MARKET: Maruti, HDFC help Sensex settle 127 pts higher; Nifty tops 11,900
All that happened in the markets today
 "Markets continue to rally on RBI policy fillip; Sensex rises 164 points")
The volatility index, India Vix, slipped over 3.5 per cent to 21.82 levels.
9:19 AM
Top gainers and losers on the S&P BSE Sensex at Open
9:18 AM
Opening Bell
9:17 AM
Opening Bell
9:10 AM
US Presidential Elections 2020 :: Investors react to last Trump-Biden final debate
VASU MENON, SENIOR INVESTMENT STRATEGIST, OCBC BANK WEALTH MANAGEMENT, SINGAPORE:
"It was a slightly more civilised debate this time around, but Trump failed to make up for lost ground from the first debate. Biden came through better than Trump in this debate and this should help to cement his lead over Trump and may just help him to cross the final line with a win. Biden was more persuasive in the debate on COVID-19 and the stalemate with fiscal stimulus, which are critical issues for the American people and that should benefit him in the polls." READ MORE
9:06 AM
Top gainers and losers on the S&P BSE Sensex at Pre-open
9:05 AM
Markets at Pre-open
9:04 AM
Markets at Pre-open
9:01 AM
BROKERAGE VIEW :: MOFSL on Coforge
CMP: Rs 2,456 | TP: Rs 2,460 | Reco: Neutral
>> Coforge’s revenue growth of 8.1% QoQ CC was better than expected (7% QoQ), driven by good broad-based recovery in verticals and geographies. Operational improvement supported EBITDA margin expansion by 174bp QoQ to 17.8%, ahead of our estimate of 17.2%.
>> Coforge reported a healthy order intake of USD201m. A robust deal pipeline, continued momentum in large deal wins (two deals in the quarter), and executables of USD489m (in 12 months; 21% YoY) indicate an optimistic outlook.
>> We see good growth in the Travel vertical (on the back of client wallet share gains) and a continued positive outlook as encouraging.
>> Management has indicated industry-leading organic growth of 6% YoY for FY21. It also expects to maintain the FY20 EBITDA margin (pre-RSU) of 17.8% in FY21. This indicates a good sequential growth outlook for the coming quarters and the ability to maintain 1HFY21 margins in 2HFY21 as well.
>> Coforge’s revenue growth of 8.1% QoQ CC was better than expected (7% QoQ), driven by good broad-based recovery in verticals and geographies. Operational improvement supported EBITDA margin expansion by 174bp QoQ to 17.8%, ahead of our estimate of 17.2%.
>> Coforge reported a healthy order intake of USD201m. A robust deal pipeline, continued momentum in large deal wins (two deals in the quarter), and executables of USD489m (in 12 months; 21% YoY) indicate an optimistic outlook.
>> We see good growth in the Travel vertical (on the back of client wallet share gains) and a continued positive outlook as encouraging.
>> Management has indicated industry-leading organic growth of 6% YoY for FY21. It also expects to maintain the FY20 EBITDA margin (pre-RSU) of 17.8% in FY21. This indicates a good sequential growth outlook for the coming quarters and the ability to maintain 1HFY21 margins in 2HFY21 as well.
>> We upgrade our estimates for FY21/FY22E by 5%/3%. Our TP implies 25x FY22 EPS. Maintain Neutral on fair valuations
8:59 AM
>> We raise our PAT estimate by 18% for FY21, factoring in increased momentum in the Non-US/API segment, a better growth outlook for the DF segment, robust
BROKERAGE VIEW :: MOFSL on Alembic Pharma
CMP: Rs 1,010 | TP: Rs 1,120 (+11%) | Reco: Neutral
>> Alembic Pharma (ALPM) delivered a beat on earnings for 2QFY21, led by strong traction in the Non-US/API segment and a superior product mix. India Domestic Formulations (DF) is back on the growth trajectory. ALPM also remains on track to start filing oncology injectables for the US market in 2HFY21.
>> On a high base of FY20, we expect a PAT CAGR of 11% over FY20–23, led by a 22%/18%/14% sales CAGR in the Non-US/API/US segment.
>> Alembic Pharma (ALPM) delivered a beat on earnings for 2QFY21, led by strong traction in the Non-US/API segment and a superior product mix. India Domestic Formulations (DF) is back on the growth trajectory. ALPM also remains on track to start filing oncology injectables for the US market in 2HFY21.
>> On a high base of FY20, we expect a PAT CAGR of 11% over FY20–23, led by a 22%/18%/14% sales CAGR in the Non-US/API/US segment.
>> We raise our PAT estimate by 18% for FY21, factoring in increased momentum in the Non-US/API segment, a better growth outlook for the DF segment, robust
traction in the US, and controlled cost driving overall profitability. However, we also factor in higher opex from new facilities expected to begin commercialization in FY22; thus, we maintain our PAT estimate for FY22. We also introduce FY23 estimates. We value ALPM on a 20x 12M forward earnings basis to arrive at price target of INR1,120. Maintain Neutral.
8:56 AM
Stocks in focus today
Tech Mahindra: The company is slated to announce its Q2 numbers on Friday, October 23. Deal pipeline in telecommunication & enterprise segment, opportunities in 5G, margin improvement in portfolio companies, long term growth opportunity, attrition level, and increment /promotion cycle will be the key things to watch out for.
Mphasis: Gross Revenue grew 5.2 per cent QoQ and 12.9 per cent YoY on a reported basis. In constant currency, growth was 6 per cent QoQ and 6.7 per cent YoY. Net profit grew 9.5 per cent YoY to Rs 299.2 crore; EPS grew 9.3 per cent YoY to Rs 16.04.
Earnings today: Besides Tech Mahindra, 37 other companies are expected to release their quarterly numbers today. The list includes names such as Nestle India, JSW Steel, YES Bank, and ICICI Lombard General Insurance Company. READ MORE
8:56 AM
BROKERAGE VIEW :: MOFSL on Ambuja Cement
CMP: Rs 254 | TP: Rs 235 (-7%) | Reco: Neutral
>> Ambuja Cements’ (ACEM) 3QCY20 results highlight the strong rebound in volumes and benefits of fixed cost reduction. EBITDA grew 55% YoY (on a low base), with EBITDA/t of INR1,200/t – the highest reported over the last 10 years in the seasonally weak 3Q.
>> ACEM announced interim dividend of INR17/share amounting to INR33.8b (~60% of cash pile), implying 7% dividend yield. However, this is only a onetime dividend. We expect dividends to revert to usual level of ~INR3/share.
>> While commissioning of Marwar-Mundwa capacity (in 2QCY21) should aid volume growth from 2HCY21, we expect ACEM’s volume growth to lag industry over the next two quarters due to capacity constraints.
>> Despite the expansion, we estimate CY19-22E CAGR of only 5% in volume and 8% in PAT (partly due to lower cash-pile post the high dividend payout).
>> We value ACEM at INR235/share based on 9x CY22E EV/EBITDA, but take a 10% holding company discount for its stake in ACC. We maintain Neutral.
>> Ambuja Cements’ (ACEM) 3QCY20 results highlight the strong rebound in volumes and benefits of fixed cost reduction. EBITDA grew 55% YoY (on a low base), with EBITDA/t of INR1,200/t – the highest reported over the last 10 years in the seasonally weak 3Q.
>> ACEM announced interim dividend of INR17/share amounting to INR33.8b (~60% of cash pile), implying 7% dividend yield. However, this is only a onetime dividend. We expect dividends to revert to usual level of ~INR3/share.
>> While commissioning of Marwar-Mundwa capacity (in 2QCY21) should aid volume growth from 2HCY21, we expect ACEM’s volume growth to lag industry over the next two quarters due to capacity constraints.
>> Despite the expansion, we estimate CY19-22E CAGR of only 5% in volume and 8% in PAT (partly due to lower cash-pile post the high dividend payout).
>> We value ACEM at INR235/share based on 9x CY22E EV/EBITDA, but take a 10% holding company discount for its stake in ACC. We maintain Neutral.
8:54 AM
BROKERAGE VIEW :: MOFSL on Bajaj Auto
CMP: Rs 3,009 | TP: Rs 3,300 (+10%) | Reco: Neutral
>> Bajaj Auto (BJAUT)’s operating performance was impacted by the reversal of 1QFY21 MEIS incentives, adjusted for which performance was in-line. BJAUT has levers for both the near term (3W recovery) and long term (premiumization and exports), which are fairly reflected in the current valuations.
>> BJAUT would benefit from a) the premiumization trend and b) good growth opportunity in exports. While domestic 3W recovery may be delayed, it is vulnerable to possible disruption from electrification.
>> Valuations at 19.1x/15.2x FY21/FY22E consol. EPS largely capture the strong recovery from 2HFY21 and beyond. Maintain Neutral, with TP of INR3,300.
>> Bajaj Auto (BJAUT)’s operating performance was impacted by the reversal of 1QFY21 MEIS incentives, adjusted for which performance was in-line. BJAUT has levers for both the near term (3W recovery) and long term (premiumization and exports), which are fairly reflected in the current valuations.
>> BJAUT would benefit from a) the premiumization trend and b) good growth opportunity in exports. While domestic 3W recovery may be delayed, it is vulnerable to possible disruption from electrification.
>> Valuations at 19.1x/15.2x FY21/FY22E consol. EPS largely capture the strong recovery from 2HFY21 and beyond. Maintain Neutral, with TP of INR3,300.
8:52 AM
BROKERAGE VIEW :: MOFSL on Asian Paints
CMP: Rs 2,100 | TP: Rs 1,980 (-6% ) | Reco: Neutral
>> Asian Paints (APNT) witnessed consistent MoM demand improvement in 2QFY21. This augurs well for growth in 2HFY21 unless a second wave of Covid plays spoilsport. With stable material cost as well as currency, elevated margins also appear likely to sustain over the next few quarters.
>> However, valuations of 58.4x FY22E EPS appear to be fully capturing the growth revival. This is despite assuming 20% PBT growth and 21.5% PAT growth in FY22E, nearly 3x the PBT CAGR over FY16-FY21E. Maintain Neutral.
>> Asian Paints (APNT) witnessed consistent MoM demand improvement in 2QFY21. This augurs well for growth in 2HFY21 unless a second wave of Covid plays spoilsport. With stable material cost as well as currency, elevated margins also appear likely to sustain over the next few quarters.
>> However, valuations of 58.4x FY22E EPS appear to be fully capturing the growth revival. This is despite assuming 20% PBT growth and 21.5% PAT growth in FY22E, nearly 3x the PBT CAGR over FY16-FY21E. Maintain Neutral.
8:50 AM
BROKERAGE VIEW :: MOFSL on IT sector
>> 2QFY21 IT results reinforce our OW stance on the sector. We have been raising IT weights in the model portfolio since 4QFY20, with the latest revision in July’20. 2QFY21 has seen sustained earnings momentum in IT, resulting in a healthy earnings upgrade for the second consecutive quarter. Management commentaries remained upbeat across the board. Lastly, a fresh round of dividends and buybacks provide a strong cushion for sustained re-rating, in our view.
>> Therefore, we continue to maintain the OW stance in the model portfolio, and after the sharp run-up, we now replace Wipro with HCL Tech. We had recently downgraded Mindtree post its stellar outperformance in CY20.
>> With business tailwinds and improvements in the deal pipeline, IT continues to offer solid and visible earnings growth with superior FCF generation and continued elevated capital returns via dividends/buybacks. This stands out against the otherwise tepid earnings growth seen in broader markets. IT management teams have indicated that this may mark the beginning of a multiyear technology upgrade cycle by enterprises, providing decent visibility for the sector’s earnings. Thus, we maintain the OW stance.
>> Therefore, we continue to maintain the OW stance in the model portfolio, and after the sharp run-up, we now replace Wipro with HCL Tech. We had recently downgraded Mindtree post its stellar outperformance in CY20.
>> With business tailwinds and improvements in the deal pipeline, IT continues to offer solid and visible earnings growth with superior FCF generation and continued elevated capital returns via dividends/buybacks. This stands out against the otherwise tepid earnings growth seen in broader markets. IT management teams have indicated that this may mark the beginning of a multiyear technology upgrade cycle by enterprises, providing decent visibility for the sector’s earnings. Thus, we maintain the OW stance.
8:46 AM
Pharma in focus :: USFDA approves first coronavirus treatment drug - antiviral remdesivir
The drug, which California-based Gilead Sciences Inc. is calling Veklury, cut the time to recovery by five days from 15 days to 10 on average in a large study led by the US National Institutes of Health. READ MORE
Topics : Markets Ambuja Cements Bharti infratel Tech Mahindra Nestle India YES Bank ICICI Lombard General Insurance MARKET WRAP
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First Published: Oct 23 2020 | 7:58 AM IST
