Sensex ends 110 pts lower ahead of Q2 GDP data; BSE Smallcap index up 2.4%

All that happened in the markets today

9:08 AM

Markets at Pre-open

9:07 AM

Markets at Pre-open

9:05 AM

BROKERAGE VIEW :: Emkay Global on Oil and Gas Sector

>> PNGRB has sweetened CGD open access by not considering the incumbent’s existing OMC/dealer CNG stations as shipper for allowing access. As per our channel checks, this implies that an OMC/dealer outlet cannot terminate the trade agreement with an incumbent and seek access to start CNG retailing on its own. PNGRB has also removed draft provisions challenging infra exclusivity such as allowing shipper to set up compressor facilities, cascade supplies and even pipelines in the event incumbent is not able to do so.

>> Protection from the existing OMC CNG volume threat is a relief and near-term positive for CNG-heavy CGD players, though incoming competition would weigh on long-term growth and pricing power. Infra exclusivity protection is positive but technical disputes may crop up ahead. The unified tariff is mostly neutral. Hence, we retain our estimates, recommendation and TP for players under our coverage, though taking an EW stance on IGL vs. UW earlier.

9:02 AM

BROKERAGE VIEW :: Antique Broking on NMDC

CMP: Rs 96 | TP: Rs 127 | Reco: Buy

>> Higher domestic steel production, Odisha supply squeeze and firm international ore prices would support the pricing outlook. Potential levy of additional premium would be offset by the contribution from incremental volumes at Donimalai and pricing power provided by the sharp discount to international ore prices. Commissioning/ divestment of the steel plant would improve return ratios and lead to a higher valuation of the asset. We maintain our target price of INR127 per share, valuing the stock at 5x FY23E EV/EBITDA and adding the FY23E CWIP @0.2x book value and maintain our BUY on the stock.

9:01 AM

BROKERAGE VIEW :: Antique Broking on Real Estate

>> Liquidity in the market going down as only very few lending in real estate. In addition, gap between Tier I developers and small developers increasing in terms of lending rates and easy access of funding. Thus, weaker developers will find it difficult to raise funds to continue construction, impacting incremental sales and internal accruals. NPAs expected to go up. Big players would continue to sell, grab market share and have low cost of capital as well.

>> We expect the momentum of 2QFY21 to spill over in 3QFY21 and expect better numbers. Big developers with large inventory would report robust numbers with better traction from ready inventory and non-premium segments. Although, the drag of job and income losses may shrink the overall demand, reputed developers expected to do well and increase market share due to consolidation across markets. Most of the listed real estate companies expected to do better YoY numbers. Our top picks in residential continue to be DLF and Brigade.

8:57 AM

BROKERAGE VIEW :: JM Financial on Building Material

>> Wood Panel companies 2QFY21 performance was better than our estimates on account of higher than expected volumes and margins. Ply/Laminates volumes remained weak (declined 7%-27% YoY), though players hope to report positive growth in 2HFY21. MDF, on the other hand, recovered smartly (19%-31% YoY) and are expected to remain strong given robust demand from OEMs. Operating margins surprised positively on account of higher gross margins (lower RM cost, especially lower chemical costs). We believe the momentum continues to improve in the wood panel space and we maintain our positive stance on the sector.

>> We have a BUY rating on all the wood panel companies under coverage, namely, Century Ply, Greenply, Greenpanel and Greenlam. Our top picks are Greenpanel Industries (Biggest beneficiary of MDF industry tailwinds) and Greenlam Industries (consistent performance with healthy return ratios).

8:55 AM

BROKERAGE VIEW :: IDBI Capital on Hotel sector

>> We believe the pace of recovery is albeit slower than anticipated and the meaningful revival in key operational parameters may be seen in CY22E. Though recovery may be faster for selected organized players owing to strong brand recall and scale operations, leveraged balance sheet remains an overhang on profitability.

>> The domestic hospitality industry is taking measures to survive and revive in current crisis. To fill the void created by international travel segment, the industry is promoting domestic leisure travel through various initiatives at state and national level. The industry has opted for stringent cost cutting on key verticals like employee cost, operational expenses, power and fuel as well as food and beverages. Rental contracts are being re-negotiated. The cost cutting initiatives will remain part of the hotels’ operations even after business normalizes and drive healthy improvement in EBITDA margin in future.

>> We maintain HOLD on Indian Hotels (TP Rs95) and Lemon Tree Hotels (TP Rs29).

8:51 AM

BROKERAGE VIEW :: MOFSL on M&M

 CMP: Rs 729 | TP: Rs 830 (+14%) | Reco: Buy

>> MM has divested its entire stake in vehicle servicing business - Mahindra First Choice Services (MFCS) - to TVS Automobile Solutions (TVS-AS) for INR350m. It would then invest the INR350m proceeds for a 2.76% stake on a fully-diluted basis (via Compulsorily Convertible Preference Shares).

>> While MM's core business would recover faster, the focus on tightening capital allocation could act as a re-rating catalyst. Hence, we see twin levers of EPS growth and a re-rating. The stock trades at a core FY22E/FY23E P/E of 14.1x/12.3x, which is at a 5/10- year discount to its LPA. Maintain Buy with a TP of INR830/share (Dec-22E SoTP), implying a core P/E of ~15x at the TP.

8:51 AM

Stocks to watch today

Astrazeneca Pharma India: Developers of the Sputnik V Covid-19 vaccine said on Thursday that AstraZeneca should try combining its experimental shot with the Russian one to boost efficacy. In a separate development, AstraZeneca Plc and the University of Oxford face mounting questions about their Covid-19 vaccine trial results after acknowledging a manufacturing error.

 

AU Small Finance Bank: As per news reports, AU Small Finance Bank has made a strategic investment of Rs 7.70 crore in NPCI, wherein 61,320 equity shares at a book value of Rs 1,256 per share are allocated to the bank, constituting around 0.44 per cent shareholding of NPCI.

 

Gillette India said it has been directed by National Anti-Profiteering Authority (NAA) to deposit Rs 57.99 crore in Consumer Welfare Funds. READ MORE   

 

8:49 AM

BROKERAGE VIEW :: MOFSL on Automobiles

>> While the festive season has augured well, with no major negative surprise, current demand and low inventory sentiment suggests higher wholesales in Dec’20. Valuations are reflecting a recovery during 2HFY21, leaving a limited margin for safety for any negative surprises. We prefer companies with: a) higher visibility in terms of demand recovery, b) strong competitive positioning, c) margin drivers, and d) balance sheet strength. MM and HMCL are our top OEM picks. Among auto component stocks, we prefer ENDU and MSS

8:47 AM

BROKERAGE VIEW :: MOFSL on Laurus Labs

CMP: Rs 292 | TP: Rs 410 (+40%) | Reco: Buy

>> Laurus Labs’ (LAURUS) has acquired 73% stake in Richcore Lifesciences (RICH) for a cash consideration of INR2.5b. The acquisition is a step towards building a vertically integrated biotech segment and adds a new lever to growth.

>> It particularly provides capabilities in high growth areas of Recombinant (Rh) Proteins, Enzymes and Biological Contract Development and Manufacturing Organization (CDMO).

>> We raise our FY22E/FY23E EPS estimates by 3% to arrive at our target price of Rs 410/share, on 18x 12M forward earnings, to reflect benefits of this deal accruing to LAURUS. Considering the addition of technology-based high entry barriers/superior RoCE business, we expect the RICH-led CDMO business to result

in a re-rating of LAURUS once it starts contributing meaningfully to earnings over the next 4-5 years. Maintain Buy

8:45 AM

BROKERAGE VIEW :: MOFSL on Oil and Gas sector

>> GUJGA has more volume growth drivers than IGL and could potentially receive a huge volume boost from NGT’s directive to curb air pollution (five GAs classified as severely/critically polluted).

>> Also, IGL aims to facilitate competition as this would aid gas market expansion. We believe IGL has the most lucrative market for a competitor in the form of well-balanced volumes and margin mix.

>> GUJGA trades at 19.6x FY22E EPS of INR17.6, a discount of ~25% to IGL (which trades at 26.3x FY22E EPS of INR17.0) despite having a similar volume growth potential of 10-12% in the medium term.

>> We reiterate our Buy rating on GUJGA and maintain Neutral on IG

8:43 AM

BROKERAGE VIEW :: MOFSL on Metals

>> Indian steel spreads have risen ~25% in 3QFY21 and are at a three-year high. We expect spreads to stay strong on the back of a domestic demand recovery and higher regional prices. The improvement in EBITDA/t should be even higher on an improving sales mix (lower exports and higher value-added sales). We raise our coverage EBITDA estimates by 3-12%/5-13% for FY21E/FY22E to factor in higher spreads.

>> Domestic steel prices are at a two-year high Domestic HRC prices have increased by INR4,500/t in Nov’20 to INR47,000/t on a strong recovery in the demand for flat steel, backed by a demand recovery in enduse sectors like Auto, White Goods, etc. The price hikes have been well supported by higher regional steel prices. Domestic HRC prices are trading at par to the landed cost of imports from Korea. With monsoon subsiding and expected recovery in infra and construction demand after the festive season, rebar prices too have increased by INR5,000/t in Nov’20.

>> Despite domestic iron ore prices rising to a five-year high, spot steel spreads are at a multi-year high due to higher steel prices and subdued coking coal prices. While iron ore prices from NMDC have increased by 30% YTD in FY21, imported coking coal prices have declined by ~35% YTD, keeping total raw material cost in check. As a result, domestic steel spreads are strong at INR33,000/t for flats (HRC) and INR30,000/t for longs (rebar). On an average, spot spreads are ~INR6,000/t higher than 2QFY21. Assuming spot prices sustain, spreads in 3QFY21 are expected to be higher by ~INR5,000/t for flats and ~INR3,500/t for longs, which should largely flow through to EBITDA as conversion costs have been largely unchanged.

8:37 AM

Here's a Bull Spread Strategy on Bajaj Auto

Bull spread Strategy on Bajaj Auto

 

Buy Bajaj Auto Dec 3,150 Call at Rs 118 & simultaneously sell Dec 3,300 Call at Rs 61

 

Lot Size: 250.

 

Cost of the strategy: Rs 57 (Rs 14,250 per strategy)

 

Maximum profit: Rs 23,250 If Bajaj auto closes at or above 3,300 till Dec 31 expiry

 

Breakeven Point: Rs 3,207 READ MORE

8:35 AM

Top stock picks by Nilesh Jain of Anand Rathi:

BUY HCL TECH | TARGET: Rs 880 | STOP LOSS: Rs 810

 

The stock is trading in a falling channel and is on the verge of a breakout from the same. It has also formed a bullish engulfing candlestick pattern on the daily chart which indicates a bullish reversal. Further, the stock is trading above its short-term and long-term moving averages. A fresh buy crossover can be seen on MACD indicators and RSI has reversed from the oversold territory which hints at a strong pullback in the short term. READ MORE