Asian Paints, Eicher Motors, GSPL, Aditya Birla Capital, Sagar Cements And More Q4 Review: HDFC Securities

HDFC Securities Institutional Equities

Asian Paints - Margins surprise positively

Asian Paints Ltd.’s top line grew 11.3% YoY (four-year compound annual growth rate: 15%), marginally short of expectations. The decorative business clocked 16/13% volume/value growth (15/12% volume/value growth YoY in Q4 FY23). The mix in Q4 was led by economy emulsions and waterproofing. Urban and rural both contributed evenly. Margins, however, surprised positively, led by moderation in key input costs (- 4%); formulation gains; and healthy product mix.

Gross margin/Ebitdam increased 379/293 basis points respectively to 42.5/18.7% (our estimate: 39.5/16.6%). We increase our FY24/25 earnings per share estimates (+6/+3%) to account for a steeper gross margin gain than earlier expected.

Eicher Motors - Margin beat led by improved mix

Eicher Motors Ltd. Q4 earnings beat estimates, largely due to higher-than-expected average selling price at the standalone entity, even as VE Commercial Vehicles performance was in line with our estimates. Margin beat was driven by improved ASP and soft input costs. Royal Enfield targets to launch multiple new products over the next 18-24 months, which would provide an upgrade option to its existing customers.

The recently launched Hunter has been very well-accepted and it seems to be attracting newer customers to RE, including women bikers. With the launch of the Hunter, RE is now rebalancing between growth and profitability and aims to make its product more accessible to customers.

Aditya Birla Capital - Lending businesses in full-throttle mode

Aditya Birla Capital Ltd.’s lending businesses witnessed accelerated growth momentum (+40% YoY) on the back of simultaneous build-up in balance sheet granularity (67% of non-banking financial company assets under management is towards retail + small and medium enterprise + high networth individual; 41% of the housing finance comapany AUM is towards affordable loans) and sharp improvement in asset quality.

This is reflected in sustained improvement in franchise earnings (NBFC returns on asset nears FY24 target; HFC RoA above FY24 target).

Gujarat State Petronet - Volume improves as spot LNG prices moderate

Our optimism on Gujarat State Petronet Ltd. is premised on muted transmission volume growth of ~5% CAGR over FY23-25E due to high spot LNG price environment, given the geopolitical issues and low global inventories and limited upside triggers in the near term. Hence, we believe that, at present, the stock is fairly valued with an return on equity of 15.4% in FY24E and a combined free cash flow of Rs 24 billion over FY23-25E.

Sagar Cements - Weak performance; margin dips QoQ

We like Sagar Cements Ltd. for its rising regional diversification; its increased focus on green fuel and power consumption; and focus to increase blended cement production.

In Q4 FY23, healthy demand in the south drove the volume, while lower realisation, elevated freight costs and other expenses pulled the Ebitda margin down by Rs 100 per metric tonne QoQ. It guided ~Rs 3 billion (versus Rs 4.7 billion earlier) for Andhra Cements to increase its clinker/ cement capacity from 1.65/1.8 million metric tonne to 2.3/3 million metric tonne by FY25 end.

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