Yes Securities (I) Ltd

Published on 7/08/2020 10:38:59 AM

Long Term Recommendation - Honeywell Automation India Ltd

Our View

*  We like HWA based on its ongoing product portfolio upgradation, focus on software industrial business model, faster adoption of automated solutions by domestic market post Covid‐19 episode & relentless execution on cost control.

* HWA would be able to mitigate the slowdown risk arising out of crude prices volatility through its diversified business exposure. Strong installed base of HWA in core sectors would aid higher services sales. Its parent has set a margin target of 25% by CY25, and we believe HWA too will follow a similar trajectory in margins, given the high entry barrier & access to parent’s superior technology.  

Valuation

* During CY07‐FY15, HWA traded at average 1‐yr forward P/E multiple of 21x & delivered average adjusted RoE (ex‐cash)/ Core RoIC of 29%/22% respectively. However, post FY15, HWA’s valuations got a significant re‐rating (traded at average 1‐yr forward P/E multiple of 45x) as it had strong profitability growth, free cash flow generation with average adjusted RoE/ Core RoIC of 51%/39% respectively over FY15‐FY20. HWA’s continued earnings outperformance among its peers, asset light tech model & robust return ratios justify its valuations. Retain ‘BUY’ with TP of Rs36,310 at 50x FY22E EPS.

Risk To Our Call

* Delay in revival of short cycle orders.

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Yes Securities (I) Ltd

Published on 6/08/2020 10:48:46 AM

Long Term Recommendation - Tata Consumer Products Ltd

Our View

*  We retain our BUY rating despite the recent up move as we believe it is a solid medium to long term story with improving visibility of higher growth rates and better execution coupled with multiple margin levers driving higher return ratios.

* We increase our SOTP‐based TP to Rs 490 from Rs 460 earlier given a 13% and 9% upgrade to our EPS estimates for FY21 and FY22 respectively, implying 44x P/E.

Risk To Our Call

* Sustained increase in commodity costs impacting margins and any further COVID‐related demand or supply shocks; significant delays in ongoing integration and supply chain initiatives which can impact realization of synergy and distribution expansion benefits.

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Yes Securities (I) Ltd

Published on 6/08/2020 10:46:10 AM

Long Term Recommendation - PSP Projects Limited

Our View

*  Despite strong order book position, we expect revenues to be under pressure in FY21 as some of the big projects like Housing project (Pandharpur and Bhiwandi) are yet to ramp up. Also, shortage of labor across projects would impact execution. However, we believe execution would substantially pickup in FY22 as COVID related impact settles and several projects move into execution.

* Operating margin is likely to remain under pressure in near term with subdued revenues and higher fixed costs. However, we expect it to normalize from H2 FY21 onwards.

* With negligible private capex, the Company may bid for more Government projects.

Valuation

* Considering the COVID impact on topline and margin, we cut our estimates for FY21. We believe, the Company would witness robust growth in FY22 as the COVID related impact settles down. We expect margins also to improve in FY22 as execution picks up.

* We believe, the Company is well placed to deliver backed by its robust order book, comfortable balance sheet position and superior execution capabilities. We maintain our BUY rating on the stock for target of Rs.520 (13x FY22 EPS)

Risk To Our Call

* Slower than expected ramp up in execution

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Yes Securities (I) Ltd

Published on 6/08/2020 10:45:09 AM

Long Term Recommendation - Narayana Hrudayala Ltd

Our View

*  With no visibility on resumption of international flights and uncertainty on domestic rebound in elective surgeries, FY21 will be a wash‐out year as expected  

* Strong recovery built in FY22 and raise our FY22 estimates (+9%) on faster recovery assumption  

Valuation

* Retain Reduce mostly due to lack of comfort on valuation as we reckon hospital players should trade at a discount to branded pharma companies especially those with sizable India revenues.

Risk To Our Call

* Faster than estimated domestic hospitals growth of 27% in FY22 which would pose upside risks to our EPS forecast  

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Yes Securities (I) Ltd

Published on 4/08/2020 10:47:35 AM

Long Term Recommendation - CreditAccess Grameen Limited

Our View

*  Retain BUY. Assume conservative covid‐related credit cost of 5‐6%. However, FY22 should be a normal year for growth and profitability. Valuation at 2.1x FY22 P/ABV does not fully capture FY22 recovery and an impending capital raise.  

Risk To Our Call

* Unabated spread of Covid and more lockdowns

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Yes Securities (I) Ltd

Published on 3/08/2020 11:55:32 AM

Long Term Recommendation - Cholamandalam Investment and Finance Ltd

Our View

*  Maintain ADD. Our FY21/22 EPS & ABV estimates undergo significant upgrade as we raise growth estimates and lower opex and credit cost. Stock trades at 1.9x FY22 P/ABV.  

* A resilient Q1 FY21 performance highlights CIFC’s core franchise strengths  ‐  a diversified product and regional profile, strong customer selection/underwriting and solid collection focus. Company will benefit significantly from stabilization in operating environment.

Risk To Our Call

* Unabated Covid spread and more lockdowns   

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Yes Securities (I) Ltd

Published on 3/08/2020 11:52:10 AM

Long Term Recommendation - Bluedart Express Ltd

Our View

*  We expect utilization to reach Pre‐COVID levels by start of H2 FY21.  

* We continue to believe that Air express would grow at much lower pace than surface cargo. However, Bluedart’s market share in Surface express is likely to increase gradually with higher competition in the industry. This would continue to impact the overall growth in near to medium term.

Valuation

* We maintain our estimates for FY22 and retain our SELL rating on the stock with a 12m TP of Rs.1,420 (7.5x FY22 EV/EBITDA multiple).

Risk To Our Call

* Faster than expected penetration in Surface express segment

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Yes Securities (I) Ltd

Published on 3/08/2020 11:50:55 AM

Long Term Recommendation - Mahindra Logistics Ltd

Our View

*  We expect revenues to be remain under pressure in FY21 with continued weakness in the auto segment. Also, MLL’s EM division is likely to remain impacted, with IT and Financial sector employees largely working from Home.

* On the margin front, despite increasing contribution from warehousing, we expect operating margin to moderate to ~4.4% during FY22E with higher operating costs.

Valuation

* We largely maintain our estimates and retain our SELL rating on the stock with a Target Price of Rs.226 (28x FY22E P/E). Weak business sentiments and delayed recoveries to impact MLL’s performance in the near to medium term.

Risk To Our Call

* Sharp recovery in the Auto and Farm Segment.

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Yes Securities (I) Ltd

Published on 31/07/2020 11:52:23 AM

Long Term Recommendation - Ajanta Pharma Ltd

Our View

* In our interaction, AJP guided to flat sales in FY21 as strength in US is offset by a decline in India; see minimal growth in other markets   

* Given a wash out kind of FY21 with supportive margins masking weakness in growth, we reckon stock lacks earnings trigger over next few quarters; we cut our FY21/22 estimates by 4‐5% to factor in the guided weakness and expect stock to stay lackluster till clarity on growth emerges.  

* Since the earnings pause is likely to be temporary and we do not see any structural hurdles to growth in India or US, retain a positive stance with unchanged TP of Rs1,580.

Risk To Our Call

* In case domestic growth surprises on the upside (we assume a 4% dip) and US fares better than 12‐15% growth, there could be upside risks to our FY21 estimates.  

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Yes Securities (I) Ltd

Published on 31/07/2020 11:51:11 AM

Long Term Recommendation - Sagar Cements Ltd

Our View

*  Driven by 1. better than expected demand pick up in May‐ June 2020, 2. robust pricing scenario during Q1FY21 and 3. sublime execution on cost optimization, we upgrade our EBITDA estimates by 57%/11% for FY21E/FY22E respectively. Although company has achieved a sturdy EBITDA/te of Rs 1,568 for the quarter, we expect normalization going ahead by factoring in prices to taper off. Subsequently, we expect EBITDA/te to hover around Rs 951/Rs 693 for FY21E/FY22E respectively.    

* Due to aforementioned reasons, we expect cash flows to be much better than earlier anticipated. We expect peak net debt of Rs 6.93 bn in FY22E (vs earlier estimate of Rs 7.86 bn) while peak net debt/EBITDA at 2.3x in FY22E (vs. earlier estimate of 3.7x).  

Valuation

* Currently SGC is trading at EV/EBITDA of ~6.1x and EV/te of $32 on FY22E. Assigning an EV/EBITDA multiple of 7x on FY22E, we have a target of Rs 607/share. We maintain our BUY rating on the stock.

Risk To Our Call

* In a scenario of second wave of Covid‐19 spread, demand and pricing outlook would be severely hampered.  

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