Expect growth to be sustainable for specialty business – Alembic Pharmaceuticals

Update on the Indian Equity Market:

On Thursday, NIFTY closed in red at 14,590 (-0.4%). Top gainers in NIFTY50 were Tata motors (+6.4%), Bajaj Finance (+2.7%), and Reliance (+2.6%). The top losers were ONGC (-3.3%), Tata Steel (-2.9%), and Coal India (-2.6%). The top sectoral losers were PSU BANK (-3.3%), REALTY (-2.6%), and METAL (-2.2%) and there were no sectoral gainers.

Excerpts of an interview with Mr. Shaunak Amin, MD – Alembic Pharma (APLLTD) with CNBC TV18 dated 20thh January 2021:

  • In the trailing quarters, they had almost 10 quarters of fantastic growth in the US business, so the base had been built up quite high. This quarter was a bit of a competitive intensity which led to a slowdown.
  • US sales have slowed down in this quarter.
  • On the Indian side of the business, they haven’t launched any of the COVID-specific products. Whatever growth they did see in Q3 was on the back of a better performance largely by speciality business.
  • The acute portfolio for them was very sluggish not just for them but for the whole market.
  • The company expects growth to be sustainable for speciality businesses.
  • It is the speciality business they expected to be sustainable going forward, acute side of the business the market for that still hasn’t recovered back to normal levels in terms of growth.
  • As long as the market continues to underperform on the acute side of things, it is hard to show large growth numbers.
  • They haven’t pursued any specific cost-cutting activities with respect to COVID. In terms of their operational expenses, they try to maintain their OPEX at the same level pre-COVID, during COVID at the current level now.

Consensus Estimate: (Source: market screener and investing.com websites)

  • The closing price of APLLTD was ₹ 942/- as of 21-January-2021.  It traded at 16x /18x/17x the consensus earnings estimate of ₹ 59.3/ 51.2/ 56.2 for FY21E/FY22E/23E respectively.
  • The Consensus price target of APLLTD of ₹ 1,121/- implies a PE multiple of 20x on FY23E EPS estimate of ₹56.2/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

 

Used data analytics to gain rural market share – L&T Finance

Update on the Indian Equity Market:

 

On Wednesday, Nifty closed 0.9% higher at 14,645. Within NIFTY50, TATAMOTORS (+6.1%), ADANIPORTS (+4.4%), and WIPRO (+3.4%) were the top gainers, while POWERGRID (-2.1%), SHREECEM (-1.8%), and NTPC (-1.6%) were the top losing stocks. Among the sectoral indices, AUTO (+2.3%), IT (+2.2%), and PSU BANK (+2.1%) were the top gainers while FMCG (-0.2%) was the only losing sector.

 

Used data analytics to gain rural market share – L&T Finance

 

Excerpts of an interview with Mr Dinanath Dubhashi, MD & CEO, L&T Finance (L&TFH), aired on CNBC-TV18 on 18th January 2021:

  • L&TFH reported 10% YoY PAT growth in 3QFY21 on the back of good disbursements, good fees, good performance on liquidity and cost of funds, and maintaining asset quality.
  • The industry has seen an uptick in demand from rural India. This is due to a combination of structural as well as seasonal factors. The general wellbeing of farmers due to several government schemes has led to higher discretionary spending ability. Seasonal factors including good rainfall for 3 years, good reservoir levels, excellent Kharif prices, and rabi sowing higher YoY have all contributed to rural demand.
  • L&TFH has used data analytics to benefit from the rural demand surge. It has helped L&TFH to gain market share till 2QFY21 and maintain it in 3QFY21. 
  • In 3QFY21, L&TFH had all-time high disbursements in tractors and 2-wheelers.
  • GNPA has marginally moderated to 5.12% in 3QFY21 vs 5.19% in 2QFY21. NNPA increased to 1.9% in 3QFY21 from 1.6% in 2QFY21.
  • Collection efficiency is better than pre-Covid levels for the farm segment, back to the pre-Covid level for the 2-wheeler segment, good collections are happening even in the wholesale businesses.
  • On provisions, the worry has not ended but new worries are not coming in either. L&TFH has not created more provisions on Stage 1 & 2 assets in 3QFY21.  In 3QFY21, L&TFH has provided Rs 1,440 mn for an HFC exposure to the extent of the entire gap between existing provisions and expected resolution money. 
  • L&TFH is still very much RoE focused, but this year is not the one to be overly concerned about RoE. This year is about remaining liquid, solvent, maintaining excellent asset quality, and maintaining market position.

 

Consensus Estimate (Source: market screener website)

  • The closing price of L&TFH was ₹ 104.2 as of 20-January-2021. It traded at 1.3x/ 1.2x/ 1.1x the consensus BVPS estimate of ₹ 77.7 /85.9 /97.6 for FY21E/ FY22E/ FY23E respectively.
  • The consensus target price of ₹ 103.8/- implies a PE multiple of 1.1x on FY23E BVPS of ₹ 97.6/-.

 

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

Will turn EBITDA positive as new releases come – PVR

Update on the Indian Equity Market:

On Tuesday Nifty closed 1.7% higher at 14,521. Among the sectoral indices, Realty (+4.2%), Metal (+2.9%), and PSU Bank (+2.7%) closed higher. None of the sectors closed in the red. Bajaj Finserv (+6.7%), Bajaj Finance (+5.3%), and Tata Motors (+5.2%) closed on a positive note. ITC (-0.4%), Tech M (-0.3%), and Britannia (-0.1%) were among the top losers.

Excerpts from an interview of Mr. Nitin Sood, CFO, PVR with CNBC-TV18 dated 18th January 2021:

  • Speaking about footfalls, Sood said the company was given permission to open in October. While the theatres are open, there are no big releases resulting in lower footfalls.
  • The film ‘Master’ has done well for the company in the South and it gives hope of new content releasing soon.
  • On new content, he said the company is in talks with producers and the Bollywood community where big film releases have not been announced.
  • The industry is waiting for someone to take the first leap and with the movie ‘Master’ release, the release pipeline may get kicked off.
  • Speaking about earning trajectory, he said it is difficult to predict as it is dependent on the film release calendar. The company expects to turn EBITDA positive in the coming 2 to 3 months as more releases are planned.
  • The company has taken cost reduction measures during the nine months in which the business was completely shut.
  • The pre-COVID level of average break-even occupancies used to be between 23-25%, these numbers are now sub 20% led by the cost reduction initiatives taken by the company.
  • There are a lot of films pending to be released in 2021.
  • Speaking about fundraising, he says the company was sitting on the liquidity of Rs 370 crores and they have taken board approval to raise additional liquidity. This will help to keep the balance sheet strong and use to build a new screen portfolio.

 

 

Consensus Estimate: (Source: market screener and Investing.com websites)

  • The closing price of PVR was ₹ 1,526 as of 19-January-2021.  It traded at 64x/ 27x the consensus Earnings per share estimate of ₹ 23.9/56.5 for FY22E/ FY23E respectively.
  • The consensus average target price for PVR is ₹ 1567/- which implies a PE multiple of 28x on FY23E EPS of 56.5/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

Confident of leading industry performance for next 2-3 years – HCL Tech

Update on Indian Equity Market:

Markets started the fresh week on a selling spree as Nifty closed the day 205 points lower at 14,228. The intensity of selling was such that only six out of 50 stocks closed the day in green led by UPL (6.3%), RELIANCE (2.1%), and TITAN (1.3%) while TATAMOTORS (-6.1%), TATASTEEL (-5.9%), and ONGC (-5.1%) led the losing pack. All the sectoral indices closed the day in red with METAL (-4.6%), PSU BANK (-3.1%), and PHARMA (-3.1%) bleeding the most.

Excerpts of an interview with Mr C. Vijayakumar, President & CEO- HCL Technologies Ltd (HCL Tech) with CNBC TV18 dated 15th January 2021:

  • The company reported revenue growth of 3.5%, higher than the guidance. The margin for the quarter was also at a six-year high. Mr Vijayakumar said that the company has outperformed guidance for two quarters in a row led by a stupendous performance from products and platforms segment.
  • He said that DWS acquisition would contribute to 1% growth in 4QFY21E. The company has signed 13 deals across verticals. The company is positive about the outlook for FY22E.
  • The next five years are expected to be better than the past five years. The company is expected to lead the industry performance for the next 2-3 years. 
  • More work and revenue shifting of offshore and sales, general, and administrative (SGA) leverage contributed to superior margin performance in 1HFY21. Some of the expenses are expected to come back, but not at pre-COVID levels.
  • The company gave the salary increments to a large section of employees during 3QFY21. This has led to a headwind of 50 bps in margins. Further, the company is expected to give increments to seniors and a larger population which would be eroding about 80 bps from the margins.

Consensus Estimate: (Source: market screener)
• The closing price of HCL Tech was ₹ 978/- as of 18-January-2021. It traded at 20x/ 19x/ 17x the consensus earnings estimate of ₹ 49.3/ 52.0/ 58.0 for FY21E/FY22E/23E respectively.
• The Consensus price target of HCL Tech was ₹ 1,073/- as of 18th January 2021 which is 19x of FY23E EPS estimate of ₹58.0/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

 

Might see 4-5% increase in home prices due to steel price hike: Brigade Enterprises

Update on the Indian Equity Market:
On Friday, NIFTY closed in red at 14,433 (-1.1%). Top gainers in NIFTY50 were Tata motors (+6.6%), Bharti Airtel (+3.9%), and UPL (+2.6%). The top losers were Tech M (-3.9%), HCLT (-3.7%), and Wipro (-3.6%). The top sectoral losers were IT (-2.2%), PSU BANK (-2.1%), and REALTY (-1.8%) and there were no sectoral gainers.

Excerpts of an interview with Mr M. R. Jaishankar, CMD – Brigade Enterprises with CNBC TV18 dated 14th January 2021:
• They have fully recovered. In fact, they have exceeded whatever sales they did in Q3 FY20 and in Q2FY21.
• The sales, in general, have been robust. On an overall basis, across India, there is about a 25 per cent drop in sales as compared to the previous financial year. The recovery is quite fast and the worst is over for real estate.
• He expects a 4-5 per cent increase in home prices due to steel price hikes.
• There are a few dampeners like 50 percent jump in steel price and few metal prices which are required in real estate – aluminum, copper, and the petroleum prices which has an impact on PVC products. All this has some dampener effect on the cost.
• The demand for rentals is down 40 per cent compared to last year, but enquiries have gone up substantially in the past 4-6 weeks.
• Looking at the last 9 months, the demand has certainly come down by maybe about 40 percent as compared to the previous calendar year which is what rentals are generally being assessed on calendar year basis by international property consultants.
• Now with US elections behind and with the finance minister promising a fantastic budget – also enquiries have gone up substantially in the last 4-6 weeks and with the IT sector continuing to do very well, the outlook for 2021 and 2022 should be bright.

Consensus Estimate: (Source: market screener and investing.com websites)
• The closing price of BRIGADE was ₹ 264/- as of 15th January 2021. It traded at NM/ 30x/ 23x the consensus earnings estimate of ₹ -0.7/ 8.9/ 11.7 for FY21E/FY22E/23E respectively.
• The Consensus price target of BRIGADE was ₹ 250/- as of 15th January 2021 which is 22x of FY23E EPS estimate of ₹11.7.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

Greater need for technology across enterprises led to growth – Wipro

Update on the Indian Equity Market:
On Thursday, after another volatile session, Nifty 50 ended at 14,596 (+0.2%). Among the sectoral gainers, PHARMA (+0.8%), FMCG (+0.8%), and AUTO (+0.3%) led the gainers, while METAL (-1.0%), MEDIA (-0.2%), and BANK (-0.2%) led the losers. UPL (+3.7%), BPCL (+3.2%), INDUSINDBK (+3.0%) led the index higher while HCLTECH (-2.4%), GRASIM (-1.8%), and JSWSTEEL (-1.7%) led the laggards.

Wipro recently declared strong 3QFY21 numbers. Mr. Jatin Dalal, President and Chief Financial Officer (CFO) explained that a greater need for technology by clients across enterprises led to growth. The interview was published in Business Standard on 14th January 2021:

• A greater need for technologies like cloud, cybersecurity, and data analytics contributed to a strong set of numbers. With most business models becoming virtual has meant that greater investment in technology is taking places across Wipro’s customer base.
• Of Wipro’s seven business units, five delivered over 4 % sequential growth which suggests broad based growth.
• Over 92 percent staff is still working from home, which is not going to change in 4QFY21. About 2.5 percent staff is working from office, and about 5 percent staff is working from customer locations.
• Depending on the situation in April vis-à-vis Covid, they will think about the eventual model for employees working from home or office.
• There was double digit growth in order bookings in 3QFY21 and Wipro is entering the March quarter with a good set of pursuits.
• There is a significant momentum in clients’ spend, driven by cloud transformation, digital transformation, and investment in cybersecurity. Overall, there is an increase in IT spend.
• 3,000 freshers were added in 3Q and Wipro will continue to add more in 4QFY21.
• They do not foresee any adverse outcomes of Brexit on their European business. They expect more decision making around the future architecture and future scheme of things that customers will have post-Brexit.
• The sector-specific initiatives by the new Biden administration in US needs to be watched out.

Consensus Estimate: (Source: market screener website)
• The closing price of Wipro was ₹ 453/- as of 14-January-2021. It traded at 24x/ 23x/ 21x the consensus earnings estimate of ₹ 18.8/ 19.4/ 21.2 per share for FY21E/FY22E/FY23E respectively.
• The consensus target price of ₹ 459 implies a PE multiple of 22x on FY23E EPS of ₹ 21.2/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

Expect reasonable revenue growth for the industry in FY21– M&M

Update on the Indian Equity Market:
On Wednesday, Nifty ended flat at 14,565 while PSU banks outperformed. The top gainers for Nifty 50 were M&M (+5.7%), SBI (+4.6%), and Adani Ports (+4.4%) while the losing stocks for the day were Bajaj Finance (-2.9%), Shree Cement (-2.8%), and HDFC (-2.8%). Top gaining sectors were PSU bank (+3.3%), Auto (+0.9%), and Bank (+0.7%) while Pharma (-0.9%), Financial Service (-0.6%), and Realty (-0.3%) were the losing sectors.

Edited excerpts of an interview with Mr Pawan Goenka, MD & CEO, Mahindra & Mahindra (M&M); dated 12th January 2021 from Economic times:

The demand is now no longer a pent-up demand, it is a structural demand that is coming back.

With the new product launches, all companies have plans for 2021. Many of the companies had held back on product launches and that is certainly going to spur demand now. On top of that, if the government comes in with some kind of stimulus to grow the auto demand, then the demand will really take off and will lead to a great year.
The Heavy Commercial Vehicle (HCV) industry which was lagging for the last several months has started showing signs of revival. There was good growth in November and December. Once HCV is also on the growth path, the auto industry overall should look pretty good in FY22E.

Mr Goenka said GST rate cuts may not be possible because of the need for tax revenues in these difficult times, but GST rates should be simplified. There are eight or nine different GST rates. He hopes that the government will just keep two rates – 28% and 43% and not have all of these different rates. Right now, a rate reduction is not expected. When the economy is fully back on track, the government could reconsider rate reduction.
The massive cost cuts in 1Q & 2Q for the Company is not cost cutting but removing the fat. That is where a lot of the cost reduction has happened in terms of travel. Use of digital media for meetings has resulted in a significant reduction in cost in 1Q & 2Q FY21 and this will never come back. Maybe travel will go up somewhat but probably 75-80% will continue. The reductions have happened in events, inventory costs and communication costs. These will not come back to earlier levels, according to Mr Goenka. He said that more than half of the reduction is for good and continue to aid in the Company’s bottom line.

In the auto industry, this year there has not been any significant price cut or increased incentives given to propel demand.

Compliance with BS-VI emission norms has led to prices going up, therefore per unit revenue has gone up which will lead to a top-line increase for the Company. Given that volumes are also going up and the Company does not expect 2021 to be any worse than 2020 there will be a revenue growth for most companies. There are some companies that will do better, some will not and competition will continue. But overall for the industry, he sees reasonable revenue growth in 2021E.

Many companies have not passed on the full BS-VI cost increase yet and as the companies become more comfortable with the continued volume or continued demand, the gap in the BS-VI cost increase will get passed on during this year.

The big thing looming ahead of the industry is the commodity price increase, which will also lead to a price increase. That is not desirable if the auto industry were to pass on all the cost increases, then there could be a significant increase in prices. So commodity price increases are a matter of concern right now for the auto industry.

Most companies are coming back to their core where they have a right to win and have strength in India and globally and this is automatically leading to capital allocation which is going more towards the core.
The Company is going to be working on multiple platforms for personal mobility.

The overall positive sentiment in the rural area, in the agriculture area, somewhat tempered because of the farm agitation right now but that will be soon resolved. Mr Goenka remains very bullish on the Agri sector and on the overall rural demand coming from the income of the Agri sector for durables that are sold in rural areas.
M&M is one of those who had very robust demand this year. As a result, a marginal increase in prices is possible and usually in January every year, prices have increased. So M&M has announced a 2% price increase. It should not be a dampener on demand.

A partial increase is very much doable for most companies. Companies will have to do it because nobody can absorb the kind of commodity price increases that we are seeing and one will have to simply get used to it. Not only auto but the effect of commodity price rise will also be felt by users of almost all sort of durable goods.

The auto industry overall has gone through some very difficult times because of the investments in BS-VI which led to increasing in costs, most of which could not be passed on. The cost reduction that happened during Covid outbreak has come to the rescue and therefore most companies have managed to maintain their profit margin.

On an average, before Covid, in the passenger vehicle segment, a 30-35 days’ inventory was considered to be good. Now, most companies are saying 30-35 days is too high and they need to learn to work with 20-25 days of inventories.

If all companies bring down the inventory level to 20-25 days and also do very good inventory control in their plants and to the suppliers, the auto industry could take out as much as Rs 50,000 crore from the working capital. This is a learning from Covid that will help the industry reduce working capital and improve the balance sheet of almost all the companies.

Consensus Estimate: (Source: market screener website)
The closing price of M&M was Rs 838/- as of 13-January-2021. It traded at 31x/ 22x/ 20x the consensus EPS estimate of Rs 27.3/37.4/42.0 for FY21E/ FY22E/ FY23E respectively.

The consensus target price of Rs 762/- implies a PE multiple of 18x on FY23E EPS of Rs 42.0/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

Expect a boom in the real estate sector in next few years– Godrej Properties

Update on the Indian Equity Market:

On Tuesday, Nifty closed 0.5% higher at 14,563. Within NIFTY50, TATAMOTORS (+7.5%), GAIL(+4.7%), and BHARTIARTL (+4.0%) were the top gainers, while ASIANPAINT (-3.2%), TITAN(-2.2%), and NESTLEIND (-2.1%) were the top losing stocks. Among the sectoral indices, PSU BANK (+6.0%),REALTY (+2.8%) and MEDIA (+1.4%) were the top gainerswhilePHARMA (-1.3%), FMCG (-0.6%), and IT (-0.2%) were the only losing sectors.

Expect a boom in the real estate sector in next few years– Godrej Properties

Excerpts of an interview with Mr. Pirojsha Godrej, Executive Chairman, Godrej Properties (GODREJPROP), aired on CNBC-TV18 on 11thJanuary 2021:
● The Maharashtra Government has cut real estate premiums by 50% until 31st December 2021.
● In 1HFY21, volume growth went up 11% for GODREJPROPwith ~4.2 mn sq. ft. of sales in the same period.
● Covid-19 concerns are in the past now for the company and the management is expecting a much better 2HFY21E. 4QFY21E will be especially good as the company has planned several launches. The overall industry momentum is becoming positive.
● On the cash flow front, collections in 3QFY21 were much stronger than 1HFY21 as construction resumed in full swing.
● Mumbai, Pune, NCR, and Bangalore are important markets forGODREJPROP and the company is seeing good traction across these markets.
● Decisions of MaharashtraGovt. to first reduce stamp duty and now premium is very encouraging for the real estate market in Maharashtra. As a result management expects to see Mumbai market to do well.
● Final notification in relation to reduction in premiums is yet to come out. Management’s sense currently is that there will be about 5-10% reduction in overall development costs depending on the type of project. That is a meaningful reduction which will spur activity in the sector.
● Premium cost is an upfront cost to be borne by thedeveloper. The upfront expense will come down significantly which will improve liquidity.
● The 2 steps taken by the government, in combination with other factors- increased desire for home ownership post covid-19, affordability in terms of lower interest rates, property prices not having appreciated in last 5-7 years- bode well for the real estate sector in years ahead.
● Rise in commodity prices is concerning. But overall, the Government’s attention on real estate sector as a lever for economic growth is meaningful. The industry can take some cost increase in stride provided the overall industry continues to move in a positive direction.
● A boom in real estate sector could start sometime in next couple years. Fresh inventory addition has been limited in the last few years and the demand-supply equilibrium will tilt as demand starts coming back gradually.
● Confidence to invest into under construction houses has started coming back- but the beneficiaries of that are largely the leading players in each market and not the smaller players.

Consensus Estimate (Source: market screener website)
● The closing price of GODREJPROPwas ₹ 1,474as of 12-January-2021. It traded at 154x/ 96x/ 61x the consensus EPS estimate of ₹9.6/15.4/24.0 for FY21E/ FY22E/ FY23E respectively.
● The consensus target price of ₹ 960/- implies a PE multiple of 40x on FY23E EPS of ₹24.0/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

Concluded the issuance of bonds to fund overseas business- SBI

Update on the Indian Equity Market:
On Monday Nifty closed 1% higher at 14,485. Among the sectoral indices, IT (+3.3%), Auto (+2.6%), and Realty (+0.6%) closed higher. Media (-1.5%), PSU Bank (-1.5%), and METAL (-1.0%) were the sectoral indices that closed lower. Tata Motors (+12.6%), HCL Tech (+5.9%), and Infosys (+4.8%) closed on a positive note. Tata Steel (-2.6%), Bajaj Finance (-1.9%), and Adani Ports (-1.9%) were among the top losers.

Excerpts from an interview of Mr. Ashwani Bhatia, MD, SBI with CNBC-TV18 dated 8th January 2020:
● State Bank of India (SBI), has concluded the issuance of USD 600mn from bonds to fund the expansion of their overseas business.
● Mr. Ashwani Bhatia said there was a funding gap on the overseas side and this was the right time to fill it.
● SBI is the first bank to raise money post the Covid crisis. The spreads are better as compared to the last 6-7 years.
● Speaking about asset quality on the domestic side, he said the bank has not seen the gloom that was anticipated on slippages.
● On credit growth, he said there could be 8-9% growth in 2HFY21. The demand is coming back and, retail has been a good surprise.
● The decision taken by the central government, RBI, and tax cuts in Maharashtra has helped the bank.
● On loan growth, he said the bank is sitting on excess SLR and it can be used for the economy in the next 3 months. The bank reported a growth of 8% and the expectation is to touch double digits.
● In terms of recovery, he said Rs 7,000-10,000 cr of recovery is expected.
Consensus Estimate: (Source: market screener and investing.com websites)
● The closing price of SBI was ₹ 283 as of 11-January-2020. It traded at 1x/ 0.9x/ 0.8x the consensus BVPS per share estimate of ₹ 262/286/318 for FY21E/ FY22E/ FY23E respectively.
● The consensus average target price for SBI is ₹ 312/- which implies a PB multiple of 0.9x on FY23E BVPS of 318/-.
Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

A long way for us to reach volume levels of FY19 – Maruti Suzuki

Update on Indian equity market:
Another day, another all-time high! Indian markets were in full swing today as Nifty50 closed 209 points higher at 14,346. Within the index, MARUTI (5.8%), TECHM (5.8%), and WIPRO (5.7%) led the gainers while HINDALCO (-1.6%), TATASTEEL (-1.2%), and INDUSINDBK (-1.1%) were the highest losers. Among the sectoral indices, IT (3.8%), AUTO (3.6%), and MEDIA (3.3%) led the gainers while METAL (-0.6%) and PSU BANK (-0.5%) were the only losing sectors.
Excerpts of an interview with Mr. Shashank Srivastava, Executive Director, Maruti Suzuki India Ltd (Maruti) published on Economic Times dated 7th January 2021:
On the retail side, the demand has been pretty good but not at the levels seen the year before last. This year is a unique year. This December is different from the earlier Decembers because the availability of vehicle stock across the industry has been a constraint for retail for the month.
In terms of vehicle availability, the company has been working at peak production for the last couple of months and still the stocks are low.
There is definitely a bounce-back in the last couple of months, but if the April to December cumulative figure is compared to that of last year’s, there is an 18% YoY decline. Last year itself was 17-18% less than the previous year. If compared to the same period two years ago, this year is almost 33% down.
In the previous five years (2015-2020), the CAGR growth in industry volumes is just 1.6-1.7% compared to 5.9% during 2010-2015 and 12.9% during 2005-2010.
The big reason for the slowdown in growth is that the cost of acquisition has gone up for various reasons. One is because taxation has gone up substantially. Extremely high road taxes along with an increase in insurance taxes increased the cost of acquisition for vehicles. Another factor is a shift from BS-IV to BS-VI norms which increased the cost of owning a vehicle substantially.
Just like BS-VI, two major regulations are coming up in near future; the CAFÉ 2 which is applicable from 22nd April 2021, and BS-VI phase II, RDE which will start from April 2023. This will result in a further increase in the cost of ownership.
In the entry SUV space, Vitara Brezza continues to be the leader. For the mid SUV, the company has S-Cross which was launched recently with a 1.5-liter BS-IV petrol engine. The company has a weaker spot in the upper SUV space.
Consensus Estimate: (Source: market screener and investing.com websites)
The closing price of Maruti was ₹ 8004/- as of 8-Jan-2021. It traded at 53x/ 32x/ 26x the consensus EPS estimate of ₹ 152/ 248/ 311 for FY21E/ FY22E/ FY23E respectively.
The consensus target price of ₹ 7,670/- implies a P/E multiple of 25x on FY23E EPS of ₹ 311.
Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”