Demand for Housing loans is strong – HDFC

Update on the Indian Equity Market:

On Thursday, Nifty closed in the red at 15,081. Among the sectoral indices, Media (+1.6%), and Realty (+0.1%) closed higher. Metals (-2.0%), Financial Services (-1.8%), and Financial Services 25/50 (-1.6%) closed in the red. Ultratech Cement (+3.9%), Adani Ports (+3.0%), and Shree Cement (+2.9%) closed on a positive note. JSW Steel (-2.9%), HDFC (-2.6%), and Hindalco (-2.6%) were among the top losers.

Excerpts from an interview of Mr. Keki Mistry, Vice Chairman  & CEO of HDFC with CNBC-TV18 dated 03rd March 2021:

  • Interest rates may bottom out by March-end and there is not much downside expected from current levels.
  • The demand for housing loans is extremely strong. In Q3FY21, individual loan disbursements were ~26% higher YoY for HDFC.
  • 3rd quarter of last year (2019) was not impacted by covid, which indicates that the growth was not on a lower base.
  • HDFC manages COF (Cost of funds) carefully which helps to manage spread in higher/lower interest rate scenarios. The incremental cost of borrowings is coming down, which led to rate cut by some players. HDFC will also take an ALM meeting to take a decision on this front.
  • He said that on a 9-month basis individual loans constituted 76% of total loans and 24% is non-individual loans.
  • In non-individual loans, 11% is construction finance and the rest is lease rental discounting. 80% of the growth came from individual loans and the rest from non-individual loans in 9MFY21.
  • There is a pickup in demand in every segment.
  • Speaking on projects, he said the builders are able to finish projects. Some projects are stuck and they are taking a bit more time to come around.
  • The company is not looking to raise capital.
  • The company is looking to list HDFC ERGO and HDFC Credila, however, it is still in the planning stage.

 

Asset Multiplier comments:

  • Cheaper home loan rates have helped people to buy homes. The Home loan rates are already at a 15 year low. This has acted as a trigger for rising home loans.
  • RBI has lowered its repo by 115 bps since March 2020, the bank has also passed these benefits by offering lower interest rates.
  • Many players like SBI, Kotak Mahindra Bank have announced a reduction in home loan interest rates.
  • Lower interest rates and lower stamp duty in some regions might act as a demand driver for residential real estate in India.

 

Consensus Estimate: (Source: Market screener and Investing.com website)

  • The closing price of HDFC was ₹ 2,585 as of 04-March-2021.  It traded at 4.4x/4.0x/3.6 the consensus Book value per share estimate of ₹ 582/633/699 for FY21E/FY22E/FY23E respectively.
  • The consensus average target price is ₹ 2,921/- which implies a PB multiple of 4.1x on FY23E BVPS of 699/-.

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.”

Demand remains strong, expect 4QFY21 to be better than 3QFY21 – Berger Paints

Update on the Indian Equity Market:

On Wednesday, Nifty50 ended in the green at 15,246 (+2.2%), lifted by heavyweight Reliance Industries which gained after winning INR 571 bn worth of airwaves in the recently concluded spectrum auction.  The stock gainers in Nifty50 were TATASTEEL (+5.3%), BAJAJFINSV (+5.0%), and RELIANCE (+4.8%) while the auto companies HEROMOTOCO (-1.5%), MARUTI (-1.2%), and BAJAJ-AUTO (-1.2%) topped the losers. Among the sectoral indices, METAL (+3.3%), PSU BANK (+3.2%), and FINANCIAL SERVICES 25/50 (+2.9%) led the gainers. AUTO (-0.7%) was the only index to close in the red.

Excerpts of an interview with Mr. Abhijit Roy, MD &CEO, Berger Paints (BERGEPAINT) with CNBC TV18 on 2nd March 2021:

  • In 3QFY21, BERGEPAINT reported a 32% rise in volumes. The demand scenario is quite similar to 3QFY21 and with a low base of 4QFY20, the company expects to report strong growth in 4QFY21.
  • The management expects good growth from the waterproofing business and construction chemicals.
  • A part of the volume growth was partly on account of pent-up demand.
  • There is a shift towards premium and luxury categories which were suffering in the initial Covid-19 days. Overall, the demand scenario is strong, though 30%+ growth may not be sustainable.
  • There has been an increase in input costs, especially for solvent-based products and the industrial segment is affected. To compensate for the higher input costs, they have received price hikes from some customers. Discussions with some clients regarding price hikes is still pending.
  • The impact of cost hikes has been lesser on the decorative paints. The management expects an impact on gross margins but EBITDA margins are expected to be retained on account of cost-saving measures undertaken. The management believes a price hike may have to be taken for decorative paints as well if the material cost uptrend continues.
  • The company is currently operating at ~95% of its capacity due to the uptick in volumes. Hence, they are undertaking both brownfield and greenfield expansion projects. A new plant at Lucknow is being commissioned for ~Rs 7,000 mn. The new plant is expected to be operational by Jan 22.
  • The decorative paints segment is growing at a faster rate compared to Automobiles. The Auto segment is a mixed bag, with Commercial vehicles, and Tractors doing well and passenger vehicles and 2-wheeler lacking compared to expectations.
  • The protective coatings category is growing in double digits, albeit at a slower pace compared to decorative and automotive.
  • The premium category has picked up significantly after Oct-20.

Asset Multiplier Comments

  • The paint companies reported strong growth in the decorative paints segment due to pent-up demand, delayed festive season, strong momentum in tier 3-4 markets, and share gains from small, unorganized players.
  • The weak macro environment impacted the industrial coatings while auto coatings did well. The auto coatings recovery was in line with the recovery in the Passenger and Commercial vehicles.
  • We believe as the metros and cities return to normalcy, the premiumisation trend will be stronger.

Consensus Estimate: (Source: market screener website)

  • The closing price of BERGEPAINT was ₹ 729/- as of 03-March-2021. It traded at 101x/ 77x/ 65x the consensus earnings estimate of ₹ 7.2/ 9.5 /11.3 per share for FY21E/FY22E/FY23E respectively.
  • The consensus target price of ₹ 620 implies a PE multiple of 55x on FY23E EPS of ₹ 11.3/-.

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

 

Expect 400,000 + volumes in March 2021– Bajaj Auto

Update on the Indian Equity Market:

 

On Tuesday, Nifty closed 1.1% higher at 14,919. Within NIFTY50, TATAMOTORS (+5.1%), M&M(+4.6%), and WIPRO(+4.5%) were the top gainers, while ONGC (-2.6%), HDFC(-1.2%), and DRREDDY (-1.1%) were the top losing stocks. Among the sectoral indices, AUTO (+3.2%), IT (+3.0%), and FMCG (+1.4%)were the top gainerswhile PSU BANK (-0.2%) was the only sector to end with losses.

 

Expect 400,000 + volumes in March 2021– Bajaj Auto

 

Excerpts of an interview with Mr. Rakesh Sharma, ED, Bajaj Auto, aired on CNBC-TV18 on 1st March 2021:

  • Bajaj Auto reported total wholesale volumes of 375,017 units for February 2021, a growth of 6% YoY. According to Mr. Sharma, there was a shortfall in the volumes due to several factors.
  • Domestic 2-wheeler retails were higher than wholesale as Bajaj Auto was deliberately clearing stock. February onward, Bajaj Auto has started to focus aggressively on the entry-level segment.
  • The 2nd big shortfall was in exports, as there was a big spill over due to shipping container schedule. Bajaj Auto also lost some volumes in premium segment in domestic as well as exports market.
  • As all the above factors go away, Mr. Sharma expects monthly volumes to again go beyond 400,000 units in March 2021.
  • A 4% hit from raw material inflation is expected in 4QFY21. Bajaj Auto’s response to this will be after a very careful view of the fragile demand recovery.
  • Sharma estimates that the domestic 2-wheeler industry retails had a YoY decline in February 2021.Bajaj Auto saw a YoY retail growth. But a decline in retail volumes is not a good sign for the industry.
  • Bajaj Auto has taken a price hike in 3QFY21, but that has not impacted the customers significantly. The strategy is to increase the prices and simultaneously improve the product proposition for the customer. Further hikes will have to be taken in fragments, and cannot be taken at once.
  • Bajaj Auto is seeing a steady increase in 3-wheeler sales which is an important segment for the company. This is the tipping point for Bajaj to reach out to the customer with innovative financing schemes.
  • As Bajaj Auto was gaining market share in above 125 cc segment, they were losing in the below 125 cc segment. To address this, Bajaj Auto has now taken some initiatives which will help them grow both the segments. But for the industry, the below 125 cc segment has suffered.

 

Asset Multiplier Comments:

  • For the month of February 2021, Hero Motocorp has reported domestic 2-wheeler wholesales of 484,433 units, a growth of 0.8% YoY. For the same period, TVS Motors has reported 195,145 units, a growth of 15% YoY. Against this, Bajaj Auto’ s domestic 2-wheeler segment reported 1% YoY growth.
  • For domestic 3-wheelers in February 2021, Bajaj Auto reported a 27% YoY decline in wholesales while TVS Motors reported a 24% YoY decline.
  • Sales in the 3-wheeler segment saw steeper declines since the covid-19 pandemic on account of lower mobility. Several banks and NBFCs had taken a very cautious approach to auto lending. As 3-wheelers are predominantly purchased through loans, low finance availability put a roadblock in 3-wheeler volume recovery.

 

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

  • The closing price of BAJAJ-AUTO was ₹ 3,950as of 2-March-2021. It traded at 25x/ 20x/ 18x the consensus EPS estimate of ₹ 158/193/221 for FY21E/ FY22E/ FY23E respectively.
  • The consensus target price of ₹ 3,950/- implies a PE multiple of 18x on FY23E EPS of ₹221/-.

 

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.”

 

Rising commodity costs, a headwind in managing cost reduction: Crompton Greaves

Update on the Indian Equity Market:

After a big sell-off on Friday, markets witnessed some relief as Nifty started the week on a positive note with 252 point gains to close at 14,782. Within the sectoral indices, all but one, PSU BANK (-0.3%), closed in green led by MEDIA (4.3%), AUTO (2.4%), and METAL (2.0%). The Nifty index followed similar path as only one stock, BHARTIARTL (-4.3%) closed in the red. POWERGRID (6.7%), ONGC (5.5%), and GRASIM (5.4%) led the gainers within the index.

Excerpts of an interview with Mr. Shantanu Khosla, Managing Director, Crompton Greaves Consumer Electricals (CROMPTON) with CNBC -TV18 dated 25th February 2021:

  • The overall demand scenario is promising through January and February. The company reported double-digit growth in the December quarter largely driven by volumes.
  • The trend in the overall demand scenario is positive and expected to continue well into 2021. The company is expected to reach to pre-COVID levels in CY21E.
  • The B2C (Business to Consumer) delivered double-digit growth while B2G (Business to Government) and institutional segment was subdued during the December quarter.
  • Commenting on a possible GST rate reduction, he mentioned that the company has always passed on the benefit of lower tax rates to its customers and it will continue to do so in future as well. The benefit is passed on to the customers through price reductions.
  • Commodity costs have moved up significantly in the last few months. The rising prices are acting as headwinds in the cost optimization initiative taken by company. The company is managing this price rise by further deepening of cost reductions and better management.

Asset Multiplier Comments:

  • With the Make-in-India program and Work from Home restrictions, there was a shortage of appliances in India. As a result, domestic electrical goods companies have witnessed a surge in demand for appliances such as washing machines, dishwashers, air-conditioners, and laptops.
  • CROMPTON has also been a beneficiary and reported YoY revenue growth in the appliances category in the December quarter. CROMPTON intends to increase its presence in electrical appliances category as well to meet the increasing demand.
  • As the company is focusing more on premium category products, the increasing pressure of raw material prices is expected to have lesser impact on the fundamentals of the company.

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

  • The closing price of CROMPTON was ₹ 383/- as of 1-March-2021.  It traded at 49x/ 40x/ 34x the consensus EPS estimate of ₹ 8.0/ 9.8/ 11.4 for FY21E/22E/23E respectively.
  • The consensus price target is ₹ 451/- which trades at 40x the EPS estimate for FY23E of ₹ 11.4/-

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.”

This week in a nutshell (Feb 22nd to Feb 26th)

                                                                                      Technical Talks

As expected, Nifty continued to decline this week. On Friday, the index had a gap down opening and it witnessed a fall of (-3.8%). Opening on 22nd Feb at 14,999 and closing on 26th Feb at 14,529, it made a weekly loss of ~3%. For the next week we think that on the downside, 50DMA of 14,445 could act as a support. On the upside, 14,957 is the key level to watch out for as the 20DMA might act as a resistance. With the RSI (45) and MACD on a declining trend, the technical indicators have cooled off a bit but the trend is declining. There could be further possible decline.                                                           

Weekly highlights

  • The Indian Cabinet launched a production-linked incentive scheme (PLI) for the Pharmaceutical sector. The outlay of ~Rs 150 bn is approved by the Union Cabinet. This scheme will benefit domestic manufacturers to offer a wide range of affordable medicines to consumers, and it will also help to generate employment. The duration of the scheme would be from FY21 to FY29.
  • Agriculture Ministry estimates that India’s foodgrain production will rise by 2% in FY21 to an all-time high of 303.34mn tonnes. The estimates suggest a better output of rice, wheat, pulses, and coarse cereals. Availability of grains reduces dependence on a good monsoon.
  • Oil prices climbed this week to fresh 13-month highs after US government data showed a drop in crude output after a deep freeze disrupted production last week. The Brent crude futures and US West Texas Intermediate (WTI) crude futures rallied to 66.96$ and 63.01per barrel respectively.
  • Many OEMs (Automobile companies) have written to GOI to address the semiconductor shortage issue. The industry has requested the government to direct embassies to help in restoring supplies of semiconductors.
  • The foreign institutional investors’ (FII) bought Rs 181bn worth Indian equity shares last week. The inflows are elevated due to the bulk deal of Bosch Ltd. Excluding this deal, FIIs were net sellers. Domestic institutional investors (DII) were net buyers during this week of Rs 2.8 bn.

Things to watch out for this week

  • Auto data- OEMs will be reporting their volumes data for the month of February. The previous 2-3 months performance for almost all OEM’s was impressive led by festive season demand and some pent-up The semi-conductor shortage issue impact on monthly volumes is key to watch. The volume numbers will set the tone for auto OEM’s performance in March.

The next 2-3 years will be very good for the CV segment: Eicher Motors

Update on the Indian Equity Market:

On Tuesday, NIFTY closed at 15,097 (+0.77%). Top gainers in NIFTY50 were Coal India (+8.6%), UPL (+7.3%), and Adani Ports (+5.9%). The top losers were ICICI Bank (-1.9%), Nestle (-1.4%), and Divis Labs (-1.4%). The top sectoral gainers were METAL (+3.9%), REALTY (+1.7%), and MEDIA (+1.3%) and sectoral losers were FMCG (-0.3%) and FIN SERVICES (-0.2%).

Excerpts of an interview with Mr Vinod Aggarwal, MD & CEO, Eicher Motors (EICHERMOT) with CNBC -TV18 dated 24th February 2021

  • Tata Motors, addressing auto analysts, gave very positive comments on the commercial vehicle (CV) industry saying it is likely to grow 36-38 per cent in FY22 and Mr Aggarwal, Eicher motors analyzed the demand trends.
  • This year first half was a washout. Based on this low base, there will be good growth next year.
  • Growth will be better than FY20 and it should be somewhere between FY19 and FY20. They are expecting the industry to do much better in FY22.
  • They are already at pre-COVID levels as far as the truck industry is concerned. Buses are down but hopefully, schools will be opening soon so next year it will be much better
  • He expects replacements to be very strong in the CV industry. Within two years, the company should reach its earlier peak ofFY19 or even cross that.
  • He expects that for the CV industry, the next two-three years will be very good because they have a lot of pent-up replacement demand.
  • The sentiment is positive. Since the economic sentiment is positive, people have started replacing their old trucks.
  • Electronic control units (ECU) shortage is one of the major supply constraints. They are trying to cope up and manage the situation.
  • The transport industry runs on economic growth therefore diesel price increase might increase freight levels and increase inflationary pressures.
  • Tippers performance is back to peak levels now and they have grown more than 20%.

 

Asset Multiplier comments:

  • Overall Industry growth is picking up in the January-March period for the two-wheeler industry, which has witnessed a recovery in the festive period from COVID-19 induced disruptions.
  • As economies start gaining momentum, the Indian CV industry is also picking up demand faster. January-March volumes are better than pre-covid levels.
  • Eicher Motors is targeting export markets and aiming at new product launches in the coming two years. ‘Make you own’ initiative which allows customers to customize the bikes is also gaining momentum especially in millennials.

 

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

  • The closing price of EICHERMOT was ₹ 2,554/- as of 25-February-2021.  It traded at 48x/ 30x/ 24x the consensus earnings estimate of ₹ 52.8/ 85.1/ 106 for FY21E/22E/23E respectively.
  • The consensus price target is ₹ 2,773/- which trades at 26x the earnings estimate for FY23E 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.”

Expect credit costs to gradually normalize in FY22E – Axis Bank

Update on the Indian Equity Market:

 

Wednesday was a pause from normalcy at NSE as the exchange closed down at 11.40 am due to issues at both their telecom service providers. To compensate, NSE & BSE extended trading hours from 3.45 pm to 5 pm. Nifty closed 1.9% higher at 14,982. Within NIFTY50, HDFCBANK (+5.4%), COALINDIA (+5.3%), and AXISBANK (+5.2%) were the top gainers, while UPL (-2.4%), POWERGRID (-1.5%), and DRREDDY (-1.5%) were the top losing stocks. Among the sectoral indices, PRIVATE BANK (+3.9%), BANK (+3.8%), and FINANCIAL SERVICES (+3.4%) were the only gainers while IT (-0.1%)    was the only sector to end with losses.

 

Expect credit costs to gradually normalize in FY22E – Axis Bank

 

Excerpts of an interview with Mr Amitabh Chaudhry, MD & CEO, Axis Bank, aired on CNBC-TV18 on 23rd February 2021:

  • AXISBANK was expecting to see slippages rise in 2HFY21. AXISBANK has already seen a large part of the slippages already happening in 3QFY21. Management expects slippages to be comparatively lower in 4QFY21, and stability to return in FY22E.
  • Management has been prudent in upfronting the provision hit and being conservative on restructuring and the Emergency Credit Line Guarantee Scheme (ECLGS).
  • Management expects the credit costs to start moving back to long-term averages gradually.
  • AXISBANK’s retail disbursements were back to pre-Covid levels in 3QFY21. They have seen the momentum continue till now. If economic activity slows down again, it will impact loan demand with a lag.
  • AXISBANK reported a 5.9% growth in advances in 3QFY21 which is conservative compared to growth reported by peers.
  • On the wholesale segment, AXISBANK is focusing on only certain segments as pricing is under pressure.
  • AXISBANK had slowed down on the SME book 2 years back. The SME book is now restructured and growth has started to come back.
  • On the Retail book, AXISBANK was cautious on the uptick when the demand came back, but December was very strong for them.
  • AXISBANK’s capital adequacy is among the industry best. He does not see the need for further equity issue in the next couple of years. Regardless, AXISBANK has the approval to raise Rs 50 bn via equity.
  • AXISBANK’s proposed deal with Max Life has received CCI approval. IRDAI approval has to be obtained by Max Life and the timeline for that cannot be predicted.
  • AXISBANK is always looking out for opportunities for acquisition. One space where they do not have a presence in the health and non-life side. If the right opportunity comes in, management will be open to acting on it. AXISBANK also wants to scale up subsidiaries, but only if opportunities appear at the right price.

 

Asset Multiplier Comments:

  • Most large banks have indicated that their credit costs have been upfronted and would see normalization FY22E onward. AXISBANK is no different in this aspect.
  • The banking sector overall is showing signs of improvement as the economy is getting back on track. However, the recovery hinges on the prevalence of this normalcy. In the event of a second wave of Covid-19 and any further disruption in the economic recovery, the performance across sectors will be impacted.

 

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

  • The closing price of AXISBANK was ₹ 753 as of 24-February-2021. It traded at 2.3x/ 2.0x/ 1.8x the consensus BVPS estimate of ₹ 328/ 368/ 419 for FY21E/ FY22E/ FY23E respectively.
  • The consensus target price of ₹ 764/- implies a PB multiple of 1.8x on FY23E BVPS of ₹419/-.

 

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.”

 

Slippages and Credit cost to remain within guidance: State Bank of India

Update on Indian Equity Market:

Markets bounced back from Monday’s steep decline as Nifty closed the day 32 points higher at 14,708. Within the index, TATASTEEL (7.2%), TATAMOTORS (6.6%) and HINDALCO (5.7%) charged the index higher while KOTAKBANK (-3.9%), ADANIPORTS (-1.7%) and MARUTI (-1.6%) lagged the index. Among the sectoral indices, METAL (3.9%), REALTY (2.7%) and AUTO (0.8%) led the winners while FIN SERVICE (-0.5%), PVT BANK (-0.5%) and BANK (-0.4%) led the losing sectors.

Excerpts of an interview with Mr Dinesh Khara, Chairman, State Bank of India Ltd (SBIN) with CNBC -TV18 dated 22nd February 2021:

  • The bank is currently using data analytics to have more effective control over the quality of the loan book. All the measures have resulted in an improvement in the asset quality for the bank.
  • The quality of unsecured loan book depends upon the underwriting of the book. In the unsecured loan portfolio held by the bank, the majority of borrowers are salaried employees either from Government, the public sector or well-rated corporates. To that extent, although it is unsecured, there are no challenges in this book.
  • The corporate loan to working capital book ratio stands at 70:30 at present. He expects working capital utilization to improve with improving capacity utilization. 
  • The bank is not looking at the divestment of any subsidiary at the moment. He said that the bank will evaluate various options available for capital raising in the next financial year and could look at investment in the mutual fund business.
  • The bank is keeping a close watch on the stressed assets’ book and is making efforts via one-time settlement and other means to recover the loans as soon as possible. The slippages and credit cost is expected to remain within the guidance given by the bank.  
  • Digital transactions have gone up significantly in the current year. It has gone to the extent of 64% of the total transactions. The bank is trying to reduce its operating costs to improve cost to income ratio.

 Asset Multiplier Comments:

  • The focus on asset quality and the use of data analytics to keep watch on the quality of the book will lead to prompt decision making regarding the health of the loan book. With this, the confidence to achieve credit cost and slippages as per guidance reflects well for the company.
  • With the pick-up in economic activities, the improvement in collection efficiency augurs well for the banking industry. This will strengthen the asset quality as per the expectation of management.
  • The intent of taking efforts to monetize the stressed assets’ book will help the bank to strengthen the balance sheet over the period of time.

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

  • The closing price of SBIN was ₹ 397/- as of 23-February-2021.  It traded at 1.5x/ 1.3x/ 1.2x the consensus book value estimate of ₹ 269/ 301/ 340 for FY21E/22E/23E respectively.
  • The consensus price target is ₹ 385/- which trades at 1.1x the book value estimate for FY23E of ₹ 340/-

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.”

 

Leisure occupancy sees demand boom but business occupancy still low: Lemon Tree

Update on the Indian Equity Market:

On Monday, NIFTY closed at 14,676 (-2.0%). Top gainers in NIFTY50 were Adani Ports (+2.8%), JSW Steel (+2.3%), and Hindalco (+2.0%). The top losers were Eicher Motors (-5.1%), M&M (-4.7%), and Tech M (-4.6%). The top sectoral gainers were METAL (+1.6%), and sectoral losers were MEDIA (-3.4%), IT (-2.9%) and REALTY (-2.8%)
Excerpts of an interview with Mr. Vikramjit Singh, President, Lemon Tree Hotels (LEMONTREE) with CNBC -TV18 dated 19th February 2021

  • The COVID-19 pandemic hit the hospitality sector hard and things are just starting to look up now.
  • The large corporates are the biggest laggards predominantly because the IT companies have not started travel; their employees are still working from home. Therefore, this segment has seen the slowest recovery.
  • However, the big surprise is the leisure/retail segment; they have not only recovered but today their retail contribution is about 115-120 percent of pre-COVID levels.
  • In tier-I cities occupancies are now catching up, they are roughly about 20 percent below pre-COVID level but the big dip is in the average room rate (ARR), the average rates today are still 40-50 percent below what they were for the same period pre-COVID so the revenue recovery has not happened. Tier-II is doing very well.
  • On the expansion front, Lemon Tree opened 5 hotels in the COVID fiscal and will open hotels in Coorg, Port Blair, Dehradun, Mumbai and other places.
  • In the COVID fiscal, they have opened 5 hotels; they opened hotels in Dwarka, Aligarh, Jhansi, Vijayawada and Goa.
  • So today, as things stand, they have about 8,300 rooms in 84 hotels across 51 cities and they have 2,200 room additions in the pipeline.

Asset Multiplier comments:

  • The most talked-about trend that is fast catching up in Resorts & Hotels is Work away from home, where guests experience a completely new and refreshing environment. As most of the corporates have extended WFH till the second half of 2021, this trend will be embraced by most working professionals.
  • The onset of COVID-19 and the subsequent travel restrictions and nation-wide lockdown, however, have had an unprecedented impact on the sector.
  • Upscale/Luxury Leisure and Branded Economy/Mid-market business hotels are expected to lead the recovery growth in the sector.

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

  • The closing price of LEMONTREE was ₹ 41/- as of 22-February-2021.  It traded at NM/ NM/ 215x the consensus earnings estimate of ₹ -1.9/ -0.8/ 0.2 for FY21E/22E/23E respectively.
  • The consensus price target is ₹ 40/- which trades at 209x the earnings estimate for FY23E of ₹2/-

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

 

12 Things to remind yourself when markets go crazy

Ben Carlson reminds us that there has never been a better time to be an individual investor than right now. And things are only going to get better from here. The problem with having all of these options available at your fingertips is that it’s never been easier to experience Fear of Missing out (FOMO). FOMO brings about a lot of emotions — greed, envy, regret — that make it difficult to make level-headed decisions with your money.

So here are some things Carlson reminds himself when markets go crazy to put things into perspective:

  1. There is no such thing as a normal market. Uncertainty is the only constant when investing. Get used to it.
  2. The most effective hedge is not necessarily an investment strategy. The best hedge against wild short-term moves in the markets is a long time horizon.
  3. Your gains will be incinerated at some point. Investing in risk assets means occasionally seeing your gains evaporate before your eyes. Carlson says he doesn’t know why and he doesn’t know when but at some point a large portion of his portfolio will fall in value. That’s how this works.
  4. You still have a lot of time left. Carlson says he is still young(ish) with (hopefully) a number of decades ahead of him to save and invest. That means he is going to experience multiple crashes, recessions, bull markets, manias, panics and everything in-between in the years ahead. The current cycle won’t last forever just like the last one or the next one.
  5. Know yourself. One of the biggest mistakes you can make as an investor is confusing your risk profile and time horizon with someone else’s. Understanding how markets generally work is important but understanding yourself is the key to successful investing over the long haul.
  6. There’s nothing wrong with using a “dumb” strategy. Buy and hold is one of the dumbest investment strategies ever…that also happens to have the highest probability of success for the vast majority of investors. There’s no shame in keeping things simple.
  7. The crowd is usually right. Being contrarian will always make you feel like you’re smarter than everyone else, but the crowd is right more often than its wrong when it comes to the markets. Yes, things can get overcrowded at times but being a contrarian 100% of the time will lead you to be wrong far more often than you’re right.
  8. Markets don’t end. For years pundits have been proclaiming I’ve seen this movie before and it ends badly. Well, guess what? Markets don’t end. Yes, some companies fail but most of them keep right on chugging along, selling products and services, making profits and paying dividends. And the stock market isn’t going out of business anytime soon. No one knows how this movie ends because there will always be another sequel.
  9. Anchoring is dangerous. Whenever there are huge moves in the market it becomes tempting to play the anchoring game. What if I would have bought at the lows? What if I would have sold at the highs? No one is able to consistently get in at the bottoms and out at the tops. Hindsight makes it look easy but it never is at the moment. Buying when something is falling is hard to act on because it always feels like it’s going lower while selling when something is rising is easy but most of the time you’re wrong.
  10. You don’t have to be bullish or bearish at all times. Focusing on your own goals can release you from the need to always have an opinion on the next move higher or lower.
  11. You don’t have to invest in everything. Sometimes the stuff you don’t invest in is even more important than the stuff you do invest in. It’s never been more important to have filters in place to guide your actions.
  12. Don’t worry about what everyone else is doing. There will always be someone getting richer than you in life and the markets. And with the advent of social media, that means people throwing this fact in your face constantly. This one is not easy but defining what a rich life means to you can help avoid unnecessary envy and regret.