Discoms in key states Rajasthan, Tamil Nadu, Uttar Pradesh, Karnataka, Maharashtra, J&K;, and Telangana account for 81% of the total overdue amount to gencos. In a positive move, the government has allowed a one-time relaxation to the eligibility criteria for discoms to avail working capital loans under the Atmanirbhar scheme by allowing PFC and REC to lend even beyond the cap of 25% of previous year's revenue. PFC/REC will now extend loans for dues pending till Jun'20 (Rs1.28tn), extending the previous set limit of Rs900bn as of Mar'20. Till date, Rs680bn has been sanctioned and Rs236bn in loans has been disbursed by PFC/REC....
Refer to important disclosures at the end of this report Counter-cyclical infrastructure spending to boost the economy not a realistic hope We appreciate your support in the Asiamoney Brokers Poll 2020 Several experts suggest a counter-cyclical infrastructure driven stimulus worth the size of 5-15% of GDP (as compared to estimated direct government-funded spend of below 3% in FY20) to bail out the economy. We took a deep dive into India's fiscal math just as we look at corporate finances to find that India does not...
Power distribution companies' (discoms) pending dues to power generation companies (gencos) shot up 66% yoy (5% mom) to Rs1.20tn as of June'20. Total outstanding stood at Rs1.31tn (+66% yoy/+5% mom) - close to its Nov'15 peak of Rs1.35tn. Discoms in key states Rajasthan, Tamil Nadu, Uttar Pradesh, Maharashtra, Telangana, Karnataka, and J&K; account for 82% of the total overdues to gencos. Discoms' financial health has deteriorated during the lockdown due to a steep fall in power offtake across the C&I; segment. However, while the collection efficiency initially fell sharply to 25-35% in April-May'20, it showed a marked improvement in June, rising to 55%....
We appreciate your support in the Asiamoney Brokers Poll 2020 After falling below $20/barrel in April'20, crude prices managed to cover some ground and hovered above $40/barrel in June'20, led by tightened supply from OPEC and supported by encouraging economic data from the US and China. OPEC's production in June'20 was cut to a three-decade low after Saudi Arabia reduced production by an additional 1mn bpd. This propelled some relief rally in various downstream products in the last two months. Gradual re-opening of economies helped bring demand back on track for ~60-70% of the chemical products. Although, some chemical prices still...
We appreciate your support in the Asiamoney Brokers Poll 2020 We continue to see a limited read-through from Accenture's Q3FY20 results as always. The company reported a 1.3% YoY local currency growth in Q3FY20 (within the guided range of -2% to +2%), while narrowed its full-year outlook for FY20 now to 3.5-4.5% YoY local currency growth (vs. 3-6% earlier). Growth was largely led by Health and Public Services verticals (+12% YoY local currency, This report is solely produced by Emkay Global. The following person(s) are responsible for the...
Blended marketing margin rose 16% qoq to Rs5.7/kg, a 7% miss. Domestic/total sales volumes declined 8%/5% yoy, with petrol/diesel down 3%/9%. Gross debt rose 58% yoy/50% qoq to Rs430.2bn. Core EPS for Q4 stood strong at Rs11.9, a 30%+ beat. We raise FY21/22E EPS by 1%/9% due to low taxes/higher marketing margins, offsetting volume declines. We cut TP by 13% to Rs280, assuming higher debt. We reiterate Buy and OW stance in EAP. We remain positive on OMCs and HPCL is our top pick. Result highlights: Opex was broadly in line, with employee cost having Rs697mn provision due to PF trust investment diminution, while Other Expenditure was down 6% yoy/3% qoq....
Titan's profitability was better than expectations and was driven by stronger margins in jewelry and watches divisions. Excluding IND-AS and one-offs, comparable EBITDA at Rs5.5bn was 18% ahead of our estimates and was marginally lower YoY. Management said that nearly 75% of its jewelry store network resumed operations and is expected to reach 90% by June-end. The pace of recovery has been encouraging at ~80% in jewelry and over 40% in watches, although this is for the very few stores, which were operational for around four weeks in May. Q1 will witness a sharp decline (zero sales in April, 10-15% in May and 30-40% expected...
Once again, V-Guard missed estimates with a wide margin, with its performance being weaker than peers. Gross margin continued to expand, while now base catch-up has happened. The sharp fall in revenues and stable costs led to 42% EBITDA decline yoy. Majority of the revenue recovery has happened in rural and suburban areas, while metros yet to open up fully. The management remained confident on sustained gross margin expansion (+390bps in FY20). FY21 capex would be Rs400mn vs. Rs850mn in FY20. In the wake of extended lockdowns delaying recovery, we have cut FY21/FY22 revenue estimate by 8%/7%; however, the EPS cut has been restricted to 14%/4% on gross and...
The first tranche of the Rs20tn package' mentioned by the Prime minister was announced today, comprising measures worth Rs6tn. This tranche included a Rs900bn loan to state discoms by govt-owned PFC and REC to pay off the genco dues. The loan will be provided against the Rs940bn receivables of the discoms. The loans will be secured against receivables, and additionally guaranteed by respective state govts. The liquidity will be infused within a couple of days by offering concessional loans to state electricity discoms, which would be 150 bps lower than the usual lending rates by the PFC and REC. while the loan rate would be concessional, it will vary from utility-to-utility depending...
Marico's Q4 performance was relatively better than peers, led by strong growth in Saffola. Consolidated sales declined 7% - marginally lower than estimates, whereas EBITDA and PBT fell 3-4% but still better than expectations on lower ad spends (down 18%). India business dropped 8% and as per management, growth would have been flat, excluding disruptions. Saffola's improved growth outlook and management's increased...
conclusion that the spread and containment of Covid-19 is far beyond our initial estimates. The rising number of Covid-19 cases in India, extended country-wide lockdown and gradual pace of relaxation even after 3 rd May are resulting in another round of estimate changes for multiplexes. We believe that sustained case increases across the globe and in India will continue to create a fear psychosis in the mind of consumers, which will keep them away from cinemas for a longer period of time. Global surveys (Exhibit 26) also...
RIL, Jio Platforms Ltd (JPL) and Facebook Inc (FB) announced the signing of binding agreements for Rs435.7bn investment by FB in JPL. FB's investment will translate into a 9.99% equity stake in JPL on a fully diluted basis. Deal is subject to statutory approvals. The investment values JPL at a pre-money EV of Rs4.62tn, or USD65.95bn (at Rs70/USD) which is in line with RIL's aspiration of USD65-70bn. JPL is hold-co for Reliance Jio, along with other Jio app companies/digital platforms. RIL will now have ~90% stake in JPL. Concurrent with this, JPL, Reliance Retail and WhatsApp have also entered into a commercial partnership agreement to further accelerate Reliance Retail's New Commerce...
Q4FY20 earnings are expected to be disappointing in Emkay's power coverage universe. Demand across India fell significantly in the second half of March after the country was locked down to contain the spread of Covid-19. Thus, PLF across stations was impacted, but availability picked up due to improved inventory levels. However, the power ministry's move to provide a moratorium on bill payments is likely to impact discoms' collection efficiency and would stretch its working capital. This is likely to have a cascading impact on the electricity chain of discoms, transmission, gencos and eventually the banks, all of...
We have not assumed an increase in working capital cycle due to the liquidity crunch faced by the distribution channel. Weak demand and tight liquidity could also lead to price disruption in an effort to liquidate existing inventory (especially for summer products). Although it is difficult to assess when the demand will be fully recovered, we believe that companies with dependence on seasonal products and B2B segments will take longer to recover. In our coverage universe, this could adversely affect Havells. We prefer Crompton and Dixon, and have Buy rating on both. We maintain Hold on Blue Star, V-Guard and Voltas, while the risk of delayed recovery and premium valuations lead...
Refer to important disclosures at the end of this report Mar'20 volume preview: Covid-19 lockdowns impacting volume performance across segments Wholesales are expected to be under pressure across segments in March due to lockdowns in the wake of the covid19 outbreak and inventory correction by dealers before the BS6 transition. Festive season (Gudi Padwa, Ugadi, Chaitra Navratri) volumes have been severely impacted by lockdowns. Tractor volume growth trajectory turns negative: Tractor volume growth had turned...
Read-through from Accenture's Q2FY20 (FY ending Aug'20) results for Indian IT: Possible downside risks to H1FY21 growth estimates at the least Accenture (Unrated; CMP US$151) reported its Q2FY20 (fiscal year ending Aug'20) results earlier today. While the stock has reacted positively to the results (stock up ~3% in trade today), we note that this comes after a 25%+ YTD correction in the stock, driven by Covid-19 led correction across global markets. The company has cut down its revenue growth guidance and earnings outlook for FY20, noting the uncertainties on demand emanating from the pandemic outbreak despite record...
Peaking of Covid-19 count in the West could be key milestone for market sentiment: While a number of factors and events, including the breakdown of the oil cartel, have led to the collapse of global equity markets in the past couple of weeks, we believe that the overarching theme, causing the risk-off sentiment, is the spread of Covid-19 in the developed world. While the daily infection count has peaked in China, it continues to rise in the rest of the world. In our view (based on past experience from SARS see our report), the daily new infections count could be a key driver of sentiment. Sell-off driven by passive fund redemption pressure: We choose the period starting...
Refer to important disclosures at the end of this report Infra spending to slow sharply: we prefer niche players over larger ones The Government has come up with an ambitious plan of spending Rs102tn to boost the infrastructure in the country over FY20-25, highlighted through the National Infrastructure Pipeline (NIP). However, the worsening fiscal stress of both the Centre and the States implies that funding this capex will be a huge challenge. As against a combined Government infra spend growth of 28% in FY19RE, we are already set for a...
Recent underperformance and improving margin outlook on easing input prices provide a good entry opportunity, in our view. 9M volume growth is slow, partly due to weight reductions, but sales growth is better with higher price/mix on pricing and cut in promotions. The correction in crude and palm oil prices by ~20% from peak and softening in wheat prices are reducing inflation concerns. In addition, recent price hikes and BRIT's strong...
Q3FY20 revenues declined 5% yoy (our est.: down 2%) for companies under our coverage, excluding TTMT. Earnings fell 9% yoy (our est.: down 11%) but were above estimates due to higher-than-expected operating margins and a lower tax rate. Aggregate EBITDA margins expanded 30bps yoy to 12% (our est.: 11.6%) due to softening input prices and cost-reduction efforts. EBITDA beat estimates for most companies, and a notable beat was seen in ESC, MM, EXID, AMRJ and HMCL. Management commentary was positive on volume expectations, especially in Tractors and PVs. In the near term, the Covid-19 outbreak is expected to negatively impact China...
