Articles By Nomura

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Torrent Pharma Rating ‘Buy’; Firm has advantage on RM pressures

FY22/23/24e EPS down ~10-11%; TP reduced to Rs 3,202; upgraded to ‘Buy’ rating

The generics markets in the US and Germany remain challenging, with no visibility on the clearance of manufacturing plants by the USFDA. However, we expect a modest revival in the sales from the current low base.

Healthcare: Preview — Slowdown likely in Q2 in q-q terms

Covid-related demand has softened; services firms may see earnings being cut; SUNP and DRRD placed the best

Cement – Q2FY22 preview: Quarter results are likely to be subdued

Demand expected to grow by 4% y-y; margins to fall sharply due to higher input costs and lower realisations

Marico rating – Buy: Demand improved in the quarter

Pre-quarterly update shows sequential rise in margins; Ebitda growth of c.+9% is estimated; ‘Buy’ maintained

While copra prices have corrected sequentially, Marico has not yet initiated a price cut.

Analyst Corner: Maintain ‘reduce’ on Eicher Motors with costlier new model

The new model starts at a price of Rs 184k, which is Rs 5k higher compared with the previous generation model.


HDFC Life Rating ‘Neutral’; Valuation is dear for buy of sub-par biz

Exide Life saw EV CAGR of just 8% over FY18-21; but deal size is not large and operating metrics could improve; ‘Neutral’ retained

AU Small Finance Bank rating – Neutral: Recent exits highlight a larger issue

Stretched valuations, asset quality concerns for street; but long-term story’s intact; ‘Neutral’ rating maintained

While mgmt tried to address these issues days ago, highlighting them to be largely re-location-related (Jaipur), we think this has not been an issue for other regional-focused lenders; hence, we do not take the explanation at face value as well.

Glenmark Pharma rating – Buy: Sustained rise in cash flows key to rerating

Estimates tweaked to factor in listing of API subsidiary; ‘Buy’ maintained with an unchanged TP of Rs 757

We think with the tight leash on costs, particularly on R&D spending, Ebitda margin has scope to improve over time.

Petronet LNG rating – Neutral: Results were in line with estimates

FY22-23e earnings down 3-4% on lower assumption of volume for Dahej; TP cut to Rs 235; ‘Neutral’ retained

In our view, Dahej’s vulnerability will rise as existing LT contracts begin to expire from 2027-28.

Apollo Hospitals rating – Buy: A strong operational show by firm

FY22e EPS up 28% due to pandemic tailwind; TP raised to Rs 4,746; ‘Buy’ maintained

The 24x7 platform is better placed vs peers given wide service offering.

Hero Motocorp Rating: neutral – Performance in quarter was below expectations

Near-term growth outlook is subdued; FY22/23e EPS down 5/1%; TP reduced to Rs 3,171; ‘Neutral’ retained

Hero Motorcorp

Shree Cement rating – Reduce: Higher costs led to marginal miss in Q1FY22

Margins likely to compress with seasonal price cuts and rising input costs; ‘Reduce’ retained with TP of Rs 26,500

Overall, fixed cost was at Rs 7.6 bn (+46% y-o-y, -11% q-o-q). Further, with lower operating leverage, per unit fixed costs at Rs 1,111 were up 7% q-o-q.

Britannia Industries rating – Neutral: Q1FY22 saw strong sales performance

Ebitda margin was below estimate; FY22/23e EPS down 3-4% due to margin pressure; ‘Neutral’ retained

Also, Q1 would have seen some pipeline filling (Q4 sales impacted) due to ERP upgrade to S4/HANA.

Tech Mahindra Rating: Buy – A strong performance by the firm in Q1FY22

Robust growth expected in FY22; FY22/23e EPS up ~6%; TP raised to `1,350 from `1,110; ‘Buy’ retained

ICICI Bank rating – Buy: A mixed first quarter for the company

Asset quality suffered even as loan and core PPOP growth were positives; EPS for FY22/23 down ~3%; TP up to Rs 790; ‘Buy’ retained

CV segment NPLs was elevated, while cards/personal fared better. Total COVID-19 restructuring invoked was only

Reliance Industries Rating: Buy – Relatively subdued quarter for company

Weak retail was offset by better energy biz and Jio; all key segments expected to improve; ‘Buy’ retained with TP of Rs 2,400

ACC rating – Neutral: Another solid set of numbers for company

CY21/22e EPS up 14/9%; ‘Neutral’ retained as margins have peaked; TP up to Rs 2,215

We expect ACC’s Ebitda/t to decline significantly in H2CY21F, for CY21F Ebitda of Rs 1,021/t .

Adani Ports & SEZ Rating ‘Buy’; Firm largely insulated from Group entities

Other entities financially sustainable at present; FY22/23e PAT revised by -13/10%; TP up to Rs 890 from Rs 860; ‘Buy’ retained

Sun TV Network rating – Neutral: Results were largely in line with estimates

Dividend figure was a key negative; re-rating will depend on growth visibility; ‘Neutral’ rating retained

VA Tech Wabag rating – Buy: Net cash status eases investor concerns

FY22/23e EPS up 4/8%; TP raised to Rs 546; prospects are bright; ‘Buy’ retained

FY21 results, in our view, demonstrate that past concerns on execution and rising debt levels are largely behind.

Bank of Baroda rating – Reduce: Performance in Q4 was better than expected

Stress in small-ticket retail and MSMEs is cause for caution; ‘Reduce’ retained with TP raised to Rs 75

Separately, the stress in the book is mainly in the lower ticket retail and MSME segment, which makes us a bit cautious. We, therefore, maintain Reduce with our TP revised up to Rs 75.

State Bank of India rating – Buy: Asset quality came as a surprise in Q4

Second Covid wave could raise NPLs; loan growth likely to be weak in next two quarters; Buy retained with unchanged TP of Rs 550

Analyst Corner: Downgrade Ujjivan to ‘neutral’ with TP of Rs 240

Ujjivan managed to remain barely profitable for FY21, with no provisions in Q4 (Rs 250 million reversal) despite a Covid-19 wave-2 impact as well as relatively large wave-1 residual stress, and through cost cuts (partly unsus

Further, collections in April indicate 300-600 bps declines across portfolios, with MFI declining to 88% from 94% in Mar-21, and May will possibly see a further decline.

Analyst Corner — AU SFB: Downgrade to ‘neutral’, raise TP to Rs 1,075

We are less worried about the long-term story and expect the bank to deliver well relative to new-age banking peers. That said, valuations at 3.8x/25x FY23F BV/EPS warrant caution in the near term as room for error is low.

Britannia Industries rating – Neutral: Q4 numbers were below expectations

Demand outlook is weak; FY22-23e EPS down c.6%; TP cut to Rs 4,000; rating downgraded to ‘Neutral’

Maruti Suzuki Rating: neutral: Q4FY21’s performance missed estimates

Margin pressure likely to continue; near-term risks to demand; FY22/23e EPS down 14/6%; TP cut to Rs 7,362; ‘Neutral’ retained

Insurance: Life volumes were strong in March

March/Q4FY21 growth was 7%/9% for pvt insurers on 2-yr CAGR basis; momentum revival for SBI Life and IPRU

We continue to monitor the impact of a second COVID-19 wave on growth.
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