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This Automobile Stock To ‘Buy’ With +29% Return In 1 Year: Motilal Oswal

November 5, 2021 root Personal Finance

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Target price

According to the firm Motilal Oswal, the current market price (CMP) of Eicher Motors is Rs. 2,522. the target price (TP) for the stock is Rs. 3,250, hence giving a +29% return in 1 year. Motilal Oswal has recommended investors to buy this stock. About the company’s growth, the firm said, it’s “Above our estimate; beat driven by higher realization.”

CMP AND TP chart


Current market price (CMP)	Rs. 2,522
target price (TP)	Rs. 3,250
Return in 1 year	29.00%

Company performance

Eicher Motors reports a consolidated revenue/EBITDA/PAT growth of 5%/flat/9% YoY and 14%/29%/57% QoQ to ~ Rs. 22.5b/ Rs. 4.7b/ Rs. 3.7b. Their revenue/EBITDA/PAT also increased by 43%/75%/ 112% YoY in H1FY22. Standalone revenue increased by 3% YoY and 14% QoQ to Rs. 21.8b (beating Motilal Oswal’s estimation of Rs. 18.95b), while gross margin declined by 130bp YoY (+40bp YoY) to 41% (est. 40%). They have doubled their revenue from accessories, and expanded their network in the international market, by adding 9 exclusive stores (149 outlets in total) and 3 new multi-brand outlets (over 650 stores). Eicher Motors also added 14 new studio stores (1,052 stores in total) and 20 large stores in the domestic market (1,053 stores in total).

Motilal Oswal’s estimation

The firm said Eicher Motors’ EIM’s beat in performance has been driven by growth in RE realization and lower staff cost. With supply chain issues showing some signs of improvement, the company is expecting volume performance to be better in H2FY22. Export focus and revenue from accessories are also helping RE improve the company’s realization.

According to Motilal Oswal’s estimation, “We cut our FY22E consolidated EPS by 5% to account for lower volumes in FY22E while maintaining our FY23E earnings estimates. We maintain our Buy rating with a target price of Rs. 3,250/share (Mar’23E SoTP).”

Disclaimer

The above stock is 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 Recommended By Motilal Oswal For Good Returns In 1 Year

November 5, 2021 root Personal Finance

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Buy Eicher Motors with a target price of Rs 3,250

Eicher Motors Limited, headquartered in New Delhi, is an Indian global automobile firm that manufactures middleweight motorcycles and is also the listed parent of Royal Enfield.

Company’s performance according to the brokerage

The consolidated revenue/EBITDA/PAT grew 5%/flat/9% YoY and 14%/29%/57% QoQ to ~INR22.5b/INR4.7b/INR3.7b. Revenue/EBITDA/PAT grew 43%/75%/ 112% YoY in 1HFY22. Standalone revenue grew 3% YoY and 14% QoQ to INR21.8b (est. INR18.95b), while gross margin declined by 130bp YoY (+40bp YoY) to 41% (est. 40%). Gross profit per unit was the highest ever ~INR72k.

The company’s all recent product launches of Royal Enfield has seen huge success, hence the brokerage has said “We expect 25% volume CAGR (FY21-23E), which would drive margin recovery (by 400bp) to 24.8% by FY23E and standalone PAT CAGR by ~56%.”

What should investors do?

Motilal Oswal has said “We cut our FY22E consolidated EPS by 5% to account for lower volumes due to the ongoing semiconductor shortage while maintaining our FY23 earnings estimate. Demand for RE demand is expected to recover on the back of new launches and ongoing expansion in the international market. After witnessing severe headwinds over the last 24 months, we expect volumes to grow hereafter. The recent launches could be an inflection point for RE as a completely new and improved platform could drive a revival. VECV would see a cyclical recovery in volume and profit, in turn boosting consolidated PAT CAGR to 61%. The stock trades at 35.5x/19.2x FY22E/FY23E consolidated EPS. We maintain our Buy rating, with a TP of ~INR3,250/share (Mar’23E based SoTP).”

Buy Bharti Airtel with a target price of Rs 860

Bharti Airtel Limited is a multinational telecommunications firm with operations in 18 Asian and African countries. The firm, which is headquartered in New Delhi, India, is one of the top three cellular telecommunications providers in the world by customer base.

Company’s performance according to the brokerage

According to Motilal Oswal. Bharti posted a strong 2QFY22, with consolidated EBITDA up 6% QoQ (above our estimate) on India Mobile/Africa EBITDA growth of 6%/5%, led by a 5% increase in India Mobile ARPU. The brokerage has said Bharti Airtel’s consolidated revenue grew 5.5% QoQ to INR283.2b, consolidated EBITDA grew 6.4% QoQ (in-line) to INR138.1b on healthy all-around revenue growth and 330bp margin improvement, led by the nonWireless India business. The company has also reported net profit stood at INR11.3b and excluding exceptional costs, net profit after minority interest stood at INR5.9b (est. INR6.8b).

The brokerage has also said “Capex remained high at INR65.9b (INR241b in FY21). FCF, post interest, declined to INR17.1b v/s INR 22.7b QoQ due to higher taxes. Despite the healthy FCF, net debt (excluding lease liability) continued to increase by INR48.3b to INR1,313b due to reclassification of accrued interest capitalization. Including lease liability of INR349b, net debt stood at INR1,662b, with net debt-to-EBITDA ratio of 2.9x on a 2QFY22 basis, down from 3x QoQ.”

What should investors do?

The brokerage has said “We expect 20% CAGR in consolidated EBITDA over FY21-23E on the back of 23% CAGR in Mobile India EBITDA. While the street has been concerned about the timelines of a potential tariff hike, we believe strong earnings growth can be achieved even without a tariff hike. We see the potential for a re-rating in both the India and Africa businesses on the back of steady earnings growth. We value Bharti on a Sep ’22E basis, assigning an EV/EBITDA of 11x/5x to the India Mobile/Africa business, arriving at a SoTPbased TP of INR860. Our estimates do not factor in any upside from a tariff hike or steep market share gains from VIL’s financial stress. We maintain our Buy rating.”

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Motilal Oswal Recommends This Telecom Stock To ‘Buy’ With +21% Returns In 1 Year

November 5, 2021 root Personal Finance

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Target price

The current market price (CMP) of Bharat Airtel is ~ Rs. 713, and According to Motilal Oswal, the target price (TP) for this stock should be Rs. 860. Hence, it will give a return of +21% in 1 year. The firm says this company has reported steady growth, and they are gaining market share. The brokerage firm has rated this stock as ‘Buy’.

Current market price (CMP)	~ Rs. 713
Target price (TP)	Rs. 860
Return in 1 year	21.00%

Company performance

Bharati Airtel has posted strong Q2FY22 results, with consolidated EBITDA up 6% QoQ, to Rs. 138.1b (which has been above Motilal Oswal’s estimate) on India Mobile/Africa EBITDA growth of 6%/5%, led by a 5% increase in India Mobile ARPU. Bharati Airtel’s Consolidated revenue grew 5.5% QoQ to Rs. 283.2b on strong performance across segments, particularly the India business. Their reported net profit also stood at Rs. 11.3b. The brokerage firm said, “It expects 20% consolidated EBITDA CAGR over FY21- 23E, along with tariff/consolidation to drive FCF/deleveraging. We maintain our Buy rating.”

Motilal Oswal’s estimation

Motilal Oswal, maintaining a ‘Buy’ rating on the company’s stock said, “We see the potential for a re-rating in both the India and Africa businesses on the back of steady earnings growth. We value Bharti on a Sep’22E basis, assigning an EV/EBITDA of 11x/5x to the India Mobile/Africa business, arriving at an SoTP based TP of Rs. 860. Our estimates do not factor in any upside from a tariff hike or steep market share gains from VIL’s financial stress.”

However, Motilal Oswal, also mentioned the company’s negative points by mentioning, “High Capex and spectrum spend limiting FCF growth/deleveraging: Capex continued to increase to Rs. 70b (Rs. 135.6b/ Rs. 241b in 1HFY22/FY21). FCF, post interest, grew to Rs. 22b (v/s INR17b QoQ), although this is much lower than the company’s potential. Along with an Rs. 105b increase in deferred spectrum liability, this has increased net debt by Rs. 48.3b to Rs. 1,313b.”

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Raamdeo Agrawal | Stocks to buy: PSU banks or private sector banks or fintechs? Raamdeo Agrawal explains, BFSI News, ET BFSI

November 5, 2021 root Personal Finance

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PSU banks are good trade but if I want to buy and hold for 10 years, I would go for private sector and some big PSU banks. But the real finance sector game is going to be private sector banks and that too some of the newer private sector banks where book is very small say Rs 20,000, 30,000, 40,000 crore, says Raamdeo Agrawal, Chairman, Motilal Oswal Financial Services.

Where would you put the entire PSU pack? Is it going to be a pool which is going to give you parabolic returns, is it a pool which is going to give you low return or no returns? The government’s conviction about Air India privatisation and how quickly the disinvestment secretary corrected the convenience fee faux pas in IRCTC in less than 12 hours, what is your view on PSUs?
Yes, that is a positive aspect of that entire incident. PSUs are wonderful companies — mostly monopolistic or duopolistic. They are dominant players in the economy and their underlying value is very high if there is a bit of entrepreneurship and hands off approach to these companies.

The PSUs as a basket should give at least the market return. I do not think it will underperform the way it underperformed in the last 10 years and there is a good chance that it might even outperform because the valuations have been completely pessimistic even till date so as the economy recovers because they are mostly not export oriented. They are proxies to the Indian economy. I think they will do well if the policy remains encouraging and there is no interference in their affairs. I am quite sure eventually some optimism will come back in their counters. A little bit of rerating from 7-8 PE multiple to a 9-10 can take care of their market performance or even a bit of outperformance.

Also Read: Bull run is getting bigger! There are 70 million bulls in the market now

What should be the best way to participate in the financial space? Currently there are two very diverse views in the market. One view is supporting the comeback in PSU banks and one view is favouring technology and fintechs?
Fintech has a niche typically in unsecured lending and mass lending — 5,000, 10,000, 100,000 buy today pay tomorrow or buy now pay later. Basically it is unsecured. The moment you talk about security, you have to go on the ground and become non-digital; taking care of the collateral is a non-digital process mostly. So, that is a one small segment.

I do not think mainstream banking is yet threatened by fintech companies broadly. In mainstream banking there is a public sector, there is a private sector. In the next two-three years, when the economy recovers and the credit cycle changes and credit cost cycle goes in the reverse, public sector banks will also do well. But they are a trade in the sense they are good till the recovery process is complete. That may be the next two years-three years. When the credit cost is the lowest, they will show the highest profit but after that, they will keep losing the market share to private sector banks. But private sector banks are not as cheap as the public sector banks right now.

So if I want to buy and hold for 10 years, I would rather buy private sector and at the margin some public sector banks like the big ones one. They are trading at below one book and then after that, real finance sector game is going to be private sector banks and that too some of the newer private sector banks where book is very small say 20,000, 30,000, 40,000 crore. They can grow at a rapid pace in a given opportunity.

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Paytm signs up over 100 institutional investors for IPO

November 5, 2021 root Banking & Finance

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Ant Group-backed fintech firm Paytm said it has allocated shares worth ₹82.35 billion ($1.11 billion) to more than 100 institutional investors,including the government of Singapore, ahead of what is expected to be India’s largest stock market listing.

Paytm’s offer of up to ₹183 billion, which was increased last month from ₹166 billion, garnered interest from 122 institutional investors who bought more than 38.3 million shares for ₹2,150 apiece, according to a regulatory document dated November 3.

BlackRock Global Funds, Canada Pension Plan Investment Board and Abu Dhabi Investment Authority were among the investors.

Launched a decade ago as a platform for mobile recharging, Paytm grew quickly after ride-hailing firm Uber listed it as a quick payment option. Its use swelled further in 2016 when a ban on high-value currency bank notes in India boosted digital payments.

Also read: We have priced the IPO rationally, says Paytm chief

Paytm has since branched out into services including insurance and gold sales, movie and flight ticketing, and bank deposits and remittances.

The company’s offering will open on Monday and top investor Ant Financial, with a 27.9% stake in Paytm, plans to sell shares worth ₹47.04 billion.

Several companies including Paytm have tapped capital markets this year in a fund-raising frenzy on the back of record highs hit by the Indian stock market, which has outperformed Asian peers so far this year.

In India, 157 companies including TPG-backed Nykaa, Oyo Hotels and Rooms and online insurance aggregator Policybazaar have raised $17.22 billion via IPOs this year as of October 31,compared with $8.54 billion raised by 49 companies in the same period last year, according to Refinitiv data.

Paytm’s IPO is likely to be the biggest in the country’s corporate history, breaking a record held by Coal India Ltd, which raised ₹150 billion more than a decade earlier

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7 Stocks To Buy As Recommended By The Bulls And Bears Report

November 5, 2021 root Personal Finance

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SBI and Canara Bank

Among the PSU banks, Motilal Oswal is bullish on the stocks of State Bank of India and Canara Bank.

According to the Bulls & Bears (November 2021): India Valuations Handbook, PSU Banks are trading at P/B of 0.9x, near the historical average of 0.8 times.

“Overall, we believe the earnings of PSU banks are set to rebound strongly. Along with improving asset quality trends, this would enable healthy CAGRs in ABVs over FY21-24E – compared with muted growth, or even decline, witnessed in many of them in prior years. We estimate PSU banks to deliver early double-digit RoE by FY23, while valuations remain undemanding (except for State Bank of India).

SBI remains top pick in the sector. We resume coverage on Canara Bank with a BUY rating,” the report says.

Stocks to buy from the technology sector

From the technology sector, Motilal Oswal likes the stocks of HCL Tech and Infosys, Zenstar Technologies, L&T Technology and Cyient.

“We believe largecap companies are better placed to absorb the supply pressure given their capabilities in training employees in newer skills. Among the Tier I players, we like INFO and HCL Technology on the expectation of industry-leading growth. From the Tier II pack, we prefer LTTS, CYL, and ZENT given their attractive and industry-relevant portfolios,” the brokerage has said.

Earning season broadly in line

According to Bulls & Bears (November 2021): India Valuations Handbook, the 2QFY22 earnings season has thus far been above estimates, benefitting from a) strong growth in the Technology sector, b) steady recovery in loan growth as well as recovery and an upgrade in the asset quality of most private sector banks, c) higher commodity prices and volume growth in the Energy and Metals sectors, and d) the economic unlock driving growth in Consumer and Retail.

“Nifty profits for the 34 companies that have posted their results have grown 22% YoY (v/s exp. of 13% growth). On the other hand, for the 127 companies in our Motilal Oswal Financial Services Universe, profit growth stands at 26% YoY (v/s exp. of 19% growth),” the report said.

Disclaimer

The above stocks are 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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Whistleblowers raise loan evergreening issue at IndusInd arm, BFSI News, ET BFSI

November 5, 2021 root Banking & Finance

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Acting as whistleblowers, several people, including a group of senior employees of the IndusInd Bank arm, Bharat Financial Inclusion (BFIL), have alerted the Reserve Bank of India (RBI) and the board of the private sector lender about lapses in governance and accounting norms to allegedly ‘evergreen’ loans running into thousands of crores since the outbreak of Covid-19.

According to them, if the IndusInd management is unable to quickly correct the practice of “adjusting new loan money with overdues from earlier loans”, the subsidiary BFIL would eat into the financials of the parent. These alleged transactions to dress-up the books have damaged the micro-lending business built over the years and could even trigger political backlash, the group warned in at least two emails to IndusInd’s Bank CEO Sumant Kathpalia, some independent directors and RBI officials between October 17 and 24.

IndusInd took over the micro-finance lender BFIL – formerly SKS Microfinance – in a stock deal in March 2019.

Kathpalia did not respond to queries from ET. An official of a PR agency hired by the bank said, “The bank has received complaint from anonymous person(s). The bank has a well established policy to deal with such matters and the veracity of the allegations/complaints are being assessed. While management review is in progress, the bank has yet not come across any material findings that warrant immediate action on any count (sic).”

Two persons familiar with the developments said that on October 14, there was a separate whistleblower complaint from an ‘outsider’ to RBI, saying that suggestions to set up risk management and audit committees for BFIL were ignored as the unlisted micro-lending subsidiary of IndusInd was not required to meet Clause 49 conditions of the listing agreement. It also talked about “process lapses” in extension of loan contracts, cash disbursement and accounting practices.

BFIL’s Former Non-Exec Chair Raised Red Flags
Micro-lending companies disburse loans through banking channels but collect cash while recovering loans. Cash collection for most micro-finance companies dropped due to the pandemic, particularly during the second wave.

Significantly, a month before the October 14th whistleblower complaint, non-executive chairman of BFIL M R Rao stepped down. In his September 15th resignation letter to board members, Rao, who had been the CEO of BFIL (SKS), said, “…I am aware that RBI has raised issues with respect to BFIL particularly the 80,000 loans given in May 2021, without customer consent. This is a point on which I expressed deep concern in the board and in fact demanded a third-party audit too. To me it appears to be not a process lapse but a deliberate act to shore up repayment rates. I had warned the board too about the serious consequences…”

Rao did not respond to ET’s queries and declined to confirm whether he was among the whistleblowers. S Dilliraj, former president of the company who has worked with Rao for years, also declined to comment. Rao has asked the board to cancel the non-compete agreement he has with the company.

A person who identifies and declares himself as a ‘whistleblower’ before RBI expects a degree of legal protection. Also, the regulator does not disclose the identity of the whistleblower.

While an IndusInd Bank official said that the bank had stepped up provisioning on its portfolio of micro loans, one of the whistleblower emails alleged that two senior officials of BFIL, who were primarily responsible for hiding non-performing loans, have been threatening employees and tracking their call records to restrain them from talking about the matter. Another email said that the government’s ECLGS scheme, which was intended to provide emergency line of credit in the wake of the pandemic, was used to “adjust arrears instead of giving credit to customers.”

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SBI expects uptick in capacity utilisation; steel and Iron to contribute more, BFSI News, ET BFSI

November 5, 2021 root Banking & Finance

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SBI Chairman Dinesh Kumar Khara sees significant improvement in India Inc’s capacity utilisation by the next quarter saying that major additions are expected in sectors like iron, steel, oil and metals.

“There is a clear availability of demand. Demand (is) coming in and capacity augmentation is happening. And I hope by the end of the current quarter or next quarter, there should be significant improvement in capacity utilisation…The major (capacity addition) is in the iron and steel sector. Oil companies might also start availing working capital limits, and the metal sector is also seeing an uptick, so capacity addition is expected in that sector,” said Dinesh Khara, Chairman SBI in a virtual press conference following SBI’s Q2 financial results.

Khara shared that the lender has currently unutilised term loans to the corporate to the extent of 27 per cent,and while working capital limits in large corporates is unutilised to the extent of 50 per cent. Khara said it is not possible to articulate when corporate book growth will come back but he added he expects unutilised capacity to reduce to roughly 30 per cent in the subsequent quarters.

SBI Chairman also said the lender is not losing any such business to mutual funds due to prevailing excess liquidity in the system, indicating corporates in the present low interest rate environment would prefer banks when scaling up their investments.

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SBI chief, BFSI News, ET BFSI

November 5, 2021 root Banking & Finance

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Mumbai: SBI chairman Dinesh Khara has said that the bank has full confidence in the judiciary and that former SBI chairman Pratip Chaudhury would be released unconditionally soon. He also said that the banking community, through the Indian Banks’ Association, has taken up the matter with the government.

“The arrest of Mr Chaudhury is extremely unfortunate. There have been several reactions in the public space of the banking community as well as previous chairmen. It appears that an opportunity was not given to him to be heard before the arrest. We have utmost faith in the country’s judicial system and are confident that he will be released unconditionally at the earliest,” Khara told reporters here on Wednesday.

Banking sources said that the complainant in the same case had filed a false FIR against the resolution professional (RP) who had been appointed to take charge at the defaulting company. This had resulted in a landmark judgment that said a case against the RP can be filed only with the Insolvency and Bankruptcy Board of India (IBBI).

Khara denied that there were any irregularities in the sale of the loan by SBI. “As far as SBI is concerned, we adhere to the best practices in corporate governance and there has been no irregularities in the instant case and the prescribed rules and process were followed by the bank in dealing with this account.” Khara indicated that the decision on the sale of the NPA was unlikely to have been taken by Chaudhury. “Issues of this magnitude are invariably dealt with at a local level and the top management of the bank, including the chairman, are not involved in decision making. We have got the structure in place and we are confident that people across the hierarchy can take decisions in such matters,” Khara said.

Banking sources said that the complainant in this case was politically connected. They said that it appeared to be a premeditated case as most of the higher courts are on vacation for Diwali.

Meanwhile, SBI sources said that the valuations mentioned in the order are irrelevant as the properties were not sold by the bank. They said that the bank had sanctioned a term loan of Rs 24 crore and a cash credit limit of Rs 1 crore was sanctioned in 2008 and the loan had to be restructured within a year itself. Despite restructuring, the loan turned into a non-performing asset in 2010. This prompted the bank to send a recall notice for Rs 34 crore in 2012 and a suit was filed in the debt recovery tribunal in 2013 for Rs 40 crore.

As the bank was not successful in attaching the property under the Securitisation Act, the loan was sold to Alchemist Asset Reconstruction Company (ARC) for Rs 25 crore in 2014. The ARC too could not recover the loan and finally invoked the IBC.

The promoters had filed an FIR against the RP, who was arrested. It was in this case that the landmark order was passed requiring complaints against the RP to be filed only with the IBBI. Banking sources said that both NCLAT and the Supreme Court have passed strictures against the promoters.

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Former SBI chairman hospitalised after spending a day in jail, BFSI News, ET BFSI

November 5, 2021 root Banking & Finance

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Jaipur, Former SBI chairman Pratip Chaudhary, jailed in the loan scam, has been admitted to Jawahar Hospital after he complained of restlessness, officials said on Thursday morning.

“He was brought to Jawahar Hospital on Wednesday evening after he complained of restlessness and hypertension in jail,” they added.

Chaudhary was jailed on Monday evening after the CJM Court of Jaisalmer ordered him to be sent to judicial custody for 14 days in the loan scam case.

Jawahar Hospital’s Principal Medical Officer JR Panwar said that Chaudhary is suffering from hypertension and undergoing treatment.

The former SBI chairman has been accused of misusing his position to sell Jaisalmer’s Hotel Fort Rajwada against the rules.

The CJM Court of Jaisalmer issued an arrest warrant against him.

On Sunday, the Jaisalmer Police nabbed him from Delhi and brought him to Jaisalmer.

The following day, the court ordered to send him to judicial custody for 14 days.

–IANS

arc/shb

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