We expect the IT sector revenue to grow at 14.4/10.8% (in USD terms) for FY22/23E with mid-tier IT growth to come in at 15.1/12.5%. We expect a margin expansion of ~55ps over FY21-23E (10/45 bps expansion in FY22/23E), following a 220bps expansion in FY21, leading to ~17% EPS CAGR over FY21-23E. We remain higher than consensus (HSIE EPS is ~6% ahead for FY23E) and expect the outperformance to continue. We increase multiples for Mindtree/Cyient/Zensar/Sonata and roll forward to Mar-23E for our coverage universe. Earnings for Wipro is revised downwards by 6.5/3.9% due to acquisition impact while we have increased estimates for Mindtree/Zensar/Sonata/Teamlease. We prefer INFY, HCLT, Persistent and Sonata We hosted our 5th Tech Investor forum with 20 corporates/experts participating in the event (virtual). The participants represented the full spectrum: (1) Large-cap IT services (TCS, Infosys, Wipro, Tech Mahindra, L&T; Infotech), (2) IT/ER&D; midcaps & small caps (Mphasis, L&T; Technology, Mindtree, Tata Elxsi, Happiest Minds, Zensar, Sonata, Intellect and Mastek), (3) Staffing (Teamlease) and (4) Tech industry experts (IBM, Capgemini, Salesforce, ISG, and Captive expert ANSR). The commentary across companies/experts indicated a continuation of multi-year industry tailwind (cloud acceleration) and optimism around the sector hitting and sustaining double-digit growth rate was validated
We continue to believe that most near to medium term drivers are priced in. However, on account of expected aggressive store expansion in India, we increase our EPS by 3% for FY22/23. The stock is valued at 81 and 65 P/E on FY22/FY23 EPS. We increase our target multiple to 55x P/E (50x earlier) and derive TP of Rs 2,500. We maintain our REDUCE rating. JFL is a far superior company among QSR peers but we see earnings surprises more for other discretionary companies (driven by pent-up, market share gain, pricing, sourcing advantage, make in India etc). Jubilant FoodWorks (JFL) announced the acquisition of Fides Food Systems Coperatief U.A., Netherlands (Fides) for GBP 24.8mn (INR 2.5bn). Fides is the beneficial owner of 32.81% of equity shares of DP Eurasia N.V. (DP Eurasia). DP Eurasia is the exclusive master franchisee of the Dominos Pizza brand, having 771 stores in Turkey, Russia, Azerbaijan and Georgia. It is listed with London Stock Exchange PLC. DP Eurasia has weak financials (due to operational losses in ex-Turkey, financial leverage and currency impact) resulting in a crack in its stock price over the past 3 years (GBX 250 in 2018 to GBX 70 now). The deal is valued at 8x EV/EBITDA of CY19.
We maintain BUY on AIL, Galaxy Surfactants, Sudarshan Chemical; ADD on NFIL, Balaji Amines, Alkyl Amines, SRF; while maintaining SELL on Vinati Organics. We are also initiating coverage on Fine Organic and NOCIL with a BUY and Deepak Nitrite with an ADD recommendation. The first half of CY20 was an unanticipated turning point for the chemical industry. The dual effects of the COVID-related economic downturn and disruption in chemical supply chain impacted the industry adversely. However, this sector was amongst the first few that returned to normalcy. We have assessed the current situation of the industry and our analysis compels us to uphold our positive stance on our specialty chemicals universe.
Brookfield India Real Estate Trust (REIT) - IPO Note Issue Snapshot: Issue Open: Feb 03 Feb 05, 2021 Price Band: Rs. 274 275 Bid size: 200 units and in multiples thereof Total Issue Size: Rs 3,800cr
We remain optimistic and see sector rerating at a 4-5x book-to-bill and ~ 7.1/5.5x core EPC P/E for FY22/23E. Pandemics can be game changers and we are seeing that play out for the Industrials sector. There have been many first times during this cycle: (1) broad-based ordering from roads, water, refineries, metro, mega projects like high speed rail, buildings, etc; (2) average order size increasing with L&T; gaining market share in the absence of formidable competition; (3) diversified plays outperforming roads pure plays in order wins; (4) roads players accelerating diversification; (5) competitors joining hands to qualify for large ticket size projects. Given our thought leadership in the sector, we believe there may be a few mid to long term triggers for sector: (1) earnings upgrades of 30-40% coming in from 4QFY21; (2) with asset monetization - HAM P/BV to be seen as cash; (3) all-round increase in ordering both at Central/State level, given development push.
Home First Finance Company India Ltd - IPO Note Issue Snapshot: Issue Open: Jan 21 Jan 25, 2021, Price Band: Rs. 517 518, *Issue Size: 22,272,568 eq shares, (Fresh Issue of 5,115,830 eq sh + Offer for sale of 17,156,737 eq sh), ssue Size: Rs. 1151.5 1153.7 cr, Reservation for: QIB Upto 50% eq sh Non Institutional atleast 15% eq sh Retail atleast 35% eq sh, Face Value: Rs 2, Book value: Rs 126.06 (September 30, 2020), Bid size: - 28 equity shares and in multiples thereof
