Indices end choppy day in the red; Sensex dips 31 pts; banks, metals bleed
Broader markets, meanwhile, remained better placed. The S&P BSE MidCap and SmallCap indices each ended around 0.4 per cent higher
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8:44 AM
BROKERAGE VIEW :: Elara Capital on BPCL
Reco: Accumulate | TP: Rs 520
>> BPCL’s announcement to sell its stake of 61.65% in Numaligarh Refinery (NRL) to Oil India consortium, a 7.3% treasury stock sale and plans to purchase 36.62% stake in Bharat Oman Refinery (BORL) from Oman Oil shows the government’s intent to divest in FY22. However, we believe reduction in excise duty on gasoline and diesel will be the key for buyers to bid for higher valuation, as retail gasoline and diesel price reduction would reduce the risk of government interference on retail fuel prices and improve OMC earnings visibility.
>> Consequently, visibility on BPCL divestment would help drive its valuation towards assets-based value estimated at INR 756/share vs our earnings-based TP at INR 520/share, implying potential 65% upside over the CMP at assets-based value.
>> BPCL’s announcement to sell its stake of 61.65% in Numaligarh Refinery (NRL) to Oil India consortium, a 7.3% treasury stock sale and plans to purchase 36.62% stake in Bharat Oman Refinery (BORL) from Oman Oil shows the government’s intent to divest in FY22. However, we believe reduction in excise duty on gasoline and diesel will be the key for buyers to bid for higher valuation, as retail gasoline and diesel price reduction would reduce the risk of government interference on retail fuel prices and improve OMC earnings visibility.
>> Consequently, visibility on BPCL divestment would help drive its valuation towards assets-based value estimated at INR 756/share vs our earnings-based TP at INR 520/share, implying potential 65% upside over the CMP at assets-based value.
8:41 AM
BROKERAGE VIEW :: Antique Stock Broking on Welspun India
Reco: BUY | TP: Rs 160
>> WEL has developed assets, even beyond roads, sold them, and bid for new. And it has happened with adequate cushion of cash in hand. True, the company's net cash has eroded to net debt of INR1.9bn, however. With incremental focus to EPC business, we believe the company can deliver a revenue/EBITDA growth of 7%/ 5% CAGR respectively (FY20-23E). Valuing the EPC business at 7x FY23 EPS and other investments at varying discount to the invested value, we value the company at TP of INR160. We maintain BUY.
>> WEL has developed assets, even beyond roads, sold them, and bid for new. And it has happened with adequate cushion of cash in hand. True, the company's net cash has eroded to net debt of INR1.9bn, however. With incremental focus to EPC business, we believe the company can deliver a revenue/EBITDA growth of 7%/ 5% CAGR respectively (FY20-23E). Valuing the EPC business at 7x FY23 EPS and other investments at varying discount to the invested value, we value the company at TP of INR160. We maintain BUY.
8:38 AM
BROKERAGE VIEW :: Antique Stock Broking on Eicher Motors
Reco: BUY | TP: Rs 3,300
>> The customer bookings for Royal Enfield (RE) motorcycles have recovered to well above pre-Covid levels. Our channel checks indicate 3-4 months of waitlist for new models, Meteor and Himalayan. Further, our interactions suggest Meteor is attracting new customers to the brand, hence the current strong demand for the model is likely to sustain. EIM has a robust pipeline of new models and it is planning to launch one new model every quarter over the next 2-3 years.
>> We expect RE to launch new Classic 350 in 1QFY22E, which will be a key driver for volume growth over the medium-term. RE's production has been constrained over the last few months, but we expect production to ramp-up in FY22E with the platform consolidation and easing of supply constraints.
>> We expect RE volumes to grow at 24% CAGR over FY21-24E, led by new models. EIM stock is trading at 20.7x FY23E PER. We maintain BUY rating with a price target of INR3,300.
>> The customer bookings for Royal Enfield (RE) motorcycles have recovered to well above pre-Covid levels. Our channel checks indicate 3-4 months of waitlist for new models, Meteor and Himalayan. Further, our interactions suggest Meteor is attracting new customers to the brand, hence the current strong demand for the model is likely to sustain. EIM has a robust pipeline of new models and it is planning to launch one new model every quarter over the next 2-3 years.
>> We expect RE to launch new Classic 350 in 1QFY22E, which will be a key driver for volume growth over the medium-term. RE's production has been constrained over the last few months, but we expect production to ramp-up in FY22E with the platform consolidation and easing of supply constraints.
>> We expect RE volumes to grow at 24% CAGR over FY21-24E, led by new models. EIM stock is trading at 20.7x FY23E PER. We maintain BUY rating with a price target of INR3,300.
8:35 AM
BROKERAGE VIEW :: HDFC Securities on Aditya Birla Capital
Reco: BUY | TP: Rs 155
>> With its mature balance sheet business (NBFC) at an inflexion point and an annuity cash cow business (AMC) operating on an auto-pilot mode, Aditya Birla Capital (ABCL) is at the cusp of a credible makeover, driving consolidated return ratios closer to franchise potential over the next three years. We believe that ABCL’s current valuations do not adequately factor in the successful re-positioning of its lending businesses towards retail and granular loans, which is likely to drive a sustainable improvement in franchise earnings.
>> We initiate with a BUY and an SOTP-based target price of INR155 - we value the AMC business at INR240bn (7.2% of Mar’23 AUM) and the NBFC business at INR170bn (1.85x Mar’23 ABVPS).
>> With its mature balance sheet business (NBFC) at an inflexion point and an annuity cash cow business (AMC) operating on an auto-pilot mode, Aditya Birla Capital (ABCL) is at the cusp of a credible makeover, driving consolidated return ratios closer to franchise potential over the next three years. We believe that ABCL’s current valuations do not adequately factor in the successful re-positioning of its lending businesses towards retail and granular loans, which is likely to drive a sustainable improvement in franchise earnings.
>> We initiate with a BUY and an SOTP-based target price of INR155 - we value the AMC business at INR240bn (7.2% of Mar’23 AUM) and the NBFC business at INR170bn (1.85x Mar’23 ABVPS).
8:32 AM
BROKERAGE VIEW :: HDFC Securities on Cummins India
Reco: BUY | TP: Rs 1,068
>> Going ahead, we make a case of PE expansion, given (1) structural changes in emission norms, (2) strong budget roadmap for infrastructure creation aligning with CIL product portfolio, (3) ahead-of-peers leadership in clean energy solutions, (4) recovery in end exports markets and, lastly, (5) probable long-term case for CIL-CTIL merger.
>> We have adopted an SOTP-based valuation methodology to arrive at CIL’s fair valuation. Whilst the company’s 10-year average 1-yr forward P/E multiple is 26x, it has traded at ~6.5-year average 1-yr forward multiple P/E multiple of 30x, post the NDA government coming into power. With the budget push, recovery in exports markets, and receding concerns on CG issues with newer technologies/products introduction through publicly listed CIL, we believe multiple reversion to 30x is warranted. Emission norms may further lead to market share gains. Standalone CIL is valued at 30x (vs 25x earlier) Mar-23E EPS, which is in line with its peak cycle multiple. We have upgraded our FY22E/23E estimates by 7.6%/8.5% on the back of faster-than-anticipated rebound.
>> Going ahead, we make a case of PE expansion, given (1) structural changes in emission norms, (2) strong budget roadmap for infrastructure creation aligning with CIL product portfolio, (3) ahead-of-peers leadership in clean energy solutions, (4) recovery in end exports markets and, lastly, (5) probable long-term case for CIL-CTIL merger.
>> We have adopted an SOTP-based valuation methodology to arrive at CIL’s fair valuation. Whilst the company’s 10-year average 1-yr forward P/E multiple is 26x, it has traded at ~6.5-year average 1-yr forward multiple P/E multiple of 30x, post the NDA government coming into power. With the budget push, recovery in exports markets, and receding concerns on CG issues with newer technologies/products introduction through publicly listed CIL, we believe multiple reversion to 30x is warranted. Emission norms may further lead to market share gains. Standalone CIL is valued at 30x (vs 25x earlier) Mar-23E EPS, which is in line with its peak cycle multiple. We have upgraded our FY22E/23E estimates by 7.6%/8.5% on the back of faster-than-anticipated rebound.
8:24 AM
FII/FPI & DII trading activity on NSE, BSE and MSEI
8:22 AM
Rupee check
Source: Bloomberg
8:20 AM
Oil check
8:18 AM
SGX Nifty alert
>> At 8:17 am, the index was ruling 43 points higher at 14,993 levels.
8:16 AM
Wall Street update
In the overnight session, the S&P 500 and Dow Jones closed at record highs as investors eyed economic recovery from the coronavirus and awaited cues from the Federal Reserve this week amid caution over rising borrowing costs.
The Dow Jones Industrial Average rose 0.53% while the S&P 500 gained 0.65%. The Nasdaq Composite climbed 1.05%.
8:15 AM
Asian markets today
Equities traded with modest gains tracking a record close for Wall Street and as Treasury yields edged lower to 1.60% from 1.64% hit last week. Australia’s S&P/ASX 200 index rose 0.24%, Japan's Nikkie index added 0.76% and Hong Kong's Hang Seng index was up 0.52%.
8:10 AM
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First Published: Mar 16 2021 | 7:58 AM IST
