Tag: 2023

State Bank of India (SBI) a Fortune 500 company, is an Indian Multinational, Public Sector Banking and Financial services statutory body headquartered in Mumbai. The rich heritage and legacy of over 200 years, accredits SBI as the most trusted Bank by Indians through generations.

SBI, the largest Indian Bank with 1/4th market share, serves over 45 crore customers through its vast network of over 22,000 branches, 62617 ATMs/ADWMs, 71,968 BC outlets, with an undeterred focus on innovation, and customer centricity, which stems from the core values of the Bank – Service, Transparency, Ethics, Politeness and Sustainability.
The Bank has successfully diversified businesses through its various subsidiaries i.e SBI General Insurance, SBI Life Insurance, SBI Mutual Fund, SBI Card, etc. It has spread its presence globally and operates across time zones through 229 offices in 31 foreign countries.

Growing with time, SBI continues to redefine banking in India, as it aims to offer responsible and sustainable Banking solutions.

Quarterly Result Highlights

State Bank of India (SBI) had a remarkable performance in Q4FY23, surpassing market expectations. The bank achieved a net profit of Rs. 50,232 crores for FY23, marking a growth of 58.6% YoY. In Q4FY23, SBI reported its highest-ever quarterly profit of Rs. 16,694.5 crores, up 17.5% QoQ and 83.2% YoY. Net Interest Income grew impressively by 6.1% QoQ and 29.5% YoY to Rs. 40,392.5 crores, surpassing consensus estimates.

Pre-provision operating profit (PPOP) declined 6.1% QoQ but increased by 24.9% YoY due to factors such as wage revision and increased tech-related expenses. Provisions decreased sharply to Rs. 3,315.7 crores in Q4FY23, attributed to effective asset quality management. Asset quality improved, with Gross NPA at 2.78% in Q4FY23 and Net NPA at 0.67%. The bank’s capital adequacy ratio improved to 14.68% in Q4FY23. Gross deposits and advances showed positive growth. CASA ratio stood at 43.80% in Q4FY23.

Valuation and Outlook

State Bank of India (SBI), the largest PSU bank, delivered an outstanding performance, surpassing market expectations in all key areas. The bank demonstrated strength in core operations, asset quality, and capital resilience, adhering to strict regulatory guidelines. Provisioning reduced significantly in Q4FY23 compared to the previous year.
SBI’s prudent approach to managing asset quality was evident with no defaulting loans in Q4FY23. Despite industry credit growth moderation, SBI remains optimistic about its credit growth in FY24. The bank’s commitment to improving return on assets (ROA) is on track, with ROA reaching 1.23% in Q4FY23. SBI’s core income streams and profitability continue to improve, providing a positive outlook for the bank.

Key Concall Highlights

1. SBI expects its credit growth to continue in FY24, albeit with some moderation, projected to be around 12-14%.
2. The bank has sufficient SLR reserves of Rs. 4 trillion, eliminating the need for aggressive deposit acquisition.
3. There is potential for margin sustainability with the possibility of MCLR increasing.
4. Other income is driven by forex earnings and cross-selling opportunities.
5. The Express Credit Book is in a comfortable position, with a majority of borrowers being government employees or from reputable corporate houses.
6. SBI’s strategy of reinvesting profits has created value for shareholders without diluting RoE.
7. With a CAR of 14.68%, the bank can support a loan growth of around Rs. 7.10 trillion.
8. Gross NPA ratio improved by 15 bps, reflecting asset quality improvement.
9. Provision coverage ratio and digital customer acquisition remain strong for the bank

Established in 1988, Zydus Wellness is a prominent consumer wellness company with a rich Indian heritage and a global presence. Their overarching vision is to promote wellness in people’s lives by adopting a holistic approach to health and well-being. With a focus on nourishing, nurturing, and energizing individuals, they offer a wide range of innovative and industry-leading products.

Boasting over 30 years of operational excellence, Zydus Wellness possesses a portfolio of seven leading brands, including Complan, Sugar Free, Glucon-D, Everyuth, Nycil, Sugarlite, and Nutralite. The company is headquartered in Ahmedabad and Mumbai, operating five manufacturing facilities across four locations: Aligarh, Sitarganj, Ahmedabad, and Sikkim. Additionally, Zydus Wellness has eight co-packing facilities situated in India, Oman, and New Zealand.

Result Highlights

In the fourth quarter of FY23, Zydus Wellness Ltd. experienced significant revenue growth of 71.6% compared to the previous quarter and 11.4% compared to the same period last year, reaching Rs. 713.0 crores. This growth was driven by improved consumer sentiment, leading to increased sales volume. However, the company faced challenges on the operational front, including higher input costs in the milk category, wage hikes, and third-party manufacturing expenses.

As a result, the EBITDA (earnings before interest, taxes, depreciation, and amortization) declined to Rs. 141.5 crores in Q4FY23 compared to Rs. 144.6 crores in Q4FY22. The EBITDA margin also contracted by 183 basis points to 22.1% in the quarter. Despite these challenges, the company’s profit after tax (PAT) increased by 9.0% YoY to Rs. 145.3 crores in Q4FY23, with a PAT margin of 20.4% compared to 20.8% in Q4FY22. The board of directors has recommended a final dividend of Rs. 5 per share.

Valuation and Outlook

Zydus Wellness Ltd. achieved a solid 11.4% YoY revenue growth in Q4FY23. Their distribution reach improved, and they gained market share in their top five categories. However, their profit margin declined due to increased input costs, wage hikes, and manufacturing expenses. Despite this, the company’s Glucon-D and Nycil brands are expected to have strong volume growth, while caution is advised for the performance of the Complan brand. The company plans to raise prices and control input costs, which should help improve margins in the future.

Key Concall Highlights

1. Q4FY23 revenue grew by 11.4% YoY, driven by 4.2% volume growth.
2. Other expenses increased by 36% due to inflation, wage hikes, and Glucon-D manufacturing costs, with half being one-time expenses.
3. Consolidated capex for FY23 was Rs. 48.9 crores.
4. Long-term growth expected from international business, while FY23 growth was affected by supply issues in New Zealand and economic issues in Nigeria.
5. Minimal impact on sugar-free business despite WHO’s announcement on low-calorie claims.
6. New products contributed to 3.5% of sales.
7. Everyuth brand expects double-digit growth, driven by peel-off, scrubs, and new facial cleansing launch.
8. Zydus plans price hikes to regain FY21 gross margins.
9. FY24 Ads & Promotion spends estimated to be around 12.5%.

Click here to view the detailed report.

Eicher Motors Limited (EML) is the listed parent of Royal Enfield, the global leader in middleweight motorcycles. The world’s oldest motorcycle brand in continuous production, Royal Enfield has made its distinctive motorcycles since 1901.
Focussed on bringing back simple, yet engaging and accessible motorcycling, Royal Enfield operates in India, and over 60 countries around the world with modern development facilities in Leicestershire, UK and Chennai, India. Royal Enfield makes its motorcycles in Chennai, Tamil Nadu for the world. Royal Enfield has evolved into an experiential brand. Royal Enfield with its motorcycle that combines modern-day elements with the brand’s heritage, garners immense enthusiasm amongst global motorcyclists.

Results Highlights

Eicher Motors Ltd. (EML) had a strong Q4FY23 with 20% YoY and 7% QoQ revenue growth to Rs. 3,831 crores. This growth was driven by 18% higher volumes YoY and increased average selling prices (ASPs).
ASPs rose by 6% QoQ and 2% YoY due to price hikes on the Hunter and Bullet models. In addition, there was an improved product mix with the launch of Meteor-650, and higher exports.

In the VECV joint venture, volume growth of 31% YoY resulted in revenue growth of 42% YoY. 6,200 crores. The EBITDA margin expanded by 310 basis points YoY to 9.6% due to higher realizations and a favorable product mix.
Overall, EBITDA grew by 25% YoY and 10% QoQ to Rs. 945 crores, driven by a 20 basis points YoY and 120 basis points QoQ gross margin expansion. This expansion was due to savings on raw materials, lower employee expenses, partially offset by higher depreciation and amortization costs.

Consolidated profit after tax (PAT) increased by 48% YoY and 22.2% QoQ to Rs. 906 crores, led by higher EBITDA and other income. The joint venture’s PAT share was at Rs. 173 crores.

Valuation and Outlook

EML’s future growth will be driven by supply-side improvements, new product introductions, and increased exports. Stable commodity prices will also support margins and earnings. While immediate exports may face challenges due to global macro issues, the long-term potential is significant, considering the large addressable market size of 1 million units, of which only 10% is currently served by the company. Despite a high base, Royal Enfield volumes are expected to grow in the mid-single digits due to growing customer demand for premium motorcycles and the company’s strong position in the domestic >250 cc market. This growth will be supported by reasonably priced launches like the Hunter 350 and upcoming launches in the pipeline.

Key Concall Ltd.

1. The commercial vehicle (CV) sector is expected to continue its growth due to replacement demand, infrastructure projects driving heavy truck demand, and the CV market has not reached its FY19 peak yet. Replacement demand from state transport departments and schools will drive bus volumes.
2. Higher realizations in Q4FY23 were driven by increased exports and full absorption of price hikes from November 2022. A 1.5% price hike is planned for key models from May 1, 2023, to anticipate commodity cost inflation.
3. Margins benefited from commodity costs declining in the quarter. However, minimal gains are expected in the future due to a slight increase in steel costs.
4. Market share in the >125cc motorcycle segment increased from ~29% in FY22 to ~33.5% in FY23. Overall two-wheeler market share was 7.2%.
5. Market shares in the America, APAC, and EMEA regions reached approximately 8%, 9%, and 9% respectively.
6. A capital expenditure of Rs. 1000 crores is planned for FY24, focusing on the development of electric vehicle (EV) models and further research and development in internal combustion engine (ICE) models.
7. Market share improved in heavy trucks, light trucks, and buses, reaching 7.7%, 31.5%, and 23.8% respectively. Overall, the company’s CV space share was 17.1% for FY23.
8. Eicher Motors invested EUR 50 million in an 11.4% stake in Stark Future SL. They will collaborate on future product development and utilize Stark’s technology in upcoming RE electric platforms.

Click here to view the detailed report.

Godrej Agrovet is a diversified, Research & Development focused agri-business company that is dedicated to improving the productivity of Indian farmers by innovating products and services that sustainably increase crop and livestock yields. The company holds leading market positions in various businesses including Animal Feed, Crop Protection, Oil Palm, Dairy and Poultry, and Processed Foods.

The Animal Feed business of Godrej Agrovet is recognized as one of the largest organized players in the Compound Feed market in India. It typically achieves annual sales of more than a million tonnes across cattle, poultry, aqua feed, and specialty feed.

Quarterly Result Highlights

Godrej Agrovet Ltd. experienced a slight increase in revenue compared to the previous year, but a decrease of 10.6% compared to the previous quarter, reaching Rs. 20,950 million. This performance fell below market expectations.

The company saw annual revenue growth in some of its segment businesses ie. Animal Feed business, Dairy business and Poultry and processed food business. However, the revenue growth of its businesses that operate in the vegetable oil sector, crop protection industry, etc declined.

The positive performance in Animal Feed and Dairy businesses was driven by healthy volume growth, gaining market share, and price hikes. On the other hand, the Vegetable oil business was negatively affected by lower crude palm oil prices, and the Crop protection business declined due to lower sales in the Plant Growth Regulators category and pricing pressure.

The company’s EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) decreased by 55.9% compared to the previous year. The EBITDA margin stood at 457 basis points compared to the previous year, primarily due to a contraction in gross margins by 451 basis points to 19.7%.

The Profit after Tax (PAT) for the company was Rs. 235 million, showing a decline of 37.8% compared to the previous year and a decline of 20.6% compared to the previous quarter. This result was below market expectations of Rs. 300 million. The PAT margin decreased to 1.1% this quarter.

Valuation and outlook

Godrej Agrovet faced earnings pressure across segments due to weak demand and intense competition. In the future, the Animal Feed business is expected to perform better with volume growth and market share gains in the cattle feed category.

The Crop Protection business experienced lower sales in the Plant Growth Regulators category and pricing pressure. The Dairy business sustained volume growth in value-added products, while the Oil Palm business was impacted by lower crude palm oil prices. The management expects improvement in FY24 compared to FY23.

Key Concall Highlights

Animal Feed Business Outlook: The segment experienced 10% YoY revenue growth, driven by increased market share in cattle feed and 11% YoY volume growth. Animal feed margins are expected to improve in FY24 due to growth in cattle feed and the newly commissioned fish feed plant.

Oil Palm Business Outlook: Revenue declined by 23% YoY due to lower crude palm oil prices. However, significant fruit production growth is expected in the coming years due to increased plantations in Telangana and the Northeast.

Standalone Crop Protection: Standalone crop business revenue increased due to lower prices and an unfavorable product mix. In FY24, products like Maxcot are expected to perform well, and Gracia sales are projected to double in FY24.

Astec LifeSciences: The fourth quarter was impacted by weak demand and lower prices in the agrochemical industry, caused by erratic rainfall and inventory pile-up after the Covid situation.

Dairy Business Outlook: Revenues increased by 18% YoY, driven by strong demand for value-added products. Rising milk procurement costs affected profit margins.

Godrej Tyson: This segment saw a 22% YoY revenue increase, primarily due to higher volumes.

Capex Plan: The first phase of the MPP project, with a capital expenditure of Rs. 5 billion, will begin by 2023 and be commissioned by December 2024. Other businesses are planning to debottleneck production capacity and improve efficiency

Escorts Kubota Limited is one of India’s leading engineering conglomerates operating in the high-growth sectors of agri-machinery, construction & material handling equipment, railway equipment and auto components.

With over 1 million tractors in the fields in India, 16,000 construction and material handling equipment and 5 million auto-components manufactured till date, Escorts is leveraging its engineering expertise and positioning as a change agent in the agriculture, construction equipment and automotive sectors.

Quarterly Result Highlights

Escorts Kubota Limited (EKL) reported mixed numbers in Q4FY23 due to weak demand in the tractor sector. Consolidated revenue declined 3.4% compared to the previous quarter but increased by 17.4% compared to the previous year, reaching Rs. 2,215 crores.

EBITDA grew to Rs. 233 crores, mainly due to price hikes, lower commodity prices, and higher sales of 40HP+ tractors. The PAT increased by 19.7% compared to the previous quarter, reaching Rs. 216.5 crores.

Tractor sales EBIT margin contracted YoY due to increased raw material prices. Export sales outperformed the industry, growing by 11.7% in FY23. The construction equipment segment showed growth in Q4FY23, with improved EBIT margin.

Valuation and Outlook

The tractor segment is expected to have a positive demand outlook in the near term, driven by improved rural sentiment and increased availability of financing. Escorts is anticipated to experience higher growth than the sector, benefiting from its collaboration with Kubota and new export opportunities.

The construction equipment segment has also improved due to the reopening of the economy and increased government infrastructure spending. The renewable energy business shows promise with product commercialization and a strong order book. Overall, the company’s profitability is expected to improve due to lower raw material costs, a premium product mix, increased exports, and effective pricing strategies.

Key Concall Highlights

Tractor segment:

1. The tractor industry is expected to grow mid-single-digit in FY24, with an increasing use of tractors for non-agricultural purposes.
2. Market share for Escorts increased to 10.9% but has not fully recovered from pre-pandemic levels.
3. Record-high exports, with around 30% of total exports through the Kubota channel, expected to reach around 40%.
4. Tractor EBIT margin is projected to reach 14-15% by Q4FY24, driven by higher MSPs, improved product mix, and cost management.
5. Capacity expansion planned to increase total capacity to 300k units per annum.
6. No price hikes are anticipated in the near future.

Construction Equipment Segment:

1. Expected to grow by 10-12% in FY24 with expanding profit margins due to cost savings and operational leverage.

 
Railway Equipment Segment:

1. Anticipated double-digit growth in FY24, driven by new products and exports.
2. The order book at March 2023 was Rs. 1,050 crores.
3. Margins expected to improve further with localization benefits on upcoming products by FY25