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ICICIdirect Posted on 09:04am 26-Jun-2020

With Coronavirus changing the way people dined at restaurants, Indian Hotels Company Ltd (IHCL), has announced a new service called Qmin...

* Market Outlook

Indian markets are likely to open higher tracking positive global cues amid more relaxations for the banking industry in the US by the regulator. However, rising number of Covid19 infections and earnings outcome of domestic companies will be key monitorables.

* Markets Yesterday

• Domestic markets ended slightly lower due to weak global cues

• US markets ended sharply higher led by gains in financial stocks amid newsflow about US regulator’s plans to ease banking regulations


* Key Developments  

• We expect ITC to report 4.1% fall in sales with expected cigarettes sales dip of 0.7% despite price hike of~10-20% taken across categories after a hike in excise in the Budget. Disruption in supply chain would have impacted sales in the last eight to 10 days of the quarter. We expect operating margin decline of 234 bps due to loss of cigarette volumes during the quarter. We expect 14.4% decline in earnings during the quarter despite corporate tax cut in FY20

• Vedanta has received shareholder’s approval for its delisting process. The company has disclosed the results of the postal ballot as it obtained 93.3 % votes ‘in favour’ of the proposal while 6.7 %‘against’ vote. Overall, nearly 85% of institutional public shareholders and 75% of noninstitutional shareholders have voted in favour of the proposal. Going ahead, the company will now have to launch reverse book building (RBB) process to delist

• For Q4FY20, we expect Coal India to report coal offtake of 164.2 million tonne (MT), up 0.7% YoY. We expect the topline to decline 1.9% YoY to | 28001.7 crore. The EBITDA margin is likely to come in at 22.9% (vs. 21.4% in Q3FY20 and 28.8% in Q4FY19)

• We expect Sun TV's ad revenues to decline 18% YoY given the challenging ad environment amid Covid-19 outbreak. However, subscription revenues continue to benefit from NTO implementation (specifically in Tamil market) and are expected to register growth of 24% YoY. We expect EBITDA margins (ex-IPL) to decline 430 bps YoY to 66.5% owing to higher spend on content building as well as lower revenues

• We anticipate Kajaria Ceramics’ sales volume to decline 13.3% YoY to 19.5 MSM in Q4FY20E. On the revenue front, we expect it to decline 11.3% YoY to | 723.4 crore mainly led by volume de-growth. Additionally, with gas prices expected to remain broadly stable in Q4FY20E, we expect EBITDA margins to contract 184 bps QoQ to 13.2%, impacted by negative operating leverage. Overall, we expect the bottomline to witness a decline of 31.4% YoY to | 45.3 crore

• TajGVK Hotels reported a weak set of numbers as tourism was one of the worst hit sectors owing to the virus outbreak. Company’s revenues dropped 18% YoY to | 76.6 crore, which we believe is mainly driven by fall in occupancies lower F&B income. EBITDA for the quarter fell 44% YoY to | 16.1 crore and EBITDA margins contracted 950 bps to 21%. PAT saw a fall of 56% YoY to | 5.7 crore owing to lower operating profits

• Star Cements’ revenues increased by 3.5% YoY to | 557 crore in Q4FY20. Higher employee and other costs softened the revenue increase impact on the EBITDA. EBITDA margins contracted 54bps YoY to 23.7% and EBITDA increased 1% YoY to | 132 crore. PAT saw a decline of 3.5% YoY to | 86.6 crore

• Weakness in AP and Telangana weighed on Deccan Cements Q4FY20 performance. Company’s revenues dropped 20% YoY to | 123.8 crore which would have been driven mainly by lower volumes. EBITDA for the quarter dropped 60% YoY to | 11.3 crore and EBITDA margins contracted 890 bps to 9.1%. Company provided | 9.6 crore towards certain demand from Andhra Pradesh Electricity Regulatory Commission (APERC) towards wheeling charges. Thus company reported a net loss of | 2.96 crore against a profit of | 13 crore last year

• As per media sources, RBI's Central Board meeting is held today (26th June 2020) wherein the regulator would consider a one-time loan restructuring scheme for non MSME loans. Furthermore, RBI is also mulling to relax the delinquency period for the classification of NPA's from the current 90 days to 180 days

• Bank of Baroda has informed exchanges regarding a board meeting to be held on June 30, 2020 to consider raising of capital funds through issue of capital debt instruments

• As per media sources, the Joint Venture between Axis Bank and Max Life Insurance has faced regulatory hurdles. In a letter to both the companies, IRDAI has sought clarifications on the clauses in the Joint Venture agreement

• Sumitomo Chemical Company, promoter of Sumitomo Chemical India proposes to sell up to 49.91 lakh shares, representing approximately 1% of the outstanding shares. The OFS would begin today for institutional investors and on Monday for retail investors. The OFS has an option to additionally sell up to 49.91 lakh shares in case of oversubscription. The floor price for the sale has been fixed as | 265

• Apollo Tyres has commissioned its Andhra Pradesh greenfield facility. It would invest | 3,800 crore in Phase 1 of the facility, with production slated to ramp up gradually over next 12-18 months. By 2022, the facility would have capacity to produce 15,000 PCR and 3,000 TBR tyres per day

• Jaguar Land Rover would be supplying 25 electric I-Pace models to the city of Oslo, Norway as part of the world's first wireless charging system for electric taxis

• Cyient has tied up with Microsoft to accelerate IOT solutions to customers

• Infosys Finacle and VPBank Financial Co. Ltd (FE CREDIT) in Vietnam, announced the company’s decision to upgrade their existing Finacle Digital Banking solution suite to the latest version and migrate it from an onpremise deployment to a Software-as-a-Service (SaaS) model. This will make FE CREDIT the first non-banking financial company in Vietnam to be fully hosted in a state-of-the-art public cloud architecture, enabling it to cost-effectively scale at will, while delivering outstanding digital customer experiences

• With Coronavirus changing the way people dined at restaurants, Indian Hotels Company Ltd (IHCL), has announced a new service called Qmin starting with home delivery of dishes from its popular restaurants. In the first phase customers can order from eight iconic and celebrated restaurants in Mumbai like Golden Dragon and Souk from Taj Mahal Palace; Thai Pavilion and Trattoria from President; and Ming Yang from Taj Lands’ End, to name a few. In five weeks, this service will be made available at top ten markets in India, including Delhi, Chennai and Bengaluru. IHCL will unveil the Qmin mobile application on July 25. Qmin will be integrated with IHCL’s loyalty programme in September, where customers can earn and burn points using Qmin services

• As per media sources, from mid-July, Cocor will restart coastal shipping services it had suspended in March when the government imposed a nationwide lockdown to slow the spread of the pandemic

• As per media sources, Infosys expects gig economy in IT sector to constitute 35% of the total workforce. The Government has also formed an inter-ministerial working group to aid large scale work from home, in which gig economy will be a major focus area

• As per media sources, AGIA Inc. has completed its upgrade to Majesco's InsPro PAS and moved to cloud, running on Amazon Web Services

• Indoor TV shooting has been permitted to start from June 25 in Mumbai

• As per media reports, Gail is planning to acquire 26% stake in Indian gas exchange

• Icra has withdrawn rating of ICRA AA- assigned to PVR's term loan facilities and NCD programme while CP continued to be rated as A1+

* Today's Highlights

Results: Shree Pushkar Chemicals, Coal India, ITC, Hester Biosciences, Oil India, Sun TV, Glenmark, Hudco, Kajaria Ceramics, Century Ply, Hind Rectifiers, EIH Ltd, South Indian Bank, Rupa & Company, Emami