Author - Mrunmayee Jogalekar

  • Mrunmayee Jogalekar
29 Jun

Aspirational middle class buying from Tier 3,4,5 cities will drive growth- Blue Star

Update on the Indian Equity Market:

On Tuesday, NIFTY closed 0.4% down at 15,748. Top gainers in NIFTY50 were POWERGRID (+2.3%), CIPLA (+1.5%), and NESTLEIND (+1.3%). The top losers were IOC (-2.4%), ONGC (-2.2%), and HINDALCO (-2.1%). The only sectoral gainers were PHARMA (+0.6%) and FMCG (+0.5%) while the top sectoral losers were PSU BANK (-1.5%), METAL (-1.2%), and PRIVATE BANK (-1.0%).

Aspirational middle class buying from Tier 3,4,5 cities will drive growth- Blue Star

Excerpts of an interview with Mr. B Thiagarajan, MD, Blue Star (BLUESTARCO), aired on CNBC TV18 dated 29thJune 2021:

  • Markets started reopening in first week of June 2021. Since then, demand has been much better than anticipated. The loss of summer sales will still keep the numbers lower than 1QFY20 by almost 25-30%. However, sales in 1QFY22 will be much better than 1QFY21.
  • In January 2021, BLUESTARCO took a price hike of 5-8% due to cost inflation. Despite that, BLUESTARCO had record sales in 4QFY21with 37% YoY growth.
  • BLUESTARCO took a second price hike in April 2021 to the tune of 3-5%. As the company cannot absorb the exorbitant input cost inflation, it plans to take a third price hike in mid-August 2021.
  • Naturally, consumers have migrated to lower end products and may continue to do that due to the several price hikes.
  • Mr.Thiagarajan maintains the guidance of 8-8.5% margins in the cooling products. BLUESTARCO does not want to sacrifice margins to gain volume.
  • Government’s Production linked incentive (PLI)scheme will have a positive impact in coming months.
  • Embracing the technology of aluminium heat exchangers will reduce the costs and increase energy efficiency for AC industry. Auto industry has shifted to this technology while the AC industry has not done so yet.
  • The next energy level change is scheduled for 1st January 2022 which will push up prices by another 7%. For demand to continue to grow at least at 10% CAGR, these cost rationalizationmeasures will have to be taken.
  • For room ACs, delivering 8% EBITDA margin is possible in 1HFY22. 8.5% is the upper target band which may not be possible in the short term.
  • Demand in Tier 1 cities has been worst affected. For BLUESTARCO, Tier 3,4,5 cities form 65% of revenue. This aspirational middleclass segment in Tiers 3,4,5 cities is what will drive the growth going ahead so BLUESTARCO has repositioned itself in line with this expectation.

 

Asset Multiplier comments:

  • Industries across the board have been facing input cost pressures and are trying to pass on the costs through price hikes.
  • However, passing on the entire cost inflation is proving to be difficult in an already sensitive demand scenario.
  • Consumer discretionary items are sensitive to pricing, so companies will have to calibrate pricing based on competitive scenario. Consumers will shift to a lower priced product if the price difference is large.

 

Consensus Estimate: (Source: market screener website)

 

  • The closing price of BLUESTARCO was ₹ 815/- as of 29-June-2021.  It traded at 44x/ 31x the consensus earnings estimate of ₹ 18.5/ 26.7 for FY22E/23E respectively.
  • The consensus price target is ₹ 819/- which trades at 31x the earnings estimate for FY23E of ₹ 26.7/-

 

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 Blue star, Consumer durable, Uncategorized 0 Comments Read more...
19 Jun

This Week in a nutshell (June 14th to June 19th)

This Week in a nutshell (June 14th to June 19th)

Technical talks

NIFTY opened the week on 14th June at 15,812 and closed 1% lower on 18th June at 15,683. The index came off from it’s all-time high levels as indicated by last week’s RSI and MACD trends. The index has broken past 10DMA of 15,749 but seems to have found support at 20DMA of 15,603. These two levels on either side will be crucial indicators to understand the index movement hereon. 

Weekly highlights

  • In response to the improving economic indicators and rising inflation, the US Federal Reserve indicated that fed interest rate hikes could start in 2023. The earlier indication was for the interest rates to remain near zero throughout 2023 and only start increasing in 2024. Rising interest rates would mean funds flowing away from equities and into the debt market as well as out of emerging markets and into the US. This development led to some consolidation in broader equity indices in the US as well as India. 
  • In it’s monthly bulletin, RBI said that the impact of the covid-19 second wave led lockdowns has impacted the FY22E output by Rs 2 lakh crore. The report also said that unlike the first wave, the second wave has impacted rural India and in turn, the rural demand scenario.
  • Shares of Adani group companies tumbled in response to a report stating that National Securities Depository Ltd. (NSDL) had frozen accounts of 3 foreign funds who are among top investors of Adani group companies. Despite clarifications from the group, the stocks continued to decline for most of the week- some declining as much as 18%. 
  • Foreign Institutional Investors (FII) continued to be net buyers of Indian equities of Rs 10,596  mn. Domestic Institutional Investors (DII) continued their selling spree, with a net outflow of Rs 4,878 mn.

Things to watch out for next week

  • As the result season is now well behind us, the stock markets will be driven by macro developments. The covid-19 situation as well as vaccination drive will continue to be important metrics to be tracked. 

 

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 #WeekInANutshell 0 Comments Read more...
24 May

Gaining market share due to shift from unorganized to organized sector- HAVELLS

Update on the Indian Equity Market:

 

On Monday, Nifty closed 0.2% higher at 15,198. Within NIFTY50, IOC (+4.9%), BPCL(+2.8%), and SBIN(+2.4%) were top gainers, while SHREECEM (-2.5%),JSWSTEEL(-2.3%), and TATASTEEL (-1.9%) were the top losing stocks. Among the sectoral indices, PSU BANK (+2.1%), REALTY (+1.4%), and MEDIA (+1.2%) were the highest gainers, while METAL (-0.6%) and FMCG (-0.3%) were the only losing sectors.

 

Gaining market share due to shift from unorganized to organized sector- HAVELLS

 

Excerpts of an interview with Mr. Anil Rai Gupta, CMD, Havells India (HAVELLS), aired on CNBC-TV18 on 21stMay 2021:

  • HAVELLS reported a strong performance in 4QFY21. Even 1QFY22E started off well with continued growth momentum but has been hampered as the covid-19 second wave progressed. Mr. Gupta believes that things should start looking up fromJune 2021.
  • HAVELLS margins contracted 80 bps in 4QFY21. Any movement in raw material costs is passed on with a bit of lag. Due to the sharp increase in raw material costs in 2HFY21, the lag has been longer which led to margin contraction in some categories. As raw material prices start stabilizing, Mr. Gupta expects the margins to normalize by 2QFY22E.
  • HAVELLS made foray into rural India only a couple years back. They have expanded distribution that resulted in 100% growth for the segment in FY21. Rural sales now form 4-5% of overall sales. Rural India is in stress right now but Mr. Gupta still expects it to be an area of big growth potential for HAVELLS.
  • Post the 1QFY21 lockdown, consumer products (contributes to 75% of total revenues)saw good growth in 2QFY21 and 3QFY21. Industrial products segment reported revenue decline in the same period and only started growing in 4QFY21. Mr. Gupta believes that the industrial and infra segment should come back to normalized levels post the current lockdown.
  • Within the consumer products segment, the growth in FY21 largely came from electrical products such as fans, domestic appliances, and personal grooming appliances. As housing sales started improving from 3QFY21, installation products like switches and sockets also started growing.
  • Covid-19 led disruption has been an opportunity for HAVELLS to gain market share from unorganized sector. Mr. Gupta expects to see more benefits on market share post the 2nd
  • HAVELLS sawa lot of restructuring on operating costs and improvement on the technology side in FY21. As some cost savings are sustainable, going ahead Mr. Gupta expects there will be margin expansion compared to FY20.

Asset Multiplier Comments

  • Raw material cost inflation has affected the entire spectrum of sectors and thus companies have taken a hit on their margins. Many companies have taken a cautious approach in taking price hikes as the demand scenario is a little sensitive currently.
  • As companies start taking the required price hikes gradually, margin profiles are expected to improve.
  • Post the lockdowns in FY21, there was a big spike in consumer spending as there was pent up demand in the market. Whether that phenomenon repeats and if it does, will it be to the same extent remains to be seen.

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

  • The closing price of HAVELLSwas ₹ 1,016as of 24-May-2021. It traded at 55x/ 46x the consensus EPS estimate of ₹ 18.5/22.1 for FY22E/ FY23E respectively.
  • The consensus target price of ₹ 1,071/- implies a PE multiple of 49x on FY23E EPS of ₹22.1/-.

 

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 Havells , , 0 Comments Read more...
11 May

More price hikes will be required to mitigate input cost pressures- KANSAINER

Update on the Indian Equity Market:

 

On Tuesday, Nifty closed 0.6% lower at 14,851. Within NIFTY50, COALINDIA (+5.9%), NTPC (+4.9%), and IOC (+4.4%) were top gainers, while JSWSTEEL (-3.4%), HINDALCO (-3.0%), and KOTAKBANK (-3.0%) were the top losing stocks. Among the sectoral indices, PSU BANK (+1.1%), MEDIA (+0.8%), and REALTY (+0.3%) were the highest gainers, while FINANCIAL SERVICES (-1.3%), METAL (-0.9%), and PRIVATE BANK (-0.9%) were the top losers.

 

More price hikes will be required to mitigate input cost pressures- KANSAINER

 

Excerpts of an interview with Mr. Anuj Jain, ED, Kansai Nerolac Paints (KANSAINER), aired on CNBC-TV18 on 10th May 2021:

  • 4QFY21 was good for KANSAINER on a YoY basis because of low base of last year.
  • KANSAINER saw sales growth of 34.7% YoY in 4QFY21. For full year FY21, decorative paints segment saw a positive volume growth but a decline on the revenue/value basis.
  • In FY21, KANSAINER gained market share in the industrial paints segment, while growth in the decorative paints was at par with market growth.
  • April 2021started on a good sales momentum but the momentum dropped later due to rising Covid-19 cases in India.
  • KANSAINER’s 80-90% sales offices are closed in May. Factories are running as they fall under continuous process units but demand has taken a hit.
  • KANSAINER took a price hike for the decorative paints segment in March 2021.
  • In the Industrial segment, the company has started talks with its clients for price increases and started implementing price hikes in some places as well. But these price hikes are not enough as the raw material inflation is still raging. Mr. Jain thinks that more price hikes will be required to mitigate the input cost pressure.
  • KANSAINER’s Auto OEM clients are also facing significant pricing pressures. But it is inevitable for KANSAINER to pass on at least some, if not all, component of the input cost pressure.
  • Most Auto OEMs have declared shutdowns, so demand for KANSAINER’s products to the auto space is also expected to be very low till the situation improves.
  • FY22E revenues are difficult to predict at this point as paint industry is closely linked to the GDP growth and dependant on how the current situation evolves.

Asset Multiplier Comments

  • Companies across industries have been talking about significant input cost pressures. This comes at a time when demand is also impacted due to partial lockdowns imposed in several states in India. This is a double whammy situation for companies. On the one hand they are not able to pass on the entire rise in cost in a fragile demand scenario. At the same time, lower sales means that companies face negative operating leverage- contributing to further pressure on the margins.
  • How companies navigate this tough situation remains to be seen and will only get reflected in the 1QFY22E results.

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

  • The closing price of KANSAINER was ₹ 554 as of 11-May-2021. It traded at 50x/ 39x the consensus EPS estimate of ₹ 11.2/14.3 for FY22E/ FY23E respectively.
  • The consensus target price of ₹ 612/- implies a PE multiple of 43x on FY23E EPS of ₹14.3/-.

 

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 Kansai Nerolac, Paints 0 Comments Read more...
29 Apr

Rural demand is still strong, vehicle availability an issue – M&MFIN

Update on the Indian Equity Market:

 

On Thursday, Nifty closed 0.2% higher at 14,895. Within NIFTY50, JSWSTEEL (+9.6%), TATASTEEL(+6.6%), and BAJAJFINSV(+6.5%) were top gainers, while HEROMOTOCO (-2.4%),EICHERMOT(-2.3%), and BAJAJ-AUTO(-1.8%) were the top losing stocks. Among the sectoral indices, METAL (+4.5%), PHARMA (+0.3%), and FINANCIAL SERVICES 25/50 (+0.2%) were the highest gainers, while PSU BANK (-1.1%), AUTO (-1.0%), and FMCG (-0.4%) were the top losers.

 

Rural demand is still strong, vehicle availability an issue – M&MFIN

 

Excerpts of an interview with Mr. Ramesh Iyer, MD&Vice Chairman, M&M Financial (M&MFIN), aired on CNBC-TV18 on 26th April 2021:

  • M&MFIN represents the rural and semi-urban vehicle markets. Non-availability of vehicles has led to a lower growth in disbursements for M&MFIN.
  • MHCVswere a growth story for M&MFIN earlier and this segment has also been under pressure leading to lower growth.
  • Collections are good while disbursements are slower, again contributing to a slower growth on the balance sheet.
  • Iyer expects 2HFY22E to be strong once the availability of vehicles is smoothened. The demand in rural India is still strong.
  • Iyer thinks that they have sufficient provisioning for current book. As the 2nd Covid-19 wave is spreading to the rural areas unlike the 1st wave, M&MFIN will take a very cautious approach in 1HFY22E.
  • M&MFIN had GNPA of about 9% in 4QFY21. The seasonality of agriculture means that there is a tendency for GNPAs to go up in the 1st half of the financial year, even without Covid disruption. So 1HFY22E will be the correct period to watch out for in terms of asset quality trends.
  • Iyer is positive on the agri cash flow on back of good monsoon forecast. Infra projects were ready to start which have again faced disruption due to the second wave of covid-19. But as those projects also start post monsoon, the asset growth should be back in 2HFY22E.
  • Industry players are seeing customers wanting smaller EMIs and extended period- i.e. restructuring, which again seems necessary from customer perspective. Regulators’ decision on the same remains to be seen.

Asset Multiplier Comments

  • Several states have imposed lockdowns or restrictions to curb the rising Covid-19 cases. Vehicle demand could see further slowdown due to restricted public mobility, leading to slower disbursements for vehicle financiers.
  • Several banks as well as NBFCs that have reported 4QFY21 results have commented that current provisioning seems adequate. But the situation is still developing and any stress in the loan book will only be visible by the end of 1QFY22E.

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

  • The closing price of M&MFIN was ₹ 165 as of 29-April-2021. It traded at 1.3x/ 1.1x the consensus BVPS estimate of ₹ 131/145 for FY22E/ FY23E respectively.
  • The consensus target price of ₹ 186/- implies a PE multiple of 1.3x on FY23E BVPS of ₹145/-.

 

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 M&M Finance, NBFC 0 Comments Read more...
25 Apr

This week in a nutshell (April 19th to April 23rd)

Technical talks

NIFTY opened the week on 19thApril at 14,307and closed on 23rd April at 14,341, a marginal increase of 0.2%.NIFTY has been hovering around the 100 DMA of 14,374 throughout the week. This remains the crucial level to watch out for before moving in either direction.

Weekly highlights

  • FIIs continued their selling spree with a net outflow of Rs 49,870 mn during the week. DIIs continued to be net buyers as they pumped in Rs 62,250 mn in the week.
  • The daily rise in covid-19 cases in India reached a record on 22ndApril when the number crossed 0.33 mn. This is the highest number of new cases recorded in a single day in the world. Several Indian states have imposed stricter restrictions or lockdowns in response. The worsening conditions have led to volatility in the equity markets.
  • Government of India announced the next phase of Covid-19 vaccination drive will start from 1st May 2021. Everyone above the age of 18 will be eligible to get vaccinated. Amidst concerns over shortage of vaccines, producers have been asked to ramp up production. This is a developing scenario as there are also concerns regarding raw material procurement from the US.
  • US Equity indices came off from their record highs oflast week. The indices ended the week on a lower note as reports indicated that President Biden will propose to significantly increase capital gains tax for wealthy individuals.
  • Insurance Regulatory and Development Authority of India (IRDAI) reported March monthly business figures for life insurers. The industry New Business Premium (NBP) grew by 71% YoY. Mar-20 was a low base due to Covid-19 led disruption. For the quarter 4QFY21, the NBP growth was 35% YoY.

Things to watch out for next week

  • The ongoing 4QFY21 result season will gain traction next week as several big companies across sectors start to report quarterly numbers. Managements’ comments over the business impact of second wave of Covid-19 will be important.
By #WeekInANutshell, Uncategorized , , 0 Comments Read more...
07 Apr

Volume boost expected from commissioning of Western Dedicated Freight Corridor– CONCOR

Update on the Indian Equity Market:

 

On Wednesday, Nifty closed 0.9% higher at 14,819. Within NIFTY50, JSWSTEEL (+5.3%), WIPRO (+2.4%), and SBIN (+2.2%) were top gainers, while ADANIPORTS (-2.8%), TATACONSUM (-1.4%), and UPL (-1.3%) were the top losing stocks. Among the sectoral indices, PSU BANK (+1.9%), AUTO (+1.6%), and PRIVATE BANK (+1.5%) were the highest gainers, while no sector ended with losses.

 

Volume boost expected from commissioning of Western Dedicated Freight Corridor– CONCOR

 

Excerpts of an interview with Mr. V Kalyana Rama, MD& Chairman, Container Corporation of India (CONCOR), aired on CNBC-TV18 dated on 6th April 2021:

  • CONCOR had good volumes in 4QFY21. Overall for FY21, handling volumes for CONCOR were 2.8% less YoY, while originating volumes were higher on a YoY basis.
  • Rama hopes FY22E will be a good year as demand has picked up and is expected to continue. Export demand has also increased in the last 6 months.
  • CONCOR has paid Rs 5,900 mn to Indian Railways in relation to a dispute, and the issue is now resolved.
  • According to a comment by DIPAM (Department of Investment and Public Asset Management) secretary, divestment of CONCOR may not happen in 1QFY22E. CONCOR divestment can take place only after Indian Railways finalizes land lease policy, which has to be approved by the Cabinet.
  • Commissioning of Western Dedicated Freight Corridor (DFC) is expected to be completed by June 2022. Connection up to Palanpur is expected to start any day now. This will help in connecting to 2 ports- Mundra and Pipavav. This will be a big volume boost in the northern India container movement business. The connection upto Mumbai port will take another year.
  • The DFC will lead to higher revenues. There is also a possibility to increase EBITDA margins due to double stacking and high capacity wagons. CONCOR is planning to have a 100% double stacking movement for all containers meant for northern India.
  • In the short term, Mr. Rama expects more growth in EXIM business as exports are picking up. In the domestic market, he is seeing more people coming toward containerization which will also aid growth. In addition, CONCOR is focusing on bulk transportation of commodities.

Asset Multiplier Comments

  • In the Union Budget for FY22E, Government of India (GoI) has budgeted inflow of Rs 17.5 lakh mn from divestment in PSUs.
  • To kick start the privatization of PSUs, GoI will float the Expression of Interest (EoI) for divestment in CONCOR. GoI plans to divest 30.8% stake and cede management control in the Rs 355 bn market cap (as on 6th April 2021) company.
  • Several Indian as well as global companies seem to be interested in getting a stake in India’s largest container and terminal operator.
  • There has been scepticism on whether GoI will be able to successfully execute their PSU divestment strategy.  Success of this privatization will pave way for further divestments in other PSUs.

 

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

  • The closing price of CONCOR was ₹ 583as of 6-April-2021. It traded at 35x/ 27x the consensus EPS estimate of ₹16.7/21.4 for FY22E/ FY23E respectively.
  • The consensus target price of ₹ 520/- implies a PE multiple of 24x on FY23E EPS of ₹21.4/-.

 

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 CONCOR, Miscellaneous, Uncategorized , , 0 Comments Read more...
25 Mar

Capital raise on cards to fund aggressive growth plans – Can Fin Homes

Update on the Indian Equity Market:

On Thursday, Nifty closed 1.5% lower at 14,325. Within NIFTY50, TATASTEEL (+2.9%), DRREDDY (+0.8%), and ICICIBANK (+0.6%) were top gainers, while IOC (-4.0%),MARUTI (-3.9%), and COALINDIA(-3.4%) were the top losing stocks. Among the sectoral indices, METAL (+0.02%) was the only gainer whileMEDIA (-3.1%), AUTO (-2.8%), and PSU BANK (-2.6%) ended with the most losses.

Capital raise on cards to fund aggressive growth plans – Can Fin Homes

Excerpts of an interview with Mr. Girish Kousgi, MD& CEO, Can Fin Homes (CANFINHOME), published on Economic times dated on 24th March 2021:

  • CANFINHOME witnessed a decline in loan book in the last couple quarters. This was due to repayments being higher than incremental disbursements. But December 2020 onward, the business is seeing a comeback.
  • CANFINHOME’s disbursements have been strong since December 2020. December 2020 disbursements were equal to disbursements in October 2020 and November 2020 put together. February 2021 saw disbursements at an all-time high and March 2021 is expected to be even better.
  • The demand for affordable housing revived couple months ago, while the non-affordable housing demand is back to 90% levels.
  • Several financial institutions have been focusing on mortgage segment. CANFINHOME has changed its pricing strategy to retain customers and attract good customers.CANFINHOME has moderated its pricing to be at par with best banks in India. This will contribute to CANFINHOME’s expectation of 17-18% loan book growth in next few quarters.
  • CANFINHOME’s aggressive pricing strategy will put a pressure on its margins. Mr Kousgi said the management will look for opportunities to improve yields where possible.
  • CANFINHOME has a capital adequacy of 24% and leverage at 7.3x. While the capital adequacy is comfortable, Mr Kousgi says capital raise is shortly on the cards to fund aggressive growth plans for next 3-5 years.
  • Kousgi does not anticipate any additional covid-19 related provision requirement.

 Asset Multiplier Comments:

  • Demand for housing has seen a revival in last few months due to attractive prices, lower interest rates, lower stamp duties, and other benefits.
  • In the covid-19 era, banks refrained from lending to the more risky segments such as unsecured consumer loans, SMEs, and vehicle finance.Several banks have ramped up their lending in the home loans space due to lack of other lending options. This has led to increased competition in the mortgage lending space.

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

  • The closing price of CANFINHOMEwas ₹ 575 as of 25-March-2021. It traded at 3.0x/ 2.5x/ 2.1x the consensus BVPS estimate of ₹ 192/233/271 for FY21E/ FY22E/ FY23E respectively.
  • The consensus target price of ₹ 593/- implies a PB multiple of 2.2x on FY23E BVPS of ₹271/-.

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 Can Fin Homes, Housing Finance 0 Comments Read more...
21 Mar

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

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

Technical talks

  • NIFTY opened the week starting 15th  March at 15,048 and closed on 19th March at 14,744, declining 2% in the 5 trading sessions. 
  • The index broke its support of 50 DMA on Thursday and rebounded back to almost the same level on Friday. Now 50 DMA at 14,748 will be the crucial resistance level to watch out for. On the downside, the index may find support at 100 DMA of 13,909. 

Weekly highlights

  • This week, FII buying intensity increased as they pumped in Rs 58,929 mn in the Indian equity market. DIIs turned net sellers with Rs 30,366 mn net outflow from equities.
  • The Consumer Price Index (CPI) inflation for the month of February came in at 5.03% against 4.06% in January 2021. An increase in inflation reduces the scope for a further repo rate cut by the Monetary Policy Committee. Repo rate cuts are a monetary measure of boosting economic growth.
  • India’s trade data for the month of February was released this week. Exports saw a YoY growth of 0.7% to USD 27.9 bn, while imports saw a YoY jump of 7.0% to USD 40.5 bn. The trade deficit for February 2021 was USD 12.6 bn vs USD 10.2 bn for the same month last year.
  • For the month of January 2021, the Index of Industrial Production (IIP) declined 1.6%. YoY decline in IIP suggests that the economy is still not entirely out of the shadow of covid-19 issues.
  • GOI announced its much-anticipated vehicle scrappage policy this week. Under this policy, Commercial Vehicles (CVs) aged 20+ years and Passenger Vehicles (PVs) aged 15+ years will be de-registered in absence of a fitness certificate. The policy also includes incentives to vehicle owners for scrapping old vehicles including scrap value, road tax rebate, discount on new vehicles, and waiver of registration fees for new vehicles. This policy is expected to boost auto demand in an environment where auto sales have been suffering for the past several quarters.
  • The US Fed reiterated its stance on keeping the interest rates near zero in the next few years. This announcement acted as a reassurance to the market that the US central bank will continue to remain pro-growth.

Things to watch out for next week

  • The yearlong suspension of the Insolvency and Bankruptcy Board of India (IBC) is coming to an end on 25th March 2021. The suspension was implemented to protect the corporate debtors from defaulting due to the Covid-19 impact. If there is no further extension of the suspension, it will open up an important avenue for creditors to resolve bad assets.

 

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 #WeekInANutshell 0 Comments Read more...
08 Mar

Disbursement growth will be higher than AUM growth– CHOLAFIN

Update on the Indian Equity Market:

 

On Monday, Nifty closed 0.1% higher at 14,956. Within NIFTY50, UPL (+7.1%), GAIL (+4.3%), and LT (+3.4%) were the top gainers, while INDUSINDBK (-2.2%), SHREECEM (-2.2%), and BAJFINANCE (-2.1%) were the top losing stocks. Among the sectoral indices, PSU BANK (+1.6%), MEDIA (+1.0%), and METAL (+0.8%) were the top gainers while REALTY (-1.1%), FMCG (-0.5%), and FINANCIAL SERVICES (-0.4%) were the top losers.

 

Disbursement growth will be higher than AUM growth– CHOLAFIN

 

Excerpts of an interview with Mr. D Arul Selvan, Executive VP and CFO, Cholamandalam Investment and Finance (CHOLAFIN), aired on CNBC-TV18 on 4th March 2021:

  • Commercial Vehicles (CV) replacement has been delayed by about 2 years now due to a series of factors such as axle load norms, BS6 implementation, and covid-19 impact. Mr. Selvan expects the replacement demand to kick in as CVs have to be replaced sooner or later. February 2021 itself saw good growth across CV segments.
  • Disbursements will have good growth in FY22E, but the AUM growth will not be the same. During the moratorium period, disbursements dropped but AUM was not impacted in the absence of repayments. Now as repayments also happen, disbursement growth will be higher while the AUM growth will be lower.
  • CHOLAFIN is adequately provided and won’t see higher credit costs. The collections are also improving. February as a 28-day month generally has lower absolute collections. However, collections in February 2021 have been marginally higher than January 2021.
  • Selvan is seeing that the earning potential of customers is improving and they are now able to service loans comfortably.
  • CHOLAFIN’s 4QFY21E RoE should be significantly better than FY20 reported numbers and directionally, the RoE would now improve.
  • Mr Selvan expects that the NIMs will be stable. NIMs could have marginally improved but CHOLAFIN is now scaling up on M&HCV segment which has lower NIMs. M&HCV lending business has a lower yield but it is compensated by much lower operating expenses and lower loan losses.

 

Asset Multiplier Comments:

  • CV cycle recovery has been a matter of debate between industry players for some time now. Some companies seem to be banking on the hope that CV recovery is here, while some players think we are still some time away from the upcycle.
  • Lenders across board have been witnessing improvement in collection efficiency. This is attributable to opening up of the economy post lockdown.

 

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

  • The closing price of CHOLAFIN was ₹ 537 as of 8-March-2021. It traded at 4.5x/ 3.8x/ 3.1x the consensus BVPS estimate of ₹ 119/142/171 for FY21E/ FY22E/ FY23E respectively.
  • The consensus target price of ₹ 444/- implies a PB multiple of 2.6 on FY23E BVPS of ₹171/-.

 

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

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