2 Stocks To Buy From IDBI Capital For Good Returns of +24% to +25%

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2QFY22 results of Britannia Industries

IDBI Capital in its research has said that “Britannia (BRIT) 2QFY22 result was below our estimates. Revenue growth at 6%YoY on a high base of 12% is healthy. However, a steep contraction in gross margin led to a higher than expected decline in PAT. Positively, BRIT expects to offset the impact of inflation both by taking price hikes (to the tune of 1/3rd) and grammage reduction (2/3rd) by the end of FY22. During 2QFY22 BRIT has taken a 4% price hike and expects benefit from grammage reduction to flow in 2HFY22.”

The brokerage has also clarified that “Distribution expansion is tracking well. BRIT expects rural to outperform urban through distribution expansion and penetration. In rural; market share gains stood at 2.5x vs urban during 2QFY22. Modern trade grew 10% higher than traditional channels. However, the company expects lower volume growth due to inflation and reduction in grammage during 2HFY22.”

Key highlights and investment rationale for Britannia Industries according to IDBI Capital

Key highlights and investment rationale for Britannia Industries according to IDBI Capital

Domestic business remained resilient: Consolidated revenue grew 6%YoY (on a base of 12%YoY in 2QFY21) driven by 6%YoY growth in the domestic business while revenue from subsidiaries (consolidated less standalone) declined 5%YoY. BRIT has taken a 4% price hike during the quarter. In the international market; Nepal grew in high double digits led by market share gains.

Inflationary raw material impacts operating margins: Gross margin contracted 502bp to 37.5% driven by material inflation in palm oil (54%YoY), industrial fuel (35% YoY) and packaging material (30%YoY). EBITDA declined 17%YoY to Rs 5.6bn. A decline in Adjusted PAT at 23%YoY is higher due to Rs 350mn tax benefit in the base quarter.

Maintain BUY: As per the revised business outlook on inflation; we have trimmed our EPS estimate by 6- 13% in FY22-23E. We have introduced FY24E in our estimates. We maintain our bullish view on the company. Our revised TP stands at Rs 4507 with a BUY rating.

Q2FY22 results of RITES

Q2FY22 results of RITES

According to the brokerage’s research report “RITES (RITE) Q2FY22, PAT came 14%/ 20% higher than our / consensus estimate. Beat in the result is led by better execution (revenue) in the Export segment, as shipment of the orders has commenced. Here revenue stood at Rs3410mn vs Rs7mn QoQ vs nil YoY, RITE expects its FY22E revenue and PAT to reach FY20 levels and FY23E to witness growth in the business. Q2FY22 order inflow is at Rs2.6bn and Order book at Rs64bn equals 3x TTM Revenue.”

IDBI Capital has stated in its research report that “RITE has announced a second interim dividend of Rs4/sh for FY22 and till date dividend announced is at Rs6 for FY22. We have introduced FY24E financials and rolled forward TP to FY24E at Rs369 (valued at 12x PER). Maintain BUY rating on the valuation (trades at its historical average at 10x FY24E EPS) and a dividend yield of 7-8%.”

Key highlights and investment rationale for RITES according to IDBI Capital

Key highlights and investment rationale for RITES according to IDBI Capital

Q2FY22 Snapshot: Q2FY22 Revenue stood at Rs7.6bn (+72%YoY / +113% QoQ). This is led by better higher Exports revenue at Rs3.4bn vs Rs7mn QoQ. Consultancy / Leasing execution was up 5% /22% YoY at Rs2.6bn / Rs0.3bn. Consolidated EBITDA margin stood at 28.6% vs 29% YoY and was higher QoQ of 27.3%. EBITDA increased by 69% YoY at Rs2.1bn. PAT stood at Rs1.7bn (+32% YoY / +124% QoQ).

Order book provided visibility: H1FY22 Order book is at Rs64bn (equals 3x TTM Revenue) comprising of Consultancy /Exports/ Lease/ Turnkey/ REMC at Rs2.5bn /Rs10bn/ Rs1bn/ Rs28bn/ Rs1bn. New opportunity is expected from metro consultancy order and 2-3 international orders of USD100mn each.

Segmental composition: With Exports back on track, RITE is aiming for Rs7-7.5bn revenue in FY22E. Consultancy segment is growing and RITE expects revenue to increase at 10% pa over the next 3-4 years. For Turnkey segment, the company expects revenue to improve on QoQ and stabilize in Q4FY22. Going forward, the company is targeting to improve margins at ~3% for turnkey.

Disclaimer

Disclaimer

The above stocks are picked from the brokerage report of IDBI Capital. 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 This Large Cap Stock With Upside Potential Up To 25%: ICICI Securities

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NMDC: Q2FY22 Results

In Q2FY22, NMDC reported a strong performance.

  • NMDC reported iron ore sales volume of 9.0 million tonnes (MT) in the third quarter, up 36% year over year but down 5% quarter over quarter (in line with our expectation of 8.9 million tonnes). EBITDA/tonne was Rs 3488/tonne, exceeding our forecast of Rs 3000/tonne Rs 4421/tonne in Q1FY22).
  • Revenue from operations for the quarter was Rs 6794 crore, up 205 percent year over year and 4 percent quarter over quarter, exceeding our forecast of Rs 5944 crore. EBIDTA for the quarter was Rs 3115 crore, up 202 percent year over year but down 25 percent quarter over quarter, exceeding our forecast of Rs 2679 crore.

NMDC: Target and Valuation

NMDC: Target and Valuation

“NMDC’s share price has given a return of ~54% over the last 12 months (from ~| 91 in November 2020 to ~| 140 in November 2021). We maintain our BUY rating on the stock Target Price and Valuation: We value NMDC at Rs 175, based on SoTP valuation,” the brokerage has said.

Key triggers for future price-performance:

The Nagarnar steel factory is expected to be operational in Q4FY22, according to NMDC. NMDC has provided volume guidance of 44 MT for FY22E. NMDC has set a capex budget of Rs 3750 crore for FY22E.

Alternate Stock Idea

The brokerage also favours Hindalco in their metal sector coverage. Hindalco is the world’s largest aluminium corporation in terms of sales, as well as a major copper player. BUY with a Rs600 target price

Disclaimer

Disclaimer

The above stock has been picked from the brokerage report of ICICI 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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This Pharma Stock Is Given A ‘Buy’ By ICICI Direct For 21% Gains In 12 Months

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Buy IPCA Laboratories for a price target of Rs. 2490

The fully integrated pharma entity manufactures more than 350 formulations and 80 APIs. In Fy21, exports accounted for 50% of the company’s revenues. The company’s leading therapeutic domains cover pain management, cardiovascular and anti-diabetics, anti-infectives, anti-malarials that on a whole contribute to 75% revenues.

Q2FY22 Results:

Q2FY22 Results:

Despite the challenges the company reported a decent September quarter of Fy22 period. Sales came in higher by 13.5% YoY to Rs. 1544.4 crore. EBITDA also registered a surge of 1.5% YoY at Rs. 365.6 crore

with margins at 23.7%.Furthermore, PAT was at Rs. 250.2 crore (down 6.3% YoY).

Target Price and Valuation:

Target Price and Valuation:

We value Ipca at Rs. 2490 i.e. 26x P/E on FY23E EPS. “We Maintain BUY due to good traction in domestic formulations and sustainable growth amid some margin pressure in medium term”, says the brokerage.

Key triggers for future price performance:

• Incremental growth in other therapies (excluding malaria), especially non-communicable diseases like pain management, cardio-diabetology, etc, the

overall portfolio is poised for steady growth.

• Sustained traction from branded and generics exports sales with a revival in EU is likely to mitigate the US void.

• Commissioning of Devas plant and additional capacities from Ratlam.

• US traction will take longer due to USFDA import alerts for the Ratlam facility that is the only API source for Silvassa and Pithampur formulations.

Alternate Stock Idea:

Alternate Stock Idea:

Besides Ipca, in the healthcare segment, ICICI Direct likes Ajanta Pharma. “Ajanta Pharma is a focused player in branded, which constitutes appx.70% of overall sales that are spread across geographies including India. Focus is launching maximum number of first time launches with new drug delivery system (NDDS)”, says the brokerage house. The company recommends buying Ajanta with target price of Rs. 2500, implying returns of 18 percent as against the last traded price of Rs. 2120.

Disclaimer:

Disclaimer:

The above stock has been picked from the brokerage report of ICICI 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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Buy HCL Technologies With A Target Price of INR 1,430: Motilal Oswal

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Motilal Oswal’s take on HCL Technologies

The brokerage has said in its research report that “We expect the robust performance in HCL’s Services business, especially the ER&D vertical, to continue as the demand environment remains favorable. We also draw comfort from improving management commentary on continued growth momentum in the IT Services business. Sustainable demand momentum for Cloud and Digital Engineering benefits HCLT, given its large presence within IMS and ER&D and continued investments in capabilities. Strong headcount additions and deal wins reflect the management’s confidence in the sustainable growth momentum.”

According to Motilal Oswal “We continue to see potential in HCLT’s Products and Platforms business. While the recent departure of the head of Products has elevated concerns on business recovery. However, we don’t see a meaningful risk of a further hit from this event, our sensitivity analysis (Exhibit 7) suggests a limited impact on EPS even in a bear case (4% decline in revenue for the Products and Platforms business in FY23E would lead to a 2.6% drag on our EPS estimate).”

The brokerage has also claimed that “On a combined basis, HCLT should deliver USD revenue growth of 13.1% over FY21-23E. We expect the EBIT margin to stabilize at 20% in FY23E, which should help it deliver 14.3% PAT CAGR over FY21-23E. The company has been constantly improving its shareholder payouts. It has recently announced a dividend payout policy, which implies a distribution of at least 75% of net income over a five-year period. The management has revised its quarterly dividends to INR10/share (from INR6/share) for FY22. The quarterly DPS has been continuously moving up to INR10/share in 2QFY22 v/s INR1/share (adjusted for the stock split) in FY19.”

“The 75% payout ratio would be the highest in the past 15 years. We see this commitment as a strategic shift to focus on organic growth and limit inorganic

investments to bolt-on and capability-based acquisitions (v/s large revenue accretive acquisitions)” the brokerage further said in its research report.

What should investors do?

What should investors do?

Motilal Oswal in its research report has said that “Given its deep capabilities in IMS and strategic partnerships, investments in Cloud, and Digital capabilities, we expect HCLT to emerge stronger on the back of an expected increase in enterprise demand for these services. The stock is currently trading ~20.1x FY23E EPS, which offers a margin of safety. Our TP is based on 25x FY23E EPS. We maintain our Buy rating as we expect traction in the Services business in 2HFY22E and FY23E, driven by higher IMS/Cloud-focused deals.”

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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Reserve Bank of India – Tenders

Tenders

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Reserve Bank of India, Chandigarh invites e-Tender from eligible and willing firms for undertaking Supply, installation, testing and commissioning of one X-Ray baggage scanner system in Bank Premises, RBI, Chandigarh. The estimated cost of work is ₹14.75 lakh (including GST) only.

2. This is an Open Tender. Only those firms, who are registered on MSTC portal will be able to take part in the Tender process. The tender document is available on website www.rbi.org.in for download.

3. Tender shall be submitted online in two parts. Part-I of the tender will contain the Bank’s standard technical and commercial conditions for the proposed work, which must be agreed to by the tenderers. Part-II of the tender will contain Bank’s schedule of quantities and tenderer’s price bid to be submitted online.

4. The firms fulfilling the eligibility criteria and desirous of being considered for award of the work should upload all the required documents at www.mstcecommerce.com/eprochome/rbi on or before December 16, 2021 till 12:00 Noon.

5. Part-I of the tender will be opened at December 16, 2021 at 12:30 PM on MSTC website. The timeline of the tender is as follow:

A E-Tender no RBI/Chandigarh/Estate/192/21-22/ET/260
B Mode of Tender e-Procurement System

(Online Part I – Techno-Commercial Bid and Part II – Price Bid through MSTC portal www.mstcecommerce.com/eprochome/rbi)
C Estimated cost ₹14,75,000/- (Rupees Fourteen Lakhs Seventy Five Thousand Only) (Including GST)
D Date of availability of Tender Document for download on RBI website November 18, 2021
E Pre-Bid meeting Offline: December 16, 2021 at 11:00 AM

Venue: Estate Department, 3rd Floor, Reserve Bank of India, Central Vista, Sector 17, Chandigarh- 160017
F Earnest Money Deposit (Only through NEFT) ₹29,500/- (Rupees Twenty Nine Thousand Five Hundred Only)

Beneficiary Name-

Reserve Bank of India
IFSC: RBIS0CGPA01 (5th and 10th being zero)
Account No: 186003001
G Last date of submission of EMD December 16, 2021 till 12:00 Noon
H Starting Date of e-Tender for submission of Part-I (Techno-Commercial Bid) and Part-II (Price Bid) at www.mstcecommerce.com/eprochome/rbi November 18, 2021 from 12:00 Noon onwards
I Closing Date of e-tender for submission of Techno-Commercial Bid & Price Bid December 16, 2021 till 12:00 Noon
J a. Date & time of opening of Part- I (Techno-Commercial Bid)

b. Date of opening of Part II (Price Bid)

 a. December 16, 2021 at 12:30 PM

b. Date of opening of Part- II to be communicated to eligible bidders separately.
K Transaction Fee Payment of transaction fee through MSTC payment gateway / NEFT / RTGS in favour of MSTC LIMITED

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Small finance banks, microlenders stay away from IPO party, BFSI News, ET BFSI

Banking & Finance

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Kolkata: While Nykaa, Paytm and Policybazaar are the toast of the primary equity market now, lenders to the bottom of the pyramid which had earlier lured investors for their capacity to earn high margins remain laggards.

Half-a-dozen entities in the small finance bank and microfinance space that have received approval for raising funds through initial public offerings appear to be going slow because of valuation issues, people familiar with the matter said.

Among small finance banks, ESAF, Jana, Fincare and Utkarsh are said to be weighing investor interest for their proposed IPOs. Utkarsh Small Finance Bank received Securities & Exchange Board of India’s approval for IPO in June, Jana SFB got it in July and Fincare in August. ESAF Small Finance Bank received the regulator’s approval in October for the second time, after the one-year validity on the first lapsed in March.

Microfinance firm Arohan Financial Services received Sebi approval in April but has yet to hit the market. Northern Arc Capital, a non-bank lender with exposure to the financial inclusion space, got the approval in September.

“Many Lenders including those in the microfinance industry are not getting the kind of investor interest or valuation seen for primary issues of fintech firms,” said Donald D’Souza, managing director & co-head (investment banking) at Equirus.

“Some of these firms have done a few roadshows but have failed to attract investors at higher valuation. That’s the reason why some of these lenders are not seen in the IPO market despite the bull run. Even some small finance banks, which need to be listed within a specified time frame to meet regulations, are yet to be seen in this space,” D’Souza said.

Investors are apparently exercising caution as micro lenders are saddled with concerns over asset quality, high credit cost and squeezed margin following the pandemic-led stress on their borrowers.

The portfolio at risk for 30 days (PAR30+) for the microfinance sector remained high at 10.18% at the end of September, even after showing a sharp improvement from 16.56% three months earlier.

“The new-age companies are mostly making merry in the season of IPOs since investors are ready to pay huge premiums for new business models and fresh ideas. The party is on at least till Christmas. The valuations however are relatively muted for lending companies as investors are comparing them with the existing secondary market prices in the same segment,” said Dinesh Arora, partner and leader (deals) at PwC India.

As many as 52 companies have mobilised Rs 1.08 lakh crore from primary issuances in 2021 so far compared with Rs 26,600 crore raised by 15 companies last year. Foreign portfolio investors are said to have invested more than Rs 46,000 crore in IPOs this year.

Microfinance association Sa-Dhan said the average collection efficiency has increased to more than 95% in the quarter through September from 85% in the preceding quarter, even as 13 states and union territories including Chhattisgarh, Kerala, Tamil Nadu and West Bengal have their PAR30+ value higher than the industry average.



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Private banks lead, overall NPA provisioning falls in Q2, BFSI News, ET BFSI

Banking & Finance

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The worst seems to be over for banks in the pandemic, going by the drop in bad loan provisioning numbers. The bad loan provisioning by banks fell sequentially for the second consecutive quarter in the three months ended September 2021, led by a significant drop in some of the private sector banks. The trend is likely to continue on account of improved collections and lower slippages.

The aggregate provisioning towards non-performing assets (NPA) or loan loss provision for a sample of 29 banks fell by 20.5 per cent sequentially and 10.9 per cent year-on-year to Rs 30,400 crore. It has softened over the past two quarters after peaking at Rs 65,986.9 crore in the March 2021 quarter when banks resumed accounting for slippages.

Private banks at the forefront

The fall in the September quarter was driven by a sharp 43.9 per cent drop in loan loss provisioning by the private sector banks at the aggregate level. Top banks including HDFC Bank, Axis Bank, Kotak Bank, and IndusInd Bank recorded a double-digit sequential drop in the NPA provisioning.

The public sector banks on the other hand reported a modest 1.6 per cent fall in the NPA provisioning. Their share in the sample’s NPA provisioning increased to 68.5 per cent from 55.3 per cent in the previous quarter.

Analysts expect the asset quality of banks to improve gradually in the coming quarters following a pick up in economic activity and recovery in collections.

“Banks slippage ratios reduced substantially by 100 basis points QoQ on an average in the September quarter. The asset quality situation is likely to improve further driven by a reduction in retail as well as SME nonperforming loans in the coming quarters,” a Macquarie Capital Securities (India) note said.

The banks’ net interest income increased by 3.7 per cent sequentially and 2.4 per cent year-on-year to Rs 1.3 lakh crore. The sequential growth was faster for PSU banks at 5 per cent compared with 2.1 per cent for the private sector banks.



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RBI, BFSI News, ET BFSI

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In the fortnight ended November 6, 2020, bank loans stood at Rs 104.19 lakh crore and deposits at Rs 144.03 lakh crore, according to the RBI‘s Scheduled Banks’ Statement of Position in India as on November 5, 2021, data released on Wednesday.

In the previous fortnight ended October 22, 2021, bank credit had grown by 6.84 per cent and deposits by 9.94 per cent. In FY2020-21, bank credit had risen by 5.56 per cent and deposits by 11.4 per cent.

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Punjab & Sind Bank adjusts net loss for FY21 at Rs 2,750 cr after divergence in asset classification, BFSI News, ET BFSI

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Public sector Punjab & Sind Bank (P&SB) on Wednesday said it has adjusted the net loss for fiscal ended March 2021 slightly higher at Rs 2,750 crore due to divergence in asset classification. The bank had reported a net loss of Rs 2,733 crore in 2020-21.

Whereas the bank reported gross non-performing assets (NPAs) at Rs 9,334 crore, the Reserve Bank assessed it at Rs 9,363 crore, thus leading to a divergence of Rs 29 crore.

Similarly, the net NPAs too had a divergence of Rs 29 crore.

Based on the difference of the provisions for NPAs reported by the bank and that assessed by the RBI, the divergence in provisioning for the financial year 2020-21 stood at Rs 17 crore.

The adjusted (notional) net profit after tax (PAT) for the year ended March 31, 2021, after taking into account the divergence in provisioning stood at Rs 2,750 crore, the bank said in a regulatory filing.

The bank published the divergence in asset classification and provisioning in accordance with RBI’s Risk Assessment Report as on March 31, 2021.

P&SB stock closed at Rs 17.25 apiece on BSE, down 1.43 per cent from previous close. PTI KPM SHW SHW



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Shares of PB Fintech likely to see limited upside in near term, says JM Financial, BFSI News, ET BFSI

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PB Fintech, the parent company of PolicyBazaar, made a positive stock market debut with a 17.35% gain on Monday. The listing pop came as a positive surprise to many experts and analysts, however, JM Financial Services expects limited scope for further gains in the stock.

The brokerage has set a price target of Rs 1,270, which implies a near 5 per cent downside from the current market price. “We initiate coverage with a ‘hold’ rating, solely due to premium valuations with significant upside risks in our ‘bull’ scenario that can drive share price to over Rs 2,200 by December 2024,” it said.

Though the brokerage firm sees limited near-term upside against CMP post the strong listing, they reckon there is a likely path for PB Fintech to grow to a valuation of $13.5 billion over the next couple of years against $7.3 billion currently. This is only if few incremental levers fall into place, which are unlikely in the very near-term, the brokerage said.

These levers consist of digital penetration reaching 5.5 per cent against 4.5 per cent.

Shares of PB Fintech likely to see limited upside in near term, says JM Financial

“Policybazaar is the dominant market leader in a large and growing industry with strong tailwinds such as increasing digital penetration, rising disposable income and insurance awareness. We do believe Policybazaar will be in the driving seat in enhancing insurance penetration in India,” JM Financial said

The brokerage firm is of the strong opinion that the company should continue deepening scale moats in light of new-found competition emerging from insurers’ direct channels and cross-sell by fin-tech players like PhonePe and Paytm.

JM Financial expects PB Fintech, PolicyBazaar’s parent, to grow revenues by 31 per cent annually over the next 10 years.

“While we expect slight market share loss in online distribution due to insurers’ investment in direct channel and newer competition, this loss will be aptly compensated by the company’s growth in physical distribution” it added.



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