12 August 2022 HSIE Results Daily

HSIE Results Daily

Contents
Results Reviews
 PGCIL: PGCIL’s consolidated asset capitalisation in Q1FY23 declined 76.2%
YoY to INR13.5bn, on a high YoY base, while consolidated Capex went up
33.5% YoY to INR14.8bn. On a standalone basis, capitalisation/Capex came in
at INR13.3bn/INR7.6bn. Q1FY23 revenue increased 6.8% YoY, led by
moderate growth in transmission segment (+5.5% YoY) and strong growth in
the telecom (+60.1% YoY) and consultancy (+53.2% YoY) segments. While
EBITDA grew 2.7% YoY, adjusted PAT was up 14.8% YoY to INR37.7bn
(mainly due to a one-off income in Q1FY22 from asset monetisation). PGCIL
has INR520bn worth of projects in hand and a bidding opportunity for
INR270bn worth over the next year and INR900bn over the next five-year
period. We expect capitalisation of INR120bn for FY23 and FY24 each. On
smart metering space, PGCIL has signed an MoU with Gujarat discom to
implement AMI System for 66 lakh meters. We maintain our estimates and
retain our ADD rating with a TP of INR252.
 ABB India: ABB’s revenue/EBITDA/PAT came in at INR 20.5/2/1.5bn, beating
our estimate by 5/7/0%, led by increased traction in exports and higher growth
in HV motors. Whilst commodity prices impacted negatively, price increase
helped neutralise this impact, thereby leading to a margin gain. ABB
maintained its 10% PBT margin guidance and, in the medium term, it aims to
move to 10% PAT margin. To ramp up exports, group mandates India to be
used as a permanent base to cater to the Middle East and Americas.
Supporting this will be ongoing new capacity addition across all of ABB’s four
plants in India, which are expected to be completed and inaugurated in the
coming 1-2 quarters. This Capex will be aided by a healthy cash position of
INR 27.8bn. The divestment of turbocharger business for a consideration of
INR 3.5bn is expected to be completed by Q3CY22. We believe the punchy
valuation would limit further upside on cyclical recovery, and thus maintain
REDUCE with an unchanged TP of INR 2,420/sh (54x Jun-24 EPS).
 Cummins: Cummins India Ltd (CIL) reported a robust revenue/EBITDA/PAT
at INR 17/2.1/1.9bn, beating/(missing) our estimate by 12/(5)/10%.
Gross/EBITDA margins miss is largely reflective of price increase measures
catching up with a lag. With price resets in place now (the latest one in
July’22), commodities inflation softening shall aid margin recovery. The
demand environment, however, is strong in both domestic and export
markets, especially in the power-gen segment where pharma, biotech, realty,
telecom and data centres are driving strong demand. Supply chain issues
continue to pose challenges to power gen growth; CIL is unable to service 10-
18% of demand. It expects pre-buying in H2FY23 before the transition to
stringent CPCB 4+ norms in July’23. It has multiple tailwinds, namely,
stringent upcoming norms, Capex cycle recovery, adoption of alternative
fuels with lesser carbon footprint, revival in industrials and supporting
manufacturing policies. We maintain BUY, with an SOTP target price of INR
1,503 (35x FY24E EPS).
 Bharat Forge: Bharat Forge (BHFC) standalone Q1 earnings at INR 1.6bn were
HSIE Research Team
in line with our estimates. However, overseas subsidiary margin declined
hdfcsec-research@hdfcsec.com
350bps QoQ to 4.7% due to the recently commissioned US Al facility and
sharp rise in energy costs in Europe. Going forward, we expect standalone
demand momentum to be strong for BHFC, led by: (1) sustained recovery in

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HSIE Results Daily
domestic demand, both in auto and non-auto segments; (2) strong export
demand in PVs and aerospace and stable demand from oil and gas. Overseas
subsidiary margins are expected to normalise as the US Al forging facility
ramps to full capacity. Also, near-term cost headwinds are likely to be
partially mitigated by favourable currency movement and healthy revenue
growth. Reiterate BUY with a revised TP of INR 867 (from INR807 earlier) as
we roll forward to June-22 estimates.
 NHPC: NHPC operated at a PAF of 98.6% in Q1FY23 vs 92.5% YoY. As a
result, incentives and deviation charges increased 36.6% YoY and 90% YoY
respectively in Q1FY23. NHPC reported revenue of INR25.9bn (+19.5% YoY),
led by 11.4% YoY increase in generation, while EBITDA grew 10% YoY to
INR14.1bn. PAT for the quarter came in at INR10.5bn (+15.0% YoY). With
Parbati IV and Subansiri expected to be commission partially in FY24,
NHPC’s capacity is expected to reach 8521MW and regulated equity is
expected to increase by 70% by FY24 to INR220bn. The company has received
approval for Kwar Hydroelectric project worth INR45bn and it is foraying
into green hydrogen technology, for which it has signed two MoUs with Leh
and Kargil districts. In the renewable space, 1,115MW is under construction
stage, 900MW is under tendering and 1,400MW is in the pipeline. All these
developments are positive for NHPC and will help it boost growth and
earnings in the long term. We maintain BUY with a TP of INR41.
 Aarti Industries: We maintain our BUY recommendation on Aarti Industries
(AIL), with a target price of INR 1,085/share. AIL's constant focus on Capex
and R&D will enable it to remain competitive and expand its customer base.
The toluene segment in India is mainly untapped and catered to through
imports; AIL will benefit in the long term by entering this segment. Q1
EBITDA/APAT were 6/3% above our estimates, owing to a 26% rise in sales,
lower-than-expected depreciation, offset by higher-than-expected raw
material cost, higher-than-expected other expense and higher-than-expected
finance cost.
 Oil India: Our BUY recommendation on Oil India with a target price of INR
255 is premised on (1) increase in crude price realisation and (2) improvement
in domestic gas price realisation. Q1FY23 revenue/EBITDA/APAT stood at
INR 60/26/16bn, below our estimate, impacted by higher-than-expected
provisions that resulted in higher other expenses and below estimate other
income.
 Radico Khaitan: Radico reported a miss on revenue, but EBITDA was in line.
Net revenue growth was at 27% YoY (three-year CAGR at 7% vs. -1% for
UNSP), a miss, on account of lower P&A volume and transfer of few brands
to royalty agreement. P&A volume three-year CAGR (even adjusting royalty
agreement) has seen deceleration at ~1% as compared to 15% in the previous
three quarters. Regular portfolio, too, saw deceleration in three-year volume
CAGR at 3% (7% previous three quarters). Luxury portfolio continued to see
strong traction; we believe mid-price segments have seen pressure in Q1
(similar trend for UNSP). Gross margin was better than expected at 43.6%
(HSIE 42%), down 350bps YoY but improved 100bps QoQ. We expect GM to
improve with (1) price hikes, (2) higher royalty revenue, (3) benefits of new
capacity build-up, and (4) better product mix within IMFL. Thereby, we
expect EBITDA margin to hover ~17% in FY24/25. We remain positive on
Radico’s constant product innovation and success in the luxury portfolio.
However, with overall slowdown in consumption, the demand for mid-price
P&A and regular portfolio will be the key monitorables. Capex execution and
industry demand remain key monitorables for the stock. We value Radico at
28x P/E on Jun-24 EPS to arrive at a TP of INR 900. Maintain REDUCE.

Page | 2
HSIE Results Daily

 Sobha: Sobha’s (SDL) Q1FY23 revenue came in at INR 5.8bn (+13.5%/-20.5%

YoY/QoQ, 23% miss) and APAT at INR 138mn (+28%/-45% YoY/QoQ, a 68%
miss). This weak performance was largely led by muted completions in
Q1FY23. Revenue recognition is expected to ramp up with enhanced pace of
project completions in ensuing quarters. The residential launch pipeline
stands at 12.11msf of saleable area spread across 16 projects—Bengaluru alone
has nine projects with a saleable area of 6.8msf. Out of the cumulative sales
done in residential business as on Jun-22, balance revenue of INR 85.2bn is
yet to be recognised. The average price realisation has increased 2% QoQ to
INR 8,431psf. SDL achieved its second best cash inflow till date at INR 11.2bn
(+55.7%/-13.4% YoY/QoQ) on back of robust residential cash collection of INR
8.9bn (+62.2%/-16.2% YoY/QoQ). It also received INR 1.6bn from the land
monetisation deal. Thus, the consolidated gross/net debt reduced to INR
22/21.1bn (vs. INR 25.3/23.4bn as at Mar’22), with net D/E at 0.84x (vs. 0.93x
as at Mar’22). We maintain BUY with an unchanged TP of INR 902.
 Ashoka Buildcon: Ashoka Buildcon (ASBL) reported revenue/EBITDA/
APAT of INR 14.8/1.5/1bn, beating our estimates on all fronts. EBITDA
margin is expected to remain in 9-10% range in FY23, impacted by the project
mix. Some support to the margins is expected from softening raw material
prices and high proportion of variable priced orders (~90% of the OB). The
Chennai ORR sale deal with NIIF is expected to fetch INR 4.5bn for ASBL and
it is targeted to complete by early Q3FY23. The five ACL BOT sales worth INR
13.4bn are expected to conclude by Sep-22 and the Jaora BOT asset sale is
expected in FY23. ASBL has received orders worth ~INR 25bn FYTD23 vs.
earlier FY23 order inflow guidance of more than INR 100bn, taking the
FYTD23 OB to INR 153.6bn (~3.3x FY22 revenue). The company has revised
its FY23 revenue growth guidance to 15-20% YoY. We maintain BUY, with a
TP of INR 140/sh (9x Mar-24E EPS).

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HSIE Results Daily

PGCIL
Projects in hand stand at INR520bn ADD
PGCIL’s consolidated asset capitalisation in Q1FY23 declined 76.2% YoY to CMP(as on 11 Aug 22) INR 223
INR13.5bn, on a high YoY base, while consolidated Capex went up 33.5% YoY
Target Price INR 252
to INR14.8bn. On a standalone basis, capitalisation/Capex came in at
INR13.3bn/INR7.6bn. Q1FY23 revenue increased 6.8% YoY, led by moderate NIFTY 17,659
growth in transmission segment (+5.5% YoY) and strong growth in the telecom
(+60.1% YoY) and consultancy (+53.2% YoY) segments. While EBITDA grew KEY
OLD NEW
CHANGES
2.7% YoY, adjusted PAT was up 14.8% YoY to INR37.7bn (mainly due to a one-
Rating ADD ADD
off income in Q1FY22 from asset monetisation). PGCIL has INR520bn worth of
projects in hand and a bidding opportunity for INR270bn worth over the next Price Target INR250 INR252
year and INR900bn over the next five-year period. We expect capitalisation of FY23E FY24E
INR120bn for FY23 and FY24 each. On smart metering space, PGCIL has signed EPS Change %
- -
an MoU with Gujarat discom to implement AMI System for 66 lakh meters. We
maintain our estimates and retain our ADD rating with a TP of INR252.
KEY STOCK DATA
 Q1FY23 result highlights: PGCIL’s revenue grew 6.8% YoY to INR104.5bn, Bloomberg code PWGR IN
led by 5.5%/53.2%/60.1% YoY growth in transmission/consulting/telecom
No. of Shares (mn) 6,975
segments. EBITDA grew 2.7% YoY to INR88.0bn, while margin declined 342
bps YoY to 84.3%. Surcharge income and incentive income came in at MCap (INR bn) / ($ mn) 1,554/20,889

INR970mn/INR1.5bn in Q1FY23 vs INR550mn/INR1.1bn YoY. Interest 6m avg traded value (INR mn) 2,654
expenses declined 13.7% YoY to INR19.8bn and depreciation rose 5.8% YoY 52 Week high / low INR 248/168
to INR32.0bn. PAT increased 14.8% YoY to INR37.7bn (adjusting for one-off
income from transfer of assets to its InVIT platform in Q1FY22).
STOCK PERFORMANCE (%)
 Bidding opportunity of ~INR900bn over FY23-FY27: In Q1, 3M 6M 12M
capitalisation/Capex stood at INR13.5bn/INR14.8bn vs INR56.4bn/INR11.1bn
Absolute (%) (6.8) 7.2 28.3
YoY. Total projects in hand now stand at INR520bn (CWIP – INR82bn, new –
INR280bn and TBCB – INR158bn). Of this, INR260bn worth of projects belong Relative (%) (16.5) 5.2 19.5
to the Pang-Taithal transmission line, which is likely to be commissioned in
6-7 years. Further, transmission projects worth INR270bn will come up as SHAREHOLDING PATTERN (%)
tenders in the next one year and INR900bn over FY23-FY27 period. We expect Mar-22 Jun-22
INR120bn capitalisation for FY23 and FY24 each.
Promoters 51.3 51.3
 Maintain ADD: PGCIL is well-poised to gain from the transmission FIs & Local MFs 8.32 8.59
opportunity, apart from the new tendering opportunities. It has been
FPIs 29.4 30.3
awarded the INR260bn Leh transmission project and the market is poised to
witness transmission opportunity for another ~INR900bn over the next five Public & Others 10.9 10.9

years to evacuate RES projects. Further, it has signed an MoU with Gujarat Pledged Shares - -
discom to implement 66 lakh AMI system meters and is in discussions with a Source : BSE
few other states as well like MP and Karnataka. We maintain ADD, with a TP
of INR252, factoring in a strong order book and robust project pipeline ahead.
Financial summary
1Q 1Q YoY 4Q
(INR mn, Mar YE) QoQ (%) FY22 FY23E FY24E
FY23 FY22 (%) FY23
Net Revenues 1,04,461 97,766 6.8 1,02,212 2.2 3,99,281 4,21,663 4,31,599
EBITDA 88,017 85,724 2.7 88,759 -0.8 3,49,217 3,66,215 3,73,163
APAT 37,659 32,790 14.8 38,782 -2.9 1,55,442 1,42,246 1,51,214
Diluted EPS (INR) 7.2 6.3 14.8 7.4 -2.9 22.3 20.4 21.7
P/E (x) 10.0 10.9 10.2 Anuj Upadhyay
P/BV (x) 2.0 1.8 1.7 anuj.upadhyay@hdfcsec.com
RoE (%) 17.5 17.4 17.3 +91-22-6171-7355
Source: Company, HSIE Research
Hinal Choudhary
hinal.choudhary@hdfcsec.com
+91-22-6171-7349

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HSIE Results Daily

ABB India
In-line performance REDUCE
ABB’s revenue/EBITDA/PAT came in at INR 20.5/2/1.5bn, beating our estimate by CMP(as on 11 Aug 22) INR 2,798
5/7/0%, led by increased traction in exports and higher growth in HV motors. Whilst
Target Price INR 2,420
commodity prices impacted negatively, price increase helped neutralise this impact,
thereby leading to a margin gain. ABB maintained its 10% PBT margin guidance NIFTY 17,659
and, in the medium term, it aims to move to 10% PAT margin. To ramp up exports,
group mandates India to be used as a permanent base to cater to the Middle East and KEY
OLD NEW
Americas. Supporting this will be ongoing new capacity addition across all of ABB’s CHANGES

four plants in India, which are expected to be completed and inaugurated in the Rating REDUCE REDUCE

coming 1-2 quarters. This Capex will be aided by a healthy cash position of INR Price Target INR 2,420 INR 2,420
27.8bn. The divestment of turbocharger business for a consideration of INR 3.5bn is
EPS CY22E CY23E CY24E
expected to be completed by Q3CY22. We believe the punchy valuation would limit
Change % - - -
further upside on cyclical recovery, and thus maintain REDUCE with an unchanged
TP of INR 2,420/sh (54x Jun-24 EPS).
 Financial highlights: ABB reported a strong revenue of INR 20.5bn (+44%/+4.3% KEY STOCK DATA

YoY/QoQ, a 5% beat); Sequentially, robotics & discrete Bloomberg code ABB IN

automation/motion/electrification/process automation posted growth/(de- No. of Shares (mn) 212
growth) of (26)/17/(3)/8%. On an annual basis, the same posted growth/(de-
growth) of (46)/67/45/39%. EBITDA recorded at INR 2bn (+110%/+5.8% YoY/QoQ, MCap (INR bn) / ($ mn) 593/7,969

7% beat) and margin was 9.7% (+303/14bps YoY/QoQ, 20bps beat). RPAT/APAT 6m avg traded value (INR mn) 717
was INR 1.5bn (+115%/-60% YoY/QoQ, in line with est.). PBT margin came in at
52 Week high / low INR 2,851/1,618
9.5%. ABB has a medium-term target to reach 10% PBT margin. Exchange rate and
commodity rate variation had an impact of INR 570mn, of which the electrification
STOCK PERFORMANCE (%)
segment was impacted by INR 180mn and motions was impacted by INR 350mn.
These two segments form 70% of the company’s India business. Robotics and 3M 6M 12M
discrete automation were mainly impacted by semi-conductor shortage.
Absolute (%) 23.3 28.4 67.1
 Robust order book: Q2CY22 order inflow (OI) stood at INR 28bn (+16x/+21% Relative (%) 13.6 26.4 58.3
YoY/QoQ), taking the OB as on Jun-22 to INR 60bn (vs. INR 52.3bn as on Mar-22).
Process automation (PA) OB stood at INR 21.7bn (+54% YoY), with significant
SHAREHOLDING PATTERN (%)
orders from steel, paint, and cement majors. Motions (MO) OB stood at INR 21.7bn
(+25% YoY), backed by exports and packaged orders from motors & drives. It Mar-22 Jun-22
bagged a large order for traction convertor from the railways. Electrification (EL) Promoters 75.00 75.00
OB stood at INR 15.6bn (+14% YoY) on account of strong customer connect and
FIs & Local MFs 8.23 8.60
segment focus. Export orders increased in this segment. Robotics and discrete
automation (RDA) OB stood at INR 1.7bn (+16% YoY) on the back of service FPIs 3.68 3.53
orders, led by system upgrades. The share of large orders (> INR 1bn) in the OB Public & Others 13.09 12.87
stood at INR 2.5bn, whilst the base orders contribute to a large part of OB.
Pledged Shares - -
 Exports to ramp up: ABB is witnessing strong export traction in the electrification
Source : BSE
and motion verticals increased localisation has taken place. In order to ramp up
exports, the group has decided to serve the Middle East and Americas from India
unit. So, all four manufacturing units in India namely, Faridabad, Maneja,
Nelamangala, and Nashik are currently under capacity expansion, likely to be
completed in next 1-2 quarters.
Parikshit D Kandpal, CFA
Standalone financial summary (INR mn) parikshitd.kandpal@hdfcsec.com
Dec Year End Q2CY22 Q2CY21 YoY (%) Q1CY22 QoQ (%) CY21 CY22E CY23E CY24E
Net Revenues 20,525 14,250 44.0 19,684 4.3 69,340 85,698 99,988 121,779
+91-22-6171-7317
EBITDA 1,988 948 109.8 1,879 5.8 5,567 8,824 11,203 13,604
APAT 1,471 683 115.3 1,458 0.9 6,538 6,613 8,791 10,200 Manoj Rawat
EPS (INR) 6.9 3.2 115.3 6.9 0.9 30.9 31.2 41.5 48.1 manoj.rawat@hdfcsec.com
P/E (x) 90.7 89.7 67.4 58.1
+91-22-6171-7358
EV/EBITDA (x) 103.2 64.7 50.5 41.1
RoE (%) 17.2 15.5 17.5 17.1
Source: Company, HSIE Research Nikhil Kanodia
Nikhil.kanodia@hdfcsec.com
+91-22-6171-7362

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HSIE Results Daily

Cummins
Power-packed performance BUY
Cummins India Ltd (CIL) reported a robust revenue/EBITDA/PAT at INR CMP (as on 11 Aug 22) INR 1,238
17/2.1/1.9bn, beating/(missing) our estimate by 12/(5)/10%. Gross/EBITDA margins
miss is largely reflective of price increase measures catching up with a lag. With Target Price INR 1,503
price resets in place now (the latest one in July’22), commodities inflation softening NIFTY 17,659
shall aid margin recovery. The demand environment, however, is strong in both
domestic and export markets, especially in the power-gen segment where pharma, KEY CHANGES OLD NEW
biotech, realty, telecom and data centres are driving strong demand. Supply chain
issues continue to pose challenges to power gen growth; CIL is unable to service 10- Rating BUY BUY

18% of demand. It expects pre-buying in H2FY23 before the transition to stringent Price Target INR 1,501 INR 1,503
CPCB 4+ norms in July’23. It has multiple tailwinds, namely, stringent upcoming
FY23E FY24E
norms, Capex cycle recovery, adoption of alternative fuels with lesser carbon EPS change %
footprint, revival in industrials and supporting manufacturing policies. We (1.1) +0.1
maintain BUY, with an SOTP target price of INR 1,503 (35x FY24E EPS).
 Financial highlights: Revenue came in at INR 16.9bn (+13%/+42% QoQ/YoY, 12% KEY STOCK DATA
beat). Domestic sales at INR 11.7bn (+36%/+12% YoY/QoQ). Export sales at INR
Bloomberg code KKC IN
4.9bn (+57%/+15% YoY/QoQ). EBITDA was INR 2.1bn (+4%/+44% QoQ/YoY, 5%
miss), with EBITDA margin was 12.7% (-116/+13bps QoQ/YoY) vs est. of 14.9%, No. of Shares (mn) 277
affected by higher commodities prices and supply chain disruptions. There was MCap (INR bn) / ($ mn) 343/4,610
an exceptional loss of INR 143mn, pertaining to the Voluntary Retirement Scheme.
6m avg traded value (INR mn) 702
RPAT was INR 1.99bn (+5%/-16% QoQ/YoY). APAT was INR 2.1bn
(+10.8%/+52.5% QoQ/YoY, 10% beat). CIL has taken price hikes (last one taken in 52 Week high / low INR 1,257/842
Jul’22) to absorb commodity inflation, though it lags by a couple of quarters. With
commodity prices softening, CIL expects to close this gap in coming quarters, STOCK PERFORMANCE (%)
thereby stabilising margins.
3M 6M 12M
 Strong demand environment: CIL is seeing a strong demand environment, both
Absolute (%) 26.4 31.8 31.0
in domestic and export markets. This higher demand, however, is not fully
converting into revenue booking as supply chain disruption poses a challenge. Relative (%) 16.8 29.8 22.2
The revenue impact on power gen segment is estimated to be in the range of 10-
18%. The supply chain issue is now beyond core silicon availability to smaller SHAREHOLDING PATTERN (%)
items like sensors, wiring components, specialist items and forged machinery. As
Mar-22 Jun-22
supply chain issues iron out progressively every quarter, CIL expects
unconstrained supplies resolution in next 2-3 years. Promoters 51.00 51.00
 Multiple tailwinds to benefit CIL: More stringent norms benefit CIL - with the FIs & Local MFs 25.15 25.04
transition to CPCB 4 plus expected in Jul’23 (government sticking to timeline for
FPIs 10.52 10.35
now), pre-buying is expected in Q3/Q4FY23. Adoption of alternative fuels like
ethanol blended fuel, LNG and CNG based engines etc. will benefit the company Public & Others 13.33 13.61
as it has ready products. Emission norm transition involves changes and calls for Pledged Shares - -
more sophisticated, higher tech, higher grade of electronics, after treatment and
Source: BSE
will result in significant price increase, market share gain vs. tech lagging peers,
and better realisation for CIL in domestic and exports markets.
Standalone financial summary
(INR in mn) Q1FY23 Q4FY22 YoY (%) Q1FY22 QoQ (%) FY21 FY22 FY23E FY24E
Net Revenues 16,867 14,936 12.9 11,845 42.4 43,292 61,404 70,824 78,775
EBITDA 2,138 2,067 3.5 1,488 43.7 6,027 8,802 11,572 14,035
APAT 2,095 1,892 10.8 1,374 52.5 6,086 7,837 10,527 12,689 Parikshit D Kandpal, CFA
Diluted EPS(INR) 7.6 6.8 10.8 5.0 52.5 22.0 28.3 38.0 45.8 parikshitd.kandpal@hdfcsec.com
P/E (x) 56.4 43.8 32.6 27.0 +91-22-6171-7317
EV/EBIDTA (x) 54.8 37.2 28.0 22.6
RoE (%) 14.2 16.9 20.5 21.9
Manoj Rawat
Standalone Estimate Change Summary (INR mn)
manoj.rawat@hdfcsec.com
FY23E FY24E
Particulars +91-22-6171-7358
New Old % Chg New Old % Chg
Revenues 70,824 66,916 5.8 78,775 76,435 3.1
EBIDTA 11,572 10,942 5.8 14,035 13,074 7.3 Nikhil Kanodia
EBIDTA Margins (%) 16.3 16.4 (1.3) 17.8 17.1 71.1 nikhil.kanodia@hdfcsec.com
APAT 10,527 10,640 (1.1) 12,689 12,670 0.1 +91-22-6171-7362
Source: Company, HSIE Research
Page | 6
HSIE Results Daily

Bharat Forge
Multiple growth drivers ahead BUY
Bharat Forge (BHFC) standalone Q1 earnings at INR 1.6bn were in line with our CMP (as on 11 Aug 22) INR 736
estimates. However, overseas subsidiary margin declined 350bps QoQ to 4.7%
Target Price INR 867
due to the recently commissioned US Al facility and sharp rise in energy costs
in Europe. Going forward, we expect standalone demand momentum to be NIFTY 17,659
strong for BHFC, led by: (1) sustained recovery in domestic demand, both in
auto and non-auto segments; (2) strong export demand in PVs and aerospace KEY
OLD NEW
CHANGES
and stable demand from oil and gas. Overseas subsidiary margins are expected
Rating BUY BUY
to normalise as the US Al forging facility ramps to full capacity. Also, near-term
cost headwinds are likely to be partially mitigated by favourable currency Price Target INR 807 INR 867
movement and healthy revenue growth. Reiterate BUY with a revised TP of INR FY23E FY24E
867 (from INR807 earlier) as we roll forward to June-22 estimates. EPS %
0% 0%
▪ Q1 performance in line with estimates: Bharat Forge (BHFC) standalone Q1
earnings at INR 1.6bn were in line with our estimates. Margins at overseas KEY STOCK DATA
subsidiaries declined 350bps QoQ to 4.7% due to: (1) recently commenced
Bloomberg code BHFC IN
production at US AL facility (which is loss making due to lower initial
No. of Shares (mn) 466
utilization) and (2) sharp rise in energy costs in Europe.

▪
MCap (INR bn) / ($ mn) 343/4,604
Call takeaways: (1) US market outlook: As per management, the US Class8
6m avg traded value (INR mn) 1,083
OEMs have so far secured capacities till CY23 end and the rate of cancellations
is not high. While the PV segment in the US is seeing some supply chain 52 Week high / low INR 848/595
disruption, production schedules remain fairly stable. The non-auto segment
in US (including oil and gas) is also operating at a fairly stable level. (2) STOCK PERFORMANCE (%)
Europe market outlook: Europe market seems a bit more volatile than US due
3M 6M 12M
to the ongoing geopolitical issues. Even then, it continues to see reasonably
Absolute (%) 16.9 0.5 (6.0)
strong growth in CVs and good demand from the premium PV segment
where it operates. (3) On the back of its recent acquisition of JS Auto w.e.f. Relative (%) 7.2 (1.5) (14.8)
July 2022 and the Sanghvi Forgings acquisition, it expects the domestic non-
auto segment to grow in strong double digits over the next 3-4 years. (4) The SHAREHOLDING PATTERN (%)
defense business in BHFC is currently doing revenue of around INR 500crs
Mar-22 Jun-22
(INR 200-250crs from vehicle segment and INR 300crs from spares and
consumables) with negligible exports currently. With strong potential in both Promoters 45.25 45.25
domestic and export markets, management targets to scale this business to FIs & Local MFs 17.66 18.9
INR 1,900crs revenue in the next 3-4 years. (5) Overseas subsidiary outlook: FPIs 19.80 18.82
The company has recently started its US Al forging plant, which is expected
Public & Others 17.29 17.03
to break even by FY23 end. Phase1 of this facility is fully booked and given
incremental new orders, management intends to start construction of the Pledged Shares 3.22 3.22
second phase soon. It is confident that the overall overseas subs would do Source : BSE
10% EBITDA margin in steady state. (6) Capex outlook for FY23 for Pledged shares as % of total shares
standalone entity stands at INR 2.5bn. It would invest INR 1.25bn in EV
subsidiary in FY23. Further, the company intends to invest USD75mn for the
second phase of expansion in the US over the next two years and Euro10-15
mn in Europe.
Quarterly/annual financial summary
Q1 Q1 YoY Q4 QoQ
YE Mar (INR mn) FY22 FY23E FY24E FY25E
FY23 FY22 (%) FY22 (%)
Net Sales 28,515 21,077 35.3 35,731 -20.2 1,04,611 1,25,076 1,44,870 1,64,307
EBITDA 4,278 4,503 -5.0 5,539 -22.8 19,803 22,401 27,980 34,374 Aniket Mhatre
APAT 1,665 1,123 48.2 2,445 -31.9 9,875 11,109 15,027 19,544 aniket.mhatre@hdfcsec.com
Diluted EPS (INR) 3.6 2.4 48.2 5.3 -31.9 21.2 23.9 32.3 42.0
+91-22-6171-7357
P/E (x) 34.6 30.7 22.7 17.5
EV / EBITDA (x) 35.7 31.5 25.1 20.1
Sonaal Sharma
RoCE (%) 11.1 11.4 14.5 17.4
sonaal.sharma@hdfcsec.com
Source: Company, HSIE Research
+91-22-6171-7307

Page | 7
HSIE Results Daily

NHPC
Project commissioning remains intact ADD
NHPC operated at a PAF of 98.6% in Q1FY23 vs 92.5% YoY. As a result, CMP(as on 11 Aug 22) INR 34
incentives and deviation charges increased 36.6% YoY and 90% YoY
Target Price INR 41
respectively in Q1FY23. NHPC reported revenue of INR25.9bn (+19.5% YoY),
led by 11.4% YoY increase in generation, while EBITDA grew 10% YoY to NIFTY 17,659
INR14.1bn. PAT for the quarter came in at INR10.5bn (+15.0% YoY). With
Parbati IV and Subansiri expected to be commission partially in FY24, NHPC’s KEY
OLD NEW
CHANGES
capacity is expected to reach 8521MW and regulated equity is expected to
Rating ADD ADD
increase by 70% by FY24 to INR220bn. The company has received approval for
Kwar Hydroelectric project worth INR45bn and it is foraying into green Price Target INR41 INR41
hydrogen technology, for which it has signed two MoUs with Leh and Kargil FY22E FY23E
districts. In the renewable space, 1,115MW is under construction stage, 900MW EPS Change %
- -
is under tendering and 1,400MW is in the pipeline. All these developments are
positive for NHPC and will help it boost growth and earnings in the long term.
KEY STOCK DATA
We maintain BUY with a TP of INR41.
Bloomberg code NHPC IN
 Improved performance: Generation increased 11.4% YoY to 8bn units, which
No. of Shares (mn) 10,045
along with tariff approvals led to a 19.5% YoY increase in revenue to
INR25.9bn in Q1FY23. Employee expenses decreased 3.2% YoY to INR3.1bn, MCap (INR bn) / ($ mn) 340/4,569

while generational and other recurring expenses increased 2.9%/62.6% YoY to 6m avg traded value (INR mn) 342
INR2.7bn/INR5.1bn respectively. EBITDA increased 10% YoY to INR14.1bn, 52 Week high / low INR 38/25
led by increased incentives income (INR1.7bn in Q1FY23 vs INR1.3bn YoY)
and deviation charges (INR721.4mn vs INR379.0mn YoY). Regulatory income
STOCK PERFORMANCE (%)
declined 39.5% YoY to INR279bn due to MAT credit. Accordingly, PAT came
in at INR10.5bn (+15.0% YoY). 3M 6M 12M

 Management discussion: Capex for FY23 is estimated at INR58.6bn. NHPC Absolute (%) 10.6 15.5 30.2

expects two units of Subansiri to get commissioned in FY23 and the balance Relative (%) 0.9 13.5 21.4
in FY24. Parbati II tunneling work is expected to be completed by Mar-23 and
full commissioning would take place by the end of FY24. These two projects SHAREHOLDING PATTERN (%)
will increase regulated equity by 70% to INR221bn in FY25E, vs. INR130.6bn
Mar-22 Jun-22
in FY22. It has also received investment approval for Kwar Hydroelectric
Promoters 71.0 71.0
project worth INR45bn. The company has also entered into an MoU to
develop green hydrogen technology in Leh and Kargil districts. On renewable FIs & Local MFs 15.3 14.5
front, 1,115MW is under construction stage, 900MW under tendering, and FPIs 5.7 6.6
1,400MW is in the pipeline.
Public & Others 8.0 7.9
 Maintain ADD: We have maintained our earnings estimates for FY23/24 and
Pledged Shares - -
retain our BUY rating with a TP of INR41. The stock continues to trade at an
Source : BSE
attractive multiple of 0.9x its FY25 BV and 9.0x its FY25 P/E. Going ahead,
with the commissioning of Subansiri and Parbati II unit, PAT is expected to
increase by 46% to INR51.7bn in FY25E vs INR35.4bn in FY22. At a similar
payout level of 50%, DPS could increase to INR2.6/share, which would
provide a high yield of ~8%.
Financial Summary
1Q 1Q YoY 4Q QoQ
(INR mn, Mar YE) FY22E FY23E FY24E
FY23 FY22 (%) FY22 (%)
Net Revenues 25,944 21,702 19.5 15,058 72.3 83,538 1,03,427 1,08,566
EBITDA 14,069 12,793 10.0 4,237 232.1 46,787 64,505 67,474 Anuj Upadhyay
APAT 10,495 9,123 15.0 5,601 87.4 35,377 35,551 37,279 anuj.upadhyay@hdfcsec.com
Diluted EPS (INR) 1.0 0.9 15.0 0.6 87.4 3.52 3.54 3.71 +91-22-6171-7355
P/E (x) 9.5 9.5 9.0
P/BV (x) 1.0 1.0 0.9 Hinal Choudhary
RoE (%) 10.6 10.3 10.3 hinal.choudhary@hdfcsec.com
Source: Company, HSIE Research +91-22-6171-7349

Page | 8
HSIE Results Daily

Aarti Industries
Healthy volume trajectory BUY
We maintain our BUY recommendation on Aarti Industries (AIL), with a target
CMP (as on 11 Aug 22) INR 815
price of INR 1,085/share. AIL's constant focus on Capex and R&D will enable it
Target Price INR 1,085
to remain competitive and expand its customer base. The toluene segment in
India is mainly untapped and catered to through imports; AIL will benefit in NIFTY 17,659
the long term by entering this segment. Q1 EBITDA/APAT were 6/3% above
our estimates, owing to a 26% rise in sales, lower-than-expected depreciation, KEY
OLD NEW
offset by higher-than-expected raw material cost, higher-than-expected other CHANGES
expense and higher-than-expected finance cost. Rating BUY BUY

 Financial performance: Revenue grew 50% YoY to INR 19.7bn, steered by

Price Target INR 1,155 INR 1,085

higher volume off-take for key products as well as favourable realisation FY23E FY24E
EPS %
gains. It was supported by incremental volume coming from newer capacities +1.5% -3.2%
added in the recent past. Both 1st and 2nd long term contract has seen a ramp-
up during the quarter, and this is expected to further improve in the ensuing KEY STOCK DATA
quarters. EBITDA grew 18% YoY to INR 3.7bn. EBITDA margin fell by 510bps Bloomberg code ARTO IN
YoY to 19% in Q1, on account of higher input and utility costs, combined with No. of Shares (mn) 363
logistical challenges and mark to market impact on the ECBs on account of
MCap (INR bn) / ($ mn) 296/3,972
steep depreciation in currency rates during the quarter.
6m avg traded value (INR mn) 683
 Speciality chemicals: Revenue/EBIT grew 44/8% YoY to INR 17.7/2.5bn,
52 Week high / low INR 1,168/669
owing to higher volumes. Value-added products contributed ~74% to the
revenue in Q1. EBIT margin for the segment fell by 475bps YoY to 14% on
STOCK PERFORMANCE (%)
account of higher input costs. The company witnessed sustained scale-up
from 1st and 2nd long-term contracts in Q1. 3M 6M 12M

 Pharma: Revenue/EBIT grew 48/46% YoY to INR 4.1/0.8bn, owing to higher

Absolute (%) 9.3 (17.4) (11.3)

demand trajectory for key products from generic pharma companies and Relative (%) (0.4) (19.5) (20.1)
Xanthine businesses. The recently commissioned new block at the USFDA
approved API facility at Tarapur in early Q2FY23 will lead to positive SHAREHOLDING PATTERN (%)
contribution in subsequent quarters. Mar-22 Jun-22

 Change in estimates: We raise our FY23 EPS estimate by 1.5% to INR 23.3/sh, Promoters 44.19 44.19
and cut our FY24 EPS estimate by 3.2% to INR 29.8/sh to factor in Q1 results FIs & Local MFs 14.90 15.07
and the change in raw material assumption. FPIs 12.46 11.82
 DCF-based valuation: Our target price is INR 1,085 (WACC 11%, terminal Public & Others 28.45 28.92
growth 4%). The stock is currently trading at 27x FY24E EPS. Pledged Shares 0.00 0.00
Financial summary (consolidated) Source: BSE
Q1 Q4 QoQ Q1 YoY
INR mn FY20 FY21 FY22P FY23E FY24E
FY23 FY22 (%) FY22 (%)
Net Sales 19,720 17,556 12.3 13,168 49.8 41,863 45,061 70,000 78,701 84,578
EBITDA 3,693 3,391 8.9 3,138 17.7 9,773 9,815 19,288 15,607 19,443
APAT 1,891 1,937 (2.4) 1,649 14.7 5,361 5,235 13,072 8,457 10,793
Nilesh Ghuge
AEPS (INR) 5.2 5.3 (2.4) 4.5 14.7 14.8 14.4 36.1 23.3 29.8
nilesh.ghuge@hdfcsec.com
P/E (x) 55.1 56.4 22.6 34.9 27.4
+91-22-6171-7342
EV/EBITDA(x) 32.1 32.6 16.3 20.7 16.5
RoE (%) 19.1 16.2 27.8 13.4 15.0 Harshad Katkar
Source: Company, HSIE Research harshad.katkar@hdfcsec.com
+91-22-6171-7319
Change in estimates (consolidated)
Y/E Mar FY23E Old FY23E New % Ch FY24E Old FY24E New % Ch Rutvi Chokshi
EBITDA (INR mn) 15,329 15,607 1.8 19,888 19,443 (2.2) rutvi.chokshi@hdfcsec.com
Adj. EPS (INR/sh) 23.0 23.3 1.5 30.8 29.8 (3.2) +91-22-6171-7356
Source: Company, HSIE Research
Akshay Mane
akshay.mane@hdfcsec.com
+91-22-6171-7338

Page | 9
HSIE Results Daily

Oil India
Earnings miss on higher provisions BUY
Our BUY recommendation on Oil India with a target price of INR 255 is CMP (as on 11 Aug 22) INR 188
premised on (1) increase in crude price realisation and (2) improvement in Target Price INR 255
domestic gas price realisation. Q1FY23 revenue/EBITDA/APAT stood at INR
NIFTY 17,659
60/26/16bn, below our estimate, impacted by higher-than-expected provisions
that resulted in higher other expenses and below estimate other income.
KEY
OLD NEW
 Standalone financial performance: Sales in Q1 were INR 60bn (+99% YoY, CHANGES
+33% QoQ). Crude realisation in rupee terms was at INR 8,439/bbl (+76% YoY, Rating BUY BUY
+18% QoQ). EBITDA came in at INR 26bn (+2.1x YoY, +35% QoQ), impacted Price Target INR 255 INR 255
by higher-than-expected provisions of INR 4bn, resulting in high other FY23E FY24E
expenses of INR 12.1bn (+2.5x YoY, +1.5x QoQ). Employee cost was at INR EPS change
- -
4.4bn (+5% YoY, +13% QoQ). Resultant, APAT stood at INR 16bn (+3.1x YoY,
-5% QoQ), below our estimate.
KEY STOCK DATA
 Standalone operational performance: In Q1, crude oil realisation increased Bloomberg code OINL IN
to USD 109.3/bbl, (+68% YoY, +15% QoQ); gas realisation was at USD No. of Shares (mn) 1,084
6.1/mmbtu, (+3.4x YoY, +2x QoQ). Oil and gas production was at 0.78mmt (in
MCap (INR bn) / ($ mn) 204/2,739
line) and 0.77bcm (1% below HSIE). Oil sales volumes were at 0.76mmt (+6%
6m avg traded value (INR mn) 920
YoY, +4% QoQ), while gas sales volumes were at 0.59bcm (-2% YoY, +7%
QoQ), in line with HSIE. 52 Week high / low INR 306/159

 Call takeaways: (1) The standalone Capex guidance for FY23 is at ~INR 43bn, STOCK PERFORMANCE (%)
of which the company has spent INR 12bn in Q1. (2) The company has guided
3M 6M 12M
oil production at 3.2mmt and gas production at 3.2bcm for FY23; driven by
Absolute (%) (14.8) (18.0) 15.0
accelerated production from existing fields, the company targets to improve
the oil production to 4mmt and gas production to 5bcm by FY25. (3) NRL Relative (%) (24.5) (20.0) 6.1
expansion from 3MTPA to 9MTPA is on schedule and is expected to be
completed by end of 2025. (4) Q1 consolidated gross debt stood at INR 150bn SHAREHOLDING PATTERN (%)
vs INR 166bn as at the end of FY22. Mar-22 Jun-22

 We value Oil India’s standalone business at INR 146 (4x Mar-24E EPS) and Promoters 56.66 56.66

its investments at INR 109. The stock is currently trading at 3.6x FY24E EPS. FIs & Local MFs 16.84 15.53

FPIs 11.23 12.42

Standalone financial summary
YE March Q1 Q4 QoQ Q1 YoY Public & Others 15.27 15.39
FY20* FY21* FY22P* FY23E* FY24E*
(INR bn) FY23 FY22 (%) FY22 (%)
Pledged Shares 0.00 0.00
Revenues 60 45 33.2 30 98.7 206 225 300 503 514
EBITDA 26 20 34.6 12 114.4 53 57 105 125 102 Source : BSE
APAT 16 16 (4.6) 5 206.2 52 46 67 76 57
AEPS (INR) 14.3 15.0 (4.6) 4.7 206.2 48.3 42.2 62.0 69.9 52.9
P/E (x) 3.9 4.5 3.0 2.7 3.6 Harshad Katkar
EV/EBITDA
(x)
5.7 6.9 3.6 2.4 2.4 harshad.katkar@hdfcsec.com
RoE (%) 22.5 19.5 24.8 21.9 13.7 +91-22-6171-7319
Source: Company, HSIE Research | *Consolidated
Nilesh Ghuge
nilesh.ghuge@hdfcsec.com
+91-22-6171-7342

Akshay Mane
akshay.mane@hdfcsec.com
+91-22-6171-7338

Rutvi Chokshi
rutvi.chokshi@hdfcsec.com
+91-22-6171-7356

Page | 10
HSIE Results Daily

Radico Khaitan
Miss on volume, EBITDA in line REDUCE
Radico reported a miss on revenue, but EBITDA was in line. Net revenue CMP (as on 11 Aug 22) INR 947
growth was at 27% YoY (three-year CAGR at 7% vs. -1% for UNSP), a miss, on
Target Price INR 900
account of lower P&A volume and transfer of few brands to royalty agreement.
P&A volume three-year CAGR (even adjusting royalty agreement) has seen NIFTY 17,659
deceleration at ~1% as compared to 15% in the previous three quarters. Regular
portfolio, too, saw deceleration in three-year volume CAGR at 3% (7% previous KEY
OLD NEW
CHANGES
three quarters). Luxury portfolio continued to see strong traction; we believe
Rating REDUCE REDUCE
mid-price segments have seen pressure in Q1 (similar trend for UNSP). Gross
margin was better than expected at 43.6% (HSIE 42%), down 350bps YoY but Price Target INR 900 INR 900
improved 100bps QoQ. We expect GM to improve with (1) price hikes, (2) FY23E FY24E
higher royalty revenue, (3) benefits of new capacity build-up, and (4) better EPS %
-2% 0%
product mix within IMFL. Thereby, we expect EBITDA margin to hover ~17%
in FY24/25. We remain positive on Radico’s constant product innovation and
KEY STOCK DATA
success in the luxury portfolio. However, with overall slowdown in
consumption, the demand for mid-price P&A and regular portfolio will be the Bloomberg code RDCK IN
key monitorables. Capex execution and industry demand remain key No. of Shares (mn) 134
monitorables for the stock. We value Radico at 28x P/E on Jun-24 EPS to arrive
MCap (INR bn) / ($ mn) 127/1,701
at a TP of INR 900. Maintain REDUCE.
▪ Miss on revenue: Net revenue grew by 27% YoY (+46% in Q1FY22 and +18% 6m avg traded value (INR mn) 296

in Q4FY22; HSIE 48%). P&A and Popular revenues grew (YoY) 37% (6% three- 52 Week high / low INR 1,300/723
year CAGR) and 18% (6% three-year CAGR). IMFL volume was up by 22%
YoY to 6.82mn cases. P&A volume grew by 29% YoY (+41% in Q1FY22 and STOCK PERFORMANCE (%)
+28% in Q4FY22; 78% HSIE). Popular volume was up by 9% YoY (+67% in 3M 6M 12M
Q1FY22 and +12% in Q4FY22; 28% HSIE).
▪ In-line EBITDA: GM declined by 354bps YoY (-754bps in Q1FY22 and -
Absolute (%) 21.6 (1.4) 6.1

Relative (%) 12.0 (3.4) (2.7)

529bps in Q4FY22; -555bps HSIE) to 43.6%. Employee, selling and distribution
expenses and other expenses were up 19/33/22% YoY (-21/44/47% in Q1FY22).
EBITDA margin contracted 319bps YoY to 12.2% (-312bps in Q1FY22 and - SHAREHOLDING PATTERN (%)

490bps in Q4FY22) vs. HSIE 10.2%. EBITDA was flat YoY (HSIE -1%). We Mar-22 Jun-22
expect margin to improve in the coming quarters, led by price hikes seen in a Promoters 40.27 40.27
few states.
▪ Con call takeaways: (1) Radico has maintained its IMFL margin on price hikes FIs & Local MFs 19.24 20.26

and favorable product mix. It has received price hikes across UP, FPIs 19.28 18.35

Uttarakhand, Rajasthan, MP, Jharkhand, Assam and a few other small states. Public & Others 21.21 21.21
(2) The impact of commodity pressure is being felt in the non-IMFL segment, Pledged Shares 0.00 0.00
where the company is expecting price increases. (3) Some commodity prices
Source : BSE
continue to rise (glass and ENA), with glass prices up INR 5,000/tn over April.
Pledged shares as % of total shares
(4) The company has incurred INR 1.65bn on the Rampur Dual Feed and
Sitapur Green Field projects till date. (5) H2FY23 gross margin will be higher
on account of backward integration, price hikes and benefits from scaling up
the new launches.
Naveen Trivedi
Quarterly/annual financial summary naveen.trivedi@hdfcsec.com
YE Mar (INR mn) Q1FY23 1QFY22 YoY (%) Q4FY22 QoQ (%) FY22 FY23E FY24E FY25E +91-22-6171-7324
Net Sales 7,574 5,976 26.7 8,125 (6.8) 28,756 33,367 37,699 42,056
EBITDA 925 921 0.5 796 16.2 4,149 5,051 6,420 7,319
Varun Lohchab
APAT 583 598 (2.6) 464 25.7 2,521 3,278 4,085 4,598
varun.lohchab@hdfcsec.com
Diluted EPS (INR) 4.4 4.5 (2.6) 3.5 25.7 18.9 24.5 30.6 34.4
+91-22-6171-7334
P/E (x) 51.6 39.7 31.8 28.3
EV / EBITDA (x) 31.4 25.5 20.8 17.4
RoCE (%) 12.7 14.8 15.4 14.6
Saras Singh
Source: Company, HSIE Research saras.singh@hdfcsec.com
+91-22-6171-7336

Page | 11
HSIE Results Daily

Sobha
Weak financial performance BUY
Sobha’s (SDL) Q1FY23 revenue came in at INR 5.8bn (+13.5%/-20.5% YoY/QoQ, CMP (as on 11 Aug 22) INR 692
23% miss) and APAT at INR 138mn (+28%/-45% YoY/QoQ, a 68% miss). This
Target Price INR 902
weak performance was largely led by muted completions in Q1FY23. Revenue
recognition is expected to ramp up with enhanced pace of project completions NIFTY 17,659
in ensuing quarters. The residential launch pipeline stands at 12.11msf of
saleable area spread across 16 projects—Bengaluru alone has nine projects with KEY
OLD NEW
CHANGES
a saleable area of 6.8msf. Out of the cumulative sales done in residential
Rating BUY BUY
business as on Jun-22, balance revenue of INR 85.2bn is yet to be recognised.
The average price realisation has increased 2% QoQ to INR 8,431psf. SDL Price Target INR 902 INR 902
achieved its second best cash inflow till date at INR 11.2bn (+55.7%/-13.4% FY23E FY24E
EPS Change %
YoY/QoQ) on back of robust residential cash collection of INR 8.9bn (+62.2%/- - -
16.2% YoY/QoQ). It also received INR 1.6bn from the land monetisation deal.
Thus, the consolidated gross/net debt reduced to INR 22/21.1bn (vs. INR
KEY STOCK DATA
25.3/23.4bn as at Mar’22), with net D/E at 0.84x (vs. 0.93x as at Mar’22). We
Bloomberg code SOBHA IN
maintain BUY with an unchanged TP of INR 902.
 Financial highlights: Sobha reported a revenue of INR 5.8bn (+13.5%/-20.5% No. of Shares (mn) 95
YoY/QoQ, a 23% miss) with real estate (RE) contributing 76.4% to total MCap (INR bn) / ($ mn) 66/882
revenue. Under the completed contract method, SDL has INR 85.2bn in
6m avg traded value (INR mn) 289
revenue to be recognised from sales made until Jun’22. EBITDA came in at
52 Week high / low INR 1,045/480
INR 0.9bn (-10%/+1% YoY/QoQ, a 31% miss). EBITDA margin came in at
15.6% (-408/+327bps YoY/QoQ, vs. estimate of 17.3%). RPAT/APAT was INR
138mn (+28%/-45% YoY/QoQ, a 68% miss). SDL took price hikes of ~4-6% for STOCK PERFORMANCE (%)
some projects in Bengaluru. 3M 6M 12M
 Blockbuster presales; robust launch pipeline: SDL reported its highest-ever Absolute (%) 29.1 (18.6) 18.1
quarterly presales at a volume of 1.36msf (+51.7% YoY) valued at INR 11.5bn
Relative (%) 19.4 (20.7) 9.3
(+67.7% YoY), with Sobha’s share at INR 9.5bn (the highest-ever since its
inception). Non-Bengaluru region contributed 22% to total sales (vs. 31% in
SHAREHOLDING PATTERN (%)
Q4FY22), while contribution from Gurugram/GIFT City/Chennai/Kochi was
higher at 12.4/4.5/2.5/2.2% respectively. Average realisation came in at INR Mar-22 Jun-22
8,431/sq. ft. (+10.5%/+2% YoY/QoQ). With three project launches in Promoters 51.99 51.99
Bengaluru, SDL booked presales of 1msf for the first time. SDL has a
FIs & Local MFs 13.38 13.00
residential launch pipeline of 12.11msf of saleable area with ~2-3msf launches
planned in balance part of FY23 and remaining launches in FY24. The pipeline FPIs 16.16 15.02

is spread across 16 projects—Bengaluru alone has nine projects with a saleable Public & Others 18.47 19.99
area of 6.8msf. Pledged Shares 7.12 10.54
 Balance sheet remains stable; collections robust: SDL achieved its second
Source: BSE
best cash inflow until date at INR 11.2bn (+55.7%/-13.4% YoY/QoQ) on the
Pledged shares as % of total shares
back of robust residential cash collection of INR 8.9bn (+62.2%/-16.2%
YoY/QoQ). SDL realised balance INR 1.6bn from the land monetisation deal.
This resulted in the consolidated gross/net debt reducing to INR 22/21.1bn as
of Jun’22 vs. INR 25.3/23.4bn as of Mar’22, with net D/E at 0.84x vs. 0.93x as
at Mar’22. The average borrowing cost has inched up to 8.45%, from 8.40%, Parikshit D Kandpal, CFA
due to repo rate hikes by RBI. Finance cost came in at INR 581mn (-23%/-9% parikshitd.kandpal@hdfcsec.com
YoY/QoQ). +91-22-6171-7317
Consolidated financial summary (INR mn)
Particulars 1QFY23 1QFY22 YoY (%) 4QFY22 QoQ (%) FY21 FY22 FY23E FY24E Nikhil Kanodia
Net Sales 5,816 5,123 13.5 7,313 (20.5) 21,098 27,309 32,299 35,831 nikhil.kanodia@hdfcsec.com
EBITDA 906 1,007 (10.0) 900 0.7 4,102 4,617 6,395 7,095
+91-22-6171-7362
APAT 138 108 27.8 250 (44.8) 623 1,168 2,288 2,705
Diluted EPS 1.5 1.1 27.8 2.6 (44.8) 6.6 12.3 24.1 28.5
P/E (x) 105.3 56.2 28.7 24.3 Manoj Rawat
EV/EBITDA (x) 23.0 19.1 14.5 12.9 manoj.rawat@hdfcsec.com
RoE (%) 2.6 4.7 8.7 9.4
+91-22-6171-7358
Source: Company, HSIE Research

Page | 12
HSIE Results Daily

Ashoka Buildcon
Robust performance BUY
Ashoka Buildcon (ASBL) reported revenue/EBITDA/APAT of INR 14.8/1.5/1bn, CMP (as on 11 Aug 22) INR 76
beating our estimates on all fronts. EBITDA margin is expected to remain in 9-
Target Price INR 140
10% range in FY23, impacted by the project mix. Some support to the margins
is expected from softening raw material prices and high proportion of variable NIFTY 17,659
priced orders (~90% of the OB). The Chennai ORR sale deal with NIIF is
KEY
expected to fetch INR 4.5bn for ASBL and it is targeted to complete by early OLD NEW
CHANGES
Q3FY23. The five ACL BOT sales worth INR 13.4bn are expected to conclude
Rating BUY BUY
by Sep-22 and the Jaora BOT asset sale is expected in FY23. ASBL has received
Price Target INR 140 INR 140
orders worth ~INR 25bn FYTD23 vs. earlier FY23 order inflow guidance of more
than INR 100bn, taking the FYTD23 OB to INR 153.6bn (~3.3x FY22 revenue). EPS Change FY23E FY24E
The company has revised its FY23 revenue growth guidance to 15-20% YoY. We % - -
maintain BUY, with a TP of INR 140/sh (9x Mar-24E EPS).
 Financial highlights: Revenue: INR 14.8bn (+46%/-5% YoY/QoQ, a 26% beat). KEY STOCK DATA
EBITDA: INR 1.5bn (+21% YoY, -7% QoQ, a 19% beat). EBITDA margin: 9.8 %
Bloomberg code ASBL IN
(-208/-25bps YoY/QoQ, vs. our estimate of 10.4%). Depreciation: INR 168mn
No. of Shares (mn) 281
(+5%/-18% YoY/QoQ). Interest cost: INR 198mn (+21%/-16% YoY/QoQ). Other
income of INR 312mn (-34%/-51% YoY/QoQ). APAT: INR 1bn (+3% YoY, -44 MCap (INR bn) / ($ mn) 21/287
QoQ, 15% beat). During Q1, ASBL recorded gross toll collection at INR 2.9bn 6m avg traded value (INR mn) 74
(+38.3%/+7% YoY/QoQ). For FY23, ASBL has revised its revenue growth
52 Week high / low INR 125/69
guidance downward to 15-20% YoY vs. 20-25% earlier with EBITDA margin
guidance now at 9-10% vs. 11-12% earlier.
 Robust order inflow, attempt at diversification: The OB as on Jun’22 stood
STOCK PERFORMANCE (%)

at INR 147.8bn (~3.2x FY22 revenue). The OB is well-diversified with 3M 6M 12M

roads/T&D/railways/buildings/others contributing 60.4/15.9/7.7/15.6/.3% of Absolute (%) 4.2 (19.2) (21.9)
the order backlog. Including three orders worth INR 5.6bn won after Jun’22,
Relative (%) (5.5) (21.2) (30.7)
the OB stood at INR 153.6bn (~3.3x FY22 revenue). ASBL has received orders
worth ~INR 25bn FYTD23 vs. earlier FY23 order inflow guidance of more than
SHAREHOLDING PATTERN (%)
INR 100bn. ASBL has guided for OI of INR 60-80bn in balance eight months
of FY23. While ASBL has its clear focus on national and state highways, it is Mar-22 Jun-22
diversifying its portfolio into power T&D, railways, and buildings as well. Promoters 54.48 54.48
 Asset-light balance sheet by FY23 end: Chennai ORR asset sale to NIIF (for FIs & Local MFs 21.48 19.82
INR 6.9bn) is expected to complete by early Q3FY23. ASBL at parent level will
FPIs 2.13 2.43
receive INR 4.5bn from this transaction. The INR 13.4bn sale of 5 BOT asset is
expected to conclude by Sep-22. The Jaora BOT asset sale is expected in FY23. Public & Others 21.91 23.27

The proceeds from these transactions will be mainly used for giving exit to Pledged Shares - -
SBI Macquarie from ACL and funding working capital. The standalone Source : BSE
gross/net debt doubled to INR 8.6/6.4bn as at Jun’22 vs. INR 4.9/3.2bn as at
Mar’22. The balance equity requirement for HAM assets as on Jun’22 stands
at INR 2.5bn, of which INR 1.6bn would be funded in remaining year FY23
and the rest in FY24.
Standalone Financial Summary (INR mn)
YE March 1QFY23 1QFY22 YoY (%) 4QFY22 QoQ (%) FY21 FY22 FY23E FY24E Parikshit D Kandpal, CFA
Net Sales 14,790 10,114 46.2 15,592 (5.1) 38,175 45,915 52,802 58,082 parikshitd.kandpal@hdfcsec.com
EBITDA 1,446 1,199 20.6 1,563 (7.5) 5,195 5,025 5,914 6,563 +91-22-6171-7317
APAT 1,043 1,013 3.0 1,880 (44.5) 4,081 4,086 2,989 3,368
EPS (INR) 3.7 3.6 3.0 6.7 (44.5) 14.5 14.6 10.6 12.0 Nikhil Kanodia
P/E (x) 5.2 5.2 7.2 6.3 nikhil.kanodia@hdfcsec.com
EV/EBITDA (x) 4.7 5.1 4.4 3.8 +91-22-6171-7362
RoE (%) 14.6 14.3 10.4 10.3
Source: Company, HSIE Research Manoj Rawat
manoj.rawat@hdfcsec.com
+91-22-6171-7358

Page | 13
HSIE Results Daily

Rating Criteria
BUY: >+15% return potential
ADD: +5% to +15% return potential
REDUCE: -10% to +5% return potential
SELL: > 10% Downside return potential

Disclosure:
Analyst Company Covered Qualification Any holding in the stock
Anuj Upadhyay PGCIL, NHPC MBA NO
Hinal Choudhary PGCIL, NHPC CA NO
Parikshit Kandpal ABB India, Cummins, Sobha, Ashoka Buildcon CFA NO
Manoj Rawat ABB India, Cummins, Sobha, Ashoka Buildcon MBA NO
Nikhil Kanodia ABB India, Cummins, Sobha, Ashoka Buildcon MBA NO
Aniket Mhatre Bharat Forge MBA NO
Sonaal Sharma Bharat Forge MBA NO
Nilesh Ghuge Aarti Industries, Oil India MMS NO
Harshad Katkar Aarti Industries, Oil India MBA NO
Rutvi Chokshi Aarti Industries, Oil India CA NO
Akshay Mane Aarti Industries, Oil India PGDM NO
Naveen Trivedi Radico Khaitan MBA NO
Varun Lohchab Radico Khaitan PGDM NO
Saras Singh Radico Khaitan PGDM NO

Page | 14
 HSIE Results Daily

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