Rising bond yields, Covid-19 cases spoil D-St party; Sensex slides 487 pts
Sectorally, all the NSE indices were painted red with the Nifty Auto and PSU Bank indices down around 2 per cent each
 "Rising bond yields, Covid-19 cases spoil D-St party; Sensex slides 487 pts")
9:06 AM
Anupam Rasayan India IPO opens today
The IPO is valued at 80x and 69x EPS for FY20 and annualized FY21, respectively, which look to be aggressively priced. ARIL indicated that as capex programme is completed, growth outlook is quite strong. However, considering capacity utilization of ~75% as on 9MFY21 and likely interest cost savings from debt repayment from IPO proceeds, we believe its earnings can potentially register ~35-40% CAGR over FY20-23E. Despite factoring this, it trades at over 40x of FY23 earnings, which is expensive compared to its quality peers like SRF and PI Industries. Further, a less than 1x asset turnover ratio over the years and low OCF yields raise apprehensions.
(View by Reliance Securities)
(View by Reliance Securities)
9:03 AM
BROKERAGE VIEW :: Sharekhan on Welspun India
TP: Rs 90 | Reco: Buy
>> We retain a Buy on Welspun India (Welspun) with a PT of Rs. 90; higher export opportunities in home textile and flooring business and a likely beneficiary of the PLI scheme in advance textiles business make it a better play in the space.
>> India’s exports of terry towels and bed-sheets to the US grew by ~19% and 47% in January. For both products, the share of exports improved by 570BPS and 510BPS for both the products. Welspun’s share in US terry towel exports stands at 20% and bed-linen around 11-12%.
>> Share gains in home textile segment exports to US, scale-up of flooring business (likely to contribute Rs450-500crore in FY23) and advance textiles business (likely to contribute Rs 600 crore in FY23) are long-term growth drivers. The government’s PLI scheme is also likely to offer incremental benefits.
>> Despite a strong capex plan to support growth in key segments, net debt is expected to remain at Rs. 2,400 crore as large capex funding will be done by improving cash flows.
>> We retain a Buy on Welspun India (Welspun) with a PT of Rs. 90; higher export opportunities in home textile and flooring business and a likely beneficiary of the PLI scheme in advance textiles business make it a better play in the space.
>> India’s exports of terry towels and bed-sheets to the US grew by ~19% and 47% in January. For both products, the share of exports improved by 570BPS and 510BPS for both the products. Welspun’s share in US terry towel exports stands at 20% and bed-linen around 11-12%.
>> Share gains in home textile segment exports to US, scale-up of flooring business (likely to contribute Rs450-500crore in FY23) and advance textiles business (likely to contribute Rs 600 crore in FY23) are long-term growth drivers. The government’s PLI scheme is also likely to offer incremental benefits.
>> Despite a strong capex plan to support growth in key segments, net debt is expected to remain at Rs. 2,400 crore as large capex funding will be done by improving cash flows.
9:00 AM
BROKERAGE VIEW :: MOFSL on Info Edge
TP: Rs 5,440 | Reco: Neutral
>> Amazon has started its much awaited Food Delivery service (Amazon Food) in Bengaluru, exactly a year after launching internally for employees. While we see a marginal impact on Zomato/Swiggy’s duopoly from the much delayed and limited launch, Amazon Food will pose a risk to both players as it can shake up an established setup with a focus on profitability.
>> Amazon will consistently keep take rates below the industry average as it gains an additional benefit for increasing Prime membership at the expense of losses in the Food Delivery vertical.
>> Unlike Amazon, Zomato and Swiggy do not have a vested interest in lower commission rates. Increasing competition (in case of an Amazon expansion) can lead to another prolonged period of cash burn in the industry.
>> Amazon’s expansion can pose a risk to Zomato’s road to profitability and lead to higher ‘losses from investee companies’ on INFOE’s consolidated P&L.
>> We foresee a risk to the duopoly structure and consistent take rates in the industry. INFOE holds 18.4% stake in Zomato. Maintain Neutral.
>> Amazon has started its much awaited Food Delivery service (Amazon Food) in Bengaluru, exactly a year after launching internally for employees. While we see a marginal impact on Zomato/Swiggy’s duopoly from the much delayed and limited launch, Amazon Food will pose a risk to both players as it can shake up an established setup with a focus on profitability.
>> Amazon will consistently keep take rates below the industry average as it gains an additional benefit for increasing Prime membership at the expense of losses in the Food Delivery vertical.
>> Unlike Amazon, Zomato and Swiggy do not have a vested interest in lower commission rates. Increasing competition (in case of an Amazon expansion) can lead to another prolonged period of cash burn in the industry.
>> Amazon’s expansion can pose a risk to Zomato’s road to profitability and lead to higher ‘losses from investee companies’ on INFOE’s consolidated P&L.
>> We foresee a risk to the duopoly structure and consistent take rates in the industry. INFOE holds 18.4% stake in Zomato. Maintain Neutral.
8:58 AM
BROKERAGE VIEW :: Emkay Global on AU Small Finance Bank
CMP: Rs 1,233 | TP: Rs 1,000 | Reco: Hold
>> According to media reports, AU Small Finance Bank (AU SFB) plans to raise ~Rs6.15bn-Rs6.32bn (US$0.08bn-US$0.09bn) at an indicative price band of Rs1,230-Rs1,265 vs. CMP of Rs1,231 (SEBI floor price: Rs1,181 per equity share). The issue will open on March 9 and close on March 10 by 8.30 am IST (with an option to close earlier).
>> Despite lumpy stake sale in Aavas Financiers, AU SFB’s Tier 1/CRAR ratio, ex-9M profit, dropped to 16.3%/18.8% in Q3 while including profits stood at 20%/23.5%, mainly due to a sharp rise in RWA. AU SFB’s CAR is based on credit risk as the bank still enjoys the leeway to not maintain capital on operational/market risk. After the capital raise, Tier-1 ratio will increase by 244bps/251bps (based on Q3FY21 RWA).
>> We expect the bank to report healthy pre-money RoE of 23%/19%/20% over FY21/FY22/FY23, which post-money without factoring in the benefits of capital raised, should stand at 22%/17%/18%. At the higher QIP band of Rs1,265, the stock is valued at 5.3x FY23 ABV pre-money and 4.9x FY23 ABV post-money. Currently, we have a Hold rating on the stock, given rich valuations. Asset-quality movement too remains a key monitorable given its relatively vulnerable portfolio.
>> According to media reports, AU Small Finance Bank (AU SFB) plans to raise ~Rs6.15bn-Rs6.32bn (US$0.08bn-US$0.09bn) at an indicative price band of Rs1,230-Rs1,265 vs. CMP of Rs1,231 (SEBI floor price: Rs1,181 per equity share). The issue will open on March 9 and close on March 10 by 8.30 am IST (with an option to close earlier).
>> Despite lumpy stake sale in Aavas Financiers, AU SFB’s Tier 1/CRAR ratio, ex-9M profit, dropped to 16.3%/18.8% in Q3 while including profits stood at 20%/23.5%, mainly due to a sharp rise in RWA. AU SFB’s CAR is based on credit risk as the bank still enjoys the leeway to not maintain capital on operational/market risk. After the capital raise, Tier-1 ratio will increase by 244bps/251bps (based on Q3FY21 RWA).
>> We expect the bank to report healthy pre-money RoE of 23%/19%/20% over FY21/FY22/FY23, which post-money without factoring in the benefits of capital raised, should stand at 22%/17%/18%. At the higher QIP band of Rs1,265, the stock is valued at 5.3x FY23 ABV pre-money and 4.9x FY23 ABV post-money. Currently, we have a Hold rating on the stock, given rich valuations. Asset-quality movement too remains a key monitorable given its relatively vulnerable portfolio.
8:53 AM
Top stocks to watch today
IDBI Bank: The bank has been taken out of PCA framework by the RBI. The bank has provided a written commitment that it would comply with the norms of minimum regulatory capital, net NPA and leverage ratio on an ongoing basis.
JSW Steel: The company posted a marginal decline of 1 per cent in its crude steel output at 13.06 lakh tonnes (LT) in February this year. READ MORE
8:47 AM
Anupam Rasayan India IPO opens today
>> Anupam Rasayan India Ltd. is a company engaged in the custom synthesis and manufacturing of specialty chemicals in India. Company started its business as a partnership firm in 1984 as a manufacturer of conventional products and have, over the years, evolved into custom synthesis and manufacturing of life science related specialty chemicals and other specialty chemicals, which involve multi-step synthesis and complex technologies, for a diverse base of Indian and global customers.
>> Company has strong and long-term relationships with various multinational corporations, including, Syngenta Asia Pacific Pte. Ltd., Sumitomo Chemical Company Limited and UPL Limited. The company has posted strong revenue growth of 24.3% CAGR between FY2018 to FY2020. Despite the impact of the COVID-19 pandemic, company has posted revenue growth of 45.0% for the nine month period ending December 2021. Given strong revenue growth and long-term relationships with various multinational corporations we assign a "SUBSCRIBE" rating to the IPO.
(View by Angel Broking)
>> Company has strong and long-term relationships with various multinational corporations, including, Syngenta Asia Pacific Pte. Ltd., Sumitomo Chemical Company Limited and UPL Limited. The company has posted strong revenue growth of 24.3% CAGR between FY2018 to FY2020. Despite the impact of the COVID-19 pandemic, company has posted revenue growth of 45.0% for the nine month period ending December 2021. Given strong revenue growth and long-term relationships with various multinational corporations we assign a "SUBSCRIBE" rating to the IPO.
(View by Angel Broking)
8:41 AM
Trading strategies for crude oil and zinc
The current weakness in crude has only triggered a small amount of risk reduction from hedge funds with the combined net-long in WTI (-3.7k) and Brent (-3.8k) being reduced to 728k lots. With the net-long staying close to the highest level since October 2018, the 7.6k reduction was however the biggest on a weekly basis since early November. This week, we saw crude oil touching $70 on the back of Iran-backed Houtini rebels striking Saudia Arabia’s refineries. READ MORE
8:30 AM
FII/FPI & DII trading activity on NSE, BSE and MSEI
8:27 AM
Rupee check
Source: Bloomberg
8:24 AM
Oil check
8:21 AM
US treasury yields
>> The yield on the benchmark 10-year Treasury note fell as low as 1.475%, the first time it had dipped below 1.5 per cent in a week.
8:20 AM
SGX Nifty Update
>> At 8:18 am, the index was ruling 15,393 levels, up over 200 points from Wednesday's close of 15,175.
8:18 AM
Wall Street check
While the Dow and S&P 500 (up 0.5 per cent and 1 per cent, respectively) closed at record highs, the tech-heavy Nasdaq paced the gains, rising more than 2 per cent on the day.
Topics : MARKET WRAP Markets IDBI Bank BSE Sensex Nifty50
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First Published: Mar 12 2021 | 7:49 AM IST
