27 July 2020 CROMPTONs top line was 11% below estimates. Earnings were 14% above expectations on account of strong cost controls, led by a cut in ad-spends and the ongoing cost rationalization exercise (Project Unnati). Although a large part of the cost control measures (e.g. ad-spends) may not be recurring, the business model strength of the company is impressive in times of a crisis. Demand activity in Jun20 is back particularly at ~85% for fans and at ~90% for overall ECD segment. Management has indicated that there was no MoM sales decline observed, despite pent-up demand coming in post lockdown. Improvement in working capital cycle helped in further strengthening of the Incorporating 1QFY21 performance, we have increased our FY21E EPS by 12%, while FY22E EPS remains unchanged. Maintain unchanged TP of INR285 (32x FY22E EPS). Revenues declined 47% YoY to INR7.1b (11% below expectation).
INR2.25-2.5b in FY21 for new product development and capacity We are upgrading our EPS estimates by 9%/7% for FY21/FY22E to reflect the improving outlook for tractor volumes, mix and cost savings. - Margin has improved due to lower commodity cost Improved product mix (>40hp tractors), as share of 40HP+ tractors has increased to 62% in 1QFY21 (v/s 45-46% YoY) v/s 57-58% in 4QFY20, Subdued discounts during the quarter, which is expected to remain subdued till the supply chain normalizes, and Other expenses being lower by INR300-350m due to (a) no SG&A; expenses in 45 days shutdown (had resulted in no cost on SG&A; of INR300-350m, and (b) no marketing spends, both of which will normalize in the coming It has aggressive plans to cut fixed cost by 10-15% in FY21. Our estimates are not yet factoring in any contribution We are upgrading our EPS estimates by 9%/7% for FY21/22E to reflect the improving outlook for tractor volumes, mix and cost savings.
25 July 2020 ICICI Banks (ICICIBC) 1QFY21 results were in line. The bank prudently used higher treasury/stake sale gains for higher provisions. This led the COVID-19 related provision buffer to 1.3% of loans. Also, provision coverage strengthened further to ~79%. Core operating performance (excluding treasury/stake sale gains) was strong, led by robust NII growth and controlled operating expenses. Moratorium book declined to 17.5% of loans while another ~2% of loans (outside moratorium) were overdue on their Jun20 EMI. Maintain PAT grew 36% YoY to INR26b (in-line), despite higher provisions. The bank prudently made provisions of INR55.5b due to COVID-19 (v/s INR27.25b in 4QFY20), taking the total COVID-19 provisions to INR82.8b. NII grew 20% YoY (4% QoQ) to INR92.8b.
Direct International (DI) revenues were largely stable, while DXC revenue witnessed sharp decline (16% QoQ, CC). EBIT margin contraction was largely led by a sharp fall in While S&M; expenses remained stable (as % of revenue), pressure at the gross margin level was partially offset by G&A; rationalization (~150bp QoQ). While the DXC business (~20% of revenues) is expected to be under pressure in the near term, Direct International should continue to drive overall performance. While MRC of USD250m (up to Sep21) is still due, management expects the DXC In 1QFY21, revenue (USD) / EBIT (INR) / PAT increased by 3%/12%/4% YoY v/s International (DI) revenues were largely stable, while DXC revenue witnessed estimates. EBIT margin contraction was largely led by a sharp fall in utilization While S&M; expenses remained stable (as % of revenue), pressure at the gross margin level was partially offset by G&A; rationalization (~150bp QoQ).
Commentary around defending margins, healthy deal wins (USD150m), and a robust We upgrade our EPS estimate for FY21/FY22E by 5%/0% as we adjust our revenue growth assumptions and margin trajectory post the beat during the In 1QFY21, revenue (USD) / EBIT (INR) / PAT decreased by 15%/13%/7% YoY v/s our estimate of 17%/32%/30% YoY. The USD1.5b deal pipeline (v/s USD1b in 4QFY20) remains healthy, with robust demand in Cloud and Infrastructure Services and Digital Application Across verticals, Retail is expected to stabilize by 2QFY21 and grow in 2HFY21. We value the stock at ~10x FY22E 1Q revenue was impacted as clients ramped-down some projects as part of their immediate cost-control initiatives in response to COVID-19. Decline was The USD1.5b deal pipeline (v/s USD1b in 4QFY20) remains healthy, with robust demand in Cloud and Infrastructure Services and Digital Application Services. In 1QFY21, revenue (USD) / EBIT (INR) / PAT decreased by 15%/13%/7% YoY v/s Revenue decline of 4.8% QoQ (CC) was lower than our expectations.
25 July 2020 TTCH India Soda Ash business reported revenue decline of 10% to INR14.8b, primarily due to significant 9% drop in volumes (to 634kMT) and 1% decline in realizations. This was due to an oversupplied market (incl. increased imports) and decline in Soda Ash prices. Tata Chemicals North America (TCNA) revenues declined marginally by 0.3% YoY to USD480m in FY20, mainly due to 1% drop in realizations (to USD215/MT). However, this was offset by marginal 0.6% increase in sales volume (to 2.23MMT). TCNA revenue (in INR terms) inched up 1% YoY to INR34b while EBITDA increased 8.5% YoY to INR7.4b. Its Europe operations reported ~5% YoY revenue decline to GBP150m in FY20, which was mainly due to the 11% YoY fall in Soda Ash volumes (to 0.29MMT). However, this was partially offset by 1% YoY increase in Bicarbonate volumes (to 0.
Expected dividend yield of 5-6% over the next two years and the apparent relief of cigarette sales bouncing back to near pre-COVID levels are not clear positives due to (a) persistent global ESG concerns on cigarettes (85% of EBIT in FY20), (b) overhang of further GST increase on cigarettes, (c) ITCs valuation premium to global tobacco majors like Philip Morris (trading at 15.2x one-year forward P/E) and BAT (at 8.1x), and (d) continuance of weak earnings trajectory (6.6% PBT CAGR over the last 5 years). PAT growth has still been better in high single-digits led by the Expected dividend yield of 5-6% over the next two years and the apparent relief of cigarette sales bouncing back to near pre-COVID levels are not clear positives due to (a) persistent global ESG concerns on cigarettes (85% of EBIT in FY20), (b) overhang of further GST increase on cigarettes, (c) ITCs valuation premium to global tobacco majors like Philip Morris (trading at 15.2x one-year forward P/E) and BAT (at 8.1x), and (d) continuance of weak earnings trajectory (6.6% PBT CAGR over the last 5 years).
25 July 2020 While Asian Paints (APNT) reported sharp YoY declines of 42.7%, 58.2%, and 67.4% in sales, EBITDA, and PAT, respectively, the numbers were still better than expected given the double-digit volume growth witnessed in Jun20. Despite healthy volume growth, earnings growth has been weak for several years now, which is likely to continue going ahead. Nevertheless, the likelihood of sharp earnings decline, as feared earlier, may not materialize. Therefore, it is possible that APNT, unlike other discretionary peers, would emerge relatively unscathed from the COVID-19 crisis. With better than expected recovery, APNT continues to remain market leader in a category with attractive long term potential. Hence, we upgrade our rating from Sell Rich valuations of 55x FY22 EPS for a business with uncertain earnings growth and weaker ROCE v/s peers prevent us from turning more constructive. 55%) in the domestic Decorative Paints business.
Capital investment and product development are on track for the Generics segment, additional We maintain our EPS estimates for FY21/FY22 and value BIOS at 30x (20% discount to its five-year avg.), arriving at TP of INR450. BIOS is well-placed to deliver a 39% earnings CAGR over FY2022, led by new launches / increased market share for existing products in the Biologics segment and superior performance from the Generics / Research Services segment. New contracts, led by Mylans efforts, would lead to better market share going BIOS is on track with regard to developing Insulin Aspart. Considering new launches and strong traction from existing products, we expect a 43% CAGR in revenue to INR40b over FY2022. An increase in the number of customers and better traction from existing customers are expected to drive a 12 13% CAGR in Research Services revenue over FY2022E. BIOS delivered 16% YoY growth in this segment, led by favorable demand for API.
25 July 2020 JSW Steels (JSTL) 1QFY21 results reflect the adverse impact of COVID-19 on steel demand and prices as consol. EBITDA declined 55% QoQ to INR13.4b. We expect an increase in domestic steel prices, supported by improving domestic demand and international prices which should improve margins in 2QFY21. EBITDA was down 64% YoY (+55% QoQ) to INR13.4b (v/s est. INR13.0b) on lower volumes and realizations. It reported loss of INR5.6b (v/s profit of INR10.4b in 4QFY20 and est.
