the quarter. YE Mar Centrum Actual Variance
Small appliances grew 32% YoY while the company is witnessing revival in consumer (Rs mn) Q1FY24 Q1FY24 (%)
demand in Tier 2 and 3 cities. EBIT margin expanded by 120bps YoY to 9.5%, on a low Revenue 6,625 7,056 6.5
base. Hyderabad plant is ready for commissioning and will make atleast 200bps more EBITDA 488 440 (9.9)
margin than older plants. EBITDA margin % 7.4 6.2 (120bps)
Lighting: Growth aided by B2B category; price correction impacts B2C sales PAT 263 197 (25.1)
Lighting and switchgears sales grew 8% YoY to Rs1.9bn. B2B sales grew 40% YoY and is EPS 1.2 0.9 (25.1)
Source: Centrum Broking
backed by healthy enquiries. B2C lighting growth was flat due to lower realization as
lower cost of LED driver has led to lower market pricing. Switchgears grew 8% YoY led by
healthy B2B offtake from real estate sector. ORIENTEL continued onboarding of channel
partners for switchgears and housewires. EBIT margin grew 290bps YoY to 16.1%, aided
by better product mix and softer commodity costs.
Downgrade to ADD, with a revised target price of Rs245
We expect ORIENTEL to post 20% revenue CAGR over FY23-25E, with low base driving
51% earnings CAGR (11% CAGR over FY22-25E). While growth is likely to be aided by fans
and B2B lighting; the extent of margin recovery is likely to be limited amidst high
competition and ORIENTEL’s planned investment in brand, capabilities and people. We
downgrade our rating to ADD with a revised target of Rs245 based on 30x FY25E EPS.
Financial and valuation summary
YE Mar (Rs mn) 1QFY24A 1QFY23A YoY (%) 4QFY23A QoQ (%) FY23A FY24E FY25E
Revenues 7,056 6,216 13.5 6,579 7.3 25,292 30,837 36,258
EBITDA 440 382 15.3 464 (5.1) 1,510 2,364 3,075
Consumer Electricals

Chirag Muchhala
EBITDA margin (%) 6.2 6.1 10bps 7.0 (80bps) 6.0 7.7 8.5 Research Analyst, Consumer Electricals
Adj. Net profit 197 190 3.9 246 (20.0) 759 1,281 1,725 +91-22-4215 9203
Adj. EPS (Rs) 0.9 0.9 3.3 1.2 (20.2) 3.6 6.0 8.1 chirag.muchhala@centrum.co.in
EPS growth (%) (40.3) 68.4 34.7
PE (x) 67.3 40.0 29.7
EV/EBITDA (x) 32.7 20.9 15.8
PBV (x) 8.7 7.6 6.6
Rahul Kumar Mishra
RoE (%) 13.5 20.4 23.8 Research Associate, Consumer Electricals
RoCE (%) 16.0 22.8 26.0 +91-22-4215 9265
Source: Company, Centrum Broking rahulkumar.mishra@centrum.co.in

Please see Disclaimer for analyst certifications and all other important disclosures.
 Result Update

Institutional Research
India I Building Materials
04 August, 2023

Cera Sanitaryware BUY

Price: Rs7,917
Steady state quarter; maintains growth guidance Target Price: Rs9,317
Forecast return: 18%

Cera’s sales grew by 8% YoY to record its highest first quarterly sales of Rs4.3bn. 1Q is Market Data
seasonally a slow quarter for the company contributing 18-20% to the annual sales. Bloomberg: CRS IN
Sanitaryware/Faucetware grew by 7/8% YoY contributing 53/35% respectively. New 52 week H/L: 8,196/4,622
products contributed 29% (v. 34% in 4QFY23). Gross margins improved 130bps YoY Market cap: Rs103.0bn
(+140bps QoQ) at 54.8%. EBITDA margins inclined by 60bps YoY and stood flat QoQ at Shares Outstanding: 13.0mn
16.4%. We maintain our bullish stance on Cera on account of sustained growth in real Free float: 64.0%
estate market, market leadership of Cera and strong balance sheet. We revise our FY25 Avg. daily vol. 3mth: 30,288
EPS estimates by +2% and maintain Buy rating on the stock with new TP of Rs9,317 Source: Bloomberg

valuing at 38x (earlier 35x) FY25E EPS. We increase our target multiple given the Changes in the report
consistency in its growth and operating performance. Rating: Unchanged
Continues to grow and expand margins as guided Target price: +11%; Rs9,317 from Rs8,426
Cera grew its sales by 18/25% in FY22/FY23. 1Q growth stood at 8% due to seasonality. EPS: FY24E: Unchanged; FY25E: +2%
2H usually contributes 62-64% to total sales. Management remains confident of growing Source: Centrum Broking

by 17-19% in FY24. This is led by 3 key factors – better product availability, higher Shareholding pattern
contribution (29% in 1Q) from new products compared to industry average of 10% and Jun-23 Mar-23 Dec-22 Sep-22
Cera's Retail Loyalty Program. This program has completed more than a year of Promoter 54.5 54.5 54.5 54.5
operation registering over 0.185mn invoices uploaded by over 15,300 retailers. It is first FIIs 19.4 18.0 17.5 17.9
such program in the industry that is helping Cera improve stickiness with the retailers. DIIs 9.0 9.7 9.4 9.8
Cera has now commenced similar loyalty program for plumbers. Public/other 17.1 17.8 18.6 17.8
Source: BSE
Capacity expansion on track
The brownfield faucetware capacity will come on stream this month and will reach at Centrum estimates vs Actual results
peak production (4L pcs/mo) by end of FY24. Management expects to clock peak sales YE Mar Centrum Actual Variance
of Rs2.5bn from this facility giving an asset turn of 4x+. Apart from this, Cera is doing (Rs mn) Q1FY24 Q1FY24 (%)
Greenfield expansion in Sanitaryware with addition of 12L pieces per month over Revenue 4,568 4,289 -6.1
existing base of 25L. Cera is in final process of land acquisition in GJ and total deeds are EBITDA 744 704 -5.4
expected to be executed in next three months. We believe this capacity will add to the EBITDA margin (%) 16.3 16.4 10bps
sales by start of FY26 and will add Rs3.3bn to sales at peak. PBT 762 760 -0.2
Adj. PAT 567 567 -0.1
Maintain guidance of doubling of sales in 3.5 years
Source: Bloomberg, Centrum Broking
Given the robust demand, management maintains its guidance of doubling the sales over
FY22-1HFY26. Growth momentum is expected to continue with CAGR sales growth
expectation of 17-19% over FY23-25E. The growth will be further aided by increasing
contribution from new products (launched within last 3 years) and possible market share
gains. Cera achieved higher contribution of 29% from its new products in this quarter (vs
34% QoQ) which used to be in the range of 20-25% in last 2-3 years. Cera launched 699
new products in FY23 vs. historical average of 75-100. Company will be focused to
increase penetration of these newly launched products in FY24.
Valuations remain attractive
We expect Cera’s sales/EBITDA/PAT to grow at CAGR of 17/19/21% respectively over FY23-
25E and EBITDA margins to expand from 16.2% in FY23 to 17% in FY25. Healthy momentum
in real estate cycle and strong replacement demand should drive the growth momentum
for Cera. We revise our FY25 EPS estimates by +2% and maintain Buy rating on the stock
with new TP of Rs9,317 valuing at 38x (earlier 35x) FY25E EPS.
Financial and valuation summary
YE Mar (Rs mn) 1QFY24A 1QFY23A YoY (%) 4QFY23A QoQ (%) FY23A FY24E FY25E Akhil Parekh
Building Materials

Revenues 4,289 3,972 8.0 5,325 (19.5) 18,035 21,026 24,487 Research Analyst, Building Materials
EBITDA 704 628 12.0 872 (19.3) 2,930 3,512 4,162 +91-22 4215 9265
EBITDA margin (%) 16.4 15.8 3.8 16.4 0 bps 16.2 16.7 17.0 akhil.parekh@centrum.co.in
Adj. Net profit 567 399 42.2 682 (16.8) 2,161 2,541 3,065
Adj. EPS (Rs) 43.6 30.7 42.2 52.4 (16.8) 172.8 203.3 245.2
EPS growth (%) 36.1 17.6 20.6
PE (x) 45.8 38.9 32.3
EV/EBITDA (x) 33.8 28.0 23.3 Kevin Shah
PBV (x) 8.4 7.4 6.3 Research Associate, Building Materials
RoE (%) 19.8 20.2 21.1 +91-22 4215 9000
RoCE (%) 19.5 20.0 20.9 kevin.shah@centrum.co.in
Source: Company, Centrum Broking
Please see Disclaimer for analyst certifications and all other important disclosures.
 Result Update

Institutional Research
India I Capital Goods
04 August, 2023

KEC International ADD

Price: Rs658
Strong execution; in-line margins; guidance retained Target Price: Rs660
Forecast return: 0%

KECI’s consolidated sales grew 28% YoY to Rs42.4bn, 11%/9% above our/consensus Market Data
estimates. Growth was led by T&D (+46% YoY to Rs18.8bn) and Civil segment (+60% Bloomberg: KECI IN
YoY to Rs9.6bn). EBITDA grew 45% YoY to Rs2.4bn, leading to EBITDA margin of 5.8%, 52 week H/L: 699/387
up 70bps YoY/QoQ each and in-line with our/consensus estimate. PBT grew 26% YoY Market cap: Rs169.2bn
to Rs467mn while PAT was up 37% YoY to Rs423mn aided by lower tax rate at 9% (vs. Shares Outstanding: 257.1mn
16% YoY). YTD-FY24 order inflow grew 30% YoY to Rs45bn while order book was flat
Free float: 58.0%
QoQ at Rs301bn with domestic-international split of 71-29%. With strong renewable
Avg. daily vol. 3mth: 10,63,916
pipeline in domestic T&D and robust scale up prospects in railways & civil segments, Source: Bloomberg
KECI has retained its order inflow/revenue guidance of Rs250bn/Rs200bn for FY24.
Changes in the report
With SAE turning PBT positive in Q1 and all legacy projects likely to conclude in Q2, the
Rating: ADD; Unchanged
operating margin guidance of 6%/8% for H1/H2 FY24 has also been retained. Factoring
Target price: Rs660, up from Rs610
in business updates, we tweak our earnings estimates and retain ADD rating with a
FY24E: Rs20.6, down 3.1%
revised target of Rs660 (Rs610 earlier) based on unchanged P/E of 16x FY25E EPS. EPS:
FY25E: Rs41.1, up 8.3%
Strong execution in T&D and Civil segment aided topline growth Source: Centrum Broking

Segment-wise, T&D sales grew 46% YoY to Rs18.8bn while Civil segment grew 60% YoY Shareholding pattern
to Rs9.6bn. Railways grew 8% YoY to Rs7.6bn. SAE Towers / Cables sales fell 16%/7% YoY Jun-23 Mar-23 Dec-22 Sep-22
to Rs3bn/Rs3.9bn. Domestic T&D opportunities is immense in renewable sector (wind Promoter 51.9 51.9 51.9 51.9
and solar) from states like Rajasthan, Gujarat, AP and TN. For Civil business, growth will FIIs 11.6 12.6 12.6 11.6
be largely driven by sectors such as data centers, water pipeline (Rs40bn order book), DIIs 26.1 25.3 25.1 26.1
and residential/industrial/commercial construction. Railways offers large opportunities Public/other 10.4 10.2 10.4 10.4
in signaling, speed upgradation, Kavach and international markets. Source: BSE

Operating margin in-line; H2 to see much improved margin profile Centrum estimates vs Actual results
EBITDA margin expanded 70bps YoY 5.8%, in line with management guidance of 6% YE Mar Centrum Actual Variance
margin for H1FY24. With SAE Towers achieving break-even in Q1 and pending legacy (Rs mn) Q1FY24 Q1FY24 (%)
Revenue 38,324 42,436 10.7
projects likely to conclude in Q2, KECI expects H2FY24 margin of 8%. The bid level margin
EBITDA 2,186 2,444 11.8
in domestic T&D has started to trend up while international margin are close to double
EBITDA margin 5.7 5.8 10bps
digit as steel prices have softened. Civil margin have also rose to high single digits.
PAT 502 423 (15.7)
Large tender pipeline comforting for healthy order inflow in FY24
EPS 2.0 1.6 (15.7)
YTD-FY24 order inflow stood at Rs45bn, up 30% YoY on low base. Key contributors to Source: Company Data, Centrum Broking
inflow was T&D (Rs14.9bn, up 48%), Civil (Rs13.5bn, up 8% YoY), Railways (Rs7.6bn, up
84% YoY), Cables (Rs5.4bn, up 20% YoY) and SAE Towers (Rs3.6bn, up 48% YoY). FY24
order inflow guidance of Rs250bn (+12% YoY) has been retained. Tender pipeline is large
at Rs1trn. Domestic T&D (PGCIL + SEB + pvt) are likely to award tenders worth Rs200bn
in next couple of quarters, where KECI’s win ratio is 15-16%. Saudi Arabia, UAE, Oman,
Bangladesh and Nepal have good pipeline in overseas markets. Railways and civil also
offers robust scale up prospects, including in international markets.
Maintain ADD with a revised target price of Rs660
We expect KECI to report revenue CAGR of 17% and EPS CAGR of 145% on a low base
(FY21-25E CAGR of 18% on normalized base). Robust tender pipeline, strong execution
capabilities and normalization of margin profile/NWC will support valuation.

Financial and valuation summary

YE Mar (Rs mn) 1QFY24A 1QFY23A YoY (%) 4QFY23A QoQ (%) FY23A FY24E FY25E
Revenues 42,436 33,181 27.9 55,250 (23.2) 172,817 201,977 235,469
EBITDA 2,444 1,684 45.1 2,835 (13.8) 8,297 14,565 21,382 Chirag Muchhala
Capital Goods

EBITDA margin (%) 5.8 5.1 70bps 5.1 70bps 4.8 7.2 9.1 Research Analyst, Capital Goods
+91-22-4215 9203
Adj. Net profit 423 310 36.5 722 (41.4) 1,760 5,287 10,555
chirag.muchhala@centrum.co.in
Adj. EPS (Rs) 1.6 1.2 36.5 2.8 (41.4) 6.8 20.6 41.1
EPS growth (%) (53.1) 200.4 99.6
PE (x) 96.1 32.0 16.0
EV/EBITDA (x) 23.8 13.6 9.3
PBV (x) 4.5 4.1 3.4 Rahul Kumar Mishra
RoE (%) 4.8 13.3 23.0 Research Associate, Capital Goods
+91-22-4215 9265
RoCE (%) 9.4 13.6 18.9 rahulkumar.mishra@centrum.co.in
Source: Company, Centrum Broking

Please see Disclaimer for analyst certifications and all other important disclosures.
 Result Update

Institutional Research
India I Oil & Gas
05 August, 2023

Mahanagar Gas Ltd BUY

Price: Rs1,056
Supernormal margins in Q1, tepid volumes growth Target Price: Rs1,234
Forecast return: 17%
During Q1FY24, Mahanagar Gas (MGL) reported stronger operational performance than Market Data
Q4FY23 with EBITDA/ PAT surging by 82.5%/ 98.9% YoY and 33.8%/ 37.0% QoQ led by Bloomberg: MAHGL IN
robust EBITDA/ scm expansion. EBITDA/ scm in Q4 rose 30.7% QoQ at Rs16.8/ scm vs
52 week H/L: 1,145/759
Rs12.8/ scm in Q4FY23 and jumped 84.5% YoY from Rs9.1/scm. Substantial reduction in
Market cap: Rs104.3bn
gas sourcing costs by 20.9% QoQ and 15.0% YoY due to revision in APM gas price led to
Shares Outstanding: 98.8mn
the supernormal performance. However, management guided for normalised EBITDA/
Free float: 43.7%
scm at Rs10/ scm and steady state volume growth of 5-6. In Q1, the company signed tow
MOUs one for a Biogas project with BMC and another for setting up LNG dispensing Avg. daily vol. 3mth: 5,25,150
Source: Bloomberg
stations in Maharashtra and outside Maharashtra. LNG is expected to be growth
opportunity for the company. Management guided for over Rs6.0-8.0bn capex in FY24E. Changes in the report
Based on Q1 numbers and management guidance, we have upped our FY24E EBITDA/ Rating: BUY, Changed from ADD earlier
scm while lowering volume assumptions and raising EBITDA/ scm for FY25E. Based on Rs1,234; Up 8.1% from earlier
Target price:
Rs1,141
our upward revision in estimates, we upgrade the stock to Buy from Add with a DCF- FY24E: Rs104.6, Up 22.3%
based revised TP of Rs1,234 (earlier Rs1,141). EPS:
FY25E: Rs84.1, down 5.1%
Source: Centrum Broking
Supernormal EBITDA/ scm in Q1, no normalised subsequently
Downward revision in APM gas price led to lowering sourcing cost despite marginally Shareholding pattern
lower QoQ allocation at 89% vs 91% in Q4. Despite CNG price revision in early April, lower Jun-23 Mar-23 Dec-22 Sep-22
gas cost led to significant expansion in QoQ EBITDA/ scm at Rs16.8/ scm vs. Rs12.8/ scm Promoter 32.5 32.5 32.5 32.5
in Q4FY23. Consequently, EBITDA surged 82.5% YoY and 33.8% QoQ at Rs5.2bn vs. FIIs 32.4 31.0 29.7 28.4
Rs2.9bn in Q1FY23 and Rs3.9bn in Q4FGY23. EBITDA expansion led to PAT surging by DIIs 14.8 14.9 15.5 15.5
98.9% YoY and 37.0% QoQ at Rs3.7bn. Public/other 20.3 21.6 22.3 23.6
Source: BSE
Pick up private vehicle conversion, however slowdown in commercial vehicles
During Q1, CNG vehicle addition stood at 14,750 with higher conversion observed in Centrum estimates vs Actual results
June. With reduction in CNG prices, the pace of conversion in rising monthly with higher YE Mar Actual Centrum Variance
(Rs bn) Q4FY23 Q4FY23 (%)
conversion observed in private vehicles while slowdown in commercial vehicles. MGL is
devising schemes to address the slowdown in commercial vehicle conversion. The Revenue 15.4 15.9 (3.1%)
company may revise CNG prices to attract more conversions. EBITDA 5.2 4.0 30.0%
EBITDA margin % 33.9 18.1 1580bps
2 MOUs in Biogas and LNG dispensation
Rep. PAT 3.7 2.8 32.1%
MGL signed two MoUs in Q1, one for a Biogas project with BMC and another for a LNG Source: Bloomberg, Centrum Broking
dispensation project with Baidyanath LNG. Management cited that LNG could be a
sizable opportunity for long haul transportation on highways. It plans to add 5-6 LNG
stations in next one year keeping LNG pricing favourable for conversion.
Margins to taper, steady state volume growth of 5-6%
We believe Q1 as an outlier with margins tapering off while volume pick in subsequent
quarters. Nonetheless, with robust Q1 EBITDA/ scm and management guidance, we have
revised our FY24E EBITDA/ scm from Rs9.5/ scm to Rs12.1 and FY25E EBITDA/ scm from
Rs9.5/ scm to Rs9.8. The stock is currently trading at 10.1x/ 12.6x FY24E/ FY25E EPS of
Rs104.6/ Rs84.1. We upgrade the stock from Add to Buy with a revised DCF-based TP of
Rs1,234 (earlier Rs1,141).
Risks – Lower than expected EBITDA/ scm, slowdown in CNG conversions

Financial and valuation summary

YE Mar (Rs mn) 1QFY24A 1QFY23A YoY (%) 4QFY23A QoQ (%) FY23A FY24E FY25E
Revenues 15,378 14,548 5.7 16,105 (4.5) 62,993 55,304 57,235
EBITDA 5,213 2,856 82.5 3,897 33.8 11,842 15,635 13,353 Rohit Nagraj
EBITDA margin (%) 33.9 19.6 72.7 24.2 40.1 18.8 28.3 23.3 Research Analyst, Oil & Gas
Oil & Gas

+91-022-4215000
Adj. Net profit 3,684 1,852 98.9 2,688 37.0 7,900 10,335 8,312 rohit.nagraj@centrum.co.in
Adj. EPS (Rs) 37.3 18.7 98.9 27.2 37.0 80.0 104.6 84.1
EPS growth (%) 32.4 30.8 (19.6)
PE (x) 13.2 10.1 12.6
EV/EBITDA (x) 8.6 6.4 7.4
PBV (x) 2.5 2.2 2.0 Jay Bharat Trivedi
Research Associate, Oil & Gas
RoE (%) 20.4 23.3 16.7
+91-42150000
RoCE (%) 20.6 23.3 16.7 jay.trivedi@centrum.co.in
Source: Company, Centrum Broking
Please see Disclaimer for analyst certifications and all other important disclosures.
 Result Update

Institutional Research
India I Retail
05 August, 2023

Devyani International REDUCE

Price: Rs190
Stretched consumer spends hold weak SSSG Target Price: Rs180
Forecast return: -5%
Devyani International’s Q1FY24 print was below our estimates; consol. revenue/EBIDA Market Data
grew 20.1%/5.3%, and PAT declined 38.1%. India KFC/PH revenue grew 21.5%/11.1% led by Bloomberg: DEVYANI IN
decline in SSSG at 0.9%/5.3%. Costa coffee revenue/SSSG grew 83.4%/9.4%. DIL stated, 52 week H/L: 215/134
despite IPL event, given challenging environment ADS declined for KFC/PH at 7.9%/10% Market cap: Rs227.7bn
indicating shift in demand towards value segment. In Q1 DIL added 20/15/11 stores under
Shares Outstanding: 1205.5mn
KFC/PH/Costa format. Though DIL effected 3.5%/1.0% price increase in KFC/PH portfolio,
Free float: 31.6%
inflation in chicken and dairy cut DIL’s gross margin to 70.3% (-30bp) led by KFC at 69.7%
(+70bp), PH at 74.9% (-130bp) and Costa 77.3% (-430bp). However higher employee cost Avg. daily vol. 3mth: 2,239,031
Source: Bloomberg
(+45.9%) and other exp. (+21.1%) ensued post-INDAS EBITDA margins at 20.5% (-288bp).
Despite softer demand management held store expansion target with single digit SSSG led Changes in the report
by strong menu innovation expecting recovery in margins in Q2. We tweak our earnings Rating: Unchanged
and retain REDUCE, with a revised DCF-based TP Rs180 (implying 17.7x EV/EBITDA FY25E). Target price: Rs180; up 12.5% from Rs160
Persistent weakness in demand coupled with lower no of days cut SSSG in Q1 FY24E: Rs2.9; up 6.4%
EPS:
DIL reported consol. revenue at Rs8.5bn (+20.1%) YoY driven by persistent weakness in demand. FY25E: Rs3.2; up 7.5%
Source: Centrum Broking
KFC/PH India revenue grew 21.5%/11.1% led by decline in SSSG at 0.9%/5.3% YoY. Costa
coffee revenue/SSSG grew 83.4%/9.4%. Management alluded, despite IPL event/ vacations, Shareholding pattern
given challenging environment ADS declined for KFC/PH at 7.9%/10% indicating shift in Jun-23 Mar-23 Dec-22 Sep-22
demand towards value segment. In Q1 DIL added 20/15/11 stores each under KFC/PH/Costa Promoter 62.8 62.8 62.8 62.8
format in India (total count KFC/PH/Costa at 510/521/123) with focus on non-metro (52% FIIs 12.1 9.8 8.8 8.3
stores). Management attributed weak revenues and SSSG to, (1) negative operating leverage DIIs 8.3 9.2 7.4 6.9
due to higher scale of store addition, (2) decline in ADS for KFC/PH, and (3) rising competition. Public/other 16.8 18.2 21.0 22.0
That said, in Q1 DIL dialed up menu innovation adding 10 new pizzas and Chicken roll/ snackers Source: BSE
priced at Rs99/- supporting with higher media spends. With one new store addition revenues in Centrum estimates vs Actual results
International business (Nigeria/Nepal) stood at Rs580mn (+8.4%) YoY, yet ADS declined 15.9%.
YE Mar Centrum Actual Variance
Weaker margin on account of higher chicken/ dairy inflation and adverse impact in Nigeria (Rs mn) Q1FY24 Q1FY24 (%)
DIL’s gross margin declined to 70.8% (-30bp) YoY, reflecting Pre-INDAS restaurant EBITDA Revenue 8,350 8,466 1.4
margin to 13.2% (-290bp) led by, (1) higher inflation in chicken/dairy, and (2) lower brand EBITDA 1,820 1,734 (4.7)
contribution margin for KFC at 21.1% (-130bp), PH at 10.1%(-740bp) and Costa coffee at 20.9% EBITDA margin % 21.8 20.5 -131 bp
(-960bp). Despite higher employee cost (+45.9%) and other expense (+21.1%) company EBITDA Other Income 125 68 (45.4)
grew by 5.3%, settling post EBITDA margin at 20.5% (-288bp). Company effected 3.5%/1.0%
Interest 430 404 (6.1)
price increases in KFC/PH portfolio in Q1 yet expect lower diary inflation to improve margins in
Depreciation 790 796 0.8
Q2FY24. PAT dropped to Rs457mn (-38.8%). DIL said it has booked exceptional item
PBT 725.2 602.9 (16.9)
(Rs473.3mn) on account of currency devaluation in Nigeria resulting in Rs15mn loss.
Tax 145.0 146 0.4
Management opined the higher employee expenses in Q1 on account of, (1) overall wage
inflation, (2) factoring minimum wages bill in Karnataka, and (3) reversing incentive to staff. Rep. PAT 580.2 -16 (102.7)
Adj. PAT 580 457 (21.2)
Valuation and risks Source: Bloomberg, Centrum Broking
As argued in our recent QSR Thematic report, with strong management and execution
capabilities we saw solid performance delivered by DIL. However weak demand, incremental
competition in chicken QSR, and rising inflation in chicken/dairy pose short term challenges in
our view. We reckon with 3.5%/1.0% price increases in KFC/PH portfolio and higher corporate
overheads DIL may hold margins. We increase earnings for FY24E/FY25E by 6.4%/7.5% and
retain REDUCE rating with a revised DCF-based TP of Rs180 (implying EV/EBITDA of 17.7x FY25E).
Key risks to our call prolonged weakness in demand, rising inflation in key RM/PM and severe
competition in chicken portfolio from organized/ unorganized players.
Financial and valuation summary
YE Mar (Rs mn) 1QFY24A 1QFY23A YoY (%) 4QFY23A QoQ (%) FY23A FY24E FY25E
Revenues 8,466 7,047 20.1 7,550 12.1 29,978 39,938 47,609 Shirish Pardeshi
EBITDA 1,734 1,647 5.3 1,513 14.6 6,551 8,978 10,861 Research Analyst, Retail
EBITDA margin (%) 20.5 23.4 (288bp) 20.0 50bp 21.9 22.5 22.8 +91-22-4215 9634
Retail

Adj. Net profit 457 748 (38.8) 599 (23.6) 2,826 3,408 3,830 shirish.pardeshi@centrum.co.in
Adj. EPS (Rs) 0.4 0.6 (38.1) 0.0 (20.0) 2.3 2.9 3.2
EPS growth (%) 56.9 20.6 12.4
PE (x) 81.0 67.2 59.8
EV/EBITDA (x) 31.9 22.2 17.7
PBV (x) 23.6 17.4 13.4 Soham Samanta
Research Associate, Retail
RoE (%) 34.1 29.8 25.4
+91-22-4215 9771
RoCE (%) 40.7 39.4 34.6 soham.samanta@centrum.co.in
Source: Company, Centrum Broking

Please see Disclaimer for analyst certifications and all other important disclosures.
 Result Update

Institutional Research
India I Mid Cap
05 August, 2023

Mold-Tek Packaging ADD

Price: Rs1,003
Volume growth muted led by paints segment Target Price: Rs971
Forecast return: -3%

Mold-Tek Packaging reported sales decline of 11%. Volumes grew modestly by 2% Market Data
while realization dropped by 12% YoY to Rs202/kg. The modest volume growth was on Bloomberg: MTEP IN
account of decline in volumes in Paints (-8%) & Lubes (-2%) segments while F&F grew 52 week H/L: 1,123/798
by 37%. Sales decline too was led by Paints (-21%) & Lubes (-14%) while F&F grew by Market cap: Rs33.3bn
13%. Paints reported third consecutive quarter of sales decline (-21%). GP/kg and Shares Outstanding: 33.2mn
EBITDA/kg both reported decline by 2/7% respectively. Though we remain bullish on Free float: 55.8%
Mold-Tek on account of market leadership in IML packaging, massive capacity Avg. daily vol. 3mth: 51,906
expansion and introduction of new product categories we believe that near term Source: Bloomberg
growth is priced-in. We cut our FY24/FY25 PAT estimates by 4/5% respectively. We
Changes in the report
maintain ADD rating & value the company at 30x FY25E EPS to arrive at TP of Rs971
Rating: Unchanged
(earlier TP of Rs1,018).
Target price: -5%; Rs971 from Rs1,018
Weakness in demand led by Paints segment EPS: FY24E: -4%; FY25E: -5%;
Paints segment reported third consecutive quarter of sales decline. MTEP’s Khandala Source: Centrum Broking
unit (~30% of paints production) has been running at 45% of capacity utilization since Shareholding pattern
last few quarters. This unit is undergoing upgradation and would have lost ~400tn of Jun-23 Mar-23 Dec-22 Sep-22
volumes in 1Q. Capacity utilization of this unit has jumped to 70% in month of July. Promoter 33.3 33.5 34.0 34.1
Management has guided that Paints segment is expected to report modest growth of FIIs 18.0 16.9 14.5 13.9
~5% in volumes in FY24. Lubes on a high base of last few quarters reported volume DIIs 17.3 18.2 18.7 18.9
decline of 2% while F&F remained strong, with 37% volumes growth. However, weakness Public/other 31.4 31.4 32.8 33.1
in ice cream and dairy industry demand led to decline in sales/kg by 17% in F&F. Source: BSE
New capacities to contribute to growth only in FY25 Centrum estimates vs Actual results
MTEP currently has 45.3ktn capacity with ~75% utilization rate. ABG Grasim’s two YE Mar Centrum Actual Variance
Greenfield plant at Panipat and Cheyyar of 2,000tn each are expected to come on stream (Rs mn) Q1FY24 Q1FY24 (%)
by end of 3QFY24 and 4QFY24 respectively. Third plant for Grasim will be in Mahad of Revenue 2,127 1,859 -12.6
1,000tn of an initial capacity. Company has applied for land parcel. Total sales from these EBITDA 417 350 -15.9
three units is expected to be at ~Rs1-1.25bn at peak utilization. Apart from this pharma EBITDA margin % 19.6 18.8 -70bps
packaging capacity is expected to commercialize from Oct’23, FMCG capacity in Panipat PBT 322 241 -25.0
and Daman by 3Q/4QFY24 respectively. These new capacities are expected to contribute Rep. PAT 246 187 -23.8
meaningfully from FY25. With these capacity additions in place, management has guided Source: Bloomberg, Centrum Broking

for low double digit volume growth in FY24 and 15%+ volume growth in FY25.
Client additions, newer product categories to drive growth
In 1Q, the Company bagged new orders from the reputed Companies such as Red Bucket
Biryani, Pidilite Paints, Aayu International, Libero Enterprises, Gemini Edibles, Living
Foods and Aries Agro. In 1Q, the Company bagged new orders from 23 new Food & FMCG
clients. It processed 284 new SKUs and 646 new designs for customers.
Valuations
We expect sales/EBITDA/PAT to grow at CAGR of 13%/16%/15% respectively and EBITDA
margins to expand by 80bps over FY23-25E to 19.5%. We cut our FY24/FY25 PAT
estimates by 4/5% respectively. We maintain ADD rating & value the company at 30x
FY25E EPS to Rs971 (earlier TP of Rs1018).

Financial and valuation summary

YE Mar (Rs mn) 1QFY24A 1QFY23A YoY (%) 4QFY23A QoQ (%) FY23A FY24E FY25E
Revenues 1,859 2,078 (10.6) 1,847 0.7 7,299 7,986 9,352
EBITDA 350 372 (5.7) 356 (1.6) 1,354 1,514 1,814
EBITDA margin (%) 18.8 17.9 90bps 19.3 (50bps) 18.6 19.0 19.4 Akhil Parekh
Research Analyst, Midcap
Adj. Net profit 187 217 (13.7) 230 (18.5) 804 866 1,060
Packaging

+91-22--42159265
Adj. EPS (Rs) 5.6 6.6 (13.8) 6.9 (18.5) 24.2 26.1 32.0 akhil.parekh@centrum.co.in
EPS growth (%) 13.0 7.7 22.4
PE (x) 41.4 38.4 31.4
EV/EBITDA (x) 20.8 18.9 15.4
PBV (x) 6.0 5.4 4.8
Kevin Shah
RoE (%) 15.8 14.7 16.1 Research Associate, Midcap
RoCE (%) 15.1 13.6 14.5 +91-22-4215 9000
Source: Company, Centrum Broking kevin.shah@centrum.co.in

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 Result Update

Institutional Research
India I Metals & Mining
05 August, 2023

Venus Pipes & Tubes BUY

Price: Rs1,282
Robust performance; growth prospects brigthens Target Price: Rs1,809
Forecast return: 41%

During Q1FY24 stainless steel pipes realisation decline sharply by 10-15% QoQ. Despite Market Data
price correction, VENUSPIP reported revenue growth of 2% QoQ/58% YoY on back of Bloomberg: VENUSPIP IN
higher volumes as well as better product mix (seamless pipes share at 62% vs 30-40% 52 week H/L: 1,320/380
average). Moreover, commissioning of piercing mill helped in raw material cost saving Market cap: Rs26.0bn
as well as better product mix, resulting in margin expansion to 15.4% up by 320bps Shares Outstanding: 20.3mn
QoQ and highest ever EBITDA of Rs276mn up 28% QoQ/90% YoY. During the quarter Free float: 37.1%
it completed capex and expanded capacity from 12ktpa to 33.6ktpa. Further, it Avg. daily vol. 3mth: 1,09,879
announced to add 4.8ktpa seamless pipe capacity and expect to commission by FY24 Source: Bloomberg
end. We revise our earnings estimate upwards by 13% and 26% for FY24 and FY25
Changes in the report
respectively. Also, upgrading its multiple from 22x to 25x and value on FY25E EPS, we Rating: BUY; no change
arrive at target price of Rs1809/sh (Earlier: Rs1258/sh). Reiterate BUY rating on the Target price: Rs1809, up 44%
stock. FY24 EPS: Rs50, up 13.6% and
EPS:
FY25 EPS: Rs72, up 26.5%
Higher seamless sales mix lead to Revenue growth and margin expansion Source: Centrum Broking
Venus Pipe reported revenue of Rs1796mn, up 2% QoQ/ 58% YoY. The sequential
Shareholding pattern
increase is largely on account of higher volume and better product mix. The seamless
Jun-23 Mar-23 Dec-22 Sep-22
pipes sales share stood at 62% (vs 55% in Q4) with revenue of Rs1116mn up 15%
Promoter 48.2 48.2 48.2 48.2
QoQ/149% YoY. The blended realisation declined by ~16% QoQ. The share of exports
FIIs 6.5 5.8 5.8 0.7
continue to remain subdued at 4% of total sales. Management is confident that piercing
DIIs 8.6 8.7 8.6 7.2
line is commissioned well and will able to substitute import of raw material for seamless
Public/other 36.7 37.3 37.4 43.9
pipes with in-house production. This will help to meet export requirements and expect Source: BSE
exports to rise upto 15% of total sales in coming quarters. EBITDA stood at Rs276mn up
28% QoQ and margin expanded by 320bps QoQ to 15.4%. Centrum estimates vs Actual results
YE Mar Centrum Actual Variance
3x capacity expansion completed; announced further capacity addition (Rs mn) Q1FY24E Q1FY24 (%)
Currently, total capacity stands at 33600tpa which includes 24000tpa capacity of welded Revenue 1,575 1,796 14.0
pipes and 9600tpa capacity of seamless pipes. Further, also commissioned piercing mill EBITDA 205 276 34.7
to manufacture hollow pipe of 9600tpa which will help to 100% replace imports from EBITDA margin % 15.3 15.4 -
china to manufacture seamless pipes. During installation of piercing mill, a few Adj. PAT 124 174 40.8
modifications were made to enhance efficiency as well as productivity. Moreover, The Source: Bloomberg, Centrum Broking

LSAW pipe earlier proposed to manufacture upto 48 inch diameter has been increased
to 56 inch diameter. Venus pipe is planning to add further 4800tpa capacity of seamless
pipes which will be installed in next 6 months. Total capex will be ~Rs400-450mn.
Best play on SS growth story; Reiterate BUY
Venus Pipes has become 2nd largest player after Ratnamani metals with 33.6ktpa
capacity. The backward integration and capacity expansion to play a pivotal role in cost
saving, product acceptance in export market as well as enhance profitability. We have
high conviction on company and expect Revenue/EBITDA/PAT to grow by
46%/74%/82% CAGR over FY23-25E along with margin expansion from 12.5% in FY23
to 18% in FY25. We recommend BUY on Venus Pipes with target price of Rs1809.

Financial and valuation summary

YE Mar (Rs mn) 1QFY24A 1QFY23A YoY (%) 4QFY23A QoQ (%) FY23A FY24E FY25E
Revenues 1,796 1,136 58.1 1,763 1.9 5,524 8,794 11,721
EBITDA 276 145 90.4 216 27.8 691 1,482 2,086
EBITDA margin (%) 15.4 12.7 20.5 12.2 25.4 12.5 16.8 17.8
Adj. Net profit 174 91 91.0 134 29.6 442 1,014 1,468
Adj. EPS (Rs) 8.6 4.5 91.0 6.6 29.6 21.8 50.0 72.3
Metals & Mining

EPS growth (%) 4.7 129.4 44.8

PE (x) 58.9 25.7 17.7
EV/EBITDA (x) 38.6 18.5 13.1
PBV (x) 8.1 6.1 4.6
RoE (%) 19.6 27.2 29.5 Kunal Kothari
RoCE (%) 16.9 23.7 26.4 Research Analyst, Metals & Mining
Source: Company, Centrum Broking +91 22 4215 9375
kuunal.kothari@centrum.co.in

Please see Disclaimer for analyst certifications and all other important disclosures.
 Result Update

Institutional Research
India I Consumer Durables
05 August, 2023

Blue Star ADD

Price: Rs763
In-line performance; planning for long growth runway Target Price: Rs780
Forecast return: 2%
BLSTR’s consolidated sales grew 13% YoY to Rs22.3bn, in-line with our/consensus Market Data
estimates. Unitary Products revenue was up 6% YoY to Rs12bn as RAC sales decline Bloomberg: BLSTR IN
amidst unseasonal rains in summer, was offset by healthy traction in commercial 52 week H/L: 820/480
refrigeration products. EMPS sales grew 19% YoY to Rs9.5bn aided by robust order Market cap: Rs147.0bn
book. Gross margin rose 120bps YoY to 22.2%. EBITDA grew 18% YoY to Rs1.5bn Shares Outstanding: 192.6mn
leading to 30bps YoY rise in operating margin to 6.5%, broadly in-line with our/ Free float: 58.3%
consensus estimate. PAT grew 12% YoY to Rs834mn. BLSTR expects RAC industry to Avg. daily vol. 3mth: 2,44,194
grow 10-15% in FY24, while it aims to sustain 8-8.5% margin in unitary products. EMPS Source: Bloomberg

and commercial air-conditioning segment is likely to grow faster driven by robust order Changes in the report
book and strong enquiry pipeline. With a long runway of growth in sight, BLSTR has Rating: ADD; Unchanged
approved Rs10bn fund raise via QIP as it embarks on Rs7.5bn capex plan over next Target price: Rs780; up 3.3%
three years to expand capacity in RAC and commercial air-conditioning products. We FY24E: Rs20.4; up 3.4%
EPS:
increase earnings estimates by 3%/6% for FY24E/25E and retain ADD rating with a FY25E: Rs26.4; up 6.0%
Source: Centrum Broking
revised target price of Rs780 (Rs755 earlier) on SOTP basis.
Unitary Products: Unseasonal rains impact RAC sales; EBIT margin remains decent Shareholding pattern
Jun-23 Mar-23 Dec-22 Sep-22
Unitary Products sales grew 6% YoY to Rs12bn with a decent EBIT margin of 7.5%, down
Promoter 38.9 38.8 38.8 38.8
60bps YoY. The RAC industry is likely to have de-grown by 10% in Q1FY24 while BLSTR’s
FIIs 11.1 10.5 11.0 11.8
sales decline was lower due to institutional sales. BLSTR maintained its RAC market share
DIIs 24.1 24.6 24.3 22.8
at 13.5% (in value terms), although its average realization was lower due to rising mix of
Public/other 25.9 26.1 26.0 26.6
affordable ACs. Channel inventory is only marginally higher as dealers refrained from
Source: BSE
over-stocking. Thus, BLSTR expects demand to revive from festive season, with likely
industry growth of 10-15% in FY24. BLSTR aims to sell 1mn units in FY24 (vs 0.8mn YoY), Centrum estimates vs Actual results
leading to 10% volume market share. Commercial Refrigeration business stayed healthy YE Mar Centrum Actual Variance
(Rs mn) Q1FY24 Q1FY24 (%)
led by hospitality, pharma and processed food sectors with BLSTR benefiting through its
Revenue 21,878 22,260 1.7
market leadership in deep freezers, storage water coolers and modular cold rooms.
EBITDA 1,473 1,450 (1.5)
EMPS & commercial AC: Strong traction across sectors drive topline growth EBITDA margin % 6.7 6.5 (20bps)
EMPS sales grew 19% YoY to Rs9.5bn. EBIT margin rose 130bps YoY to 7% led by better PAT 923 834 (9.7)
realizations, lower input costs, value engineering and better execution. Order inflow was EPS 4.8 4.3 (9.7)
lower at Rs12.2bn vs. Rs13.6bn YoY as BLSTR is selective in taking orders with core focus Source: Company Data, Centrum Broking
on profitability and FCF. With strong order book of Rs40.4bn and uptick in enquiries from
industrial factories, data centers, healthcare, hospitality and metro rail, the growth
outlook remains robust. Commercial air-conditioning products are exhibiting strong
demand with BLSTR being a key beneficiary due to its leadership in ducted AC, chillers
and VRF. It aims to enhance its capacity in these products via a new plant at Sri City.
Maintain ADD with revised target price of Rs780
We expect BLSTR to report revenue CAGR of 19% over FY23-25E, but earnings CAGR will
be higher at 40% due to margin improvement and reducing tax rate (shift to new tax
regime + Sri City tax benefits). We are optimistic about BLSTR’s AC growth prospects and
strong EMPS business outlook. However, current valuations offers limited upside.
Maintain ADD with revised target price of Rs780 on SOTP basis.
Financial and valuation summary
YE Mar (Rs mn) 1QFY24A 1QFY23A YoY (%) 4QFY23A QoQ (%) FY23A FY24E FY25E
Revenues 22,260 19,770 12.6 26,238 (15.2) 79,773 93,918 1,13,582
EBITDA 1,450 1,233 17.6 1,792 (19.1) 4,928 6,405 8,013
Consumer Durables

Chirag Muchhala
EBITDA margin (%) 6.5 6.2 30bps 6.8 (30bps) 6.2 6.8 7.1 Research Analyst, Consumer Durables
Adj. Net profit 834 742 12.3 2,253 (3.1) 2,612 3,934 5,093 +91-22-4215 9203
chirag.muchhala@centrum.co.in
Adj. EPS (Rs) 4.3 3.9 12.3 4.5 (3.1) 13.6 20.4 26.4
EPS growth (%) 55.8 50.6 29.4
PE (x) 56.3 37.4 28.9
EV/EBITDA (x) 30.5 23.5 18.8
PBV (x) 11.0 8.9 7.3 Rahul Kumar Mishra
RoE (%) 22.2 26.4 27.9 Research Associate, Consumer Durables
+91-22-4215 9265
RoCE (%) 17.5 21.3 22.8
rahulkumar.mishra@centrum.co.in
Source: Company, Centrum Broking

Please see Disclaimer for analyst certifications and all other important disclosures.
 Company Update

Institutional Research
India I Cement
04 August, 2023

Ambuja Cement REDUCE

Price: Rs474
Sanghi acquisition to address near term growth issues Target Price: Rs467
Forecast return: -1%

Ambuja cements announced acquisition of Sanghi Industries Ltd for total EV of Market Data
~Rs50bn translating to acquisition cost of US$100/mt on existing capacity and Bloomberg: ACEM IN
US$67/mt on expanded capacity. We believe this deal will immediately address the 52 week H/L: 598/315
issue of near term volume growth for the company owing to capacity constraints. Both Market cap: Rs941.9bn
ACC and Ambuja plants are currently operating at full capacity and barring a clinker Shares Outstanding: 1985.6mn
unit at Ametha (ACC) coupled with 1 mn mt grinding unit, rest of the capacities of Free float: 30.6%
Ambuja are coming up in FY26, thereby resulting in lack of near term growth. With Avg. daily vol. 3mth: 52,77,087
Sanghi acquisition, Ambuja will be able to deliver near term growth in West region Source: Bloomberg

which is its strongest market. Sanghi can add ~8% to FY25 consolidated EBITDA of the Changes in the report
company and ~5% to total value assuming full debt repayment by Ambuja. We see this Rating: Unchanged
deal as positive for Ambuja as it gives them access to vast limestone resources and Target price: Unchanged
improved access to entire west coast. We currently have Reduce rating on the stock EPS: Unchanged
given limited upside from our TP of Rs467, and we do not expect change in our rating Source: Centrum Broking
due to this acquisition. ACEM relative to Nifty 50
Deal contours: 160
Ambuja cements Ltd has announced the acquisition of acquisition of Sanghi Industries
140
Ltd (SIL) at an EV of ~Rs50bn. ACL will acquire 56.74% shares of SIL from its existing
ACEM
promoter group at Rs114.22 per share. Additionally, the company will make open offer 120
for 26% of share capital at the same price. We do not expect full tendering of shares at 100 NIFTY 50
the open offer price. The deal would be funded through internal accruals and Sanghi will
80
continue to remain listed at least for next 12 months. Ambuja has also provided inter Aug-22 Oct-22 Dec-22 Feb-23 Apr-23 Jun-23 Aug-23
corporate deposits of Rs3bn to Sanghi for short term working capital requirement. Source: Bloomberg
Existing promoters of Sanghi will continue to hold 15% in the company after the deal.
Shareholding pattern
Acquisition would provide near term volume growth: Jun-23 Mar-23 Dec-22 Sep-22
With lack of capacity addition under Holcim management, Ambuja had lost meaningful Promoter 63.2 63.2 63.2 63.2
market share while other players kept adding capacity and market share. Ambuja has FIIs 12.4 11.1 11.2 11.1
operated at close to 85%-90% utilizations which restricted its growth. However, after the DIIs 13.4 13.5 15.5 15.1
takeover by Adani group, company has taken concrete steps to get on parity with its Public/other 11.0 12.2 10.1 10.6
peers by announcing capacity additions to reach its 140MTPA target capacity. With Source: BSE
Sanghi deal, Ambuja is poised to expand its market presence, strengthen its product
portfolio, and reinforce its position as a leader in the sector.
Competitive intensity in west region to increase:
Western market is highly consolidated with Ultratech and Adani group controlling more
than 2/3rd of capacity in the region. With substantial addition planned by Adani group,
we expect competitive intensity to increase in coastal markets of Maharashtra, esp.
Mumbai and Thane region.
Despite acquisition, industry consolidation not on the cards:
Despite acquisition of Sanghi’s assets by Ambuja, we believe that incremental supply in
the market is set to increase as Sanghi’s presence in the region was miniscule. Also, given
the aggressive expansion plans by the Ambuja management, we expect competitive
intensity to increase despite so called consolidation.
Financial and valuation summary
YE Mar (Rs mn) CY20A CY21A FY23A* FY24E FY25E
Revenues 1,13,719 1,39,790 1,99,854 1,75,508 1,89,600
EBITDA 26,466 32,152 32,204 40,223 44,017 Mangesh Bhadang
Research Analyst, Cement
EBITDA margin (%) 23.3 23.0 16.1 22.9 23.2
+91-22-4215 9053
Cement

Adj. Net profit 17,901 21,489 27,108 26,823 29,421 mangesh.bhadang@centrum.co.in

Adj. EPS (Rs) 9.0 10.8 13.3 10.9 11.9
EPS growth (%) 17.1 20.0 22.5 (17.9) 9.7
PE (x) 52.6 45.2 38.0 43.6 39.7
EV/EBITDA (x) 28.3 22.9 22.4 19.2 17.7
PBV (x) 4.6 4.2 3.4 2.6 2.5 Sanjit Tambe
RoE (%) 8.4 10.1 10.7 7.3 6.4 Research Associate, Cement
RoCE (%) 8.7 10.4 11.1 7.5 6.6 +91-22-4215 9201
sanjit.tambe@centrum.co.in
Source: Bloomberg, Centrum Broking; Note: FY23 includes financials of 15 months due to change in year end from December to March

Please see Disclaimer for analyst certifications and all other important disclosures.
Morning WrapMorning Wrap 7 August 2023

Market overview
Insider market trades*
Number of
Security Name Name Category Transaction type
securities
L&T Technology Services Ltd ALIND SAXENA Director 5,000 Disposal
L.G.BALAKRISHNAN & BROS.LTD. VIJAYSHREE VIJAYAKUMAR Promoter 15,765 Disposal
ULTRAMARINE & PIGMENTS LTD. S Narayanan Promoter 2,000 Disposal
Source: BSE (Reported to exchange on 4 August 2023), * Only Promoter and Director Insider trades

Upcoming Q1FY24 results

Company Name Date
Emami Ltd 7 - Aug
Ramco Cements Ltd/The 7 - Aug
Restaurant Brands Asia Ltd 7 - Aug
Whirlpool of India Ltd 7 - Aug
Birla Corp Ltd 8 - Aug
Coal India Ltd 8 - Aug
Hindalco Industries Ltd 8 - Aug
NMDC Ltd 8 - Aug
Star Cement Ltd 8 - Aug
Bajaj Consumer Care Ltd 9 - Aug
Bata India Ltd 9 - Aug
G R Infraprojects Ltd 9 - Aug
Kalyan Jewellers India Ltd 9 - Aug
PI Industries Ltd 9 - Aug
Safari Industries India Ltd 9 - Aug
Trent Ltd 9 - Aug
V-Guard Industries Ltd 9 - Aug
V-Mart Retail Ltd 9 - Aug
Bajaj Electricals Ltd 10 - Aug
NCC Ltd/India 10 - Aug
Page Industries Ltd 10 - Aug
Suryoday Small Finance Bank Ltd 10 - Aug
Jindal Steel & Power Ltd 11 - Aug
PNC Infratech Ltd 11 - Aug
Voltas Ltd 11 - Aug
Crompton Greaves Consumer Electricals Ltd 12 - Aug
JK Cement Ltd 12 - Aug
Source: BSE

Conference calls & analyst meet details

Date Time Company Name Login Details/Venue Analyst Meet / Concall
8 August 2023 16:00 Hindalco Industries 022 6280 1303 / 7115 8204 Conference call
9 August 2023 14:30 Birla Corp Ltd 022 6280 1458 / 7115 8846 Conference call
9 August 2023 16:00 Kalyan Jewellers India Ltd 022 6280 1309 / 7115 8210 Conference call
10 August 2023 11:00 Bajaj Consumer Care Ltd 022 6280 1144 / 7115 8045 Conference call
10 August 2023 15:00 V-Mart Retail Ltd 022 6280 1123 / 7115 8024 Conference call
10 August 2023 15:30 V-Guard Industries Ltd 022 6280 1366 / 7115 8267 Conference call
10 August 2023 16:00 Page Industries Ltd 022 6280 1468 / 7115 8812 Conference call
Source: BSE

Centrum Institutional Research

Morning Wrap 7 August 2023

Disclaimer
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MrNischalMaheshwari,
CEO, Institutional Equities
Ph.: 91 22 4215 9536
Email: nischal.maheshwari@centrum.co.in

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Buy – The stock is expected to return above 15%.
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Reduce – The stock is expected to deliver -5-+5% returns.
Sell – The stock is expected to deliver <-5% returns.

Centrum Institutional Research

Morning Wrap 7 August 2023

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