Author - Aniket Khanolkar

Demand for casual wear is consistent – Bata India

Update on the Indian Equity Market:
On Thursday Nifty closed 0.35% lower at 11,896. Among the sectoral indices NIFTY Media (+0.7%), Metal (+0.7%), and Realty (+0.4%) closed higher. Pharma (-0.9%), IT (-0.7%), and Private Bank (-0.7%) closed lower. Hero Motocorp (-3.03%), Indusind Bank (-2.99%), and ICICI Bank (-1.62%) closed on a negative note. NTPC (+4.1%), Tata Motor (+3.1%), and Bharti Airtel (+2.9%) were among the top gainers.

Excerpts from an interview of Mr. Sandeep Kataria, CEO, Bata with CNBC-TV18 dated 20th October 2020:

● Speaking about demand, Mr. Kataria said things are much better as compared to the past 3-4 months.

● There is a pick up of demand MoM. The company expects to reach normal levels with the festive season coming in.
● Speaking about stores, he said almost all the stores are opened except a few isolated ones.

● People are getting back to the office. Delhi and Gurugram are the cities where traffic is visible.
● Demand for casual wear is consistent and washable slippers.

● Q1 was weak for the company as well as the industry. He expects that the company will reach pre-covid levels towards the end of the festive season.

● Speaking about stores, the company had negotiations with landlords which was helpful. The push of the franchise store in towns below 5 lakh population is showing a good trend and there are a lot of enquires.

● The biggest cost is rentals for the company and the company is taking measures to reduce it.

● The administration and travel costs are also looked closely.

● The company has a strong balance sheet and remain cash positive, there is no worry on that front.

● On post- covid scenario, he said the company is already working on E-commerce and the focus will continue.

● He said tier 2,3 towns are showing a quick bounce back as compared to urban.

Consensus Estimate: (Source: market screener and Investing.com websites)
● The closing price of Bata was ₹ 1,362 as of 22-October-2020. It traded at 182x/ 46x/ 38x the consensus Earnings per share estimate of ₹ 7.5/29.8/35.9 for FY21E/ FY22E/ FY23E respectively.
● The consensus average target price for Bata is ₹ 1293/- which implies a PE multiple of 36x on FY23E EPS of ₹35.9/-.

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.”

Replacement Market has played well- CEAT

Update on the Indian Equity Market:
On Wednesday Nifty closed 0.3% higher at 11,917. Among the sectoral indices, Fin Services (+2.0%), Bank (+1.6%), and Private Bank (+1.5%) closed higher. IT (-1.3%), Pharma (-0.7%), and Auto (-0.3%) closed lower. Wipro (-7.1%), NTPC (-4.1%), and ONGC (-3.1%) closed on a negative note. Bajaj Finserv (+4.1%), SBILIFE (+3.4%), and Bajaj Finance (+2.8%) were among the top gainers.

Excerpts from an interview of Mr. Anant Goenka, MD & CEO, CEAT Ltd with ET NOW dated 12th October 2020:

● The demand for tyres has picked up faster than expectations.
● They operate in 3 markets- Replacement, Auto players, and Export.
● The replacement market has played very well and it leads the way, OEM’s has recently seen a pick up from August and September and reached pre-covid levels. The Export segment has also seen gradual growth.
● Amongst vehicle categories, the two-wheeler and tractor industry is showing the strongest demand followed by the passenger car segment.
● The Commercial Vehicle OEM segment has yet to show growth. The demand is slow over there.
● The rural sector has also shown a very strong demand for the company.
● The company is very well positioned at this point in time and had set up a fair amount of capacity.
● The company’s capacity is well utilized.
● The company had set a new facility in Nagpur for 2 Wheelers and the PV car facility in Chennai, and Truck facility in Halol is now ramping up. The company has invested around Rs 3,000 crore.
● The last six months were about managing supplies.
● Things are much clear for the company up to December, January onwards will have to see how things will pan out.
● The company is planning to reduce its cost by Rs 1000 mn.
● Speaking on the manufacturing front, he said India is in a strong position in the Auto Space. Within Type space, the industry is capable of manufacturing all kinds of tyres.
● On Export opportunities, he said the market has shown a linear growth. It is one big area where the Industry can take advantage of the current situation.
● The company is planning to de-risk the exposure towards China by focusing to have at least one domestic supplier for key raw materials.
Consensus Estimate: (Source: market screener and Investing.com websites)
● The closing price of CEAT was ₹ 1,004/- as of 14-October-2020. It traded at 22x/ 15x/ 13x the consensus Earnings per share estimate of ₹ 46.6/65.5/79.0 for FY21E/ FY22E/ FY23E respectively.
● The consensus average target price for CEAT is ₹ 967/- which implies a PE multiple of 12x on FY23E EPS of ₹79.0/-.
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.”

70% rise in footfalls in Q2 – Muthoot Finance

Update on the Indian Equity Market:
On Monday Nifty closed 0.8% higher at 11,503. Among the sectoral indices IT (+3.5%), Metal (+2.6%), and Pharma(+1.7%) closed higher. Fin Services (-0.2%), Media (-0.2%), and PSU Bank (-0.1%) closed lower. Bajaj Finserv (-2.79%), Shree Cement (-2.8%), and Bharti Airtel (-2.0%) closed on a negative note. TCS (+7.6%), Wipro (+7.0%), and Tata Steel (+4.9%) were among the top gainers.
70% rise in footfalls in Q2 – Muthoot Finance
Excerpts from an interview of Mr.George Alexander Muthoot, MD, Muthoot Finance with CNBC-TV18 dated 1st October 2020:
● There is an increase in average daily footfall. The increase is by 70% as compared to Q1.
● Q2 is much better as more customers are coming to the branch as lockdown is lifted and travel is becoming possible.
● Customer transactions are also increasing. There is a 40% increase in customer transactions.
● There is a 10% increase in online transactions. Q1 also saw a rise in online transactions. The company did 3mn transactions in Q1.
● Muthoot Finance has started a new loan scheme with a free COVID-19 insurance policy.
● This scheme was started late in Q2 and in the southern branches. The company offered 46k COVID-19 policies to customers free of cost.
● The customers have a small ticket size. The average loan size is Rs 50,000.
● The company expects Q2 to be much better as there is a new loan disbursal as well.
● The company continues to maintain the guidance of 15% growth in the gold loans.
● On the home loans business, he said there was no new lending in Q1 and Q2. The company will start new lending going ahead. The recovery is 85-90% in the home loan business.
● People who took moratorium earlier have not utilized it fully and already paid installments.
● The customers are coming back for payments but the company will start lending in Q3 and Q4.
● On the change in LTV for banks, he said there is always a high competition in the gold loan sector. There is no decrease in business for the company.
Consensus Estimate: (Source: market screener website)
● The closing price of Muthoot Finance was ₹ 1,164/- as of 04-October-2020. It traded at 3.2x/ 2.6x/ 2.3x the consensus Book value per share estimate of ₹ 363/445/510 for FY21E/ FY22E/ FY23E respectively.
● The consensus average target price for Muthoot Finance is ₹ 1,300/- which implies a Pb multiple of 2.4 times on FY23E BVPS of ₹ 510/-.
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.”

Not faced a lot of Covid-19 claims- HDFC Life

Update on the Indian Equity Market:
On Wednesday Nifty closed 0.2% lower at 11,132. Among the sectoral indices Media (-2.4%), Pharma (-1.6%), and PSU Bank (-1.5%) closed lower. Realty (+0.79%), PVT Bank (+0.2%), and Bank (+0.2%) closed higher. Infratel (-8.3%), Bharti Airtel (-8.2%), and Tata Steel (-3.5%) closed on a negative note. Axis Bank (+2.4%), Coal India (+2.4%), and GAIL (+1.7%) were among the top gainers.

Excerpts from an interview of Mrs. Vibha Padalkar, MD and CEO, HDFC Life with ET dated 21th September 2020:

● Speaking about the coronavirus pandemic, she said the life insurance in India has grown in a particular way led by savings-based products.
● The pandemic is a penny drop movement for life insurance, especially for term products.
● The Chinese insurers have over 50% share of term protection while for India on a weighted premium basis it is in single digits. This could change with the pandemic and definitely a pull can be seen.
● The market segment is largely the middle class. The target is to focus on all. In a job loss and salary cut scenario, the company is suggesting that people get some cover.
● The average ticket size has fallen to 75% than pre-pandemic, there is a definite pull towards getting insured.
● People are spending less on discretionary and as more people gain awareness on having life insurance, the penetration will also improve.
● The endowment plan gives topline, and other products contribute to the bottom line. Protection, if done sensibly, is a highly profitable business.
● Three protection policies need to be sold to match the premium that a single endowment product brings. Therefore, the company has to balance the mix.
● Products like riders and annuity are also good to have for building strong bottom lines.
● HDFC life has not faced a lot of COVID-19 claims. The company has settled 235 claims since March with the sum at risk at about 22 crore and very much in line actuarial funds.
● Some studies have shown that the overall deaths, in general, have gone down. This could be because of reduced accidents which to an extent has had a neutralizing effect on the impact of coronavirus.
● Last year, the company launched a guarantee backed product that caught customer’s attention. Over 60% of the business in that quarter was through that product. However, now the company has brought it down to 25%. There is constant monitoring of the segment and the reprising of new policies according to interest rates. Then there is asset backing as well where the company writes against long-dated government paper which provides the hedge.
● On LIC listing, she said, the biggest impact is that it would bring transparency. When listed companies make disclosures it’s not just on accounting profits but also on long term profit emergence and value creation.
● The listing of LIC is of utmost importance as it’s the largest financial institution in the country.
● On the demand for Investment-linked products, she said there is a balanced product mix and the company likes Unit Linked Investment Products (ULIPs) to be at 25% of the mix. The company is able to sell enough to maintain it but for companies having a 60-70% mix could struggle.
● Speaking on the effects of automation on agents, she says, it goes hand in hand. There is an India, and, there is a Bharat. There are young people adept at doing their own research to purchase online while there are older people who like assistance and hand-holding.
Banca partners are targeting branch walk-ins, the financial advisors are getting savvy with digital to push digital through existing channels.

Consensus Estimate: (Source: market screener website)
● The closing price of HDFC Life was ₹ 580/- as of 23-September-2020. It traded at 81x/ 73x/ 71x the consensus Earnings per share estimate of ₹ 7.10/7.94/8.14 for FY21E/ FY22E/ FY23E respectively.
● The consensus average target price for HDFC Life is ₹ 615/- which implies a PE multiple of 75x on FY23E EPS of ₹8.14/-.
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.”

Industry to see a spike in NPA’s in Q3 – Sundaram Finance

Update on the Indian Equity Market:
On Monday Nifty closed 0.2% lower at 11,440. Among the sectoral indices Bank (-1.8%), PVT Bank (-1.5%), and FIN Services (-1.7%) closed lower. IT (+4.4%), Realty (+3.7%), and Media (+1.5%) closed higher. Bharti Airtel (-3.8%), Bajaj Finance (-3.2%), and BPCL (-3.2%) closed on a Negative note. HCL Tech (+10.6%), TCS (+4.9%), and Wipro (+4.5%) were among the top gainers.

Excerpts from an interview of Mr. TT Srinivasaraghavan, MD, Sundaram Finance with ET NOW dated 14th September 2020:

• Mr Srinivasaraghavan said the situation is better and the negativism has started to lift.
• The company continues to focus on prudence and in terms of protecting asset quality.
• The moratorium has ended 10 days ago and now the company is moving into real world.
• He says, the next 4 months ending December are going to be curtail from an asset quality portfolio preservation perspective.
• The growth is coming back is selected few segments, the disbursals in August 20 were 70% of August 19 and September20 is looking similar side or little more.
• The rural and infrastructure segments are showing signs of growth.
• For Commercial Vehicles the first 5 months was a no show and an estimate of the company says that some growth will be seen in Q4FY21E.
• Given current situation he said the current portfolio will be skewed away from Medium and Heavy commercial vehicles.
• The company is well capitalized and there is no need to raise capital.
• On the NPA front, he said that it’s too early to spot a trend but people have started to repay and collections have started to flow in.
• He says, In Q3 the industry will see a spike in NPA’s.
Consensus Estimate: (Source: market screener and Investing.com websites)
• The closing price of Sundaram Finance was ₹ 1,335/- as of 14-September-2020. It traded at 28x/ 19x/ 21x the consensus Earnings per share estimate of ₹ 47.8/70.5/63.5 for FY21E/ FY22E/ FY23E respectively.

• The consensus average target price for Sundaram Finance is ₹ 1,423/- which implies a PE multiple of 22x on FY23E EPS of ₹63.5/-.
Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

Plants running at 100% capacity- M&M

Update on the Indian Equity Market:
On Thursday Nifty closed -0.1% lower at 11,527. Among the sectoral indices Bank (-1.4%), PVT Bank (-1.4%), FIN Services (-1.0%) closed lower. IT (+1.50%), Pharma (+0.9%) and FMCG (+0.8%) closed higher. ICICI Bank (-2.1%), Bharti Airtel (-1.9%) and Axis Bank (-1.9%) closed on a Negative note. Infratel (+10.9%), GRASIM (+7.2%) and Titan (+5.9%) were among the top gainers.
Excerpts from an interview of Mr. Hemant Sikka, President Farm Equipment Sector, M&M with CNBC-TV18 dated 2nd September 2020:
• Tractor sales were up 65% YoY, M&M remains positive because of good harvest and bountiful monsoon.
• The production started from mid-May and now plants are running at 100% capacity.
• The demand is robust throughout the country. The kharif sowing is going well which gives a confidence to farmers.
• The domestic market grew by 69% in August 20.
• On Finance, the availability is better compare to 3-4 months back. Initially finance was an issue as offices were not open, it was difficult for people to reach offices.
• The improvement in financing is seen from middle of June. The collection is also good as farmers have a better cash flow.
• Mr. Sikka said that for the next 3 months the company is expecting a full blast of production.
• The stock is at historic low levels.
• The challenges on supply side had eased out. All suppliers have ramped up their production.
• A good festive season is expected as supply chains are coming back on track and all factories running.
Consensus Estimate: (Source: market screener and Investing.com websites)
• The closing price of M&M was ₹ 642/- as of 03-September-2020. It traded at 25x/ 18x/ 16x the consensus Earnings per share estimate of ₹ 26.1/35.7/41.1 for FY21E/ FY22E/ FY23E respectively.
• The consensus average target price for M&M is ₹ 585/- which implies a PE multiple of 14x on FY23E EPS of ₹41.1/-.
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.”

Revenues badly affected as theatres are closed – PVR

Update on the Indian Equity Market:
On Tuesday Nifty closed 0.05% higher at 11472. Among the sectoral indices, PSU Bank (+1.3%), Bank (+1.1%), and Financial Services (+0.9%) closed higher. Realty (-2.1%), Metal (-0.7%), and Pharma (-0.6%) sectors closed lower. Tata Motors (+5.3%), Bajaj Finance (+4.8%), and SBI (+3.4%) closed on a positive note. GAIL (-1.7%), NTPC (-1.5%), and Sun Pharma (-1.4%) were among the top losers.

Excerpts from an interview of Mr. Ajay Bijli, CMD, PVR with ET Now dated 24th August 2020:
• Revenues are badly affected as theatres are closed. Theatres were asked first to close down and now it will be one of the last few activities to be allowed to resume.

• Cinemas have closed down all over the world, but a lot of help was also given by the governments in various countries. But here in India the sector didn’t get any support.

• PVR is ready to resume its operations. The people of India have always loved to go out and watch films.

• Mr Bijli thinks five to six months of being deprived will not change people old habit of decade.

• In some malls of Delhi, footfall is already back to 90% of pre-covid level during weekends despite no cinema.
• OTT platform is a concern for PVR but in a country like India with 1500 films releasing, if 10-20 movies have gone in shutdown, it is fine.

• The company will focus on 3 buckets – rescue, revival and reinvention.

• As a rescue plan, PVR did rights issue. The company will focus on cost cutting and manage developer related issues. Revival will happen when the government gives permission to open and with new SOPs being ready comes reinvention mode.

• Survey suggest that youngsters are eager to come back.

• The company will continue with expansion. If there was no shut down, PVR would have done 100 screens last fiscal, but finished with 88 the company got licenses for the rest of the 12. Once the restrictions are lifted there will be opening of 15-20 new screens.

• The Mumbai drive in theater was on cards from a long period of time, the core business is cinemas and drive in model is yet to be tested.

Consensus Estimate: (Source: market screener website)
• The closing price of PVR was ₹ 1,324/- as of 25-August-2020. It traded at NM/ 38x/28x the consensus Earnings per share estimate of ₹ -80.9/35.3/47.5 for FY21E/ FY22E/FY23E respectively. (NM- Not Meaningful)
• The consensus average target price for PVR is ₹ 1,314/- which implies a PE multiple of 28x on FY23E EPS of ₹ 47.5/-
Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

85% of stores are open – Bata India

Update on the Indian Equity Market:
On Friday, Nifty closed 1.1% lower at 11,178. Among the sectoral indices PSU banks (-2.3%), Auto (-2.6%) and Bank (-2.3%) closed lower. Pharma (+1.4%) and Metal (+1.1%) closed on a positive side. Eicher Motors (-7.2%), Tata Motors (-4.8%) and M&M (-3.3%) closed on a negative note. JSW Steel (+2.6%), Coal India (+2.3%), and Sun Pharma (+2.0%) were among the top gainers.

Excerpts from an interview of Mr. Ashwani Windlass, Chairman, Bata India with Business Line on 13th August 2020:

• The market place is still uncertain. There are intermittent lockdowns happening and the pandemic is surging in different places.

• Consumers are still not going out as they use to go before and that puts a question in terms of demand.

• Categories like sports, chappals, sandals and casuals are more popular and are moving faster, as opposed to formal footwear.
• This behaviour is also justifiable with the current scenario as there are not many social gatherings and people are not going to offices.

• The company is responding to the trends through offerings in stores and also on digital campaigns.

• Markets are opening up but the footfall is less. Factories are also working with staff limitations.

• Key metros like Delhi, Mumbai, Chennai are showing positivity.

• The company is hopeful that after the current ‘End of Season’ sale, some demand will be back in festival season

• Tier-I towns in India, including metros, are more congested, and they witnessed a different level of surge first. Now, the spread is into tier-II or tier-III towns. For example, the tier-II towns in Karnataka and Kerala were doing well before the surge happened there.

• The impact in smaller cities will not be as much as what it is in the metros that has the bulk of the demand.
• At this moment, Bata is supplying what customer wants.

• On new store openings, Bata adds 50 retail outlets which are company-owned and at least 50 which are franchisee-owned in a normal year. However, this year the company will focus on cash conservation and look for franchisees.

Consensus Estimate: (Source: market screener & Investing.com websites)
• The closing price of Bata India was ₹ 1,234/- as of 14-August-2020. It traded at 218x/40x/34X the consensus earnings per share estimate of ₹ 5.6/30.5/35.9 for FY21E/FY22E/FY23E respectively.
• The consensus average target price for Bata India Ltd is ₹ 1,296/- which implies a PE multiple of 36x on FY23E EPS of ₹ 35.9/-.

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.”

Covid19 Tests will become a part of company’s portfolio – Dr Lal Path Labs

Update on the Indian Equity Market:

On Wednesday, Nifty closed 0.06% higher at 11,102. Among the sectoral indices Metal (+4.0%), Auto (+1.8%) and Media (+1.1%) closed higher. Pharma (-0.5%), Fin services (-0.2%) and PSU Banks (-0.2%) closed on a negative side. Hindalco (+9.1%), Tata Steel (+6.7%) and Eicher Motor (+4.4%) closed on a positive note. UPL (-1.5%), HDF Life (-1.5%), and Wipro (-1.0%) were among the top losers.

Excerpts from an interview of Mr. Om Manchanda, MD, Dr Lal Path Labs with ET Now on 3rd August 2020:

  • The business was impacted in the months of April and May due to lockdown restrictions. It restricted the movement of samples to various cities.
  • The movement of patients was also impacted due to lockdown. There was a steep fall in walk-in customers.
  • The company also witness a sharp fall in OPD.
  • Recovery started in late part of May as lockdown restrictions started to get lifted.
  • They witnessed a sharp recovery in June but the trends are early as there may be pent up demand coming up.
  • The company witnessed some gains as competitors were not able to serve some markets.
  • On impact of covid on diagnostic space, Mr. Manchanda said the government has built capacity in the recent past and 60% of business is coming from the government side. The company will be working in a supporting role to the governments.
  • Tests for Covid-19 will become a part of company’s portfolio, but the trend line is not yet clear.
  • Q1 was a bad quarter for the company, non covid business had shown recovery in June. Company expects that the growth will come back in later part of the year by Q3FY21E.
  • Business related to covid is a new business for the company.
  • Historically the company had grown organically. The model is urban based.
  • The company picks up a geography and tries to cater all diagnostic needs in that area.
  • Mr Manchanda said the company is neither a wellness company nor a diagnostic company but a full-service model.
  • There are close to 215 labs as of now.

Consensus Estimate: (Source: market screener website)

  • The closing price of Dr Lal Path Labs was ₹ 1,850/- as of 5-August-2020.  It traded at 71x/50x/44X the consensus earnings per share estimate of ₹ 25.9/37/42 for FY21E/FY22E/FY23E respectively.
  • The consensus average target price for Dr Lal Path Labs is ₹ 1,769/- which implies a PE multiple of 42x on FY23E EPS of ₹ 42/-.

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.”

 

Export strategy worked out – Jindal Steel & Power Limited (JSPL)

Update on the Indian Equity Market:

On Monday Nifty closed 0.6% lower at 11,132. Among the sectoral indices PVT Bank (-3.6%), Bank (-3.6%) and PSU Bank (-3.1%) closed lower. IT (+2.0%) and Metal (+0.3%) closed on a positive side. Asian Paints (3.5%), HCL Tech (+3.1%) and Infosys (+2.6%) closed on a positive note. ICICI Bank (-6.0%), ZEEL (-4.0%), and HDFC Bank (-3.5%) were among the top losers.

Excerpts from an interview of Mr. V.R Sharma, MD, JSPL with ET Now on 23rd July 2020:

  • The quarter one of the current financial year was very challenging, as the entire nation was under lockdown.
  • The company charted out policies and switched from domestic market to export market.
  • It took sleepless nights to adapt to new polices and because of that, the company could reach to 1.67 metric tons production.
  • While the industry was down by 50% in terms of volumes, JSPL could increase production by 8% which led to 12% sales growth quarter on quarter. The strategy worked out very well.
  • In the quarter, EBITDA increased from Rs 10,600 a ton to Rs 11,700 a ton, an increase of about Rs 1,100.
  • Economies of scale, reduction in cooking coal and iron ore prices led to higher EBITDA. The company also managed to keep a control on overall costs.
  • JSPL could do a sale of exports in April for 2,48,000 tons; in May, it was 4,01,000 tons and in June it was 2,50,000 tons. In July the company is planning to bring it down to 2,00,000 tons, and the target for August is also 2,00,000 tons. So, on a monthly basis, dependence on exports would be only 30% and 70%. The company will focus back to sell in the domestic market because the market is picking up and a lot of new projects are coming and that is a good sign.
  • The power business was also challenging because power consumptions in the country was very low, industries were closed, offices were closed, no malls, no shopping centers were working. However, the company managed to maintain and EBITDA of Rs 368 crore.
  • The coal prices have come down. Coal India is very pragmatic and it is working on a right price strategy from 84 paisa per megawatt, now they have come down to 52-53 paisa per MW. The prices will come down further and it should be somewhere about 40 to 42 paisa. Once these numbers are achieved, hopefully JSPL will be in a position to maintain the profitability as well as the overall EBITDA level.
  • The company is expecting an EBITDA of more than Rs 500 crore in Q3, as the sale of power has increased and there is a flexibility now in iExchange.
  • The company has reduced debt by Rs 1,562 crore. Initially, the plan was a Rs 5,000 crore reduction but now the company is sure debt can be reduced by Rs 6,000.
  • The company aims to reach aim is to reach at Rs 15,000 crore debt by 2023 from current level of 29,000 crore with an EBITDA of about Rs 12,000 crore.

Consensus Estimate: (Source: market screener)

  • The closing price of JSPL was ₹ 176/- as of 27-July-2020.  It traded at 82x/16x the consensus earnings per share estimate of ₹ 2.15/11.0 for FY21E/ FY22E respectively.
  • The consensus average target price for JSPL is ₹231/- which implies a PE multiple of 21x on FY22E EPS of ₹ 11/-.

 

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.”