Cummins, Brigade Enterprises, Lemon Tree, KNR Constructions, Ahluwalia Contracts Q4 Review: HDFC Securities

HDFC Securities Institutional Equities

Cummins - Exceptional performance; demand drivers intact

Cummins India Ltd. reported yet another exceptional quarter with revenue/Ebitda/adjusted profit after tax surpassing our estimates by 5/16/36%. Domestic business grew 28% YoY whilst exports declined 18% on the back of geopolitical issues. Cummins maintained a two times real GDP growth guidance band of 12-16% over the longer term with a positive margin bias.

Data centre demand remains robust, touching ~10% in the revenue mix. Industrials and distribution businesses continue to aid growth. Going ahead, with the CPCB 4+ implementation from July 01. 2024, Cummins expects a positive margin bias, though full impact will be visible from Q3 FY25 depending on competitors’ pricing actions.

We have recalibrated our estimates higher to factor in better growth and margins. The company has multiple tailwinds, namely, stringent emission norms, capex cycle recovery, adoption of alternative fuels with lower carbon footprint, revival in industrials, and support for manufacturing policies.

We maintain Buy, with an increased SOTP of Rs 4,328 (54 times Mar-26 EPS, versus 48 times earlier, higher multiple to support new growth drivers and export recovery).

Brigade Enterprises - New launches augur well for growth

Brigade Enterprises Ltd. posted strong Q4 FY24 presales of 2.7 msf (+15/+60% YoY/QoQ), valued at Rs 22.4 billion (+50/+47% YoY/QoQ), with average realisation touching an all-time high of Rs 7,968 per sq. ft (+36/+21% YoY/QoQ).

Moreover, for FY25, Brigade Enterprises has a robust launch pipeline of 12.6msf with a GDV potential of Rs 130 billion, largely in Bengaluru as Brigade Enterprises expects that the Bengaluru market has a huge potential.

The Neopolis launch is expected in H2 FY25. Besides this, Brigade Enterprises is planning for 3msf of new office projects in Bengaluru, Hyderabad, and Chennai, and 0.5 msf of hotels. This will entail a new capex of Rs 20 billion over FY25-28.

Given Brigade Enterprises’ strong cash position of Rs 20.7 billion, a robust business development pipeline, and a healthy balance sheet, we remain constructive.

We reiterate Buy, raising the target price to Rs 1,400/share to account for-

1. inclusion of new projects in Hyderabad, Bengaluru, and Chennai,

2. expansion in the office/hospitality segment, and

3. incorporation of a 5-10% price hike across projects.

Lemon Tree - Focus on asset sweating

Lemon Tree Hotels Ltd. recorded a strong Q4 in terms of operational and financial parameters, capitalising on the sector tailwinds. Revenue grew 30% YoY to Rs 3.3 billion, led by a healthy 13% average room rate growth and robust occupancy of 72% in Q4 FY24, leading to a healthy RevPAR growth of +11% YoY.

Given the company’s focus on expansion-led growth, we believe a ramp-up of Aurika, Mumbai (669 rooms) and room additions (incremental 2,773 rooms by FY27) under brands “Lemon Tree Premier” and “Lemon Tree Hotels” are key growth levers for the company.

Management has guided that it will become debt-free in the next four years, aided by increased cash flows and the proposed listing of Fleur Hotels.

We believe an elevated gross debt level of INR18.8bn is a key monitorable. We expect Lemon Tree RevPAR to grow in the mid-teens for two more years, benefitting from buoyant discretionary spending and demand tailwinds.

We maintain a Buy rating with an enterprise value/Ebitda of 17 times FY26 and a target price of Rs 152/share.

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