Author - Abhishek Salunke

  • Abhishek Salunke
08 Jun

Built-up social capital helped in working in remote areas during the crisis: Infosys

Update on the Indian Equity Market:

Markets shrugged Thursday’s losses as Nifty closed the day 1.1% higher at 10,142. The top gainers for Nifty 50 were Tata Motors (+13.7%), SBIN (+8.7%) and INFRATEL (+8.3%) while the losing stocks for the day TCS (-1.8%), HINDUNILVR (-1.6%) and BAJAJAUTO (-1.4%). The gaining sectors for the day were PSU BANK (+6.9%), MEDIA (+5.3%) and NIFTY BANK (+3.2%). FMCG (-0.7%) was the only losing sector for the day.

Edited excerpts of an interview with Mr Salil Parekh, CEO, Infosys Ltd; dated 4th June 2020 from Economic Times:

  • Over the past few years, Infosys has invested in technology infrastructure, remote access and telecommunications. As a result, the Company was able to scale up work from home with ease and security. They currently employ 240,000 people of which 90% have migrated and are working from home.
  • The infrastructure for working from remote places was already in place for Infosys. The Company simply had to scale it up and make it effective.
  • About the future of the work environment, he mentioned that people are underestimating the value of building social capital by working together. He explained that remote working has worked for the Company because of the social capital that they built over the years of working together. His sense is that working from home shall continue till we achieve medical milestones in therapeutics and vaccines post which we should look at rebuilding and expanding social capital because that is the glue which has helped to put all of this together.
  • The Company has not yet finalized on the target model for working culture. There are tremendous benefits to work from home or remote working. It creates a lot of flexibility for many employees. The way is to build a model once we are out of this crisis.
  • The IT industry will look at the most effective ways of cutting costs like travel expenses, and onsite expenses. There will be some efficiencies in adopting this model but it is too early to quantify how much per cent will be saved on a permanent basis.
  • He emphasized on the fact that hiring is still an important part of the IT industry. The industry is witnessing technology demand in the digital cloud areas.

Consensus Estimate: (Source: market screener website)

  • The closing price of Infosys Ltd was ₹ 707/- as of 05-June-2020. It traded at 18.9x/ 16.7x/ 15.2x the consensus EPS estimate of ₹3/ 42.3/ 46.3 for FY21E/ FY22E/ FY23E respectively.
  • The consensus target price of ₹ 725/- implies a PE multiple of 17x on FY22E EPS of ₹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.”

By Infosys, IT 0 Comments Read more...
28 May

Need more clarity on the extension of the moratorium: Sanjiv Bajaj, Bajaj Finserv

Update on Indian equity market:

Ahead of the monthly F&O expiry session, the Nifty rallied 3.2% (286 points) largely on the back of banking stocks to close at 9,312.  Within the index, only eight stocks closed lower with SUNPHARMA (-2.0%), ULTRACEMCO (-1.5%) and ZEEL (-1.0%) being the biggest losers. Among the winners, AXISBANK (14.2%), ICICIBANK (8.9%) and WIPRO (7.1%) were the highest gainers. Within the sector indices, PVT BANK (7.5%),  BANK (7.3%) and FIN SERVICES (5.9%) were the highest gainers whereas PHARMA (-0.2%) and MEDIA (-0.1%) were the only sectors that closed in the red.

Excerpts from an interview with Mr Sanjiv Bajaj, MD & CEO, Bajaj Finserv aired on  ET NOW on 27th May 2020:

 

  • This pandemic has put the entire economy in a coma because both the demand as well as the supply side has stopped working. He further mentioned that the country needs to get out of lockdown as soon as possible. 
  • Reserve Bank of India (RBI) has taken significant steps and has been quite proactive in the last few months. There is a need to stimulate the demand side as well to balance the equation. People need to be given the confidence to start spending and buy things sensibly. This is how the economy will get back to its feet.
  • According to him, the extension of moratorium was not necessary. For the first three months, the moratorium was understandable as the economy was frozen. The second three-month moratorium needs to be better calibrated. There are still clarifications that a number of companies including Bajaj Finance (a subsidiary of Bajaj Finserv) are pursuing. He would prefer allowing a one-time restructuring which gives the option to the lender to decide which truly deserve extension rather than a blanket moratorium.

 

  • He sought two more clarifications from the RBI. Is the second three-month moratorium applicable only to pre-Covid loans or is it available to new loans today? If somebody takes a new loan today, does he not have to pay for three months? He said that if the above two conditions are allowed, this creates a disadvantage for the lenders.
  • Speaking about the borrowing profile, he mentioned that the sources of borrowing for Bajaj Finance have been well-distributed. The Company does not have over-dependence on Banks. Second, the Company sources 20% of borrowings from fixed deposits. Third, the company keeps 4-7% of borrowings into liquid assets where returns are 4-5% instead of a 20% RoE. This is to ensure that the book stays solid. 
  • He further mentioned that Bajaj Finance at a consolidated level has liquidity of Rs 210,000 mn. It probably takes away Rs 3,000-4,000 mn of profits every year but it creates a stronger franchise in many ways mimicking what a bank does. 

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

  • The closing price of Bajaj Finserv was Rs 4,249/- as of 27-May-2020. It traded at 1.9x/ 1.7x the consensus Book Value estimate of Rs 2,157/ 2,495 for FY21E/ FY22E respectively.
  • The consensus target price of Rs 6,054/- implies a PB multiple of 2.4x on the FY22E BV estimate of Rs 2,495/- 

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 Bajaj Finserv, NBFC , 0 Comments Read more...
18 May

Banking sector’s exposure to MSMEs at 12-14%- Amitabh Chaudhary, Axis Bank

Update on Indian Equity Market:

Nifty started the day with a sell-off but closed the week flat at 9,136. The only sectors to close in positive today were METAL (1.6%) and FMCG (0.1%) as all other sectoral indices traded lower with MEDIA (-1.8%), REALTY (-1.5%) and PVT BANK (-1.2%) were the biggest losers. Within the index, VEDL (3.9%), BHARTIARTL (2.8%) and BPCL (2.6%) were the highest gainers whereas M&M (-4.6%), ZEEL (-3.6%) and AXISBANK (-3.3%) were the laggards.

Excerpts from an interview with Mr Amitabh Chaudhary, MD & CEO, Axis Bank aired on CNBC TV18 on 14th May 2020:

  • Mr Chaudhary mentioned that the impact of this lockdown is widespread across all industries and no longer restricted to some. It will take more time for economic activities to pick up. IT will continue to remain tough for some period of time.
  • He mentioned that as a result of all this, non-performing liabilities (NPL) will rise. The economy needs support so that people can come back to business quickly and start producing the cash flow so that the NPLs will be lower.
  • He accepted that there is ample liquidity in the system. The challenge is to be able to deploy it effectively. This is resulting in the excess liquidity being parked with the RBI. There is a negative pressure on the net interest margins (NIMs) across the banking system because the cash which has been there is not getting deployed.
  • Government is slowly coming up with new schemes where the deployment of some excess liquidity will start happening. He is confident that this will help the NIMs positively.
  • He stated that if the NPLs rise and if moratorium is not given or some kind of one-time restructuring is not allowed, this will further lead to negative impact on NIMs. Next three to six months will determine the trajectory of the banking
  • Commenting on the fiscal package announced by the Government, Mr Chaudhary said that the Government further needs to provide support to the economy to prevent non-performing loan formation.

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

  • The closing price of Axis Bank was Rs 403/- as of 15-May-2020. It traded at 1.2x/ 1.1x the consensus Book Value estimate of Rs 324/ 363 for FY21E/ FY22E respectively.
  • The consensus target price of Rs 568/- implies a PB multiple of 1.6x on the FY22E BV estimate of Rs 363/-

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 Axis Bank, Bank 0 Comments Read more...
07 May

Less than 15% customers applied for moratorium: Siddhartha Mohanty, LIC Housing

Update on Indian equity market:
Indian markets continued to remain volatile as the Nifty opened lower but managed to close 65 points higher at 9,270. The index traded in a wide range of 9,116-9,346 during market hours. Among the stocks, BAJFINANCE (5.5%), M&M (5.4%) and GAIL (3.9%) led the index higher while INFRATEL (-5.5%), ITC (-5.2%) and COALINDIA (-2.9%) were the laggards. Within the sector indices, FIN SERVICES (2.6%), PVT BANK (2.5%) and BANK (2.2%) were the highest gainers whereas FMCG (-1.9%) and PSU BANK (-0.9%) closed the day lower

Excerpts from an interview with Mr Siddhartha Mohanty, MD & CEO, LIC Housing aired on CNBC
TV18 on 5th May 2020
● He said that RBI has been very supportive as far as liquidity is concerned. The Apex bank has infused sufficient liquidity through TLRTO (Targeted Long Term Repo Operations). The company is in discussion with banks to get that fund at a cheaper rate. This will help the sector as a whole.
● The customer composition of the company is such that regular income group forms more than 76% of the total loan book. Very few people from this segment have applied for a moratorium period.
● The company has received less than 15% of the total clients application for moratorium. Many of them have asked for cancellation of moratorium when they understood that interest payment will have to be made during the moratorium period. It will not affect the cash flow of the company in a big way.
● Cost of Fund for the company is going down. It is difficult to predict the asset quality situation as the moratorium period is currently playing out. The company has launched a new product for those with CIBIL score greater than 800, offering home loans at 7.5%.
● Developer loans consist less than 7% of the total loan book. The book is currently under stress and some developers have asked for a moratorium. This period will help them to equip with the situation and develop some fund flow to repay the loans.
● He expects pick-up in affordable housing sales as the crisis settles down. The demand for luxurious houses will be under pressure for the next few quarters.
Consensus Estimate: (Source: market screener, investing websites) ● The closing price of LIC Housing was Rs 263/- as of 06-May-2020. It traded at 0.7x/ 0.6x the
consensus Book Value estimate of Rs 402/ 454 for FY21E/ FY22E respectively. ● The consensus target price of Rs 395/- implies a PB multiple of 0.9x on the FY22E BV estimate of Rs 454/-
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 Housing Finance, LIC Housing , 0 Comments Read more...
27 Apr

Few customers opting for a moratorium: VP Nandkumar, Manappuram Finance

Update on Indian Equity Market:

After two days of rally, Nifty closed the week 1.7% lower at 9,154. Among the sectoral indices, only PHARMA (1.4%) sector managed to close the day higher whereas all other sectors closed negatively with REALTY (-4.2%), FIN SERVICES (-3.8%) and PSU BANK (-3.7%) being the biggest losers. Within the index, 10 out of 50 stocks managed to close in green led by RELIANCE (4%), BRITANNIA (3.5%) and SUNPHARMA (1.7%) while BAJFINANCE (-8.7%), INFRATEL (-7.9%) and ZEEL (-7.5%) were the laggards

Edited excerpts of an interview with Mr VP Nandkumar, MD & CEO, Manappuram Finance published on CNBC TV18 on 23rd April 2020:

 

  • Mr Nanadkumar said that 85% of the total Assets under Management (AUM) are related to gold loans. In this segment, very few customers have opted for the moratorium given by the company. The collections are happening at a normal rate. The company is able to do collections through different digital payment solutions.
  • In the gold loan business, the company is expecting reasonable growth in the coming few quarters. The reason for this uptick in demand is due to limited avenues available for borrowing due to lockdown. 
  • The company is expecting 10-15% growth in the loan book in the current year. The rise in the gold price is also one of the reasons why there will be demand for gold loans.
  • The company has a loan portfolio of around Rs 50,000 mn to microfinance. This is one-third of the gold loans book. Few customers from the portfolio had asked for the moratorium and the company has allowed the moratorium period. 
  • He mentioned that asset quality is expected to remain stable. With the increasing gold prices, it has become valuable to the customers. It has also led to a lower loan to value ratio. He expects this will help the company maintain its asset quality.

 

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

  • The closing price of Manappuram Finance was Rs 107/- as of 24-April-2020. It traded at 1.6x/ 1.3x/ 1.1x the consensus Book Value estimate of Rs 66.5/ 83.2/ 101 for FY20E/ FY21E/ FY22E respectively.
  • The consensus target price of Rs 182/- implies a PB multiple of 1.8x on the FY22E EPS estimate of Rs 101/- 

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 Gold loan NBFC, Manappuram Finance , 0 Comments Read more...
16 Apr

No need for retrenching employees, call on pay cut will be taken soon: Keki Mistry, CEO of HDFC

Update on Indian equity market:

Indian markets opened on Wednesday higher but erased all the gains towards the end as Nifty closed 69 points lower at 9,196. Among the sectoral indices, six out of 11 indices closed in the red led by FIN SERVICES (-2.8%), BANK (-2.2) and PVT BANK (-2.1%) whereas FMCG (4.2%), REALTY (1.8%) and MEDIA (0.9%) were the highest gainers.  Within the index, KOTAKBANK (-5.7%), HEROMOTOCO (-4.7%) and BAJFINANCE (-4.4%) led the index lower while UPL (8.0%), HINDUNILVR (5.4%) and BRITANNIA (5.2%) closed the day higher.

Edited excerpts of an interview with Mr Keki Mistry, CEO, HDFC published on CNBC TV18 on 14th April 2020:

  • Sharing his views on the announcements made by PM Modi on 14th April, Mr Mistry said that there will be calibrated reopening of the economy. Certain industries which are very critical and necessary for the smooth functioning of the economy might be a part of this calibrated reopening starting from 20th
  • According to him, the critical thing at this point is to ensure that there is enough liquidity in the system.
  • He made a request to the Reserve Bank of India (RBI) to provide funding to the National Housing Bank (NHB), which is 100% owned by the government. Through the NHB, the RBI can provide the funding to Housing Finance Companies and something similar could be done for Non-Banking Financial Companies.
  • According to him, certain sectors of the economy like hospitality, hotels, airlines, real estate have been badly hurt by the crisis. They need some sort of a special stimulus.
  • Commenting on the cost-cutting measures, he said that the salary cost is not a major expense for the company as about 1.5% of the total expenditure for HDFC is spent on salaries.
  • The company currently has 3,500 employees and he believes that there will be no need to look at retrenching employees. Pay cuts are being studied on a day to day basis and the company will come out with something in the coming days.
  • He said that retrenchment and pay cuts could be a problem in certain sectors. However, in the financial sector, retrenchment may not be a major concern.

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

  • The closing price of HDFC was Rs 1,594/- as of 15-April-2020. It traded at 3.2x/ 2.9x/ 2.7x the consensus Book Value estimate of Rs 506/ 544/ 598 for FY20E/ FY21E/ FY22E respectively.
  • The consensus target price of Rs 2,594/- implies a PB multiple of 4.3x on the FY22E BV estimate of Rs 598/-
By HDFC, Housing Finance , 0 Comments Read more...
01 Apr

Managing fixed costs is the foremost challenge- Vinod Aggarwal, MD & CEO, VECV

Update on the Indian Equity Market:

Following its global peers, Indian markets traded higher on Tuesday with Nifty closing 3.8% higher at 8,597. It was a muted day for the corporate news flow as the country is busy controlling the spread of Coronavirus. All the sectoral indices closed the day higher with FMCG (5.8%), METAL (5.2) and PHARMA (4.1%) leading the list. Within the index, BPCL (13.6%), BRITANNIA (8.6%) and GAIL (8.1%) were the highest gainers whereas INDUSINDBK (-15.1%), EICHERMOT (-2.7%) and CIPLA (-2.2%) were the highest losers.

Edited excerpts of an interview with Mr Vinod Aggarwal, MD & CEO, Volvo Eicher Commercial Vehicles, published on CNBC TV18 on 30th March 2020:

  • The Supreme Court has provided relief to the auto manufacturers by allowing the sale of BS-IV inventory for 10 days after the lockdown ends. Earlier, the last registration date for BS-IV compliant vehicles was 31st March 2020.
  • Mr Aggarwal said that the management was not expecting any relief regarding BS-IV vehicles. The biggest concern for the manufacturers is regarding registration of vehicles which have been sold. He highlighted that because of lockdown, the customers still haven’t got the registration number for the purchased vehicles and the stock is large. This is a major challenge for the CV industry and for Volvo Eicher Commercial Vehicles (VECV).
  • He said that the sales which were earlier under negotiation or finalization have been cancelled. This along with lockdown is impacting the auto industry as well as the company.
  • He highlighted that the lockdown has created cash management problem. The challenge for the company is to manage the fixed costs in the immediate future. The company has 12,000 to 15,000 employees on its payroll as well as there are other fixed expenses like rents, minimum charges for power and other security expenses for the plant.
  • He further mentioned that the second challenge is going to be the setup time to get back to the normal operations. Whenever the lockdown is opened up, the supply chain would be impacted and how fast they are able to come back has to be seen. Most of the workmen or the people who have been working on the line have migrated back to their villages. To get them back to work is going to be a very big challenge. It means that whenever the lockdown is over, it will take some time for the life to come back to normal.

Consensus Estimate: (Source: market screener website)

  • The closing price of Eicher Motors was ₹ 12,973/- as of 31-March-2020. It traded at 17x/ 16x/ 13x the consensus EPS estimate of ₹ 762/ 815/ 974/- for FY20E/ FY21E/ FY22E respectively.
  • The consensus target price of ₹ 20,030/- implies a PE multiple of 21x on the FY22E EPS estimate of ₹ 974/-
By Eicher Motors 0 Comments Read more...
23 Mar

Maruti Suzuki readies strategy to deal with coronavirus impact: CV Raman, Maruti Suzuki

Update on the Indian Equity Market:

Markets bounced back strongly to end a highly volatile week and Nifty closed 5.6% higher at 8,284. During the current week, Nifty traded in the range of 7,833 – 9,602, that’s a lot to digest for the investors! Out of fifty stocks from the index, 8 stocks traded above 10% and 31 stocks traded above 5%. ONGC (17.9%), GAIL (15.4%) and INFRATEL (14.9%) were the highest gainers. Five stocks among the index closed lower with INDUSINDBK (-1.4%), HDFCBANK (-1.3%) and ADANIPORTS (-1.1%) were the biggest losers. All the sectoral indices, FMCG (8.8%), IT (8.5%) and METAL (7.7%) led the gains. None of the sectors ended the day in the red.

Excerpts from an interview with Mr CV Raman, Executive Director, Maruti Suzuki published in CNBC TV-18 on 17th March 2020:

  • As Coronavirus is spreading fast across the world, Maruti Suzuki is working on two-pronged strategy to minimize the impact of the pandemic.
  • He said that officials at the company are assessing the impact of the pandemic on sales. The company has started focusing more on digital marketing and delivery of cars from service centres directly to customers. He mentioned that automakers have already reported a 15 per cent de-growth in FY20.
  • About the measures taken to curb the virus, he said that the company has issued advisories to its employees and suppliers. He added that the company is reducing physical contact by doing meetings through video conferencing and reducing visits of suppliers to Maruti’s offices.
  • While several automobile manufacturers have expressed concern about the impact of the disease on supply chains from China and South Korea, Raman said Maruti was in a position to manage supply chains well. He said that most of the tier-1 suppliers are in India and the company is able to get the supplies as per production requirements.
  • The Federation of Automobile Dealers have moved the court seeking a grace period for sell and registration of BS-IV vehicles after March 31 as dealers are saddled with inventory and coronavirus has impacted sales. Individual companies are also considering moving court to seek an extension. He said that for Maruti which began executing its BS-VI transition a year back does not need any intervention at this stage.
  • Introduction of BS-VI standards are set to make diesel vehicles significantly more expensive. Considering the cost implications, the company has stopped production of diesel cars for the moment but hasn’t ruled out a higher capacity diesel engine in future. The company currently has CNG variants in seven models and planning to increase the range of CNG offerings this year.
  • He refused to comment on future products but said that Maruti would be actively participating in the growing SUV segment.

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

  • The closing price of Maruti Suzuki was ₹ 5,094/- as of 17-March-2020.  It traded at 25x/ 20x/ 16x the consensus EPS estimate of ₹ 202/ 255/ 314 for FY20E/ FY21E/ FY22E respectively.
  • Consensus average target price for Maruti Suzuki is ₹ 7,246/- which implies a PE multiple of 23x on FY22E EPS of ₹ 314/- .
By Maruti Suzuki 0 Comments Read more...
12 Mar

Deposit figures shot up since the announcement of Yes Bank moratorium: Romesh Sobti, IndusInd Bank

Update on the Indian Equity Market:

Markets seesawed the entire session after a one day break as Nifty closed marginally lower at 10,448. The increasing number of virus infections in the country has created uncertainty over the near term outlook for companies as many states are rushing to close public places to control the spread of the virus. Among the Nifty 50 stocks, YESBANK (36.7%), ZEEL (7.5%) and INFRATEL (6.6%) were the highest gainers whereas GAIL (-10.2%), TATASTEEL (-7.8%) and TATAMOTORS (-6.9%) were the top losers. Within the sectoral indices, MEDIA (1.7%), PVT BANK (0.4%) and FIN SERVICES (0.2%) were few of the gainers while PSU BANK (-3.9%), REALTY (-2.7%) and METAL (-2.1%) were the top losers.

Excerpts from an interview with Mr Romesh Sobti, MD & CEO, IndusInd Bank published in CNBC TV-18 on 9th March 2020:

  • IndusInd Bank has deferred its plans to raise funds through additional tier-1 (AT 1) bonds after a write-down in the AT1 bonds of Yes Bank under the restructuring plan. The bank’s board meeting that was scheduled for 9th March 2020 has also been deferred.  On this development, Mr Sobti said that the bank does not need capital on an urgent basis. He believes that the bank still has got enough fuel in the tank for the next 2 years for loan growth.
  • He said that the capital adequacy ratio of the bank is well beyond 15 percent and another 1 percent to come in from the residual preference share allotment to the promoters as a consequence of the Bharat Financial Inclusion merger.
  • He further said that they did not defer capital raising due to fear around AT1 bonds. The bank decided to defer the meeting as there is a lot of dust flying around the Yes Bank issue and IndusInd bank is still above the threshold level where the board is comfortable.
  • On the write-off of AT1 bonds, he said that the last word is not yet out on the fate of the bonds. He is waiting for the final resolution plan before concluding his remarks.
  • When asked about the Yes Bank fiasco, he said that the moratorium is a standard process that happens whenever this sort of restructuring or merger takes place. He said that the moratorium is going to be lifted sooner than later in the coming 30 days period.
  • Commenting on the behaviour of depositors since Yes Bank moratorium was announced, he said that the deposit figures of IndusInd have shot up since the announcement. As a result, the bank is carrying a huge amount of excess liquidity.
  • When asked if they would be interested in buying 5 percent stake in Yes Bank if they were approached by SBI, Sobti said that it is a very attractive proposition under current valuations.

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

  • The closing price of IndusInd Bank was ₹ 845/- as of 11-March-2020.  It traded at 1.6x/ 1.4x/ 1.2x the consensus book value estimate of ₹ 514/ 613/ 728 for FY20E/ FY21E/ FY22E respectively.
  • The consensus target price for IndusInd Bank is ₹ 1,660/- which implies a PB multiple of 2.3x on FY22E BV of ₹ 728/-.
By Bank, IndusInd Bank , , 0 Comments Read more...
02 Mar

Demand intact amid high gold prices and Coronavirus: Mr S. Subramaniam,Titan

Update on the Indian Equity Market:

Amid rising concerns over Coronavirus becoming a pandemic, major global indices witnessed heavy selling with markets falling in the range of 2.5- 4.5%. India was no exception to this as the Nifty fell 420 points (-3.6%) to close at 11,202. FIIs continued to be net sellers as they sold Rs 30,648mn on Friday. The depth of weakness in Friday’s market was such that 39 out of 50 stocks in the index fell more than 2% with VEDL (-12.8%), TATAMOTORS (-10.9%) and M&M (-8.0%) being the biggest losers. Only two stocks in the index, MARUTI (0.2%) and IOC (0.1%) survived the day on the positive side. All the sectoral indices fell in the range of -2.4% (FMCG) to -7.3% (METAL) with -5.3% (IT) and MEDIA (-4.9%) being the other two biggest losers.

Excerpts from an interview with Mr S. Subramaniam, CFO- Titan, published in CNBC TV-18 on 27th February 2020.

  • Gold prices in India have hit record high levels as investors tried to shift from risky asset classes to safe assets. Mr Subramaniam said that he is not sure if there is any major impact on consumption due to the increase in gold prices and Coronavirus.
  • About Coronavirus, he said that the impact on the business due to the virus is extremely remote or small. Although the company relies on some supplies for watches from China, as of now the stock situation is not deteriorating.
  • The increase in the price of gold has not affected the demand for the company. He cited two possible reasons for this; first, people are now looking at gold as something which will be going up over time and second, there’s wedding season going on in the country.
  • In January, he gave guidance for the revenue growth around 11-13% for the quarter. He reiterated the target again in the interview as he is confident of achieving the target.
  • He talked about the demand situation in the current market. It is quite expensive to buy gold at these elevated prices. At the same time, because of issues like Coronavirus and microeconomic global situation, people may start looking at gold as an investment. As a result, there may be a pick-up in demand on the back of ETF gold coins rather than the jewellery side. Jewellery is still driven by festivals and customary requirements.
  • In the eyewear and watch business, the demand situation was not bad in January. It is still low but not as bad as it was in December. He expects a reasonable quarter for both these segments. He stated that the demand situation is possibly at the bottom and the company might witness improvement in the future.

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

  • The closing price of Titan was ₹ 1,254/- as of 28-February-2020.  It traded at 70x/ 55x/ 46x the consensus earnings estimate of ₹ 18.0/ 23.0/ 27.5 for FY20E/ FY21E/ FY22E respectively.
  • The consensus target price for Titan is ₹ 1276/- which implies a PE multiple of 46x on FY22E EPS of ₹ 27.5/- .
By FMCG, Titan , 0 Comments Read more...