All You Need To Know Going Into Trade On May 20

Earnings Fineprint: Bajaj Finance Q4FY20

• Net Interest Income up 38 percent to Rs 4,459 crore
• Net profit falls 20 percent to Rs 892 crore
• Covid-19 related contingency provision at Rs 900 crore
• Impairment expenses up 2.3 times at Rs 1,865 crore
• Gross NPA at 1.61 percent while Net NPA stood at 0.65 percent
• Provision Coverage Ratio stood at 60 percent

Bajaj Finance: Management Commentary

• 27 percent of our consolidated AUM is under moratorium, of which 68 percent customers who availed the moratorium were not default in January and February.
• Focus going forward will remain on existing customers rather than new customers.
• Default rate for moratorium assets was 12 percent, which jumped 3 times in April. Do not see it deteriorating once economy improves.
• Re-pivoting deposits towards more retail deposits. Corporate deposits account for 33 percent of the total deposits as of today which will be reduced going forward.
• We can take shocks like Covid-19 which is a once in a 100 years shock. Our pre-provisioning profit is very strong.

Brokerages On Bajaj Finance

Morgan Stanley

• Overweight rating maintained
• Price target of Rs 2,740
• Strong PPoP in Q4 with meaningful coverage and best in-class disclosures
• PPoP margin expanded to a new high via cost control
• Provisions high because of Covid-19 and will stay high in FY21
• Expect highest RoE in our coverage in FY21, driven by pricing power, cost control, capital, coverage, funding access and large granular customer base

Axis Capital

• Downgrade to add from buy
• Price target cut to Rs 2,150 from Rs 2,600
• Lower than expected results in Q4, primarily due to the lockdown
• Concerned on uncertainty on additional moratorium, higher credit costs and poor growth outlook
• See focus shifting to capital protection, cost curtailment and liquidity management

Stocks To Watch

• Cipla: Files ANDA for generic version of GSK’s Advair Diskus, as reported by Bloomberg News
• Piramal Enterprises: Bloomberg News reports that Boston-based private equity firm TA Associates is in discussions to buy about 20 percent stake in Piramal Pharma, for as much as $500 million. Piramal Group aims to reach an agreement as soon as June.
• SpiceJet: Clarifies that it has been been maintaining adequate cash flows to cover the reduced cost of operations. It said that lessor payments, which form the bulk of fixed costs, have been mutually deferred and waived as there has been no economic value derived by the airline. SpiceJet stated in a press release that India’s aviation sector, with a huge pent up demand, and a drastic fall in ATF prices is waiting to bounce back once travel restrictions are lifted.
• Tata Power: Divestment plans remain on track with closure of the Cennergi transaction in April with Rs 842 crore realised from this sale including hedging gain. The company is in advanced discussions to execute sale agreement for another overseas asset. In addition, there is good progress on closing the sale of Defense business in current quarter. The divestment in Zambia hydro project is also expected to be completed by December. The restructuring of Renewable businesses including setting up the vehicle for their growth is well on track to closure. Capex plans for transmission and distribution business have been deferred for the last two quarter of fiscal year 2021. The company’s board approved raising up to Rs 1,500 crore via NCDs.
• Embassy Office Parks REIT: Properties have remained opened to support core business functions of its occupiers throughout the national lockdown and rent collections from office occupiers remained strong at 92 percent for the month of April. Demand is likely to moderate considerably through 2020.
• Mangalam Drugs & Organics: Gets Certificate of Suitability (CEP) for API - Hydroxychloroquine Sulphate (HCQS) from European Directorate for the Quality of Medicines & Healthcare.
• Future Retail: Board approved allotment of Rs 1.48 crore shares at Rs 505 per share aggregating to Rs 750 crore to promoter entity Future Coupons, upon exercise of option for conversion of remaining equity warrant.
• South Indian Bank: Revises MCLR across various tenors from May 20. One-Month MCLR now at 8 percent and One-Year MCLR at 8.65 percent.
• L&T Infotech: Board re-appointed Sanjay Jalona as MD and CEO till August 2025.
• Finolex Industries: Has increased the turnover discount scheme across its dealer network. The additional dealer incentive scheme will be paid to the dealers who have achieved their target and for those who could not, they will be paid a token amount as gratitude to cushion the impact of the challenging business environment. Company has decided not to deduct staff salaries.
• AU Small Finance Bank: Promoters revoked pledge of 15.5 lakh shares on May 19.
• Non-Nifty Earnings Today: Ajanta Pharma, Birlasoft, GHCL, JSW Energy, Jubilant Foodworks, Kalpataru Power, JK Lakshmi Cement, Mahindra Logistics, Matrimony.com, Strides Pharma.

Earnings Reported After Market Hours

Embassy Office Parks REIT Q4FY20

• Revenue down 0.5 percent to Rs 543.4 crore
• Net profit down 77.2 percent to Rs 57.8 crore
• Impairment loss of Rs 178 crore this quarter
• Declares dividend of Rs 6.89 per unit, aggregating to Rs 532 crore
• Record date for dividend is May 28
• Leased 3,89,000 square feet of new area in the current quarter
• All numbers are consolidated and compared on a year-on-year basis

Ujjivan Small Finance Bank Q4FY20

• Net Interest Income up 45.9 percent to Rs 466.6 crore
• Net profit up 14.7 percent to Rs 73.2 crore
• Provisions at 97 crore from 12.4 crore in the previous quarter
• Gross NPA at 0.97 percent from 0.95 percent sequentially
• Net NPA at 0.2 percent from 0.38 percent quarter-on-quarter
• All numbers are standalone while NII and Net profit numbers are compared on a year-on-year basis

Tata Power Q4FY20

• Revenue down 8.4 percent to Rs 6,620.8 crore
• Net profit up 3.3 times to Rs 402.6 crore
• Ebitda up 17.2 percent to Rs 1,579.8 crore
• Ebitda margin expands to 23.9 percent from 18.6 percent
• DTA adjustments due to new tax regime led to gains of Rs 159 crore
• One-time gain on sale of Cennergi Investment offset by impairment provisions in SEO and reversal of MAT credit
• Lower fuel under recovery in Mundra on account of lower HBA prices and better sourcing of coal aid margins

L&T Infotech Q4FY20

• Revenue in dollar terms up 3.9 percent to $409.9 million
• Revenue in rupee terms up 7.1 percent to Rs 3,011.9 crore
• Net profit up 13.1 percent to Rs 426.7 crore
• Ebitda up 9.5 percent to Rs 578 crore
• Ebitda margins at 19.2 percent from 18.8 percent
• All numbers are consolidated and compared on a sequential basis

Apollo Tyres Q4FY20

• Revenue down 15.5 percent to Rs 3,610.1 crore
• Net profit down 7.4 percent to Rs 77.8 crore
• Ebitda up 11.9 percent to Rs 475 crore
• Ebitda margins expand to 13.2 percent from 9.9 percent
• Lower raw material costs aid margins
• Exceptional loss of Rs 100 crore in the base quarter
• All numbers are consolidated and compared on a year-on-year basis

Earnings Estimates: Dr Reddy’s Laboratories Q4FY20

• Revenue seen 6 percent higher at Rs 4,268 crore
• Net profit seen 22 percent higher at Rs 530 crore
• Ebitda seen 9 percent higher at Rs 933 crore
• Ebitda margin may expand to 21.8 percent from 21.2 percent
• All estimates are compared on a year-on-year basis

Key Factors At Play For Dr. Reddy's Laboratories:

• New launches to drive strong growth in U.S. business
• Rise in market share for gSuboxone and gToprol XL to aid growth in U.S. business
• New launches: gGeodon injection, gNarcan injection, gDaraprim tablet and gVimovo
• India business likely to see steady growth

Earnings Estimates: Bajaj Auto Q4FY20

• Revenue seen 12 percent lower at Rs 6,481 crore
• Net profit seen 24 percent lower at Rs 991 crore
• Ebitda seen 12 percent lower at Rs 1,025 crore
• Ebitda margin seen flat at 15.8 percent from 15.7 percent
• Lower volumes may lead to decline in revenue
• Volumes down 17 percent year-on-year to 9,91,961 units
• All estimates are Bloomberg Estimates and compared on a year-on-year basis

Key Factors To Watch For Bajaj Auto:

• Outlook on exports, particularly for Africa
• Impact on demand due to fall in oil prices
• Delay in new product launches
• Impact on demand due to higher prices of BS-VI models

Earnings Estimates: Ultratech Cement Q4FY20

• Revenue seen flat at Rs 10,818.6 crore
• Ebitda seen 1.6 percent lower at Rs 2,295 crore
• Ebitda margin seen at 21.2 percent from 21.4 percent
• Net profit seen 32 percent lower at Rs 702.3 crore
• Sales volumes seen 15.8 percent lower at 21.48 MT
• Realisations likely to rise 18 percent to Rs 5,036
• Ebitda/Tonne seen 16.9 percent higher at Rs 1,069
• All estimates are Bloomberg estimates, consolidated and compared on a year-on-year basis

Factors At Play For Ultratech Cement:

• Lockdown in the last few days of March to weigh
• High prices despite lower volumes to aid realisations
• Lower freight costs to keep operating costs under control
• Benign fuel prices to aid cost control measures

Brokerage Radar

Cement Channel Check By IDFC Securities

• Demand improvement compared to last week, albeit muted
• Labour availability and logistics a constraint in ramping up
• Prices to hold on well; cost pressures benign
• FY21 likely to be a challenging year
• Volumes to be under severe stress in H1FY21

Macquarie On Reliance Industries

• Downgrade to underperform from neutral
• Price target raised to Rs 1,195 from Rs 1,124
• Expect higher capex and no free cash flow as it embarks on digital aspirations
• See margin and return compression risk in retail due to competition
• See downside risk to Jio ARPU due to slowdown

Citi On Adani Ports

• Buy rating maintained
• Price target raised to Rs 402 from Rs 350
• Poised for re-rating due to reduction in leverage at the promoter level
• Company confident of maintaining margins and cash flow
• Mundra volumes to see boost post commissioning of Dedicated Freight Corridor

Nomura On M&M

• Buy rating maintained
• Price target raised to Rs 501 from Rs 419
• Rural revival a key driver
• Beneficiary of government's rural focus
• Efficient capital allocation to drive re-rating
• If more loss-making investments like Ssangyong are discontinued, there is scope for significant re-rating

IDFC Securities On Sanofi India

• Outperform rating maintained
• Price target raised to Rs 8,666 from Rs 8,099
• Revenue growth ahead of estimates in a good quarter
• One of the more promising MNC pharma companies in India
• Valuations attractive and steady improvement in operating performance

Haitong On Indian Autos

• Tractor industry may see revival ahead of other sectors
• Positive agri sentiment may boost tractor growth
• Plants and dealerships have resumed partially and seeing sales enquiries returning back gradually

Jefferies On Indian Autos

• Auto registrations witnessed only a tiny uptick last week after falling to near zero levels
• Web search activity shows a reasonable improvement in customer interest
• E-Way bill generation, a measure of road freight movement is also improving

Jefferies On Tata Power

• Hold rating maintained
• Price target cut to Rs 35 from Rs 36
• Q4 results above expectations primarily due to lower interest cost
• 48 percent gross debt reduction target is the key takeaway
• Believe the concrete intent is positive but difficult markets could play a spoiler in monetisation plans

Bulk Deals

• Equitas Holdings: Morgan Stanley Asia acquired 19.68 lakh shares (0.58 percent) at Rs 44.39 per share.
• Healthcare Global: Buena Vista Fund acquired 5.16 lakh shares (0.58 percent) at Rs 103.99 per share.

Trading Tweaks

• Move Into ASM Framework: Inox Lesiure, Best Agrolife
• Move Into Short-ASM Framework: Orient Green Power, Shree Digvijay Cement, Healthcare Global Enterprises.
• Move Out Of Short-Term ASM Framework: Neuland Laboratories, Subex

Money Market Update

• The currency ended Tuesday's trading session at 75.64 against the U.S. Dollar as compared to Monday's close of 75.91.
• The rupee snapped a three-day losing streak and was the fifth-best performing currency among Emerging Market peers.

F&O Cues

• Nifty May futures closed at 8,884; Premium widens to 5 points from 3 points
• Nifty May futures add 0.5 percent in Open Interest and 37,000 shares
• Nifty Bank May futures closed at 17,438, discount widens to 48 points from 36 points
• Nifty Bank May futures shed 1.8 percent in Open Interest and 25,000 shares
• Nifty Put-Call Ratio at 1.02 from 0.95 across all series
• Stocks In F&O Ban: Vodafone Idea

Nifty Weekly Expiry: May 21

• Maximum Open Interest on Call side at 9,000 strike (19.5 lakh shares)
• Maximum Open Interest on Put side at 8,800 strike (12.9 lakh shares)
• Active Options: 8,800 Put (+3.4 lakh shares), 9,000 Call (+5.9 lakh shares)

Nifty Monthly Expiry: May 28

• Maximum Open Interest on Call side at 10,000 strike (23.9 lakh shares)
• Maximum Open Interest on Put side at 8,500 strike (21.2 lakh shares)