Kotak Institutional Equities

Articles By Kotak Institutional Equities

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Raise FV on L&T by 8% to Rs 1,410 on order buoyancy

With support from several large orders finalised over the past three years and benefits of share gains for L&T in FY 2021, we note prospects of FY2022 ordering hovering around FY2020 levels.

Key risks are delay in economic recovery, a sharp increase in commodity costs like steel and cement and a rise in working capital.

Analyst Corner – United Breweries: Beer volume recovery tracking well; FV raised to Rs 1,260

We expect UBBL’s new CEO to step up focus on market share defence in value segment and gain share in the premium segment.

We raise estimates and FV to Rs 1,260.

Analyst corner: Initiate with ‘add’ on SBI Cards with fair value of Rs 900

In this report, we discuss trends on retail payment behaviour across time periods and different geographies, stakeholders' perspectives on credit cards and the earnings model of the credit card business.

On a risk-adjusted basis, we believe that this business is quite profitable on a through-the-cycle basis.

Auto & Components: Prospects are strong for tyre makers

Volume estimates up; rise in rubber prices a worry; Apollo Tyres downgraded to Reduce; TP raised for MRF and CEAT

With economic activity picking up, we expect the OEM segment to grow by 6.2% CAGR and the replacement segment to grow by 5.5% over FY2020-25e.

Analyst Corner: Reiterate ‘buy’ on GAIL with revised FV of Rs 140

The recent increase in crude-linked, as well as spot LNG prices, will augur well for the gas marketing segment, as the respective differential with the US LNG price has reduced considerably in the past few months


Wipro Rating: Add Deal with Metro reinforces credentials

Firm likely to gain from strong momentum in digital foundation deals; valuations inexpensive; ‘Add’ retained

Analyst Corner: ‘Buy’ on InterGlobe Aviation with unchanged FV of Rs 1,870

We expect Indigo to report healthy and durable spreads from FY2023 given benign medium-term outlook for crude and competitive intensity.

It will also commence flights between Kolkata-Gaya, Cochin-Trivandrum, Jaipur-Surat, Chennai-Surat from March 28 onwards, the release said.

Analyst Corner: Double-digit revenue growth seen for Infosys in FY22 & beyond

Infosys is on track to report double-digit revenue growth in FY2022 and beyond. Even after the run-up, the stock offers reasonable upside.

Infosys has announced an IT infrastructure transformation deal with Daimler.

Analyst Corner: Maintain ‘add’ on GCPL; firm gaining share in soaps space

GCPL expects HI portfolio to deliver high single-digit to low double-digit growth on normalised basis.

Oberoi Realty Rating ‘Add’; deal value’s small in overall NAV

While showing could be soft in near term, outlook is positive; TP up to Rs 570 from Rs 450

Oberoi Realty has an extant commercial portfolio of 1.7 mn sq.

Reiterate ‘buy’ on Tata Steel with fair value at Rs 800

After a potential exit from Europe, India business would generate Rs 130-140 billion FCF before growth capex in FY2022E/23E. With ~20% FCF yield, growth plans would not increase leverage.

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Varun Beverages Rating: Buy; poised for strong growth in earnings

Volumes have recovered steadily; margins likely to rise; CY21/22e EPS up 10-11%; TP raised to Rs 1,000; ‘Buy’ maintained

Analyst corner: PVR fundamentals intact despite near-term hiccups

PVR’s gross/net debt is about Rs 15 billion/Rs 10 billion as of date; equity fund raise would reduce leverage enabling PVR to invest in organic and inorganic growth opportunities post-Covid.

‘Buy’ TechM as outlook for biz is healthy post Covid

TM has a presence in other areas of manufacturing, rail transportation and medical devices. Service capabilities are comprehensive and include mechanical, embedded, chip design, digital and device engineering.

Analyst corner: ICICI Bank our top idea in banks, revised FV at Rs 600

ICICI Bank’s analyst meet gave yet another glimpse of the efforts it is taking to rebuild itself as a bank which would enable it come closer to the current best-in-class peers.

ICICI Bank revises FD interest rates for select maturity periods, ICICI bank cuts Fixed deposit rates by 10 bps for select maturity periods

Analyst Corner: Indigo exits Nov at closer to 65% of pre-Covid levels

Load factors for air travel have also likely crossed 80% levels recently, suggesting return of business travellers

Under the UDAN initiative, the government promotes the airlines to connect smaller cities of the country and subsidises the airline for incurring the losses during the initial phase of its operations.

Analyst Corner: Indigo exits Nov at closer to 65% of pre-Covid levels

Our assessment of the change in number of domestic air travellers per flight suggests that daily average load factors for air travel as a whole have potentially crossed 80% levels in the exit week of November

Scheduled domestic flight services were suspended in India from March 25 to May 24 due to the lockdown. The domestic flights resumed operations from May 25 but in a curtailed manner.

Analyst Corner: Laurus Labs’ strength is adding new revenue streams

Laurus has announced acquisition of 72.55% stake in Richcore Lifesciences, a Bangalore-based company for a consideration of Rs 2.5 bn, valuing Richcore at Rs 3.4 bn.

Laurus, in the past, has successfully established new revenue streams (Hep-C, formulations) to diversify its sales mix away from LMIC ARV APIs.

Cochin Shipyard’s FV at Rs 520 on weakness in execution

An MoU with Italian shipbuilder brings some assurance while the wait for new orders for the under-construction dry dock continues.

Petronet LNG Rating: Buy- A robust showing by the company

Higher dividend payout was comforting; FY21e EPS up 7%; valuation is attractive; Buy retained with TP of Rs 300

Utilisation at Dahej terminal increased to a robust 109% from 81% in Q1FY21 reflecting a strong rebound in LNG demand, partly aided by lower cost of long-term as well as spot LNG in the quarter.

Initiate ‘reduce’ on Divi’s Labs with FV of Rs 3,000

At ~35X FY2023E EPS, we believe the stock fully captures the generics growth, while ignoring the emerging headwinds to the higher valued synthesis business.

IRB Infrastructure rating – ‘Buy’: Jump in toll collection the highlight

Higher debt, SPVs’ losses hit earnings; FY22/23 estimates down 9/3%; ‘Buy’ retained

Retain ‘sell’ on ONGC with unchanged FV of Rs 60

Reported net income was lower at Rs 28.8 billion including an impairment loss of Rs 12.4 billion recognised on producing fields on factoring lower natural gas price.

Retain ‘add’ on Grasim with revised fair value at Rs 875

Margins should expand in 2HFY21 further led by higher prices. Chemical sales volumes increased to 236 kt (-2% yo-y, +71% q-o-q) on improved demand.

Coal India rating – Buy: A much improved earnings performance

FY21/22 EPS down 11/3% on weak e-auction prices & revision in coal prices in FY22; TP cut to Rs 180 from Rs 195; ‘Buy’ maintained

Moderation in employee cost (-5% q-o-q), as well as contractual expenses were compensated by increase in consumption of stores (+14% q-o-q).

Analyst Corner: ‘Add’ rating on LIC Housing Finance with FV of Rs 400

Niitailwnds: Provisions,remain low. Improving growth in retail home loans coupled with falling funding costs will support LICHF’s NII

Analyst Corner: Retain ‘sell’ on Bharat Forge with revised FV of Rs 320

Retain SELL rating as valuations are too expensive with revised FV of Rs 320 (from Rs 340 earlier) based on 20X September 2022E EPS for the standalone business.

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