Tejas Networks showed improvements in all front namely; revenue growth, profitability, order book as well as free cash flows in Q2. Although marginal enhancements in the financials, but they were on account of India private and International business. Company’s medium term strategy to diversify away from Governments Bharat Net projects finally seems to show some fruitful results after continued underperformance over the past 2 years. We believe revenues as well as profitability will pick up pace Q4 onwards and opine investors to BUY on Dips from current levels.

Nestle India to invest Rs.2600 crore into India in the next 3-4 years

Ø This announcement came on the back of stellar results announced by Nestle India for the Sep-20 quarter

Ø With double digit growth in all its top brands, Nestle plans to invest in expanding and deepening these consumer markets

SBI Cards stock came under pressure on rising default concerns

Ø During the Sep-20 quarter, SBI cards saw 160% rise in bad debts to Rs.862 crore due to a series of retail defaults

Ø However, the company admitted that it had not fully factored in the likely impact of the Supreme Court decision on EMIs

SEBI clears the proposed buyback of shares by NTPC

Ø NTPC will be one among the 8 cash-rich PSUs in India to do a buyback under directions of the government

Ø With the market for PSUs still looking shaky, the government is relying on buybacks to meet its divestment targets

Brent Crude gained above the $42/bbl mark during the week

Ø OPEC is expected to announce another round of supply cuts, with the support of Russia, giving oil prices some support

Ø However, demand for crude continues to be weak and that may negate the price rise unless the supply cut is huge

Forex Reserves touch an all-time record of $555 billion

Ø India is already in the top-5 countries in the world in terms of forex reserves and this should reinforce its position

Ø With overall imports falling in line with lower oil prices, the forex cover for imports is now in excess of 15 months

Government imposes onion stocking limits to curb prices

Ø Now retailers are limited to stocking up to 2 tons of onions and wholesalers can only stock 25 tons of onions

Ø In the last few days, onion prices have gone above Rs.100/kg and that has normally been a very politically sensitive issue

NBFCs want to be included as beneficiaries in on-tap TLTRO

Ø This liquidity mechanism opened by RBI is currently only available to the scheduled banks in the system

Ø NBFCs believe that this could give them easy access to liquidity at economical rates in times of crisis

ICICI Lombard reports 35% spike in net profits to Rs.416 crore in Q2 Sep-20

Ø The higher profit was managed on the back of better management of costs during the quarter

Ø Even as direct premium grew, the insurer managed to expand its retention ratio sharply during the quarter

MPC minutes point to unanimity on an accommodative monetary stance

Ø Most of the members dwelt on the need to keep rates low and stance accommodative to revive GDP growth

Ø However, Jayanth Varma has raised objections to the MPC giving a long term guidance on accommodative stance

HPCL raises Rs.2000 crore via issue of debt instruments in the market

Ø The 3-year paper maturing in 2023 will carry a coupon rate of 4.79% on an annualized basis

Ø This is among the lowest rates at which Indian companies are borrowing and should be a boost to other PSUs

Flipkart to acquire 7.8% in Aditya Birla Fashions for Rs.1500 crore

Ø For Aditya Birla Fashions, this gives them the much needed capital to expand their retail brand franchise in a big way

Ø For Flipkart, this is an extension of their fashion offering, where it is already present via Myntra

Bernstein initiates coverage on Bharti Airtel with outperform rating

Ø Bernstein feels that the only telecom player other than Jio that has the ability to expand market share is Bharti Airtel

Ø Also, the price status quo in the telecom market is likely to favour Jio and Bharti at the cost of Vodafone Idea

Jet Airways stock rallies by 108% in a span of just 12 days

Ø This positive price movement came after the COC finally agreed to sell Jet to a consortium headed by Kalrock

Ø Kalrock along with Murari Jalan had placed the bid for Jet Airways, which was finally approved in the last meeting

In the US elections, most surveys point to neck-to-neck battle

Ø While Joe Biden had an advantage, the survey observes that Trump had covered enough ground in last few days

Ø Like in the past, the eventual election outcome may boil down to the swing factors in just a handful of states

Government likely to divest 10% stake in GIC RE and New India Assurance

Ø It may be recollected that the government had sold 15% in both these companies way back in 2017

Ø However, both the IPOs had been steeply priced and the stocks have grossly underperformed post listing

Reliance becomes extremely over owned by FPIs

Ø As of Sep-20, foreign portfolio investors hold a record 27.2% stake in Reliance Industries, with a last quarter spike

Ø At the same time, domestic MFs have cut their holding in RIL by 25 bps, largely due to breaching the 10% AUM ceiling

Equitas Small Finance Bank gets a tepid response to its IPO

Ø The overall IPO got oversubscription only to the extent of 1.95x with QIB portion showing 1.92x subscription

Ø While the retail book was filled, HNIs were not interested in an issue where funding was unlikely to be lucrative

SEBI penalizes promoters of Kirloskar Brothers to the tune of Rs.31 crore

Ø This includes a penalty and disgorgement of profits and is the largest such levy by SEBI on a promoter group

Ø The case pertains to 2010 when the promoter family had allegedly traded on inside information

Bajaj Finance reports 36% fall in net profits on higher provisioning

Ø While net interest income or NII increased by 4%, it provided an additional Rs.1370 crore for COVID provisions

Ø However, the gross NPAs of Bajaj Finance at 1.03% and net NPAs at 0.37% are among the best in the industry

Venugopal Dhoot makes Rs.30,000 crore bid to buy back Videocon

Ø Dhoot wants offer this as a full and final settlement of all dues and get control of Videocon back from the NCLT

Ø However, in the past, the COC has not been too enthused by the idea of letting promoters buy back at a discount

Gland Pharma may be the first mega IPO with a Chinese parent

Ø Gland Pharma of Hyderabad is majority owned by Fosun of China, which it acquired from private equity investor KKR

Ø The IPO will combine a new issue and an OFS, in which the Gland Pharma promoter and Fosun will seek partial exit

ISGEC Heavy Engineering reported topline of Rs. 1074.85 cr down 31.1% Q-o-Q from Rs. 15460.13 cr reported in Q4 FY20. EBTDA for the quarter came in at Rs. 96.31 cr with EBITDA margins of 9.2%. EBITDA growth of 36.1% Q-o-Q basis was mainly on account of salary cuts and reduction on SGA (selling, general and administrative) expenses in Q1 FY21. The company reported PAT of Rs. 42.53 cr up 218.1% Q-o-Q basis with PAT margin of 4.1%.

ISGEC Heavy Engineering trades at fair valuation of 13x TTM earnings with opportunities on cards in defence and space. Company’s strong order book (1.11x FY20 sales) provides a cushion on the downside whereas cost saving efforts in terms of reducing in salary and SGA expenses would help improve margins in the current financial year.

Geojit Financial Services reported a strong growth in consolidated revenue of Rs. 91 cr for the quarter ended June, 2020. The company reported EBITDA of Rs. 39.90 cr up 24.2% Q-o-Q with EBITDA margins of 43.80% in Q1 FY21. EBITDA improved significantly mainly on account of increase in equity related sales which grew 23.1% Q-o-Q. The company reported PAT of Rs. 24.57 cr up 24.70% Q-o-Q basis from Rs. 19.70 cr reported in Q4 FY20.

Even though traditional broking faces headwinds with new customer acquisition lagging behind its competition Geojit Financial Services still remains a beneficiary given its largest proportion of cash business. With the surge in brokerage activity given the current environment outlook, Geojit Financial Services trades at lower valuations to its peers at 14.2x TTM earnings.

Glenmark Pharmaceuticals Ltd. reported flattish revenue of Rs. 2344.79 cr up 0.9% Y-o-Y basis. The company reported EBITDA of Rs. 478.07 cr up 39.8% Y-o-Y basis with EBITDA margins of 20.4% for the quarter ended June, 2020. EBITDA margins improved 570 bps mainly on account of cost control measures on all front. Glenmark reported PAT of Rs. 254.04 cr for the quarter against profit of Rs. 109.31 cr reported same period last year.

The management is confident of achieving revival in growth Q2 onwards in all the geographies the company operates in. However, large investments in riskier bets of ICHNOS Sciences have restricted free cash flow generations. Reduction in debt along with growth in topline would further strengthen company’s balance sheet. As the company trades at a fair valuation of 14.7x TTM earnings we opine investors to HOLD with re-rating on cards if capital raising activity in ICHNOS Science goes through.

Natco Pharma reported consolidated revenue of Rs. 563.40 cr up 14.4% Y-o-Y basis from Rs. 492.30 cr reported in Q1 FY20. Increase in revenue was on account of increase in exports and formulations business. EBITDA for the quarter stood at Rs. 171.10 cr down 10.6% Y-o-Y basis with EBITDA margins of 30.4% in Q1 FY21. The company reported PAT of Rs. 122.10 cr down 14.5% Y-o-Y basis. Profitability was impacted primarily due to lower oncology segment revenue during the quarter. Natco Pharma also declared an interim dividend of Rs. 1.25 per share for the quarter ended June, 2021.

The management is confident of achieving 25% eps growth in the current financial year based on order book and product pipeline outlook. However, sales mix in the coming quarter could impact the margins this financial year. Taking 25% eps growth values the company at 25.9x E FY21 earnings of ~Rs. 572 cr which is a premium valuation to its competitors. However, there are various green shoots such as Revlimid and other agro chemical products which put the company in better position to achieve higher profitability FY22 onwards. We opine investors to Buy based on management’s ability to carve out niche in each business segment it operates with a horizon of 18 - 24 months.

Zydus Wellness reported a topline of Rs. 537.37 cr decline of 13.4% Y-o-Y basis against Rs. 620.25 cr reported in Q1 FY20 mainly on account of supply disruptions due to the pandemic. Gross margins declined by 357 bps to 55.7% due to unfavorable revenue mix in Q1 FY21 but restricted A&P (advertising and promotion) spends limited EBITDA margin drop to 120 bps to 22.8% for the quarter ended June, 2020. EBITDA declined 17.7%Y-o-Y basis to Rs. 122.35 cr in Q1 FY21. The company reported PAT of Rs. 89.20 cr with PAT margin 16.6% in Q1 FY21.

Zydus Wellness is focused on wellness FMCG products and is a market leader in most of them with overall segment showing a high single digit growth. With the acquisition of Heinz India business, the company has created a huge goodwill on the books of Rs. 3900 cr which has resulted in lower ROE. The company trades at a premium valuation of 62.8x TTM earnings with a dividend yield of 0.30% due to its recent acquisition. Even though the company fared well during the pandemic with only 13% de-growth in sales on Y-o-Y basis the recovery is already priced in. We opine investors to HOLD and re-evaluate on regular intervals basis on how newly launched products perform.

Solar Industries reported a topline of Rs. 547.48 cr in Q4 FY20 against Rs. 672.95 cr reported in the same period last year, down 18.64% Y-o-Y basis on account of lower defence sales and lower realisations during the quarter. The company reported EBITDA of Rs. 89.71 cr during the quarter with EBITDA margins decreasing 475 bps Y-o-Y basis to 16.39% in Q4 FY20. EBITDA margins were down due to falling commodity prices and higher overhead cost. PAT was at Rs. 53.18 cr with PAT margins of 9.71% for the quarter ended March, 2020. The company also reduced their dividend per share to Rs. 6 per share in view on conserving cash during the pandemic.

Solar Industries continues to face sluggishness in the current financial year with green shoots in Defence and Overseas segment visible Q2 onwards. Even though the management has guided for a flattish growth, EBITDA margins and PAT would materially improve in FY21. The company trades at a rich valuation of 31.12x FY20 earnings of Rs. 278 cr. Even though the fundamentals of the business remain strong, we opine investors to Sell on account of premium valuations and corporate governance issue.

Auto components maker Minda Crporation reported a topline of Rs. 697.93 cr in Q4 FY20 up 3.95% Q-o-Q basis from Rs. 671.44 cr reported in Q3 FY20. EBITDA for the quarter ended March, 2020 was at Rs. 38.51 cr down 49.38% from Rs. 76.07 cr reported in Q3 FY20 whereas; EBITDA margins for the quarter declined 581 bps to 5.52% mainly on account of higher losses in KTSN business, ramping up cost of BS-IV and cost related to Covid-19. Minda Corporation reported PAT of Rs. -299.77 cr in Q4 FY20 due to impairment of KTSN business.

The management has taken steps to improve profitability by discontinuing loss making business such as KTSN and cost rationalization measures. Even though coming few quarters would face some hardship due to Covid-19 and auto industry slowdown, we believe the worst would soon be behind us and recommend investors to Buy on Dips.

HDFC AMC reported revenue of Rs. 411.49 cr Q-o-Q decline of 13.6% from Rs. 476.13 cr in Q4 FY20 mainly on account of market volatility which hit the growth trajectory. EBITDA for the quarter came in at Rs. 316.48 cr with EBITDA margins of 76.9%. The company reported PAT of Rs. 302.36 cr up 21% Q-o-Q basis for the quarter ended June, 2020.

Closing AUM improved 12.0% Q-o-Q to Rs 3,57,500 cr. on account of mark to market gain. AUM split stood at 39:61 equity to non-equity oriented schemes compared to the industry ratio of 38:62 at the end of June, 2020. Market share of closing AUM declined to 14.0% in Q1FY21 from 14.7% in Q1FY20

As ~75% of the company’s profitability depends on the equity-oriented schemes, HDFC AMC will continue on its growth path as normalcy returns when retail investors revert to saving habits post the pandemic. We believe the worst is over for the equity markets and for the Mutual Fund industry with the risk of Covid-19 factored in HDFC AMC’s stock price. At the current valuation of 39.89x TTM earnings, we opine investors to Buy on Dips as the HDFC’s strong brand name, healthy balance sheet and re-looking investment style would all help navigate through the pandemic with ease.

Granules India reported a 24.13% growth on Y-o-Y basis in revenue to Rs. 741.23 cr for the quarter ended June, 2020 mainly on account of growth in PFI (pharmaceutical formulation intermediates) and FD (finished dosage) segment. The company reported EBITDA of Rs. 183.59 cr with EBITDA margins improving 503 bps on Y-o-Y basis to 24.96% in Q1 FY21. Net profit for the quarter was at Rs. 111.45 cr resulting in a growth of 33.88% compared to same period last financial year. Granules India also declared an interim dividend of Rs. 0.25 per share for the quarter ended June, 2020.

Granules has started focusing on higher margin business like PFI and FD and has laid out a road map for capacity expansion to help aid future growth. As the company becomes one of the key players in manufacturing high volume molecules and shifts its focus to continuously improving its free cash flow generation we believe re-rating is on card. We opine to Buy on Dips as the company trades at fair valuation of 18.7x TTM earnings.

Bajaj Consumer Care reported a topline of Rs. 208.14 cr up 11.23% Q-o-Q basis from Rs. 187.13 cr reported in Q4 FY20 mainly on account of higher sales from the sanitizers. The company reported an EBITDA of Rs. 57 cr with an EBITDA margin of 28.87% for the quarter ended June, 2020. Net Profit stood at Rs. 54.24 cr in Q1 FY21 against Rs. 23.29 cr reported in Q4 FY20 clocking in a growth of 132.86% on Q-o- Q basis.

Being an FMCG company, Bajaj Consumer Care trades at a fairly cheap valuation of 13.5x earnings on ttm basis. Having a single portfolio of hair oil segment and no revenue growth over the past 5 years has hampered the investor sentiments in the past. However, with the new Managing Director in place we believe the company will again ride the topline & profitability growth in the coming few years thereby driving the higher valuations. We opine investors to Buy on Dips as the coming few quarters would be stressful but the future would be bright.

On an upper price band of Rs. 425, the company trades at 33x FY20 earnings of Rs. 65 cr which is above an industry average. The higher valuations are justified given better asset turnover ratio, working capital cycle and strong balance sheet compared to the peers. With doubling up of the capacity the company is poised for a significant long term growth; however it may face some turmoil in near term due to its exposure to textile industry which is struggling due to Covid-19. We opine investors to subscribe for the IPO for listing gains and Buy on Dips post listing for long term.

Bodal Chemicals reported a topline of Rs. 372.16 cr up 12.38% on Q-o-Q basis mainly on account of increase in Dye Intermediates and Dyestuff prices due to shut down in China. EBITDA was at Rs. 39.94 cr whereas EBITDA margins improved 379 bps Q-o-Q basis to 10.84% for the quarter ended March, 2020. The company reported PAT of Rs. 26.07 cr compared to Rs. 12.85 cr reported in Q3 FY20.

The chemical sector is expected to grow in India over long term on the back of isolating China from global trade. However, medium term outlook remains subdued as there is a demand collapse and slower pick-up of the utilisation levels.

With stretched working capital cycle, operating losses in subsidiary and muted finished product prices we recommend to Hold the stock at current levels as the company trades at fair valuation of 9.52x FY20 earnings of Rs. 86 cr

APL Apollo Tubes reported a topline of Rs. 1896.83 cr sequentially down 9.54% compared to same period last year. EBITDA for the quarter ended March 2020, came in at Rs. 119.86 cr with EBITDA margin of 6.35%. The company reported PAT of Rs. 60.79 cr in Q4 FY20, down 1.47% on Q-o-Q basis from Rs. 61.70 cr reported in Q4 FY19.

The company also announced its sales volume performance for the quarter ending June 30, 2020. It registered sales volume of 238,311 tons in Q1FY21 (61% of Q1FY20 volume and 59% of Q4FY20 volume).

With strengthening balance sheet, plans to becoming debt free, improving free cash flow and better working capital cycle; management is touching all the right points to take the company ahead. We believe the fall in demand outlook of building material segment would be recovered by market share gains from competitors and increasing infrastructure segment sales. As the company trades at fair valuation of 18.22x FY20 earnings of Rs. 238 cr we recommend to Buy on Dips.

Mayur Uniquoters reported a topline of Rs. 137.22 cr down 4.32% on Q-o-Q basis from Rs. 143.41 cr reported in Q3 FY20. EBITDA was at Rs. 32 cr with EBITDA margins improving 247 bps to 24.85% in Q4 FY20 mainly on account of better export OEM realisations. The company reported a PAT of Rs. 24 cr up 6.59% on Q-o-Q basis from Rs. 23.29 cr reported in quarter ended December, 2020. Mayur Uniquoters also recommended a final dividend of Rs. 1 per share for the quarter ended March, 2020 thereby bringing the total dividend declared to Rs. 3 per share in FY20.

Mayur Uniquoters sailed through subdued macro environment over the past two years by increasing their export sales. With the newly commissioned PU plant, the company forays into new phase of growth as it maintains its strong financial discipline. Commencement of Mercedes business in FY21 would further aid growth trajectory with other auto makers such as BMW approvals are in the pipeline. The company trades at moderate valuations of 12.76x FY20 earnings of Rs 79.7 cr however, multiple growth drivers such as commissioning of PU plant and increasing export OEM share would help company grow in double digits for next few years and a re-rating of the stock would follow. We opine to Buy on Dips with a target price of Rs. 300 valuing the company at 14x FY 22 earnings of Rs. 97 cr

CCL Products reported a topline of Rs. 267 cr in Q4 FY20 up 1% Y-o-Y basis with no impact of Covid-19. The company reported EBITDA of Rs.70 cr with EBITDA margin of 26.73%. EBITDA margin improved y 610 bps on Y-o-Y basis mainly on account of favorable product mix. Net profit for CCL Products rose 18.35% to Rs. 42.18 cr in the quarter ended March 2020 as against Rs. 35.64 cr reported in the quarter ended March 2019.

For the year ended March 2020, CCL Products reported a topline of Rs. 1,143 cr with an EBITDA of Rs. 286 cr and EBITDA margin of 25.09% and PAT of Rs. 166 cr.

CCL Products continued focus of increasing in-house brand will have fruitful result over the long term. For the short term growth company is increasing its capacity in Vietnam plant where it enjoys tax break (0% tax). Focus on volume growth, branded business and better product mix will aid profitability and EBITDA margins in FY21. However, falling green coffee prices would affect the topline and should be tracked closely. CCL Products trades at 19x FY20 earnings of Rs. 166 cr which is fairly valued. We opine to Buy on Dips as the business fundamental remains strong with the company sailing through the Covid-19 situation with ease.

Crompton reported topline of Rs. 1026 cr a fall of 15% Y-o-Y basis as against revenue of Rs. 1206 cr same period last year. The 15% decline in revenue is majorly attributed to Covid-19, whereas pre Covid-19 growth was strong at 14% Y-o-Y increase in sales for Jan-Feb 2020. EBITDA for the quarter ended March, 2020 came in at Rs. 141 cr with EBITDA margin of 13.8%. The company reported 27% decline on Y-o-Y basis in net profit to Rs. 102 cr as compared to profit of Rs. 140 cr reported a year-ago period. Given the uncertain economic outlook, the company considered it prudent not to recommend any dividend in FY20.

Crompton trades at a trailing valuation of 25.5 times. At this valuation; in the current state of affairs with subdued sales, poor government expenditure and continuous price erosion in LED industry Crompton has many challenges along the way. We believe that the slowdown in current business, tapering of industry prospects in the mid-term and re-rating of stock to factor in the complete impact of covid-19 shall further weigh heavy on the stock & hence assign a SELL rating to the stock.

Escorts reported revenue of Rs. 1,385 cr in Q4 FY20, down 16% Y-o-Y basis mainly on account of nationwide lock down as significant number of sales materialize during the Navratra festival. The company reported EBITDA of Rs. 182 cr with EBITDA margins at 13.1% in Q4 FY20. EBITDA margins expanded by 190 bps on Y-o-Y basis due to one off gain and softening of commodity prices. PAT came in at Rs. 127 cr up from Rs. 116 cr reported in corresponding quarter last year. The company also declared a final dividend of Rs. 2.5 per share during the quarter. Domestic tractor industry is a cyclical industry going through the recovery phase of the industry cycle. Good reservoir levels along with healthy signs of Rabi crop sowing are an ideal arrangement for pick up in tractor sales and we expect Escorts to be the biggest beneficiary of the same. At CMP of Rs. 810 Escorts trades at 21x FY20 earnings of Rs 471.7 cr. Also, the impact of Covid-19 on sparsely populated agrarian industry is significantly constrained at the same time a good crop and unhampered consumption of the produce shall aid rural economy and keep the agriculture ancillary business like Escorts fueled. At current valuation, with the current capital market situation we expect intermediate corrections in the stock to around 17x trailing valuations; we assign an Accumulate rating to the stock and recommend to buy on dips below Rs. 693.

For the quarter ended March, 2020 IndiaMART reported a topline of Rs. 170 cr up 3.2% Q-o-Q basis and 23.3% on Y-o-Y basis. Revenue increased on the back of increase in number of paying customers and better realisation per customer. EBITDA came in at Rs. 52 cr with EBITDA margins improving at 30.7% in Q4 FY20. EBITDA margin improved by 430 bps on Q-o-Q basis mainly on account of increase in revenue. The company reported PAT at Rs. 44.3 cr in Q4 FY20. At the current price of Rs. 2212 IndiaMart trades at 43x trailing valuation based on the FY20 earnings. With the impact of Covid-19 being material on the business that has turned operationally profitable only a couple of years ago we believe that there is room for re-rating of the stock. Business impact and valuation shrinkage continue to keep the stock price under pressure. We assign a SELL rating to the stock.