All You Need To Know Going Into Trade On May 26

Brokerages On HDFC

Credit Suisse

• Outperform rating maintained
• Price target cut to Rs 1,800 from Rs 2,080
• Growth slows in Q4 as asset quality impacted
• Cut FY20 EPS by 2% due to higher provisions and revaluation loss
• Remains well placed among NBFCs to access stable funding

Morgan Stanley

• Overweight rating maintained
• Price target of Rs 2,155
• Core PPoP was strong while headline profit was higher than expectation
• Investor focus likely to be on asset quality where trajectory in Q4 was weak
• FY21 likely to be one of the most challenging years
• Maintain overweight rating for strong capital, coverage, funding access and attractive valuations

Emkay

• Buy rating maintained
• Price target of Rs 1,971
• Slowing growth amid stable margins
• NPAs and credit costs spike
• Growth to remain volatile due to slowdown in real estate as well as demand from developers
• Remains top pick due to superior liability profile, robust recoveries and collection mechanism along with sufficient capital buffer

Earnings Fineprint: JSW Steel Q4FY20

• Revenue down 20% to Rs 17,887 crore
• Net profit down 84.8% to Rs 231 crore
• Ebitda down 33% to Rs 2,975 crore
• Ebitda margin narrows to 16.6% from 19.8%
• Exceptional loss of Rs 805 crore includes impairment provisions of Rs 725 crore for overseas arm and Rs 80 crore towards identified items of property, plant and equipment
• Domestic Ebitda per tonne down 14.9% to Rs 8,702
• Sales volumes down 14% to 3.7 MT
• All numbers are compared on a year-on-year basis
• Lower domestic realisations and overseas losses weigh on operational performance
• Lower cost of raw materials helped partially offset impact on margins
• Board recommends final dividend of Rs 2 per share

Capex Plans:

• Fails to meet FY20 capex guidance
• Spends Rs 10,200 crore as against the earmarked capex of Rs 11,000 crore
• Revised FY20 planned capex in October 2019 to Rs 11,000 crore from Rs 15,700 crore
• Reduces FY21 capex to Rs 9,000 crore from the earlier guidance of Rs 16,340 crore

Brokerages On JSW Steel

Nomura

• Buy rating maintained
• Price target cut to Rs 234 from Rs 330
• Demand headwinds factored in the valuations
• Liquidity scarcity leading to industry consolidation, benefitting the company
• Steel spreads to improve from Q2 on lower coking coal and iron ore price benefits
• Lockdown extension into Q2, weak steel spreads and domestic liquidity crunch are key headwinds

Investec

• Hold rating maintained
• Price target cut to Rs 171 from Rs 178
• Strong quarter with standalone business offsetting overseas losses
• Headline debt and guided capex post concerns on covenants
• Delayed IBC offers a balance sheet breather in the interim but remains an overhang

Earnings Fineprint: UPL Q4FY20

• Revenue up 31% to Rs 11,141 crore
• Net profit up 146.8% to Rs 617 crore
• Ebitda up 54% to Rs 2,169 crore
• Ebitda margin widens to 19.5% from 16.5%
• Exceptional loss of Rs 171 crore related to Arysta integration impacts bottomline
• Numbers are not comparable as base quarter includes only two months of Arysta's financials
• Latin America revenue up 27%
• Rest of the World revenue up 33%
• North America revenue up 45%
• India revenue up 36%
• Europe revenue down 2%
• North America, Asia growth due to phasing Q3 and Q4 of legacy Arysta business
• March a record month for the company despite Covid-19 impact: Investor Presentation
• Negative margin impact from strong and sudden forex devaluation in Emerging Markets
• Accrued Ebitda synergies of Rs 238 crore in Q4FY20 and Rs 773 crore for FY20 respectively
• Revenue synergies for FY20 stood at Rs 1,693 crore

Brokerages On UPL

Morgan Stanley

• Equalweight rating maintained
• Price target of Rs 415
• Positives were sharp reduction in working capital and strong volume growth
• Forex headwinds, gross margin compression due to adverse regional mix were the negatives
• Net debt reduction in-line with guidance
• Await clarity on a few items from the management

Jefferies

• Buy rating maintained
• Price target raised to Rs 465 from Rs 430
• Q4 was above estimates
• Robust deleveraging, balance sheet improvements key highlights
• Working capital improved notably and synergies are on track
• Management envisages FY21 revenue/cost synergies at $200 million/$150 million with net debt/Ebitda at 2 times

Stocks To Watch

• Bharti Airtel: Bharti Telecom is offering up to 15 crore shares in the company at a floor price of Rs 558 per share, according to the term sheet accessed by Bloomberg. Floor price is at a 5.9% discount to Friday's closing price. JPMorgan India is the sole placing agent for the same.
• ITC: Enters into a share purchase agreement to acquire Sunrise Foods for an undisclosed sum.
• JSW Steel: The company's board has approved raising long-term funds through NCDs with warrants for an amount not exceeding Rs 7,000 crore. It has also approved raising Rs 7,000 crore through a Qualified Institutional Placement. It will also raise long-term funds worth $1 billion in one or more tranches in the international markets through Foreign Currency Convertible Bonds, ADRs, GDRs or warrants or other convertible instruments.
• Eicher Motors: To consider a stock split and fourth quarter results on June 12.
• JSW Steel & Tata Steel: Fitch Ratings has downgraded the Issuer Default Ratings of both the companies to BB- from BB after a portfolio review. The review follows an expectation of decline in steel demand in India for FY21. The agency assumes standalone sales volume for both companies to decline by 6%. It also expects lower Ebitda margins in FY21 due to drop in volumes and weaker steel prices.
• IDFC First Bank: Bloomberg News reports that the top management of the lender will take a voluntary 10% paycut. MD & CEO V Vaidyanathan will take a 30% paycut.
• UPL: The company stated in a conference call that it is in talks with the government on the proposal to ban 27 generic products. It stated that the draft order will not impact exports and 25 out of these 27 products banned are widely accepted. The company believes that most of the products banned will be reversed.
• Kansai Nerolac’s Covid-19 Update: No material production was done in the month of April. The company has started limited operations at its manufacturing units and depots. Dispatches to the company's depots have commenced. The release stated that the supply chain has enough inventory and is fully prepared to meet the demand of the customers in all markets as and when demand arises. It also does not foresee any immediate concern towards completion of its capital projects.
• Jagran Prakashan’s Covid-19 Update: The company stated that it has been operating during the lockdown, adding that it does not have any significant short-term debt which requires to be repaid in FY21. It also said that advertisement revenue has declined by 80-85% and outdoor and event activation business revenue is negligible.
• Acrysil Covid-19 Update: Company has partially started manufacturing operations to meet the backlog of export orders. Plants are currently operating at a production capacity of around 70%. The company expects the business to start improving from quarter ending September 2021.
• Birla Corporation: Manufacturing operations of its jute mills in West Bengal has been disrupted on account of Cyclone AMPHAN. The release stated that it may take up to 3 months to restore normal production levels. Jute segment contributes around 4.5% in terms of revenue for the Kolkata-based company. The board of the company has also approved raising Rs 300 crore via NCDs.
• HFCL: Bags order worth Rs 175 crore from an integrator of data networks for supply of Optic Fibre Cable under the Bharat Net Phase-II program.
• Deepak Fertilisers: To raise up to Rs 180 crore via rights issue. Promoters will also participate in the issue. The company has also forayed into the alcohol-based hand sanitisers space.
• InterGlobe Aviation: To fly more than 200 flights daily until May 31. The airline said that all flights are in accordance with the Covid-19 guidelines issued by various state governments.
• Bosch: To observe 'No-Production Days' at its Gangaikondan plant till May 31.
• Gateway Distriparks: India Ratings has placed the company's long-term issuer rating on 'Rating Watch Negative' with a stable outlook.
• Snowman Logistics: India Ratings revises the company's long-term issuer rating to 'Rating Watch Evolving' from 'Rating Watch Positive.'
• Solar Industries: Suspends operations of its detonator division at its Nagpur facility.
• IFGL Refractories: To begin construction of it's new facility in Andhra Pradesh. The first phase of this project is slated to be completed by the first half of FY21.
• NCC and Just Dial: To be excluded from futures and options segment from July 31.
• IDFC First Bank: Board approved raising Rs 5,000 crore via NCDs
• Great Eastern Shipping: Board to consider raising Rs 1,000 crore via NCDs on a private placement basis on May 30.
• Raymond: To consider raising Rs 200 crore via NCDs on May 27
• Yes Bank: Gets shareholder approval to raise capital through issue of equity shares or other convertible securities
• Trent: The company stated that as a result of the lockdown induced by Covid-19, the revenue from retailing of non-food merchandise has been entirely and adversely impacted. As on date, 70 stores have commenced their operations.
• Aarti Industries: Approved early redemption of NCDs worth Rs 40 crore.
• Manappuram Finance: To meet Morgan Stanley on May 26.
• Indian Energy Exchange: To meet Ward Ferry and New Mark Capital between May 26-28
• Eveready Industries: To resume operations in its battery manufacturing facility in Noida.
• Companies That Resumed Operations: Bharat Forge, CCL Products, Manali Petrochemicals, IFB Industries, Man Infraconstructions, Tide Water Oil, Garden Silk Mills.
• Non-Nifty Earnings Today: Blue Dart, Coromandel International, Deepak Nitrite, Firstsource Solutions, Max Financial Services, Praj Industries, SH Kelkar, Torrent Pharma, VIP Industries, Wonderla Holidays.

Earnings Reported After Market Hours

Avenue Supermarts Q4FY20

• Revenue up 23.1% to Rs 6,194 crore
• Ebitda up 11% to Rs 418 crore
• Ebitda margin narrows to 6.7% from 7.5%
• Net profit up 41% to Rs 287 crore
• Higher other income and lower taxes aid net profit
• Numbers are standalone and compared on a year-on-year basis

Commentary On Covid-19 Impact:

• Revenue for April down over 45% compared to last year
• Margins saw erosion due to no sale of apparel and general merchandise
• Expect significantly large decline in Ebitda due to lower sales, lower gross margins and higher cost of operations
• Post relaxation, the first 14 days of May saw a rise of 17% over the first 14 days of April 2020

Bata India Q4FY20

• Revenue down 9% to Rs 621 crore
• Net profit down 56% to Rs 38 crore
• Ebitda up 46% to Rs 139.5 crore
• Ebitda margin widens to 22.5% from 14%
• All numbers are compared on a year-on-year basis

Just Dial Q4FY20

• Revenue up 1% to Rs 235 crore
• Net profit up 21% to Rs 76 crore
• Ebitda up 28% to Rs 74 crore
• Ebitda margins widen to 31.5% from 25%
• All numbers are compared on a year-on-year basis

IDFC First Bank Q4FY20

• Net interest income up 40.5% to Rs 1,563.5 crore
• Net profit of Rs 71.5 crore from net loss of Rs 218 crore
• Had a deferred tax reversal of Rs 198.7 crore in the base quarter
• Provisions down to Rs 412.4 crore from Rs 2,304.8 crore in the previous quarter
• Gross NPA at 2.6% from 2.83% sequentially
• Net NPA at 0.94% from 1.23% quarter-on-quarter
• Creates additional provision of Rs 225 crore for Covid-19 impact
• Moretorium provided to 35% of the outstanding book based on customer requests
• Provides 100% moratorium on suo-moto basis to select segments like rural financing

DCB Bank Q4FY20

• Net Interest Income up 10.2% to Rs 331.7 crore
• Net profit down 28.6% to Rs 68.8 crore
• Provisions double to Rs 118.2 crore from Rs 59 crore in the previous quarter
• Gross NPA at 2.46% from 2.15% in Q3FY20
• Net NPA at 1.16% from 1.03% in the previous quarter
• Net Interest Margins at 3.64%
• Provision Coverage Ratio at 70.81% from 78.7% in Q4FY19
• Recoveries and upgrades impacted due to the lockdown. Likely to improve gradually post easing of restrictions

Chambal Fertilisers Q4FY20

• Revenue down 25% to Rs 1,969 crore
• Ebitda down 48% to Rs 217 crore
• Ebitda margin narrows to 11% from 16%
• Net profit up 122% to Rs 204 crore
• Exceptional gain of Rs 102.5 crore this quarter
• Exceptional gain on account of reversal of an earlier made provision
• Base quarter had an exceptional loss of Rs 197 crore
• All numbers are standalone and compared on a year-on-year basis

Trent Q4FY20

• Revenue up 8.1% to Rs 722.8 crore
• Net profit down 83.8% to Rs 2.6 crore
• Ebitda up 2.8 times to Rs 93 crore
• Ebitda margin widens to 12.9% from 5.05%
• Impact of Ind-AS 116 seen on rent, depreciation, other income and finance costs
• Board recommends dividend of Re 1 per share
• Added 63 new stores in FY20
• Opening of 21 new stores - 4 Westside and 17 Zudio were impacted due to Covid-19 related developments. The company expects these stores to open once lockdown measures are relaxed
• All numbers are standalone and compared on a year-on-year basis

BASF India Q1CY20

• Revenue up 40.3% to Rs 1,848.6 crore
• Net profit down 53.2% to Rs 40.4 crore
• Ebitda up 5.4 times to Rs 75.7 crore
• Ebitda margin widens to 4.1% from 1.05%
• Exceptional gain of Rs 120.5 crore in base quarter
• Lower raw material cost and other expenses aid margin expansion
• All numbers are standalone and compared on a year-on-year basis

Essel Propack Q4FY20

• Revenue down 1% to Rs 688.9 crore
• Net profit down 7.2% to Rs 48.6 crore
• Ebitda up 5.3% to Rs 138.5 crore
• Ebitda margin at 20.1% from 19%
• High employee costs dent net profit
• Board recommends final dividend of Rs 2.05 per share of Rs 2 each
• Net debt reduced to Rs 276 crore from Rs 499.8 crore in Q4FY19
• Africa, Middle-East and South Asia revenue down 9%
• East Asia and Pacific revenue down 12.1%
• Americas revenue up 3.9%
• European revenue growth of 15.6%
• All numbers are consolidated and compared on a year-on-year basis

Birla Corporation Q4FY20

• Revenue down 9.6% to Rs 1,145 crore
• Net profit up 4.4% to Rs 91.4 crore
• Ebitda up 20.3% to Rs 169.7 crore
• Ebitda margin widens to 14.8% from 11.1%
• Lower transportation and fuel costs aid margins
• Realisations up 3.9% to Rs 4,795 per tonnes
• Ebitda per tonne up 31.1% to Rs 1,045
• Sales volume down 13% to 3.3 million tonnes
• All numbers are standalone and compared on a year-on-year basis

Honeywell Automation Q4FY20

• Revenue down 13.1% to Rs 704.3 crore
• Net profit up 32.1% to Rs 111.1 crore
• Ebitda up 3.3% to Rs 128.6 crore
• Ebitda margin widens to 18.3% from 15.4%
• Lower raw material costs aid margins
• Lower taxes and higher other income aids bottomline
• All numbers are standalone and compared on a year-on-year basis

Bayer CropSciences Q4FY20

• Revenue up 81.9% to Rs 458.7 crore
• Net profit of Rs 31.5 crore from a net loss of Rs 57.1 crore
• Ebitda gain of Rs 58.2 crore from an Ebitda loss of Rs 92.6 crore
• Numbers not comparable as numbers of merged entity of Monsanto also included
• Exceptional loss of Rs 29 crore this quarter due to employee separation expenses
• Tax reversal of Rs 31.7 crore in the base quarter due to change in taxation regime
• All numbers are standalone and compared on a year-on-year basis

Orient Cement Q4FY20

• Revenue down 12.8% to Rs 654.5 crore
• Net profit down 28.9% to Rs 44.1 crore
• Ebitda down 18.5% to Rs 124.7 crore
• Ebitda margin at 19.1% from 20.4%
• Recommends dividend of Rs 0.75 per share
• All numbers are standalone and compared on a year-on-year basis

GMM Pfaudler Q4FY20

• Revenue down 5.3% to Rs 132 crore
• Ebitda up 13.6% to Rs 22.5
• Ebitda margin widens to 17.1% from 14.2%
• Net profit down 12.8% to Rs 11.6 crore
• Bottomline impacted due to lower other income, higher finance cost and depreciation
• All numbers are consolidated and compared on a year-on-year basis
• Approves expansion plan of Rs 50 crore which will be spend via cash reserves
• Expansion plan likely to be completed in the next 12-18 months

Impact Of Covid-19 On Business:

• Additional revenue that could have been recognised in the fourth quarter in a normal business environment is estimated to be around Rs 30 crore
• Expect to re-open sales offices across India during June 2020
• Revenue and profitability in Q1FY21 to be impacted due to 20 days of lost production in April
• Confident that shortfall can be recouped in the coming quarters

JSPL Q4FY20

• Revenue down 13% to Rs 8,811 crore
• Net profit of Rs 406 crore from net loss of Rs 2,146 crore
• Ebitda up 20% to Rs 2,220.5 crore
• Ebitda margin widens to 25.2% from 18.1%
• Exceptional loss of Rs 1,734 crore in the base quarter
• All numbers are compared on a year-on-year basis

Astral Poly Q4FY20

• Revenue down 19% to Rs 626 crore
• Net profit down 18% to Rs 51 crore
• Ebitda down 4% to Rs 113 crore
• Ebitda margin widens to 18% from 15.2%
• All numbers are compared on a year-on-year basis

Music Broadcast Q4FY20

• Revenue down 44% to Rs 46 crore
• Net loss of Rs 9 crore from a net profit of Rs 18 crore
• Ebitda loss of Rs 5 crore from Ebitda gain of Rs 32.5 crore
• All numbers are compared on a year-on-year basis

Aarti Industries Q4FY20

• Revenue down 6% to Rs 1,076 crore
• Net profit down 12% to Rs 110 crore
• Ebitda down 13% to Rs 218.5 crore
• Ebitda margin narrows to 20.3% from 22%
• All numbers are compared on a year-on-year basis

Lakshmi Machine Works Q4FY20

• Revenue down 34% to Rs 386 crore
• Net profit down 94% to Rs 2 crore
• Ebitda loss of Rs 6.5 crore from Ebitda gain of Rs 32 crore
• All numbers are compared on a year-on-year basis

Thyrocare Technologies Q4FY20

• Revenue down 3.9% to Rs 101.4 crore
• Net loss of Rs 1.6 crore from net profit of Rs 16.33 crore
• Ebitda down 10.2% to Rs 31 crore
• Ebitda margin at 30.5% from 32.6%
• Exceptional item of Rs 6.5 crore this quarter
• All numbers are compared on a year-on-year basis

Brokerage Radar

Jefferies On Bharti Airtel

• Buy rating maintained
• Price target of Rs 660
• Promoter sale mainly to de-lever balance sheet as dividend payments from Airtel are insufficient to service its Rs 8,500 crore debt
• Stake sale will lower Singtel and promoters' effective stake in the company to 32% and 24% respectively
• This is not a de-rating event and we see any potential pullbacks in the stock due to this as a buying opportunity

Jefferies On Two-Wheelers

• Indian two-wheelers will fall further in FY21 due to Covid-19 and BS-VI cost push
• Volumes should rebound by FY22 on two-years of low base
• Longer-term, rising penetration should shift demand towards premium bikes
• Exports are at a cyclical high and are likely to follow domestic cycle with a lag
• Initiate coverage on Eicher Motors with a buy rating and price target of Rs 17,500
• Initiate coverage on Hero MotoCorp with a buy rating and price target of Rs 2,550
• Initiate coverage on Bajaj Auto with a hold rating and price target of Rs 2,770
• Initiate coverage on TVS Motor with an underperform rating and price target of Rs 260

Jefferies On Supreme Industries

• Buy rating maintained
• Price target cut to Rs 1,245 from Rs 1,260
• Strong performance in Q4
• Margin expansion led by growth in VAP, inventory gains and raw material discounts
• Cut FY21 EPS by 8% factoring in lockdown extension and volatile PVC prices
• Like robust franchise, market share, strong growth levers, entrenched network and pristine financials

Investec On Colgate

• Sell rating maintained
• Price target cut to Rs 1,267 from Rs 1,303
• Volume de-growth of 8% while market share shows signs of improvement
• Ebitda weakness due to negative operating leverage
• Near-term stress likely
• Focus more on innovation and distribution

Investec On Essel Propack

• Buy rating maintained
• Price target of Rs 218
• Diversification helps mitigate Covid-19 impact
• Ebit margins were higher than estimates due to lower other expenses
• Expect strong earnings growth performance to continue

Ambit On Avenue Supermarts

• Rating under review
• Revenue/Ebitda/net profit below estimates given closure of 50% stores during March-end
• Social distancing measures would mean footfalls cannot be accommodated in the near-term as compared to the past
• Stock has reached beyond fair valuation
• See downside to near-term earnings estimates
• Stance under review as we see limited catalysts to upgrade our earnings estimates over the near-term
• Next two years likely to be difficult along with more retail peers

Morgan Stanley On IDFC First Bank

• Underweight rating maintained
• Price target cut to Rs 13 from Rs 15
• Progress on retailisation of loans and deposits has been good
• Core profit remains weak
• Asset quality a concern given weak customer profile and soft RoE
• Cut price target on account of lower EPS and share dilution due to announced capital raising

Trading Tweaks

• Moves Into ASM Framework: Indiabulls Ventures
• Move Out Of ASM Framework: Somany Home Innovation, GIC Housing Finance, Paisalo Digital, Intellect Design Arena, SpiceJet, Avadh Sugar & Energy, MPS, Ramco Systems
• Move Out Of Short-Term ASM Framework: Adhunik Industries, Eros International Media
  

Insider Trading

• Aarti Drugs: Promoters sold 50,000 shares on May 18
• Cyient: Promoter Bodanapu Reddy acquired 1 lakh shares between May 18-22

(As Reported On May 22)

F&O Cues

• Nifty May futures end at 9,028; discount narrows to 13 points from 30 points
• Nifty May futures shed 2% and 1.5 lakh shares in Open Interest
• Nifty Bank May futures end at 17,216; discount narrows to 60 points from 90 points
• Nifty Bank May futures add 27% and 3.8 lakh shares in Open Interest
• Nifty Put-Call Ratio at 1.15 from 1.12 across all series

Nifty: May 28 Expiry

• Maximum Open Interest on Call side at 10,000 strike (30.6 lakh shares)
• Maximum Open Interest on Put side at 9,000 strike (32.8 lakh shares)
• Active Options: 8,800 Put (+6 lakh shares) and 9,000 Call (+4.5 lakh shares)