Kotak Institutional Equities

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

Markets News

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.

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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.

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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.

The key takeaways are that we are seeing improvement, especially in the corporate book. News

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.

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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

Banking & Finance News

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.

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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.

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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.

Markets News

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.

Banking & Finance News

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.

Commodities News

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.

Insurance News

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

Investors Corner: United Spirits rating - maintain reduce with FV unchanged at Rs 550 News

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.

Avenue Supermarts pins hope on e-commerce model News

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.

Jaypore retails apparel (for women, men and kids), silver and fashion jewelry, accessories, home décor and gift items. (Website image) News

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

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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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Stock corner: ‘Reduce’ Interglobe Aviation, earnings were stronger than estimated

FY21e EPS up 2% and TP revised to `1,575; while positives are factored in at present price, risks are not; downgraded to ‘Reduce’

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Deposit rates, lending rates expect to remain stable over the near term

As per the latest data by RBI, term deposit rates were flat m-o-m in March 2019 at 6.9%.

rbi, deposit rates, lending rates News

Your Money: FY20 Nifty-50 Index net profits to grow at 24%

FY2019 net profits of Nifty-50 Index to grow 13% versus 22% at the beginning of FY2019 due to large earnings misses in 4QFY19 results.

Money News

Stock corner: Maintain ‘sell’ rating on Endurance Technologies – Kotak Institutional Equities

Endurance Technologies reported consolidated EBITDA of `320 crore (+26% yoy) in 4QFY19, 18% above our estimatesmainly due to sharp improvement in gross margins and government incentives.

Stock corner: Maintain 'sell' rating on Endurance Technologies - Kotak Institutional Equities (Website image) News

Stock corner: ‘Reduce’ on Pidilite, stock expensive on relative basis

PIDI’s 4Q earnings were 10-12% below our and the Street’s estimates due to sharp deceleration in volume growth (India CBP volume/mix growth down to 4% in 4Q from 15% in 9MFY19), partly offset by better-than-estimated reco

Stock corner: 'Reduce' on Pidilite, stock expensive on relative basis News

Stock corner: ‘Add’ Vodafone Idea, a couple of hits and misses in last quarter

While synergy benefits are accruing, company is not yet out of woods; reinitiated with ‘Add’ rating and TP of Rs 16

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Banks: Trends remain unchanged in MSME lending

While loan growth is healthy and NPLs are stable, private banks have been gaining market share at cost of PSBs

Banking & Finance News

Will liquidity crisis affect Mahindra Finance? Check what Kotak Institutional Equities has to say

Mahindra Finance reported 29% growth in NII on the back of strong (27% yoy and 6% qoq) growth in AUMs and flat NIM (up 5 bps yoy).

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Stock corner: Buy Bajaj Consumer Care, decent performance in the quarter

A steady quarter defying some slowdown in consumer staples, healthy trends (market share gains and offtake growth tracking ahead of primary) and new product launches keep us optimistic of earnings growth acceleration.

Bajaj Consumer Care Rating: buy| Decent performance in the quarter News

Analyst corner| IT services – Indian companies still favourite with PE firms

The acquisition reflects continued interest from PE firms in mid-tier companies listed in India and strategic buyers for private or US-listed offshore pureplays.

Markets News