Corporate India | Portfolio Choice - PVR, LOANS GROW DESPITE COVID, CORDS CABLE INDUSTRIES

Portfolio Choice ¹²³ ¹⁵

Published: Aug 29, 2019
Updated: Aug 29, 2019

PVR

BSE ticker code	532689
NSE ticker code	PVR
Major activity	Specialty Retail
Managing Director	Ajay Bijli
Equity capital	Rs. 55.17 crore; FV Rs. 10
52 week high/low	Rs. 2083 / Rs. 707
CMP	Rs. 1566
Market Capitalisation	Rs. 8639.62 crore
Recommendation	Buy at declines

Getting back to pre-Covid screenings

PVR Limited (PVR) is an India-based film exhibition company engaged in the business of movie exhibition and production. It also operates cinema theatres across India and distributes Hollywood, Bollywood and regional movies. The company conducts the movie distribution business through PVR Pictures Ltd. Its Zea Maize business is engaged in manufacturing, packaging and selling gourmet popcorn under the 4700BC brand. Its products are offered on electronic commerce portals. The company’s brands include PVR DIRECTOR’S CUT, PVR PICTURES, PVR IMAX, PVR 4DX, PLAYHOUSE, PVR GOLD, PVR P[XL], PVR ONYX and PVR NEST. It also operates food & beverages and restaurant businesses. The company is going from strength to strength.

Consider:

New content is seeing strong traction. The movie ‘Master’ released in the South has become the second highest opening movie in Tamil Nadu. The management expects long-term employee and overhead costs to reduce by ~10-15% once Covid-19 ends on a long-term basis, while rental cost would revert to pre-pandemic levels in FY22. Kerala has waived entertainment tax and other states can be expected to follow suit. Ticket prices, which were low in Q3FY21, were close to pre-Covid levels for newly released movies. Expectations over relaxation of capacity norms and strong performance of the Tamil ‘Master’ movie can be expected to drive footfalls and movie launches from Q4FY21 onwards. Negotiation in rental charges and a sharp drop in employee and other expenses have been a relief. Fixed costs are expected to reduce by 10-15% over the long term. Around Rs 370 crore cash and an option to raise Rs 800 crore in equity would provide PVR with sufficient cash to meet its operating expenses over FY22.
PVR has significantly reduced its capex outlay during Covid-19, with minimal capex spends on projects that are in advanced stages of construction. The management is continuously evaluating the evolving situation before it recommences its capex program. The company is yet to re-open 56 screens in 13 cinemas as of January 15, 2021 since rental negotiations are currently ongoing with certain mall developers, landlords, lessors and partners. PVR has reopened its theatres in all states where it has a presence, except for Rajasthan and Jharkhand. Hindi film producers have withheld the release of big budget movies and are likely to announce release dates over the next few weeks, with the situation evolving. Producers of big budget Bollywood movies are still hesitant, but a few low-to-mid size Bollywood movies, much awaited Hollywood movies and diverse regional content have debuted on screens. PVR has introduced the concept of private screenings, which is a premium-personalized offering for a small group of reserved audience to enjoy the content of their choice, thereby reducing the risk of contamination.
The company has discontinued paper tickets and instead started issuing booking confirmations only via SMS and e-mails. It has launched QR code-based food ordering, limited the menu under F&B offerings and included healthy choices and options, which include ingredients that help boost immunity. This would give a boost to the food business. Once the Covid-19 situation normalises, business will pick up.
The management expects recovery to be strong. The ‘Master’ movie released in South India in January has seen good traction. This should embolden other Bollywood/regional producers to follow suit and release movies. ‘Master’ has been the second highest opening movie in Tamil Nadu (by collections). For the nine months, sales fell 95% from Rs. 2,790.45 crore to Rs. 119.57 crore. It reported a net loss of Rs. 393.98 crore against a net profit of Rs. 169.05 crore. But long-term prospects are highly promising. We expect the company to register negative EPS of Rs. 9.6 in FY21, Rs. 9.4 in FY22 and Rs. 43.4 in FY 2023. The scrip trades at Rs. 1,566.

PERFORMANCE INDICATORS (Rs. in crore)

Year	Net Sales	Net Profit	EPS (Rs.)	Div (%)	BV (%)	RONW (%)
2018-19	3085.6	189.8	40.6	20.00	258.80	14.28
2019-20	3414.4	27.3	5.3	40.00	284.95	2.06
2020-21(E)	510.67	-52.72	-9.6	0.00	275.35	2.18
2021-22(E)	3100.53	51.66	9.4	20.00	282.71	9.63
2022-23(E)	3822.98	239.19	43.4	40.00	322.07	14.22

Loans grow despite Covid

BSE ticker code	500253
NSE ticker code	LICHSGFIN
Major activity	Housing Finance
Chairman	M R Kumar
Equity capital	Rs. 100.93 crore; FV Rs. 2
52 week high/low	Rs. 4860 / Rs. 186
CMP	Rs. 348
Market Capitalisation	Rs. 17561.82 crore
Recommendation	Buy at declines

LIC HOUSING FINANCE

LIC Housing Finance is a housing finance company promoted by Life Insurance Corporation and provides loans for purchase, construction, repairs and renovation of houses/flats to individuals, corporate bodies, builders and co-operative housing societies. It operates through its subsidiaries, which include LICHFL Care Homes Limited, which is engaged in the business of setting up, running and maintaining assisted living community centres/care homes for senior citizens; LICHFL Financial Services Limited, which is engaged in the business of marketing financial products and services; LICHFL Asset Management Company Limited, which is engaged in the business of managing, advising, administering mutual funds, unit trusts and investment trusts and acting as financial and investment advisors, and LICHFL Trustee Company Private Limited, which acts as a trustee to venture capital trusts and funds. The company operates primarily in India. Prospects for the company are highly promising.

Consider:

Collection efficiency for non-moratorium customers was 96% on September 30. Individual loan NPAs at 1.7% and developer NPAs at 17% still stand on the higher side, especially when 87% of the customer base on the retail side is from the salaried class. The company upped provisioning for Q2FY21 and the management expects the credit costs to climb to 22 bps for the fiscal. September/ October saw 22%/38% yoy growth. H2FY21 will report double-digit growth.
Cost of funds declined around 10 bps qoq and 60 bps yoy to 7.8%. As a result, spreads were stable at 1.5%. The incremental cost of funds raised during Q2FY21 was 5.8%, down 100 bps qoq. LICHF continues to borrow incrementally from banks, the share of which is up 300 bps qoq and 700 bpsyYoy to 23%. Operating expenses increased 18% qoq to Rs 160 crore, driven by a similar increase in employee and non-employee expenses. Higher opex growth sequentially was due to CSR expense of Rs 33 crore which is generally incurred in the fourth qurarter. The ‘Homie’ mobile app has sanctioned Rs 200 crore loans tiln now. Rs 10 crore was disbursed towards new home loan products to senior citizens.
Over the past two years, LICHF’s GNPL ratio has increased 150 bps to 2.8%, driven by both retail and corporate delinquencies. At the same time, growth has been on a decline. However, the company has kept the loan mix stable over the past six quarters – a positive in this environment. Additionally, given its parentage, it has been able to raise debt capital at low rates, which should keep margins steady in these tough times. The improvement in disbursements is also encouraging.
Post the liquidity crisis in September 2018, parentage and credit rating have been of paramount importance for NBFCs/HFCs. LICHF is well-placed on this front. The company’s incremental cost of funds is sub-6% now. With declining cost of funds, the company should be able to keep spreads stable in the wake of increasing pricing pressure from banks.
In Q2 ending September 2020, loans at Rs 213,350 crore grew 5% yoy and 2.0% qoq. The retail loan portfolio registered a growth of 5% and individual home loans grew at 5% yoy. Disbursements increased 2% yoy to Rs 12,440 crore in Q2 and is at pre-Covid levels. Disbursements to developers have increased 80% yoy to Rs 800 crore in Q2FY21. About 76.5% of the AUM stands towards individual home loans while developer’s loans account for 7% as at Q2FY21. GNPA has decreased marginally to 2.79% in Q2 qoq (Q1 GNPA was at 2.83%).

We expect the company to register EPS of Rs 37.7 in FY 2021 and Rs 40.7 for FY 2022. At the current market price of Rs 348, the scrip trades at about 8.6 times its expected FY 2022 EPS and the price/ book value works out to Rs 0.80.

CONSOLIDATED PERFORMANCE INDICATORS (Rs. in crore)

Year	Net Sales	Net Profit	EPS (Rs.)	Div (%)	BV (%)	RONW (%)
2018	4364.57	2430.97	48.2	380.00	322.51	14.95
2019	4821.49	2401.84	47.6	400.00	360.50	13.21
2020(E)	4981.23	1900.41	37.7	350.00	391.16	12.12
2021(E)	5670.19	2051.98	40.7	400.00	423.82	12.99

CORDS CABLE INDUSTRIES

BSE ticker code	-
NSE ticker code	-
Major activity	-
Managing Director	-
Equity capital	-
52 week high/low	-
CMP	-
Market Capitalisation	-
Recommendation	-

Eyeing global leadership in cables

CCIL designs, develops and manufactures a varied range of power, control, instrumentation, thermocouple extension/compensating and communication cables. It manufactures instrumentation and control cables as well as power cables that find applications across industries; viz, power, oil & gas, hydrocarbons, fertilizers, metal & cement, airports, railways, metro rail and smart cities, amongst others. This is a safe investment bet with good chances of appreciation.

Consider:

Since its start in 1991, the company has expanded its product portfolio. Currently its product range includes instrumentation cables, control cables (upto 1.10 KV) and low tension (LT) power cables (upto 1.10 KV). Currently about 76% of the company’s cable comprises instrumentation and control cables and the balance 24% comprises power cables. Over three decades of market presence, the company enjoys a strong brand image in the B2B segment. CCIL has carved a niche in manufacturing customized cables as per the customer’s specifications. 95% of the company’s orders are based on customer specifications.
The clientele of the company is diverse and across sectors, including hydrocarbons, automobiles, cement, power, andfreight corridors. In the domestic market, some of the key clients are Larsen & Toubro, BHEL, Bombardier, Delhi Metro, Engineers India, GE, Alstom, ABB, ONGC, Cairn and Alstom Transportation. CCIL has a low customer concentration risk as the top 5 customers contributed around 24% (PY 33%) of net sales in FY20. In FY20 about 69% (54% in FY19) of the revenue came from the hydrocarbon sector with contributions from metro/ railways at 5% (down from 11% in FY19) and power at 6% (down from 19% in FY19). The company aims to be a leading global player, providing products and services, offering comprehensive solutions to the electrical, data and signal connectivity requirements of businesses as well as household users. It continues to focus on capturing new markets by developing customers in new and existing territories, and to provide new cables for special applications like solar, marine, low temperature cables, cables for automobiles, etc.
Likewise, the company is also an approved vendor for Abu Dhabi National Oil Company for instrumentation & control cables, OFCs, LV power distribution cables, and with Samsung Engineering Company for Instrument, Control, Thermocouple, FF and Fire Survival cables. · The order book of the company as of November 25, 2020 was Rs. 132 crore (hydro carbon 71.7%, power 13%, railways including metro 5.6%, fertilizer 5.1%), which is executable over the next 3-5 months. The order book last year (as of September 30, 2019) was Rs. 148 crore (hydro carbon 64.4%, power 16.3%, railways including metro 5.1%, cement & metals 7.5%). The short execution cycle of its order book provides near-term revenue visibility. Cords Cable Industries’ net sales fell 17% to Rs 83.41 crore in Q2FY21 compared to Q2FY20. PAT fell 55% to Rs 1 crore. For the half year ended September 20, net sales fell 37% to Rs 132.41 crore. PAT fell 71% to Rs 1.12 crore
Overall the company is the major beneficiary of investment in modernization and fresh capacity creation in both the industrial and infrastructure segments of the country.

The company is well-placed to sustain growth momentum as CCIL continuously strives to achieve higher efficiencies, cost control and better preventive maintenance, and focuses on improving its product mix to attain economies of scale. We expect the company to register EPS of Rs 4.6 in FY21 and Rs 7.8 in FY22. The scrip trades at Rs. 44.

PERFORMANCE INDICATORS (Rs. in crore)

Year	Net Series	Net Profit	EPS (Rs.)	BV (%)	RONW (%)
2018-19	416.75	7.35	5.7	104.13	5.46
2019-20	420.89	10.67	8.3	109.30	7.54
2020-21(E)	369.38	6.01	4.6	113.95	4.31
2021-22(E)	441.45	10.11	7.8	121.77	6.89

February 15, 2025 - First Issue

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VOL XVI - 10
February 01-15, 2025

Formerly Fortune India Managing Editor Deven Malkan Assistant Editor A.K. Batha President Bhupendra Shah Circulation Executive Warren Sequeira Art Director Prakash S. Acharekar Graphic Designer Madhukar Thakur Investment Analysis CI Research Bureau Anvicon Research DD Research Bureau Manager (Special Projects) Bhagwan Bhosale Editorial Associates New Delhi Ranjana Arora Bureau Chief Kolkata Anirbahn Chawdhory Gujarat Pranav Brahmbhatt Bureau Cheif Mobile: 098251-49108 Bangalore Jaya Padmanabhan Bureau Chief Chennai S Gururajan Bureau Chief (Tamil Nadu) Ludhiana Ajitkumar Vijh Bhubaneshwar Braja Bandhu Behera

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Portfolio Choice 123 15

PVR

Getting back to pre-Covid screenings

Loans grow despite Covid

LIC HOUSING FINANCE

CORDS CABLE INDUSTRIES

Eyeing global leadership in cables

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