Author - Sharvari Joshi

09 Aug

Expect 50% revenue growth on back of consolidation of new acquisitions – Rossari Biotech

Update on the Indian Equity Market:

On Monday, NIFTY closed up at 16,258 (+0.1%). Top gainers in NIFTY50 were M&M (+2.2%), Tech M (+1.9%), and Axis Bank (+1.9%). The top losers were Tata consumer (-1.9%), Coal India (-1.8%), and Adani Ports (-1.7%). The top sectoral gainers were MEDIA (+1.1%), PVT BANK (+0.7%) and BANK (+0.6%) and sectoral losers were METAL (-1.9%), PSU BANK (-1.6%), and REALTY (-0.7%).
Excerpts of an interview with Mr. Edward Menezes, Executive Chairman, Rossari Biotech (ROSSARI) with CNBC TV18 dated 9th August 2021:

  • The specialty chemicals company reported a strong set of earnings for the June-ended quarter with good growth both on a year-on-year (YoY) and quarter-on-quarter (QoQ) basis.
  • They have done almost three acquisitions in the last two months – Unitop Chemicals, Tristar Intermediates, and Romakk Chemicals.
  • In FY22, they expect 50 percent growth in their revenues over FY21 as they will be able to consolidate the revenues from these acquisitions. In FY23, they expect their revenues will double over FY22 revenues.
  • The coming quarter looks challenging. The price increase pass on is inevitable as the entire pipeline of old raw material stock is almost dry for all the players. The trend continues to be upwards. Therefore, they are focusing more on asset turnover.
  • Their R&D has been working continuously to find alternatives to raw materials to fight a huge raw material price increase.
  • The highest gross margin vertical is animal health and nutrition. The second being the home, personal care, and performance chemicals (HPPC) followed by textile specialty chemicals and it’s their cash cow.
  • Textile specialty is shaping very well due to pent-up demand. They don’t have to make substantial investments in animal nutrition as well, so good growth opportunities there too.
  • The company might have to take more price hikes to ensure stability in margins.
  • He shared that the logistics and freight costs have gone up substantially and the raw material price volatility has been unprecedented as well.
  • He believes that there is a high growth possibility in the animal nutrition business. He also mentioned that the company has plans to enter the aqua and cattle market as well.
  • They have a small business in pet care that has suffered due to pandemic but has a very high growth prospect.

Asset Multiplier comments:

  • The demand environment for specialty chemicals will be favorable, with volume uptick across industries led by rising domestic consumption.
  • The challenge will be to manage raw materials cost-efficiently to protect margins.
  • China +1 strategy will be a beneficial factor to drive growth for these companies as the China+1 strategy is the key catalyst for global firms to turn towards India.

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

  • The closing price of ROSSARI was ₹ 1,371/- as of 9-August-2021. It traded at 70x/ 57x the consensus earnings estimate of ₹ 19.7/ 24.0 for FY22E/23E respectively.
  • The consensus price target is ₹ 1,270/- which trades at 53x the earnings estimate for FY23E of ₹ 24.0/-

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.”

By Chemicals, Rossari Biotech 0 Comments Read more...
29 Jul

Over 50% of slippages from the MSME sector: Canara Bank

Update on the Indian Equity Market:

On Thursday, NIFTY closed at 15,779 (+0.4%). Top gainers in NIFTY50 were Hindalco (+10.1%), Tata Steel (+6.8%), and SBI (+4.1%). The top losers were Maruti (-2.3%), Power Grid (-2.1%), and Bajaj Auto (-1.6%). The top sectoral gainers were METAL (+5.0%), PSU BANK (+3.2%), and REALTY (+1.6%) and the sectoral losers were FMCG (-1.0%), AUTO (-0.4%), and PHARMA (-0.3%).

Excerpts of an interview with Mr LV Prabhakar, MD, Canara Bank (CANBK) with ET Now dated 28th July 2021:

  • As far as slippages are concerned, they had given the guidance earlier in the quarter that their slippages will be around Rs 40bn. They worked on those lines.
  • As far as the retail is concerned, their NPA is only 1.5%. One thing is timely assistance to these people, retail as well as MSME, and the second one is restructuring also helped a lot in assessing these people, at the same time controlling the NPAs.
  • Out of Rs 42.5 bn slippages, about 55% to 58% is from MSME and 18% to 20% is it from retail. The rest is from other sectors.
  • The lockdown led to the closure of business and cash flows were not there for MSME borrowers, as well as other people. It was a challenge in the month of April and May.
  • In June, their collection efficiency increased to 91%. RBI resolution framework has helped a lot in assessing these people and in controlling the NPAs by restructuring the loans, wherever it is required.
  • The best part of this restructuring, as far as their bank is concerned, is under MSME. They have restructured about Rs 33 bn and retail about Rs 76 bn and the total amount are over Rs 132 bn.
  • After restructuring the people have started paying the instalments and already out of this, they have recovered about Rs 640 bn, out of which Rs 350 mn is an advance payment.
  • They are going to have about 12% of their share in the equity and they are working on the accounts which can be transferred to this ARC with the approval of the board.
  • In the last five quarters, every quarter, QoQ, the bank is strengthening the balance sheet. They are controlling the expenses. They are increasing the fee-based income because of which today their operating profit is at Rs 57 bn YoY; there is a growth of 34%.
  • As far as loan book is concerned, corporate is about 45% and in the next couple of quarters, they do not see any stress as far as infrastructure and NBFC accounts are concerned because accounts have already passed through the stage. Now they are out of that impact of COVID.
  • As far as provisions are concerned, as of date, all the accounts are amply provided. The provision coverage ratio is 81.18%. The bank is in a better position today compared to one year earlier when the provision coverage ratio was only 70%.
  • Bank feels that subsidiaries have a lot of potentials and going forward this potential is going to increase significantly.
  • Canara Bank stands 6th among 44 banks in the digital banking area. Going forward they are encouraging their customers to do more and more transactions through digital mode and they are encouraging their staff to handhold the customers to use the digital mode. Especially mobile banking, internet banking and also the debit cards and the credit cards to a larger extent, in which they have achieved significant success.

Asset Multiplier comments:

  • The future of banking will be driven by major technological changes and will keep transforming. 
  • The future of banking is ‘Digital’.  since most banks have already undergone their digital transformation, it will help in further stabilizing the Indian Banks.

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

  • The closing price of CANBK was ₹ 150/- as of 29-July-2021.  It traded at 0.5x/ 0.4x/ 0.4x the consensus book value of ₹ 319/ 347/ 426 for FY22E/23E/24E respectively.
  • The consensus price target is ₹ 160/- which trades at 0.4x the book value for FY24E of ₹ 426/-

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

 

By Bank, Canara Bank 0 Comments Read more...
25 Jul

This Week in a nutshell (July 19th to July 23rd)

Technical Talks

NIFTY opened the week on 19th July at 15,754 and closed on 23rd July at 15,851, it made a small weekly gain of 0.6%. The index is trading below its upper Bollinger band level of 15,952, which might act as a resistance. On the downside, 20 DMA of 15,788 might act as a support. The index might trade in the range of the above-mentioned levels before making a strong move on either side.

Weekly highlights

  • After two sessions of losses and Wednesday being a holiday, the Market recovered for the last 2 days of the week as Nifty ended below 15,900, led by gains in most of the sectoral indices including Realty, Bank, Pvt bank, etc.
  • Among the sectoral indices, NIFTY Private Bank was the top loser (-2.26%) this week followed by Nifty Auto (-2.18%) and NIFTY IT was the top gainer (+1.68%) as most of the IT companies came up with strong numbers and positive outlook. 
  • The Nifty Private Banks sector was impacted by the result of HDFC Bank where the earnings growth in the June quarter was the lowest seen in many years. The disruption caused by the second wave of COVID-19 impacted profitability as the bank shored up provisions. HDFC Bank was down by 5.2% this week. On monthly basis, the defensive sectors are again at the forefront. Pharma and IT are up by 4.5% and 2.9% respectively.
  • Zomato made a stellar debut on bourses on Friday, listing at Rs 116 apiece on the NSE, garnering a 53 percent premium over its issue price of Rs 76 per share. The valuation of the company soared to Rs 910 bn.
  • India continued to attract strong foreign direct investment inflows in the first two months of FY22.  Gross FDI inflows more than doubled to $18.3 billion in April-May this year compared to $8.5 billion in the same period a year ago, according to RBI data. Nearly a third of the inflows are in the form of acquisition of shares rather than investing in new projects.
  • Oil prices trimmed gains on Friday but were poised to end the week largely steady after rebounding from a sharp drop, underpinned by expectations supply will remain tight as demand recovers. Brent crude futures fell 7 cents, or 0.1%, to $73.72 a barrel at 0147 GMT, after jumping 2.2% on Thursday. For the week, Brent was headed for a 0.1% gain.
  • Foreign Institutional Investors (FIIs) continued to be net sellers in Indian equity of Rs 54,460 mn, and the quantum of outflows increased from the previous week of Rs 15,350 mn. Conversely, Domestic Institutional Investors (DIIs) continued to be net buyers with an increased net outflow of Rs 50,520 mn vs the previous week’s Rs 12,000 mn. 

                                                                       Things to watch out

  • With results season picking up, quarterly numbers are to be watched out.
  • With Covid third wave concerns hovering around, government restrictions & policies regarding full or partial lockdowns are to be watched out for.
By #WeekInANutshell 0 Comments Read more...
13 Jul

Confident of delivering 16-18% CC revenue growth in FY22 – Vaibhav Global

Update on the Indian Equity Market:

On Tuesday, NIFTY closed up at 15,805 (+0.7%). Top gainers in NIFTY50 were ICICI Bank (+2.7%), HDFC (+2.6%), and Grasim (+2.6%). The top losers were Adani Ports (-2.0%), Dr Reddy (-1.1%), and HCLT (-0.9%). The top sectoral gainers were FIN SERVICES (+1.4%), PVT BANK (+1.3%) and BANK (+1.2%) and sectoral losers were MEDIA (-0.6%), IT (-0.3%) and FMCG (-0.2%).

Excerpts of an interview with Mr Vineet Ganeriwala, Group CFO, Vaibhav Global (VAIBHAVGBL) with ET Now dated 12th July 2021

  • In FY21, they grew their unique customer base by about 39% and reached the half-million mark. A part of it was induced by the pandemic. A lot of people were at home and there was high TV viewership and heightened web traffic throughout last year.
  • Their business model is such that it works in all kinds of economic cycles. They have been working on it, expanding their product portfolios, and are getting good traction by retaining old customers and getting new customers on board.
  • When the economies open up, some softening might be seen in certain periods but they are pretty confident of delivering their guidance to the market which is 16% to 18% constant currency revenue growth for FY22.
  • They are an omnichannel player. They sell via TV as well as the web. They are present in marketplaces like Amazon, eBay, etc. They use all kinds of social platforms — Facebook, Instagram, etc. This unique positioning gives a fantastic shopping experience to their customers, a high recall value, and the value positioning which they command.
  • Talking about the TV viewership, he said pay-TV may see a decline in the next few years. The decline in TV viewership of their customer demographics (above 45-50 years) is very low.
  • While the pay-TV decline is seen in the US, at the same time, over the air (OTA) moves are growing. From 13 million homes, maybe seven years back now the OTA which is free-to-air homes in the US has already crossed 20 million. They are constantly increasing their presence there.
  • In the new age stream of OTT, they are consciously investing and are increasing their presence there as well. They recently revamped their Roku app and tied it up with YouTube. They are present in almost all prominent digital, OTT, and streaming devices.
  • While they gave guidance of 16-18% constant currency growth in FY22, they gave guidance of 15-17% for the medium and long term as well.
  • While they will keep working on increasing their market share in the US and the UK, the B2C revenue has been growing at a CAGR of 16% for the last six years. Still, they have a market share of about 2.5-3%. Even in these two geographies, they are pretty confident of increasing the market share there.
  • They announced their German company in January this year. Their team is physically there in Germany already. Their website is already launched in Germany. TV is already live in their partner studio. Their studio which is under construction will be live in a few days. They are pretty excited about the German venture.
  • Part of the growth will come from the US and the UK; part of the growth will come from newer geographies like Germany. Once they stabilize and operationalize the German operation, they would look into other geographies like Japan.
  • They will keep the cash on the balance sheet. They want to build a kitty for the future, both organic and inorganic opportunities. They plan to invest about US$2 million of capex in rolling out the German business this year and similar other organic opportunities for plans as well. Otherwise, they will look at any inorganic opportunities which come their way.
  • Their inventory in terms of holding number days has been going down in the last 2-3 years. in March-20, they had about $60 million of inventory. In terms of the number of days of sales gone down by about 20% year-on-year. While the absolute number might have increased slightly, the sales growth has been much faster.
  • Being a regional supply chain player, in case of any transit delays, they are able to procure material from other countries and even procure locally from the US and the UK. To that extent, their operations are very smooth and they do not see any challenge on that front.
  • As a result of a delay some transient inventory would shoot up in the 2QFY22 but that would be a timing difference. As soon as the shipment situation improves, they will bring that down like they did last year.

Asset Multiplier comments:

  • We believe that the company has good growth prospects due to its presence in different geographies. Also, presence in both B2B and B2C will drive the growth faster.
  • consumer attention is constantly shifting. So, their omnichannel presence strengthens their positioning in the industry.

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

  • The closing price of VAIBHAVGBL was ₹ 813/- as of 13-July-2021. It is trading at 54x FY21 EPS of Rs 15.
  • Consensus estimates are not available for VAIBHAVGBL.

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 Miscellaneous, Vaibhav Global 0 Comments Read more...
05 Jul

Rural India outlook positive on good rabi procurement, cash flow – M&M

Update on the Indian Equity Market:

On Monday, NIFTY closed up at 15,834 (+0.7%). Top gainers in NIFTY50 were Hindalco (+3.8%), ONGC (+2.4%), and SBI (+2.2%). The top losers were Tech M (-1.6%), HDFC Life (-1.4%), and BPCL (-0.6%). The top sectoral gainers were REALTY (+2.7%), METAL (+1.2%) and PVT BANK (1.1%) and sectoral losers were IT (-0.2%) and PHARMA (-0.01%).

Excerpts of an interview with Mr. Hemant Sikka, President of Farm Equipment Sector, M&M (M&M) with CNBC-TV18 dated 2nd July 2021

  • In the month of June 21, the total tractor sales went up 32 per cent, exports jumped over 90 per cent and the market share rose to 42.5 per cent. The company is optimistic about tractor demand in the coming months. The farm sector equipment industry has grown by 19 per cent in June and M&M has outperformed showing 32 per cent growth.
  • The rural outlook looks bright as demand has increased in June. Overall, the rabi procurement has gone around very well. Cash flow in the rural heartland is very positive.
  • With the second wave of COVID subsiding, confidence is coming back. It was a play of two factors, clearly, a little bit of pent-up demand and also some fresh demand coming in that is why June has played out so well for the industry overall.
  • They are getting into a very high base in Q2, Q3, and Q4 FY21 so they will wait for July and August, see how the monsoon pans out, and then maybe at the beginning of September, they will be able to revise the guidance.
  • Overall guidance remains the same and they will try to maintain their usual high & healthy margins.
  • In June, pent-up demand was there due to lockdowns in April & May but there was a little bit of fresh demand as well. The tractor industry has been on the roll and if the monsoon progresses well then the industry will be able to perform much better.
  • None of the players has a very high inventory. M&M also has a very reasonable inventory. In fact, they have reduced inventory in Q1, so production will be running at full capacity.
  • Automakers have raised prices in recent times with most citing increased output costs as a reason. M&M plans to gradually do so.
  • They have taken their latest price increase on July 1. They have taken a 3 per cent price increase. Before that on April 1 and January 1, they had taken the previous 2 price increases. Another increase might be there in 2HFY22.
  • Some of the states have come back as far as supply is concerned like Maharashtra, all the suppliers are running at 100% capacity. In Karnataka, Bangalore, suppliers are running at 50-60% capacity.
  • Overall, they are looking at positive sentiment from the Rural side.

Asset Multiplier comments:

  • Due to positive sentiment building up in rural India, we expect the tractor industry to perform very well.
  • Overall waiting time has increased due to semiconductor shortage but there has been a good demand for their newly launched models (XUV, Thar, bolero).

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

  • The closing price of M&M was ₹ 791/- as of 05-July-2021.  It traded at 20x/ 17x the consensus earnings estimate of ₹ 38.8/ 45.5 for FY22E/23E respectively.
  • The consensus price target is ₹ 947/- which trades at 21x the earnings estimate for FY23E of ₹ 45.5/-

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.”

 

By Auto, Mahindra & Mahindra 0 Comments Read more...
24 Jun

Inquiries and booking coming back as more states are unlocking- Maruti Suzuki

Update on the Indian Equity Market:

On Thursday, NIFTY closed up at 15,790 (+0.6%). Top gainers in NIFTY50 were Infy (+3.5%), TCS (+3.3%), and JSW Steel (+2.2%). The top losers were Reliance (-2.6%), IOC (-1.3%), and Coal India (-1.1%). The top sectoral gainers were IT (+2.8%), PVT BANK (+0.8%) and BANK (0.7%) and sectoral losers were PSU BANK (-1.4%), MEDIA (-1.1%), and REALTY (-0.8%).
Excerpts of an interview with Mr. Shashank Srivastava, ED, Maruti Suzuki (MARUTI) with ET Now dated 22nd June 2021

  • Car is a discretionary product. It is a very large-item product; it is probably the second-largest purchase people make in their lifetime in India. As a result, future demand depends on the economy in general — the per capita income growth and the sentiment.
  • Per capita income growth is expected around 10% as RBI had indicated, lower than the budget figure which was indicated around 14% or so. After the second wave, there has been a lowering down of expectations of economic growth.
  • The rural sentiment is a little more negative at this time of the year compared with last year. The fundamentals of the economy in the rural area are still strong. There can be a good bounce back.
  • OEMs are a little apprehensive of making forward projections at this time because of all this uncertainty. People are talking of a third wave. Unless the sentiment related to Covid becomes negative, there can still be a bounce back.
  • Inquiry levels are getting better. Last week’s levels were almost similar to what they had at the beginning of April. That is pretty good.
  • Closure of outlets, because of weekend lockdowns or whatever, naturally causes a dip. Having said that, inquiries and bookings seem to be coming back as more and more states are unlocking.
  • Cost of running and fuel efficiency are important criteria for the Indian buyer. There are substantial savings if you use CNG. Besides, the availability of CNG now is also much better. They have had good traction on that front.
  • A couple of years back, they were making about 100-1,000 CNG cars a year. In FY21 they did something like 1,58,000-1,60,000. This year they are projecting sales of almost 2,50,000 for CNG.
  • The percentage of electric vehicles being sold in India as well as globally is still very small. The primary reason for it is that the cost of acquisition of electric vehicles is extremely high, largely because the battery costs are very high. There is also the distance-per-charge limitation.
  • Cheaper technology is currently not available, which is one of the basic hindrances to the progress of EVs. The other major factor is the lack of charging infrastructure.
  • In hatchbacks their market share is 65-66%, in sedans almost 50%, in PVs segment, they are more than 60% now, and in vans, they are 90-95%. The one area which seems to be a weak area for them seems to be SUVs.
  • There too, in the entry-level, they are sitting pretty with the Brezza, the number one model there in the entry-level SUV segment.
  • In the mid-SUV segment where competition has the Seltos and the Creta, they have the S Cross. Their numbers are not so great yet. They are quite conscious of this fact and they are watching this SUV segment very closely.
  • After April’s plant shut down owing to the oxygen issue, they restarted production on May 17. They brought forward the maintenance shutdown from June to May. Since the restart, they have been ramping up rapidly. Their utilization is pretty strong at the moment.
  • About semiconductors, there is a global shortage. Maruti has been able to manage production well largely because they have the advantage of a large portfolio — different vehicles using different levels of semiconductors.
  • If semiconductors are not available of a particular type in a particular variant, they then go and produce more of the other. They are just hoping that the situation will normalize in a while.

Asset Multiplier comments:

  • There has been a good bounce back in volumes for auto companies in 4QFY21 and volume data is showing good recovery.
  • In a post-COVID-19 environment, the entry-level hatchback segment, national scrappage policy, and new launches are expected to drive sales.
  • The Indian electric vehicle (EV) market also might see positive movement in 2021-2022.

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

  • The closing price of MARUTI was ₹ 7,531/- as of 24-June-2021.  It traded at 35x/ 27x the consensus earnings estimate of ₹ 214/ 284 for FY22E/23E respectively.
  • The consensus price target is ₹ 6,367/- which trades at 22x the earnings estimate for FY23E of ₹ 284/-

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 Auto, Maruti Suzuki 0 Comments Read more...
16 Jun

Normalized revenue growth could have been around 15% in 4QFY21- JK Paper

Update on the Indian Equity Market:

On Wednesday, NIFTY closed at 15,767 (-0.6%). Top gainers in NIFTY50 were Tata Consumer (+2.1%), Nestle (+1.5%), and ONGC (+1.1%). The top losers were Adani ports (-7.9%), Tata Steel (-2.9%), and Hindalco (-2.8%). The top sectoral gainers were FMCG (+0.5%) and IT (+0.2%) and sectoral losers were METAL (-2.8%), REALTY (-1.2%), and MEDIA (-1.1%).

Excerpts of an interview with Mr. AS Mehta, President & Director, JK Paper (JKPAPER) with CNBC TV18 dated 14th June 2021

  • Sales were impacted for 10 days in 4QFY21. Normalized revenue growth in 4QFY21 could have been around 15 percent.
  • In 4QFY21, the Sirpur plant volume was close to 70 percent of its capacity, which was not there in the 4QFY20.
  • Going forward the full impact of this new high-efficiency boiler for the company is likely to be in the range of Rs 300-350 mn on an annualized basis.
  • The pulp prices at some point of time crossed US$ 800 per tonne, but that is not a sustainable pulp price level. The pulp prices are currently in the same band of US$ 780-800 per tonne and it may continue for some more time.
  • There is no way that the pulp prices can remain in the current band. It can only sustain for a short period. Sustainable prices could be close to US$ 600 plus-minus US$ 20-30.
  • There is no direct connection between global pulp prices and local paper prices. Local paper prices are impacted due to the demand and supply scenario.
  • Post the first covid wave, paper prices dropped by ~18-20% but it revived after demand recovery.
  • Gujarat project is close to Rs 20 bn expansion project. In this project, they are putting up a new board machine & pulp mill. The projected date for completion was April or May but it was delayed due to covid. They are likely to start the trial and the final commission may happen in July. Both the additions will be on stream by the end of 2QFY21.
  • If the situation remains normal, there could be an increase in revenue. There might be some impact but overall performance should be good.

Asset Multiplier comments:

  • The Paper industry was one of the worst-hit due to lockdowns in CY20 and 1HCY21. Now that the lockdowns have been eased, offices have started operating at capacity.
  • Though in-person classes are shut, with online schools and colleges restarting, there will be demand for paper products from students. Hence, there could be a revival in the paper industry.

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

  •  The closing price of JKPAPER was ₹ 175/- as of 16-June-2021. It traded at 5x/ 4x the consensus earnings estimate of ₹ 32.0/ 45.8 for FY22E/23E respectively.
  • The consensus price target is ₹ 225/- which trades at 5x the earnings estimate for FY23E of ₹ 45.8/-

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 JK Paper 0 Comments Read more...
07 Jun

Optimistic about a sequential pick-up in supply chain stability- Cummins India

Update on the Indian Equity Market:

On Wednesday, NIFTY closed at 15,752 (+0.5%). Top gainers in NIFTY50 were Adani Ports (+5.3%), Power Grid (+5.0%), and NTPC (+4.2%). The top losers were Bajaj Finance (-4.5%), Bajaj Finserv (-2.9%), and HDFC (-1.2%). The top sectoral gainers were MEDIA (+1.2%), IT (+1.1%), and PVT BANK (+0.9%) and sectoral losers were METAL (-0.4%), REALTY (-0.3%), and FIN SERVICES (-0.2%).
Excerpts of an interview with Mr. Ajay Patil, CFO, Cummins India (CUMMINSIND) with CNBC TV18 dated 7th June 2021

  • It has been a good quarter for Cummins with double-digit revenue growth and also margin expansion.
  • Pent-up demand and a pick-up in execution aided growth for Cummins India in the March quarter.
  • From the early part of July onwards, they are optimistic about a sequential pick up in the supply chain stability, as the pace of vaccination is picking up along with shutdown getting relaxed progressively.
  • The impact of the second wave of COVID-19 has been widespread. Even before the second wave, the supply chain was impacted as a result of disruption on the logistics side and supply chain constraints on electronics and semiconductor parts.
  • Their portfolio is also shifting to electronic engines and the use of semiconductor components is increasing on the engine side.
  • End-markets do have a substantial need for semiconductors and electronics.
  • There is a bit of cyclicality to their exports, and Q4 has been about the rebalancing of inventory levels. There is a supply constraint that is impacting the business more than demand, for both domestic as well as export markets.
  • Export outlook for the sector is improving with vaccination increasing & infections decreasing.
  • There will be an impact on margins of increasing input costs. They are trying to optimize their costs in the best possible manner.

Asset Multiplier comments:

  • The power electronics market holds substantial growth potential for companies that are able to leverage the opportunities offered by the electric vehicle sector.
  • Increasing commodity prices have been impacting the margins for this industry so the overall outlook remains uncertain.

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

  • The closing price of CUMMINDIND was ₹ 813/- as of 7th June 2021.  It traded at 32x/ 28x the consensus earnings estimate of ₹ 25.6/ 29.5 for FY22E/23E respectively.
  • The consensus price target is ₹ 753/- which trades at 26x the earnings estimate for FY23E of ₹ 29.5/-

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.”

 

By Cummins 0 Comments Read more...
03 Jun

Margin pressure in the next couple of months- Siemens

Update on the Indian Equity Market:
On Wednesday, NIFTY closed at 15,690 (+0.7%). Top gainers in NIFTY50 were Titan (+6.8%), ONGC (+5.0%), and Eicher Motors (+3.4%). The top losers were IndusInd Bank (-3.1%), Wipro (-0.7%), and Dr Reddy (-0.6%). The top sectoral gainers were REALTY (+3.8%), MEDIA (+1.6%), and FIN SERVICES(+0.9%), and the only sectoral loser was PHARMA (-0.3%).

Excerpts of an interview with Mr Sunil Mathur, CEO, Siemens (SIEMENS) with ET Now dated 3 rd June 2021

● They opened the factory and offices cautiously. But that was just for a short period of about two months time, and then the second wave really came in.
● The second wave has been much more intense compared to the last year. It did have an impact on operations initially, but that started somewhere toward the mid part of March and went well into April and May as well.
● They had sporadic cases of COVID in factories, but the management of the factory was able to juggle those capacities. Though the health and safety of the employees come first, they were able to keep the manufacturing activities running.
● There has been very little impact on their manufacturing and their employees have gotten used to working from home. That really helped in keeping the business moving in the January-March quarter.
● They saw pent-up demand getting released from July-20 onwards and that went on until December. But they were very pleasantly surprised by the speed of the turnaround.
● Post-December, the January to March quarter was very good with both private, as well as government capex, kicking off. That got a lot of interest in digital projects and automation.
● There has been a slowdown in long-term projects; primarily infrastructure projects in their transmission generation and distribution side.
● Some of the old capex has not really panned out and they are waiting for that to happen before they start ordering fresh. So, things in the states and with government spending actually did slow down.
● There was a lot of concern from international customers about whether they would be able to meet their export commitments. The last few months have really helped and export demand continues there.
● They are hopeful about the increase in demand and the recent announcements of stimulus made by the US and a couple of other countries as well. So, they do believe this is the right time to focus on exports as well.
● Commodity prices have gone up and transport costs have gone up substantially, between 20% to 40%. It is very difficult to offset those prices or cost increases with other cost-saving measures. Some foreign exchange gains helped offset that, but to a large extent, commodity prices are continuing to be high.
● The shortage of semiconductors has caused a major increase in material costs and Mr Mathur believes the shortage may go on for a longer period. That is impacting both the demand side with both, the automotive and FMCG companies being hit.
● He thinks that there will be margin pressure in general in the next couple of months. They will have to wait and see how long the commodity prices continue to be at the level at which they currently are.

Asset Multiplier comments:

● The number of infrastructural projects related to commercial and residential buildings is increasing in India, owing to factors such as population growth and support from government bodies. That will be the main growth driver for this industry.
● Significant investments in the distribution sector by the government will drive the demand for transmission and distribution equipment, which will drive the electrical equipment market growth.

Consensus Estimate: (Source: market screener and investing.com websites)
● The closing price of SIEMENS was ₹ 2,143/- as of 3-June-2021. It traded at 55x/ 48x the consensus earnings estimate of ₹ 39.0/ 44.8 for FY22E/23E respectively.
● The consensus price target is ₹ 1,799/- which trades at 40x the earnings estimate for FY23E of ₹ 44.8/-

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.

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22 May

This week in a nutshell (May 17th to May 21st)

Technical Talks

NIFTY opened the week on 17th May at 14,756 and closed on 21st May at 15,175. It made a weekly gain of 3%. The index is trading above its 10DMA of 14,913 which might act as a support. RSI 14 (60) and MACD turning upwards suggests a possible rally going ahead.

Weekly highlights

  • India on Thursday cut sugar export subsidies by 31.4% for the current season which ends on Sept 30th Higher sugar exports from India, also the world’s biggest consumer of the sweetener, will cut back large inventories at home and prop up domestic prices, which will help the country’s money-losing mills.
  • New investment projects announced by private sector during the previous financial year fell by 68% on account of the Covid-19 pandemic. The announced projects, which represent an intention to invest, amounted to Rs 5,180 bn in FY21, the lowest since 2004-05 and down from the Rs 16,280 bn announced in FY20.
  • India Inc’s investment abroad in the April-21 jumped by more than two times YoY to $2.51 billion, data from the Reserve Bank showed.
  • The US Labor Department reported initial jobless claims fell to 444,000 in the week ended May 15. That was lower than the prior week’s 478,000 claims and economists’ forecasts for 460,000 new filings. This led the Wall Street higher.
  • Gold is at the highest price in more than four months. Its claimed virtual rival, Bitcoin, steadied after a volatile cryptocurrency slump this week.
  • Foreign Institutional Investors (FIIs) were net sellers in Indian equity of Rs 17,540 mn, against net selling of Rs 36,199 mn in the previous week. Domestic Institutional Investors (DIIs) were net buyers of Rs 13,180 mn, against last week’s selling of Rs 18,170 mn.

                                                                       Things to watch out

  • India reported 2.59 lakh new COVID-19 cases on Friday, the lowest daily count in one month. Declining covid cases and hope of lockdown being lifted by June/July in metro cities might lead the Indian market sentiment going forward.
  • As the 4QFY21 result season is going on, companies’ results will be the key thing to watch out for.

 

 

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