Sensex ends at fresh closing peak of 48,782, up 689 pts; Nifty at 14,347
Tata Consultancy Services (TCS) hit a record high of Rs 3,127.55 apiece in the intra-day trade and closed 3 per cent higher ahead of the announcement of Q3FY21 results
 "Experts say aggressive stimulus measures announced by global central banks helped investors look beyond the worst economic outlook in more than 40 years")
9:04 AM
Markets at Pre-open
8:59 AM
Result today :: Cloud adoption, large deal wins may lift TCS Q3 profit by 8% YoY
The IT firm's revenue in constant currency (CC) terms is expected to rise in the range of 2.4-4 per cent on quarter-on-quarter (QoQ) basis while it may grow between 3-4.5 per cent in dollar revenue. As for revenue growth in rupee terms, it is expected to be up between 3.4-5 per cent year-on-year (YoY) and 2.7-4.2 per cent quarter-on-quarter (QoQ). Besides, analysts expect TCS to post a 3-8 per cent year-on-year (YoY) growth in its Q3 net profit. READ MORE
8:52 AM
BROKERAGE VIEW :: Prabhudas Lilladher on Gujarat Gas
TP: Rs 403 | Reco: Buy
>> GGAS remains sole gas supplier post ban on dirty competing fuels. Management likely to pass gas price hikes on consumers if demand momentum sustains. Addition of fifteen new units along with expansion of existing units to drive GGAS volumes; we factor in 10.3% CAGR volume over FY20-23E.
>> Demand traction remains robust led by 1) revival in domestic housing market supported by govt. initiated liquidity measures and 2) strong export demand given cost competitiveness along with opening of new markets in US and Brazil. Improved ceramic market demand augurs well for GGAS as Morbi accounts for over 60% of total sales volumes. Also, ban on competing dirty fuel has led to restricted competition with propane in summer months, thereby improving GGAS’s margin visibility. Rising pollution in industrial zones is likely to drive gas usage. Reiterate BUY with a PT of Rs403.
>> GGAS remains sole gas supplier post ban on dirty competing fuels. Management likely to pass gas price hikes on consumers if demand momentum sustains. Addition of fifteen new units along with expansion of existing units to drive GGAS volumes; we factor in 10.3% CAGR volume over FY20-23E.
>> Demand traction remains robust led by 1) revival in domestic housing market supported by govt. initiated liquidity measures and 2) strong export demand given cost competitiveness along with opening of new markets in US and Brazil. Improved ceramic market demand augurs well for GGAS as Morbi accounts for over 60% of total sales volumes. Also, ban on competing dirty fuel has led to restricted competition with propane in summer months, thereby improving GGAS’s margin visibility. Rising pollution in industrial zones is likely to drive gas usage. Reiterate BUY with a PT of Rs403.
8:50 AM
BROKERAGE VIEW :: Prabhudas Lilladher on Dalmia Bharat
TP: Rs 1,480 | Reco: Buy
>> We initiate coverage on Dalmia Bharat (DALBHARA) with BUY rating, underpinned by strong earnings growth and compelling valuations post mutual fund fiasco.
>> DALBHARA is India’s 4th largest cement producer with capacity of 29.6mnt, spread over East, South and West region. In South (40% volume share), more than 75% volumes come from profitable states of Tamil Nadu, Karnataka and Kerala while volatile and oversupply prone states of AP & Telangana constitute only 25% of volumes. In East (50% of volumes), the company enjoys logistics edge over peers with integrated operations in Odisha.
>> Led by strong market positioning and competitive cost structure, DALBHARA’s margins rank in top quartile of the sector. To further consolidate its position in East region, company is expanding East plant’s capacity by 75% or 8mnt with its All-India capacity increasing by 27% to 37.5mnt. This would drive 13%/31% CAGR in EBITDA/PAT for FY20-FY23E. We value the stock at Rs1,480, EV/EBITDA of 9.0x FY23e (25% discount to pre-MF episode valuations of 12.0x).
>> We initiate coverage on Dalmia Bharat (DALBHARA) with BUY rating, underpinned by strong earnings growth and compelling valuations post mutual fund fiasco.
>> DALBHARA is India’s 4th largest cement producer with capacity of 29.6mnt, spread over East, South and West region. In South (40% volume share), more than 75% volumes come from profitable states of Tamil Nadu, Karnataka and Kerala while volatile and oversupply prone states of AP & Telangana constitute only 25% of volumes. In East (50% of volumes), the company enjoys logistics edge over peers with integrated operations in Odisha.
>> Led by strong market positioning and competitive cost structure, DALBHARA’s margins rank in top quartile of the sector. To further consolidate its position in East region, company is expanding East plant’s capacity by 75% or 8mnt with its All-India capacity increasing by 27% to 37.5mnt. This would drive 13%/31% CAGR in EBITDA/PAT for FY20-FY23E. We value the stock at Rs1,480, EV/EBITDA of 9.0x FY23e (25% discount to pre-MF episode valuations of 12.0x).
8:47 AM
Top stocks to watch today
TCS: The IT major is slated to announce its December quarter results today. TCS is likely to post a robust performance for Q3FY21 on the back of strong demand in cloud adoption, tailwinds of large digital deals, project ramp-up and lower furloughs, analysts said.
Biocon: The company announced that its subsidiary Biocon Biologics has approved a primary equity investment by Abu Dhabi-based ADQ, one of the region's largest holding companies. As per the terms of the proposed agreement, ADQ will invest Rs 555 Crore for a 1.80 per cent minority stake in the biosimilar business. READ MORE
8:45 AM
BROKERAGE VIEW :: Axis Securities on Dixon Tech
TP: Rs 15,636 | Reco: Buy
>> Dixon continues to focus on new client acquisition and product addition to increase its top-line, backward integration and increasing ODM revenues.The company has added new clients across segments and is expanding capacities based on healthy order-book.Strong traction across segments, PLI boost under Government’s initiatives to give a thrust to domestic manufacturing under ‘Make in India’ and ‘Atmanirbhar Bharat’ will lead to strong growth going forward in our view. We believe Dixon will continue to ride on the strong order book and execution capabilities to scale up its operations thuss capturing such opportunities.
>> We maintain BUY and value Dixon at 45x FY23E EPS of Rs 347 arriving at target price of Rs 15,636 a premium to consensus PE of 37x FY23E EPS. We do think it enjoys the scarcity premium tag given that it remains the only listed player in the industry with a well diversified industry exposure as compared to Amber Enterprises which caters exclusively to air conditioning and HVAC segment.
>> Dixon continues to focus on new client acquisition and product addition to increase its top-line, backward integration and increasing ODM revenues.The company has added new clients across segments and is expanding capacities based on healthy order-book.Strong traction across segments, PLI boost under Government’s initiatives to give a thrust to domestic manufacturing under ‘Make in India’ and ‘Atmanirbhar Bharat’ will lead to strong growth going forward in our view. We believe Dixon will continue to ride on the strong order book and execution capabilities to scale up its operations thuss capturing such opportunities.
>> We maintain BUY and value Dixon at 45x FY23E EPS of Rs 347 arriving at target price of Rs 15,636 a premium to consensus PE of 37x FY23E EPS. We do think it enjoys the scarcity premium tag given that it remains the only listed player in the industry with a well diversified industry exposure as compared to Amber Enterprises which caters exclusively to air conditioning and HVAC segment.
8:43 AM
BROKERAGE VIEW :: ICICI Securities on HDFC Life
TP: Rs 820 | Reco: Buy
>> HDFC Life is focused on delivering consistent profitability with steady growth. GWP has grown at 17.1% CAGR in FY15-20. Value of new business (VNB) saw growth at 26.6% CAGR in FY15-20 while VNB margin expanded 740 bps to 25.9% in FY20 from 18.5% in FY15. PAT posted 10.5% CAGR in the past five years to Rs 1,295 crore for FY20. The company has a healthy RoEV at 18.1% for FY20 and has remained at 20% mark in the past few years. We expect PAT to grow at 8.9% CAGR to Rs 1,671 crore in FY20-23E.
>> We expect gross written premium (GWP) to grow at a CAGR of 10.1% in FY20-23E to Rs 43,703 crore. PAT is expected to grow at 9% CAGR over the same period to Rs 1,671 crore. VNB margins are expected to be in the region of ~25% by FY23E. HDFC Life currently trades at ~4.3x FY23E embedded value (EV), which is at a premium compared to its peers.
>> Given the superior business franchise and continued focus on profitability, valuations are expected to remain at a premium. Considering the current business
>> HDFC Life is focused on delivering consistent profitability with steady growth. GWP has grown at 17.1% CAGR in FY15-20. Value of new business (VNB) saw growth at 26.6% CAGR in FY15-20 while VNB margin expanded 740 bps to 25.9% in FY20 from 18.5% in FY15. PAT posted 10.5% CAGR in the past five years to Rs 1,295 crore for FY20. The company has a healthy RoEV at 18.1% for FY20 and has remained at 20% mark in the past few years. We expect PAT to grow at 8.9% CAGR to Rs 1,671 crore in FY20-23E.
>> We expect gross written premium (GWP) to grow at a CAGR of 10.1% in FY20-23E to Rs 43,703 crore. PAT is expected to grow at 9% CAGR over the same period to Rs 1,671 crore. VNB margins are expected to be in the region of ~25% by FY23E. HDFC Life currently trades at ~4.3x FY23E embedded value (EV), which is at a premium compared to its peers.
>> Given the superior business franchise and continued focus on profitability, valuations are expected to remain at a premium. Considering the current business
franchise and building anticipated improvement in business momentum and profitability metric, we initiate coverage on the stock with a BUY rating and a target price of Rs 820/share, valuing the company at 5.0x FY23E EV.
8:39 AM
BROKERAGE VIEW :: Emkay Global on GAIL
TP: Rs 125 | Reco: Buy
>> Overall volumes are now back to pre-Covid levels. Polymer prices are also strong, with healthy momentum expected in Q4. Petchem demand outlook is good and Pata plants are running stable. Q1/Q2FY22 would see some domestic capacity increase from HMEL. Gas trading outlook is better amid high international prices but the current situation is volatile and GAIL is monitoring the same, hence cannot say if further hedging can be done. GAIL expects spot LNG prices to cool off going ahead.
>> Gas transmission volume outlook is dependent more on demand than supply. Hence, new RIL-KG basin gas could rather replace LNG volumes and hence, not impact pipeline throughput much. Overall incremental volumes/demand in India should flow through GAIL’s pipelines, hence offers an upside.
>> Overall volumes are now back to pre-Covid levels. Polymer prices are also strong, with healthy momentum expected in Q4. Petchem demand outlook is good and Pata plants are running stable. Q1/Q2FY22 would see some domestic capacity increase from HMEL. Gas trading outlook is better amid high international prices but the current situation is volatile and GAIL is monitoring the same, hence cannot say if further hedging can be done. GAIL expects spot LNG prices to cool off going ahead.
>> Gas transmission volume outlook is dependent more on demand than supply. Hence, new RIL-KG basin gas could rather replace LNG volumes and hence, not impact pipeline throughput much. Overall incremental volumes/demand in India should flow through GAIL’s pipelines, hence offers an upside.
8:36 AM
BROKERAGE VIEW :: HDFC Securities on Mphasis
>> Mphasis is well positioned to capture the improving growth in the technology space led by its lower exposure to impacted verticals, improved traction in deal wins, strong relationship with top customers, customer stickiness and the integrated nature of services provided to clients. Mphasis has a strong record of retaining key customers, with an average tenor of 14-15 years that provides some operating stability. Its strong deal wins, healthy balance sheet and expectation of inorganic growth could bring earning visibility in medium to long term.
>> We think the Base case fair value of the stock is Rs 1774 (21.0x Sept22E EPS) and the bull case fair value of the stock is Rs 1899 (22.5x Sept22E EPS) over the next 2 quarters. Investors can buy at LTP and add further on dips to Rs 1426-1436 band (17.0x Sept22E EPS). At the LTP of Rs 1616, stock trades at 19.2x Sept22E EPS.
>> We think the Base case fair value of the stock is Rs 1774 (21.0x Sept22E EPS) and the bull case fair value of the stock is Rs 1899 (22.5x Sept22E EPS) over the next 2 quarters. Investors can buy at LTP and add further on dips to Rs 1426-1436 band (17.0x Sept22E EPS). At the LTP of Rs 1616, stock trades at 19.2x Sept22E EPS.
8:34 AM
BROKERAGE VIEW :: MOFSL on United Spirits
CMP: Rs 614 | TP: Rs 750 (+22%) | Reco: Upgrade to Buy
>> Sharp excise increases were seen over Apr–May’20 amid the COVID outbreak, leading to the expectation of a nosedive in sales and volumes. However, in a positive surprise, the company witnessed a strong recovery in 2QFY21, driven by robust in-home consumption. With various occasions of indulgence restricted (outdoor social activity, cinemas, and travel and tourism), spirits offered a convenient alternative for in-home consumption.
>> Accordingly, after 49% volume decline YoY in the lockdown impacted 1QFY21, volume decline was arrested to just 3.9% in the 2QFY21. Hence, we expect volume growth in the positive territory in 3QFY21.
>> Valuations, on the other hand, are at a 25% discount to our Coverage Universe at 46x FY22 EPS and 34.7x FY23 EPS. With an improving outlook, we upgrade UNSP to BUY, with TP of INR750, valuing the company at 45x Dec’22 EPS
>> Sharp excise increases were seen over Apr–May’20 amid the COVID outbreak, leading to the expectation of a nosedive in sales and volumes. However, in a positive surprise, the company witnessed a strong recovery in 2QFY21, driven by robust in-home consumption. With various occasions of indulgence restricted (outdoor social activity, cinemas, and travel and tourism), spirits offered a convenient alternative for in-home consumption.
>> Accordingly, after 49% volume decline YoY in the lockdown impacted 1QFY21, volume decline was arrested to just 3.9% in the 2QFY21. Hence, we expect volume growth in the positive territory in 3QFY21.
>> Valuations, on the other hand, are at a 25% discount to our Coverage Universe at 46x FY22 EPS and 34.7x FY23 EPS. With an improving outlook, we upgrade UNSP to BUY, with TP of INR750, valuing the company at 45x Dec’22 EPS
8:31 AM
'Nifty Bank may hit record high in coming days'
BUY BANK NIFTY | TARGET: 32,600 | STOP LOSS: 31,550
The Nifty Bank index has outperformed so far this week and is showing resilience as every dip is getting bought into. Although, the momentum indicators and oscillators have reached the overbought territory but there aren't any signs of reversal yet. Hence, a further momentum on the higher side is likely to continue. The overall broader structure is hinting at a fresh new high in the January series and as long as it sustains above 31,550 levels, the decline should be utilized as a buying opportunity. READ MORE
8:29 AM
Here's a Bull Spread Strategy on Max Financial Services
Rationale:
Long build up was seen in the MFSL Futures’ where we have seen 11% rise (Prov) in the Open Interest with price rising by 3%
8:23 AM
SGX Nifty Update
>> At 8:22 am, the index is at 14,288 levels, up 78 points.
Topics : Bitcoin MARKET WRAP Markets Gross domestic product Indian Economy Narendra Modi TCS Tata Consultancy Services Q3 results BSE NSE Nifty 50 stock market SGX Nifty Sensex Nifty
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First Published: Jan 08 2021 | 7:41 AM IST
