(PIEL IN, Mkt Cap USD4.8b, CMP INR1722, TP INR2200, 28% Upside, Buy)
- Piramal Enterprises' (PIEL) PBT increased 29% YoY to INR7.3b in 2QFY20. However, with a tax rate of 36%, the company has not availed of the tax rate reduction this quarter.
- Financial Services (FS): Loan book declined 6% QoQ to INR530b. PIEL securitized INR24b in the quarter which has been reported on books based on Ind-AS. Net income (calc.) declined 7% QoQ to INR7.6b. However, PBT was sequentially flat.
- PIEL has infused INR17b of equity in the FS business from the stake sale of SHTF done in 1Q. Total equity in FS (ex Shriram Group) stands at INR143b. Debt to equity of FS declined to 2.9x versus 3.8x a quarter ago.
- Pharma Services: Pharma revenue grew 17% YoY to INR13.2b. Global pharma revenue was up 17% YoY to INR12b, while India consumer business revenue increased 39% YoY to INR1.1b. Reported global EBITDA margin improved to 24% from 22% a year ago.
- Valuation view: In the current environment, PIEL has focused on (a) reducing the top 10 exposures from INR140b to INR100b by Mar '20, (b) lowering the share of short-term borrowings and (c) diversifying the loan mix towards retail assets. The company has infused INR17b from the SHTF stake sale in the lending business and is committed to further infuse capital in this segment. Asset quality performance is a key monitorable. Our estimates do not factor in the proposed capital raise of $750m. We derive an SOTP-based target price of INR2,200 (FY21E based). Buy.
No comments:
Post a Comment