Despite macro challenges (Demon and GST), DCBB fulfilled its almost prophetic guidance of 1% RoAA. While loan growth disappointed in 4QFY19 (16%), stable margins, improving op-lev and asset quality impressed. With its core growth engine intact, we believe DCBB has the potential to grow at faster rates. Upgrade earnings by ~12/16% for FY20/21E. A significant improvement in resulting efficiencies (anticipated) drives up our RoAA estimate to ~1.2% by FY21E. 4QFY19 marked the fulfillment of dual commitments by DCBB, viz. (1) Achievement of 1% RoAA in FY19A, (2) A meaningful improvement in operating efficiency (C-I ratio lowest in 20 qtrs). We maintain BUY with a TP of Rs 228 (2x FY21E ABV of Rs 114).

With an unblemished record, abundant opportunity and focus on high yielding granular credit segments, RBK will sustainably outperform peers on growth and margins. Op-lev and credit costs (esp. on the cards portfolio) are key monitorables, as they drive RoAA expansion hereon. With a book value-accretive fund raise in FY20, RBK can get capital to fuel its ambitious growth aspirations. Our opex (29% CAGR) and flattish NIM assumptions (3.9%) over FY19-21E provide upside risk to estimates. An all round 4Q show and an impending (book accretive) fund raise justify our positive stance on RBK. Maintain BUY with a TP of Rs 803 (3x Mar-21E ABV of Rs 268).

Cost and Capital Efficiencies to Aid RoE; Maintain BUY DCB Bank continued to deliver a consistent performance in 4QFY19 with 21% YoY growth in noncorporate advances, sustained decline in C/I ratio and further improvement capital consumption. CI ratio improved by 300bps YoY to 57% in FY19 (55% in 4QFY19), contributing ~30bps to RoA in FY19. Mortgages and AIB continue to be the key drivers for loan growth in 4Q and FY19. Focus on small-ticket granular loans, efforts towards cost rationalisation, and improved capital consumption should aid expansion in RoE going forward. Margin decline in FY19; to Improve Hereon Margins declined by 33bps YoY to 3.8% in FY19 led by higher cost of funds (+25bps YoY) and...

Sharp Growth Deceleration In FY20 Not Factored In The Price Mindtree's (MTCL) has given guidance of a sharp deceleration in revenue growth from 18% in US dollar in FY19 to a low-teen level in FY20. This may lead to a downward revision by part of the street which was expecting a mid-teen kind of number (we had been in the high single-digit camp). MTCL also indicated a 100bps-120bps improvement in EBITDA margin driven by tightening of operations (delivery mix, employee utilisation, employee pyramid, better pricing in digital, etc). The margin uptick, we believe, is broadly expected by the street but would be under the scanner as sharp INR depreciation-related benefits seen in FY19 are likely to be absent in FY20. Despite having the largest...

We attended Dilip Buildcon's analyst meet in Goa and visited the under construction site at Zuari bridge & Goa airport on 5th/6th April 2019. Execution of both projects are in high gear and expected to complete Zuari bridge by October 2020. Whereas,...

We attended the conference-call of Dixon Technologies (India) or Dixon to discuss the recent acquisition of its partner's 50% stake in Padget Electronics Pvt Ltd, a joint venture (JV) company. Dixon ventured into mobile phone manufacturing in 2016 through a 50-50 JV with Mr. Pradeep Jain (owner of Karbonn mobiles) to form Padget Electronics. On 12 April 2019, Dixon acquired its partner's 50% stake for a total cash consideration of Rs270mn, thus making Padget Electronics its wholly-owned subsidiary. The key drivers for the acquisition are: (a) Likely surge in the domestic mobile phone market. (b) Imminent addition of a strong mobile brand as its customer. (c) Backward integrated business model which offers higher value addition to customers and margin enhancement...

Men to be separated from boys: The NBFC segment is undergoing a significant shift in market approach. Courtesy recent events such as defaults (and subsequent bankruptcy in several cases) of the debt paper of several toprated corporates, we find that risk tolerance and appetite have been tempered across money markets. We believe this may lead to a possible shift in market approach, giving more...

Deal TCV enhances revenue visibility for FY20E Banking & financial services continued to have momentum in Europe besides a few banks facing company specific issues. Sub-segments such as softness in capital markets can keep vertical growth in check. Commentary on demand in retail & CPG vertical was positive from a medium term perspective. The key positive was continued trajectory in order win TCV, growth of 5% QoQ at $6.2 billion ($21.9 billion in FY19). This implies book to bill ratio of 1.15x indicating better revenue visibility for FY20E. Hence,...

Healthy deal wins, client addition key positive Infosys added one client in the US$50 million, two in the US$100 million and eight in the US$10 million client buckets, representing a healthy client mining and farming strategy. Further, the company's deal wins have also been healthy, up 2x to US$6.3 billion. Out of the overall deal pipeline, we believe US$ 3 billion would be net new deal wins, which can help Infosys to register double digit growth in FY20E. Further, digital growth has also been healthy (up 32.0% YoY, 31% of overall revenues). This gives us confidence...

We largely maintain our FY20E revenue (in US$). We cut our EBIT margin forecast to 25.2% vs. 26.4% and also cut our EPS forecast by 4.3%. We introduce FY21 financials and forecast revenue (US$)/EPS CAGR of 11%/9.9% over FY19-21E. We maintain ACCUMULATE with new TP of Rs2,228 (vs. Rs2,084 earlier) based on 22x FY21E. Key Highlights and Investment Rationale Q4FY19 see strong revenue growth of 2.4%/12.7% QoQ/YoY in CC Both QoQ CC growth and US$ growth of 2.8% was in-line with our forecast. Life Sciences & Healthcare (7.7% of revenue; +18.2% YoY in CC) and Regional markets &...

Infosys' (INFO) Q4FY19 revenue of 2.1% QoQ in CC was in-line with our forecast. However, EBIT margin decline of ~115bps QoQ to 21.4% was a miss. This was offset by lower tax rate which boosted EPS of Rs9.4, +0.4%/+7% QoQ/YoY which was in-line with our forecast. Large deal TCV of US$1.57bn was higher than our forecast. INFO's FY20 revenue guidance of 7.5%-9.5% YoY in CC and EBIT margin guidance of 21%-23% is in-line with our forecast. While we maintain our FY20E revenue forecast, we now factor EBIT margin of 22.3% vs. 23.8% resulting in a 6.2% cut in EPS. We introduce FY21 financials and forecast revenue...

In-line 4QFY19: FY20 Growth And Margin Picture Not Yet Settled TCS' 4QFY19 performance was broadly in line with a positive surprise coming from the BFSI vertical, which after nine quarters, delivered double-digit (DD) growth. This was out of line with commentary given by TCS a month ago (see our note here). TCS hopes to sustain its DD constant currency (CC) revenue growth shown in FY19 going into FY20 and also deliver EBIT margin close to its aspirational target of 26%-28%. TCS emphasised the strong 4Q exit growth rate along with its broad nature as reasons for its hope. We believe only a 3% plus growth (QoQ) in each of 1Q and 2Q of FY20 would help settle the issue. The reason we question DD growth sustenance in FY20 is because FY19 did not witness large deals like...

TCS delivered strong Mar'19 quarter performance with 2.4% QoQ CC growth, 25.1% EBIT margins and US$6.2bn worth deal wins. BFSI growth returned to double digit trajectory and marked its strongest performance in 11 quarters. Digital revenues at US$6.7bn run rate increased by 46% YoY. TCS remains our preferred pick amongst IT large-caps due to its (1) systematic and timely investment in digital capabilities, (2) growth visibility buoyed by robust...

13 April 2019 TCS ended FY19 with full-year constant currency (CC) revenue growth of 11.4% YoY, EBIT margin of 25.6% (+80bp YoY) and net income growth of 22.5% YoY. In FY19, TCS paid out 93% of its free cash flows to shareholders via dividends/buybacks. For 4QFY19, revenue in CC grew 12.7% YoY (in line), EBIT margin shrank 50bp QoQ to 25.1% (in line after adj. for 60bp one-off) and net income at INR81.3b grew 17.7% YoY a 3.6% beat due to INR3.4b forex gains. TCS signed USD6.2b worth of deals in total contract value (TCS) in 4Q, making it the strongest quarter in FY19 on that front.

Infosys came out with good set of numbers in Q4FY19, ahead of our estimate though topline was slightly below our estimate and EBIT margin faced some pressure. Revenue was flat sequentially at Rs 21,539cr against our estimate of Rs 22,109cr. PAT for the quarter stood at Rs 4074cr ahead of our estimate of Rs 3860cr. We are positive on the stock from longer term perspective, however due to cut in FY20E guidance by management, the stock might remain under pressure for few sessions. We maintain our...

expectations of 2.2%. EBIT margins, however, was 25.1%, down 50bps qoq vs. our expectation of 25.6%, but in line if adjusted for one-time charges toward electoral trust. Robust commentary driven by client optimism, evident from strong TCV signings of US$6.2bn up 5% qoq indicates continued business traction for TCS in FY20E. The...

11 April 2019 Automobiles The domestic tractor industry is in its third year of upcycle in FY19, with ~17% CAGR in volumes over FY16-19. While fortunes of the tractor industry are heavily influenced by monsoon, tractor cycles are generally four years long (three good years and one down year). Volumes will at best grow 7-8% in FY20. However, over the long term, MM is targeting a bigger play in the USD160b global farm equipment market both in tractors (USD60b) and non-tractor equipment (USD100b). Network expansion and product launches by competitors (such as Escorts) led contraction in MMs tractor market share to 40.5% in FY19. The market share contraction is explained by the weak performance in key markets such as UP (-250bp to 38.4%), Bihar (-80bp to 48.1%), MP (-190bp to 33.3%) and Maharashtra (-50bp to 44.3%). It gained share in Punjab (+290bp to 44.1%) and Gujarat (+180bp to 41.6%).

We remain positive on Tata Steel on the back of increasing focus on higher margin domestic operations. Tata Steel's standalone operations benefit from its integrated operations thereby clocking higher EBITDA/tonne vis-vis its domestic peers. After the recent correction, since the start of February 2019 both domestic as well as global steel prices have moved upward, auguring well for Tata Steel. Furthermore, with respect to the potential European JV so as to allay EU concerns, both ThyssenKrupp AG and Tata Steel have submitted concessions to European Union regulators in an effort to win antitrust approval for their steel joint venture. Both Tata Steel and...

The slowdown in real estate market is peaking now and there is enough demand seen in retail segment. Though, liquidity scenario has improved compared to Q3FY19, sector continues to see challenges due to higher funding costs resulting into pressure on margin (as compared to last year). In light of liquidity issue and lower demand in reality sector, PNBHFL finds itself in a sweet spot. Company has maintained Rs. 6000 cr liquidity in form of cash and investments as on 9MFY19 and expects to close year FY19 with enough liquidity. PNBHFL has well diversified borrowings profile. It borrows 17%, 30% & 17% from...

We hosted investor meetings with management in Europe and the UK for five days. Catalysts are expected from new project acquisitions and accelerated presales. Investors are positive on Mumbai's property market due to ongoing infrastructure upgrade. Investors believe SRIN is undervalued at a 35% discount to NAV and is a good entry point. They are impressed with the company's high ROE, strong balance sheet and solid growth...