Uncategorized

Dated: 21st July 2019

“A down market lets you buy more shares in great companies at favourable prices. If you know what you are doing, you’ll make most of your money from these periods. You just won’t realise it till much later.” Shelby Davis
“Christopher Davis’s grandfather used to say that you make the most money out of a bear market financial panic – you just don’t know it at the time. It’s always the case.” Li Lu
“We see the latest correction not as a disaster, but as an opportunity to acquire more shares at low prices. This is how great fortunes are made over time.” Peter Lynch

“Bear markets are great times to load up on stocks.” Ralph Wanger
“It’s not during up years that great investment track records are made!” Charles De Vaulx
“Down cycles are not fun. But they form the basis for enormous future profitability.” Steve Schwarzman
“Most investors take comfort from calm, steadily rising markets: roiling markets can drive investor panic. But these conventional reactions are inverted. When all feels calm and prices surge, the markets may feel safe; but, in fact, they are dangerous because few investors are focussing on risk. When one feels in the pit of one’s stomach the fear that accompanies plunging market prices, risk-taking becomes considerably less risky, because the risk is often priced into an asset’s lower valuation.” Seth Klarman
“Ironically, most of the risk to long-term investors in equities comes from panicking in the short-term and closing out positions at temporary low points.” Jeremy Grantham 
“Invest in time of chaos, harvest in times of prosperity.” Jonathon Sokoloff
“The best bargains are always found in frightening environments.” Howard Marks

Source: www.masterinvest.com

Dated: 16th July 2019

Following are the excerpts from the interview given by Mr Yashpal Gupta, MD & CEO of Repco Home Finance published in Livemint.
· Mr Yashpal Gupta mentioned that the stoppage of disbursals to builders as predicted in a broker report will not affect the company. The company’s home loans are mostly given out for self-reconstructed houses.
· Out of the total outstanding loan book, the company has only 10-15% exposure to builder loans. The average ticket size of housing loans is about Rs 15 lakh. So even if there is a delay, the borrowers generally continue to pay from their own pocket. Most of the loans in the form of self-constructed houses are in tier II, III and IV cities.
· According to him, the banks and Housing Finance Companies (HFC) which constitute a large percentage of loans to the builder loans may get affected because of this development.
· The majority of the loan book is in Tamil Nadu. Since the last couple of years, the state is facing problems related to sand mining issue and the problem of land registration. During 1Q CY19, the state faced a water shortage in some areas due to rain shortfall.
· There are several aspects within affordable housing such as subsidy under PMAY (Pradhan Mantri Awas Yojana) scheme, affordable housing in terms of tax benefits up to Rs 45 lakhs and the builder constructing the affordable housing projects. The industry is facing the issues as the builder constructed affordable housing projects are at far places like distance of 50 to 60 km from major cities. People are not very keen on buying properties in those places creating a demand shortfall in the market for available properties.
Consensus Estimate (Source: market screener website)
· The closing price of Repco was Rs 366/- as of 16th July 2019. It trades at a price to Book Value (P/BV) multiple of 1.3x/1.1x the consensus Book Value estimates for FY20/21E of Rs 283/320 respectively. 
· Consensus target price of Rs 477/- implies a P/BV of 1.5x on EPS of Rs 320 for the year ending Mar-21E.

Dated: 15th July 2019

Consolidated Quarterly performance highlights:
1) Net Interest Income (NII) for the quarter grew 34% YoY at Rs. 28,440 mn. The Net Interest margins (NIMs) stood at 4.05% as against 3.92% in 1QFY19.
2) Fee income grew 28% YoY at Rs 16,630 mn, led by 47% YoY growth in the loan processing fees.
3) Provision for the quarter was Rs 4,310 mn where the credit cost stood at 3,040 mn and other provisions including the standard provisions stood at Rs1,260 mn.
4) Net profit for the quarter grew by 38% at Rs 14,330 mn.
5) Loan book grew by 28% YoY whereas the deposit growth for the quarter stood at 26% YoY led by CASA growth of 25% YoY. CASA (Current Accounts- Savings Accounts) ratio stands at 43%.
6) GNPA & NNPA for the quarter stood at 2.15% & 1.23% respectively. The provision coverage ratio for the bank stood at 43%.
7) The annualised ROE stood at 18.45% vs 5.46% in 4QFY19. 
8) IndusInd bank standalone performance {excluding Bharat Financial Inclusion Ltd (BFIL)}: NII grew by 14% YoY, Fees income grew 23% YoY, and operating profit growth has shown a 17% YoY growth while the Net Profit stood at Rs 12,200 mn, a growth of 18% YoY. IndusInd standalone loan book grew by 26% YoY for the quarter at Rs 18,99,620 mn.
Key Highlights of the Concall:
a) The IndusInd bank has guided for a loan book growth of mid-20% in the medium term.
b) They expect the credit cost to be in the range of 55-65 bps for FY20E.
c) The bank targets to gain market share in vehicle financing from the NBFCs. They expect the slowdown in the auto industry to continue in 2QFY20E. They see some recovery in the auto sector during the festive season this year.
d) IndusInd Bank has made an adequate provision for IL&FS exposure according to the management. Bank’s funded and non-funded exposure to the group is 1.67% of the loan book net of provisions held. 
e) Liabilities of BFIL have not fully transferred and will take another 6-9 month to get reflected. The IndusInd bank expects the AUMs to grow at 35% YoY. BFIL disbursement has seen a slowdown in Orissa & West Bengal region. This slowdown is expected to continue for a few more months.
Consensus estimates: (source market screener website)
• The stock price is Rs 1,485/- as of close price of 15th July 2019. It trades at 2.8x/ 2.4x/ 2.0x the consensus book value for FY20E/ FY21E/ FY22E of Rs 523/ 626/ 741 respectively.
• The consensus price target is Rs 1,851/- valued at 3.0x FY21E book value of Rs 626/-.

Dated: 10th July 2019

Tata Consultancy Services Limited: Softer 1Q, Company still eyeing for double-digit sales growth in FY20

1QFY20 Results
• TCS revenues in Rs terms reported 9% YoY growth to Rs 3,81,720 mn and to Rs 5,484 mn in $ terms. BFSI grew 11% YoY and Digital revenue reported strong growth of 44% YoY.
• Reported EBIT grew 7% YoY to Rs 92,200 mn. EBIT margins declined by 80 bps YoY to 24.2% due to higher depreciation and other expenses. 
• Reported PAT grew 11% YoY to Rs 81,530 mn.

Management Commentary
• TCS remains confident about medium-to-long term demand.
• Double-digit revenue growth in FY20 will depend on how 2Q pans out. 
• From now on, the focus will remain on maintaining margins. That will remain priority rather than margin expansion.
• Volatility in currency shall remain a factor to keep track of. 
• Sub-contracting costs have been on an upward trajectory for some time. This is a reflection of TCS’ decision to participate aggressively and capturing Digital demand, despite the supply situation.
• Issued joining letters to 30k+ in 1Q. 40% have on-boarded in 1Q and the remainder in 2Q.

Consensus Estimate (Source: www.marketscreener.com) 
• The stock price is Rs 2,105/- as of close price of 10th July 2019 and trades at 23x / 21x the consensus EPS for FY 20E / 21E EPS of Rs 90.1 / 101.0 respectively. 
• Consensus target price is Rs 2,165/- valued at 21x FY21E EPS of Rs 101.0.

Dated: 9th July 2019

Titan has published its press release giving an update for the 1QFY20 sales performance of the company:

Key highlights are as follows:
1) 1QFY20 witnessed a tough macro- environment with consumption being hit.
2) Jewellery Segment: Titan reported lower than expected revenue growth in this quarter. The management expected growth of 20% YoY for FY20 and the actual growth is ~13% in 1QFY20. This was driven by a sharp increase in gold prices that dented consumer demand significantly in the month of June. Wedding jewellery & studded group witnessed decent growth in the quarter. Sales on the auspicious occasion of ‘Akshaya Tritiya’ were robust.
Tanishq launched Swayahm collection of both plain and studded Jewellery. Mia launched ‘Birthstone Pendant’, ‘Facets’ and ‘Florets’ collections, which have all got a good response according to the Company.
3) Watches Segment: The segment grew 19% YoY in 1QFY20, partly led by the execution of a large institutional order from Tata Consultancy Services (TCS). The tech-enabled wearable has been the new driver for the division. In channels, E-Commerce, Trade and LFS (Large Format Stores) channel remain the growth drivers for Watches division for June quarter. Under the ‘Titan Raga’ brand for women, ‘Raga Cocktails’ collection with Swarovski crystals was launched at the premium end and ‘Raga Viva III’ at affordable prices. ‘Light Leathers — II’ collection, contemporary classic wear watches for men and ‘Purple PoP’ collection for the fun-loving millennial was also launched during the quarter. Fastrack has the exclusive rights in India to produce watches inspired by Game of Thrones and has launched the ‘Game of Thrones’ collection.

4) Eyewear Segment: The division witnessed revenue growth of 13%, aided by the activation i.e., a greater number of buyers enrolling for memberships, schemes/ offers, loyalty programmes, etc during the quarter. Trade channel grew faster than the overall division growth. The division added 27 stores during the quarter and also closed 9 stores ending up with a net increase of about 12,000 sq. feet of retail space. Fastrack Sunglasses launched a lightweight collection called ‘Floatables’.

Consensus estimates (Source: Marketscreener website):
Titan with a closing price, (as on 09-07-2019) of Rs 1,096/- per share trades at a P.E of 51.5x/ 42.3x/ 35.0x its earnings per share estimates of Rs 21.3/ 25.9/ 31.3 for FY20E/ FY21E/ FY22E. The consensus price target is at Rs 1,256/- over the next 12 months.

Dated: 8th July 2019

Following are the excerpts from the interview given by Mr Jitendra Adhia, President of Finance, Atul Auto Ltd. on CNBC TV18.
· The volumes are improving month on month. The Pressure is on exports as few contracts have been postponed. He expects that to be normalised in the next few months.
· Domestically, the volumes grew by 6% on a quarterly basis. The first quarter remained lean and particularly for the first two months of April & May due to external factors like liquidity crunch, elections, etc. The company has given guidance of double-digit growth for FY20E.
· The new Ahmedabad plant is likely to be commercialised by the end of CY19. Currently, the company is having a capacity of 60,000 units per annum. The company is operating close to 80% capacity utilisation. The capex will be completed in 2 phases out of which phase 1 will be commercialised by 2019 end with the capacity strength of 30,000 units per annum. Phase 2 of CAPEX will be ramped up once phase 1 will be stabilised. The company aims to target 80% of the capacity utilisation before phase 2 is commercialised
· The company has spent Rs 1,300 mn on CAPEX. This was fully funded through internal accruals and the company still maintains the debt-free status. The company requires another Rs1,000 mn for completion of CAPEX as well as product development expenses. The company expects to fund this additional funding requirement through internal accruals.
Consensus Estimate (Source: market screener website)
· The closing price of Atul auto was Rs 272/- as of 8th July 2019. It trades at a price to earnings (P/E) multiple of 10x/9x the consensus EPS estimates for FY20/21E of Rs 28.2/ 29.7 respectively. 
· Consensus target price of Rs 419/- implies a P/E of 14x on EPS of Rs 29.7 for the year ending Mar-21E.

Dated: 2nd August 2019

1QFY20 result update:

• Consolidated revenue grew 31% YoY (-3% QoQ) to Rs 5,953 mn. API, PFI and FD segments contributed to 36%,16% and 48% of revenues respectively.
• EBITDA grew 63% YoY (+22% QoQ) to Rs 1,186 mn. Reported EBITDA margins expanded by 390 bps YoY to 19.9% from 16.0% in 1QFY19.
• Net Profit without JV grew 55% to Rs 578 mn and net profit with the share of JV grew 61% YoY to Rs 832 mn.

Management Commentary:

• Management has reiterated 20% CAGR growth in revenues and 25% CAGR growth in profits for the next 3 years.
• Management has said that raw material costs risks have been mitigated so going forward raw material costs will be stable.
• Good growth in FD sales and increased utilization of few idle capacities has led to an improvement in gross margins
• Management has guided for ~19% EBITDA margins for FY20E.
• Granules have guided for 8-12 filings and 3-5 approvals in FY20E.
• Capex guidance for FY20E remains constant Rs 1500 mn.
• Management has mentioned that they will be reducing promoter pledging which is 43% as of now to 33% in a few days and will be fully removed by FY21E.

Consensus Estimate (Source: market screener website)

• The closing price of Granules is Rs 92/- as on 2^nd August 2019. It traded at 8x / 7x the consensus EPS for FY 20E / FY 21E of Rs 11.6 / 13.6 respectively.
• Consensus target price of Rs 142/- implies a PE of 10x on FY21E EPS of Rs 13.8.