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value Rs. 10 each, (Comprising of fresh issue of 1,18,80,46,000 Equity Shares* (Rs. 3089 cr.) and Offer Employees Reserve for Sale of 59,40,23,000 Equity Shares* (Rs. 1544 cr.) by Total...
Gradual improvement in demand to cushion overall growth We expect 3QFY21 earnings for Auto & Auto Ancillary to witness sequential growth driven by healthy volume recovery and cost control measures. Pent-up demand, increased preference for personal mobility and strong rural sentiments has enabled to revive the sector. Ramp-up in production post unlocking measures has helped to fill channel inventory,. Tractor, PV and 2W OEMs witnessed good pent-up demand, aided by strong rural and semi-urban markets. CV segment is gradually witnessing a recovery led by increase in construction activities and national infrastructure projects. Various cost control measures and increasing capacity utilization will enable to drive operating margins. However,...
Budget 2021 will aim for a booster dose for growth We expect Budget 2021 to provide a booster dose for growth by focusing on government spending on infrastructure, rural and healthcare. The thrust on rural spending is expected to prevail, as full-fledged urban recovery will be tied to the end of the pandemic, which is most likely to occur only in 2HFY22. Urban infrastructure and housing will receive due thrust to support urban job creation. The micro, small and medium enterprises (MSME) sector has been hard hit by the pandemic. Therefore, we expect further incentives to ease the stress and boost credit flow. Incentives to support the real estate and hospitality sectors are also likely. The...
IRFC is a proxy play on the strong capex growth in Railways which has witnessed a considerable pickup post FY15 as the NDA Government accelerated the overall infrastructure spending including Railways. Railway capex witnessed a growth of 20% CAGR post FY15 compared to 14% CAGR in the preceding ten years. Also, stable cost-plus business model makes IRFC a low risk (nil NPA), low return (11-12% ROE) company. Upon comparing IRFC with other PSU NBFCs having exposure to infrastructure sectors, we observe that IRFC has a marginally lower ROE which is compensated by higher growth; although valuations appear to be higher than peers. We believe IRFC is fairly priced at Rs. 26 and has limited scope for any meaningful upside. We rate the issue as Neutral'.
Asian markets are trading mixed as investors take note of data from China that reported it's GDP rose 2.3% last year. Nikkei is trading lower by 0.83%, Hang Seng is trading higher by 0.42% and Shanghai is trading higher by 0.28%. Indian indices are expected to open lower Sgx Nifty is trading lower..
We expect the companies under our pharmaceutical coverage to clock 36.7% (YoY) earnings growth with an 8.4% (YoY) rise in the revenue base, led by a notable recovery in the domestic market and healthy growth in the export market. In the domestic business, the chronic portfolio continues to be steady, and acute therapies are recovering slowly. US formulations are expected to grow due to a ramp-up in speciality products supported by improving prescription trends, new product launches, and favourable currency movement. We expect a moderation in API sales, which were abnormally high during H1FY21 due to the stocking of raw material by formulation companies. The recent INR weakness will also benefit Indian pharma companies, but some of the margin benefits are being offset from EM currencies and higher API/ KSM costs. Overall, our pharmaceutical coverage would...
We believe that this would be positive for companies such as CONCOR and Gateway Rail, while roadways will be impacted, which could impact demand for new trucks in the medium term. The Indian Railways (IR) is targeting to increase its market share from the current ~28% to 44% in the longer term (FY51) as per the National Rail Plan (NRP) document released recently. The IR has set near-term targets of 33% in 2026, 39% in 2031, 43% in 2041 and 44% in 2051. We believe that the IR has carried out detailed work in assessing these market share targets (which was released in their 1,178 pages document). Under the base case of the railways, it proposes to double the speed of trains to 50kmph gradually and reduce tariff on selected commodity items by 30%. IR is projecting Container tonnage to increase from 54MT to 234MT over FY18-31 (CAGR of 12%).
LNG Japan/Korea Market 1 M future (USD/mmbtu) CGD companies may see some pressure on demand form non preferential segments like industrial and commercial consumers if gas prices remain above what these users can absorb or pass on. This is ~15% of volume for IGL and MGL. Watch out for...
Asian markets are trading mixed as investors take note of U.S. President-elect Joe Biden's $1.9 trillion coronavirus rescue package, which includes stimulus checks as well as unemployment support; while investors also digested news of inclusion of smart-phone maker Xiaomi to a blacklist of alleged..
In our view, comparing PE multiples in isolation will not spell out the correct direction or assessment as to whether Nifty multiples are stretched or undervalued. For instance, looking at just TTM PE of 38.5x will definitely make one say about overvaluations but on the contrary this number does not give the correct picture as the TTM EPS so applied includes performance of Q1FY21 and Q2FY21 wherein earnings of corporate India were completely washed out thereby deflating the true earnings. Secondly, markets are...
Top picks are Alkem, Aurobindo, Cipla and Lupin We like Alkem (the best play on acute recovery), Aurobindo (building complex pipeline, Covid upsides), Cipla (strong India franchise, inhalers monetisation) and Lupin (chronic focused portfolio, inhalers, operating leverage). We see several growth catalysts across key markets and product categories (inhalers, biosimilars, complex injectables) playing out over the next 2-3 years for Indian pharma companies. The investments made over the last few years leave them well placed to capitalise on these opportunities. With cost bases pruned and operating leverage benefits, the sector is poised to grow at ~21% earnings CAGR and witness ROCE improvement of 430bps to 15% over FY20-23e. This, coupled with strong balance sheets (near debt-free), should support valuations, in our view. BSE HC Index has outperformed Nifty by ~47% in the past one year and trades at ~29x 1-yr forward, ~30% above its historical average and ~22% premium to Nifty (vs. 10-yr average of 31%).
Despite benign expectations for 3QFY21E, we raise our FY22/23E earnings by 7% and 10% for our coverage universe, reflecting: (a) lower-than-anticipated eventual loan losses from COVID-19, (b) better-than-expected growth impulses accruing to large private sector banks, (c) reversal of the drag from unwinding of large liquidity buffers, and (d) gradual return of business volume-led pricing power. Our cumulative credit cost forecasts (FY21-23E) have eased by ~130bps for our coverage universe, reflecting this optimism. However, we remain conservative, relative to broader consensus estimates. Any incremental narrative, which suggests better-than-expected growth and asset quality outcomes, poses an upside risk to our forecasts. Our banking coverage universe is expected to clock negligible QoQ growth in NII and PPOP in 3QFY21E, on the back of sequentially flat NIMs and a gradual volume-driven rebound in opex and fee income. Against the backdrop of an in-force SC stay on marking of NPAs, we believe that investors will focus on pro-forma GNPAs, trends in collection efficiency and the likely restructuring pipeline. Incremental provisioning is likely to moderate at AXSB and ICICIBC, which have already built significant buffers; while small and mid-sized private banks are likely to continue witnessing elevated provisions.
Food inflation in December is down sharply at 3.4% compared to 9.5% in November and 11.0% in October. Within food, almost all items witness decline in growth led by de-growth in vegetables (10.4% in December vs. 15.5% growth in November). In food, only...
