Author: root

1. Buy Nuvoco Vistas for a target price of Rs. 827, upside of 54%

The brokerage firm is bullish on the Nirma Group company i.e. the largest cement company in East India in terms of capacity and sees it to have a potential upside of 54 percent, having set a target price of Rs. 827 per share.

Buy call has been initiated given the company’s strengthening of its leadership:

The company has consolidated its position in the East and grown inorganically to become the sixth leading cement company in the country. “A large retail presence in the high-growth east region buoyed its operating margin during FY20-21. It should further expand to Rs. 1,177/MT in FY23E, riding on cost initiatives and synergy benefits from the integration of the recently acquired NU Vista (erstwhile Emami Cements)”, adds the brokerage. The other acquisition way back in 2016 of Lafarge Cement also helped.

Triggers abound to help the company in scaling up its operating margin:

The company is working to strengthen its low cost power consumption share to result in cost savings. Also, the acquisition of NU Vista into the company and focus on boosting its blended cement manufacturing is seen to unlock another Rs. 200/mt of of unitary EBITDA by FY23E. These moves along with healthy pricing should drive up consolidated unitary EBITDA by NR 235/MT by FY23E, despite factoring in fuel cost inflation and the impact of accelerated capacity additions by competitors.

Post IPO, balance sheet is healthy:

The huge inflow of Rs. 1500 crore from the proceeds of the just concluded IPO helped the company to de-stretch its balance its balance sheet. The brokerage adds that additionally from “strong operating cash flow outlook, and lower Capex outgo, we estimate its net debt/EBITDA to cool off to below 1x FY23E onwards vs ~4x during FY17-21. We estimate its debt reduction to continue despite its ongoing 8/15% clinker/cement expansion by FY23E and despite factoring in Capex acceleration towards the Karnataka greenfield plant by late FY25E.”

Strong performance to drive multiple valuation re-rating

“We like Nuvoco for its balance sheet turnaround after two mega acquisitions and robust operating performance, led by structural revenue and cost triggers. We initiate coverage on the stock with a BUY rating and target price of INR 827/sh (11x its Sep’23E consolidated EBITDA). In our view, Nuvoco’s continued strong performance should drive valuation multiple rerating”, adds the brokerage.

2. Gujarat Narmada Valley Fertilizers- Buy for 21% gains

It is a technical positional pick by the brokerage firm for a short term, wherein the brokerage suggests a buy in the stock for a target of Rs. 465, from the current levels of Rs. 383, implying upside of Rs. 21.41 percent. Stop loss for the trade is suggested at Rs. 332 per share.

Observations:

Downward sloping channel breakout is seen on the daily charts. Price breakout is accompanied by jump in volumes. Stock has been holding levels above its medium to long term moving averages. Inverted head and shoulder breakout is seen on the daily charts Indicators and oscillators have turned bullish on daily and weekly charts Short term moving averages are trading above medium to long term moving averages. These are some of the observations considering which the stock has been given a ‘Buy’ for 21 percent gains.

Gujarat Narmada Valley Fertilizers & Chemicals Limited.(GNFC), is a joint sector enterprise promoted by the Government of Gujarat and the Gujarat State Fertilizers & Chemicals Ltd.(GSFC). Set up in Bharuch, GNFC draws on the resources of the natural wealth of the land as well as the industrially rich reserves of the area. The company at first set up its largest single-stream ammonia-urea fertilizer complexes.

Disclaimer:

The above stocks are picked from the brokerage report of HDFC Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.

According to Mundra, it is very important for banks to have a ‘very hard look’ at the traditional models which banks have been pursuing.

While the process of re-imagination of business models for banks has already started, the banks should not ‘try to imitate’ fintech companies in totality as it is not the right approach, former RBI deputy governor S S Mundra said on Tuesday.

Growingly, it is looking like banks are evolving as the fintech companies, which also do the business of accepting deposits and do lending, Mundra said while speaking at the 14th edition of the Banking Colloquium, organised by CII.

“Banks have to be conscious that fintech companies are compact entities, they are nimble. So, banks trying to imitate a fintech company in its totality, to my mind is not a right approach and it is not a right business model,” he pointed out.

According to him, it would be beneficial for both the banks and the fintech companies to have a meaningful cooperation, and in this way, both can leverage their respective strengths. “So it is that situation where there is a competition, but there is a cooperation.”

Mundra said fintech companies have the strength of being nimble and innovative, while banks have the advantage of having good resource bases, reach and trust of the customers. “So, these things can be complementary and to the advantage of both,” he emphasized.

The former RBI deputy governor said both banks and fintech companies ‘should avoid the temptation’ of introducing too many products and too many processes, whether it is by way of collaboration or in-house, in short intervals.
“My personal observation and experiences are it leaves both their important constituencies confused. And, the important constituencies are their own staffs and their own customers,” he said.

According to Mundra, it is very important for banks to have a ‘very hard look’ at the traditional models which banks have been pursuing.

“I am not suggesting that branches should go away but there is a need to reimagine the business model. One has to see which are the branches that are loss making and which are the branches that are contributing positively, which are the branches which can be downsized and which branches can be completely done away with and where you can rely completely on technology and where you can rely on agency arrangement,” he said, adding for every bank it was important to do a complete holistic assessment of their branch networks and how to derive maximum value from this.

On corporate lending, he said banks should not sell only products to a corporate as most corporates are now expecting ‘solutions’ from the banking system. “So if you only focus on products you will only end up making some topline, but it will not add to your bottomline. So you need to adopt a solution-based approach if you want to do corporate banking,” he added.