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.
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.
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.
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.
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.
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.
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
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
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.
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.
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.
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.
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.
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.
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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