Market News and Impact, Raunaq Singh

images-1-4-1-300x134Expect market to open on a weak note after a smart rally in the last two days. Weak global cues may open negative impact in the market but stock specific actions expected on account of quarterly results and may be buying interest ahead of Diwali. India macro data is encouraging on account of fall in oil price, USDINR and 10-Year G-Sec Yield. USDINR yesterday fell nearly 100paisa to close 72.43. Moreover 10-Year G-Sec Yield fell to below 7.8% of 2-month low after a recent high of 8.21%. Brent Crude declined further to below $73/bbl. Moreover, good quarterly results also boosted the market sentiment..

US market declined 1% on account of poor quarterly reported by Apple and expectation of US wages hike to increase inflation. Asian markets like Nikkei and Hong Kong Index declined 1.5% and 2% respectively. SGX Nifty declined nearly half percent.

Positive for oil marketing companies (IOC, HPCL, BPCL and Aviation stocks – IndiGo) – Brent Crude continued to southbound journey on account of increased US inventory and USDINR fell to 1-month low. India will get exemption for oil import from Iran also positive for OMCs and Aviation stocks.

Brokers Radar – CLSA Buy Axis Bank TGT 750, Bhart Forge CLSA TGT 685

Among the quarterly results like Axis Bank, ONGC and SAIL (profit vs loss previous year) reported good quarterly results.

This week is important for the market despite a very short spun on account of long Diwali holiday (Wednesday and Thursday). US mid-term Election will be announce on 7th November which may impact global markets. However, street expectation that the ruling party may retain. FOMC interest rate decision will be announce on 9th November and any impact for sanction against Iran oil exports today (4th November).

Among the major results this week – Today results – SBI, Cipla, IGL, Exide, Power Grid, Fortis, Bosch will be announce quarterly results today. Voltas and Manpuram Finance on 6th Nov. MRF will be announce on 8th November and Amara raja Batteries , India Cement, Titan and Indian Bank on 9th Nov. Wockhardt, Nalco, Aventi Feed will be announce on 10th November.

Watch on Bosch – Company will be announce Q2 result today and also announce share buy-back.

Adani Gas will be listing today after de-merger of Adani Enterprises. Shareholders will get 1 share of Adani Gas for every 1 share held by Adani Enterprises.

The Finance Ministry is likely to finalise the second round of capital infusion for public sector banks towards the end of this month or early next month – media report. Fund infusion after on Nov. 2, Prime Minister Narendra Modi launched a slew of measures, including loan sanction of up to Rs 1 crore in less than an hour and relaxation in labour and environmental laws for MSMEs to give a boost to the sector. – Fund infusion will be positive for the PSU Banks to easy provide loan up Rs1cr.

Axis Bank reported better than expected Q2 results and fall in GNPA. We have a buy rating on the stocks. Company reported net profit INR7.9b [ vs. estimate of INR6.7b] (up 83%) . NII up 15% YoY to INR52.3b [ vs. estimate of INR48.8b]. NIM for Q2FY19 was 3.36%, up from 3.29% in Q1 (adjusting for recovery on an IBC list 1 account in Q1). Other income grew 4% to INR26.8b [ vs. estimate of INR30.1b] mainly due to lower trading profits during the quarter. PPP grew 8% to INR40.9b [ vs. estimate of INR42.1b]. Provisions came in at INR29.3b [ vs. estimate of INR31.1b and INR31.4b in 2QFY18]. GNPA stood at 5.96% vs 6.52% in the previous quarter [ vs. estimate of 6.8%]. Slippages declined to INR27.8b (INR43.4b in 1Q and INR89.4b in 2QFY18). Corporate slippages accounted for 40% of overall slippages. IL&FS – Total exposure of INR8.25b to the group (of which INR5.4b is part of the BB and below book). Made 20% provisioning on this exposure in 2Q.

Bhart Forge reported inline with expected Q2 results and EBITDA inline with expectation. We have a buy rating on the stock. Company reported Q2 net profit Rs2.27bn (up 11% YoY) – expectation Rs2.4bn, dividend Rs2.5 a share, EBITDA was up ~18% yoy (1% qoq) at Rs4.34bn – expectation Rs4.36bn- in-line with expectation at Rs436bn. EBITDA margin at 25.9% – expectation 28.8% and sales Rs16.8bn (up 33% YoY) – expectation Rs15.1bn.

Hindalco reported better than expected standalone profit and EBITDA margin due to strong performance from the copper business. We have a buy rating on Hindalco. EBITDA for the aluminum segment (including Utkal) beat expectations as well. EBITDA Rs12.92bn (down 7%) better than expectation and EBIDTA margin fell by 156bps yoy to 11.9% inline. Net Profit at Rs3.09bn inline. Hindalco repaid long term loans of Rs15.75bn in October .

BSE ltd’s reported lower than street estimates profit and margin. Company reported revenue Rs1.57bn (up 2.3% QoQ). EBITDA at Rs520mn, (down 7.9% qoq). EBITDA margin contracted by 1,533bps yoy and 369bps qoq to 33.23%. Company reported Net profit of Rs430mn(down19.1% qoq).

Mahindra Finance says 78000 vehicle finance in October.

Bata India reported better than expected Q2 results and EBITDA margin better than street estimates. Company reported Q2 net profit Rs556.6mn – Bloomberg expectation Rs530, EBITDA margin 13% and sales Rs6.73bn – Bloomberg expectation Rs6.60bn. EBITDA for the quarter at Rs870, up 35.5% yoy . EBITDA margin expanded 199bps to 12.98%.

Indian Oil Q2 net profit Rs32.5bn (down 12% YoY) – expectation Rs49.4bn, GRM $8.45/bbl vs $6.08/bbl and Income Rs1.52tn (up 14% YoY) – Expectation Rs1.37tn.

The U.S. has agreed to let eight countries – – including Japan, India and South Korea — keep buying Iranian oil after it reimposes sanctions on the OPEC producer on Nov. 5, a senior administration official said. – it will be positive for India to import oil from Iran in rupee terms rather than dollar.

City Union Bank Q2 net profit Rs1.68bn (up 16% YoY) , GNPA 2.85%, provision Rs679.6mn, other income Rs1.19bn and NII Rs4bn (up 12%), stock is trading 2.5x P/B (Not our coverage) – We are positive on Federal Bank and DCB among the small cap banks.

Novelis tied up with banks for up to $775mn of term loan, Novelis to take up to $1.5bn in short term bridge loan

Future Supply Q2 net profit Rs212.7mn (up 5% YoY) and sales Rs2.76bn (up 31% YoY)

Government may infuse Rs200bn more in state banks this fiscal year – Positive for SBI CNBC

Ingersoll – Rand Q2 net profit Rs224.6mn, dividend Rs3 a share and sales 1.77bn.

PNB reported weak quarter as net loss came in at INR45.3b (significantly higher than our estimates). Avoid on the stock. NII stood at INR39.7b, down by 1% YoY (5% miss). PPOP at INR 28.4 Bn, -13% YoY. Asset quality improved with absolute GNPLs/NNPLs decreasing by 2%/13% QoQ respectively thus driving 110bp/168bp QoQ decline in GNPL/NNPL ratios. GNPL and NNPL ratio thus stood at 17.16%/8.9% respectively. Total Provisions elevated to INR97.6b (significantly above our estimates). Loan loss provisions stood at INR77.3b (+55% QoQ). As a result coverage ratio increased QoQ to 52.9% (PCR including TWO stood at 66.9%; +512bp QoQ). Bank has made a further provision of INR32.9b with respect to the fraud account (INR90.4b already provided till Jun’18). Remaining provision will be made during the next two quarters. As on 2QFY19 INR4.8b of MTM losses has been deferred which will be provided in the subsequent quarters. During the quarter Bank provided INR5.3b of MTM losses pertaining to 2QFY19. * During 2QFY19 the bank has made provision of INR 5.2b in respect of 24 borrowal accounts under the provisions of IBC. The total provision made in these accounts is INR107.4bn.

Petronet LNG reported inline with expected Q2 results. Expect volume growth will increase earning. We are positive on the stock. Company reported Q2 net profit Rs5.63bn (down 4% YoY) – expectation Rs5.75bn, other income Rs1.11bn – expectation Rs1bn, EBITDA came in line with estimates at INR8.8b (est 8.8b, -2% YoY, -5% QoQ) and sales Rs107.4bn (up 38% YoY) – expectation Rs102.8bn.

SUN TV reported better than expected Q2 results. We have a buy rating on the stocks. Sun TV reported Q2 net profit Rs3.51bn (up 23% YoY) – Expectation Rs3.2bn and income Rs7.5bn (up 11% YoY) – Expectation Rs7.7bn.

Gujarat State Petronet reported strong Q2 results. Company reported Q2 net profit Rs3.23bn (up 83% YoY), EBITDA margin 25% , up 125bps and EBITDA Rs4.73bn (up 44% YoY) and income Rs5.98bn (up 79% YoY).

Torrent Pharma reported better than street estimates of Q2 results on account of improved EBITDA margin. Company reported Q2 net profit Rs1.70bn (down 12% YoY), EBITDA margin 86% , up 101bps and EBITDA Rs5.16bn (up 81% YoY) and income Rs18.94bn (up 33% YoY).

Godrej Consumers reported lower than expected EBITDA but EBITDA margin better than expectation. EBITDA margin expanded 80bp YoY to 25.9%. There was 26% increase in A&P investments to support new product launches. We are positive on the stocks. Company reported Q2 Consol. EBITDA declined by 10.3% YoY to INR4.9b (est. INR5.96b) and Adj. PAT declined 13.3% YoY to INR3.2b (est. INR4.2b). and sales Rs26.6bn (up 6% YoY) – expectation Rs28.3bn, PAT is post adjusting for gain of divestment of UK business (INR696.6m) and also change in the earn out liability of a subsidiary (INR1,890.9m).

NTPC Q2 net profit Rs24.3bn (down 2.5% YoY) – expectation Rs27.9bn, other income Rs2.25bn vs Rs2.61bn (Expectation Rs2.31bn) and sales Rs222.6bn (up 12% YoY) – expectation Rs202bn.

Future Retail Q2 net profit Rs70mn vs loss Rs20mn and income Rs12.1bn (up 9% YoY). Alkem Labs Q2 net profit Rs2.60bn (down 21% YoY) – Bloomberg expectation Rs3.07bn and income Rs19.2bn (up 3% YoY) – Bloomberg estimates Rs20.22bn.

Tata Chemical reported inline with expected Q2 results. We have a buy rating on the stocks. Tata Chemicals consolidated revenue at Rs29.6bn(up by 10.1% yoy), Oerating profit Rs6.02bn 9down 5.6% YoY), EBITDA margin declined by ~338bps yoy to 20.3% in Q2FY19.Adjusted net profit at Rs3.22bn (up 24.6% yoy).

Dividend – Bharti Airtel, Colgate, Dish TV, Hedelberg Cement, Nilkamal Plastic, Shriram Transport Finance, Supreme Industries and Supreme Petrochem.

Results – Aegis Logistic, APL Apollo, Asashi India Glass, Balkrishna Industries, Bosch, Century Plyboards, Cipla, Eveready Industries, Exide Industries, Fortis, GAIL, Godrej Agrovet, Himatsingka Seide, IGL, Inox Wind, Minda Industries, Natco Pharma, Orient Cement, Phoeinx Mills, PNB Bank Housing, Power Grid, Sheela Foams, SBI, Timken India, Venkys and Wabco India.

Raunak Singh 9830774198

Raunak Singh

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