Motilal Oswal

Articles By Motilal Oswal

483 Articles

IT Q1FY21 preview: Growth likely to suffer due to Covid-19

Margins should not be hit as hard as feared; deal signings key metric; Infosys, TCS and HCLT are top tier-1 picks.

Nevertheless, we believe Indian IT should demonstrate a similar operational resilience.

Bajaj Finance rating ‘neutral’ – fall in moratorium rate welcome surprise

Q-o-q decline in AUM in Q1 in line with estimates; FY21/22e EPS up ~15% given prospects; ‘Neutral’ retained with TP of Rs 3,000.

The cross-sell ratio to existing customers stood at ~70% (up from 66% y-o-y).

Analyst corner: GCPL displays strong ability to ramp up production

However, domestic sales slowdown in recent years and continued inability to scale up margins and improve weak RoCEs in the international business have adversely affected GCPL's pace of earnings growth.

GCPL witnessed strong momentum in the hygiene category as well.

Godrej displays strong ability to ramp up production amid Covid

It also leveraged technology, strong relationships with channel partners and was agile in meeting end-consumer demands.

GCPL witnessed strong momentum in the hygiene category as well.

Equity Strategy: Muted earnings were largely in line

FY21/22e Nifty EPS cut by 9/6%; FY21e Nifty EPS expected to decline by 3.7%.

Vodafone Idea under review until clarity on biz continuity

VIL’s weak cash position with outstanding cash and equivalents of Rs 26.6 bn in FY20 and EBITDA of Rs 58.1 bn would be insufficient to service the estimated cash requirement of ~ Rs 135 bn for FY21/22E.

VIL’s fate is dependent on the AGR case resolution, as stated by its management.

Ashok Leyland rating: Maintain ‘buy’ with target price of Rs 65

Q4FY20 revenue/Ebitda declined ~57%/81% to ~Rs 3,840 crore/Rs 1,830 crore, with recurring loss of Rs 18 crore.

This, coupled with higher depreciation/interest cost, resulted in recurring loss of ~Rs 11.8 crore.

Auto Sector: Swing turns ‘deep value’ into ‘growth’

H1FY21 may be weaker than estimated; FY21/22e EPS lowered; MM, EIM top large cap picks; MSS in mid caps

We are witnessing quick recovery in Tractors, followed by 2Ws and PVs, but CVs is yet to see any recovery.

Power Grid Rating: Buy — Q4 earnings were in line with estimates

Delay in award of projects could affect profitability; valuations do not factor in growth potential; ‘Buy’ retained with TP of Rs 222.

Page Industries rating: Maintain ‘neutral’ with target price of Rs 17,905

Page Industries’ (PAG) 4QFY20 results missed estimates significantly on top line, and particularly, on EBITDA/PAT levels.

Analyst Corner: Cadila Healthcare rating ‘buy – Performance was in line with estimates

Earnings are expected to recover, led by gradual revival of US sales and better growth in DF; ‘Buy’ retained with TP of Rs 420

CDH’s sales at Rs 37.5 bn (in line) for Q4FY20 stood largely flat y-o-y.

Hindalco rating: Reiterate ‘buy’; Rs 190 per share based on SOTP

Hindalco India (standalone+Utkal) Ebitda was up 18% q-o-q (6% y-o-y) to Rs 1,440 crore.

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Vedanta Q4 loss largely led by impairment in assets

Oil & gas reported an Ebitda of Rs 870 crore, down 41% q-o-q (52% y-o-y), primarily due to lower oil prices (down 21% q-o-q) and lower volumes (161 kbpd, down 7% q-o-q).

United Spirits rating: ‘Neutral’; Performance was below par in Q4FY20

Outlook bleak for FY21 and FY22, with RoE likely to be well below 20% seen in past; ‘Neutral’ retained as valuations are fair

Lupin rating: ‘Buy’; Performance in the quarter was weak

Despite 14.5/5% cut in FY21/22e EPS, outlook for earnings is good; ‘Buy’ retained with TP of Rs 1,000.

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Dabur rating: Neutral — Disappointing performance in final quarter

FY21/FY22e EPS down 7.4/9.0% due to outlook; valuations are fair; ‘Neutral’ retained with TP of Rs 410

UPL rating: Neutral — Synergies drove results in quarter

High debt a key concern for company; ‘Neutral’ maintained with target price of Rs 424

Titan: Rate stock ‘neutral’ but earning opportunity attractive

Caratlane’s operations were hit due to lockdown. Many of its stores are in malls and have not reopened yet. However, it has a good proportion of sales from online operations.

Analyst corner: Maintain ‘sell’ on D-Mart operator with TP of Rs 1,900

In FY20, D-Mart added 38 stores vs 21 in FY19. In FY21, we expect lower store adds, while in FY22, this should once again gather pace with 45 store adds.

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JSW Steel: Maintain ‘buy’ with target price of Rs 199

We expect JSTL to sail through these uncertain times due to Covid-19 given its ability to export higher volumes. We expect lower iron ore and coking coal prices in FY21 to partly offset decline in steel realisations.

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Dr Reddy’s Rating: Neutral — A strong performance in the quarter

FY21/22e EPS up 2/5%; TP raised to Rs 3,775 from Rs 3,490; ‘Neutral’ retained as valuations capture positives

Bharti Airtel rating: Maintain ‘buy’ with higher target price of Rs 710

Subscriber adds were flat q-o-q at 284 million, but 4G subs grew 10% q-o-q to 136 million, thus leading the estimated incremental 4G market share.

We increase our FY22E Ebitda by 5% with higher Arpu increase of 14%, after building in some tariff increase.

Maintain valuation of Rs 855 per share for RJio

Further, along with the previous three deals — Facebook, Silver Lake and Vista — this could help RJio in realisation of its digital plans.

We value Jio Platforms by assigning an EV/Ebitda multiple of 13x on FY22E to arrive at a target price of Rs 855 per share.

Analyst Corner: Acreage activity of key crops to have bearing on CRIN

Prices of paddy (down 9% y-o-y) and soyabean (flat y-o-y) have remained firm (relatively); thus, the sowing of these crops is likely to continue at similar levels in the upcoming kharif season, particularly in the southern re

Reliance Industries Rating: ‘Buy’ as tech and consumer segments form the new core

Q4 Ebitda was in line with estimates; RIL on track to be debt free by end FY21, which could drive rerating; TP revised to Rs 1,618.

AU Small Fin Bank Rating: Target price to be revised after earnings call

AU Small Finance Bank (SFB) reported an increase of 3.5% year-on-year in PAT to Rs 120 crore (our estimate: Rs 180 crore), affected by higher provisions of Rs 150 crore.

Ambuja Cements Rating: ‘Neutral’ — Reduction in costs led to a margin beat

CY20e volumes cut by 6% due to Covid-19; limited upside from current levels; ‘Neutral’ maintained.

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