17 May

Strong growth expected in Navratna, Kesh King and Fair & Handsome – Emami

Update on the Indian Equity Market:

On Tuesday, the shares of Life Insurance Corporation of India Ltd (LIC) got listed on the bourses and it closed at an 8% discount to its issue price of Rs949.

NIFTY closed 2.6% higher at 16,259, led by HINDALCO (+9.8%), TATASTEEL (+7.7%), and COALINDIA (+7.6%). There was no NIFTY stock that ended in the red. METAL (+6.9%), OIL & GAS (+3.7%), and MEDIA (+3.0%) led the sectoral gainers and no sector ended in the red.

Excerpts of an interview with Mr. NH Bhansali, CEO – Finance, Strategy & Business Development, and CFO, Emami published in the Economic Times on 16th May 2022:

  • New age channels like modern trade and e-commerce are growing very strongly for Emami. These contributed 15% and 13% to domestic sales in 4QFY22 and FY22 respectively.
  • The company has taken price hikes of ~4.5% and may take further hikes in case the need arises. Due to price hikes, strategic procurements, and other cost optimisation initiatives, the gross margin contraction was limited to 30bps and it was 62.4% in 4QFY22.
  • There has been significant inflation for key materials like crude derivatives, vegetable oils, camphor, and packaging materials. Geo-political uncertainty and high inflation is impacting input costs adversely.
  • 4QFY22 witnessed unprecedented inflation which hurt consumer wallets across rural and urban areas, which impacted volumes. With a good monsoon season and an uptick in government initiatives to boost rural income, the management expects the slowdown to fade away.
  • The Company’s rural distribution initiatives like Project KHOJ have continued to progress with ~8,000 rural towns being added in FY22 taking the total tally to 40,000 rural towns which will aid rural growth.
  • Notwithstanding the pandemic-related challenges and inflationary pressure, Emami managed to increase its leadership position and increased household penetration for most of its brands.
  • The Company expects gross margin pressure of ~200bps in 1QFY23.
  • Despite the high base in the pain management portfolio, it expects a strong growth in Navratna, Kesh King, and Fair and Handsome, which have been impacted for the last 2 years due to the pandemic. This would help maintain the double-digit growth rate momentum.
  • The company is expanding its distribution footprint across markets and channels to supplement the growth targets.
  • Emami maintains a bullish view on digital businesses- Zanducare or e-commerce. Through the D2C model, it is connecting directly with consumers and generating superior consumer insights leading to higher offtakes.

Asset Multiplier Comments

  • High inflation and a weak rural sentiment are expected to weigh on the short-term outlook for the company. Unprecedented levels of inflation are leading to downtrading across markets. The impact of downtrading is expected to be lower for Emami as it generates 24% from smaller SKUs.
  • A severe summer season across India and rural recovery post a good monsoon season could act as a tailwind for the company.

Consensus Estimates: (Source: Market screener website)

  • The closing price of Emami was ₹ /- as of 17-May-2022.  It traded at x/ x the consensus earnings estimate of ₹ 16.7/ 20/- for FY23E/FY24E respectively.
  • The consensus target price of ₹ 565/- implies a P/E Multiple of 28x on the FY24E EPS estimate of ₹ 20/-

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 Consumer, Emami , 0 Comments Read more...
16 May

Rising interest rates to have a positive impact on NIMs – SBI

Update on the Indian Equity Market:

On Monday, NIFTY ended at 15,842 (+0.4%). PSUBANK (+3%), REALTY (+2.6%), and AUTO (+2.3%) were the sectoral gainers while IT (-0.7%), FMCG (-0.35%), and PHARMA (-0.2%) were the losers.

Among the stocks, EICHERMOT (+8%), APOLLOHOSP (+4.2%), and UPL (+2.8%) led the gainers, while ULTRACEMCO (-3%), SHREECEM (-2.5%), and ASIANPAINT (-1.7%) led the losers.

Excerpts of an interview with Mr. Dinesh Kumar Khara, Chairman, SBI with CNBC-TV18 on 15th May 2022:

  • In terms of advances, SBI has a pipeline of about Rs 4,600 bn worth of proposals. Currently, its corporate book stands at Rs 8,100bn, and if this number fructifies, then it is going to reflect in a healthy corporate book for the bank.
  • There is enough demand in the economy. The growth is coming from the investment demand which is there from the infrastructure projects being led by the government of India. This is going to be the major lever that will bring in more and more spending for investment purposes in the economy.
  • Focus on PLI schemes, and increase in exports are some of the other growth levers that give SBI the confidence and conviction to see decent growth in their loan book.
  • SBI expects ROE (Return on Equity) to be near 15% by FY23 and reach the equivalent level by FY24.
  • It has a Capital Adequacy Ratio that can easily support 10-11% growth in the loan book but it will be closely watching the scenario in terms of growth as it doesn’t want capital to be a constraint when it comes to growth of the bank.
  • SBI expects its slippages to be down but will be closely monitoring them due to the rising interest situation.
  • The asset quality of the bank is expected to be at least at the current levels of 4% if not improved.
  • Normally, there is always a lag between the deposit rates increase and that leads to a situation where the loan interest rates might start moving faster as compared to deposits. This will have a positive impact on the NIMs of the bank.

Asset Multiplier Comments

  • We expect loan book momentum to remain healthy with economic activities picking up and the government’s initiatives to boost infrastructure-related investments.
  • We expect a higher mix of floating loans and CASA mix to contribute to margin expansion in a rising interest rate scenario.
  • We expect moderation in slippages over the subsequent quarters.

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

  • The closing price of SBI was ₹ 456/- as of 15-May-2022.  It traded at 1.3x/1.2x the consensus book value per share estimate of ₹ 342/388 for FY23E/FY24E respectively.
  • The consensus target price of ₹ 646/- implies a P/BVPS multiple of 1.6x on the FY24E BVPS estimate of ₹ 388/-.

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, SBI , , 0 Comments Read more...
15 May

This week in a nutshell (1st August- 5th August)

Technical talks

NIFTY opened the week on 1st August at 17,243 and closed on 5th August at 17,397. The index gained 1.4% during the week. The index has managed to sustain above the 50DMA of 17,105 level, which acts as a support. On the upside, the recent high of 18,114 might act as a resistance.

Among the sectoral indices, IT (+2.8%), AUTO (+2.1%), and METAL (+2.1%) were the top gainers while REALTY (-2.9%) was the only loser in the week.

Weekly highlights

  • Wall Street fluctuated (Indices data to be inserted) throughout the week due to better than anticipated corporate earnings, economic data, and US-China tensions following Speaker of the US House of Representatives Nancy Pelosi’s visit to Taiwan, which led to China conducting military exercises near Taiwan.
  • China’s factory activity contracted in July after rebounding from COVID-19 lockdowns as new virus outbreaks and a bleak global outlook weighed on demand. (rephrase)
  • Oil prices fell ahead of the OPEC+ meeting on August 3rd. In the meeting, it was decided that the cartel will add only 100,000 barrels a day of oil in September. Consumers feeling the inflationary squeeze due to higher oil prices won’t find much relief from the increase. Brent oil futures and WTI futures were mixed wherein the former settled 0.6% up at USD 94/ barrel and the latter 0.01% lower at USD 89/barrel. 
  • The 5G spectrum auction concluded on August 2nd, with bids exceeding Rs 1.5 bn. Approximately 71% of the total spectrum was sold in the auction held through 40 rounds of bidding. The government has received bids totaling Rs 1,501,730 mn. 
  • Reliance Jio was the highest bidder at the 5G spectrum auction, with bids of over Rs 880,000 mn. Bharti Airtel took 19,867 MHz for Rs 430,840 mn, while Vodafone Idea acquired the spectrum worth Rs 187,990 mn.
  • Bank of England raised the interest rate by 50 bps to 1.75% despite warning that recession is on its way, even as inflation is now expected to top 13%.
  • RBI in its policy meeting on Friday raised the repo rate by 50 bps. It now stands at 5.4%. The MPC also decided to remain accommodative while focusing on withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth.
  • After nine months of relentless selling, foreign investors turned net buyers in July, investing Rs 49,890 mn in Indian equities as the dollar index fell and corporate earnings improved. This is in stark contrast to the stock market’s net withdrawal of Rs 501,450 mn in June. 
  • FII (Foreign Institutional Investors) turned net buyers this week, buying shares worth Rs 54,620 mn. DII (Domestic Institutional Investors) turned net sellers by selling shares worth Rs 17,650 mn.

Things to watch out for next week

  • India’s largest lender, State Bank of India (SBI), will report earnings on August 6. SBI is expected to report robust balance sheet growth, improvement in asset quality, and improved interest income.
  • Investors and traders are focused on corporate earnings and announcements. The earnings of companies such as SBI, Tata Consumer, HAL, Eicher, Hero Moto, and Aurobindo may cause volatility in Indian markets. Share price moments would be driven by management comments on the impact of inflation on demand and the supply chain challenges, particularly chip shortages for 2W companies.
  • With result season coming to an end next week, investors’ attention would be focused on company-specific news.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered 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...
12 May

Remain optimistic on business prospects but cautious in the near-term – UPL

Update on the Indian Equity Market:

On Thursday, NIFTY ended lower at 15,808 (-2.2%). All the sectoral indices ended in the red led by PSUBANK (-5.4%), METAL (-3.7%), and PRIVATEBANK (-3.5%). Among the stocks, WIPRO (+0.8%), EICHERMOT (+0.2%), and HCLTECH (+0.1%) led the gainers, while ADANIPORTS (-5.8%), INDUSINDBK (-5.7%), and TATAMOTORS (-4.2%) led the losers.

Excerpts of an interview with Mr. Jaidev Shroff, Global CEO, UPL with CNBC-TV18 on 9th May 2022:

  • The company remains optimistic about business prospects although cautious in the near term due to the global supply chain and shipping disruptions.
  • The company is quite comfortable committing to conservative guidance of 10% revenue growth in FY23E due to global uncertainties.
  • Europe had a challenging quarter in Q4FY22 with low single-digit growth. Europe has continued to ban certain traditional products which also impacts the portfolio. Europe is expected to be the slowest growing region in FY23E. The company expects a 7-8% YOY growth in the Europe business in FY23E.
  • In 4QFY22 Indian business grew by 63% on a YoY basis. The company anticipates the India business to continue this growth momentum for FY23E on the back of new launches in 4QFY22, strong commodity prices for farm products, and investments in sustainable technologies.
  • The company is investing in sustainable solutions that will provide considerable value to farmers, making agriculture more sustainable.
  • There is a global need for sustainable agriculture techniques and technologies. A slew of new technologies is being introduced by the company under the Natural Plant Protection (NPP) vertical. The company is reorganizing to focus on this business vertical which is expected to grow faster than the traditional businesses.
  • In FY22, the company incurred a debt of Rs 182,500 mn. The company’s goal is to reduce the debt to equity ratio to 2, or Rs 30,000 mn in absolute terms, by FY23E.

Asset Multiplier Comments

  • For FY23E, the management has guided growth across revenue and EBITDA at 10% and 12-15% YoY, supported by strong commodity prices, increased demand for biofuels fueled by high cost, and reduced availability of fertilizers.
  • Strengthening the supply chain through a reduction in imports and diversifying the raw material sourcing mix ensures a reliable supply base.
  • Reorganizing the firm’s focus towards the high margin and sustainable solutions business positions the company favorably to reach the company’s long-term growth objective of 7-10% from FY23-FY27E.

Consensus Estimates: (Source: Market screener website)

  • The closing price of UPL was ₹ 510/- as of 12-May-2022.  It traded at 8/7x the consensus earnings estimate of ₹ 62.1/72.6 for FY23E/FY24E respectively.
  • The consensus target price of ₹ 974/- implies a P/E Multiple of 13.4x on the FY24E EPS estimate of ₹ 72.6/-

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 UPL 0 Comments Read more...
12 May

The Myth of Consistent Outperformance

In the active fund management industry, there is no better sign of investment insight than to overcome the odds and produce excess returns with unfailing regularity. This notion is bogus because patterns of consistent outperformance are exactly what one would expect to see if results were entirely random. This measure alone tells us nothing and believing in it would lead investors to an array of investing mistakes.

The careers of most star fund managers have been shaped by seemingly rare runs of good form. Performance consistency is also often used as a tool for rating and filtering active fund managers – with skill linked to how regularly they beat their benchmarks over each year/quarter/month. To think that the delivery of regular benchmark beating returns is indicative of skill, investors need to believe one of two things:

  • For a fund manager or team to outperform consistently, investors must suppose that they can accurately predict future market conditions. Without having this ability, it is impossible to position a portfolio to outperform in a constantly evolving environment.
  • Financial markets will consistently reward a certain investment style. If investors do not accept the first notion, then they must believe that a fund manager has a flawless approach that always outperforms- regardless of the market conditions.

Stories over randomness

The existence of consistent outperformers is almost certainly the result of fortune rather than skill.  In any activity where there is a significant amount of randomness and luck in the results, outcomes alone tell one next to nothing about the presence of skill. The only way of attempting to pinpoint skill is by drawing a link between process and outcomes. In order to claim performance consistency is evidence of skill, one should justify the part of the process that leads to such unwavering returns.

Consistently poor behavior

The obsession with performance consistency is not just a harmless distraction, but an issue that leads to poor outcomes for investors. There are three main problems:

  • It leaves investors holding unrealistic expectations about what active funds can achieve. A rule of thumb to follow- if a fund has outperformed the market for five years straight, then at some point it will underperform for five years straight.
  • Buying funds that have shown unusually strong run of performance leads to entering markets at expensive valuations. Markets tend to converge to their mean values over time and by walking into expensive valuations investors may have to sit through painful mean reversion.
  • Narratives surrounding consistent outperformance promote the glorification of star fund managers.

Source: The Myth of Consistent Outperformance by Joe Wiggins on www.behaviouralinvestment.com

Asset Multiplier Comments

  • Fund investors should focus on the consistency of the philosophy and process of a fund manager. In an unpredictable environment, one’s investment approach is the only thing that can be controlled.
  • Believing that consistent outperformance is the evidence of skill can lead to capital erosion.
  • Instead of chasing active mutual funds, investors can go passive. Sticking to this approach in a disciplined way will ensure slightly better performance than active funds over the long run as fees are comparatively lower.

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...
11 May

Expect to maintain 20% EBITDA margins – DABUR

Update on the Indian Equity Market:

On Wednesday, NIFTY ended lower at 16,167 (-0.5%). Among the sectoral indices, REALTY (+0.7%), BANK (+0.6%), and PRIVATE BANK (+0.5%) were the gainers, whereas IT (-1.2%), AUTO (-0.9%), and CONSUMER DURABLES (-0.7%) led the losers. Among the stocks, ONGC (+3.1%), AXISBANK (+2.5%), and INDUSINDBK (+1.7%) led the gainers, while SHREECEM (-3.3%), BAJAJFINSV (-2.2%), and LT (-2.1%) led the losers.

Excerpts of an interview with Mr. Mohit Malhotra, CEO of Dabur India (DABUR) with CNBC-TV18 on 6th May 2022:

  • On the back of the price increases that have happened across the industry, DABUR foresees a reduction in the volumes of the overall FMCG market.
  • In 4QFY22 the FMCG market declined by ~4%. As compared to the FMCG market, DABUR’s volumes grew by ~2%. The tonnage growth for the 4QFY22 stood at ~12%. While evaluating the volume growth it becomes 2% as the company sells juices in the beverage segment which have a lower value.
  • The company expects that it will grow at a mid-single-digit volume growth and low double-digit value growth with the support of price hikes and increases in volumes. It expects to grow ahead of the market and continue to gain market share across all categories.
  • The oral care business has grown at ~2.5% on a high base of last year and in toothpaste, DABUR gained a market share of 20bps. The oral care business is performing well in terms of revenue and profitability, and the company has also taken some price hikes to mitigate the cost inflation.
  • Dabur Red and Meswak also growing significantly. Herbal toothpaste which is a new category is also performing significantly well.
  • The overall hair care business grew by 16% on a YoY basis. In the hair care business, the market declined by ~6.5% but DABUR grew by ~3%.
  • In the overall hair oil market, DABUR gained ~70bps of market share and in all sub-segments of hair oil, it continues to gain market share. In the shampoo segment also the company grew ahead of the market and gained ~40bps market share.
  • On the back of the high base of 4QFY21, the growth looks a little bit muted in 4QFY22. However, the full-year growth numbers are very robust, the businesses are in good positions and the fundamentals also remain intact.
  • On operating margins the company targets to maintain ~20% EBITDA margins through further price hikes and cost-cutting measures.
  • The company also taking some measures to expand distributions as rural contributes ~47% of total business. The company expects by the end of 1QFY23 the rural consumption to be back to normal levels on the back of good monsoon and crop sentiments. It expects the rural business will continue to grow higher than urban business.
  • The company continues to invest in its brands and the company is in a good position in advertising spending.

Asset Multiplier Comments

  • The geopolitical tensions coupled with high inflation are liked to impact the demand for discretionary items in the near term. Though companies have taken measures such as reduction in grammage or price hikes, these have not been sufficient to abate the high inflation. The margins of the companies are expected to remain under pressure in the medium term.
  • Market share gains from its peers in all categories, entry into adjacent categories and focus on premiumization position DABUR well despite shorter-term headwinds.

Consensus Estimates: (Source: Market screener website)

  • The closing price of DABUR was ₹ 510/- as of 11-May-2022.  It traded at 44/ 38x the consensus earnings estimate of ₹ 11.5/13.4 for FY23E/FY24E respectively.
  • The consensus target price of ₹ 628/- implies a P/E Multiple of 47x on the FY24E EPS estimate of ₹ 13.4/-

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

By Dabur, FMCG 0 Comments Read more...
10 May

Banking on technological transformations in BFSI sector – Intellect Design Arena

Update on the Indian Equity Market:

On Tuesday, NIFTY ended at 16,240 (-0.4%). HINDUNILVR (+3%), ASIANPAINT (+2.9%) and INDUSINDBK (+2.4%) were the top gaining stocks. COALINDIA (-7.5%), TATASTEEL (-7.3%) and ONGC (-7%) lost the most.

Within the sectoral indices, PRIVATE BANK (+0.8%), BANK (+0.6%) and FINANCIAL SERVICES (+0.5%) closed in the green while METAL (-5.2%), REALTY (-2.9%) and OIL & GAS (-2.3%) ended in the red.

 

Excerpts of an interview with Mr. Arun Jain, Chairman & MD, Intellect Design Arena (INTELLECT) with The Economic Times on 9th May 2022:

  • The company, which mainly sells software to banks and financial institutions, showcased an FY22 revenue growth of 25%. EBITDA and PAT grew by 33% and doubled their cash balance over the previous year. Subscription revenues grew by 112%.
  • Sequentially, EBITDA Margins were lower due to an increase in salary costs, a multi-million-dollar deal with a Russian Bank in Germany falling through owing to the Russia-Ukraine war, and capacity building for a USD 75mn quarterly revenue run rate.
  • The company’s license-linked products have a life cycle of about 10 years. This translates into continuing revenue streams in the form of maintenance, production support agreements, change requests, etc. The revenue from these license-linked products crossed the mark of ₹ 10bn in FY22. The company joined hands with 48 new clients in FY22.
  • An improvement in margins over the last two years was achieved by shrinking the product delivery cycle to 6 months against the industry average of 12-18 months. This was made possible by being operationally efficient. Also, the pandemic led cost savings in travel and business promotion upped the margins.
  • Its license-linked revenues (license, AMC, and subscription) make up 56% of revenues. The subscription revenue growth of 112% YoY translated to higher margins.
  • The company is moving its products to platform-based. Platforms consist of multiple products. It is experiencing a YoY increase in average deal size by winning large transformational deals in multiple countries. Banks and financial institutions’ digital transformation & cloud adoption journeys play a big role in achieving the company’s target of a 20% revenue growth year on year.
  • Focusing on ‘destiny deals’, the company is making additional investments in geographies like Vietnam, France, and Saudi Arabia, to deepen engagements with their major clients. This will bring in more subscription deals.
  • The company enjoyed success with Government eMarketplace, LIC, and AMFI. Going ahead, the company expects to offer a retail / corporate banking ecosystem.

Asset Multiplier Comments:

  • The banking services penetration in India will rise with a rise in India’s per capita income. The expansion of the banking & financial services sector in rural India will create more demand for digital transformation which provides scalability.
  • This may eventually result in better revenue prospects for a company like Intellect Design Arena from banks, NBFCs, insurance companies, and the likes.

Consensus Estimates:

  • The closing price of Intellect was ₹ 608/- as of 10-May-2022. It traded at 23x/16x the consensus EPS estimate of ₹ 26.3/37.9 for FY23E/FY24E respectively.
  • The consensus price target price for Intellect is ₹ 940/-. It implies a P/E multiple of 25x on the FY24E EPS of ₹ 37.9/-

 

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 IT , , 0 Comments Read more...
09 May

Plan to become USD 500 mn company by 2026 – Cigniti Tech

Update on the Indian Equity Market:

On Monday, NIFTY ended at 16,302 (-0.7 %) as it closed near the day’s opening level of 16,228. Among the sectoral indices, IT (+0.1%), was the only gainer, whereas MEDIA (-2.7%), PSU BANK (-2.3%), and OIL&GAS (-2.1%) led the losers. Among the stocks, POWERGRID (+3.1%), HCL TECH (+3.1%), and INFY (+2%) led the gainers, while RELIANCE (-4.3%), NESTLEIND (-2.9%), and HEROMOTOCO (-2.8%) led the losers.

Excerpts of an interview with Mr. Shrikanth Chakkilam, CEO & Non-Executive Director of Cigniti Technologies (CIGNITITEC) with The Economic Times on 8th May 2022:

  • The company’s 75% revenues come from five sectors: Banking, Financial Services and Insurance BFSI (20%), Travel and Hospitality TTH (16%), Retail and Ecommerce (15%), Healthcare and Life sciences HCLS (13%), and independent software vending ISV (12%). The management believes that these sectors support Cigniti’s revenue growth and will continue to do so during the digital transformation in these sectors in the coming years.
  • Attrition in FY22 was at an all-time high of 30%. The revenue per employee in US dollar terms is USD 45,378. The current job market has become highly volatile and more complicated than usual.
  • The high attrition has increased the cost of hiring, and also the cost of training new employees, direct and indirect costs for advertising available positions, performing background checks, paying out referral bonuses, etc.
  • Intangible costs to the company include management’s time spent reviewing resumes, making calls, and conducting interviews, as well as the time spent by dedicated recruiting staff and the HR department.
  • To deal with these challenges, the company is increasing freshers’ hiring, increasing re-skilling programs through online learning, and ensuring engagement initiatives.
  • The plan is to become USD 500 mn company by 2026, effective from 2021. The company increased its investment in building capabilities, sales, marketing infrastructure, and investment in employee retention and rehiring. These investments reduced the company’s margins which it expects to neutralize in FY23.
  • The company’s 85% of revenues come from North America, yet Mr. Chakkilam believes that the dollar variation is not a concern. He considers inflation as a nominal worry which is constant across businesses.
  • The company’s recently approved acquisition of Aparaa Digital (RoundSqr), a specialist in AI/ML, data, and blockchain engineering services would help strengthen its digital ambitions and help offer digital engineering services to its clients. The company is confident of retaining a high teen growth rate in FY23.

Asset Multiplier Comments

  • Though the management doesn’t consider dollar variation a concern for the company, a strengthening dollar, and its adverse rate movements may hamper the earnings of the company.
  • We expect the margins to remain impacted in the medium term due to the sectoral headwinds.
  • The company may not be impacted by commodity inflation as it provides software services. But as the employees start coming back to offices, its transport and commuting costs will go up thereby increasing its other expenses, which will also end up impacting its margins.

Consensus Estimates:

  • The closing price of Cigniti was ₹ 412/- as of 09-May-2022. The consensus price target estimate for Cigniti’s stock is unavailable. It traded at 17x the earnings of ₹ 33 for FY22.

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 0 Comments Read more...
07 May

This Week in a nutshell (May 2nd to May 6th)

                                                                                       Technical talks

NIFTY opened the week on 2nd May at 16,924 and closed on 6th May at 16,411. During the week, NIFTY was down 1.63%. The index has breached the 50-week moving average on the weekly chart with RSI at 42. Immediate support for the index stands at 16,269 and resistance at 16,763.

Nifty Realty (-8.0%), Nifty Media (-6.0%), and Auto (-5.0%) were the top losers and there were no sectoral gainers during the week.

                                                                                     Weekly highlights

  • Wall Street had a very volatile week. At the start of the week, the stocks were trading higher on the back of news that the European Union is working on new sanctions against Russia for waging war on Ukraine that will target Moscow’s oil industry.
  • The rally continued after the Federal Reserve delivered a widely expected interest-rate hike of half a percentage point with another half-percentage-point rate hike expected at the upcoming policy meetings in June and July.
  • Bureau of Labor Statistics released data revealing a tight labor market that has emboldened millions of Americans to seek better-paying jobs, while also contributing to the biggest inflation surge in four decades.
  • Later in the week, US stocks ended sharply lower amid a broad sell-off, as investor sentiment cratered in the face of concerns that the Federal Reserve’s interest rate hike would not be enough to tame surging inflation. All three main Wall Street benchmarks erased gains made in the earlier rally.
  • The downward journey continued as stronger-than-expected jobs data amplified investor concerns over bigger interest rate hikes by the U.S. Federal Reserve to tame surging prices.
  • Indian markets also followed the lead and were no less volatile. Entirely unexpected – the Reserve Bank of India (RBI) on May 4 increased the repo rate by 40 basis points to 4.4 percent for the first time in almost two years since the start of the pandemic in 2020. This comes when inflation has been rising to an 18-month high amidst a rebound in domestic economic activity.
  • RBI Governor stated that India’s foreign exchange reserves are “sizeable” and the outlook for the country’s overall external sector is bright. Potential market opportunities have opened up due to geopolitical conditions and the recent trade agreements.
  • LIC launched its IPO on 4th May 2022. Through this IPO, the government of India will be liquidating its 3.5 percent stake in the corporation. The offer has garnered bids of 223.4 mn equity shares against the offered size of 162 mn shares, subscribing 1.38 times on Friday.
  • International Monetary Fund released data saying India’s GDP to hit USD 5 tn in FY29E and the Rupee at 94 a Dollar.
  • Oil prices dipped as worries about an economic downturn that could dampen demand for crude vied with concerns over new sanctions from the European Union against Russia, including an embargo on crude oil.
  • Larsen and Toubro Infotech (LTI) board approved amalgamation with Mindtree, creating a USD 3.5 bn IT service provider named LTIMindtree.
  • Axis AMC suspended two fund managers pending investigation of potential irregularities after conducting a suo moto investigation over the last two months and used reputed external advisors to aid the investigation.
  • Foreign institutional investors (FIIs) continued to be sellers, selling equities worth Rs 1,27,335 mn. Domestic institutional investors (DIIs) continued to be buyers and bought equities worth Rs 85,333 mn.

                                                                       Things to watch out for next week

  • The 4QFY22 earnings season so far has not succeeded to uplift the market sentiments. The commentary so far from companies on rising pressure on their margins and muted demand environment has tempered the enthusiasm of investors.
  • We expect volatility to remain high in the coming days as surging global inflation is forcing investors to reconsider their assumptions of strong earnings growth. Fear of further up move in the US 10-year bond yield, geopolitical concerns, fluctuations in oil prices, and earnings season will keep the investors on their toes.

 

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, Uncategorized 0 Comments Read more...
06 May

A few basic questions…: Part II

(In continuation with the previous article…)

Where should investors spend their time?

Investors should focus on that sweet spot. They can revisit each business that’s near buyable levels, to make sure they don’t miss anything on risk and quality. While evaluating their buying opportunities, investors should also explicitly check if they are being too cheap. Investors should be prepared to buy at a price that strikes a balance between losing money and missing opportunities.

What will happen in the short run?

Anything. It is impossible to predict what will happen in the short run. Investors can keep revisiting these basic questions at every price level for their consideration set. There is no investment process that can reliably deliver good short-term results. Aiming for good short-term results jeopardizes good long-term results. One side benefit of sticking to safe and good is that one is less likely to question business fundamentals just because price tanks. In weaker businesses that periodically require kindness of strangers, reflexivity complicates life.

What will happen in the long run?

Across decisions, one should hope for outcomes that are better than bad, with wipe-outs being rare. In aggregate, investors hope for satisfactory returns, both absolute and relative. But they are far from certain and there’s a decent chance they won’t work out at all. Investors’ assurance is a vague comfort drawn from history and experience. Even if it works out, the long run can turn out to be painfully long.

What will one miss?

A lot. It’s not possible to catch every great opportunity of the coming decade. There will surely be icky banks and dodgy unicorns among tomorrow’s rockstars. Many a 50 PE will look cheap in hindsight, like in those cherrypicked back-tests. Investors should not aim to capture every likely winner. They should aim to do their best within what works for them.

More generally, the focus is central to any sensible method. Investors should zoom in on a subset of opportunities that fit into their way of thinking. What’s left out is usually way larger than what’s in. Straying outside their focus area implies that investors either don’t have a method or will implement it poorly. Living with FOMO (Fear of Missing Out) and envy is part of investing process.

How do these questions help?

Reassurance. Everyone knows what to do. The problem lies in sticking to it in scary times. If investors are at peace with their chosen approach, they’re less likely to lose their nerve or try to become someone else. Explicitly going back to basics helps one be more at peace with one’s chosen approach and act in line with it. Investors should avoid getting consumed by immediacy and noise.

Source: A Few Basic Questions from www.buggyhuman.substack.com By Anand Sridharan.

Asset Multiplier comments:

  • Investors should revisit the above-mentioned questions to stay aligned with their investment process.
  • Aiming for short-term results hinders the process of long-term wealth creation.
  • Instead of evaluating every winner, filtering out stocks that don’t match one’s investment strategy reduces the size of the stock universe and strengthens conviction.

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...