MARKET WRAP: Sensex ends 743 pts higher as RIL jumps 10% on Facebook deal

All that happened in the markets today

12:50 PM

BROKERAGE VIEW:: Edelweiss Securities on Auto Bearings players

We are downgrading Schaeffler India (SCHFL) and SKF India (SKF) each from ‘HOLD’ to ‘REDUCE’. The COVID-19 pandemic has thrown a spanner in the works for bearings players given the largely OEM nature (two-thirds) of their automotive sales. Furthermore, supressed industrial activity (low utilisation and infra spend) would impact their industrial sales. That said, strong balance sheets (net cash) would help organised bearings players sustain market shares in our view. All in all, we are forecasting a contraction in their FY21E sales, on top of a plunge in volume in FY20. We are not building in a release of pent-up demand in FY22; hence, absolute volumes in auto OE would remain below the FY18/19 peak. We are slashing FY21/22E EPS by ~30% each to factor in lower auto OE and industrial sales.

12:48 PM

MARKET CHECK

12:36 PM

Covid-19: Global pvt wealth takes a hit; India sees 20% dip in Jan-March

In India, the drop was fueled by local currency depreciation from around Rs 71 per US dollar to Rs 75 a US dollar during the quarter, the report said. The loss in local stock market - the BSE index down by 31 per cent in local currency terms during the first quarter of 2020 - was the other major reason for the erosion in value of private wealth in the country, the report added. READ MORE

12:19 PM

Gold can hit $3,000/oz as investors become risk-averse: BofA Securities

Gold prices can shoot up to $3,000 per ounce (oz) – up a massive 78 per cent from the current level of around $1,689/oz – as investors become risk averse in the backdrop of coronavirus (Covid-19) pandemic that has already pushed central banks across the globe unveil stimulus measures to help stem the economic malaise triggered by this health scare. READ MORE

12:12 PM

RBL Bank hits new low of Rs 102; stock tanks 67% in two months

Shares of RBL Bank hit a new low of Rs 102, down 7 per cent on the BSE in the intra-day trade on Wednesday, falling 20 per cent in the past three trading days on concerns of weak net earnings. The stock of the private sector lender slipped below its previous low of Rs 105.60 touched on April 7, 2020. In the past two months, it has tanked 67 per cent despite management clarification that the bank is a well-capitalised and profitable entity. READ MORE

11:51 AM

EXPERT SPEAK:: Shankar Sharma on Covid-19 impact on emerging markets

11:47 AM

NEWS ALERT | Investment and collaboration is about the opportunity to work together: Reliance Jio on deal with Facebook

-- 'Whatsapp Pay' is in a trial period, hoping to get regulatory approval

-- Debt repayment is the priority in the long-term

-- Initial priority is to target small businesses

(via CNBC TV18)

11:35 AM

Aurobindo extends rally after US FDA clears Unit IV, zooms 133% in a month

Shares of Aurobindo Pharma rose 6 per cent to Rs 684 on the BSE on Wednesday, gaining 26 per cent in the past two trading days after the US health regulator US FDA reverted its inspection classification of the company’s Unit IV back to voluntary action indicated (VAI), thus relieving the company of any further regulatory action for this manufacturing facility. READ MORE

11:29 AM

Heatmap: S&P BSE Sensex gainers and losers at this hour

11:21 AM

BROKERAGE VIEW:: BofA on SBI Cards

Initiating Coverage: BUY | Price Objective: Rs 680 | Price: Rs 540.10

SBI Cards (SBIC) is the second-largest credit-card issuer in India with industry-leading growth in volumes (34.5% CAGR vs 25.6% industry CAGR) and spends (54.2% CAGR vs 35.6% industry CAGR) over FY17-19. We believe SBIC’s ability to leverage its SBI association positions it well in the high-growth Indian credit-card market: 2.5x spend growth expected over five years (CRISIL). Despite factoring the near-term impact of COVID-19, we see strong long-term growth supported by SBIC’s diversified model. We initiate at Buy with a PO of Rs 680 (26% potential upside) implying FY21E/22E P/ABV of 10x/7.7x. Upside risks - faster than expected macro improvement, lower credit costs; downside risks – spend decline, higher NPAs with job losses and tougher regulations.

11:16 AM

BROKERAGE VIEW:: JM Financial on Ashok Leyland

Rating Upgrade | BUY | Target Price: Rs 70

 

Medium and heavy commercial vehicle (MHCV – Goods) industry is cyclical in nature and usually follows a set pattern of 3-5 years of up-cycle and 2 years of down-cycle. What is a good time to BUY AL? Tracking the CV cycle and stock returns of AL, we found that the return profile changes materially if accumulated during the down-cycle vs. the first year of volume recovery. We estimate revenue growth of 12% CAGR and EBITDA growth of 45% CAGR over FY20-22E, driven by a sales up-cycle and margin expansion. The EBITDA estimates have been reduced by 46%/24% for FY21E/F22E to factor in near-term volume pressures. The target price of  Rs 70 (INR 85 earlier) is based on 14x FY22E EPS and Rs 7 contribution from Hinduja Leyland Finance (1x FY22 BV and 30% holding company discount). We UPGRADE the stock to a BUY rating.

11:11 AM

BROKERAGE VIEW:: HDFC Securities on asset management companies

FY20 was a difficult year for asset managers as equity flows deteriorated (-50.9% YoY), commissions increased (although managably), and performance deteriorated- as listed AMCs outperforming AUMs declined. Lastly, we have also worked out sensitivity of FY21E earnings to equity AAUMs and yields. While we continue to hold our constructive view on the sector, we believe flows to mutual funds may improve only in 2HFY21 and earnings will remain under pressure in FY21E.

NAM: We rate Nippon Life India Asset Management (NAM) a BUY with a TP of Rs 349 (40x Mar-22E NOPLAT + cash & investments). We appreciate the recent ownership change with Nippon Life buying out stake, and believe that the current management team has the ability to regain market share, although the same will not be easy. At CMP of Rs 285 stock trades at a FY21E/22E P/E of 31.5/27.6x.

 

MOFS: We have a BUY rating on MOFS with TP of Rs 668. We like MOFS’ differentiated business model and unique client franchise. There are headwinds in the near term in the form of a difficult fund raising environment due to regulatory changes and tough market conditions. We are also concerned of increased competition in broking. Lastly, MOHL too needs to display scalability. Having said the above valuations are compelling- at CMP of Rs 538 MOFS (ex. MOHL) trades at FY21E/22E P/E of 15.9/13.1x.

11:06 AM

BROKERAGE VIEW:: Prabhudas Lilladher on ACC

Rating: BUY | TP: Rs 1,340

India’s cement demand has been under pressure since Q1FY20 due to dearth of liquidity, weak sentiments and low Govt spending. With the outbreak of novel covid-19 virus, India’s cement demand is expected to fall 3% YoY in FY20e to 330mnt. In spite of weak volumes, sector is expected to deliver 15% earnings growth on the back of strong pricing discipline and lower costs. We expect 10% decline in India’s cement demand for FY21e, followed by 16% growth in FY22e given the low base. On prices front, we expect sector to repeat tight discipline, partially offsetting volume fall. We keep our CY20e/CY21e earnings estimates unchanged for ACC with BUY rating and TP of Rs1,340, EV/EBITDA of 10x CY21e.

11:04 AM

BROKERAGE VIEW:: ICICI Securities on Paints sector

We remain structural bulls on paint stocks, however, the ADD/HOLD ratings on Asian Paints, Berger and Kansai reflects the requirement of lower multiples (or potential earnings upgrade thesis) to turn more constructive. Akzo Nobel (the only paint stock in our coverage rated BUY) is preferred turnaround pick for 2020 and beyond.

We value the paint companies on DCF basis. Key upside risk is better-than-expected gross margins due to correction in crude oil prices and key downside risk is unexpected irrational competition due to deceleration in consumption due to outbreak of corona virus.

10:58 AM

SECTOR WATCH:: Auto stocks trade higher