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ICICIdirect Research Posted on 09:13am 31-May-2021

According to ICRA, toll collection on national highways is likely to fall by 25-30% in May over last month...

* Market Outlook

Indian markets are likely to open flat and remain at record highs on the back of positive global cues as optimism on economic rebound and progress in pandemic fight is expected to evince buying interest across major sectors.

* Markets Yesterday

• Domestic markets ended higher tracking gains mainly in BFSI stocks and select index heavyweights amid positive global cues

• US markets ended higher amid release of macroeconomic data


* Key Developments  

• Aurobindo Pharma's Q4FY21E revenues are expected to grow 6.1% YoY to | 6537 crore. US sales are expected to remain flat (up 1% YoY) with injectables continuing to be marginally impacted tracking Covid impact on US hospitals. The erstwhile Natrol sale will also skew US sales slightly negative. Europe is expected to post 7% YoY growth with currency tailwinds being moderated by a high base effect. ARV is expected to remain strong amid EFV to DTG transition. API sales are expected to grow 5% YoY. EBITDA margins are likely to decline 66 bps to ~20.7% mainly due to slightly higher other expenditure. Net profit is expected to decline 2.1% YoY to ~| 820 crore

• Nesco’s Q4 performance was weak with near closure of exhibition business. Reported revenues were down 36% YoY at | 75.1 crore. EBITDA at | 47.6 crore, was down 33.3%. PAT at | 39.7 crore was down 25% YoY. For FY21, revenues, PAT declined 33%, 26% to | 291, | 172 crore, respectively. With the second wave, we expect recovery to be pushed back to H2FY22

• Mahindra & Mahindra (M&M) reported soft Q4FY21 results. Standalone net sales were at | 13,512 crore (up 47.8% YoY, down 4.9% QoQ). Automotive ASPs were up 7% QoQ to | 7.41 lakh/unit while tractor ASPs grew 2% QoQ to | 5.3 lakh/unit. Standalone EBITDA margins at 13.2% were down 280 bps QoQ amid 110 bps sequential decline in gross margins. Automotive EBIT margins fell ~330 bps QoQ to 3.1% while tractor margins were down ~140 bps QoQ to 22%. Standalone PAT came in at | 48.4 crore impacted by a large impairment hit of | 887 crore in relation to long term investments and lower other income. M&M declared a dividend of | 8.75/share for FY21

• NCC reported a decent set of numbers in Q4FY21 with revenue growth of 20% YoY to | 2617.7 crore on a standalone basis. However, operating margin declined 179 bps YoY to 11.1% owing to higher sub-contracting expenses. Consequently, operating profit improved merely 3.3% YoY to | 289.7 crore. At the net level, a decent operating performance coupled with benign depreciation and interest cost has translated into 11.4% YoY growth to | 115.5 crore in PAT

• Bank of Baroda posted good operating performance but due to DTA impact under new tax regime, the bank reported a loss. NII was up 4.5% YoY to | 7107 crore but declined 5% QoQ due to interest reversals. Global NIM declined by ~5 bps QoQ to 2.72%. Other income grew 71% YoY led by higher recoveries. Provisions stood at | 3586 crore including reversals in Covid buffer of | 1663 crore. PBT came at |2680 crore however due DTA impact of ~|3314 crore due to shift in new tax regime led to a loss of |1047 crore. Asset quality improved as GNPA declined to 8.87% vs 9.63% proforma GNPA QoQ. Restructured advances stood at 1.3%. Loan growth was tepid at 2% YoY while deposit growth stood at 5% YoY

• City union bank posted modest numbers for Q4FY21 with muted top-line and business growth. NII was down 12.4% to |428 crore QoQ due to interest reversals of |70 crore and as a result NIM declined by 44 bps QoQ to 3.72%. Other income declined by 37% YoY owing to lower treasury income. Opex increased by 11% QoQ due to higher business activity. Provisions stood at |173 crore and bank utilized |309 worth Covid provisions. PAT stood at |111 crore, down 34% QoQ. Asset quality was stable as GNPA stood at 5.11% while NNPA on proforma basis declined 40 bps QoQ to 2.97%, total restructured book is at 5%. Loan growth was decent at 7% YoY while deposits were up 9% YoY driven by 27% YoY uptick in CASA

• TV Today reported a muted set of numbers for Q4FY21 numbers Operating revenue came in at | 214.3 crore, up 2.9%YoY with TV broadcasting revenue at | 176.5 crore (4.4% YoY growth). Radio segment disappointed again with a straight ninth quarterly de-growth with revenues down 33.5% YoY to | 2.4 crore on further erosion in advertising pricing. Digital revenue recovered, reporting healthy growth of 19.3% YoY and came in at | 35.4 crore. EBITDA was at | 49.7 crore, up 6% YoY. EBITDA margin came in at 23.2%, up 74 bps YoY. The company reported PAT of | 36.2 crore, growth of 30.2% YoY despite muted operating performance due to lower tax rate transition

• Affle India’s (Affle) revenues increased 76.9% YoY (down 5.9% QoQ as it is seasonally weak quarter) to | 141.6 crore. We believe organic growth would be 32% and inorganic revenues would be | 36 crore. EBITDA margins were down 180 bps YoY (down 120 bps QoQ) to 24.3%. PAT was up from | 15.3 crore to | 58.5 crore mainly due to one off other income (| 34 crore). Adjusting for one off expense Affle PAT was up 73.6% YoY (down 13.6% QoQ) to | 26.5 crore

• Jagran Prakashan reported weak numbers. Print ad revenues were down 10.7% YoY, Radio revenue reported decline of 7.4% YoY; while Circulation reported a decline of 12.1% YoY. The only solace was digital ad revenues which grew by 19.8% YoY |13 crore. EBITDA was up 65.6% YoY while margins came in at 22.3%, up ~1000 bps YoY due to depressed base and cost control impact especially on newsprint cost which declined by 27% YoY. Sequentially EBITDA declined 30.5% due to 43% rise in marketing expenses. The benefit at EBITDA has flown down to PAT, which came in at |37.6 crore, up 235% on depressed base

• D’Link Q4FY21 revenues were strong optically on YoY basis due to depressed base (impacted by Covid). Revenue came in at |212.6 crore, up 29.7% YoY and 4% QoQ while EBITDA came in at |13.5 crore, up 130% YoY and 5.9% sequentially. PAT came in at 9.9 crore, up by 11% YoY. For FY21, revenue was down 1.8% YoY to |726 crore while EBITDA was down 1.2% YoY to |42 crore. EBITDA margins were up 10bps to 5.8%

• For Q4FY21, Sunflag Iron & Steel Ltd. reported consolidated topline of | 555 crore, up 33% YoY and down 14% QoQ. For the quarter, Sunflag Iron & Steel Ltd. reported consolidated EBITDA of |105 crore, up 106% YoY & 32% QoQ. Consolidated EBITDA margin came in at 18.9% as compared to 12.3% in Q3FY21 and 12.2% in Q4FY20. The ensuing consolidated PAT came in at |80 crore, up 82% YoY & 70% QoQ

• Action reported strong numbers for Q4FY21 led by strong performance from all segments. Revenue for the quarter came in at | 457.4 crore, up 49.7% YoY & 14% QoQ. EBIDTA increased 82.4% YoY to | 50 crore with an expansion of ~ 196 bps YoY & contraction of 36 bps QoQ in EBIDTA margins which came in at 10.9%. Subsequently, ACE reported a net profit of | 38.8 crore, up 182% YoY. For FY21, ACE posted a revenue increase of 6% led by robust performance in H2. The company cash flow to the tune of | 86.05 crore during the period

• The government has expanded scope of ECLGS scheme in its latest announcement in order to support business impacted by second wave of pandemic. Validity of ECLGS has been extended to September 30, 2021, or till guarantees for an amount of | 3 lakh crore are issued. Additional ECLGS assistance of up to 10% of the outstanding credit as of February 2020, has been offered to borrowers. Current limit of | 500 crore loan outstanding for eligibility has been removed, subject to maximum additional ECLGS assistance to each borrower being limited to 40% or |200 crore, whichever is lower. Loans to Civil Aviation Sector and oxygen generation plants are added in the scheme

• RBI has imposed a penalty of |10 crore on HDFC Bank for violating regulatory compliance in auto loan segment. As reported in business standard, The RBI, upon examining the documents in the matter of marketing and sale of third-party non-financial products to the banks’ customers, it found that the bank was in contravention of the provisions of certain banking regulation act. The RBI acted on the matter after it received a whistleblower complaint regarding the irregularities in the auto loan portfolio of the bank

• As per Business Standard, PSU banks have come out with a template approach for restructuring retail and small business loans of up to |25 crore under the RBI’s Covid restructuring package 2.0. Business loans have been divided into three categories. For loans under | 10 lakh, PSU banks will follow a standard restructuring plan while loans between | 10 lakh and | 10 crore will follow a graded approach. For loans above | 10 crore, the lenders will put in place a common outreach programme and follow a graded restructuring approach

• In March 2018, Wipro and Ensono, a leading hybrid IT services provider, had signed a long-term partnership agreement to jointly address the hybrid IT requirements of Wipro’s new and existing enterprise customers. As part of this agreement, Wipro had made a strategic investment of US$55 million for a 10.2% stake in Ensono’s. As part of recently announced acquisition of Ensono by KKR, Wipro has sold its entire stake in Ensono Holdings, LLC for a consideration of US$ 76.24 million (~| 550 crore)

• Media report (ET) states that Department of Telecom (DoT) has asked Telcos to test 5G in rural areas as well. Bharti Airtel, Reliance Jio and Vodafone Idea have been given trial spectrum for six month to test 5G technology in the country. Telecom operators have been allocated spectrum in 700 MHz band, 3.6 GHz band and 2.5 GHz band across various locations

• Cadila Healthcare has received USFDA approval for the generic version of Prolixin (Fluphenazine Hydrochloride) Tablets in US. The neuroleptic drug, indicated for the treatment of schizophrenia symptoms, will be manufactured at the company's Ahmedabad SEZ formulations facility

• As reported in Mint, Ministry of commerce and industry will clarify that 100% FDI will be applicable in the case of divestment of BPCL. This will be done to remove confusion regarding permissible FDI limit in petroleum refining sector

• As per media sources, Indian lenders, led by the State Bank of India, have initiated talks with SBI Caps to sell Mallya-owned shares in United Breweries (UBL). Mallya's 16.2% stake in the UB group is valued at |5500 crore and will be sold via block deals

• According to The Economic Times, Department of Telecommunications (DoT) is considering regulating communication apps such as WhatsApp, Facebook Messenger and Skype, primarily from the national security point of view. It has sought comments from the home ministry on the matter before it starts working on a licensing regime

• Ashoka Buildcon Limited has received Letter of Acceptance from FAHI DHIRIULHUN CORPORATION, a Stateowned company of the Government of the Republic of the Maldives, for the Project namely ‘‘Design and Construction of 2000 Social Housing Units in Hulhumale’, Republic of Maldives’ on EPC basis. The total value is estimated to be ~ USD 140.33 Million (~| 1018 crore)

• According to ICRA, toll collection on national highways is likely to fall by 25-30% in May over last month as a fall out of the lockdown and restrictions imposed by several states to contain the spread of coronavirus. In April too, toll collection fell 10% over March. However, with fall in number of Covid cases from third week of May, states are expected to relax lockdown restrictions in a gradual manner which is likely to ramp-up toll collections from June onward


* Today's Highlights

Results: Aurobindo Pharma, Narayana Hrudayalaya

Events: India GDP Q4 (YoY), India federal fiscal deficit, India infrastructure output