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The pharma sector is up ~1% YTD and has outperformed the Nifty Index by 28%. We prefer stocks with high India exposure as it offers greater earnings visibility, supported by reasonable valuations. Reiterate Buy on Cipla. Downgrade Dr. Reddy's to Reduce. Our positive stance on Indian pharma is premised on sectors relative resilience to Covid disruption, favorable currency tailwinds and stable outlook for India and US business. India growth has picked up (~10% growth for IPM as of MAT Mar20) and we forecast 11% growth for covered companies over the next two years. US pricing environment continues to remain benign and the regulatory challenges are well understood.
ARBP has mutually terminated its proposed acquisition of Sandoz asset (Novartis generic subsidiary). ARBP planned to acquire a part of Sandoz's generic business including oral solid and dermatology products in CY18 while expecting to wind up the deal by CY-20 March with USFTC's approval. With US$1,200m sales, ARBP agreed for the deal value of $US900mn and an additional payment of US$100m based on revenue milestones with the entire amount was to be funded by debt. While our estimated earning has not discounted potentials from Sandoz deal, we placed ARBP UNDER REVIEW'...
Companies like Larsen & Toubro and KEC with exposure to Middle East and North Africa (MENA) region are expected to get moderately impacted by the recent more than 30% fall in crude oil prices to US$35/barrel. This is expected to impact overall orders/awarding from MENA region. Companies like Elgi Equipments, AIA Engineering, Thermax, Engineers India and Kalpataru Power with exposure to international geographies like Europe, Middle East, China for sales or essential raw material may get impacted. Accordingly, we have tried to factor in the additional risk and revised our...
Companies like Larsen & Toubro and KEC with exposure to the Middle East and North Africa (MENA) region are expected to get impacted by the recent more than 60% fall in crude oil prices to US$22/barrel. This is expected to impact overall orders/awarding from the MENA region. Companies like Elgi Equipments, AIA Engineering, Thermax, Engineers India and Kalpataru Power with exposure to international geographies like Europe, Middle East, China for sales or essential raw material may get impacted. However, lockdowns in India, UK, Europe and other geographies due to Covid-19 are...
Companies like Larsen & Toubro and KEC with exposure to the Middle East and North Africa (MENA) region are expected to get impacted by the recent more than 60% fall in crude oil prices to US$22/barrel. This is expected to impact overall orders/awarding from the MENA region. Companies like Elgi Equipments, AIA Engineering, Thermax, Engineers India and Kalpataru Power with exposure to international geographies like Europe, Middle East, China for sales or essential raw material may get impacted. However, lockdowns in India, UK, Europe and other geographies due to Covid-19 are...
Crude prices witnessed a sharp decline in March due to spread of Covid-19 across the globe and Opec deal failure. A likely increase in oil output by both Saudi Arabia and Russia from Q1FY21E and lower demand are expected to lead to a sizeable oversupply in the oil market. Subsequent low oil prices are expected to significantly affect ONGC's profitability....
We will be reviewing our numbers and recommendations once we have a better understanding of the Covid-19 situation. ICICIGI: GDPI (ex-crop) increased 13.3% YoY to Rs 10.4bn. Growth momentum (ex crop) improved from -2.0/12% YoY seen in Dec-19/Jan-20. Health and Motor OD business reported growth (ahead of industry) of 12.4% and 12.7% respectively. FY20TD GDPI for ICICIGI stands at Rs 125.7bn (-7.5% YoY), with ex-crop GDPI is healthy at Rs 121.7bn (+13.9% YoY). We have a SELL on ICICIGI with a TP of Rs 1,170 (Mar-22E P/E of 26.0x and a P/ABV of 5.7x). ICICIGI is currently trading at a FY21/22E P/E of 26.6/22.3x and P/ABV of 4.9/4.0x. NIACL: GDPI grew to Rs 19.3bn, +24.2% YoY (ex. crop at Rs 18.6bn, +26.0% YoY) led by growth primarily in health business. Growth in retail business segments such as motor TP/health improved moderately to 20.7/30.3% YoY. FY20TD GDPI for NIACL stands at Rs 246.9bn (+15.6% YoY), ex-crop GDPI at Rs 219.1bn (+12.7% YoY). We have a SELL on NIACL with a TP of Rs 130 (0.65x Mar-22E ABV (less 5% discount for expected 10.4% supply). NIACL is currently trading at a FY21/22E P/E of 7.4/6.2x and P/ABV of 0.4/0.4x. Bajaj Allianz General Insurance (BAGIC): GDPI slipped by 1.4% YoY in Feb-20 to Rs 7.0bn, (ex-crop GDPI at Rs 6.6bn +1.6% YoY) led by sharp decline in crop business (-32.2% YoY). Motor OD GDPI declined 8.6% YoY vs. industry decline of 2.7% YoY. FY20TD GDPI for BAGIC stands at Rs 120.5bn (+20.1% YoY), while GDPI (ex-crop) is Rs 89.4bn...
Muted Volume Growth with Sequential Margin Contraction Mahanagar Gas (MAHGL) has reported a muted performance (albeit marginally above our estimates) in 3QFY20. While total sales volume grew by a muted 3% YoY (+2% QoQ) and EBITDA/ scm sequentially declined to Rs9.2 (vs. Rs9.9 in 2QFY20). Despite a muted growth in sales volume, its net sales decreased by 1% YoY and 5% QoQ to Rs7.4bn (2.3% below our estimate) mainly due to ~Rs2/scm cut in CNG & PNG prices during the quarter. Overall price realisation of Rs26.5/scm decreased by 7% YoY and 4% QoQ. Its gross profit grew by 6% YoY to Rs3.9bn on account of 8% YoY decline in cost of natural gas. EBITDA increased by 8% YoY (-5% QoQ) to Rs2.6bn (in line with...
ABB India has delivered a subdued performance in 4QCY19 with revenue declining by 1% YoY to Rs19.5bn owing to 20% lower revenue in industrial automation and significant decline in other segments. Revenue from Electrification and Motion segment grew by 11% and 7%, respectively. EBITDA margin fell by 390bps YoY to 7.1%, while EBITDA declined by 36% YoY to Rs1.4bn impacted by lower margin across segments. Adjusted PAT declined by 45% YoY to Rs1.1bn due to poor operating performance, while reported PAT declined by 81% YoY to Rs387mn, as the company has provided Rs697mn towards remeasurement of fixed assets and inventory for sale of solar inverter business. Order inflow declined by 16% YoY to Rs16bn in 4QCY19. The current order...
