Gap between outstanding lending rates and fresh loans rises in August
The gap between outstanding and fresh lending rates was up 10 bps m-o-m in August 2019 to 75 bps. The gap has been broadly in the range of 50-70 bps since July 2018.
Stock corner: Maintain ‘sell’ on Yes Bank, fair value unchanged at Rs 55
Yes Bank surprised positively on Thursday with an announcement that it has received a binding bid from an investor committing US$1.2 bn.
Stock corner: ‘Reduce’ Hindustan Zinc, results were in line with expectations
FY20-22e EPS cut by 7-4% due to lower volumes and higher costs; TP revised to Rs 205; ‘Reduce’ retained due to dear valuations.
Third-party motor insurance drives up growth in premiums of general insurers
Most large players were strong on ex-crop basis—ICICI Lombard was up 17% (overall premium down 23%), Bajaj up 24% (overall premium up 1.4X) and SBI GI up 51% y-o-y (overall premium up 88%).
Life insurance: Private sector individual APE growth slows down in Sept
Private sector players reported 3% y-o-y growth in overall APE in September 2019, with 3% growth in individual APE.
Aurobindo Pharma: Stock has factored in import alert
Assuming worst-case scenario, ARBP announced that the USFDA issued a form-483 for its Unit-VII, its largest orals facility for the US, though, increasingly less relevant for future pipeline/filings, particularly, post Sandoz
BPCL ratings: Reiterate ‘Sell’ amid adverse risk-reward balance
The recent outperformance of BPCL against other OMCs is pricing in upside from a potential open offer in lieu of control premium that maybe paid by a strategic buyer in a scenario of privatisation.
Kotak Institutional Equities: Maintain ‘buy’ on CIL with fair value of Rs 285/share
Coal India reported a decline of 20% yoy with dispatch volumes of 35.2 mn tons in September 2019—the fifth consecutive month of weak dispatches.
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.
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