Research Reports published by HDFC SECURITIES

Godrej Properties Ltd.    
26 Nov 2020, 11:38PM
HDFC Securities
We believe GPL only constrains itself, and that is its biggest strength or weakness. Given recent run up we initiate coverage on the stock with an ADD recommendation and SOTP of Rs 1,164/sh (40% NAV premium). Godrej Properties Ltd (GPL) is a sectoral bell-weather with an innate capacity to build homes. Over the years, it has metamorphosed into a seamless home manufacturing machine with the shortest production time from land acquisition to approvals to launches and sales. In this journey, it has gained market share and emerged a crucial challenger in the respective micro-markets; it is on its way to becoming a leader. Given strong brand, robust financial capacity and strong execution capabilities, landowners/Tier 2 developers have been partnering with GPL for JV opportunities. The growth journey is expected to crystallise further with the regulatory landscape changing over the years, in favour of organised developers.
Godrej Properties Ltd. has gained 82.82% in the last 6 Months
Sundram Fasteners Ltd.    
25 Nov 2020
HDFC Securities
We initiate coverage on Sundram Fasteners with an ADD rating and set a target price of Rs 565, at 27x FY23E EPS, which is at a 10% premium to its 5-year average P/E. Post the run-up in stock price, we would recommend accumulating the stock on every correction. Key risks: slower-than-expected recovery and rapid shift towards electric vehicles We initiate on Sundram Fasteners with an ADD recommendation. Volumes are back to pre-COVID levels for several segments, including cars, tractors and 2Ws. We expect sales to grow in mid-teens over FY21-23, led by a cyclical uptick in India and abroad. Sundaram's enhanced competencies have allowed it to diversify into multiple products. It is also expanding in the non-auto segment. It has lowered dependence on high tensile fasteners with contribution reducing from 80% of revenues earlier to 31% currently. Sundram's diversified customer and product mix enable it to enjoy robust profitability - the elevated margins (16-18%) and high ROEs (in mid-teens) are a function of its mix across cars, tractors, CVs, exports and aftermarkets.
Sundram Fasteners Ltd. is trading above all available SMAs
Consumer Durables    
SECTOR | 24 Nov 2020
HDFC Securities
Within the FMCG universe, Dabur, Britannia, GCPL, Radico, Emami, and Nestle outperformed, clocking revenue growth of 14/12/11/11/11/10% YoY respectively. Growth in packaged food and hygiene moderated, although it continued to remain strong, following reduced fear among consumers and easing of restrictions. Discretionary demand witnessed substantial sequential improvement as increased economic activity and more instances of going out lifted sentiments. Rural growth has been ahead of urban due to lower restrictions, migration of labour & capital and healthy agri economy. We expect rural will remain strong in 2HFY21. However, we remain cautious and selective within the sector due to the unfavourable medium-term risk-reward, given modest absolute growth relative to expectations and valuations. Despite defensive characteristics, we are underweight on the sector in our model portfolio. We recommend BUY on ITC and ADD on UNSP, Colgate and Radico. The HSIE Consumer-Index sales indicated recovery with a growth of 1% YoY in 2QFY21 (+6% in 2QFY20 and -23% in 1QFY21) as easing of lockdown and resumption of economic activity supported demand. The three-year CAGR (which normalises all base adjustments over the past three years) in 2QFY21 was +7% YoY, supported by the healthy growth in the past two years. Categories that outperformed our index in 2QFY21 are OTC FMCG, F&B;, Oral Care, Paints, and Haircare, clocking 50/13/8/6/5% YoY growth. The divergence between the underperforming and outperforming categories narrowed sequentially as growth in essentials moderated and discretionary demand saw improvement. QSR, Footwear, Liquor and Dairy categories were impacted the most, contracting by 30/27/16/3% YoY.
HDFC Securities released a Sector Update report for Consumer Durables on 24 Nov, 2020.
SECTOR | 23 Nov 2020
HDFC Securities
Perhaps the most significant set of recommendations, in line with the intent to increase the number and diversity of private banks, is the RBI laying out two potential routes for the entry of new private banks by allowing large corporate houses to set up banks and large NBFCs to become banks. We believe that potential new banks are more likely to choose the NBFC-Bank route' as the entry of industrial houses will require a slew of changes to the extant legislative, regulatory and supervisory frameworks.The recommendations proposed by the IWG are especially significant given that no non-financial institution was able to float a bank under the 2013 licensing guidelines and no NBFC has successfully converted into a bank under the extant 2016 On-tap' licensing guidelines.While large NBFCs aspiring for banking licenses will face near-term challenges, conversion into a bank should be viewed as a desirable long-term strategy, in our opinion. Amongst banks within our coverage, DCBB and IIB stand to benefit from the recommended increase in the limit on promoter shareholding. In its recently released report, the RBI's Internal Working Group (IWG) has proposed several recommendations to harmonise the ownership guidelines, regulatory landscape, and corporate microstructure of Indian private banks. We explore the key implications of the findings and recommendations and the likely winners.
Prabhudas Lilladhar released a Sector Update report for Banks on 24 Nov, 2020.
HDFC Securities
Two major global players shifting away from the pigment business could act as a tailwind for Indian pigment manufacturers. We believe SCIL is in a sweet spot to seize this opportunity by offering products similar to those of global players. We initiate coverage on the stock with a BUY recommendation. Our DCF-based target price of INR 550/sh (WACC of 10% and terminal growth rate of 3%) implies an upside of 21.5% from the current level (implied PE of 24x). For the period over August-16 to November-20, the stock of Sudarshan Chemical Industries Ltd (SCIL) was merely up by 10%, despite EBITDA expanding at a 10% CAGR, and PAT doubling at a 19% CAGR. This is after considering the 48% stock rally from its March-20 lows until November. SCIL plans to become the third-largest pigment manufacturer globally by developing R&D; capabilities, operational efficacy, and expanding to new geographies. Global scale is the key to success in the pigment business.
HDFC Securities released a Buy report for Sudarshan Chemical Industries Ltd. with a price target of 550.0 on 20 Nov, 2020.
SECTOR | 19 Nov 2020
HDFC Securities
Our core thesis continues to favour large private banks with strong funding profiles as defensive plays in a likely risk-off environment. ICICIBC and AXSB remain our preferred bets, despite the sharp run-up, given their comfortable capital position, strong deposit franchises and significant provision buffers. Amongst the mid-tier banks within our coverage universe, we prefer CUBK. Post the recent run-up, we downgrade IIB to reduce. For most banks within our coverage, earnings were ahead of estimates on account of higher-than-expected NII and core fees and lower-than-expected provisions. Loan growth expectedly slowed while deposit growth remained strong, led by strong traction in CASA balances. Despite the continued drag of surplus liquidity, several banks reported a sequential rise in NIMs, driven by the favourable deposit mix. We believe NIMs have peaked in the near term. GNPAs dipped QoQ as slippages were optically lower, on account of the recent SC order. Collection efficiency rose sharply across the board, crossing 90%, which was a significant positive surprise. A sustained uptick in collection efficiency from hereon would demonstrate lenders' better-than-expected resilience to external shocks.
Prabhudas Lilladhar released a Sector Update report for Banks on 24 Nov, 2020.
HDFC Securities
We have tweaked our FY21/FY22 estimates and maintain BUY on AHLU with a slightly increased target price of Rs 382 (13x Sep-22E EPS), given its robust order book, strong balance sheet, and better RoE/RoCE than peers. Ahluwalia Contracts: Ahluwalia (AHLU) surprised positively on execution front (1.5x our estimate), despite the shortage of labour and restriction on operation in projects within city limits, as it focused on off-site execution. Labour availability has improved from ~60% to ~80% QoQ. AHLU won new orders worth Rs 12.4bn FYTD21, taking the order book to Rs 82bn (Rs 75bn as on 2QFY21). Gross debt increased marginally to Rs 440mn from Rs 430mnQoQ. With cash balance at Rs 2.2bn, AHLU remains a net cash company
Ahluwalia Contracts (India) Ltd. has gained 52.13% in the last 6 Months
Market Movement    
TREND | 18 Nov 2020
HDFC Securities
Given the positive base effect from Q4, markets would focus more at QoQ trends in revenues and costs compared to Q2 levels, which has become a benchmark. Given the sharp rally in markets and Nifty valuations at 21x FY22 PE, absolute upsides look capped at index level. However, we still see a favorable risk-reward on the economy-facing sectors and spotting bottom-up investment ideas across sectors for next 12-24 months. Our preferred sectors continue to be IT, Chemicals, Pharma, Telecom, Insurance, large Banks, Cement, Durables and Gas while we remain underweight on Consumption (Staples, Discretionary and Autos). Our large-cap picks in the model portfolio include Infosys, ITC, SBI Life, ICICI Bank, Axis Bank, L&T, Bharti. Within mid-caps, we like Mphasis, Max Life, IGL, Radico, Gujarat Gas, Crompton Consumer, Alkyl Amines, Galaxy Surfactants, JK Cement, and KNR Construction. Q2FY21 was a strong quarter, beating expectations across most sectors, led by margin surprises and in-line revenue performance. Revenues rebounded at a faster pace than costs post the lockdown, resulting in earnings beat. Key highlights of the quarter: (1) Q2 margins beat estimates across multiple sectors such as Cement, IT, Chemicals, Pharma, Paints, Durables, AMCs, Brokers, Gas Distribution etc. due to (a) sharp cost-cutting initiatives leading to lower SG&As; (A&P;, travel expenses, etc.) and (b) improved pricing power in the wake of lower competition; (2) positive management commentaries on Sep/Oct exit run-rate of revenues as unlocking led to sharp demand rebound in multiple sectors; (3) market share gains for the larger companies; (4) much improved collection trends for lenders; (5)...
Edelweiss released a report for Market Movement on 27 Nov, 2020.
Repco Home Finance Ltd.    
18 Nov 2020
HDFC Securities
Mahanagar Gas: Our ADD recommendation on Mahanagar Gas (MGL) with a price target of INR 916 is premised on its loyal customer base of CNG and commercial establishments (together comprising ~80% of the sales mix in FY20), which are less price-sensitive than industrial customers that enable the company to maintain its per-unit margins higher than peers. We do not foresee any significant regulatory adversity in its CGD business either through a change in gas allocation or capping returns. 2QFY21 EBITDA/APAT was 41/43% above estimates, owing to 9% higher-than-anticipated volumes, and 30% higher per-unit EBITDA margin. Repco Home Finance: REPCO's 2Q earnings were ahead of estimates, led by lower-than-expected provisions. The company, like most lenders, saw a sharp improvement in collection efficiency and a sequential rebound in disbursals. We have revised our estimates upwards, as we factor in lower (vs. our earlier estimates) provisions and slightly faster loan growth. The company continues to remain comfortable in terms of funding and liquidity (CRAR- 26.8% and available undrawn lines at ~17% of AUM), and these drive our ADD rating (target price of Rs 282). ONGC: Our REDUCE recommendation on ONGC with a price target of INR 70 is premised on (1) muted crude oil and gas realisations and (2) lack of production growth for oil. Despite production cuts from OPEC and non-OPEC countries, we expect oil prices to remain at USD 36/41 per barrel in FY21/22E vs. USD 59/bbl in FY20, given the weak global macro. Lower oil and gas realisations will drag profitability down for ONGC. In 2QFY21,...
Repco Home Finance Ltd. has gained 19.08% in the last 1 Month
HDFC Securities
Sadbhav Engineering: Sadbhav Engineering (SEL) reported revenue at Rs 4.1bn (-27/+80% YoY/QoQ, in-line). PAT too was in line at Rs 52mn, as EBIDTA margins normalized to 12.1%. Labour availability has improved to pre-COVID level. Standalone order book stood at Rs 94bn as it won orders of Rs 16bn in 2QFY21. Net debt increased marginally to Rs 10.9bn (vs 10.6bn QoQ). However, with receivables of ~Rs 17bn, working capital still remains stretched. Improvement in balance sheet and pick-up in execution will lead to re-rating. IRB Infra: IRB reported revenue at Rs 11.2bn, beating our estimate by 7%, on 40% QoQ recovery in toll collections though EPC remained muted. However, the company registered loss of Rs 197mn, marginally lower than our estimated loss of Rs 231mn. While toll collection in majority of the BOT assets have reached near pre-COVID level, execution remained impacted due to monsoon. IRB secured a HAM order worth Rs 18bn during the quarter, taking the orderbook to Rs 122bn. Consolidated net debt increased to Rs 127bn from Rs 119bn on Jun 20-end, with net D/E at 1.94x (1.75x on 1QFY21-end). With monsoon behind, we expect execution to ramp-up in second half. Besides, traffic is likely to normalize with further ease of restrictions. We maintain BUY on IRB given affordable valuation and comfortable liquidity position, with an unchanged SOTP based target price of Rs 157/Sh.
ICICI Securities Limited released a IPO Note report for IRB Infrastructure Developers Ltd. on 23 Nov, 2020.