Sell

Cummins Q1 earnings came in below our estimates primarily on account of lower exports impacting operating margin by 1.5 percent and Fx impacting 1percentof operating margin.

Despite good performance in marketing segment, Bharat Petroleum Corporation (BPCL) has reported weak operating performance in 1QFY20 with EBITDA falling by 44% YoY and 55% QoQ to Rs21.8bn (in line with our estimate) led by lower refining throughput and margin. It reported a GRM of US$2.81/bbl in 1QFY20 vs. US$7.49/bbl in1QFY19. We believe 4% YoY fall in crude throughput was mainly due to Mumbai refinery upgradation for BS-VI fuel. Its net profit declined by 53% YoY and 66% QoQ to Rs10.7bn (11% above our estimate) mainly due to higher interest cost (+50% YoY and +28% QoQ). Notably, its debt increased by Rs15.5bn sequentially. Further, adoption of Ind AS-116 resulted into net Rs520mn decrease in PBT. In Jul'19, benchmark complex...

We had downgraded Divi's after it reported one of its strongest quarters in a decade in 2QFY19, as we had realized that the performance was driven by shortages in certain molecules (like Valsartan) and currency erosion of ~10% during that quarter. For the last 2 quarters, our thesis of margin contraction is playing out and we have further cut our FY20/21E estimates by 8-9% as we are yet to see the impact of ongoing capex. We believe it would be a challenging task for Divi's to cross 36-37% margin in FY20/21E. Still, with our generous estimates of 11/10/11% revenue/EBITDA/PAT CAGR over FY20-21E, Divi's is trading at 32.3/27.7x FY20/21E EPS, a ~50% premium to peer-avg and ~40% above its historical avg, much of which corresponds to periods of 40% plus return ratios. Even so, valuations have rarely crossed 25x one-year forward P/E. With return ratios falling below 20%, current valuations look unsustainable. We maintain SELL on DIVI, following a second consecutive quarter of dismal performance. With sustained erosion in profitability, we have cut our FY20/21E EPS estimates by 8-9%. At 22x FY21E EPS, our revised TP is at Rs 1,320.

Tech Mahindra (TECHM) subsidiary Pininfarina (PINF) was a harbinger of growth for the company over the past two years, bringing in 16% of incremental FY19 revenue.

TGBL has reported a steady quarter led by 5.3 percentage growth in consolidated revenue on YoY basis against 5.7 percentage of growth in Q1FY19.

HPCL's Q1FY20 earnings at Rs 8.1bn (52% YoY) came in below estimates, marred by low GRMs (US$ 0.75/bbl, after US$ 2.6/bbl inventory loss).

fall in EBITDA at US$9mn (PLe:USD$125mn). Operational issues and sharp fall in spreads impacted TSE's earnings. Due to weak margins in TSE, we cut our EBITDA/EPS estimates for FY20E by 4%/18%. Despite sharp increase in iron ore prices, steel prices softened by US$20-25/t in last couple of months. In spite of serious trade restrictions imposed on its imports by various countries, China acted in a disciplined manner with reduced export intensity and stable domestic demand. On the contrary, RoW (ex-China), the so called disciplined and earnings focused markets witnessed...

With benefits from the last quarter of exclusive sales of gRanexa and slower Change in Estimates | Target | Reco ramp up in Levothyroxyn sales, the adj. sales increased by by 1% QoQ due to muted growth in Japan and declining sales in US (constant currency). Adj....

Currently, LPC has OAI status for its 4 plants i.e. (1) Mandideep Unit 1 (No new approval pending for approval); (2) Goa (30-40% of US sales; WL also; 20 pending ANDAs); (3) Somerset (~15-20% to US sales, ~40 ANDA pending ANDAs); (4) Pithampur Unit 2 (WL; 15-20 ANDAs pending for approvals; no new filings since WL). We expect the pending US FDA issues to remain as the key overhang for the...