Piramal Enterprises
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
PIEL IN
615
309 / 4.3
2001 / 608
-8/-6/-22
2752
31 July 2020
1QFY21 Results Update | Sector: Financials
CMP: INR1,369
TP: INR1,600 (+17%)
Lending business stable; Pharma recovering
Buy
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Financials & Valuations (INR b)
Y/E March
2020 2021E
Revenues
130.7 129.1
EBITDA
17.9
21.6
PAT
-5.5
16.9
EPS (INR)
-24.5
74.8
EPS Gr. (%)
BV/Sh. (INR)
1,274 1,322
Payout (%)
-53
35
Valuations
P/E (x)
18.3
P/BV (x)
1.1
1.0
Div. Yield (%)
0.9
1.9
Shareholding pattern (%)
As On
Jun-20 Mar-20
Promoter
46.1
46.1
DII
9.9
9.7
FII
30.3
30.2
Others
13.8
14.1
FII Includes depository receipts
2022E
141.3
27.5
22.1
93.4
25
1,392
35
14.7
1.0
2.4
Piramal Enterprises (PIEL) reported 11% YoY growth in PAT to INR5.0b. The
lending book was stable, while margins improved sharply QoQ (on a lower
base of 4Q +230bp) to 6.5%. Asset quality was stable, with GNPA% at 2.5%
and ECL provisions remaining high at 5.9% (5.8%) of loans.
Pharma business sales were at nearly 90% of 1QFY20 levels, although
EBITDA margins were a challenge. The company continues to carry
unallocated networth of INR30b+ for any inorganic opportunities.
We expect FY21 to be a challenging year for the Financial Services business.
We forecast the loan book to be stable in FY21 and grow modestly in FY22.
The company has a provision buffer of ~6% of loans and conservatively, we
build in additional credit cost of 2.5% each year in FY21/FY22. The recent
Pharma stake sale to Carlyle is a step in the right direction. Maintain Buy,
with TP of INR1,600 (SOTP-based).
FS – Balance sheet stable; Margins improve
Jun-19
46.1
9.1
29.3
15.6
The loan book was largely stable at INR513b, with a steady share of retail
and wholesale loans. The company increased lending rates by ~100bp,
while cost of funds declined 40bp sequentially.
As a result, NIM was the
highest in the past five quarters at 6.5%.
In 1QFY21, the company raised INR96b in long-term borrowings. The
share of bank borrowings was up 300bp QoQ to 68%. CPs were down to
just INR9b.
The GNPL ratio / Total provisions marginally increased by 10bp QoQ to
2.5%/5.9%. The top 10 exposures remained largely stable QoQ at INR142b.
Sales declined 10% YoY to INR10.4b for 1QFY21, weighed by COVID-19-led
disruption across CDMO (-5% YoY), Complex Hospital Generics (-22% YoY),
and India Consumer Healthcare (-4% YoY).
The EBITDA margin contracted considerably to 11% in the quarter (from
21% in FY20) due to lower revenue from Complex Hospital Generics and
reduced operating leverage.
The deferment of surgeries in the Hospital segment impacted overall
performance in PIEL’s Pharma segment. However, the phase-wise easing of
the lockdown is improving the outlook across the CDMO and Complex
Hospital Generics segments.
The company will roll out retail lending products such as LAP and small
business loans around the Diwali festival in 15–20 towns.
Housing sales in Apr/May/June were 10%/22%/40% of pre-COVID-19 levels.
INR34b of the INR37b Pharma stake sale would go to the parent.
67%/25% of wholesale/retail AUM is under moratorium.
Pharma – Margins under pressure
Highlights from management commentary
14
Oswal
2020
1
Motilal
January
research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Research Analyst: Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com) |
Piran Engineer
(Piran.Engineer@MotilalOswal.com)
Nitin Aggarwal
(Nitin.Aggarwal@MotilalOswal.com) |
Divya Maheshwari
(Divya.Maheshwari@motilaloswal.com)