Johnson Controls-Hitachi Air Conditioning India Ltd - Q1 FY22 Result Report - YES Securities

(Rating: REDUCE, TP: Rs2,363, Upside: 4.4%)

- JCHAC delivered revenue growth of 84% on base of 72% decline. Favorable base along with entry into mass premium segment has resulted in strong growth. Gross margin contracted 417bps to 30.9% (lowest in past many years) which can be attributable to competitively pricing its products aggressively in quest to gain market share.

- Cooling products segments which largely consist of RAC has grown at 87% against industry growth of 55%. JCHAC has managed to regain its lost market share although at cost of margins.

- Gross margins contracted by 794bps sequentially to 30.9% on back of steep increase in commodity prices. Company has not been able to pass on increased commodity prices fully.

- As per our channel checks, JCHAC is managing to claw back its lost market share which it had lost in past 18 months.

- We expect FY21-24E Revenue/EBITDA/PAT CAGR of 16%/28%/51% on favorable base. We roll forward our valuation to FY24E and given minimal upside, maintain our REDUCE rating on the stock, with a revised PT of Rs2,363 valuing it at 45x (from 50x earlier) FY24 EPS as we feel profitability will be impacted in quest to gain share.

Shares of Johnson Controls-Hitachi Air Conditioning India Ltd. was last trading in BSE at Rs. 2270.3 as compared to the previous close of Rs. 2258.3. The total number of shares traded during the day was 3785 in over 1063 trades.

The stock hit an intraday high of Rs. 2314.5 and intraday low of 2221.95. The net turnover during the day was Rs. 8582859.

Source : Equity Bulls

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