Author - Neha Kshirsagar

13 Jan

Expect reasonable revenue growth for the industry in FY21– M&M

Update on the Indian Equity Market:
On Wednesday, Nifty ended flat at 14,565 while PSU banks outperformed. The top gainers for Nifty 50 were M&M (+5.7%), SBI (+4.6%), and Adani Ports (+4.4%) while the losing stocks for the day were Bajaj Finance (-2.9%), Shree Cement (-2.8%), and HDFC (-2.8%). Top gaining sectors were PSU bank (+3.3%), Auto (+0.9%), and Bank (+0.7%) while Pharma (-0.9%), Financial Service (-0.6%), and Realty (-0.3%) were the losing sectors.

Edited excerpts of an interview with Mr Pawan Goenka, MD & CEO, Mahindra & Mahindra (M&M); dated 12th January 2021 from Economic times:

The demand is now no longer a pent-up demand, it is a structural demand that is coming back.

With the new product launches, all companies have plans for 2021. Many of the companies had held back on product launches and that is certainly going to spur demand now. On top of that, if the government comes in with some kind of stimulus to grow the auto demand, then the demand will really take off and will lead to a great year.
The Heavy Commercial Vehicle (HCV) industry which was lagging for the last several months has started showing signs of revival. There was good growth in November and December. Once HCV is also on the growth path, the auto industry overall should look pretty good in FY22E.

Mr Goenka said GST rate cuts may not be possible because of the need for tax revenues in these difficult times, but GST rates should be simplified. There are eight or nine different GST rates. He hopes that the government will just keep two rates – 28% and 43% and not have all of these different rates. Right now, a rate reduction is not expected. When the economy is fully back on track, the government could reconsider rate reduction.
The massive cost cuts in 1Q & 2Q for the Company is not cost cutting but removing the fat. That is where a lot of the cost reduction has happened in terms of travel. Use of digital media for meetings has resulted in a significant reduction in cost in 1Q & 2Q FY21 and this will never come back. Maybe travel will go up somewhat but probably 75-80% will continue. The reductions have happened in events, inventory costs and communication costs. These will not come back to earlier levels, according to Mr Goenka. He said that more than half of the reduction is for good and continue to aid in the Company’s bottom line.

In the auto industry, this year there has not been any significant price cut or increased incentives given to propel demand.

Compliance with BS-VI emission norms has led to prices going up, therefore per unit revenue has gone up which will lead to a top-line increase for the Company. Given that volumes are also going up and the Company does not expect 2021 to be any worse than 2020 there will be a revenue growth for most companies. There are some companies that will do better, some will not and competition will continue. But overall for the industry, he sees reasonable revenue growth in 2021E.

Many companies have not passed on the full BS-VI cost increase yet and as the companies become more comfortable with the continued volume or continued demand, the gap in the BS-VI cost increase will get passed on during this year.

The big thing looming ahead of the industry is the commodity price increase, which will also lead to a price increase. That is not desirable if the auto industry were to pass on all the cost increases, then there could be a significant increase in prices. So commodity price increases are a matter of concern right now for the auto industry.

Most companies are coming back to their core where they have a right to win and have strength in India and globally and this is automatically leading to capital allocation which is going more towards the core.
The Company is going to be working on multiple platforms for personal mobility.

The overall positive sentiment in the rural area, in the agriculture area, somewhat tempered because of the farm agitation right now but that will be soon resolved. Mr Goenka remains very bullish on the Agri sector and on the overall rural demand coming from the income of the Agri sector for durables that are sold in rural areas.
M&M is one of those who had very robust demand this year. As a result, a marginal increase in prices is possible and usually in January every year, prices have increased. So M&M has announced a 2% price increase. It should not be a dampener on demand.

A partial increase is very much doable for most companies. Companies will have to do it because nobody can absorb the kind of commodity price increases that we are seeing and one will have to simply get used to it. Not only auto but the effect of commodity price rise will also be felt by users of almost all sort of durable goods.

The auto industry overall has gone through some very difficult times because of the investments in BS-VI which led to increasing in costs, most of which could not be passed on. The cost reduction that happened during Covid outbreak has come to the rescue and therefore most companies have managed to maintain their profit margin.

On an average, before Covid, in the passenger vehicle segment, a 30-35 days’ inventory was considered to be good. Now, most companies are saying 30-35 days is too high and they need to learn to work with 20-25 days of inventories.

If all companies bring down the inventory level to 20-25 days and also do very good inventory control in their plants and to the suppliers, the auto industry could take out as much as Rs 50,000 crore from the working capital. This is a learning from Covid that will help the industry reduce working capital and improve the balance sheet of almost all the companies.

Consensus Estimate: (Source: market screener website)
The closing price of M&M was Rs 838/- as of 13-January-2021. It traded at 31x/ 22x/ 20x the consensus EPS estimate of Rs 27.3/37.4/42.0 for FY21E/ FY22E/ FY23E respectively.

The consensus target price of Rs 762/- implies a PE multiple of 18x on FY23E EPS of Rs 42.0/-.

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 Mahindra & Mahindra , , , , , 0 Comments Read more...
05 Jan

Will complete phase III trial for COVID vaccine in next 2-3 months – Zydus Cadila

Update on the Indian Equity Market:
On Tuesday, Nifty ended 0.5% higher at 14,200 led by IT and Financials. The top gainers for Nifty 50 were Axis Bank (+6.3%), HDFC (+3.0%), and IndusInd Bank (+2.7%) while the losing stocks for the day were ONGC (-2.0%), JSW Steel (-1.9%), and Hindalco (-1.8%). Top gaining sectors were IT (+2.6%), Pvt Bank (+1.9%), and Bank (+1.6%) while Metal (-1.4%), Realty (-0.4%), and Auto (-0.02%) were the losing sectors.

Edited excerpts of an interview with Mr Sharvil Patel, MD, Zydus Group; dated 04th January 2021 from CNBCTV18:

CADILA’s COVID-19 vaccine received a very good response in the second phase trials. The company is now prepared to carry the third phase of the trials in over 60 sites with 30,000 doses, which it expects to complete in the next two-three months, Mr Patel added.

The phase I/ II data have been found to be safe & immunogenic.

They also expect the efficacy results on the COVID-19 vaccine by the first quarter of FY21.

The subject expert committee in India has already given permission to Cadila Healthcare to conduct phase-III clinical trial protocol for the COVID-19 vaccine.

The Company is making sure that they have the manufacturing capacities while they are working on developing the vaccine.

For the last 6-8 months, the Company has been investing large amounts of its capacities in building for the vaccine. They are able to produce around 150 million doses of the vaccine annually.

The Company has partnered with contract manufacturing organisations where they could potentially transfer their technology to produce another additionally 50-70 million doses and that can also be ramped up depending on the requirements.

On funding, Mr Patel said that these activities are all from internal accruals.

On EBITDA, he said that in the current scheme of thing with the current mix of the business that the Company is doing, they are able to maintain their EBITDA levels. The challenge will be in the coming years when things normalise. With the new portfolio that they are adding to both India and US markets, the Company has been working towards at least maintaining those margins and then over a period of next 3 years further improving this.

Consensus Estimate: (Source: market screener website)
The closing price of Cadila Healthcare was ₹ 486/- as of 05-January-2021. It traded at 26x/ 24x/23x the consensus EPS estimate of ₹ 18.5/20.0/21.6 for FY21E/ FY22E/ FY23E respectively.
The consensus target price of ₹ 454/- implies a PE multiple of 21x on FY23E EPS of ₹ 21.6/-.

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 cadila healthcare, Pharmaceuticals , , , , 0 Comments Read more...
29 Dec

Seeing a sharp fall in demand after Nov; will invest Rs 650 cr in a new plant at Chakan, says Bajaj Auto.

Update on the Indian Equity Market:
On Monday, Nifty ended 0.9% higher at 13,873 supported by the metal & financial stocks. The top gainers for Nifty 50 were JSW Steel (+5.8%), Tata Motors (+5.6%), and SBI (+3.3%) while the losing stocks for the day HUL (-0.5%), Sun Pharma (-0.5%), and Cipla (-0.4%). Top gaining sectors were PSU Bank (+2.7%), Realty (+2.6%), and Metal (+2.6%) while Pharma (-0.3%) was the only losing sector for the day.

Edited excerpts of an interview with Mr Rajiv Bajaj, MD, Bajaj Auto dated 24th December 2020 from CNBCTV18:

The demand in the auto sector is back to last year levels which are not a good sign. Mr Bajaj also sees a sharp fall in demand after November although he expects December 2020 sales to be slightly higher on YoY.
Things have panned out as Mr Bajaj thought they would which is that there has been a demand peak as is the case every year around the festive time.

According to him, what the company has recorded in October and November has been good because of the festive season. In December last year, the company did a total of 335,000 units roughly between domestic and exports. He thinks the Company will be a little ahead of that in December 2020.

According to him, on the domestic front, the Company will be on par with last year for motorcycles. The Company has almost doubled the EBITDA of the domestic motorcycle portfolio, which has been positive for them.

Bajaj Auto has a 90% market share in the three-wheeler market primarily in major metros.

In terms of exports, Mr Bajaj mentioned that the reason the overall numbers will be in-line with or a bit better than last year is that exports have been going like gangbusters. Demand seen is good.

On the product front, the Company has a huge task before them for the next 24 months which is
a) to renew their entire motorcycle portfolio especially on the premium brands,
b) There is a humongous amount of work to do on the EV front.

On the market front, Bajaj Auto has to continue to push to improve domestic share and having consistently now been at over 200,000 units exported every month their next goal has to be to move from 2 million exports to 3 million exports on an annual basis. For that, they need to successfully and effectively enter the Brazilian market.

Talking about the new manufacturing facility at Chakan, he said that the Company has signed up for a second plant in Chakan. The new plant was in the works for some time. This is for the expansion in premium motorcycles KTM Husqvarna, and the introduction of Triumph. Bajaj Auto may also expand the electric vehicle portfolio in the new facility.

The Company will be building this plant for a total capacity of a million units to start with. They have estimated an investment of about Rs 650 crore and perhaps the employment of a little over 2,000 people.
On the partnership front, the Company’s goal with KTM Husqvarna is to almost double the business soon.

In terms of production-linked incentive (PLI), Mr Bajaj said that it would be very beneficial to a company like Bajaj Auto. From the Merchandise Exports from India Scheme (MEIS), the Company had a benefit of 2% on exports.

Consensus Estimate: (Source: market screener website)
The closing price of Bajaj Auto Ltd was ₹ 3,420/- as of 28-December-2020. It traded at 22.8x/ 18.8x/16.5x the consensus EPS estimate of ₹ 149/180/206 for FY21E/ FY22E/ FY23E respectively.
The consensus target price of ₹ 3,316/- implies a PE multiple of 16.1x on FY23E EPS of ₹ 206/.

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...
18 Dec

Hopeful of double-digit credit growth in FY22E- Karnataka Bank

Update on the Indian Equity Market:
On Thursday, Nifty ended 0.4% higher at 13,740. The top gainers for Nifty 50 were Divis Labs (+3.0%), HDFC (+2.7%), and Bajaj Finance (+2.4%) while the losing stocks for the day Hindalco (-2.2%), Coal India (-1.8%), and Maruti (-1.7%). Top gaining sectors were Financial Services (+1.2%), Realty (+0.6%) and Pvt Bank (+0.5%). The losing sectors were Media (-1.9%), PSU Bank (-1.4%) and Metal (-0.4%)

Hopeful of double-digit credit growth in FY22- Karnataka Bank

Edited excerpts of an interview with Mr Mahabaleshwara MS, Managing Director & CEO, Karnataka Bank Ltd; dated 16th December 2020 from CNBC TV 18:

Karnataka Bank has no plans of raising capital right now but will consider it at an appropriate time.
The bank is comfortable with the current capital position and is at a comfortable position of 13.08% capital adequacy ratio (CAR).

Going forward the Bank has also assessed the impact of COVID-19 and there will not be any negative impact, according to him. Karnataka Bank has been maintaining a CAR varying in between 12-13.3%. So, considering that, the position is comfortable. But at the appropriate time, all banks are evaluating to take a stand in further strengthening the capital. So, the Bank will also take an appropriate stand going forward if required. The growth capital & stress capital both are in comfortable space according to the Bank’s internal assessment.

On asset quality, Mr Mahabaleshwara said that he had estimated about 2-4% of the Bank’s loan book to be converted under the one-time restructuring (OTR) scheme. So this is on the expected lines because the Bank has to identify all those accounts by December 31. That exercise is going on and he is sure that it will be within that range itself. The moratorium book will be somewhere around 1% by the end of December-20 as estimated earlier from 11.6% in September-20 of the total loan book.

The Bank’s strategy is to conserve, consolidate & emerge stronger. It would be focusing on the bottom line rather than the top line. Mr Mahabaleshwara does not expect credit growth to be more than 2-4% for FY21E. However, he said that for FY22E, the credit growth could be in double digits.

Mr Mahabaleshwara expects the average net interest margins (NIMs) to be more than 3%. Comfortable margins will be ensured with an increase of retail loans and a reduction in corporate exposure in loans. Digital sanctioning is in focus currently for the loans.

Post moratorium stress is much lower than the pre-Covid level for the bank. Slippage ratio is expected to be at 1-2% levels, he added.

Consensus Estimate: (Source: market screener website)
The closing price of The Karnataka Bank was ₹ 58/- as of 17-December-2020. It traded at 0.30x/ 0.28x the consensus Book value per share estimate of ₹ 191/204 for FY21E/ FY22E respectively.
The average consensus target price of 50/- implies a PB multiple of 0.2x on the FY22E book value of ₹ 204/-.

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, Karnataka Bank 0 Comments Read more...
10 Dec

Optimistic on future of the real estate, service sector to take longer to recover – HDFC

Update on the Indian Equity Market:
On Wednesday, Nifty ended 1.0% higher at 13,529 with banks outperforming. The top gainers for Nifty 50 were GAIL (+8.3%), Sun Pharma (+5.7%), and IndusInd Bank (+4.9%) while the losing stocks for the day were Nestle (-2.6%), Kotak Bank (-1.5%), and Titan (-1.3%). The top gaining sectors were Media (+3.8%), Pvt bank (+1.7%), and Bank (+1.5%). The losing sectors were PSU Bank (-1.0%), Metal (-0.5%), and Auto (-0.1%).

Edited excerpts of an interview with Mr Deepak Parekh, Chairman, HDFC dated 09th December 2020 from CNBC TV 18:

Mr Parekh is optimistic about the future of the real estate sector, especially the small homes. However, he believes the service sector is going to take long before it recovers.
The pain, the struggle and difficulty have been in close contact service sectors like restaurants, hotels, transport, civil aviation and these industries still have a long way to recover.

Mr Parekh said October 2020 was a record month for auto as companies saw all-time high numbers of sales.
On inflation, he said that the latest monetary policy has been mature and accurate although the inflation is higher than the comfort zone of the Reserve Bank of India (RBI). RBI has decided not to make any changes and leave the surplus liquidity into the system. He is confident RBI will not destabilize any large non-banking finance company (NBFC) or housing finance company (HFC) even if they don’t want to convert into a bank.

Speaking about NBFCs, Mr Parekh said that there needs to be a change in the RBI Act for corporates to enter the banking system. He does not see it happening immediately. It’s a 2-3 year process. However, in the end, RBI will be more conservative and cautious in their usual style and manner and will differ giving licences to corporate houses.
On the GDP front, Mr Parekh said that 2Q has surprised everyone; although the gross domestic product (GDP) showed a negative growth rate for 2Q, one should look at it as an aberration.

One never expected that September and October would see such fantastic new inflows of application in e-bills, tolls or housing sector compared to previous September-October, which was pre-pandemic.

Consensus Estimate: (Source: market screener website):

The closing price of HDFC was ₹ 2,308/- as of 09-December-2020. It traded at 4.0x/ 3.7x/3.4x the consensus Book value per share estimate of ₹ 569/615/674 for FY21E/ FY22E/ FY23E respectively.
The average consensus target price of ₹ 2,106/- implies a PB multiple of 3x on the FY23E book value of ₹ 674/-.

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 HDFC 0 Comments Read more...
02 Dec

Industry at pre- Covid levels in terms of volume, price – Tata Steel

Update on the Indian Equity Market:

On Tuesday, Nifty ended 1.1% higher at 13,109. The top gainers for Nifty 50 were GAIL (+8.3%), Sun Pharma (+5.7%), and IndusInd Bank (+4.9%) while the losing stocks for the day were Nestle (-2.6%), Kotak Bank (-1.5%), and Titan (-1.3%). The top gaining sectors were Realty (+3.3%), PSU bank (+2.9%), and IT (+1.9%). FMCG (-0.04%) was the only losing sector.

Edited excerpts of an interview with Mr T V Narendran, MD & CEO, Tata Steel Ltd; dated 01st December 2020 from Business Standard:

Recovery has been faster than expected for the steel sector and prices have touched a high.

Talking about the steel prices Mr Narendran said that the long-term average for steel prices in the past 10-12 years have been $600 a tonne. Steel, iron ore & coal prices are just about coming to long- term spreads.
In India, he is very optimistic in terms of demand as across the sectors there is a pickup in consumption. There is some concern that a fresh wave of the Covid-19 virus can disrupt recovery, but, otherwise, the steel consumption growth rate has to match or exceed that of the GDP. So, the steel industry has to do well and Tata Steel, being one of the lowest-cost producers with a very strong franchise, will deliver it.

About the economic recovery he said that even though the industry has shifted from exports to domestic, they are struggling to keep up with market requirements, which is a good problem to have. The industry had expected the normalcy to return in March-21 quarter but it is already at the pre- covid levels, both in terms of volumes & prices.

The segments that recovered faster than expected according to Mr. Narendran are automotive where first passenger cars started to pick up; the commercial vehicle segment was slow but medium & light commercial vehicles started showing improvement from September. The heavy vehicle segment has also started to pick up.

The more recent surprise was the recovery in the residential housing market.

Tata Steel will be focusing on completing the second phase of the Kalinganagar plant. This will take the capacity to 25 million tonnes (MT) from 20 MT).

The Company will try to grow at least at the rate at which consumption of steel is growing in India.

The Company’s India business generates enough cash to support the Company’s growth. They are confident of growth without adding to the debt.

Once Tata Steel is on track as far as deleveraging goes and the SSAB transaction is done, the Company will be in a comfortable position. Even the Board will be in the position to continue to support the growth.
The Company participates and bid for iron ore mines at prices that would work for them. Tata Steel will keep bidding for mines that come up for auction in the hope of getting some at reasonable prices.

Consensus Estimate: (Source: market screener website)
The closing price of Tata Steel Ltd was ₹ 587/- as of 01-December-2020. It traded at 25.5x/ 9.4x/9.2x the consensus earnings per share estimate of ₹ 23.0/62.5/64.1 for FY21E/ FY22E/ FY23E respectively.
The consensus target price of ₹ 572/- implies a PE multiple of 9x on FY23E EPS of ₹ 64/-.

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 Tata Steel 0 Comments Read more...
23 Nov

On track to deliver 11th straight quarter of double-digit growth – Nestle India

Update on the Indian Equity Market:
On Friday, Nifty ended 0.7% higher at 12,859. The top gainers for Nifty 50 were Bajaj Finserv (+9.3%), Titan (+5.4%), and GAIL (+4.0%) while the losing stocks were Reliance (-3.7%), Adani Port (-1.6%), and IndusInd Bank (-1.5%). Top gaining sectors were Financial Service (+1.7%), IT (+1.4%), and FMCG (+1.2%) while top losing sectors are Media (-0.9%), and Pharma (-0.3%).

Edited excerpts of an interview with Mr Suresh Narayanan, CMD, Nestle India Ltd; dated 19th November 2020 from CNBCTV18:

The Company had a good 2Q with 10.2% growth in the top line. This will be the 11th straight quarter of double-digit growth.

The plant utilisation is well over 90% with some restrictions. Manufacturing levels are growing upwards.
For Nestle India, the core elements of their strategy which are 1) penetration linked volume growth and; 2) a strong focus on innovation and renovation remains constant for the upcoming quarters.

The total Distribution infrastructure has opened & continues to be a positive feature.

The Indian economy in recent times is following the theme of the resurgence of Bharat. The Tier 2, 3 & 4 towns and the rural market are doing extremely well.
Urban India is still facing some operating issues but is growing gradually. For Nestle India, it grew by 0.7% in 2Q while rural grew by 1.7%. In 3Q the Company saw urban growth of 6% & rural growth of 12%.

According to Mr Narayanan, the most unfortunate thing that happened during the pandemic was the meltdown of out of home consumption while an enormous surge is seen in at-home consumption. On a positive note, the out-of-home consumption is gradually opening up, and therefore, he sees some balancing in in-home & out-of-home consumption. Thus, the kind of absurd seen in the consumption in some of the categories will start to normalise.

As part of accessing rural India, the Company is taking 3 major steps: 1) improved access points of distribution. Stocking points have been increased to 12,000 from 8,000-9,000 2 years back, 2) carving out the portfolio making it more relevant for semi-urban & rural consumers, 3) Concentrating & establishing a better value & quality in brands as per the consumer’s needs.

The Company has recalibrated the innovation strategy during the pandemic. The Company has launched 60 new products in the last 2 years and 70% of these are successful.

Four big themes of innovation are coming up going forward: 1) better nutrition, 2) immunity-related innovation, 3) will be introducing ‘touchless’ vending for restaurants, and 4) identifying parts of the portfolio which need tweaking.

The Company may enhance nutrition & immunity brands in line with the theme and may also modify the price-value equation of some products.
The food processing PLI opportunity announced by the government is a huge and fantastic opportunity according to him.

Nestle India expects a CAPEX of Rs 2,600 crores to be completed over the next 3-4 years. Capex includes a new factory in Sanand, Gujarat. A substantial part of the CAPEX goes for the Sanand factory set up. The Company plans to invest in coffee, confectionery & dairy business. The higher capacity will have a huge multiplier effect for Nestle India.

Consensus Estimate: (Source: market screener website)
The closing price of Nestle India Ltd was ₹ 17,400/- as of 20-November-2020. It traded at 77x/ 65x/57x the consensus book value estimate of ₹ 225/267/307 for FY21E/ FY22E/ FY23E respectively.
The consensus target price of ₹ 16,855/- implies a PE multiple of 55x on FY23E EPS of ₹ 307/-.

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 Nestle India 0 Comments Read more...
12 Nov

Looking at quarterly run rate of $140 mn in US market – Cipla

Update on the Indian Equity Market:
On Wednesday, Nifty ended 0.9% higher at 12,749 led by the pharma & metal stocks. The top gainers for Nifty 50 were Hindalco (+8.0%), Tata Steel (+7.7%), and Dr Reddy (+4.1%) while the losing stocks for the day IndusInd bank (-5.2%), Reliance (-4.1%), and Titan (-2.1%). Top gaining sectors were Pharma (+3.6%), Metal (+3.5%), and IT (+1.7%) while the losing sectors for the day were PSU Bank (-0.5%), and Media (-0.3%).

Edited excerpts of an interview with Mr Umang Vohra, MD & Global CEO, Cipla Ltd; dated 10th November 2020 from CNBCTV18:

Cipla’s second-quarter performance exceeded analyst estimates on most parameters. Talking about growth sustaining in the second half of FY21E Mr Vohra said that the numbers are in response to the market forces and he thinks these numbers in a certain range will continue to exist going forward at least for the next one quarter.
There might be a marginal dip or off in revenue or in profit but by and large, Cipla is on this trajectory for 3QFY21E as well.

On the outlook for the India business, he believes that the COVID portfolio growth will begin to abate as cases go down in India. Other than COVID, Cipla’s businesses are fairly strong on its fundamentals. Non- Covid portfolio has been doing well and beating the industry growth for the 5th consequent quarter.

Cipla can expand its margin trajectory by about 300 basis points from the start of the year on a normalise basis to where it thinks it would be in 2-3 years.

Talking about US markets Mr Vohra said that approximately $140 million is now the new base of the US and as they launch new products this run rate would increase.

The Albuterol category is a fairly large category, Perrigo was in the market till about a month and a half back, and Perrigo will be back in the market soon as well.

He thinks that the arrival and the departure of players may create a little bit of short-term pressure in volumes, but he doesn’t think that the prices would correct as significantly because of Perrigo’s arrival back into the market.

The Company has finished the remediation efforts and has reverted back to the US FDA on Goa facility. The Company is also expecting some response from USFDA on the Goa facility soon.
The Company is open for acquisitions which would be strategic for the Company rather than big acquisitions. But as of now, the Company is focused on delivering organic growth with timely product launches.

Consensus Estimate: (Source: market screener website)

The closing price of CIPLA was ₹ 741/- as of 11-November-2020. It traded at 25x/ 23x/19x the consensus book value estimate of ₹ 29.5/32.9/38.4 for FY21E/ FY22E/ FY23E respectively.

The consensus target price of ₹ 882/- implies a PE multiple of 23x on FY23E EPS of ₹ 42.4/-.

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 Cipla 0 Comments Read more...
04 Nov

Demand strong ahead of festive and wedding season – Asian Paints

Update on the Indian Equity Market:
On Tuesday, Nifty ended 1.2% higher at 11,813 led by the financial & metal stocks. The top gainers for Nifty 50 were ICICI Bank (+6.7%), Hindalco (+5.1%) and SBI (+4.3%) while the losing stocks for the day UPL (-6.6%), NTPC (-3.8%) and Reliance (-1.3%). Top gaining sectors were Bank (+3.2%), Financial Services (+3.1%) and Pvt Bank (+3.1%) while the losing sectors for the day were Realty (-2.3%), and Media (-0.3%).

Edited excerpts of an interview with Mr Amit Syngle, MD & CEO, Asian Paints; dated 02nd November 2020 from CNBCTV18:

Demand has been buoyant in the festive season, according to Mr Syngle. He further added that staying at home has made people desire home improvement.

The Company is seeing a very strong growth trend because of the festivals coming in with the wedding season which is also around. So both these factors are giving very strong flavour to the market and that is the trend they are seeing in October as well.

Mr Syngle said that demand in tier-II, III and IV cities has been exceptional. The luxury segment in rural areas was picking up too.

The company sees demand from metros close to about 85% of the pre-COVID levels. For Tier-III and tier-IV, it sees a strong jump in terms of demand even better than pre-COVID times.

Mr Syngle added that the home décor business was growing much faster on a low base.

According to him, Asian Paints is not about just owning the walls, but space between the walls. The Company sees that trend coming in strongly and he sees a definite pick up in September in terms of people embellishing their homes not only with respect to walls but even with respect to the other areas which fill up space in the home.
Asian Paints is open to acquisitions that will bring in synergistic benefits.

Talking about the quarterly result he said, 3Q margins may be better than 2Q on stable inputs. The Company has lately witnessed input costs moving up due to demand.

Consensus Estimate: (Source: market screener website)

The closing price of Asian Paints Ltd was ₹ 2,158/- as of 03-November-2020. It traded at 74x/ 52x/51x the consensus book value estimate of ₹ 29.2/36.4/42.4 for FY21E/ FY22E/ FY23E respectively.

The consensus target price of ₹ 2,086/- implies a PE multiple of 49x on FY23E EPS of ₹ 42.4/-.

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.”

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26 Oct

Difficult to predict festive season sales – Bajaj Auto

Update on the Indian Equity Market:
On Friday, Nifty ended 0.3% higher at 11,930 led by the auto stocks. The top gainers for Nifty 50 were Maruti (+4.3%), M&M (+3.3%), and Tata Steel (+3.3%) while the losing stocks for the day were Ultra Cement (-2.4%), HCL Tech (-1.6%), and HUL (-1.6%). Top gaining sectors were Auto (+2.9%), Media (+0.7%), and IT (+0.5%) while top losing sectors are Realty (-1.1%), Pharma (-0.4%) and Pvt Bank (-0.04%).

Edited excerpts of an interview with Mr Rakesh Sharma, ED, Bajaj Auto Ltd; dated 22nd October 2020 from CNBC TV18:

The geographical mix & the business unit mix have a very big impact on the blended margins of Bajaj Auto. Last year the Company faced many headwinds in maintaining the margins. The Company is optimistic about maintaining the margins reported in 2QFY21 despite raw material cost increases seen.
There has been a marginal improvement in walk-ins, enquiries & sales over the beginning of the festive period last year.

Bajaj Auto is optimistic about maintaining margin despite raw material cost increase and they have streamlined low margin products.

The Company recorded the highest ever sales of Pulsar in 2QFY21. This impacted margins in a positive way during the quarter.

The Company had the highest ever exports in September-20 and October performance will beat September performance according to Mr Sharma. If the Company does not have any supply chain issues and transport interruption, then in November they will beat October exports.

The Company saw a smart recovery in domestic performance. They aim to improve the domestic market share from 18.2% in H1 to 20% in H2. There is a huge scope for expansion in market share but the Company does not want to compromise the margins and profitability for gaining the market shares.

It is very difficult to make predictions about the festive season sales as of now. The industry is seeing a slight improvement in enquiry and sales in this festive season. Post festive where all pent up demand is exhausted, it is interesting to see how the industry and demand responds. This will be the most important thing to be considered.
125cc segment is more profitable than 100cc and thus Bajaj Auto has expanded this market segment.

The ultra-premium segment (KTM/ Dominar) has clocked 10,000-12,000 units run rate per month currently.

The underperforming models/ low margin products of the Company have been stream-lined and prices have been increased during 2QFY21.

Bajaj Auto has passed on cost increases from September-20 onwards in the majority of the International markets. It had been a very difficult exercise for the Company as the Chinese & Japanese brands which has seen a huge revival, the company had to face intense competition.
The Company hopes the three-wheelers will start performing well with support from the Government initiatives.

Consensus Estimate: (Source: market screener website)
The closing price of Bajaj Auto Ltd was ₹ 3,090/- as of 23-October-2020. It traded at 20.7x/ 17.2x/15.0x the consensus book value estimate of ₹ 149/180/206 for FY21E/ FY22E/ FY23E respectively.

The consensus target price of ₹ 3,088/- implies a PE multiple of 15.0x on FY23E EPS of ₹ 206/-.

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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