02 Feb

Expect export market to bounce back in Q4 -Tata Chemicals

Update on the Indian Equity Market:

On Tuesday, NIFTY closed at 14,648 (+2.5%). Top gainers in NIFTY50 were Tata Motors (+16.9%), Shree Cement (+7.2%) and UltraTech Cement (+6.9%). The top losers were HDFC Life (-2.5%), Bajaj Finserv (-2.2%), and Hero Motocorp (-1.5%). The top sectoral gainers were AUTO (+4.1%), REALTY (+3.8%), and BANK (+3.5%) and there were no sectoral losers.

Excerpts of an interview with Mr. R Mukundan, MD & CEO – Tata Chemicals with CNBC -TV18 dated 29th January 2021:

  • Tata Chemicals is expecting the export market to bounce back in the 4QFY21 quarter.
  • They are expecting exports from the US to be better than last year’s levels in Q4. Demand in South-East Asia should also normalise by H1-H2 FY22.
  • The market in which the Magadi division faced a bit of pressure is South-East Asia. There the tourism industry is hit very hard. The demand for container glass which goes into beverages and drinks had been impacted severely.
  • They believe by H1-H2 of FY22 that demand would come back. But what Magadi has done is to get a lot of cost orders in the system. So they have posted a solid margin this quarter and will continue to maintain a good set of numbers.
  • He thinks that revenues of Rs 170 bn in the next 4-5 years are doable. Rs 170 bn is board-approved plan and that guidance still remains. They are not way off from that.
  • By the end of FY21, some of the projects will come on-stream, and by 2022-23 almost 50 percent of the capital would be deployed, and it will be on-stream.
  • They anticipate an incremental revenue of about Rs 14 bn and an incremental contribution or EBIT margin of close to about Rs 6 bn as a result of investments of Rs 2,600 crore.

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

  • The closing price of TATACHEM was ₹ 521/- as of 2-February-2021.  It traded at 32x/ 15x/ 13x the consensus earnings estimate of ₹ 16.5/ 34.5/ 39.7 for FY21E/22E/23E respectively.
  • The consensus price target is ₹ 448/- which trades at 11x the earnings estimate for FY23E of ₹ 39.7/-

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.”

 

 

 

 

 

By Chemicals, Tata Chemicals 0 Comments Read more...
01 Feb

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.

By Uncategorized , , , 0 Comments Read more...
29 Jan

In liquidity surplus, better to have secured retail loans – Bank of Baroda

Update on the Indian Equity Market:

On the last trading day before the Union Budget is presented, Nifty 50 ended at 13,635 (-1.3%) dragged by auto and IT stocks. Among the sectoral indices, PSU BANK (+1.7%), PRIVATE BANK (+0.9%), and BANK (+0.7%) led the gainers. AUTO (-2.9%), IT (-2.6%), and METAL (-1.9%) ended the day with losses. Among the stocks, INDUSINDBK (+6.1%), SUNPHARMA (+4.3%), and ICICIBANK (+2.0%) led the gainers, while DRREDDY (-5.3%), MARUTI (-4.8%), and HEROMOTOCO (-3.7%) led the index losers.

Excerpts of an interview with Mr. Sanjiv Chadha, MD, and CEO, Bank of Baroda (BANKBARODA) with CNBC TV-18 aired on 28th January 2021:

  • The bank recently reported its 3QFY21 results with a strong domestic loan growth reported quarter on quarter (QoQ).
  • Domestic advances have grown by 8.2% percent YoY and a large portion has come from retail secured loans. The bank plans to increase the share of retail advances to ensure more risk mitigation, and secured retail loans giving better yield than high-rated coupons.
  • The CASA growth for the bank had been good and deposit growth had been in sync with the business strategy. Within CASA, current accounts are growing 18%. This is very important to protect the margins when liquidity is surplus.
  • In a liquidity surplus situation, the highly-rated corporates are able to command price which is almost unprecedented. They are borrowing at rates which are never seen before. To grow the loan book and protecting interest rate margins, while on the liability side ensuring a large proportion of book comes from CASA, on the asset side it is secured retail loans which give the combination of being good quality, low loss giving default, and giving better coupon. This is the strategy they are following in coming quarters as well.
  • The bank witnessed 6.5% YoY growth in its deposits. As the bank wants to closely align the deposit growth to where the advances growth is, and ensuring good quality of deposits growth. The growth in deposits is in line with the previous quarter.
  • The credit cost of the corporate book should start looking better. On the retail and MSME, there still is some uncertainty.
  • When it came to restructuring, a very small percentage of borrowers opted for restructuring which would seem to suggest that they are comfortable in terms of paying loans.
  • The bank is launching a QIP of Rs 200– 400 bn later in the year.

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

  • The closing price of BANKBARODA was ₹ 68/- as on 29-Janaury-2021. It traded at 0.5x/ 0.4x/ 0.4x the consensus book value estimate of ₹ 147/ 154/ 168 for FY21E/ FY22E/FY23E respectively.
  • The consensus target price of ₹ 65/- implies a PB multiple of 0.4x on FY23E BV of ₹ 168/-.

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.”

By Bank, Bank of Baroda 0 Comments Read more...
28 Jan

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.”

 

By Cyient, IT, Uncategorized 0 Comments Read more...
27 Jan

Bagged largest EPC Order – L&T

Update on the Indian Equity Market:

On Wednesday Nifty closed 1.9% lower at 13,568. Among the sectoral indices, FMCG (+0.3%) was the only sector that closed higher. PVT Bank (-3.1%), Bank (-2.9%), and FIN Services (-2.8%) led the indices that closed in the red. Tech M (+2.6%), SBI Life (+2.3%), and Wipro (+2.0%) closed on a positive note. Tata Motors (-4.4%), Tata Steel (-4.3%), and Titan (-4.2%) were among the top losers.

Excerpts from an interview of Mr. SN Subrahmanyam, MD & CEO, L&T with CNBC-TV18 dated 27th January 2021:

  • Speaking about the Q3FY21 results, Mr. Subrahmanayan said the company received a record order inflow of Rs 73,000 crores.
  • L&T bagged it’s largest EPC order of Mumbai – Ahmedabad high speed 2 packages at Rs 32,000 crores and India’s largest bridge order for Rs 2,900crores.
  • Speaking about sales, he said the company touched previous years same quarter number (Q3FY20), the number fell short of Rs 600-700 crore.
  • Looking at the growth in orders the momentum is back.
  • The high margins are sustainable as there are levers to save ahead.
  • Working capital has fallen and cash inflows have improved. The company has total debt of Rs 1,85,000 crores. The company has paid Rs 10,000 crores in Q3FY21 and the debt has now come down to Rs 1,75,000 crores. Out of this Rs, 91,000 crore is L&T Finance Holdings debt.
  • The company has not utilized its entire debt, the board at the start of the year took a decision to keep cash of Rs 35-45,000 crores due to uncertainties.
  • Speaking about the realty sector, he said properties in Bangalore, sea woods, and Mumbai had done well in December 20. The company will not invest inland, but only in the construction part.

 

 

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

  • The closing price of L&T was ₹ 1,358 as of 27-January-2021.  It traded at 20x/18x/16x the consensus Earnings per share estimate of ₹ 67.9/73.7/86.8 for FY21E/FY22E/ FY23E respectively.
  • The consensus average target price for L&T is ₹ 1,481/- which implies a PE multiple of 17x on FY23E EPS of 86.8/-.

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.”

 

By L&T , 0 Comments Read more...
25 Jan

Double-digit growth to continue in 4QFY21 – Asian Paints

Update on Indian Equity Market:

Markets started the fresh week on a selling spree as Nifty closed the day 133 points lower at 14,239. Within the index, the gainers were led by GRASIM (5.9%), UPL (4.0%) and CIPLA (3.8%) while RELIANCE (-5.9%), INDUSINDBK (-5.5%) and HCLTECH (-3.8%) led the losing pack. Within the sectoral indices, PHARMA (1.7%), METAL (0.2%) and BANK (0.1%) were the only gainers while IT (-1.8%), AUTO (-0.8%) and REALTY (-0.8%) were the highest losers.

Excerpts of an interview with Mr Amit Syngle, MD & CEO- Asian Paints (ASIANPAINT) with CNBC TV18 dated 22nd January 2021:

  • 3QFY21 has been phenomenal as the company witnessed a YoY growth of more than 30%. The growth was achieved on the back of the Indian decorative segment which grew 32% YoY in volume terms and 26% in terms of value. 
  • All three months during 3QFY21 reported double-digit YoY volume growth. October grew fastest in terms of volumes. The company gained market share in the organized as well as the unorganized market. Metros, Tier-I and Tier-II contributed to a sizable chunk of growth.
  • He said that industrial and international segments picked up strongly from 2QFY21. The growth was seen across verticals.
  • The consumer sentiment continued to improve. The company expects to continue double-digit YoY volume growth in 4QFY21.
  • The industry is witnessing some pent demand which is difficult to quantify. The construction and real estate sector is also picking up which will add to the growth during the quarter.
  • He said that 4QFY21 may see an impact in terms of raw material inflation. The company is still expected to maintain the current level of margins in the quarter.

Consensus Estimate: (Source: market screener website)
• The closing price of ASIANPAINT was ₹ 2,521/- as of 25-January-2021. It traded at 80x/ 65x/ 56x the consensus earnings estimate of ₹ 31.5/ 38.7/ 45.3 for FY21E/FY22E/23E respectively.
• The Consensus price target of ASIANPAINT  was ₹ 2,525/- as of 25th January 2021 which is 56x of FY23E EPS estimate of ₹45.3/-.

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.”

 

By Asian Paints, Paints , , 0 Comments Read more...
22 Jan

Demand recovering despite product prices at historic highs – Indian Oil Corp.

Update on the Indian Equity Market:

On Friday, Nifty50 ended 1.5% lower at 14,372 dragged by the metal and banking stocks. AUTO (+1.4%), and IT (+0.2%) were the only sectoral indices to end the day with gains. METAL (-3.9%), BANK (-3.2%), and PRIVATE BANK (-3.2%) led the sectoral losers. Auto stocks led the gainers with BAJAJ AUTO (+11.2%), HEROMOTOCO (+4.0%), and EICHERMOT (+1.8%) leading the pack. AXISBANK (-4.5%), ASIANPAINT (-4.3%), and JSWSTEEL (-4.0%) were the top losers.

Excerpts of an interview with Mr. Shrikant Vaidya, Chairman, Indian Oil Corporation (IOC) published in Business Standard on 21st January 2021:

  • Crude oil prices are rising does not impact IOC’s margins as refining margins are influenced by product cracks. Product cracks are yet to recover fully. The increase in crude oil prices is likely to boost margins through inventory gains, provided prices stabilise at these levels.
  • India is set to drive global oil demand over the long term. Vaccine rollout suggests a more certain recovery in the oil market in 2021, but demand uncertainty still looms. Saudi Arabia’s decision to reduce crude oil production by 1 mn barrels a day in February and March has provided support to the market but demand concerns remain.
  • We may have to wait for fiscal conditions to improve before a significant reduction in excise duty rates are announced.
  • With the upcoming Budget, he reiterated the petroleum industry’s demand to move petrol, diesel, aviation turbine fuel, natural gas, and crude oil under GST. Exclusion of these products which account for ~60 percent of refined product volumes, with crude oil and natural gas has resulted in stranded taxes in the hands of oil & gas companies.
  • Oil consumption posted a month-on-month increase for the fourth straight month in December 2020. The easing of restrictions has revived demand from transportation.
  • IOC is sticking to the investment plans as those are based on long term demand potential in the country. Though they have faced temporary issues due to pandemic restrictions, IOC is on track to achieve its capex target of Rs 260 bn in FY21.
  • Since the easing of lockdown, IOC has commenced work on 2800 projects at an anticipated cost totaling Rs 2 trillion.

Consensus Estimate: (Source: market screener website)

  • The closing price of IOC was ₹ 96/- as of 22-January-2021. It traded at 8x/ 7x/ 6x the consensus earnings estimate of ₹ 12.8/ 14.2/ 17.3 per share for FY21E/FY22E/FY23E respectively.
  • The consensus target price of ₹ 115 implies a PE multiple of 7x on FY23E EPS of ₹ 17.3/-.

 

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.”

By Miscellaneous , 0 Comments Read more...
21 Jan

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.”

 

By Alembic Pharma 0 Comments Read more...
20 Jan

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.”

By L&T Finance Holdings, NBFC , , , , 0 Comments Read more...
19 Jan

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.”

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