{LONGTERMINVESTORS} India Daily: Initiating Coverage - TeamLease Services; Strategy; Results; Results, Change in Reco

 

 

 

Special Reports

Initiating Coverage

TeamLease Services: Team up with this

l Structural play on rising organized sector employment in India l Industry leading market share and strong management are key positives l Forecast strong PAT CAGR of 37% over FY2016-19E and steady FCF generation l Key risks: high competitive intensity, change in labor laws, economic growth slowdown

Strategy

Strategy: Bottom of the barrel

l 1QFY17 results decent at net level helped by non-operating factors in several cases l Volume growth continues to be sluggish; summer months may have aggravated demand l Demand will hopefully pick up on good monsoons and 7CPC-related payouts l Valuations are expensive based on any reasonable parameter or timeframe

Daily Alerts

Results

ICICI Bank: Walking wounded

l Earnings take the brunt of high slippages l NPLs arising mainly from the sub-investment portfolio and restructured loans l There are probably a few tricks up the sleeve in 2HFY16 l We continue to maintain our positive view

L&T: New accounting norms - confusion galore

l 1QFY17 below estimate led by Ind-AS changes and weak financials in RE, MMH, shipbuilding l Ind AS - ECL provision components (non-cash) have material impact l Revise estimates; Maintain Reduce

Eicher Motors: Strong quarter

l Adoption of Ind-AS: VECV to be accounted under equity method, fair value accounting of ESOP l Consolidated results above estimates on stronger performance of Royal Enfield business l Increase FY2017-19 consolidated EPS estimates by 4%; maintain SELL on expensive valuations

Vedanta: In line, but divergent across businesses

l Consolidated EBIDTA in line though standalone weaker than expected l Consolidated net debt increases by Rs64 bn due to payment of dividend at HZ l Ramp-up of aluminum, power progresses well and will drive volume growth over FY2017-18E

UPL: Soft start

l Revenue growth momentum sees moderation in both ag-chem and seeds businesses l Management sees growth improving in coming quarters; keeps guidance in-tact l Increase estimates TP to Rs660 (Rs600 earlier); Recommend ADD

Cholamandalam: Mixed performance

l PAT up 50% yoy l Vehicle finance (VF) remains in sweet spot l Headwinds for LAP/home equity (HE) business l Retain REDUCE; TP Rs1,010

Hexaware Technologies: Focus areas power 2Q performance

l BPO and IMS power growth; financial services resilient; EBIT margin disappoints l Focus bets paying off; quarterly volatility will remain though l Dividend cut not a surprise; maintain ADD rating

KEC International: On the path to recovery

l In-line EBITDA; higher interest cost and Ind-AS-induced higher tax rate mar PAT l Improving operations of SAE and prospects in domestic market bode well for FY2017; retains guidance l Revise estimates to build the miss in 1QFY17

Results, Change in Reco

Nestle India: Market minus performance in a weak market = lackluster quarter

l 2QCY16 - weak earnings print unless one stretches the 'benefit of doubt' argument l Downgrade to SELL as we trim estimates

Godrej Consumer Products: Weak revenue print across the board

l 1QFY17 disappoints on revenues; EBITDA and PAT in line on the back of cost cuts l Even a 'sharp recovery starting next half' thesis not enough to justify current valuations; SELL

Muthoot Finance: On an uptrend

l In a sweet spot l Challenges in forecasting NIM is our key concern l Raising near-term estimates, ADD

Shriram City Union Finance: Strong business momentum, all priced in

l Strong loan growth and lower cost of borrowings drive earnings l Positive on growth trajectory l Provisions coverage levels remain the key sensitivity l Business going strong, await better entry points

Dr Lal Pathlabs: Growth trajectory continues

l 1QFY17 - revenues in line, higher margin drives PAT above estimates l Healthy growth in mature region of Delhi-NCR; patient growth robust l Increase estimates by 4-7%; downgrade to REDUCE post sharp rally

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