All You Need To Know Going Into Trade On July 23

Earnings Fineprint: Larsen & Toubro Q1FY21

• Revenue down 28.3% to Rs 21,260 crore
• Net profit down 79.4% to Rs 303.1 crore
• Ebitda down 47.2% to Rs 1,620.5 crore
• Ebitda margin at 7.6% from 10.4%
• Exceptional gain of Rs 224.7 crore and deferred tax reversal of Rs 307 crore this quarter
• International revenue this quarter at Rs 9,497 crore and constituted 45% of total revenue
• Lower revenue, credit provisions in financial services business and under recovery of overheads impacted net profit
• Exceptional gain of comprises of gain from sale of wealth management business of L&T Finance
• New orders down 39% to Rs 23,574 crore, characterised by low interest towards fresh investment and deferment of award decisions
• Consolidated order book up 4% to Rs 3,05,083 crore
• Infrastructure segment revenue down 53% to Rs 6,456 crore
• Hydrocarbon segment revenue down 19% to Rs 3,070.1 crore
• I.T. & Technology services revenue up 57% to Rs 6,043.4 crore
• Financial services revenue down 5% to Rs 3,284.2 crore
• Power segment revenue down 33% to Rs 380 crore
• Heavy Engineering segment revenue down 57% to Rs 425.1 crore
• Defence Engineering revenue down 49% to Rs 476.5 crore
• Lost revenue worth Rs 12,500 crore of revenue in the quarter
• Revenue ramp-up will take a few more quarters to reach normal levels
• All numbers are consolidated and compared on a year-on-year basis

Stocks To Watch

• Vodafone Idea: Bloomberg News reports that the Supreme Court has rejected a petition by the Income Tax Department, which had challenged a lower court's verdict asking it to refund Rs 833 crore to the company.
• Glenmark: Phase-3 trial of Favipiravir demonstrates statistically significant faster time to clinical improvement with Favipiravir treatment in mild to moderate Covid-19 patients compared to control. It said that the medicine has a 40% faster clinical cure.
• Covid-19 Impact on Bajaj Auto: All manufacturing operations came to a near standstill from 28 to 43 days between March and May. Able to ramp-up production to almost 70% of normal levels. However, things are far from normal as this is an unstable recovery due to sporadic local shutdowns in various parts of the country impacting both demand as well as supply chain.
• Coal India: To publish a notice inviting registration for special spot e-auction scheme for import substitution (only for coal importers) on July 23, in newspapers.
• eClerx Services: Has closed its buyback, after buying back 20.93 lakh shares at Rs 522.97 per share worth Rs 109.5 crore. The entire amount has been utilized, and the shares will be extinguished.
• GMM Pfaudler: Board to approve signing of definitive documents with De Dietrich Process Systems India for acquisition of their manufacturing facility at Hyderabad, Telangana on an itemized sale basis on July 29.
• Future Retail: Missed payment due on U.S. dollar bonds. Company said that Covid-19 has impacted the company’s liquidity position and it missed service of payment of interest due on the said notes on July 22. Terms of issuance allows for another 30 days for payment of interest and company proposes to make payment of interest within the 30 day period.
• Cox & Kings has clarified that it has received no information/written communication from Mumbai police on inquiry against the company in the IndusInd Bank case.
• Infosys: Launched digital solution to re-skill the American workforce and fulfill employment needs following Covid-19.
• Non-Nifty Earnings Today: Mphasis, Biocon, PNB Housing, Radico Khaitan, Dish TV, ABB India, AU Small Finance Bank, HDFC AMC, Sterlite Tech, Tube Investments, Zensar Tech, Repco Home Finance

Earnings Reported After Market Hours

ICICI Securities Q1FY21

• Revenue up 36% to Rs 546.4 crore
• Net profit up 70% to Rs 193 crore
• Ebitda up 41% to Rs 295.7 crore
• Ebitda margin at 54.1% from 52.1%
• Treasury segment revenue more than triples to Rs 21 crore
• Broking and distribution revenue up 38% to Rs 503.1 crore
• Issuer Services & Advisory revenue up 34% to Rs 22.2 crore
• Private Wealth Management revenue up 36% to Rs 77 crore
• Distribution revenue down 19% to Rs 80 crore
• 1.5 million+ active clients; 80,000 clients added this quarter
• Equity market share up 260 basis points to 10.7%
• Derivative market share up 150 basis points to 8.9%
• All numbers are consolidated and compared on a year-on-year business

Heidelberg Cement Q1FY21

• Revenue down 31% to Rs 407.7 crore
• Net profit down 38% to Rs 49 crore
• Ebitda down 31% to Rs 108.3 crore
• Ebitda margin flat at 26.6%
• Sales volumes down 31.9% to 857 KT
• Ebitda per tonne up 1% to Rs 1,264
• Decrease in volumes impact revenue and profitability
• Lower volumes negatively impact operating leverage
• All numbers compared on a year-on-year basis

Rallis India Q1FY21

• Revenue up 6% to Rs 662.7 crore
• Net profit up 52% to Rs 91.9 crore
• Ebitda up 35% to Rs 128.3 crore
• Ebitda margin at 19.4% from 15.2%
• All numbers are consolidated and compared on a year-on-year basis
• Raw material cost as % of sales at 60.3% from 62.6%
• Lower raw material costs and other expenses aid margins
• Expect domestic demand to remain buoyant for crop care products
• Exports likely to pick-up gradually
• Metribuzin 500 MTPA commissioned in July, although production may be low due to market softness.
• New formulation plant is to be commissioned in phases in December 2020 and March 2021

Astec LifeSciences Q1FY21

• Revenue up 45.3% to Rs 111.9 crore
• Net profit of Rs 16.2 crore from net loss of Rs 1.1 crore
• Ebitda up 4.3 times to Rs 28.2 crore
• Ebitda margin at 25.2% from 8.4%
• Lower raw material costs aid margins
• All numbers are consolidated and compared on a year-on-year basis

Brokerage Radar

JPMorgan On L&T

• Overweight rating maintained
• Price target of Rs 1,115
• Strong cash flow management key highlight of the quarter
• Positive net-cash from operations for the first time in five years
• Management commentary around pace of shift towards normalcy to be in focus

CLSA On L&T

• Buy rating maintained
• Price target cut to Rs 1,280 from Rs 1,290
• Surprised on E&C order inflow and infrastructure margins
• Good proxy for domestic capex
• Credible strategy to improve growth and RoE
• Cut FY21-22 EPS estimates by 2-7% on shutdown of Hyderabad Metro till September
• Stock is inexpensive at -1 standard deviation
• View 29% correction in last six months as a buying opportunity

CLSA On Bajaj Auto

• Buy rating maintained
• Price target raised to Rs 3,550 from Rs 3,400
• Cost controls drive earnings beat
• Management guides for continued demand restoration in coming months
• Results show two-wheelers are better prepared to control fixed costs
• Offers FY22 Free Cash Flow Yield of 5.9%
• Forecast Free Cash Flow conversion at 54-70% of Ebitda in FY21-23
• Raise FY21-23CL EPS by 3-4%

IIFL Securities On Bajaj Auto

• Buy rating maintained
• Price target of Rs 3,370
• Resilient business model helps in Covid-19 hit quarter
• Lowest operating and financial leverage on its P&L
• Strong margin performance despite weak volumes
• Forecast 18% volume decline in FY21 with revival in FY22 and FY23
• Demand scenario is improving
• Ebitda margin should rebound as volumes normalise
• Raise FY21-23 EPS estimates by 8%, 3% and 4% respectively

Morgan Stanley on Bajaj Auto

• Overweight rating maintained
• Price target raised to Rs 3,388 from Rs 2,807
• Tight cost cutting, forex gains led to Ebitda beat
• FY21-23 earnings estimates are largely unchanged
• Expect multiples to re-rate because volumes are below prior peak
• Strong Q1, launch of triumph brand in 2022 to also aid re-rating
• Aggressive and sustained price competition a key downside risk
• Stronger-than expected demand recovery, sharp fall in commodity prices a key upside risk

CLSA On ICICI Securities

• Buy rating maintained
• Price target raised to Rs 625 from Rs 450
• Strong core retail equity broking business performance partly offset by weak distribution revenue
• Raise FY21CL EPS estimates by 18% to factor in strong Q1 earnings
• Expect revenue growth to normalise as buoyant retail equity participation subsides
• Increase FY22 estimates by 3%

Macquarie On Indian Life Insurers

• Protection and non-participating products gaining traction
• Annual Premium Equivalent declined across the board
• Managements are cutting discretionary spends to keep cost ratios in control
• Increase VNB multiple across the board by ~30%
• Relatively safer balance sheets compared to other financials across the country
• Companies now have structurally higher margins compared to earlier cycle
• Upgrade HDFC Life to outperform from neutral; price target raised to Rs 680 from Rs 419
• Maintain outperform rating on ICICI Prudential; price target raised to Rs 487 from Rs 379
• Maintain Underperform rating on SBI Life; price target raised to Rs 715 from Rs 613

Pledged Share Details

• Emami: Promoter Bhanu Vyaapar released pledge of 53 lakh shares on July 21
• Jamna Auto: Promoter Map Auto created pledge of 3.71 lakh shares on July 20

(As Reported On July 22)

Bulk Deals

• Indiamart Intermesh: Action Frontier Inclusion Mauritius sold 1.75 lakh shares (0.61%) at Rs 2,251.4 per share.
• Trident: Promoter Trident Group acquired 4.8 crore shares (0.94%) at Rs 6.25 per share.
• Shriram Transport Finance Rights Issue: Societe General acquired 1.47 lakh rights shares at Rs 102.04 per rights share.

Trading Tweaks

• IPO: Rossari Biotech to be listed on bourses
• AGM Date: Sobha, Tech Mahindra, Asian Paints, Shriram City Union Finance, CESC, Orient Cement, Biocon, HDFC AMC, JSW Steel, Mphasis, NIIT Tech, SKF, Tube Investments, Transpek Industries
• Record Date For Rights Issue: Mahindra & Mahindra Financial Services (Rights issue at 1:1, premium at Rs 48 per share)
• Ex-Date For Rights Issue: Gateway Distriparks (Rights issue at 4:27, premium at Rs 62 per share)
• Price Band Revised From 10% To 5%: Hathway Cable & Datacom, Kuantum Papers, Tanla Solutions
• Price Band Revised From 20% To 10%: Matrimony.Com
• Move Out Of Short-Term ASM Framework: Simplex Infrastructures
• Move Into ASM Framework: Everest Kanto Cylinder, Ujaas Energy

Money Market Update

• The currency ended little changed on Tuesday at 74.76 against the U.S. Dollar as compared to Tuesday's close of 74.74.
• The rupee snapped a three-day gaining streak.

F&O Cues

• Nifty July futures closed at 11,111; a discount of 22 points from premium of 8 points
• Nifty July futures shed 2.5% and 2.7 lakh shares in Open Interest
• Nifty Bank July futures closed at 22,804; a discount of 78 points from premium of 24 points
• Nifty Bank July futures add 5.7% and 89,000 shares in Open Interest

Nifty Weekly Expiry: July 23

• Maximum Open Interest on Call side at 11,200 strike (34.1 lakh shares)
• Maximum Open Interest on Put side at 11,000 strike (37.9 lakh shares)
• Active Options: 11,000 Put (+6 lakh shares) and 11,200 Call (+7.3 lakh shares)

Nifty Monthly Expiry: July 30

• Maximum Open Interest on Call side at 11,500 strike (31.7 lakh shares)
• Maximum Open Interest on Put side at 10,000 strike (37.3 lakh shares)