Larsen and Toubro (L&T;) has underperformed the broader market over the trailing two months, correcting by ~9%, led by sustained delay in revival of project tendering in the infrastructure sector against earlier expectations of revival post normal monsoon. L&T;'s FY2020 order inflow growth guidance of 10-12% seems unlikely to be achieved, with order inflows announced for Q3FY2020 till date remaining weak (three significant orders in Rs. 1,000 crore to Rs. 2,500 crore range, one mega order above Rs. 7,000 crore). To achieve the targeted FY2020 order inflow, L&T; would require Rs. 1 lakh...

We think that Kotak Mahindra Bank's (KMB) valuation (3.6x 1HFY22E BV) reflects, amongst other qualities, its superior risk-adjusted margin. Our analysis across key peers reveals that KMB's risk-adjusted margin, at 3.65-3.70%, is at par with HDFC Bank (HDFCBK). Even during the most testing times, the bank's asset quality has held up very well, which has also helped the bank to maintain low credit costs through the cycle (10-year avg: 61bps). Liability franchise management has been excellent. Despite reducing overall cost of deposits by ~220bps over the last 6 years, CASA ratio has expanded substantially, to 52.5% (FY19). A strong balance sheet (low NPAs + strong CAR), supported by an enviable...

In addition to large capacity addition in lieu of higher IMO-led diesel demand, Chinese teapot refineries have ramped up their utilization rates (~67% vis--vis 61% in Oct-Nov18) as the country increased crude oil import More importantly, with IMO less than a month away, the forward curve for diesel depicts an incapacitated scenario of a mere USD14-16/bbl, as against consensus estimate of USD25-30/bbl. MRPL suffered refinery shutdowns in 1HFY20, leading to lower utilization (6.2mmt in 1HFY20 v/s 7.8mmt in 1HFY19) and poor GRM (USD0.13/bbl in In 1QFY20, water scarcity in Mangalore led to a major forced shutdown of 75 days. Nevertheless, in 2QFY20, MRPL faced another (precautionary) shutdown of the phase-III units after intensified monsoon caused landslide in Dakshina Given subdued global oil demand and incremental capacity addition, GRMs will likely remain suppressed for a few more months. Originally, it was expected that the INR150b phase-III expansion would generate ~USD8/bbl of GRM when SG GRM is at USD6/bbl.

3 December 2019 The Supreme Court (SC) has deferred its verdict on JSPs case related to the offtake of iron ore from the Sarda mines. JSP though had made payment for ~12mt of iron ore (mainly fines) to Sarda and the state (royalty/taxes), thereby stating its claim on the related ore. JSP cited it sources iron ore fines at INR1,800-2,000/t (ex-mine). Thus, if the company were allowed to lift the 12mt of fines, it will lead to a benefit of INR22- 24b. Thus, availability of this 12mt would provide significant cushion against any possible disruption (accounting for 18-20 months of sourcing from merchant mines). In recent times, JSPLs stock has re-rated (up ~55% over the past two months) on expectations of (a) benefit of coal block allocation (Gare Palma), (b) possible positive verdict on the Sarda mines case and (c) a recovery in steel prices.

2 December 2019 After reporting a sub-optimal performance over the last few years, SBIN appears well positioned to report a strong uptick in earnings. With the overhang on Essar resolution getting clear, recoveries for the bank are expected to be robust at ~INR120b (90% of exposure). This will enable it to further improve upon the PCR and provide toward a few other residual stressed accounts. Our deep-dive analysis on stressed accounts suggests that SBINs exposure to the stressed pool stands at ~2% of total loans, which we believe is manageable. However, according to SBINs disclosure on stressed accounts, net stressed loans (excl. SBIs subs SBI MF, SBI Life, SBI Cards and SBI Cap have displayed a robust performance over the last few years. At CMP, subs account for ~34% of total valuation, while SBIN trades at a discount of 24% to its six-year average (1.2x ABV) (refer page 7 for quick snapshot on subs).

without the adjustment, operating loss would have been to the tune of Rs 7.87 crs/$1.1m (vs loss of Rs 3.86 crs/$0.6m in Q2FY19). Higher depreciation expense and finance cost due to lease rental adjustment dented PBT (loss of Rs 22.88 crs/$3.3m vs loss of Rs 9.68 crs/$1.4m...

Cadila Healthcare is India's leading vertically integrated pharmaceutical company. With its presence across the value chain, it manufactures finished dosage forms, active pharmaceutical ingredients, animal healthcare...

Bank of Baroda is an Indian multinational, public sector banking and financial services company. It currently has 9,449 branches in India and 100 overseas offices across 21 countries. The bank merged with Vijaya Bank and...

Background: Vinati Organics Limited (VOL) was established in 1989 to manufacture specialty organic chemicals. It has since grown to becom e the world's largest manufacturer of IBB & ATBS and India's largest manufacturer of IB & HP MTBE. The company's products are exported to customers in countries across Europe, America and Asia. Competitive edge in niche specialty chemicals Cost leadership & scale economies in IBB and technological entry barrier in ATBS. The company started with a small capacity of 1,000 TPA and gradually expanded to 26,000 TPA today for its ATBS production, capturing 60% of the market share. The company also commands more than 65% market share in the world for IBB. With consistent investments in technology and capacities, the company is the largest producer of IBB in the world with a capacity of 16,000 TPA....

Hurt by planned shutdown of the phenol for two weeks coupled with moderation in global phenol prices, DNL's phenolics business posted over 13% drop in revenues last quarter, while crack spreads continued its moderation not least due to slowdown in global economic growth and subdued activity in Indian real estate and automobile sectors. EBIT margin as a consequence slid to 5.6% in Q2 compared to 11.8% in the preceding...

27 November 2019 Oil & Gas Over FY11-19, LPG consumption in India registered ~7% CAGR while LPG imports clocked ~14% CAGR over the same period. LPG demand in India is expected to grow from ~23mmt in FY19 to ~40mmt in FY35 (a conservative estimate) supported by increased LPG penetration in the country and rise in average consumption per household. With Indian refiners moving towards increasing yields of higher value added products, LPG production is expected to lag the incremental demand. We estimate LPG imports to register ~6-7% CAGR over FY20-35. The company expects to push gas through its Mumbai terminal starting Jan20, which should aid additional throughput of ~400-500,000mtpa (taking the total throughput to 1.2mmtpa). A new LPG project at Kandla with static capacity of 45,000mt is expected to be completed by 4QFY21. Throughput of ~700,000mtpa is expected in the first full year of operation (i.e.

Sector: IT /Mid-Cap | Earnings Update 2QFY20 Background: NIIT Technologies is a leading global IT solutions organization. The Company focuses on three key verticals which are Banking and Financial Services (16.7% of revenues), Insurance (31.1% of revenues), and Travel/ Transportation (27.8% of revenues). The company has around 95 active clients across US (49% of revenues), EMEA (37% of revenue) and Row (14% of revenues). The Company added 40 new clients in FY2019 and won 6 large deals, spread across US and EMEA....

Change in our financial statements post application of Ind AS 116 ACCUMULATE Ind AS 116 replaces existing standard on leases i.e. Ind AS 17, Leases with effect from accounting periods beginning on or after 1 April 2019. Ind AS 116 will affect primarily the accounting by lessees and will result in the recognition of almost all leases on balance sheet. The standard removes the current distinction between operating and finance leases and requires recognition of an asset (the right-of-use the leased item) and a financial liability to pay rentals for virtually all lease contracts. An optional exemption exists for short-term and low-value leases. The statement of profit and loss will also be affected because the total expense...

26 November 2019 INDIGO has guided to bring down its high maintenance cost significantly from FY22 as deliveries for A321neos replace the older aircraft and the share of A321neos increases in the total fleet. However, the directive from the DGCA can delay this guidance due to replacement of older aircraft, which in turn might require extension of current leases and result in continued high maintenance cost. It may take 5-6 months to catch up the lagged supply, creating difficulties for replacement of engines according to the DGCAs directive. Considering the sizeable amount of modification (110 engines) and the supply lag from the aircraft manufacturer, the company may not be able to replace all of the required 110 engines in FY20, in our view. As a result, there is no change in our EPS estimate for FY20/21. Our estimates are highly sensitive to (a) ticket yield, (b) PLF and (c) crude price assumption.

NOCIL for Q2FY20 posted Revenue of Rs. 210cr (23% YoY), EBITDA of Rs. 48.5cr (39% YoY) and PAT of Rs. 50.7cr (3% YoY) aided by tax cuts. The drag in Q2 performance was owing to severe slowdown in auto industry (domestic & global) that led to fall in volumes as well as realization.

Sector: Power Transmission /Mid Cap | Earnings Update 2QFY20 Background: KEC International (KEC), the flagship company of the RPG (Harsh Goenka) group, is a leading EPC player in T&D; (Transmission & distribution) Space. KEC has over six decades of experience with footprint across 100 countries globally and strong execution capabilities. KEC, the global leader in Power Transmission EPC has...

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Sector: Auto Parts & Equipment /Mid-Cap | Earnings Update 2QFY20 Background: Amara Raja Batteries Ltd (ARBL) is the second largest automotive battery manufacturer and the largest supplier of industrial storage batteries in India. JCI, the global leader in lead-acid automotive batteries and advanced batteries for start-stop, hybrid and electric vehicles, provides technical support to ARBL. Company's business model is de-risked as it caters to automotive as well as industrial segments. Sales are well diversified...

Sector: Banking /Mid-Cap | Earnings Update 2QFY20 Background: RBL bank (RBL) came into operations in 1943 and was incorporated as a small, regional bank in Maharashtra with two branches in Kohlapur and Sangli. Post the change in the management team in 2010, it has been one among the fastest growing private sector banks and now has 346 interconnected branches and 394 interconnected ATMs spread across 24 Indian states and union territories serving ~7.3mn customers. The bank offers a comprehensive range of banking products and services customized to cater to the needs of large corporations, SMEs, agricultural customers, retail customers and development banking & financial inclusion (low...