November 2024
India Strategy
BSE Sensex: 80,234
OUR RECENT
STRATEGY REPORTS
Nifty-50: 24,275
The Winners and Laggards!
Presenting our top preferred ideas after a muted earnings season
Corporate earnings moderate YoY after a solid 21% CAGR over FY20-24
After a healthy 21% CAGR over FY20-24, corporate earnings have moderated in
1HFY25. Earnings growth for MOFSL Universe (-1% YoY) and Nifty-50 (+4% YoY) in
2QFY25 was the lowest in 8 and 17 quarters, respectively. However, excluding global
commodities, it remained strong at 12%/11% YoY for MOFSL/Nifty-50 Universe.
Since Aug’24, we have reduced our FY25 estimates for Nifty EPS by 5%, and we now
expect a modest 5% growth for Nifty earnings in FY25, the first year of single-digit
growth in five years. However, compared to the muted 1H, we expect corporate
earnings to recover in 2HFY25 (9% YoY growth for MOFSL Universe in 2HFY25 vs. flat
YoY performance in 1H), aided by a rise in rural spending, a buoyant wedding season
in 2HFY25 (30% higher weddings YoY), and a pick-up in government spending.
A welcome correction in equity markets
Indian stock markets corrected 11-12% from the top over Sep-Nov’24, due to a
variety of factors, viz. earnings moderation and elevated valuations in mid-caps and
small caps, along with global factors, such as a fragile geopolitical backdrop in the
Middle East and a strengthening dollar index after the Trump victory. FIIs sold
equities worth ~USD14b in Oct-Nov’24. The correction has cooled off the valuations
in large-caps, even as mid/small-caps trade at expensive multiples – Nifty-50 is now
trading at 19.6x FY26E EPS, while mid-cap/small-cap indices are trading at 30x/23x
one-year forward P/E multiples, off from the Sep’24 highs but still rich vs. their own
history as well as relative to Nifty-50.
NDA’s sweep in Maharashtra to boost sentiment and policy momentum
The BJP’s decisive victory in the recent Maharashtra and Haryana assembly elections
will boost overall sentiment, strengthen policy momentum, expedite the key infra
projects, and increase focus on overall govt. spending going ahead (govt. spending
remained flat YoY, while capex was down 17% YoY in 1HFY25), in our view. This poll
result will also bolster the perception around the political capital of PM Narendra
Modi, especially given the minor setback NDA suffered in 2024 Loksabha polls.
Presenting the WINNERS and LAGGARDS
Motilal Oswal values your support
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The recent correction and the consequent moderation in valuations provide an
opportunity to add select bottom-up ideas. We notice that even in a muted quarter,
several companies delivered resilient performance. In this report, we present (page
3 onwards) 10 WINNERS and 5 LAGGARDS based on the 2Q earnings print. Apart
from strong earnings performance, the shortlisted winning ideas are the ones for
which MOFSL Research Team has high conviction and/or are part of MOFSL Model
Portfolio.
Winners:
SBI, L&T, M&M, Sun Pharma, Indian Hotels, Page Industries, Ipca
Labs, Angel One, Amber Enterprises, Atul
Laggards:
TATA Motors, Asian Paints, Avenue Supermarts, ABB India,
IndusInd Bank
Gautam Duggad – Research Analyst
(Gautam.Duggad@MotilalOswal.com)
Research Analyst: Deven Mistry
(Deven@MotilalOswal.com) |
Aanshul Agarawal
(Aanshul.Agarawal@Motilaloswal.com)
Motilal Oswal 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.
 Motilal Oswal Financial Services
STRATEGY: WINNERS AND LAGGARDS OF 2QFY25
Valuation snapshot: The WINNERS and LAGGARDS of 2QFY25
Company
Winners
St Bk of India
Larsen & Toubro
Sun Pharma.Inds.
M&M
indian Hotels
Page Industries
Ipca Labs.
Angel One
Amber Enterp.
Atul
Laggards
TATA Motors
Asian Paints
Avenue Supermarts
ABB India
IndusInd Bank
MCap
(USDb)
88.7
60.3
50.0
42.4
13.4
6.0
4.7
3.1
2.6
2.6
35.5
28.4
28.2
18.4
9.3
CMP
(INR)
834
3,698
1,750
3,004
789
44,957
1,527
2,910
6,473
7,357
784
2,490
3,664
7,498
1,002
EPS (INR)
EPS
PE (x)
PB (x)
ROE (%)
CAGR (%)
FY24 FY25E FY26E
FY24 FY25E FY26E FY24 FY25E FY26E FY24 FY25E FY26E
FY24-26E
98.8
137.2
59.3
116.2
14.8
724.6
44.8
189.7
113.0
231.0
115.4
160.3
67.4
136.7
17.6
872.8
55.5
264.1
172.3
282.0
13.7
20.1
16.9
17.1
22.1
20.3
27.0
25.0
48.6
26.1
3.5
14.9
23.0
16.0
31.1
9.3
33.3
35.5
30.1
66.9
74.5
44.4
17.2
83.0
41.5
12.3
52.4
82.6
84.6
10.6
8.4
27.0
29.5
25.9
53.3
62.0
34.1
15.3
57.3
31.8
12.5
45.1
66.4
73.1
7.8
7.2 1.6 1.4 1.1 18.8 17.4 17.2
23.1 5.2 4.5 3.9 16.5 17.9 18.2
26.0 5.7 4.9 4.1 17.2 17.8 17.1
22.0 5.9 5.0 4.2 21.0 20.8 20.8
44.9 10.0 8.5 7.2 16.2 17.2 17.3
51.5 28.6 24.6 21.0 38.4 39.6 40.7
27.5 5.5 4.8 4.2 13.0 15.0 16.3
11.0 4.1 3.5 2.9 31.2 24.5 29.0
37.6 9.4 8.1 6.6 12.0 15.1 19.4
26.1 3.9 3.6 3.2 9.8 11.7 12.9
11.5 2.7 2.2 1.9 24.4 19.7 17.9
39.7 12.4 11.6 10.6 24.0 26.6 27.9
54.6 11.0 9.5 8.1 14.3 15.4 16.0
62.9 20.7 16.4 13.3 27.6 25.1 23.4
6.1 1.1 1.0 0.9 11.2 13.6 15.2
Source: Company, MOFSL
89.3
111.1
49.3
99.7
11.8
603.4
34.4
169.0
78.0
177.3
63.7
47.5
44.3
88.7
94.9
63.0 68.3
55.2 62.7
55.2 67.1
102.5 119.3
128.2 163.1
27 November 2024
2
 Motilal Oswal Financial Services
STRATEGY: WINNERS AND LAGGARDS OF 2QFY25
WINNERS
State Bank of India: Delivering robust growth and profitability
Earnings Summary – 2QFY25
Financials & Valuation (INR b)
Y/E March
FY25E FY26E FY27E
NII
1,691 1,868 2,089
OP
1,128 1,246 1,407
NP
712 764 865
NIM (%)
3.0
3.0
3.0
EPS (INR)
79.8 85.6 96.9
EPS Gr. (%)
16.6
7.3 13.2
BV (INR)
471 538 617
ABV (INR)
432 500 578
Cons. BV (INR)
523 618 729
Cons. ABV (INR)
486 579 688
Ratios
RoA (%)
1.1
1.1
1.1
RoE (%)
18.8 17.4 17.2
Div. Payout (%)
Valuations
Investment thesis: Robust underwriting; RoE remains healthy at ~18%
P/BV (x) (Cons.)
1.6
1.4
1.2
Dominant market position with scale advantage:
With a balance sheet of INR
P/ABV (x) (Cons.) 1.7
1.5
1.2
63t, SBI enjoys an unmatched scale in the Indian banking system, which provides
P/ABV (x)*
1.4
1.2
1.0
stability and resilience. Its diversified credit portfolio, with RAM accounting for
Div. Yield (%)
56% of advances, ensures balanced growth. Corporate credit growth at 18% YoY
P/E (x)
9.5
8.6
7.3
demonstrates SBI’s ability to capitalize on the ongoing capex demand in select
P/E (x)*
7.4
6.9
6.1
sectors, making it a critical beneficiary of India’s economic revival.
*Adjusted for subsidiaries
Digital transformation drives operational efficiency:
YONO, SBI’s flagship digital
Robust performance; loan growth to accelerate:
SBI reported a strong 2QFY25
with PAT of INR183.3b, up 28% YoY, exceeding our estimate by 12%. Growth
was driven by steady NII of INR416.2b, up 5.4% YoY, supported by robust loan
book expansion. Despite moderating NIMs (down 8bp QoQ to 3.14%), SBI's
profitability was bolstered by a surge in treasury income to INR46.4b.
Healthy and broad-based growth:
Advances grew 15.3% YoY, led by broad-
based growth across retail (12% YoY), corporate (18% YoY), and SME (17% YoY)
segments. The retail segment was led by home loans and personal loans.
International advances also grew 15% YoY, reflecting SBI’s diverse lending
portfolio. The bank guided for robust advances growth of 15% YoY for FY25,
implying much stronger growth in 2H.
Asset quality strengthens further:
GNPA and NNPA ratios improved to 2.13%
and 0.53%, respectively, aided by lower slippages. A healthy PCR of ~75%
ensures resilience against potential credit risks. The restructured book remains
manageable at 0.4% of advances, underscoring SBI’s robust risk management
framework.
platform, continues to be a cornerstone of its digital strategy, with over 74m
users and ~63% of new savings account additions. This digital push enhances
customer engagement, reduces costs, and accelerates credit delivery. With
initiatives like ‘YONO for Business,’ SBI is further strengthening its presence in
corporate and government banking, reinforcing its leadership in digital banking.
As a result, SBI has managed its overall C/I ratio, which improved to 48% in 2Q.
Steady improvement in asset quality metrics:
SBI’s asset quality is currently at
its best form in over a decade, with consistent improvements in GNPA and
NNPA ratios. Its conservative provisioning policy, high recovery rates, and
strengthened underwriting standards have resulted in a sharp reduction in
slippages. With a low restructured book and controlled credit costs (guided at
0.5% for FY25), SBI is well-positioned to sustain strong asset quality metrics.
Valuation supported by subsidiary contributions:
SBI’s subsidiaries, including
SBI Life, SBI Cards, and SBI Mutual Fund, continue to deliver strong
performance, contributing a combined value of INR254 per share. SBI Life’s PAT
grew 39% YoY in 2Q, while SBI Mutual Fund saw robust AUM growth. These
subsidiaries enhance the bank’s overall profitability and provide a diversified
revenue base, making SBI a comprehensive investment play in the financial
sector.
27 November 2024
3
 Motilal Oswal Financial Services
STRATEGY: WINNERS AND LAGGARDS OF 2QFY25
Our view: SBIN remains our preferred idea among PSU banks
SBI remains the market leader in credit growth, with management guiding 14-
15% YoY advances growth and a stable RoA of ~1%. Its diversified lending
portfolio and strong deposit base provide ample support for continued
expansion. The bank’s leadership in corporate credit and retail lending ensures
that it captures growth opportunities across sectors.
SBI’s focus on operational efficiency, including branch rationalization and digital
adoption, is expected to lower the cost-to-income ratio to ~50% in FY25 and
49% in FY27 from 59% in FY24. These measures, combined with controlled
credit costs and a healthy NIM trajectory, will drive profitability in the coming
quarters.
Despite its stellar performance, SBI’s valuation remains attractive at 1.1x FY26E
P/ABV, offering favorable risk-reward. We expect a CAGR of 12% in PAT over
FY24-26, driven by steady NII growth, cost control, and robust subsidiary
performance.
Mahindra and Mahindra
Financial & Valuation (INR b)
Y/E MARCH
Sales
EBITDA
Adj. PAT
Adj. EPS (INR)
EPS Gr. (%)
BV/Sh. (INR)
Ratios
RoE (%)
RoCE (%)
Payout (%)
Valuations
P/E (x)
P/BV (x)
Div. Yield (%)
FCF Yield (%)
2025E
1,097
156.9
119.6
99.7
12.4
512
21.0
20.2
23.5
29.0
5.6
0.8
2.9
2026E
1,251
179.1
139.3
116.2
16.5
603
20.8
20.1
22.3
24.9
4.8
0.9
3.4
2027E
1,427
207.4
164
136.7
17.7
709
20.8
20.2
21.9
21.1
4.1
1.0
4.1
Strong performance in a weak quarter:
Mahindra & Mahindra (MM) delivered a
healthy operational performance in 2QFY25, with EBITDA margins expanding by
150bp YoY to 14.3%, ahead of our estimate of 13.5%. The farm equipment
segment (FES) stood out with an impressive core PBIT margin of 18.7% (+120bp
YoY) in a seasonally weak quarter. Meanwhile, the auto segment maintained a
margin of 9.5%, despite pricing interventions in XUV700. Supported by higher
other income, adjusted PAT came in at INR38.4b (est. INR33.7b), up 13% YoY.
Well positioned to recover share in UVs:
Over the last few years, MM has
rechristened its brand by launching multiple well-designed products at
attractive price points, thereby reigniting customer interest. On the back of
strong demand for XUV3XO and Scorpio, MM has outperformed UVs for
YTDFY25 and gained 140bp share to ~20%. On the EV front, MM has a well-
defined transition roadmap, strengthened by its partnership with Volkswagen
(VW), under which VW will supply components from its MEB platform to MM’s
INGLO platform. In order to maintain its growth momentum, MM has lined up
nine ICE SUVs (including six new models and three mid-cycle upgrades) and
seven BEVs by 2030. Overall, it expects EVs to contribute 20-30% of its mix
within the next five years. Given its strong order backlog and a healthy launch
pipeline, we expect its outperformance to continue going forward and expect
MM to post 12% volume CAGR in UVs over FY24-27E.
To emerge as a major beneficiary of the tractor recovery cycle:
MM has done
well in this segment, gaining 140bp market share in 1HFY25 to 43.7% (five-year
high) in an otherwise weak market (industry growth ~1% YoY). Further,
sentiment in the tractor industry has turned positive in 2H, aided by good kharif
output, healthy reservoir levels, and positive terms of trade for farmers. As a
result, tractor OEMs now expect the industry to post mid-single digit growth in
FY25 (implying double-digit growth in 2H) and remain optimistic about the FY26
outlook. Given its dominance in this segment, we expect MM to emerge as a
major beneficiary of this uptrend in tractors and expect MM to post 6% volume
CAGR over FY24-26E.
27 November 2024
4
 Motilal Oswal Financial Services
STRATEGY: WINNERS AND LAGGARDS OF 2QFY25
Value unlocking in growth gems provides option value:
MM has identified nine
businesses as its growth gems and has set an ambitious target of achieving 5x
growth in the next five years for each of these. The progress on some of these
growth gems is encouraging: 1) Last Mile Mobility – IFC has agreed to invest
INR6b for a stake of 9.97%-13.64%, valuing it at INR60.2b; 2) MM and Ontario
Teachers Pension Board have sponsored an InvIT in the renewable energy space
and raised INR13.65b, which will support Mahindra Susten in reaching the next
level of growth; and 3) Logistics and Hospitality businesses seem to be on track
to achieve their targets. Any incremental value unlocked in any of the growth
gems in the coming years is likely to provide additional returns for MM
shareholders.
Valuation and view:
MM’s incremental capital allocation would be focused on
delivering long-term value creation for shareholders. While MM has already
exceeded its target of 18% RoE in FY24, it maintains this target going forward as
it aspires to balance between strong growth and healthy returns. At an implied
core P/E of 23x/20x FY25E/FY26E EPS, MM remains a good investment bet over
the long term. We have a BUY rating on MM, with a target price of INR3,420,
based on Sep’26E SOTP.
Larsen and Toubro: 2QFY25: Core EPC business outperforms
estimates
Financial & Valuation (INR b)
Y/E Mar
Sales
EBITDA
Adj. PAT
EPS (INR)
EPS Gr. (%)
BV/Sh. (INR)
Ratios
RoE (%)
RoCE (%)
Valuations
P/E (x)
P/BV (x)
EV/EBITDA (x)
Div. Yield (%)
32.9
5.2
18.2
0.7
26.9
4.5
15.7
0.9
23.0
3.9
13.9
1.0
16.8
9.6
17.9
10.3
18.2
10.6
2025E 2026E 2027E
2,638.0 2,945.1 3,315.6
280.3
152.7
111.1
19.4
714.9
324.8
188.5
137.2
22.2
820.6
365.4
220.4
160.3
16.9
944.2
LT reported better-than-expected consolidated revenue/EBITDA/PAT of
INR616b/INR64b/INR34b, which grew 21%/13%/5%. For the core E&C business,
order inflows came in above our estimate at INR630b, down 14% YoY vs. our
estimate of 25% YoY decline. This outperformance was driven by strong 77%
YoY growth in order inflows for the infrastructure segment, mainly from the
international market. Core E&C revenue came in at INR445.3b, up 28% YoY vs.
our estimate of 14% YoY growth. This is driven by robust execution in
international projects, which jumped 83% YoY, while domestic execution was
largely flat YoY, presumably owing to monsoons. EBITDA margin at 7.6% for the
core business came in below our estimates of 8%. Margins stood flat QoQ and
were up 20bp YoY. Core order book stood at INR5.1t, up 13% YoY. Net working
capital improved sharply to 12.2% of sales in 1HFY25 vs. 16.7% in 1HFY24. RoE
too improved from 15.3% to 16.1% YoY.
Investment thesis
Strong execution, bottoming out of margins to sustain healthy PAT CAGR for core
EPC
LT already has a strong order book of INR5.1t, providing a visibility of 2.5x on
revenues, which should help LT sustain healthy revenue growth over the next
few years. Despite weaker inflows and muted revenue growth in domestic
segment, we expect the international segment inflows and revenue growth to
continue to be strong. Revenue growth stood at 23% YoY in 1HFY25, driven by
improvement in overseas execution owing to a higher share of international
order inflows over the last one year. This, coupled with better collections,
improved the net working capital cycle to 12.2% of sales in 1HFY25 vs. 16.7% in
1HFY24. We do see a possibility of LT’s revenue growth outperforming its
27 November 2024
5
 Motilal Oswal Financial Services
STRATEGY: WINNERS AND LAGGARDS OF 2QFY25
guidance of 15% in FY25. Its overall prospect pipeline is at INR8.1t and LT is
confident of a pickup in domestic ordering, with prospects of INR4.1t across
data centers, hospitals, residential and industrial real estate, rail, expressways,
airports, hydel-related projects, etc. With most commodities being range-bound
in FY25 and the expected completion of legacy projects during 1HFY25, we
expect margins to start inching up in the next few quarters.
Newer areas will bring results over few years
LT is focusing on: 1) enhancing technology for participating in the nuclear
projects, 2) green energy initiatives, with an emphasis on expanding the
electrolyzer capacity in the medium to long term, 3) semiconductor design and
enhancing offerings in semiconductors, 4) expanding data center capacity from
the existing Mumbai and Chennai locations to other areas too, and 5) further
expanding the real estate business, where LT has another 60msf to be
developed over the next few years. We expect these initiatives to bear fruit in
the next few years.
Valuation and view
Despite muted ordering trends in FY25 so far, we see the following positive
factors for LT: 1) strong order book sustaining healthy revenue growth, 2) an
expected revival of domestic order inflows after state elections, 3) bottoming-
out of margins, 4) fairly stable working capital, and 5) attractive valuations of
21x FY26E EPS for the core EPC segment. We do believe that, LT’s near-term
performance may be influenced by narratives surrounding state elections and
Middle East tensions; however, our long-term thesis on the company stays
intact. We expect L&T core E&C revenue CAGR of 15% PAT CAGR of 22% over
FY24-27E.
We have a BUY rating with our SOTP-based TP of INR4,200, valuing core
business at 30x two-year earnings and a 25% holding company discount for
subsidiaries.
Sun Pharma
Outperformance in branded generics/lower R&D spend led earnings beat
for 2QFY25
SUNP sales grew 10.5% YoY to INR132b (vs. our est: INR129b) led by Domestic
Formulation (DF) (up 11% YoY)while US sales grew 22% YoY, led by strong
traction in specialty portfolio and higher contribution from Revlimid (USD517m,
up 20% in CC terms; 33% of sales).
EBITDA margin expanded 330bp to 28.5% (vs our est: 27%). Accordingly, EBITDA
grew 25% YoY to INR37.8b (vs our est: INR35) while Adj. PAT grew 22% YoY to
INR29.3b (our est: INR28.7b).
In 1HFY25, revenue/EBITDA/PAT grew 8%/18%/24% YoY to
INR257b/INR73b/INR58b.
Investment thesis
Specialty drug: Portfolio expansion underway
SUNP's specialty pipeline is robust in dermatology (Ilumya, Winlevi, Leqselvi)
and is expanding in derma-oncology with additions like Nidlegy (EU) and global
6
27 November 2024
 Motilal Oswal Financial Services
STRATEGY: WINNERS AND LAGGARDS OF 2QFY25
Financial & Valuation (INR b)
Y/E March
2025E 2026E 2027E
Sales
525.8 574.3 636.8
EBITDA
144.3 165.0 186.1
Adj. PAT
118.7 142.6 162.1
EBIT (%)
22.6 24.1 25.0
Core EPS (INR)
49.3 59.3 67.4
EPS Gr. (%)
19.0 20.2 13.7
BV/Sh. (INR)
307.4 360.0 427.4
Ratios
Net D-E
-0.17 -0.26 -0.36
RoE (%)
17.2 17.8 17.1
RoCE (%)
17.0 17.8 17.3
Payout (%)
13.6 11.3
0.0
Valuations
P/E (x)
35.5 29.6 26.0
EV/EBITDA (x)
30.4 25.9 22.3
Div. Yield (%)
0.3
0.3
0.0
FCF Yield (%)
1.3
2.6
3.1
EV/Sales (x)
8.3
7.5
6.5
rights for Fibromun. Specialty R&D rose to 38% of total R&D in 2QFY25, up from
22% in FY20. SUNP's specialty portfolio now includes 26 products, focusing on
derma, ophthal, and onco-derma, with key trials underway for MM-II, SCD-044
and GL0034. While Deuruxolitinib approval is secured, its launch faces delays
due to litigation. We expect specialty and generics sales to grow at a 21% CAGR,
reaching USD1.7b by FY25-27.
Domestic formulation: On track to sustain superior execution
SUNP has consistently outperformed the IPM over the past three years, driven
by its chronic-focused approach. It launched an average of 91 products annually
during FY21-23, though the pace has slowed recently. The sales force grew by
~45% from FY20 to FY24, reaching 13,984, with PCPM at INR10.6m in FY24. We
project an 11% CAGR to INR209b over FY25-27, supported by stronger volumes,
new launches, in-licensing opportunities, improved MR productivity, and
expanded geographical reach.
SUNP's US generic sales grew at a 10% CAGR to INR153b over FY20-FY24, driven
by new launches, despite regulatory challenges at Halol, Mohali, and Dadra. The
company has filed 640 ANDAs and 65 NDAs, with 103 ANDAs and 14 NDAs
awaiting approval. In the emerging and RoW markets, SUNP operates in 80+
countries with a strong sales force of 2,500 people. This segment grew at an
11% CAGR to INR193b over FY20-24. While business growth was moderate in
1HFY25, it is expected to recover as stronger execution offsets Japanese price
cuts. RoW and emerging markets are projected to grow at a 10% CAGR to
INR193b during FY25-27, driven by expanded reach, strong brand recall, and a
specialized portfolio focus.
Overall, SUNP continues to implement efforts toward sustainable levers of
growth, such as: a) adding products/improving prescriptions for specialty
portfolio, b) clinical development of differentiated products, and c) volume/new
introduction in the branded generics market. Expect 10%/14%/17%
revenue/EBITDA/PAT CAGR over FY25-27. We value SUNP at 35x 12M forward
earnings to arrive at a TP of INR2,280.
US Generics + ROW: Strong product portfolio and brand recall
View and recommendation
Indian Hotels
2QFY25 result summary
Indian Hotels (IH) reported a strong consolidated revenue growth (up 27% YoY
to INR18.3b) in 2QFY25, led by healthy demand across regions. Like-for-like
consolidated revenue growth (excluding consolidation of TajSATS) stood at
~16% YoY. Standalone business revenue also grew by ~16% YoY, led by an
increase in ARR (up 10% YoY) and better occupancy (up 150bp YoY). EBITDA
grew 41% YoY to INR5b, driven by favorable operating leverage. Adj. PAT grew
94% YoY to INR3.2b. We expect IH to post strong FY25 as the growth
momentum is likely to continue in 2H (expecting revenue/EBITDA/Adj. PAT
growth of ~30%/34%/27% in 2HFY25), driven by strong wedding seasons (~30%
YoY higher wedding dates), anticipated increase in foreign tourist arrivals,
healthy traction in the MICE segment aided by convention centers, and
favorable demand-supply dynamics.
7
27 November 2024
 Motilal Oswal Financial Services
STRATEGY: WINNERS AND LAGGARDS OF 2QFY25
Financial & Valuation (INR b)
Y/E MARCH
2025E 2026E 2027E
Sales
84.2 101.6 111.4
1.
EBITDA
28.1 35.2 40.8
Adj. PAT
16.7 21.0 25.0
EBITDA Margin % 33.4 34.6 36.6
2.
Adj. EPS (INR)*
11.8 14.8 17.6
EPS Gr. (%)
33.0 25.6 18.7
BV/Sh. (INR)
79.2 93.2 110.0
3.
Ratios
Net D:E
(0.3) (0.4) (0.5)
4.
RoE (%)
16.2 17.2 17.3
RoCE (%)
15.9 17.4 17.4
Payout (%)
6.0
5.4
4.6
Valuations
P/E (x)
63.9 50.9 42.8
Valuation and view
EV/EBITDA (x)
37.1 29.1 24.5
IH has emerged as a compelling growth story in the Indian hospitality sector
Div. Yield (%)
0.1
0.1
0.1
following its transformative journey during FY17-24. With a notable financial
FCF Yield (%)
1.5
1.9
2.3
turnaround, expansions across traditional and new businesses and a clear
*Cons.
Further, we expect the earnings momentum to sustain in the medium term, led
by:
Increase in ARR
(driven by healthy demand, asset management strategy and
corporate rate hikes) and
higher occupancy
(led by favorable demand-supply
dynamics; demand CAGR of ~9-11% v/s supply CAGR of 7-8%)
Strong room addition pipeline
till FY28 in both owned/leased (3,532 rooms) and
management hotels (13,822)
Higher income from
management contracts
(management fee is expected to
clock ~15-18% CAGR, primarily driven by net unit growth)
Strong traction within
new and reimagined businesses.
New businesses such as
Ginger, Qmin, Ama's and Tree of Life are expected to clock a CAGR of over 30%
while reimagined business such as Taj SATS and Chamber will maintain their
growth momentum.
strategy for long-term growth, IH has become a market leader in the industry
and aims to become the most valued, responsible, and profitable hospitality
ecosystem in South Asia. The company plans to expand its portfolio to 700
hotels (including pipeline), double consolidated revenues to INR150b, and
achieve 25%+ of revenues from innovative and reimagined businesses like
Ginger, Qmin, and TajSATS.
We believe the company’s strong operational performance, portfolio
diversification, and focus on sustainability will provide a robust foundation for
its ambitious 2030 goals. We expect IH to deliver a CAGR of 18%/24%/26% in
revenue/EBITDA/Adj. PAT over FY24-27. Hence, we have a BUY rating with a TP
of INR880 (based on FY27E SoTP).
Page Industries - growth acceleration to sustain
Financial & Valuation (INR b)
Y/E March
2025E 2026E 2027E
Sales
50.0 57.5 66.5
Sales Gr. (%)
9.1 15.1 15.5
EBITDA
9.9 11.7 13.9
EBITDA Gr. %
13.2 19.0 18.5
EBITDA Margin (%) 19.7 20.4 20.9
Adj. PAT
6.7
8.1
9.7
Adj. EPS (INR)
603.4 724.6 872.8
EPS Gr. (%)
18.2 20.1 20.5
FCF to PAT
1.3
0.8
0.9
BV/Sh.INR
1571.0 1831.1 2144.4
Ratios
RoE (%)
38.4 39.6 40.7
RoCE (%)
37.9 39.9 41.0
Payout (%)
90.0 75.0 75.0
Valuations
P/E (x)
75.4 62.8 52.1
P/BV (x)
29.0 24.8 21.2
EV/EBITDA (x)
50.9 42.6 35.7
Div. Yield (%)
1.0
1.0
1.2
Earnings Summary – 2QFY25
Beat on volume growth:
Sales grew 11% YoY to INR12.5b (est. INR12.0b), while
demand remained subdued but improved vs. 1Q. Sales volume was up 6.7% YoY
in 2Q (2.6% in 1QFY25; 3.5% our est.) at 55.2m pieces. The festive season also
partially supported growth in 2Q. Festive demand was healthy, with
improvement in secondary growth.
Network expansion continues:
Exclusive brand outlets (EBOs) are also a key
area, with the company aiming to increase EBOs from 150-180 annually to
around 1,550 by FY25. Technology upgrades, like the ARA system, are enhancing
distribution and inventory management, while athleisure is emerging as a major
growth area.
Surprise on margin:
Gross margin expanded ~80bp YoY to 56.5% (est. 56.3%)
and EBITDA margin expanded 185bp YoY to 22.6% (est. 20.9%). The margin
expansion was led by stable input costs and improved operating efficiency.
EBITDA grew 21% YoY to INR2.8b (est. INR2.5b). Adj. PAT was up 30% YoY at
INR1.9b (est. INR1.7b).
27 November 2024
8
 Motilal Oswal Financial Services
STRATEGY: WINNERS AND LAGGARDS OF 2QFY25
Investment thesis:
Long-term category growth potential intact:
The innerwear category forms ~8%
of the India’s domestic apparel industry and it is growing at rapid pace. As per
industry estimates, the innerwear category is expected to grow from INR670b in
2023 to INR755b in 2025 (11% CAGR). It will be led by favorable demographic
(higher mix of youth population, etc.) and rising income level to further increase
the mix of branded products.
Strong foundations for success:
PAGE’s moat lies in its strong product
innovation capabilities, steady quality, and understanding of consumer
upgradation. Jockey is a mass premium brand with aspirational value at
competitive price points. With 80% in-house production across 16
manufacturing units in Karnataka and Tamil Nadu, the company ensures quality
consistency. Brand’s ground presence is improving at a rapid pace as the
company has been expanding its network across markets with all distribution
channels. It has robust distribution network with 107,702 MBOs, 1,387 EBOs
and e-commerce, supported by 3,987+ distributors in 2,710+ cities. The
company is also particular about its capital allocation and invests primarily in
core projects with a minimum 20% ROCE threshold. Additionally, it maintains a
high dividend payout ratio of over 50%.
Recent trend positive:
In 2QFY25, PAGE saw a stable operating environment,
with the festive season boosting demand despite subdued consumer sentiment.
Rural consumption is gradually recovering, aiding overall demand, while Tier 3
and Tier 4 cities continue to outpace average growth. The focus remains on
metros, Tier 2, and Tier 3 cities. No price hikes were undertaken, and the gap
between volume and value growth reflects premiumization, a changing category
mix, and higher e-commerce sales.
Channel inventory normalizing:
PAGE exited the quarter with ~40 days of
distributor inventory, a three-day improvement from FY24 and reflecting better
secondary vs. primary performance. Management expects further inventory
reduction in 2HFY25 and aims for optimal inventory levels across channels by
FY25-end. However, athleisure inventory remains elevated, with no plans for
near-term channel filling.
Margin expansion headroom:
Yarn and cotton saw a sharp rise during 2020–
2022 but have since stabilized, leading to margin expansion in 2QFY25. We
expect RM price stability to continue, supporting GM of 55-56% in FY25/FY26.
While innerwear companies faced margin pressure due to higher discounts
recently, PAGE avoided aggressive discounting to drive volumes. With demand
picking up, inventory levels are gradually normalizing, and soft input prices, we
anticipate PAGE to sustain an EBITDA margin of ~20% in FY25E/FY26E.
Our view:
We expect demand improvement to continue in 2HFY25, along with normalizing
channel inventory. We estimate a CAGR of 13%/17%/19% in sales/EBITDA/PAT
over FY24-27E.
With PAGE’s strong execution history and a large market opportunity, we expect
an uptick in the earnings cycle and the valuation will also see quick re-rating.
BUY with a revised TP of INR54,000, premised on 60x Mar’27E EPS.
27 November 2024
9
 Motilal Oswal Financial Services
STRATEGY: WINNERS AND LAGGARDS OF 2QFY25
IPCA
IPCA’s 2QFY25 sales grew 15.8% YoY to INR23.5b (our est: INR22.8b), driven by
Financial & Valuation (INR b)
growth in both domestic formulation (DF) and exports. DF sales increased by
Y/E March
FY25E FY26E FY27E
11.3% YoY, outperforming IPM growth by ~500bp, with acute growth exceeding
Sales
89.7 102.1 119.8
by +500bp and chronic by +700bp vs. IPM. Export performance was mixed, with
EBITDA
16.7 20.3 24.3
15% growth in the export formulation business, an 8% increase in generic
Adjusted PAT
8.7 11.4 14.1
exports, and an impressive 85% growth in the institutional segment.
EBIT Margin (%) 14.2 15.9 16.8
Adj EPS (INR)*
34.4 44.8 55.5
Gross margin (GM) expanded 110bp YoY to 67.8%, due to a superior product
EPS Gr. (%)
65.3 30.3 23.8
mix and lower RM costs.
BV/Sh. (INR)
278.8 316.9 364.0
EBITDA margin expanded 110bp YoY to 18.8% (our est: 20.7%). EBITDA grew
Ratios
22.7% YoY to INR4.4b (our est: INR4.7b). Adj. PAT grew 36.4% YoY to INR2.3b
Net D-E
0.1
0.0 -0.1
(our est: INR2.4b).
RoE (%)
13.0 15.0 16.3
In 1HFY25, revenue/EBITDA/PAT grew 23%/28%/31% YoY. We expect
RoCE (%)
12.2 14.0 15.2
Revenue/EBITDA/PAT to grow 11%/28%/120% in 2HFY25.
Payout (%)
21.5 17.2 19.3
Investment thesis
Valuation
P/E (x)
44.3 34.0 27.4
Domestic Formulation: Geared up to sustain industry-beating growth
EV/EBITDA (x)
23.2 19.1 15.9
Given the highest share of acute therapies in the DF market (68% of DF sales)
Div. Yield (%)
0.5
0.5
0.7
and chronic therapies (32% of DF sales), IPCA has outperformed IPM
FCF Yield (%)
2.0
1.9
2.5
consistently for the past three years, led by strong brand equity, efficient
EV/Sales (x)
4.3
3.8
3.2
management of seasonality, increase in MR productivity and market share gain.
*Cons.
Superior execution in DF/Unichem drives 2QFY25 earnings
IPCA’s Cardiac/Anti-infective/Derma outperformed IPM by 6%/10.6%/13.1% in
MAT Aug’24, led by superior execution. Although the pharma industry has been
witnessing a decline in Pain therapy, IPCA has outperformed IPM by ~680bp
over the past three years, led by strong execution and growth in its key brands,
including Zerodol and combination. IPCA is focusing on improving MR
productivity, new launches and market share gain in existing and new launches.
Synergies of Unichem, approvals to boost exports
Unichem business, after the consolidation in Sep’23, grew 53% YoY over Dec’23-
Sep’24. Driven by efficient cost optimization, Unichem’s EBITDA margins
expanded by 1,030bp YoY to 12.4% in 2QFY25. The US remains a key market for
the company, with ~58% contribution to total Unichem revenue and 40% YoY
growth in FY24. IPCA’s North America (NA) business grew by a meager 7% over
FY18-24, due to regulatory issues at three sites. However, after the clearance of
the three sites, IPCA is working on filing new products in the US market, which
would yield benefits over the medium term. Further, with the integration of
Unichem business, IPCA would restructure its US business faster. Furthermore,
the company is also foraying into biosimilar business, which would benefit over
the longer term.
Valuation and view
Considering a 27% earnings CAGR and an anticipated improvement in the return
ratio to ~16% over FY25-27, we value IPCA at 36x 12M forward earnings to
arrive at a TP of INR1930. IPCA is working on multiple fronts to maintain its
strong earnings momentum over the next 2-3 years. The momentum will be
driven by: 1) re-launch of products in the US market, 2) new offerings through
its own site as well as Unichem sites, c) outperforming the industry in DF/ROW
markets, and d) building synergy between IPCA and Unichem’s operations. We
have a BUY rating.
27 November 2024
10
 Motilal Oswal Financial Services
STRATEGY: WINNERS AND LAGGARDS OF 2QFY25
Amber Enterprises
2QFY25 performance
Financial & Valuation (INR b)
Y/E March
2025E 2026E
Sales
89.2 110.0
EBITDA
7.0
8.9
Adj. PAT
2.6
3.8
EPS (INR)
78.0 113.0
EPS Gr. (%)
97.7
44.9
BV/Sh. (INR) 690.7 803.7
Ratios
RoE (%)
12.0
15.1
RoCE (%)
11.3
13.1
Valuations
P/E (x)
82.6
57.0
P/BV (x)
9.3
8.0
EV/EBITDA (x) 32.7
25.3
Div. Yield (%)
0.0
0.0
2027E
134.7
11.7
5.8
172.3
52.5
976.0
19.4
16.2
37.4
6.6
19.0
0.0
Amber posted a relatively strong set of numbers in 2QFY25, with EBITDA/PAT
margin improving by 40bp/180bp YoY. Consolidated revenue grew 82% YoY to
INR16.8b, beating our estimates by 33%, mainly due to increased demand in the
RAC segment in the quarter and the company’s presence in PCB assembly and
manufacturing. Absolute EBITDA grew by 91% YoY to INR1.14b, exceeding our
estimate by 28%. Margin improved 40bp YoY to 6.8% vs. our estimate of 7.0%.
While the Street was expecting a loss, a trend similar to the company’s previous
2Q results, Amber’s PAT beat our estimate by 105% at INR192m vs. our estimate
of INR94m. PAT margin was 1.1% vs. our estimate of 0.7%.
Investment thesis
Improved RAC growth offsetting weakness in railways
The RAC market stood at 10m units in FY24 and is currently growing at a fast
pace of 40%. The company has maintained its market share of 25-26% in the
RAC market and expects a similar trend in future. Amber is also adding new
clients in consumer durable business. Amber’s revenue from the railway sub-
systems and mobility segment has been weak for the past few quarters,
primarily due to a delay in the Mumbai metro project amid a shortage of rolling
stock and a change of focus of Indian Railways toward non-AC coaches. Amber
expects improvement in this segment from FY26 onward, led by product trials of
the Yujin JV greenfield facility.
Electronics segment to witness a higher growth trajectory
Amber aims to become a key player in PCB assembly and manufacturing. It has
strategically taken steps to grow this segment in the last 1-2 years by: 1)
focusing on newer sectors with a higher margin and growing its PCBA business;
2) entry into PCB manufacturing by acquiring Ascent Circuits; 3) expanding
capacity in the electronics segment with a targeted capex of INR5-6b over the
next two years that will provide incremental revenue to the company; and 4) JV
with Korea Circuits for advanced manufacturing of PCB. With these initiatives,
we expect electronics segment to remain on a high growth trajectory, coupled
with scope for margin improvement.
View and recommendation
Amber is diversifying its presence beyond consumer durables. Its AC segment is
benefiting from improved RAC demand and increased sales of components. For
the electronics division, the company is adding new customers in segments such
as automotive, defense, medical, and telecom and is targeting to grow its
electronics division at a fast pace. The company is also continuously expanding
the scope of addressable market in railways, though ordering remains slow in
this segment. We maintain our positive stance on Amber on account of its
ability to grow other segments beyond RAC. We thus expect revenue/PAT to
grow at 26%/63% over FY24-27E for Amber. We have a BUY rating with a TP of
INR7,350.
27 November 2024
11
 Motilal Oswal Financial Services
STRATEGY: WINNERS AND LAGGARDS OF 2QFY25
Angel One
Financial & Valuation (INR b)
Y/E March
2025E 2026E 2027E
Revenues
Opex
PBT
PAT
EPS (INR)
EPS Gr. (%)
BV/Sh. (INR)
Ratios (%)
C/I ratio
PAT margin
RoE
Div. Payout
Valuations
P/E (x)
P/BV (x)
Div. Yield (%)
17.4
4.1
0.0
15.5
3.5
2.4
11.1
3.0
3.3
55.9
30.8
31.2
0.0
56.3
30.1
24.5
40.0
53.0
34.5
29.0
40.0
45.4
25.4
18.9
14.0
169.0
24.4
716.8
52.2
29.4
21.2
15.7
12.3
63.4
33.6
27.8
21.9
39.2
PAT beat driven by better-than-expected operational efficiency
189.7 264.1
830.7 989.1
In 2QFY25, Angel One reported 45% YoY growth in operating revenue at INR9.8b
(5% beat on our est.), driven by 45% YoY growth in number of orders to 489m
and a strong surge in MTF book. However, gross broking revenue per order
declined 11% YoY to INR19.1, led by a 19% drop in cash segment (price
rationalization) and a 7% fall in F&O realizations. Total operating expenses grew
51% YoY, largely owing to 38% YoY increase in finance costs and 73% YoY jump
in employee costs (led by investments into new businesses). This resulted in YoY
increase in the CI ratio to 50.1% compared to 48.7% in 2QFY24 (better than our
estimate of 52.5%). PAT grew 39% YoY to INR4.2b (5% beat), aided by better-
than expected operational efficiency. In 1HFY25, total income/PAT posted a
solid 60%/36% YoY growth.
Investment Thesis
New F&O regulations to impact 13-14% of revenues; aims to maintain profitability
New F&O regulations have recently been implemented with two big measures:
1) increase in lot sizes and 2) restricting exchanges to only one weekly expiry.
These regulations have been anticipated to hit ANGELONE’s revenues and
earnings. Management has guided for a 13-14% hit on revenues because of
these measures. Also, there are levers to offset the impact of these regulations
such as price hikes. In the recently implemented true-to-label charge
regulations, ANGELONE increased the cash segment realizations, along with few
other measures, demonstrating its aim of maintaining profitability.
Business diversification in progress
While concerns related to F&O regulations have been lingering over the past
one year, ANGELONE has been investing in diversifying its revenue base and
building foundation for loan distribution, wealth management, and AMC to
offset the cyclicality of core broking business. With significant amount of data
available on the behavior and financial strength of customers, ANGELONE is well
poised to increase LTV of these customers by distribution of other financial
products. Industry tailwinds for each of these segments and robust execution
backed by strong management teams will provide large growth opportunities in
each of the new segments. We believe these segments can contribute about
INR3b to revenues in FY27.
Revamp of assisted business channel to drive further growth
The assisted business with >11k partners currently contributes ~22-23% of the
overall revenue. This channel is key to the company’s strategy of enhancing the
LTV of its existing customer base. A complete revamp of this channel is in
progress, such as: 1) rehashing the NXT platform for enhancing partner-client
interaction, 2) building strong data analytics capabilities, and 3) extensive
training for partners to build capability to sell multiple financial products such as
MFs, PMS, insurance and loans. The company plans to focus on on-boarding
more APs with the ability to distribute a broader range of financial products.
ANGELONE stock has been range-bound over the past few months amid
concerns about the impact of new F&O regulations. However, with
27 November 2024
12
 Motilal Oswal Financial Services
STRATEGY: WINNERS AND LAGGARDS OF 2QFY25
management guidance ahead of street expectations and possibility of price
hikes in future, the concerns would allay. Scale-up of new businesses will further
boost revenue and profitability in the longer run. We expect FY25-27 CAGR of
18%/25% in revenue/ PAT, without factoring in revenue upsides from new
businesses. We have a BUY recommendation with a one-yr TP of INR3,600 (16x
Sep’26E EPS).
Atul
Financial & Valuation (INR b)
Y/E March
FY25E FY26E FY27E
Sales
EBITDA
PAT
EPS (INR)
EPS Gr. (%)
Ratios
Net D:E
RoE (%)
RoCE (%)
Payout (%)
Valuations
P/E (x)
P/BV (x)
EV/EBITDA (x)
Div. Yield (%)
FCF Yield (%)
41.7
3.9
22.9
0.4
0.0
32.0
3.6
19.1
0.6
1.6
26.2
3.2
15.9
0.7
2.3
0.0
9.8
9.1
18.2
0.0
11.7
10.6
18.2
-0.0
12.9
11.9
18.2
54.3
9.6
5.2
177.3
61.2
61.6
11.4
6.8
231.0
30.3
68.5
13.5
8.3
282.0
22.1
Earnings Summary – 2QFY25:
Impressive show continues across segments
BV/Sh.(INR) 1,881.1 2,070.1 2,300.9
EBITDA in line with our estimate:
Revenue stood at INR13.9b (+17% YoY). Life
Science Chemicals’ revenue was INR4.1b (+13% YoY). Performance chemicals
revenue was INR10.2b (+18% YoY). EBITDA came in at INR2.4b (est. of INR2.4b,
+56% YoY). PAT stood at INR1.4b (est. of INR1.3b, +53% YoY).
Margin expanded across segments:
Gross margin was at 53.1% (+900bp YoY)
and EBITDA margin was at 17.4% (+440bp YoY). EBIT margin expanded YoY for
both segments. Life Science Chemicals’ margin stood at 20.5% (+900bp YoY);
Performance Chemicals’ margin was at 9.7% (+140bp YoY.
Impressive show in 1HFY25:
Revenue was at INR27.1b (+14% YoY), EBITDA was
at INR4.7b (+38% YoY), with PAT at INR2.5b (+30% YoY). EBITDAM for 1HFY25
stood at 17.2% (+300bp YoY)..
Investment thesis:
Recovery in international market to aid volume growth:
The Life Science
segment has seen increased demand for intermediates used in the pharma and
personal care industries, with high demand for crop protection chemicals in the
international market. Lower prices would be offset by higher volumes across all
sub-segments in both the domestic and international markets and lower input
costs for the company.
Unrealized sales potential provides further upside:
The capex cycle is almost
over for the company and the unrealized sales potential currently stands at
INR17.1b from existing capacities. Incremental sales of INR8b could be
contributed by various projects at different stages of commissioning currently.
Total revenue potential stands at INR72.4b currently (FY24 revenue at
INR47.3b).
Subsidiaries to start contributing positively once again:
Performance
Chemicals’ sales and profitability were aided by an improvement in demand for
epoxy and sulphones product groups, along with an improved performance of
the subsidiaries. Operations at Atul Products also stabilized during the quarter.
Contribution from the subsidiaries/JVs turned positive (profit at INR108m in
2QFY25, vs. loss of INR121m).
Financials to remain robust:
We estimate a revenue/ EBITDA/PAT CAGR of
13%/28%/37% during FY24-27. EBITDAM is estimated to improve by 620bp in
FY27 vs. FY24 level. We recently upgraded the stock as we believe that ATLP is
ready to make a comeback in the next 2-3 years, and our view has already been
supported by a strong show in 1HFY25.
27 November 2024
13
 Motilal Oswal Financial Services
STRATEGY: WINNERS AND LAGGARDS OF 2QFY25
Valuation and view
The end-user market demand has picked up, and we believe that overall
demand will also accelerate in 2HFY25. The company is undertaking various
projects and initiatives aimed at improving plant efficiencies, expanding its
capacities for key products, debottlenecking its existing capacities, capturing a
higher market share, and expanding its international presence.
ATLP has completed the expansion of its Liquid Epoxy Resin plant of 50ktpa in
Oct’24 (revenue potential of INR8b). Its caustic soda plant (300tpd) also faced
teething issues in Dec’23, which were largely resolved in 1HFY25. Anaven
(monochloro acetic acid) is also likely to ramp up its plant for optimum
utilization due to better offtake in FY25.
The stock is trading at ~31x FY26E EPS of INR231 and ~19x FY26E EV/EBITDA.
We value the stock at 40x Sep’26E EPS to arrive at our TP of INR10,260. We have
a BUY rating on the stock. The upside risk could be a faster-than-expected ramp-
up of new projects and products. Downside risks include weaker-than-expected
revenue growth and margin compression amid further delays in the
commissioning of new projects.
27 November 2024
14
 Motilal Oswal Financial Services
STRATEGY: WINNERS AND LAGGARDS OF 2QFY25
LAGGARDS
Tata Motors
Financial & Valuation (INR b)
Y/E March
2025E 2026E
Net Sales
4,402 4,872
EBITDA
581.7 644.9
Adj. PAT
234.4 231.5
Adj. EPS (INR) 63.7
63
EPS Gr. (%)
9
-1
BV/Sh. (INR) 290.5 349.3
Ratios
Net D/E (x)
0.1
0
RoE (%)
24.4
19.7
RoCE (%)
15.3
14
Payout (%)
6.6
6.7
Valuations
P/E (x)
12.3
12.4
P/BV (x)
2.7
2.2
EV/EBITDA (x)
5.3
4.5
Div. Yield (%)
0.5
0.5
2027E
5,368
706.2
251.3
68.3
9
413.4
-0.1
17.9
13.7
6.1
11.5
1.9
3.7
0.5
Weak 2QFY25 result:
TTMT reported a weak 2QFY25 performance, with margins contracting ~150bp
YoY to 11.6% (vs est. 13.2%), primarily driven by weaker volumes and high cost
pressures at JLR. While the India business showed resilience despite subdued
demand, JLR faced challenges from lower wholesales and elevated selling costs.
The Indian operations performed relatively better in both CV and PV segments.
For overall consolidated business, 2HFY25 revenues are estimated to remain flat
YoY, while EBITDA/adj. PAT are expected to decline 4%/2% YoY.
Management has maintained its EBIT margin guidance for JLR for both
FY25/FY26 but has cautioned that there is limited headroom to achieve the
same. While management has maintained its stance, we expect margin pressure
to sustain at JLR going forward given: 1) continued weakness in demand in
Europe and China, 2) weak demand would drive higher VME and FME costs, 3)
gradual normalization of mix, 4) normalization of capitalization rate, and 5)
margin-dilutive EV ramp-up. We expect JLR margins to remain under pressure at
14% over our forecast period.
TTMT is facing significant competitive pressure across different segments in
domestic CVs. While TTMT has been able to maintain its share in MHCV goods
for 1H, it is still much lower than the 52% levels it used to enjoy in FY21. Further,
it continues to lose share in LCV goods segment, which has fallen another 300bp
to 29.5% - this continues to be a major cause of worry (given that its share in
LCV segment was at around 40% as of FY22). Further, CV demand continues to
be weak even in 3Q with hopes of some revival in 4Q. We expect TTMT’s India
CV business to see a 4% volume CAGR (FY24-26E).
Despite multiple new launches over the last couple of years, its PV market share
has remained stable at 13.8% for FY24 and now fallen to 13.3% for YTDFY24.
Further, despite multiple EV variant launches across key product categories, its
EV sales remain at around 5k units per month. Further, the PV industry outlook
remains subdued. While Currv EV has not picked up yet, it remains to be seen
whether the ICE variant is accepted in the Indian market. In PVs, we expect
TTMT to post a much slower 3% volume CAGR, that too back-ended.
While JLR posted impressive performance in FY24, there are clear headwinds
ahead, which should put pressure on margin for the company. Given this margin
pressure and its capex imperatives, there is a risk that debt may start rising from
hereon. Further, the outlook for India PV and CV businesses remains weak.
Given the lack of near-term triggers, we have a Neutral rating with Sep’26E
SOTP-based TP of INR840.
Management maintains JLR margin guidance, we remain circumspect:
Gradually losing its dominance in domestic CVs:
India PV business seems to be stagnating:
Valuation and view:
27 November 2024
15
 Motilal Oswal Financial Services
STRATEGY: WINNERS AND LAGGARDS OF 2QFY25
Asian Paints - Industry challenges persist
Y/E March
2025E 2026E 2027E
Sales
350.5 388.1 436.2
Sales Gr. (%)
-1.2 10.7 12.4
EBITDA
64.4 75.2 85.3
EBIT Margin (%) 18.4 19.4 19.6
Adj. PAT
45.6 52.9 60.2
Adj. EPS (INR)
47.5 55.2 62.7
EPS Gr. (%)
-18.0 16.2 13.6
BV/Sh.(INR)
200.9 214.2 234.8
Ratios
RoE (%)
24.0 26.6 27.9
RoCE (%)
20.6 22.7 23.5
Payout (%)
86.3 74.3 65.4
Valuation
P/E (x)
52.7 45.4 39.9
P/BV (x)
12.5 11.7 10.7
EV/EBITDA (x)
36.1 30.9 27.1
Div. Yield (%)
1.6
1.6
1.6
Financials & Valuation (INR b)
Earnings Summary – 2QFY25
Investment thesis:
Miss in volume growth:
Consol. net sales declined 5% YoY to INR80.3b (est.
INR85.2b), impacted by weak demand conditions, price cuts, a shift in the mix,
and increased discounts. Volume declined by 0.5% (est. +5.5%, 7% in 1QFY25) in
the domestic decorative paints business.
Sharp contraction in operating margin:
Gross margins contracted 260bp YoY to
40.8% (est. 43%). EBITDA margin contracted 480bp YoY and 340bp QoQ to
15.4% (est. 17.6%). EBITDA declined 28% YoY to INR12.4b (est. INR15.0b). Adj.
PAT declined 29% YoY to INR8.7b (est. INR10.8b).
Currency devaluation continues to affect growth:
The international business
portfolio registered a marginal decline in revenues in 2QFY25 (8.7% growth in
CC terms) due to a weak macroeconomic condition and currency devaluation in
Ethiopia, Egypt, and Bangladesh.
Rise in competitive intensity:
APNT highlighted rising competitive intensity,
with higher discounts across all segments and rising competitive activity in the
economy segment from both organized and unorganized players. Weak
demand, particularly in seasonal markets, has made the market leader more
susceptible to competitive actions. Regarding Birla Opus, APNT noted no major
disruption but is preparing to ramp up activity. Competitive pressures are
unlikely to ease soon. APNT is countering by increasing investments for its
salesforce.
Slowdown in project/institutional business:
The projects and institutional
business has experienced slower growth due to a deceleration in construction
and government sectors. After general elections, activity from the public sector
in infrastructure has remained subdued and is expected to continue at the same
pace.
Currency devaluation continues to affect growth:
The international business
remains under pressure due to economic uncertainty, forex crises, and liquidity
challenges in key markets across Asia and Africa. Weak demand in Asia and
forex losses in Ethiopia have significantly affected profitability. Management
expects demand challenges to persist in these regions.
Weak 3Q/2HFY25:
APNT expects persistent weakness in 3Q and 2HFY25 due to
a muted festive season and subdued urban consumer sentiment. It expects flat
revenue growth in FY25. Gross margin declined by 150bp in 1HFY25 due to RM
inflation, price cut impact, and weak product mix. EBITDA margin contracted by
450bp due to higher employee costs and lower operating leverage. Besides
growth weakness, margin outlook also looks muted, and to achieve guidance of
18–20%, EBITDA margin should be on the lower side of the band for FY25.
Our view:
The near-term demand outlook looks bleak given the weak demand and
curtailed festive period due to extended monsoon and early Diwali. Rising
competition also partially impacted the performance. Further, the operating
margin is expected to witness weakness in the near term, as the company needs
to reinvest in the business to counter competition.
27 November 2024
16
 Motilal Oswal Financial Services
STRATEGY: WINNERS AND LAGGARDS OF 2QFY25
The stock has massively underperformed (down 18% in the last three years) and
is not likely to offer respite in the near term. Industry volume recovery and
competitive strategy on pricing/incentives will be key monitorables. We
maintain our
Neutral rating with a TP of INR2,650 (based on 45x Sep’26E EPS).
ABB
Financials & Valuation (INR b)
Y/E Dec
Sales
EBITDA
Adj. PAT
EPS (INR)
EPS Gr. (%)
BV/Sh. (INR)
Ratios
RoE (%)
RoCE (%)
Valuations
P/E (x)
P/BV (x)
EV/EBITDA (x)
Div. Yield (%)
82.7
20.2
66.7
0.2
71.5
16.1
57.3
0.3
61.4
13.0
48.8
0.4
27.6
27.8
25.1
25.2
23.4
23.5
2024E 2025E 2026E
120.3
22.9
18.8
88.7
50.5
362.1
141.5 169.7
26.4
21.7
15.6
30.5
25.3
16.3
3QCY24 performance was below expectations
102.5 119.3
456.2 565.2
ABB reported a miss in 3QCY24 vs. our and consensus expectations. Revenue at
INR29.1b grew 5% YoY, missing our expectation of INR34.3b as the order book
tilted toward slightly longer gestation projects. Robotics & Motion/
Electrification segments grew 8%/11% YoY, while Process Automation declined
12% YoY. With robust demand, stable commodity prices, price hikes, and a
better product mix, gross margin expanded ~670bp YoY to 43.4%. Other
expenses rose during the quarter due to higher warranty costs. EBITDA margin
came in at 18.6% vs. 15.8% in 3QCY23. PAT grew 22% YoY to INR4.4b, aided by
higher other income (+21% YoY). Order inflows at INR33.4b rose 11% YoY, taking
the order book to INR99.9b (+25% YoY). Cash balance stood at INR50b at the
end of 3QCY24.
Investment thesis
Changing mix of OB toward slightly longer gestation projects
ABB has a large installed base across base industries, and nearly 45-50% of the
business originates from this segment, which is growing at less than 10%. About
15-20% of the business comes from the fast-growing segments, which are
experiencing 20%+ growth, and the remaining 30-35% of the business comes
from the moderate growth segments. Due to longer gestation of the projects in
high-growth segments, revenue growth was hurt during the quarter. However,
as the pace of growth improves across base industries, we expect that overall
revenue growth will start improving again.
Overall demand environment remains strong
The emerging and high-growth segments like data centers, railways and metros
continue to provide growth momentum to overall order inflows. Renewables,
water and power distribution would be other catalysts of business growth. The
government’s focus on low-carbon technology and energy transition is also
providing a leg-up to different business segments of ABB India. ABB India is
continuously benefiting from higher localization, expanded offerings across
markets and geographies, client preference for quality players, and productivity
measures.
View and recommendation
We maintain our positive stance on ABB based on its ability to benefit from the
high growth segments with its wide offerings and deeper penetration network.
We do expect the near-term execution velocity to be affected by slower-than-
expected growth in order inflows and a shift of order book toward longer-
gestation projects. However, with higher value-added content in large-sized
order inflows, we expect margin performance to remain healthy. The company’s
27 November 2024
17
 Motilal Oswal Financial Services
STRATEGY: WINNERS AND LAGGARDS OF 2QFY25
improved penetration into Tier II and Tier III cities, higher localization efforts,
benefits from global feeder factories for exports, and improved product
portfolio are helping it expand its presence across markets spanning 23 market
segments. We expect revenue/PAT CAGR of 17%/27% over CY23-26E. We have a
BUY rating with a DCF-based TP of INR8,500.
Avenue Supermart
Financials & Valuation (INR b)
Y/E March
FY24 FY25E FY26E
Sales
508.0 589.0 700.0
EBITDA
41.0 47.0 59.0
Adj. PAT
25.0 29.0 36.0
EBITDA Margin. % 8.1
8.0
8.4
Adj. EPS (INR)
39.0 44.0 55.0
EPS Gr. (%)
6.0 14.0 24.0
BV/Sh. (INR)
287.0 332.0 387.0
Ratios
Net D:E
0.0
0.0
0.0
RoE (%)
14.6 14.3 15.4
RoCE (%)
14.3 14.1 15.2
Payout (%)
0.0
0.0
0.0
Valuations
P/E (x)
93.9 82.5 66.3
EV/EBITDA (x)
58.0 50.4 40.5
EV/Sales (X)
4.7
4.1
3.4
Div. Yield (%)
0.0
0.0
0.0
FCF Yield (%)
0.0 -0.1
0.1
Weak 2Q; impact from Quick Commerce key monitorable
DMART reported weak results in 2QFY25 as consolidated revenue growth
moderated to 14% YoY (from 19% YoY in 1Q) with modest EBITDA growth of 9%
YoY (7% miss) due to the higher cost of retailing (CoR).
Management indicated that the impact of online grocery formats was clearly
visible, especially on large metro stores that operate at a high turnover per
store. DMart reported a moderation in like-for-like (LFL) growth for 2+ year old
stores to 7.5% in 1HFY25, with a sharp moderation to ~5.5% in 2Q (vs. ~10% in
FY24).
However, EBITDA margins declined 40bp YoY on weaker store productivity
(revenue/sqft flat YoY) and higher CoR (opex up 10% YoY on cost/sqft). As a
result, EBITDA increased 9% YoY (7% miss) and PAT was up 6% YoY (11% miss).
DMART added six stores in 2QFY25 (12 in 1HFY25). Accelerated store additions
remain the biggest growth driver for DMART and we expect the pace of store
additions to pick up in 2HFY25 (four added in Oct’24).
Store additions key growth driver; QC impact a key monitorable
DMART’s revenue growth remains dependent on its ability to add store area.
With the increase in capex, we believe store additions can pick up pace starting
2HFY25. We model 40/45/50 store additions in FY25/FY26/FY27.
DMART’s LFL growth has been recently impacted by a moderation in inflation
and a fast ramp-up of quick commerce (QC) services. We would watch out for
impact of quick commerce on DMART’s LFL growth and the ramp-up in DMart
Ready over the next few quarters.
We believe Quick Commerce and value formats such as DMart can co-exist in
the longer term. However, this hypothesis would likely be tested over the next
few quarters.
We estimate a CAGR of 17%/20% in revenue/PAT over FY24-27, aided by 13/4%
growth in footprints/revenue productivity and ~50bp margin improvement.
Valuations & view
We assign a 51x EV/EBITDA multiple (implies ~83x PE) on Dec’26E basis, in line
with DMART’s long-term 1-yr forward multiples to arrive at a TP of INR5,300.
DMart stock has corrected sharply (down 32% in last 2M) and now trades at
~66x FY26E P/E (vs 100x average LT 1-year forward PE). We believe the risk-
reward seems attractive after the recent correction.
We have a BUY rating on
the stock with a TP of INR5,300.
27 November 2024
18
 Motilal Oswal Financial Services
STRATEGY: WINNERS AND LAGGARDS OF 2QFY25
IndusInd Bank – Muted performance; asset quality
outlook remains uncertain
Financials & Valuation (INR b)
Y/E MARCH
NII
OP
NP
NIM (%)
EPS (INR)
EPS Gr. (%)
BV/Sh. (INR)
ABV/Sh. (INR)
Ratios
RoA (%)
RoE (%)
Payout (%)
Valuations
P/E (X)
P/BV (X)
P/ABV (X)
10.6
1.1
1.2
7.8
1.0
1.0
6.2
0.9
0.9
1.4
11.2
16.9
1.6
13.6
13.3
1.8
15.2
10.1
FY25E FY26E FY27E
219.5 260.1 310.3
155.4 189.2 231.3
73.8
4.0
-17.9
867
99.8 126.9
4.2
35.1
4.3
27.2
Earnings Summary – 2QFY25
94.9 128.2 163.1
889 1,000 1,146
975 1,118
Loan growth tepid:
IIB’s advances grew 13% YoY (2.7% QoQ) to INR3.6t, led by
the corporate and commercial books. However, the slowdown in the MFI
segment (down 12% QoQ, dragged down overall growth. Retail loan growth also
remained subdued due to cautious disbursements.
NIM contraction impacts profitability:
NIM fell sharply by 17bp QoQ to 4.08%
due to a rising cost of deposits and slower growth in high-yielding segments. NII
grew 5% YoY to INR 53.5b but dipped sequentially by 1%.
Asset quality deteriorates:
Fresh slippages rose 17% QoQ to INR17.9b, driven by
stress in the consumer finance book. GNPA/NNPA ratios increased to
2.11%/0.64% (up 9bp/4bp QoQ). The MFI segment remained the primary pain
point, with a 30-90 DPD bucket rising to 4% in 2QFY25 from 2% in the 1QFY25.
Weak bottom-line:
PAT dropped significantly by 40% YoY to INR13.3b, impacted
by a one-off contingency provision of INR5.25b.
Investment thesis: Loan growth moderates; asset quality outlook uncertain
Loan growth moderates:
While vehicle finance (26% of the book) remains a
cornerstone of IndusInd’s portfolio, growth in this segment has been slower
than industry expectations, with OEM-driven sourcing facing challenges. The
corporate and commercial books saw steady traction, but the cautious stance
on unsecured lending, particularly cards and MFI, is expected to cap overall
credit growth at ~13% for FY25, lower than earlier management guidance.
NIM moderates sharply; potential turn in rate cycle to boost margins:
Funding
cost remains tight (2bp QoQ increase in 2Q), while moderation in lending yield
as mix of MFI declined sharply adversely impacted margins. A shift toward term
deposits (now 64% of total deposits) has caused a moderation in CASA ratio to
35.9%, further driving NIM compression. However, the potential turn in the rate
cycle will likely aid margins as the loan portfolio remains dominated by fixed-
rate loans.
Asset quality outlook uncertain:
IndusInd Bank’s MFI portfolio, which
contributes ~9.2% to the total loan book, remains under pressure due to rural
stress, over-leveraging and other uncertainties. Delinquencies in key
geographies such as Bihar and Maharashtra are on the rise, with GNPA in the
MFI business likely to peak during 3QFY25. While the bank has tightened
underwriting standards and moderated disbursements, the drag from this high-
yielding segment is expected to persist.
Profitability under pressure:
Despite contingency provisions, we remain
watchful on provisioning requirement as unsecured/MFI loan segments
continue to witness elevated stress. The bank has guided for a credit cost of
110-130bp and this appears optimistic given rising slippages, particularly in
consumer finance. Fee income has seen weakness, and operating expenses
remain elevated due to investments in digital and branch expansion. These
factors will likely delay profitability normalization.
Management continuity critical for a quick recovery:
The pending RBI approval
for the renewal of the MD & CEO's term adds an overhang, particularly at a time
27 November 2024
19
 Motilal Oswal Financial Services
STRATEGY: WINNERS AND LAGGARDS OF 2QFY25
when business performance is already subdued. The continuity in management
term and robust governance standards are crucial to navigating the current
challenges and enabling quick recovery in the stock price.
Our view: Valuations reasonable; Clarity in business performance,
management critical for re-rating
IndusInd Bank’s financial performance in 2QFY25 highlights the challenges of
rising costs, subdued loan growth and asset quality pressures. The MFI business,
in particular, remains a drag, and any broader economic or regulatory
disruptions could further impact recovery.
With cost pressures mounting, adverse asset mix and limited scope for
immediate CASA recovery, NIMs are likely to remain under pressure. The bank’s
focus on secured lending and cautious approach in unsecured segments may
limit near-term growth opportunities.
The stock has underperformed broader indices over the last year due to rising
concerns over asset quality and growth. Despite the bank’s efforts to strengthen
its balance sheet and diversify its portfolio, the lack of near-term triggers and
uncertainty around management tenure suggest limited upside.
The stock remains susceptible to execution risks, competitive pressures, and
macroeconomic uncertainties. Asset quality recovery, especially in the MFI
business and margin pick-up particularly as the rate cycle turns, are key near-
term indicators for a potential re-rating.
Investment in securities market are subject to market risks. Read all the related documents carefully before investing
27 November 2024
20
 Motilal Oswal Financial Services
REPORT GALLERY
RECENT STRATEGY/THEMATIC REPORTS
STRATEGY: WINNERS AND LAGGARDS OF 2QFY25
27 November 2024
21
 Motilal Oswal Financial Services
STRATEGY: WINNERS AND LAGGARDS OF 2QFY25
RECENT INITIATING COVERAGE REPORTS
27 November 2024
22
 Motilal Oswal Financial Services
STRATEGY: WINNERS AND LAGGARDS OF 2QFY25
Explanation of Investment Rating
Investment Rating
BUY
SELL
NEUTRAL
UNDER REVIEW
NOT RATED
Expected return (over 12-month)
>=15%
< - 10%
< - 10 % to 15%
Rating may undergo a change
We have forward looking estimates for the stock but we refrain from assigning recommendation
*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall be within following 30 days take
appropriate measures to make the recommendation consistent with the investment rating legend.
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27 November 2024
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 Motilal Oswal Financial Services
STRATEGY: WINNERS AND LAGGARDS OF 2QFY25
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The associates of MOFSL has not received any compensation or other benefits from third party in connection with the research report
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which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from clients which are not considered in above disclosures.
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The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is,
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Investment in securities market are subject to market risks. Read all the related documents carefully before investing.
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Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 - 71934200 / 71934263; www.motilaloswal.com.
Correspondence Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad (West), Mumbai- 400 064. Tel No: 022 71881000. Details of Compliance Officer: Neeraj Agarwal,
Email Id: na@motilaloswal.com, Contact No.:022-40548085.
Grievance Redressal Cell:
Contact Person
Contact No.
Email ID
Ms. Hemangi Date
022 40548000 / 022 67490600
query@motilaloswal.com
Ms. Kumud Upadhyay
022 40548082
servicehead@motilaloswal.com
Mr. Ajay Menon
022 40548083
am@motilaloswal.com
Registration details of group entities.: Motilal Oswal Financial Services Ltd. (MOFSL): INZ000158836 (BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst: INH000000412 . AMFI:
ARN .: 146822. IRDA Corporate Agent – CA0579. Motilal Oswal Financial Services Ltd. is a distributor of Mutual Funds, PMS, Fixed Deposit, Insurance, Bond, NCDs and IPO products.
Customer having any query/feedback/ clarification may write to query@motilaloswal.com. In case of grievances for any of the services rendered by Motilal Oswal Financial Services Limited (MOFSL) write to
grievances@motilaloswal.com, for DP to dpgrievances@motilaloswal.com.
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