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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.”

 

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15 Mar

Focus on next stage of digital transformation – HDFC Bank

Update on the Indian Equity Market:

On Tuesday, NIFTY50 ended in its 5 day winning streak and closed at 16,663 (-1.2%). Among the sectoral indices, AUTO (+0.6%), and FMCG (+0.2%) were the only gainers while METAL (-4.1%), IT (-2.6%), and OIL & GAS (-2.5%) were the top sectoral indices that closed in the red. Among the NIFTY50 stocks, TATACONSUM (+3.7%), M&M (+2.4%), and CIPLA (+2.0%) led the gainers while TATASTEEL (-5.2%), HINDALCO (-5.2%), and ONGC (-4.9%) led the losers.

Excerpts of an interview with Mr. Parag Rao, Country Head, HDFC Bank published in Economic Times on 14th March 2022:

  • The bank did face a couple of outages and it impacted the customers. The regulator took notice of this and conveyed that it has no issues with the bank’s growth plans and strategic direction in which the bank is going, but it would like it if the bank reconsiders its investments in infrastructure so that it can sustain this growth.
  • The bank in the interim was not allowed to do two things. One was the credit card ban; it could not issue new credit cards to customers and at the same time, all the new digital initiatives which the bank was planning to launch were put on temporary hold till such time the bank strengthened and demonstrated the capability to manage this kind of growth.
  • The bank’s new motto is technology become the driver and magnet to get business for the bank and that is how it has started the transformation. In this context, the first embargo on the issuance of credit cards was lifted in August-21. Since then, the bank has gotten back to its regular run rates and rapid growth plans on its credit card base.
  • HDFC Bank is a very large bank. It has commitments and responsibility to a very large customer franchise and in that sense, this pause in its growth was for a very good cause and it is now far better prepared for the next five years.
  • The bank’s strategy can be broken up into three core parts; one is reimagining the entire customer experience and building new digital platforms which would take the customer experience that much far into the future. The context has already been set over the last five to seven years with the emergence and explosion of the digital wave.
  • This digital wave has brought about significant changes in the way customers would interact with their principles, banks, and various other categories practically in every industry and so there was a different need for customers in this whole digital world.
  • All of this has expanded the kind of needs and demands that the customer expects from the institution. So reimagining customer experience and building completely new digital platforms to enhance customer value is one leg of the bank’s strategy.
  • One immediate change over the next couple of months will be the relaunch of PayZapp 2.0 on a completely new platform. The Bank aims is to be among the top three payment apps in the country and a significant ramp-up for PayZapp not just by how it engages and provides the services of holistic payments to its existing set of 60 million customers.
  • The Bank’s planned investments into technology are expected to double over the next 3 years as compared to the past 3 years. The bank is focused on expanding its digital infrastructure by bringing new and skilled talent to lead the transformation.

Asset Multiplier Comments

  • After 16 months of restrictions imposed by the RBI, HDFC Bank is all set to leverage its investments in technology to fuel the next stage of growth in customers by expanding its omnichannel presence.
  • While HDFC Bank is a leader in a lot of parameters in the banking sector, it requires significant catch-up to its peers like ICICI Bank and SBI who have already ahead of the curve when it comes to customer acquisition and tech-based infrastructure development.

Consensus Estimate: (Source: Marketscreener website)

  • The closing price of HDFC Bank was ₹ 1424 /- as of 15-March-2022. It traded at 2.7x/ 2.4x the consensus Book Value per share estimate of ₹ 520/600 for FY23E/FY24E respectively.
  • The consensus target price of ₹ 1970/- implies a P/B multiple of 3.3x on FY24E BVPS estimate of ₹ 600/-

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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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.”

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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.”

 

 

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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.”

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18 Apr

The week in a nutshell (April 12th to 16th)

 

Technical talks

  • NIFTY opened the week on 12th April at 14,645 and closed on 16th April at 14,617. After beginning the week with major losses, the index rebounded to close flat for the week. The index is trading below its 20DMA of 14,661, which may act as resistance. The next level being 50DMA at 14,863. The Index breached its 100DMA at 14,316 during the week where it may find support.

Weekly highlights

  • The week began with major indices in red due to the rising Covid-19 cases and lockdown-like conditions imposed across major areas in the country.  Indices recovered during the week to end flat. Gains were seen in pharma, IT, metals, and auto stocks, while bank and realty indices ended in the red.
  • Due to the increasing number of COVID-19 cases in India, Foreign Institutional Investors (FII) turned net sellers this week,  at  Rs 10,590 mn. Domestic Institutional Investors (DII) were net buyers and pumped in Rs 6,080 mn.
  • Q4FY21 result earnings season started this week with the big 3 tech companies -TCS, Infosys, and  Wipro. All reported good revenue growth on the expected lines. Their comments for upcoming quarters suggest promising growth. On the back of a strong earnings show, Infosys has announced a buyback of Rs.92 bn, at an upper price limit of Rs. 1750/share.
  • The US Equity markets hit a record high during the week. The Dow Jones Industrial Average hit the historic milestone of 34,000 for the first time owing to economic recovery and stimulus package announced by President Joe Biden and reducing unemployment.
  • American banking major Citibank on Thursday announced that it will exit from the consumer banking business in India and 13 countries. This is a part of a global strategy of CEO Jane Fraser attributing the decision to an absence of scale to compete in these geographies. The bank has 35 branches in India and employs approximately 4,000 people in the consumer banking business. 
  • India’s retail inflation, measured by the Consumer Price Index (CPI), rose to 5.52 percent in March. Separately, the country’s factory output, measured in terms of the Index of Industrial Production (IIP), witnessed a contraction of 3.6 percent in February. The retail inflation during February was at 5.03 per cent.

Things to watch out 

  • Q4FY21 result season to continue with HDFC Bank and Nestle reporting their earnings. India’s COVID patient numbers will drive the sentiment of the market in the near term. Some economists are already reducing India’s GDP growth forecast for FY22 due to the second wave. We expect investors to focus back on cash flow creators – pharma, consumer, and software services. This is a holiday-shortened week due to a break on Wednesday. 
By #WeekInANutshell, Weekly Markets highlights, Weekly update , , , 0 Comments Read more...
16 Oct

5 focus areas to reinvigorate the company – Wipro

Update on the Indian Equity Market:

On Thursday, Nifty closed 2.4% lower at 11,680. Within NIFTY50, ASIANPAINT (+0.4%), JSWSTEEL (+0.2%), and COALINDIA (+0.1%) were the only gainers, while BAJFINANCE (-5.0%), TECHM (-4.4%), and ICICIBANK (-4.1%) were the top losing stocks. All the sectoral indices closed with losses led by BANK (-3.4%), PVT BANK (-3.3%), and FINANCIAL SERVICES (-2.9%).

5 focus areas to reinvigorate the company – Wipro

Excerpts of an interview with Mr. Thierry Delaporte, MD & CEO, Wipro, published in the Business Standard on 14th October 2020:
● Out of the impacted sectors, Wipro is now seeing a good volume of deals in the BFSI, retail, and consumer sectors. The manufacturing sector is still impacted by the pandemic. However, the need for transformation will lead to growth coming back in the next couple of quarters. The aerospace and automobile sectors are still under pressure.
● Clients have intent on reducing expenses. But in reality, spending on technology actually increases. Spending on technology is a business requirement now. Not just the CIO but also the chief marketing officer, chief of the supply chain, chief digital officer are all asking for technology. The reduction will be in terms of spending on legacy processes.
● Wipro is focusing on five main areas. They are-
1. Focus on large clients and large deals as opposed to going after new clients
2. Focus on more markets and sectors where Wipro can claim leadership
3. Refine offerings by creating more vertical differentiation
4. Invest in talent to acquire the best domain and technology expertise
5. Refine the operating model to drive simplicity and nimbleness
● In order to chase and win large deals, Wipro plans to enhance and reinforce the global client partners’ power so they can have a bigger impact on clients.
● Due to the pandemic, Wipro has now learned that employees can work from home productively. On the other hand, they also need to connect with the rest of the organization for the culture and sense of belonging. Mr. Delaporte is of the view that going forward there will be a hybrid model where employees will have more flexibility without any judgment on where they choose to work from.
Consensus Estimate (Source: market screener website)
● The closing price of WIPRO was ₹ 342/- as of 15-October-2020. It traded at 20.3x/ 19.0x/ 17.9x the consensus EPS estimate of ₹ 16.8/18.0/19.1 for FY21E/ FY22E/ FY23E respectively.
● The consensus target price of ₹ 283/- implies a PE multiple of 14.8x on FY23E EPS of ₹19.1/-.

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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22 Sep

Investment in digital transformation paying off now – Titan

Update on the Indian Equity Market:
On Monday, Nifty ended 2.5% lower at 11,222 mirroring sell-off in global markets due to rising coronavirus cases across the globe. Domestic investors remained cautious due to the passage of a farm bill as well. Among the Nifty50, TCS (+0.8%), INFY (+0.5%), and KOTAKBANK (+0.3%) were the only stock gainers. INDUSINDBK (-8.6%), TATAMOTORS (-7.8%), and HINDALCO (-7.2%) were the top losers. None of the sectoral indices ended the day in the green, and REALTY (-6.0%), METAL (-5.6%), and MEDIA (-4.8%) were the top sectoral indices to end with losses.

Edited excerpts of an interview with Mr. S Subramaniam, CFO, Titan Company with CNBC-TV18 on 18th September 2020:
• As of now, plain gold jewelry, wedding jewelry, and gold coins are still very much in demand. The recovery from an overall revenue perspective has been fine. The month of September will not see high sales due to the extended inauspicious period.
• In terms of revenues, the company is at about a 90% level on a year-on-year basis. Around 85-90 percent of stores are open but for shorter timings due to localized lockdowns.
• As far as diamond jewelry is concerned, the ratio will remain low this year as discretionary expenses are not taking off as expected. The company hopes to return to normalcy by 4QFY21.
• The industry is facing some serious challenges due to Covid-19, especially the smaller jewelers. Titan is witnessing higher market share, due to a strong balance sheet and strong brands.
• The high investments in digital transformation over the past years are now paying off. Videoconferencing has become a big way of attracting and connecting with customers. Some of the customers may visit the store to complete the sale but a lot of sales are happening digitally. These are the big competitive advantages of Titan.
• The studded jewelry caters to people who are unlikely to face job losses due to the pandemic. Discretionary spending doesn’t depend just on the income levels but also on the general mood and sentiment. In the current situation, most people are avoiding going out. They are waiting for better times when they can feel safe going out to buy jewelry.
• The recovery has been good, slightly better than what the company had anticipated. There are some worrying signs such as the unpredictable timing of normalcy returning, the vaccine is available for all, vaccine doses, which are slightly dampening.
• The cost-cutting measures have been implemented since December 2019, before the outbreak of the virus. The companywide initiative been doing very well. The measures start from discounts to customers, to franchisee pay-outs and every aspect is being looked at. Similarly, every element of fixed cost is also being looked at, including employee cost. The savings from the measures are coming in and assuming next year to be a normal year, will see a bump up in margins.

Consensus Estimate: (Source: market screener and investing.com websites)
• The closing price of Titan Company was ₹ 1,117/- as of 21-September-2020. It traded at 111x/ 54x/ 45x the consensus earnings estimate of ₹ 10.1/ 20.7/ 24.9 per share for FY21E/FY22E/FY23E respectively.
• The consensus target price of ₹ 1,062/- implies a PE multiple of 43x on FY23E EPS of ₹ 24.9/-.
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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27 Dec

Focus on vertical strengthening of product portfolio, market momentum expected in Q4: Sunil Bothra, Minda Industries

Update on the Indian Equity Market:

On Thursday, Nifty closed 0.7% lower at 12,126. Among the stocks, ONGC(+2.5%), Vedanta (+1.9%) and JSW Steel (+1.0%) were the gainers. Yes Bank (-4.4%), Bharti Airtel (-2.0%), and Reliance (-1.9%) ended in the red. Nifty Media (+0.1%) and Nifty Metal (+0.6%) were the only sectors which ended in the positive. Nifty PSU Bank (-1.5%), Nifty Pharma (-0.9%) and Nifty Bank (-0.9%) were the worst-performing sectors.

Focus on vertical strengthening of product portfolio, market momentum expected in Q4: Sunil Bothra, Minda Industries

Excerpts from an interview with Mr Sunil Bothra, Executive Director and Group Chief Financial Officer, Minda Industries:

  • The existing sensor business is more than 5 years old and as part of their strategy, they are in a long-term partnership with Sensata Technologies.
  • Sensata, which was previously Texas Instruments have many businesses which are into defence and other technologies.
  • Minda Industries has entered into an agreement with Sensata to acquire the wheel speed sensor business. The agreement will help to acquire the customer base in India and South Korea and will also make global opportunities available.
  • Although the acquisition cost only ₹ 45 crore, it is expected to generate an additional revenue of ₹100-120 crore in the next four years. With this acquisition, the fresh investment in the sensor business will reach ₹ 145 crore and it is expected to generate revenue of ₹ 500-600 crore in the next 4-5 years.
  • The company has been focussing on vertically strengthening the product portfolio, which they have done by undertaking small acquisitions. Now that they have more than 30 businesses or products, the focus is on strengthening their technological capability and offering to the OEs.
  • The recently concluded acquisition of Delvis will help strengthen their technology position in 4-wheeler lamps, thereby strengthening the sensor business.
  • Talking about the demand, he said the company has seen some green shoots in October, which led to a little increase in volume in a few original equipment manufacturers in November.
  • Since December is generally a lean period, Q3 is not very bullish as compared to Q2.
  • Some market momentum is expected in Q4. But they will have to wait and see how the market pans out post the BS-VI launch from April 1, since there will be price impact of 10-12%.
  • If they are able to increase their kit value per car or 2-wheeler or OE in Q4, they are hopeful of continuing the overperformance in the near future.      

Consensus Estimate: (Source: market screener website)

  • The closing price of Minda Industries was ₹ 348 /- as of 26-December-19. It traded at 32.8 x/ 23.4x / 18.5x the consensus EPS estimate for FY20E/ FY21E/ FY22E of ₹ 10.6/14.9 /18.8 respectively.
  • Consensus target price of ₹ 383/- implies a PE multiple of 20.4x on FY22E EPS of ₹ 18.8/-.
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06 Nov

“The worst is behind us” says Ashok Leyland Chairman.

Update on the Indian Equity Market:

On Tuesday, NIFTY closed 0.2% lower. Bajaj Finance (+3.3%), Bharti Infratel (+3.3%) and Yes Bank (+3.2%) were the top NIFTY50 gainers. Zee (-3.7%), Indusind Bank (-2.3%) and Ultratech Cement (-2.2%) were the top NIFTY50 losers. Among the sectors, NIFTY FMCG (+0.3%) was the only sectoral index that closed positive. NIFTY MEDIA (-1.4%), NIFTY PHARMA (-1.1%), NIFTY METAL (-0.9%) were the worst-performing sectors.

 “The worst is behind us” says Ashok Leyland Chairman.

Excerpts from an interview with Mr. Dheeraj Hinduja, Chairman, Ashok Leyland broadcasted on CNBC on 5th November 2019.

  • Demand slowdown has been caused by multiple issues including issues faced by financing companies and the availability of liquidity in the market.
  • Last financial quarter is traditionally a strong quarter for Commercial Vehicle (CV) OEMs. 4QFY20 will be a strong quarter followed by a slow 1QFY21 due to the technology transition from BS-IV to BS-VI.
  • Management is looking forward to FY21. Historically, the year of transition is a strong year.
  • The transition from BS-IV directly to BS-VI in a 3 year period is one of the shortest transition times globally. Other countries have taken 7-10 years in which period the cost absorption has been done in a phased manner. There will be a significant cost-push on account of the transition.
  • Even post the cost-push due to BS-VI, management says Ashok Leyland will be cost-competitive as ever. The customers will see real value in products launched.
  • Looking forward, there are some good signs such as many initiatives that the government is taking and the revival of financing. Most of the OEMs have now corrected the state of their inventories that had built up. The next few months look to be quite positive.
  • The market is not going to recover overnight, but the worst is behind for Ashok Leyland.
  •  It’s been a year since the previous CEO, Mr. Vinod Dasari quit.  Search for the CEO is on. FY20 is a year of important changes with respect to BS-VI, their new modular platform and the introduction of a whole line up of LCV products. The Board had taken a decision that they did not want a major disruption in the Management at this important juncture.  But a new CEO is required and the Board will be announcing a successor in the next few months.
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