28 Tata Motors has launched CNG variants of its passenger vehicle models... | iCommunity ICICIdirect

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ICICIdirect Research Posted on 09:34am 20-Jan-2022

Tata Motors has launched CNG variants of its passenger vehicle models...

* Market Outlook

Indian markets are likely to open lower tracking mixed global cues with concerns on inflation and surge in crude prices. Shares of HUL, Asian Paints, Biocon among others would be in focus as they announce quarterly results today.


*  Markets Yesterday

• Domestic markets ended lower on the back of losses across sectors amid a surge in crude prices and a global selloff.

• US markets ended lower amid negative news Inflow.


* Key Developments

• HUL is expected to witness 10.6% revenue growth largely led by price hikes taken in home care & beauty & personal care category (BPC). We estimate home care, BPC & foods business will see 11.8%, 9% & 6.9% sales growth respectively during the quarter. With continuous increase in key raw material prices (palm oil, crude based packaging costs), we expect 202 bps contraction in gross margins. We estimate 170 bps & 53 bps dip in marketing & overhead spends in Q3, which would keep the operating margins at 24.5% (40 bps higher). Operating profit growth of 12.5% and sharp increase in other income would drive net profit to grow at 18.5%.

• Concor’s Q3FY22 revenues are expected to grow 13% YoY to | 1979 crore (global trade remains impacted but domestic rebound due to festivities and low base). However, EBITDA margins are expected to expand 240 bps to 23.6% (due to recent price hikes). Absolute EBITDA is expected to grow 26% to | 467 crore. Subsequently, PAT is expected to grow 21% to | 288 crore.

• Bajaj Finserv's consolidated revenue is expected to grow 10.6% YoY to | 17655 crore, led by a pick-up in lending business coupled with continued healthy traction in premium accretion in life insurance. Healthy growth of ~26% YoY in AUM is expected to boost operational performance. Focus on individual business in life insurance & gradual revival in health & credit protect business in general insurance may support premium accretion. Steady provisioning and claims seem to support consolidated earnings at | 1386 crore. Outlook on digital financial services and commentary on recent increase in infection remain key monitorables.

• Despite a higher base, Asian Paints is likely to report consolidated revenue growth of 15% YoY to | 7784 crore supported by 8% volume growth in Q3FY22E. We believe inventory build-up at dealer level in the fear of price hike and supply disruptions drove the volume uptick during Q3FY22. Further aggressive price hikes by paint companies in mid of the quarter will help drive realisation up by 6-7%. EBITDA margin is likely to decline 914 bps YoY to 17.2% (+445 bps QoQ) due to higher base and delay in price hikes. As a result, PAT may see a decline of 27% YoY (up 52% QoQ) to ~ | 921 crore.

• Havell's topline is likely to increase by 9% YoY to | 3459 crore supported by price hikes and new product launches under the Lloyd brand. Despite a higher base, Lloyd business is likely to grow 12% YoY to | 572 crore supported by new product launches and dealer additions. We believe wire & cable and switchgear segment revenues are likely to grow by 12% and 10% YoY, respectively, supported by revival in real estate demand. The EBITDA margin is likely to decline by 180 bps YoY to 14% mainly due to higher raw material costs and delay in price hike. As a result, Havells is likely to report a marginal bottomline drop of 2.5% YoY to | 340 crore in Q3FY22.

• Biocon’s revenues are likely to grow ~12.3% YoY to |2079.5 crore mainly due to 11.8% YoY growth in Biosimilar segment to | 859.5 crore and 9.7% YoY growth in Syngene to | 641.4 crore. EBITDA margins are expected to increase by 312 bps YoY to 24.7% mainly due to reduction in other expenditure. EBITDA is expected to grow 28.6% YoY to | 513.7 core. Adjusted PAT is likely to decline by 1.6% YoY to | 165.8 crore.

• Mastek reported muted numbers in Q3. Revenue grew by 3.7% in CC while dollar revenue grew by 2.2% QoQ to USD73.6 mn. In rupee terms revenue grew by 3.4% QoQ to |551.9 crore. In terms of geographies, UK grew by 2.3% QoQ while growth for US/Middle East market was at 5.1%, 5.7% QoQ, respectively. Vertical wise government grew 4.7% QoQ while retail and financial services were weak as they reported decline of 7.5%/6.9% QoQ, respectively.

• M&M has announced a strategic partnership with Hero Electric wherein M&M will do contract manufacturing for Hero Electric at its manufacturing plant at Pithampur and at the same time use its distribution strength to augment the reach of Hero Electric products domestically. Both partners will also work upon joint product development and knowledge sharing as well as enable electrification of Peugeot Motorcycles portfolio through platform sharing. The transaction size amounts to ~| 140-150 over the contractual period.

• Tata Motors has launched CNG variants of its passenger vehicle models i.e. Tiago & Tigor starting at | 6.1 lakh/unit & | 7.7 lakh/unit respectively (ex-showroom Delhi).

• HCL Technologies announced the appointment of Prabhakar Appana as Senior Vice President and the Global Head of its AWS Ecosystem Business Unit to further accelerate the company’s #HCLCloudSmart journey. Mr Prabhakar joins HCL Technologies from Accenture, with a successful track record building technology business for telcos, media, high-tech, and aerospace and defence industries and later in London driving and transforming the cloud business.

• Lupin has entered into a partnership with Shenzhen Foncoo Pharmaceutical to establish its first partnership arrangement in China. Foncoo's medicine sales network covers more than 5,000 hospitals in 31 provinces across China, serving more than 5 million patients.

• Ashoka Buildcon has secured the project namely "construction of mall cum multiplex, B2+B1+LG+G+4, Bailey Road, Patna on item rate basis". The project, awarded by Bailey Properties Pvt Ltd, has estimated cost of | 111.5 crore.

• NTPC has emerged as the top biomass user, having co-fired about 58,000 MT of biomass, while tendering a total of 10.7 MMT over short-term and long-term basis, the power ministry said on Wednesday. As on date, approximately 59,000 metric tonnes (MT) of biomass has been co-fired in thermal power plants in the country, while tenders for 12 million metric tonnes (MMT) are at different stages of process for short-term & long-term duration, the ministry said in a statement.

• As per The Economic Times. the government approved sanction of | 973.74 crore to State Bank of India (SBI) as reimbursement related to loan moratorium that was implemented in 2020 amid the pandemic.

• According to Business Standard, RBL Bank to seek PE funding amid concerns over financial health. The bank has approached private equity firms for funds in exchange for a stake. The bank is looking to raise as much as | 1,500 crore ($201 million) in “confidence capital”. Deliberations are at an early stage and RBL Bank could still decide against the fundraising plan, which may be subject to approvals by the Reserve Bank of India.

• According to Business Standard, the Reserve Bank of India’s (RBI) digital payments index (DPI), which was launched in January to indicate the extent of digitisation of payments across the country, shows the index for September 2021 was at 304.06 against 270.59 in March 2021, indicating the rapid adoption and deepening of digital payments in the country. In March 2019, the index was at 153.47 and by September 2019, it rose to 173.49, followed by 207.94 in March 2020, 217.74 in September 2020, and 270.59 in March 2021.

• As per Business Standard, Cholamandalam Investment and Finance Company (Chola) has launched three new business divisions for consumer and small and medium enterprises segment -- Consumer and Small Enterprise Loan (CSEL), Secured Business & Personal Loan (SBPL) and SME Loan (SME), in order to drive the next phase of its growth. CIFC has also partnered with leading Fintech companies – BankBazaar, Kreditbee and Paytail.

• As per Business Line, Federal Bank, in association with Equirus Wealth, has launched a “US Dollar offshore fund” exclusively for their customers. Both NRI and Resident customers of Federal Bank will be able to invest in this fund. The fund offers a portfolio return (IRR) guidance of around 6.50% per annum with a fund tenor of three years from the date of fund closure with an option to extend by one year.

• India's crude oil production fell 1.8% YoY to 2.5 MMT in December 2021 whereas natural gas production grew 19.4% YoY to 2.9 BCM mainly on account of higher production from privately operated fields. Crude oil processed increased 2.2% YoY to 21.5 MMT.


*  Today's Highlight

Results: Mphasis, Cyient, VST Industries, Havells, Bajaj Finserv, Asian Paints, Biocon, HUL, Concor, Shoppers Stop, Philips Carbon Black.