Our interaction with Hero MotoCorp's (HMCL) management indicated that the structural growth traction in the two-wheeler (2W) industry remains intact. HMCL continues to benefit from premiumisation of its products, its stronghold in the economy and executive motorcycle segments, and aggressive products offerings in premium bike and scooters segments. HMCL is a market leader in the Indian 2W industry, commanding a ~38.5% share. The company commands ~65% market share in the combined economy and executive motorcycle segment, which together makes up 80% of the motorcycle market size in India. HMCL has strong penetration in semi-urban and rural areas, aided by its largest distribution network...
We retain Buy recommendation on the stock of Biocon with a revised PT of Rs. 520. Biologics segment is expected to be a significant growth driver and the company is well placed to harness the opportunities emerging in global biosimilars space. Sturdy growth prospects, strong earnings visibility, healthy balance sheet position and lower debt-equity augur well for the company. The possible listing of its wholly owned subsidiary - Biocon Biologics Limited...
State Bank of India (SBI) is an attractive play on a gradual recovery in Indian economy, with a healthy PCR (88% including Technical Write Off), robust Tier 1 capital ratio of ~11.9% and a strong liability franchise. Manageable asset quality outlook with a 97% collection efficiency, guidance of just Rs. 60,000 crore for FY2021 slippages and restructuring (~2.5% of gross advances), and only ~Rs 2,000 crore of provisions remaining provide comfort. Stock trades at 1.2x / 1.0x its FY2022E / FY2023E ABVPS which is reasonable;...
Aditya Birla Fashion & Retail Ltd (ABFRL) clocked a good recovery in the festive season with its core business Madura Fashion & Lifestyle and Pantaloon Retail saw business recovering to 75-80% (better than a 45% recovery witnessed in Q2FY2021). Company will reduce debt by Rs. 1,750 crore (to ~Rs. 900 crore) by FY21-end by raising...
Sharp recovery in LNG imports (up 12% y-o-y in November and continuous y-o-y growth since July) would help Petronet LNG (PLNG) to sustain high utilisation rate for its Dahej terminal. PLNG to also take 5% re-gas tariff hike for Dahej terminal from January 2021. We do not see any concern on volume outlook from the recent rise in spot LNG price as 98% of volume comes from long-term and tolling contracts. Kochi terminal utilisation to reach breakeven level of 25% by Q4FY2021. PLNG is well positioned to tap India's rising LNG consumption with 2mmt expansion at Dahej terminal, ramp-up of Kochi terminal utilisation, and focus to enter LNG retailing business....
We retain a Buy on KEC International Limited (KEC) with an unchanged PT of Rs. 435, considering its improving operations and reasonable valuations. Pick-up in execution would ensure better performance in FY2021. Strong YTD order inflows and a Rs. 30,000-crore bidding pipeline offer visibility for remainder of FY21. Expect 1.4x and 2.5x y-o-y rise in revenue for rail and civil in FY2021. Rail division continues faster execution, while order tendering is gaining traction for railways and tendering in T&D; is largely dominated by international market. YTD collections better than last year. Interest outgo contained with lower rate debt....
We maintain a Buy rating on Honeywell Automation India with a revised price target of Rs. 44,312, rolling forward our valuation multiple to FY2023E. Management expects FY2021 performance to be better than FY2020, backed by execution capabilities and growing demand for industrial automation and software solutions. Company likely to benefit from domestic growth, driven by rising technological capabilities...
Margin contraction in Q3FY21 is a concern and could keep the stock price volatile in the near term; however, recent roll-back of Rs. 4/scm discount on industrial PNG would improve the margin back to Rs. 5-5.5/scm in Q4FY21. Moreover, volume growth guidance of 10%12% p.a. to drive strong 20% PAT CAGR over FY20-FY23E along with high RoE of 27.5% Potential NGT crackdown of polluting industrial areas in Gujarat and ramp-up of volume from 7 new GAs provides strong impetus for sustained high volume growth. GGAS is one of the best bets in the CGD space as consistent high-volume growth and potential to become net cash positive by FY22 makes valuation of 16.8x its FY23E EPS attractive. Hence, we maintain our Buy rating on GGAS with a revised PT of Rs. 452....
We continue to have a Buy rating on ILGI with a revised PT of Rs. 1,710. We had management interaction with ICICI Lombard General Insurance (ILGI) to get a business update. Higher collections in the health insurance vertical and momentum on overall business are positive. Recovery (and rebound) in auto sales augur well for the motor business. Strong pickup in the health segment has also helped post GDPI collections, which are encouraging. Premium income had already normalised for H1FY2021 (GDPI growth of 0.8% y-o-y for H1FY2021) and traction for October and November was healthy (YTD GDPI growth of 3%), which indicates...
CESC's management indicated that power demand in Kolkata (key area of operation) has normalised and impact of COVID-19 (lower PLF-related incentive) has passed; company has guided for 9% y-o-y growth in PAT in H2FY21. Turnaround of Dhariwal Infrastructure (guided for PAT of Rs. 75-80 crore for FY21 versus loss of Rs. 10 crore in FY20) to sustain as PLF of Chandrapur plant has improved. Rajasthan DF losses would reduce in FY21 and is expected to turn profitable by FY22. Consistent improvement in performance of subsidiaries would aid gradual re-rating of CESC. Concerns of higher receivables (at Rs. 2,000 crore as of September versus normal levels of...
We continue to have a Buy rating on ILGI with a revised PT of Rs. 1,710. We had management interaction with ICICI Lombard General Insurance (ILGI) to get a business update. Higher collections in the health insurance vertical and momentum on overall business are positive. Recovery (and rebound) in auto sales augur well for the motor business. Strong pickup in the health segment has also helped post GDPI collections, which are encouraging. Premium income had already normalised for H1FY2021 (GDPI growth of 0.8% y-o-y for H1FY2021) and traction for October and November was healthy (YTD GDPI growth of 3%), which indicates...
CESC's management indicated that power demand in Kolkata (key area of operation) has normalised and impact of COVID-19 (lower PLF-related incentive) has passed; company has guided for 9% y-o-y growth in PAT in H2FY21. Turnaround of Dhariwal Infrastructure (guided for PAT of Rs. 75-80 crore for FY21 versus loss of Rs. 10 crore in FY20) to sustain as PLF of Chandrapur plant has improved. Rajasthan DF losses would reduce in FY21 and is expected to turn profitable by FY22. Consistent improvement in performance of subsidiaries would aid gradual re-rating of CESC. Concerns of higher receivables (at Rs. 2,000 crore as of September versus normal levels of...
We retain our Buy recommendation on Jyothy Labs Limited (JLL) with an unchanged price target of Rs. 170; discounted valuation at 19x its FY2023E EPS with stable growth prospects in the medium terms makes it a good pick in the consumer goods space. Volume growth momentum to sustain in Q3 with dishwashing and personal care categories likely to maintain double-digit growth, while fabric care recovered to 100%. HI with large presence in North and East is a seasonally weak quarter but will grow on a y-o-y basis. With some of the key input prices (including packaging material and palm oil), gross margins are expected to be lower on a y-o-y basis. The company will be taking price hike of 3%-5%...
Further, the company's foray in the lucrative biologics/biotech space through the acquisition of a majority stake in Richcore Lifesciences would be a key positive as it would create a new revenue stream. We interacted with the management of Laurus Labs Limited (Laurus) and their commentary suggests a robust growth outlook. Laurus' formulations business is gaining traction with the tender business, which accounts for around three-fourth of total formulation sales, is witnessing sturdy growth. Moreover, Laurus is expanding capacities, primarily through brownfield expansions to cater to increasing demand. The first leg of de-bottlenecking is...
We retain Buy on Polycab India Limited (Polycab) with a revised PT of Rs. 1,200, given the improvement in demand in underlying user-industries. Strong traction seen in new launches and sales in pan-India residential market is expected to drive the company's housing wires and FMEG segments. Multiple price hike undertaken by the company led by a rise in copper prices to drive C&W; revenues along with underlying healthy demand. Copper volatility is a natural hedge unaffecting margin profile. The company to deepen its presence in semi-urban and rural markets to drive FMEG...
The company has launched its audience targeting technology on CTV in Oct 2020. The combined opportunities in mobile-app video, OTT and CTV programmatic ad spending is expected to clock a 17% CAGR over 2020-2025 Affle's revenue from its top-10 industry verticals have grown at a CQGR of 26% over the last three quarters. These top-10 industries are expected to grow in the range of 20-70% CAGR over next five years. Affle aims to achieve a 10x revenue growth and reach over 10 billion connected devices from over 2.1 billion connected devices currently in the next 10 years. We...
Jubilant Foodworks (JFL) has expanded its platter by foraying into the Biryani segment under the brand name -Ekdum! by opening three restaurants in Gurgaon. This is inline with its strategy expand its portfolio to include products that Indian consumers prefer. The expected rise in QSR sector, shift to trusted brandspost COVID-19 and higher ordering through online platforms will be the key growth drivers for such ventures in the near term. Core business recovered m-o-m (in October,business bounced back to 96%). With stores operating at optimal levels and the on-going festive/cricket season, online...
We interacted with RBL Bank's management, which indicated that while the bank was still cautious on credit quality and growth outlook, it has steady fundamentals by healthy provisions cover and adequate capital buffer, which provides it cushion in the medium term. The bank expects slow traction on business loans, but traction on retail loans is better; falling cost of funds is likely to help maintain NIMs at present levels. RBL Bank currently trades at 1.2x/1.1x its FY2022E/FY2023E book value per...
NTPC's risk averse regulated business model provides earnings visibility (expect a 19% PAT CAGR over FY2021E-FY2023E) as robust commercialisation target (5-6 GW annually) would drive strong growth in regulated equity base. We expect gradual re-rating led by improving operational performance (PAF at 90% plus and higher PLF for coal-based power plants), 15% CAGR guidance over FY21-23 in regulated equity, and better mix of renewable energy to allay concern of ESG. Management is confident to reduce receivable to Rs. 16,000 crore by Q4FY2021 (versus Rs. 19,164 crore in Q2FY2021) as discoms are expected to clear dues of power generation...
Further, Aurobindo is investing ~$180 -200 million (~Rs. 1,350-1,500 crore each) towards capacity expansion in FY2021 and FY2022 and encompassing areas of injectables and oral solids across geographies....
