MARKET WRAP: Sensex slips 149 pts in volatile trade; mid, small-caps shine
All that happened in the markets today
9:07 AM
Top gainers and losers on the S&P BSE Sensex at Pre-open
9:05 AM
Markets at Pre-open
9:03 AM
Markets at Pre-open
9:01 AM
BROKERAGE VIEW :: Nirmal Bang on Bajaj Finance
Target Price: Rs 3,564 | Reco: Accumulate
>> We have revised our estimates and expect the company to deliver 10.6%/18.9%/22.2% ROE over FY21/22/23E. The company is confident of regaining market share and reach 70% among the OEMs in the near term on the back of enhanced volume push and new customer acquisitions. We continue to like the structural play Bajaj Finance has to offer on India’s consumerism. Balance sheet is one of the strongest in the NBFC sector. Expected near term pressure on profitability (due to high credit costs) and asset quality risks could keep the stock under pressure. Hence, we retain our ACCUMULATE rating on the stock with a target price of Rs3,564, based on 4.5x 1HFY23E ABV. Per se, on the key P&L items, BAJF posted NII growth of 4% YoY at Rs39,815mn, PPOP growth of 15% YoY at Rs30,059mn and PAT decline of 36% YoY at Rs9,649mn.
>> We have revised our estimates and expect the company to deliver 10.6%/18.9%/22.2% ROE over FY21/22/23E. The company is confident of regaining market share and reach 70% among the OEMs in the near term on the back of enhanced volume push and new customer acquisitions. We continue to like the structural play Bajaj Finance has to offer on India’s consumerism. Balance sheet is one of the strongest in the NBFC sector. Expected near term pressure on profitability (due to high credit costs) and asset quality risks could keep the stock under pressure. Hence, we retain our ACCUMULATE rating on the stock with a target price of Rs3,564, based on 4.5x 1HFY23E ABV. Per se, on the key P&L items, BAJF posted NII growth of 4% YoY at Rs39,815mn, PPOP growth of 15% YoY at Rs30,059mn and PAT decline of 36% YoY at Rs9,649mn.
8:58 AM
BROKERAGE VIEW :: HDFC Securities on Colgate Palmolive
CMP: Rs 1,427 | Target Price: Rs 1,529 | Reco: Add
>> Colgate reported a healthy 2QFY21 with 5% net revenue growth (HSIE 4.5%) and 7% domestic growth. Volume and price have equally contributed to the revenue growth. Toothpaste recovery was healthy (no sequential divergences) while toothbrush exit recovery was encouraging. Dental cream and Max fresh
>> Colgate reported a healthy 2QFY21 with 5% net revenue growth (HSIE 4.5%) and 7% domestic growth. Volume and price have equally contributed to the revenue growth. Toothpaste recovery was healthy (no sequential divergences) while toothbrush exit recovery was encouraging. Dental cream and Max fresh
posted encouraging recovery. Naturals toothpaste continue to outperform (even as an industry) although the growth gap has gone down. Market share was stable during the quarter. GM expanded sharply (339bps YoY) owing to (1) price hike, (2) soft raw material and (3) favourable mix (lower revenue share of toothbrush and exports and higher share of larger pack size). We expect gradual growth recovery with healthy margin expansion in 2HFY21 and increase our estimates for FY21/22 by 6/1%. We value Colgate at 40x P/E on Sep-22E EPS and derive a target price of Rs 1,529. Maintain ADD.
8:56 AM
BROKERAGE VIEW :: HDFC Securities on UltraTech Cement
CMP: Rs 4,632 | Target Price: Rs 5,670 | Reco: Buy
>> During 2QFY21, UTCEM reported solid earnings beat, driven by strong cost controls, healthy realisation and strong retail demand. Consolidated net sales/ EBITDA/APAT surged 8/41/113% YoY to Rs 103.54/26.95/12.34bn respectively. Working capital reduction and lower Capex further drove a 42% YoY fall in net debt. Management has guided that non-trade demand is recovering well, which should boost sales hereon. Continued cost controls should further support UTCEM’s strong margins. In line with our view, UTCEM continues to deliver margin expansion, asset sweating, and debt reduction. We maintain BUY with a higher Target Price of Rs 5,670/share (15x Sep’22E consolidated EBITDA).
>> During 2QFY21, UTCEM reported solid earnings beat, driven by strong cost controls, healthy realisation and strong retail demand. Consolidated net sales/ EBITDA/APAT surged 8/41/113% YoY to Rs 103.54/26.95/12.34bn respectively. Working capital reduction and lower Capex further drove a 42% YoY fall in net debt. Management has guided that non-trade demand is recovering well, which should boost sales hereon. Continued cost controls should further support UTCEM’s strong margins. In line with our view, UTCEM continues to deliver margin expansion, asset sweating, and debt reduction. We maintain BUY with a higher Target Price of Rs 5,670/share (15x Sep’22E consolidated EBITDA).
8:55 AM
BROKERAGE VIEW :: HDFC Securities on Bajaj Finance
CMP: Rs 3,233 | Target Price: Rs 3,647 | Reco: Add
>> While BAF’s 2QFY21 operating performance was in line with estimates, earnings were lower on account of higher than expected provisions. The management was prudent in its approach to growth and provisioning. Even as we build higher provisions, our earnings estimates remain largely unchanged as we factor in a slight improvement in cost metrics. Our outlook on the company’s long-term prospects remains positive. We continue to believe that current valuations do not fully capture BAF’s high RoAE potential. We maintain ADD with a target price of Rs 3,647.
>> While BAF’s 2QFY21 operating performance was in line with estimates, earnings were lower on account of higher than expected provisions. The management was prudent in its approach to growth and provisioning. Even as we build higher provisions, our earnings estimates remain largely unchanged as we factor in a slight improvement in cost metrics. Our outlook on the company’s long-term prospects remains positive. We continue to believe that current valuations do not fully capture BAF’s high RoAE potential. We maintain ADD with a target price of Rs 3,647.
8:53 AM
BROKERAGE VIEW :: Kotak Institutional Equities on L&T Infotech
CMP: Rs 3,100 | Target price: Rs 3,350 | Reco: Add
>> LTI reported sharp margin expansion driven by operational improvements and rollback of select customer rebates. The company announced a large deal, has a strong deal pipeline and remains well-placed to report significantly better than peer growth. LTI’s business model is scalable with a good play in core transformation. We raise FY2021-23E EPS estimates by 4-6% and Fair Value to Rs 3,350 (Rs2,800 earlier), valuing the stock at 25X December 2022E EPS. ADD.
>> LTI reported sharp margin expansion driven by operational improvements and rollback of select customer rebates. The company announced a large deal, has a strong deal pipeline and remains well-placed to report significantly better than peer growth. LTI’s business model is scalable with a good play in core transformation. We raise FY2021-23E EPS estimates by 4-6% and Fair Value to Rs 3,350 (Rs2,800 earlier), valuing the stock at 25X December 2022E EPS. ADD.
8:53 AM
Stocks to watch today
Bajaj Auto: Bajaj Auto is scheduled to announce its September quarter earnings on Thursday and analysts expect the automaker to report strong sequential recovery, albeit lower on a year-on-year (YoY) basis, on both the revenue and bottom-line front while margins are set to expand.
Earnings today: Besides Bajaj Auto, 47 other companies are expected to release their September quarter results later in the day. The list includes names such as Asian Paints, Biocon, Bharti Infratel, Mphasis, Coforge, SBI Cards, and HDFC AMC. READ MORE
8:51 AM
BROKERAGE VIEW :: Kotak Institutional Equities on Bajaj Finance
CMP: Rs 3,233 | Target Price: Rs 3,000 | Reco: Reduce
>> Bajaj Finance’s performance seems to be broadly tracking its guidance with likely bottoming out of loan book, building adequate buffers for the year and control over expenses. The company may be well-placed for a normalized FY2022E unless slippages disappoint. All the positives, however, are already reflected in the current valuations, prompting us to await better entry points. REDUCE; FV Rs3,000; prefer Bajaj Finserv (BUY, FV Rs7,600).
>> Bajaj Finance’s performance seems to be broadly tracking its guidance with likely bottoming out of loan book, building adequate buffers for the year and control over expenses. The company may be well-placed for a normalized FY2022E unless slippages disappoint. All the positives, however, are already reflected in the current valuations, prompting us to await better entry points. REDUCE; FV Rs3,000; prefer Bajaj Finserv (BUY, FV Rs7,600).
8:50 AM
BROKERAGE VIEW :: MOFSL on Mahindra CIE
CMP: Rs 137 | TP: Rs 165 (+20%) | Reco: Buy
>> Mahindra CIE (MACA)’s adverse operating performance in 3QCY20 was attributable to weaker revenue in India and restructuring cost in EU. While it is focusing on new orders / exports in India, it is also cutting cost to reduce breakeven points for the EU business.
>> We marginally cut our CY21E EPS to factor in lower revenue growth. Maintain Buy, with TP of ~INR165 (13x Sep’22 consol EPS).
>> Mahindra CIE (MACA)’s adverse operating performance in 3QCY20 was attributable to weaker revenue in India and restructuring cost in EU. While it is focusing on new orders / exports in India, it is also cutting cost to reduce breakeven points for the EU business.
>> We marginally cut our CY21E EPS to factor in lower revenue growth. Maintain Buy, with TP of ~INR165 (13x Sep’22 consol EPS).
8:48 AM
BROKERAGE VIEW :: MOFSL on Info Edge
CMP: Rs 3,482 | TP: Rs 3,620 (+4%) | Reco: Neutral
>> We foresee a halt in near-term momentum, led by expectation of billing decline in the recruitment/real estate segments for 1HFY21. However, given the market
>> For FY21, we expect 9% decline in revenue, largely driven by ~50% drop in collection for 1QFY21. With expectations of more jobs coming in (on pent-up demand) and pressure on real estate developers to sell off inventory, we expect 20% revenue growth for FY22E. Margin should expand 100bp over FY20-22E on lower advertisement expenses, partially offset by higher employee cost.
>> Valuations are elevated with 1-year forward multiples exceeding 100x. However, we believe that INFOE provides a good entry point for the start-up ecosystem with higher risk being moderated from its relatively stable standalone operating business.
>> We have individually valued INFOE’s group entities using DCF-based valuation. Our SOTP-price target stands at INR3,620/share. Maintain Neutral.
>> We foresee a halt in near-term momentum, led by expectation of billing decline in the recruitment/real estate segments for 1HFY21. However, given the market
positioning of its entities, multi-dimensional growth can be expected for INFOE in the medium-to-long term, backed by recruitment, real estate, Zomato (its biggest investee company) and PolicyBazaar.
>> For FY21, we expect 9% decline in revenue, largely driven by ~50% drop in collection for 1QFY21. With expectations of more jobs coming in (on pent-up demand) and pressure on real estate developers to sell off inventory, we expect 20% revenue growth for FY22E. Margin should expand 100bp over FY20-22E on lower advertisement expenses, partially offset by higher employee cost.
>> Valuations are elevated with 1-year forward multiples exceeding 100x. However, we believe that INFOE provides a good entry point for the start-up ecosystem with higher risk being moderated from its relatively stable standalone operating business.
>> We have individually valued INFOE’s group entities using DCF-based valuation. Our SOTP-price target stands at INR3,620/share. Maintain Neutral.
8:46 AM
BROKERAGE VIEW :: MOFSL on L&T Infotech
CMP: Rs 3,095 | TP: Rs 3,480 (+12%) | Reco: Buy
>> L&T Infotech (LTI)’s 2QFY21 revenue growth of 2.3% QoQ CC was better than expected. It was led by sharper recovery in some verticals (BFS and Manufacturing) and geographies (Europe).
>> More impressively, LTI expanded its EBIT margin (+250bp QoQ) for the fourth quarter in a row, aided by better operational efficiencies. Management reinstated guidance of 14–15% PAT margin for FY21, broadly in line with our expectation.
>> Large deal wins in 1HFY21 have been lower than the typical run-rate. However, LTI has a strong deal pipeline (+22% YoY) and expects certain large deal closures in 3Q, which should aid FY22 revenue growth. FY22 should also benefit from the strong exit of FY21.
>> We upgrade our FY21/FY22 EPS estimates by 7%/11% as we adjust to the margin surprise in the quarter. As digital becomes mainstream, we expect LTI to benefit from continued investments in digital capabilities, strong client additions, and mining abilities. Our TP implies 25x Sep’22 EPS (10% discount to TCS valuation).
>> L&T Infotech (LTI)’s 2QFY21 revenue growth of 2.3% QoQ CC was better than expected. It was led by sharper recovery in some verticals (BFS and Manufacturing) and geographies (Europe).
>> More impressively, LTI expanded its EBIT margin (+250bp QoQ) for the fourth quarter in a row, aided by better operational efficiencies. Management reinstated guidance of 14–15% PAT margin for FY21, broadly in line with our expectation.
>> Large deal wins in 1HFY21 have been lower than the typical run-rate. However, LTI has a strong deal pipeline (+22% YoY) and expects certain large deal closures in 3Q, which should aid FY22 revenue growth. FY22 should also benefit from the strong exit of FY21.
>> We upgrade our FY21/FY22 EPS estimates by 7%/11% as we adjust to the margin surprise in the quarter. As digital becomes mainstream, we expect LTI to benefit from continued investments in digital capabilities, strong client additions, and mining abilities. Our TP implies 25x Sep’22 EPS (10% discount to TCS valuation).
8:44 AM
BROKERAGE VIEW :: MOFSL on Colgate Palmolive
CMP: Rs 1,425 | TP: Rs 1,720 (+21% ) | Reco: Buy
>> We maintain Buy on CLGT given that (a) the nature of the category (98% of sales from oral care) offers less uncertainty currently, (b) it has best-of-breed balance sheet, (c) valuations are moderate at 38x FY22E EPS, close to its 10-year average, and (d) there is a spark of an incipient market share recovery under the new Managing Director. We arrive at a TP of Rs 1,720 (target multiple of 40x Sep’22E EPS, close to 5-year average)
8:42 AM
BROKERAGE VIEW :: MOFSL on Bajaj Finance
CMP: Rs 3,233 | TP: Rs 3,350 (+4%) | Reco: Neutral
>> BAF reported an in-line quarter on all fronts. A cautious stance on disbursements led to flattish AUM on a sequential basis. While this stance would continue for certain products going forward, we expect disbursements to see healthy improvement MoM from 3QFY21 with the onset of the festive season. We factor in 20%/25% YoY AUM growth in FY22/FY23. Performance on spreads is encouraging and expected to improve in FY22 as COF would decline and the impact of negative carry on excess liquidity would start abating. Performance on fee income surprised in 1HFY21, and with an expected uptick in disbursements, we expect continued performance.
>> On the asset quality front, management is very clear that the company would take all the possible asset quality impacts in FY21 itself. Hence, it should revert to run-rate credit costs of 1.7–1.8% in FY22. We reduce our FY22 credit cost estimate to 2.2% (from 3.3%), resulting in an upgrade in FY21/FY22E EPS estimates by 6%/15%. Maintain Neutral, with target price of INR3,350 (4.2x Sep’ FY22 BV).
>> BAF reported an in-line quarter on all fronts. A cautious stance on disbursements led to flattish AUM on a sequential basis. While this stance would continue for certain products going forward, we expect disbursements to see healthy improvement MoM from 3QFY21 with the onset of the festive season. We factor in 20%/25% YoY AUM growth in FY22/FY23. Performance on spreads is encouraging and expected to improve in FY22 as COF would decline and the impact of negative carry on excess liquidity would start abating. Performance on fee income surprised in 1HFY21, and with an expected uptick in disbursements, we expect continued performance.
>> On the asset quality front, management is very clear that the company would take all the possible asset quality impacts in FY21 itself. Hence, it should revert to run-rate credit costs of 1.7–1.8% in FY22. We reduce our FY22 credit cost estimate to 2.2% (from 3.3%), resulting in an upgrade in FY21/FY22E EPS estimates by 6%/15%. Maintain Neutral, with target price of INR3,350 (4.2x Sep’ FY22 BV).
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First Published: Oct 22 2020 | 7:52 AM IST