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Kotak Institutional Equities

Articles By Kotak Institutional Equities

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Investor Corner | Ultratech Cement rating – Reduce: Earnings were higher than estimated

Margins under pressure q-q due to higher costs; demand outlook is bright; TP raised to Rs 7,400 from Rs 6,950; ‘Reduce’ retained

Volumes increased 6% y-o-y to 20.4 mn tons (flat q-o-q), in line with our estimate.

Analyst Corner: ‘Add’ on Brookfield REIT with fair value of Rs 290

Near-term earnings growth comes largely from contractual escalations as well as build-out of new assets, the former makes Brookfield’s earnings less vulnerable to a Covid-induced weakness in the leasing market.

Brookfield REIT: Initiate coverage with ‘add’ rating and FV of Rs 290

Near-term earnings growth comes largely from contractual escalations as well as build-out of new assets, the former makes Brookfield’s earnings less vulnerable to a Covid-induced weakness in the leasing market.

Valuations—NOI of Rs8.5 billion valued at Rs117 billion for 14 million sq ft across key metros: We initiate coverage on Brookfield REIT with an 'add' rating and a fair value (FV) of Rs290.

Analyst Corner: ‘Sell’ with fair value of Rs 3,080 for Avenue Supermarts

Store additions will continue to gather pace as construction activity recovers. We believe the stock is pricing in aggressive revenue growth with no margin dilution

dmart, Avenue Supermarts

HCL Technologies Rating: But for products biz, an excellent quarter

HCLT: The stock is inexpensive and trades at a sharp discount to peers

HCLT results

Oil & Gas: Operating environment has got better

Valuations are reasonable for OMCs; any weakness in the stocks may be seen as a buying opportunity

Analyst Corner: ‘Sell’ on NMDC with fair value of Rs 155

NMDC, despite inexpensive valuations, should remain under pressure amid declining margins and limited growth visibility. SELL.

JK Cement rating – Reduce: A strong first quarter for company

Central India project offers growth visibility; TP up to Rs 2,700; ‘Reduce’ maintained

The Central India expansion project is on track to commission by FY2023e, providing growth visibility. We increase our FV to Rs 2,700 on rollover and maintain Reduce.

Grasim Industries Rating ‘add’; Ebitda was in line with estimate in Q1

Standalone Ebitda for FY22/23e raised by 10/5% on stronger VSF margins; debt-free B/S in offing; TP up to Rs 1675; ‘Add’ retained

Power Grid rating – Buy: Performance in Q1FY21 met estimates

Visibility on earnings growth trajectory is a positive; valuations are attractive; TP up to Rs 205 from Rs 195; ‘Buy’ retained

Against these projects standalone CWIP stands at Rs 148 bn and another Rs 66 bn under TBCB.

Mahindra & Mahindra rating – Buy: Q1 performance was below expectations

FY22-24e standalone EPS down 1-6%; turnaround in global subsidiaries is a positive; ‘Buy’ retained on inexpensive valuations

Also, a turnaround in international farm and auto subsidiaries will aid the company to meet its ROE target. Maintain Buy.

Sunteck Realty rating – Buy: Operationally strong Q4FY21 for company

More affordable projects and low leverage are positives; TP up to Rs 360; ‘Buy’ retained

Analyst Corner: Reiterate ‘buy’ on Hindalco with unchanged FV of Rs 500

At Novelis, strong demand, record scrap spreads and ramp-up in auto volumes create upside risks to management margin guidance.

hindalco

ONGC Rating ‘Sell’: Operating numbers in line with estimates

Weak volumes persisted; FY22-23 EPS raised due to higher O&G prices; TP up to Rs 110; ‘Sell’ maintained given production profile

Indraprastha Gas: Retain ‘add’ with unchanged FV of Rs 575

We see limited risk to margins for CNG from expected rise in domestic gas price, given its significant differential versus liquid auto fuels.

Oil India rating – Sell: Firm’s results were muted yet again

FY22-23e EPS up to factor in higher O&G prices; TP up to Rs 125; ‘Sell’ retained given track record, weak cash flow

Net crude realisations were in line with our assumption at $59.8/bbl and gas realisation remained steady q-o-q at $2/mn BTU.

JK Cement rating – Reduce: Realisations impacted Q4 performance

FY22/23e EPS cut by 4/2%; medium-term prospects are strong but positives factored in; downgraded to ‘Reduce’

Jubilant Foodworks: ‘Buy’ with revised FV of Rs 3,400

Store expansion gathers pace: JUBI’s 4Q print was in line with expectations. Store openings were higher than expected and ahead of guidance: 50 new Domino’s stores (gross) in 4Q (134 in FY2021 versus guidance of 100). JUB

jubilant fireworks

MRF rating – Sell: RM headwinds took a toll on performance

Margins are likely to remain under pressure; FY22-23e EPS down 11-16%; TP cut to Rs 69,150; ‘Sell’ retained

The stock is currently trading at 21.6X FY2023E consolidated EPS, which is expensive.

Divi’s Laboratories rating – Reduce: Growth momentum was maintained

FY22-23e EPS up 5%; TP raised to Rs 3,750 from Rs 3,300; valuations factor in prospects for growth; ‘Reduce’ rating retained

At 38X FY2023e P/E, valuations fully capture the superior growth in APIs, while ignoring the risks to the synthesis segment over the long-term. REDUCE

Vedanta rating – Reduce: A buoyant quarter for the company

FY22/23e Ebitda up 28/15% on strong commodity prices; TP raised to Rs 270 from Rs 180; ‘Reduce’ maintained

We increase our Ebitda estimate by 28%/15% for FY2022/23e on higher commodity prices and FV to Rs 270 (from Rs 180). REDUCE.

Bharti Airtel rating – Buy: Healthy numbers across key segments

Strong performance in FY21; FY22-23e Ebitda cut by 1-3%; outlook for medium term bright; ‘Buy’ retained with TP of Rs 700

We reiterate Buy with a revised SoTP-based FV of Rs 700 (Rs 710 earlier) seeing Bharti as a definite play on industry repair as well as consolidation; the visibility on either may improve in 12-18 months.

Analyst Corner: ‘Reduce’ on Gland Pharma, revised FV at Rs 2,550

Gland Pharma posted revenue growth of 40% yoy in 4QFY21, largely in line with our estimates. The US grew 26% yoy (in line vs KIE) led by ramp-up in micafungin, daptomycin and dexmedetomidine supplies.

Gland Pharma ended FY2021 on a strong note with new launches and expansion into other geographies driving robust revenue growth.

Analyst Corner: UltraTech Cement – Maintain ‘reduce’, revise FV to Rs 6,300

With a strong balance sheet and management’s focus on RoE expansion, dividend payout has upside risk.

Reliance Industries rating – Add: Final quarter results were a mixed bag

Operating performance improved across segments barring Jio, but concerns remain; FY22-23e EPS cut by 2-5%; ‘Add’ retained

Revise United Breweries fair value to Rs 1,365

UBBL reported 8% yoy growth in revenues to Rs 15.4 bn (3% above estimate) and 9% growth in volumes. On a 2-yr CAGR basis, volumes declined 7% (versus 11% decline in 3Q), and revenues declined 3% (versus 6% decline in 3Q).

Analyst Corner: Initiate CAMS coverage with ‘add’; DCF-based FV of Rs 1,850

We initiate coverage on CAMS with an ADD rating and Fair Value of Rs 1,850 (5% upside). CAMS has a dominant position in India’s registrar and transfer agent (RTA) market duopoly, which reduces risks of market share movement

We continue to be cautious about medium-term challenges to India’s mutual fund industry, which will likely pressure CAMS’ revenues, driving (moderate) 14% EPS CAGR during FY2021-24E.
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