Volume growth revival; Faster growing parts return accretive We had a meeting with Bata India (BIL) management recently to understand its 1HFY20 performance in greater detail as well as status of its various initiatives to drive revenue growth and margins. The key takeaways from the meeting were: (1) After many years of stagnant volume due to defocus on lower priced SKUs, volume has grown at 8% in 1HFY20 (5% in 2Q). This has been driven by increased momentum in the wholesale business growing ~18% in 1HFY20. Unlike revenue in last many years, which was driven by average selling price (ASP) growth, we believe from here on, there is going be a better mix of volume and ASP growth. This move has been in line with the strategy of...
This was driven by an increase in generation from pit head (lower variable cost) plants in the northern and eastern regions of India; on the other hand, higher variable cost generation from the southern region CERC, in its order, has taken note of this and (1) extended its implementation up to end-FY20, and (2) set out a methodology for sharing of benefits accumulated in the pool. The CERC has directed that benefits within the SCED pool should be shared equally between the participating generators and DISCOMs (after compensation for part load operations of generators). The benefit for each generator would be in proportion to their share of SCED schedule for the time Our analysis suggests that NTPC is entitled to a net benefit of ~INR1b for the first three months of the pilot scheme (see As observed, PLF for NTPCs non- pit head plants (such as Simhadri, Kudgi, Solapur and Dadri) have declined.
Assuming Rs25-30 hike in ARPU, it translates to incremental EBIDTA of Rs85100bn. Reliance JIO has launched All-in-One Plans' with higher tariffs following hikes by Vodafone and Airtel. After three years of severe tariff war, price hikes are welcome and we expect further hikes going forward. We increase RJIO's ARPU assumptions for FY21-22E to Rs 170 /180 vis--vis FY20 rate of Rs130....
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 Q2FY20, Sheela foam Ltd. reported sales revenues of Rs 497 cr (down 7%YoY& down 3%QoQ), EBIDTA of Rs 70 cr grew strongly by 66% YoY& 13% QoQ. EBIDTA margin improved to 14.2% up 625 bps YoY& 210 bps QoQ. Profit of Rs 59 cr was up 2.4x on yearly basis and 1.5x quarterly basis.
Our constructive stance on ICICIBC (for a while now) has been mostly premised on the reduction in stress pools, consequently lower provisions and (therefore) earnings expansion. The visible risk-consciousness in corporate lending (and limited exposure to recent defaulters) reconfirms our stance on asset quality. The action on the digital and retail fronts sets the bank up for strong, granular and efficient growth. We think ICICIBC now merits a hike in valuation multiple from 2.0 to 2.2x. Maintain BUY. Our revised SOTP is Rs 565 (2.2x Dec-21E core ABV of Rs 200 and sub-value of Rs 125). At the recently concluded ICICIBC Analyst Day, we noted a common desire (and plan) across verticals to drive up risk-adjusted RoAE. The primary drivers of this expansion are (1) Improving oplev due to digitalisation of processes, (2) Expanding margins via faster growth of higher yielding retail loans, and (3) Reducing credit costs by following a calibrated growth path. The emphasis on digital capacity building seems to be a cross-company imperative.
ICICIBC held an analyst day to showcase its digital capabilities being placed at the core and leveraging the same across business segments & operations of the bank. Bank emphasized its journey of making One Bank One ROE as a principle for every business enabled through high focus on core operating profit. This will be led by high use of digital, technology & data analytics helping lower costs, maximize risk adjusted NIMs and enable customized offerings to increase stickiness. We have been witnessing some of the initiatives play out in past couple of quarters with improved market share in...
Siemens India, a flagship company of Siemens AG (Germany), is an integrated technology provider and a leading powerhouse in electronics and electrical engineering. Siemens is strongly placed in Energy and Infrastructure...
In addition, (1) marquee client connects, (2) sales driven by multiple units (e.g. alliances, customer success, large deal teams), (3) strong focus/expertise in a few segments (e.g. CIB and WM in BFSI), (4) optimal scale and (5) a high quality management team remain the key competitive advantages of the company. Over 9MCY19, LTI has witnessed deceleration in growth (~9pp YoY) and drop in utilization (~300bp) due to issues faced at three of its key clients. While client specific issues seem to be largely behind, the key question is whether growth and margins will bounce back in a cautious spending environment. The recent large deal wins hint at growth accelerating over the next 12-18 months. L&T; Infotech It is interesting to note that during the previous cycle of cautious IT spending (Jun16 to Dec17), LTI consistently outperformed growth of Tier-I companies and that too by a wide margin (1-11pp YoY).
ICICIBC has started offering online credit cards to pre-approved customers, while the effective use of technology has facilitated a significant improvement in opex and delinquency trends across key product segments. ICICIBC suggested for robust traction in its unsecured loans business it has reported a 41% CAGR since FY15 and will continue growing strongly as the market share in these segments is not very high. ICICIBC has built customized digital solutions to accelerate growth in business banking and expects this segment to grow at 35-40% over the next few years. The bank follows four levers of business based on risks, (ii) customized product offering, (iii) partnership with fin techs and (iv) strong distribution. ICICI Bank ICICIBC is engaging with various start-ups to provide improved customer proposition, penetrate into newer markets and reduce operating costs across product segments. It is making equity investments into high growth and disruptive fintech start-ups which helps build cutting-edge customized banking solutions for customers and improves competitive positioning.
The Indian cotton scenario was adverse for spinners in H1FY20 as cotton prices internationally fell significantly to ~50-60 cents/pound whereas domestic cotton prices were stable in the range of 80 cents/pound (owing to shortage of cotton crop). On the other hand, international yarn prices corrected with a steep decline in cotton prices. As per the VTL management, in the first six months, India's average monthly exports (yarn) fell to 74 million kg vs. run rate of 102 million kg (down 28%). India exports to China (monthly) for the first six months dropped to 20 mn kg vs. run rate 40 mn...
Grasim Industries Limited's (Grasim) stock has risen by ~10% over the fortnight, led by two key developments in the telecom sector affecting VIL (Grasim holds 11.6%). Firstly, the government provided benefit of Rs. 23,920 crore to VIL through deferment of spectrum payment for FY2021FY2022. However, the Committee of Secretaries (CoS) set up to suggest relief measures for the telecom sector has been disbanded, which has put expectations of further relief in abeyance as of now. Secondly, the three major players in telecom have decided upon tariff hike from December 2019, which is seen as a sign of bottoming out of ARPUs for...
Bharti Airtel (Bharti) and Vodafone Idea Limited (VIL) have announced to increase tariffs of their prepaid services by 15-50%, effective from December 3, 2019. Bharti has raised tariff of its popular bundled plans by 20-40% along with a 40% price hike in low-end plans. Reliance Jio (RJio) has indicated that it will take tentative price hike of 40% and will provide 300% more benefits to its customers, though RJio has not disclosed the plan-wise details. Though we await for RJio's plan-wise details as its new plans could impact equation of subscribers and the pricing gap in the popular plans, its participation in this...
Timken's Q2FY20 performance was led by double digit growth in the railway segment, which contributed 24% to the topline. With strong traction in railway ordering and further push from Dedicated Freight Corridor, the railway segment is expected to play a vital role, going forward. Adding to this, the railway replacement market and bearing maintenance orders would further propel growth in the railway segments. The exports segment during the quarter grew 22% with European markets opening up. Exports are expected to further pick up with Bharuch plant starting to export from this...
We continue to maintain BUY on Airtel with a revised TP of | 550/share, given its relative superior standing and comfortable balance sheet position. For VIL, we continue to believe this price hike is just part of relief and further respite in AGR payout (waiver or payment terms) as well as fund infusion will be key. We now assign a BUY rating on VIL (vs. UNDER REVIEW, earlier) with a TP of | 9/share. Our rating is in the belief that the government's intent and comment on industry implies more measures will be seen, thereby keeping VIL afloat. We also raise our target multiple for Bharti Infratel to 7x...
We view Bajaj Finserv (BFIN) as a play on fast growing consumer finance, and the high growth potential/underpenetrated insurance business in India. Its three subsidiaries, namely the lending arm of Bajaj Finance (BAF), and the insurance subsidiaries are strong domain leaders in their...
JLR has endured a turbulent operating environment over the last two 29 November 2019 years, led by a troika of adverse macro, product mix (due to pipeline favoring Jaguar) and market mix (due to the underperformance in China led by product quality issues, high inventory, high discounts and low dealer profitability). aforementioned challenges, particularly on product/market mix, are likely to ease based on product pipeline visibility and initiatives undertaken by JLR in China. JLRs product pipeline is dominated by LR, with four of the five new product launches over the next 2-3 years coming from the LR brand. In China, JLR has been focused on (a) reducing inventory (now at lowest levels since 2017), (b) improving dealer profitability and (c) brand-led pull strategy. JLRs cost-cutting initiatives under Project Charge have started reflecting in P&L;, with GBP0.5b of the targeted GBP1b of cost savings achieved till Sep19 and the balance GBP0.5b on track to be achieved in 2HFY20.
In the plywood business, GIL's market share was at 26% of the | 4,500 crore organised plywood market (total plywood industry size: ~| 19,000 crore) with a pan-India network of 1,870 distributors/stockists, 6,000 retailers serviced by 27 branches. Currently, its product portfolio consists of 64%, 36% premium, mid-to-low segment plywood in volume terms (72%, 28% in value terms), respectively. To gain market share by increasing presence in the mid-to-low segment, GIL had earlier launched plywood under Bharosa & Jansathi brands. Going ahead, the management is aiming at premium, mid...
