We reiterate that AUBANK represents the virtues of both a bank and an NBFC. The bank's ability to deliver strong operating performance across parameters in a challenging environment, (with considerable consistency, esp. over the trailing 3 qtrs) increases our confidence on RoAE improvement at the bank. However, in view of lofty valuations (6.5x Mar-21E), esp. after the recent run-up (48% since Sept-19), we downgrade the stock to NEUTRAL. While the mgt has indicated that the bank could raise CET 1 in FY21, we have not built this. AUBANKs 3QFY20 performance exceeded our estimates across all fronts. While we remain admirers of AUBANKs strong fundamentals and business potential, were compelled to downgrade to NEUTRAL, post the recent run up. TP of Rs 866 (4.75x Dec-21E core ABV of Rs 177 + Rs 23/sh for the residual AAVAS stake).

Asset quality deterioration was on expected lines, and from pre-identified stressed pools. However, we remain cautious on RBK's asset quality for the following reasons (1) 3QFY20 saw a sharp ~Rs 7bn rise in BB and below rated corp loans, (2) Recent asset quality trends reflect poorly on underwriting and risk practices , and (3) Broader economic conditions. While the capital raise is a big positive and will support the bank's growth trajectory, it does not entirely mitigate the above risks. We maintain NEUTRAL. Yet again RBKs PPOP was better than expected, due to sharp NIM improvement and one-off staff cost reversals. PAT was above estimates, even as provisions remained elevated. Slippages remained high, and were mostly from anticipated stress. Maintain NEUTRAL with a TP of Rs 348 (1.5x Dec-21E ABV of Rs 232).

TCS reported sluggish revenue growth of 1.3% QoQ and 6.8% YoY in constant currency terms for Q3FY20 at Rs. 39,854 crs. Client addition for TCS remained high during Q3FY20 which will help to generate sustainable growth over long term. TCV for Q3FY20 remained strong at $6bn.

We like IPRU's re-engineered business model which is focused on a more diversified product mix along with an increased protection share. We expect VNB to grow at FY19-22E CAGR of 19.3%. Lower than expected growth and lower protection share remain key risks. We rate IPRU a NEUTRAL with a TP of Rs 495 (Dec-20E EV + 19.5x Mar-22E VNB). IPRU printed a higher than est. 3QFY20 total APE of Rs 20.4bn (3.9/7.3% YoY/QoQ,+5.5% vs. est.). 9MFY19 reported VNBM was steady at 21.0%, leading to a +24.7% YoY VNB of Rs 11.4bn.

22 January 2020 by International Formulations (+48% YoY), supported by the US (+61% YoY; 43% of sales) and Non-US (+15% YoY; 12% of sales) segments. However, muted growth in India (1% YoY; 30% of sales) and API business (-14% YoY; 15% of sales) dragged growth to some extent. Gross margin shrank marginally by 30bp YoY to 75% due to the change in 25%) led by lower employee cost (-70bp YoY) and other expenses (-470bp YoY), partly offset by higher R&D; expense (+110bp YoY). EBITDA increased PAT grew at a higher rate of 38% YoY (v/s EBITDA growth) to INR2.3b (our Sartans-led opportunity is expected to continue for the next 3-6 months. ALPM incurred capex of INR5.5b in 9MFY20, of which INR1.8b was in 3QFY20. As most sites would be ready by FY20, it would likely incur maintenance-related capex of INR3-3.5b annually. Gross debt stood at INR14.1b and cash at INR590m at end-3QFY20.

22 January 2019 Havells weak operating performance in 3QFY20, led by 10% overall revenue decline, has led to the third consecutive quarter of cut in earnings estimates. While the base is favorable, Havells should regain double-digit growth in FY21, if improvement in the liquidity scenario for overall consumption revival is supportive. Overall, revenues declined 9.9% YoY to INR22.7b (v/s 14% below est.). Revenue miss was largely due to weakness in Havells core portfolio (i.e. ex- Lloyd business), which declined 9%. This can be attributable to (a) weak consumer sentiment, (b) economic slowdown, (c) weak industrial demand due to muted capex, (d) dealer de-stocking on liquidity crunch, and (e) high base of last year (3QFY19 revenue growth was 29% in core portfolio). Lloyds revenue was down 15.9% YoY to INR3b. In the AC business, the company has witnessed low double-digit growth, a key positive after dull performance in the last summer season.

22 January 2020 3QFY20 revenue momentum was hit by weak consumer advertisement spends in a slowing economy and higher expenses, which dragged margins; the same trend is expected to continue for another quarter. Zee Entertainments (ZEEL) overall revenue declined 6% YoY to INR20.5b (5% miss) on account of lower-than-expected ad revenues. Ad revenue declined 16% YoY to INR12.3b (6% miss), led by decline in ad spending by advertisers. Domestic ad revenue was down 16% YoY as volume growth for consumer companies declined. Subscription revenue grew 15% YoY to INR7.1b (in-line), with domestic segment witnessing 22% YoY growth, which was offset by 17% decline in international subscription revenues. EBITDA at INR5.7b (6% miss), declined 25% YoY; EBITDA margin plummeted by 720bp YoY and stood at 27.6%, partly due to rise in other expenses. ZEEL reported long-pending trade receivables worth INR7.5b from Dish TV and Siti Cable, which has now been given a revised recovery plan spanning 12-24 months.

The operational performance came in healthy in the quarter. Revenue from operation came in at | 525 crore, up 10% YoY; with revenue yield reported at 57 bps. Other income came in healthy at | 67 crore. Accordingly, total revenue was at | 592 crore, up 11% YoY. Expenditure was contained at ~| 126 crore with employee expense of | 57 crore. Accordingly, expense to AUM remained steady at 14 bps in Q3FY20 vs. 13 bps in Q2FY20. The...

HDFC Asset Management Company Limited (HDFC AMC) reported its 3QFY20 results with the key pointers being: (1) AUM growth was mostly in line with estimates; retain 18% forecast for FY20 (2) PAT growth strong; revise estimate upwards to account for higher other income (3) Individual equity key to profitability (4) Investing in tech as direct investing is on an uptrend (See comprehensive conference call takeaways on page 2 for significant incremental colour). Per se, on the key financials, HDFC AMC posted MF AUM growth of 12% YoY at Rs3,689bn, net revenue growth of 10% YoY at Rs5,247mn, EBITDA growth of 30% at Rs4,114mn and PAT growth of 45% YoY at Rs3,526mn. We have revised our estimates for FY20/FY21/FY22 and retained Accumulate...

KMB's strong fundamentals (CRAR, liability franchise, minimal reported stress) should enable the bank to deliver an improvement in already strong return ratios. We do not find the current slowdown in growth and uptick in stress worrisome. Our NEUTRAL stance reflects discomfort on rich valuations. The contentious issue of promoter holding remains unresolved, and the next hearing is slated in Mar-20. KMBs earnings were slightly below estimates as opex (led by a one-off) and provisions came in higher. GNPAs continued to rise, though not alarmingly. Maintain NEUTRAL with a TP of Rs 1,681 (4.25x Dec-21E core ABV of Rs 309 + Rs 367 for subs), as valuations are expensive.

21 January 2020 3QFY20 results broadly reflect Hindustan Zincs (HZL) continuing challenges in ramping up production. While mined metal production did recover (+4% QoQ), it was on a low, seasonally weak base. Revenue/EBITDA was up 4%/8% QoQ (in-line). We expect volumes to recover in 4QFY20 as production issues recede with ramp-up from SK mines. We build in 17% QoQ improvement in EBITDA for 4QFY20 on higher volumes and lower costs. However, at 6x FY21E EV/EBITDA, this benefit is well baked in. Maintain HZLs EBITDA was up 8% QoQ at INR22.9b (in line with est) on the back of some sequential recovery in volumes. Refined metal production rose 4% QoQ to 219kt. Revenue also increased 4% QoQ on higher zinc/silver volumes and slightly better LME prices. PBT came in at INR21b (flat QoQ). PAT, though decreased 22% QoQ to INR16.2b (5% lower than est.) as 2QFY20 had deferred tax credits of INR3.65b.

Kotak Mahindra Bank (KMB) reported 3QFY20 results with the key takeaways being: (1) Weak credit growth amid overall economic slowdown; we cut estimates (2) NIM expansion of 8bps qoq due to lower CoF; liability profile enviable (3) 14bps uptick in GNPAs partly a function of slower credit growth (See comprehensive conference call takeaways on page 2 for significant incremental colour.) Per se, on the key P&L; Items, KMB posted NII growth of 17% YoY at Rs34,295mn, PPOP growth of 23% YoY at Rs23,881mn and PAT growth of 24% YoY at Rs15,959mn. We have revised our estimates for FY20/FY21/FY22 and have retained an Accumulate rating on KMB with a revised target price of Rs1,757 (from Rs1,781 earlier), valuing...

Kotak Mahindra Bank's (KMB) 3QFY20 earnings were below expectations with weaker than expected growth, higher one-time opex charges, and elevated provisions resulting in 1.4% YoY decline in PBT (8% QoQ). Reported PAT however was higher by 24% YoY on lower than expected tax rate at 18%. Slippages at 2% (annualized) remained elevated with higher slippages from unsecured and corporate portfolios. Growth in fee-based income moderated to 10% YoY mainly led by weaker growth in advances and lower TP distribution fee. Margin improved further to 4.7% driven by ~20 bps sequential decline in cost of funds as the full impact of lower SA rates (for accounts with balances below 1 lakh) played out. KMB's consolidated profits grew by 27%...

Earnings visibility continued to remain weak due to deteriorating ore grade last one month due to production restrictions in China and improvement in sentiments related to USA-China Trade war. However, we do not see prices...

Net interest income (NII) came in at | 3430 crore, up 16.7% YoY, on the back of an improvement of 300 bps YoY in margins at 4.69% (up 8 bps QoQ). Other income grew 36.3% YoY to | 1314 crore. Traction in core fee income remained slower at ~8% YoY. One-time charge of | 200 crore towards pension obligation has led CI ratio to inch up to 50.2%. Provision came in higher at | 444 crore i.e. ~20 bps of advances. Moderation in operating profit and higher-than-expected provision was partly offset by lower tax outgo...

Revenues from core services fell marginally by 0.2% to US$155.2 million while DLM revenues dipped 36.8% QoQ to US$15.1 million. Weakness within core services was mainly due to drag in its largest vertical aerospace & defence (decline 5.1% QoQ) on account of a dip in spend in engineering design. Decline in transport (down 14.7% QoQ) vertical also contributed to the slowdown in core. On the positive side, communication recovered healthily with 2.3% QoQ growth. Going ahead, growth is expected to gradually recover in aerospace from Q4FY20E. Taking into account...

KMB's bank earnings of Rs15.9bn (PLe: 16.9 bn) was lower than estimates on back of miss in NII and higher provisioning on few lumpy corporate slippages. NII growth has been reflected from lower growth trajectory in-line with macroeconomic factors and similar to peer banks. A strong liability built-up (CASA + Retail TDs) in last few years is reflecting in rapid lowering in cost of funds and is now equivalent to some of the large banks in the sector leading to all time high NIM of 4.69% and also has opened up opportunities for new product penetration and drive growth ahead. Small setback has been increased slippages from corporate & unsecured retail leading to moderate...

20 January 2020 KMBs third-quarter result mirrored overall slowdown in the economy, which led to moderation in loan growth and elevated slippage trajectory. Overall operating performance was healthy with PPoP increasing by 23% YoY, despite the bank making INR2b provisions toward pension obligations. We cut our EPS estimate for FY21/22 by 4%/7%, primarily as we factor in lower loan growth assumption. Maintain Standalone PAT increased 24% YoY to ~INR16b (4% miss v/s our estimate of NII grew ~17% YoY to INR34.3b (2% miss), impacted by moderate loan growth; however, margins improved 8bp QoQ to 4.7%. Opex increased 21% YoY to INR23.8b, led by one-off of INR2b toward pension obligations. Thus, the C/I ratio came in at 49.9% v/s 45.2% in 2Q. Loan book grew ~10% YoY to INR2.2t, reflecting the slowdown in the business banking/corporate banking and CV/CE portfolios. Deposits growth moderated to 12% YoY to INR2.4t, albeit term deposits grew by 5% YoY.

The company recently revamped its distribution policy for the domestic market, which we believe would aid the company to achieve higher growth from the domestic market, going ahead. Revenue from India was up 35% during Q3FY20, largely driven by a late Kharif and better Rabi season. Apart from this, new product launches have also helped higher growth during the quarter. Going ahead, the management expects to introduce two new molecules every year along with more focus towards Rabi crop portfolio, diversifying the revenue stream, to a certain extent in the years to come....

Weakness in BFS, retail likely to continue in near term The company reported a below par performance on the revenue front mainly due to continued headwinds in banking financial services (tightening of spends in large banks in the US, UK) and retail (large retailers in US). The pressure is likely to persist in the near term in these areas. Further, the company discontinued giving breakup between digital and non-digital segments citing blurring lines between the two parts of businesses. On the other hand, momentum is expected to continue in insurance and life...