Sharekhan Broker Research reports

NTPC's Q2FY2021 PAT at Rs. 3,505 crore (up 7.4% y-o-y) was in-line with our estimate of Rs. 3,502 crore as higher-than-expected higher surcharge income at Rs. 657 (up 20% q-o-q) and increased regulated equity (up 19.3% y-o-y) was offset by FC underrecoveries of Rs. 271 crore. Management has guided for strong commercialisation of 5,566MW for FY2021, 7,336MW for FY2022, and 5,016 for FY2023 and expects fixed cost under-recoveries to reduce to Rs. 200 crore-220 crore by March 2021. NTPC board has approved buyback of equity shares not exceeding 19.8 crore shares (2% of the total paid up equity share capital) at a price of Rs. 115/share (29% premium...

We maintain our Buy rating on Tech Mahindra (TechM) with a revised PT of Rs. 910, given it is trading at a sharp discount to its large peers. Revenue growth in Q2 would be driven by strong recovery in BPO business,...

Aurobindo Pharma Limited (Aurobindo) is witnessing improved traction in its US business, which constitutes around half of overall sales. Aurobindo is one of the few pharmaceutical companies reporting an impressive performance in the US as compared to others, which have been facing challenges. The US business is expected to grow in double digits going ahead. A combination of factors, including a sturdy new product pipeline, easing of pricing pressures, opportunities arising from shortage of products in the US, and an expected recovery in the injectable business would be key drivers for the US business....

Mid-quarter update raises revenue and margin guidance for Q2FY2021, driven by better-than-expected execution, pick-up in discretionary spends that were held up, and return of normalcy in certain pockets. Given strong capabilities in IMS, HCL Tech would continue to win consolidation deals with...

We retain Buy on KEC International Limited (KEC) with a revised PT of Rs. 435, taking into account improving operations and reasonable valuations. Execution run-rate and labour availability pick-up to ensure higher y-o-y revenue for Q2FY2021 and FY2021. Strong order inflows YTD along with Rs. 30,000 crore-35,000 crore bidding pipeline visibility over the next three months. Expect 1.2x and 2.5x y-o-y rise in revenue for rail and civil in FY2021. Rail division continues faster execution, while order tendering is likely to gain traction. YTD collections better than last year. Interest outgo contained with lower rate debt....

Ashok Leyland Ltd (ALL) is witnessing month on month improvement in MHCV sales as economic activities pick up with the Government opening the economy. A progressive improvement in Index of Industrial Production (IIP) point at picking up of industrial activities which is leading to increased MHCV demand. We expect MHCV industry to witness stronger recovery cycle from FY22 driven by normalisation of economic activity and pent up demand post two consecutive years of downcycle in FY20 and FY21. With the launch of a new LCV platform, ALL has closed an important gap...

Household Insecticides will maintain good run in domestic market led by share gains and better penetration in rural markets; soaps regained growth momentum on improved supply and strong traction in key brands. Africa has recovered from lows with the region quickly exiting the pandemic situation; operational performance to be better in Q2. New leadership's focus on driving growth through faster innovations, cross pollination and shortening working capital cycle augurs well. Godrej Consumer Products (GCPL) clocked relatively better numbers in Q1FY2021...

Revenue is expected to recover to mid-to-high single digits in Q2FY2021 from 3% in May-June (and an 11% decline in Q1FY2021). Core brands Parachute coconut oil have recovered and registered sales that is better than pre-COVID levels (in July-August); Saffola edible oil continues to get good demand and is expected to register an 8-12% volume growth. Conservative ad-spends and stringent cost-saving measures would help company save Rs. 150 crore in FY2021; consolidated OPM to remain at over 20%. Stock is trading at 36x its FY2022E earnings, which is at discount to large-cap...

Shree Cement Limited (Shree Cement) has corrected ~13% over trailing fortnight. As per the DPIIT, cement production declined by 38% y-o-y and 13.5% y-o-y during Q1FY2021 and July 2020 led by impact of Covid-19 and the onset of monsoons respectively. However, our interaction with the management of Shree Cement suggest that it has witnessed volume growth of 7% y-o-y and 6% y-o-y during July 2020 and August 2020 while cement offtake has been good during September 2020 till date. Hence, we believe Shree Cement should continue its industry outperformance during Q2FY2021 as was seen during Q1FY2021 (where Shree Cement reported 19% y-o-y decline in...

SRF Limited (SRF) posted robust Q2FY2021 result with better-than-expected revenue growth of 21% y-o-y (versus our estimate of 6%) to Rs. 2,101 core and sharp 641 bps beat in EBITDA margin at 28.2% (expectation of 21.8%). Chemical/packaging film business reported higher-than-expected revenue growth of 30%/26% y-o-y to Rs. 881 crore/Rs833 crore. Packaging EBIT margin was up 995 bps y-o-y to 29.6% and chemical EBIT margin stood at 19.8% (up 50 bps y-o-y; 724 bps q-o-q). The company is upbeat on strong growth in the specialty chemical business and has guided for...

Positive outlook for festive season; expect strong double-digit growth from FY22: Maruti retail sales decline has narrowed down to 5% driven by improving economic activities due to unlock measures and increased preference for personal mobility. With improving consumer sentiments and the upcoming festive season, dealers expect sales to improve further. We expect Maruti to resume its positive growth trend from the festive season.FY22 is likely to witness a strong double-digit growth with normalization of economic activity and pent...

Company rebuilt supply chain, launched 50 products; rationalised of SKUs to supply relevant products and enhanced capacity of sanitisers (by 120x) and handwash (by 6x) to capture growing demand. HUL focuses on improving profitability through cost-savings; synergistic...

We upgrade TCS to Buy from Hold with a revised PT of Rs. 2,600, given strong earnings growth potential over FY2021-23E Company best-placed to leverage next transformation wave given early investments on tech spend areas, strong delivery model, client proximity and status as preferred digital partner of large enterprises....

CESC Limited's (CESC) Q1FY2021 standalone PAT declined by 38.2% y-o-y (down by 46.4% q-o-q) to Rs. 134 crore, below our estimate of Rs. 193 crore due to lower plant-load factor (PLF) based incentive income as volume slumped by 30.7% y-o-y to 2,118 million units and higher per unit cost of electricity purchased (up 15% y-o-y). However, the decline of 14.7% y-o-y in the consolidated PAT to Rs. 198 crore was much lower as compared to the decline in PAT for the standalone business due to: 1) better profitability of Dhariwal Infrastructure (PAT of Rs. 24 crore versus a net loss of Rs. 24 crore in Q1FY2020) and 2) reduction in losses at distribution franchisee...

Valuation Upgrade to Buy with a PT of Rs. 3,650: We have revised our estimates upward for FY2021E/FY2022E, factoring in strong beat in operating margin, continued growth momentum in Jeevansathi business, and gradual recovery in billings in IT and telecom segments. We continue to believe that leadership position in its core businesses along with improving valuation in certain investee companies (Zomato and PolicyBazaar) bodes well for the company. Further, we expect revenue and margin to improve sharply in FY2022E because of the company's cost-control measures and resumption of economic activity. We prefer...

Sadbhav Engineering Limited (SEL) yet again disappointed on execution front during Q1FY2021 with standalone revenues declining by 73% y-o-y to Rs. 230 crore. However, OPM beat expectations (although falling 402 bps y-o-y to 8.5%) as gross margins improved. Lower revenue affected by COVID-19 led challenges and a dip in OPM led to a standalone net loss of Rs. 26.6 crore (higher than our expectation of a net loss of Rs. 22 crore). However, post Q1FY2021, SEL has seen labour availability and execution run-rate improving to 70-80% and 60-70%, respectively, from July 2020. It expects to achieve labour availability of 90100% and normalized execution run-rate from October 2020 onwards. Hence, the...