Cholamandalam Finance, Jubilant FoodWorks, Shriram Finance, KEC International Q3 Review: HDFC Securities

HDFC Securities Institutional Equities

Cholamandalam Investment and Finance Company Ltd. - Growth accelerated; switching to the fast lane

Cholamandalam’s Q3 FY23 earnings were ahead of estimates on the back of better-than expected assets under management growth (up 31% YoY), steady net interest margins (7.6%), and improving asset quality. Cholamandalam further pushed the accelerator on business growth with strong disbursal growth (up 68% YoY). The management remains upbeat about growth prospects across segments—buoyant vehicle financing cycle, strong home loans demand and growing traction in new businesses (~21% of disbursals, and 7% of AUM) driven by expanding distribution network.

Shriram Finance Ltd. - Steady operating performance; plenty of moving parts

Shriram Finance reported its first quarterly operating performance as a merged entity. While the profit and loss metrics are not comparable on a YoY basis, the balance sheet and asset quality outcomes indicate a healthy quarter. AUM grew up 13.2% YoY on the back of strong disbursals (up 26% YoY, up 13% QoQ), with strong growth in passenger vehicles and personal loans. Asset quality improved sequentially with gross stage-III/NS-III at 6.3%/3.3%, better than pre-Covid levels.

Jubilant FoodWorks Ltd. - Miss on all fronts

Jubilant FoodWorks’ Q3 performance was a miss on all fronts. Revenue and like-for-like YoY growth was at 10% and 0.3% versus the expectation of 12% and 4.5%. We were building up a weak consumption trend, but it came sharper than expected. Gross margin was down 200/78 basis points YoY/QoQ to 75.5% (coming off from 78% in FY21). Inflationary headwinds with weaker offtake have been pressurising the margin.

KEC International Ltd. - Margin recovery awaited

KEC reported a weak quarter, with consolidated/standalone margins at multiyear low levels. Revenue: at Rs 43.7 billion, driven by transmission and distribution segments. Ebitda: Rs 2 billion (down 16.4/up 12.3% YoY/QoQ, a miss of 4.2%, owing to higher input prices; partly offset by better absorption of overheads and lower employee benefit expenses).

Ebitda margin: 4.6% (down 259/up 19 bps YoY/QoQ, versus our estimate of 5.2%). Adjsuted profit after tax: Rs 176 million (down 81.2/down 10.5% YoY/QoQ, a 40.2% miss owing to higher finance cost and lower non-operating income).

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