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Recommendations and stock pick: We expect mixed-use plays to outperform pure plays as office segment is least impacted followed by retail, residential and hospitality. DLF, Brigade and Prestige Estates are our top sectoral bets. Oberoi may see delayed recovery on account of concentrated exposure to highly unaffordable Mumbai realty market. 1QFY21 hit by COVID-19: Real estate being highly cyclical has been hit hard by the COVID-19 pandemic. The first two months of 1QFY21 were nearly a washout with realty companies adopting the digital way of doing business. Things have improved from June-20 and, with partial aid from online channels, we expect coverage companies to report 40-65% of normal quarterly pre-sales. Affordable housing players are seeing a faster recovery vs. luxury segment players. As things were turning positive, the re-imposition of a partial lockdown may lead to delayed recovery, though it would make a case for further extension in the moratorium.
IIP or the Index of Industrial Production declined by 34.7% YoY in May'20, which was better than our estimate of a 40% decline and Bloomberg consensus estimate of a 37.5% decline. The reading for April was revised down to a decline of 57.6% YoY from 55.5% earlier. The biggest improvement was seen in manufacturing output, which declined by 39.3% YoY compared to a 67.1% decline in the previous month. The improvement was led by Consumer Non-durables (down 11.7% YoY) after a 48.7% decline in the previous month. Consumer Non-durables include fast moving consumer goods (FMCG) and pharmaceuticals. Production of pharmaceutical products was up 2.5% YoY in May'20, and of the 23 manufacturing industries it was the only one...
Asian markets are trading higher tracking firm cues from Wall Street over the weekend. Nikkei is trading higher by 1.78% Shanghai is trading higher by 0.55% and Hang Seng is trading higher by 0.30%. Indian indices are expected to open higher. Sgx Nifty is trading higher by 0.63%.
Between FY17-20 Rossari Biotech's revenues have grown at CAGR of 37% while EBIDTA grew at higher pace of 63% CAGR. We expect Rossari to grow at 15-18% CAGR for next 2-3 years which is ahead of industry growth. We expect EBITDA margins to improve from hereon, on the back of (a) improved margins in HPPC segment (b) benefits coming from recently commenced Dahej facility (c) increased economies of scale. We have compared Rossari Biotech with all the leading specialty chemicals companies and found it to be better in almost all financial parameters. The issue price commands P/E of 33.7x (FY20) at the upper price of band of Rs 423-425, which is at upper end of the industry. However, going forward the higher revenue growth, improving profitability would make it a better choice among peers. We recommend Subscribe on the issue for listing as well as long term gains.
Rossari Biotech Ltd. is one of the leading specialty chemicals manufacturing companies in India based on sales for FY19 providing customized solutions to specific industrial and production requirements of their customers primarily in the FMCG, apparel, poultry and animal feed industries through company's diversified product portfolio comprising home, personal care and performance chemicals; textile specialty chemicals; and animal health and nutrition products. The company operates in India as well as in 17 foreign countries including Vietnam, Bangladesh and Mauritius. According to the F&S; Report, as on September 30, 2019, the company is one of the largest manufacturer of textile specialty chemicals in India providing textile specialty chemicals in a sustainable, eco-friendly yet competitive manner. Rossari's business is organized in three main product categories (i) home, personal care and performance...
Lockdown impact and volatile prices make or mar earnings We believe 1QFY21 will be a true test for the entire oil&gas; chain, investors and analysts, with the worst ever performance in decades for refiners, CGD firms, gas transmission companies and LNG importersname them and they suffered. OMCs will buck the trend and enjoy healthy margin expansion-, despite inventory losses in refining, marketing taken together, as a result of buoyant marketing margins (despite potential inventory losses) and healthy GRMs aided by inventory gains. The EBITDA margin expansion for OMCs is the net result of improved unit margins on a revenue base that will be down YoY due to i) the 58% fall in crude price, and ii) the steep 32.6%-40% fall in marketing volume, combined with lower refining operations due to the lockdown. HPCL/BPCL will report healthy earnings growth at 82.7%/40%,...
Our channel check suggests, average cement prices at an all India level is down 3% MoM in July-2020. Cement prices has taken a breather after sharp increase in the last two months. Recall, in May-20/June-20 cement price has increased by 6%/1% MoM. But despite the July-20 month weakness, average all India cement prices is up 4% MoM as on July-20 vs exit price of March-20. Cement industry production decreased by 22% YoY for May 2020 (latest data available). Led by pent up demand, cement companies has seen sharp increase in the utilization in May-20 vs April-20. But, given the monsoon, we expect the demand to decline YoY basis...
We have a BUY rating on ITC; ADD rating on UNSP, Colgate and Radico We believe companies with higher revenue mix from essential commodities and rural will benefit in the near term (1HFY21). Ecommerce will continue to gain pace as consumers remain vary about venturing into crowded MT stores. Hence, companies with a strong presence and diversified offerings in ecommerce will do well. While sector does not offer value bargains yet, we see better opportunities in select stocks where business models are strong, and valuations have normalised in the past 12-18 months. We adjust our estimates and target multiples to reflect slower near-term growth and lower cost of capital with falling bond yields. We roll forward our target prices to June-22. We maintain our ratings except downgrade for Radico from BUY to ADD due to limited upside.
1QFY21 a washout, a quick opening up is critical PVR and Inox Leisure (INOL) were down ~15% and ~13%, respectively in 1QFY21 on top of a very steep fall in 4QFY20. Film Exhibition companies likely had no revenues for the first time in history as cinemas remained shut for the entire quarter. Both us as well as the industry have been expecting an announcement of an opening up all through 1QFY21 but that was not to be as Covid-19 cases exploded in Mumbai and NCR where a majority of the screens of both players are located. We now hope for an opening by the second half of July or the first half of August. However, the situation looks grim, as there has been no indication from the Government regarding this. However, what gives...
Bata India (BIL): We expect 1QFY21 to be a complete washout quarter for BIL. Given the nationwide lockdown during most part of 1Q, we expect volumes to shrink considerably. Margins may further be impacted on account of an unfavorable product mix in the near term and the relatively high fixed cost structure. Bata in its interactions with the media had indicated that it expects demand for lower priced products to increase at the expense of casual and office wear. After gradual opening up of the lockdowns, BIL has also been gradually opening up its stores. The last indication was that about 1000 out of its total 1400 stores had been opened up. We believe most of these would have been stores in high streets (there are 1100 of them) rather than in Malls (300). BIL had been focusing...
Weather gods to boost sector outlook despite COVID NBIE Chemical sector 1QFY21E earnings should be healthy, barring commodity stocks like TTCH, based on (i) seasonal traction in demand, supported by robust start to monsoon and (ii) limited hit on volumes due to lockdown as agri related sector is supported by government. Global CPC generics leader UPL and fertilizer major CRIN will show massive 156.5%/369.2% growth in PAT YoY on improved revenue growth and margin expansion. The brisk start to the new kharif season, aided by timely copious rains has boosted area under crops and domestic demand for pesticides/fertilizers. The impact of labour shortage/lockdown impact on supply chain has been challenges on the margin. In addition to the vastly...
June 2020 much better than last two months; IPRU Life remains a laggard New business generation for June 2020 seems to have been much better as the economy partially re-opened. Total industry-wide individual APE for June 2020 is down 1.4% YoY compared to a decline of 43.7% in April 2020 and 19.8% in May 2020. LIC has shown a remarkable turnaround, posting a 7.5% YoY growth in June 2020. On the other hand, the private industry individual APE is down 7% YoY in June 2020, though still better than 32-40% decline seen in April and May. Though the lockdown was still in force through the whole month of June, we believe that the companies have generally been extremely quick to deploy digital tools and...
Asian markets are trading lower as investors remain cautious amid increasing number of coronavirus cases across the world. Nikkei is trading lower by 0.23%, Shanghai is trading lower by 1.14% while Hang Seng is trading lower by 0.79%. Indian indices are expected to open lower. Sgx Nifty is trading l
Likely the worst quarter in this cycle; 2H visibility key In 1QFY21, Nifty IT index underperformed Nifty by ~420bps (surprising!) even as Nifty Bank underperformed by 820bps (see Exhibit 3). This is despite signals from a few players (Accenture, TCS and Cognizant) indicating that the demand environment was not as bad as was feared in early April 2020. A few of them were making encouraging noises around a better than expected deal momentum though the commentary around revenue and margins for 1QFY21 remained cautious. We will witness peak revenue and margin weakness in 1QFY21 (QoQ) with expectations that pain would ease in 2Q and that the industry would be on a growth path in 3Q and 4Q. We believe that USD revenue would be down on a QoQ basis by 510% and EBIT margins would be down by 50-200bps QoQ. With almost 5% INR depreciation QoQ against...
Unprecedented operational challenges due to COVID-19 lockdown challenges due to strict imposition of COVID-19 lockdown. The quarter began with the complete shutdown of manufacturing plants, distribution network and retail outlets. Gradual resumption was visible from mid-May post relaxations announced by the government at selected places. Based on our channel checks, the consumer durable and electrical sector saw negligible sales in April, while May sales were down 75%-80% YoY and June sales were down 20%-30% YoY. The summer season categories of AirConditioners and Air-Coolers were the worst impacted. The capital goods sector faced execution challenges due to lockdown followed by labour migration and deferment of...
Will Common Carrier Norms Hurt the CGD Ecosystem? PNGRB has come up with common carrier regulations for CGD companies to increase gas penetration by creating a level playing field for new domestic gas CGD companies, and encourage competition to protect consumer interests.
be the focus of 1QFY21 earnings as far as the lenders are concerned. Though moratorium numbers have started to come down, the actual underlying stress still remains a known unknown'. In light of such uncertainty, we expect credit costs to remain elevated. Across our banks and NBFCs coverage, we expect average credit costs of 1.8% (+76bps YoY, -77bps QoQ). On account of lack of credit opportunities and high liquidity, we expect NIMs to contract by ~17bps on average across our lenders' coverage. We expect credit outstanding for our banks coverage to decline by 1.1% QoQ (+9.7% YoY). For our NBFC coverage, we expect credit contraction of 2.3% QoQ (+4.5% YoY). On the non-lending front, we expect 1QFY21 to be severely impacted for life insurers (as suggested by monthly disclosures for April & May). Given the varied product mix...
