09 Jun

What We Should Remember About Bear Markets: Part II

(In continuation with the previous article…)

Some losses won’t be temporary: For sensibly diversified, long-term investors the losses from most bear markets should be temporary (there is a long-run premium attached to equity investing after all), but investors should not naively assume that everything will recover. Imprudent investment decisions will be exposed in bear markets. Inappropriate leverage, unnecessary concentration, and eye-watering valuations tend to bring about permanent losses of capital that time will not heal.

Emotions will dominate: The ability to make good, long-term decisions during a bear market is severely compromised. The emotional strains that investors are going to feel will outweigh rational thought – what happens if things continue to deteriorate and they do nothing? It is during such times that systematic decision-making – such as rebalancing and regular saving – comes to the fore.

Risk tolerance will be examined: Bear markets are the worst possible time to find out about one’s tolerance for risk. Everyone becomes risk-averse when they are losing money. The issue for investors is that experiencing a 37% loss in real life is very different from seeing it portrayed as a hypothetical situation. If possible, investors should avoid reassessing their appetite for risk during tough periods.

Investors will extrapolate: During a bear market, it’s difficult to perceive anything except doom and gloom. Investors might believe that things will keep getting worse – prices will be lower again tomorrow.

Each bear market will be different: Investors should ignore all charts comparing current declines with other bear markets in history, they are entirely unhelpful. There is no reason to believe that such a deeply complex, unpredictable system should mimic patterns of the past. Each bear market is unhappy in its own way.

Bear markets are the ultimate behavioral test: The outcomes of bear markets are more about investors than they are about the market. Investors entering a bear market with identical portfolios will have wildly different results based on the decisions that they make during it.

Source: ‘What We Should Remember About Bear Markets’ by Joe Wiggins published on behaviouralinvestment.com

Asset Multiplier comments:

  • It is difficult but necessary to remain a long-term investor during bear markets. During times of uncertainty, investors should resist allowing their emotions to influence their rational decision-making.
  • Rather than chasing winners or trying to time the market, investors should concentrate on rebalancing their portfolios and keeping them steady.
  • Accepting that stock markets have ups and downs is a key element of investment discipline. This helps investors protect their capital and maintain their calm amidst turbulent markets.

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 Investment articles , 0 Comments Read more...
08 Jun

Expect helicopter orders worth Rs 600 bn – Hindustan Aeronautics

Update on the Indian Equity Market:

On Wednesday, NIFTY closed in the red at 16,342 (-0.5%). BHRATIARTL (-3.9%), ITC (-2.2%), and RELIANCE (-1.8%) led the losers while TATASTEEL (+1.7%), SBIN (-1.6%), and TITAN (-1.4%) led the gainers. Among the sectoral indices, REALTY (+2%), MEDIA (+1.4%), and PSU BANK (+0.7%) led the gainers, while OIL &GAS (-1.1%), FMCG (-1.0%), and CONSUMER DURABLES (-0.6%) were the only losers.

Excerpts of an interview with Mr. R Madhavan, Chairman and Managing Director at Hindustan Aeronautics (HAL) with BQ Prime on 8th June 2022: 

  • HAL anticipates revenue to increase by 6-7% in FY23. Revenue is expected to increase by double digits in FY24 and will continue to grow in FY25.
  • The company’s order book stands at Rs 820 bn, of which Rs 200 bn is for a repair and spare parts order and Rs 615 bn is for production for Light Combat Helicopters (LCH) to be delivered in 2024.
  • HAL is expecting orders worth Rs 600 bn for helicopters and basic trainers. These orders, coupled with other engine orders, will increase the company’s book-to-bill ratio from three to five times.
  • Due to the longer cycle time for the ministry’s order placing, the company must begin production or the helicopter manufacturing facilities would be underutilized. The company hopes to have a capacity of more than 90 to 100 helicopters every year. The order book is also required to be in that range so that the capacities that they have established are adequately utilized.
  • Management thinks that India should take advantage of the current geopolitical environment since countries are not favoring China and Russia for their respective source and support systems and platforms. Management sees this as an opportunity as India is capable of supporting Russia’s systems. Furthermore, Indian equipment is easier and less expensive to maintain than western competitors.
  • HAL is hoping to increase export orders as the Indian Ocean Commission area and West Asia gains traction.
  • The Tumkur facility will be inaugurated in July 2022, with an initial capacity of 30 helicopters, in addition to the present capacity of 30 helicopters. In phase 2, this capacity would be increased to 60-70 helicopters.
  • There is excess capacity for fixed-wing aircraft, with the Hindustan Turbo Trainer (HTT-40) trainer aircraft, as well as the Light Combat Aircraft (LCA) Mark-1A and LCA Mark-2, scheduled for production.
  • There hasn’t been much movement from large corporates in India’s defense industry, but the MSME sector has forayed into defense manufacturing, particularly in the avionics and accessories segment.
  • The Company anticipates some push from larger corporates, which is currently lacking, towards indigenous development of platforms and equipment.

Asset Multiplier Comments

  • Due to outstanding helicopter orders, HAL’s order book is likely to reach Rs 1,000 bn in CY22E/ FY23E, and the book-to-bill ratio is expected to rise from 3x to 5x.
  • We anticipate HAL will be able to meet its double-digit revenue growth projections starting in FY25E, as key projects like the LCA Tejas Mark-1A and LCH helicopter orders are scheduled to be completed in 2024.
  • As military threats have grown across the world, the demand for defense equipment has increased. HAL’s addressable market is likely to grow as the firm seeks to diversify its activities by increasing its foreign exposure.

Consensus Estimates: (Source: tikr website)

  • The closing price of Hindustan Aeronautics Ltd was ₹ 1,842/- as of 08-June-2022.  It traded at 15x/ 14x the consensus earnings estimate of ₹ 124.1 / 134.5/- for FY23E/FY24E respectively.
  • The consensus target price of ₹ 2,025/- implies a P/E Multiple of 15x on the FY24E EPS estimate of ₹ 134.5/-.

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.”

 

By Defense , , , 0 Comments Read more...
07 Jun

Expect good growth potential in the credit card industry – SBI Cards

Update on the Indian Equity Market:

On Tuesday, NIFTY closed in the red at 16,416 (-0.9%), dragged by TITAN (-4.5%), UPL (-4.4%), and DRREDDY (-3.9%). ONGC (+4.8%), NTPC (+1.5%), and COALINDIA (+1.4%) were the top gainers. Among the sectoral indices, OIL & GAS (+0.9%) and AUTO (+0.5%) were the only gainers while CONSUMER DURABLES (-2.3%), REALTY (-1.7%) and MEDIA (-1.6%) led the losers.

Excerpts of an interview with Mr. Rama Mohan Rao Amara, MD & CEO, SBI Cards (SBICARD) with ETMarkets on 7th June 2022:

  • In FY22 the company’s new accounts grew by 33% YoY and cards in force have delivered a growth of 16% YoY. The RBI consumer confidence survey suggests an improvement in consumer confidence and continued recovery despite global and domestic economic headwinds.
  • The company’s medium to long-term strategy in card sourcing continues to be at similar levels in the open market and BANCA channels with some variance. SBICARD aims to focus on sustainable growth in card volume and spending going forward.
  • In the current scenario of the central bank increasing interest rates, SBICARD’s interest cost will also go up slowly in line with the industry. Over the years SBICARD’s long-term borrowing mix will increase, which will help to reduce the impact of higher interest rates.
  • Mr. Amara said that the overall impact will be gradual due to revising interest rates, but said if the impact is higher then the company will pass on some hikes on new EMI bookings and wherever possible to offset the impact.
  • Credit card growth depends on a combination of factors. In India, the credit card market is underpenetrated, and inflationary pressures might be impacting spending and it differs from product to product
  • Spending on credit cards has seen a steady increase even during the Covid period. At SBICARD spending grew by 51% in 4QFY22 vs 11% in 4QFY21 YoY, despite the key categories such as travel, entertainment, and dining being impacted. The company expects robust growth in spending as key categories are coming back to normalcy.
  • The company’s Co-brand card portfolio contributes a significant share of the revenue. Many of their Co-brands have gained good traction and the company will also continue to explore similar synergies going forward.
  • Credit card continues to be an important payment format in the country. In April-22 the outstanding credit cards registered a growth of ~21% YoY and grew over the 75mn mark.
  • Despite the growth, he believes that the credit card market is underpenetrated in the country as compared to globally and expects a huge potential for growth in this sector.
  • Due to Covid, the digital payment mode has been accelerated. As per RBI data in Apr-22, E-commerce spending stood at ~Rs 657bn, and the overall credit card share stood at ~60%.
  • ~54% of SBICARD’s retail spends contributed by online spending and continues to grow, in the past two years categories like health and fitness, rental, utilities, education, etc have emerged significantly.
  • The company has seen a healthy increase in EMI conversions and the share of EMI also increased from 29% in 4QFY21 to 34% in 4QFY22.

Asset Multiplier Comments

  • We expect credit card spending to register healthy growth as economic activities start to pick up. With a recovery in key categories such as travel, entertainment, dining, etc., and with a widespread network of SBI branches and a strong customer base, SBICARD is well-positioned to capture the growth in the Credit card industry.
  • We expect the current cycle of interest rate hikes might affect the profitability in the short term. But SBICARD’s improvement in its asset quality and increased long-term borrowing mix may help cushion the impact. if the company were to increase its lending rates, its market share could be impacted.
  • Its robust distribution network, co-branded channels, strong open market sourcing capabilities, lower customer acquisition costs, better asset quality, and strong parentage with sizable opportunities are the key positives for the stock. But the increasing competitive intensity from competitors and new-age fintech companies might become an area of concern for the company.

Consensus Estimates: (Source: market screener website)

  • The closing price of SBICARD was ₹ 765/- as of 07-Jun-2022.  It traded at 7.4x/5.9x the consensus book value per share estimate of ₹ 103/130 for FY23E/FY24E respectively.
  • The consensus target price of ₹ 1,128/- implies a P/BVPS multiple of 8.7x on the FY24E BVPS estimate of ₹ 130/-.

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 NBFC, SBI Cards 0 Comments Read more...
06 Jun

Aims to reach Revenue of Rs 50,000 mn by FY25E: Bata India

 

Update on the Indian Equity Market:

On Monday, the Nifty failed to close in the green, despite recovering much of its intraday losses. Nifty closed at 16,530 (-0.1%). METAL (+1.1%), OIL & GAS (+0.6%), and PRIVATE BANKS (+0.2%) were the top sectoral gainers. MEDIA (-1.3%), REALTY (-0.8%), and CONSUMER DURABLES(-0.6%) were top losing sectors.

The top losers were SHREECEM (-3.1%), BPCL (-2.6%), and ASIANPAINT (-2.5%) while BAJAJAUTO (+4.0%), JSWSTEEL (+2.7%), and TATACONSUM (+1.7%) were the top gainers.

 Aims to reach Revenue of Rs 50,000 mn by FY25E: Bata India

Edited excerpts of an interview with Mr. Gunjan Shah, MD & CEO, Bata India with ET NOW on 2nd June 2022:

  • 4QFY22 has been a robust quarter for Bata. Revenue grew by 13% YoY and EBITDA grew by 45% on the back of price hikes and improved product mix.
  • When asked why the volume growth has been weak, are these metrics likely to continue, the CEO replied that the company has proactively worked towards margin expansion through different levers:
    • First, improving the product mix. The movement towards casualization and sneakerization has aided the effort. In 4QFY22, sneakers contributed ~20% of the total revenue.
    • Second, bringing cost efficiencies in different operations.
    • Third, price hikes.
  • Short-term bounce back has been seen in the market. There is a normalization of consumer behavior after distortion of almost 2 years. Reopening of schools and offices and marriage season is pushing the fashion and formal footwear sales.
  • Longer-term trends lie in “sneaker-isation” and “casualisation’ as people now want to take comfort out of home as well. Bata is making sure that its portfolio is in line with these trends and has been backed by the latest launched campaign of 24/7 casual collection along with Brand Ambassador Disha Patani.
  • Bata aspires to reach Rs 50,000 mn revenue by FY25E with the help of the following levers:
    • Ensuring portfolio in line with the faster-growing categories (Sneakerization),
    • Footprints expansion through deeper penetration into the Tier 3&4 cities to tap the rural and middle India which is ramping up at a faster pace,
    • Digital Footprint expansion, and
    • Keep looking into the inorganic opportunities.
  • Bata delivered ~24% EBITDAM in 4QFY22. Management commented that they are just nearing the pre covid levels and have worked on cost efficiencies to aid margin expansion and will try to keep the margins stable.
  • The company is looking to increase the market share in smaller towns aggressively by adding new stores. It expects consumer preference to shift from an unorganized market to an organized market.
  • The promoters sold ~2.8% stake in the company through a block deal on 1st Jun 2022 on which the CEO commented that it doesn’t impact the majority control the promoter has over the operations. It was a minor dilution which was in line with the restructuring of the family trust.

Asset Multiplier Comments

  • We think Bata is striking the right chord to bring in revenue growth. Strong market leadership, the revival of formal footwear along with strong growth in casual portfolio and various distribution initiatives would help the company reach rich dividends.
  • Continuous focus on cost savings across rentals & operations, manufacturing and driving efficiencies in its value chain, and improving product mix will aid margin expansion.

Consensus Estimate (Source: market screener website)

  • The closing price of Bata India was ₹ 1,829/- as of 06-June-2022. It traded at 54x/44x the consensus EPS estimate of ₹34.2/41.9 for FY23E/FY24E respectively.
  • The consensus target price of ₹ 1,980/- implies a PE multiple of 47x on the FY24E EPS estimate of ₹ 41.9/-.

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.”

 

 

 

 

 

By Bata 0 Comments Read more...
05 Jun

This Week in a Nutshell (May 30 to June 3)

Technical talks

NIFTY opened the week on 30th May at 16,527. After trading in a range of 350+ points, it finally ended with a gain of 1.4% and closed at 16,584. It closed just below the 50-week exponential moving average. With the weekly RSI at 46, the next support and resistance levels for the index would be 16,400 and 16,970 respectively.

Among the sectoral indices, REALTY (+4.9%), IT (+4.4%) and OIL & GAS (+3.9%) were the top gainers whereas, HEALTHCARE (-2.5%), PHARMA (-2%) and BANK (-1%) lost the most.

Weekly highlights

  • The US market had a 4 day trading week, as Monday was a holiday on account of The Memorial day. The major US indices had a sideways movement with a minor loss for the week.
  • The WTI Crude traded in a strict range of USD 111-120 per barrel. Same was the case with Brent which ended at USD 121 per barrel on Friday.
  • We know, like us, you are also suffering from frequent power cuts. The states and the centre continue to fight over whether to import the 5 times costlier coal in addition to using our domestic capacity. But why does India, the second-biggest coal producer import coal? Here’s a quick trivia. The calorific value, i.e., the heat produced by burning the Indian coal is only around 60% of the coal imported from Australia or America. Burning Indian coal also results in more pollution. And it’s just the way it is. Nature didn’t favor us with good coal!
  • The National Statistics Office on Tuesday released the Jan-March 2022 GDP figure. The 4.1% GDP growth couldn’t meet the NSO’s and RBI’s estimates. It also slowed sequentially for the third straight quarter. 20.9%, 8.5%, 5.4%, and 4.1% was the trajectory of the quarterly GDP growth with full-year FY22 growing at 8.7%.
  • The start of each month brings out two crucial data points; Monthly GST collection and Automobile sales numbers. The GST collection of ₹1.41 tn in May is 16% lower than the record high collection in April which was ₹1.68 tn. The collection in May pertains to the sales occurred in April. And yes, it is an anomaly, May collections are always lower than that of April.
  • Coming to the number of vehicles auto manufacturers sell to the auto dealers. Broadly speaking, the percentage growth was flattish to negative compared to the previous month across all segments as companies continue to face supply chain issues, a surge in raw material prices, and semiconductor shortages.
  • Amazon along with a group of investors are in talks with Vodafone Idea to invest up to ₹ 200 bn. Only time will tell if Amazon through Voda-Idea succeeds at giving a tough time to Jio in this concentrated three-player telecom market.
  • The foreign institutional investors (FII) net sold equities worth ₹ 66,539mn and domestic institutional investors (DII) were net buyers in equities with buying shares worth ₹ 68,448mn.

Things to watch out for next week

  • The RBI’s monetary policy committee commences its bi-monthly meeting on Monday and will conclude it on Tuesday. The MPC decides whether to increase interest rates or not. This time, the market consensus suggests that it is a question of how much will they be raised and not about raising or not. The committee’s stance and future outlook will also be a key factor to watch out for.
  • World over, the markets are convinced that Central banks have no other option than to raise interest rates to curb the surging inflation.
  • With the Mar-22 earnings season over, the focus will shift to how monsoon season plays out in India. A normal monsoon would boost demand for consumer goods, and automobiles (cars and farm equipment) and aid recovery in rural India.

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 #WeekInANutshell 0 Comments Read more...
02 Jun

Royalty payments to accrue over the next 5 years – UNSP

Update on the Indian Equity Market:

On Thursday, NIFTY closed in the green at 16,628 (0.6%), led by RELIANCE (+3.6%), BAJAJFINSV (+3.4%), and SUNPHARMA (+2.7%). APOLLOHOSP (-5.0%), HEROMOTOCO (-3.5%), and EICHERMOT (-1.7%) were few of the laggards. Among the sectoral indices, OIL & GAS (+2.3%), IT (+1.8%), and METAL (+1.1%) led the gainers, and AUTO (-0.6%) and FINANCIAL SERVICES (-0.3%) led the losers.

Excerpts of an interview with Ms. Hina Nagarajan, MD & CEO, Diageo India with CNBC-TV18 on  30th May 2022:

  • UNSP has sold 32 popular brands which include Haywards and White Mischief for Rs 820 crores to Inbrew. The deal is expected to close in 3-4 months by 30th September 2022. The surplus will be invested prudently in the short term. The deal is ROCE accretive. This accelerates UNSP’s journey towards dividend distribution.
  • Ideally, the company would have liked to do a full slump sale in one go and take the money upfront. As part of the contract, the company has signed a 5-year franchise deal with Inbrew limited for Rs 12,930 mn, company has paid all the underlying interest. Royalty payments will accrue over the next 5 years and they will be higher in later years.
  • UNSP to focus on premium brands.
  • The company has reiterated guidance of sustained double-digit revenue growth with mid to high teen margins. The company has also cautioned about EBITDA margin pressures due to inflation and other short-term supply pressures which would be mitigated by productivity initiatives and product mix by including premium brands in the mix thus improving the pricing mix.
  • The company has stepped up advocacy with states on price increases. Assam which contributes about 7-8% of the business, MP, and Rajasthan have given some price increases.
  • UK- India FTA is being negotiated concerning the customs duty reduction on scotch imports. The company is optimistic that the deal will come through. However, it’s uncertain how much benefit the company will get, as the quantum and the timing are not known. If the import duty were to come down depending on the quantum, the range of momentum the brands could get would be between 7-15% and consumer prices would be reduced, thus increasing volumes.

Asset Multiplier Comments

  • This deal is a step forward to the UNSP’s premiumization strategy as the company sees potential in the premium/luxury segment. This will help the company to focus on the Prestige and Above segment where the core competencies of the company lie.
  • We remain positive on the premiumization trend in the liquor industry, however, state-wise pricing actions and portfolio reshuffle benefits will remain the key monitorable in the near term.

Consensus Estimates: (Source: market screener website)

  • The closing price of UNSP was ₹ 801/- as of 02-June-2022.  It traded at 53x/ 45x the consensus earnings estimate of ₹ 15/ 18 – for FY23E/FY24E respectively.
  • The consensus target price of ₹ 918 /- implies a P/E Multiple of 51x on the FY24E EPS estimate of ₹ 18/-.

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 United Spirits 0 Comments Read more...
02 Jun

What We Should Remember About Bear Markets: Part I

The following article is taken from ‘What We Should Remember About Bear Markets’ by Joe Wiggins.

Bear markets are an inescapable feature of equity investing. They are also the greatest challenge that investors will face. This is not because of the (hopefully temporary) losses that will be suffered, but the poor choices investors are liable to make during them. Bear markets change the decision-making dynamic entirely. In a bear market, smart long-term decisions often look foolish in the short-term; whereas in a bull market foolish long-term decisions often look smart in the short term.

If investors are to enjoy long-run investment success, they need to be able to navigate such exacting periods. There are certain features of bear markets that it pays to remember:

They are inevitable: Bear markets are an ingrained aspect of equity investing. Investors know that they will happen; they just cannot know when or why. Their occurrence should not be a surprise. The long-run return from owning equities would be significantly lower if it were not for bear markets.

It will feel predictable: As share prices fall, hindsight bias will go haywire. It will seem obvious that this environment was coming – the warning signs were everywhere. Investors will heedlessly ignore all the other periods where red flags were abundant and no such market decline occurred.

Nobody can call the bottom: Market timing is impossible, and this fact does not change during a bear market. The only difference is the attraction of attempting it when falling portfolio values can become overwhelming, and the damage it inflicts will likely be greater than usual.

Economic and market news will be conflated: The temptation to interlace economic developments with the prospects for stock market returns can become irresistible during a bear market. Weak economic news will make investors increasingly fearful about markets, despite this relationship being (at best) incredibly hazy.

Time horizons will contract: Bear markets induce panic, which shortens time horizons dramatically. Investors stop worrying about the value of their portfolio in thirty years and start thinking about the next thirty minutes. Being a long-term investor gets even more difficult during a bear market.

Investors don’t consider what a bear market really means: In the near-term, bear markets are about painful and worry-inducing portfolio losses, but what they really are is a repricing of the long-run cash flows generated by a business / the market. The core worth of those companies does not fluctuate nearly as much as short-term market pricing does.

Lower prices are good for long-term savers: For younger investors saving for the long-term, lower market prices are attractive and beneficial to long-run outcomes (it just won’t feel like it).

Source: ‘What We Should Remember About Bear Markets’ by Joe Wiggins published on behaviouralinvestment.com

Asset Multiplier Comments:

  • Losing investment plans during bear markets is inevitable. Although difficult, long-term investors should sit through such exacting periods patiently and stick to their investment approaches.
  • Investors can use bear markets to their advantage by accumulating quality stocks at cheaper valuations and profiting from long-term gains.
  • Investors should avoid getting consumed by noise and immediacy and focus on building wealth over the long term.

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 Investment articles , 0 Comments Read more...
01 Jun

e-XUV 300 to be launched in 4QFY23- Mahindra and Mahindra

 

Update on the Indian Equity Market:

On Wednesday, NIFTY closed in the red at 16,523 (-0.4%) dragged by BAJAJ-AUTO (-3.7%), APOLLOHOSP (-3.3%), and HINDALCO (-2.9%). JSWSTEEL (+3.6%), COALINDIA (+2.0%), and HDFCLIFE (+1.5%) were the top gainers. Among the sectoral indices, PSU BANK (+0.7%), BANK (+0.4%), and PRIVATE BANK (+0.3%) were the top gainers, and HEALTHCARE (-1.5%), IT (-1.4%), PHARMA (-1.3%) were the top losers.

Excerpts of an interview with Mr. Rajesh Jejurikar, Executive Director (ED), Mahindra and Mahindra published in Moneycontrol on 30th May 2022:

  • The revenue market share for sports utility vehicles (SUVs) is back to the top position, the company is getting 9,000-10,000 bookings every month for the XUV 700. The recently launched XUV 700 has seen only 10-12 per cent cancellations despite a waiting period of 18-24 months.
  • The Company has seen huge success in its XUV 700 Utility Vehicle and is not able to match the demand despite producing more than 5000 vehicles every month. The company plans to ramp up its production once supply issues subside.
  • The Management believes the worst supply constraints are behind it. And that as the company ramps up the capacity with semiconductors supplies expected to improve further, the waiting period will come down.
  • The Company announced the launch of Scorpio-N a new newer generation model of the classic Scorpio on 27th June marks the 20th anniversary of the first launch of Mahindra Scorpio in 2002.
  • While commenting on the overall market situation, ED reiterated that some risks remain on the external environment front and supply has been disrupted due to lockdowns in China. ED, however, added that they expect to see “strong growth” in the auto business in FY23E.
  • The company reported its highest-ever standalone revenue for auto and farm segments at Rs 553 bn for FY22 with April traction in tractors being strong, better than expectations. The farm equipment sector (FES) tractors market share for FY22 is at 40 per cent, up 1.8 per cent year on year with the highest ever farm export volume of 17,500 tractors in FY22.
  • The management reiterated the company’s goal to reach an 18 per cent return on equity (RoE), adding that focus on capital allocation and improved financial metrics continue to deliver results.
  • The Company is planning to launch the fully electric version of its XUV 300 SUV in the market in the first quarter of next year and is expected to unveil its electric vehicle business strategy, ‘Born Electric Vision’ of EV concept in Aug-22.

 

Asset Multiplier Comments

  • Mahindra and Mahindra continue to cement its position as the market leader in the utility vehicles segment and with the expected launch of e-SUV, the company can better consolidate its leadership.
  • The farm Equipment segment has been performing really well for the company, increased farm incomes due to government policy, and strong monsoon forecasts will augur well for the company’s demand in the medium term.

Consensus Estimates: (Source: market screener and investing.com website)

  • The closing price of Mahindra and Mahindra was ₹ 1,047/- as of 01-June-2022.  It traded at 16x/ 11x the consensus earnings estimate of ₹ 69/ 94 – for FY23E/FY24E respectively.
  • The consensus target price of ₹ 1,150/- implies a P/E Multiple of 12x on the FY24E EPS estimate of ₹ 94/-.

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 Mahindra & Mahindra , , 0 Comments Read more...
31 May

Expect Double Digit growth for India business – Torrent Pharma

Update on the Indian Equity Market:

On Tuesday, NIFTY closed in the red at 16,854 (-0.5%), dragged by KOTAKBANK (-3.5%), SUNPHARMA (-2.6%), and HDFC (-1.8%). Some of the gainers were ONGC (+5.2%), NTPC (+4.4%), and M&M (+3.4%).

Among the sectoral indices, REALTY (+2%), MEDIA (+1.5%), and METAL (+1.3%) led the gainers, and NIFTY PSU BANK (-1%), NIFTY BANK (-1.0%) and NIFTY FINANCIAL SERVICES (-0.9%) led the losers.

Excerpts of an interview with Mr. Sudhir Menon, CFO & ED, Torrent Pharma (TORRENT) with CNBCTV18 on 27th May 2022:

  • In 4QFY22, TORRENT reported an EBITDA margin of 26.3% as compared to 25.5% in 3QFY22. 3QFY22 was impacted on account of higher than expected price erosion in the US. TORRENT believes that the worst has already happened for the US.
  • IN FY23, TORRENT expects certain margin levers to play out. A few of these levers could be the price increase-driven margin improvement in the Branded Business which contributes 70% of overall revenues as of 4QFY22.
  • Certain cost optimization measures were undertaken in 4QFY22 by realigning capacities between its facilities in India which are expected to come through from 1QFY23.
  • Cash burn impact of 1-1.5% on the liquid facility which was discontinued in the US is expected to roll back into the margins.
  • There was an impact of increased freight expenses on the margins of 1.2-1.3% in 3QFY22 which continued in 4QFY22. TORRENT expects these costs to normalize over the next 2-3 quarters of FY23.
  • Overall, revenue growth in FY23 is expected to be better than FY22 and that would enable TORRENT to have operating leverage play out positively in the near term. TORRENT has guided for 300 bps margin improvement in FY23.
  • Acquisition of Dr. Reddy’s Laboratories’ 4 brands would help fill up the portfolio gap in gynecology and urology. As per AIOCD (All Indian Origin Chemists & Distributors) data set, the 4 brands combined had a revenue of Rs 450-500 mn.
  • India business registered 15% revenue growth in FY22 and most of the existing therapies TORRENT has outperformed the market.
  • TORRENT is growing at 2x of the market growth in therapies like GI (Gastro-Intestinal), CNS (Central Nervous System), and Anti-Diabetics and this is expected to continue.
  • It expects the Indian market to deliver low double-digit growth over the next two years and TORRENT is expected to grow 200 bps above the market as per its historical trend as it is over-indexed in some of the high growth markets.
  • One of the objectives TORRENT had taken was to achieve the 10 lakh MR (Medical Representatives) productivity in FY22. Now that it has achieved this productivity, TORRENT has been expanding its field force which is expected to bring in incremental revenue growth.
  • The new product pipeline is looking good for the next few years and TORRENT is seeing some of the large-size markets going off-patent in the coming years. With the incremental growth coming in the future, TORRENT believes it is well-placed to achieve double-digit growth for India Business.
  • The US story has not been playing out well for TORRENT because of the new launches not coming through due to pending US FDA inspections.
  • TORRENT has around 57 ANDA pending approvals. In the next 2-3 months if the US FDA reinspection takes place, TORRENT expects new products to start coming in from 4QFY23.

Asset Multiplier Comments  

  • The growth trajectory in TORRENT’s India branded generics business is expected to continue, due to new product launches in the upcoming quarters.
  • We expect a revival in tender business and new launches to drive growth in the Germany Business. Brazil is expected to continue its momentum in both the branded and generic segments.
  • With the worst of price erosion in the US business over, an improvement is expected with the resumption of USFDA inspections.
  • We expect cost-optimization measures, normalization in freight expenses, and closure of the Pennsylvania (US) facility to aid margin expansion in FY23.

Consensus Estimates: (Source: market screener website)

  • The closing price of TORRENT was ₹ 2,835 /- as of 31-May-2022.  It traded at 34x/27x the consensus earnings estimate of ₹ 84/ 106/- for FY23E/FY24E respectively.
  • The consensus target price of ₹ 3,194/- implies a P/E Multiple of 30x on the FY24E EPS estimate of ₹ 106/-.

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 Pharmaceuticals, Torrent Pharma 0 Comments Read more...
30 May

A three-dimensional approach to 5G -TCS

Update on the Indian Equity Market:

On Monday, NIFTY closed in the green at 16,661 (+1.9%), led by M&M (+5.0%), TITAN (+4.9%), and INFY (+4.6%). KOTAKBANK (-2.0%), JSWSTEEL (-1.9%), and SUNPHARMA (-1.7%) were few of the laggards. Among the sectoral indices, CONSUMER DURABLES (+4.2%), REALTY (+4.1%), and IT (+3.9%) led the gainers, and there were no losers for the day.

Excerpts of an interview with Mr. N Ganapathy Subramanium, Chief Operating Officer, TCS published in Business Standard on 30th May 2022:

  • The annual report outlines the company’s ambition to reach USD 50bn revenue. Currently, TCS has 600,000 employees with revenues of USD 25bn. It doesn’t want to double the employees to double its revenues, so there is an element of nonlinearity there. The company doesn’t just want to work with clients, it wants a play in the ecosystem.
  • TCS wants to create systems that give real-time information.
  • Metaverse is currently a hype cycle. If it succeeds, the COO would like TCS to be present in that segment as well.
  • TCS will continue to enter unchartered territories. Currently, it is not present in B2B businesses, it may get into consumer businesses in the future.
  • BFSI, being one of the early adopters of technology consumes the largest amount of technology talent and resources. Almost every aspect of banking is changing and demand for transformative solutions in the banking space is at an all-time high.
  • TCS is the largest provider of technology services and has a solid play in the BFSI segment. About 30-35 percent of the world’s population uses the company’s product. In insurance as well, it has built a solid platform, with about 20-25mn policies administered across major markets.
  • Many Indian insurance companies use the TCS platform for processing policies and claims, in both life and non-life.
  • Discussions with clients don’t seem to suggest the peak is over for the IT sector.
  • For FY22, the total contract value (TCV) stood at USD 11.3bn. The quarterly run rate is USD 8-9bn. A year back, it was USD 6-7bn. The company’s focus is on getting the deals, irrespective of the size.
  • TCS is supporting several customers in rolling out the 5G network. Its approach to 5G is three-dimensional. First act as a systems integrator to integrate, deploy the network, and operate it for telco customers. Second how to help enterprises build a private 5G network within their facilities. Third, leverage the two network layers to build vertical applications on top of it. The company’s strength is in software, and with more networks getting softwarised TCS will have a bigger role to play beyond applications.

Asset Multiplier Comments

  • Post FY22 earnings, the management alluded that tech spending continues to remain strong and believes it would be the last to be cut despite an economic downturn. The company is focusing on tech integration led hyperscaler deals in its Industry 4.0 initaitive helping it win more transformational deals.
  • Deal wins across segments, reduction in subcontractor costs and better realisation would likely drive revenue growth in the medium term, while employee costs and attrition are likely to be a drag.

Consensus Estimates: (Source: market screener and investing.com website)

  • The closing price of TCS was ₹ 3,380/- as of 30-May-2022.  It traded at 29x/ 25x/ 23x the consensus earnings estimate of ₹ 118/ 133/ 146/- for FY23E/FY24E/FY25E respectively.
  • The consensus target price of ₹ 3,939/- implies a P/E Multiple of 27x on the FY25E EPS estimate of ₹ 146/-.

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 IT, TCS , , 0 Comments Read more...