01 Mar

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

Update on the Indian Equity Market:

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

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

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

Asset Multiplier Comments:

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

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

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

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

By Consumer durable, Crompton Greaves Consumer Electricals , 0 Comments Read more...
28 Feb

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

                                                                                      Technical Talks

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

Weekly highlights

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

Things to watch out for this week

  • Auto data- OEMs will be reporting their volumes data for the month of February. The previous 2-3 months performance for almost all OEM’s was impressive led by festive season demand and some pent-up The semi-conductor shortage issue impact on monthly volumes is key to watch. The volume numbers will set the tone for auto OEM’s performance in March.
By Weekly Markets highlights, Weekly update 0 Comments Read more...
25 Feb

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

Update on the Indian Equity Market:

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

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

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

 

Asset Multiplier comments:

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

 

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

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

 

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

By Auto, Eicher Motors 0 Comments Read more...
24 Feb

Expect credit costs to gradually normalize in FY22E – Axis Bank

Update on the Indian Equity Market:

 

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

 

Expect credit costs to gradually normalize in FY22E – Axis Bank

 

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

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

 

Asset Multiplier Comments:

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

 

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

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

 

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

 

By Axis Bank, Bank 0 Comments Read more...
23 Feb

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

Update on Indian Equity Market:

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

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

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

 Asset Multiplier Comments:

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

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

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

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

 

By Bank, SBI , , 0 Comments Read more...
22 Feb

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

Update on the Indian Equity Market:

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

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

Asset Multiplier comments:

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

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

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

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

 

By Hotels, Lemon Tree 0 Comments Read more...
21 Feb

12 Things to remind yourself when markets go crazy

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

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

  1. There is no such thing as a normal market. Uncertainty is the only constant when investing. Get used to it.
  2. The most effective hedge is not necessarily an investment strategy. The best hedge against wild short-term moves in the markets is a long time horizon.
  3. Your gains will be incinerated at some point. Investing in risk assets means occasionally seeing your gains evaporate before your eyes. Carlson says he doesn’t know why and he doesn’t know when but at some point a large portion of his portfolio will fall in value. That’s how this works.
  4. You still have a lot of time left. Carlson says he is still young(ish) with (hopefully) a number of decades ahead of him to save and invest. That means he is going to experience multiple crashes, recessions, bull markets, manias, panics and everything in-between in the years ahead. The current cycle won’t last forever just like the last one or the next one.
  5. Know yourself. One of the biggest mistakes you can make as an investor is confusing your risk profile and time horizon with someone else’s. Understanding how markets generally work is important but understanding yourself is the key to successful investing over the long haul.
  6. There’s nothing wrong with using a “dumb” strategy. Buy and hold is one of the dumbest investment strategies ever…that also happens to have the highest probability of success for the vast majority of investors. There’s no shame in keeping things simple.
  7. The crowd is usually right. Being contrarian will always make you feel like you’re smarter than everyone else, but the crowd is right more often than its wrong when it comes to the markets. Yes, things can get overcrowded at times but being a contrarian 100% of the time will lead you to be wrong far more often than you’re right.
  8. Markets don’t end. For years pundits have been proclaiming I’ve seen this movie before and it ends badly. Well, guess what? Markets don’t end. Yes, some companies fail but most of them keep right on chugging along, selling products and services, making profits and paying dividends. And the stock market isn’t going out of business anytime soon. No one knows how this movie ends because there will always be another sequel.
  9. Anchoring is dangerous. Whenever there are huge moves in the market it becomes tempting to play the anchoring game. What if I would have bought at the lows? What if I would have sold at the highs? No one is able to consistently get in at the bottoms and out at the tops. Hindsight makes it look easy but it never is at the moment. Buying when something is falling is hard to act on because it always feels like it’s going lower while selling when something is rising is easy but most of the time you’re wrong.
  10. You don’t have to be bullish or bearish at all times. Focusing on your own goals can release you from the need to always have an opinion on the next move higher or lower.
  11. You don’t have to invest in everything. Sometimes the stuff you don’t invest in is even more important than the stuff you do invest in. It’s never been more important to have filters in place to guide your actions.
  12. Don’t worry about what everyone else is doing. There will always be someone getting richer than you in life and the markets. And with the advent of social media, that means people throwing this fact in your face constantly. This one is not easy but defining what a rich life means to you can help avoid unnecessary envy and regret.
By Weekend Reading 0 Comments Read more...
21 Feb

This week in a nutshell (Feb 15th to Feb 19th)

Technical Talks

During this week NIFTY declined as expected, opening on 15th Feb at 15,270 and closing on 19th Feb at 14,982, a weekly loss of 1.9%. After hitting a new high of 15,432 this week, the index has started to decline. With the RSI (58) and MACD on a declining trend, the technical indicators indicate a further possible decline. On the downside, 20DMA of 14,759 could act as a support. On the upside, 15,432 is the key level to watch out for as the last high could act as a resistance.                                                                 

Weekly highlights

  • The Indian Cabinet launched a production-linked incentive scheme (PLI) for telecommunication and networking products. The outlay of ~Rs 122bn over five years is approved for manufacturing telecom equipment, 4G/5G next generation radio access network and wireless equipment, Internet-of-Things (IoT) access devices and other wireless equipment, and equipment like switches and routers. The scheme will be operational from April 1, 2021. This scheme is expected to incentivize telecom service providers and is another push for the Prime Minister’s Atma Nirbhar Bharat plan.
  • On the other side of the world, a severe winter storm hit North America, with Texas being the worst hit. The storm has impacted crude oil output in the energy rich state of Texas and it is estimated that about 4mn barrels a day of output is offline.
  • The Brent crude futures and US West Texas Intermediate (WTI) crude futures, both corrected after rallying to 13-month highs of $65.5 and $62.3 per barrel respectively. The correction has been due to worries that refineries will take time to resume operations after the big freeze.
  • On the domestic front, consecutive hikes in petrol and diesel are pinching the pockets of Indians. The rise in international crude prices and higher central and state taxes have led to petrol prices crossing a century in some states.
  • The foreign institutional investors’ (FII) buying in Indian equity market continued to decline. FIIs inflows for the week were Rs 44,080 mn. Domestic institutional investors’ (DII) selling continued this week as well with outflows of Rs 62,840mn vs Rs 56,430 mn in the previous week.

Things to watch out

  • With the quarterly result season out of the way, the attention is now onto macroeconomic developments.
  • The benchmark 10-year bond yields have surged post the Budget announcement of additional borrowing to bridge the deficit. To keep the yields under control, RBI has held a special G-sec auction, a separate open market operation (OMO) and Operation Twist this week. Further measures by RBI will be something to watch for. Equity markets are inversely related to interest rates so increasing bond yields could lead to a decline in share prices.
By Weekly Markets highlights, Weekly update , , 0 Comments Read more...
18 Feb

Don’t expect CV cycle turn for another 12-18 months– SKF India

Update on the Indian Equity Market:

 

On Thursday, Nifty closed 0.6% lower at 15,119. Within NIFTY50, ONGC (+7.6%), GAIL (+7.0%), and BPCL (+4.7%) were the top gainers, while BAJFINANCE (-2.5%), M&M (-2.2%), and TATAMOTORS (-2.2%) were the top losing stocks. Among the sectoral indices, PSU BANK (+5.6%), IT (+1.3%), and METAL (+1.3 %)were the onlygainerswhileFINANCIAL SERVICES (-1.5%), AUTO (-1.4%), and PRIVATE BANK(-1.1%) were the top losing sectors.

 

Don’t expect CV cycle turn for another 12-18 months– SKF India

 

Excerpts of an interview with Mr. Manish Bhatnagar, MD, SKF India, aired on CNBC-TV18 on 12thFebruary 2021:

  • SKF reported strong 3QFY21 results where the Revenue/ EBITDA/ PAT growth was 16%/ 152%/ 151% respectively on a YoY basis.
  • EBITDA margins reported in 3QFY21 were 22.0% vs. 10.1% in 3QFY20. A quarter of the PBT delivered in 3QFY21 came from a one-time benefit; rest of the improvement is sustainable.
  • SKF was a front runner in opening up operations as early as end of April 2020. Come July-August 2020, SKF was the only company that could supply bearings to the customers when they began to ramp up production. This led to market share gain and significant growth for SKF.
  • SKF caters to 2 main segments, automotive and other industries, and is diversified in terms of type of industries.
  • On automotive, SKF is bullish on rural economy linked sub-segments which includes tractors and 2-wheelers. SKF is also positive on PVs on back of new model launches. SKF is conservative on CVs and management doesn’t expect the CV cycle to pick up for another 12-18 months.
  • On the Industrial side, SKF expects industrials to pick up soon after having lagged automotive in last 6 months. Management is bullish on everything related to infrastructure- cement, steel, and construction equipment.
  • Rise in steel and metal prices is concerning and if it continues, will impact everyone across the economy and could negatively impact the demand recovery scenario.
  • SKF’s benchmark going forward is FY19 performance and they expect to grow in double digits across all segments.

 

Asset Multiplier Comments:

  • CV OEMs have seen growth on back of e-commerce, industrial production, infrastructure projects, mining. Most sub-segments of CVs expect buses are now showing signs of revival.
  • OEMs commentary has been positive on the future CV demand on back of indicators like fleet utilizations almost near pre-covid levels, consumer sentiment index trending up, and improvement in financing availability.
  • While there are green shoots visible in the last few months, it is still early to be certain of a turn in the CV cycle. The demand situation is still fragile and can deteriorate in face of any disruption ranging from a second wave of Covid-19 in India, any further lockdowns, material cost inflation, or price hikes.

 

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

  • The closing price of SKFINDIAwas ₹ 2,344 as of 18-February-2021. It traded at 40x/ 36x/ 30x the consensus EPS estimate of ₹58.0/65.5/78.1 for FY21E/ FY22E/ FY23E respectively.
  • The consensus target price of ₹ 1,948/- implies a PE multiple of 25x on FY23E EPS of ₹78.1/-.

 

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.”

 

By SKF India 0 Comments Read more...
17 Feb

May look to raise funds in 2HFY22E: Federal Bank

Update on Indian Equity Market:

On Wednesday, markets closed lower as Nifty ended the day 0.7% lower at 15,209. Within the index, HEROMOTO (3.5%), BPCL (2.9%), and SBIN (2.8%) were the highest gainers while NESTLEIND (-3.0%), ASIANPAINT (-2.6%), and MARUTI (-1.4%) were the laggards. Among the sectoral indices, PSUBANK (5.9%), MEDIA (2.2%), and AUTO (0.8%) led the gainers while PHARMA (-1.7%), IT (-1.3%), and FIN SERVICE (-1.1%) were the losing sectors.

Excerpts of an interview with Mr Shyam Srinivasan, MD & CEO, Federal Bank (FEDRALBNK) with CNBC -TV18 dated 16th February 2021:

  • Retail business is almost back to pre-COVID levels across category and geographies. He believes that the bank is expected to achieve growth in mid-teen percentage for CY21E in the loan book for this segment.
  • The worst is over from an economic standpoint and the banking industry is expected to deliver YoY growth of 10 percent in CY21E. The bank is expected to deliver above industry growth in the same period. FY21E loan book is expected to deliver 8% YoY growth.
  • The bank is applying conservative approach in capital consumption. The bank is well capitalized at the juncture. There might be an opportunity for a capital raise towards the second half of CY21E.
  • The bank is well placed on asset quality. The continued recovery in the economy is expected to provide better run for the asset quality in the future quarters. All indicators currently suggest that there will be a better outcome regarding asset quality.
  • He mentioned that collection efficiencies have picked up materially as the bank is reporting month-on-month recovery in collections. The bank foresees that trend to continue.
  • The Net Interest Margin (NIM) is expected to be in the current zone of 3.2-3.3% in the coming quarters. The blended cost of funds and yield on new assets resulted in expansion in NIM during 3QFY21 for the bank.

Asset Multiplier Comments:

  • With the pick-up in economic activities, the improvement in collection efficiency augurs well for the banking industry. This will strengthen the asset quality as per the expectation of management.
  • With the recent rally in the shares of banking stocks, the environment is favorable for capital raising as the dilution will be comparatively lesser.
  • The banks are currently getting benefit of lower cost of funds compared to a year ago, resulting in stable or increasing NIMs. Once the interest rates start moving up, banks could either see NIM compression or increase the yield on loans to maintain current levels.

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

  • The closing price of FEDERALBNK was ₹ 88/- as of 17-February-2021.  It traded at 1.1x/ 1.0x/ 0.9x the consensus book value estimate of ₹ 79.5/ 87.2/ 96.7 for FY21E/22E/23E respectively.
  • The consensus price target is ₹ 90/- which trades at 0.9x the book value estimate for FY23E of ₹ 96.7/-

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, Federal Bank , , 0 Comments Read more...