TVS Motor, Marico, Macrotech Developers, SRF, Oberoi Realty, Mahindra Lifespaces Q2 Review: HDFC Securities

HDFC Securities Institutional Equities

TVS Motor - Margins improve despite EV ramp-up

TVS Motor Company Ltd.’ Q2 profit after tax at Rs 5.4 billion came in line with our estimates. The highlight for Q2 was the record-high 11% margin despite the ramp-up of iQube to 58,000 units. While TVS gained about 300 bps market share in motorcycles in H1 to 10.3%, it has maintained its share in scooters.

With supply challenges now over, we expect TVS Motors’ outperformance to continue on the back of healthy demand for its products like Raider, i-Qube, Jupiter125, etc.

In exports, having established its presence in Africa, its outperformance is likely to be driven by its focus on penetrating Latin America in the coming years. Even in two-wheeler EVs, TVS Motors is putting the right building blocks in place in order to emerge as a leading player. Its investments in e-bikes in Europe, Norton and the extension of tie-up with BMW Motorrad are expected to deliver strong returns over a two-three year horizon.

Given its strong performance in H1, we have raised our FY24-25 estimates by 11% each. We maintain 'Buy' with a revised target price of Rs 1,778/share (earlier Rs 1,459), as we roll forward to September-25 earnings per share.

Marico - Better print at Ebitda; trend to sustain

Marico Ltd.’s consolidated revenue fell 1% YoY as price cuts continue to impact revenue growth. Domestic revenue is down 3% with volume growth of 3% (6% four-year compound annual growth rate). Urban sentiment sustained sequential improvement while erratic rainfall and food inflation continue to impact rural recovery. International business posted 13% constant currency (7% reported) with broad-based growth across markets.

Gross margin is up by 685/50 bps YoY/QoQ to 50.5%. Advertisement and promotion saw a sharp 26% growth (reinvestment witnessed industry-wide) to drive new product development and rising competition. Ebitda margin was up by 270 bps to 20%, and Ebitda growth of 15% is superior than reported by peers in Q2.

We continue to build in gradual recovery in volumes/ in H2 FY24. However, healthy Ebitda performance is expected to be sustained.

Given improving demand trends and input cost tailwinds, management remains upbeat about 350-400 bps gross margin and more than 200 bps Ebitdam expansion in FY24 (in-line).

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 the stock at 45 times on Sep-25 EPS to derive a target price of Rs 650. Maintain 'Add'.

Macrotech Developers - Positives priced in

Macrotech Developers Ltd. reported its best-ever quarterly presales of Rs 35.3 billion (+12/+5% YoY/QoQ), with presales volume of Rs 2.6 msf (+24/-7% YoY/QoQ). Average price realisation as a result increased to Rs 13,577 (-9/+13% YoY/QoQ). MMR/Pune market saw presales of Rs 27.4/7.9 billion.

Collections were Rs 27.5 billion (+16/+15% YoY/QoQ). Embedded Ebitda margin on presales was ~30%. On business development front, Macrotech Developers added two projects with gross development worth Rs 23 billion (Rs 140 billion in H1 FY24, which is ~80% of FY24 guidance of Rs 175 billion) and saleable area of 1.2 msf.

The implied realisation as a result is Rs 19,167/sft. Macrotech Developers will be launching its first project in Bengaluru in November 2023 with a second project likely in Q4 FY24. The IRR threshold for the Bengaluru project is marked at 20%. In terms of launches, Rs 120 billion worth of launches are planned for the rest of FY24 with saleable area of 8 msf.

In terms of price hike, since April 2023, Macrotech Developers has hiked prices by 3% and expects full year price appreciation of 6-7%. Given robust growth visibility, better than expected GDV addition and uptick in land prices, we maintain our target price of Rs 750/share.

Recent share price rally offers limited upside on our target price, and we maintain our 'Add' rating.

SRF - Enhancement in PFB and TTB performance

We retain our 'Add' rating on SRF Ltd., with a target price of Rs 2,320 on the back of-

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

2. a strong balance sheet. Q2 Ebitda/adjusted profit after tax were 9/19% below our estimates, owing to a 13% fall in revenue, higher-than expected interest cost, and lower-than-expected other income.

Oberoi Realty - Launch visibility improving

Oberoi Realty Ltd. registered muted presales of Rs 9.7 billion (-17%/+103% YoY/QoQ) in the absence of new launches in the quarter. Oberoi Realty has a strong launch pipeline for FY24, with a new tower expected to open up in Goregaon and a project launch in Kolshet (post Diwali in Q3 FY24) and Pokhran (likely launch in Q4 FY24) in Thane.

Commerz 3 and Borivali Mall are expected to start operation by June 2024, with rental potential of Rs 5 billion in Commerz 3 and INR 3.5 billion in the mall.

Oberoi Realty for now plans to use Glaxo land in Worli for a residential project. Traction was seen in the 360W project with four units of sales recorded during Q2 FY24. Oberoi Realty expects to liquidate the remaining inventory within two years. Mulund projects also did well with Rs 2 billion worth of combined sales recorded during the quarter.

Oberoi Realty is redeveloping a society in Tardeo with a GDV potential of Rs 30 billion with 0.25 msf of free sale component. In terms of business development, Oberoi Realty has an ongoing deal in Gurugram, an letter of intent signed for a redevelopment project in MMR and a few prospective land parcels in the pipeline.

Given the expected robust cash flows from ready-to-move-in inventory in the 360W and Mulund projects along with new business development outside MMR, we remain constructive on Oberoi Realty and maintain 'Buy', with an unchanged target price of Rs 1,298/share.

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