Investoreye (10) - 4

Investor’s Eye
November 07, 2023
Index
Stock Update
Trent Ltd
Zydus Lifesciences Ltd
Hindustan Petroleum Corporation Ltd
Devyani International Ltd
Radico Khaitan Ltd
Gujarat State Petronet Ltd
Jyothy Labs Ltd
Viewpoint
Kolte-Patil Developers Ltd
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Stock Update
Trent Ltd
Strong performance in a tough business environment
Powered by the Sharekhan 3R Research Philosophy Consumer Discretionary Sharekhan code: TRENT
Reco/View: Buy  CMP: Rs. 2,428 Price Target: Rs. 2,750 á
3R MATRIX + = -
Result Update
Right Sector (RS) ü
á Upgrade  Maintain â Downgrade
Right Quality (RQ) ü Summary

Trent maintained its strong growth momentum in Q2FY2024 with 59% y-o-y revenue growth (37% CAGR over
Right Valuation (RV) ü FY2020-FY2024) versus low single-digit apparel industry’s growth affected by weak consumer demand.
+ Positive = Neutral – Negative Like-for-like (LFL) growth stood at 10%, well ahead of peers who saw subdued LFL during Q2. Focus on providing
consistent value to customers will help in maintaining double-digit LFL going ahead.
Strong earnings growth visibility with double-digit growth in the core Westside brand and strong scale-up in
What has changed in 3R MATRIX Zudio in the coming years.
Old New The stock currently trades at 39.3x/29.9x/24.1x its FY2024E/FY2025E/FY2026E EV/EBIDTA. We maintain Buy with
a revised PT of Rs. 2,750.
RS  Trent posted the 10th consecutive quarter of over 50% revenue growth in Q2FY2024, with
RQ  revenue growing by 59% y-o-y to Rs. 2,890.7 crore, ahead of our as well as street’s expectation.
Revenue growth is strong compared with its peers and amid muted growth in the branded
RV  apparel space. Gross margin fell by 230 bps y-o-y to 44.7% due to change in the mix, while
EBIDTA margin improved by 119 bps y-o-y to 15.9%, led by better operating leverage. EBIDTA
grew by 72.3% y-o-y to Rs. 460.9 crore and reported PAT grew by 56% y-o-y to Rs. 289.7 crore. In
H1FY2024, revenue grew by 57% y-o-y to Rs. 5,427.2 crore, EBIDTA margin decreased by 126 bps
ESG Disclosure Score NEW y-o-y to 15.2%, and PAT grew by 50.4% y-o-y to Rs. 437.9 crore.
Key positives
ESG RISK RATING
Updated Aug 08, 2023
18.66 Fashion concepts registered LFL growth of 10% over Q2FY2023.
Contribution of emerging categories, including beauty and personal care, innerwear and footwear
Low Risk improved to 19%.
NEGL LOW MED HIGH SEVERE Cash & cash equivalents on books stood close to Rs. 700 crore in September 2023.
0-10 10-20 20-30 30-40 40+ Star market business reported 30% y-o-y revenue growth; entire growth was largely driven by
Source: Morningstar strong LFL growth and volume growth.
Key negatives
Company details Gross margin fell by 230 bps y-o-y to 44.7% in Q2.
Market cap: Rs. 86,319 cr Management Commentary
During Q2FY2024, Trent added six Westside (total 223 stores) and 27 Zudio stores (total 411 stores).
52-week high/low: Rs. 2,454 / 1,155
Four stores each of Westside and Zudio were consolidated during the quarter.
NSE volume: The company will expand and deepen its store presence with the aim of coming to close proximity
5.8 lakh
(No of shares) and convenience of customers.
Q2 was the second consecutive quarter of double-digit LFL in its fashion concept. Focus on delivering
BSE code: 500251
consistent value to customers and providing elevated brand experience in its stores help to report
NSE code: TRENT good LFL growth.
Gross margin of Westside and Zudio continued to remain consistent with earlier trends.
Free float:
22.4 cr The company continued to see good traction across its offerings, resilience in the business model,
(No of shares)
and attractiveness on different platforms.
Revision in earnings estimates - We have fine-tuned our earnings estimates for FY2024, FY2025, and
Shareholding (%) FY2026 to factor in yet another quarter of strong performance in Q2FY2024.
Promoters 37.0 Our Call
FII 26.9 View: Retain Buy with a revised PT of Rs. 2,750: Trent posted yet another quarter of strong revenue
performance in Q2FY2024 amid sluggish demand environment. Innovation in the product portfolio,
DII 14.9 scaling up of supply chain, 100% contribution from own brands, aggressive store expansion, and
leveraging on digital presence will be key growth drivers in the medium term. The stock is currently
Others 21.2 trading at 39.3x/29.9x/24.1x its FY2024E/FY2025E/FY2026E EV/EBITDA. With long-term growth
prospects intact and a strong balance sheet among the retail companies, we maintain our Buy
Price chart recommendation on the stock with a revised price target (PT) of Rs. 2,750 (rolling it over September
2600 2025 earnings).
2400
Key Risks
2200
2000 Slow recovery in consumer demand will act as a key risk to our earnings estimates in the near term
1800
1600 Valuation (Standalone) Rs cr
1400
1200 Particulars FY23 FY24E FY25E FY26E
1000 Revenue 7,715 11,696 14,898 18,589
Jul-23
Nov-22
Nov-23
Mar-23
EBITDA Margin (%) 14.5 15.8 16.9 17.3

Adjusted PAT 555 1,007 1,493 1,985
Price performance YoY growth (%) - 81.7 48.2 33.0
Adjusted diluted EPS (Rs.) 15.6 28.3 42.0 55.8
(%) 1m 3m 6m 12m
P/E (x) - 85.7 57.8 43.5
Absolute 16.8 35.8 69.5 61.0 P/B (x) 28.0 21.5 15.9 11.7
Relative to EV/EBITDA (x) 56.4 39.3 29.9 24.1
17.7 37.4 64.3 54.9
Sensex RoNW (%) 19.1 28.4 31.6 31.0
Sharekhan Research, Bloomberg RoCE (%) 14.5 21.7 26.2 28.5
Source: Company; Sharekhan estimates
November 07, 2023 2

Stock Update
Powered by the Sharekhan
3R Research Philosophy
Strong Q2 with double-digit revenue growth and improvement in EBIDTA margins

Trent (standalone) revenue grew by 59% y-o-y to Rs. 2,890.7 crore, ahead of our and average street expectation of
Rs. 2,759 crore and Rs. 2,683 crore, respectively. Like-for-like growth stood at 10% in Q2. Gross margin decreased by
230 bps y-o-y to 44.7% due to changing mix (increased contribution from Zudio) and higher raw-material expenses.
On the other hand, EBIDTA margin improved by 119 bps y-o-y to 15.9%, ahead against our expectation of 14% and
average street expectation of 13.3%. Better operating leverage led to strong expansion in EBIDTA margins. EBIDTA
grew by 72.3% y-o-y to Rs. 460.9 crore, while reported PAT grew by 56% y-o-y to Rs. 289.7 crore, ahead of our and
average street expectation of Rs. 169-171 crore. In H1FY2024, revenue grew by 57% y-o-y to Rs. 5,427.2 crore, EBIDTA
margin decreased by 126 bps y-o-y to 15.2%, and PAT grew by 50.4% y-o-y to Rs. 437.9 crore.
Results (Standalone) Rs cr
Particulars Q2FY24 Q2FY23 y-o-y (%) Q1FY24 q-o-q (%)
Net revenue 2,890.7 1,813.6 59.4 2,536.4 14.0
Cost of goods sold 1,599.7 961.9 66.3 1,407.0 13.7
Gross profit 1,291.1 851.7 51.6 1,129.5 14.3
Staff cost 210.6 148.1 42.2 185.4 13.6
Rent expenses 275.8 178.3 54.7 282.2 -2.2
Other expenses 343.8 257.8 33.4 296.2 16.1
Total operating expenses 830.2 584.2 42.1 763.8 8.7
EBITDA 460.9 267.5 72.3 365.7 26.0
Other income 151.1 168.0 -10.1 49.8 -
Interest 92.3 88.0 4.9 89.1 3.6
Depreciation 144.8 104.3 38.9 133.5 8.5
Profit before tax 374.8 243.2 54.1 192.8 94.4
Tax 85.1 57.4 48.3 44.5 91.1
Adjusted PAT 289.7 185.9 55.9 148.3 95.4
EPS (Rs.) 8.1 5.2 55.9 4.2 95.4
bps bps
GPM (%) 44.7 47.0 -230 44.5 13
EBITDA Margin (%) 15.9 14.8 119 14.4 153
NPM (%) 10.0 10.2 -23 5.8 418
Tax rate 22.7 23.6 -89 23.1 -39
Source: Company, Sharekhan Research
November 07, 2023 3

Stock Update
Outlook and Valuation

n Sector Outlook – Long-term growth prospects intact
Organic same-store sales of retail companies are likely to be muted due to weak consumer sentiments as higher
inflationary pressures affected demand, while revenue growth is expected to be largely driven by strong store
expansion. In H1FY2024, growth remained muted, but we expect it to gradually recover prior to the festive season.
Branded retail and apparel companies are likely to benefit from steady demand for premium products and better
consumer sentiments in urban markets/metros in the quarters ahead. In the medium-long term, market share gains,
higher traction on the e-commerce platform, a strong retail space expansion strategy, and sustained expansion
of product portfolio will help branded apparel and retail companies to post consistent growth. Better operating
leverage and improved efficiencies would help branded apparel and retail companies to post higher margins in the
coming years.
n Company Outlook – Strong growth eyed in FY2024
Trent continued its momentum of strong double-digit revenue and PAT growth in H1FY2024 with revenue growing
by 57% y-o-y and PAT growing by 50% y-o-y. The company’s strong execution capabilities aided to achieve robust
2.5x revenue growth and 3.6x PAT growth in FY2023 over FY2020. Trent is seeing strong pick-up in new initiatives/
categories through increased contribution from online sales and emerging categories. An accelerated store expansion
programme, increased contribution from the online channel, and pick up in the foods business will augur well for the
company in the near term. Overall, growth is expected to recover strongly in FY2024, while profitability will improve
gradually as the pricing environment improves.
n Valuation – Maintain Buy with a revised PT of Rs. 2,750
Trent posted yet another quarter of strong revenue performance in Q2FY2024 amid sluggish demand environment.
Innovation in the product portfolio, scaling up of supply chain, 100% contribution from own brands, aggressive store
expansion, and leveraging on digital presence will be key growth drivers in the medium term. The stock is currently
trading at 39.3x/29.9x/24.1x its FY2024E/FY2025E/FY2026E EV/EBITDA. With long-term growth prospects intact and a
strong balance sheet among the retail companies, we maintain our Buy recommendation on the stock with a revised
price target (PT) of Rs. 2,750 (rolling it over September 2025 earnings).
Peer Comparison
P/E (x) EV/EBITDA (x) RoCE (%)
Particulars
FY23 FY24E FY25E FY23 FY24E FY25E FY23 FY24E FY25E
Aditya Birla Fashion - - - 19.2 18.5 14.5 4.1 2.4 4.3
Shoppers Stop 57.7 - 37.3 12.4 12.0 9.4 9.9 8.5 13.2
Trent - 85.7 57.8 56.4 39.3 29.9 14.5 21.7 26.2
Source: Company, Sharekhan estimates
November 07, 2023 4

Stock Update
About the company

Trent is a leading branded retail company that operates Westside, a chain of departmental stores retailing apparel,
footwear, and other accessories, with over 99% contribution from its own brands. Westside stores have a footprint of
18,000-34,000 sq. ft. across over 90 cities. Trent also operates value fashion chain Zudio, having a footprint of around
7,000-10,000 sq. ft., and books and music retail chain Landmark. Trent has a 50:50 JV with Tesco PLC UK to operate
Star stores through Trent Hypermarket Private Limited. In addition, Trent has two separate associations of 49% each
with the Inditex Group of Spain to operate Zara and Massimo Dutti stores in India through Inditex Trent Retail India
Private Limited.
Investment theme
Trent is the only branded retail player with close to 100% share of private brands with a pan-India presence. Trent
offers a strong set of brands catering to all categories of consumers, which has helped the company report the highest
average revenue per square foot compared with other branded players. Trent has maintained its SSSG momentum
over the years as well as its profitability is seen increasing on a y-o-y basis. Aggressive store expansion, better store
fundamentals, higher contribution from private brands, omni-channel network, and innovative product offerings in
the premium and value fashion space would be key growth drivers for the company going ahead.
Key Risks
Any slowdown in the discretionary demand environment would impact SSSG, affecting revenue growth.
Heightened competition, especially in the form of private labels by other branded players, would act as a threat
to revenue growth.
Any significant increase in key raw-material prices, such as cotton, would affect the company’s profitability.
Additional Data
Key management personnel
Noel Tata Chairman
Palaniswamy Venkatesalu Executive Director and Chief Executive Officer
Neeraj Basur Chief Financial Officer
Krupa Anandpara Company Secretary and Compliance Officer
Source: Company
Top 10 shareholders
Sr. No. Holder Name Holding (%)
1 Dodona Holdings Ltd. 4.8
2 Wasatch Advisors 3.0
3 SBI Life Insurance Co. Ltd. 2.2
4 Amansa Holdings Pvt. Ltd. 2.2
5 Vanguard Group Inc. 2.1
6 Blackrock Inc. 1.8
7 Derive Trading Pvt. Ltd. 1.5
8 Axis Asset Management Co. Ltd. 1.5
9 HDFC Life Insurance Co. Ltd. 1.2
10 Arisaig India Fund Limited 1.2
Source: Bloomberg
Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.
November 07, 2023 5

Update
Update
Zydus Lifesciences Ltd
Stock
Mixed Q2; Outlook robust
Stock
Powered by the Sharekhan 3R Research Philosophy Pharmaceuticals Sharekhan code: ZYDUSLIFE
Reco/View: Buy  CMP: Rs. 583 Price Target: Rs. 687 á
3R MATRIX + = -
Result Update
Summary
Right Quality (RQ) ü
Q2FY24 was a mixed bag, where revenue rose 8% y-o-y but declined 15% q-o-q to Rs. 4259 crore on
Right Valuation (RV) ü account of lower US sales. US sales grew by 9% y-o-y but declined 24% q-o-q to Rs. 1865 crore due to NIL
Revlimid sales.
+ Positive = Neutral – Negative Ex-Revlimid, the company hiked prices in the base portfolio in domestic region, while the US saw no price
erosion. Product launches, volume growth in base portfolio and cost rationalization aided a 623 bps hike
in EBITDA margins to 26%.
What has changed in 3R MATRIX
Company maintained its guidance of double-digit growth in the US and in-line performance in India
Old New region for FY24E
RS We maintain a Buy with a revised PT of Rs. 687. Stock trades at an attractive ~21.7x/18.4x FY2024e/FY2025e
á EPS estimates, as compared to peers that trade at ~25x/ 22x its FY24 and FY25E EPS estimates.
RQ  Q2FY24 was a mixed bag of numbers led by a 24% q-o-q decline in the US sales (~44% of sales). US
sales growth decline was on account of no Revlimid sales in Q2 ($70 million Revlimid sales in Q1FY24).
RV  Zydus stayed the leader in the super-specialty segment in nephrology and is fastest-growing company
in oncology. In domestic region, companies’ wellness portfolio grew by 3% y-o-y but declined 37%
q-o-q (~10% of operating income) driven by brands like Nycil and Everyouth. The domestic branded
formulation business grew by 5% y-o-y to Rs. 1334 crore (31% of sales) led by a delayed acute season.
ESG Disclosure Score NEW The company also hiked prices in the consumer segment to mitigate inflationary pressures. Also,
the emerging market and Europe (~11% of sales) grew 17% y-o-y to Rs. 450 mn. Healthy sales and
ESG RISK RATING lower contribution of other expenses (25% of sales in 2QFY24 vs 27% of sales) led to EBITDA growth
Updated May 08, 2023
38.3 of 41% y-o-y to Rs. 1,146 crore (versus internal estimate of Rs.985 crore), indicating benefits of strong
operating leverage. Adjusted PAT after Minority Interest (MI) and before the unusual costs rose by a
High Risk strong ~53% y-o-y to Rs. 800 crore (versus our estimate of Rs. 600 crore) driven by healthy operations
and 75% decline in finance cost to Rs. 87 crore.
NEGL LOW MED HIGH SEVERE Key positives
0-10 10-20 20-30 30-40 40+
Strong beat on EBITDA and PAT continues.
EBITDA margin surpassed our estimates by 520 bps to 26.2%.
Source: Morningstar
Key negatives
Company details Revenues reported 9% lower than our estimates to Rs. 4258 crore
US sales were reported 15% lower than our estimates to Rs. 185 crore on account of NIL Revlimid sales in
Market cap: Rs. 58,707 cr Q2.
52-week high/low: Rs. 668 / 390 Management Commentary
US sales expected to grow in double digit in FY24 and thereafter to continue the growth momentum.
NSE volume: India sales to perform in-line with the IPM.
4.83 lakh
(No of shares) It expects to launch 30 products in the FY24E, with market opportunity of 8-10 billion.
BSE code: 532321 Expect US specialty portfolio to reach $100 million in sales in the next three years.
Revlimid sales to report in Q1 and Q4 until FY26 with expectation to increase volume beyond 6% market
NSE code: ZYDUSLIFE share.
Free float: Revision in estimates – Zydus earnings are in-line with our estimates hence we have not revised our
25.6 cr estimates. Our estimates reflects increased volume traction in the base business, Revlimid sales growth, new
(No of shares) product launches and increased traction from Liquid dosage acquisition in the UK , hence we estimate our
sales to clock a ~10% and PAT to grow at ~23% CAGR from FY23-25.
Our Call
Shareholding (%) Valuation: Retain Buy with a revised PT of Rs. 687: We see many visible levers of growth for Zydus
Promoters 75.0 going forward that would help sustain high earnings growth momentum in near term led by 1) gRevlimid
and other launches such as gVascepa and Transdermal in the US that will play out in H2FY24 and 2) steady
FII 3.4 domestic formulations growth led by its strong biosimilars scale-up. We expect EBITDA margins to expand
around 100bps every year to 24% by FY25E despite R&D spending in the range of 8% (investment towards
DII 13.6 innovation). A healthy balance sheet (Rs. 1,600 crore in cash) will aid in case of M&A and a clean compliance
track record will help garner any short-term opportunities in the US. Citing higher visibility of sales traction
Others 8.0 in the US (likely to pass $1 billion in FY24) that will lead to strong earnings trajectory going forward we raise
our PT to Rs. 687 per share. At current market prices, Zydus trades at 21.7x of FY24E EPS of Rs. 26 and 18x of
FY25E EPS of Rs. 18 per share.
Price chart Key Risks
700 1) Price erosion in the US generics business could hurt performance. 2) Forex volatility could affect earnings.
600
Valuation (Consolidated) Rs cr
500
Particulars FY2022 FY2023 FY2024E FY2025E
400
Net sales 1,48,276 1,68,778 1,84,984 2,04,423
300 EBITDA 33,407 38,599 43,287 49,607
Jul-23
Nov-22
Nov-23
Mar-23
OPM (%) 21.9 22.4 23.0 23.9

Adjusted Net profit 23,264 20,019 27,147 31,991
Price performance EPS (Rs. ) 21.9 24.0 26.5 31.2
(%) 1m 3m 6m 12m PER (x) 16.8 23.9 21.7 18.4
Absolute 14.7 18.3 38.1 62.6 EV/EBITDA (x) 11.5 15.0 12.9 11.0
Relative to P/BV (x) 2.2 3.3 2.9 2.5

12.6 7.4 32.4 41.3 RoCE (%) 13.3 14.7 16.2 16.7
Sensex
Sharekhan Research, Bloomberg RoNW(%) 14.9 14.1 14.2 14.5
November 07, 2023 6

Stock Update
Q2FY2024 Conference Call Highlights:

US business - Price erosion was stable in mid-single digits, volume pick up in base portfolio and new launches
offset lack of Revlimid sales in Q2FY24.
US business expected to grow in double digits amidst factoring gAsacol High Demand competition in H2FY24.
Among key launches, Indomethacin (enjoys 180-day exclusivity) and Topiramate launched earlier while other few
also expected as well going ahead.
REMS product - Expect two launches in Q3 and Q4 in FY24 that are sizable in nature.
Transdermal launches – Focus on securing supply chain (90% imported) before launch. Expect 2 new product
launches in FY24.
Injectable portfolio update – This is still in scale-up phase. Some complex approvals in over FY24-FY25 ahead.
Zydus filed 4 ANDAs / received approval for 9 products / Launched 4 new products during the quarter.
India business – India branded formulation business grew 5% y-o-y to Rs. 1334 crore as key brands Lipaglyn,
Bilypsa and Ujvira continued to register volume expansion through various patient support programs and activities
followed by new launches.
Growth in India business was muted due to delay in pick up in acute business
Investing in NCEs, biosimilars and vaccines in the India market. Companion diagnostic will also be a part of strategy.
Field force of 6500 personnel includes managers as well. Zydus expects to add more field force in FY25E to boost
growth.
India business’ gross profit improving due to price hike and easing of input cost.
Other highlights–
Capital allocation – It will be towards innovation / specialty pipeline for regulated markets.
Capex of Rs. 216 crore in Q2 – Rs. 1000 crore planned for FY24E.
Cash balance of Rs. 16 billion as of June 2023.
USFDA received an establishment inspections report from the USFDA for the inspections of our oral solid dosage
facility one and facility two located in the Ahmedabad SEC and Biologics Fill finish facility located at the Zydus
Biotech Park in Changodar.
Vaccines update - Commissioned the newly constructed Measles and Rubella (MR) drug substance manufacturing
facility and Initiated Phase II clinical trials of Hepatitis E vaccine.
Biosimilars – Continue to expand capacities to cater to additional demand and portfolio.
Guidance for FY24–
US sales are expected to record double digit growth from the earlier stance of single digit growth.
Subsequently, EBITDA margins expected to expand 150-200bps in FY24 to ~24% despite an increase in R&D spends
ahead.
R&D to remain at 8% of sales.
Capex of Rs. 10,000 crore planned for FY24.
Other expense ex of R&D and wellness expense to remain at Rs. 850-900 crore.
November 07, 2023 7

Stock Update
Results (Consolidated) Rs cr
Particulars Q2FY24 Q2FY23 y-o-y % Q1FY24 q-o-q%
Total Operating revenues 4,258.6 3,942.6 8.0 5,052.8 -15.7
Expenditure 3,222.7 3,190.2 1.0 3,634.3 -11.3
EBITDA 1,035.9 752.4 37.7 1,418.5 -27.0
Depreciation 184.2 181.8 1.3 179.8 2.4
EBIT 851.7 570.6 49.3 1,238.7 -31.2
Interest 8.7 35.1 -75.2 18.1 -51.9
Other Income 54.0 44.4 21.6 36.0 50.0
PBT 1,007.2 642.8 56.7 1,343.4 -25.0
Taxes 253.3 186.4 35.9 216.1 17.2
Adjusted PAT 780.8 505.8 54.4 1,113.1 -29.9
Margins BPS BPS

EBITDA % 24.3 19.1 524.1 28.1 -374.9
NPM % 18.3 12.8 550.6 22.0 -369.5
Tax rate % 25.1 29.0 -385 16.1 906.3
Revenue break-up Rs cr
Particulars Q2FY24 Q2FY23 y-o-y % Q1FY24 q-o-q%
India 1,769 1,688 4.8% 1,921 -7.9%
Human formulations 1,334 1,265 5.5% 1,227 8.7%
Consumer Wellness 435.2 422.7 3.0% 693.6 -37.3%
US Formulation 1,865 1,708 9.2% 2,454 -24.0%

Europe Formulations 450 385 17.0% 489 -8.0%
APIs 140 112 25.5% 138 1.6%
Alliances 34 50 -32.5% 50 -32.1%
Grand Total 4,259 3,943 8.0% 5,052 -15.7%
OOI 1,102 629 75.2% 868 27.0%
Total Operating revenues 5,361 4,572 17.3% 5,920 -9.4%
November 07, 2023 8

Stock Update

n Sector view - Input cost easing with companies focusing on complex product launches
Over the years, Indian pharmaceutical companies have established themselves as a dependable source for global
peers. A confluence of other factors, including a focus on specialty/complex products in addition to emerging
opportunities in the API space, would be key growth drivers over the long term. The sector is witnessing an easing
of input costs – raw material, freight and power, which to aid the sector in expanding margins. The sector is also
witnessing an easing of price erosion followed by increasing contribution from new product launches. We believe
the sector is in sweet spot where it is experiencing healthy product mix and cost rationalization, which increases
operational profit of the companies. Sector is mainly a low-debt sector and increasing operational profit followed by
experiencing advantage of low tax rate due to its operations in the SEZ sector, hence overall, we stay positive on the
sector.
n Company outlook - Healthy growth outlook
Over the long term, both the US and India have a healthy growth outlook. The US business is on a strong footing,
helped by a sturdy new product pipeline and ramp-up in recent product launches, which would be long-term growth
drivers. However, in the near term, high price erosion would act as dampeners. Efforts to build-up presence in the
injectables space would also add to growth albeit over the medium to long term. The India business has a robust
growth outlook, backed by pickup in chronic as well as acute therapies and a few substantial high-value launches lined
up. Over the long term, product launches such as Saroglitazar, gRevlimid, and Desidustat offer substantial growth
potential. With a substantial reduction in debt, Zydus Lifesciences has strengthened its balance sheet. Management
looks to keep an eye on debt reduction going ahead as well. This augurs well and would strengthen the company’s
financial muscle. Strong earnings prospects, healthy return ratios, and strengthening balance sheet are key positives
for Cadila. In the near term, US growth is expected to moderate, while India and other geographies are likely to stage
double-digit growth.
n Valuation - Retain Buy with a revised PT of Rs. 687
We see many visible levers of growth for Zydus going forward that would help sustain high earnings growth momentum
in near term led by 1) gRevlimid and other launches such as gVascepa and Transdermal in the US that will play out in
H2FY24 and 2) steady domestic formulations growth led by its strong biosimilars scale-up. We expect EBITDA margins
to expand around 100bps every year to 24% by FY25E despite R&D spending in the range of 8% (investment towards
innovation). A healthy balance sheet (Rs. 1,600 crore in cash) will aid in case of M&A and a clean compliance track
record will help garner any short-term opportunities in the US. Citing higher visibility of sales traction in the US (likely
to pass $1 billion in FY24) that will lead to strong earnings trajectory going forward we raise our PT to Rs. 687 per
share. At current market prices, Zydus trades at 21.7x of FY24E EPS of Rs. 26 and 18x of FY25E EPS of Rs. 18 per share.
November 07, 2023 9

Stock Update
About company
Zydus Lifescience is one of the leading pharmaceutical companies in India. The company is present across the
pharmaceutical value chain of research, development, manufacturing, marketing, and selling of finished dosage
human formulations (generics, branded generics, and specialty formulations, including biosimilars and vaccines),
active pharmaceutical ingredients (APIs), animal healthcare products, and consumer wellness products. The company
has a global presence and sells its products in the US, India, Europe, and emerging markets, including countries in
Latin America, Asia Pacific region, and Africa. The company is also engaged in research and development activities
focused across the value chain of API process development, generics development for simple as well as differentiated
dosage forms such as modified release oral solids, transdermal, topicals and nasals, biologics, vaccines, and new
chemical entities (NCE).
Investment theme
Zydus Lifescience is favorably progressing in its efforts to build an alternative growth platform (NCE, biologics, and
vaccines) that should start delivering over the medium to long term and reduce the company’s dependence on
limited competition assets in the US for its earnings. India business, including the consumer wellness segment, is
likely to grow at a healthy pace, albeit over the medium to long term. Zydus Lifesciences is in a sweet spot, wherein
both its geographies have an improved growth outlook. Easing pricing pressures, sturdy new product pipeline, and
ramp-up in the recent product launches would be key growth drivers for the US business. The efforts to build up
presence in the injectables space would also add to growth albeit over the medium to long term. India business
is also showing signs of a pick-up in growth momentum, led by a solid presence in the chronic and sub-chronic
segments and an improving outlook for the acute segment. Further, COVID-19 related opportunities would add to
the company’s growth momentum.
Key Risks
1) Regulatory compliance risk; 2) delay in product approvals; 3) currency risk; and 4) risk concentration in the US
portfolio.
Additional Data
Pankaj R. Patel Chairman
Dr. Sharvil P. Patel Managing Director
Mr. Ganesh Nayak COO & Executive Director
Mr. Nitin Parekh CFO
Source: Company
Top 10 shareholders
1 SBI Funds Management 4.61
2 Life Insurance Corp India 3.19
3 Govt Pension Fund 2.48
4 BlackRock Inc. 2.54
5 Norges Bank 2.31
6 Vanguard Group Inc. 2.12
7 HDFC AMC 1.64
8 NPS Trust 1.55
9 UTI AMC 1.09
10 Schroders PLC 1.02
Source: Bloomberg
November 07, 2023 10

Stock Update
Hindustan Petroleum Corporation Ltd
Stellar Q2; potential value unlocking from lubes biz. key catalyst
Powered by the Sharekhan 3R Research Philosophy Oil & Gas Sharekhan code: HINDPETRO
Reco/View: Buy  CMP: Rs. 279 Price Target: Rs. 320 
3R MATRIX + = -
Result Update
Summary
Right Quality (RQ) ü
Q2 standalone PAT of Rs. 5,118 crore was significantly above our estimate, led by better-than-
Right Valuation (RV) ü expected marketing margin, inventory gain, higher other income and lower tax rate.
GRM improved by 79% q-o-q to $13.3/bbl but was below our estimate of $15.5/bbl as well at a
+ Positive = Neutral – Negative discount of $5/bbl versus peers.
After super-strong H1, the earnings environment would be challenging for OMCs in H2FY24 as
What has changed in 3R MATRIX Brent crude oil is on the boil and slump in GRMs. The normalisation of geopolitical risk premiums in
Old New oil prices is key to improving sentiments.
We maintain a Buy on HPCL with an unchanged PT of Rs. 320 on inexpensive valuation of 3.7x/0.9x
RS  FY25E EPS/BV and FY25E dividend yield of ~8-9%. Potential IPO for lubes business or induction of
strategic investor could unlock value.
RQ 
Hindustan Petroleum Corporation Limited (HPCL) posted strong Q2FY24 results with a large
RV  beat of 56%/87% in standalone operating profit/PAT at Rs. 7836 crore/Rs. 5118 crore, down
19%/18% q-o-q led by better-than-expected marketing performance and inventory gain of
Rs2,100 crore (marketing/refinery inventory gain of Rs1200 crore/Rs900 crore). Although
GRM grew strongly by 79% q-o-q to $13.3/bbl but missed our estimate of $15.5/bbl and was
ESG Disclosure Score NEW at discount $5/bbl to peers. Refinery throughput/marketing volume of 5.8mmt/10.7mmt, up
6.5%/down 9.4% q-o-q was in-line while pipeline throughput of 6.1 mmt (down 5.5% q-o-q) was
ESG RISK RATING
39.86 % below our estimate. The sequential decline in the earnings should be seen from the high base
of Q1FY24.
High Risk Key positives
Better-than-expected marketing margin.
NEGL LOW MED HIGH SEVERE
Key negatives
0-10 10-20 20-30 30-40 40+
Lower-than-expected GRM of $13.3/bbl.
Source: Morningstar
Management Commentary
Company details Capex plan of Rs75k crore over the next 5 years. Mix - 25-30% on RE/gas, 20% on refinery and 50-
55% on marketing. The focus would be on investment in RE, gas, biofuels and value addition in the
Market cap: Rs. 39,528 cr refinery.
52-week high/low: Rs. 310/204 This fiscal HPCL to decide on IPO for lubes business or induction of a strategic partner.
Rajasthan refinery – Capex plan of Rs73k crore; out of which Rs37k crore already spent; 72% project
NSE volume: work completed. Refinery part to be completed by Mar’24 and followed by Petchem. D/E of Rs48.6k
41.4 lakh
(No of shares) crore/Rs24.4k crore. HPCL equity contribution at Rs18k crore (Rs9.5k crore already invested). Expect
GRM/EBITDA of $20/bbl and Rs8k crore.
BSE code: 500104
Vizag refinery – Expect to operate at 13.7mt in Q4FY24 and would further ramp up to 15mt post
NSE code: HINDPETRO commissioning of bottom upgradation unit. Commissioned Hydrocracker which would improve
diesel yield.
Free float:
64.0 cr Product sourcing – Post Rajasthan refinery entire 100%/70% of diesel/petrol would be sourced
(No of shares) from HPCL/JV refineries.
Revision in estimates – We have raised our FY24-25 earnings estimate to factor in higher GRM
Shareholding (%) assumption, offsetting lower auto fuel marketing margin. We have also introduced our FY26 earnings
estimate in this report.
Promoters 54.9 Our Call
FII 13.3 Valuation – Maintain Buy on HPCL with an unchanged PT of Rs. 320: HPCL’s valuation of 3.7x its
FY2025E EPS and 0.9x its FY2025E P/BV is attractive, and stock offers high ~8-9% dividend yield based
DII 22.6 on FY25E DPS. Hence, we maintain a Buy on HPCL with an unchanged PT of Rs. 320. Sustained high
crude oil prices is a key risk to earnings recovery, especially given OMCs’ inability to hike petrol/diesel
Others 9.2 price given the general election expected in May 2024.
Key Risks
Price chart Lower-than-expected auto fuel marketing margin in case of a spike in crude oil price amid a continued
350 inability to raise petrol/diesel prices and lower-than-expected refining margins remain a key risk to
earnings and valuation.
300
250
Valuation (Standalone) Rs cr
200
Particulars FY22 FY23E FY24E FY25E FY26E
150 Revenue 3,48,428 4,38,894 3,73,252 3,51,296 3,51,296
Jul-23
Nov-22
Nov-23
Mar-23
OPM (%) 2.6 -2.1 6.1 4.8 5.1

Adjusted PAT 6,383 -8,974 15,106 10,642 11,106
% y-o-y growth -40.1 -240.6 -268.3 -29.5 4.4
Price performance
Adjusted EPS (Rs.) 45.0 -63.3 106.5 75.0 78.3
(%) 1m 3m 6m 12m P/E (x) 6.2 -4.4 2.6 3.7 3.6
Absolute 11 5 10 36 P/B (x) 1.0 1.4 1.1 0.9 0.8
Relative to EV/EBITDA (x) 8.7 -10.9 3.4 4.5 3.9
12 7 5 30 RoNW (%) 17.0 -26.9 47.0 26.8 24.1
Sensex
RoCE (%) 11.6 -11.2 24.7 17.6 18.1
Sharekhan Research, Bloomberg

Stock Update
Strong Q2; PAT beat estimate on better-than-expected marketing performance & inventory gain
Standalone operating profit of Rs7,836 crore (down 19% q-o-q) was significantly above our estimate of Rs5014 crore.
The large beat could be attributed to better-than-expected marketing margin and inventory gains. The sequential
decline in operating profit was due to the exceptionally high base of Q1FY24. GRM at $13.3/bb (up 79%) was below our
estimate of $15.5/bbl and at a discount of $5/bbl versus peers. Volumes were broadly line with refinery throughput/
marketing volume at 5.8mmt/10.7mmt, up 6.5%/down 9.4% q-o-q. PAT of Rs5118 crore (down 17.5% q-o-q) was 87%
above our estimate, led by better marketing margin, inventory gain, higher other income and lower tax rate.
Results (standalone) Rs cr
Particulars Q2FY24 Q2FY23 YoY (%) Q1FY24 QoQ (%)
Revenue 95,320 1,08,056 -11.8 1,11,961 -14.9
Total Expenditure 87,484 1,09,915 -20.4 1,02,306 -14.5
Reported operating profit 7,836 -1,859 NA 9,655 -18.8
Adjusted operating profit 7,836 -7,476 NA 9,655 -18.8
Other Income 725 642 13.0 628 15.5
Interest 579 595 -2.6 588 -1.5
Depreciation 1240 1081 14.7 1364 -9.1
Reported PBT 6,742 -2,893 NA 8,331 -19.1
Adjusted PBT 6,742 -8,510 NA 8,331 -19.1
Tax 1624 -721 NA 2127 -23.6
Reported PAT 5,118 -2,172 NA 6,204 -17.5
Adjusted PAT 5,118 -6,389 NA 6,204 -17.5
Equity Cap (cr) 142 142 142
Reported EPS (Rs) 36.1 -15.3 NA 43.7 -17.5
Adjusted EPS (Rs) 36.1 -45.0 NA 43.7 -17.5
Margins (%) BPS BPS
Adjusted OPM 8.2 -1.7 NA 8.6 -40.2
Adjusted NPM 5.4 -2.0 NA 5.5 -17.2
Tax rate 24.1 24.9 -83.3 25.5 -143.9
Key operating metrics

Operating performance Q2FY24 Q2FY23 YoY (%) Q1FY24 QoQ (%)
Reported GRM ($/bbl) 13.3 8.4 58.5 7.4 79.2
Refining throughput (mmt) 5.8 4.5 28.1 5.4 6.5
Market sales including exports (mmt) 10.7 10.4 3.4 11.9 -9.4
Pipeline throughput (mmt) 6.1 5.5 10.8 6.5 -5.5

Stock Update

n Sector view - The inability to hike petrol and diesel prices a concern for OMCs
OMCs’ earnings remained stressed in 9MFY23 on two counts – first, sustained high crude oil prices and an inability
to hike retail petrol/diesel prices that would mean large marketing losses on auto fuels and second, refining margins
have declined sharply due to lower transportation fuel crack spreads. Moreover, a weakening Indian Rupee would
add to trouble, given a rise in forex losses. OMCs’ inability to hike petrol and diesel prices also remains a concern.
n Company outlook - H2 earning environment challenging
Over Q4FY23 to Q2FY24, earnings performance has been strong and reflects high GRM and better auto fuel marketing
margins. Post super strong H1 earnings, we believe that the earnings environment will be tough for OMC in H2FY24
given a sharp rise in Brent crude oil price and steep fall in GRM. If high crude oil sustains, then OMCs may also incur
large auto fuel under-recoveries and the same result in losses in H2FY24.
n Valuation - Maintain Buy on HPCL with an unchanged PT of Rs. 320
HPCL’s valuation of 3.7x its FY2025E EPS and 0.9x its FY2025E P/BV is attractive, and stock offers high ~8-9% dividend
yield based on FY25E DPS. Hence, we maintain a Buy on HPCL with an unchanged PT of Rs. 320. Sustained high crude
oil prices is a key risk to earnings recovery, especially given OMCs’ inability to hike petrol/diesel price given the general
election expected in May 2024.
One-year forward P/BV (x) band
3.0
2.5
2.0
1.5
P/E (x)
1.0
0.5
0.0
Jul-17
Jul-22
Jun-20
Nov-20
Apr-16
May-18
Apr-21
May-23
Aug-19
Sep-16
Feb-17
Dec-17
Mar-19
Jan-20
Sep-21
Feb-22
Dec-22
Oct-18
Oct-23
P/BV (x) Avg. P/BV (x) Peak P/BV (x) Trough P/BV (x)
Source: Sharekhan Research

Stock Update
About company
HPCL is engaged in the business of crude oil refining and marketing of petroleum products. The company has a
standalone refining capacity of 20.5 mmt (Mumbai/Vizag refinery capacity of 9.5mtpa/11mtpa) and retail fuel outlets
of 21,242. HPCL also operates a petroleum product pipeline network with a capacity of 27mtpa and markets ~43 mmt
of petroleum products. The company is under the process to expand its Vizag refinery to 15mtpa and is implementing
refinery project with capacity of 9mtpa at Barmer in Rajasthan.
Investment theme
Earning environment to be tough for OMC in H2FY24 given the sharp rise in Brent crude oil price and steep fall in GRM.
The normalisation of geopolitical risk premiums in oil prices is key to improving sentiments for OMCs. HPCL’s valuation
is attractive, and the stock offers a high dividend yield on FY25E DPS.
Key Risks
Lower-than-expected auto fuel marketing margin in case of a spike in crude oil price or auto fuel price cut.
Lower-than-expected refining margins in case of surplus global refining capacity.
Lower-than-expected marketing volume and refining throughput in case of economic slowdown.
Additional Data
Pushp Kumar Joshi Chairman & Managing Director
Rajneesh Narang Director – Finance
S. Bharathan Director – Refineries
Amit Garg Director – Marketing
Source: Company
Top 10 shareholders
1 Life Insurance Corp of India 5.13
2 HDFC Asset Management Co Ltd 4.82
3 ICICI Prudential Asset Management 3.64
4 Republic of Singapore 1.81
5 Vanguard Group Inc/The 1.80
6 BlackRock Inc 1.34
07 Kotak Mahindra Asset Management Co 1.30
8 Jupiter Fund Management PLC 0.83
9 DSP Investment Managers Pvt Ltd 0.82
10 Franklin Resources Inc 0.70
Source: Bloomberg

Stock Update
Devyani International Ltd
Dull Q2; long-term growth levers in place
Powered by the Sharekhan 3R Research Philosophy Consumer Discretionary Sharekhan code: DEVYANI
Reco/View: Buy  CMP: Rs. 188 Price Target: Rs. 230 â
3R MATRIX + = -
Result Update
Right Sector (RS) ü á Upgrade  Maintain â Downgrade
Right Valuation (RV) ü Devyani International Ltd (DIL) posted fourth consecutive quarter of weak SSSG with KFC’s and Pizza
Hut’s SSSG standing at -3.9% and -10.4%, respectively. A recovery is eyed in H2FY2024 led by higher
+ Positive = Neutral – Negative demand from festive season and the World Cup.
DIL has maintained its guidance of opening 250-275 new stores in FY24 and eyes 2,000 stores by 2026.
Capex is expected to be met from internal accruals.
What has changed in 3R MATRIX
Strong prospects of the QSR industry, aggressive store additions and formation of JV for setting up food
Old New courts at railway stations would drive revenue growth in the long term.
Stock trades at 28.3x/19.9x its FY2024E/FY2025E EV/EBIDTA. We maintain a Buy with a revised PT of Rs.
RS  230.
RQ  DIL’s Q2FY2024 performance was affected by multiple headwinds including the extended month of
Shraavan, customer preference shifting to non-pizza (lower value) categories and Nigerian currency
devaluation, which dragged SSSG and ADS across brands and geographies. Revenue growth of 9.6% y-o-y
RV  to Rs. 819.5 crore was largely led by higher store addition of 68 stores in Q2. Pizza Hut’s SSSG declined by
10.4% and KFC’s SSSG fell by 3.9%. EBITDA margin fell by 277 bps y-o-y to 19.4%, due to lower operating
leverage. Adjusted PAT declined by 29.2% y-o-y to Rs. 46.2 crore, impacted by a 4% y-o-y decline in EBITDA
and higher interest and depreciation costs. In H1FY2024, revenues grew by 14.7% y-o-y to Rs. 1,666 crore,
ESG Disclosure Score NEW EBITDA margin fell by 277 bps y-o-y to 19.9% and adjusted PAT declined by 43.1% y-o-y to Rs. 79.6 crore.
Key positives
ESG RISK RATING Costa’s SSSG came at 8.5%; revenues grew by 57.4% y-o-y.
30.72
DIL opened 115 stores in H1; maintained guidance of opening 275-300 stores FY2024.
High Risk Gross margin of KFC and Pizza Hut improved by 110 bps and 120 bps, respectively.
Key negatives
NEGL LOW MED HIGH SEVERE Pizza Hut’s SSSG declined by 10.4%; KFC’s SSSG fell by 3.9%.
0-10 10-20 20-30 30-40 40+ EBITDA margin fell by 277 bps y-o-y to 19.4%, due to lower operating leverage.
Source: Morningstar KFC and Pizza Hut witnessed a sharp decline in brand contribution from 21.5% and 17% in Q2FY2023 to 19.4%
and 7.7% in Q2FY2024.
International business’ revenue declined by 25.6% y-o-y to Rs. 41.6 crore, hit by currency devaluation in Nigeria.
Company details
Market cap: Rs. 22,616 cr Growth was impacted by seasonality (Q2 is a seasonally weak quarter), an extended Shraavan, competition in the
pizza category from consumers shifting to non-pizza categories and Nigerian currency devaluation.
52-week high/low: Rs. 228 / 134 The management is optimistic about recovery in Q3 aided by festive demand and higher demand due to the
World Cup. ADS across brands is expected to improve in couple of quarters as stores mature and with stabilisation
NSE volume: of macro issues.
20.5 lakh
(No of shares) KFC’s SSSG declined q-o-q (versus stable SSSG reported by peers) as DIL has higher presence in South India.
Pizza Hut saw a sharp decline in SSSG in Q2FY24 as fun-flavour pizza were introduced in Q2FY23. The company is
BSE code: 543330 taking efforts to improve mix and has arrested the ADS decline led by marketing initiatives and menu innovation.
Margins are expected to improve with recovery in ADS.
NSE code: DEVYANI
Costa is expected to scale up led by aggressive store expansion, setting up Costa counters at cricket World Cup
Free float: stadiums in Mumbai & Kolkata and partnership with PVR.
44.9 cr The management has indicated that the Nigerian business would need financial support till the situation
(No of shares) stabilises for the next couple of years. However, the amount is likely to be minor in context of size of overall
business.
Shareholding (%) DIL has entered into a JV with R.K. Associates & Hoteliers Private Limited (RKAHPL) to set up food courts,
standalone food and beverage outlets, and lounges at the railway stations to capitalise on the government’s
Promoters* 62.7 plan to modernise railway stations. However, management expects it to materialise over the next few quarters.
Revision in earnings estimates: We have lowered our earnings estimates for FY2024 and FY2025 to factor in lower-
FII 16.4 than-expected performance in Q2FY2024. We will keenly monitor the performance in the coming quarters.
Our Call
DII 8.3 View – Maintain Buy with revised PT of Rs. 230: DIL posted a weak show in Q2FY2024 owing to multiple headwinds.
However, management expects rebound in consumer spending in H2FY2024 aided by festive demand and higher
Others 12.5 demand due to World Cup. DIL with strong brands under its kitty and focus of having 2,000 stores by FY2026 will be
one of the key players in the Indian QSR play. Further, formation of JV to set up food courts at railway stations is long
Price chart term positive. The stock trades at 28.3x and 19.89x its FY2024E and FY2025E EV/EBIDTA. Given the strong business
model and long-term growth prospects, we maintain Buy on the stock with a revised price target of Rs. 230.
240
Key Risks
220
Any slowdown in demand, stiffer competition due to entry of new brands or slowdown in expansion in key markets
200 are some of the key risks to our earnings estimates.
180
160 Valuation (Consolidated) Rs cr
120 Revenue 2,998 3,681 4,709 5,691
Jul-23
Nov-22
Nov-23
Mar-23
EBITDA margin (%) 21.9 20.5 22.2 22.8

Adjusted PAT 283 202 393 547
% Y-o-Y growth 64.1 -28.4 94.1 39.4
Price performance
Adjusted EPS (Rs.) 2.4 1.8 3.4 4.7
(%) 1m 3m 6m 12m P/E (x) 76.6 - 55.1 39.5
Absolute -13.5 -3.1 5.3 0.9 P/B (x) 23.3 19.3 14.4 10.7
Relative to EV/EBIDTA (x) 32.8 28.3 19.9 15.6
-12.6 -1.5 0.1 -5.3 RoNW (%) 34.1 18.9 28.7 29.8
Sensex
RoCE (%) 17.6 16.0 22.6 25.2

Stock Update
Weak Q2 – SSSG remained weak, EBITDA margin declined by 277 bps y-o-y
DIL’s revenue grew by 9.6% y-o-y to Rs. 819.5 crore aided by store addition while average daily sales of key brands
remained muted y-o-y. Revenue came in lower than our and average street expectation of Rs. 871-872 crore. KFC,
Pizza Hut and Costa revenues grew by 14.9%, 1.5% and 57.4% y-o-y, respectively. The company opened 68 stores in
Q2 taking total count to 1,358 stores. Softening of input costs aided in 61 bps y-o-y gross margin expansion to 70.8%,
while EBITDA margin fell by 277 bps y-o-y to 19.4%, due to lower operating leverage. EBITDA margin missed ours and
the average street’s expectation of 20.6-20.9%. Contribution from KFC stood at 19.4% (versus 21.5% in Q2FY2023) and
for Pizza Hut stood at 7.7% (against 17% in Q2FY2023). EBITDA declined by 4.1% y-o-y to Rs. 58.8 crore, while higher
interest and depreciation costs led to 29.2% y-o-y decline in adjusted PAT to Rs. 46.2 crore, in line with our and street
average expectation of Rs. 47-48 crore. Exceptional items includes impairment of goodwill in relation to one of the
company’s subsidiary (Rs. 14 crore). After considering the exceptional items, reported PAT declined by 37% y-o-y to Rs.
358 crore. In H1FY2024, revenue grew by 14.7% y-o-y to Rs. 1,666 crore, EBITDA margins fell by 277 bps y-o-y to 19.9%
and adjusted PAT declined by 43.1% y-o-y to Rs. 79.6 crore.
Store addition momentum continued
DIL opened a net 68 stores in Q2FY2024 including 30 KFC stores, 14 Pizza Hut stores, 23 Costa stores and one Vaango
store, taking the total store count to 1,358 stores at Q2FY2024-end. As of September 30, 2023, DIL operates 594 KFC
stores, 539 Pizza Hut stores, 146 Costa Coffee stores and 79 other brand stores across all geographies. The company has
1,279 stores of core brands (KFC, Pizza Hut, and Costa) as of September 30, 2023 as compared to 1,212 stores as on June
30, 2023. DIL has maintained its guidance of opening 275-300 stores during FY2024 across brands and geographies,
and targets to reach 2,000 stores by 2026. DIL is on track to open 250-275 stores in FY24 and has maintained its target
of touching 2,000 stores by 2026. The management has indicated that the capex required for the store expansion is
planned to be incurred though internal accruals.
KFC – Store addition-led growth as ADS and SSSG remained weak
Revenues grew by 14.9% y-o-y to Rs. 509 crore majorly aided by new store additions. The company added 30 net new
stores in Q2FY2024 (50 stores net addition in H1FY2024). ADS came in lower at Rs. 1.09 lakh as compared to Rs. 1.21
lakh in Q2FY2023, while SSSG came in at -3.9%. Gross margin of KFC business improved by 110 bps y-o-y to 69%, while
brand contribution declined by 210 bps y-o-y to 19.4%, mainly due to lower ADS. Dine-in contribution declined to 61%
in Q2FY2024 versus 64% in Q2FY2023.
Pizza Hut – Growth driven by store additions; ADS and SSSG remained weak
Revenues grew by 1.5% y-o-y to Rs. 184 crore majorly driven by new store additions. The company added a net 14 stores
in Q2FY2024 (29 stores net addition in H1FY2024). ADS declined by 13% y-o-y to Rs. 0.39 lakh, while SSSG declined by
10.4% y-o-y. Gross margins of Pizza Hut business improved by 120 bps y-o-y to 75.7%, while the brand’s contribution
fell by 930 bps y-o-y to 7.7%, impacted by higher marketing spends and ADS deleverage. Dine-in contribution stood
stable y-o-y at 45%.
Costa – moderation in ADS and SSSG compared to earlier quarters
Revenues grew by 57.4% y-o-y to Rs. 34.6 crore, largely aided by store expansion. The company added net 34 stores
(net) in H1FY2024 (23 stores added in Q2FY2024), taking the total store count to 146 stores at Q2FY2024-end. ADS for
the quarter declined by 3% y-o-y to Rs. 0.30 lakh, while SSSG came in at 8.5%. Gross margin of Costa business declined
by 330 bps y-o-y to 76.3%, while brand contribution plunged from 19.6% in Q2FY2023 to 14.6% in Q2FY2024.
Currency devaluation in Nigeria adversely impacted international business
International business revenues declined by 25.6% y-o-y to Rs. 41.6 crore, impacted by currency devaluation in Nigeria
(DIL has large exposure to Nigeria). The store count stood stable q-o-q, with 60 stores at Q2FY2024-end. ADS for the
international business reduced to Rs. 0.79 lakh from Rs. 1.34 lakh in Q2FY2023.

Stock Update
Key concall highlights

Multiple headwinds in Q2; Q3 expected to be better: Q2 was impacted due to multiple headwinds such as 1.
Q2 is a seasonally weak quarter, 2. Extended Shraavan wherein consumption of meat is lower, 3. Competition at
local and national level in the pizza category from consumers shifting to non-pizza categories, 4. Nigerian currency
devaluation sharply impacting the Nigerian business’ performance. However, management is optimistic about
recovery in Q3 aided by festive demand and higher demand due to World Cup. ADS across brands is expected to
improve in couple of quarters as stores mature and with stabilisation of macro issues.
KFC sees q-o-q fall due to higher presence in South: Management has guided that KFC’s SSSG declined q-o-q
(versus stable SSSG reported by peers) as DIL has higher presence in South. KFC’s brand contribution is expect to
recover to 20-21% in a couple of quarters with stabilisation of macro issues.
Double-digit decline in Pizza Hut’s SSSG due to launch of value rage in Q2FY2023: PH saw high decline in
SSSG in Q2FY2024 as fun-flavour pizza were introduced in Q2FY2023. The company is taking efforts to improve
mix (aiming for higher contribution from premium pizzas versus value range) and has arrested the decline in ADS
led by marketing initiatives and menu innovation. Margins are expected to improve with recovery in ADS.
Costa scaling up: The company has undertaken multiple steps to scale up the Costa brand including aggressive
store expansion, setting up Costa counters at cricket World Cup stadiums in Mumbai & Kolkata and partnership
with PVR.
Naira devaluation hit international business: Nigeria saw a significant currency devaluation in Q2FY2024
(currency devalued by over 60%) which led to lower disposable income and lower discretionary spending.
Management has indicated that the Nigerian business would need financial support until the situation stabilises
for the next couple of years. However, the amount is likely to be minor in context of size of overall business.
Formation of JV for setting up food courts at railway stations: DIL has entered into a joint venture agreement
with R.K. Associates & Hoteliers Private Limited (RKAHPL) to setup food courts, standalone food and beverage
outlets, and lounges at the railway stations. DIL and RKAHPL shall invest in the JV in the ratio of 51:49, respectively.
The company has undertaken this step to capitalise on the government’s plan to modernise railway stations. So,
a place for food courts at railway stations is expected to be allocated.

Stock Update
Particulars Q2FY24 Q2FY23 y-o-y % Q1FY24 q-o-q %
Net revenue 819.5 747.4 9.6 846.6 -3.2
Material cost 239.3 222.9 7.4 246.8 -3.0
Employee cost 110.9 88.1 26.0 111.8 -0.8
Other expenditure 310.5 271.0 14.6 314.6 -1.3
Total expenditure 660.7 581.9 13.5 673.2 -1.9
Operating profit 158.8 165.5 -4.1 173.4 -8.5
Other income 6.6 4.5 45.8 6.8 -3.6
Interest expenses 41.7 34.8 19.7 40.4 3.2
Depreciation 90.7 65.2 39.1 79.6 13.9
Profit Before Tax 33.0 70.0 -52.9 60.3 -45.3
Tax -13.2 4.9 - 26.9 -
Adjusted PAT 46.2 65.2 -29.2 33.4 38.1
Extra-ordinary gain / loss -10.4 -8.4 23.9 -35.0 -70.4
Reported PAT 35.8 56.8 -37.0 -1.6 -
Adjusted EPS (Rs.) 0.4 0.5 -29.2 0.3 38.1
bps bps
GPM (%) 70.8 70.2 61 70.8 -5
OPM (%) 19.4 22.1 -277 20.5 -111
NPM (%) 5.6 8.7 -309 3.9 169
Tax rate (%) -39.9 6.9 - 44.6 -190
Source: Company; Sharekhan Research
Brand-wise revenue performance

Particulars Q2FY24 Q2FY23 y-o-y % Q1FY24 q-o-q %
KFC 509 443 14.9 516.4 -1.4
Pizza Hut 184 181.2 1.5 183.5 0.3
Costa Coffee 34.6 22 57.3 32.4 6.8
Others 50.3 45.3 10.9 56.3 -10.8
DIL India revenue 777.9 691.5 12.5 788.6 -1.4
International 41.6 55.9 -25.6 58 -28.3
DIL Consolidated revenue 819.5 747.4 9.6 846.6 -3.2

Stock Update

n Sector Outlook – Long-term growth prospects of the QSR industry are intact
Organic same-store-sales of QSR companies is likely to be muted due to weak consumer sentiments as higher
inflationary pressures affected demand, while revenue growth is expected to be largely driven by strong store
expansion. We expect growth to be muted in H1FY2024 but expect it to gradually recover prior to the festive season.
Having said that, QSR’s long-term growth prospects are intact and QSRs are poised to beat the food services industry
on higher demand for out-of-home consumption, market share gains from unorganised players, increased online
delivery and food technology, menu innovation driving new demand, and incremental demand on account of offers
and discounts. With robust growth drivers, QSRs are likely to grow strongly, outpacing other sub-segments in the
food service industry in the coming years.
n Company Outlook – Strategies in place to drive revenue and earnings growth
DIL posted the fourth consecutive quarter of weak SSSG in Q2FY2024 as consumer sentiments stayed weak. However,
the company has multiple strategies in place, including aggressive store openings, focusing on flagship stores
with higher ADS for Pizza Hut, improving the penetration of KFC, and developing the Costa brand, which will aid
strong revenue growth in the medium to long term. Increased contribution from relatively high-margin KFC brand,
improving store fundamentals of Pizza Hut brand, and fast scale-up in Costa will help in consistent improvement in
gross margins in the years ahead. This along with cross-brand synergies and improved profitability per unit will help
EBIDTA margins to improve to 23% in FY2026E from 20% in FY2021.
n Valuation – Retain Buy with a revised PT of Rs. 230
DIL posted a weak show in Q2FY2024 owing to multiple headwinds. However, management expects rebound in con-
sumer spending in H2FY2024 aided by festive demand and higher demand due to World Cup. DIL with strong brands
under its kitty and focus of having 2,000 stores by FY2026 will be one of the key players in the Indian QSR play. Further,
formation of JV to set up food courts at railway stations is long term positive. The stock trades at 28.3x and 19.89x its
FY2024E and FY2025E EV/EBIDTA. Given the strong business model and long-term growth prospects, we maintain
Buy on the stock with a revised price target of Rs. 230.
Peer Comparison
Particulars
Jubilant Foodworks 86.6 92.9 60.7 31.8 32.3 25.8 17.0 15.0 19.0
Restaurant Brands Asia - - - 52.1 25.8 18.7 - - -
Devyani International 76.6 - 55.1 32.8 28.3 19.9 17.6 16.0 22.6

Stock Update
About the company

DIL is the largest franchisee of Yum Brands in India and is among the largest operators of chain QSR in India, on a non-
exclusive basis, and operates 1,358 stores across more than 244 cities in India, Nigeria, and Nepal, as of September 30,
2023. DIL’s business is broadly classified into three verticals that includes stores of KFC, Pizza Hut, and Costa operated
in India – Core Brands Business; stores outside India primarily comprising KFC and Pizza Hut stores operated in Nepal
and Nigeria – International Business; and certain other operations in the food and beverage (F&B) industry, including
stores of the company’s own brands such as Vaango and Food Street – Other Business.
Investment theme
DIL is a multi-dimensional QSR player with a strong portfolio of global brands (including KFC, Pizza Hut, and Costa).
The company’s strong association with Yum Brands will help it create more opportunities in India’s growing QSR
market. DIL plans to add 250-300 outlets p.a. (as against 60-70 stores added p.a. in the earlier years) with a cluster-
based approach in India. A strong recovery in out-of-home consumption, rising traction for branded products, strong
store expansion plans, boosting value proposition through an innovated menu, widening delivery reach, and various
cost-saving initiatives will help DIL’s revenue and EBITDA to post a CAGR of 25% and 18%, respectively, over FY2023-
FY2026E. The company is likely to generate a cumulative FCF of ~Rs. 1,000 crore over FY2023-FY2026E.
Key Risks
Slowdown in demand: Any slowdown in the demand environment would impact revenue growth.
Increased raw-material costs: A significant increase in key raw-material prices would impact profitability.
Increased competition: Increased competition in the QSR category would act as a threat to revenue growth.
Additional Data
Ravi Kant Jaipuria Chairman
Virag Joshi Whole-time Director (President & CEO)
Manish Dawar Whole time Director and Chief Financial Officer
Pankaj Virmani Company Secretary & Compliance Officer
Source: Company
Top 10 shareholders
1 Yum Restaurants India Pvt Ltd 4.4
2 Tamasek Holdings Pte Ltd 2.9
3 Nippon Life India AMC 1.7
4 Capital Group Cos Inc 1.7
6 Vanguard Group Inc 1.4
7 ICICI Prudential Life Insurance 1.3
8 Sabre Investment Consultan 1.2
9 Aditya Birla Sun Life AMC 0.8
10 FIL Ltd 0.6
Source: Bloomberg

Stock Update
Radico Khaitan Ltd
Strong Q2; margins improve sequentially
Powered by the Sharekhan 3R Research Philosophy Consumer Goods Sharekhan code: RADICO
Reco/View: Buy  CMP: Rs.1,366 Price Target: Rs. 1,660 
3R MATRIX + = -
Result Update
Right Valuation (RV) ü Radico Khaitan Limited’s (RKL’s) Q2FY2024 performance beat expectations with revenues and PAT
growing by 22% and 19% y-o-y respectively; EBIDTA margins expanded by 127 bps y-o-y to 13.1%.
+ Positive = Neutral – Negative Revenue of Prestige & Above (P&A) segment grew by 36% y-o-y in Q2 (22% volume growth). Management
eyes strong volume growth in H2 led by festive demand.
What has changed in 3R MATRIX EBIDTA margins improved by 60 bps q-o-q to 13.1% in Q2; likely to reach 14-15% by FY24-end; targets
EBIDTA margins to reach high teens in the next three years.
Old New Stock is currently trading at 59x/40x/33x its FY24E/FY25E/FY26E earnings. We retain a Buy rating on the
stock with an unchanged PT of Rs. 1,660.
RS 
RKL’s Q2FY2024 performance was a marginal beat on ours as well as the street’s expectation driven by higher-
RQ  than-expected volume growth in the P&A segment, high single-digit rise in realization (led by a better mix
and price hikes) and sequential improvement in EBIDTA margins. RKL’s net revenues grew by 23% y-o-y to Rs.
RV  925 crore driven by 36% y-o-y growth in the P&A segment and 49% y-o-y growth in the non-IMFL segment.
Gross margins improved by 259 bps y-o-y (54 bps q-o-q) to 44.1%. OPM rose by 127 bps y-o-y (57 bps q-o-q) to
13.1%. Operating profit grew by 35% y-o-y to Rs. 121.2 crore. Higher interest costs and depreciation charges
led to a 19% y-o-y growth in reported PAT to Rs. 64.8 crore. In H1FY224, net revenues grew by 23.7% y-o-y to
ESG Disclosure Score NEW Rs. 1,878.9 crore; EBIDTA margins rose by 80 bps y-o-y to 12.8%; PAT grew by ~14% y-o-y to Rs. 125.1 crore.
Key positives
ESG RISK RATING
33.41 P&A segment’s revenue grew by 36% (volume grew by 22%); value contribution to IMFL segment improved to
70%.
High Risk Net realisations grew by 5% q-o-q to Rs. 1,004.5 per case due to better mix.
Non-IMFL revenues grew by 49% y-o-y to Rs. 226 crore dur to incremental country liquor volumes from new
NEGL LOW MED HIGH SEVERE commissioned Sitapur Facility.
0-10 10-20 20-30 30-40 40+ Magic Moment vodka clocked volumes of over 1.5 million cases.
Source: Morningstar Key negatives
Regular and royalty brands sales volumes fell by 16.5% and 10% y-o-y, respectively.
Company details Management Commentary
Market cap: Rs. 18,264 cr Extension of brands in new states, strong traction to premium categories and new launches in white/whiskey
space will help P&A volumes to continuously grow in double digits in the coming years.
52-week high/low: Rs. 1,478 / 910 Regular brands’ volumes will remain flat or will increase by low single digit in H2FY2024.
NSE volume: Management expects business to attain certain stability once P&A to Regular ratio improves to 60:40 in the
2.6 lakh coming years.
(No of shares)
Commissioning of Sitapur facility, price hikes and premiumization will help margins to consistently improve in
BSE code: 532497 the coming quarters. It targets EBIDTA margins to reach 14-15% by FY2024-end and will reach high teens over
the next three years.
NSE code: RADICO Current expanded capacity will take care of incremental volumes in 5-6 years. Hence, there are no major capex
Free float: plans going ahead.
8.0 cr Company has launched two new variants under the Rampur Whiskey brand – Jugalbandi 3 and Jugalbandi-4.
(No of shares)
It has launched Happiness gin to compete with domestic gin brands. It will be launching pink vodka under the
magic moment vodka brand.
Shareholding (%) Revision in estimates – We have broadly maintained our earnings estimates for FY2024, while we have increased
FY2025 estimates by ~4% to factor in little higher volume growth in the P&A category and non-IMFL segment. We
Promoters* 40.3 have introduced FY2026 estimates through this note.
FII 18.9 Our Call
View – Retain Buy with an unchanged PT of Rs. 1,660: RKL posted the second consecutive quarter of strong
DII 23.8 double digit volume growth of above 20% in the P&A brands. Premiumisation will drive consistent strong double-
digit earnings growth along with the support of backward integration in the coming years. We like the company’s
Others 17.1 focus on launching new products in the brown and white spirits space targeting the premium/luxury segment to
consistently gain share in key market and grow ahead of industry. Margins have bottomed-out and we should expect
Price chart consistent improvement in profitability and cash flows in the coming years. This should further enhance valuation
1500 from the current levels. The stock is currently trading at 59x/40x/33x its FY2024E/25E/26E EPS. We maintain a Buy
1400 rating with an unchanged PT of Rs. 1,660.
1300 Key Risks
1200 Slow expansion in the EBIDTA margins due to change in liquor policies in key states/sustained increase in excise rate
on liquor or volatile increase in the raw material prices would act as a key risk to our earnings growth in the near to
1100
medium term.
1000
Particulars FY23 FY24E FY25E FY26E
Jul-23
Nov-22
Nov-23
Mar-23
Revenue 3,143 3,828 4,438 5,111

OPM (%) 11.4 14.0 16.6 16.9
Price performance Adjusted PAT 204 311 458 559
(%) 1m 3m 6m 12m Adjusted EPS (Rs.) 16.5 23.3 34.3 41.8
P/E (x) 82.8 58.6 39.8 32.7
Absolute 12.4 0.1 21.5 33.3
P/B (x) 8.3 7.4 6.3 5.4
13.2 1.7 16.4 27.2
Sensex RoNW (%) 9.3 12.6 15.9 16.5
Sharekhan Research, Bloomberg RoCE (%) 9.8 14.0 18.7 20.0

Stock Update
Strong Q2 – Revenue growth at 21.5% y-o-y; OPM higher by 127 bps y-o-y
RKL’s net revenue grew by 21.5% y-o-y to Rs. 925 crore ahead of our and average street expectation of Rs. 884 crore and Rs. 905
crore, respectively, led by strong performance by Prestige & Above category (contribution of 70% to IMFL revenues) registering
a growth of 35.6% y-o-y to Rs. 489.7 crore (driven by 21.8% volume growth). Non IMFL segment grew by 49.3% y-o-y to Rs. 226
crore driven incremental country liquor volumes from Sitapur facility and increase in country liquor prices from April-23. Gross
margin and OPM rose 259 bps and 127 bps y-o-y to 44.1% and 13.1% (57 bps q-o-q), respectively aided by softening of raw
material inflation. OPM came largely in-line with our and average street expectation of 12.9%. Operating profit grew by 34.6%
y-o-y to Rs. 121.2 crore. However, adjusted PAT grew by 19.4% y-o-y to Rs. 61.9 crore due to higher interest and depreciation costs.
PAT came in marginally ahead of ours and the average consensus expectation of Rs. 57-59 crore. In H1FY2024, revenue grew by
23.7% y-o-y to Rs. 1,878.9 crore, OPM expanded by 79 bps y-o-y to 12.8% and adjusted PAT increased by 13.6% y-o-y to 125.1
crore.
Volume-led growth in P&A brands continued
P&A brands reported net sales of Rs. 489.7 crore, up 35.6% y-o-y, led by volume growth of 21.8% y-o-y to 2.84 million cases. P&A
brands’ contribution to total IMFL revenues increased from 59.2% in Q2FY2023 to 70% in Q2FY2024 due to a higher volume
contribution of 47.1% in Q2FY2024 versus 37.9% in Q2FY2023, in line with the company’s strategy to grow its premium portfolio.
To support premiumisation and expansion of the brand portfolio, RKL launched next two whiskies in the Jugalbandi series of
eight Indian Single Malt whiskies, i.e. Jugalbandi #3 and Jugalbandi #4, at The Whisky Show in London.
Double-digit growth in non-IMFL segment
Non-IMFL segment registered a strong growth of 49.3% y-o-y to Rs. 226 crore aided by incremental country liquor volumes from
the Sitapur bottling plant and country liquor price hikes in April 2023.
Net debt increases
Net debt rose by Rs. 160.4 crore since March 2023 after a capex of Rs. 156 crore on new projects. Net debt stood at Rs. 771.4 crore
as on September 30, 2023, consisting of long-term debt of Rs. 357.9 crore and short-term debt (including current maturities) of
Rs. 468.4 crore, taking the total debt to Rs. 826.3 crore. Cash & cash equivalents as of September 30, 2023, stood at Rs. 54.9 crore.
Capacity expansion on track
RKL commissioned the Sitapur greenfield distillery in Q2FY2024. The company has incurred a capex of Rs. 834 crore on Rampur
Dual Feed and Sitapur greenfield projects since inception.
Key concall highlights
Sitapur facility commissioned: The company commissioned its 350 KLPD greenfield grain distillery in Sitapur in Q2FY2024.
The facility will be a huge support to its branded business as it will take care of supply of ENA for next six years. After sourcing
to brand portfolio, some portfolio of ENA will be utilized for manufacturing products in the new segment of UP-based liquor
products and rest will be sold outside. Fully commissioning of plant will provide further support to the gross margins and
EBIDTA margins in the coming years. Full benefits of same would start flowing in from FY2025.
Regular brand volumes to gradually improve – Regular brands were affected by weak consumer sentiments. The industry
grew in low single digits in Q2 (a large effect was seen Karnataka due to a 20% increase in excise duty). The management
expects volumes to remain flat or grow in mid-single digit in H2FY2024 with price hike in some states getting stabilized.
Further Canteen store department has initiated price hike of 6% on popular brands.
Raw material prices to stabilise in quarters ahead: Broken rice prices have gone by 15% y-o-y and 4% q-o-q. With the
season beginning from November, the broken rice prices are expected to reduce on back of better production. Glass prices
spiked in FY2023 but have stabilized in the recent past. With the backward integration the company will be 100% self-
sufficient for the supply of ENA. Also, large bottling unit in Sitapur will be reduce purchases from third-party manufacturers
(currently 45% is sourced from outside).
FTA with the UK: According to the management, FTA with the UK will benefit the company from the cost perspective as it
imports bulk alcohol for manufacturing of premium blends. Reduction in duty will reduce overall cost of imports. Availability
of scotch malt at competitive pricing will improve the quality of Indian blends in the coming years. Further if UK reduces the
import tariffs on liquor brands from India, the export of whiskey and rum from UK will substantially increase in the coming
years.
Premium brands performing strongly: Jaisalmer gin is the highest selling gin in the premium segment globally has market
share of close to 60% in the Indian market. It is available in 20 states in the India and gaining strong traction in the domestic
market. Royal Ranthambore whiskey is available in 18 states. It is gaining strong response in the domestic market despite the
pricing premium over the other scotch brands available in the market. Rampur Whiskey is available in 10 states in India. The
brand achieved volumes of FY2023 in H1FY24 itself. The company is gearing up for expanding capacities.
No major capex going ahead: With commissioning of the Sitapur facility, significant capital expenditure is already done.
The company will be doing capex of Rs. 125 crore in H2FY2024, which are post commissioning payments to be done for
Sitapur facility. In FY2025, it will be doing a capex of Rs. 150 crore for setting up new facility for launch of Happiness Rum and
tripling the Jailsamer Gin facility to cater to strong demand.

Stock Update
Particular Q2FY24 Q2FY23 y-o-y (%) Q1FY24 q-o-q (%)
Gross Sales 3715.1 3018.6 23.1 4023.3 -7.7
Excise duty 2790.1 2257.2 23.6 3069.4 -9.1
Net Sales 925.0 761.4 21.5 953.9 -3.0
Total operating expenses 803.8 671.3 19.7 834.4 -3.7
Operating profit 121.2 90.1 34.6 119.5 1.4
Other income 0.7 0.9 -27.0 1.1 -38.5
Interest expense 12.5 4.0 - 12.3 1.6
Depreciation 26.1 17.2 52.0 24.3 7.3
Profit before tax 83.3 69.8 19.4 84.0 -0.9
Tax 21.4 18.0 19.3 20.8 3.1
Adjusted PAT (before MI) 61.9 51.8 19.4 63.2 -2.2
Minority interest (MI) 3.0 2.7 11.5 5.0 -41.0
Reported PAT 64.8 54.5 19.0 68.3 -5.0
EPS (Rs.) 4.6 3.9 19.4 4.7 -2.2
bps bps
GPM (%) 44.1 41.6 259 43.6 54
OPM (%) 13.1 11.8 127 12.5 57
NPM (%) 6.7 6.8 -12 6.6 6
Tax rate (%) 25.7 25.7 -1 24.7 99
Segment-wise performance
IMFL Volumes (Million cases)
Prestige & Above 2.84 2.33 21.9 2.39 18.8
Regular & Others 3.19 3.82 -16.5 4.15 -23.1
Total Own Volume 6.03 6.15 -2.0 6.54 -7.8
Prestige & Above as % of Total IMFL Volume 47.1 37.9 36.5
Royalty brands 0.93 1.03 - 0.83 -
Total IMFL volume 6.96 7.18 -3.1 7.37 -5.6
Revenue Break up (Rs. crore)

IMFL (A) 699.1 610 14.6 705.5 -0.9
-Prestige & Above 489.7 361.1 35.6 419.5 16.7
-Regular & Others 201.4 241.1 -16.5 278.3 -27.6
-Others 8.0 7.8 2.6 7.7 3.9
Non IMFL (B) 226.0 151.4 49.3 248.4 -9.0
Revenue from Operations (Net) (A+B) 925.1 761.4 21.5 953.9 -3.0
Prestige & Above as % of Total IMFL Revenue 70.0 59.2 59.5
IMFL as % of Total Revenue 75.6 80.1 74.0

Stock Update

n Sector Outlook – Structural change in the alcohol industry
Indian Made Indian Liquor (IMIL) is evolving from a restricted quota-based, commoditised market to a consumer-driven brand-
based industry. Its main attractiveness lies in its sizeable base, comprising SEC-D, below which could translate into ~40% of
total population (excluding the Below Poverty Line). Growth in this segment is expected to be driven by a growing consumer
base, rising rural income, consumption, conversion from illicit/toddy to IMIL with increasing awareness about health and quality,
conducive regulatory policies, and growth in population. In the short run, the IMIL industry could benefit from lower discretionary
incomes, which would push up demand for lower-priced liquor. The government is targeting to achieve 20% blending of ethanol
by 2025, which would result in higher demand for grain-based molasses in the coming years.
n Company Outlook – Premiumisation remains the key growth driver
RKL posted good numbers in H1FY2024, with revenue growing by 23.7% y-o-y, OPM higher by 79 bps y-o-y and adjusted PAT
increasing by 13.6% y-o-y. With consumers shifting to premium IMFL brands, RKL’s focus on improving presence of each brand
in key markets and emergence of favourable liquor policies in key states would help in faster growth of branded liquor products
in the near to medium term. The company expects double-digit volume growth in the P&A segment to sustain in the medium
term due to strong traction to its premium brands. Inflationary pressure will continue to put stress on margins in the near term.
However, the management has maintained its medium-term guidance of achieving high-teen OPM over the next 2-3 years due
to improved mix of the P&A segment and backward integration to secure raw-material supply in the long run.
n Valuation – Maintain Buy with an unchanged PT of Rs. 1,660
RKL posted the second consecutive quarter of strong double digit volume growth of above 20% in the P&A brands. Premiumi-
sation will drive consistent strong double-digit earnings growth along with the support of backward integration in the coming
years. We like the company’s focus on launching new products in the brown and white spirits space targeting the premium/
luxury segment to consistently gain share in key market and grow ahead of industry. Margins have bottomed-out and we should
expect consistent improvement in profitability and cash flows in the coming years. This should further enhance valuation from
the current levels. The stock is currently trading at 59x/40x/33x its FY2024E/25E/26E EPS. We maintain a Buy rating with an un-
changed PT of Rs. 1,660.
One-year forward P/E (x) band

2,000
1,800 60X
1,600
50X
1,400
1,200 40X
1,000
30X
800
600 20X
400
200
0
Dec-20
Dec-21
Dec-22
May-23
Mar-14
Mar-15
Mar-16
Aug-16
Aug-17
Aug-18
Jun-21
Jun-22
Jan-19
Jan-20
Nov-23
Sep-14
Sep-15
Feb-17
Feb-18
Jul-19
Jul-20
Peer Comparison
Particulars
United Spirits 89.4 72.6 55.2 54.9 45.9 37.0 16.0 16.0 17.0
Radico Khaitan 82.8 58.6 39.8 52.5 34.4 24.8 9.8 14.0 18.7

Stock Update
About the company

RKL, formerly known as Rampur Distillery, commenced its operations in 1943. Over the years, the company has evolved from
being just a distiller of spirits for others to a leading IMFL company. Currently, the company has five millionaire brands, which
are 8PM Whisky, 8PM Premium Black Whisky, Contessa Rum, Old Admiral Brandy, and Magic Moments Vodka. RKL has three
distilleries in Rampur (Uttar Pradesh) and two in joint venture with RNV in Aurangabad (Maharashtra) in which RKL owns 36%
equity. The company operates five own and 28 contract bottling units spread across the country with a combined capacity of 157
million litres. RKL is one of the largest providers of branded IMFL to Canteen Stores Department (CSD) and exports its products
to more than 85 countries.
Investment theme
RKL has transformed itself into a leading IMFL brand player from just a distillery player with premiumisation at the core of
its growth strategy. The company’s P&A segment reported a 13% CAGR over FY2018-FY2023, contributing 33% to IMFL’s sales
volume (48% to IMFL’s sales value). Going ahead as well, the company expects the strong growth trajectory in premium brands
to continue. Efficient working capital management and improved profitability would help the company generate high free cash
flows (FCF) in the coming years. The company is investing Rs. 740 crore (mix of debt and internal accruals) in backward integration
to secure extra neutral alcohol (ENA) supply (largely grain-based). It will help to retain its guidance of high-teen margins over the
next two years.
Key Risks
Decline in demand for the company’s products: Slowdown in global economic growth and other declines or disruptions
in the Indian economy, in general, may result in reduction in disposable income of consumers and slowdown in the IMFL
industry. This could adversely affect the company’s business and financial performance.
Risk due to stringent regulation norms: The Indian spirit industry is highly regulated and complex as each state has its
own regulations governing the manufacture and sale of spirits. Any change in rules and regulations by the respective state
governments and non-compliance with laws and regulations could adversely impact the business.
Increased raw-material prices: ENA and packaging materials are two key raw-material components. Any price volatility in
the prices of these components may have a bearing on the company’s profitability.
Additional Data
Lalit Kumar Khaitan Chairman-Managing Director
Abhishek Khaitan Executive Director-Managing Director
Dilip K. Banthiya Chief Financial Officer
Dinesh Kumar Gupta Vice President - Legal, Company Secretary & Compliance Officer
Source: Company
Top 10 shareholders
1 TIMF Holdings 4.2
2 Tata Asset Management Pvt Ltd 3.9
3 Aditya Birla Sun Life AMC Ltd 3.4
4 Nippon Life India Asset Management Company 3.1
5 TATA AIA LIFE INSURANCE CO 2.9
6 Vanguard Group Inc 2.3
7 DSP invesment Managers Pvt Ltd 1.5
8 HDFC AMC 1.3
9 BNP Paribas SA 1.3
10 Baroda BNP Paribas Asset Management India Pvt Ltd 1.2
Source: Bloomberg

Update
Update
Gujarat State Petronet Ltd
Stock
Strong Q2; core pipeline biz attractive
Stock
Powered by the Sharekhan 3R Research Philosophy Oil & Gas Sharekhan code: GSPL
Reco/View: Buy  CMP: Rs. 279 Price Target: Rs. 342 
3R MATRIX + = -
Result Update
Right Valuation (RV) ü Q2 PAT of Rs. 532 crore (up 132% q-o-q) was 63% above our estimate, led by higher
transmission tariffs, surge in other income and lower tax rate.
Net gas transmission tariff rose 11% q-o-q led by a better mix of HP pipelines and one-
+ Positive = Neutral – Negative offs, while volume of 30 mmscmd missed estimate on lower volume from the refinery &
What has changed in 3R MATRIX petchem sector.
PNGRB amendments to natural gas pipeline tariffs would allay concerns of steep tariff
Old New cuts of 15-20%. Recovery in capex (Rs328 crore in H1FY24 versus only Rs47 crore in
RS  H1FY23) bodes well for tariffs going forward.
We maintain a Buy with an unchanged PT of Rs. 342 as core pipeline business is available
RQ  at just 2.4x FY25E EPS.
RV 
Q2FY24 standalone operating profit of Rs. 410 crore, up 22% q-o-q was 12% above our
estimate led by higher-than-expected net transmission tariff of Rs. 1.6/scm (up 11%
q-o-q) and lower other expenses (36% q-o-q). Higher net gas transmission tariff was
ESG Disclosure Score NEW led by a better mix of HP pipelines and one-offs. However, gas transmission volume of
ESG RISK RATING 30 mmscmd missed our estimate of 33 mmscmd by 8%. Volume from fertilizer/power/
34.32 CGD/other sectors rose by 33%/2%/4% q-o-q to 4.6 mmscmd/4.1 mmscmd/10.8
mmscmd/5.2 mmscmd, while that from refinery & petchem sector declined by 17%
High Risk q-o-q to 5.5 mmscmd. Higher net gas transmission tariff and lower operating cost led
to a better-than-expected EBITDA margin of Rs. 1.5/scm (up 17% q-o-q and beat of
NEGL LOW MED HIGH SEVERE 21% versus estimate of Rs. 1.2/scm). Standalone PAT of Rs. 532 crore (up 69% y-o-y;
0-10 10-20 20-30 30-40 40+ up 132% q-o-q) was 63% above our estimate of Rs. 326 crore due to beat in margin,
Source: Morningstar significantly higher other income of Rs. 266 crore (versus Rs. 104 crore in Q2FY23) and
lower tax rate of 15%.
Company details Key positives
Market cap: Rs. 15,761 cr Higher-than-expected transmission tariffs led to a 17% beat in EBITDA margin at Rs. 1.5/
scm.
52-week high/low: Rs. 311/225
Key negatives
NSE volume:
7.8 lakh Gas transmission volume missed mark by 8% at 30 mmscmd.
(No of shares)
Revision in estimates – We have raised our FY24-25 earnings estimate to factor higher
BSE code: 532702 other income and have introduced our FY26 earnings estimate.
NSE code: GSPL Our Call
Free float: Valuation – Maintain Buy on GSPL with an unchanged SoTP-based PT of Rs. 342:
35.2 cr Regulatory tailwinds, potential higher domestic gas production and proximity to LNG
(No of shares)
terminals (27.5 MTPA re-gas capacity) make GSPL a strong long-term bet on the robust
outlook for gas demand in India. We highlight here that GSPL’s core pipeline business
Shareholding (%) (excluding market value of GSPL’s investment in Gujarat Gas after assuming 20% holding
company discount) is valued at just 2.4x FY2025E EPS. Moreover, the Gujarat state
Promoters 37.6 government’s recent policies on dividend distribution and share buyback would improve
FII 16.0 shareholder returns in the coming years. Hence, we maintain a Buy with an unchanged
SoTP-based price target (PT) of Rs. 342.
DII 25.2 Key Risks
Others 21.2 Lower-than-expected gas demand from power, fertilisers, refineries, and CGD in case of
spike in LNG prices could affect gas transmission volumes. Any adverse regulatory changes
Price chart in terms of gas transmission tariffs. Delay in volume ramp-up at new LNG terminals.
320
300 Valuation (Standalone) Rs cr
280 Particulars FY22 FY23E FY24E FY25E FY26E
260
Revenue 2,020 1,762 1,958 2,247 2,425
240
OPM (%) 69.2 71.4 73.1 75.4 76.1
220
Adjusted PAT 979 945 1,151 1,348 1,460
Jul-23
Nov-22
Nov-23
Mar-23
YoY growth (%) 5.2 -3.5 21.9 17.1 8.3

Adjusted EPS (Rs. ) 17.4 16.7 20.4 23.9 25.9
Price performance P/E (x) 16.1 16.7 13.7 11.7 10.8
(%) 1m 3m 6m 12m P/B (x) 1.9 1.7 1.5 1.4 1.2
Absolute -3.1 -1.7 1.0 21.4 EV/EBITDA (x) 11.3 12.0 10.8 8.5 7.2
Relative to RoNW (%) 12.2 10.7 11.8 12.4 12.1
-2.3 -0.3 -4.2 15.0
Sensex RoCE (%) 13.8 12.0 13.6 14.4 14.8
Sharekhan Research, Bloomberg Source: Company; Sharekhan estimates;
Note: Valuation is based on current market capitalisation, which includes value of a 54% stake in Gujarat Gas

Stock Update
Robust Q2 led by higher tariff

Q2FY24 standalone operating profit of Rs. 410 crore, up 22% q-o-q was 12% above our estimate led by higher-than-
expected net transmission tariff of Rs. 1.6/scm (up 11% q-o-q) and lower other expenses (36% q-o-q). Higher net
gas transmission tariff was led by a better mix of HP pipelines and one-offs. However, gas transmission volume of
30 mmscmd missed our estimate of 33 mmscmd by 8%. Volume from fertilizer/power/CGD/other sectors rose by
33%/2%/4% q-o-q to 4.6 mmscmd/4.1 mmscmd/10.8 mmscmd/5.2 mmscmd, while that from refinery & petchem
sector declined by 17% q-o-q to 5.5 mmscmd. Higher net gas transmission tariff and lower operating cost led to a
better-than-expected EBITDA margins of Rs. 1.5/scm (up 17% q-o-q and beat of 21% versus estimate of Rs. 1.2/scm).
Standalone PAT of Rs. 532 crore (up 69% y-o-y; 132% q-o-q) was 63% above our estimate of Rs. 326 crore due to beat
in margin, significantly higher other income of Rs. 266 crore (versus Rs. 104 crore in Q2FY23) and lower tax rate of 15%.
Volumes miss estimate
45
40 39
40 37 37
33 34
35 32
29 29 29 30
30
25 25
25 22
20
15
10
5
0
1QFY21
2QFY21
Q3FY21
Q4FY21
Q1FY21
Q2FY22
Q3FY22
Q4FY22
Q1FY23
Q2FY23
Q3FY23
Q4FY23
Q1FY24
Q2FY24
Gas transmisison volume (mmscmd)
Implied net gas transmission up 11% q-o-q
1.8 1.7 1.7

1.5 1.6
1.6 1.5
1.4 1.4
1.3 1.3 1.3
1.4 1.2 1.2 1.3 1.3
1.2
1.0
0.8
0.6
0.4
0.2
0.0
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Q3FY21
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Q1FY21
Q2FY22
Q3FY22
Q4FY22
Q1FY23
Q2FY23
Q3FY23
Q4FY23
Q1FY24
Q2FY24
Implied net transmission tariff (Rs/scm)

Stock Update
Results (standalone) Rs cr
Revenue 529 435 21.8 441 20.0
Total Expenditure 119 101 18.1 105 13.7
Reported operating profit 410 334 22.9 336 21.9
Other Income 266 104 156.7 18 1,376.0
Interest 1 1 -10.8 1 -1.0
Depreciation 48 49 -2.2 47 1.9
PBT 628 388 62.0 307 104.8
Tax 96 73 30.4 77 23.9
Reported PAT 532 314 69.3 229 132.0
Equity Cap (cr) 56 56 56
Reported EPS (Rs. ) 9.4 5.6 69.3 4.1 132.0
Margins (%) BPS BPS
OPM 77.5 76.8 70 76.3 125
Tax rate 15.3 18.9 -369 25.2 -996
NPM 100.5 72.3 2822 52.0 4854
Key operating metrics

Gas transportation volume (mmscm) 2,778 2,260 22.9 2,673 4.0
Gas transportation volume (mmscmd) 30.2 24.6 22.9 29.4 2.8
Implied transmission tariff (Rs. /scm) 1.9 1.9 -0.8 1.6 15.4
Net transmission tariff (Rs. /scm) 1.6 1.7 -4.2 1.4 10.6
EBITDA (Rs. /scm) 1.5 1.5 0.0 1.3 17.3

Stock Update

n Sector view - Infrastructure expansion, regulatory push to drive strong gas demand; volatile spot LNG
price a concern
We expect strong growth in transmission volumes for gas utilities such as GAIL and GSPL to be supported by robust gas
demand outlook, which in turn would be due to - 1) Demand recovery from the power, CGD, and fertiliser sectors and
2) Regulatory push to switch to gas from polluting industrial/auto fuels. Moreover, the recently notified unified tariff
for gas pipeline operators (although it is revenue neutral in the short term) provides a massive volume opportunity
and would drive growth in the long term. However, volatile spot LNG (although moderated recently) and alternate
fuel price would volatility in near-term volumes for gas utilities.
n Company outlook - Volume recovery to drive earnings growth
We expect GSPL’s gas transmission volume to recover in the coming quarters given the recent steep fall in the spot
LNG price. We expect GSPL’s gas transmission volume to rise strongly at a 16% CAGR over FY2023-FY2025E on low
base of FY23 (volume decline of 25% y-o-y). The amendment in natural gas pipeline tariff regulations are positive
and we model net transmission tariffs of Rs. 1.4-1.5/scm over FY2024E-2025E post expectation of 10% cut in FY24E).
We expect GSPL’s standalone EBITDA/PAT to post a 14%/16% CAGR over FY2023-FY2026E given low base of FY23.
Potential higher pipeline capex would augment pipeline capacities would result in better gas transmission tariff and
support GSPL’s earnings.
n Valuation - Maintain Buy on GSPL with an unchanged SoTP-based PT of Rs. 342
Regulatory tailwinds, potential higher domestic gas production and proximity to LNG terminals (27.5 MTPA re-gas
capacity) make GSPL a strong long-term bet on the robust outlook for gas demand in India. We highlight here that
GSPL’s core pipeline business (excluding market value of GSPL’s investment in Gujarat Gas after assuming 20% holding
company discount) is valued at just 2.4x FY2025E EPS. Moreover, the Gujarat state government’s recent policies on
dividend distribution and share buyback would improve shareholder returns in the coming years. Hence, we maintain
a Buy with an unchanged SoTP-based price target (PT) of Rs. 342.

25.00
20.00
15.00
10.00
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5.00
0.00
Jul-15
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Jul-20
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Jul-22
Jul-23
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Oct-15
Oct-16
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Oct-18
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Oct-22
Oct-23
P/E Avg. P/E Peak P/E Trough P/E

Stock Update
About company
GSPL, a group entity of the GSPC group, is currently a Gujarat-focused natural gas transmission firm operating on an
open access basis. The company owns approximately 2,500 km natural gas pipeline, transporting 29-30 mmscmd of
gas currently. To increase its geographical spread, the company had participated and won bids to put up three major
pipelines outside Gujarat (1) Mallavaram (Andhra Pradesh) - Bhilwara (Rajasthan), (2) Mehsana (Gujarat) - Bhatinda
(Punjab), and (3) Bhatinda (Punjab) - Srinagar (J&K). GSPL owns stake in two city gas distribution firms – Sabarmati Gas
and Gujarat Gas. The company is the second largest gas pipeline player in the country after GAIL.
Investment theme
Higher gas supplies with commissioning of new LNG terminals in Gujarat, rise in domestic gas supply, and government’s
target to increase share of gas in India’s energy mix to ~15% by 2030 (from 6% currently) and thrust to reduce pollution
provide a strong gas transmission volume opportunity for GSPL. Investment in CGD space (Gujarat Gas and Sabarmati
Gas) is likely to create long-term value for investors. Core pipeline business is available at attractive valuation.
Key Risks
Lower-than-expected gas demand from power, fertiliser, and CGD in case of spike in LNG prices could impact gas
transmission volume.
Any adverse regulatory changes in terms of gas transmission tariff.
Delay in volume ramp-up at new LNG terminals.
Additional Data
Raj Kumar Chairman
Ajith Kumar T R Chief Financial Officer
Arti Kanwar Non-Executive - Nominee Director
Source: Bloomberg
Top 10 shareholders
1 Mirae Asset Global Investments Co 7.8
2 GUJARAT MARITIME BOARD 6.57
3 Kotak Mahindra Asset Management Co 3.34
4 Norges Bank 2.78
5 GOVERNMENT PENSI 2.77
6 Gujarat Urja Vikas Nigam Ltd 2.01
7 Vanguard Group Inc/The 1.95
8 Invesco Asset Management India Pvt 1.67
10 Gujarat Narmada Valley Fertilizers 1.42
Source: Bloomberg

Stock Update
Jyothy Labs Ltd
Stellar performance
Powered by the Sharekhan 3R Research Philosophy Consumer Goods Sharekhan code: JYOTHYLAB
Reco/View: Buy  CMP: Rs. 402 Price Target: Rs. 470 á
3R MATRIX + = -
Result Update
Right Valuation (RV) ü Jyothy Labs Limited (JLL) posted a stellar performance in Q2FY2024 with revenue and PAT growing by
11.0% and 59% y-o-y, respectively; OPM stood high at 18.5%.
+ Positive = Neutral – Negative Domestic volume growth of 9% is ahead of some of the large peers; management is confident of
maintaining volume-led double-digit revenue growth in H2FY2024.
What has changed in 3R MATRIX Consolidated OPM stood at 17.8% in H1FY2024; management has guided for 16-17% OPM for FY2024.
The stock trades at 43x/36x/31x its FY2024E/FY2025E/FY2026E earnings. We maintain our Buy rating on
Old New the stock with a revised price target of Rs. 470.
RS  JLL posted yet another quarter of strong performance in the weak demand environment with
domestic volume growth of 9% compared to low single-digit volume growth achieved by some
RQ  of the large consumer goods companies in the home & personal care category. Consolidated
revenue grew by 11% y-o-y to Rs. 732.3 crore (grew by 7% on a sequential basis). Fabric care,
RV  dishwashing products and personal products registered growth of 10.6% y-o-y, 10% y-o-y, and
22.3% y-o-y, respectively. Lower input prices led to a sharp 870 bps y-o-y expansion in the gross
margin to 49.2%, while consolidated OPM expanded by 628 bps y-o-y to 18.5%. Operating profit
registered strong growth of 68% y-o-y to Rs. 135.3 crore and reported profit grew by 59% y-o-y
NEW to Rs. 104.1 crore. For H1FY2024, the company’s revenue grew by 13% y-o-y to Rs. 1,419.4 crore,
ESG Disclosure Score OPM rose by 665 bps y-o-y to 17.8%, and reported PAT grew by 77.1% y-o-y to Rs. 200.2 crore.
ESG RISK RATING Key positives
31.95 Domestic volumes grew by 9%, beating the industry’s low single-digit growth.
The personal care category registered strong growth of 22%.
High Risk
Net working capital days reduced to 5 days in H1FY2024 from 28 days in H1FY2023.
NEGL LOW MED HIGH SEVERE Strong cash balance of Rs. 440 crore as on September 2023.
0-10 10-20 20-30 30-40 40+ Key negatives
Source: Morningstar The HI category’s revenue grew by just 3%; it registered PBIT loss of Rs. 8 crore.
Company details Management has maintained its guidance of achieving double-digit revenue growth, largely driven
Market cap: Rs. 14,749 cr by volume growth in FY2024.
Volume growth would be driven by distribution expansion, leveraging on low-priced SKUs in key
52-week high/low: Rs. 411 / 180 markets and increased brand-building initiatives.
Management has increased OPM guidance to 16-17% from earlier guidance of 15-16% for FY2024.
NSE volume:
14.2 lakh A large part of the savings in gross margin will be utilised for higher spends behind advertisement
(No of shares) and promotional activities in the current competitive environment. Advertisement and promotional
BSE code: 532926 spends will be 7-8% of sales.
The company’s products are available in 2.8 mn outlets (direct reach of 1.1 mn outlets). This provides
NSE code: JYOTHYLAB a huge scope for the company to enhance its distribution reach.
Innovation under the Margo brand is gaining strong traction and supported the strong growth
Free float: achieved in Q2FY2024.
13.6 cr
(No of shares) Revision in earnings estimates – We have revised upwards our earnings estimate for FY2024/FY2025/
FY2026 to factor in higher-than-expected OPM.
Shareholding (%) Our Call
View – Maintain Buy with a revised PT of Rs. 470: JLL has posted a strong performance for the
Promoters 62.9 past few quarters in a tough consumer demand environment. Product innovation and availability of
relevant product assortment for general trade/e-Commerce/modern trade and distribution expansion
FII 15.1 will help JLL gain market share in key categories. We expect JLL’s revenue and PAT to post a CAGR of
DII 14.1 13% and 28%, respectively, over FY2023-FY2026E. The stock has seen a good run-up in recent times and
is trading at 43x/36x/31x its FY2024E/FY2025E/FY2026E EPS. Improving cash flows, focus on sustaining
Others 7.9 double-digit revenue growth with decent volume growth, and strong earnings visibility make it a good
small-to-mid cap pick in the consumer goods space. We maintain our Buy rating on the stock with a
revised price target (PT) of Rs. 470.
Price chart
Key Risks
420
Delayed recovery in the HI category or market share loss in some of the key categories would act as a
370 key risk to our earnings estimates.
320
170 Revenue 2,486 2,784 3,178 3,626
Jul-23
Nov-22
Nov-23
Mar-23
OPM (%) 12.7 16.5 16.6 16.9

Adjusted PAT 231 344 404 481
% YoY growth 45.1 48.8 17.6 18.9
Price performance
Adjusted EPS (Rs.) 6.3 9.4 11.0 13.1
(%) 1m 3m 6m 12m P/E (x) 63.8 42.8 36.4 30.6
Absolute 11.6 25.6 99.2 106.7 P/B (x) 9.5 8.7 7.8 6.8
12.5 27.2 94.1 100.5 RoNW (%) 15.4 21.2 22.6 23.7
Sensex
RoCE (%) 15.1 20.1 20.7 21.9

Stock Update
Stellar Q2 – Revenue grew by 11% y-o-y; OPM up by 628 bps y-o-y

JLL’s revenue grew by 11.1% y-o-y to Rs. 732.3 crore (in line with our as well street’s average expectation of Rs. 728-736
crore). Growth was driven by 10.6% y-o-y growth in the fabric care segment, 10% y-o-y growth in the dishwashing
segment, and 22.3% y-o-y growth in the personal care segment, while the household insecticide segment posted
muted quarter with 3.4% y-o-y growth. Softening of raw-material prices aided in 870 bps and 628 bps y-o-y expansion
in gross margin and OPM to 49.2% and 18.5%, respectively (much higher than our and street average expectation of
16.4-16.7%). Operating profit increased by 68.3% y-o-y to Rs. 135.4 crore. Adjusted PAT grew by 59.1% y-o-y to Rs. 104
crore, beating our and street’s average expectations of Rs. 92-93 crore.
Fabric Care – Double-digit revenue growth coupled with EBIT margin at 26%
The fabric care category’s revenue grew by 10.6% y-o-y to over Rs. 316.6 crore in Q2FY2024 (grew by 7% q-o-q).
The category witnessed improvement in sales across all brands. ATL/BTL campaigns for various brands and focus on
small packs aided in consumer engagement. Expansion in distribution has helped to accelerate sales of detergent
powder brands on a pan-India basis. Ujala Supreme held its market share at 84% in Q2FY2024. Henko liquid detergent
witnessed significant growth in the liquids category. PBIT margin stood at 26% in Q2FY2024 vs. 15.1% in Q2FY2023.
Dishwash – Revenue growth at 10% y-o-y; margin improved by 542 bps y-o-y
The dishwashing category’s revenue grew by 10% y-o-y to Rs. 250.7 crore and PBIT margin improved by 542 bps
y-o-y to 20.9%. Increased consumer acceptance for lower unit packs and strengthening the brand in key geographies
through multi-media approach aided strong growth in both the brands. For Pril Liquid, large packs are driving strong
growth in the modern trade channel. Pril Tamarind has become the consumers’ preference of choice in the liquid
dishwashing space.
Household Insecticides – Muted quarter
The HI category registered muted revenue growth of 3.4% y-o-y to Rs. 45 crore in Q2FY2024. Weather vagaries
affected the category’s growth in Q2. Liquid Vaporiser portfolio registered positive growth with continued focus on
distribution and consumer engagement activities. The company continues to make losses at EBIT level at Rs. 7.9 crore.
The company is focusing on increasing the share of LVs through distribution expansion and relevant media activities
in the coming years.
Personal care – Revenue up 22% y-o-y; margins expanded strongly
JLL’s personal care category grew by 22.3% y-o-y to Rs. 89.6 crore, driven by strong growth in the core Margo neem
brand. Consistent brand investments across mediums, promoting and advocating the benefits of Neem helped the
brand in registering strong growth. The recent introduction of Margo Neem Naturals in three variants of Rose, Lemon,
and Jasmine has seen good response and supported overall growth. PBIT margin improved by 86 bps y-o-y to 10.9%.

Stock Update
Total Revenue 732.3 659.2 11.1 687.1 6.6
Raw-material cost 371.9 392.2 -5.2 358.2 3.8
Employee expenses 76.9 69.7 10.4 75.9 1.3
Advertisement expenses 57.4 41.5 38.2 50.4 13.8
Other expenses 90.7 75.4 20.3 85.2 6.6
Total operating cost 597.0 578.8 3.1 569.7 4.8
Operating profit 135.4 80.4 68.3 117.4 15.3
Other income 13.2 5.3 - 16.9 -21.9
Depreciation 12.3 13.0 -5.5 12.0 2.9
Interest expenses 1.2 3.5 -66.2 1.1 5.4
Profit before tax 135.1 69.3 95.0 121.3 11.4
Tax 31.1 11.0 - 25.0 24.4
Adjusted PAT 104.0 58.3 78.3 96.3 8.0
Extraordinary item 0.0 7.0 - 0.0 -
Reported PAT 104.0 65.4 59.1 96.3 8.0
EPS (Rs.) 2.8 1.6 78.3 2.6 8.0
bps bps
GPM (%) 49.2 40.5 870 47.9 135
OPM (%) 18.5 12.2 628 17.1 140
NPM (%) 14.2 8.8 535 14.0 19
Tax rate (%) 23.0 15.8 723 20.6 240
Category-wise performance
Particulars Q2FY24 Q2FY23 y-o-y (%) Q1FY24 q-o-q (%)
Revenue
Fabric care 316.6 286.2 10.6 296.6 6.7
Dish washing 250.7 227.9 10.0 231.5 8.3
Household insecticides 45.0 43.5 3.4 49.4 -8.9
Personal care 89.6 73.3 22.3 84.1 6.6
Other Products 30.4 28.4 7.1 25.6 19.1
Total revenue 732.3 659.2 11.1 687.1 6.6
PBIT
Fabric care 82.8 43.3 91.0 65.6 26.1
Dish washing 52.3 35.2 48.6 46.3 13.0
Household insecticides -7.9 -7.9 -0.1 -9.4 -15.7
Personal care 9.8 7.4 32.8 15.3 -36.1
Other Products 0.1 0.1 -58.3 0.5 -89.6
78.7 -34.0 - -30.6 -
PBIT Margins (%)
Fabric care 26.1 15.1 - 22.1 401
Dish washing 20.9 15.4 542 20.0 87
Mosquito Repellant -17.6 -18.2 63 -19.0 142
Personal care 10.9 10.1 86 18.2 -731
Other Products 0.2 0.7 -54 1.9 -171

Stock Update

n Sector Outlook – Rural recovery on cards; margin improvement to sustain
With food inflation easing and an expected stable kharif crop, managements of most consumer goods companies are confident
of witnessing a pick-up in rural demand in H2FY2024. This will also be supported by the upcoming festive season and higher
government spending prior to the general elections. Overall, we expect a gradual improvement in volume growth of consumer
goods companies in the quarters ahead. Crude oil prices moved up from its low but continue to remain in a comfortable zone.
Other input prices are yet to see a significant jump and will provide lesser stress on the profitability front in the near term. Thus,
we expect the rise in gross margins to sustain in the quarters ahead. Despite higher media spends, OPM is expected to remain
high y-o-y in the near term. Most of the consumer goods companies are optimistic about medium-term growth outlook aided
by low penetration in most categories, emerging distribution channels, and improving per-capita income.
n Company Outlook – Focus remains on achieving double-digit revenue growth
The company is focusing on achieving volume-led, double-digit revenue growth in the medium to long term through driving
category development, increased brand-building initiatives, digital technology driving sales efficiency in go-to-market initiatives,
market share gains, distribution expansion, and improving penetration for key categories in rural and urban markets. With the
recent correction in key input prices, the company expects OPM to reach historical levels of 15-16% in the next 1-2 years.
n Valuation – Maintain Buy with a revised PT of Rs. 470
JLL has posted a strong performance for the past few quarters in a tough consumer demand environment. Product innovation
and availability of relevant product assortment for general trade/e-Commerce/modern trade and distribution expansion will
help JLL gain market share in key categories. We expect JLL’s revenue and PAT to post a CAGR of 13% and 28%, respectively, over
FY2023-FY2026E. The stock has seen a good run-up in recent times and is trading at 43x/36x/31x its FY2024E/FY2025E/FY2026E
EPS. Improving cash flows, focus on sustaining double-digit revenue growth with decent volume growth, and strong earnings
visibility make it a good small-to-mid cap pick in the consumer goods space. We maintain our Buy rating on the stock with a
revised price target (PT) of Rs. 470.

450.0
40x
400.0
35x
350.0
30x
300.0
25x
250.0
200.0
150.0
100.0
50.0
0.0
Peer Comparison
Particulars
Godrej Consumer Products 60.0 48.0 41.7 40.7 35.0 30.9 15.2 15.7 16.2
HUL 58.6 53.9 47.2 42.7 38.6 33.4 25.6 28.0 31.1
Jyothy Labs 63.8 42.8 36.4 46.0 31.7 27.3 15.1 20.1 20.7

Stock Update
About the company

JLL has evolved from being a promoter-driven, south-centric, single-product company to a professionally managed,
multi-brand, multi-product company with pan-India operations and a turnover of ~Rs. 2,500 crore. JLL is present
in key categories such as fabric care, dishwash, HI, and personal care products. JLL’s power brands include Ujala,
Henko, Exo, Maxo, Margo, and Pril. The company’s flagship brand, Ujala has remained at the top of the fabric whitener
category since its launch, with an ~80% market share.
Investment theme
JLL has a leadership position in the fabric whitener category in India, whereas it ranks number two in the dishwash
bar, liquid, and mosquito repellent coil categories. Going forward, long-term strategies undertaken to enhance
growth include winning through innovations in the fabric wash category, leveraging rural penetration in the dishwash
category, increasing footprint, and relevant extensions in the HI and personal care categories. A large presence in the
essential and hygiene category will help JLL drive near-term growth in the pandemic situation. A resurgence in the HI
category will help drive growth in the medium term.
Key Risks
Slowdown in demand: A sustained slowdown in the HI category’s growth would affect demand.
Higher input prices: Sharp rise in key raw-material prices such as Brent crude oil would affect profitability and
earnings growth.
Increased competition in highly penetrated categories: Increased competition in highly penetrated categories
such as fabric whiteners would threaten revenue growth.
Additional Data
Ramakrishnan Lakshminarayanan Chairman
Jyothy Ramchandran Managing Director
Sanjay Agarwal Chief Financial Officer
Shreyas Trivedi Company Secretary & Compliance Officer
Source: Company
Top 10 shareholders
1 Nalanda India Equity Fund 6.0
2 Franklin Resources 4.8
3 Nippon Life India AMC 2.7
4 ICICI Lombard General Insurance Co Ltd 1.3
5 ICICI Prudential AMC 1.2
6 abrdn plc 1.0
7 Canara Robeco AMC 0.9
8 Axis AMC 0.8
9 BlackRock Inc 0.7
10 Dimensional Fund Advisors 0.5
Source: Bloomberg

Viewpoint
Viewpoint
Kolte-Patil Developers Ltd
One-off Q2; growth story intact
Powered by the Sharekhan 3R Research Philosophy Real Estate Sharekhan code: KOLTEPATIL
Reco/View: Positive  CMP: Rs. 487 Upside potential: 24-26% 
3R MATRIX + = -
Result Update
Right Valuation (RV) ü We stay Positive on Kolte-Patil Developers Limited (KPDL) and expect a 24-26% upside, considering a
strong growth visibility in its key regions, driven by a capital-efficient model. Recent correction offers
+ Positive = Neutral – Negative buying opportunity.
KPDL reported healthy sales booking and collections for Q2FY2024 aided by sustenance sales. However,
operating and net losses were driven by one-off items.
The management retained pre-sales guidance of Rs. 2,800 crore and Rs. 3,500 crore for FY2024 and
FY2025, respectively. Business development target retained at Rs. 8,000 crore for FY2024.
What has changed in 3R MATRIX Revenue booking is pegged at Rs. 1,500 crore and Rs. 2,000 crore for FY2024 and FY2025. OPMs are
Old New slated to rise significantly in FY2026.
RS  Kolte-Patil Developers Limited (KPDL), reported a healthy sales booking of Rs. 632 crore (up 72%
y-o-y) despite absence of new launches for Q2FY2024. Collections too grew 17% y-o-y at Rs. 472
crore. However, revenue booking (Rs. 198 crore, down 65% q-o-q) lagged our estimates. Further,
RQ  goodwill impairment (Rs. 12.4 crore) and reversal of land transaction in LR project (Rs. 6.78 crore) led
to operating and net loss of Rs. 8.9 crore and Rs. 25.3 crore. Despite no new launches and business
RV  developments during Q2 (Rs. 1,985 crore launch and Rs. 3,450 crore BD additions in Q1), it retained
its pre-sales and BD targets of Rs. 2800 crore and Rs. 8000 crore for FY2024 respectively. The
revenue booking is pegged at Rs. 1500 crore/Rs. 2000 crore for FY2024/FY2025. On the operational
profitability, FY2024 OPM may remain flat, while it eyes significant improvement in OPMs in FY2026
as new projects come under revenue recognition.
Company details Key positives
Sales volumes and value rose 75% y-o-y and 72% y-o-y at 0.98 msf and Rs. 632 crore, respectively led by
Market cap: Rs. 3,703 cr sustenance sales.
52-week high/low: Rs. 528 / 231 Collections were up 17% y-o-y at Rs. 472 crore in Q2. Healthy OCF generation of Rs. 182 crore in H1.
Key negatives
NSE volume:
3.91 lakh Consolidated earnings lagged estimates on account of lower than expected deliveries and one-off items.
(No of shares)
Absence of new launches or business developments done during Q2. However, it retained its FY2024
BSE code: 532924 targets for the same.
NSE code: KOLTEPATIL Company retained pre-sales guidance of Rs. 2800 crore/Rs. 3500 crore for FY2024/FY2025. It targets
Free float: revenue booking of Rs. 1500 crore/Rs. 2000 crore in FY2024/FY2025. OPMs are expected to significant
1.9 cr improvement (20-25% current project margins) in FY2026 although OPM for FY2024 are expected to
(No of shares) remain flat y-o-y.
Collection target for FY2024 is Rs. 2100-2200 crore with construction spends of Rs. 700-800 crore. It has
set a diversification target of 25-30% by FY2025 with LR project expected to contribute lower from 70%
to 45-50%.
It has sanctioned RERA inventory of Rs. 2100 crore, additional inventory planned to launch of Rs. 3000
Shareholding (%) crore and future phases of existing project inventory of Rs. 3700-3800 crore. Overall, it has Rs. 8000-9000
crore inventory available.
Promoters 74.5
Revision in estimates – We have lowered our earnings estimates for FY2024-FY2026 factoring lower OPM
FII 2.6 than earlier estimated.
Our Call
DII 4.0
Valuation – Retain a Positive view with a 24-26% upside potential: KPDL is at the cusp of a strong growth
Others 19.0 trajectory, led by strong momentum in its flagship LR project, sustenance sales from other Pune projects, and
upcoming launches in Mumbai. Further, the company continues to add new projects across Pune, Mumbai,
and Bengaluru, which would ascertain higher sales booking growth over the next few years. Company’s
strong OCF generation, asset-light business model, and almost nil gearing provide comfort on new business
development and execution scale-up. KPDL has corrected 8% from its yearly peak on November 6, 2023 in the
Price chart wake of weak Q2 performance though it is up 14% since we initiated viewpoint coverage on August 4, 2023.
We consider this as a buying opportunity and retain our Positive view on the stock with an upside potential of
550 24-26%, considering its strong growth visibility in its key regions, driven by its capital-efficient model.
450 Key Risks
Slowdown in realty demand in Pune, inability to conclude new deals, delay in sales and/or execution in
350 existing and upcoming projects.
250

Particulars FY23 FY24E FY25E FY26E
Mar-23
Jul-23
Nov-22
Nov-23
Revenue 1488.4 1690.8 2070.1 2664.6

OPM (%) 12.7 13.4 15.0 17.7
Adjusted PAT 102.5 122.6 175.2 295.5
% YoY growth 29.0 19.6 42.9 68.7
Price performance
Adjusted EPS (Rs.) 13.5 16.1 23.1 38.9
(%) 1m 3m 6m 12m P/E (x) 36.1 30.2 21.1 12.5
Absolute 5.0 7.2 86.3 43.3 P/B (x) 3.5 3.2 2.8 2.3
5.8 8.7 81.1 37.1 RoNW (%) 10.2% 11.1% 14.0% 19.9%
Sensex
RoCE (%) 15.4% 14.9% 16.7% 22.2%

Viewpoint
Net loss widens; sales booking stay healthy

Consolidated net revenues of stood at Rs. 198 crore, up 60.7% y-o-y (down 65% q-o-q) for Q2FY2024, which was more
than 50% lower than our estimates. Sales booking remained strong at Rs. 632 crore (up 72% y-o-y) led by 75% y-o-y
rise in sales volumes. Collections grew 17% y-o-y at Rs. 472 crore. Lower revenue booking and impairment of goodwill
(Rs. 12.4 crore) led to operating loss of Rs. 8.9 crore. Consequently, it reported consolidated net loss of Rs. 25.3 crore as
against a net loss of Rs. 8.8 crore in Q2FY2023 and net profit of Rs. 46 crore in Q1FY2024. The company launched five
projects with a saleable area of 2.73 msf and topline potential of Rs. 1,985 crore during H1FY2024. It acquired projects
aggregating to ~3msf and topline potential of Rs. 3450 crore in H1FY2024.
Key Conference Call Takeaways

Guidance: The company retained pre-sales guidance of Rs. 2800 crore/Rs. 3500 crore for FY2024/FY2025. It
targets revenue booking of Rs. 1500 crore/Rs. 2000 crore in FY2024/FY2025. OPMs are expected to significant
improvement (20-25% current project margins) in FY2026 although OPM for FY2024 are expected to remain at
similar level as in FY2023. The collection target for FY2024 is Rs. 2100-2200 crore with construction spends of Rs.
700-800 crore. It has set a diversification target of 25-30% by FY2025 with LR project expected to contribute lower
from 70% to 45-50%.
Q2 & H1 performance: The company achieved sales volume and value growth of 63% y-o-y and 64% y-o-y at
1.91 msf and Rs. 1333 crore (55% of sales value from project launches) for H1FY2024. During Q2, sales volume and
value grew by 75% y-o-y and 72% y-o-y at 0.98 msf and Rs. 632 crore. Collections during H1 were up 12% y-o-y at
Rs. 985 crore. Life Republic projects achieved 1.3 msf sales in H1. Revenues for Q2 stood at Rs. 198.2 crore, EBITDA
(excluding goodwill impairment) at Rs. 3.5 crore and net loss of Rs. 25.3 crore. Net debt to equity stood at 0.05x. It
generated OCFs of Rs. 182 crore in H1.
Exceptional items: During Q2, EBITDA and PAT were impacted by impairment of goodwill related to merger of
subsidiary amounting Rs. 12.38 crore. It also reversed compensation for land in LR project of Rs. 6.78 crore in other
expenses.
Business development: It added six projects with a gross development value (GDV) of Rs. 3450 crore in H1FY2024.
It has a strong BD pipeline while it is being judicious in closing it. It is pursuing multiple BD transactions in Pune
and one in Bangalore. It has invested Rs. 350 crore in BD in H1 and expected to incur similar amount in H2.
24K brand: Out of five 24K projects (premium product) launch target for FY2024, it has launched three projects
which received healthy response (one project was 60% sold out, second was 20% sold out in pre-launch stage and
third one was 25% sold out). The 24K projects has higher margins of 5-7%.
Inventory: It has sanctioned RERA inventory of Rs. 2100 crore, additional inventory planned to launch of Rs. 3000
crore and future phases of existing projects inventory of Rs. 3700-3800 crore. Overall, it has Rs. 8000-9000 crore
of inventory available.
Mumbai: Out of five ongoing projects in Mumbai, it has sold out three and it has inventory of Rs. 225-250 crore
in balance two. It plans to launch Vashi, Navi Mumbai project in Q4FY2024 having an inventory value of Rs. 300
crore. The two society redevelopment projects (Goregaon and Mulund) are expected to be launched in H1FY2025.
Bangalore: It would be launching third phase of Radha project in Bangalore in 15-20 days which has revenue
potential of Rs. 150 crore.

Viewpoint
Particulars Q2FY24 Q2FY23 Y-o-Y % Q1FY24 Q-o-Q %
Net sales 198.2 123.3 60.7% 571.2 -65.3%
Other income 6.7 14.5 -53.6% 7.35 -8.7%
Total income 204.9 137.8 48.7% 578.5 -64.6%
Total expenses 207.1 128.9 60.6% 480.0 -56.9%
Operating profit -8.9 -5.6 - 91.2 -
Depreciation 3.1 3.1 - 3.1 -
Interest 9.4 11.5 - 36.6 -
Profit Before Tax -14.7 -5.7 - 58.8 -
Taxes 9.3 0.7 - 10.0 -
PAT -24.0 -6.4 - 48.9 -
Adj PAT after MI -25.3 -8.8 - 46.0 -
EPS (Rs.) -3.3 -1.2 - 6.0 -
BPS BPS
OPM (%) -4.5% -4.5% - 16.0% -
NPM (%) -12.8% -7.1% - 8.0% -
Tax rate (%) -63.0% -11.9% - 17.0% -

Viewpoint

n Sector View – Residential market on a growth trajectory
The real estate sector, especially the residential realty market, is expected to be in the limelight going ahead, as it
benefits from central and state governments’ favourable policies pertaining to the affordable housing segment. Rising
income and affordability levels are expected to drive sales for quality and organised developers. Further, organised
players are expected to benefit from ample inorganic opportunities in the sector, which is leading to consolidation
in the sector. The sector is also expected to benefit from low interest rates, which provide the twin benefits in driving
demand and lowering funding costs. Overall, we are positive on the residential segment of the real estate market for
reasons mentioned above.
n Company Outlook – Strong growth outlook within core markets
KPDL, having a strong foothold in its core Pune market and increasing exposure in Mumbai market, is on a strong
growth trajectory as these markets continue to outperform other key top markets in India with a positive outlook
going ahead. The company’s flagship LR project is at an inflection point since FY2023, as it continues to witness strong
buying interest across affordable, mid-income and luxury product segments. Additionally, sustenance sales from
other Pune projects are contributing equally to sales growth. Its focus on non-Pune markets especially in MMR region
is expected to provide further fillip to sales booking with higher realisations and improved profitability. Overall, the
company is expected to reap benefits from both its key markets while being a niche player in Bengaluru region.
n Valuation – Retain Positive view; expect upside of 24-26%
KPDL is at the cusp of a strong growth trajectory, led by strong momentum in its flagship LR project, sustenance sales
from other Pune projects, and upcoming launches in Mumbai region. Further, the company continues to add new
projects across Pune, Mumbai, and Bengaluru, which would ascertain higher sales booking growth over the next few
years. The company’s strong OCF generation, asset-light business model, and almost nil gearing provide comfort on
new business development and execution scale-up. KPDL has corrected 8% from its yearly peak on November 6, 2023
in the wake of weak Q2 performance although it is up 14% since we initiated viewpoint coverage on August 4, 2023.
We consider this as a buying opportunity and retain our Positive view on the stock with an upside potential of 24-26%,
considering its strong growth visibility in its key regions, driven by its capital-efficient model.
Peer Comparison
P/E (x) EV/EBITDA (x) P/BV (x) RoE (%)
Particulars
FY24E FY25E FY24E FY25E FY24E FY25E FY24E FY25E
Kolte Patil Developers 30.2 21.1 16.7 11.6 3.2 2.8 11.1 14.0
Sunteck Realty 34.3 18.2 22.6 12.7 2.2 2.0 6.7 11.5
Macrotech Developers 65.3 42.3 25.3 17.1 5.3 4.8 9.2 12.7
Oberoi Realty 23.2 19.9 17.2 14.8 3.1 2.7 14.5 14.7

Viewpoint
About company
KPDL, incorporated in 1991, is a leading real estate company with a dominant presence in the Pune residential
market and growing presence in Mumbai and Bengaluru. Kolte-Patil is a trusted name with a reputation for high-
quality standards. The company has developed and constructed over 50 projects, including residential complexes,
integrated townships, commercial complexes, and IT Parks covering a saleable area of ~25 million square feet across
Pune, Mumbai, and Bengaluru. The Indian Green Building Council (IGBC) has certified several projects of the company.
KPDL markets its projects under two brands: Kolte-Patil (addressing the mid-income segment) and 24K (addressing
the premium luxury segment). The company’s long-term bank debt has been rated ‘A+ / Stable’, short-term bank loan
facilities as A1 and non-convertible debentures as A+/Stable by CRISIL.
Investment theme
KPDL has built a strong project portfolio, led by its stronghold Pune region apart from Mumbai and Bengaluru. It has
carved out priority launches out of its overall portfolio, which would expedite sales growth over the next two years.
Its flagship LR project along with contribution from other Pune projects is expected to drive sales booking growth. It
also has a strong business development pipeline, which is expected to ascertain a higher sales growth trajectory for
the next few years. The company’s efficient capital allocation policy and strong OCFs have strengthened its balance
sheet, providing comfort on new project additions and timely execution of ongoing projects.
Key Risks
Slowdown in realty demand in the Pune region
Inability to conclude new business development, delay in sales and/or execution in existing and upcoming
projects.
Additional Data
Rajesh Patil Chairman and Managing Director
Yashvardhan Patil Joint Managing Director
Khiroda Chandra Jena CFO
Rahul Talele Group CEO
Source: Company Website
Top 10 shareholders
1 Patil Rajesh Anirudha 20.38
2 Patil Naresh Anirudha 16.64
3 Patil Harshavardhan Naresh 9.60
4 Kolte Milind Digambar 8.48
5 Kolte Sunita Milind 7.29
6 Patil Yashvardhan 6.58
7 Patil Sunita Rajesh 2.68
8 India First Life Insurance Co Ltd 1.51
9 Patil Vandana Naresh 1.49
10 Patil Priyanjali Naresh 1.32
Source: Bloomberg

Understanding the Sharekhan 3R Matrix
Right Sector
Positive Strong industry fundamentals (favorable demand-supply scenario, consistent industry
growth), increasing investments, higher entry barrier, and favorable government
policies
Neutral Stagnancy in the industry growth due to macro factors and lower incremental
investments by Government/private companies
Negative Unable to recover from low in the stable economic environment, adverse government
policies affecting the business fundamentals and global challenges (currency
headwinds and unfavorable policies implemented by global industrial institutions)
and any significant increase in commodity prices affecting profitability.
Right Quality
Positive Sector leader, Strong management bandwidth, Strong financial track-record, Healthy
Balance sheet/cash flows, differentiated product/service portfolio and Good corporate
governance.
Neutral Macro slowdown affecting near term growth profile, Untoward events such as natural
calamities resulting in near term uncertainty, Company specific events such as factory
shutdown, lack of positive triggers/events in near term, raw material price movement
turning unfavourable
Negative Weakening growth trend led by led by external/internal factors, reshuffling of key
management personal, questionable corporate governance, high commodity prices/
weak realisation environment resulting in margin pressure and detoriating balance
sheet
Right Valuation
Positive Strong earnings growth expectation and improving return ratios but valuations are
trading at discount to industry leaders/historical average multiples, Expansion in
valuation multiple due to expected outperformance amongst its peers and Industry
up-cycle with conducive business environment.
Neutral Trading at par to historical valuations and having limited scope of expansion in
valuation multiples.
Negative Trading at premium valuations but earnings outlook are weak; Emergence of roadblocks
such as corporate governance issue, adverse government policies and bleak global
macro environment etc warranting for lower than historical valuation multiple.
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Investor’s Eye

November 07, 2023

For Private Circulation only

Right Quality (RQ) ü Summary

EBITDA Margin (%) 14.5 15.8 16.9 17.3

November 07, 2023 2

Strong Q2 with double-digit revenue growth and improvement in EBIDTA margins

November 07, 2023 3

Outlook and Valuation

November 07, 2023 4

About the company

November 07, 2023 5

OPM (%) 21.9 22.4 23.0 23.9

Relative to P/BV (x) 2.2 3.3 2.9 2.5

November 07, 2023 6

Q2FY2024 Conference Call Highlights:

November 07, 2023 7

Margins BPS BPS

US Formulation 1,865 1,708 9.2% 2,454 -24.0%

November 07, 2023 8

Outlook and Valuation

November 07, 2023 9

November 07, 2023 10

OPM (%) 2.6 -2.1 6.1 4.8 5.1

November 07, 2023 11

Key operating metrics

November 07, 2023 12

Outlook and Valuation

One-year forward P/BV (x) band

Source: Sharekhan Research

November 07, 2023 13

November 07, 2023 14

Right Quality (RQ) ü Summary

EBITDA margin (%) 21.9 20.5 22.2 22.8

November 07, 2023 15

November 07, 2023 16

Key concall highlights

November 07, 2023 17

Brand-wise revenue performance

November 07, 2023 18

Outlook and Valuation

November 07, 2023 19

About the company

November 07, 2023 20

Right Quality (RQ) ü Summary

Revenue 3,143 3,828 4,438 5,111

November 07, 2023 21

November 07, 2023 22

Revenue Break up (Rs. crore)

November 07, 2023 23

Outlook and Valuation

One-year forward P/E (x) band

Source: Sharekhan Research

November 07, 2023 24

About the company

November 07, 2023 25

Right Quality (RQ) ü Summary

YoY growth (%) 5.2 -3.5 21.9 17.1 8.3

November 07, 2023 26

Robust Q2 led by higher tariff

Volumes miss estimate

Source: Company, Sharekhan Research

Implied net gas transmission up 11% q-o-q