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Background: Balkrishna Industries (BIL) is focused solely on 'off-highway' tyres catering to agricultural & industrial segments. The company has a ~7% share of the global market. While OTR forms ~65% of the global market, for BIL, it only contributes ~33% to its revenue. The company has been undertaking various actions like setting up warehouses in markets in North America and Europe to be closer to the customer and have a just in time (JIT) system. The company sales...
City Union Bank Ltd (CUB), the oldest private sector bank in India, is a mid-sized commercial bank headquartered at Tamil Nadu, having a network of 660 branches and 1,757 ATMs spread across the country and a loan book size of ~Rs33,800cr. Total business grew at 11% YoY with deposits and advances growing at 12%/10% YoY while sequential growth remained flat. CASA ratio declined to 23.35% with a 10% CASA growth on a YoY basis and 7% decline on QoQ basis....
Weekly Eco Wrap: Fed, RBI minutes expected to be dovish. AL: Weak Q3FY20; recovery still some time away. Logistics: Rail container volumes steady, major port cargo sluggish
During FY20E, SRCM vol growth will flatten after 8-yr of steady growth (industry leading 11% CAGR) as SRCM is focused on trade sales. This has also helped SRCM's strong margin expansion in FY20E (~Rs 470/MT YoY) to industry best of ~Rs 1,470/MT. In our view, while sales ramp-up from its east, south & west expansions should drive 9% vol CAGR in FY20-22E, volatile pricing in these markets should prevent further margin expansion (with downside risks on higher vol growth). Thus, we estimate its RoCE/RoE to marginally cool off by ~100-200bps in FY21/22E. Our EBITDA forecasts are in-line consensus nos. We value standalone cement biz at 15x EV/EBITDA (in-line industry leader UltraTech's target valuation) - for SRCM's industry leadership in cost & return ratios and strong capex management - leading to SOTP value of Rs 19,900. As the stock currently trades at an expensive 19.8/18.4x FY21/22E EBITDA, and at an EV of USD 280/MT, we downgrade our rating to SELL from Neutral. We downgrade Shree Cement (SRCM) to SELL with a TP of Rs 19,900 (SOTP based: Cement (India)/power biz at 15/5x Sep21E EBITDA, and UAE subsidiary at 1x BV). Our TP implies cement EV of USD 222/MT. In 3QFY20, SRCM reported strong results (Rev/EBITDA in-line our est).
Background: Established in 1995, Solar Industries is the largest manufacturer of industrial explosives and explosive initiating systems in India and has the world's largest manufacturing facility for packaged explosives. With a licensed explosives capacity of over 290,000 MT/annum, the company has ~28% market share in India. Solar, with a 70% market share in exports from India, exports to 51 countries around the world. Economic Explosives, a 100% subsidiary, manufactures detonators. Solar has manufacturing facilities spread across 25 locations and eight states in India. In recent years expanded its manufacturing base to Nigeria,...
The domestic auto space continues to face demand-side challenges across segments at present (for 10MFY20 - PV down 15.4%, CV down 20.3%, 2-W down 15.9%). Increase in product prices on account of introduction of safety features/other regulations, higher taxes and reduced propensity to spend is affecting PV segment while the CV segment is suffering from several issues of cyclical (high installed base, slowing economic activity) and structural (system idle capacity) nature. The upcoming changeover to BS-VI regime is set to further complicate the demand and pricing scenario. We expect the...
Dismal Performance with No Improvement in GRM; Maintain REDUCE Bharat Petroleum Corporation Ltd. (BPCL) has delivered a disappointing performance in 3QFY20. It reported GRM of US$3.23/bbl below ours/consensus estimates of US$4.1/bbl. Petrol/diesel sales volume grew by 5.9%/(1.6%) YoY lower than the industry growth rate of 7.1%/0.2%. It clearly implies that BPCL has lost market share to private retailers during the quarter. EBITDA increased by 248% YoY and 14% QoQ to Rs 27bn (6% below the consensus estimate/8% higher than our estimate) mainly due to 12% YoY growth in crude throughput of refineries, comparative higher YoY GRM and improved net marketing margin on diesel. Net profit grew by 155% YoY (down 26%...
We cut our CY20 and CY21 EPS by 5.4% and 4.7% and maintain Reduce rating on Nestle given that it represents a classic confluence of life time high PE multiples and EBIDTA margins in a scenario of rising input costs with an estimated 10% PAT CAGR over CY19-21. Although NESTLE has been able to report a strong 10% domestic sales growth in a tepid demand scenario, it has...
