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We expect a lacklustre festive season for Auto OEMs to translate into slower disbursal growth for vehicle financiers. Given the steep rise in CoF (post IL&FS) and a large fixed rate book, NIM compression for asset financiers is imminent. Stable asset quality in certain segments may well be the only silver lining. We expect the HFCs in our coverage (LICHF and Repco) to report a mixed qtr. While business momentum will sustain, NIMs/spreads will come under pressure. Asset quality is a key monitorable, given LAP/CRE exposures for some players. 3QFY19 is expected to be predominantly good for banks. With system credit growth at 15% YoY (Dec-18), we expect large banks to register higher loan growth. Meanwhile, NIM tailwinds are expected to play out, driven by an increase in pricing power and lower slippages. As bond yields have fallen, treasury gains will accrue. On the asset quality front, stress accretion will reduce (except IL&FS;). Credit costs may remain high for corporate heavy banks and PCR will continue to improve. The change in guard at the RBI will impact liquidity and PSB reforms (e.g. PCA) and must be watched closely.
Maintain BUY. Our TP is Rs 1,255 at 14x Dec-20E EPS (in-line with 5-yr avg multiple). We recently hosted HCL Techs (HCLT) CFO for investor meetings. The discussions covered organic business and Mode-3 strategy (esp. the recent product acquisition). HCLT has under-performed peers ~30% over the last two years on (1) Organic growth slowdown, with IMS slowing from 9% to 4% YoY, and (2) Balance sheet-heavy capital allocation strategy. HCLTs rev/PAT/OCF share in tier-1 IT has been steady at ~15%.
India's growth is estimated at 7.2% in FY19 (6.7% in FY18). While government and private consumption are weak, investment activity is upbeat at 12.2% in FY19. India's near-term growth momentum is likely to remain weak on the back of fiscal concerns and weak global outlook. However, with capacity utilisation at 76%, investment outlook is far better. Growth is expected to improve in FY20 to 7.3% on the back of sustained capital spending. Recent dip in oil prices will...
8 January 2019 TELXs revenue grew 17.8% YoY to INR4.07b in 3QFY19, lower than our estimate of +20% YoY. The company delivered INR revenue growth of 1% QoQ, which implies a sequential decline in USD revenue (as INR depreciated by 2%+ QoQ against USD). On a YoY basis too, USD revenue growth decelerated to 5.4% from 19% only three quarters ago. This can partially be attributed to 3Q seasonal weakness. EBITDA margin shrank 110bp QoQ to 25.4%, below our estimate of 26%. PBT margin of 23.2% missed managements guidance of 24-25%, mainly due to forex losses. Consequently, PAT grew by only 5% YoY (-20% QoQ; our quarter, 3Q saw a much slower growth in Software development (97% of revenue; +1% v/s +6% in 2QFY19), while System Integration (SI; 3% of revenue) grew 19% QoQ (v/s -12% QoQ in 2QFY19). PBT margin came in at 23.2%, lower than our estimate of 26.5%.
8 January 2019 The aggression demonstrated by the PGHH management in recent quarters on increase in ad spends, new launches and price cuts, wherever required. Continued market share gain in Vicks. New product - Vicks Baby Rub, launched in FY18 is reportedly doing very well. While valuations of 51.7x FY20 EPS implies that near-term upside is limited, category growth potential in the Feminine Hygiene segment (~67% of sales) and potential for market share growth because of its considerable moats, and (2) Potentially huge margin gains from premiumization in Feminine Hygiene over the longer term. Increasing pace of distribution expansion, continuing strong pace of category development efforts in schools to boost awareness and growth, rising ad spends after a lull in preceding years, healthy pipeline of new products and willingness to take price cuts whenever required to boost growth are all encouraging developments that should aid rapid growth for the company over the long term.
8 January 2019 reached a point where growth of dispatches will suffer not only in FY19E, but also in FY20E. COAL builds inventories during 2H of any financial year in order to meet demand in the 1H of the next financial year, when production is usually lower due to seasonally high heat followed by monsoons. Various government agencies and COALs top management need to work on a war footing to address these issues, else production growth will suffer. Since inventories at power plants remain low, the restocking demand will continue to drive higher demand in FY20E as well. Therefore, we need to reduce E-auction volumes by 3% to 79mt in FY19E and by 25% to 69mt in FY20E. A scarcity of coal for non-power will ensure that E-auction prices remain high. EBITDA estimates by 5%/6% to INR242/274b for FY19E/20E on combined impact of reduction in volumes and increase in E-auction prices as discussed above.
ICICI Securities Ltd | Retail Equity Research In its quarterly preview of Q3FY19, the management of Titan highlighted that healthy revenue growth was witnessed across all its divisions, signalling robust customer demand in the festive season of DiwaliDussehra. The jewellery division continued to gain market share driven by rapid store expansion and strong same store sales growth (SSSG). The management now expects the jewellery division to exit FY19 with revenue growth of 22% (vs. earlier guidance of ~20%). The watches division continued on its healthy trajectory driven by launch of new...
A confluence of slowing global economic growth, easing oil prices, open market (OMO) purchases by the RBI, and contained inflation has helped rein in domestic yields. We estimate OMO purchases of Rs 2.5tn-3tn in FY19, dipping to Rs 1.5tn-2tn (at currency demand of Rs 3tn) in FY20 as FPI inflows likely gather pace. While this should ensure a narrow range for India's 10-year yield at 7.25-7.75% in FY20, we expect bank deposit rates to continue to move up as credit growth outstrips that of deposits....
