Steady performance; New CEO seen delivering early Wipro delivered QoQ CC revenue growth (3%) and margin (21%), which were tad higher than our expectations. This is the best growth it has delivered in 10 years in the 4Q and third successive quarter of good growth under the new CEO, Thierry Delaporte. The revenue growth guidance for 1QFY22 is relatively strong at 2-4% QoQ in CC terms, which will translate into 1113% YoY CC growth - a first in many years (or possibly the last decade). This is without including Capco and Ampion acquisitions, which should get consummated sometime during 1QFY22. At Wipro's recent analyst meet (Meet), the new CEO talked about an obsession with growth' while maintaining respectable margins. Without giving out specific numerical targets,...

Infosys' 4QFY21 results were a tad disappointing, especially due to elevated expectations. The guidance for FY22, both on revenue growth (12-14% CC) and EBIT margin (22-24%) was broadly in line with consensus expectations. The attrition spike by 500bps QoQ was a key negative surprise. With the street building in mid-teen or higher revenue growth number for Infosys in FY22 and an EBIT margin that is only slightly lower than FY21, there is little room for disappointment in 1HFY22. With demand likely to get back to its normal seasonality, the street is likely building in strong numbers for 1QFY22 and 2QFY22 on QoQ revenue growth. The very large net new number of FY21 total TCV of US$14.1bn (66% net new, 2.9x FY20) has...

CPI inflation came in at 5.52% in March'21, largely in line with our estimate of 5.54%. But, it was marginally Research Analyst (Economist) higher than Bloomberg consensus estimate of 5.40%. Food & beverage inflation stood at 5.24%, marginally teresa.john@nirmalbang.com higher than our estimate of 5.18%. Core inflation stood at 5.96% in March'21, marginally up from 5.88% in +91 22 6273 8114 Feb'21, but below our estimate of 6.1%. Core inflation rose less than anticipated on account of a sharper than expected decline in the personal care & effects category amid a decline in gold and silver prices. In addition, inflation in key categories such as household goods & services and healthcare rose only modestly. Despite the increase in inflation on a low base, headwinds from rising commodity prices and the prospects of supply-chain bottlenecks (on account of localised lockdowns), we expect rates to remain...

TCS delivered a strong 4.2% QoQ CC revenue growth and EBIT margin of 26.8% in 4QFY21 though they were a tad below our expectations of 4.5% and 27.1%, respectively. This performance was driven by work connected with core transformation, market share gains and execution of some of the large deals won earlier. Just like 3QFY21, 4QFY21 growth seems a 9-year best and is more or less broad-based, both vertically and geographically. The strong exit along with the highest TCV ever recorded in history (US$9.2bn in 4QFY21) and a robust pipeline sets up TCS to deliver midteen USD revenue growth in FY22, in our view, which should be among the highest in the Tier-1 set. As indicated in our 4QFY21 preview, TCS did not give out any specific guidance on both revenue and margin. On the latter, it allayed recent fears surrounding supply-side pressures affecting...

Second wave pushes back return to normalcy; 2HFY22 key With India in the grip of a second wave of the Covid-19 virus, we believe that the expectations from the investing community of 1QFY22 being the start of return to normal business conditions have been dashed. With Maharashtra, a key geography for the Film Exhibition industry, being shut for film exhibition for the entire April 2021, with potential for further extensions, we are now faced with shortterm uncertainty - around cost structures, screen openings, film release dates, movies going straight to OTT, etc. Pararellely, we also have the vaccination program underway, which is going on in fits and starts, but which will hopefully gain significant traction in 1QFY22. With all of these, we believe that 1QFY22 is likely to be only as good as 4QFY21 or potentially slightly worse. We think that expectations...

FY21 to end on a strong note supported by demand revival & low base 4QFY21 saw the economy continue to revive with decline in COVID cases and improvement in mobility. Further, the sector will see an optically strong revenue growth across most companies on account of a low base, which was affected by the onset of the pandemic. We expect overall sales of our consumer coverage universe to grow by 20.4% YoY in 4QFY21 on account of robust performance by FMCG and Paint companies. Within FMCG, discretionary & out-of-home categories have seen QoQ pick-up whereas essential categories (biscuits, health & hygiene products etc.) have seen some normalization during 4QFY21. Paint sector is expected to continue...

We expect healthy earnings for NBIE Chemical companies for 4QFY21, aided by healthy soil moisture and high water storage levels in key reservoirs, which augur well for Rabi crop prospects and CPC/fertilizer demand. The positive view on CPC is based on the growth in area sown in this period that augurs well for CPC demand. The sharp increase in global crop prices (including soyabean) to record highs and healthy agri product demand (especially for corn and soya from China) are reported to have lifted farm incomes globally and in India this is likely to boost exports for our CPC universe. Tata Chemicals (TTCH) is likely to see improved chemical volume, especially in India. Overseas sales could see some pressure due to the resurgence of COVID cases. PI Industries and Sumitomo lead the pack...

We are cutting Tata Chemicals (TTCH) from Accumulate to Sell with the stock expected to witness 31.3% downside from CMP based on our new target price (TP) of Rs563 post the 63.9%/252% rally in the last 3 months/12 months. The stock trades at rich PE of 38.9x/22.1x on FY22E/FY23E EPS, which prices in the improving fundamentals over FY21E-23E ~ our FY23E EBITDA is the highest in 15 years. The stock's valuation looks stretched as it implies a 143%/35% premium to the 5-year median/SD+1 readings on 12-month rolling PE of 9.1x/16.4x vs EPS CAGR of 5.4% over FY20-FY23E, which is more relevant than the 43.3% CAGR on the beaten down FY21E as base. This premium is likely due to bullish expectations on EV battery...

Revenue growth for capital goods and consumer durables sector in 4QFY21 is chirag.muchhala@nirmalbang.com expected to be robust due to a favourable base (4QFY20 was affected by COVID-19 +91-22-6273 8092 pandemic and lockdown) and healthy underlying demand. The capital goods sector has witnessed pick-up in execution as 4Q is a seasonally strong quarter while the Rahulkumar Mishra consumer durables sector continues to benefit from revival in consumer spending, Research Associate pre-buying by trade channel and the advent of summer season. However, both the rahulkumar.mishra@nirmalbang.com sectors are facing challenges such as steep rise in commodity prices, higher +91-22-6273 8028 transportation costs (both overseas ocean freight and domestic transport) and...

For 4QFY21, companies have reported strong pre sales, implying that problems related to raw material availability and labor migration have started to fade away. While pre-sales for companies have been encouraging to a certain extent, the distress in realizations is expected to continue. The Retail segment was one of the worst affected segments due to COVID-19 for the real estate companies. While most of the retail assets have resumed operations, only certain category of the tenants is expected to perform well. Select categories like multiplexes, family entertainment and F&B; are still expected to be weak because of the restrictions with regards to operational timings and capacities in place in most states. The trading density is expected to be high as only genuine buyers have visited the malls. Thus, retail revenues...

In 4QFY21, Nifty IT index (up 6.6%) outperformed Nifty (up 5.1%) by 150bps and Nifty Bank index (up 6.5%) by 10bps (see Exhibit 3). While 3QFY21 results had surprised the street with multi-year best revenue growth (QoQ) in a seasonally weak quarter, margin expansion and sustained deal win momentum, we expect ramp-up of previously signed large deals to help the sector post another stellar 4QFY21 (in relation to history). We expect all IT companies to report a robust QoQ performance, led by healthy demand, sustained deal pipeline conversion, stable to positively biased pricing environment and meaningful cross currency gains. This is mainly due to client enterprises being under pressure by the pandemic and the subsequent lockdown...

Demand recovery and low base to drive strong results; commodity inflation to restrict margin expansion We expect 4QFY21 earnings of Auto & Auto Ancillary companies in our coverage to witness strong YoY growth, led by (1) volume recovery, albeit on a low base (2) operating leverage benefits (3) tight cost controls. But, a sharp uptick in RM cost basket (+10-15% QoQ) is a negative and should drag margins lower QoQ (refer our report- AutoMeter). Most OEMs have announced price hikes from January and will take another round of price hikes in April to partly offset the negative impact from RM inflation. However, we expect margins to be under...

Low base and higher demand to improve earnings Fourth quarter is always the best quarter for cement companies and we expect our coverage cement companies to report (1) robust YoY growth in volume primarily due to the low base of 4QFY20 (2) sequentially lower EBITDA/mt on account of cost inflation and (3) increased debt repayments, owing to improved cash flows. Demand across various segments like rural housing, affordable housing and infrastructure was buoyant in 4QFY21. We believe that most cement companies operated at full clinker utilisations across North, Central and West regions, thereby providing operating leverage. South region reported...

4QY21 was operationally better for hotels in terms of room revenues and F&B; business compared to Research Analyst 3QFY21 and 9MFY21. Since international travel, corporate travel and MICE have not yet resumed, we amit.agarwal@nirmalbang.com expect the RevPar to be lower YoY. Some of the loss of international demand is expected to be +91-22-6273 8033 substituted by staycation demand, uptake in domestic travel to leisure destinations and luxury destinations. Our interactions with experts suggest that certain leisure properties are performing better and drawing higher RevPar compared to the RevPar they used to draw in the pre-COVID times. The cost benefit initiatives taken by the companies are expected to benefit them in 4QFY21 as well. However, as we expect 4QFY21 to have higher capacity utilization, the cost savings are...

Good end to a difficult year; FY22 outlook strong Despite the Covid-19 pandemic, in FY21, MoRTH constructed a record total length of 13,394kms of national highway, translating into 37kms/day of highway construction whereas in FY20 it had constructed a total length of 10,236kms. Both, awarding and construction activities have been very strong and as a result, we expect a good end to FY21 for the construction companies. This strong momentum is expected to continue in FY22 too given the strong order books of the construction companies. For our coverage companies, we are forecasting 19.5%/7.5%/15% YoY growth in Revenue/EBITDA/PAT for 4QFY21. We are building in higher revenue growth for...

In the second fortnight of March'21, economic activity did not witness a sharp slowdown despite the sharp rise in Covid-19 cases and deaths. The number of active Covid cases rose by 152.01% from the previous fortnight, the biggest fortnightly increase since Apr'20. The number of deaths was up by 115.8%, the biggest fortnightly increase since May'20. Meanwhile, the pace of vaccination is picking up, but it is yet to reach critical mass, and only about 3-3.6mn people are being fully vaccinated (completed two doses) every fortnight. As of 31st March, 2021, only ~9.1mn people were fully vaccinated. But, a total of ~63mn people have received at least one dose of the vaccine as of 31st March, 2021. Mobility indicators witnessed some slowdown, except for essential activities. The TomTom New Delhi traffic congestion index, which had been slowing for the past two fortnights, dipped further to levels last seen in July'20. Data from Google suggests that workplace mobility slowed while the use...

Covid resurgence supports lower for longer'; CPI at 5.54%; WPI at 6.24%; IIP at -3.3% We expect the RBI's monetary policy committee (MPC) to keep rates on hold at its meeting on April 7. We also expect the RBI to highlight downside risks to growth on account of localised lockdowns. The resurgence in Covid-19 cases will ensure that the RBI will not pull back accommodative measures in a hurry and rates will remain lower for longer'. The RBI is likely to reiterate its whatever it takes' stance to ensure smooth functioning of the bond markets and to prevent yields from rising sharply. We had conservatively pegged our GDP growth forecast for FY22 at 7% as evidence from the past pandemics had suggested that intermittent containment measures are inevitable. Please see our note Lessons from history: Recovery post pandemics. In our view, while base effects will aid recovery in the months ahead, intermittent...

Based on our recent channel checks as of 31st March 2021, cement price at the pan-India level has increased by 1.9% to Rs351/bag over the fortnight. All the regions (except the Central region) have seen an increase in cement prices. Maximum increase of Rs18/bag was observed in Kolkata and Raipur whereas Bangaluru was the only city to report a price decline (down Rs5/bag). Prices remained flat in Lucknow, Kanpur, Agra, Indore and Bhopal. Volume push was observed in the last 15 days of March 2021 and as a result prices in few regions were marginally lower. Based on the dealer feedback, we expect prices to increase in the first fortnight of April 2021 due to increased cost inflation. Over the last 2-3 days,...

We expect 4QFY21 earnings to be under pressure for most pharmaceutical companies in our coverage universe. Domestic growth will be subdued due to COVID-19 and 4QFY21 remains a seasonally weak quarter for most domestic names. In addition, the US market also did not witness any meaningful launches while overall prescriptions remained under pressure due to a renewed surge in COVID cases there during the quarter. Operational cost savings that have continued to aid pharma companies so far should reverse partially as...