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Footfalls improving every month– Phoenix Mills

Update on the Indian Equity Market:

On Thursday, Nifty closed 1.3% lower at 12,772. Within NIFTY50, POWERGRID (+2.6%), ITC (+2.2%), and NTPC (+1.7%) were the top gainers, while SBIN (-5.0%), ICICIBANK (-4.2%), and AXISBANK (-4.1%) were the top losing stocks. Among the sectoral indices, FMCG (+0.4%), and MEDIA (+0.3%) were the only gainerswhilePSU BANK (-3.1%), BANK (-2.9%), and PRIVATE BANK (-2.6%) were the toplosing sectors.

Footfalls improving every month– Phoenix Mills

Excerpts of an interview with Mr. Shishir Shrivastava, MD, Phoenix Mills, aired on CNBC-TV19 on 18thNovember 2020
● Average footfalls for October and November have reached 55%. Footfalls were higher in the first 2 weeks of November. Consumption, especially in the first 2 weeks of November has been 104% of last year. This means that conversion rates have gone up, i.e more people entering the mall are actually buying/consuming.
● 2QFY21 revenue was down 48% YoY as retail stores and hotels were not operational. But Phoenix Mills is seeing very good pick up now. Management expects FY21 to end at 58% of FY20’s rental income.
● Phoenix Mills has concluded negotiations with bank partners and have absolute visibility on how cash flows will pan out.
● Any discounts and waivers given by Phoenix Mills for the period of shutdown and the period after unlocking will end by the close of FY21. FY22 rentals will be close to what was recorded in FY20.
● When malls opened in August, footfalls were 25% which has increased to 55% now. So the trend is encouraging. People are being careful leading to still subdued footfalls. Phoenix Mills are also regulating the people density in their properties.
● Every month footfalls are improving 25-30%. Management hopes that they should be close to 75-80% of footfalls by 4QFY21. That being said, the important metric of consumption is tracking very well.
● All of Phoenix Mills’ expansion projects are well underway. They opened a new 1 mn sq ft. mall in Lucknow in July 2020 which is performing well. There are some delays on account of shortage of manpower but they are largely on track with expansion projects.
● Under construction projects of Phoenix Mills were funded by equity and there was no draw down of debt- which continues.
● Phoenix Mills have lease rental discounted debt on the operational assets. The moratorium has helped and now as cash flows are improving, management has visibility that they will be able to service all debt obligations by 3QFY21. This also includes amounts to be paid for deferment of moratorium.
● Phoenix Mills has around Rs 45,000 mn gross debt, and aroundRs 18,500mn cash on book. As free cash flow keeps improving, net debt levels can come down further.

Consensus Estimate (Source: market screener website)
● The closing price of PHOENIXLTD was ₹ 645/- as of 19-November-2020. It traded at 215x/ 33 x/ 25x the consensus EPS estimate of ₹ 3.0/19.8/26.2 for FY21E/ FY22E/ FY23E respectively.
● The consensus target price of ₹ 732/- implies a PE multiple of 28x on FY23E EPS of ₹26.2/-.

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

OMC’s have asked for an increase in trade margins- Mahanagar Gas

Update on the Indian Equity Market:
On Wednesday Nifty closed 0.5% higher at 12,860. Among the sectoral indices, PSU Banks (+3.6%), Auto (+3.1%), and Realty (+2.1%) closed higher. FMCG (-1.1%), IT (-0.8%), and Pharma (-0.7%) closed lower. BPCL (-2.9%), HUL (-2.0%), and Dr Reddy (-1.7%) closed on a negative note. M&M (+10.4%), Tata Motors (+9.5%), and Bajaj Finserv (+6.5%) were among the top gainers.

Excerpts from an interview of Mr. Deepak Sawant, Deputy MD, Mahanagar Gas with CNBC-TV18 dated 17th November 2020:

● Margins have increased led by a drop in the purchase prices of gas. Domestic gas is around 75-80% of total sales.
● There is an improvement seen in the maintenance cost and other expenditures.
● On volumes and execution, he said the volume was 2.1 mmscmd in Q2FY21.
● In Q3 and Q4 the company will cross 3 mmscmd but on an overall FY21 basis we will be at ~2.5 mmscmd.
● Oil marketing companies have asked for a hike in dealer commission. The OMC’s have asked for double of earlier trade margins. The company has created a contingent liability every year as per the formula.
● The capex plan for FY21E is around Rs 550cr. The company is planning 1.5 times of FY21E capex in FY22 because of future opportunities.
● The volume growth in Q3 & Q4 will be 10% higher YoY.
● The company has reached 100% of the previous year’s volumes and CNG volumes still at 90% as of the date of the interview, so volume growth has come from other sectors.
● In the last 6 months, there were around 40,000 vehicles converted in the city of Mumbai to CNG which amounts to 10% of CNG volumes.

Consensus Estimate: (Source: market screener and Investing.com websites)
● The closing price of Mahanagar Gas was ₹ 906 as of 18-November-2020. It traded at 15x/ 12x/ 11x the consensus Earnings per share estimate of ₹ 59.4/78.6/84.8 for FY21E/ FY22E/ FY23E respectively.
● e consensus average target price for Mahanagar Gas is ₹ 1,119/- which implies a PE multiple of 13x on FY23E EPS of 84.8/-.

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.”

Revenue growth across segments expected to continue– Laurus Labs

Update on the Indian Equity Market:

On Monday, Nifty closed 0.2% higher at 11,669. Within NIFTY50, INDUSINDBK (+6.5%), ICICIBANK (+6.0%), and AXISBANK (+6.0%) were the top gainers, while RELIANCE (-8.7%), DIVISLAB (-2.8%), and EICHERMOT (-2.5%) were the top losing stocks. Among the sectoral indices, PRIVATE BANK (+4.2%), BANK (+4.2%) and FINANCIAL SERVICES (+3.9%) were the top gainerswhileIT (-0.9%), PHARMA (-0.6%), and AUTO (-0.3%) were the top losing sectors.

Revenue growth across segments expected to continue– Laurus Labs

Excerpts of an interview with Mr. Satyanarayana Chava, Founder & CEO, Laurus Labs, aired on CNBC-TV19 on 30th October 2020:
● In 2QFY21, LAURUSLAB’s revenue growth came from all three divisions and management expects that trend to continue.
● Management has very good visibility of revenue growth going forward.
● Management also expects to maintaingross margins and EBITDA margin. The EBITDA margin is expected to be maintained within the 1HFY21 band of 29%-33%. However, Management refrained from giving any numerical guidance.
● LAURUSLAB’s net debt as of 30th September 2020 is Rs 20,000 mn. Management does not want to bring down the net debt beyond this level as there is a large capacity expansion plan on cards.
● Based on the revenue visibility and order book level, investment in additional capacity is required. Over the next 24 months, management expects a capital outlay of Rs 12,000 to 15,000 mn. The capacity expansion will be done using internal accruals and no external funds will be raised.
● LAURUSLABS has an annualized net debt to equity ratio of 0.85x so they are not highly leveraged. So,the decision to not reduce the net debt levels will not hurt the company.
● Recently the rules have been relaxed in the production linked incentives (PLI) scheme for Active Pharmaceutical Ingredients (APIs), drug intermediaries, and medical devices. LAURUSLABS has some products where they could get benefit from the modified norms of the PLI scheme, but it will not be very significant.

Consensus Estimate (Source: market screener website)
● The closing price of LAURUSLABS was ₹ 301/- as of 2-November-2020. It traded at 18.1x/ 20.6 x/ 13.1x the consensus EPS estimate of ₹ 16.6/14.6/22.9 for FY21E/ FY22E/ FY23E respectively.
● The consensus target price of ₹ 309/- implies a PE multiple of 13.5x on FY23E EPS of ₹22.9/-.

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.”

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.”

Demand will not be affected due to peak prices – HPCL

Update on the Indian Equity Market:

Markets started the week on optimism as Nifty closed the day 1.5% higher at 10,764. The optimism was such that within the Nifty index, 40 out of 50 stocks ended in green. The top gainers for Nifty 50 were M&M (+7.4%), BAJFINANCE (+6.5%) and HINDALO (+5.7%) while the losing stocks for the day BAJAJAUTO (-1.1%), GAIL (-1.0%) and BHARTIARTL (-0.9%). Ten out of 11 sectors ended the day in green led by REALTY (3.0%), AUTO (2.9%) and METAL (2.5%) while PHARMA (-0.6%) was the only sector in the red zone.

Edited excerpts of an interview with Mr M K Surana, Managing Director and Chairman, Hindustan Petroleum Corporation Ltd. (HPCL); dated 6th July 2020 from CNBC TV-18:

  • Sales during the current quarter were 88% of the last year’s same quarter. As construction and industrial activities pick-up, the company expects to reach hundred percent of last year’s sales figure in the coming quarters.
  • He mentioned that the demand for fuel is not expected to get affected due to peak prices. This is because the price elasticity is not profound in India due to the nature of the requirement. 
  • The current situation has made people opt for personal vehicles for commuting. People are buying vehicles irrespective of the price of fuel for safety reasons. He expects this trend to continue in the coming months as well. 
  • About the marketing margins, he mentioned that the rise in price of petrol and diesel is in line with global markets. Whenever the price of raw material rises, it hurts the margins of the company as the base becomes larger. 
  • The prices are going up because of the rise in international crude prices. Oil marketing companies have no say in determining the final prices so the margins get affected during a surge in crude prices.
  • Generally, the company derives 50% of the fuel demand from urban markets, 15% demand comes from highways and remaining 35% comes from the rural markets.
  • Initially during the lockdown, the percentage of rural demand was more than highways and urban demand. As the unlocking of economy is taking place, the demand is again increasing in urban and highways whereas rural demand remains intact.

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

  • The closing price of HPCL was ₹ 216/- as of 6-July-2020. It traded at 7x/ 5x the consensus EPS estimate of ₹ 32.6/ 39.4 for FY21E/ FY22E respectively.
  • The consensus target price of Rs 274/- implies a PE multiple of 7x on FY22E EPS of ₹ 39.4/-.

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

Bank has started collections in non- containment zones-Bandhan Bank

Update on the Indian Equity Market:

On Monday, Nifty closed 0.3%higher at 10,167. Among the sectoral indices, IT(+1.8%), PVT Bank (+1.3%), Bank (+0.7%)closed higher, whereas Media (-1.7%), PHARMA (-1.4%) and PSU Bank (-1.2%) closed lower. Among the stocks GAIL (+7.5%), IndusInd Bank (+7.3%),and BPCL (+7.0%) closed on a positive note.ZEEL (-4.5%), ShreeCement (-3.9%) and Eicher Motor (-3.4%) were among the top losers.

Excerpts from an interview of Mr.Chandra Shekhar Ghosh, CEO, Bandhan Bankwith Mint dated  8thJune 2020:

  • The pandemic has brought in a whole new set of risks for banks which are both internal and external.
  • The bank is asking its customers to use more digital modes of transaction in the changed scenario.
  • Branches were operational throughout the lockdown by observing government and administration rules.For Bandhan Bank, there were not many people working remotely.
  • He said some things can be done virtually. Earlier all regional managers were mandated to come to the head office for meetings but now the bank is doing it virtually and it is working.These efforts are saving expenses on travel.
  • Every sector cannot work from home and in banking some jobs might be possible but not all.
  • For Bandhan Bank, there is not a greater degree of acceptability to work – from- home.There are a lot of security issues related to bankers working remotely and that includes possible violations of agreements with customers, bound by data-security clauses.
  • The bank will have to take a deeper look into how these risks could be mitigated and only then banks will be able to move towards a work-from-home model.
  • On recoveries, he saidcollections have just started and at the ground level, the borrowers, especially in micro-credit involved in livelihood projects and agriculture, are continuing their businesses. Due to lockdown the bank is not being able to reach them.
  • The bank has started collections in the non-containment zone. However, the problem is that collection executives are facing difficulties in collecting loans from villages, as local residents are not allowing outsiders to access those places, citing covid-19 risks.
  • Speaking about post covid-19 opportunities, he said secured credit is the area where there are big opportunities.
  • There are customers who have been regularly paying all equated monthly installments (EMIs) and are eligible for more funds. These are small businesses which are running despite the lockdown.
  • When the rural demand recovers, pick-up in two-wheelers and other vehicles popularly used in these areas will see demand, and so will bank loans in these segments. Demand for gold loans is also coming quite strong.

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

  • The closing price of Bandhan Bankwas ₹ 264/- as of 8-June-2020.  It traded at 2.4x/ 2.0x theconsensus book value estimate of ₹ 107/127for FY21E/ FY22E respectively.
  • The consensus average target price for Bandhan Bank is ₹284/- which implies a PB multiple of 2.2x on FY22E BV of ₹127/-.

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.”

Higher but manageable inventory levels – MrAnil Kumar Chaudhary, Chairman, SAIL

Update on the Indian Equity Market:

 

On Wednesday, NIFTY50 closed positive (+1.8%) at 9,553. Within NIFTY50, HINDALCO (+7.0%), ADANIPORTS (+6.6%) and HDFC (+6.5%) were the top gainers, while AXISBANK (-3.6%), ASIANPAINT (-2.7%) and HINDUNILVR (-2.4%) were the top losers. Among the sectoral indices,METAL (+3.7%), FINANCIAL SERVICES (+3.4%) and MEDIA (+2.7%) gained the most. FMCG(-0.4%) andPHARMA (-0.01%) closed in the negative.

 

Higher but manageable inventory levels – MrAnil Kumar Chaudhary, Chairman, SAIL

 

Excerpts of an interview with Mr. Anil Kumar Chaudhary, Chairman,SAIL broadcasted on CNBC TV18on 24th April 2020:

  • As with most industries, steel industry is also facing issues in running facilities. Steel is a continuous process industry and has to continue to run albeit at a lower level.
  • Domestic orders have dried up. SAIL is dependent on export orders for now. As a result of continuous production and lower sales, there is a buildup of inventory.
  • Chaudhary believes that the current inventory level is high but manageable. Higher inventory is not unprecedented for steel industry. Current inventory for SAIL is close to 2 mn ton.
  • Inventory level was also high during the slowdown in July- October 2019. 31st October 2019 also had high inventory like current levels. But as of 31st Jan 2020, the inventory levels reduced to 1st April 2019 level.Mr. Chaudhary expects that similar performance will repeat if everything goes well and lockdown lifts on 3rd May 2020.
  • Chaudhary is confident that after lifting of lockdown there will be substantial demand from construction and infrastructure sectors. That should take care of SAIL’s high inventory levels. Other sectors such as automobiles or engineering may take time to revive.
  • For SAIL specifically, they have not seen issues in logistics. In lockdown, railways have become more efficient and even portsare able to handle exports.
  • Cash flow is a bit strained due to lower sales and continued fixed costs. Quite a few debtors have been due for repayments and SAIL has been getting those payments.
  • After lockdown, road transport has to be restored. Government is also really concerned about current state of affairs and they also want to ensure that the supply chains are restored as fast as possible.
  • SAIL has close to 70,000 employees.SAIL has to be able to ramp up production in time to bring down per ton cost of production. SAIL continues to incur fixed costs of about Rs 15,000 mnper month, major expense due to employee cost.
  • Chaudhary is confident that some government measures are going to help such as waiver of certain charges from power companies in some states. Interest cost in % terms has also come down.

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

  • The closing price ofSAIL was ₹ 30.1/- as of 29-April-2020. It traded at 8.4x/ 4.1x the consensus EPS estimate of ₹ 3.6/ 7.3 for FY21E/ FY22E respectively.
  • Consensus target price of ₹ 35.1/- implies a PE multiple of 4.8x on FY22E EPS of ₹ 7.3/-.

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

Expect more pressure on power demand if lockdown persists- AK Singh, CMD, NHPC and Rajeev Sharma, CMD, Power Finance Corporation

Update on the Indian Equity Market:
On Thursday, NIFTY closed in green at 9,112 (+4.2%). Top gainers in NIFTY50 were M&M (+17.5%),
Maruti (+13.9%) and Cipla (+13.1%). The top losers were HUL (-3.3%), Dr Reddy’s (-2.2%) and Tech M
(-2.1%). Top sectoral gainers were Auto (+10.5%), Financial services (+5.8%) and Pvt Bank (+5.1%).
There were no sectoral losers.

Excerpts of an interview with Mr AK Singh, CMD of NHPC and Mr Rajeev Sharma, CMD, Power
Finance Corporation (PFC) with CNBC -TV18 dated 9 th April 2020:

  • The power ministry is working on a liquidity package for the sector and it has also issued a host of clarifications on relaxations for the distribution companies (DISCOMS).
  • After this scheme of 90-days moratorium, they have finalised their scheme for moratorium and the board has approved this and some DISCOMs are paying, some are not but as the situation unfolds, he is expecting the payments, said Mr Sharma (PFC).
  • He further added that they have prepared an action plan also for these three months to mobilise funds because they need to make repayments for their borrowings but they don’t see any problem. There is enough liquidity in the market.
  • Detailing the liquidity package which the government is pondering over, he added it is under advanced stage of discussion with the ministry of power.
  • They are requesting for a robust payment security mechanism as they extend further loans to DISCOMs, they are asking for a state government guarantee along with a provision in their annual budget for their repayments.
  • Very soon, this liquidity infusion scheme will be out and REC and PFC will be helping the state DISCOMs to pay the receivables.
  • “Just 21-day lockdown is not going to create much problem for us and it is not going to last more also. We are planning to restart the project which is on hold right now. So, I don’t think there is going to be much difference on this account for a company like us,” Mr. Singh added.
  • Power demand has declined 25-30 per cent. If the lockdown continues, this will put further pressure on DISCOMs and there will be more stress on balance-sheets.
  • As of now, he doesn’t see any problem of liquidity in the market. Enough money is available. Long-term Repo Operations (LTRO) has been declared by Reserve Bank of India (RBI), they are in consultation with State Bank of India (SBI).
  • It is cheaper money and banks can lend it over and above their exposure limits. In LTRO, that limit won’t be applied, so they are in consultation with SBI for that and with other banks also for commercial papers and other taxable bonds also, Mr Sharma explained.

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

  • The closing price of NHPC Ltd was ₹ 22/- as of 9th April 2020.  It traded at 8x/ 7x/ 7x the consensus earnings estimate of ₹ 2.8/ 2.9 /3.3 for FY20E/21E/22E respectively and the closing price of PFC Ltd was ₹ 90/- as of 9th April 2020.  It traded at 4x/ 3x/ 3x the consensus earnings estimate of ₹ 24.4/ 29.6 /34.8 for FY20E/21E/22E respectively
  • Consensus target price for NHPC Ltd. is ₹ 27/- which implies a PE multiple of 8x on FY22E EPS of ₹ 3.3/- and Consensus target price for PFC Ltd. is ₹ 136/- which implies a PE multiple of 4x on FY22E EPS of ₹ 34.8/-.

 

Biosimilars will have a huge impact on global healthcare – Kiran Mazumdar Shaw, CMD, Biocon

Update on the Indian Equity Market:

On Tuesday, Nifty closed 8.8% higher at 8,792, taking cues from global markets.  All components of NIFTY50 ended with gains led by INDUSINDBK (+25.0%), AXISBANK (+20.1%) and GRASIM (+15.0%). All sectoral indices also ended with gains. NIFTY PVT BANK (+11.1%), NIFTY PHARMA (+10.4%) and NIFTY BANK (+10.4%) gained the most.

Biosimilars will have a huge impact on global healthcare – Kiran Mazumdar Shaw, CMD, Biocon

Edited excerpts of an interview with Kiran Mazumdar Shaw, Chairperson and Managing Director of Biocon Ltd.; dated 1st April 2020. The interview aired on CNBC-TV18.

  • Biocon received an Establishment Inspection Report (EIR) with Voluntary Action Indicated for it’s Malaysian unit in respect of production of glargine. Insulin glargine is a long-acting, manmade version of human insulin.
  • This is an important EIR for Biocon and with that, the management is confident that the approval will come in sooner than later. Inspection went well but in terms of launch, management needs to keep track of current crisis as US is going through a very bad phase.
  • Post the crisis, there will be a huge effort to bring down healthcare costs. Biosimilars will be extremely important in this effort. Insulin therapies are also going to play a very important role in cost cutting and biosimilar glargine, insulins and others are going to be extremely important.
  • In terms of opportunity, biosimilars business is a USD 7 bn business globally and USD 4 bn business in the US. With biosimilars, the access to insulin glargine is much larger. Biocon has a very important role to play in providing affordable access to glargine.
  • Including the private labs in testing for the current crisis has been a good move on part of the government. The issue regarding less number of approved kits is resolved and more kits are now being produced. The challenge now is that state governments are now restricting private labs from testing. Maharashtra, Telangana, Gujarat, West Bengal have put heavy restrictions on private labs. If private labs are restricted from conducting tests in large numbers, the purpose of including them in the testing arena is defeated.
  • Biocon has a turnover target of USD 1 bn in Biologics by FY22E. There is a lull created by the logistics issues currently. However, the target is still 2 years away and management hopes that the crisis will pass soon. This is a time when biosimilars will have a huge impact on global healthcare and that’s why Biocon will have a very big role to play.
  • The private sector is in close cooperation with government on various fronts including research, private testing, vaccine development, therapy developments and antibody based serological testing. This crisis has shown that we have to focus on these areas and our public health system has to be improved and there is a lot of opportunity for us to build a very robust healthcare ecosystem.

Consensus Estimate: (Source: market screener website)

  • The closing price of Biocon was ₹ 319/- as of 7April2020. It traded at 42.5x/ 31.9x/ 24.5x the consensus EPS estimate of ₹ 7.5/ 10.0/ 13.0 for FY20E/ FY21E/ FY22E respectively.
  • The consensus target price of ₹ 311/- implies a PE multiple of 23.9x on FY22E EPS of ₹ 13.

To some extend pain is addressed by RBI- Mr Dinesh Khara, SBI

Update on the Indian Equity Market:

On Wednesday Nifty closed -4.0% lower at 8,253. Among the sectoral indices NIFTY IT (-5.5%), NIFTY Bank (-4.9%), NIFTY PVT Bank (-4.9%) closed lower. None of the sectors closed on a positive note. Tech Mahindra (-9.4%), Kotak Bank (-8.7%), and AXIS Bank (-6.2%) led the losing stocks. Hero Motocorp (+2.5%), Bajaj Auto (+1.0%), Bajaj Finance (+0.5%) were among the top gainers.

Excerpts from an interview of Mr Dinesh Khara, MD- Global Banking and subsidiaries of State Bank Of India with CNBC-TV18 dated 31st March 2020:

  • Speaking on recent measures by RBI Mr Khara said the steps taken by RBI have mitigated the stress which the bank would have seen on account of the 21-days lockdown which has been announced.
  • However, the only thing could be the special mention accounts – SMA-I and SMA-II, which normally has a tendency of seeing the recovery towards the latter half of the month. So there, the bank might face some kind of a situation but that also is being resorted through follow up mechanism.
  • He added the pain has been addressed to an extent of about 90 %.
  • Speaking about the moratorium, he said everybody is entitled to the moratorium unless they opt-out.
  • For the next quarter, on the margin front, the bank has not looked at this point as the issue is evolving.
  • On asset quality, Mr Khara said the bank is in the process of evaluating the impact and it would be too early to say anything.
  • On SMEs, SBI announced an emergency package for SMEs, which is 10 per cent of the working capital for all the accounts which are performing. This package was announced even before the steps taken by RBI.
  • Speaking about loan growth he said after the lockdown is taken off, there would be pent-up demand and to meet that demand, the corporates might go for shoring up their working capital too. Apart from that, there is bound to be some kind of reconstruction effort post COVID-19 and the bank is confident that will also bring in opportunities for credit growth.

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

  • The closing price of SBI was ₹ 187/- as of 01-April-2020.  It traded at 0.7x/ 0.6x/ 0.5x the consensus Book value per share estimate of ₹ 249/277/312 for FY20E/ FY21E/ FY22E respectively.
  • The consensus average target price for SBI is ₹ 384/- which implies a PB multiple of 1.2x on FY22E BVPS of ₹312/-.