Namdev Finvest eyes eight-fold AUM growth by March 2024

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Namdev Finvest Pvt Ltd (NFPL) is eyeing an eight-fold increase in its assets under management (AUM), to touch at least ₹2,000 crore, by March-end 2024 even as it expects the recent $4.7-million fund raise to lead to a rating upgrade.

Once the Jaipur-based non-banking finance company (NBFC) — which is focused on the micro, small and medium enterprises (MSME) sector — attains the targeted AUM, it will be better placed for co-lending tie-ups with large banks, its top officials said. Its current AUM value is about ₹270 crore.

Jitendra Tanwar, MD and CEO, said the company’s USP is providing funding on time to existing as well as new entrepreneurs in the MSME segment.

NBFCs: No need to press the panic button yet

“Our turnaround time is 7-10 days. So, within 10 days we disburse money to the customer.

“We also educate our customers about the importance of using banking facilities, as far as possible, avoid cash transactions, and route payments through digital payment apps,” he said.

Tanwar said NFPL encourages those at the bottom of the pyramid to start their business and grow it.

According to CARE Ratings, the NBFC’s loan portfolio is moderately diversified with the ‘loan against property’ portfolio and SME loans (secured) comprising 80 per cent, two-wheeler loans 16 per cent, new or used four-wheeler loans 3 per cent and gold loans 1 per cent.

NBFC regulation needs to be strengthened

NFPL received private equity investment (A series) of around $4.7 million in September 2021 from Belgium-based Incofin Investment Management, via its India Progress Fund.

The company, which has operations in Rajasthan, Punjab, Delhi and Gujarat, expects CARE Ratings to take into account the capital infusion when it updates its rating, which is currently at ‘BBB-’. An ‘A’ rating will help NFPL tap the debt capital market, said a company official.

On the importance of reaching the ₹2,000-crore milestone, PH Ravikumar, Director, said that co-lending becomes meaningful when there is a minimum monthly loan origination.

“When it comes to microfinance or MSMEs, the ability of specialised NBFCs like Namdev Finvest to spot, manage and contain the risk is much better than that of large banks. NBFCs have the skill sets, local focus, and local intelligence,” he said.

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Buy This Financial Stock For +42% Upside Suggested By Motilal Oswal

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Company’s performance

According to the brokerage core to Angel’s growth strategy has been its customer acquisition initiatives wherein it has targeted the Millennial and GenZ population in tier 2 and tier 3 towns. As a result, the share of tier 2 and tier 3 towns in its gross customer additions has surged from 85% in 1QFY20 to 94% in 2QFY22. Also, the median age of these customers has declined from 34 years in 1QFY20 to 29 years in 2QFY22.

The brokerage has said Angel’s market share in F&O has jumped up from 3.3% in 1QFY20 to 21.1% in 2QFY22. While the cash segment witnessed some pressure post the margin norms implementation (market share fell from 18.2% in 3QFY21 to 13.6% in 2QFY22), the F&O segment contributes to 98% of the total retail industry ADTO has witnessed a sustained increase.

The brokerage has reported that “Angel’s market share in the F&O ADTO segment has increased sharply from 3.3% in 1QFY20 to 23.8% in 1QFY22. During 2QFY22, its market share fell to 21.1%, and the company is confident of recovering a large portion of the market share loss in due course. In the cash segment, the company’s market share increased from 13.7% in 1QFY20 to 18.4% in 2QFY21 before declining to 13.6% in 2QFY22.”

What should investors do?

What should investors do?

Motilal Oswal has reported in its research report that “During 1HFY22, Angel reported revenues of INR10b as compared to INR7.2b in FY20. We estimate the company to record a revenue CAGR of 34% for FY21-24E. The EBITDA margin is expected to remain steady at around 50% as the company has guided for sustained investments in technology and marketing with a focus on acquiring more customers and improving its activation rates.”

The brokerage has further claimed that “Over the next three years, we expect Angel’s revenues to grow at 34% CAGR and C/I ratio to remain steady at 51%. As a result, the company should deliver 38% PAT CAGR to INR7.8b in FY24E. Angel’s business is largely capital-light, and its entire revenues are cash-flow based (no accrual income). We initiate coverage with a Buy rating and a TP of INR1750 (20x Sep’23E EPS).”

The brokerage says the stock trades at FY24E P/E of 13.1x, which we find attractive in view of the company’s strong earnings growth profile. Angel’s RoE is expected to remain healthy in the range of 34-42% over the next three years.

Disclaimer

Disclaimer

The above stock has been picked from the brokerage report of Motilal Oswal. 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.



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Bitcoin, ether scale new peaks as flows pour in to crypto, BFSI News, ET BFSI

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SYDNEY – Bitcoin and ether made record peaks in Asia trade on Tuesday, with enthusiasm for cryptocurrency adoption and worry about inflation driving momentum and flows into the asset class.

Bitcoin rose as high as $68,564 in Asian afternoon trade and ether, the second-biggest cryptocurrency by market value, earlier hit $4,825.

Both have more than doubled since June and added nearly 70% against the dollar since the start of October.

“We’re getting the feeling that the market has shifted,” said Matthew Dibb, chief operating officer at Singapore-based crypto asset manager Stack Funds, pointing to a sharp pick up in demand from large investors and even pension funds.

“People are now figuring out that not having any exposure, even a small amount, is probably not a good thing moving forward, so they’re having to allocate at this price,” he said.

Market momentum has been gathering since last month’s launch of a futures-based bitcoin exchange-traded fund in the United States raised expectations of flow-driven gains.

Inflows into bitcoin products and funds have hit a record $6.4 billion so far this year, data from digital asset manager CoinShares showed, and totaled $95 million last week.

Other pieces of positive news have also helped, including plans by Grayscale, the world’s largest digital currency manager, to convert its flagship bitcoin trust into a spot-bitcoin exchange traded fund. Last week Grayscale also applied to list a “future of finance” fund that would track companies involved in the growing digital economy.

“Crypto is where the fast money is at,” said Chris Weston, head of research at brokerage Pepperstone. “(Ether) is trending like a dream and I’d be long and strong here,” he added.

“Clients are net long, with 79% of open positions held long, and I can sense the $5k party could get going soon.”

Others flagged cause for some near-term caution on bitcoin, however, as the cost of funding long positions has crept higher in recent days, according to trading platform BitMEX – sometimes a precursor to a pullback.

Still, the moves so far have carried the token more than 1680% higher from its March 2020 lows and helped lift the total market capitalisation of cryptocurrencies above $3 trillion, according to crypto price and data aggregator CoinGecko.

CoinMarketCap put it slightly lower at $2.94 trillion. Either way true believers, or “hodlers” in crypto markets terminology, have felt vindicated and remain bullish.

“They threw everything at the beast and still it moves,” said payments strategist and sometimes host of the Around the Coin podcast, Brian Roemmele, on Twitter. “Next stop: #Bitcoin $72000.”

(This story corrects spelling to Roemmele in final paragraph)



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1 Midcap Stock and Smallcap Stock To Buy As suggested By Axis Direct

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CCL Products

With a total manufacturing capacity of 35k tonnes, CCL Products (CCLP) is India’s largest maker and exporter of instant coffee.

The firm has set a target price of Rs. 430, while the stock last traded on the NSE on November 6, 2021, at a price of Rs. 381 per share. Though a 6- to 9-month investment horizon is preferable for such ideas, our recommendations may bring some profit potential even for short-term investors.

US business a key growth driver over the long term

CCLP has done well in the US markets, and management expects to become the primary supplier for one of its biggest clients, which would be a significant lift for the company moving forward.

Target and Valuation

“Management of CCLP has revised its volume guidance upwards of more than 15% for FY22 from earlier 10-15% guidance on the back of commercialization of new capacity at Vietnam. It also expects a steady improvement in EBITDA/kg. Overall for FY22 topline is likely to be driven by a combination of volume and price/mix led growth. Despite sharp rise in RM prices and other Operating Costs, CCLP maintained its EBITDA Margin at 24%+ levels on the back of improved mix and better price realization. We recommend BUY with TP of Rs. 430/share,” the brokerage has said.

NOCIL Ltd

NOCIL Ltd

The firm has set a target price of Rs. 300, while the stock last traded on the NSE on November 8, 2021, at a price of Rs. 268 per share.

Strong industry growth prospects going ahead

The Indian tyre industry’s medium to long-term prospects have improved following the impact of COVID-19, with stable demand growth. Replacement demand and the OEM segment are projected to rebound quickly. Demand from export markets is also expected to be strong. NOCIL has claimed some market share increases in the local market as demand has improved significantly.

Target and Valuation

“We revise our FY22/23/FY24 estimates downwards to factor in the near-term pressure on business and profitability. Maintain BUY with a revised TP of Rs 300/share (previously Rs 315/share) valuing it at 20x FY24E EPS,” the brokerage has said.

Disclaimer

Disclaimer

The above stocks are picked from the brokerage report of Axis Direct. 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



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HSBC exceeds China wealth hiring targets, explores India private banking re-entry, BFSI News, ET BFSI

Banking & Finance

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HSBC Holdings Plc is ahead of its hiring targets for its Chinese retail wealth management business and is exploring re-entering India’s private banking business, senior executives said, as part of its plan to make Asia and wealth key pillars of growth.

Under a strategy spearheaded by Group CEO Noel Quinn, HSBC is ploughing $3.5 billion into its wealth and personal banking business, in line with its ambition to become Asia’s top wealth manager by 2025.

“We are the leading international bank in China, so we want to squeeze that opportunity,” said CEO of Wealth and Personal Banking Nuno Matos, one of four top executives moving to Hong Kong from London this year as part of the bank’s regional pivot.

“On the private banking side, we are now in clear expansion mode,” Matos told Reuters in one of his first interviews since moving to the region.

Asia is the biggest region for HSBC, and the wealth and personal banking unit contributed 44% or $22 billion to London-headquartered HSBC’s adjusted global revenue last year.

The bank is looking to boost its mobile wealth planning service, HSBC Pinnacle, in China by having about 700 personal wealth planners by the year-end instead of the 550 originally planned, Matos said.

HSBC’s wealth management services include investments, insurance and asset management products, while private banking caters to the needs of those with investible assets of $5 million or more.

The bank had 20 people operating in China onshore private banking business at the end of last year, said Siew Meng Tan, head of HSBC Private Banking for Asia Pacific.

“By the end of this year, we will get to 64 and by the end of next year, we’ll double that,” she said.

HSBC is exploring whether to re-enter onshore private banking in India, where the ranks of the super rich are growing fast and record high stock markets have created a string of billion dollar start-ups.

HSBC exited the Indian private banking business in 2015 as part of a group strategy. The lucrative but very competitive Indian market has few foreign players.

“We want to bank mass affluent and high net worth customers. At this moment, the two major pillars we are expanding in India are insurance and asset management,” Matos said. “On the private banking side, we are not there yet and that’s something that demands a strategic decision this year.”

Currently, HSBC is focusing on catering to wealthy Indians from its global hubs in Singapore, London and the Middle East.

‘COMPELLING OPPORTUNITY’

HSBC is also looking to bulk up its Singapore and Southeast Asia presence, Matos said. In August, the bank bought French insurer AXA’s Singapore assets for $575 million.

Though HSBC has a dominant Asia presence with its retail banking, particularly in the financial hub of Hong Kong, global leaders such as UBS and Credit Suisse rule the market for wealthier clients.

Global wealth managers remain bullish about their growth prospects in China despite an unprecedented regulatory crackdown in the world’s second-largest economy.

In a global wealth report published in June, Boston Consulting Group said Asia’s wealth management revenue pools will soar faster than any other market worldwide, nearly doubling over the next five years to $52 billion.

“Asian wealth is expanding twice as fast as the rest of the world. This is a compelling opportunity for us,” said Matos, who took charge of HSBC’s newly combined division in February.

“I’m not going to re-do now our goals but what I can say is that in 2021, we will over-deliver our goals on the wealth side,” he said.

After announcing plans last year to buy out its life insurance joint venture partner in China, HSBC is also keen to gain full control of its asset management company in the country, Matos said. (Reporting by Anshuman Daga; Editing by Sumeet Chatterjee and Lincoln Feast.)



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Reserve Bank of India – Press Releases

Press Releases

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(Amount in ₹ crore, Rate in Per cent)
  Volume
(One Leg)		 Weighted
Average Rate 		Range
A. Overnight Segment (I+II+III+IV) 4,65,908.55 3.29 0.10-3.50
     I. Call Money 11,119.48 3.31 2.00-3.45
     II. Triparty Repo 3,54,304.65 3.28 2.81-3.42
     III. Market Repo 1,00,484.42 3.34 0.10-3.50
     IV. Repo in Corporate Bond 0.00   –
B. Term Segment      
     I. Notice Money** 804.85 3.27 2.50-3.45
     II. Term Money@@ 461.50 – 3.15-3.60
     III. Triparty Repo 70.00 3.30 3.30-3.30
     IV. Market Repo 150.00 2.50 2.50-2.50
     V. Repo in Corporate Bond 2,300.00 3.80 3.80-3.80
  Auction Date Tenor (Days) Maturity Date Amount Current Rate /
Cut off Rate
C. Liquidity Adjustment Facility (LAF) & Marginal Standing Facility (MSF)
I. Today’s Operations
1. Fixed Rate          
     (i) Repo          
    (ii) Reverse Repo Mon, 08/11/2021 1 Tue, 09/11/2021 2,56,290.00 3.35
    (iii) Special Reverse Repo~          
    (iv) Special Reverse Repoψ          
2. Variable Rate&          
  (I) Main Operation          
     (a) Reverse Repo          
  (II) Fine Tuning Operations          
     (a) Repo          
     (b) Reverse Repo          
           
3. MSF Mon, 08/11/2021 1 Tue, 09/11/2021 335.00 4.25
4. Special Long-Term Repo Operations (SLTRO) for Small Finance Banks (SFBs)£          
5. Net liquidity injected from today’s operations
[injection (+)/absorption (-)]*		       -2,55,955.00  
II. Outstanding Operations
1. Fixed Rate          
    (i) Repo          
    (ii) Reverse Repo          
    (iii) Special Reverse Repo~ Wed, 03/11/2021 15 Thu, 18/11/2021 1,158.00 3.75
    (iv) Special Reverse Repoψ Wed, 03/11/2021 15 Thu, 18/11/2021 291.00 3.75
2. Variable Rate&          
  (I) Main Operation          
     (a) Reverse Repo Wed, 03/11/2021 15 Thu, 18/11/2021 4,34,492.00 3.99
  (II) Fine Tuning Operations          
     (a) Repo          
     (b) Reverse Repo Tue, 02/11/2021 7 Tue, 09/11/2021 1,50,015.00 3.95
  Tue, 02/11/2021 28 Tue, 30/11/2021 50,007.00 3.97
3. MSF          
4. Long-Term Repo Operations# Mon, 17/02/2020 1095 Thu, 16/02/2023 499.00 5.15
  Mon, 02/03/2020 1094 Wed, 01/03/2023 253.00 5.15
  Mon, 09/03/2020 1093 Tue, 07/03/2023 484.00 5.15
  Wed, 18/03/2020 1094 Fri, 17/03/2023 294.00 5.15
5. Targeted Long Term Repo Operations^ Fri, 27/03/2020 1092 Fri, 24/03/2023 12,236.00 4.40
  Fri, 03/04/2020 1095 Mon, 03/04/2023 16,925.00 4.40
  Thu, 09/04/2020 1093 Fri, 07/04/2023 18,042.00 4.40
  Fri, 17/04/2020 1091 Thu, 13/04/2023 20,399.00 4.40
6. Targeted Long Term Repo Operations 2.0^ Thu, 23/04/2020 1093 Fri, 21/04/2023 7,950.00 4.40
7. On Tap Targeted Long Term Repo Operations€ Mon, 22/03/2021 1095 Thu, 21/03/2024 5,000.00 4.00
  Mon, 14/06/2021 1096 Fri, 14/06/2024 320.00 4.00
  Mon, 30/08/2021 1095 Thu, 29/08/2024 50.00 4.00
  Mon, 13/09/2021 1095 Thu, 12/09/2024 200.00 4.00
  Mon, 27/09/2021 1095 Thu, 26/09/2024 600.00 4.00
  Mon, 04/10/2021 1095 Thu, 03/10/2024 350.00 4.00
8. Special Long-Term Repo Operations (SLTRO) for Small Finance Banks (SFBs)£ Mon, 17/05/2021 1095 Thu, 16/05/2024 400.00 4.00
Tue, 15/06/2021 1095 Fri, 14/06/2024 490.00 4.00
Thu, 15/07/2021 1093 Fri, 12/07/2024 750.00 4.00
Tue, 17/08/2021 1095 Fri, 16/08/2024 250.00 4.00
Wed, 15/09/2021 1094 Fri, 13/09/2024 150.00 4.00
D. Standing Liquidity Facility (SLF) Availed from RBI$       21,695.80  
E. Net liquidity injected from outstanding operations [injection (+)/absorption (-)]*     -5,28,625.2  
F. Net liquidity injected (outstanding including today’s operations) [injection (+)/absorption (-)]*     -7,84,580.2  
G. Cash Reserves Position of Scheduled Commercial Banks
     (i) Cash balances with RBI as on 08/11/2021 6,24,964.54  
     (ii) Average daily cash reserve requirement for the fortnight ending 19/11/2021 6,34,320.00  
H. Government of India Surplus Cash Balance Reckoned for Auction as on¥ 08/11/2021 0.00  
I. Net durable liquidity [surplus (+)/deficit (-)] as on 22/10/2021 11,79,109.00  
@ Based on Reserve Bank of India (RBI) / Clearing Corporation of India Limited (CCIL).
– Not Applicable / No Transaction.
** Relates to uncollateralized transactions of 2 to 14 days tenor.
@@ Relates to uncollateralized transactions of 15 days to one year tenor.
$ Includes refinance facilities extended by RBI.
& As per the Press Release No. 2019-2020/1900 dated February 06, 2020.
* Net liquidity is calculated as Repo+MSF+SLF-Reverse Repo.
# As per the Press Release No. 2020-2021/287 dated September 04, 2020.
^ As per the Press Release No. 2020-2021/605 dated November 06, 2020.
€ As per the Press Release No. 2020-2021/520 dated October 21, 2020, Press Release No. 2020-2021/763 dated December 11, 2020, Press Release No. 2020-2021/1057 dated February 05, 2021 and Press Release No. 2021-2022/695 dated August 13, 2021.
¥ As per the Press Release No. 2014-2015/1971 dated March 19, 2015.
£  As per the Press Release No. 2021-2022/181 dated May 07, 2021 and Press Release No. 2021-2022/1023 dated October 11, 2021.
~ As per the Press Release No. 2021-2022/177 dated May 07, 2021.
ψ As per the Press Release No. 2021-2022/323 dated June 04, 2021.
Ajit Prasad
Director   
Press Release: 2021-2022/1163

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ICICI Securities Recommends This Finance Stock To ‘Buy’ For Good Returns

Personal Finance

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Target Price

The Current Market Price (CMP) of Muthoot Finance is Rs. 1661. the brokerage firms stated a Target Price for the stock at Rs. 1920, indicating a 16%, with a Target Period of 12 months (1 year).

Stock Outlook
Current Market Price (CMP) Rs. 1661
Target Price Rs. 1920
1 year return 16.00%

Company performance

Company performance

Muthoot Finance has experienced a Steady operational performance. The company’s NII went up by 14.5% YoY to Rs. 1813 crore, NIMs increased 53 bps QoQ to 13.46%. their total gold loan AUM hiked 18% YoY and 5% QoQ to Rs. 54682 crore. On the other hand, Stage-3 assets increased 63 bps QoQ to 1.85%. Muthoot Finance’s pick-up in AUM growth has been significant.

Comments by ICICI Securities

Comments by ICICI Securities

According to ICICI Securities, “Muthoot Finance’s share price has grown by ~4.7x over the past five years. We believe this is a good opportunity to play on the gold finance theme. We maintain our BUY rating on the stock.” commenting on the Target Price and Valuation, the brokerage firm states, “We value the core business (gold loan) at ~3.5x FY23E ABV and assign, 41 to subsidiaries to arrive at a target price of Rs. 1920 per share.”

The firm added, “Focus on customer addition and market expansion to aid AUM growth. Stable credit cost leading to healthier RoA, RoE at +5%, +25%, respectively. Strong asset quality, low leverage, positive ALMs and with sticky customer, base levers to aid strong operating performance.”

About the company

About the company

ICICI Securities said, “Muthoot Finance is a leading gold financier in India with overall AUM of Rs. 60,918 crore as on September 2021, of which ~90% comes from gold loans.” The company’s PAT (in line) has increased by 11% YoY and 2% QoQ to Rs. 9.94 b. Since the pandemic, the hike in gold rates has impacted the company’s business positively.

Disclaimer

Disclaimer

The above stock has been picked from the brokerage report of ICICI 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.



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This Stock Has A “BUY” Call From HDFC Securities With A Target Price of Rs 124

Personal Finance

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Q2FY22 results of Federal Bank

According to the brokerage, the Net Interest Income (NII) of the bank was up 7.2% YoY and 4.3% QoQ, the strong traction in fee income (+30% YoY) and lower provisions (0.8% of loans) have helped the net profit growth of 50% YoY and 25% QoQ and the improved funding cost and steady asset yields with changing asset mix has aided the NIMs (up 5bps QoQ at 3.2%) of the bank.

The brokerage has said “The bank had to make higher provisions for the family pension scheme (amortized over five years with a total liability of Rs180 cr). CASA grew by 18% YoY and CASA Ratio came at an all-time high level of 36.16%. Overall deposits grew 10% YoY and 1.5% QoQ. Advances for the quarter grew by a 6 quarter high of 10%YoY and 3.4% QoQ. (Agri was up 20% YoY, business banking up 11.9% YoY, commercial banking up 11.6% and retail were up 11.6%). Gold Loans registered a growth of 25.88% to reach Rs.159.76 bn. Recovery from DHFL during the quarter aided the PAT.”

HDFC Securities has said “The management has guided for Rs.18-20 bn of slippages for FY22, which suggests that total slippage for H2FY22 will be same or lower than H1FY22 (Rs.6.40 bn in Q1+ Rs.3.2 bn Q2). Further recoveries and upgrades are expected to be Rs.3-3.5 bn per quarter for H2FY22.”

Buy Federal Bank with a target price of Rs 124

Buy Federal Bank with a target price of Rs 124

In its research report the brokerage has said “On the back of a granular wholesale portfolio and its secured retail franchise, Federal Bank has reported an impressive asset quality with slippages at 1.1% and steady early-stage delinquencies. NPA % is now at a 5 year low. We have envisaged 14% CAGR in Net Interest Income and 24% CAGR in net profit over FY21-FY24E. Further, we have estimated that the loan book would grow at 12.9% CAGR over this period. We expect asset quality and NIM to improve gradually over FY21-24E.”

“The management has guided for Rs.18-20 bn of slippages for FY22. Further, it has guided for a Cost to income ratio of 52-53% in FY22 and ~50% by FY23. For RoA, guidance of 1% is by FY22 and 1.25% over the next two years. Potential value unlocking in 74% subsidiary FedFina (balance 26% held by True North) adds to the margin of safety. Fedfina is focused exclusively on small ticket size credits; LAP, gold loans, and small business lending. Their lending book is now at Rs.51 bn (vs Rs.44.92 bn as of March 31, 2021) and they are expected to grow at 25-30% a year or more. The net profit of the Company grew by 48% to Rs. 586 mn for the year ended March 31, 2021 as against Rs.395.4 bn for the year ended March 31, 2020” said HDFC Securities.

The brokerage has clarified “We feel that investors can buy Federal bank at the LTP of Rs.101.1 (1.02x Sep-23E ABV) and add on dips to Rs.90.25 (0.91x Sep-23E ABV) band. We expect the Base case fair value of Rs.111.5 (1.12x Sep-23E ABV) and the Bull case fair value of Rs.124 (1.25x Sep-23E ABV) over the next 2 quarters.”

Disclaimer

Disclaimer

The above stock has been 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.



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Buy Aditya Birla Fashion & Retail For +21% Upside Says Motilal Oswal

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Company’s performance

According to the brokerage “Consolidated revenue of ABFRL grew by 2x YoY to INR20.5b (7% beat), or 89% of preCOVID levels (2QFY20). Estimated LTL fell 11% as it saw limited store additions. TRENT clocked 25% YoY revenue growth, with a 46% addition in its area footprint.”

The gross margin of ABFRL improved significantly (590bp YoY) to 53.4% (~340bp above pre-COVID levels) on lower mark downs and a higher share of private labels. EBITDA came in 43% higher than our estimate at INR3.1b v/s an operating loss of INR76m in 2QFY21 (and INR3.3b in 2QFY20). Net profit stood at INR59m v/s an estimated loss of INR835m, according to the research report of the brokerage.

According to Motilal Oswal, “Net debt of ABFRL stood at INR8.7b v/s INR5.3b/INR12b as of FY21/1QFY22 end. The profitability and working capital unwind have reduced net debt QoQ. Lifestyle: Revenue grew by 2.2x YoY to INR11.5b (92% of pre-COVID levels), with EBITDA up by 3.3x YoY at INR2.1b. Pantaloons: Revenue grew 80% YoY to INR6.6b (27% below pre-COVID levels), with EBITDA at INR1.2b. Ethnic Wear: Revenue grew by ~5.8x YoY to INR0.6b, with an EBITDA of INR10m v/s an operating loss of INR70m QoQ and INR40m YoY.”

Buy Aditya Birla Fashion and Retail (ABFRL) at a price of Rs 350

Buy Aditya Birla Fashion and Retail (ABFRL) at a price of Rs 350

According to Motilal Oswal, the management expects a strong and sustained recovery on the back of tailwinds from the festive season and opening up of the economy after the lifting of COVID-related restrictions. ABFRL witnessed a margin improvement on an improved share of Retail and private labels, lower mark downs, and cost control measures.

“We factor in a revenue/EBITDA CAGR of 7%/16% over FY20-23E and estimate Ind AS 116 EBITDA at INR7.3b in FY23E. ABFRL has consistently improved its earnings graph, with a revenue/EBITDA CAGR of 37%/75% over FY14-19. If FY20 growth is taken into consideration, revenue/EBITDA CAGR stands at 32%/55% over FY14-20 (FY20 pre-Ind AS 116 EBITDA of INR4.5b)” the brokerage has said.

Motilal Oswal has further clarified in its research report that “We value ABFRL on a SoTP basis, rolling forward our valuation to Sep’23E. We assign an EV/EBITDA of 16x/15x to Lifestyle/Pantaloons and 1x EV/sales to other businesses, slightly upping our multiple, given the quick recovery and improving Balance Sheet. We arrive at a TP of INR350/share (from INR280 earlier). We maintain our Buy rating.”

Disclaimer

Disclaimer

The above stock has been picked from the brokerage report of Motilal Oswal. 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.



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2 Stocks To Buy For Gains Up To 40% For The Long Term

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Buy Gujarat State Petronet

Motilal Oswal Institutional Equities has set a price target of Rs 450 on the stock of Gujarat State Petronet as against the current market price of Rs 321.

“We expect spot LNG prices to return to normal levels post winter (i.e. end of FY22) as seasonal gas demand subsides, with supply constraints being resolved.

Reliance Industries has bought 8mmscmd (4.8mmscmd/3.2mmscmd in auction-II/III) of its own KG basin gas. Various companies (like GSPC, Essar Steel, and GSFC) have procured gas in two rounds of auctions. We believe substantial volume will flow to Gujarat and thus on the pipeline of Gujarat State,” the brokerage has said.

Reasons to buy the stock of Gujarat State Petronet

Reasons to buy the stock of Gujarat State Petronet

Motilal Oswal says that it reiterate its belief that volumes for Gujarat State would jump to 44mmscmd in FY23 as the company is also a beneficiary of: a) the upcoming LNG terminals in Gujarat, and b) increased demand due to focus on reducing industrial pollution (Gujarat has five geographical areas, or GAs, identified as severely/critically polluted), and c) commissioning of Mehsana-Bhatinda pipeline.

“The stock trades at 16x FY23E EPS and 10x FY23E EV/EBITDA. Investments in Gujarat Gas and Sabarmati Gas, at 25% holding discount, offer a valuation of Rs 307. Valuing the core at 7x (long term trough valuation) adjusted Dec’23E EPS of Rs 20.5 and adding the value of investments, we arrive at a target price of Rs 450 per share,” the brokerage has said.

Buy NOCIL, says Motilal Oswal

Buy NOCIL, says Motilal Oswal

According to Motilal Oswal Financial Services the management guided that the priority would be to undertake debottlenecking at existing units in the near term, while long-term planning for the next 3-5 years is under evaluation. Specialized products form 25% of the total revenue, and any new capex announcement in this category would be both realization and margin accretive.

The brokerage has also recommended buying the stock of NOCIL. The firm has set a price target of Rs 320 on the stock, which is around 23% higher from current levels.

“The management continues to believe optimal capacity utilization for the expanded capacity (of 110ktpa) would be achieved by 1HFY24. Although, being conservative, we expect the same by end-FY24 (translating to a volume CAGR of 18%). Based on the aforementioned factors, we forecast a revenue/EPS CAGR of 26%/45% over FY21-24E,” the brokerage has said.

“Valuing the company at 22x Dec’23 EPS, we arrive at Target Price of INR320. We reiterate Buy, with a decent upside on the stock. A key risk to our call would be further margin suppression hereafter if tyre import restrictions are lifted,” the brokerage has said.

Disclaimer

Disclaimer

The above stocks are picked from the brokerage report of Motilal Oswal Institutional Equities. 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.



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