Infosys delivered another stellar quarter, beating our and consensus estimates on revenues and margins. Revenues grew 6.2% QoQ (highest in Q3 in 8 years) to USD3.5bn. Digital revenues rose 12.4%/33.8% QoQ/YoY, contributing over 50% of overall revenues. Infosys raised its FY21 revenue growth guidance to 4.5-5% in cc terms (earlier 2-3%) and EBITM guidance range to 24-24.5% (earlier 23-24%) based on 9M performance and robust deal wins. Revenue guidance implies 0.5-2.5% QoQ growth in Q4. signed in YTD FY21 was ~USD12bn (+63% YoY) with net new deal wins of USD8.2bn (~3.3x YoY). The deal pipeline is healthy (tad lighter after strong conversions in Q2/Q3)....
We hosted two public sector banks, Bank of Baroda and Indian Bank, at our PSU Day conference, to understand their outlook mainly on growth and asset quality post unlocking leading to rally in banking stocks, including typically laggard PSBs, on the back of the improving pace of economy recovery. Management indicated that the overall growth outlook remains upbeat, driven by retail and some early signs of pickup even seen in corporate. The asset quality so far has been better than expected in terms of fresh slippages and restructuring, though caution is needed in case of any tail-end risk in FY22. After Canara, PNB and IDBI, we expect BOB and Indian Bank may also raise equity capital for growth, though not immediately. Merger integration has...
Limited retail/SME stress and corporate resolution reacceleration to limit NPAs/credit cost: SBI's GNPA has steadily declined to 5.3% since FY18. This is the lowest among PSBs and even better than that of ICICI. The bank also expects limited stress after Covid-19, given its relatively resilient retail book that includes secured mortgages and unsecured PL built largely around salaried govt. employees. ECLGS/restructuring should limit the stress in the otherwise risky SME portfolio. Improving prospects of resolutions in some large corporates should further reduce corporate NPAs. The bank now carries strong PCR on NPAs (71%), driven by strong PPoP on healthy...
Discoms in key states Rajasthan, Tamil Nadu, Uttar Pradesh, Karnataka, Maharashtra, J&K; and Telangana account for 79% of the total overdue to gencos. Disbursements under the Atmanirbhar scheme have been very slow due to the reluctance or delay on the part of state governments to adhere to the stringent norms put forth by the PFC and the REC. So far, total loans of Rs1.18tn and Rs311bn have been sanctioned and disbursed to discoms by the PFC and the REC, respectively. We are of the opinion that discoms' overdues could take a while to moderate with the revival in demand that could further increase power offtake. However, the improvement in...
Q2FY21 results were subdued due to lower volumes, but came in above estimates. Revenue was marginally lower by 3% yoy at Rs21.3bn (est.: Rs21.8bn). EBITDA margin contracted 260bps to 22.1%, but was better than expectation of 18.7%, owing to betterthan-expected gross margin and lower Other expenses. We expect 2W volumes to rebound strongly, aided by ramp-up in production, healthy order-book, aggressive launches and focus on network expansion. Volume CAGR is...
SBI strongly beat earnings estimates by 72% with a PAT of Rs45.7bn, aided by slightly better margins and contained provisions. Proforma slippages were relatively higher at Rs14.4bn. GNPA stood at 5.9% mainly from the SME/agri segment, but the bank has seen some pull-back in Oct'20. Overall collection efficiency has touched 97%, similar to large private peers. SBI expects restructuring to the extent of Rs195bn (0.9% of loans) and slippages in H2 (ex. proforma slippages) largely around BAU levels (Rs100bn in each quarter). The guidance looks optimistic, but management contends that its retail book remains resilient, built largely around...
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...
