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ICICIdirect Posted on 09:13am 30-Jun-2020

Media reports state the government is drawing up plans to incentivise manufacturers for doubling auto exports (vehicles and components) over the next five years..

* Market Outlook

Indian markets are likely to open on a firm note tracking positive global cues supported by indications of a faster economic recovery. Global news flows and earning outcomes of domestic companies would be key monitorables.

* Markets Yesterday

 Domestic markets ended lower as rising Covid-19 cases across the globe dented hopes of a quick economic recovery

• US markets ended higher despite a rise in Covid-19 cases as investors remained hopeful about further stimulus from central banks


* Key Developments  

• We expect the churn for Vodafone Idea to continue amid integration led challenges, tariff hike impact and Covid-19 impact. Consequently, we bake in ~10 million customer exits QoQ. With ARPU growth of ~10% QoQ at | 120 due to tariff hike, we expect overall revenues to be up 3.3% QoQ at | 11,735 crore. Reported margins are expected at 33.8%, up 300 bps QoQ given the integration led opex benefits as well tariff hike pass through to profitability. The company is expected to post a net loss of | 6009 crore.

• ONGC's oil production is expected to decline 1.3% QoQ, 2.5% YoY in Q4FY20. Gas production is estimated to stay flat QoQ and decline 5.7% YoY. Oil production is estimated at 5.8 MMT, with gas output expected at 6.2 MMT in Q4FY20E. We expect a sharp decline in realisations QoQ at US$ 50.5/bbl due to lower average crude oil prices. Hence, EBITDA is expected to decline ~13.2% QoQ. PAT decline is expected to be lower as Q3FY20 had higher depreciation & amortisation expenses

• Bharat Forge (BFL) reported a dismal performance in Q4FY20. Standalone revenues came in at | 881 crore, down 47.2% YoY. Standalone EBITDA margins were at a new low of 12.5%, a 937 bps sequential fall. Negative operating leverage took a major toll on margins (employee costs up 250 bps QoQ, other expenses up 890 bps QoQ). Reported loss at PAT level was at | 73.3 crore

• CESC reported revenues at | 1583 crore, decline of 4.8% YoY. However, thereported revenues were better than our estimates of | 1553.7 crore, this is mainly on the back of higher than expected energy sold during Q4FY20. Reported EBITDA came in at |250 crore which was higher than our estimate of |157 crore. The key reason for the beat is lower fuel costs and lower other operating expenses which were down by 13.8% and 41% YoY, respectively. PAT came in at |250 crore vs. our estimate of |267 crore, on account of lower other income and other regulatory income

• J&K Bank reported weak set of Q4FY20 numbers wherein surge in provisioning led to a loss of | 294 crore. Total provisioning for Q4FY20 stood at | 620.5 crore which includes Covid provisions of | 147 crore. GNPA increased 200 bps YoY to 10.97% however de-grew sequentially by 13 bps. On account of standstill asset classification norms, NNPA was down 141 bps to 3.48%. Advances de-grew 2.8% YoY to | 64399 crore with J&K and Ladakh comprising 63% overall advances. Deposit growth was healthy at 9.1% YoY to | 89636 crore with CASA ratio at 56.3%. NII stood at | 987 crore, up 6% YoY. On account of lower CoF, NIMs improved to 4.1%. Muted other income and higher opex led PPP to come at | 382 crore, down 36% YoY

• Nocil reported revenue decline of 12% YoY to | 212.7 crore largely impacted by poor growth from domestic auto industry, however on QoQ basis, the sales improved by 9% QoQ due to better exports. OPM contracted 760bps YoY/160bps QoQ to 17.2% largely on account of poor gross margins, resulted into EBITDA fall by 39% YoY to | 36.6 crore. PAT stood at | 21.9 crore (-39.5% YoY)

• Oriental aromatics reported better operational numbers. The revenue fell by 15.4% YoY to | 170 crore largely due to fall in pine oil prices leading to poor realisations. Gross margins improved by 1000bps YoY/400bps QoQ to 43% leading to OPM improvement of 500bps YoY & QoQ to 21%. EBITDA was up by 16% YoY/28.6% QoQ to | 36 crore. Lower taxes led bottom line to stand at | 24 crore against | 3 crore in Q4FY19

• Sun Pharma has received approval from the Ministry of Health, Labour and Welfare (MHLW), Japan for ILUMYA (Tildrakizumab) for the treatment of plaque psoriasis

• Cipla, Boehringer Ingelheim announce partnership in India to co-market 3 oral anti-diabetic drugs namely Oboravo (Empagliflozin), Oboravo Met (Empagliflozin+Metformin) and Tiptengio (Empagliflozin+Linagliptin)

• As per media reports, Carlyle Group may pick up 20% stake in Airtel's 100% subsidiary Nxtra data at $200 million, valuing it at $1 billion. Nxtra data is managing data centres and cloud business

• Media reports state the government is drawing up plans to incentivise manufacturers for doubling auto exports (vehicles and components) over the next five years, and has invited industry feedback for the same. The scheme is proposed to initially target larger companies (| 10,000 crore revenues, | 1,000 crore EBITDA in three of the past five years) 

• As per media sources, Singapore based firm Temasek is expected to put in US$100 million in Zomato. However, valuation at which the funding will take place is still not decided.

• Zee entertainment, Star India and SPN have resumed shooting of daily serials and fresh episodes of selected shows will be aired from July 13

• Seven Hindi films involving major stars will be released directly on a streaming platform bypassing the theatrical release. Multiplex companies' stocks are likely to be under pressure today (June 30) following the news

• India Ratings has revised downwards by one notch JK Tyre's credit rating for long term loans to A- with negative outlook

• Indian Bank has informed exchanges regarding a board approval to raise | 5000 crore via issue of Basel III Compliant Tier I and /or Tier II bonds in one or more tranches

• Axis Bank has informed exchanges regarding a board meeting to be held on 2nd July 2020 to consider raising of funds via issue of equity shares/ depository receipts and/or any other instruments or securities representing either equity shares and/or convertible securities linked to QIP/ADR/GDR program or such other permissible mode or combinations thereof, subject to regulatory approvals

• PNGRB has accepted proposal for transfer of authorization of Amritsar and Bhatinda district GAs to Gujarat Gas from GSPL

• DB Corp's pledged shareholding reduced 1.2% to 33% of share capital

• ICRA has assigned AAA(SO) rating for Mahindra Finance's Pass-Through Certificate (PTC) Series A1 worth | 1702.7 crore

• Crisil has reaffirmed FAA- rating for J&K Banks's Fixed Deposit Programme. Furthermore, the rating agency has also reaffirmed A1+ for the certificate of deposits and short term fixed deposits programme of the bank

• Fitch has affirmed Gail's long term foreign currency IDR at BBB- with negative outlook


* Today's Highlights

Results: ONGC, Midhani Alloys, Control Print, Nirlon, NCL Industries, Vodafone Idea, NBCC