Author - Maitreyee Vaishampayan

  • Maitreyee Vaishampayan
15 Mar

Three-box framework for SUV-focus in EV space – M&M

Update on the Indian Equity Market:
On Monday, Nifty closed in the red at 14,930 (-0.7%), recovering from the day’s low due to a rebound in the metals and technology stocks. JSWSTEEL (+2.4%), TECHM (2.4%), and TATASTEEL (+2.3%) led the index gainers while DIVISLAB (-2.9%), BAJAJFINSV (-2.7%), and GAIL (-2.6%) led the laggards. Among the sectoral indices, METAL (+1.0%), IT (+0.6%), and PSU BANK (+0.2%) were the only gainers while MEDIA (-1.4%), PHARMA (-1.3%), and FINANCIAL SERVICES (-1.2%) led the laggards.

Mahindra & Mahindra (M&M) recently reorganized its EV (Electric Vehicle) strategy by setting up 2 new verticals, one for last-mile mobility, and the other for EV tech center. Mr. Rajesh Jejurikar, ED- Auto and Farm Sectors, M&M explained the rationale behind this strategy on CNBC TV-18 on 12th March 2021. Here are the excerpts of the interview:

  • To undertake a comprehensive look at the future, M&M has deployed a three-box framework. This framework suggests different businesses need different kind of attention and focus depending on company strategy and goals. Box 1 is the one that has the ability to scale up/Box 2 and 3 are more mid-long-term focus and need more technology and know-how.
  • According to M&M, Last mile mobility is a box 1 business, which has a ready customer market today and they have to drive growth and penetration. Their box 2 business is the SUV focus IC-derived electric vehicles, and box 3 is EV which is preparing M&M’s strategy for the longer term.
  • They have created a strong talent pool with good products at Mahindra Electric, which will help them in the future as well.
  • They want to be SUV-focused in EV space as well. Currently, there are no plans of manufacturing EVs in shared mobility space (Sedans and hatchbacks).
  • They believe the EV market penetration to be much higher by 2025-30, hence the need for a comprehensive SUV EV portfolio. They hope to have an electric variant for all price points they operate in.
  • The level of readiness should be for 50-80% conversion in FY2025-30. The extent of conversion is very hard to predict at this stage so they are not setting any targets per se.
  • They will launch eKUV100 and eXUV300 between CY21-CY22.
  • The last-mile mobility segment is at an inflection point and the pace of sales should pick up significantly. The goods carrier segment is completely ready and a committed sales team and channel will help drive sales for this segment. The PV (Passenger Vehicle) was also ready but the slowdown due to Covid-19 has hampered the sales and M&M expects sales to pick up in 2HCY21.
  • For last-mile mobility, export is a huge opportunity. M&M is already getting leads for alliances and partnerships in different markets across the world. Some of their key customers in the B2B segment are planning to take M&M products in their global ecosystem. While these deals will take some time to fructify, the initial response has been good.
  • When M&M canceled their JV with Ford, the rationale was the money saved from JV will be put into the EV business. Rs 30,000 mn has been set aside for creating a strong EV portfolio.

Asset Multiplier Comments

  • With the Covid-19 outbreak, the personal mobility demand has increased. Though Gen Z and millennials would prefer EVs for personal mobility, the success of EVs would largely depend on increasing penetration and availability of the infrastructure, which is currently lacking.
  • M&M has been stressing on reducing investments in non-profitable subsidiaries and focusing on the core business. This three-box framework for EV vertical is a step in the right direction.

Consensus Estimate: (Source: market screener and tickr websites)

  • The closing price of M&M was ₹ 846/- as of 15-March-2021. It traded at 31x/ 21x/ 18x the consensus earnings estimate of ₹ 27.4/ 41.1/ 46.8 per share for FY21E/FY22E/FY23E respectively.
  • The consensus target price of ₹ 959 implies a PE multiple of 20x on FY23E EPS of ₹ 46.8/-.

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 Auto, Mahindra & Mahindra , , 0 Comments Read more...
09 Mar

Investments in generics getting validated now – LUPIN

Update on the Indian Equity Market:

On Tuesday, the equity market reversed from the day’s lows and the Nifty50 index closed 1% higher led by the BFSI sector. The top gainers in the index were SBILIFE (+5.0%), KOTAKBANK (+3.1%), and HDFCBANK (+2.9%) while the losers were BPCL (-4.6%), TATASTEEL (-3.9%), and GAIL (-3.3%). The sectoral gainers were FINANCIAL SERVICES (+2.2%), FINANCIAL SERVICES 25/50 (+1.9%), and PRIVATE BANK (+1.8%). METALS (-2.5%), MEDIA (-1.4%), and REALTY (-1.1%) led the sectoral losers.

On Women’s Day, CNBC-TV18 conducted interviews with some women leaders from India Inc. Here are the excerpts of an interview with Ms. Vinita Gupta, CEO, Lupin with CNBC TV18 on 8th March 2021:

  • Ms. Gupta believes that all the investments made to drive the generics business, and affordable medicines business to the next level are getting validated now. They have been investing in therapies like inhalation, biosimilars, complex injectables, and women’s health products over the past 5 years, and have made tremendous progress in the last 12-18months.
  • In the inhalation therapy, they have received the first major approval for Albuterol in Sept-2020. The timely approval despite the pandemic will be beneficial for asthma and COPD patients who are at a high risk of complications due to Covid-19 infection. Lupin was able to launch the product and is ramping up the production.
  • With more inhalation products pending approval from the US FDA, she believes the inhalation therapy will drive growth in the generics business.
  • There is still a very large number of Corona cases in particular in the US. From a lockdown point, some states have more of a lockdown than others. The elective procedures are still below pre-Covid levels, suggesting things aren’t yet back to normal. They hope things would be in the second half of this year with vaccinations ramping up over the next couple of months.
  • Lupin supplies medicines for about 5% of prescriptions in the USA so maintaining the supply continuity was essential through the pandemic.
  • Despite the pandemic, Lupin was able to achieve QoQ growth in both revenues and profits. She expects the growth to continue on FY22E as well. The Albuterol approval will be a significant growth driver in FY22E.
  • There are 5 other inhaler products in the pipeline in the next 2 years for Lupin in the USA. The FY23 will be a significant year as they intend to launch products like Albuterol, Fostair in Europe, Spiriva in 2023.
  • Price Erosion in the generics will continue to be one of the biggest challenges in FY22E. The price erosion has reduced from earlier periods to low-mid single digits now. The complex generics launches and operating efficiency will help offset the price erosion impact.
  • They have acute and chronic care products within their India portfolio. The chronic care areas such as diabetes, CNS, Cardiovascular, Respiratory have done extremely well. Acute care products have been struggling, in line with the overall acute market in India.

Asset Multiplier Comments

  • Domestic pharma companies have been facing price erosion pressures in generic products in the US for quite some time now. Hence, they have shifted focus on complex generics, and biosimilars which require a higher degree of specialization and are margin accretive. Some of these companies have shifted to a direct-to-market (DTM) approach rather than being partnered companies of US pharma majors.
  • Some domestic Indian companies such as Lupin and Cipla have specialization in respiratory/inhalation therapies. These companies expect Albuterol Sulfate inhaler products to be one of the key growth drivers in the near term. Apart from Albuterol Sulfate, these companies expect an incremental USD 100-150mn opportunity from the respiratory pipeline in the USA.

Consensus Estimate: (Source: market screener website)

  • The closing price of LUPIN was ₹ 1,033/- as of 09-March-2021. It traded at 43x/ 28x/ 23x the consensus earnings estimate of ₹ 23.9/ 37.5/ 45.7 per share for FY21E/FY22E/FY23E respectively.
  • The consensus target price of ₹ 1,045 implies a PE multiple of 23x on FY23E EPS of ₹ 45.7/-.

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 pro

By Lupin, Pharmaceuticals , 0 Comments Read more...
03 Mar

Demand remains strong, expect 4QFY21 to be better than 3QFY21 – Berger Paints

Update on the Indian Equity Market:

On Wednesday, Nifty50 ended in the green at 15,246 (+2.2%), lifted by heavyweight Reliance Industries which gained after winning INR 571 bn worth of airwaves in the recently concluded spectrum auction.  The stock gainers in Nifty50 were TATASTEEL (+5.3%), BAJAJFINSV (+5.0%), and RELIANCE (+4.8%) while the auto companies HEROMOTOCO (-1.5%), MARUTI (-1.2%), and BAJAJ-AUTO (-1.2%) topped the losers. Among the sectoral indices, METAL (+3.3%), PSU BANK (+3.2%), and FINANCIAL SERVICES 25/50 (+2.9%) led the gainers. AUTO (-0.7%) was the only index to close in the red.

Excerpts of an interview with Mr. Abhijit Roy, MD &CEO, Berger Paints (BERGEPAINT) with CNBC TV18 on 2nd March 2021:

  • In 3QFY21, BERGEPAINT reported a 32% rise in volumes. The demand scenario is quite similar to 3QFY21 and with a low base of 4QFY20, the company expects to report strong growth in 4QFY21.
  • The management expects good growth from the waterproofing business and construction chemicals.
  • A part of the volume growth was partly on account of pent-up demand.
  • There is a shift towards premium and luxury categories which were suffering in the initial Covid-19 days. Overall, the demand scenario is strong, though 30%+ growth may not be sustainable.
  • There has been an increase in input costs, especially for solvent-based products and the industrial segment is affected. To compensate for the higher input costs, they have received price hikes from some customers. Discussions with some clients regarding price hikes is still pending.
  • The impact of cost hikes has been lesser on the decorative paints. The management expects an impact on gross margins but EBITDA margins are expected to be retained on account of cost-saving measures undertaken. The management believes a price hike may have to be taken for decorative paints as well if the material cost uptrend continues.
  • The company is currently operating at ~95% of its capacity due to the uptick in volumes. Hence, they are undertaking both brownfield and greenfield expansion projects. A new plant at Lucknow is being commissioned for ~Rs 7,000 mn. The new plant is expected to be operational by Jan 22.
  • The decorative paints segment is growing at a faster rate compared to Automobiles. The Auto segment is a mixed bag, with Commercial vehicles, and Tractors doing well and passenger vehicles and 2-wheeler lacking compared to expectations.
  • The protective coatings category is growing in double digits, albeit at a slower pace compared to decorative and automotive.
  • The premium category has picked up significantly after Oct-20.

Asset Multiplier Comments

  • The paint companies reported strong growth in the decorative paints segment due to pent-up demand, delayed festive season, strong momentum in tier 3-4 markets, and share gains from small, unorganized players.
  • The weak macro environment impacted the industrial coatings while auto coatings did well. The auto coatings recovery was in line with the recovery in the Passenger and Commercial vehicles.
  • We believe as the metros and cities return to normalcy, the premiumisation trend will be stronger.

Consensus Estimate: (Source: market screener website)

  • The closing price of BERGEPAINT was ₹ 729/- as of 03-March-2021. It traded at 101x/ 77x/ 65x the consensus earnings estimate of ₹ 7.2/ 9.5 /11.3 per share for FY21E/FY22E/FY23E respectively.
  • The consensus target price of ₹ 620 implies a PE multiple of 55x on FY23E EPS of ₹ 11.3/-.

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.”

 

By Berger Paints, Paints , 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...
09 Feb

Double-digit volume growth to continue – Galaxy Surfactants

Update on the Indian Equity Market:

On Tuesday, the Indian equities snapped the six-day winning streak and Nifty 50 ended at 15,109 (-0.5%). Among the sectoral indices, FINANCIAL SERVICES 25/50 (+0.3%), FINANCIAL SERVICES (+0.3%), and BANK (+0.2%) ended the day with gains. MEDIA (-1.9%), AUTO (-1.4%), and PHARMA (-1.2%) led the losers. Among the stocks, SBILIFE (+4.0%), ASIANPAINT (+3.8%), and HDFCLIFE (+3.6%) led the gainers while M&M (-3.0%), TATAMOTORS (-3.0%), and JSWSTEEL (-2.2%) dragged the index lower.

Excerpts of an interview with Mr. U Shekhar, Founder Promoter and Managing Director, Galaxy Surfactants (GALAXY) with CNBC TV18 on 9th February 2021:

  • GALAXY saw good 3QFY21 earnings. The reported double-digit volume growth on a YoY basis is expected to continue, especially in the specialty chemicals segment.
  • Money received from Egypt which was accounted in 3Q was export benefits accumulated over the last 2-3 years. GALAXY accounts for the export benefits availed only when received.
  • Consumer focus on personal hygiene has increased significantly this year. This is expected to sustain going forward and the new products which have been introduced are seeing slow evolution which is certainly giving Galaxy better numbers.
  • The company has implemented expansion projects at Jhagadia, which was expected to be completed by April-21. This project has been delayed a little due to difficulties faced due to the outbreak of Covid-19.
  • The disruption due to shipping and containers is continuing which is certainly putting pressure on the supply chain.
  • The price hikes have been passed on to customers or absorbed the freight hikes in case of long-term contracts.
  • As far as the margin is concerned, there will be a gradual progression when new products keep on getting better.

Consensus Estimate: (Source: market screener website)

  • The closing price of GALAXY was ₹ 2,222/- as of 09-February-2021. It traded at 31x/ 27x/ 23x the consensus earnings estimate of ₹ 71.6/ 83.8/ 95.7 per share for FY21E/FY22E/FY23E respectively.
  • The consensus target price of ₹ 2,160 implies a PE multiple of 23x on FY23E EPS of ₹ 95.7/-.

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 Chemicals, Galaxy Surfactants , , 1 Comment Read more...
29 Jan

In liquidity surplus, better to have secured retail loans – Bank of Baroda

Update on the Indian Equity Market:

On the last trading day before the Union Budget is presented, Nifty 50 ended at 13,635 (-1.3%) dragged by auto and IT stocks. Among the sectoral indices, PSU BANK (+1.7%), PRIVATE BANK (+0.9%), and BANK (+0.7%) led the gainers. AUTO (-2.9%), IT (-2.6%), and METAL (-1.9%) ended the day with losses. Among the stocks, INDUSINDBK (+6.1%), SUNPHARMA (+4.3%), and ICICIBANK (+2.0%) led the gainers, while DRREDDY (-5.3%), MARUTI (-4.8%), and HEROMOTOCO (-3.7%) led the index losers.

Excerpts of an interview with Mr. Sanjiv Chadha, MD, and CEO, Bank of Baroda (BANKBARODA) with CNBC TV-18 aired on 28th January 2021:

  • The bank recently reported its 3QFY21 results with a strong domestic loan growth reported quarter on quarter (QoQ).
  • Domestic advances have grown by 8.2% percent YoY and a large portion has come from retail secured loans. The bank plans to increase the share of retail advances to ensure more risk mitigation, and secured retail loans giving better yield than high-rated coupons.
  • The CASA growth for the bank had been good and deposit growth had been in sync with the business strategy. Within CASA, current accounts are growing 18%. This is very important to protect the margins when liquidity is surplus.
  • In a liquidity surplus situation, the highly-rated corporates are able to command price which is almost unprecedented. They are borrowing at rates which are never seen before. To grow the loan book and protecting interest rate margins, while on the liability side ensuring a large proportion of book comes from CASA, on the asset side it is secured retail loans which give the combination of being good quality, low loss giving default, and giving better coupon. This is the strategy they are following in coming quarters as well.
  • The bank witnessed 6.5% YoY growth in its deposits. As the bank wants to closely align the deposit growth to where the advances growth is, and ensuring good quality of deposits growth. The growth in deposits is in line with the previous quarter.
  • The credit cost of the corporate book should start looking better. On the retail and MSME, there still is some uncertainty.
  • When it came to restructuring, a very small percentage of borrowers opted for restructuring which would seem to suggest that they are comfortable in terms of paying loans.
  • The bank is launching a QIP of Rs 200– 400 bn later in the year.

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

  • The closing price of BANKBARODA was ₹ 68/- as on 29-Janaury-2021. It traded at 0.5x/ 0.4x/ 0.4x the consensus book value estimate of ₹ 147/ 154/ 168 for FY21E/ FY22E/FY23E respectively.
  • The consensus target price of ₹ 65/- implies a PB multiple of 0.4x on FY23E BV of ₹ 168/-.

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, Bank of Baroda 0 Comments Read more...
22 Jan

Demand recovering despite product prices at historic highs – Indian Oil Corp.

Update on the Indian Equity Market:

On Friday, Nifty50 ended 1.5% lower at 14,372 dragged by the metal and banking stocks. AUTO (+1.4%), and IT (+0.2%) were the only sectoral indices to end the day with gains. METAL (-3.9%), BANK (-3.2%), and PRIVATE BANK (-3.2%) led the sectoral losers. Auto stocks led the gainers with BAJAJ AUTO (+11.2%), HEROMOTOCO (+4.0%), and EICHERMOT (+1.8%) leading the pack. AXISBANK (-4.5%), ASIANPAINT (-4.3%), and JSWSTEEL (-4.0%) were the top losers.

Excerpts of an interview with Mr. Shrikant Vaidya, Chairman, Indian Oil Corporation (IOC) published in Business Standard on 21st January 2021:

  • Crude oil prices are rising does not impact IOC’s margins as refining margins are influenced by product cracks. Product cracks are yet to recover fully. The increase in crude oil prices is likely to boost margins through inventory gains, provided prices stabilise at these levels.
  • India is set to drive global oil demand over the long term. Vaccine rollout suggests a more certain recovery in the oil market in 2021, but demand uncertainty still looms. Saudi Arabia’s decision to reduce crude oil production by 1 mn barrels a day in February and March has provided support to the market but demand concerns remain.
  • We may have to wait for fiscal conditions to improve before a significant reduction in excise duty rates are announced.
  • With the upcoming Budget, he reiterated the petroleum industry’s demand to move petrol, diesel, aviation turbine fuel, natural gas, and crude oil under GST. Exclusion of these products which account for ~60 percent of refined product volumes, with crude oil and natural gas has resulted in stranded taxes in the hands of oil & gas companies.
  • Oil consumption posted a month-on-month increase for the fourth straight month in December 2020. The easing of restrictions has revived demand from transportation.
  • IOC is sticking to the investment plans as those are based on long term demand potential in the country. Though they have faced temporary issues due to pandemic restrictions, IOC is on track to achieve its capex target of Rs 260 bn in FY21.
  • Since the easing of lockdown, IOC has commenced work on 2800 projects at an anticipated cost totaling Rs 2 trillion.

Consensus Estimate: (Source: market screener website)

  • The closing price of IOC was ₹ 96/- as of 22-January-2021. It traded at 8x/ 7x/ 6x the consensus earnings estimate of ₹ 12.8/ 14.2/ 17.3 per share for FY21E/FY22E/FY23E respectively.
  • The consensus target price of ₹ 115 implies a PE multiple of 7x on FY23E EPS of ₹ 17.3/-.

 

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.”

By Miscellaneous , 0 Comments Read more...
14 Jan

Greater need for technology across enterprises led to growth – Wipro

Update on the Indian Equity Market:
On Thursday, after another volatile session, Nifty 50 ended at 14,596 (+0.2%). Among the sectoral gainers, PHARMA (+0.8%), FMCG (+0.8%), and AUTO (+0.3%) led the gainers, while METAL (-1.0%), MEDIA (-0.2%), and BANK (-0.2%) led the losers. UPL (+3.7%), BPCL (+3.2%), INDUSINDBK (+3.0%) led the index higher while HCLTECH (-2.4%), GRASIM (-1.8%), and JSWSTEEL (-1.7%) led the laggards.

Wipro recently declared strong 3QFY21 numbers. Mr. Jatin Dalal, President and Chief Financial Officer (CFO) explained that a greater need for technology by clients across enterprises led to growth. The interview was published in Business Standard on 14th January 2021:

• A greater need for technologies like cloud, cybersecurity, and data analytics contributed to a strong set of numbers. With most business models becoming virtual has meant that greater investment in technology is taking places across Wipro’s customer base.
• Of Wipro’s seven business units, five delivered over 4 % sequential growth which suggests broad based growth.
• Over 92 percent staff is still working from home, which is not going to change in 4QFY21. About 2.5 percent staff is working from office, and about 5 percent staff is working from customer locations.
• Depending on the situation in April vis-à-vis Covid, they will think about the eventual model for employees working from home or office.
• There was double digit growth in order bookings in 3QFY21 and Wipro is entering the March quarter with a good set of pursuits.
• There is a significant momentum in clients’ spend, driven by cloud transformation, digital transformation, and investment in cybersecurity. Overall, there is an increase in IT spend.
• 3,000 freshers were added in 3Q and Wipro will continue to add more in 4QFY21.
• They do not foresee any adverse outcomes of Brexit on their European business. They expect more decision making around the future architecture and future scheme of things that customers will have post-Brexit.
• The sector-specific initiatives by the new Biden administration in US needs to be watched out.

Consensus Estimate: (Source: market screener website)
• The closing price of Wipro was ₹ 453/- as of 14-January-2021. It traded at 24x/ 23x/ 21x the consensus earnings estimate of ₹ 18.8/ 19.4/ 21.2 per share for FY21E/FY22E/FY23E respectively.
• The consensus target price of ₹ 459 implies a PE multiple of 22x on FY23E EPS of ₹ 21.2/-.

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 IT, Wipro 0 Comments Read more...
07 Jan

Demand buoyant but supply chain challenges remain – Galaxy Surfactants

Update on the Indian Equity Market:
On Thursday, Nifty 50 ended in the negative at 14138 (-0.1%). Among the stocks, TATASTEEL (+5.3%), HINDALCO (+4.8%), and BHARTIARTL (+3.6%) ended with gains while NESTLEIND (-2.0%), HDFCLIFE (-1.9%), and HINDUNILVR (-1.8%) were the top laggards. METAL (+3.8%), REALTY (+1.4%), and PRIVATE BANK (+0.7%) were the top sectoral gainers, while FMCG (-0.9%), IT (-0.7%), and PHARMA (-0.4%) were the sectoral laggards.

Excerpts of an interview of Mr. U Shekhar, Founder Promoter and Managing Director, Galaxy Surfactants (GALAXY) with CNBC TV18 on 6th January 2021:
• The raw material prices have surged significantly in the last month. The freight rates have gone up by more than 4-6 times across the world. GALAXY has been able to pass on the price hikes to customers.
• Despite the raw material price increase, he expects the margins to be stable.
• With the supply chain being disrupted across the world, getting the supply remains the number one priority for customers. At current levels, price increases seem to have been absorbed by the customers.
• 2QFY21 saw record volumes for the company. FMCG products, particularly the ones required for cleaning and sanitization have maintained the tempo but the trend of pantry stocking has subsided. The demand has been strong and buoyant.
• For GALAXY’s products, the pipeline got built in September and that should translate into sales for their customers in December quarter.
• Even on exports, the demand has been pretty strong but supply chain challenges remain. Getting the containers is a challenge and even if they get the containers, the freight rates have gone through the roof. Demand remains strong but supply chain challenges remain.
• The expansion plans are on track and he remains hopeful of commissioning the existing products by 1QFY22.
• They have acquired new land and the process of applying for clearance will take some time.
• GALAXY is not opting for the PLI scheme now but they would be happy expanding in the existing premises.
• For the last 2-3 years, they incurred a capex of Rs 1300-1400 mn every year financed through internal accruals. The capex for the next year or two will also be financed through internal accruals.
• Their R&D expenditure has been about 1.5% of their sales consistently. The entire R&D has been in-house for them.
• He expects 6-8% volume growth in FY22 and the growth will be gradual over time.

Consensus Estimate: (Source: market screener website)
• The closing price of Galaxy Surfactants was ₹ 2280 /- as of 07-January-2021. It traded at 32x/ 27x/ 24x the consensus earnings estimate of ₹ 71.5/ 83.1 / 95.7 per share for FY21E/FY22E/FY23E respectively.
• The consensus target price of ₹ 2118 implies a PE multiple of 22x on FY23E EPS of ₹ 95.7/-.

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 Chemicals, Galaxy Surfactants 0 Comments Read more...
30 Dec

Expect 2021 tech spend growth to be in mid-single digits – Mphasis

Update on the Indian Equity Market:
On Tuesday, Nifty 50 ended at an all-time high of 13,933 (+0.4%), as gains in the banking, IT, and Technology sectors propelled the index higher. Among the stocks, INDUSINDBK (+5.7%), TECHM (+2.2%), and AXISBANK (+2.1%) led the gainers while HINDALCO (-2.1%), NESTLEIND (-1.8%), and COALINDIA (-1.7%) led the laggards. PRIVATE BANK (+1.6%), BANK (+1.4%), and FINANCIAL SERVICES (+1.0%) led the sector gainers. MEDIA (-1.5%), METAL (-1.1%), and REALTY (-0.3%) led the sectoral losers.

Excerpts of an interview of Mr. Nitin Rakesh, CEO & Executive Director, Mphasis with CNBC TV18 on 29th December 2020:
• Mphasis has witnessed a good expansion of deal pipeline in the last 3-4 quarters but the type of deals is different. The conversation has been about transformation deals, and acceleration of the work done for clients, such as the adoption of application transformation, and moving work to the cloud.
• Their guidance for a pretty strong year in the direct business remains on track. There were 87% (in terms of Total Contract Value (TCV)) more deals done in 1HFY21 compared to 1HFY20. This is expected to translate nicely to the overall revenue momentum.
• The pipeline is pretty strong in terms of the size of deals, the number of deals, and the nature of deals are very encouraging.
• They are expanding their business in Europe, which was resilient to lockdowns in certain areas. Mr. Rakesh feels the impact of these lockdowns needs to be seen on the sales pipeline. In the short to medium term, he believes they are good to sustain through the lockdowns.
• The growth in the business has been broad-based. Hi-tech, banking, logistics – these segments have done well.
• He believes the recovery post the Covid-19 crisis will be different compared to the recoveries from the Y2K crisis and the global financial crisis. This is primarily due to shifting in consumption patterns from a technological standpoint, which will change the importance of technology in every business. Second, the type of competency and capability required is going to be different.
• The market opportunity will exist over the next 3 years. The total tech spend will go up probably higher than it has been in the last 3-5 years. The tech spends are expected to grow in mid-single digits in CY21.
• He believes Mphasis will see above-market growth.
• Mphasis has a pretty robust investment plan. There has been investment in two new tribes in the last six months- Experience and Everything as a platform. They are also investing ahead of the curve in areas such as Quantum Computing.
• The entire value chain that involves all things cloud, AI and machine learning will the areas where Mphasis will keep investing.

Consensus Estimate: (Source: market screener website)
• The closing price of Mphasis was ₹ 1,555/- as of 29-December-2020. It traded at 24x/ 20x/ 18x the consensus earnings estimate of ₹ 66/ 77 /87 per share for FY21E/FY22E/FY23E respectively.
• The consensus target price of ₹ 1,569 implies a PE multiple of 18x on FY23E EPS of ₹ 87/-.

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