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Berger Paints (NS:): BRGR’s topline delivery (20% YoY; INR25.5bn) missed expectations (HSIE: INR26.28). Two-year topline CAGR (standalone) lagged that of APNT (23% vs APNT’s 27%). However, BRGR has managed to better balance growth and margin as we reckon (1) the focus on lower ASP products has been less intense vs APNT; (2) there were formulation gains; and (3) strategic inventory buying cushioned the RM inflation-led GM decline on a relative basis (9MFY22 GM decline for BRGR was 540bps vs APNT’s 850bps). Standalone volume growth stood at 12%. CY21 price hikes (+24) should catch up with RM inflation by Q4 exit. Maintain ADD with a DCF-based TP of INR750, implying 56x FY24 P/E.
Apollo Hospitals (NS:): Apollo’s Q3 revenue/EBITDA missed our estimates by ~8%/10%. While the vaccine revenue waned off (-80% QoQ), the non-COVID business continued to recover at a decent pace (IP volumes up 6% QoQ), despite a seasonally weak quarter. The outlook for high-growth pharmacy and diagnostics businesses remains intact, partially aided by the integration of Apollo 24/7. With multiple growth drivers in place, we expect Apollo to report strong revenue/EBITDA CAGRs of 18%/24% over FY20-24e. Besides this, it expects to announce strategic funding partnerships for Apollo HealthCo (Apollo 24/7, back-end pharmacy) in the near term. We raise our EBITDA estimates by 1-2% for FY22-24e and arrive at a SOTP TP of INR5,365/sh. Upgrade to BUY.
Trent Ltd (NS:): Trent’s Q3 performance surprised positively. Standalone revenue grew 86% YoY to INR13.48bn (two-year CAGR for 9MFY22 stood at 5%). The make-up of format-wise store openings implies that the beat was mostly SSSG-led, although store expansion has been healthy too. GM declined 513bps YoY to 51.2% (vs HSIE: 52%). We reckon this is primarily a function of the rising Zudio skew in the mix. However, the impact on PBT margin was lower YoY (-140bps, 13%) as Zudio entails the lower cost of retailing vs portfolio. FY24 EBITDA estimate remains largely unchanged. We retain our SELL recommendation with a SOTP TP of INR 860/sh (earlier INR850), implying 31x FY24 EV/EBITDA.
Kansai Nerolac Paints Ltd (NS:): Kansai Nerolac’s (KNPL) topline performance (15% YoY, INR16.9bn, 2-year CAGR: 16%) was largely in line. In decorative segment, volume/value grew in high-single/double digits; performance continues to lag top-2. YTD, KNPL price hikes in decorative/industrial coatings stand at 21/18%. Price hikes should broadly cover RM inflation by Q4 in decorative, while there is some price re-calibration left in the industrial segment. Over 9MFY22, given KNPL’s revenue mix, it faced significant heat on GM (810bps YoY). However, reversal is likely to be as sharp and is baked in. We’ve marginally revised our FY23/24 EPS estimates down by -3/-2% respectively. We maintain our BUY rating with a DCF-based TP of INR700/sh (unchanged), implying 45x FY24 P/E.
V Mart Retail Ltd (NS:): V-MART reported 47% growth YoY. Organic business (ex-Unlimited acquisition) recovered fully from the pandemic blues (INR5.74bn). 2-yr CAGR for 9MFY22 stands at -10.6%. Footfall density still needs to catch up, while transaction sizes remain elevated vs. pre-pandemic levels. The acquisition of Unlimited weighed down profitability and is likely to be a drag in the near term. We account for this and tone our FY23/24 EBITDA estimates down by 7/3% resp. Consequently, our DCF-based TP stands revised at INR 3,700/sh (earlier INR3,850), implying 26x FY24 EV/EBITDA. The recent stock price correction allows us to upgrade our rating on V-MART to ADD (earlier REDUCE), as risk-reward becomes more palatable.
Dilip Buildcon Ltd (NS:): Dilip Buildcon (DBL) reported a weak quarter, missing our estimate at all levels. Moderate project progress, extended southern monsoon, commodity price spike (metals, fuel, and bitumen), and absence of early completion bonus suppressed EBITDA margin to a mere 0.3%. Due to high commodity price volatility, price escalation coverage in EPC projects reduced to 50-60%. DBL has 13 HAM assets slated for divestment, with expected total proceeds of INR 27.8bn. All future projects would be monetized via a listed Shrem private InVIT for better equity valuation. We maintain BUY; however, given the margin pressure, execution delays, and high operating leverage sensitivity, we reduce our FY22/23/24 EPS and TP to INR 490 (12x Dec-23E EPS, 1x P/BV HAM equity investment).
TCNS Clothing Co Ltd (NS:): TCNS Clothing recovered its pre-pandemic sales in Q3 (INR3.29bn; HSIE: INR3.19bn) as offline sales hits near full recovery. Recovery lags peers though (Trent/Madura clocked 24/11% 2-yr CAGR). Online salience continues to normalize towards pre-pandemic levels. GM surprised positively (67.8%, up 670bps+ vs HSIE: 65%) due to (1) normalizing offline salience (2) lower inventory provisioning and discounting, and (3) improvement in quality of online sales. The cost of retailing normalized too; ergo, the beat on EBITDAM lagged that on GM (19.2 vs HSIE: 18.8%). Store additions to pick up in Q4. FY24 EBITDA estimate remains unchanged. Maintain SELL rating with a DCF-based TP of INR575/sh (unchanged), implying 13x FY24 EBITDAR.
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