ITC, GAIL India, Bajaj Finance, Marico, Macrotech Developers, Cholamandalam Q3 Results Review: HDFC Securities

HDFC Securities Institutional Equities

ITC - Weak quarter

ITC Ltd. reported a weak operating print due to a soft cigarette performance along with sustained weakness seen in the agri and paper portfolio. Cigarette net revenue/Ebit growth was at 4/2%, with volume estimated to have fallen by 1% (5% four-year compound annual growth rate) on a high base.

Differentiated and premium offerings continued to perform well. With the base now catching up, we model cigarette revenue/Ebit growth of 7% over FY23-FY26. Fmcg continued to report a resilient performance in a difficult environment with revenue growing by 8% (+13% on two-year CAGR) while Ebitdam expanded by 100 bps to 11%.

Paper performance remained impacted by low-priced Chinese supplies, muted domestic demand and a sharp drop in realisations. Hotel revenue was up by 18%.

ITC’s overall revenue grew 2% while Ebitda fell 3% YoY. The recent stock run-up (~30% in last twelve months) and limited earnings surprise scope given a higher base further restrict rerating potential.

We cut our estimates by 1% over FY24- 26 to reflect Q3 performance and value ITC on a SoTP basis to derive a target price of Rs 460. The implied target price/earning is 24 times Dec-25E earnings per share. Maintain 'Add'.

Bajaj Finance - Strong fundamentals support relative resilience

Bajaj Finance Ltd. delivered a mixed set of earnings with robust AUM growth (+35% YoY) despite a regulatory embargo on select products and stable net interest margins (11.3%), offset by elevated credit costs (1.8% annualised).

Bajaj Finance extended its long-range strategy to FY28, guiding for 22-27% AUM CAGR and 20-25% earnings CAGR over FY24-FY28E. On the back of its omnichannel strategy, the widest product suite and focus on cross-sell, we believe Bajaj Finance is poised for ~23% AUM CAGR in the medium-term, while also simultaneously delivering steady profitability.

We tweak our earnings by ~2% for FY24E-FY26E to reflect stronger AUM growth, offset by higher credit costs; we maintain 'Buy' with a revised RIbased target price of Rs 8,690 (implied 26 times Sep-25 EPS; 5.4 times Sep-25 adjusted book value per share).

Gail India - Trading and petchem segments aid earnings

Our 'Buy' recommendation on GAIL India Ltd. with a target price of Rs 185 is based on-

1. an increase in gas transmission volume to 130 mmscmd by FY25 on the back of an increase in domestic gas production,

2. completion of major pipelines in eastern and southern India, and

3. expectation of improvement in earnings from the petchem segment.

Q3 FY24 reported Ebitda/PAT at Rs 38/28 billion, which came in above our estimates, driven by higher natural gas marketing margins and improvement in petchem segment earnings.

Higher-than-expected other income of Rs 8 billion (+18% YoY, +45% QoQ) also supported earnings. Depreciation was at Rs 7.8 billion (+26% YoY, +4.5% QoQ) and interest cost at Rs 1.6 billion, (+49% YoY, - 9% QoQ).

Marico - Resilient margin performance

Marico’s consolidated revenue fell 2% YoY as price cuts continue to impact revenue growth. Domestic revenue is down 3% with volume growth of 2% (5% four-year CAGR). Corrective steps taken to alleviate return on investment challenges faced by channel partners impacted volumes in Q3.

While rural demand and mass segments continued to remain soft, urban demand sustained its moderate growth trajectory. The international business posted 6% constant currency (2% reported) dragged by transient macro headwinds in Bangladesh as other regions delivered resilient performances.

Softening inflation and a favourable mix enabled gross margin expansion of 635 bps YoY to 51.3%, a part of which was reinvested through higher advertising and promotion spending (up 12% YoY).

As a result, Ebitda grew by 13% YoY while margins expanded by 270 bps to 21%. Marico remains on track for an Ebitdam expansion of 250 bps in FY24.

With improving macros and the anniversary of price cuts on the horizon, we continue to build in gradual recovery in volumes in coming quarters.

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 value the stock at 45 times on Dec-25 earnings per share to derive a target price of Rs 650. Maintain 'Add'.

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