A host of companies have come out with their December quarter earnings of late. They included Hindalco’s subsidiary Novelis, Birla Corporation (Birla Corp), Varun Beverages, Apollo Tyres, Tube Investments. Except for Varun Beverages, other stocks have received buy recommendations from individual brokerages. Here's what brokerage said on the five stocks:
Hindalco | Nuvama Institutional Equities | Buy | Target Rs 506
Hindalco's wholly-owned subsidiary Novelis posted an Ebitda of $341 million (down 33 per cent YoY) against Nuvama's estimate of $396 million. It reported Ebitda/tonne of $376, down 31 per cent YoY. This was primarily due to high energy and freight cost and lower volumes (down 2.4 per cent YoY), which in turn was due to lower beverage cans volume amid destocking at consumers’ end, Nuvama said.
"Although earnings have bottomed out in Q3FY23, near-term outlook is cautious and Ebitda/tonne could be $400-450/tonne in the next two-three quarters. We cut FY23-FY24E Ebitda estimates by 4-6 per cent factoring in Novelis’ lower earnings, partly offset by higher aluminium prices. Rolling over partially to FY25E, we retain ‘BUY’," Nuvama said while revising its price target to Rs 506 from Rs 511 earlier.
Birla Corp | Elara Securities | Buy | Target Rs 1,178
Birla Corporation reported mixed performance, with lower-than-expected net sales, hit by volume and realisation underperformance, said Elara Securities. The brokerage, however, said Ebitda for the quarter came in ahead of its estimates on lower-than-expected operating cost. Net sales grew 15 per cent YoY, below its estimates. Ebitda for Birla Corp, it said, fell 35 per cent YoY but jumped 54 per cent sequentially to Rs 140 crore, above estimates of Rs 130 crore. Finance cost and depreciation rose 43 per cent YoY and 29 per cent YoY, respectively. Adjusted loss stood at Rs 49.9 crore.
"We believe Birla Corp is well-placed to post healthy volume growth in upcoming quarters considering a gradual ramp-up of newly added capacity in Maharashtra and better demand scenario. Further, multiple levers such as: easing off of fuel prices, fall in operating cost of Maharashtra-based capacity, focus on augmenting captive coal use, rising share of renewable power, and booking of GST incentive from FY24 from Maharashtra plant should bolster margin, going ahead," it said.The brokerage has upgraded Birla Corp to 'Buy' from 'Accumulate' and raise its target price to Rs 1,178 from Rs 1,138 earlier.
Varun Beverages | Emkay Global | Hold | Target Rs 1,370
Emkay Global said Varun Beverages Q4 Ebitda was 7-19 per cent above Street and its own estimates. The beat was led by stronger traction in Sting, better revenue mix in favour of Sting/smaller SKUs and price hikes. Emkay said the company exudes confidence on continuation of strong double-digit volume growth beyond 2022, led by 10-15 per cent distribution expansion against the targeted 8-10 per cent earlier. However, such growth would require higher capital employment than earlier expectations, Emkay said.
"Inventory days were higher at 55 in 2022 against 45 days historically and Varun Beverages expects to incur a higher capex of Rs 1500 crore in 2023 against earlier target of Rs 1,200 crore. Faster traction in Sting and stronger distribution expansion leads to a 5-6 per cent increase in our Ebitda estimates. However, higher capital investment restricts EPS increase to 1-2 per cent and drives a 200-300bps reduction in our RoIC estimate," it said.
Apollo Tyres | Nirmal Bang Institutional Equities | Buy | Target Rs 419
Nirmal Bang said Apollo Tyres’ consolidated revenue for the December quarter was ahead of its estimate. Domestic volume declined 4 per cent YoY due to poor demand in the replacement segment (down 8 per cent YoY) and exports, partly offset by strong off-take in the OEM segment, the brokerage said. YoY. Nirmal said demand in the EU market was affected by economic slowdown and higher inventories. Consolidated Ebitda margin came in at 14.2 per cent ahead of Nimal Bang's exepctations of 12.7 per cent).
"In terms of demand, we believe that the domestic replacement market will recover from 1QFY24 while OEM will continue its healthy growth trajectory," it said.
Nirmal Bang said even if Apollo Tyres undergoes capacity expansion, Capex/TPD is expected to remain significantly lower as incremental capex will be driven more by brownfield expansion. "We tweak our FY24E/25E revenue estimates by 1.6 per cent/2 per cent and margin estimates by 60 bps/30 bps. We maintain BUY on Apollo Tyres with a target price of Rs 419, valuing it at 15 times September 2024E EPS," it said.
Tube Investments | Motilal Oswal Securities | Buy | Target Rs 3,215
Motilal Oswal said Tube Investments of India’s December quarter performance was hit by tepid revenue growth across all businesses as well as operating deleverage that hurt margins. Traction in revenue is likely to revive, though, driven by recovery in the underlying auto volumes, the brokerage said. Motilal Oswal said exports for Tube Investments might be subdued in the near term while adding that launches in the EV segment are lined-up over the next six months.
"We have raised our FY23E/FY24E EPS by 10 per cent/5 per cen, respectively, driven by upgrades in our estimates for CG Power despite downgrades in the S/A business by 8 per cent each. Maintain BUY with a target price of Rs 3,215 (Dec-24E)," it said.
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