Author - Pratik Mate

21 Dec

Product Development for Next-Gen EVs under Focus – Sona Comstar

Update on the Indian Equity Market:

After Monday’s freefall, Indian equities recovered on Tueday as the NIFTY 50 closed at 16,771 (+0.9%). None of the sectoral indices ended with losses. METAL (+2.9%), MEDIA (+2.5%), and CONSUMER DURABLES (+2.0%) were the best performers of the day.

Among the NIFTY 50 components, HCLTECH (+4.3%), WIPRO (+3.8%), and UPL (+3.6%) were the gainers. POWERGRID (-1.7%), AXISBANK (-1.1%), and BAJFINANCE (-0.7%) led the laggards.

Excerpts of an interview with Mr. Sunjay Kapur, Chairman of Sona Comstar with CNBC-TV18 on 20th December 2021:

  • Sona Comstar has inaugurated a new state of art research and innovation center in Chennai. This facility is dedicated solely to electric vehicles with an aim to foster the development of advanced products for next-generation electrified vehicles.
  • The semi-conductor shortage situation has not improved much over the past few weeks, as the number of chips required per vehicle are increasing as OEMs shift focus towards more digitally integrated systems in vehicles.
  • This is a trend across other industries as well, where the demand for more complex and efficient chips is increasing, adding to the supply issues. Currently, the Auto industry consumes 7% of semiconductor supply, which is slated to go up to 20% in the next 5 years.
  • There’s no immediate relief in sight as there’s no anticipation of a slowdown in demand, so until the supply catches up this issue will persist in the medium term.
  • Logistics, CIF, and Raw Material Inflation are near-term headwinds for the company, the demand persists the challenge lies in solving the supply-side issues in the medium term.
  • The company has set up a state-of-the-art Testing and R&D Facility in Chennai to develop 30-50 Kw Motors and Controllers for EVs. The company is in talks with global OEMs to gauge the demand arising from a shift towards EVs.
  • Conversion from ICE to EVs in terms of the 2 Wheeler market provides a once-in-a-lifetime opportunity for all auto-ancillary companies. The company believes that in a market of this size, competition can co-exist with significant market share

Asset Multiplier Comments

  • The shift to EVs provides a massive growth opportunity for all auto and auto ancillary companies and Sona Comstar is perfectly placed to take advantage of its unique R&D-led product portfolio.
  • The Auto Industry is reeling from the semi-conductor shortage crisis and with no respite in sight, we believe the company will be under pressure in the medium term until the supply side issues are sorted out.

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

  • The closing price of Sona Comstar was ₹ 709/- as of 21-December-2021.  It traded at 118x/ 75x the EPS estimates of ₹ 6.0/ 9.5/- for FY22E/FY23E respectively.
  • The consensus target price of ₹ 708/- implies a P/E Multiple of 75x on FY23 EPS estimate of ₹ 9.5/-.

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

By Auto Ancillary , , 0 Comments Read more...
13 Dec

Expect 15+ USFDA approval in CY22- Alembic Pharma

Update on the Indian Equity Market:

On Monday, NIFTY ended at 17,368 (-0.8%) 143 points lower. Among the sectoral indices, only IT (+0.3%) ended higher, whereas MEDIA (-1.8%), OIL&GAS (-1.4%) and REALTY (-1.4%) led the losers. Among the stocks, AXISBANK (+2.4%), TECHM (+2.2%), and SBILIFE (+1.5%) led the gainers while BAJAJFINANCE (-3.0%), BAJAJFINSERV (-2.1%), and RELIANCE (-1.9%) led the losers.

Pharmaceuticals

Expect 15+ USFDA approval in CY22- Alembic Pharma

Excerpts of an interview with Mr. RK Baheti, CFO of Alembic Pharma with CNBC TV18 on 9th December 2021:

  • Alembic Pharma has received tentative approval from USFDA for Selexipag tablets, a drug used to treat for pulmonary arterial hypertension with a market size of $460 Mn. There are 4 existing players in the market.
  • The company can only bring the drug to the market post its patent expiry so there’s an expected delay before the drug can be formally launched post final approval which will happen in CY23.
  • The company has first mover advantage in terms of launching the product on Day 1 of Patent Expiry, however the situation remains dynamic and other companies may receive approval for the same.
  • The company has an annual run rate of 15+ approvals and the company expects to launch 15 new products in the US in CY22, with 3 Products being first to file by the company.
  • Indian companies are facing intense pricing pressure in the US Generics business, due to heightened competition. Company’s degrowth is drawn by high base effect of last year’s exceptional performance and also drawn by company benefitting from scarcity and aggressive pricing over the past 2-3 years.
  • The growth ahead is expected to be driven by new launches and first to file opportunities as the pricing degrowth will continue by 10% on an annualized basis, the company has plans to stock up inventories in anticipation of shortages to take advantage of aggressive pricing as and when the opportunities arise

 

Asset Multiplier Comments

  • The company along with its peers is facing stiff competitive pricing pressure in the US Generics business, which was a key growth driver for the company in the past few years.
  • The revenue opportunity of new launches, existing competition and cost controls are going to be key drivers of profitability for the company.

 

Consensus Estimate: (Source: market screener website)

  • The closing price of Alembic Pharma was ₹ 797/- as on 13-Dec-2021.  It trades at 23x/19x/17x the EPS estimates of ₹ 35/42/47 for FY22E/FY23E/FY24E respectively.
  • The consensus target price is ₹ 860 implying a P/E Multiple of 18x on FY24 EPS Estimate of ₹ 47

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 Alembic Pharma , 0 Comments Read more...
01 Dec

Short term challenges persist– Minda Industries

Update on the Indian Equity Market:

On Wednesday, Indian benchmarks ended in green with NIFTY closing at 17,166 (1.0%). Among the sectoral indices, PHARMA (-1.6%), HEALTHCARE (-1.9%), and CONSUMERDURABLES (-0.4%) were the only losers. PSU BANK (+2.7%), METAL (+2.3%), and BANK (+1.9%) led the gainers. Among the stocks, INDUSINDBK (+5.8%), JSWSTEEL (+5.0%), and TATAMOTORS (+4.3%) led the gainers, while CIPLA (-4.4%), DIVIS (-2.3%), and ULTRACEMCO (-1.5%) led the laggards.

Short term challenges persist– Minda Industries

Excerpts of an interview with Mr Sunil Bohra, Group CFO, Minda Industries with CNBC-TV18 on 30th  November 2021:

  • There’s a significant impact on volumes in Europe, with the numbers down significantly at ~30% sequentially. The important thing to notice is that the volume numbers are also down year on year indicating the severity of the impact on a low base.
  • The recovery is expected to be volatile as the true impact of the new variant remains to be seen. International travel has also been impacted, it is expected that volumes will continue to be depressed until restrictions are eased.
  • The Industry is currently working to minimise the impact of low volumes through various cost optimisation measures, however, there’s a lack of assurance as to when will the volumes recover whether it will be in Q3 or Q4FY22.
  • However, the Industry expects pent up demand and volume recovery post this crisis to continue and thus keeps its long term outlook of double-digit growth unchanged.
  • Semi-conductor shortage volatility is expected to continue till H1CY22. There is some recovery seen, however, it’ll take another 6-8 months to indicate a semblance of normalcy. Over-stocking of inventory due to the existing shortage crisis is creating a mismatch between actual demand and supply further worsening the situation.
  • EV segment is at a nascent stage, but the company expects demand to grow exponentially once it picks up. The company is focusing on creating a base for this additional supply. The company benefits from having an agnostic product supply- i.e. it is ICE/EV neutral and the company plans to add value-added products to specifically cater to EV segments and has already launched 9 new products.
  • The company’s ICE toolkit currently tickets at Rs 7,000/-, however, the company’s new EV Value-added toolkit tickets at Rs 28,000/- The company will benefit from increased EV volumes and it’ll be margin accretive in the long run.

Asset Multiplier Comments

  • The auto industry has been severely impacted by intermittent lockdowns and supply chain issues, however, the underlying demand for the industry is set to stay and only increase in the medium term.
  • EV segment is a very value and margin accretive segment for the company, the recent shift in demand to EVs will augur well for the company’s profitability in the medium term.

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

The closing price of Minda Industries was ₹ 899/- as of 01-December-21. It traded at 69x/ 41x/ 32x the consensus EPS estimate of ₹ 13/ 22/ 29 for FY22E/ FY23E/FY24E respectively. The consensus target price of ₹ 927/- implies a PE multiple of 33x on FY24E EPS of ₹ 29/-.

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

By Auto , , , , , 0 Comments Read more...
23 Nov

No Plans to Sell Stake – Escorts

Update on the Indian Equity Market:

On Tuesday, NIFTY closed in the green at 17,503 (+0.5%). The top gainers in NIFTY50 were BHARTIARTL (+4.0%), JSWSTEEL (+4.0%), and ASIANPAINT (+4.0%). The top losers were BAJFINANCE (-2.6%), BAJAJFINSV (-2.6%), and TATAMOTORS (-1.8%). Sectoral gainers were METAL (3.3%), REALTY (2.4%), and MEDIA (2.3%). There were no sectoral losers for the day.

Excerpts of an interview with Mr. Nikhil Nanda, Chairman and Managing Director, Escorts with Economic Times dated 19th November 2021:

  • Escorts has announced the onboarding of Japanese tractor maker Kubota as a joint promoter of the company along with the Nanda family. Kubota will infuse over Rs 94 bn into Escorts, including an open offer to its shareholders, to increase its stake to 53.8% becoming the majority shareholder of the company.
  • This deal was the best partnership for the company, with the kind of ability and strength that Kubota already has as a global brand it is possible to bring the best in the world to India and use Escorts’ platform to serve the needs of the farming community globally.
  • There’s no change in the stake of the promoter family, it’ll continue to stay the same, Mr. Nanda categorically denied media reports that claimed the Promoter family was selling its stake in Escorts. The family is absolutely honoured to have a chance to partner with Kubota and It looks forward to building this partnership between Kubota and Escorts.
  • The focus of the promoter family was to create an institutionalised company that can survive the fluctuations many family-held companies go through over generational shifts. The company aspires to be a market leader but to achieve that growth trajectory institutionalising was the need of the hour.
  • The partnership with Kubota is not a new one, the relationship started in 2018 with the announcement of a JV. This is just the next step of the partnership after the tremendous success that the company has witnessed over the past 3 years.
  • With the common philosophy and the alignment of interest that the promoter family shares with Kubota, The Promoter family will become joint Promoters with Kubota and as a testament to the respect and mutual admiration, the promoter family will not hold a golden share in the company.

Asset Multiplier Comments

  • Kubota is a Japanese tractor manufacturer which is one of the largest in the world, this partnership will help Escorts leverage the technological prowess of Kubota to provide best in class products.
  • With Kubota’s global presence, India can become a launch pad of Escorts’ Tractors as it aims to aggressively expand its exports portfolio.

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

  • The closing price of Escorts was ₹ 1,803/- as of 23-November-2021.  It traded at 22x/20x/16x the consensus earnings estimate of ₹ 81/89/111 for FY22E/23E/24E respectively.
  • The consensus price target is ₹ 1,766/- which trades at 16x the earnings estimate for FY23E of ₹ 111/-

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 Escorts 0 Comments Read more...
11 Nov

Investments in EV Business a priority – Mahindra and Mahindra

Update on the Indian Equity Market:

 

On Thursday, Indian benchmarks declined for the third consecutive session with NIFTY closing at 17,874 (-0.8%). Among the sectoral indices, METAL (+0.4%),  CONSUMER DURABLES (+0.3%) were the only gainers. REALTY (-2.3%), PSU BANK (-1.8%), PHARMA (-1.4%) led the laggards. Among the stocks, TITAN (+1.7%), HINDALCO (+1.1%), and JSWSTEEL (+0.6%) led the gainers, while SBIN (-2.8%), ONGC (-2.6%), and SBILIFE (-2.5%) led the laggards.

 

Excerpts of an interview with Mr. Manoj Bhat, CFO, Mahindra and Mahindra (M&M) with CNBC-TV18 on 10th  November 2021:

  • Raw Material Inflation has been a key headwind for the industry due the commodity cycle turning, However the company is taking a calibrated approach to passing on the costs to consumers through price hikes as the commodity cycles are transient in nature.
  • The company already has taken 3 price hikes in the farm segment and 2 in the auto segment, and there’s still robust demand and thus the company plans to adopt a wait and watch policy.
  • The entire auto industry has seen margins getting contracted severely and the company thinks that the margins have bottomed out at these levels. However the impact was seen in this quarter due to volume loss as a result of semiconductor issue and new product launches which are margin dilutive in the first few quarters.
  • The Company expects margins to improve over 2HFY22 due to scale benefit from volume recovery as the semiconductor situation improves, and calibrated price hikes if necessary.
  • The semi-conductor issue is a global one and it peaked in Q2FY22, but there’s signs of improvement across the world with improving visibility and the company expects normalcy in 1HFY23.
  • Tractor volumes were impacted due to erratic monsoons, however even on an inflated base of FY21, the company expects high single digit growth in FY22. The demand fluctuation is short term the company expects demand to stabilise in 4QFY22 led by market share gain by the company.
  • EV Three Wheelers segment has shown tremendous growth of 317% YoY in Q2FY22 with a 63% market share. The company expects 20% of current 3 wheeler segment to shift to EV by FY25, and the company has plans to invest Rs 30 bn over FY23-25 to expand its dominant position.

Asset Multiplier Comments

  • We expect the raw material inflation to impact the bottom line in the medium term.
  • Notwithstanding the semiconductor shortage, it has received a positive response for its new launches such as Thar, XUV 300, and Bolero Neo. The company has indicated its loyal customers are willing to wait as long as 9-12 months to get the new cars. We like the customer loyalty and expect the company’s top line to benefit in the medium to long term.
  • While its revamping its SUV portfolio, the company has ambitious plans to launch electric varients in its UV and 3W portfolio. This may help improve the product penetration.

 

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

  • The closing price of M&M was ₹ 925/- as of 11-November-21. It traded at 24x/ 20x/ 17x the consensus EPS estimate of ₹ 39/ 46/ 54 for FY22E/ FY23E/FY24E respectively.
  • The consensus target price of ₹ 1,050/- implies a PE multiple of 19x on FY24E EPS of ₹ 54/-.

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...
27 Oct

Best Demand Environment in a Decade – Tech Mahindra

Update on the Indian Equity Market:

On Wednesday, NIFTY closed lower at 18,211 (-0.3%) dragged by MEDIA (-2.0%), METAL (-1.5%) and PRIVATEBANK (-1.4%). PSU BANK (+2.1%), IT (+1.0%) and PHARMA (+0.9%) were the gaining sectors. The top gainers in NIFTY50 were ASIANPAINT (+4.1%), UPL (+3.8%), and DIVISLAB (+2.3%). The top losers were AXISBANK (-6.5%), BAJFINANCE (-4.8%), and ONGC (-3.5%).

Edited excerpts of an interview with Mr. C P Gurnani, MD, and CEO of Tech Mahindra with CNBCTV18 on 26th Oct 2021:

  • The company is committed to the high growth trajectory over the full year of FY22, which resulted in its highest ever sequential growth in a decade. Every business segment has reported sequential growth in Q2FY22.
  • The Company has a best-in-class geographic mix with North America contributing less than 50%, Europe contributing 25%, and the Rest of the World Contributing 25%, with a geographical presence in 90 Countries. The company is well diversified in terms of geography.
  • The Company increased its guidance of around 500-600 Mn USD in Deal wins to 750 Mn to 1 Bn USD over the next few quarters, on the back of a robust deal pipeline and sustained growth in the demand environment.
  • The Company plans to improve its margins by keeping control on sub-contracting costs which are at historically high levels. Utilisation has reduced due to fresher intake in the last quarter, which the company expects to improve over time.
  • Cloud Migration and 5G are the biggest drivers of growth in new deal wins. There’s a huge movement in the legacy to digital business which is expected to continue over the next few quarters.
  • The company made two acquisitions during the quarter- Loadstone and WeMake website. Loadstone has revenue of about 35 Mn USD and is EPS accretive, the other acquisition was IP Driven and is insignificant to the topline.
  • Current levels of attrition are hurting the demand fulfillment of the company and the company plans to reduce attrition by shifting to tier-2 cities and new HR Policies.

 Asset Multiplier Comments

  • The management commentary of continued strength in end demand aided by significant deal wins, and healthy deal pipelines driven by 5G and cloud will help the company sustain its revenue growth guidance.
  • Attrition and supply-side issues are the biggest headwinds for IT Companies. The company’s bottom-line can only see sustained growth if these challenges are dealt with in the upcoming quarters.

Consensus Estimate (Source: market screener website)

  • The closing price of Tech Mahindra was ₹ 1,568/- as of 26-October-21. It traded at 25x/22x/19x the consensus EPS estimate of ₹ 64/73/81 for FY22E/ FY23E/FY24E respectively.
  • The consensus target price of ₹ 1,703/- implies a PE multiple of 21x on FY24E EPS of ₹ 81/-.

 

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 Tech M , , 0 Comments Read more...
19 Oct

Organic growth to sustain as guided, no big bang acquisitions planned– HCLTECH

Update on the Indian Equity Market:

On Tuesday, NIFTY50 ended its 7-day winning streak to close at 18,419 (-0.3%), dragged down by REALTY (-4.7%), PSUBANK (-3.7%), and FMCG (-3.2%). The sectoral gainers were IT (2.2%), and FINANCIAL SERVICES (0.2%). Among the stocks, TECHM (+4.3%), LT (+3.3%), and INFY (+1.8%) led the gainers while ITC (-6.3%), TATAMOTORS (-4.9%), and EICHERMOT (-4.5%) were the top laggards.

HCLTECH missed the street estimates in the declared earnings for the quarter ended 30th September 2021. Mr. C Vijayakumar, Chief Executive Officer, and Mr. Prateek Aggarwal, Chief Financial Officer at HCL Technologies discussed the quarter gone by and reaffirmed its annual FY22 guidance in an interview with CNBC-TV18 on 18th October 2021:

  • The Products and Platforms business has been a laggard in FY22, with quarterly slippages affecting the guidance of the segment but the impact is immaterial to the top-line growth, where the company has reaffirmed its EBIT margin guidance of 19-21%.
  • Q2FY22 was the best quarter for the company with unprecedented growth in client mining, large deal wins, and total headcount. The company has introduced a formal dividend pay-out policy on the back of its commitment to rationalise capital allocation.
  • The Company has rolled out the first tranche of wage hikes in Q2FY22 and expects the second tranche to be rolled out in Q3FY22. It expects the slippages in the Products and Platforms business to be recovered in the upcoming quarter.
  • The company had a track record of a high dividend pay-out until FY20. With a significant outflow due to an acquisition, the pay-outs were subdued over the past few quarters. With a recovery in free cash flows and demand from investors, the company has decided to come up with a formal dividend policy with higher pay-outs.
  • The current demand environment has established momentum in the organic business. The company plans to focus on executing current demands rather than go all-in after a major acquisition. The company may add small tuck-ins to expand capabilities or geographies.
  • In Q2Fy22, the company had a strong deal win rate. The pipeline in Q1FY22 was at the highest level ever, it slightly moderated because the company closed a lot of deals.
  • The pipeline has a good mix of mid-size and large deals. There is also a lot of momentum in existing accounts, where customers are ramping up on several digital initiatives, with smaller ticket transformational projects are being taken up by the company.
  • The company expects to exceed its initial guidance on hiring 20,000-22,000 freshers on the back of robust demand and backfilling attrition in the recent quarters.
  • Momentum is seen across all verticals with BFSI and Manufacturing being the leaders. The manufacturing vertical is seeing an uptick in engineering services with various transformational deals and projects being undertaken.

 

Asset Multiplier Comments

  • COVID-19 pandemic has unmistakably created a paradigm shift in the ITES Industry, with a strong focus on digitisation around the world across both size and verticals will result in a high growth period for the industry.
  • HCL Tech like its peers will also continue to face supply-side crunch and attrition problems. The situation is expected to improve over the next few quarters which will help to reduce the margin pressures.

Consensus Estimate: (Source: market screener website)

  • The closing price of HCLTECH was ₹ 1,232/- as of 19-October-2021. It traded at 25x/ 22x/20x the consensus earnings estimate of ₹ 49/ 56/ 63. for FY22E/FY23E/FY24E respectively.
  • The consensus target price of ₹ 1360/- implies a PE multiple of 22x on FY24E EPS of ₹ 63/-.

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 HCL Technologies, IT , , , , , 0 Comments Read more...
05 Oct

Multi-Year growth potential for all verticals – Infoedge

Update on the Indian Equity Market:

On Tuesday, NIFTY ended higher at 17,822. The top gainers in NIFTY50 were ONGC (+10.8%), INDUSINDBK (+5.0%), and COALINDIA (+4.2%). The top losers were CIPLA (-2.4%), HINDALCO (-2.1%), and SHREECEM (-1.8%). The top gaining sectors were OIL & GAS (+2.8%), IT (+1.2%), and MEDIA (+0.8%), while the top sectoral losers were REALTY (-1.4%), HEALTHCARE (-0.7%), and PHARMA (-0.5%).  

Edited excerpts of an interview with Mr. Hitesh Oberoi, CEO & MD, Info Edge with CNBCTV18 aired on 04th September 2021:

  • In the last few quarters, the job market, especially for engineers has not been of the type one has seen in maybe the last two decades. It’s a super-hot market with attrition rates for most companies going through the roof, talent is impossible to hire.
  • The company believes it is a rock-solid market, and it is slowly spreading now to the non-IT sectors as well. Starting with the IT market, which has been growing for the last three quarters but now, it’s now beginning to spread to the other sectors as well, as the Indian economy starts to recover.
  • There is a limited pool of talent, every company wants to go digital and companies have brought forward their multi-year plans. Companies that were hoping to get 30-50 percent of their business to come from digital in the next five years are now hoping that 70 percent of their business will be digital in the next two years.
  • The fact that there are remote working opportunities, people are able to get jobs not just in India but even overseas. There is this massive surge right now, one cannot overnight produce a lot of engineers, or overnight upskill them. Unless the demand is hit for some reason, the situation will continue to be like this for the next few quarters as well.
  • The company is a pure-play internet company that runs an online job portal Naukri.com. It has massively benefitted from this uptick in the employment market and has managed to translate that to revenue growth as well.
  • The company is also bullish on the growth prospects of its other website 99acres.com, a real estate classifieds platform due to demand pick-up post lock down impact. According to him, growing prices, demand pick up across the country, cheaper credit availability are all signs of a multi-year growth cycle for real estate.
  • The Wedding cycle is also poised to pick up with more liberal government policies and the pent-up demand due to lockdowns that had brought this industry to a stand -still, the upcoming festive and wedding season bodes well for Matrimony.com.
  • Infoedge continues to be a startup incubator and aggregator with investments across startups like Zomato and Policy Bazaar and the company will continue to be on the lookout for strategic acquisitions in the startup ecosystem which is currently in a valuation bubble.
  • The Company is planning to launch an in-house blue-collar job portal called JobHai which is currently in the test marketing stage and also has made strategic investments in real estate, jobs, and education verticals.
  • The company has significant cash and capital balances to fund more startups and acquisitions to expand its portfolio and will look at listing each of its businesses separately if it believes that will help shareholders unlock more value.

Asset Multiplier Comments

  • The intensity of digital penetration across India has increased over the past few years, however, there is a lot more value to be unlocked for companies like Infoedge by expanding across India.
  • Infoedge has created a value chain through its verticals and strategic acquisitions that range from education to jobs, insurance to real estate, and now food delivery, which will likely consolidate its presence as the undisputed leader of internet-based aggregators in India.

Consensus Estimate (Source: market screener website)

  • The closing price of Infoedge was ₹ 6,493/- as of 05-Oct-21. It traded at 193x/148x/118x the consensus EPS estimate of ₹ 36/47/59 for FY22E/ FY23E/FY24E respectively.
  • The consensus target price of ₹ 6,520/- implies a PE multiple of 111x on FY24E EPS of ₹ 59/-.

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 Info Edge , , , 0 Comments Read more...
04 Oct

This Week in a nutshell (27th Sept to 01st Oct)

Technical talks

NIFTY opened the week on 27th September at 17,932 and closed on 01st October at 17,532 during the week, the index lost -2.23%. Nifty is trading at an RSI of 58, with support at 17336 and resistance at 18,138.

Weekly highlights

  • US President Joe Biden on Thursday signed a nine-week stopgap funding bill that averts a government shutdown but fails to resolve the threat of a US default linked to the debt limit.
  • US Treasury Secretary Janet Yellen has said that if lawmakers fail to raise the debt limit by about Oct. 18, the government may not be able to pay its bills, posing a dire risk to the US and World Economy with the US Treasury defaulting on its debt obligations.
  • Japan’s former foreign minister Fumio Kishida is set to replace Yoshihide Suga as prime minister after he won the ruling Liberal Democratic Party’s leadership vote on Wednesday. Kishida will succeed Prime Minister Suga, the world’s eyes will be on the third-largest economy in the world which is facing stagnant economic growth battered by the coronavirus pandemic, the remnants of an unprecedented public health crisis, and increased political manoeuvring by China.
  • Brent Crude is at its highest since October 2018 and heading for $80 per barrel, as investors fretted about tighter supplies because of rising demand in parts of the world. Brent crude was up $1.44, or 1.8%, to settle at $79.53 a barrel, having posted three straight weeks of gains. Global supplies have tightened due to the fast recovery of fuel demand from the outbreak of the Delta variant of the coronavirus and Hurricane Ida’s hit on U.S. production
  • China’s top state-owned energy companies have been ordered to ensure there are adequate fuel supplies for the approaching winter at all costs, a report said Friday, as the country battles a power crisis that threatens to hit growth in the world’s number two economy. The country has been hit by widespread power cuts that have closed or partially closed factories, hitting production and global supply chains. The crisis has been caused by a confluence of factors including rising overseas demand as economies reopen, record coal prices, state electricity price controls and tough emissions targets.
  • The country’s top carmaker Maruti Suzuki said that it will produce fewer cars in October due to the ongoing global chip crisis. It expects vehicle production at two of its plants to be around 60 per cent of normal levels. The chip shortage has emerged as a major crisis around the world since 2020 after a sharp rise in demand for consumer electronics and continued global supply chain disruptions.
  • During the week, the foreign institutional investors (FII) net sold equities worth Rs 61,520 mn, while domestic institutional investors (DIIs) bought equities worth Rs 75,030 mn.

Things to watch out for next week

  • Q2FY22 Result season to begin with software services leader TCS announcing its results.
  • Rising Oil Prices, US Treasury Yields, Evergrande’s default, and the uncertainty over the U.S default of its debt obligations will be the themes that are in focus this week.

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...
16 Sep

Semiconductor shortage to persist – Motherson Sumi

Update on Indian Equity Market:
On Thursday, markets ended on a high with Nifty closing 110 points higher to close at 17,630. INDUSINDBK (+7.3%), ITC (+6.6%), and SBI (+4.5%) were the top gainers on the index while GRASIM (-1.8%), BHARTIARTL (-1.3%), and TCS (-1.3%) were the top losers for the day. Among the sectoral indices PSU BANK (+5.4%), PRIVATE BANK (+2.7%), and BANK (+2.2%) were the top gainers, while MEDIA (-1.7%), METALS (-0.6%), and IT (-0.6%) were laggards.

Excerpts of the Interview with Mr VC Sehgal, Chairman of Motherson Sumi with CNBCTV18, dated 15th September 2021:

A lot of struggling semiconductors manufacturers are coming back on stream. However, with the uncertainty and guidance from manufacturers, the company expects this issue to persist beyond Q2CY22.
The sophistication required and the manufacturing processes of these semiconductor chips are extremely complex, the current structural barriers faced by these manufacturers can’t be removed overnight.
Demand has picked up for the entire sector, however, there’s a rise in inventory for OEMs as manufacturers wait for semiconductors to be supplied to complete the production and deliver the automobiles.
OEMs like Motherson Sumi are agnostic towards the engine that is fitted into the automobile, whether EV or ICE. However, the shift towards EV is value accretive for the company.
PLI scheme is more focused on technology transfer and development than actual production, however, these schemes coupled with the EV push by the government will result in robust demand for OEMs.
Raw Material price hikes and other margin pressures are a function of cycles and thus the company is not planning to take any aggressive steps to counter it. Right now the focus is only on delivering on the pent-up demand as fast as possible.

Asset Multiplier Comments:
Semiconductor shortage is an issue that’s going to persist for the upcoming quarters and is universal. The Auto and Ancillary Sector has to bear the brunt until things get better.
Motherson Sumi by the virtue of its product portfolio is indifferent to the ICE/EV competition, thus it is better placed for robust growth ahead once the supply side issues subside.

Consensus Estimates (Source: market screener website):
The closing price of Motherson Sumi was ₹224/- as of 16-September-2021. It traded at 32x/20x/17x the EPS estimate of ₹ 7/₹ 11/₹ 13 for FY22E/23E/24E
The consensus price target is ₹ 256/- which trades at 19x the EPS estimate for FY24E of ₹13/-
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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