HDFC Bank, RIL help Sensex settle 478 pts higher; Nifty ends at 11,385
All that happened in the markets today
 "Markets continue to rally on RBI policy fillip; Sensex rises 164 points")
In the broader market, the S&P BSE MidCap index gained over 1 per cent to 14,656.68 levels.
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Markets at Pre-open
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Markets at Pre-open
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Top stocks to watch out for today
Bandhan Bank: The Reserve Bank of India (RBI) has lifted the restrictions imposed on the remuneration of private lender Bandhan Bank’s managing director and chief executive officer (MD&CEO) – Chandra Shekhar Ghosh, after the bank's promoter, Bandhan Financial Holdings, reduced its stake in the bank to 40 per cent.
HDFC Bank: US-based Rosen Law Firm on Monday said it plans to investigate potential securities claims against HDFC Bank following allegations of sharing "materially misleading business information" with investors.
Earnings today: A total of 36 companies including Hindustan Aeronautics, KNR Construction, and Zee Entertainment Enterprises are scheduled to report their June quarter earnings. READ MORE
8:59 AM
BROKERAGE VIEW :: Kotak Institutional Equities on United Breweries
CMP: Rs 972 | Fair value: Rs 1,120 | Reco: Add
>> UBBL’s 1Q print was expectedly weak with volumes down 77%. GMs were impacted by inferior state mix and low plant utilization while sharp overhead cuts helped contain EBITDA loss. Resumption of normal growth trends could take a while as selective lockdowns continue and the on-premise channel remains shut. We do believe that the LT volume growth potential of the category remains intact.
>> We cut our FY2021-23E revenue estimates by 3-4% given the continued demand challenges. Our FY2022-23E EPS is cut by 6-7%; FY2021E sees an increase as we bake in the sharp cost cuts of 1Q. We model 29% volume decline for FY2021E followed by a swift recovery (+35% yoy) in FY2022E. Our estimates could be at risk if there are (1) further challenges with unlocking and continued on-trade restrictions and (2) irrational tax increases by states. Nevertheless, the LT story of low category penetration remains
>> UBBL’s 1Q print was expectedly weak with volumes down 77%. GMs were impacted by inferior state mix and low plant utilization while sharp overhead cuts helped contain EBITDA loss. Resumption of normal growth trends could take a while as selective lockdowns continue and the on-premise channel remains shut. We do believe that the LT volume growth potential of the category remains intact.
>> We cut our FY2021-23E revenue estimates by 3-4% given the continued demand challenges. Our FY2022-23E EPS is cut by 6-7%; FY2021E sees an increase as we bake in the sharp cost cuts of 1Q. We model 29% volume decline for FY2021E followed by a swift recovery (+35% yoy) in FY2022E. Our estimates could be at risk if there are (1) further challenges with unlocking and continued on-trade restrictions and (2) irrational tax increases by states. Nevertheless, the LT story of low category penetration remains
8:58 AM
BROKERAGE VIEW :: Kotak Institutional Equities on Berger Paints
CMP: Rs 542 | Fair value: Rs 430 | Reco: Sell
>> Berger reported 46% yoy decline in revenues, 70% decline in EBITDA and 91% decline in net profit. We increase our FY2021E EPS by 8% as we incorporate better-than-estimated recovery of revenues but broadly maintain FY2022-23E EPS. We rollover and revise FV to Rs430 (Rs410 earlier) valuing Berger at 42X Sep-22E earnings.
>> The stock is trading at 56X FY2022E earnings that factor in 8.3% revenue CAGR and 245 bps EBITDA margin expansion over FY2020-22E; valuations are a tad rich on absolute as well as relative basis.
>> We increase FY2021E EPS by 8% and broadly maintain FY2022-23E earnings. We now model 8.3% revenue CAGR and 245 bps margin expansion over FY2020-22E. Berger has delivered an impressive well-rounded performance over the past few years and emerged as a credible #2 player in decorative paints. The story is good but the stock is trading at about 56X PE (FY2022E); about 10% premium to APNT
>> Berger reported 46% yoy decline in revenues, 70% decline in EBITDA and 91% decline in net profit. We increase our FY2021E EPS by 8% as we incorporate better-than-estimated recovery of revenues but broadly maintain FY2022-23E EPS. We rollover and revise FV to Rs430 (Rs410 earlier) valuing Berger at 42X Sep-22E earnings.
>> The stock is trading at 56X FY2022E earnings that factor in 8.3% revenue CAGR and 245 bps EBITDA margin expansion over FY2020-22E; valuations are a tad rich on absolute as well as relative basis.
>> We increase FY2021E EPS by 8% and broadly maintain FY2022-23E earnings. We now model 8.3% revenue CAGR and 245 bps margin expansion over FY2020-22E. Berger has delivered an impressive well-rounded performance over the past few years and emerged as a credible #2 player in decorative paints. The story is good but the stock is trading at about 56X PE (FY2022E); about 10% premium to APNT
8:55 AM
BROKERAGE VIEW :: Kotak Institutional Equities on NTPC
CMP: Rs 95 | Fair value: Rs 130 | Reco: Buy
>> NTPC reported a comprehensive earnings performance, with growth in adjusted PAT of Rs31.4 bn (+20% yoy) aligned to the growth in underlying regulated equity. Lower-than-estimated rebate of Rs8 bn recorded as extraordinary, in comparison Rs13.6 bn factored by us through revenues, resulted in a sharp earnings beat. NTPC remains confident of a scheduled commissioning of 10 GW of capacities under construction that will help the company report 14% CAGR in earnings between FY2020 and FY2023E.
>> Maintain BUY rating with revised fair value of Rs130/share (from Rs140/share), noting inexpensive valuations at 0.7X P/B and 6X on P/E on FY2022E earnings. We have revised our earnings downwards by 1% for FY2021E factoring lower generation in FY2021E that has a larger impact on the revenues than on the PAT.
>> NTPC reported a comprehensive earnings performance, with growth in adjusted PAT of Rs31.4 bn (+20% yoy) aligned to the growth in underlying regulated equity. Lower-than-estimated rebate of Rs8 bn recorded as extraordinary, in comparison Rs13.6 bn factored by us through revenues, resulted in a sharp earnings beat. NTPC remains confident of a scheduled commissioning of 10 GW of capacities under construction that will help the company report 14% CAGR in earnings between FY2020 and FY2023E.
>> Maintain BUY rating with revised fair value of Rs130/share (from Rs140/share), noting inexpensive valuations at 0.7X P/B and 6X on P/E on FY2022E earnings. We have revised our earnings downwards by 1% for FY2021E factoring lower generation in FY2021E that has a larger impact on the revenues than on the PAT.
8:53 AM
BROKERAGE VIEW :: Antique Stock Broking on VRL Logistics
CMP: Rs 151 | Target price: Rs 175 | Reco: Hold
>> VRL Logistics (VRLL) reported weak 1Q with a topline decline of 70% YoY with Goods/Passenger segment decline of 65%/95% YoY. Company reported EBITDA loss of INR339mn in 1Q (Antique est: loss of INR116mn) and PAT loss of INR627mn (Antique est: loss of INR491mn). Management highlighted 1) GT segment has reached 75-80% normalcy levels in 2Q and has turned PAT positive in July. It expects flat YoY revenue run-rate only by Dec-20; 2) Tonnage in segments like pharma, Agri, construction/building material (like paints etc) are showing steady improvement; 3) No further capacity related capex to be incurred due to excess capacity; 4) Focus on cost reduction to continue to manage liquidity; management targets PAT positive for FY21 despite sharp loss in 1Q; 5) DFC rollout to not impact VRL's business due to its presence in to small parcels business segment.
>> Post 1Q, we maintain our estimates and fair value target for the stock at INR175, at 20x P/E. Asset heavy and high fixed cost model to weigh on financial performance in FY21, FY22 performance could track macro recovery.
>> VRL Logistics (VRLL) reported weak 1Q with a topline decline of 70% YoY with Goods/Passenger segment decline of 65%/95% YoY. Company reported EBITDA loss of INR339mn in 1Q (Antique est: loss of INR116mn) and PAT loss of INR627mn (Antique est: loss of INR491mn). Management highlighted 1) GT segment has reached 75-80% normalcy levels in 2Q and has turned PAT positive in July. It expects flat YoY revenue run-rate only by Dec-20; 2) Tonnage in segments like pharma, Agri, construction/building material (like paints etc) are showing steady improvement; 3) No further capacity related capex to be incurred due to excess capacity; 4) Focus on cost reduction to continue to manage liquidity; management targets PAT positive for FY21 despite sharp loss in 1Q; 5) DFC rollout to not impact VRL's business due to its presence in to small parcels business segment.
>> Post 1Q, we maintain our estimates and fair value target for the stock at INR175, at 20x P/E. Asset heavy and high fixed cost model to weigh on financial performance in FY21, FY22 performance could track macro recovery.
8:50 AM
BROKERAGE VIEW :: Antique Stock Broking on Voltas
CMP: Rs 629 | Target price: Rs 690 | Reco: Buy
>> Voltas' outperformance with respect to both industry and our expectation was a result of its undisputed leadership in the Room AC (RAC) industry with ever growing moats. As the RAC market share surpasses quarter of the overall industry, the company is well geared to capture incremental value in the promising and high growth AC industry. While EMP continues to drag revenue, a stuffed up order book provides respite in the current scenario.
>> The company has ramped up investments and its efforts to drive next leg of growth through the Voltbek JV where the focus lies on localization and a subsequent ramp up in distribution to support the increased domestic manufacturing. We remain positive on the given leadership position in the fast growing AC industry while identifying a clear strategy for the next lap through Voltbek. We have maintained BUY with a revised target price of INR 690 (INR 600 earlier) based on SOTP valuation.
>> Voltas' outperformance with respect to both industry and our expectation was a result of its undisputed leadership in the Room AC (RAC) industry with ever growing moats. As the RAC market share surpasses quarter of the overall industry, the company is well geared to capture incremental value in the promising and high growth AC industry. While EMP continues to drag revenue, a stuffed up order book provides respite in the current scenario.
>> The company has ramped up investments and its efforts to drive next leg of growth through the Voltbek JV where the focus lies on localization and a subsequent ramp up in distribution to support the increased domestic manufacturing. We remain positive on the given leadership position in the fast growing AC industry while identifying a clear strategy for the next lap through Voltbek. We have maintained BUY with a revised target price of INR 690 (INR 600 earlier) based on SOTP valuation.
8:48 AM
BROKERAGE VIEW :: Antique Stock Broking on NTPC
CMP: Rs 95 | Target price: Rs 130 | Reco: Buy
>> In the quarter under review, NTPC had a Coal/Gas/Hydro PAF of 96%, 93.26%, 109% respectively. With 50.3GW under standalone operations, which is up by 3.8GW annually, the company reported a net profit of INR24bn, up 26% annually (against our estimate of INR19bn). In 1QFY21, the company has written off INR8bn (our estimate: INR13.63bn) rebate, in-line with lockdown related policy.
>> We believe re-rating drivers of operational efficiency improvements; capacity additions and coal mining profits are in place for NTPC. However, in the near-term scenario-with stretched receivables, rebates and other policy hurdles, the regulated equity multiple will not be higher. We continue to value the company at a TP of INR130, while valuing 1.3xPB FY22E for regulated asset base and subs/CWIP at 0.7x, we maintain BUY. Risks: 1) coal supply shortage impacting PAF and policy changes on receivables.
>> In the quarter under review, NTPC had a Coal/Gas/Hydro PAF of 96%, 93.26%, 109% respectively. With 50.3GW under standalone operations, which is up by 3.8GW annually, the company reported a net profit of INR24bn, up 26% annually (against our estimate of INR19bn). In 1QFY21, the company has written off INR8bn (our estimate: INR13.63bn) rebate, in-line with lockdown related policy.
>> We believe re-rating drivers of operational efficiency improvements; capacity additions and coal mining profits are in place for NTPC. However, in the near-term scenario-with stretched receivables, rebates and other policy hurdles, the regulated equity multiple will not be higher. We continue to value the company at a TP of INR130, while valuing 1.3xPB FY22E for regulated asset base and subs/CWIP at 0.7x, we maintain BUY. Risks: 1) coal supply shortage impacting PAF and policy changes on receivables.
8:46 AM
BROKERAGE VIEW :: Motilal Oswal Financial Services on Petronet LNG
CMP: Rs 254 | Reco: Buy
>> 1QFY21 EBITDA stood at INR9b (v/s est. +5%; -11% YoY and +30% QoQ). The lower interest cost was offset by lower other income.
>> Reported PAT stood at INR5.2b (v/s est. +4%; -7% YoY and +45% QoQ).
>> Post lifting of the lockdown, RLNG demand recovered gradually. Since the first week of Jun’20. Dahej terminal is operating at 100% capacity of 17.5MMTPA (63MMSCMD) v/s Jan-Feb’20 average 92% capacity of ~58MMSCMD, and Kochi terminal is operating at 20% capacity of ~3.57MMSCMD.
>> 1QFY21 EBITDA stood at INR9b (v/s est. +5%; -11% YoY and +30% QoQ). The lower interest cost was offset by lower other income.
>> Reported PAT stood at INR5.2b (v/s est. +4%; -7% YoY and +45% QoQ).
>> Post lifting of the lockdown, RLNG demand recovered gradually. Since the first week of Jun’20. Dahej terminal is operating at 100% capacity of 17.5MMTPA (63MMSCMD) v/s Jan-Feb’20 average 92% capacity of ~58MMSCMD, and Kochi terminal is operating at 20% capacity of ~3.57MMSCMD.
8:42 AM
BROKERAGE VIEW :: Motilal Oswal Financial Services on IIFL Wealth
CMP: Rs 1,065 | TP: Rs 1,240 (+16%) | Reco: Buy
>> Over the past decade, IIFLWAM has evolved into one of the best wealth management franchises in the country, giving tough competition to the private sector and foreign banks. Over the past five years, it has become the alternate asset manager in India with unique product offerings. With IIFL ONE, the company is looking to revolutionize the way wealth management is offered in India. Traction on IIFL ONE remains healthy; however, improving the retention ratio remains the moot point. While in the near term, net inflows could be modest, we expect it to improve over the medium term. While there could be some pressure on profitability due to migration to IIFL ONE (net yields of 40bp in IIFL ONE v/s 50-60bp for other distribution assets), it would make revenues more stable and less susceptible to regulatory pressures. We largely maintain our FY21/22E EPS estimates. Buy with TP of Rs 1,240 (25x FY22E EPS).
>> Over the past decade, IIFLWAM has evolved into one of the best wealth management franchises in the country, giving tough competition to the private sector and foreign banks. Over the past five years, it has become the alternate asset manager in India with unique product offerings. With IIFL ONE, the company is looking to revolutionize the way wealth management is offered in India. Traction on IIFL ONE remains healthy; however, improving the retention ratio remains the moot point. While in the near term, net inflows could be modest, we expect it to improve over the medium term. While there could be some pressure on profitability due to migration to IIFL ONE (net yields of 40bp in IIFL ONE v/s 50-60bp for other distribution assets), it would make revenues more stable and less susceptible to regulatory pressures. We largely maintain our FY21/22E EPS estimates. Buy with TP of Rs 1,240 (25x FY22E EPS).
8:41 AM
BROKERAGE VIEW :: Motilal Oswal Financial Services on Glenmark Pharma
CMP: Rs 481 | TP: Rs 495 (+3%) | Reco: Neutral
>> We have raised our EPS estimate by 19%/14% for FY21/FY22E to factor in the cost savings and better traction in DF/Europe/ROW/LATAM with ease of the lockdown. We expect 17% earnings CAGR over FY20-22E, led by sales CAGR of 7%/5% in India/Europe and margin expansion of 380bp. We value GNP at 14x 12M forward earnings to arrive at a price target of INR495/share. While earnings trajectory is improving, we are yet see any meaningful improvement in return ratios
>> Despite reduced sales in India (DF)/the US/ROW/LATAM, Glenmark Pharma (GNP) delivered better-than-expected 1QFY21 performance led by product mix change and sharp reduction in other opex.
>> We have raised our EPS estimate by 19%/14% for FY21/FY22E to factor in the cost savings and better traction in DF/Europe/ROW/LATAM with ease of the lockdown. We expect 17% earnings CAGR over FY20-22E, led by sales CAGR of 7%/5% in India/Europe and margin expansion of 380bp. We value GNP at 14x 12M forward earnings to arrive at a price target of INR495/share. While earnings trajectory is improving, we are yet see any meaningful improvement in return ratios
8:38 AM
BROKERAGE VIEW :: Motilal Oswal Financial Services on Voltas
CMP: Rs 629 | TP: Rs 700 (+11%) | Reco: Buy
>> We expect system-level inventory to normalize by Nov–Dec’20; hence, FY22E should turn out to be a normal year. We cut our FY22 EBITDA estimates by 5% as we lower our margin estimate in the Projects business to model-in some conservatism. We increase our multiple for the UCP segment to 40x from 35x earlier owing to its relative outperformance v/s white goods companies. Voltas remains our preferred play in the underpenetrated AC industry in India. Maintain Buy, with TP of INR700 (prior: INR600) as we roll over to Sep’22E
>> We expect system-level inventory to normalize by Nov–Dec’20; hence, FY22E should turn out to be a normal year. We cut our FY22 EBITDA estimates by 5% as we lower our margin estimate in the Projects business to model-in some conservatism. We increase our multiple for the UCP segment to 40x from 35x earlier owing to its relative outperformance v/s white goods companies. Voltas remains our preferred play in the underpenetrated AC industry in India. Maintain Buy, with TP of INR700 (prior: INR600) as we roll over to Sep’22E
8:37 AM
BROKERAGE VIEW :: Motilal Oswal Financial Services on United Breweries
CMP: Rs 973 | TP: Rs 820 (-16% ) | Reco: Sell
>> The Alcohol segment is being affected by a series of events, such as: (a) weak demand, (b) very sharp excise increases by state governments, (c) the unlikelihood of bars and restaurants re-opening anytime soon, and (d) worsening state finances potentially pressuring working capital.
>> The capital-intensive nature of the business (depreciation at ~23% of EBITDA even in FY20) implies the PAT impact would be even sharper than the sales and EBITDA impact.
>> Steep ROCE decline from already unimpressive levels of 12.8% in FY20 and a weak earnings outlook, combined with expensive valuations of 82x FY22 EPS and 32.7x EV/EBITDA, have led us to maintain a Sell rating on the stock, with TP of Rs 820 (targeting 24x Sep’22 EV/EBITDA, a 20% discount to peers).
>> The Alcohol segment is being affected by a series of events, such as: (a) weak demand, (b) very sharp excise increases by state governments, (c) the unlikelihood of bars and restaurants re-opening anytime soon, and (d) worsening state finances potentially pressuring working capital.
>> The capital-intensive nature of the business (depreciation at ~23% of EBITDA even in FY20) implies the PAT impact would be even sharper than the sales and EBITDA impact.
>> Steep ROCE decline from already unimpressive levels of 12.8% in FY20 and a weak earnings outlook, combined with expensive valuations of 82x FY22 EPS and 32.7x EV/EBITDA, have led us to maintain a Sell rating on the stock, with TP of Rs 820 (targeting 24x Sep’22 EV/EBITDA, a 20% discount to peers).
8:34 AM
BROKERAGE VIEW :: Motilal Oswal Financial Services on Eicher Motors
CMP: Rs 21,124 | TP: Rs 24,750 (+17%) | Reco: Buy
>> FY21 would be another challenging year for the domestic 2W industry as well as for EIM due to the COVID-19 pandemic and its impact. As a result, along with volume pressure, RE production will also be at higher risk due to its singular location unlike other OEMs, which have plants located in multiple locations. We estimate volumes to decline ~10.4% in FY21 and grow 18.4% in FY22E.
>> Technical parity with other high-end motorcycles, strong product pipeline and network expansion in both domestic and export market has equipped RE to capture the benefit of the upcoming favorable product cycle.
>> The stock trades at ~41.4x/25.7x FY21E/FY22E consol. EPS. We believe BS6 transition would be an inflection point for RE as a completely new improved platform could drive revival of the brand.
>> FY21 would be another challenging year for the domestic 2W industry as well as for EIM due to the COVID-19 pandemic and its impact. As a result, along with volume pressure, RE production will also be at higher risk due to its singular location unlike other OEMs, which have plants located in multiple locations. We estimate volumes to decline ~10.4% in FY21 and grow 18.4% in FY22E.
>> Technical parity with other high-end motorcycles, strong product pipeline and network expansion in both domestic and export market has equipped RE to capture the benefit of the upcoming favorable product cycle.
>> The stock trades at ~41.4x/25.7x FY21E/FY22E consol. EPS. We believe BS6 transition would be an inflection point for RE as a completely new improved platform could drive revival of the brand.
Topics : Markets HDFC Bank Reliance Industries Bandhan Bank Zee Entertainment Hindustan Aeronautics Sebi MARKET WRAP
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First Published: Aug 18 2020 | 7:36 AM IST
