Share Market Tips For May 2019

Page Industries Ltd (NSE: PAGEIND) (Share Price: Rs.19750 ): Avoid

Valuation:Over-Valued stock with TTM PE of 56x.

Reasons to Avoid: Q4 results significantly below estimates profit declined 20.4 percent YoY. The slump in growth rate is concerning as it comes on a relatively weak base the extent of weakness in the company is very high compared to its peers. The licensee of Jockey International and Speedo in India reported profit at Rs 75 crore in March quarter against 94 crore in the same period last year. The management also attributed weak performance to a slowdown. For the year ended March 2019, inventory jumped 32 percent to Rs 750 crore and borrowing increased 45 percent to Rs 72 crore compared to the previous year.

Financial: In Q4FY19 Net Sales was flat at Rs 607.80 crore vs Rs. 608.4 crore in Q4FY18. Net Profit at Rs. 75 crore in Q4FY19 vs Rs. 94 crore in Q4FY18 down 20%. Whereas, EBITDA stands at Rs. 129 crore in Q4FY19 down 17% from Rs. 154 crore in Q4FY18.

Sun TV Network Ltd (NSE: SUNTV ) (Share Price: Rs.535 ): Avoid

Valuation: Fairly-Valued stock with TTM PE of 16x.

Reasons to Avoid: Company has announced its Q4 result which was weak on operating levels. Its profit slips 2% despite 24% increase in revenue. Muted advertising and subscription revenue growth impacted earnings. Advertisement and subscription growth impacted by the implementation of the New Tariff Order (NTO). Viewership market share of its flagship channel, SUN TV (Tamil), has remained subdued. Advertising revenue growth was flat in Q4FY19 against expectations of 5-7 percent growth. Efforts on forming a digital strategy are still ongoing and the company remains elusive in sharing any details. The delay on that front, along with rising competition with aggressive investments in regional content, remains a concern on the traditional business.

Financial: In Q4FY19 Net Sales was at Rs 889 crore vs Rs. 717 crore in Q4FY18 up 24%. Net Profit at Rs. 283 crore in Q4FY19 vs Rs. 290 crore in Q4FY18 down 2%. Whereas, EBITDA stands at Rs. 675 crore in Q4FY19 up 20% from Rs. 559 crore in Q4FY18.

Dish TV India Ltd (NSE: DISHTV ) (Share Price: Rs.32.50 ): Avoid

Valuation: Fairly-Valued stock with TTM PE of 22x.

Reasons to Avoid: Company reported a consolidated net loss of Rs 1,360 crore for the fourth quarter vs net profit of Rs 118 crore in a year-ago quarter. Dish TV's total expenses were at Rs 1,490.72 crore. Subscription revenue dropped by 5 per cent year on year, while operating revenue fell 8.7 per cent year on year. With, high promoter pledge (84% of promoters stake is pledged) is also a cause of concern as we have already seen recent carnage in the stock and the Jio entering in the D2H sector will also be an threat to the company and user are now shifting towards more on OTT platform that will also dent the ARPU's of the company going forward.

Financial: On the financial front in Q4FY19 Net Sales was Rs 1,398 crore vs Rs. 1532 crore in Q4FY18 down 8%. Net Loss at Rs. 1360 crore in Q4FY19 vs Net Profit of Rs. 118 crore in Q4FY18. Whereas, EBITDA stands at Rs. 424 crore in March 2019 up 3% from Rs. 414 crore in March 2018. The numbers has been un-comparable due to merger with videocon d2h.

JSW Energy Ltd (NSE: JSWENERGY) (Share Price: Rs.67.60 ): Potential Buy

Valuation:Over-Valued stock with TTM PE of 18x.

Reasons to Consider: JSW Energy has posted surprisingly positive result in Q4 and logs Rs 6 cr profit as against Rs 483 cr loss in the year-ago. Company has also decided not to pursue the electric vehicle business because of the higher than anticipated uncertainties associated with it. Rather, it would maintain capital cushion for growth opportunities in power and other related businesses which street see as a positive for the company going forward. During the quarter the PLF(Plant Load Factor) was at 54% as against 51.9% in the corresponding quarter of the previous year.

Key Drivers: Company has continued de-risking the business with significant portion of open capacity tied-up with under short-term power supply contract in FY20 in which a) Vijayanagar plant secured PPA for 330 MW from Telangana state for period of 9M which begins from July 19, b) Open capacity at Ratnagiri plant nearly fully tied up in H1FY20 through short term contract, c) Commissioning of 36 MW thermal capacity at salboni and nandyal expected in Q1FY20 along with long term PPA tied up under group captive scheme. It is also focusing on strengthing the balance sheet in which during the quarter it has reduced the net debts of Rs 636 cr with net debt to equity ratio stood at 0.85x. Going forward the key to watch will be the PLF on various power plant and the tariff on merchant rates with the ability to sign the long-term PPA with Discoms.

Financial: Company had reported a Revenue of Rs 2018 cr in Q4FY19 Vs Rs 1879 cr in Q4FY18 up 8%, posted Net Profit of Rs 6 cr in Q4FY19 vs Rs 483 cr loss in Q4FY18.

PHOENIX MILLS(NSE: PHOENIXLTD ) (Share Price: Rs.610 ): Potential Buy

Valuation: Fairly-Valued stock with TTM PE of 25x.

Reasons to Consider: Company has posted robust performance on revenue and profit front up 65 & 120% during the quarter despite slowdown in the real estate sector due to liquidity crunch. The Company is engaged in the development and operation of malls and other real estate properties. The company has an operational asset portfolio of eight operational retail assets aggregating 5.9 million square feet (MSF) and four operational commercial assets aggregating 1.16 million square feet.

Key Drivers: Focusing on completing its existing/upcoming projects by FY22/23 and de-leveraging its balance sheet will be a key driver for growth. Phoenix has two under construction assets at Pune, Chennai with GLA of 1.12 MSF and plans to develop commercial asset at PMC Hebbal with GLA of 0.65 msf. Phoenix Mills Ltd provides a unique way to play Indias real-estate & retail growth story. It will be the prefer bet in the real-estate sector due to its strong operational performance, scalability (through the CPPIB deal), robust cash generation and no issue in corporate governance.

Financial: Total revenue Rs 723 cr in Q4FY19 vs Rs 436 cr in Q4FY18 up 65%. Net Profit at Rs. 228 cr in Q4FY19 vs Rs 104 cr in Q4FY18 up 120%. Ebitda stands at Rs.410 cr in Q4FY19 up 78% vs Rs. 230 cr in Q4FY18.

Indian Hotels Company Ltd (NSE: INDHOTEL) (Share Price: Rs.147 ): Potential Buy

Valuation:Over-Valued stock with TTM PE of 60x.

Reasons to Consider: Indian Hotels reported mixed bag numbers for the quarter. Consolidated revenues grew 8.8% YoY to Rs 1,244 crore. Average occupancy for Q4FY19 was at 74%, a 200 bps dip YoY led by the addition of new properties during the quarter. However, the financial year ended with an occupancy of 68% for the company, implying a 100 bps increase in occupancy rates. As demand has grown at a rate higher than supply, the industry saw RevPAR growth of 3.7%, simultaneously IHCL also seen a growth of 6 % YoY in domestic hotels while the same for international network grew 9.3% YoY in FY19. Also, IHCLs international portfolio has shown signs of a turnaround, which will provide a cushion going forward.

Key Drivers: Asset light focus continues with leverage ratios to improve in the coming quarter with Indian hotel portfolio in FY18 comprised 32% of rooms under management contracts whereas it ended FY19 with 40% of rooms under management contracts. Revenues from management contracts for FY19 were at Rs 222 crore. Further, in FY20E, 1800-2000 new keys would be added, mostly via management contracts. Thus, we believe the asset-light nature of management contracts and their increasing share in the hotels' portfolio of IHCL, should enhance EBITDA levels, thereby leading to an improvement in net debt/EBITDA ratio. Considering the expected tailwinds in the hospitality sector as a whole fuelled by steady demand, lower supply addition and higher discretionary spends, IHCL being one of the leaders in the sector should be a key beneficiary of the turnaround. Additionally, the focus on cost rationalization is expected to drive margins further.

Financial: Company had reported a Revenue of Rs 1244 cr in Q4FY19 Vs Rs 1144 cr in Q4FY18 up 8.8%, Net Profit up 62% to Rs 122.6 cr in Q4FY19 vs Rs 75.6 cr in Q4FY18, whereas EBITDA stands at Rs 284 cr in Q4FY19 vs Rs 245 cr in Q4FY18 up 16%.

Tata Chemicals Ltd (NSE: TATACHEM ) (Share Price: Rs.588 ): Potential Buy

Valuation: Over-Valued stock with TTM PE of 15x.

Reasons to Consider: Tata Chemical showed signs of revival across geographies, except Europe. EBITDA/MT increased 43% YoY to USD53.3 in North America (realization up 5% YoY to USD 226.3/MT) and 46% YoY to USD 56.1/MT in Africa (realization up 3% YoY to USD 255.3/MT). India business delivered 4% YoY growth in soda ash volumes and also improved realization, but profitability was dented by higher power and plant fixed cost. Europe was subdued with EBITDA/MT declining 65% YoY to GBP28.3 due to higher energy and plant fixed cost.

Key Drivers: TTCHs standalone business witnessed a growth of 15.3% YoY to Rs 1060 Cr. The revenue from consumer products business increased by 18.8% YoY, mainly due to higher sales volume across categories and controlled marketing investments during the quarter. Its product (Tata Salt) continues to maintain a leadership position with a market share in excess of 25% along with the company has launched snacks products and detergent powder. The detergent powder is in the pilot stage in West Bengal and has been receiving a positive response. Domestic demand remains balanced with pockets of tightness witnessed in the market in the previous quarter. The near term plan is to attain a turnover of Rs 5000 cr in the consumer segment with Rs 450 cr contributed by salt, pulses, and spices. Company Nellore plant for nutraceuticals is in the final stage of commissioning. The plant will go through pilot production and the company is targeting commercial production by the end of Dec 19. The company has guided to get into three segments in Lithium-ion business viz. 1) manufacturing of batteries (cell), 2) recycling of batteries, and 3) chemical coating which goes into making batteries. The company has also hinted at getting into manufacturing battery pack at later stages.

Financial: Company had reported a Revenue of Rs 2845 cr in Q4FY19 Vs Rs 2628 cr in Q4FY18 up 8.1%, Net Profit up 26% to Rs 450 cr in Q4FY19 vs Rs 356 cr in Q4FY18, whereas EBITDA stands at Rs 629 cr in Q4FY19 vs Rs 537 cr in Q4FY18 up 17%. EBITDA margins up 180 bps to 22.8% in Q4FY19 from 21% in Q4FY18.

Amara Raja Batteries Ltd(NSE: AMARAJABAT ) (Share Price: Rs.640 ): Avoid

Valuation: Fairly-Valued stock with TTM PE of 22x.

Reasons to Avoid: Amara Raja Batteries (ARBL) said in a statement in the month of April 19 that it has ended all agreements with its co-promoter entity and technology partner (Johnson Controls) with effect from April 1, 2019. Agreements include shareholders agreement, share subscription & investment agreement, technical assistance & licensing agreement and power frame technology license agreement. The end of an association with Johnson Control, however, raises concerns over the future innovation pipeline at ARBL, since existing business to run unchanged but future technology innovation pipeline looks uncertain for which we believe it will effect on the valuation multiple being commanded by the company.

Financial: On the financial front in Q3FY19 Net Sales was Rs 1694 crore vs Rs. 1554 crore in Q3FY18 up 9%. Net Profit at Rs. 131 crores in Q3FY19 vs Rs. 134 crore in Q3FY18 down 2.6%. Whereas, EBITDA stands at Rs. 253 crores in December 2018 up 4.6% from Rs. 242 crore in December 2017.

Marico Ltd (NSE: MARICO) (Share Price: Rs.364 ): Potential Buy

Valuation:Over-Valued stock with TTM PE of 42x.

Reasons to Consider: In Q4FY19, Marico witnessed a stable demand environment and healthy offtake on account of the competitive strength of its products. Rural growth stood ahead of urban growth. However, the same has to be keenly monitored in view of some sluggishness seen at the wholesale level at the end of March 2019. We believe volume growth of 8 percent has been aided by healthy growth in Parachute & Saffola backed by strong promotional activity, while value-added hair oil portfolio performance was muted during the quarter. The international business had a reasonable quarter, with Bangladesh and Vietnam performing well. Going forward (OPM) is expected to improve marginally due to easing input cost pressure (especially copra prices) and provides growth and margin visibility in the coming quarter.

Key Drivers: Inline with its innovation strategy, Marico launched many new products during Q4FY2019. The company launched a new range of skincare products under the new brand, Kaya Youth Oz (comprising face cream, face wash, micellar water, and face wipes). In the food space, the company launched healthier versions of ready-to-cook poha and upma by including millets and quinoa. The company also launched organic food offerings under Coco Soul brand - coconut sugar, coconut chips, coconut peanut butter and coconut almond butter in selected markets. New launches remain at the core of the companys growth strategy. We expect many more new launches in the value-added hair oil and food category which will be the key driver for the stock in the coming quarters. New launches will be well supported by adequate media and promotional spends.

Financial: Company had reported a Revenue of Rs 1609 cr in Q4FY19 Vs Rs 1480 cr in Q4FY18 up 8%, Net Profit up 118% to Rs 401 cr in Q4FY19 vs Rs 183 cr in Q4FY18, whereas EBITDA stands at Rs 311 cr in Q4FY19 vs Rs 275 cr in Q4FY18 up 13%.

Fortis Healthcare Ltd (NSE: FORTIS ) (Share Price: Rs.138): Avoid

Valuation: Over-Valued stock with negative earnings.

Reasons to avoid: Company has been in news from last year due to its corporate governance issue and its promoter stake sale to Malaysian group entity IHH healthcare where the SC has put this transaction on hold due to the petition filed by Japanese drugmaker Daiichi Sankyo alleging former promoters - brothers Malvinder and Shivinder Singh violated undertakings and court orders. Daiichi had sought a stay on the Fortis sale as the Singh brothers had not fulfilled their commitment to pay them as per the Delhi High Courts orders. Bidding for cash-strapped Fortis kicked off earlier this year after its founders, brothers Malvinder and Shivinder Singh, lost their shareholding due to debt, and allegations that they had improperly taken funds from the company. On financial front also the company has posted a quarterly loss as against profit in the previous quarter and EBITDA was also declined 14% during the quarter.

Financial: On the financial front in Q3FY19 Net Sales was Rs 1103 crore vs Rs. 1120 crore in Q3FY18 down 1.55%. Net Loss at Rs. 197 crore in Q3FY19 vs Net Profit of Rs. 19 crore in Q3FY18. Whereas, EBITDA stands at Rs. 81 crore in December 2018 down 14% from Rs. 94 crore in December 2017.

HEG Ltd(NSE: HEG ) (Share Price: Rs.1761): Avoid

Valuation:Under-Valued stock with TTM PE of 8x..

Reasons to avoid: For Q4FY19, we expect blended realisations to decline QoQ on the back of a fall in graphite electrodes prices for both UHP grade electrodes as well as HP grade electrodes. For Q4FY19, we expect HEG to report capacity utilization of 80% compared (84% in Q4FY18 and 82% in Q3FY19). Due to the higher price of needle coke, it will impact raw material costs. Thus, the top line is expected to come down 14.5% QoQ and EBITDA also likely to come down, implying an EBITDA margin of around 48% due to higher raw material prices (73.6% in Q4FY18 and 62.6% in Q3FY19).

Financial: On the financial front in Q3FY19 Net Sales was Rs 1865 crore vs Rs. 843 crore in Q3FY18 up 120%. Net Profit at Rs. 867 crore in Q3FY19 vs Rs. 342 crore in Q3FY18 up 153%. Whereas, EBITDA stands at Rs. 1313 crore in December 2018 up 135% from Rs. 559 crore in December 2017.p>

Hero Motocorp Ltd (NSE: HEROMOTOCO ) (Share Price: Rs.2526): Potential Buy

Valuation:Fairly-Valued stock with TTM PE of 15x

Reasons to consider: Hero MotoCorp (Hero) has reported results for the Q4. Revenue at Rs. 7,885 crores declined by 8% yoy and net Profit down 25% to Rs 730 cr yoy. The drop in revenue can be attributed to a sharp 11% decline in volumes, while realization per vehicle rose by 3.5% yoy on account of price hikes taken by the company. Heros management has identified the reasons for falling market share and renewed its focus on the 150-200cc segment (where buyers are moving) and on the scooters (where Hero is late entrant). Since the auto industry has seen a slowdown in 1HFY20 but due to the good festive season, pre-buying ahead of the implementation of BSVI, a lower base, the expectation of near normal monsoon and further interest rate reduction would make 2HFY20 better.

Drivers: Hero has displayed great concepts in the premium segment (200cc & 250cc) and is expected to launch three new motorcycles (Xpulse200, Xpulse 200T and HX250R). On the operating performance front, commodity prices have stabilized from the last few quarters, focus on the premium motorcycles & scooters and higher realization post BS6 to aid further. We believe the EBITDA Margins have bottomed out and is ready to bounce back gradually in the coming years due to cost rationalization and a combination of multiple things, along with Heros strategy of taking price increase in small steps. However, for the next 1-2 quarters, the margins to hover around the current levels as the headwinds and tailwinds are neutralizing each other.

Financial: Company had reported a Revenue of Rs 7885 cr in Q4FY19 Vs Rs 8564 cr in Q4FY18 down 8%, Net Profit down 25% to Rs 730 cr in Q4FY19 vs Rs 967.5 cr in Q4FY18, whereas EBITDA stands at Rs 1069 cr in Q4FY19 vs Rs 1371 cr in Q4FY18 down 22%. EBITDA margins declined 240bps to 13.6% in Q4FY19 from 16% in Q4FY18.