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08 Jan

Week in a Nutshell (January 2-6)

Technical talks

NIFTY opened the week on 2nd January at 18,130 and closed on 6th January at 17,860 near the 20-week simple moving average. The index is now showing some weakness as it closed below 17,900, which is the 100 Day moving average.

Overall, it was a negative week, with only Consumer Durables, FMCG and Pharma gaining 0.5% each and IT, Media and Financial Services lost close to 2% each.

Weekly highlights

  • In the US, the Dow Jones and S&P 500 indices gained 1.5% each.
  • During the weak, Brent oil and WTI Crude oil fell down around 8% due to the estimated lack of demand for oil as covid scare in China goes up.
  • The auto industry posted its highest-ever annual domestic passenger vehicle (PV) sales in 2022 at 3.79 mn units on the back of pent-up demand and better semiconductor chip supply. The figure was 23.1% more than that of 2021. CY22 figure is the highest ever in a calendar year. The previous high was in 2018 with 3.38 mn units sold.
  • Gross goods and services tax (GST) collection for December rang up over ₹ 1.49 tn, the data released by the finance ministry showed. This is a surge of 15% yoy, mainly driven by increase in retail prices of consumption items, high inflation, and action taken to ensure compliance. This was the third-highest monthly collection since the tax was introduced in July 2017.
  • India’s flagship payment platform, the Unified Payments Interface (UPI), ended the 2022 calendar year on a high note as the volume of transactions touched a record 7.82 bn in December, amounting to ₹ 12.82 tn, again a record high. In CY22, UPI processed over 74 bn transactions, worth ₹ 125.94 tn.
  • Public sector Banks have travelled a long distance since 2017 when they posted collective losses to the tune of ₹ 2.07 tn for five straight years to a profit of ₹ 665 bn in FY22.
  • The Indian economy may grow at 7% in FY23, which is higher than projections made by the Reserve Bank of India (RBI) and the World Bank, according to the latest estimates by the National Statistical Office (NSO). The economy grew 9.7% in the first half (April-September) of FY23. The RBI and the World Bank have projected 6.8% and 6.9% GDP growth, respectively, in FY23.
  • During the week, the Foreign Institutional Investors (FIIs) sold shares worth ₹ 78,000 mn and Domestic Institutional Investors (DIIs) bought shares worth ₹ 27,500 mn.

Things to watch out for next week

  • The corporate result season for Oct-Dec 2023 quarter kicks off on Monday with tech giant TCS reporting its result. Market volatility is expected to go up as stock prices will react to companies’ reported results.
  • Countdown to the Union Budget for FY24 to be announced on 1st February has already begun. Expectations and speculations about the budgetary announcements will add to market’s volatility.

 

 

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

By #WeekInANutshell , , 0 Comments Read more...
24 May

E-Sports to be the new driver of growth – Nazara Technologies

 

 

Update on the Indian Equity Market:

On Tuesday, NIFTY settled lower at 16,125 (-0.6%). DIVISLAB (-6.0%), TECHM (-4.0%), and GRASIM (-3.9%) were the top losers. DRREDDY (+2.0%), HDFC (1.7%), and KOTAKBANK (+1.4%) were the gainers. Among the sectors, MEDIA (-2.6%), IT (-1.9%), and HEALTHCARE (-1.5%) led the losers. FINANCIAL SERVICES (+0.3%), and BANK (+0.1%) led the gainers.

Excerpts of an interview with Mr. Manish Agarwal, CEO, Nazara Technologies with Economic times on 24th May 2022:

  • The company’s revenue mix is an evolving pie chart as it is operating in 5 growth segments viz gamified learning / E-Sports / freemium / ad tech and skill-based real money gaming. All of these areas have a very large Target Audience Market and strong tailwinds based on organic growth momentum and inorganic velocity in different segments.
  • Gamified learning was the largest segment in FY21 and now E-Sports is the largest segment in FY22 the company believes E-Sports has the potential to further evolve if mid-size M&A were to happen in skill-based real money gaming.
  • The online gaming segment has been on the rise for a few years now. In 2020, this segment grew to Rs 79 billion and had a steady growth of 28% in 2021. Even with the lockdown being lifted, this sector has continued to show growth.
  • The Online Gaming sector was valued at Rs 101 billion in 2021, according to an EY FICCI report. The number of esports players doubled from 3,00,000 in 2020 to 6,00,000 in 2021. Additionally, the number of online gamers grew by 8% from 360 million in 2020 to 390 million in 2021, and is expected to rise to 450 million by 2023. The gaming segment is expected to grow exponentially in all verticals including E-Sports for the company.
  • The management expects the online gaming industry to reach 500 million gamers by 2025 and will become the fourth largest segment of India’s M&E sector. It is expected to reach Rs 153 billion at a CAGR of 15%. This growth is expected to be mainly driven by three things: NFTs, Metaverse, and esports.
  • For the next few quarters – the management expects esports to continue to build on the momentum of Q4 and the opening of offline events and the growth of D2C biz with M&A of Wings and Planet Super Hero will be key drivers of growth for the company.
  • The company is present in 5 of the most dominant consumer trends in gaming and will also participate in web 3 so besides this, the management doesn’t think there are any unexplored new opportunity segments. The management’s aim this year is to strengthen leadership in each of the segments that the company operates across emerging markets outside the Indian subcontinent.

Asset Multiplier Comments

  • The online gaming sector is still an underpenetrated segment in India. With increasing internet accessibility and smartphone availability, India offers a largely untapped market in the online gaming segment, which has been accelerated by the pandemic and lockdowns.
  • Being the market leader in this segment, Nazara Technologies is well poised to strengthen its leadership in the E-sports category for the medium term.

Consensus Estimate: (Source: market screener website)

  • The closing price of Nazara Technologies was ₹ 1,200/- as of 24-May-2022.  It traded at 28x/ 21x the consensus earnings estimate of ₹ 43/ 58/- per share for FY23E/FY24E respectively.
  • The consensus target price of ₹ 1796 /- implies a P/E Multiple of 31x on the FY24E EPS estimate of ₹ 58/-

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered 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 Nazara Tech , , 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...
16 Aug

Production loss to be minimal despite semi-conductor Shortage: Bharat Forge

 

Update on Indian Equity Market:

On Monday, markets ended higher with Nifty closing 34 points higher to close at 16,130, TATASTEEL(3.7%), BAJFINANCE (3.4%) M&M (2.4%) were the top gainers on the index while MARUTI (-2.6%),SHREECEM (-2.3%) and EICHERMOT (-2.3%) were the top losers for the day. Among the sectoral indices,  METAL  (1.5%), OIL & GAS (0.9%) and  FINANCIAL SERVICES (0.4%) were the top gainers, while MEDIA (-1.4%),  PSU BANK (-1%) and AUTO (-0.9%) were the top losers.

 

Excerpts of an interview with Baba Kalyani, CMD of Bharat Forge on CNBCTV18 dated 13th August 2021:

 

  • Despite mounting input cost inflation, Company managed to expand its margins by 100 bps sequentially and posted robust growth on both Revenue and Net profit Fronts in Q1FY22
  • Semi-Conductor shortage is a universal phenomenon that’s affecting industries and businesses across the world. In the case of OEMs, most of them have taken adequate steps to address this issue. 
  • In the short term, everyone is suffering some loss in production, however, the company expects no adverse impact on production in the medium-long term. The company reiterated that the situation was outside the control of anyone and its a matter of when and not if the issue will be resolved,
  • He stated that the industry has resorted to rationing of semiconductors to produce higher-value products. This will impact the supply in the short term. 
  • A lot of Passenger vehicle manufacturers have resorted to reducing the production of lower end passenger cars against higher value cars that offer better realisations.
  • Cost Reduction was the company’s important priority in the past 2 years and the company has optimised costs through downsizing, IoT and WC Management, to produce the best margins this company has seen.
  • The company has a strong balance sheet and healthy cash balance, the company plans to take forward its growth through inorganic acquisitions aimed at future technologies like e-mobility, renewables etc as the company gears itself for the future.

 

Asset Multiplier Comments:

 

  • The Semi-Conductor shortage will be dealt with sooner rather than later, barring any major disruptions, OEM and the entire Auto and Ancillary sector is recovering well.
  • Bharat Forge has managed to improve its margins and its plans to grow across all segments through strategic investments as it gets ready for the future are on the right track.

 

Consensus Estimates (Source: market screener website): 

  • The closing price of Bharat Forge was ₹803/- as of 16-August-2021.  It traded at 45x/29x /26x the EPS estimate of ₹18/₹ 28/₹ 31 for FY22E/23E/24E.
  • The consensus price target is ₹ 900/- which trades at 30x the EPS estimate for FY24E of ₹ 31/-

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 Bharat Forge , , , 0 Comments Read more...
15 Jul

Double-Digit revenue growth expected in FY22 – Mindtree

Update on Indian Equity Market:

On Thursday, markets ended higher with Nifty closing 70 points to close at 15,924. HCLTECH (+5.0%), L&T (+3.7%), WIPRO (+3.0%) were the top gainers on the index while ONGC (-3.0%), EICHERMOT (-1.3%) and BHARTIARTL (-0.9%) were the top losers for the day. Among the sectoral indices,  REALTY (+4.2%), IT (+1.3%), and BANK (+0.7%) were top gainers, while AUTO (-0.4%), MEDIA (-0.4%), and PSUBANK (-0.3%) were the losers.

Excerpts of an interview with Debashis Chatterjee, MD, and CEO of Mindtree on CNBCTV18 dated 14th July 2021:

  • Robust Deal Pipeline and order book growth was seen and more renewals led to an increase in the scope of the value of the deals and the new deal wins have been characterised by multi-year long-term deals and not just project-based deals.
  • The company’s strategy of 4x4x4 across 4 of its major service lines is helping the company cross-sell and upsell a lot of the services in the existing deals in its 4 service lines of Customer Service, Data Analytics, Cloud Management, and Enterprise IT.
  • The company has guided for double-digit revenue growth of around 20% and improved EBIT margins in FY22. It hopes to achieve this as a result of the foundational changes in cost efficiencies it has done over the last 2-3 years.
  • Quarter specific and client specific headwinds may occur on the margins front. With the opening up of client businesses and increase in revenue growth aided discretionary spending, the company expects a topline growth as well.
  • The company is rolling a subsequent wage hike in Q2FY22 to deal with high levels of attrition currently faced by the industry. The company plans to undertake significant outreach programs with its personnel to manage attrition.
  • BFSI is seeing significant revival and the company expects its client base and deal wins to grow over the next few quarters after covid-induced consolidations. As far as the Travel Sector is concerned the effects of the pandemic are still looming. Full recovery may take some quarters, new contactless business models may help the company with new deal wins as the clients reimagine their business models.

Asset Multiplier Comments:

  • All Indian IT companies are enjoying the tailwinds arising out of the pandemic. Mindtree is well poised to grow further due to growth in upcoming technologies.
  • The Company is making efforts to deal with the issue of rising attrition. The rising attrition is a result of a talent war in the Indian IT Industry due to the low supply of skilled professionals.

Consensus Estimates (Source: market screener website): 

  • The closing price of Mindtree was ₹ 2,732/- as of 15-July-2021.  It traded at 33x/30x/25x the EPS estimate of ₹ 84/ ₹ 92/ ₹ 108 for FY22E/23E/24E respectively.
  • The consensus price target is ₹ 2,830/- which trades at 26x the EPS estimate for FY24E of ₹ 108/-

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 Mindtree , , , , 0 Comments Read more...
17 Jun

Provisions for slippages will affect short term outlook – LIC Housing Finance

Update on Indian Equity Market:

On Thursday, markets ended lower with Nifty losing 76 points to close at 15,691. ULTRACEMCO (+1.7%), TCS (+1.6%), and INFY (+1.4%) were the top gainers on the index while ADANIPORTS (-9.0%), INDUSINDBK (-3.0%), and HINDALCO (-3.0%) were the top losers for the day. Among the sectoral indices,  METAL (-2.3%),  REALTY (-1.7%), and PSU BANK (-1.4%) were the top losers, while IT (+0.6%) and FMCG (+0.1%) were the only gainers.

Excerpts of an interview with Mr Y Vishwanath Gawd, MD and CEO of LIC Housing Finance on CNBCTV18 dated 16th June 2021 :

  • Retail stress was the leading cause of slippages in non-performing assets (NPA). Substantial new provisions were needed to be made due to the Supreme Court Order last year, which compelled the company to make provisions in 4QFY21.
  • Project Finance and Developer Loans form just 7% of the loan book, so not much issue of NPAs there as the company has made adequate provisions for the loan book.
  • The One-time restructuring facility was provided last year by the government. Around 1.5-2% of the portfolio was restructured using the same facility, this year the company expects a similar restructuring process to be followed, the only concern will be an expectation of a longer repayment structure.
  • The disbursements grew over 97% YoY however the same was not reflected in the order book growth due to faster and larger repayments, consumers shifting their loans to other companies for better terms and restructuring offers during the pandemic.
  • Substantial reduction in the cost of funds has seen the margins improve to around 2.3-2.4% but the company expects margins to stabilise at these levels due to bottoming out of lending rates.
  • As far as the capital infusion is concerned, the company promoter LIC is investing through preferential allotment of 45.4 mn of equity shares which will further shore up leverage and provided much-needed cash impetus. 
  • The focus in FY22 will be to increase market penetration and further improve all the ratios to deliver better value and post incremental growth in the loan book portfolio.

Asset Multiplier Comments:

  • LIC Housing Finance has seen its NPA Provisions bottoming out due to the Supreme Court order. A substantial loan book growth, and improving margins will be the cause of higher growth rates going ahead.
  • As the stress from the Covid-19 pandemic subsides, the affordable housing industry will gather pace which promises better days for the company.

Consensus Estimates (Source: market screener website): 

  • The closing price of LIC Housing Finance was ₹480/- as of 17-June-2021.  It traded at 1.03x/ 0.92x the BVPS estimate of ₹ 462/ ₹ 518  for FY22E/23E respectively.
  • The consensus price target is ₹ 507/- which trades at 0.95x the BVPS estimate for FY23E of ₹ 518/-

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 LIC Housing , , , 0 Comments Read more...
20 May

Good Momentum seen in Asset and Wealth Management segments- IIFL Wealth

Update on Indian Equity Market:

On Thursday, markets were in the red, with Nifty declining 124 points to close at 14,906. CIPLA (2.4%), M&M (2.3%), and BPCL (2.1%) were the top gainers on the index while TATA STEEL (-5.1%), HINDALCO (-4.2%), and COALINDIA (-3.4%) were the top losers for the day. Among the sectoral indices, REALTY (1.0%), and PSU BANK (+0.4%) were the only gainers, while METAL (-3.2%), BANK (-1.0%), and PRIVATE BANK (-1.0%) lead the losers.

Excerpts of an interview with Mr. Karan Bhagat, CEO of IIFL Wealth aired on CNBC TV-18 on 19th  May 2021 :

  • The revenue recognition on a trailing basis instead of upfront basis has seen a strong cyclical recovery over the past 8 quarters. The Wealth Management business is poised to grow from here on.  
  • The Asset Management business has seen a stellar recovery over the past year with an increase in both listed and unlisted equity segments. 
  • NBFC business is seeing a difficult recovery due to the pandemic. The Loan against Shares segment is fairly collateralized and thus the company hasn’t seen any rise in impairment costs. The stable Net Interest margins and lower operating costs are good tailwinds going ahead.  
  • AUM growth is expected in the low teens with organic growth and around 20% on a Mark to Market basis.
  • The company has improved its revenue mix to Annual recurring revenue contributing to around 70-80% as opposed to the brokerage-centric business model over the last 2 years. The management expects this to stabilize at these levels going forward.

Asset Multiplier Comments:

  • India is in the midst of a transformation in its savings and investing habits, going forward Asset and Wealth Management are going to see manifold growth as market penetration increases.
  • The company is well poised to reap the rewards of compartmentalization and operating efficiencies going ahead in both the Asset and the Wealth Management business.

Consensus Estimates (Source: market screener website): 

  • The closing price of IIFL Wealth was ₹1,100/- as of 20-May-2021.  It traded at 23x/ 19x the consensus EPS estimate of ₹ 48/ ₹ 59 for FY22E/23E respectively.
  • The consensus price target is ₹ 1360/- which trades at 23x the EPS estimate for FY23E 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 IIFL , , , 0 Comments Read more...
10 May

Expect a demand recovery once restrictions are lifted – Blue Star

 

Update on Indian Equity Market:

On Monday, markets were on the rise, with Nifty increasing 128 points to close at 14,950. COAL INDIA (8.2%), UPL (8.0%), and HINDALCO (6.2%) were the top gainers on the index while SHREECEM (-1.9%), BRITANNIA (-1.28%), and ULTRACEMCO (-1.28%) were the top losers for the day. Among the sectoral indices, Metal (4.7%), PHARMA (2.8%), and MEDIA (+2.5%) led the gainers. There were no sectoral losers for the day.

 

Excerpts of an interview with Mr. B Thyagarajan MD of Blue Star with CNBC- TV 18 dated 7th May 2021:

 

  • Till 15-April-21, secondary sales were growing at a healthy pace. The increased restrictions have resulted in the slow down of Air- Conditioning and Commercial Refrigeration verticals.
  • The company feared a washout as evidenced in Q1FY21 but it actually posted a 20% lower compared to its earnings in Q1FY20. The Company hopes sales could normalize by the end of May and sees recovery in the months of June-July owing to a hot extended summer.
  • Blue Star had already hiked prices as of 1st April. As the Company has significant inventories owing to slow down, it doesn’t expect any more margin pressure and expects it to stabilize around 8%.
  • The company witnessed a stellar growth in the pharma-health care sectors across air-conditioning and commercial refrigeration verticals due to covid-19 developments and vaccine transports.
  • The manufacturing sector in both Electro-Mechanical and Air-Conditioning segments showed good growth in Q4FY21. The 1st financial quarter is seasonally focused on residential air-conditioning sees its growth prospects dampened due to lockdowns. 
  • Capacity expansion will be operational in the Wada plant for Deep Freezers by Q2FY22 and another plant is expected to be operational in H1FY23 for Air conditioning in Sri City.
  • It expects pent-up demand to drive residential air conditioning growth by around 10% for FY22 owing to prolonged work from home exposure and reduced spending on other luxuries.

 

Asset Multiplier Comments:

  • The seasonal nature of the company’s demand may impact the performance in the short term. The improved macro factors, longer summers due to climate change present good growth prospects over the long term.
  • The margins have been beaten down due to various factors, we expect pressure to ease off in the medium term.

 

Consensus Estimates (Source: market screener website): 

  • The closing price of Blue Star was ₹ 833/- as of 10-May-2021.  It traded at 44x/ 32x the consensus EPS estimate of ₹ 19/ ₹ 26 for FY22E/23E respectively.
  • The consensus price target is ₹ 790/- which trades at 30x the EPS estimate for FY23E of ₹ 26/-

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

 

By Blue star, Consumer durable , , , , 0 Comments Read more...
28 Apr

Preference for Margins over Volume Growth: HDFC Life

Update on Indian Equity Market:

Markets were on the rise today, with Nifty increasing 212 points to 14,865. Bajaj Finance (8.0%), Indusind Bank (4.9%), and Eicher Motors (4.8%) were the top gainers on the index while Britannia (-2.0%), Hindalco (-1.0%), and Nestle (-1.0%) were the top losers for the day. Among the sectoral indices, Bank (3.0%), Private Bank (3.0%), and Financial Services (2.9%), led the gainers while Realty (-0.6%), Pharma (-0.3%), and Metal (-0.3%) ended in the red.

 

Excerpts of an interview with Ms. Vibha Padalkar, CEO of HDFC Life with Bloomberg Quint dated 28th April 2021:

 

  • HDFC Life expects to record profit margins upwards of 70% irrespective of the covid-19 impact. 
  • Company prefers to protect high profit margins and to grow moderately than chase topline growth, especially in the protection segment due to uncertainty and higher risk due to covid-19.
  • Company aims to expand into the annuity segment which is a highly lucrative and retiral segment which is showing good potential going forward.
  • The risk associated with price hike as a result of covid-19 cannot be ruled out entirely. The company ensures that the price hike will be passed over to customers in a phased manner.
  • In order to reduce risk, the company wants to diversify its product portfolio to improve contributions from annuity and protection segments

 

Asset Multiplier Comments:

  •  The Company has identified key areas, in order to sustain growth by focusing on margins cover and sustainable growth, which provides a long term positive outlook for the company.
  • These efforts will help the company grow beyond FY22 and with the expansion of the Insurance industry is poised for stellar growth.

 

Consensus Estimates (Source: market screener website):

  • The closing price of HDFC Life was ₹ 673/- as of 28-April-2021.  It traded at75x/ 67x the consensus EPS estimate of ₹ 9/ ₹ 10 for FY22E/23E respectively.
  • The consensus price target is ₹ 758/- which trades at 76x the EPS estimate for FY23E of ₹ 10/-
  • In the case of life insurance companies, the embedded value per share is the correct multiple for valuing the company. The consensus estimate of this metric is not available on any of the websites.

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 Life , , 0 Comments Read more...
21 Apr

Expect 20 percent plus EBITDA margins to continue – Mindtree

Update on the Indian Equity Market:

The Indian Equity market indices gained after the Indian government announced that all citizens over the age of 18 can have Covid-19 vaccinations from May 1.  The markets pared morning gains as investors were worried due to the increasing Covid-19 cases in the second wave. Nifty 50 ended at 14,296 (-0.4%).  Among the stocks, DRREDDY (+3.6%), BAJAJFINSV (+3.5%), and HDFCLIFE (+3.0%) ended with gains while ULTRACEMCO (-4.9%), HCLTECH (-3.4%), and HDFC (-3.3%) led the losers. Among the sectoral indices, MEDIA (+3.0%), PHARMA (+1.3%), and AUTO (+1.0%) led the gainers while IT (-1.4%), FMCG (-0.6%), and FINANCIAL SERVICES (-0.6%) led the losers.

Excerpts of an interview with Mr. Debashis Chatterjee, MD & CEO, Mindtree aired on CNBC TV-18 on 19th April 2021:

  • Mindtree reported 4QFY21 quarterly results, with the consolidated net profit reporting a ~54% YoY growth to Rs 3,174 mn due to strong operational efficiency.
  • Two successive quarters of 5percent plus growth instills confidence in the Company in terms of momentum generated by deal closures.
  • The order book stood at USD 1.4 bn as of 31-March-21. The order book was 12% more than the previous year. The pipeline has never been stronger and with the changes done in terms of the 4*4*4 strategy- the execution is going well.
  • They have focused on some of the strategic accounts and focusing on cross-selling and up-selling as a part of their strategy. Considering these factors, they remain confident of delivering double-digit growth in FY22E and maintaining the margins at 20 percent plus.
  • They have added net 1600 employees in 4QFY21. Owing to a strong pipeline and a high demand, Mr. Chatterjee expects hiring to be robust in the next couple of quarters.
  • The war for talent has aggravated in the last couple of quarters. With a focus on cross-skilling of employees, they have been able to contain the attrition.
  • There has been a delay in BFSI deal closures, which are expected to happen in 1QFY22. Given the interest rate regimes, there have been some in-sourcing trends in the banking clients. Post the deal closures in 1QFY22, there is some recovery expected in the BFSI vertical.

Asset Multiplier Comments

  • The commentary on deal signings, consistent margin improvement, and the ability to sustain these improved margins are key positives for the Company.
  • The pandemic accelerated clients’ interest in Data, Cloud migration, and other disruptive technologies, across IT services companies. This is expected to benefit IT services companies for the foreseeable future.

Consensus Estimate: (Source: market screener website)

  • The closing price of MINDTREE was ₹ 2,033/- as of 20-April-2021. It traded at 25x/ 24x the consensus earnings estimate of ₹ 80.1/ 86.1 per share for FY22E/FY23E respectively.
  • The consensus target price of ₹ 1,857 implies a PE multiple of 22x on FY23E EPS of ₹ 86.1/-.

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.”

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