Tag - quarterly result

Preference for Margins over Volume Growth: HDFC Life

Update on Indian Equity Market:

Markets were on the rise today, with Nifty increasing 212 points to 14,865. Bajaj Finance (8.0%), Indusind Bank (4.9%), and Eicher Motors (4.8%) were the top gainers on the index while Britannia (-2.0%), Hindalco (-1.0%), and Nestle (-1.0%) were the top losers for the day. Among the sectoral indices, Bank (3.0%), Private Bank (3.0%), and Financial Services (2.9%), led the gainers while Realty (-0.6%), Pharma (-0.3%), and Metal (-0.3%) ended in the red.

 

Excerpts of an interview with Ms. Vibha Padalkar, CEO of HDFC Life with Bloomberg Quint dated 28th April 2021:

 

  • HDFC Life expects to record profit margins upwards of 70% irrespective of the covid-19 impact. 
  • Company prefers to protect high profit margins and to grow moderately than chase topline growth, especially in the protection segment due to uncertainty and higher risk due to covid-19.
  • Company aims to expand into the annuity segment which is a highly lucrative and retiral segment which is showing good potential going forward.
  • The risk associated with price hike as a result of covid-19 cannot be ruled out entirely. The company ensures that the price hike will be passed over to customers in a phased manner.
  • In order to reduce risk, the company wants to diversify its product portfolio to improve contributions from annuity and protection segments

 

Asset Multiplier Comments:

  •  The Company has identified key areas, in order to sustain growth by focusing on margins cover and sustainable growth, which provides a long term positive outlook for the company.
  • These efforts will help the company grow beyond FY22 and with the expansion of the Insurance industry is poised for stellar growth.

 

Consensus Estimates (Source: market screener website):

  • The closing price of HDFC Life was ₹ 673/- as of 28-April-2021.  It traded at75x/ 67x the consensus EPS estimate of ₹ 9/ ₹ 10 for FY22E/23E respectively.
  • The consensus price target is ₹ 758/- which trades at 76x the EPS estimate for FY23E of ₹ 10/-
  • In the case of life insurance companies, the embedded value per share is the correct multiple for valuing the company. The consensus estimate of this metric is not available on any of the websites.

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

 

Expect 20 percent plus EBITDA margins to continue – Mindtree

Update on the Indian Equity Market:

The Indian Equity market indices gained after the Indian government announced that all citizens over the age of 18 can have Covid-19 vaccinations from May 1.  The markets pared morning gains as investors were worried due to the increasing Covid-19 cases in the second wave. Nifty 50 ended at 14,296 (-0.4%).  Among the stocks, DRREDDY (+3.6%), BAJAJFINSV (+3.5%), and HDFCLIFE (+3.0%) ended with gains while ULTRACEMCO (-4.9%), HCLTECH (-3.4%), and HDFC (-3.3%) led the losers. Among the sectoral indices, MEDIA (+3.0%), PHARMA (+1.3%), and AUTO (+1.0%) led the gainers while IT (-1.4%), FMCG (-0.6%), and FINANCIAL SERVICES (-0.6%) led the losers.

Excerpts of an interview with Mr. Debashis Chatterjee, MD & CEO, Mindtree aired on CNBC TV-18 on 19th April 2021:

  • Mindtree reported 4QFY21 quarterly results, with the consolidated net profit reporting a ~54% YoY growth to Rs 3,174 mn due to strong operational efficiency.
  • Two successive quarters of 5percent plus growth instills confidence in the Company in terms of momentum generated by deal closures.
  • The order book stood at USD 1.4 bn as of 31-March-21. The order book was 12% more than the previous year. The pipeline has never been stronger and with the changes done in terms of the 4*4*4 strategy- the execution is going well.
  • They have focused on some of the strategic accounts and focusing on cross-selling and up-selling as a part of their strategy. Considering these factors, they remain confident of delivering double-digit growth in FY22E and maintaining the margins at 20 percent plus.
  • They have added net 1600 employees in 4QFY21. Owing to a strong pipeline and a high demand, Mr. Chatterjee expects hiring to be robust in the next couple of quarters.
  • The war for talent has aggravated in the last couple of quarters. With a focus on cross-skilling of employees, they have been able to contain the attrition.
  • There has been a delay in BFSI deal closures, which are expected to happen in 1QFY22. Given the interest rate regimes, there have been some in-sourcing trends in the banking clients. Post the deal closures in 1QFY22, there is some recovery expected in the BFSI vertical.

Asset Multiplier Comments

  • The commentary on deal signings, consistent margin improvement, and the ability to sustain these improved margins are key positives for the Company.
  • The pandemic accelerated clients’ interest in Data, Cloud migration, and other disruptive technologies, across IT services companies. This is expected to benefit IT services companies for the foreseeable future.

Consensus Estimate: (Source: market screener website)

  • The closing price of MINDTREE was ₹ 2,033/- as of 20-April-2021. It traded at 25x/ 24x the consensus earnings estimate of ₹ 80.1/ 86.1 per share for FY22E/FY23E respectively.
  • The consensus target price of ₹ 1,857 implies a PE multiple of 22x on FY23E EPS of ₹ 86.1/-.

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.”

The week in a nutshell (April 12th to 16th)

 

Technical talks

  • NIFTY opened the week on 12th April at 14,645 and closed on 16th April at 14,617. After beginning the week with major losses, the index rebounded to close flat for the week. The index is trading below its 20DMA of 14,661, which may act as resistance. The next level being 50DMA at 14,863. The Index breached its 100DMA at 14,316 during the week where it may find support.

Weekly highlights

  • The week began with major indices in red due to the rising Covid-19 cases and lockdown-like conditions imposed across major areas in the country.  Indices recovered during the week to end flat. Gains were seen in pharma, IT, metals, and auto stocks, while bank and realty indices ended in the red.
  • Due to the increasing number of COVID-19 cases in India, Foreign Institutional Investors (FII) turned net sellers this week,  at  Rs 10,590 mn. Domestic Institutional Investors (DII) were net buyers and pumped in Rs 6,080 mn.
  • Q4FY21 result earnings season started this week with the big 3 tech companies -TCS, Infosys, and  Wipro. All reported good revenue growth on the expected lines. Their comments for upcoming quarters suggest promising growth. On the back of a strong earnings show, Infosys has announced a buyback of Rs.92 bn, at an upper price limit of Rs. 1750/share.
  • The US Equity markets hit a record high during the week. The Dow Jones Industrial Average hit the historic milestone of 34,000 for the first time owing to economic recovery and stimulus package announced by President Joe Biden and reducing unemployment.
  • American banking major Citibank on Thursday announced that it will exit from the consumer banking business in India and 13 countries. This is a part of a global strategy of CEO Jane Fraser attributing the decision to an absence of scale to compete in these geographies. The bank has 35 branches in India and employs approximately 4,000 people in the consumer banking business. 
  • India’s retail inflation, measured by the Consumer Price Index (CPI), rose to 5.52 percent in March. Separately, the country’s factory output, measured in terms of the Index of Industrial Production (IIP), witnessed a contraction of 3.6 percent in February. The retail inflation during February was at 5.03 per cent.

Things to watch out 

  • Q4FY21 result season to continue with HDFC Bank and Nestle reporting their earnings. India’s COVID patient numbers will drive the sentiment of the market in the near term. Some economists are already reducing India’s GDP growth forecast for FY22 due to the second wave. We expect investors to focus back on cash flow creators – pharma, consumer, and software services. This is a holiday-shortened week due to a break on Wednesday. 

Tractor volumes show record growth, Momentum expected to continue: Escorts

Update on Indian Equity Market:

After yesterday’s rout markets traded flat to end the day as Nifty closed the day 45 points lower at 14,683.  Within the index, ADANIPORTS (+12.6%), TATACONSUM (+4.6%), and ASIANPAINT (+4.0%) were few of the gainers while POWERGRID (-2.3%), GRASIM (-1.3%), and EICHERMOT (-1%) led the losers. Among the sectoral indices, PHARMA (+1.8%), METAL (+1.4%), and REALTY (+1.2%)  led the winners while BANK (-0.5%), PRIVATE BANK (-0.4%), and MEDIA (-0.3%)  led the losers. 

Excerpts of Interview with Bharat Madan, Group CFO of Escorts Ltd. with CNBC-TV18 dated 5th April 2021:

  • Escorts posted very strong 10 percent tractor sales growth in March compared to the previous month. FY21 ended on a strong note with total tractor sales rising 24 percent vs FY20.
  • Escorts achieved an annual production level of 100,000 units for the first time in its history on the back of robust growth in sales despite the Covid-19 pandemic.
  • The rural sentiment is expected to be strong after a good Rabi season and a favorable monsoon outlook.
  • Demand is expected to grow for the next 6 months on account of expansion in South India.
  • Rising Covid-19 cases has not yet impacted demand but remain a concern. However, it is not expected to hamper any supply-side considerations.

Asset Multiplier Comments:

  • The Company is witnessing a strong demand on account of economic recovery and the company is poised to continue this upward trajectory for the upcoming 2 quarters.
  • Overall, the outlook for the auto industry is favorable and the effect of supply chain issues seems to be muted so there’s scope for sustained growth.

Consensus Estimates (Source: market screener website):

  • The closing price of ESCORTS was ₹ 1,223/- as of 06-April-2021.  It traded at 15x/ 13x the consensus EPS estimate of ₹ 84/ 94 for FY21E/22E/23E respectively.
  • The consensus price target is ₹ 1470/- which trades at 16x the EPS estimate for FY23E 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.”

 

Double-digit volume growth to continue – Galaxy Surfactants

Update on the Indian Equity Market:

On Tuesday, the Indian equities snapped the six-day winning streak and Nifty 50 ended at 15,109 (-0.5%). Among the sectoral indices, FINANCIAL SERVICES 25/50 (+0.3%), FINANCIAL SERVICES (+0.3%), and BANK (+0.2%) ended the day with gains. MEDIA (-1.9%), AUTO (-1.4%), and PHARMA (-1.2%) led the losers. Among the stocks, SBILIFE (+4.0%), ASIANPAINT (+3.8%), and HDFCLIFE (+3.6%) led the gainers while M&M (-3.0%), TATAMOTORS (-3.0%), and JSWSTEEL (-2.2%) dragged the index lower.

Excerpts of an interview with Mr. U Shekhar, Founder Promoter and Managing Director, Galaxy Surfactants (GALAXY) with CNBC TV18 on 9th February 2021:

  • GALAXY saw good 3QFY21 earnings. The reported double-digit volume growth on a YoY basis is expected to continue, especially in the specialty chemicals segment.
  • Money received from Egypt which was accounted in 3Q was export benefits accumulated over the last 2-3 years. GALAXY accounts for the export benefits availed only when received.
  • Consumer focus on personal hygiene has increased significantly this year. This is expected to sustain going forward and the new products which have been introduced are seeing slow evolution which is certainly giving Galaxy better numbers.
  • The company has implemented expansion projects at Jhagadia, which was expected to be completed by April-21. This project has been delayed a little due to difficulties faced due to the outbreak of Covid-19.
  • The disruption due to shipping and containers is continuing which is certainly putting pressure on the supply chain.
  • The price hikes have been passed on to customers or absorbed the freight hikes in case of long-term contracts.
  • As far as the margin is concerned, there will be a gradual progression when new products keep on getting better.

Consensus Estimate: (Source: market screener website)

  • The closing price of GALAXY was ₹ 2,222/- as of 09-February-2021. It traded at 31x/ 27x/ 23x the consensus earnings estimate of ₹ 71.6/ 83.8/ 95.7 per share for FY21E/FY22E/FY23E respectively.
  • The consensus target price of ₹ 2,160 implies a PE multiple of 23x on FY23E EPS of ₹ 95.7/-.

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.”

Indiabulls Housing Finance 1QFY20 result update: Asset quality deteriorates sequentially.

Dated: 7th August 2019

  • Loan assets declined 10% YoY to Rs 1,131 bn. The decline is primarily due to efforts taken for reduction in the Commercial Real Estate (CRE) book.
  • NII at Rs 14,750 mn was 13% lower YoY. Pre-provisioning operating profits at 12,536 mn were 15% lower YoY.
  • Provisions were at Rs 1,476 mn compared to Rs 649 mn and Rs 1,645 mn in 1QFY19 and 4QFY19 respectively.
  • PAT at Rs 8,020 mn was lower by 24% YoY.
  • Asset Quality worsened sequentially from GNPAs and NNPAs of 0.88% and 0.69% respectively in 4QFY19 to 1.47% and 1.10% respectively in 1QFY20.

Management Commentary:

  • IBHFL reduced exposure to CRE loans amounting to Rs 60 bn in 1QFY20. Efforts to reduce CRE exposure is in anticipation of the proposed merger with Lakshmi Vilas Bank (LVB).
  • Management has guided to quarterly disbursements of Rs 100 bn from 2QFY20. Guidance for loan book growth for FY20E is in mid-teens.
  • Management expects spreads to remain stable in 300-325 bps range.
  • IBHFL recovered Rs 7 bn from Palais Royale in 1QFY20 against earlier guidance of Rs 2 bn. Against the recovery, Rs 4.5 bn was used to make additional voluntary provisions. Under ECL norms, companies cannot make floating provisions. Hence IBHFL has proactively classified certain accounts as Stage 3 (including Zee group, CCD group) and provided against them.

Consensus estimates (Source: Marketscreener website):

  • IBHFL closing price (as on 07-08-2019) was Rs 446/- per share. It was trading at a P/B of 1.1x/ 0.9x its book value per share estimates of Rs 417/ 493 for FY20E/ FY21E respectively. Consensus target price over next 12 months is Rs 910/- implying P/B of 1.85x for FY21E BV of Rs 493