All You Need To Know Going Into Trade On July 13
A promenade is deserted in the Docklands area of Melbourne, Australia. (Photographer: Carla Gottgens/Bloomber)

All You Need To Know Going Into Trade On July 13

Asian markets have opened higher at the start of the new week ahead of the quarterly earnings season. Numbers this quarter are likely to provide more clues on how companies are coping with the Covid-19 pandemic.

Treasuries edged higher while early trade among major EM currencies was muted. Gold continued to hover around and above the $1,800/Oz mark.

The Singapore-traded SGX Nifty, an early indicator of the Nifty 50 Index’s performance in India, rose 0.5% to 10,831 as of 6:55 a.m.

Short on time? Well, then listen to this podcast for a quick summary of All You Need To Know before the opening bell.

Let’s take a look at the factors that can influence equities in today’s session:

  • Markets in Japan have opened over 1% higher while those in South Korea and Australia are also seeing gains.
  • Futures on the Dow Jones trade 100 points higher, after the index ended with gains of 1.5% on Friday, to post a second straight weekly gain.
  • Profit outlook from companies would be key this quarter, with global equities trading near the highest level in five months.
  • Florida reported the biggest one-day rise in cases on Sunday since the pandemic began in the U.S., reporting 15,300 new infections.
  • JPMorgan, Bank of America, Wells Fargo, Goldman Sachs, BNY Mellon and Citigroup will kickstart the U.S. earnings season this week.
  • Among key things to watch on Wednesday will be the BoJ policy decision and EIA crude inventory report.
  • Yield on the 10-year treasuries stood at 0.63%.
  • West Texas Intermediate crude fell 1% to $40.2 per barrel.

Get your daily fix of the global markets here.

All You Need To Know Going Into Trade On July 13

Stocks To Watch

  • Reliance Industries: Qualcomm Ventures - an investment arm of Qualcomm, will invest Rs 730 crore in Jio Platforms for a 0.15% stake. The deal is at an equity value of Rs 4.91 lakh crore and an enterprise value of Rs 5.16 lakh crore. Qualcomm is the world's leading wireless technology innovator and involved in the development, launch and expansion of 5G.
  • Hindustan Unilever: Bloomberg News reports that Unilever is considering to scale back the potential disposal of its tea business substantially. It may keep some operations in Emerging Markets. Sources say that the group is debating whether to hold on to its tea business in India and Indonesia. Unilever is also considering excluding its stake in a PepsiCo Inc. venture that makes Lipton bottled drinks. Sources say that removing these assets from the sale can reduce the eventual proceeds by several billion pounds. The rest of the business can fetch up to 4-5 billion pounds. Details can be announced as early as this month.
  • Vodafone Idea: Franklin Templeton says it has received full value of principal along with interest of 8.25% on the company's bonds. Franklin Templeton received payment of Rs 1,252.44 crore from the company on NCDs. The proceeds will be distributed to unit holders of the segregated portfolios in six fixed income schemes. Franklin Templeton had side pocketed the company's NCDs in six fixed income schemes.
  • Escorts: The competition Commission of India has approved the acquisition of 9.09% stake in Escorts by Kubota Corporation and of 40% in Kubota Agricultural Machinery India by Escorts.
  • Punjab National Bank: Clarifies that the provision for the Rs 3,688 crore fraud in DHFL's NPA account is Rs 1,695.7 crore instead of Rs 1,246.6 crore.
  • Biocon: Gets Drug Controller General of India's (DGCI) approval to market Itolizumab injection solution for emergency use in India in moderate to severe Covid-19 patients suffering from Cytokine Release Syndrome. The drug will be manufactured and formulated as an intravenous injection at its manufacturing facility in Bengaluru.
  • Dilip Buildcon: Declared L1 bidder for the tender floated by NHAI for a new HAM project worth Rs 882 crore in Gujarat. The project involves four laning of Dhrol-Bhadra Patiya section and has to be completed within a period of 24 months.
  • Punjab and Sind Bank: Edyar Zinc with outstanding dues of Rs 41.24 crore has been declared as fraud and reported to the Reserve Bank of India has per regulatory requirement. The account has been fully provided for.
  • BASF India: Board approves acquisition of 100% stake in BASF Performance Polyamides from BASF Nederland B.V. and BASF SE, for a consideration not exceeding Rs 305 crore. BASF Performance Polyamides is into the business of manufacture / trading of performance polyamides and has a manufacturing site in Gujarat.
  • Shriram EPC: Board approves issuance and allotment of equity shares worth Rs 250 crore via preferential issue to Markab Capital, subject to satisfactory completion of due diligence and definitive agreements. Markab Capital is a middle-east focused Multi-Family Office and Merchant Bank.
  • Coromandel International: Executes Share Purchase Agreement (SPA) for acquisition of 50 lakh equity shares of Rs 10 each of the total share capital of Coromandel SQM (India), a JV between the company and Soquimich European Holdings. The transaction is likely to be closed before July 31, 2020, post which CSQM will become a wholly-owned subsidiary of the company.
  • Lakshmi Vilas Bank: Due diligence process for proposed amalgamation of Clix Capital Service and Clix Finance India into the bank is underway. Post the amalgamation, the entire shareholders' fund of Clix Capital of approximately Rs 1,900 crore and total assets of approximately Rs 4,600 crore, will get amalgamated into the bank. As per current estimates of advisors, after amalgamation of Clix Capital, the CET-1 ratio of the bank might reach the reasonable threshold level. The bank is also looking for a few large marquee long-term investors as well in mutual consideration.
  • IRB Infra: Emerges as preferred bidder for Rs 2,193 crore BoT project under the Bharatmala Pariyojana in West Bengal. The project involves six-laning of NH-19 section of 63.83 kilometers stretch from Palsit to Dankuni in West Bengal and is part of the Golden Quadrilateral project.
  • Thyrocare: Announces completion of 1 lakh Covid-19 tests. Has also started testing for Covid antibodies from June 28, and has done more than 25,000 tests till date.
  • Shalby: ICRA has re-affirmed the long-term rating on term loans and fund-based facilities worth Rs 103.02 crore of the company's line of credit as ICRA A. Outlook has been revised to stable from positive.

Earnings Reported After Market Hours

Avenue Supermarts Q1FY21

  • Revenue down 33% to Rs 3,883 crore
  • Net profit down 88% to Rs 40 crore
  • Ebitda down 81% to Rs 111.6 crore
  • Ebitda margin down to 2.9% from 10.3%
  • Value was not on the minds of shoppers during the pandemic
  • DMart Ready sales in Mumbai have grown well
  • Recovered to 80% or more of pre-Covid sales where stores are operating unhindered
  • Discretionary consumption in non-FMCG category remains under pressure, impacting gross margins
  • All numbers are consolidated and compared on a year-on-year basis

IRCTC Q4FY20

  • Revenue up 17.9% to Rs 586.9 crore
  • Net profit up 79.3% to Rs 150.6 crore
  • Ebitda up 2.9 times at Rs 201.9 crore
  • Ebitda margin at 34.4% from 14.2%
  • Margins higher due to lower other expenses and catering expenses
  • Exceptional gain of Rs 37.4 crore in the base quarter
  • Other expenses down to Rs 41.5 crore from Rs 89.8 crore
  • Catering segment revenue down 20% to Rs 236.28 crore
  • Rail Neer revenue up 19% to Rs 51.1 crore
  • Internet ticketing revenue nearly triples to Rs 193.6 crore
  • Tourism revenue up 23% to Rs 101.65 crore
  • State Teertha revenue down 62% to Rs 4.23 crore
  • Declares dividend of Rs 2.5 per share
  • All numbers are standalone and compared on a year-on-year basis

IFB Agro Q4FY20

  • Revenue up 7.7% to Rs 198.3 crore
  • Net loss of Rs 1.1 crore from net profit of Rs 5.5 crore
  • Ebitda loss widens to Rs 4.7 crore from Rs 0.7 crore
  • All numbers are consolidated and compared on a year-on-year basis

IRCON International Q4FY20

  • Revenue up 4.2% to Rs 1,873.4 crore
  • Net profit up 15.7% to Rs 115.4 crore
  • Ebitda down 17.6% to Rs 155.1 crore
  • Ebitda margin at 8.3% from 10.5%
  • Higher input costs impact margins
  • Deferred tax reversal of Rs 67 crore this quarter impact bottomline
  • Domestic segment revenue up 24% to Rs 1,674.91 crore
  • International segment revenue down 37% to Rs 113.4
  • Declares final dividend of Rs 2.06 per equity share
  • All numbers are consolidated and compared on a year-on-year basis

SAIL Q4FY20

  • Revenue down 12.5% to Rs 16,171.8 crore
  • Net profit up 4.8 times to Rs 2,647.5 crore
  • Ebitda up 2.9 times at Rs 6,453.8 crore
  • Ebitda margin at 39.9% from 12%
  • Inventory gain of Rs 4,120.9 crore with respect to byproducts
  • Exceptional loss of Rs 771.8 crore in current quarter due to write-down of inventory
  • Bhilai Steel Plant revenue up 12% to Rs 5,433.56 crore
  • Durgapur Steel Plant revenue down 18% to Rs 2,058.26 crore
  • Rourkela Steel Plant revenue down 23% to Rs 3,183.83 crore
  • Bokaro Steel Plant revenue down 20% to Rs 3,423.46 crore
  • All numbers are consolidated and compared on a year-on-year basis

Companies With Covid-19 Updates

Jamna Auto

  • Pandemic has had a swift and severe impact on economy and business
  • Profitability has been lowered due to ongoing recession and lockdown
  • No liquidity concern, capable to service all debts as and when due
  • Will assess further capex requirements once situation improves

Repco Home Finance

  • Revenue and profitability will be impacted due to the lockdown.
  • Has been servicing debt and other financial obligations during the lockdown.
  • Not opted for any moratorium offered by its lending institutions.
  • Collection of EMIs have been postponed in some accounts due to the moratorium.
  • There was hardly any business in April. Saw some pick-up in May and further pick-up in June. However, it remains below normal levels.
  • Facing tough competition from banks and other institutions which are providing loans at attractive rates.

IRCON International

  • Construction activities have not started at full pace.
  • Situation likely to improve in the coming days.
  • Has long-term loan from IRFC which has back to back arrangement with Ministry of Railways.
  • Liquidity is not an issue for servicing debt.

Accelya Solutions

  • Significant impact on revenue of airlines until calender year 2020.
  • See gradual recovery post that till first half of 2021.

Brokerage Radar

JPMorgan On Avenue Supermarts

  • Neutral rating maintained
  • Price target of Rs 2,200
  • Operating performance in Q1 below expectations
  • Inconsistent store operations create uncertainty for Q2 revenue trajectory
  • Expect positive revenue and margin growth momentum in H2FY21
  • Rising competition from online grocery retail channels remains a key area to watch
  • Cut FY21E EPS by 5% on further cuts to revenue assumption
  • Remain neutral given rich valuations

Motilal Oswal On Avenue Supermarts

  • Sell rating maintained
  • Price target of Rs 2,000
  • Estimated same-store sales growth fell 55%
  • Channel checks indicate healthy recovery trends in SSSG, albeit remains in negative single digits
  • Risk of slow recovery may extend well beyond H1FY21
  • Acts as a classical defensive safe haven
  • Value the stock at FY22E EV/Ebitda multiple of 42x

Morgan Stanley On SAIL

  • Underweight rating maintained
  • Price target of Rs 27
  • Strong operating profit in Q4 despite weak operating leverage
  • Realisations a positive surprise but sustainability of cost beat is unclear
  • FY20 operating cash flow was negative Rs 650 crore due to worsening working capital situation
  • Receivables have more than doubled and inventory levels have seen a material increase
  • High leverage remains a key concern

BofA Securities On Avenue Supermarts

  • Buy rating maintained
  • Price target of Rs 2,750
  • Q1 missed expectations despite in-line sales
  • Cost pressures likely to be short-term in nature
  • Long runway for growth and strong execution ability
  • 2x jump in EPS in three years should back premium valuations despite near-term uncertainties
  • Medium-term growth potential remains intact
  • Strong balance sheet raises chances of expedited store addition in the future

Motilal Oswal On Reliance Industries

  • Buy rating maintained
  • Price target raised to Rs 2,000 from Rs 1,743
  • Attained dominant position in digital services as well as organised retail
  • Focus on oil-to-chemicals project will lead to huge potential upside from standalone business
  • 10% increase in conversion will increase FY22E standalone/consolidated Ebitda by ~5.7%/2.9%
  • Raise multiple for refining and petrochemical business to 7.5x from 6x
  • Value standalone business at 7.5x FY22E/Ebitda and add equity valuation of Rs 885/share for Jio and Rs 500/share for retail

Pledged Share Details

  • Adani Enterprises: Promoter Adani Tradeline released pledge of 1.12 crore shares on July 4.
  • Aurobindo Pharma: Promoters created pledge of 28.6 lakh shares on July 7.
  • Omaxe: Promoter Guild Builders created pledge of 1.13 crore shares between July 4-10.

Who's Meeting Whom

  • Kilpest India: To meet Seven Canyons Advisors on July 14.
  • Shriram City Union Finance: To meet Hara Global Capital Management on July 13.

Trading Tweaks

  • AGM Date: Wipro
  • Fund Raising: City Union Bank
  • Price Band Revised From 20% To 10%: IOL Chemicals and Pharmaceuticals
  • Move Into ASM Framework: Omaxe, Alkyl Amines Chemicals
  • Move Out of ASM Framework: Magma Fincorp, Dish TV, Nath Bio-Genes, Sanco Industries, Chalet Hotels
  • Move Into Short-Term ASM Framework: Precision Camshafts, Maharashtra Scooters, Affle, Diamines and Chemicals
  • Move Out Of Short-Term ASM Framework: Mayur Uniquoters, MT Educare, Jubilant Life Sciences, Visaka Industries, Intellect Design Arena, Tata Teleservices (Maharashtra), Omaxe.

Money Market Update

  • The currency ended at 75.2 against the U.S. Dollar as compared to Thursday's close of 74.99.
  • Rupee snapped two-week gaining streak, ended as worst performer in Asia on a weekly basis.

F&O Cues

  • Nifty July futures end at 10,767; a discount of 2 points from a premium of 10 points
  • Nifty July futures add 0.1% and 17,400 shares in Open Interest
  • Nifty Bank July futures end at 22,436; premium widens to 38 points from 1 point
  • Nifty Bank July futures add 10.8% and 1.6 lakh shares in Open Interest
  • Stocks in F&O Ban: BHEL, Century Textiles, Equitas, Glenmark, Vodafone Idea, Punjab National Bank

Nifty: July 16 Expiry

  • Maximum Open Interest on Call Side at 10,800 strike (23.3 lakh shares)
  • Maximum Open Interest on Put side at 10,700 strike (18.8 lakh shares)
  • Active Options: 10,600 Put (+18.6 lakh shares) and 10,900 Call (+12.6 lakh shares)

Nifty: July 30 Expiry

  • Maximum Open Interest on Call side at 11,500 strike (27.5 lakh shares)
  • Maximum Open Interest on Put side at 10,000 strike (34 lakh shares)

F&O Buzzers & Fund Flow Picture

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