Disclamer: These views are done by an anylast
Bandhan Bank- business update Q1FY23: Gross advances grew by 20% y-oy and fell by 3% q-o-q to Rs. 96,649 crore (before write offs) in Q1FY23. Its collection efficiency including NPA and restructured accounts was at 91% in June 2022 versus 97% in March 2022, decline of 6% q-o-q. Collection efficiency for Assam declined to 92% in June 2022 versus 96% in March 2022. While for West Bengal it was at 92% in June 2022 versus 96% in March 2022. Total deposits rose by 20% y-o-y and declined by 3% q-o-q. CASA deposits rose by 21% y-o-y and 0.3% q-o-q. CASA ratio was at 43.2% versus 41.6% in March 2022.
NTPC: As per media reports, NTPC is planning to raise ~Rs5000 crore through stake sale in its green energy subsidiary namely NTPC Green Energy Limited (NGEL). The company will transfer 15 renewable energy project and 100% holding in NTPC Renewable Energy Limited to NGEL. The process is expected to start in October as NTPC is believed to have engaged SBI Capital Markets to advise on stake sale process. A potential stake sale in green energy arm would help in value unlocking and could possibly improve dividend payout and thus positive for the stock. We have Buy rating on NTPC.
Hindustan Aeronautics Limited (HAL): Hindustan Aeronautics Limited (HAL) and Safran Helicopter Engines have signed an agreement to create a joint venture to develop helicopter engines. Through a Memorandum of Understanding (MoU), both the partners will extend their long-lasting partnership by establishing a new aero-engine company in India. It will be dedicated to the development, production, sales and support of helicopter engines and one of its main objectives will be to meet the requirements of HAL and Ministry of Defence's future helicopters, including the 13-ton IMRH (Indian Multi-Role Helicopter). HAL and Safran Helicopter Engines already have multiple partnerships, including the Shakti engine, which powers HAL-produced helicopters, including the Dhruv, Rudra and the Light Combat Helicopter (LCH). Positive for Hindustan Aeronautics
Telecom sector: The Adani Group’s entry into the 5G spectrum race and its plans to offer private captive network solutions could result in intensified competition for telecom players. Adani Group may engage in a possible bidding battle with Reliance Jio and Bharti Airtel for 5G airwaves in both the coveted but expensive 3.3-3.67 GHz and the cheaper 26 GHz bands – negative read-thru as Adani’s entry into the 5G spectrum auction and its stated ambitions of offering private captive networks as a service could intensify the competition in the 5G business
HDFC Ltd: After BSE and NSE and the RBI gave their approval for the proposed merger of HDFC with its banking subsidiary HDFC Bank, the Pension Fund Regulatory and Development Authority (PFRDA) also gave nod to the deal. The proposed entity will have a combined asset base of around Rs 18 lakh crore. The merger is expected to be completed by the second or third quarter of FY24, subject to regulatory approvals. Positive
Repco Home Finance: The company in its board meeting which is scheduled on July 15, 2022 would consider to raise funds of Rs. 4,000 crore through NCDs. The capital adequacy ratio stood at 33.6% in March 2022. Positive
Zydus Lifesciences: has launched the molecule Sitagliptin in India under the brand names Sitaglyn and Siglyn to address Type 2 diabetes in India. Both the brands will add on to a comprehensive solution for the management of Type 2 diabetes at an affordable cost, which is around 60% lesser than the originator’s cost. Both the drugs belong to the DPP4 inhibitor category with a 62% global market share and the drug is very effective in controlling HbA1C levels. Positive
Dr Reddys: Launches Fesoterodine Fumarate Extended-Release Tablets, a therapeutic generic equivalent to Toviaz in the US markets. The tablets are indicated for treatment overactive bladder in adults with symptoms of urge urinary incontinence, urgency, and frequency. The Toviaz brand in the US has sales of approx. $211 mn for the 12 months ending May 2022. Given the healthy addressable market size, the launch of the product is positive.
Aurobindo Pharma: The company pulled out of the proposed sale of Eugia Pharma, which is the injectables arm of the company. Eugia pharma consists of general injectable, oncology injectable, oncology oral solids, and hormonals business. The deal was called off citing valuation differences as the promoter family has valued the business at around Rs 26000 to RS 30000 crore , translating to $3-4 bn. The bid ask difference was quiet large and hence the deal was called off. Negative Read thru
Avenue Supermart (Dmart): Strong results - The company’s revenues grew by 95% to Rs9806.9crore in Q1FY2023 (70% ahead of pre-covid levels). EBIDTA came at Rs1008crore (ahead of street expectation of Rs877crore) vs. Rs221crore in Q1FY2022. EBIDTA margins came at 10.3% vs. street expectation of 8.9%. The same was ahead of 4.4% in Q1FY2022. Net profit stood at Rs680crore vs. Rs115crore in Q1FY23. The company has cumulatively opened 110stores over the past three years – The stock has already seen a good run-up post the pre-quarter update. Better than street expected EBIDTA margins might add to the good run-up
Stock Update: TCS – Q1FY23 results review: Robust Q1; set to grab right deals
Rating: Buy Reco Price: Rs3,265 Target price: Rs3,650
· TCS reported a steady constant currency revenue growth of 3.5%/15.5% q-o-q/y-o-y with strong client metrics and healthy deal wins. EBIT margins missed our estimates owing to supply-side challenges.
· Demand for operation transformation is robust, led by higher spends on next-gen technologies, multi-service integrated deals and new revenue streams. TCS is at forefront at driving clients' operation transformation program given its strong capabilities, robust contextual understanding of clients' operations and domain expertise.
· Management remains optimistic on achieving 25% EBIT margin by Q4FY2023 as it does not see any incremental supply-side pressure. Margin is expected to improve sequentially in the coming quarters of FY2023E given absence of wage revision, better pricing and currency tailwinds.
· We maintain a Buy on the stock with a revised PT of Rs. 3,650 given preferred strategic partner for vendor consolidation exercise, healthy deal wins and scope of margin improvement.
Stock Update: Mahindra & Mahindra Ltd. – Charged up for a long drive
Rating: Buy Reco Price: Rs1,133 Price Target: Rs1,390
· British International Investment has committed to invest up to $250 million in M&M’s passenger electric vehicle subsidiary (EVCo) at a valuation of $5.1-8.8 billion. More investors likely to invest in EVCo at a later stage.
· Promoters, along with investors would infuse ~Rs. 10,000 crore in the new EVCo between FY22-FY27, to launch five EV models, and leverage from M&M’s ecosystem of suppliers, dealers and financers.
· We firmly believe that M&M is on track with its growth roadmap. In addition to its aggressive plans for farm equipment and ICE passenger car segments, the company is taking a leap towards creating a strong product portfolio for passenger electric vehicles.
· We expect EVCo to add Rs. 132 per share to our SOTP. Reiterate buy rating on the stock with a revised PT of Rs. 1,390. Stock trades at a P/E multiple of 17.6x and EV/EBITDA multiple of 11x its FY24E estimates.
Sector update: Infra/Logistics/BM/Realty Result Preview Q1FY2023 – Favourable base to boost growth; macros pose concerns
· Our coverage universe of building materials companies are likely to report a 28% y-o-y growth in net earnings led by very low base of last year. Wood panel industry is poised for strong PAT growth compared to Piping players.
· Infrastructure companies are likely to report 14% y-o-y growth in PAT led by higher execution although OPM to remain under pressure y-o-y. Logistics to post 23.8% y-o-y growth in PAT, aided by higher revenues and better OPM.
· Real estate companies would continue to report strong sales booking y-o-y as per operational updates announced by few players. Property registrations in Mumbai and Maharashtra remain upbeat. Rising interest rates pose key challenge.
· Preferred Picks - KNR Construction, PNC Infratech, Century Plyboards, Greenlam Industries, Pidilite Industries, TCI Express, TCI Ltd., Mahindra logistics, Mahindra Lifespaces, DLF, Oberoi Realty, Prestige Estates and Macrotech Developers.
Sector update: NBFC, AMC, Insurance Results Preview Q1FY2023- NBFCs, insurers to see steady growth, AMCs to lag
· NBFCs- Disbursements to see continued business momentum, despite a seasonally weak quarter. Overall, for companies in our coverage AUM is likely to remain strong for housing and consumer loans. AUM is likely to grow by ~13% y-o-y and 1% q-o-q. Further, asset quality is also expected to improve given the improved collection efficiencies.
· Insurance - For life insurers, premium growth is likely to remain healthy driven by strong demand for annuity, guaranteed, and credit life products. Protection segment may recover while ULIP is likely to see moderate growth amid market volatility. For non-life insurers, we see strong growth in the net earned premium.
· AMCs - AUM growth on yearly basis was strong while it was subdued sequentially with volatility in the equity markets. Yields are likely to hold up account of the stable equity mix in the AUM.
· Preferred picks:
o NBFCs: HDFC Ltd, Bajaj Finance, Cholamandalam Investment and Finance Co., Mahindra Finance, Can Fin Homes, Repco Home Finance
o Insurance: HDFC Life Insurance, ICICI Prudential Life Insurance Co, Max Financial Services, ICICI Lombard General Insurance Co.
o AMCs: Nippon Life India AMC
Sector Update: Agri & Specialty Chemical preview Q1FY2023- Mixed bag Q4; Margin concern remains for specialty chemicals.
· The domestic agri market is expected to see low volume growth due to delayed monsoons, while strong global demand and better pricing in international markets are expected to drive revenue growth/margin for large players such as UPL, PI, and Sumitomo Chemical India
· Specialty chemical companies would witness margin contraction, given the first full quarter of elevated input cost and challenge to grow volume, given the inflationary environment. SRF stands out as high ref-gas price/volume is expected to drive y-o-y margin expansion and robust 55% y-o-y PAT growth in Q1FY2023.
· Softening input cost with moderation in crude oil price would drive margin recovery, while massive capex plan is expected to drive global market gain, which augurs well for medium to long-term earnings growth for the sector.
· Preferred Picks: UPL, Coromandel International, PI Industries, Sumitomo Chemical India, SRF, NOCIL, and Vinati Organics
Sugar: Union Minister for Road Transport and Highways Shri Nitin Gadkari has promoted for the use of ethanol as a preferred fuel in the future, especially considering the fact that flex engine vehicles will start becoming available in the coming months. Compared to Rs 115 per litre for petrol, ethanol at Rs 64 per litre would prove to be a very cost effective fuel. The Indian Oil Corporation’s R&D Centre in Faridabad has certified that it is possible to get the same average from ethanol as one gets from petrol - Positive read through for sugar stocks such as Balrampur Chini Mills, Triveni Engineering & Industries and Dhampur Sugar Mills
IRB Infrastructure Developers: The company’s toll collection for June 2022 was up 54.6% y-o-y (down 4.2% m-o-m) at Rs. 329 crore.
IRB InvIT Fund: The toll collection for June 2022 on like-to-like basis (excluding projects handed over to NHAI) was up 88% y-o-y (down 2.9% m-o-m) at Rs. 77 crore.
Dilip Buildcon: The company has been declared as L1 bidder for Rs. 1400 crore (excluding GST) for "Gandhisagar-2 Multi-Village Water Supply Scheme" in the Madhya Pradesh. It also achieved the financial closure of Rs. 1060 HAM project "Bangarupalem Gudipala" on July 04, 2022. Positive for the stock.
Tata Motors: The company has taken vehicle prices hike of ~0.55% in passenger vehicle segment, w.e.f. 9th July, 2022 to partially offset the impact of rising input costs. Also, the global wholesales of Tata Motors Group grew 48% y-o-y to 3,16,443 units in Q1FY23. Positive
Power Grid: Power Grid has bagged an inter-state transmission project through TBCB route for evacuation of electricity from Neemuch SEZ in Madhya Pradesh. The new project would help increase asset capitalisation on successful commissioning of the project. Positive read through for Power Grid.
Gujarat Gas: As per media reports, Gujarat Gas has tied up LNG supplies at a price of $22-24/mmBtu for H1FY23 versus current spot LNG price of $38/mmbtu. This could help the company to sustain decent margin of above Rs6/scm and thus positive for the stock.
Metals stocks: Chinese commodities futures are weak with price of coking coal, Iron Ore, HRC, rebars down about 4%. Lower iron ore price is negative for NMDC..