Amnish Aggarwal Research Analyst PL Capital – Prabhuas Lilladher
Metro Brands (METROBRA IN)
Rating: HOLD | CMP: Rs1,199 | TP: Rs1,177
Q3FY25 Result Update
Soft demand but futuristic investments continue
Quick Pointers:
- 3Q sales remain affected, however 4Q likely to be better amid good number of wedding days
- FY26 to see ~130-140 net store addition with 40% stores in new cities
We cut our FY25/26/27 EPS estimate 2.4/4.1/4.5% given 1) persistent tepid demand 2) Tepid store economics led by lower SSG & opening up of store in Tier-2 & Tier-3 cities & 3) BIS issues continue to affect high-end international brand imports. However, MBL operating parameters are on track with 1) addition of 5 new cities in 3Q (3 in Q2) & 40 in FY26 2) healthy online/ Omni channel salience of ~11% to sales with strong growth of 37% YoY and 3) increase in share of >3000 MRP sales by 100ppt YoY to ~54% of sales. Long- term growth strategy is in place led by 1) geographical and store expansion (225 stores in 2 years) 2) brands licenses/acquisitions (Crocs, Fitflop, Birkenstock, New Era) 3) re-launch and scale up in FILA/ footlocker from FY26. We believe that valuations at 69.2xFY27 do not leave any upside in short term. Expect back-ended returns given rich valuations and demand, Retain Hold.
Consol Revenues grew by 10.6% YoY to Rs7bn. (PLe: 7.4bn). Gross margins contracted by -125bps YoY to 58.6% >EBITDA grew by 13.1% YoY to Rs2.3bn (PLe:Rs2.26bn). Margins expanded by 70bps YoY to 32%. (PLe:30.5%). Adj PAT declined by -3.3% YoY to Rs0.9bn (ex of one-time tax, PAT was Rs1.18bn). ASP came at Rs1500 flat YoY/QoQ, while sales/ft came at Rs5150 vs Rs5200/4300 in Q3FY24/Q2FY25. Volume grew by 11% YoY, while sales/store was flat YoY, however, was up by 15% QoQ.
Concall highlights: 1) MBL saw decent demand in Q3 but not upto expectations, however Q4 is expected to be better led by large number of wedding days 2) GM was impacted by 50 bps amidst liquidation of FILA in Q3. 3) Metro is expected to add just ~10 stores in Q4 as it expects rent cost to taper off, FY26 is likely to see addition of ~130-140 stores (ex-FILA). 4) ASP for Q3 was flat QoQ/YoY led by increasing salience of accessories sales 5) E-commerce sales (including Omni-channel) were Rs760rmn in Q3FY25 vs Rs640mn in Q2FY25, with 11% contribution to the total revenues. 6) As per the final notification on BIS, the entire legacy stock as of 31stJuly, 2024 will be allowed to be liquidated till 31st July,2026. 7) Supply remains critical for footlocker due to BIS, however other core brands remain unimpacted 8) Fila stock liquidation is complete and it will launch new merchandise by Q4FY25 and will be sold in 90-100 stores of metro-mochi and footlocker 9) MBL is on course to open ~225 stores over FY24-FY26. 10) First Footlocker store in Delhi (Select Saket) is getting good traction and more number of stores are expected to come in next 6 months. 12) East remains key focus area, while further expansion to come from Tier-2 & Tier-3 cities 12) Sales/sq.ft was down 1% YoY in Q3 amid lower SSG and expansion in Tier-2 & Tier-3 cities. 13) Management expects to add 60% stores in existing cities and 40% in new cities in FY26.
Pritesh Thakkar Research Analyst PL Capital – Prabhudas Lilladher
Wipro (WPRO IN)
Rating: ACCUMULATE | CMP: Rs282 | TP: Rs310
Q3FY25 Result Update
Strong beat on margins…
Quick Pointers:
- IT Services margin improved by 80 bps QoQ to 17.5%
- Revenue guidance of -1% to 1% QoQ CC for Q4FY25
The operating performance witnessed notable improvement in 3Q, the intensity of decline within certain pockets has receded despite having furloughs impact during the quarter. The gaining operational strength is attributed to the internal measures coupled with improving spending sentiment on the discretionary areas. The spending environment looks promising in BFSI and Healthcare, especially in the Americas region, while other verticals and geographies are progressing to achieve a steady state. The consulting units (Capco and Rizing) are consistently supporting the topline growth, even the order book for Capco (up 9% YOY) looks attractive in 3Q. Although the large deal TCV saw a mild improvement (+6% YoY), the deal tenure has reduced to some extent, translating to better ACV. The deal pipeline is still heavily concentrated on the vendor consolidation and cost-takeout programs, while discretionary programs restricted to BFS in 3Q. The consistent recovery is visible in the company’s performance, while we believe the progress in other verticals and geographies would majorly be a function of macro recovery. We are aligning our revenue estimates to Q3 beat and baking in 1.9% YoY CC decline in FY25E (-2.5% earlier), while estimating +4.4%/+8.3% CC YoY in FY26E/FY27E. The execution on operating margin was strong, despite 2-month compensation due in Q3. The management is confident of maintaining margins at a narrow band of 17.5% while flexing FPP and pyramid optimization levers. We are re-aligning FY25E IT Service margins to Q3 beat at 16.9% (16.5% earlier), while projecting FY26E/FY27E margins at 17.4%/17.8%, which gets supported by growth acceleration and the continued optimization exercise. We believe, all positives are factored into the valuation, maintain “ACCUMULATE” rating.
Revenue: Wipro reported robust performance, exceeding expectations on both revenue and margins despite facing headwinds from furloughs. Revenue came at the top end of guidance at US$ 2.6 bn, up 0.1% QoQ vs our & BBG estimate of decline of 1% QoQ CC & 0.5% QoQ CC respectively. The growth was led by Americas 1 region & the segment of Health. Consulting business also aided the revenue growth as Capco grew by 11% YoY in Q3.
Operating Margin: Margin improvement was a positive surprise during the quarter, as Q3 faced the headwinds of a two-month impact of wage hikes (with a partial impact in Q2) and furloughs. IT Services EBIT margin improved by 70 bps QoQ to 17.5%, its highest since Q3FY22. The margin came ahead of PLe & BBGe of 16.1% & 16.5% respectively due to the tailwinds of increased utilization ex. of furloughs, higher margin from FPP, increase in higher margin business & lower depreciation.
Deal Wins: Deal wins of US$ 3.51 bn, down 9% YoY was stable at last 4 quarters average of US$ 3.5 bn. Large deal wins of US$ 0.9 bn was down sequentially due to the lumpy nature & seasonality in Q3. However, the pipeline of large deals remained robust, reflecting the company’s investments focused on cultivating a pool of large deal opportunities
Valuations and outlook: The company has witnessed gradual recovery in its operational performance, while the weakness in other verticals and geographies would keep the topline growth a little volatile. The margin recovery is notable in 3Q, majorly attributed to the pyramid exercise, FPP optimization and cost controlling measures, which we believe is sustainable at the current level. We estimate USD revenues/earnings CAGR of 2.7%/11% over FY24-FY27E. The stock is currently trading at 20x FY27E. We are assigning P/E of 22x to FY27E with a target price of Rs 310. We maintain “ACCUMUALTE” rating.
Pritesh Thakkar Research Analyst PL Capital – Prabhudas Lilladher
Tech Mahindra (TECHM IN)
Rating: ACCUMULATE | CMP: Rs1,660 | TP: Rs1,760
Q3FY25 Result Update
Robust performance, Strong deal wins lays foundation for better FY26…
Quick Pointers:
- NN win of USD 745 mn highest in last 8 quarters
- EBIT margin expansion for 3rd consecutive quarter, YTD increase of 280 bps
The quarterly performance exceeded our expectations on the topline with few verticals BFSI and Healthcare growing at 2.7% and 4.5% QoQ CC, above the consol level. The turnaround is progressing well on the notable wins and balancing business mix from Telecom dominated earlier. The robust deal TCV of USD745m is a combination of broad-based wins across verticals and geographies, derived through multiple channel partners, advisory and onboarding senior resources for scaling strategic accounts, translates to better win-rates. However, the nature of the deals is dominated largely on the vendor consolidation and cost-takeout side, which implies the discretionary programs are still deprioritized. The key verticals (Comm and Manufacturing) are still under stress that is evident through weak Q3 performance, but the pipeline is improving. The progress on cost rationalization was yet again remarkable with operating margins are tad below our estimates. We believe, the constructive recovery in growth and margin profile is a function of strategic initiatives laid out by the company coupled with improving economic indicators. Q4 margins would be under pressure with scheduled wage hike (impact of ~100-150bps QoQ), while the management believes to recoup the drag through FPP and automation. We are passing on Q3 topline beat, while considering the facts of Comviva seasonality and missing furlough in Q4, we are revising our topline growth to 1.6% CC YoY (1.0% earlier) in FY25E. We envisaged CC revenue growth of 5.1%/8.2% with EBIT margins of 12.1% and 14.6% for FY26E/FY27E. Despite passing on Q3 topline beat, our EPS numbers are seeing a cut of 1.0%/1.5% for FY26E/FY27E due to meaningful forex headwinds. The valuations factored in all the positives, retain “ACCUMULATE”.
Revenue: TechM reported steady revenue growth, but severe currency headwinds impacted the reported financials. TechM revenue grew by 1.2% QoQ CC above our & consensus estimates of 0.5% QoQ CC growth. In reported terms revenue came to US$ 1.57 bn, down 1.3% QoQ due to the currency headwinds of 250 bps. The growth was aided by strong execution in Healthcare & BFSI which grew by 2.7% & 0.5% QoQ respectively.
Operating Margin: EBIT margin during the quarter came to 10.2%, an improvement of ~60 bps QoQ slightly below our estimate of 10.4% but above consensus estimate of 9.7%. Margin expansion was aided by gross margin expansion of 90 bps QoQ.
Deal wins: TechM during the quarter won its highest NN TCV win in the last 8 quarters. It achieved an NN TCV of US$ 745 million, up 23.5% QoQ, marking the 4th consecutive quarter of sequential growth in deal wins. TechM also noted that they remain selective in the deals they participate in, as they remain focused on improving the quality of revenue and its portfolio mix.
Valuations and outlook: We believe the company’s laid-out strategy to drive a balanced portfolio mix with reduced dependency on communications is a positive. Although the company has made notable progress in chasing large deals and winning rates, the growth engines are yet to get fueled on the core segments. We believe all positives are factored into the CMP. The stock is currently trading at 21x FY27E, we are assigning P/E of 22x to FY27E with a target price of INR 1,760. We maintain “ACCUMULATE” rating.
Gaurav Jani Research Analyst PL Capital – Prabhudas Lilladher
Kotak Mahindra Bank (KMB IN)
Rating: BUY | CMP: Rs1,759 | TP: Rs2,230
Q3FY25 Result Update
Stronger balance sheet to cushion earnings
Quick Pointers:
- Strong quarter owing to beat on credit growth, NIM, opex and asset quality.
- We raise core PAT for FY26/27E by 1.6%/3.8% due to better loan growth/opex.
KMB saw a strong quarter with beat on all fronts as loan growth, NIM, opex and asset quality were better. Hence core PPoP beat PLe by 3.0%; core PAT was in-line at due to higher provisions driven by increase in PCR by 175bps QoQ to 73% which was a positive. Sequential loan growth was broad based but healthy at 3.6% QoQ considering (1) RBI embargo is still effective (2) acquisition of StanChart’s PL portfolio of Rs41bn is yet to be accounted (likely in Q4FY25) and (3) system credit accretion is weakening. Slippage ratio declined QoQ from 199bps to 176bps due to lower delinquencies in secured. Stress formation is reducing in PL, stable in CC but increasing in MFI. We increase core PAT for FY26/27E by 1.6%/3.8% due to better loan offtake and lower opex. While target multiples across the system may contract due to a tough macro environment, we maintain multiple for KMB at 2.4x on core Sep’26 ABV due to stronger balance sheet and earnings quality. Retain TP at Rs2,230 and reiterate ‘BUY’.
§ Good quarter with beat on loan-growth, NIM and opex and asset quality: NII was largely in-line at Rs72bn; NIM was a slight beat at 5.0% (PLe 4.96%) due to lower cost of funds. Loan growth was 15.1% YoY (PLe 14.4%); deposit growth was 15.9% YoY (PLe 16.4%). LDR came in at 87.4% (86.6% in Q2FY25) due to higher loan growth. Other income was a tad lower at Rs26.2bn (PLe Rs27.1bn). While fees were in-line at Rs23.6bn, misc. income was lower. Opex was lesser at Rs46.4bn (PLe Rs47.9bn) due to lower staff cost/other opex. Core PPoP at Rs49bn was 3% ahead to PLe; PPoP was Rs51.8bn (PLe Rs51bn). Asset quality was better with lower GNPA/slippages; provisions were higher at Rs7.9bn (PLe Rs6.4bn) due to increase in PCR QoQ by 175bps to 73.2%. Core PAT came in as expected at Rs31.1bn; PAT was Rs33bn (PLe Rs33.5bn).
§ Sequential loan growth was broad based: Credit growth was better at 3.6% QoQ that was broad based led by retail (+3.5%) while corporate/SME grew by 4.1%/4.9% QoQ. Within retail, growth was led HL and BuB while unsecured share fell by 74bps QoQ to 10.6%. Bank has been constantly interacting with the RBI post the embargo in Apr’24 and it has made significant progress on core banking resilience, business continuity, cyber security, governance and digital payments. Acquisition of StanChart’s PL portfolio of Rs41bn is likely to be effected in Q4FY25; we raise loan growth for FY25 by 1% to 15% YoY.
§ Asset quality was better; stress likely to peak in FY25: Gross slippages were lower at Rs16.6bn (PLe Rs17.8bn), recoveries were in-line at Rs7.6bn and write-offs were controlled at Rs6.6bn leading to slightly lower GNPA at 1.5% (PLe 1.54%). Slippages reduced QoQ as delinquencies in the secured portfolio declined while unsecured slippages were largely steady. Within unsecured stress formation is reducing in case of PL, stable in CC but increasing in MFI. Provisioning policy in unsecured is more conservative compared to RBI norms as 50% is provided at 90dpd and 100% is recognized at 180dpd.
Chennai, 21 January 2025: One of the leading banks in India, Indian Bank, has taken a major step toward supporting the agricultural community by signing a Memorandum of Understanding (MoU) with Action Construction Equipment Limited (ACE) in Lucknow. This partnership reflects Indian Bank’s commitment to offering tailored financial solutions for farmers, enabling them to access modern agricultural equipment with ease.
Bengaluru, India January 21, 2025: Samsung Electronics illuminated the cityscape of London with a live hologram showcase, transforming urban spaces into vibrant canvases in anticipation of Galaxy Unpacked 2025 and bringing the world a sneak peek into the next era of mobile AI. With live holographic activation and voice elements, Samsung invites viewers from around the world to tune into Galaxy Unpacked on January 22.
Chennai, January 21, 2025: Erba Transasia Group, India’s No. 1 In-vitro Diagnostic (IVD) Company and among the leading global IVD players focused on emerging markets, today introduced Erba H7100 – its advanced Haematology Analyzer at a Clinical Symposium held in Chennai on the theme “Need for High-End Haematology Analyzers to tackle current challenges faced by clinical laboratories.” Prof. Dr CN Srinivas, Group Director – Laboratory Medicine, Kauvery Hospital, Chennai, delivered the keynote address, joined by an expert panel that included Dr V. Chitrasree, Senior Consultant and Head of Biochemistry & Haematology at The Madras Medical Mission Hospital; Dr Archana K, Chief of Lab at Kauvery Hospital; Dr. Pooja Raghavan, Consultant Pathologist at Billroth Hospital; Dr. Dhaarani Jayaraman, MD (Paediatrics), FNB (Paediatrics), Haemato-pediatric-onco-clinician & Associate Professor at Sri Ramachandra Institute of Higher Education and Research Institute; and Dr. Ganesh Prasad NK, DNB (Internal Medicine), DNB (Nephrology), MNAMS (Nephrology), Senior Consultant – Nephrology & Transplant Physician at Kauvery Hospital.
Jaipur, 20th January 2025: IIHMR University a leading health management research university in India, celebrated an extraordinary day of cross-cultural camaraderie and sporting enthusiasm as it hosted Bryant University, USA, for a friendly cricket match on its campus. The event, aptly titled “Friendship on the Pitch,” showcased the power of sports to bridge cultures and build global friendships.
Revolutionising Coffee: How Hafele brings the café experience to your home.