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This week in a nutshell (April 19th to April 23rd)

Technical talks

NIFTY opened the week on 19thApril at 14,307and closed on 23rd April at 14,341, a marginal increase of 0.2%.NIFTY has been hovering around the 100 DMA of 14,374 throughout the week. This remains the crucial level to watch out for before moving in either direction.

Weekly highlights

  • FIIs continued their selling spree with a net outflow of Rs 49,870 mn during the week. DIIs continued to be net buyers as they pumped in Rs 62,250 mn in the week.
  • The daily rise in covid-19 cases in India reached a record on 22ndApril when the number crossed 0.33 mn. This is the highest number of new cases recorded in a single day in the world. Several Indian states have imposed stricter restrictions or lockdowns in response. The worsening conditions have led to volatility in the equity markets.
  • Government of India announced the next phase of Covid-19 vaccination drive will start from 1st May 2021. Everyone above the age of 18 will be eligible to get vaccinated. Amidst concerns over shortage of vaccines, producers have been asked to ramp up production. This is a developing scenario as there are also concerns regarding raw material procurement from the US.
  • US Equity indices came off from their record highs oflast week. The indices ended the week on a lower note as reports indicated that President Biden will propose to significantly increase capital gains tax for wealthy individuals.
  • Insurance Regulatory and Development Authority of India (IRDAI) reported March monthly business figures for life insurers. The industry New Business Premium (NBP) grew by 71% YoY. Mar-20 was a low base due to Covid-19 led disruption. For the quarter 4QFY21, the NBP growth was 35% YoY.

Things to watch out for next week

  • The ongoing 4QFY21 result season will gain traction next week as several big companies across sectors start to report quarterly numbers. Managements’ comments over the business impact of second wave of Covid-19 will be important.

Volume boost expected from commissioning of Western Dedicated Freight Corridor– CONCOR

Update on the Indian Equity Market:

 

On Wednesday, Nifty closed 0.9% higher at 14,819. Within NIFTY50, JSWSTEEL (+5.3%), WIPRO (+2.4%), and SBIN (+2.2%) were top gainers, while ADANIPORTS (-2.8%), TATACONSUM (-1.4%), and UPL (-1.3%) were the top losing stocks. Among the sectoral indices, PSU BANK (+1.9%), AUTO (+1.6%), and PRIVATE BANK (+1.5%) were the highest gainers, while no sector ended with losses.

 

Volume boost expected from commissioning of Western Dedicated Freight Corridor– CONCOR

 

Excerpts of an interview with Mr. V Kalyana Rama, MD& Chairman, Container Corporation of India (CONCOR), aired on CNBC-TV18 dated on 6th April 2021:

  • CONCOR had good volumes in 4QFY21. Overall for FY21, handling volumes for CONCOR were 2.8% less YoY, while originating volumes were higher on a YoY basis.
  • Rama hopes FY22E will be a good year as demand has picked up and is expected to continue. Export demand has also increased in the last 6 months.
  • CONCOR has paid Rs 5,900 mn to Indian Railways in relation to a dispute, and the issue is now resolved.
  • According to a comment by DIPAM (Department of Investment and Public Asset Management) secretary, divestment of CONCOR may not happen in 1QFY22E. CONCOR divestment can take place only after Indian Railways finalizes land lease policy, which has to be approved by the Cabinet.
  • Commissioning of Western Dedicated Freight Corridor (DFC) is expected to be completed by June 2022. Connection up to Palanpur is expected to start any day now. This will help in connecting to 2 ports- Mundra and Pipavav. This will be a big volume boost in the northern India container movement business. The connection upto Mumbai port will take another year.
  • The DFC will lead to higher revenues. There is also a possibility to increase EBITDA margins due to double stacking and high capacity wagons. CONCOR is planning to have a 100% double stacking movement for all containers meant for northern India.
  • In the short term, Mr. Rama expects more growth in EXIM business as exports are picking up. In the domestic market, he is seeing more people coming toward containerization which will also aid growth. In addition, CONCOR is focusing on bulk transportation of commodities.

Asset Multiplier Comments

  • In the Union Budget for FY22E, Government of India (GoI) has budgeted inflow of Rs 17.5 lakh mn from divestment in PSUs.
  • To kick start the privatization of PSUs, GoI will float the Expression of Interest (EoI) for divestment in CONCOR. GoI plans to divest 30.8% stake and cede management control in the Rs 355 bn market cap (as on 6th April 2021) company.
  • Several Indian as well as global companies seem to be interested in getting a stake in India’s largest container and terminal operator.
  • There has been scepticism on whether GoI will be able to successfully execute their PSU divestment strategy.  Success of this privatization will pave way for further divestments in other PSUs.

 

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

  • The closing price of CONCOR was ₹ 583as of 6-April-2021. It traded at 35x/ 27x the consensus EPS estimate of ₹16.7/21.4 for FY22E/ FY23E respectively.
  • The consensus target price of ₹ 520/- implies a PE multiple of 24x on FY23E EPS of ₹21.4/-.

 

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.”

 

This week in a nutshell (Feb 8th to Feb 12th)

Technical Talks

  • NIFTY opened the week on 8th Feb at 15,064 and closed on 12th Feb at 15,163, a weekly gain of 0.7%. The index was range-bound during the week. With RSI (69) nearing the overbought zone and MACD on a declining trend, the technical indicators show a possible decline. On the downside, 10DMA of 14,921 could act as a support. On the upside, 15,257 is the key level to watch out for as the index tried to test this level during the week but could not sustain.

Weekly highlights

  • Foreign Institutional Investors (FIIs) continued to be net buyers in Indian equity of Rs 5,870 mn, but the quantum of inflows declined from the previous week of Rs 12,1340 mn. Conversely, Domestic Institutional Investors (DIIs) continued to be net sellers with an increased net outflow of Rs 9,560 mn vs the previous week Rs 5,643 mn.
  • Sectoral updates:
    • IRDAI released monthly business data for January 2021 for both Life and non-life insurance companies.
    • For the General insurance industry as a whole, the growth in Gross Direct Premium Underwritten was +6.7% YoY for the month and +2.8% YoY for FY21 YTD.
    • For the Life Insurance industry, the New Business Premium growth was +3.7% YoY for the month and a decline of -1.2% YoY for FY21 YTD.

 Things to watch out

  • The 3QFY21 results season will be nearly concluded in the coming week. With that, the result-led stock-specific movements will come to an end and the focus may again shift to macro developments.

Budget 2021: Promising but ambitious one!

The Budget 2021, a highly unique one due to the pandemic, provided the confidence to the investors as witnessed by Nifty50, which closed the day 4.7% higher at 14,281. First do no harm or “primum non nocere”, is a doctrine as old as medicine itself. The Finance Minister adopted this approach to capital markets, taxation and the results are there for all to see. Investors were expecting harsh revenue raising measures as epidemic related expenses mounted while revenues shrank. Finance minister presented an expansionary budget without significant increase in taxation.

Following are the key highlights from the budget 2021;

  • The nominal growth rate target has been set at 14.4% for FY22 as against 10% in FY21.
  • The estimated fiscal deficit stands at 9.5% in FY21 vs 3.5% as per the previous estimate. The deficit is expected to be 6.8% for FY22.
  • India FY21 Gross Tax revenue estimate said to be reduced by about Rs 5 lakh crore. The Government is estimating FY22 expenditure at about Rs 35 lakh crore.
  • A sharp increase in capital expenditure on the infrastructure segment- Rs 5.54 lakh crore, 34% higher than the budget estimate of FY21.
  • Announcing its version of a bad bank, the Government will set up an asset reconstruction and management company to take over the bad loans. A bad bank will act as an aggregator of all stressed assets in the system. It is set up to buy the bad loans and other illiquid holdings of another financial institution.
  • Reducing customs duty uniformly to 7.5% on semi, flat and long products of non-alloy, alloy and stainless steel. Exempting duty on steel scrap till March 2022. To provide relief to copper recyclers, reducing duty on copper scrap from 5% to 2.5%.
  • Raising customs duty on some auto parts to 15%, on cotton from 0% to 10%, on raw silk and silk yarn from 10% to 15%.
  • Set aside Rs 15,700 crore for medium and small enterprises in FY22, double of what was budgeted in the FY21.
  • The central government aims to garner Rs 1.75 lakh crore through divestments in FY22. In FY21, the government had budgeted to raise Rs 2.1 lakh crore through divestments but managed to achieve only Rs 50,304 crore. The central government will further incentivize states to divest assets.
  • Provide Rs 20,000 crore in FY22 for re-capitalization of public sector banks.
  • Proposed to increase the permissible limit for Foreign Direct Investment for insurance companies to 74% from 49% along with allowing foreign ownership and control with safeguards.
  • The much-awaited voluntary vehicle scrappage policy is claimed to be bringing Rs 43,000 crore business opportunity by boosting consumption in the auto industry and helping the environment. Vehicles would undergo fitness tests in automated fitness centers after 20 years in case of personal vehicles, and after 15 years in case of commercial vehicles.
  • To further augment road infrastructure, more economic corridors are being planned. 3,500 km of national highway works in Tamil Nadu, investment of Rs 1.03 lakh crore 1,100 km of national highway works in Kerala, investment of Rs 65,000 crore 675 km of highway works in West Bengal, cost of Rs 25,000 crore.
  • The imposition of Agriculture, Infrastructure & Development Cess on the following items after reducing customs duty is expected to fund infrastructure for agriculture.
Items Revised basic customs duty rates
Apple 15%
Alcoholic beverages falling in chapter 22 50%
Crude edible oil (Palm, Soyabean, Sunflower) 15%
Coal, lignite, peat 1%
Specified fertilizers (Urea, MoP, DAP) 0%
Ammonium Nitrate 2.5%
Peas, Kabuli chana, Bengal gram, Lentils 10%
  • Government sets agriculture credit target of Rs 16.5 lakh crore for FY22 to increase provision to a rural infra development fund to Rs 40,000 crore from Rs 30,000 crore. Five major fishing harbours to be developed as hubs for economic activity.
  • Proposed an outlay of Rs 2.23 lakh crore towards the healthcare sector, 137% higher than Rs 94,452 crore projected in FY21. The spending will include a new centrally sponsored scheme, the PM Atmanirbhar Swasth Bharat Yojana, to strengthen the health infrastructure of the country. The government plans to spend Rs 64,180 crore on the scheme spanning over six years.
  • The Government will rationalize customs duty on gold & silver. The gold currently attracts an import duty of 12.5% which has been reduced to 7.5% and Agriculture, Infrastructure & Development Cess of 2.5% is imposed.

Impact of the budget announcement on the sectors

  • The formation of the bad bank will help the banks to liquidate its non-performing loans in a comparatively easier way. The banking industry is expected to benefit out of it.
  • The Government is expected to provide higher recapitalisation to the Public Sector Undertaking (PSU) banks. This will aid in providing relief from capital erosion due to the COVID impact.
  • The vehicle scrappage policy, although a voluntary one, is expected to provide tailwinds in the auto industry, especially the Commercial Vehicles segment. The tractor and two-wheeler makers expect increased allocation towards the rural economy.
  • The increased spending on the healthcare sector is expected to provide opportunities for the growth of the industry. The healthcare infrastructure is expected to improve as a result of increasing spending towards the sector.

 Investment Strategy

  • With the Government’s approach to have an expansionary budget, investors will be focusing more on winners like cyclical players instead of focusing on safety net stocks like those belonging to Pharma and Consumer sectors.
  • We believe that the mid-cap stocks will be a late-cycle story with the focus on the expansionary budget. We have already recommended quality mid-caps in the past and we will continue to spot opportunities in the mid-caps space as and when they arise.

We will be watching the execution of the budget very closely as any deviation from the expected performance, especially the receipts side, which can affect the interest rates meaningfully.

Seeing progress on the order book and large deals– Cyient

Update on the Indian Equity Market:

 

On Thursday, Nifty closed 1.1% lower at 13,818. Within NIFTY50, AXISBANK (+5.5%), SBIN(+2.6%), and IOC (+1.6%) were the top gainers, while HINDUNILVR (-3.7%), MARUTI(-3.4%), and WIPRO (-3.0%) were the top losing stocks. Among the sectoral indices, BANK (+6.0%), and PRIVATE BANK (+0.2%)were the only gainerswhileREALTY (-2.2%), IT (-2.2%), and FMCG (-1.9%) were the top losing sectors.

 

Seeing progress on the order book and large deals– Cyient

 

Excerpts of an interview with Mr. Karthikeyan Natarajan, President & COO, Cyient, aired on CNBC-TV18 on 28thJanuary 2021:

  • After a dip in performance in 1QFY21, Cyient is seeing a steady sequential recovery. Revenue growth and margins improved in 2QFY21 and further in 3QFY21 as well. Management expects further improvement in 4QFY21.
  • Cyient management has been able to bring in operating efficiency on the back of off shoring, utilizations, improving their pyramid structure, and through automation.
  • Cyient is making steady progress on digital transformation and expect that to accelerate in FY22E.
  • Management expects a revenue decline of ~10% in FY21E.
  • Cyient saw softness in aerospace & defense and few other verticals in the period between 1QFY20 to 1QFY21. Cyient restructured about 3 months ago and is now focusing more on good markets which should put them in a much better shape.
  • Cyient saw some one-off supply chain issues in the medical technology and healthcare business which led to 10% decline on a QoQ basis in that segment. But management expects the YoY growth momentum in this segment to remain strong.
  • Order book in 3QFY21 also included some impact of pent up demand. Management is seeing progress in order intake and has closed about 5 large deals worth USD 106 mn.
  • Within aerospace segment, Defense continues to be strong. Commercial aerospace remains soft but management hopes to stabilize to 3QFY21 levels in the near term. The next level of growth in aerospace segment will come post the vaccination drive over next 6-9 months.

 

Consensus Estimate (Source: market screener website)

  • The closing price of CYIENTwas ₹ 625as of 28-January-2021. It traded at 19x/ 16x/ 14x the consensus EPS estimate of ₹33.4/39.5/45.8 for FY21E/ FY22E/ FY23E respectively.
  • The consensus target price of ₹ 621/- implies a PE multiple of 14x on FY23E EPS of ₹45.8/-.

 

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.”

Strong jump in online sales – Tata Consumer

Update on the Indian Equity Market:
On Monday Nifty closed 0.7% higher at 13,356. Among the sectoral indices, Media (+2.8%), PSU Bank (+2.1%), and Pharma (+1.6%) closed higher. Nifty Realty (-0.3%) was the only sector which closed lower. UPL (+4.6%), Adani Ports (+3.6%), and HUL (+3.2%) closed on a positive note. SBI Life (-1.5%), Nestle (-1.4%), and Kotak Bank (-1.4%) were among the top losers.

Excerpts from an interview of Mr. Sunil D’Souza, MD and CEO, Tata Consumer with CNBC-TV18 dated 3rd December 2020:

● Any M&A deal of size and significance that happens in India does pass through the Tata Group.
● For the March quarter, 2.5% of sales were online and now sales are around 5-6% online out of total sales.
● There is a strong jump in online sales and the company expects the momentum to continue.
● On the food and beverages business, he said the results were good and the company is happy with its numbers.
● The core category business and out of home businesses are showing traction as there is an ease in lockdown.
● On Core categories, he said the tea is coming back to double-digit value growth. The company is gaining market share.
● On Tata sampann, he said it has outgrown the total food business by 3x.
● On tea prices, he says, the prices are moving in a small range. On the coffee side of the business, he says, Eight O’clock coffee which is a big brand is showing good momentum.
● On domestic side, Tata Coffee which is a subsidiary is a B2B business and there is some softness.
● On Starbucks, he said the company will continue to open outlets. The company has 201 outlets. The number of outlets opened this year might be equal to what the company opened last year.

Consensus Estimate: (Source: market screener and Investing.com websites)
● The closing price of Tata Consumer was ₹ 567 as of 7-December-2020. It traded at 57x/ 46x/ 41x the consensus Earnings per share estimate of ₹ 10/12.3/13.9 for FY21E/ FY22E/ FY23E respectively.
● The consensus average target price for Tata Consumer is ₹ 571/- which implies a PE multiple of 41x on FY23E EPS of 13.9/-.
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.”

Any new Government scheme is welcomed as it expands the market– SBI Life Insurance

Update on the Indian Equity Market:

On Friday, Nifty closed 0.1% lower at 12,969. Within NIFTY50, TATAMOTORS (+2.8%), ASIANPAINT (+2.0%), and HEROMOTOCO (+2.0%) were the top gainers, while NESTLEIND (-4.3%), POWERGRID (-3.2%), and JSWSTEEL (-2.6%) were the top losing stocks. Among the sectoral indices, REALTY (+2.7%), MEDIA (+1.5%), and AUTO (+1.4%) were the top gainers while IT (-0.4%) was the only losing sector.

Any new Government scheme is welcomed as it expands the market– SBI Life Insurance

Excerpts of an interview with Mr. Mahesh Kumar Sharma, MD & CEO, SBI Life, aired on CNBC-TV19 on 27th November 2020
● The growth trend for SBI Life remains healthy. Management is seeing numbers similar to last year and things are panning out as per internal targets.
● SBI Life did well in October even though the growth was lower than peers. Some areas like ULIPs are seeing improvement and Protection segment growth has been very strong.
● 1QFY21 was weak due to strict lockdowns. SBI Life like its peers had to jump from physical one-to-one selling to digital selling in the least possible time. Management is seeing a month-on-month improvement since June. They expect growth to continue in 2HFY21. Generally, for life insurance companies, 1HFY has lower seasonality and 2HFY is seasonally stronger.
● SBI Life has seen some increase in Covid-19 claims but the quantum is not worrying.
● Demand for risk products is higher from September. Credit life has grown in low double digits since September. Management expects this growth to continue on the back of strong growth in credit offtake.
● SBI Life is seeing YoY growth in ULIPs on the back of picking up of the market, improvement in sentiments easing of lockdowns.
● SBI Life has already repriced products that have an interest rate guarantee to adjust for a drop in interest rates. They continue to reprice products where needed.
● SBI Life has a lot of customers on the Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY). The government has been talking about Saral Bima Yojana. Management thinks that any new scheme is welcomed as it increases the market and penetration. And if everyone takes insurance, it is going to be a very profitable business.

Consensus Estimate (Source: investing.com and market screener websites)
● The closing price of SBILIFE was ₹ 849/- as of 27-November-2020. It traded at 55x/ 47x/ 39x the consensus EPS estimate of ₹ 15.3/18.2/21.8 for FY21E/ FY22E/ FY23E respectively.
● The consensus target price of ₹ 967/- implies a PE multiple of 44x on FY23E EPS of ₹21.8/-.
● In the case of insurance companies, the embedded value per share is the correct multiple for valuing the company. The consensus estimate of this metric is not available on any of the websites.

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.”

An uptick in demand during Diwali – VST Tillers Tractors

Update on the Indian Equity Market:
On Thursday Nifty closed 1.0% higher at 12,906. Among the sectoral indices, PSU Banks (+1.9%), Metal (+3.9%), and Fin Services (+1.7%) closed higher. None of the sectors closed lower. Eicher Motors (-1.6%), Maruti (-0.7%), and BPCL (-0.7%) closed on a negative note. JSW Steel (+7.0%), Tata Steel (+5.2%), and Grasim (+4.4%) were among the top gainers.

Excerpts from an interview of Mr. Antony Cherukara, MD, VST Tillers with CNBC-TV18 dated 23rd November 2020:

● Better agriculture and the festive season have led to rising demand for tractors and farm equipment.
● Speaking on the outlook, Mr. Cherukara says, the outlook is positive as an uptick in demand is seen.
● There was an uptick in demand during the Diwali festival.
● On tillers, he says, the import slowdown is coming into place, and going forward there will be an effect on demand based on that.
● 15-20% of imports of tillers were from China earlier. The Chinese tillers are cheaper as compared to Indian manufacturers. The quality of Indian tillers is good.
● On tractor sales, he says, the expected growth for tractors in FY21E is expected to be in the range of 12-15%, and a 20%+ growth is expected in tillers.
● There is not much visibility on Q4FY21 as of now.
● Speaking on cash on the books, he says, the cash flow is healthy and the company has generated 70cr + of additional cash flow in H1FY21.
● The relocation of the Benagluru facility to Hosur is on track and it is expected to be done by Q4FY21E. There will savings after this relocation.

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

● The closing price of VST Tillers Tractors was ₹ 1930 as of 26-November-2020. It traded at 22x/ 20x/ 14x the consensus Earnings per share estimate of ₹ 87.3/98.8/136 for FY21E/ FY22E/ FY23E respectively.
● Consensus average target price for VST Tillers Tractors is ₹ 1,977/- which implies a PE multiple of 15x on FY23E EPS of 136/-.

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.”

Footfalls improving every month– Phoenix Mills

Update on the Indian Equity Market:

On Thursday, Nifty closed 1.3% lower at 12,772. Within NIFTY50, POWERGRID (+2.6%), ITC (+2.2%), and NTPC (+1.7%) were the top gainers, while SBIN (-5.0%), ICICIBANK (-4.2%), and AXISBANK (-4.1%) were the top losing stocks. Among the sectoral indices, FMCG (+0.4%), and MEDIA (+0.3%) were the only gainerswhilePSU BANK (-3.1%), BANK (-2.9%), and PRIVATE BANK (-2.6%) were the toplosing sectors.

Footfalls improving every month– Phoenix Mills

Excerpts of an interview with Mr. Shishir Shrivastava, MD, Phoenix Mills, aired on CNBC-TV19 on 18thNovember 2020
● Average footfalls for October and November have reached 55%. Footfalls were higher in the first 2 weeks of November. Consumption, especially in the first 2 weeks of November has been 104% of last year. This means that conversion rates have gone up, i.e more people entering the mall are actually buying/consuming.
● 2QFY21 revenue was down 48% YoY as retail stores and hotels were not operational. But Phoenix Mills is seeing very good pick up now. Management expects FY21 to end at 58% of FY20’s rental income.
● Phoenix Mills has concluded negotiations with bank partners and have absolute visibility on how cash flows will pan out.
● Any discounts and waivers given by Phoenix Mills for the period of shutdown and the period after unlocking will end by the close of FY21. FY22 rentals will be close to what was recorded in FY20.
● When malls opened in August, footfalls were 25% which has increased to 55% now. So the trend is encouraging. People are being careful leading to still subdued footfalls. Phoenix Mills are also regulating the people density in their properties.
● Every month footfalls are improving 25-30%. Management hopes that they should be close to 75-80% of footfalls by 4QFY21. That being said, the important metric of consumption is tracking very well.
● All of Phoenix Mills’ expansion projects are well underway. They opened a new 1 mn sq ft. mall in Lucknow in July 2020 which is performing well. There are some delays on account of shortage of manpower but they are largely on track with expansion projects.
● Under construction projects of Phoenix Mills were funded by equity and there was no draw down of debt- which continues.
● Phoenix Mills have lease rental discounted debt on the operational assets. The moratorium has helped and now as cash flows are improving, management has visibility that they will be able to service all debt obligations by 3QFY21. This also includes amounts to be paid for deferment of moratorium.
● Phoenix Mills has around Rs 45,000 mn gross debt, and aroundRs 18,500mn cash on book. As free cash flow keeps improving, net debt levels can come down further.

Consensus Estimate (Source: market screener website)
● The closing price of PHOENIXLTD was ₹ 645/- as of 19-November-2020. It traded at 215x/ 33 x/ 25x the consensus EPS estimate of ₹ 3.0/19.8/26.2 for FY21E/ FY22E/ FY23E respectively.
● The consensus target price of ₹ 732/- implies a PE multiple of 28x on FY23E EPS of ₹26.2/-.

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.”