17 Sep

Will not need to dip into capital for provisioning –Indiabulls Housing

Update on the Indian Equity Market:

On Wednesday, Nifty closed with0.7% gains at 11,605. Within NIFTY50, DRREDDY (+4.4%), M&M (+4.0%), and HINDALCO (+3.9%) were the top gainers, while INDUSINDBK (-2.0%), NTPC (-1.6%), and INFRATEL (-1.1%) were the top losers. Among the sectoral indices, REALTY(+2.3%), PHARMA (+2.1%), and AUTO (+1.5%) gained the most. MEDIA (-1.6%) andPSU BANK (-0.5%)ended with losses.

Will not need to dip into capital for provisioning –Indiabulls Housing

Excerpts of an interview with Mr. Gagan Banga, Vice Chairman and MD, Indiabulls Housing Finance (IBULHSGFIN), aired on CNBC-TV18dated 15th September 2020:
• Indiabulls Housing has raised Rs 6,830 mn via QIP and Rs 5,220 mn through stake sale in OakNorth bank to build capital buffer. This will be used as growth capital. With this capital raise, the capital adequacy has gone up to 31%.
• Higher capital buffer will also help as a positive affirmation for credit rating agencies. Indiabulls Housing has been on a downward rating trajectory from AAA to AA. Management wants to get it back atleast to AA+ levels.
• Management has plans to increase capital further by about Rs 10,000 mn and increase capital adequacy up to 32%.
• In 1QFY21, AUM was flattish and similar trend persists for 2QFY21. Management expects growth from 2HFY21.
• Indiabulls Housing continues its strategy of reducing the real estate developer book. The gross developer book has reduced by Rs 180 bn in the last 2 years. In 1QFY21 and 2QFY21 the sell down has been about Rs 30 bn and 21 bn respectively. These developer loans are being refinanced by Indian PSU and private banks, as well as through a few securitization transactions with foreign institutions.
• Of the Rs 180 bn sell downs so far, there has been no discount required as the properties are prime with good LTVs of ballpark 50%.
• As a result of reduction in developer loans book, Indiabulls Housing is getting converted into a retail lending focused company.
• As Indiabulls Housing pursues growth in retail book, management expects AUM growth of 10% for FY21E. True to the adopted asset light model, the balance sheet growth will remain lower at 5%.
• Within retail book, the ratio of home loans to Loan Against Property (LAP) is 60:40.LAP segment on a risk adjusted basis has attractive RoA. On the asset quality front, this product has a 50% LTV and monthly principal amortization and the product is performing well.
• Through the last few months, initially 50-55% of LAP borrowers had taken moratorium but by August the number had declined to 20%. By September, the EMIs are getting backed and there is no significant increase in people who are not able to pay.
• Indiabulls Housing also raised Rs 15 bn to put into completion of projects which is a positive for the industry. Over the last 60-90 days, apartments across the board are selling at a strong momentum.
• Indiabulls Housing is now at a quarterly pre-provisioning operating profit (PPOP) level of about Rs 6,000 mn. Like in 1QFY21, material portion of the PPOP will be used to make provisions throughout FY21E. Indiabulls Housing will not need to dip into capital for provisioning.

Consensus Estimate (Source: market screener and investing.com websites)
• The closing price of IBULHSGFIN was ₹ 187/- as of 16-September-2020. It traded at 0.5x/ 0.5x/ 0.4x the consensus BVPS estimate of ₹ 392/408/ 445 for FY21E/ FY22E/ FY23E respectively.
• The consensus target price of ₹ 160/- implies a PE multiple of 0.3x on FY23E EPS of ₹ 473/-.

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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16 Sep

Infra development imperative to revive economic activity – L&T

Update on the Indian Equity Market:
On Tuesday, NIFTY was up by 82 pts (+0.7%) at 11,521.
Among the sectoral indices, REALTY (-0.7%), MEDIA (-0.42%), and FMCG (-0.2%) were the top losers and PHARMA (+1.9%), PVT BANK (+1.9%), and BANK (+1.7%) were the top gainers.
Among the stocks, INDUSINDBNK (+4.7%), CIPLA (+2.9%), and UPL (+2.8%) were the top gainers. TITAN (-1.4%), MARUTI (-1.1%), and HDFCLIFE (-0.9%) were the top losers.

Infra development imperative to revive economic activity – L&T

Edited excerpts of an interview with Mr. S.N. Subrahmanyan, Chief Executive Officer and Managing Director of Larsen & Toubro Ltd with The Hindu dated 12th September 2020:

Engineering conglomerate Larsen & Toubro Ltd. (L&T) recently completed divestment of its electrical and automation (E&A) business to Schneider Electric for ₹14,000 Crs. The company is also planning to divest or dilute certain concession businesses as part of the strategic review of its business portfolio, said CEO and MD S.N. Subrahmanyan.

• When asked about the next move after divesting in E&A he informed that they keep conducting a strategic review of our business portfolio from time to time and take a call on the basis of consistent, long-term planning process. As per this, they may divest or dilute certain concession businesses such as L&T Metro Rail (Hyderabad) and Nabha Power Ltd.
• When asked about the plans for E&A sale proceeds, he stated that they are in middle of an unprecedented pandemic which has caused considerable uncertainty to business during the past five months. In such times, it is necessary to strengthen the balance sheet and stay adequately liquid. Accordingly, the sale proceeds will be utilised partly for deleveraging the consolidated debt and also to strengthen the liquidity buffer warranted by the current economic environment. As business conditions improve post-COVID-19, some of the equity unlocked by the divestment will also be invested for growing the business at the group level. A certain part will also be used to reward the stakeholders.
• His comments on business operations coming back to normal: As the country unlocks, means of transport open, supply chains resume and labor returns, operations at about 90% of project sites and all manufacturing facilities have resumed and are gradually moving into normality. They remain positive.
• When asked about the workers coming back to work, he commented that Pre-pandemic, they had around 2.7 lakh labourers on rolls. This came down to 70,000 by end-May when the lockdown was lifted. Most of the labourers and workers went back to their villages and towns. But, L&T have all the reasons to be positive now as about 2.2 lakh are back on rolls and most of the sites are back to more or less normality. The amount of steel and cement L&T is purchasing is going up and that indicates better progress.
• His comments on getting new business: Infrastructure development is imperative to revive economic activity, create employment and infuse more liquidity into the system. Additionally, funded projects by the World Bank, Japan International Cooperation Agency and Asian Development Bank, among others, should start moving faster. L&T, therefore, is optimistic that sectors such as hospitals, power transmission and distribution, water, railways, roads, renewable energy and defence will start showing greater traction.
• When asked how is L&T readying for the fourth industrial revolution i.e. Digital, he said that over the last few years, L&T has deliberately and slowly enhanced its technology footprint and is charting a course in recent years that will see its technology portfolio increase its contribution vis-a-vis its traditional businesses. In FY15, the world was seeing a tectonic shift with digital technologies. These emerging technologies were creating new processes, new business models and entirely new businesses. Digitalisation and digital transformation were sweeping the business world. L&T was seeing and experiencing this first-hand from the clients of IT services companies.
• He further added that L&T saw the opportunity of digital as twofold. First, to digitally transform its own operations and use these new technologies to get better at what it was already doing well; and second, to look at digital as a new business opportunity that could shape its future portfolio. L&T started doing both and it acted swiftly with determination.

Consensus Estimate: (Source: market screener website)

• The closing price of L&T was ₹ 915/- as of 15-Sep-2020. It traded at 28x/24x/21x the consensus EPS estimate of ₹ 95.8/111/127 per share for FY21E/ FY22E/ FY23E respectively.
• The consensus target price of ₹ 2467/- implies a PE multiple of 19.4x on FY23E EPS of ₹ 127/-

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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15 Sep

Industry to see a spike in NPA’s in Q3 – Sundaram Finance

Update on the Indian Equity Market:
On Monday Nifty closed 0.2% lower at 11,440. Among the sectoral indices Bank (-1.8%), PVT Bank (-1.5%), and FIN Services (-1.7%) closed lower. IT (+4.4%), Realty (+3.7%), and Media (+1.5%) closed higher. Bharti Airtel (-3.8%), Bajaj Finance (-3.2%), and BPCL (-3.2%) closed on a Negative note. HCL Tech (+10.6%), TCS (+4.9%), and Wipro (+4.5%) were among the top gainers.

Excerpts from an interview of Mr. TT Srinivasaraghavan, MD, Sundaram Finance with ET NOW dated 14th September 2020:

• Mr Srinivasaraghavan said the situation is better and the negativism has started to lift.
• The company continues to focus on prudence and in terms of protecting asset quality.
• The moratorium has ended 10 days ago and now the company is moving into real world.
• He says, the next 4 months ending December are going to be curtail from an asset quality portfolio preservation perspective.
• The growth is coming back is selected few segments, the disbursals in August 20 were 70% of August 19 and September20 is looking similar side or little more.
• The rural and infrastructure segments are showing signs of growth.
• For Commercial Vehicles the first 5 months was a no show and an estimate of the company says that some growth will be seen in Q4FY21E.
• Given current situation he said the current portfolio will be skewed away from Medium and Heavy commercial vehicles.
• The company is well capitalized and there is no need to raise capital.
• On the NPA front, he said that it’s too early to spot a trend but people have started to repay and collections have started to flow in.
• He says, In Q3 the industry will see a spike in NPA’s.
Consensus Estimate: (Source: market screener and Investing.com websites)
• The closing price of Sundaram Finance was ₹ 1,335/- as of 14-September-2020. It traded at 28x/ 19x/ 21x the consensus Earnings per share estimate of ₹ 47.8/70.5/63.5 for FY21E/ FY22E/ FY23E respectively.

• The consensus average target price for Sundaram Finance is ₹ 1,423/- which implies a PE multiple of 22x on FY23E EPS of ₹63.5/-.
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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14 Sep

Expect AUM growth of 12-15% in FY21E – Manappuram Finance

Update on Indian equity market:
In the absence of economic news flow, markets traded with caution as Nifty closed the day mere 5 points higher at 11,455. Among the index, WIPRO (2.8%), SBIN (2.7%), and TECHM (1.9%) were the top performing stocks while ZEEL (-2.4%), INDUSINDBK (-1.7%), and POWERGRID (-1.5%) were the laggards. Within the sectoral indices, IT (1.3%), REALTY (1.3%), and PSUBANK (0.8%) were the top performing sectors whereas MEDIA (-0.9%), PVTBANK (-0.2%), and FIN SERVICES (-0.01%) were the only the sectors closed the day in red.
Excerpts of an interview with B.N. Raveendrababu, Director, Manappuram Finance (Manappuram) published on ET Now dated 9th September 2020:
The business is robust in the gold loan sector but the NBFC would stick to conservative lending and focus on consolidation of the company.
The overall demand for credit has not reached the pre-COVID state. The existing customers have taken more loans and compensated for the slowdown seen in new customer acquisition. He added that customers have also leveraged on higher gold prices.
He mentioned that around 25% of the customers in microfinance, housing finance, and vehicle leasing have availed the moratorium. Collection in microfinance business will cross 85% whereas collections in vehicle finance and housing finance division is expected to touch 90% in September. The company expects some credit loss in the coming quarter in this sector but the company has already provided for that.
New loan disbursals are lower in the non-gold portfolio and seen around 50% when compared to last year, he said. The company’s non-gold loan businesses now account for a 28-30% share of its consolidated AUM.
Regarding the cost of funds, the average borrowing cost for the stand-alone entity went down marginally by 7 bps during the first quarter to 9.39 %. The company expects the cost of funds is likely to come down further by 10-15 bps in the current quarter.
Consensus Estimate: (Source: marketscreener website)
The closing price of Manappuram was ₹ 156/- as of 11-Sept-2020. It traded at 1.9x/ 1.6x/ 1.4x the consensus BV estimate of ₹ 80.2/ 97.7/ 108 for FY21E/ FY22E/ FY23E respectively.
Consensus target price of ₹ 183/- implies a P/BV multiple of 1.7x on FY23E BV of ₹ 108/-.
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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12 Sep

Enduring a decline in share price in wonderful companies

In his blog, Jon reminds investors that the stocks of great companies are not immune to a deep decline in the share price. In fact, it’s practically guaranteed to happen more than once. Hendrik Bessembinder followed up on previous research with a deep dive into the greatest companies ever. His first conclusion shouldn’t be too surprising. The most successful company investments in terms of wealth created for shareholders at the decade horizon also involved a very substantial peak-to-trough decline in the share price. Even those investments that are the most successful at long horizons typically involve painful losses over shorter horizons.

Bessembinder looked at the top 100 companies based on shareholder wealth creation by decade since 1950. He then measured the largest decline in share price shareholders faced in that decade. Investors in the greatest companies faced a decline of 32.5%, on average, despite being one of the greatest decades of performance ever. That was just the largest decline, on average. It says nothing of the second, third, and so on a decline during the same decade. AT&T shareholders got off easy, seeing a decline of only 5.9% (over 7 months) in the 1950s. However, Netflix shareholders suffered the worst — a 79.9% drawdown (over 16 months) in the 2010s.

Bessembinder also looked at the decade, prior to the greatest decade of wealth creation, and found shareholders suffered an average decline of 51.6%. Again, that was just the largest decline for the previous decade. The duration of the decline fell in a wide range. They lasted anywhere from a month to three years in the same decade of the company’s greatest wealth creation. In the prior decade (to the greatest decade), in some cases, the decline exceeded eight years!

There are a few important takeaways from this:

First, sometimes great companies stumble. It can take management years to fix the problem (see Microsoft) or come up with a new product/innovation (see Apple) before the company moves in the right direction again. This can create multiple periods of massive wealth creation by the same company as seen in the table above.

Second, sometimes the market gets way ahead of itself in the short term. It gets the growth story right (see Amazon) but the timing is off by a decade. Expectations send the stock price soaring but once instantaneous growth is off the table, the price corrects, sometimes to the opposite extreme.

Third, and not surprising, long term shareholders must endure multiple, and sometimes painfully long decline to reap great rewards. This would confirm that the hardest part of investing is often just holding on.

Fourth, investors have multiple chances to buy great companies at wonderful prices. They usually have ample time too. Now, the usual caveats apply. Neither the buying opportunity nor the greatness of the company is always obvious at the time. But the fact stands. Declines in share price are buying opportunities for patient investors who have done the work and identified great companies in advance.

The broader point is this. It’s up to investors to separate the company from its stock price because declines are inevitable. But a great company’s stock will not only recover but go on to be extremely rewarding.

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11 Sep

FY22 to be a game changer – Dixon Technologies

Update on the Indian Equity Market:
On Thursday, Indian equity markets snapped a two-day losing streak with the Nifty50 closing 1.5% higher at 11,449. RELIANCE (+7.3%) was the top gainer after reports of potential investments in its retail arm, Reliance Retail. BPCL (+6.0%), and ASIANPAINT (4.2%) were the other lead gainers in the index. INFRATEL (-4.8%), HINDALCO (-2.9%), and TATASTEEL (-2.3%) led the losers. Among the sectoral indices, PSU BANK (+2.5%), MEDIA (+1.3%), and FINANCIAL SERVICES 25/50 (+1.01%) were the top gainers. METAL (-1.1%), and PHARMA (-0.01%) were the only sectoral indices to end in the red.
*Nifty Financial Services 25/50 is a new capped version of the Nifty Financial Services index.

Edited excerpts of an interview with Mr. Atul Lall, MD, Dixon Technologies (India) with CNBC-TV18 on 8th September 2020:
• A government panel has recently cleared $100 bn of mobile export proposals from global manufacturers.
• Dixon has submitted 2 applications under the production-linked incentive scheme (PLI) but has not received an official nod yet. It might take a week to ten days to receive official communication from the government.
• They have large contracts for exports and domestic markets lined up with big global brands. The focus is to accelerate project implementation and production is planned to start by Q4FY21.
• The government is giving a 4-6 percent incentive for manufacturing under the PLI scheme for the next 5 years, which Mr. Lall calls the government handholding in the infancy stage of any industry. There is some disability in manufacturing mobile in India when compared to China, and the scheme is helping reduce that.
• They are seeing significant traction from large global players looking to shift base from China and other countries to India.
• Year 1 is a very short period and they get barely 3 months to generate revenues in this fiscal (FY21). In year 2, in one application, there is a ceiling of about Rs 3000-4000 crore. If they get both the applications, they will be able to generate revenues of Rs 8000 crore through mobile manufacturing, which is a big leap for a company like theirs.
• There will be a small margin expansion with a large volume expansion next year, which is going to be a game-changer.
• In the LED TV segment, the order book is very strong and they are operating at 110% capacity and with the government shifting imports of a certain kind of televisions from OGL (Open General License) to a restricted category, their order book is increasing. They have already expanded their capacity from 3.6 mn to 4.4 mn units, there is a further expansion planned to take it to 5.5 mn units. This increased capacity is almost 33% of the Indian TV requirement. This second round of capacity expansion will be completed by March 2021.
• The capacity expansion is happening across verticals, including mobiles and washing machines.
• There will be significant growth in Q2 on a YoY basis. Plants for LED TV, mobiles, and washing machines are running at almost 110% capacity. Lighting being an extensive manpower-oriented segment, they had to re-engineer the lines because of social distancing is working at 80% capacity. The one vertical that is not performing as well, which is the security surveillance systems, working at 50% capacity. Overall, the business has been good.
• FY21 will be better than FY20 both on the top line as well as the bottom line.

Consensus Estimate: (Source: market screener website)
• The closing price of Dixon Technologies (India) was ₹ 9400/- as of 10-September-2020. It traded at 91.3x/ 50x/ 36.7x the consensus earnings estimate of ₹ 103/ 188 / 256 per share for FY21E/FY22E/FY23E respectively.
• The consensus target price of ₹ 7936/- implies a PE multiple of 31x on FY23E EPS of ₹ 256/-.

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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10 Sep

Jeevansathi was the only business which did well in Q1: Info Edge

Update on the Indian Equity Market:
On Wednesday, NIFTY closed in the red at 11,278 (-0.3%). The top gainers in NIFTY50 were Tata Steel (+3.6%), Zee (+3.1%) and Cipla (+2.7%). The top losers were SBI (-4.1%), GAIL (-3.4%), and Bajaj FInserv (-2.9%). The top sectoral gainers were PHARMA (+1.9%), MEDIA (+1.2%) and METAL (+0.9%) and Top sectoral losers were PSU BANK (-2.9%), BANK (-2.1%), and PVT BANK (-1.8%)

Excerpts of an interview with Mr Hitesh oberoi, MD and CEO, Info Edge with ET now dated 8th September 2020:
• They were impacted by the lockdown in April and May and that resulted in billing stopping by 44% but revenue was down only 10% because we benefited from deferred revenue of previous quarters.
• The billing growth of the previous quarters helped them and resulted in revenue decline of only 10%. Cost declined by about 17% and therefore EBITDA went up. But yes this billing growth will impact revenue growth in the coming quarters.
• Q1 was very badly impacted by both 99acres and Naukri. Requirement billings were down 44% and real estate billings were down 71%. But they have seen a recovery of some sorts in the last couple of months.
• Traffic on all their portals is back to near base level and they are back to where they were at the same time last year. On some metrics they are showing healthy growth.
• In July and August, their billings were tracking at 80% of what it was last year. So there has been a handsome recovery in July and August
• September is their biggest month in this quarter, almost half of the collections happen in September. So if September is good, that will give them much more confidence going forward.
• In July and August they have seen job seekers come back with a bang. So job seeker activity on the site is at an all-time high. They are seeing more app downloads. They are seeing more applications, more resumes being modified, more people registering
• Recruiter activity which had slowed down considerably in April, May and June, has also started inching up. They are back to 65-70% levels in Naukri
• They have seen a handsome recovery in IT. They are seeing reasonable sort of activity in sectors like healthcare, education, pharmaceuticals, insurance. But sectors like travel, hospitality, tourism, retailing, apparels all these sectors continue to be impacted by the slowdown. They are yet to show any signs of recovery.
• Jeevansathi was actually the only business in their portfolio which did well in Q1. It kept growing through the lockdown as well. Jeevansathi billings grew by 13% in Q1 and in the month of July and August the billings growth has been even better. In August, they grew billings by 23% in Jeevansathi.
• They are constantly on the lookout for investing in or acquiring both for strategic and financial purposes. They have an AI of sorts through which they make their financial investments.
• They just finished raising $250 million through their QIP. So they are now sitting on close to Rs 3,300 crore of cash.
• The purpose of this QIP was to look around for acquisitions and inorganic sort of opportunities in the spaces they operate. Their preference would be to do a deal at some point in time in the next 12 to 18 months in either matrimony or real estate or education.
• Zomato also had a terrible Q1 but business has come back strongly in Q2. The dining out part of the business has been more impacted because many of the restaurants are still shut but delivery is picking up. The company has done a very good job of cutting burn.
• Burn is now down to maybe $2-3 million a month from maybe $30-40 million a month a year ago. So, they have done a fantastic job on that front where unit economics is improved. They are making a profit per order now where they were losing maybe 35-40 cents to an order earlier.
• Covid has told us is that the world is all about essential services and clearly some of the services they offer are essential in nature to more middle class Indians.
• On the whole, you will see a more aggressive Info Edge. Of course, a lot will depend on what happens to India as a whole. At the end of the day, their businesses are index to GDP growth.
• They are very well positioned. Their Naukri business is very profitable and the two other categories they operate in are matrimony and real estate.
• Covid crisis is likely to throw up opportunities because a lot of companies have been very negatively impacted by it and hopefully there will be many more opportunities going forward than there were in the last three years.

Consensus Estimate: (Source: market screener and investing.com websites)
● The closing price of Info Edge was ₹ 3,270/- as of 09-September-2020. It traded at 128x/ 93x/ 69x the consensus earnings estimate of ₹ 25.6/ 35.2/ 47.5 for FY21E/22E/FY23E respectively.
● The consensus price target is ₹ 2599/- which trades at 55x the earnings estimate for FY23E of ₹ 47.5/-

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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09 Sep

COVID-19 has led to a delay in recovery – Yes Bank

On Tuesday, Nifty ended 0.3%, lower than the previous close at 11,317. The top gainers for Nifty 50 were BPCL (+2.8%), HCL Tech (+2.0%), and Infy (+1.4%) while the losing stocks were Infratel (-8.1%), ZEEL (-4.7%), and Tata Motors (-4.5%). The only sector in green was IT (+1.2%). The top losing sectors for the day were Media (-3.0%), Realty (-1.7%), Pharma (-1.6%) & PSU Bank (-1.6%).

Edited excerpts of an interview with Mr Prashant Kumar, MD & CEO, Yes Bank Ltd; dated 07th September 2020 from CNBC TV 18:

The recovery target would be for the entire stressed book; it is an issue about the timing. Due to COVID, the targets which the bank was expecting during FY21E have slowed down a bit. But he thinks that the bank is absolutely on track and during the current year and going forward he is confident that they will be able to recover.
Yes bank has seen a 22% cost reduction in 1QFY21. Yes Bank is targeting cost reduction of at least 10% year-on-year (YoY), but because of COVID, everything is not working in the way it used to work in the past. So, he thinks that is helping them to reduce costs further. They are working on the current situation. The Bank has launched a programme which allows a sizeable portion of the workforce to work from home which will be convenient for the younger generation & women associated with the bank.
Yes Bank already has provision coverage of almost 76% on their loan book. This loan book with 76% coverage where the estimates of loss given default (LGD) is something around 60-65%. So, that kind of loan assets can very easily move to SPV.
Talking about Dish TV stake of 24% with Yes Bank, Mr Kumar said that every case has its own merits and reasons for taking a specific course of action. In the case of Dish TV, they are evaluating the different options. He further added that there are a number of suitors for Dish TV and that they are looking for the best deal.
Deposits have seen 11% QoQ growth in 1QFY21. Going forward, he sees good progress on deposit front. There is deposit accretion seen. As of March 2020, the corporate & retail contribute is 50:50. The bank is also able to protect their margins accordingly.
Loan Book recoveries rate elongated due to COVID situation.
Yes bank looking for three partners on life as well as non- life.

Consensus Estimate: (Source: market screener website & investing.com)
The closing price of Yes Bank Ltd was ₹ 14/- as of 08-September-2020. It traded at 0.8x/0.5x/1.0x the consensus book value estimates of ₹ 17.0/29.0/13.5 for FY21E/FY22E/23E respectively.
The consensus target price of ₹ 28/- implies a PE multiple of 2.1x on FY23E EPS of ₹ 13.5/-.

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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08 Sep

Remains financially strong and net debt free–Page Industries

Update on the Indian Equity Market:

On Monday, Nifty closed with0.35% gains at 11,374. Within NIFTY50, INFRATEL (+5.7%), HDFCLIFE (+3.2%), and DRREDDY (+2.3%) were the top gainers, while M&M (-3.6%), UPL (-2.8%), and BAJFINANCE (-2.5%) were the top losers. Among the sectoral indices, FMCG (+0.6%), IT (+0.6%), and MEDIA (+0.3%) gained the most. REALTY (-0.9%), AUTO (-0.5%), and PVT BANK (-0.3%) ended with losses.

Remains financially strong and net debt free–Page Industries

Excerpts of an interview with Mr. Chandrasekar, CFO, Page Industries, aired on ETNow dated 7th September 2020:
• Page Industries has seen significant improvement in demand. From 0 sales in April, -80% YoY in May, -40% YoY in June, -30% YoY in July to a YoY growth in August, there is a good month-on-month uptick. Outlook remains optimistic for rest of the year.
• The buildup in demand has been gradual so Mr. Chandrasekar doesn’t think it was just pent up demand. Secondary sales are more than factory sales. All indications suggest that things are getting back to normalcy.
• August sales are a pretty good indication that demand is back. But predicting full year growth rate is still difficult.
• Sales via e-commerce inJuly and August were better than the past trend. E-commerce has seen YoY growth of about 200%. Purchasing modes have changed across sectors. In terms of margins and investments for Page, e-commerceis more or less similar to other distribution channels.
• Procurement control works between a range of +/-1% so raw material cost has remained more or less the same. Page is trying to work on procurement optimization, but in the near future,raw material cost will be rangebound.
• Page has done significant optimization on the other operating expense including wages, factory overheads, selling overheads, advertising,and corporate overheads. They have managed significant reductions over 4QFY20 as well as 1QFY20.
• Page’s cash position of Rs 1,700 mn as of 1QFY21 is better than any time during the past year. They have done a lot of work across working capital. Page has not borrowed any funds and continues to remain net debt free.
• Page is also paying vendors earlier than they are asking. MSMEs need support to remain afloat at this point. It is also in the interest of Page to help the small businesses as they are trusted vendor partners. Despite that, Page has improved its cash position.
• Page hasretained all employees during this difficult time.
• A specific European fund has raised concerns that Page Industries is not following best manufacturing practices. Mr. Chandrasekar assured that Page’s manufacturing practices are based on fundamental and ethical policies. Page has published sustainability report for the past 2 years in the public domain which can be referred to address concerns. Page has been in the business long enough to know that it’s a people intensive business and the company hasto take care of its employees.
• Men Innerwear market is growing at about 11% YoY and is expected to grow to Rs 900 bn by 2028 from 350 bn currently. Women innerwear market is expected to grow at about 12.5% YoY to Rs 680 bn by 2028 from Rs 210 bn currently. Page is very small in the overall market size. Premiumization will continue to happen in the market so maintaining market share is not an issue. The issue is about increasing geographical reach and introducing new offerings in the women and kids segments.
• Page will resume capex and other business investments once the business gets back to normal levels from the covid-19 disruption.

Consensus Estimate (Source: market screener and investing.com websites)
• The closing price of PAGEIND was ₹ 18,296/- as of 7-September-2020. It traded at 91.5x/ 47.0x/ 38.7x the consensus EPS estimate of ₹ 200/ 389/ 473 for FY21E/ FY22E/ FY23E respectively.
• The consensus target price of ₹ 17,617/- implies a PE multiple of 37.2x on FY23E EPS of ₹ 473/-.

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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07 Sep

Expect double digit growth over the next 5 years – Kansai Nerolac

Update on the Indian Equity Market:
On Friday, NIFTY was down 194pts (-1.7%) at 11,334. Among the sectoral indices, METAL (-3.0%), PSUBANK (-2.7%), and REALTY(-2.3%) were the top losers and there were no gainers. Among the stocks, MARUTI (+1.8%) was the only gainer. TATASTEEL (-3.9%), AXISBANK(-3.8%), and ADANIPORTS (-3.6%) were the top losers.

Edited excerpts of an interview with Mr. HM Bharuka, Vice Chairman and Managing Director of Kansai Nerolac with ETNOW dated 3rd September 2020:

• His comments on completing 100 years: Feels proud to complete 100 years, there are few companies in India who have thrived and survived 100 years. Surviving through various crises in the past 100 years and going through Covid indicates the strength of the company.
• His views on the next 3-5 years and visibility for the business: Paint industry since 1991 is having double-digit growth. He thinks the penetration level is still low, per capita income is rising, and expects double-digit growth for the next 20-25 years. Looking at various parameters like consumer, demography, infrastructure, auto industry gives confidence that these sectors will grow from hereon and sees good prospects for the paint industry for the next 20-25 years.
• When asked about his views on auto sales numbers picking up in the month of Aug-20 he commented that it is slowly picking up, because of the pandemic and financial crisis, the auto industry was facing problems. But every 3-5 years, the auto industry does see a dip and then recovers back. It was about to recover but due to the pandemic it got postponed and now we can see month on month improvement, but he thinks still there is a long way to go. Commercial vehicles are still in problem and for 2 wheelers, some companies have done well and the others have not. Overall, he thinks it will take time for the auto industry to recover but positive signs are beginning to show up. In fact, he thinks pandemic would accelerate if we are able to sort out financial issues, because of the social distancing norm and people avoiding public transport, everyone would now like to own their own private vehicle. India should focus on the auto industry as it an important core industry and can become an export hub for auto and auto components and is optimistic about the auto sector.
• When asked about the demand scenario and whether he sees continuing volume growth for the rest of the year he stated that despite there being problems like non-availability of painters and people fearing to interact with each other still, Nerolac saw growth from May-20 onwards, which is a positive sign. Posting double-digit growth in 1FY21 indicates the strong nature of the paint industry and is confident about the architecture industry and is also positive on auto, infrastructure, and white goods segment.
• When asked about the possibility of market share shifting from urban to rural areas, he informed that the penetration level of this industry is low in rural areas, so in any case, Nerolac is supposed to do better in rural areas as compared to the urban market. Due to this pandemic, the rural economy is doing well and expects rural demand to continue to grow faster than urban going forward. He is counting more on the rural market to do well for double-digit growth for the company.
• When asked whether Indian companies are complete “aatmanirbhar”, he said that India has only one manufacturer of TiO2, an important raw material for paints, and that too is government-controlled. More than 2/3rd of India’s TiO2 consumption is currently being imported. He believes there is a big opportunity to make TiO2, Monomers, and other pigments used for specialty paints in India.
• His comments on strategy for the next 5 years: This is the industry is a defensive and growing industry which is reflected in PE multiple ranging from 40-60x. For the next 5 years, Nerolac expects to continue to grow in double digits if growth continues there are few players as entry barriers are high and hence expect margins to expand. Of course, global consolidation will take place, but despite that, all major players are in India and it is expected that current players will expand its topline and bottom line. He expects 12% compounded growth for the company and stock return to be higher than 12%. He sees a golden period for investors and shareholders. Commenting on dividend payout, he said that this industry has positive cash flow, and when there are no other investment opportunities there is no point keeping the cash as ROCE goes down. So, certainly, cash should be given back if no other investment opportunities are found.

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

• The closing price of Kansai Nerolac was ₹ 486/- as of 04-Sep-2020. It traded at 59x/43x/36x the consensus EPS estimate of ₹ 8.27/11.5/13.7 per share for FY21E/ FY22E/ FY23E respectively.
• The consensus target price of ₹ 426/- implies a PE multiple of 31x on FY23E EPS of ₹ 13.7/-

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.”

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