Author - Mrunmayee Jogalekar

  • Mrunmayee Jogalekar
02 Mar

Expect 400,000 + volumes in March 2021– Bajaj Auto

Update on the Indian Equity Market:

 

On Tuesday, Nifty closed 1.1% higher at 14,919. Within NIFTY50, TATAMOTORS (+5.1%), M&M(+4.6%), and WIPRO(+4.5%) were the top gainers, while ONGC (-2.6%), HDFC(-1.2%), and DRREDDY (-1.1%) were the top losing stocks. Among the sectoral indices, AUTO (+3.2%), IT (+3.0%), and FMCG (+1.4%)were the top gainerswhile PSU BANK (-0.2%) was the only sector to end with losses.

 

Expect 400,000 + volumes in March 2021– Bajaj Auto

 

Excerpts of an interview with Mr. Rakesh Sharma, ED, Bajaj Auto, aired on CNBC-TV18 on 1st March 2021:

  • Bajaj Auto reported total wholesale volumes of 375,017 units for February 2021, a growth of 6% YoY. According to Mr. Sharma, there was a shortfall in the volumes due to several factors.
  • Domestic 2-wheeler retails were higher than wholesale as Bajaj Auto was deliberately clearing stock. February onward, Bajaj Auto has started to focus aggressively on the entry-level segment.
  • The 2nd big shortfall was in exports, as there was a big spill over due to shipping container schedule. Bajaj Auto also lost some volumes in premium segment in domestic as well as exports market.
  • As all the above factors go away, Mr. Sharma expects monthly volumes to again go beyond 400,000 units in March 2021.
  • A 4% hit from raw material inflation is expected in 4QFY21. Bajaj Auto’s response to this will be after a very careful view of the fragile demand recovery.
  • Sharma estimates that the domestic 2-wheeler industry retails had a YoY decline in February 2021.Bajaj Auto saw a YoY retail growth. But a decline in retail volumes is not a good sign for the industry.
  • Bajaj Auto has taken a price hike in 3QFY21, but that has not impacted the customers significantly. The strategy is to increase the prices and simultaneously improve the product proposition for the customer. Further hikes will have to be taken in fragments, and cannot be taken at once.
  • Bajaj Auto is seeing a steady increase in 3-wheeler sales which is an important segment for the company. This is the tipping point for Bajaj to reach out to the customer with innovative financing schemes.
  • As Bajaj Auto was gaining market share in above 125 cc segment, they were losing in the below 125 cc segment. To address this, Bajaj Auto has now taken some initiatives which will help them grow both the segments. But for the industry, the below 125 cc segment has suffered.

 

Asset Multiplier Comments:

  • For the month of February 2021, Hero Motocorp has reported domestic 2-wheeler wholesales of 484,433 units, a growth of 0.8% YoY. For the same period, TVS Motors has reported 195,145 units, a growth of 15% YoY. Against this, Bajaj Auto’ s domestic 2-wheeler segment reported 1% YoY growth.
  • For domestic 3-wheelers in February 2021, Bajaj Auto reported a 27% YoY decline in wholesales while TVS Motors reported a 24% YoY decline.
  • Sales in the 3-wheeler segment saw steeper declines since the covid-19 pandemic on account of lower mobility. Several banks and NBFCs had taken a very cautious approach to auto lending. As 3-wheelers are predominantly purchased through loans, low finance availability put a roadblock in 3-wheeler volume recovery.

 

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

  • The closing price of BAJAJ-AUTO was ₹ 3,950as of 2-March-2021. It traded at 25x/ 20x/ 18x the consensus EPS estimate of ₹ 158/193/221 for FY21E/ FY22E/ FY23E respectively.
  • The consensus target price of ₹ 3,950/- implies a PE multiple of 18x on FY23E EPS of ₹221/-.

 

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 Bajaj Auto , , 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...
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...
15 Feb

This week in a nutshell (Feb 8th to Feb 12th)

Technical Talks

  • NIFTY opened the week on 8th Feb at 15,064 and closed on 12th Feb at 15,163, a weekly gain of 0.7%. The index was range-bound during the week. With RSI (69) nearing the overbought zone and MACD on a declining trend, the technical indicators show a possible decline. On the downside, 10DMA of 14,921 could act as a support. On the upside, 15,257 is the key level to watch out for as the index tried to test this level during the week but could not sustain.

Weekly highlights

  • Foreign Institutional Investors (FIIs) continued to be net buyers in Indian equity of Rs 5,870 mn, but the quantum of inflows declined from the previous week of Rs 12,1340 mn. Conversely, Domestic Institutional Investors (DIIs) continued to be net sellers with an increased net outflow of Rs 9,560 mn vs the previous week Rs 5,643 mn.
  • Sectoral updates:
    • IRDAI released monthly business data for January 2021 for both Life and non-life insurance companies.
    • For the General insurance industry as a whole, the growth in Gross Direct Premium Underwritten was +6.7% YoY for the month and +2.8% YoY for FY21 YTD.
    • For the Life Insurance industry, the New Business Premium growth was +3.7% YoY for the month and a decline of -1.2% YoY for FY21 YTD.

 Things to watch out

  • The 3QFY21 results season will be nearly concluded in the coming week. With that, the result-led stock-specific movements will come to an end and the focus may again shift to macro developments.
By Uncategorized, Weekly update 0 Comments Read more...
05 Feb

Expect double-digit volume growth in FY22E – BIRLACORPN

Update on the Indian Equity Market:

On Friday, Nifty closed 0.2% higher at 14,924. Within NIFTY50, SBIN (+11.3%), TATASTEEL (+4.9%), and DIVISLAB (+4.5%) were the top gainers, while AXISBANK (-3.1%), BHARTIARTL (-2.7%), and TATAMOTORS (-2.4%) were the top losing stocks. Among the sectoral indices, PSU BANK (+3.6%), PHARMA (+1.7%), and METAL (+1.0%) were the top gainers while MEDIA (-4.5%), AUTO (-1.3%), and IT (-0.9%) were the top losing sectors.

Expect double-digit volume growth in FY22E – BIRLACORPN

Excerpts of an interview with Mr. Aditya Saraogi, CFO, Birla Corporation, aired on CNBC-TV18 on 4th February 2021:

  • BIRLACORPN management expects volumes of 13 mn ton in FY21 as compared to 13.6 mn ton in FY20. Lower volumes in 1QFY21 due to the pandemic have impacted FY21 full year volumes to be marginally lower YoY.
  • In FY22, management expects demand for cement to be strong on back of Government’s focus on growth and investments. Management expects double digit volume growth for BIRLACORPN in FY22.
  • Growth in demand is primarily coming from rural and infrastructure segments. Tier 2 & 3 cities are also going well.
  • In 4QFY21, management expects double digit YoY growth in volumes. Realizations have come off a bit and there is increase in cost due to fuel price inflation. As a result, margins may be under pressure in 4QFY21E and EBITDA per ton may come down by ~Rs 100 or so.
  • Going ahead, given the robust demand environment, management expects no difficulty in passing on increased costs and expects to maintain EBITDA margins in coming quarters.
  • BIRLACORPN is in the process of adding 4 mn ton capacity by Sep-2021. They also have an ambitious target of achieving 25 mn ton capacity by FY25 from current capacity of 15 mn ton.
  • BIRLACORPN’s current net debt position is Rs 35 bn and peak net debt is expected to be below Rs 40 bn. Cost of capital for BIRLACORPN has come down by 150-170 bps.

Consensus Estimate (Source: market screener website)

  • The closing price of BIRLACORPN was ₹ 831 as of 05-February-2021. It traded at 12x/ 12x/ 10x the consensus EPS estimate of ₹ 67.0/69.3/84.2 for FY21E/ FY22E/ FY23E respectively.
  • The consensus target price of ₹ 973/- implies a PE multiple of 12x on FY23E EPS of ₹ 84.2/-.

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 Birla Corporation, Cement 0 Comments Read more...
28 Jan

Seeing progress on the order book and large deals– Cyient

Update on the Indian Equity Market:

 

On Thursday, Nifty closed 1.1% lower at 13,818. Within NIFTY50, AXISBANK (+5.5%), SBIN(+2.6%), and IOC (+1.6%) were the top gainers, while HINDUNILVR (-3.7%), MARUTI(-3.4%), and WIPRO (-3.0%) were the top losing stocks. Among the sectoral indices, BANK (+6.0%), and PRIVATE BANK (+0.2%)were the only gainerswhileREALTY (-2.2%), IT (-2.2%), and FMCG (-1.9%) were the top losing sectors.

 

Seeing progress on the order book and large deals– Cyient

 

Excerpts of an interview with Mr. Karthikeyan Natarajan, President & COO, Cyient, aired on CNBC-TV18 on 28thJanuary 2021:

  • After a dip in performance in 1QFY21, Cyient is seeing a steady sequential recovery. Revenue growth and margins improved in 2QFY21 and further in 3QFY21 as well. Management expects further improvement in 4QFY21.
  • Cyient management has been able to bring in operating efficiency on the back of off shoring, utilizations, improving their pyramid structure, and through automation.
  • Cyient is making steady progress on digital transformation and expect that to accelerate in FY22E.
  • Management expects a revenue decline of ~10% in FY21E.
  • Cyient saw softness in aerospace & defense and few other verticals in the period between 1QFY20 to 1QFY21. Cyient restructured about 3 months ago and is now focusing more on good markets which should put them in a much better shape.
  • Cyient saw some one-off supply chain issues in the medical technology and healthcare business which led to 10% decline on a QoQ basis in that segment. But management expects the YoY growth momentum in this segment to remain strong.
  • Order book in 3QFY21 also included some impact of pent up demand. Management is seeing progress in order intake and has closed about 5 large deals worth USD 106 mn.
  • Within aerospace segment, Defense continues to be strong. Commercial aerospace remains soft but management hopes to stabilize to 3QFY21 levels in the near term. The next level of growth in aerospace segment will come post the vaccination drive over next 6-9 months.

 

Consensus Estimate (Source: market screener website)

  • The closing price of CYIENTwas ₹ 625as of 28-January-2021. It traded at 19x/ 16x/ 14x the consensus EPS estimate of ₹33.4/39.5/45.8 for FY21E/ FY22E/ FY23E respectively.
  • The consensus target price of ₹ 621/- implies a PE multiple of 14x on FY23E EPS of ₹45.8/-.

 

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 Cyient, IT, Uncategorized 0 Comments Read more...
20 Jan

Used data analytics to gain rural market share – L&T Finance

Update on the Indian Equity Market:

 

On Wednesday, Nifty closed 0.9% higher at 14,645. Within NIFTY50, TATAMOTORS (+6.1%), ADANIPORTS (+4.4%), and WIPRO (+3.4%) were the top gainers, while POWERGRID (-2.1%), SHREECEM (-1.8%), and NTPC (-1.6%) were the top losing stocks. Among the sectoral indices, AUTO (+2.3%), IT (+2.2%), and PSU BANK (+2.1%) were the top gainers while FMCG (-0.2%) was the only losing sector.

 

Used data analytics to gain rural market share – L&T Finance

 

Excerpts of an interview with Mr Dinanath Dubhashi, MD & CEO, L&T Finance (L&TFH), aired on CNBC-TV18 on 18th January 2021:

  • L&TFH reported 10% YoY PAT growth in 3QFY21 on the back of good disbursements, good fees, good performance on liquidity and cost of funds, and maintaining asset quality.
  • The industry has seen an uptick in demand from rural India. This is due to a combination of structural as well as seasonal factors. The general wellbeing of farmers due to several government schemes has led to higher discretionary spending ability. Seasonal factors including good rainfall for 3 years, good reservoir levels, excellent Kharif prices, and rabi sowing higher YoY have all contributed to rural demand.
  • L&TFH has used data analytics to benefit from the rural demand surge. It has helped L&TFH to gain market share till 2QFY21 and maintain it in 3QFY21. 
  • In 3QFY21, L&TFH had all-time high disbursements in tractors and 2-wheelers.
  • GNPA has marginally moderated to 5.12% in 3QFY21 vs 5.19% in 2QFY21. NNPA increased to 1.9% in 3QFY21 from 1.6% in 2QFY21.
  • Collection efficiency is better than pre-Covid levels for the farm segment, back to the pre-Covid level for the 2-wheeler segment, good collections are happening even in the wholesale businesses.
  • On provisions, the worry has not ended but new worries are not coming in either. L&TFH has not created more provisions on Stage 1 & 2 assets in 3QFY21.  In 3QFY21, L&TFH has provided Rs 1,440 mn for an HFC exposure to the extent of the entire gap between existing provisions and expected resolution money. 
  • L&TFH is still very much RoE focused, but this year is not the one to be overly concerned about RoE. This year is about remaining liquid, solvent, maintaining excellent asset quality, and maintaining market position.

 

Consensus Estimate (Source: market screener website)

  • The closing price of L&TFH was ₹ 104.2 as of 20-January-2021. It traded at 1.3x/ 1.2x/ 1.1x the consensus BVPS estimate of ₹ 77.7 /85.9 /97.6 for FY21E/ FY22E/ FY23E respectively.
  • The consensus target price of ₹ 103.8/- implies a PE multiple of 1.1x on FY23E BVPS of ₹ 97.6/-.

 

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 L&T Finance Holdings, NBFC , , , , 0 Comments Read more...
12 Jan

Expect a boom in the real estate sector in next few years– Godrej Properties

Update on the Indian Equity Market:

On Tuesday, Nifty closed 0.5% higher at 14,563. Within NIFTY50, TATAMOTORS (+7.5%), GAIL(+4.7%), and BHARTIARTL (+4.0%) were the top gainers, while ASIANPAINT (-3.2%), TITAN(-2.2%), and NESTLEIND (-2.1%) were the top losing stocks. Among the sectoral indices, PSU BANK (+6.0%),REALTY (+2.8%) and MEDIA (+1.4%) were the top gainerswhilePHARMA (-1.3%), FMCG (-0.6%), and IT (-0.2%) were the only losing sectors.

Expect a boom in the real estate sector in next few years– Godrej Properties

Excerpts of an interview with Mr. Pirojsha Godrej, Executive Chairman, Godrej Properties (GODREJPROP), aired on CNBC-TV18 on 11thJanuary 2021:
● The Maharashtra Government has cut real estate premiums by 50% until 31st December 2021.
● In 1HFY21, volume growth went up 11% for GODREJPROPwith ~4.2 mn sq. ft. of sales in the same period.
● Covid-19 concerns are in the past now for the company and the management is expecting a much better 2HFY21E. 4QFY21E will be especially good as the company has planned several launches. The overall industry momentum is becoming positive.
● On the cash flow front, collections in 3QFY21 were much stronger than 1HFY21 as construction resumed in full swing.
● Mumbai, Pune, NCR, and Bangalore are important markets forGODREJPROP and the company is seeing good traction across these markets.
● Decisions of MaharashtraGovt. to first reduce stamp duty and now premium is very encouraging for the real estate market in Maharashtra. As a result management expects to see Mumbai market to do well.
● Final notification in relation to reduction in premiums is yet to come out. Management’s sense currently is that there will be about 5-10% reduction in overall development costs depending on the type of project. That is a meaningful reduction which will spur activity in the sector.
● Premium cost is an upfront cost to be borne by thedeveloper. The upfront expense will come down significantly which will improve liquidity.
● The 2 steps taken by the government, in combination with other factors- increased desire for home ownership post covid-19, affordability in terms of lower interest rates, property prices not having appreciated in last 5-7 years- bode well for the real estate sector in years ahead.
● Rise in commodity prices is concerning. But overall, the Government’s attention on real estate sector as a lever for economic growth is meaningful. The industry can take some cost increase in stride provided the overall industry continues to move in a positive direction.
● A boom in real estate sector could start sometime in next couple years. Fresh inventory addition has been limited in the last few years and the demand-supply equilibrium will tilt as demand starts coming back gradually.
● Confidence to invest into under construction houses has started coming back- but the beneficiaries of that are largely the leading players in each market and not the smaller players.

Consensus Estimate (Source: market screener website)
● The closing price of GODREJPROPwas ₹ 1,474as of 12-January-2021. It traded at 154x/ 96x/ 61x the consensus EPS estimate of ₹9.6/15.4/24.0 for FY21E/ FY22E/ FY23E respectively.
● The consensus target price of ₹ 960/- implies a PE multiple of 40x on FY23E EPS of ₹24.0/-.

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 Godrej Properties, Real estate, Uncategorized , , 0 Comments Read more...
04 Jan

Several good products in the pipeline – Lupin

Update on the Indian Equity Market:

On Friday, Nifty closed 0.3% higher at 14,019. Within NIFTY50, ADANIPORTS (+4.4%), TCS (+2.4%), and ITC (+2.3%) were the top gainers, while ICICIBANK (-1.4%), SBILIFE (-1.0%), and HINDALCO (-1.0%) were the top losing stocks. Among the sectoral indices, PSU BANK (+3.3%), AUTO (+0.9%), and IT (+0.8%) were the top gainers while PRIVATE BANK (-0.3%), FINANCIAL SERVICES (-0.2%), and BANK (-0.1%) were the only losing sectors.

Several good products in the pipeline – Lupin

Excerpts of an interview with Mr. Ramesh Swaminathan, ED, and Global CFO, Lupin, aired on CNBC-TV18 on 30th December 2020:
● In the case of new launches- after a drought of the past few years, Lupin had several launches in the recent past. Lupin has launched 12 new products. The most important of the launches has been Albuterol. Albuterol has a large market and the overall inhalations segment is still a growing market in the US.
● Lupin has a pipeline of 150 product launches in the US over the next 3-5 years. Some of that was delayed due to plant issues but now Lupin will launch the bulk of that. Lupin’s story is all about future products in specific areas such as inhalation, complex injectables, and biosimilars.
● In the inhalations segment, Lupin is working on at least 15-20 products.
● Over the last several years, Lupin has invested 9%-9.5% of sales in R&D. This spends will pay returns in the next few years- which was lacking in the past. Lupin had a lack of good products to launch in the last 3-4 years. The company now has a few really good products which will come up in the next few years.
● In 2HFY21E, India will pick up, and going forward growth will sustain. In the US, Lupin has already reached the USD 180 mn per quarter mark and the performance will be better by 4QFY21E.
● Gross margin has been around 63-64% mark which management thinks is a good level. A lot of cost-cutting measures have been implemented which have delivered results in 2QFY21. EBITDA margin was 14.7% in 1QFY21, 16.7% in 2QFY21. Management expects that to stabilize and increase to 20%-21% by 4QFY21E.
● Lupin’s Somerset facility in New Jersey saw 13 observations. Management is disappointed but thinks things are still under control. Somerset plant is not a very big producer as compared to plants in India.
● Management is confident that Indian plants that have been impacted will get resolved. But it’s a waiting game depending on USFDA’s timeline in the covid-19 situation. There are no new filings from the Mandideep unit which has a Warning letter. The same cannot be said about Goa and Pithampur 2 which are very important sites.

Consensus Estimate (Source: market screener website)
● The closing price of LUPIN was ₹ 1,002 as of 1-January-2021. It traded at 43x/ 27x/ 22x the consensus EPS estimate of ₹ 23.4/36.8/44.8 for FY21E/ FY22E/ FY23E respectively.
● The consensus target price of ₹ 968/- implies a PE multiple of 22x on FY23E EPS of ₹44.8/-.

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 Lupin, Pharmaceuticals , , , 0 Comments Read more...
28 Dec

Health and hygiene segments seeing good growth– Emami

Update on the Indian Equity Market:

On Thursday, Nifty closed 1.1% higher at 13,749. Within NIFTY50, TATAMOTORS (+3.9%), SUNPHARMA(+3.2%), and AXISBANK (+2.8%) were the top gainers, while INFY (-1.3%), WIPRO(-1.0%), and NSETLEIND (-0.8%) were the top losing stocks. Among the sectoral indices, FINANCIAL SERVICES (+1.8%),BANK (+1.7%) and PRIVATE BANK (+1.6%) were the top gainerswhileMEDIA (-0.8%), IT (-0.7%), and REALTY (-0.4%) were the only losing sectors.

Health and hygiene segments seeing good growth– Emami

Excerpts of an interview with Mr. Mohan Goenka, Director, Emami, aired on CNBC-TV18 on 23rdDecember 2020:
● The Covid-19 worries are now over for Emami. Emami delivered double digit YoY growth in 2QFY21 and the management expects similar YoY growth in 3QFY21E. The resumption of growth is to do with Emami’s product range which includes health, immunity, and hygiene products.
● Winter is the key season for Emami and it has set in well in most parts of India. Some healthcare products that have done well because of covid-19, continue to do so. These 2 factors are leading to sustainability of last quarter’s growth.
● Emami is a rural play which is also helping with the growth.
● Emami is not seeing any input cost pressure. Margins are in an expanding trajectory and that continues.
● Due to Covid-19, health has been in focus. Zandu is an established brand that plays in that area. Emami also focused on Chyawanprash, honey and some other product portfolios which have grown well- almost 40% in 2QFY21E.
● The promoters are committed to bringing the pledging down to zero in the next few quarters.
● Emami has launched multiple products particularly in the hygiene segment. Emami is spending good amount of money on advertising for these products. Because margins are at all time high would be investing more into the business.
● Advertising as % of sales will remain in range of 17%-18%.
Consensus Estimate (Source: market screener website)
● The closing price of Emamiwas ₹ 426as of 24-December-2020. It traded at 44x/ 36 x/ 31x the consensus EPS estimate of ₹9.8/11.8/13.8 for FY21E/ FY22E/ FY23E respectively.
● The consensus target price of ₹ 435/- implies a PE multiple of 32x on FY23E EPS of ₹13.8/-.

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