IOCL, Godrej Consumer, Star Health, ACC, Indian Hotels, SRF And More Q3 Results Review: HDFC Securities

HDFC Securities Institutional Equities

Indian Oil Corporation Ltd. - Weak earnings

IOCL’s reported Ebitda stood at Rs 36 billion (down 64% YoY, up 83% QoQ), while the adjusted profit after tax stood at Rs 4.5 billion, coming in well below our estimate. The weaker than-expected performance from the marketing segment and likely higher inventory losses drove the weakness, partially offset by the better-than expected reported gross refining margin of $12.9/barrel of oil (our estimate: $9.5/bbl).

Godrej Consumers Products Ltd. - Margin recovery to sustain

Godrej Consumers’ consolidated revenue grew 9% YoY, with domestic/international clocking 11/7% YoY growth (10/8% three-year compound annual growth rate). The India business continued to be led by a high share of price hike (8% YoY), with volume growth coming in at 3% YoY. Home care growth was at 10/3% YoY for Q3/nine months-FY23; the company is focusing on expanding the market through new launches/formats. Personal care growth was at 14/19% YoY during Q3/9MFY23 and the price hike in personal wash supported the growth.

Star Health and Allied Insurance Company Ltd. - On track to achieve a 95% combined ratio

Star Health printed a soft net premiums written growth (up 15% YoY, in line with estimates), impacted by the unwinding of the high claims-ratio group business. Loss ratios clocked a positive surprise at 63.7% (down 445 bps QoQ, down 285 bps versus estimate), driving combined ratio to 94.8%. With a 25% price hike in its flagship Family Health Optima (50% of the retail mix) and tighter underwriting and claims review process, we expect a structural improvement in loss ratios (~64-65% over the next three years).

ACC Ltd. - Margin recovered strongly, expansion delayed

ACC margin recovered Rs 460/metric tonne QoQ to Rs 479 per mt due to realisation recovery (Rs 100 per mt) and opex cool-off (Rs 360 per mt). The integrated plant at Ametha in Madhya Pradesh is delayed by a year to Q2 FY24. The upcoming expansion in the central market will boost its volume growth visibility from H2 FY24 onwards. ACC is also increasing its green power/fuel mix to mitigate the impact of rising fuel costs.

The Indian Hotels Company Ltd. - Quality of earnings at its best; upcycle continues

Indian Hotels’ Q3 FY23 numbers beat expectations on all fronts, registering record earnings. Q3 revenue grew 58% YoY to Rs 16.9 billion, led by increased occupancy (68%) and average room rate (up 30% versus Q3 FY20) leading to strong revenue per available room growth (up 29% versus Q3 FY20). The increase in ARR was driven by strong demand, aided by the ongoing wedding season, vacation travel, increased corporate and meetings, incentives, conferences, and exhibitions-driven travel and the G-20 presidency.

SRF Ltd. - Continued investments in capex

Our optimism on SRF is premised on the back of-

1. the continued healthy performance of the speciality chemicals business;

2. a strong balance sheet; and

3. deployment of capex for high-growth speciality chemicals business over the next three-four years to tap opportunities emerging from the agrochemical and pharma industries.

Ebitda/adjusted profit after tax were 6/6% below our estimates, owing to a 13% fall in revenue, higher-than-expected other expenses and finance costs, offset by lower-than-expected raw material costs and lower-than-expected tax outgo.

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