Tech Mahindra rating: Add — Enterprise segment prospects getting better
Tech Mahindra indicated that the broader slowdown in the auto industry reflected in weak growth numbers for the manufacturing vertical.
Lending rates likely to soften after repo rate, MCLR cuts
Average term deposit rates are broadly similar to term deposit rates (1-2 years) offered by most banks today; slightly lower than rates offered by SFBs.
United Breweries Rating: Reduce; A robust show by the company in FY19
Return ratios rose though capex hurt FCF generation; a good long-term story but valuations are very rich; ‘Reduce’ maintained
Kotak Institutional Equities: Initiating coverage on polycab with ‘buy’ rating
We initiate coverage with a ‘buy’ rating and a fair value of Rs 700 based on 15.5X June 2021E P/E.
Consumer staples: Q1 sees slowing growth across firms
Aggregate revenue growth for our coverage universe stood at 8% for Q1, a step down from the 9.8% print in Q4FY19 and 12-15% prints from Q1-Q3FY19.
Retirement planning: Number of employees under defined benefit drops
Retirement costs for public sector banks is gradually dissipating as the ratio of employees who are in defined contribution is 60% today as compared to 10% in FY11
Wipro rating: Reduce; A muted start to the new fiscal
Q1 signals another year of weak growth; FY20-22e EPS cut by 4-7%; TP revised to Rs 260.
YES Bank Rating | Sell — Company’s getting into a negative spiral
Several risks exist outside CAR and downward revision to FV cannot be ruled out. Sell remains. FV revised to Rs 70 (from Rs 170 earlier).
DCB Bank Rating | Add — Soft showing in the first quarter
Slowdown in growth and sharp valuation expansion behind downgrade to ‘Add’; TP up to Rs 250 from Rs 230.
Your money: Term deposit rates remain broadly flat
The gap between weighted average lending rates and fresh lending rates has declined from peak values of 85-95 bps in 3QFY19 to 55 bps.
Analyst corner: Translation of repo cuts to loans still not visible
Some banks have decreased MCLR rates by 5-15 bps in March-May 2019. With deposit rates stable, a swift rise in MCLR rates is less likely
Stock corner: ‘Buy’ Ashok Leyland, revenue growth was strong in FY19
Expenditure on R&D increased by 45% y-o-y in FY2019 and R&D as a percentage of sales increased to 2.3% in FY2019 from 1.7% in FY2018.
Life insurance: High individual premium drives growth for private insurers
The company has increased focus on ULIPs in the past two years. Its ticket size in individual non-single segment was up moderately by 13% y-o-y/m-o-m.
Stock corner: Maintain ‘buy’ on ICICI Bank, FV revised to Rs 510
As highlighted in our previous notes, the decline in NPL ratios is underway with more scope for further reduction with lower impact on earnings given the bank’s healthy coverage ratio.
Analyst corner: Fuel subsidy unchanged amid steady crude oil price
The government has increased excise duties on auto fuels by `2/litre, which have been passed on to end-consumers by the OMCs.
Banks likely to show stable operating performance, earnings recovery in Q1
Positive outlook on ICICI Bank, SBI. Yes Bank to have the most challenging quarter while there will be focus on asset quality for IndusInd Bank and RBL Bank
Analyst corner: Lower Mutual fund exposure to affect financial flexibity of NBFCs
In light of liquidity challenges and concern in wholesale NBFCs, we remain cautious on the sector even as stable asset quality in most retail segments, detailed in RBI’s FSR, reinforces comfort on retail players.
Moderate growth of non-life insurers
Motor own damage weak Motor insurance premium for the month was up 8% y-o-y, vs 1% in April 2019. This was driven by 11% growth in motor third-party (TP) premium.
Hexaware Rating | Reduce — Mobiquity buy a step in the right direction
Deal will be EPS neutral in CY19; revenue estimates for CY20/21 raised by 9%; ‘Reduce’ retained given that valuations are full.
Strong May for most private insurance players; inflows to equity MFs still muted
Individual APE growth of 27% y-o-y in month; inflows to equity MFs are still muted.
Fall in crude prices augurs well; RM trends mixed for agri-commodities
The fall in crude price augurs well; RM trends were mixed for agri-commodities. We haven’t seen any meaningful pricing action/incremental promotional activity across categories.
Life insurance: Premium collections of private life insurers up 27 pct
Overall inflows to equity mutual funds were better month-on-month (m-o-m) but broadly still muted. Against this backdrop, the sustenance of such high growth is crucial.
Investors Corner: United Spirits rating – maintain reduce with FV unchanged at Rs 550
Though there’s forward movement, valuations are not factoring in moderate pace and regulatory risks; ‘Reduce’ maintained
Avenue Supermarts pins hope on e-commerce model
It is also consciously adding larger stores given good response to new stores. Land costs are certainly higher than Dmart’s historical land costs, which is driving up capex.
Analyst Corner: Retain ‘buy’ on Aditya Birla Fashion and Retail
However, the Jaypore brand is fairly nascent, and will require time and investment to scale up. We await detailed plans of the scale up, but would be wary of hefty investments, similar to the innerwear business.
Coal India Rating | Buy — Strong growth aided by a favourable base
FY19 saw much improved showing by CIL; FY20/21e earnings up 11% to factor in lower production cost; ‘Buy’ rating maintained
Stock corner: Retain ‘sell’ on Timken India at revised fair value of Rs 620
While the company’s growth prospects remain strong due to pickup in industry demand and increase in localisation, we believe that profitability is not sustainable at 4QFY19 levels. Valuations are expensive at 25X FY2021E EP
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