India Strategy; Raw material prices and cost-cutting help margins; earnings downgrades continue
Noticeable trends emerging across various macro themes: 1) Delayed govt payments – making businesses cut down on pace of execution (L&T, Havells and Bluestar); 2) Rural vs. Urban paradox: paints, F&B FMCG and adhesives seeing better rural growth, while home & personal care seeing better urban growth. Agri-chem benefiting from strong Rabi demand; 3) Premium vs. economy: biscuits, home care and some consumer electricals seeing premium shift, while down-trading in hair oils and plywood. Economy brands growing faster in paints; 4) Liquidity situation still tight: mentioned by multiple FMCG players, impacting channel inventory levels; 5) Selective movement to new tax regime: some companies are awaiting the exhaustion of MAT credit before shifting to the lower tax regime. Very few instances of interest in 15% new manufacturing tax.
LIC Housing Finance; Merger with IDBI: A blessing in disguise?
With recent media reports articulating the merger of LIC Housing Finance (LICHF) with IDBI Bank, the market does not seem to favor the move. Despite a clear denial from the managements, markets do assign some merger probability. We are also of a similar opinion that there is high probability of the merger happening, considering various assumptions.
BFSI; Accelerating corporate resolutions aid banks; another subdued quarter for NBFCs
Growth slips further, but lumpy NPA resolutions aid earnings in Q3: Overall credit growth slipped further to ~6% yoy in Q3, however, margins held up well for select banks due to lumpy resolution and some softness in CoF. On the asset-quality front, Q3 witnessed a convergence of lumpy corporate NPA recognition (DHFL, ADAG NBFC, Suzlon) and resolutions (Essar Steel, Prayagraj Power), leading to a further decline in the GNPA ratio for banks under coverage.
· Pharmaceuticals; Q3 Review: Cost rationalization remains the key for FY21
Q3 EBITDA declined 5% yoy/6% qoq for companies under Emkay coverage, while margins fell 210bps yoy/110bps qoq. R&D/operating cost rationalization continue to be the dominating theme, with most companies guiding for broadly flat costs yoy in FY21.
Jindal Stainless Hisar; Results in line, maintain Hold
JSHL reported in-line results overall. Revenue at Rs21.9bn (yoy/qoq -2%/+11%) was better than our est. of Rs20bn on higher NSR, driven by better product mix and slight improvement in the NSR at Rs140/kg (yoy/qoq: -1%/2%).
You must log in to post a comment.