IT services revenue de-grew 0.7% sequentially in constant currency. The revenue de-growth in Q1 and conservative revenue guidance for Q2FY20E (0-2% QoQ) was due to deferral of some deals and slower ramp ups of some projects. The impact of the same was most noticeable in the consumer business unit segment wherein revenues declined 4.4% QoQ. In addition, softness in capital markets and weakness in European banks continued to impact banking & financial services, similar to TCS & Infosys. Going forward, the consumer segment is expected to revive from Q2 onwards based on...
MindTree Ltd (MindTree) reported a weak Q1FY20 performance. The company reported 0.8% QoQ growth in dollar revenues to $264.2 million vs. our expectation of $265.9 million. Margins declined from 15.0% in Q4FY19 to 10.0% (below our estimate of 14.4%) in Q1FY20 mainly due to one-time special compensation (impacting margins by 260 bps), wage hike (190 bps), visa cost (30 bps) and currency (40 bps) partly offset by 150 bps benefit arising from implementation of IndAS-116. Even adjusting for one-time...
Operational performance came in healthy at 30% YoY to | 783 crore, led by higher other income at | 392 crore (~45% YoY). However, NII growth came in at 18% YoY to | 1154 crore, lower compared to our estimate. Margins improved 3 bps excluding one off of 5 bps in margins in Q4FY19. As of Q1FY20, margins were at 3.15%. Led by higher slippages in the quarter, provisions increased 8% QoQ, to | 192 crore, while stable YoY. Accordingly, PAT was at | 384 crore, up 46% YoY, largely in line with our estimates. Advance growth came in lower at ~19% YoY to | 113717 crore. However,...
The I-direct healthcare universe is expected to report 19% YoY growth to | 45915 crore mainly on the back of ~21% growth in US (select pack) led by 1) growth in the base business due to waning price erosion and lower base, 2) opportunities created by high profile exits and 3) new launches (including limited competition launches) besides consolidation. Domestic formulations (select pack) and Europe are expected to grow ~12% and ~21%, respectively. APIs and CRAMs businesses are likely to grow strong mainly due to direct advantage of Chinese capacity constraints and strong order...
Other income growth came in lower at ~5% YoY to ~| 87 crore, on the back of de-growth of ~9% YoY in CEB book, which was at ~| 55 crore in Q1FY20 (~| 65 crore in Q4FY19). Lower growth in CEB book is attributable to lower credit growth & one off loss in ATM fee income of | 3 crore. Operating profit came in at ~| 167 crore, up 18% YoY, well below our estimates (~| 201 crore) led by muted NII & other income growth. PAT came in at | 81 crore, significantly below estimates. Slippages for the quarter surged 38% YoY to | 148 crore led by stress in...
ABFRL has a strong presence in the menswear segment (formal and casual wear). However, ABFRL does not have a foothold in the Indian ethnic wear segment, which is growing in mid-teens. To strengthen its presence in the ethnic wear segment, ABFRL in the last month has done an acquisition of...
Chalet's room portfolio consists of 2328 rooms spread across 3 cities, Mumbai, Hyderabad and Bangalore. The last hotel constructed being JW Marriott Sahar, has been operational since February 2015. With more than 4 years post completion, the hotel assets portfolio has stabilized with an average occupancy of ~76%. The Orb and Business Centre in Powai would be operational in FY20E with an agreement already signed with WPP marketing to lease the Business Centre and restaurant retailers for The Orb. Leveraging real estate and third-party's management expertise...
The food inflation has come up at one year high of 2.17%. Within food, vegetables, pulses and meat & fish showed the highest month on month rise of 5.17%, 2.72% and 2.27% respectively. Apart from base effect, concerns over below normal monsoon may impact Kharif sowing area...
Infosys reported 2.8% sequential revenue growth in constant currency with Stater acquisition contributing 60 bps to it. This quarter growth was broad based and across verticals with communication and Energy & utilities segment leading in terms of growth trajectory. Going forward, retail, communication and energy & utilities are expected to drive growth while BFSI & manufacturing are expected to be under pressure (due to weakness in capital markets, European banks and softness in European auto). Retail segment is expected to witness acceleration mainly led by higher spending...
Post recognition of IL&FS; account as NPA, which impacted earnings in Q4FY19, asset quality remain steady with GNPA inching up ~6% QoQ to | 4200 crore. Likewise, GNPA ratio increased ~5 bps QoQ to 2.15%. Bank's exposure to stressed companies (Media, Diversified, and Housing Finance) stood at 1.67% of the loan book net of provisions. As of Q1FY20, these exposure remain standard. Credit cost came at ~22 bps & the management has reiterated that the credit cost for the FY20E to be contained at ~60 bps. Operational performance continue to remain healthy led by strong NII...
Large Institutional order drives revenue growth for watches The watches segment continued on its healthy trajectory (19% growth in Q1FY20) driven by large institutional order by TCS and activation in both Titan and Fastrack brands. The quarter also witnessed the launch of new products with tech-enabled wearable being the new growth driver. The...
Uphill task to achieve double digit revenue growth in FY20E The growth in banking & financial services tapered mainly due to weakness in capital markets and European banks. This trend is expected to continue, which will be a key dragger for revenue growth in the near term. In addition, 8.1% QoQ dip in deal TCV at US$5.7 billion does not augur well for the revenue growth trajectory. Further, a weak revenue performance in a seasonally strong Q1 will make it an uphill task for the company to achieve double digit growth rate in FY20E. To achieve double digit growth in FY20E,...
LPG prices have seen a declining trend over the last couple of months. This will have an impact on Gail's LPG/liquid hydrocarbon (LLH) business. We lower LPG/LLH realisations from | 35,000 in Q1FY20E to | 32,100 per tonne from Q2FY20E to factor in the recent decline in LPG prices in global markets. Subsequently, we expect LPG/LLH segment EBIT at | 1860.2 crore and | 1788.2 crore for FY20E and FY21E, respectively. This is expected to result in a reduction in standalone earnings estimate for Gail by ~5% to | 11.7 per...
Westside continues to be one of the most successful, established franchises in the women's wear category. With steady same store sales growth (8%) and aggressive store addition (added 25 stores: highest store addition historically in a single year); revenues from the Westside format grew robustly by 17% YoY in FY19. Private label brands continue to dominate the product portfolio with the share now touching 97% (from 80% in FY13). On the profitability front, gross margins for Westside format declined 210 bps YoY to 57.9%, mainly owing to price rationalisation in selected categories of...
The Q1FY20E earnings is expected to be a mixed bag with BFSI, pharma witnessing strong growth, on the one hand, while auto and commodity based sectors such as oil & gas and metals are witnessing earnings pressure. Topline and bottomline growth in Sensex companies is expected at 4.5% and 20.8%, respectively. Key earnings driver for the quarter would be the banking sector performance (Sensex BFSI earnings likely to be up 1.9x YoY) aided by a pick-up in advances, decline in slippages (both YoY, QoQ) as well as benefits of G-sec yield correction....
Structure of the deal and proceeds from the transaction On July 1, 2019, Sadbhav Infrastructure Project Ltd. (SIPL), a subsidiary of Sadbhav Engineering Ltd. (SEL), and IndInfravit Trust executed definitive agreements wherein the latter has agreed to purchase SIPL's 9 (out of 12) operational road projects at an enterprise value (EV) of | 6,611.2 crore. Equity valuation of these nine assets is | 2,550 crore, implying 1.7x P/BV (SIPL's initial investment in these 9 assets: | 1,550 crore). SIPL will receive | 2,550 crore equity in form of | 1,900 crore cash & | 650 crore (10%)...
In the 2-W pack Bajaj Auto (flat YoY) remained the outperformer, albeit by a smaller margin than previous months. Market leader Hero MotoCorp endured 12.7% drop in volumes while niche motorcycle player Eicher...
USITC affirms material injury to US market by quartz imports The USITC, in its June 24, 2019 press release (link), determined that there is a reasonable indication that the US quartz industry is materially injured/threatened due to imports of quartz surface products from India and Turkey. As part of this investigation, USITC has found that these products are allegedly subsidised and sold in the US market at less than fair value. As a result of the commission's affirmative determinations, the US Department of Commerce will continue with its antidumping and countervailing duty...
