A host of companies have come out with their December quarter results such as Persistent Systems, PVR, Asian Paints and AU SFB with some other also seeing corporate developments such as Hindustan Zinc announcing acquiring Zinc International's assets from parent Vedanta. Persistent Systems is expected to see a rerating, but analysts finds Hindustan Zinc's acquisition expensive. PVR has seen price target revision by Emkay Global while Motilal Oswal is neutral on Asian Paints.
Persistent Systems | Nomura India | Target Rs 4,940
Nomura India said the stage has been set for big earnings upgrades for Persistent Systems by Street. Nomura India said Persistent Systems’ December quarter revenue growth at 3.5 per cent in constant currency terms was ahead of the Street’s estimate of 3.25 per cent QoQ CC growth, despite continued weakness in top client, higher-than-usual furloughs and more holidays. Persistent management noted that it expects top client’s planned ramp-down to end soon and return to the growth path is likely over the next few quarters. at $264 million. Nomura has raised its FY23-25F EPS numbers for Persistent by 2-3 per cent. Its revised target for the stock at Rs 4,940 is set at an unchanged multiple of 23 times FY24F EPS.
"Our target multiple is based on a three-stage growth model discussed in our sector report . Our FY23-25F EPS estimates are higher by 2.6-22 per cent vs consensus as we expect consensus to raise its earnings on the back of continued strong execution by the company. PSYS remains our top pick in the mid-caps space as we expect it to continue to deliver the highest organic growth with improving margins over FY23-25F among peers," it said.
PVR | Emkay Global | Target Rs 2,050
Emkay Global said PVR's December quarter performance improved on the back of better box-office performance. Footfalls grew 21 per cent sequentially, it noted, leading to 37 per cent revenue growth.
Emkay said operational parameters such as average ticket price ATP and spend per hour - also improved on a sequential basis, after a disappointing September quarter.
"Bollywood failed to live up to expectations in this quarter too, with only one movie performing well, while Hollywood and Regional cinema aided collections. Ad revenue improved, though it remains well below pre-Covid levels," it said.
The brokerage has revised down its FY24/25 footfalls by 8-9 per cent, as Emkay believes that the audience content-filtration process has become more stringent.
"With NCLT approval now in the bag, we remove our merger uncertainty weightage, while reducing our target multiple to 11.5 times (from 12.5 times), to account for the inconsistent content delivery, and arrive at a revised target of Rs 2,050 (roll over to Dec-24E pro forma Ebitda)," it said.
Asian Paints | Motilal Oswal Securities Target Rs 3,090
Motilal Oswal Securities said Asian Paints' volume growth for December quarter was flat YoY against estimates of 5 per cent growth. The company reported a weaker-than-expected product mix due to which Ebitda and missed Motilal's estimates by 10-11 per cent.
The Asian Paints management indicated that after a weak October partly, caused by high base, demand recovered YoY in November 2022, before reaching double-digit sales growth in December.
"Nevertheless, we expect near-term volume to be under pressure with Ebitda margin under check for the next 2-3 years because of potential competitive pressures and expanding capacity. Asian Paints valuations are fair at 52.7 times FY24 and 46.4 times FY25 EPS. We retain our Neutral Rating with a target of Rs 3,090 (based on 50 times FY25 EPS)," Motilal Oswal Securities said.
AU Small Finance Bank | Kotak Institutional Equities| Target Rs 575
AU Small Finance Bank reported 30 per cent YoY growth in earnings, led by 20 per cent operating profit growth and 40 per cent YoY decline in provisions, culminating in 2 per cent RoA. Kotak Institutional Equities said growth was strong at 38 per cent YoY led by wholesale.
Asset quality was stable with non-performing loan (NPL) ratios down 10 bps QoQ and restructured book down 30 bps sequentially. Investments into the franchise continued, it said while maintaining its sell rating on the stock due to expensive valuations with an unchanged fair value of Rs 575.
"AU has been a strong execution-led franchise that has delivered healthy financial performance. However, we see valuations as a constraint. We maintain sell rating as we tweak our estimates a bit. We are valuing the bank at 2.7 times adjusted book and 19 times December 2024E earnings for RoEs of 16-19 per cent over the medium term," the brokerage said.
Hindustan Zinc | Nuvama Institutional Equities | Target Rs 276
Nuvama Institutional Equities said Hindustan Zinc announcement of acquiring Zinc International assets of parent Vedanta for $2.98 billion at 14.9 times FY24 EV/Ebitda overshadowed its December quarter earnings. Additionally, HZ announced a third interim dividend of Rs 13 per share and agreed to pay 2 per cent of turnover as brand fee to promoter, it noted.
"While Hindustan Zinc’s earnings shall remain firm, the takeover of Zinc International at an expensive valuation would wipe out cash. Despite raising its FY23/24/25E EPS by 6 per cent/5 per cent/3 per cent to factor in higher zinc prices, we are cutting the target valuation to 6 times from 6.5 times in the wake of the above transaction," Nuvama said while cutting its target on stock to Rs 276 from Rs 292 earlier.
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