Results Review for ITC, Bajaj Finance, Gail, Macrotech Developers, Marico
ITC (NS:): ITC reported a weak operating print due to a soft cigarette performance along with sustained weakness seen in the agri and paper portfolio. Cigarette net revenue/EBIT growth was at 4/2%, with volume estimated to have fallen by 1% (5% 4-year CAGR) on a high base. Differentiated and premium offerings continued to perform well. With the base now catching up, we model cigarette revenue/EBIT growth of 7% over FY23-FY26. FMCG continued to report a resilient performance in a difficult environment with revenue growing by 8% (+13% on 2-year CAGR) while EBITDAM expanded by 100bps to 11%. Paper performance remained impacted by low-priced Chinese supplies, muted domestic demand and a sharp drop in realizations. Hotel revenue was up by 18%. ITC’s overall revenue grew 2% while EBITDA fell 3% YoY. The recent stock run-up (~30% in LTM) and limited earnings surprise scope given a higher base further restrict rerating potential. We cut our estimates by 1% over FY24-26 to reflect Q3 performance and value ITC on a SoTP basis to derive a TP of INR 460. The implied target P/E is 24x Dec-25E EPS. Maintain ADD.
Bajaj Finance (NS:): Bajaj Finance (BAF) delivered a mixed set of earnings with robust AUM growth (+35% YoY) despite a regulatory embargo on select products and stable NIMs (11.3%), offset by elevated credit costs (1.8% annualized). BAF extended its long-range strategy (LRS) to FY28, guiding for 22-27% AUM CAGR and 20-25% earnings CAGR over FY24-FY28E. On the back of its omnichannel strategy, the widest product suite and focus on cross-sell, we believe BAF is poised for ~23% AUM CAGR in the medium, while also simultaneously delivering steady profitability. We tweak our earnings by ~2% for FY24E-FY26E to reflect stronger AUM growth, offset by higher credit costs, we maintain BUY with a revised RI-based TP of INR8,690 (implied 26x Sep-25 EPS, 5.4x Sep-25 ABVPS).
Cholamandalam (NS:) Investment and Finance Company: Chola reported healthy operating metrics with strong AUM growth and sustained NIMs, partially offset by higher opex intensity and credit costs. LAP (+35% YoY), home loans (+66% YoY) and new businesses (+120% YoY) continued to drive overall AUM growth (+40% YoY), driven primarily by increasing penetration of these products in existing branches. While Chola remains a prolific franchise with medium-term RoEs of ~20%+, we expect moderation in loan growth going ahead and subsequently limited upside in stock from current levels. We tweak our earnings estimates to build in higher AUM growth for FY24, offset by higher opex intensity and maintain ADD with a revised RI-based TP of INR1285 (implying 4.6x Sep-25 ABVPS).
Gail (India) (NS:): Our BUY recommendation on GAIL with a target price of INR 185 is based on (1) an increase in gas transmission volume to 130mmscmd by FY25 on the back of an increase in domestic gas production, (2) the completion of major pipelines in eastern and southern India, and (3) expectation of improvement in earnings from the petchem segment. Q3FY24 reported EBITDA/PAT at INR 38/28bn, which came in above our estimates, driven by higher marketing margins and improvement in petchem segment earnings. Higher-than-expected other income of INR 8bn (+18% YoY, +45% QoQ) also supported earnings. Depreciation was at INR 7.8bn (+26% YoY, +4.5% QoQ) and interest cost at INR 1.6bn, (+49% YoY, – 9% QoQ).
Macrotech Developers (NS:): Macrotech Developers Ltd (MDL) reported strong quarterly presales of INR 34.1bn (+12/-3% YoY/QoQ), with a presales volume of INR 2.6msf (+4/+0% YoY/QoQ). Average price realisation as a result increased to INR 13,115 (+8/-3% YoY/QoQ). MMR/Pune/Bengaluru market saw presales of INR 24.1/3.4/6.6bn. Collections were INR 25.9bn (-3.4/-6% YoY/QoQ). The embedded EBITDA margin on presales was ~30%. On the business development front, MDL added GDV worth INR 60bn (INR 203bn in 9MFY24, surpassing FY24 guidance of INR 175bn) and a saleable area of 2msf. The implied realization, as a result, is INR 30,000/sq. ft. MDL saw a strong launch response for its first project in Bengaluru, selling out ~90% worth INR6.6bn with a second project likely in Q4FY24. The IRR threshold for the Bengaluru project is marked at 20%. In terms of launches, INR 63bn worth of launches are planned for the rest of FY24 with a saleable area of 4.4msf. In terms of price hikes, since Apr’23, MDL has hiked prices by 4% and expects full-year price appreciation of 6-7%. Given robust growth visibility, better-than-expected GDV addition and uptick in land prices (Palava may see price and volume increase as new infra projects get commissioned over the next few years), we increase our TP to INR 1,111/sh. Owing to the limited upside on our TP, we maintain our ADD rating.
Marico (NS:): Marico’s consolidated revenue fell 2% YoY as price cuts continue to impact revenue growth. Domestic revenue is down 3% with volume growth of 2% (5% four-year CAGR). Corrective steps taken to alleviate RoI challenges faced by channel partners impacted volumes in Q3. While rural demand and mass segments continued to remain soft, urban demand sustained its moderate growth trajectory. The international business posted 6% CC (2% reported) dragged by transient macro headwinds in Bangladesh as other regions delivered resilient performances. Softening inflation and a favorable mix enabled GM expansion of 635bps YoY to 51.3%, a part of which was reinvested through higher A&P spending (up 12% YoY). As a result, EBITDA grew by 13% YoY while margins expanded by 270bps to 21%. Marico remains on track for an EBITDAM expansion of 250bps in FY24. With improving macros and the anniversary of price cuts on the horizon, we continue to build in gradual recovery in volumes in coming quarters. We model a 12% EBITDA CAGR during FY23-26E. We prefer Marico, given its thrust to drive growth in its core brands, initiatives to drive D2C/foods, and the margin upcycle. We value the stock at 45x on Dec-25 EPS to derive a target price of INR 650. Maintain ADD.
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ITC (NS:): ITC reported a weak operating print due to a soft cigarette performance along with sustained weakness seen in the agri and paper portfolio. Cigarette net revenue/EBIT growth was at 4/2%, with volume estimated to have fallen by 1% (5% 4-year CAGR) on a high base. Differentiated and premium offerings continued to perform well. With the base now catching up, we model cigarette revenue/EBIT growth of 7% over FY23-FY26. FMCG continued to report a resilient performance in a difficult environment with revenue growing by 8% (+13% on 2-year CAGR) while EBITDAM expanded by 100bps to 11%. Paper performance remained impacted by low-priced Chinese supplies, muted domestic demand and a sharp drop in realizations. Hotel revenue was up by 18%. ITC’s overall revenue grew 2% while EBITDA fell 3% YoY. The recent stock run-up (~30% in LTM) and limited earnings surprise scope given a higher base further restrict rerating potential. We cut our estimates by 1% over FY24-26 to reflect Q3 performance and value ITC on a SoTP basis to derive a TP of INR 460. The implied target P/E is 24x Dec-25E EPS. Maintain ADD.
Bajaj Finance (NS:): Bajaj Finance (BAF) delivered a mixed set of earnings with robust AUM growth (+35% YoY) despite a regulatory embargo on select products and stable NIMs (11.3%), offset by elevated credit costs (1.8% annualized). BAF extended its long-range strategy (LRS) to FY28, guiding for 22-27% AUM CAGR and 20-25% earnings CAGR over FY24-FY28E. On the back of its omnichannel strategy, the widest product suite and focus on cross-sell, we believe BAF is poised for ~23% AUM CAGR in the medium, while also simultaneously delivering steady profitability. We tweak our earnings by ~2% for FY24E-FY26E to reflect stronger AUM growth, offset by higher credit costs, we maintain BUY with a revised RI-based TP of INR8,690 (implied 26x Sep-25 EPS, 5.4x Sep-25 ABVPS).
Cholamandalam (NS:) Investment and Finance Company: Chola reported healthy operating metrics with strong AUM growth and sustained NIMs, partially offset by higher opex intensity and credit costs. LAP (+35% YoY), home loans (+66% YoY) and new businesses (+120% YoY) continued to drive overall AUM growth (+40% YoY), driven primarily by increasing penetration of these products in existing branches. While Chola remains a prolific franchise with medium-term RoEs of ~20%+, we expect moderation in loan growth going ahead and subsequently limited upside in stock from current levels. We tweak our earnings estimates to build in higher AUM growth for FY24, offset by higher opex intensity and maintain ADD with a revised RI-based TP of INR1285 (implying 4.6x Sep-25 ABVPS).
Gail (India) (NS:): Our BUY recommendation on GAIL with a target price of INR 185 is based on (1) an increase in gas transmission volume to 130mmscmd by FY25 on the back of an increase in domestic gas production, (2) the completion of major pipelines in eastern and southern India, and (3) expectation of improvement in earnings from the petchem segment. Q3FY24 reported EBITDA/PAT at INR 38/28bn, which came in above our estimates, driven by higher marketing margins and improvement in petchem segment earnings. Higher-than-expected other income of INR 8bn (+18% YoY, +45% QoQ) also supported earnings. Depreciation was at INR 7.8bn (+26% YoY, +4.5% QoQ) and interest cost at INR 1.6bn, (+49% YoY, – 9% QoQ).
Macrotech Developers (NS:): Macrotech Developers Ltd (MDL) reported strong quarterly presales of INR 34.1bn (+12/-3% YoY/QoQ), with a presales volume of INR 2.6msf (+4/+0% YoY/QoQ). Average price realisation as a result increased to INR 13,115 (+8/-3% YoY/QoQ). MMR/Pune/Bengaluru market saw presales of INR 24.1/3.4/6.6bn. Collections were INR 25.9bn (-3.4/-6% YoY/QoQ). The embedded EBITDA margin on presales was ~30%. On the business development front, MDL added GDV worth INR 60bn (INR 203bn in 9MFY24, surpassing FY24 guidance of INR 175bn) and a saleable area of 2msf. The implied realization, as a result, is INR 30,000/sq. ft. MDL saw a strong launch response for its first project in Bengaluru, selling out ~90% worth INR6.6bn with a second project likely in Q4FY24. The IRR threshold for the Bengaluru project is marked at 20%. In terms of launches, INR 63bn worth of launches are planned for the rest of FY24 with a saleable area of 4.4msf. In terms of price hikes, since Apr’23, MDL has hiked prices by 4% and expects full-year price appreciation of 6-7%. Given robust growth visibility, better-than-expected GDV addition and uptick in land prices (Palava may see price and volume increase as new infra projects get commissioned over the next few years), we increase our TP to INR 1,111/sh. Owing to the limited upside on our TP, we maintain our ADD rating.
Marico (NS:): Marico’s consolidated revenue fell 2% YoY as price cuts continue to impact revenue growth. Domestic revenue is down 3% with volume growth of 2% (5% four-year CAGR). Corrective steps taken to alleviate RoI challenges faced by channel partners impacted volumes in Q3. While rural demand and mass segments continued to remain soft, urban demand sustained its moderate growth trajectory. The international business posted 6% CC (2% reported) dragged by transient macro headwinds in Bangladesh as other regions delivered resilient performances. Softening inflation and a favorable mix enabled GM expansion of 635bps YoY to 51.3%, a part of which was reinvested through higher A&P spending (up 12% YoY). As a result, EBITDA grew by 13% YoY while margins expanded by 270bps to 21%. Marico remains on track for an EBITDAM expansion of 250bps in FY24. With improving macros and the anniversary of price cuts on the horizon, we continue to build in gradual recovery in volumes in coming quarters. We model a 12% EBITDA CAGR during FY23-26E. We prefer Marico, given its thrust to drive growth in its core brands, initiatives to drive D2C/foods, and the margin upcycle. We value the stock at 45x on Dec-25 EPS to derive a target price of INR 650. Maintain ADD.
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