In our view, comparing PE multiples in isolation will not spell out the correct direction or assessment as to whether Nifty multiples are stretched or undervalued. For instance, looking at just TTM PE of 38.5x will definitely make one say about overvaluations but on the contrary this number does not give the correct picture as the TTM EPS so applied includes performance of Q1FY21 and Q2FY21 wherein earnings of corporate India were completely washed out thereby deflating the true earnings. Secondly, markets are...
In FY20, IRFC had financed 76% of the rolling stock purchased and leased to the MoR (Ministry of Railways). IRFC's total revenue from operations increased by 19.3% from 9207.9 crore in FY18 to 10987.4 crore in FY19 and by 22.2% to 13421.9 crore in FY20, and was 7384.8 crore in 1HFY21. In FY18, FY19, FY20, and 1HFY21, net profit stood at 2001.46 crore, 2139.93 crore, 3192.09 crore and 1886.84 crore, respectively....
FIL has enhanced its focus on value added products like FDY, DTY which provide better margins than chips, POY. The share of value added products in Q3FY21 was ~ 85% of revenues. We expect the share of value added products to increase from 65% in FY20 to ~ 82% in FY22E. This would provide a fillip to the margin profile of the company. Also, the company's 30 MW thermal power plant is expected to be operational from April 2021, which is expected to result in annual power cost saving to the tune of | 4045 crore, thereby further aiding improvement in EBITDA margins. From a longer term perspective, the company is planning to foray into recycled...
Restructuring of business, large deals to drive growth We believe Wipro possesses all the key ingredients of robust growth in the long run. The company has strong full services capabilities across applications, infra, BPS and engineering, which should help it as integrated deals gain prominence. Further, the induction of a new CEO with focus on profitable growth make us positive on its future growth. This, coupled with the new CEO's focus on simplification of organisation, improving client mining, focus on fewer verticals and geographies to drive growth are...
Energy sold in Q3FY21, in the standalone business, grew 1.8% to 215.7 crore units vs. our estimate of 221.7 crore units while realisation was at | 7.69/kWHR vs. our expectation of 7.8 kWHR. Total generation was down 1.2% YoY at 120.9 crore units. PLF of the Budge Budge and southern plants for Q3FY21 was at 71% (69% in Q3FY20) and 13% (26% in Q3FY20), respectively. Revenues came in at | 1659 crore vs. our estimate of | 1729.3 crore, mainly on account of lesser-than-expected energy sold. On a consolidated basis, revenues came in at | 2539 crore, up 8.3%, which was...
Food inflation in December is down sharply at 3.4% compared to 9.5% in November and 11.0% in October. Within food, almost all items witness decline in growth led by de-growth in vegetables (10.4% in December vs. 15.5% growth in November). In food, only...
Digital acceleration, large deal continue to be growth drivers We believe the technology sector will witness multi-year growth in coming years led by traction in digital technologies. Infosys is in a sweet spot to capture this growth considering the investment it has made in digital technologies. This, coupled with increase in outsourcing in the US and Europe, vendor consolidation opportunities, captive carve outs and cost take out deals will further boost its revenues. In addition, Infosys has executed well on large deal conversion and is expected to be a key driver of...
Sales volume of city gas distribution (CGD) companies with higher CNG contribution are expected to fall in the range of 4-5% YoY as demand was not fully restored. Industrial PNG segment, however, witnessed faster recovery and are expected to report YoY growth. Domestic PNG sales volume are expected to remain steady. On the margin front, we expect an improvement YoY as CGD companies have not fully passed on lower gas cost to customers. On a QoQ basis, margins are expected to decline, to some extent, on account of an increase in spot gas prices during the quarter. For...
EBITDA to grow 12.4% YoY with bottomline up 15.3% YoY Increase in the value added segment revenue from the basket of specialty chemical companies along with a rise in realisation for selected companies can aid the operational performance. We expect our coverage universe companies OPM to expand 30 bps YoY to 18.4%, leading to EBITDA growth of 12.4% YoY. Bottomline is expected to grow 15.3% YoY, largely on the...
Rapid ageing, greater life expectancy, lack of exercise and altered lifestyles are driving incidences of osteoarthritis among Indians. Knee replacement surgery in India has been growing in double digits over the years. It is expected to emerge as fourth most common cause of physical disability in India in the next decade. Shalby is a market leader in procedure of arthroplasty (source: F&S; Report). It has ~15% market share of all joint replacement surgeries conducted by organised private corporate hospitals in India. It has performed more than one lakh joint replacements till date....
The US (select pack) portfolio is expected to grow ~7% YoY to | 12808 crore due to 1) YoY strengthening of US$ vs. rupee (3.6%), 2) new launches (Dr Reddy's) and 3) increased traction/recovery in specialty, injectable portfolios (Albuterol Cipla, Lupin, Insulin Biocon, Injectables - Aurobindo). Domestic formulations (select pack) are expected to grow ~10% to | 9908 crore. Europe is expected to grow ~15% YoY driven by new launches, ramp-up in existing products and currency benefits. API segment is also expected to post strong ~16% YoY growth on the back of a low base effect and shortterm opportunities amid Covid. On the hospitals front, continued QoQ...
In our coverage universe, EIH Ltd is best placed on the B/S front. The recent fund raising of | 350 crore thorough rights issue would improve debt/equity mix to 0.1x from 0.2x. While Indian Hotels has a strong promoter backing, its debt/equity is 0.7x, which combined with capex requirement could lead to further rise in D/E to 0.9x if current Covid issue persists for a longer period. Lemon Tree Hotels, being on a capex mode, is...
During Q3FY21, there was a sequential improvement in base metal prices. During the quarter, average zinc prices on the LME were at US$2628/tonne, up 12% QoQ & 10% YoY while average lead prices were at US$1902/tonne, up 2% QoQ, albeit down 7% YoY. Similarly, average aluminium prices on LME were at US$1917/tonne, up 12% QoQ, 9% YoY while average copper prices on the LME were at US$7178/tonne, up 10% QoQ and 22% YoY. Movement of base metal prices on LME...
In Q3FY21, we expect construction companies to return to topline growth driven by near optimum labour availability, pick-up in execution. For real estate companies, key highlight will be strong residential sales volumes growth led by factors like pent up demand, benign interest rates, measures like stamp duty cut in Maharashtra. However, financial numbers of real estate companies will look optically weak due to rental waiver in retail...
In Q3FY21, we expect construction companies to return to topline growth driven by near optimum labour availability, pick-up in execution. For real estate companies, key highlight will be strong residential sales volumes growth led by factors like pent up demand, benign interest rates, measures like stamp duty cut in Maharashtra. However, financial numbers of real estate companies will look optically weak due to rental waiver in retail...
Double digit revenue growth expected in coming years We believe growing virtualisation of business is driving multi-year growth in IT spends. We believe IT companies will be key beneficiaries of this multiyear technology transformation phase. In the current phase, enterprises are building a cloud-based foundation that will serve as a resilient, secure and scalable digital core. In subsequent phases, enterprises will see new age technologies developed around cloud and will lead to new business models & differentiated customer experiences. TCS' investments in building deep expertise on these platforms, in research & development spends and in...
Average diesel prices are up ~10% YoY, which will lead to a rise in freight cost by | 55/tonne. Also, petcoke prices inched up 26% QoQ (up 35% YoY). However, players switching to coal would help restrict its impact to ~1214%. This would lead to another cost impact of | 90-100/tonne during the quarter. On the other hand, we expect cost rationalisation drive initiated during H1 to keep overall cost of production under check. Also, cement prices despite QoQ correction are up 5.1% YoY. This is expected to lead to...
