Sensex Today | Share Market Live Updates: Sensex up 400 pts, Nifty above 21,350; Metal, Media rally, Bank lag

Key takeaways

Healthy on most key parameters

PAT in line; loan growth momentum remains healthy

AXSB’s 3QFY24 PAT of INR60.7b grew c4% y-y and was largely in line with our and Bloomberg consensus estimates. NIM shrank 10bps q-q to c4% due to higher cost of funds (+15bps q-q). Loan growth of 22.3% y-y was flattered by the ex-Citi base quarter numbers. More interpretably, loan growth at 3.9% q-q was almost in line with our expectation. Net annualised credit costs were benign at c45bps despite a one-off INR1.8b provision on AIF investments. The cost-to-income ratio was somewhat elevated at 49.5%, causing PPOP (cINR91b) to miss our estimate by c2.7%.

Some indication of profitability consciousness in segment choices:

Mimicking the pattern of most other large banks, AXSB saw solid momentum in retail (+5.1% q-q) and continued revival in SME (4.3% q-q). Corporate growth (net of IBPCs sold) remained more muted at 1.3% q-q. Within retail too, growth was led by high-yield segments such as credit cards (+11.5% q-q), LAP (+8.8% q-q), SBB loans (+6.4% q-q) and personal loans (+6.4% q-q). In stark contrast, the low-margin home loan book grew a meagre 2.3% q-q. 3QFY24 RoE (annualised, calculated) was a healthy 17.3%, albeit on a book value still somewhat optically depressed by the upfront entire Citi acquisition-cost write-down, just a tad below AXSB’s guidance threshold of 18%.

Deposit challenges to continue; margins should moderate incrementally:

CASA ratio fell 222bps q-q to c42% due to a weak CASA performance (flat q-q), largely driven by a shift towards TD (+9.4% q-q). Management highlighted tight liquidity conditions as a key detriment to industry-wide loan growth going forward, but maintained its guidance of 400-600bps above-system loan growth in the medium term. We think margins may remain under pressure in the medium term.

Still our ‘smart-beta’ pick; retain Outperform:

Given AXSB’s high and immediate earnings elasticity to borrowing costs and reasonable valuations (2x 3QFY25E P/B), AXSB remains our ‘smart-beta’ pick and among our top-3 sector picks.

Highlights from the report:

The Interim Budget to be presented against the backdrop of a 7.3% growth in current fiscal. The strong momentum will allow the Government to work towards the path of fiscal consolidation. We believe net tax revenue is likely to exceed budget estimates by ₹80,000 crores in current fiscal over the budget estimates. Non tax revenue is likely to exceed budget estimates by ₹50,000 crores. Expenditure is likely to exceed budget estimates by around ₹60,000 crores, but this number could be scaled down with the Government already employing an automatic fiscal stabilizer in terms of just in time fund releases based on spending patterns of several Ministries.

Gross tax revenue at 11.6% of GDP in FY24 is likely to be a 16 year high. In FY25, we expect gross tax revenue to be at the highest ever in the last 2 decades. We believe fiscal deficit in absolute terms could decline in FY24 but as a % of GDP it could be at 5.9% and likely to be set at 5.5% in FY25 Interim Budget. The final budget to be presented in July could set it at lower level of 5.3%-5.4% depending on GDP numbers that will be released in May 2024.

We believe in FY25, net market borrowing of the Centre will be around ₹11.7 lakh crore and with repayments of ₹3.6 lakh crore, gross borrowing are expected at ₹15.3 lakh crore. However, the Government will adjust in switches and this could adjust gross borrowings lower than ₹15 lakh crore. Even net issuance of T-Bills to the tune of ₹50,000 crore is expected.

Regarding the financing of fiscal deficit, the Government will continue to rely on small saving schemes. It can give a hard push to SSY (Sukanya Samriddhi Yojana), through encouraging fresh registrations in a mission drive mode, allowing one time registrations for all leftover cases up to 12 years. Roping in Business Correspondent (BC) channel partners by banks can be extremely useful since banks have a low share vis-à-vis Post offices (~16% in number of SSY accounts though ~32% share in deposits).

We expect the Government to make a mention of the push to solar roof tops to 1 crore households as envisaged by PM. In a similar vein, the Government could put out a road map to give a massive push to PMAY. The Government can unlock the Land Bank available with various Institutions across states and put them to constructive use for providing housing units to slum dwellers and marginalized segment of the population.

Weekly Update – Domestic cost curve inches up further

§ Indian HRC prices declined again by 0.2% WoW to ₹54,000/t from ₹54,100/t a week earlier. Iron ore lumps 63% grade remained flat in the week at Rs7,400/t. The spot spreads increased to ₹18,371/t from ₹18,098/t WoW.

§ Chinese and European HRC prices remained flat at USD 570/t and USD 625/t. Spot spreads for both regions improved by USD4/t to USD 84/t and USD 139/t respectively. Given that Chinese new year is a few weeks away, prices are expected to remain stable on inventory build-up.

§ Coking coal prices cooled 1.7% WoW to USD 331/t while iron ore 62% remained flat WoW at USD 130/t which aided spot spreads to rise in the week.

§ As per recent conclave arranged by Steel Users Federation of India, Steel industry expects Chinese steel demand to contract by 1.5-2% in CY24 due to weak real estate sector outlook, leading to higher exports.

§ Although domestic steel demand is expected to improve post weak 3Q, upcoming general elections can keep demand moderate due to slowdown in infrastructure spending. Steel companies are eyeing export markets given Indian HRC trades at discount on import parity basis. With domestic iron ore prices inching up and stable coking coal, steel companies will have to take price hikes to maintain margins in 4QFY24. Top Picks: NMDC, JSP & HNDL.

Rating: BUY | CMP: Rs1,807 | TP: Rs2,250

Q3FY24 Result Update – Asset-liability management led to better NIM

Quick Pointers:

§ Core PPoP beat led by higher NIM; AIF based provision at Rs1.9bn.

§ Strong CAR and sufficient LCR could provide leeway to grow.

KMB saw a good quarter; core PPoP beat PLe by 4.4% owing to better NIM and net loan/deposit accretion was softer at 3.2%/1.9%. Superior NIM was led by efficient balance sheet management as (1) surplus liquidity was utilized due to ICRR withdrawal which reduced deposit requirement (2) unsecured share further inched up to 12% and (3) sell down of IBPC ( ₹129bn) that could be lower yielding. As per bank, unsecured share can reach mid-teens. Deposit accretion QoQ was mainly led by ‘AcitvMoney’ (TD Sweep) which contributes 10% to overall deposits; aim is to retain SA customers at rates lower to TD. While systemic loan growth can see headwinds due to tight liquidity and peak LDR, KMB is insulated due to strong CET-1 at 20% and adequate LCR at 120%. With attractive RoA of 2.3%, we maintain our multiple at 3.3x on core Sep’25 core ABV, keeping SOTP based TP unchanged at Rs2,250. Retain ‘BUY’.

§ Core PPoP beat of 4.4% led by better NIM; one-time provision impact: NII was higher at Rs65.5bn (PLe Rs63.0bn), as NIM was a beat yet again at 5.34% (PLe 5.09%) QoQ due to better yields and lower cost of funds. Credit growth was a miss at 15.7% YoY (PLe 17.7%); deposits too saw lower growth at 18.6% YoY (PLe 21%). Other income was softer at Rs22.97bn due to treasury loss. Opex was slightly higher at Rs42.8bn (PLe Rs42.0bn) due to both staff cost and other opex. Core PPoP at Rs44.1bn was 4.4% ahead of PLe owing to better NIM; PPoP was a tad lower at Rs45.7bn. GNPA/NNPA was stable QoQ at 1.7%/0.3%; PCR was 80.6% (79.1% in Q2’24). Provisions were a miss at Rs5.8bn (PLe Rs4.2bn) due to AIF provisioning of Rs1.9bn and Rs0.65bn of NPI, re-classified from MTM loss (PBT neutral). Core PAT at Rs28.9bn was 1.2% ahead of PLe. PAT was Rs30.05bn (PLe Rs31.6bn).

§ Net loan growth lower owing to IBPC sale: Net credit offtake was softer due to IBPC sell down of Rs129bn in Q3’24 (Rs87.3bn last quarter). However, gross loans grew by 4.3% QoQ/18.9% YoY. Wholesale growth was subdued (+2.9% QoQ) due to intense pricing pressure within large corporate segment. Credit substitutes saw a strong 21% QoQ growth led by mid-market and SME. Share of unsecured inched up to 12% (a year ago 10%) and unsecured share can grow upto mid-teens, as bank has accounted for risks and RBI regulations. Deposit growth was driven by ‘ActivMoney’ (TD Sweep +12.5% QoQ) and bank is focused on scaling up these deposits which is cannibalizing SA. TD Sweep now contributes 10% to overall deposits (vs 6.9% a year ago).

§ NIM outperformed yet again: NIM positively surprised due to (1) utilization of excess liquidity post ICRR withdrawal along with better balance sheet management and (2) credit flow led by higher yielding segments. In Q4’24, low deposit growth and cost of deposits may normalize, thereby impacting NIM. We expect NIM for FY24E at 5.0% (vs 4.85% in FY23). Due to tight liquidity and LDR at 88% we trim loan growth by 1% in FY25/26 which would translate to a 17% credit CAGR over FY24-26E. However, loan growth may not be constrained due to strong CET-1 at 20% and LCR at 120%.

Rating: BUY | CMP: Rs1,009 | TP: Rs1,300

Q3FY24 Result Update – Earnings predictability improving each quarter

Quick Pointers:

§ Core PPoP beat of 3.6% given better NII and lower opex.

§ Raise NIM for FY25E by 7bps, due to likely stable interest rate scenario.

ICICIB delivered a good quarter again. NIM at 4.78% was 9bps ahead of PLe due to better yields and interest on IT refund. Fees were lower offset by lesser opex. Adjusted for IT refund, core PPoP was 3.6% ahead of PLe. at Rs130bn. Loan and deposit slightly tapered growing by 3.9%/2.9%. Liquidity is in deficit for system, LDR has peaked (77.4%) and competitive intensity in deposits continues to rise. While other larger private banks face downside risks to loan growth due to high LDR, ICICI is better placed to navigate a likely tough liquidity scenario since current LDR at 86.6% is lower to peers. Also, a lower than expected repo rate cut in FY25E and rising funding costs could benefit ICICIB due to higher share of floating rate loans. Likely RoA/RoE for FY26E at 2.0%/17.0% remains one of the best-in-class. Maintaining multiple at 3.0x, we slightly raise SOTP based TP to Rs1,300 from Rs1,280. Reiterate ‘BUY’.

§ Core PPoP beat led by better NIM/lower opex; asset quality stable: NII was ahead at Rs186.8bn (PLe Rs183.5bn) led by better NIM at 4.78% (PLe 4.69%) due to (1) superior yield on advances at 10.7% (PLe 10.5%) and interest on IT refund (4bps). Loan growth was a tad lower at 18.5% YoY (PLe 19.0%) and deposit accretion was 18.7% YoY (PLe 19.5% YoY). Other income was in-line at Rs61bn; fees was lower offset by more dividend. Opex was 4.4% below PLe led by lower employee cost and other opex. Core PPoP at Rs137.8bn (adjusted for IT refund) was 3.6% ahead of PLe; PPoP was Rs147.2bn (PLe Rs139bn). Asset quality was better; GNPA was lower at 2.34% (PLe 2.4%) due to stronger recoveries despite higher slippages. Provisions were lower at Rs10.5bn (PLe Rs9bn) owing to provision on AIF investments of Rs6.3bn. Core PAT was 1.6% ahead of PLe while PAT was Rs96.8bn (PLe Rs93bn).

§ Loan accretion slightly contracted: Domestic loan growth was 3.8% QoQ, led by SME (6.5%), BuB (6.5%), rural (4.6%) and retail (4.5%). Corporate grew by 2.9% QoQ driven by growth in well rated companies. Apart from housing, retail growth was led by vehicle (auto+CV) and unsecured (PL+CC) which saw rapid accretion of 7.9% QoQ. Bank is confident of credit quality in unsecured as exposure to small ticket portfolio is marginal while post RBI regulations, pricing has moved up by 20-25bps. Q3’24 saw competitive intensity in mortgages and corporate lending, however, focus stays on calibrated pricing based on relationship value with client rather than faster growth.

§ Upgrade in FY25E NIM; strong recoveries resulted in better asset quality: For FY25/26E, we lower loan growth by 1%. However, since the quantum of repo rate cut in FY25E could be lower than anticipated (and back-ended), we raise FY25/26E NIM by 7/2bps each to 4.3%/4.1%. Asset quality was better; while slippages were a miss Rs57.1bn (PLe Rs53bn) due to KCC, recoveries were stronger at Rs53.5bn (PLe Rs45bn) due to a bulky corporate recovery (Rs6.2bn). Buffer provisions were intact at Rs131bn or 1.1% of loans.

Rating: BUY | CMP: Rs4,335 | TP: ₹6,021

Q3FY24 Result Update – Healthy volume growth to drive revenue

Quick Pointers:

§ Domestic W&C business reported ~18% volume growth in Q3FY24.

§ EBITDA margin contracted by 50bps; W&C margin improved by 30bps YoY.

We upgrade our rating from Accumulate to ‘BUY’ at an unchanged TP of ₹6,021 valuing at PE of 39x FY26E earnings, given significant correction in stock prices on concerns of tax evasion. Polycab reported healthy revenue growth of 16.8% YoY in Q3FY24, even after disruption in business during last ten days of Dec-23 due to IT raid at various locations. Growth was largely from cable business on the back of robust volume growth in domestic business. Regarding income tax searches, Polycab reiterated that as on date, the company had not received any written communication from IT dept. The company expects sustained volume growth in dom. C&W business on the back of strong demand environment, supported by government’s continuous focus on infrastructure development and pickup in private capital expenditure. Accordingly, Polycab is expected to achieve ₹200bn revenues sooner than targeted by FY26E under Project LEAP. We expect Revenue/EBITDA/PAT CAGR of 19.0%/20.9%/21.9% over FY23-26E led by strong domestic demand environment supported by government measures & revival in private capex. Upgrade to ‘BUY’.

W&C business reported ~18% domestic vol. growth: W&C business reported 16.8% revenue growth, driven by robust volume growth. The sustained strength in demand is attributed to ongoing support from both government and private capex. On domestic front, both distribution and institutional segments demonstrated robust performance. However, growth in institutional business outperformed distribution business. International business revenue accounted for 6.2% of the total consolidated revenue for the quarter. Polycab expects continued strong performance in international business for Q4FY24 and beyond. Cables continued to outperform wires growth in Q3FY24. Healthy vol. growth indicates market share gain for Polycab. W&C margin improved 30bps YoY to 14.0%, led by better operating leverage & improvement in product-mix.

Sales grew 16.8% and PAT grew 15.4%: Sales grew 16.8% YoY to Rs43.4bn (PLe: Rs41.6bn) led by healthy volume growth in domestic W&C business. W&C business grew 16.8% YoY to Rs39bn (PLe: Rs36.5bn) on strong domestic volume growth in wires and cables business (Dom. W&C revenue up 16.5% YoY). Export revenue grew by ~22% YoY; contribution was 6.2% to its total sales. Gross margins expanded by 130bps YoY to 27.0%. (PLe:26.0%). EBITDA grew by 13.0% YoY to Rs5.7bn (PLe: Rs5.6bn). EBITDA margins contracted by 50bps YoY to 13.1% (PLe: 13.4%). PAT grew by 15.4% YoY to Rs4.1bn (PLe: Rs3.7bn). W&C‘s EBIT grew 19.2% YoY to Rs5.5bn and margins expanded by 30bps YoY to 14.0%, led by better operating leverage and improvement in product-mix. FMEG revenues down 13.4% YoY to Rs3.0bn and reported EBIT loss of ₹366mn in Q3FY24 vs loss of Rs24mn in Q3FY24.

Rating: REDUCE | CMP: Rs2,536 | TP: ₹2,170

Q3FY24 Result Update – Positive volumes, all time high margins

Quick Pointers:

§ Domestic sales grew 8.8% led by double digit growth in toothpaste sales & positive volume expansion

§ Premium segment doing well along with support of core segments

CLGT’s 3Q results show positive volume growth, 72% gross margins and 33.6% EBIDTA margins resulting in a beat at PAT level. CLGT re-launched Max Fresh gel and also launched campaign to promote twice a day brushing. 3Q ad-spend at 14.6% are all time high. We estimate that 3Q volumes are 2% lower than 3QFY22 levels and just 1% higher than 3QFY21 levels.

CLGT continues to focus on 1) driving toothpaste category penetration and twice a day usage 2) premiumisation through science-based innovations with Total and Colgate strong teeth and 3) build personal care portfolio in body/hand wash. CLGT has launched premium products (Total Sensitive Toothpaste, CLGT water flosser, Visible white O2 TP & Whitening Pen and Colgate Periogard Toothpaste), their contribution remains limited.

Although toothpaste volumes have turned positive, volume growth for FY25/26 is unlikely to beat our estimates of 4-5%. Gross margin at 72% are at a new high led by higher prices and low RM, sustaining margins at current levels looks challenge in the long term. We estimate 7.7/7.8% CAGR in sales and PAT over FY24-26 as we increase FY24 EPS by 0.5% but cut EPS by 0.2% and 0.6% for FY25-26. We value CLGT at 40x FY26 EPS and assign a target of Rs2170 (Rs2140 based on 40x Dec25 earlier). Retain reduce.

Sales grew 8.2%, EBITDA Margins expand by 557bps YoY: Revenues grew by 8.1% YoY to Rs14bn (PLe: Rs13.6bn)Gross margins expanded by 631bps YoY to 72.2% (Ple: 68.5%) EBITDA grew by 29.6% YoY to Rs4.7bn (PLe:Rs4.3bn); Margins expanded by 557bps YoY to 33.6% (PLe:32%). A&P spends expanded by 148bps YoY to 14.6% Adj. PAT grew by 35.7% YoY to Rs3.3bn (PLe:Rs3.0bn)

Key Highlights:

§ 8.8% sales growth led by pricing and premiumisation.

§ Focus on building Oral Health in the country through “Brush at night” campaign

§ Domestic growth remains strong with toothpaste segment witnessing double-digit growth, overall growth at 8.8%.

§ Relaunched Colgate Max Fresh with a new-to-world proprietary formula

§ CLGT continues to enhance investment support behind brands with A&P at all-time high of 14.6% of sales

§ Premium segments continue to do well with both Total and Colgate max fresh growing ahead of the market.

After a bout of choppy trading, both the benchmark indices consolidated in the green after markets opened in the red. Although they had dipped in the negative zone a few times through the day.

At 2 pm, Sensex was up 193.70 points, or 0.28%, at 70,564.25, Nifty was up 87.45 points, or 0.41%, at 21,326.25.

Rating: SELL | CMP: Rs175 | TP: ₹106

Q3FY24 Result Update – Weak GRMs drag earnings

Quick Pointers:

§ Refining throughput at 4.4mmt grew 38% QoQ post resumption of units which were under maintenance shutdown.

§ Forex loss declined 76% QoQ to Rs0.25bn, while total special additional excise duty (SAED) levied came in at Rs4.4 bn, down 4.8% QoQ.

Mangalore Refinery & Petrochemicals (MRPL) reported lower than estimated EBITDA at Rs11.8 bn (down 47% QoQ, PLe: Rs13.7 bn). PAT came in at ₹3.9 bn (down 63% QoQ, PLe: Rs5.7 bn). The company reported lower than expected GRMs at US$5/bbl. The stock is currently trading at 8.3/7.8x FY25/26E EV/EBITDA. Although Singapore GRM has increased in Q4-TD, concerns persist on the sustainability of strong GRMs in the long term amidst demand concerns. Thus, we factor in a GRM of US$10/6/6/bbl for FY24/25/26E. Maintain ‘Sell’ rating with TP of ₹106 (TP unchanged) based on 5x FY26 EV/EBITDA.

§ Operating performance declines QoQ: EBITDA/PAT at Rs11.8bn/Rs10.6bn were down 47%/63% QoQ. The decline was majorly on account of higher raw material cost of Rs232bn, up 45% QoQ. However, on a YoY basis, EBITDA for Q3FY24 grew significantly by 121%. Similarly, adj PAT improved remarkably against a net loss of ₹1.9bn in Q3FY23.

§ 9MFY24 performance improves substantially: Operating profit for 9MFY24 was ₹54.9bn, up 23.6% YoY. Crude oil cost declined 25.6% YoY to Rs576.3bn during the period. Interest declined 10.8% while other income grew 32% YoY. Adj PAT came in at ₹24.6bn, up significantly by 237.4% YoY.

§ Refining throughput increased remarkably: In Q3FY24, refining throughput came in at 4.4mmt, up 37.7% QoQ. This growth was primarily due to resumption of phase 3 units and HCU1 which were under maintenance shutdown. On a YoY basis, throughput declined marginally by 1%. Going ahead, we build in a throughput of 17mmt for FY25/26E.

§ Quarterly GRMs come in below estimates: The company reported a GRM of US$5/bbl, down by US$12.1/bbl QoQ, and below than our estimate of US$7.6/bbl. Core GRM came in at US$7.5/bbl with an inventory loss of US$2.5/bbl. In the ongoing quarter, Singapore GRMs have risen and are currently averaging at US$6.5/bbl, however given the weak demand concerns, uncertainty persists over the sustainability of strong GRMs in the long term. Owing to this reason, we factor in a GRM of US$6/bbl for FY25/26E.

Rating: BUY | CMP: Rs452 | TP: ₹565

Q3FY24 Result Update – On track with new launches & project additions

Quick Pointers:

§ Exploring new BD activities with likely to double GDV in coming years.

§ Launch of new tower in Mira road and new phase in Naigaon in Q4FY24.

Sunteck Reality (SRIN) reported healthy pre-sales of Rs. 4.6bn; increased 15% YoY and QoQ. Collections increased sharply by 105% QoQ led by one-time inflow from security sale. SRIN’s proven ability to market ultra-luxury projects, aggressive and multi-pronged land acquisition capabilities in various micro markets across Mumbai Metropolitan Region (MMR) is an interesting play on Mumbai’s high value real estate market. We expect company’s pre-sales to grow 2x over next 3 years aided by ongoing projects and strong new launches pipeline. Further given likely strong cash flow generation (Rs8-10bn over FY23-26E), we see SRIN to step up new project additions which will be a key catalyst for stock performance. Adoption of asset light model has enabled the company to acquire scale without straining its balance sheet and this will likely continue in new project additions too. Maintain ‘Buy’ rating with a TP of Rs. 565/share.

§ No meaningful project completion resulting in EBITDA loss: Operationally, SRIN reported EBITDA loss of ₹148mn vs ₹180mn profit in Q3FY23 and loss of Rs. 141mn in Q2FY24. Consolidated revenues de-grew by 52% YoY to Rs. 424mn. PAT came in at negative Rs. 97mn vs profit of Rs. 21mn YoY and loss of Rs.139mn QoQ. Net debt further reduced by Rs.2.1bn QoQ to Rs490mn aided by recent treasury shares sale.

§ Healthy pre-sales; driven by Kalyan launch: SRIN reported pre-sales of ₹4.6bn (up 15% YoY and QoQ) aided by recent launch in Kalyan. High mid-income projects (Sunteck City, SBR, Sky Park projects) contributed 39% (Rs. 1.8bn) to total pre-sales vs Rs. 1.9bn in Q2FY24. During the quarter, average realization increased 6% QoQ to Rs. 10,974 psf. Collections includes one-time inflows from security sale to tune of Rs2.8bn. Adjusted for this collections came in at Rs1.6bn; down 25% QoQ and should pick up as it received OC for Max word and Avenue City 4 projects. During the quarter, newly launched Kalyan project (Sunteck Crescent Park- tower one) contributed ₹726mn whereas BKC projects contributed Rs. 836mn to the total pre-sales.

§ Key con-call takeaways: (1) Mgmt plans to add new projects and double GDV in next 3 years. It includes already acquired Borivali project (expecting approval soon), adjacent land at Nepean sea road and 1-2 projects in south Mumbai including Bandra project. (2) Plans to launch Tower 3 in Mira road and New 4th phase in Naigaon which will aid pre-sales in Q4. Reiterated its pre-sales target of Rs. 20bn in FY24 (Rs12.4bn achieved in 9M). Also plans to launch residential tower at Sunteck city 5th Avenue in FY25. BKC sale momentum to continue and will see revenue booking in FY25. Guided Rs. 2.5-3bn of pre-sales from Kalyan project every year. (3) Annuity portfolio – Both Sunteck Icon and Sunteck BKC 51 are fully completed; of which one is leased out and another will be lease out in Q4FY24. (4) Exploring 2-3 opportunities in affordable segment through IFC platform. (5) Nepean sea road project guided to launch by H2FY25E.

The telecom infrastructure firm reported a consolidated net profit of ₹1,540.1 crore inQ3FY24, after posting a net loss of ₹708.2 crore in the corresponding quarter last year, the company said in a regulatory filing. The company’s consolidated revenue from operations increased 6.4% to ₹7,199 crore compared to ₹6,765 crore in the corresponding period of the preceding fiscal.

Are stretched equity valuations at a snapping point? Stock market slides that have followed quarterly results suggest so. Last week, HDFC results took a toll on indices, with banking sector stocks battered. On Tuesday, while bank scrips dropped further and Zee’s price crashed on its split with Sony, post-result Reliance and Hindustan Unilever slid, along with other heavyweights, dragging indices down.

Broad external factors are often pointed out as gloom-casters. Last week saw US bond yields rise on hawkish comments by a central bank official, while geopolitical tensions in West Asia have been implicated by some this time. Other aspects of global uncertainty have also contributed to taut nerves among investors. Yet, it doesn’t eclipse the worry that equities in general have exceeded levels justifiable by likely future earnings. (Read the full story here)

In a sign of choppy trading in the markets today, both the benchmark indices were in the green after opening in the red. Although they dipped in the negative zone a few times through the day.

At 1 pm, Sensex was up 187.95 points, or 0.27%, at 70,668.60, Nifty was up 60.05 points, or 0.44%, at 21,307.85.

The share price of REC jumped almost 9 percent in intra-day deals on Wednesday after the firm posted strong results for Q3FY24. The company’s net profit rose 13.6 percent year-on-year (YoY) to ₹3,269.3 crore for Q3FY24 versus ₹2,878 crore in the same quarter last year. Meanwhile, its net interest income (NII) for the quarter under review grew 18 percent YoY to ₹4,159 crore.Its gross non-performing assets (NPA) ratio improved to 2.78 percent, as against 3.14 percent in the preceding quarter. The net NPAs also improved to 0.82 percent from 0.96 percent in the June-September period. The net interest margin in Q3FY24 came in highest in five quarters at 3.61 percent, as against 3.45 percent in the preceding quarter. The provisional coverage ratio was also higher at 70.41 percent, as compared to 69.37 percent in the second quarter. (Read the full story here.)

The monetary policy committee of the Reserve Bank of India will convene on 6-8 February for its final meeting of financial year 2023-24. If it decides to leave the policy repo rate unchanged, it will mark one year of a ‘pause’. This is the longest that the rate has been held constant in the last decade and a half, not counting the two-year hiatus during the pandemic. The fact that a prolonged pause is required now highlights the extent of uncertainty in economic conditions. The crisis is over, but the situation is far from normal. That is a classic pause scenario. (Read the full story here)

SoftBank has sold another 2% stake in Paytm’s parent One97 Communications over the past month via open market operations. The current sale brings down Softbank’s stake to about 5 percent.

SVF India Holdings (Cayman) Limited has disposed of an aggregate of 12,706,807 equity shares of One97 Communications Ltd in a series of disposals undertaken between December 19,2023 and January 20,2024, with the disposal on January 20,2024 breaching the 2 percent threshold specified in Regulations 29(2) of the Sebi Takeover regulations,” it said in a statement on January 24.

CG Power and Industrial Solutions reported a standalone profit after tax of ₹216.47 crore for the December 2023 quarter, compared to the ₹242.75 crore PAT it had posted in the corresponding quarter last year, the company said in an exchange filing on Wednesday. For the nine months ending on December 31, 2023, the company’s standalone PAT grew to ₹763.77 crore from ₹545.13 crore registered during the same period of last year, the Murugappa Group company said in the statement.

Though many steel-making companies are likely to report a mixed bag of earnings due to an increase in coking coal and iron ore prices in Q3FY24, JSW Steel is expected to post healthy set of numbers as its crude steel production is likely to rise 8% QoQ and 12% YoY. We believe that the company is on track to achieve production and sales guidance for FY24 which will be reflected in Q3FY24. With the increase in the production and downstream operations, we expect EBITDA to improve in Q3FY24. Our outlook remains positive that JSW Steel will report healthy topline and bottom-line growth, with debt levels a key monitorable in Q3FY24.

In a sign of ensuing volatility in the markets today, both the benchmark indices climbed up after opening in the red, but dipped again in the negative zone before climbing up at noon.

At 12 pm, Sensex was up 127.66 points, or 0.18%, at 70,498.21, Nifty was up 45.70 points, or 0.22%, at 21,284.50.

India will remain the fastest-growing major economy this year and next, boosted by continued strong government spending, according to a Reuters poll of economists who also said inflation was unlikely to surge again. The world’s most populous country performed better than expected in the first two quarters of this fiscal year to end-March, as the government steps up already-strong spending to bolster growth momentum running into a national election due in May. (Read the full story here.)

Tata Steel’s domestic operations are expected to continue reaping benefits of strong steel demand in the country, and some improvement in realizations sequentially. As input costs pressures weigh, the losses in European operations however may take away some benefits and impact overall consolidated performance. Analysts at Elara Securities in their Q3 result preview said that they expect an uptick in steel prices to provide relief to steel firms in their steel coverage universe. However, this benefit might be partly offset by higher coking coal prices and softer volume. Following a challenging pricing environment in Q2FY24, average prices in Q3FY24 for flat and long products showed a recovery in the range of 1-4% sequentially. Thus, they expect blended realization for most steel firms, to improve in the range of ₹1,500-2,500 per tonne sequentially. For Tata Steel they expect volumes to remain flat yoy. (Read the full story here.)

Pricing led margin erosion in LT Motors | Not Rated

§ Pricing war in LT Motors led to margin erosion of 441bps YoY in Industrial Systems:

o Weak demand in LT motors continues led by channel destocking. Dropped pricing line (possibly high single digits) in with industry and gained market share. Expect this to normalize after election. HT Motors is business as usual. Dealer stocks for 3 months and the underlying demand seems to have paused for now. The price drops are essentially from tier-2,3 players who gained volume during covid due to proximity and the action intends to protect volume share.

§ Strong performance in transformers continues: Under power systems segment, enquiries in transformers (~100bn) and switchgears remain very strong.

o Switchgear: Expansion into the 440kV category remains on track. It takes 3-4 years to develop 765Kv category and there is no plan to enter the segment currently. Strong demand and tendering on the HV equipment category.

§ Expansion into Propulsion System for Railways: Working with a Korean company for technology transfer, could happen in the next six months.

§ Volume growth (October’23)

CG Power: LT motors 29%, HT – 33%, FHP – 19%.

Industry (by IEEMA): 10.8%, HT – 1.3%, FHP –34%.

§ CG Power Motors Market Share: LT – 38.8%, FHP – 37%, HT – 19% market share.

Other Highlights

§ Current capacity Utilization: 80-85% motors, transformers – 85%.

§ Railways orderbook grew 68% YoY during 9MFY24.

§ Exports: Taking steps to set up and international footprint in motors business, appointing people, dealers, etc.

§ Near-term expected growth rate: Power business could grow 25%, motors 20%.

§ Consumer Products: Presence in heaters, launching small range of industrial pumps. Planning to launch pan-india.

§ Need a locomotive OEM to enter the 6000HP tenders for locomotives, have all capabilities of traction motors, control systems etc.

§ Deferment of revenue of Rs350mn in Power Systems on account of delayed inspection, one-time Rs100mn provision pertaining to transformers.

Guidance for FY24

§ Expect revenue to remain flat compared with FY23. Export revenue contributed 12% to revenue for 9MFY24.

§ Gross margin for new tenders has been higher in the transformer segment. Expect gross margin to inch up significantly starting Q4FY25 (after the exhaustion of the current order book).

§ Expect EBITDA margin to inch up to industry levels to 10-12% and PAT margin also to improve from current levels.

§ Longer term: Expect revenue of Rs30bn in FY26 and EBITDA margin of 18-20% (the margin was at similar levels when company IPOed). Also, the current bid margin provides confidence towards the same.

§ No capacity expansion in the next 12 months. Capacity expansion would start by the end of CY24. It takes 8-10 months to expand capacity.

Product Development Initiatives:

§ Successfully tested Dynamic Short Circuit Test of 50, 53, 105, 250MVA (not been done in India so far as there was never a requirement from customer, this is more for showcasing capabilities intended to help get qualified in export markets)

§ Factory acceptance tests of 210*3MVA high voltage generator transformers

Domestic vs Export

§ Domestic market growing faster than export market. Supply constraint in the export market could help in faster growth going forward.

§ Domestic revenue share of 88% in 9MFY24.

Order Book

§ Order book of Rs25.7bn is executable over the next 15-18 months.

Working Capital:

§ Efforts to reduce WC, expect WC to remain same in absolute terms (target to bring down to 120 days)

GETCO Receivable Situation:

§ Received Rs900mn from GETCO, balance payment is also expected to be released in line with the terms.

§ Strengthened internal policies and control. No impact on other orders from Power Grid or any other customer.

Revenue & EBITDA margin slightly above expectation

§ Revenue increased by 0.9% QoQ to ₹71,990 mn, led by 2.0% QoQ increase in the number of colocations and 1.7% QoQ decrease in average sharing revenue per sharing operator. Core sharing revenue increased QoQ to ₹44,131mn.

§ EBITDA margin increased by 185 bps QoQ to 50.3% on account of lower power and fuel cost (down 2.1% QoQ). Other Expenses include provision for doubtful debts of ₹2,270 mn.

§ Total number of towers grew by 3.7% QoQ to 2,11,775. Total number of colocations grew by 2.0% QoQ to 3,60,679. Average sharing revenue per sharing operator per month increased by 1.3% QoQ to ₹41,454.

§ Average sharing factor for the quarter declined to 1.72x from 1.74x in Q2FY24.

§ Capex for the quarter was ₹26,528 mn vs ₹22,897 mn for Q2FY24.

§ Net debt (with lease liabilities) decreased to 198.2bn from ₹203.5bn in Q2FY24.

§ Overall, inline performance for the quarter. The management commentary on addition on 5G related towers/ BTS would be keenly watched. We currently have ADD Rating on the stock.

Broadly muted operating performance. Revenue below estimates and EBITDA margin inline with estimates

§ Reported revenue of ₹10,026mn (down 0.6% QoQ, up 15.3% YoY). Enterprise revenue was down 0.7% QoQ (up 14.6% YoY), while Platform business grew 0.5% QoQ (up 22.5% YoY).

§ The gross margin for enterprise business decreased from 20.0% in Q2FY24 to 19.5% in Q3FY24, while gross margin on Platform business decreased from 97.7% in Q2FY24 to 97.5% in Q3FY24.

§ EBITDA margin decreased by 28 bps QoQ (up 183 bps YoY) to 19.2% for the quarter.

§ PAT decreased by 1.4% QoQ to ₹1,406mn, led by lower revenue.

§ Cash & Cash Equivalents at ₹6,162 million as of December 31, 2023.

§ The Board of Directors have declared an interim dividend of ₹ 6 per share.

§ Overall, weak operating performance for the quarter. The management commentary on growth and margin outlook going ahead and traction in Wisely Platform would be key to watch out for. We currently have BUY Rating on the stock.

Demand momentum muted QoQ but margin performance remains stable & strong

§ Headline performance: Standalone net sales grew 7.5% YoY to Rs29.9bn. EBITDA grew by 33.6% YoY to Rs4.9bn. Adjusted PAT (APAT) grew by 55.5% to Rs3.5bn.

§ Volumes: Overall volumes for the quarter grew by ~1.8% YoY to 16.5mn cases.

o Prestige & above (P&A; 88.3% of net sales) volumes grew by ~4.6% YoY to 13.4mn cases with value growth of ~10% YoY.

o Popular (10.2% of net sales) volumes down ~22.8% YoY to 3.1mn cases leading to ~12.4% YoY value decline.

§ Excise duty was down 100bps YoY to 57% as a % of gross sales in 3QFY24.

§ Gross revenue per case for the quarter was up by 6% YoY from Rs3,978 in 3QFY23 to Rs4,218 in 3QFY24 (it was Rs4,175 in 2QFY24).

§ Margins: Overall gross margin up 290bps to 43.4% (flat QoQ). Savings in staff cost of ~110bps and other expenses of ~30bps on a YoY basis was offset by ~100bps increase in A&SP costs. Thus EBITDA margin was up ~320bps YoY to 16.4%.

§ EBITDA per case stood at Rs298 vs Rs221 in 3QFY23.

§ Key commentary: 1) Sequential demand momentum was relatively muted but premiumisation trend continued. 2) Popular decline primarily due to muted demand. Duty increases in the segment’s salient state further impacted demand adversely.

Strong performance driven by higher EBITDA spreads and volumes

§ Performance: EBITDA at Rs4.5bn was up 75.2% YoY but down 6.3% QoQ. PAT at 3.2bn was up 84.3% YoY and down 6.3% QoQ. Overall performance was supported by better spreads and volumes (new high across all segments), EBITDA spreads and volumes better than ours. The consensus EBITDA/PAT at ₹4.1/2.8bn, however the reported performance is a beat.

§ Volumes: Overall volumes at 3.67mmscmd (vs our est of 3.61) was up 7.6% YoY and 2.7% QoQ. CNG volumes at 2.63mmscmd (new high) vs our est of 2.62, were up 6.4% YoY and 1.9% QoQ. D-PNG volumes at 0.53mmscmd were up 6.3% YoY and 8% QoQ. Industrial and commercial sales at 0.51mmcsmd (new high), up 15.9% YoY and 1.5% QoQ.

§ Gross Margins (GM): The gas cost was down by 30% YoY and flat QoQ, this resulted in gross margins improvement on YoY but down QoQ basis. The gross margin was at Rs19.1/scm up 39.3% YoY but down 6.4% QoQ (due to price cuts).

§ Opex: The opex at Rs5.8/scm (in line with our estimates) was higher by 4.9% YoY and flat QoQ, with other operating expenses being higher by 9.9% YoY and 3.8% QoQ.

§ EBITDA spreads: EBITDA spread at ₹13.3/scm (higher than our est) is up 62.8% YoY but down 8.8% QoQ. The EBITDA spread improved YoY on better GM while declined sequentially due to price cuts.

§ Overall strong numbers on better volumes and EBITDA spreads, the volumes would continue to grow at a slower pace, but EBITDA spreads should be lower in FY25 as compared to FY24 which would result in a decline in earnings.

§ We have an ADD rating on the stock with a TP of Rs1,365/shr and see limited upside from CMP.

Recommendation: REDUCE

CMP: ₹369

Target Price: ₹350

Potential Return: -4%

Margin weakness to persist in Q4; D/G to Reduce

A subpar domestic performance, big European miss and one-off expense Rs82mn results in a rather sharp earnings downgrade of ~30% for FY24 which has a cascading effect on FY25 estimates too. We bake in margin recovery next fiscal on back of 10-11% domestic growth and notably lower other expenses as remediation costs decline YoY. With domestic business weaker QoQ in Q4 and Q1 FY25 expected to be anyways better YoY, surprises appear limited in the near term. We introduce FY26 estimates; continue to value stock at 19x FY25 EPS for a revised TP Rs350 (earlier Rs405) and downgrade to Reduce from ADD.

Recommendation: ADD

CMP: ₹580

Target Price: ₹684

Potential Return: +18%

Upward revision in EBITDA margin guidance

Sona BLW (SONACOMS) 2QFY24 results were better as EBITDA/PAT exceeded our estimates by 11-13%, led by better than expected EBITDA margins at 29.7% (est 27.4%, +180bp QoQ, 13 quarter high). This was led by operational efficiencies and benign RM costs. We believe the operating performance were healthy given UAW strike led to Rs250mn revenue impact in Oct-23, which is now resolved and will partially reverse in 4QFY24. On the positive side, the key highlight of the quarter was, 1) the new order wins for Integrated Motor Controller (IMC) for EV 2W segment and 2) upward revision in EBITDA margins guidance to 28%+ in the near term (vs earlier guidance of 25-27%). Adjusted New order addition came in healthy at ~Rs20b (v/s Rs13b/Rs5b/Rs42b/Rs4b/Rs28b/Rs6b orders added in previous 6 quarters). Co’s overall orderbook stands at Rs240b (v/s Rs221b QoQ and Rs215b/Rs186b in FY23/FY22). Sona’s EV revenue mix during 3QFY24 were at 30% (v/s 27%/26% in 2QFY24/1QFY24).

The management guided majority of new programs would go into production in 1-2 quarters. On the other hand, with RM headwinds receding, coupled with benefits of operating leverage should help margins expansion over FY23-25E. Hence, we expect revenue/EBITDA/Adj. PAT to grow 27-42% CAGR over FY24-26E. We haven’t change our FY24E/25E EPS and have maintained an ADD on the stock with TP at Rs684 (unchanged) given limited upside led by recent valuations expansion.

Recommendation: BUY

CMP: ₹1,370

Target Price: ₹1,676

Potential Return: +22%

Pokhran launch deferred again; Annuity to grow 3x in next 2years

Oberoi Realty (OBER) reported the pre-sales of 0.26msf translating to Rs7,869mn of which 78% was contributed by the Forestville, Sky City and Enigma for Q3FY24. Management is confident to monetize 360 West projects in the next 2years. Pokhran, Thane project has been deferred to Sept-24. . We maintain a premium of 25% on the current portfolio & arrived at SoTP based 1year forward NAV of Rs1676/share with ‘BUY’ rating.

Recommendation: BUY

CMP: ₹725

Target Price: ₹930

Potential Return: +28.3%

Retain BUY; Risk-reward favourable & preferred pick within HFCs

We expect Can Fin to deliver 12%/16%/17% loan growth and 19%/18%/17% RoE in FY24/25/26. While the co. has managed margins well and credit cost outlook appears benign now, the key re-rating trigger would be a material pick-up in disbursement activity over the coming quarters. Stock trades at 10x/1.6x PE/PBV on FY26 basis, a valuation which is undemanding even in the context of slightly lowered growth/RoE expectations. Retain BUY with belief that investment risk-reward is favourable for long-term investors.

Shaking of Tuesday’s market blues, benchmark indices Sensex and Nifty climbed into the green zone in the morning.

At 11 am, Sensex was up 430.71 points, or 0.61%, at 70,801.26, Nifty was up 145.30 points, or 0.68%, at 21,384.10.

Recommendation: BUY

CMP: ₹1089

Target Price: ₹1425

Potential Return: +31%

AXSB continues to outperform ICICI on slippage, Maintain BUY

(1) Gross slippage ratio for AXSB averages 1.81% over the past 7 quarters compared with 2.01% for ICICI. (2) While margin contracted sequentially, AXSB can still pull multiple levers to enhance structural margin. (3) As of now, AXSB is growing far in excess of the banking system growth but sounded a bit cautious on this front. (4) We reiterate BUY rating on AXSB with a revised price target of ₹1425.

RailTel shares have been trending up since early morning deals. RailTel share price today opened flat at ₹387.25 apiece on NSE and went on to touch an intraday high of ₹406.50 per share level within a few minutes of the stock market’s opening bell. However, the railway PSU stock failed to sustain its intraday high and witnessed profit booking on higher levels. According to stock market experts, RailTel, which is going to declare its Q3FY24 results today, is expected to post robust third-quarter numbers for the current fiscal and this rally in RailTel shares should be seen from this perspective. They advised investors to maintain the ‘buy on dips’ strategy and suggested RailTel shareholders hold the PSU stock maintaining a stop-loss at ₹350 apiece levels.

IT player Tech Mahindra is set to announce its December quarter (Q3FY24) earnings on Wednesday, January 24. The numbers are expected to be weak due to seasonality as well as the continued weakness in its communications vertical and weak discretionary spending in key markets. Brokerage firms underscore that apart from the numbers, the outlook on margin and growth in the CME (communications, media and entertainment) vertical will be the key monitorable in Tech Mahindra’s Q3FY24 scorecard.

Karnataka Bank shares witnessed a substantial decline of 12.60%, hitting a 2-week low of ₹233.10 apiece in today’s trading session. This decline follows the bank falling short of street estimates for the December-ending quarter with a deterioration in its asset quality during the quarter. The bank’s gross non-performing assets (NPA) experienced a YoY increase of 36 basis points, reaching 3.64% in Q3 FY24. However, the net NPA recorded an 11-basis point decrease, declining to 1.55%. While the Provision Coverage Ratio (PCR) has been maintained in the same range at 80.75% in December 2023 compared to 80.86% in March 2023, it has shown improvement by 54 basis points on a YoY basis (from 80.21% in December 2022). (Read full story here.)

Shaking of Tuesday’s market blues, benchmark indices Sensex and Nifty climbed into the green zone in early trades.

At 10 am, Sensex was up 504.17 points, or 0.72%, at 70,874.72, Nifty was up 151.80 points, or 0.71%, at 21,390.60.

Some investors in US initial public offerings are demanding rules what they see as unequal treatment in the rules around how stock is allocated to so-called cornerstone investors in new listings.

An overwhelming 87% of 62 institutional investors said anchor investors — who agree to buy IPO shares before the offerings are sold to a broader group — should be required to hold onto their shares for a specified period after the listing, according to a KKR Capital Markets survey in December. In several prominent recent US listings where the companies chose to involve so-called cornerstones, no such restrictions on selling were imposed. (Read the full story here.)

JSW Group: The Competition Commission of India has approved the proposed acquisition of up to 38 per cent stake in MG Motor India by Sajjan Jindal-led JSW Group. “The Acquirer is a newly incorporated entity and is not engaged in any activities as on date. It is a wholly owned subsidiary of JSW International Tradecorp Pte. Limited and belongs to JSW Group,” the CCI stated in its order. “The Target is a company incorporated in India, engaged in the automobile original equipment manufacturing business and after sale services. The Target is primarily engaged in the manufacture and sale of passenger cars (including electronic vehicles) under the Target’s brand ‘MG’,” it further said.

Bharti Airtel, the Indian multinational telecommunications services company on Tuesday announced that it’d be prepaying ₹8,325 crores to the Department of Telecom (Government of India) towards spectrum dues. This prepayment is directed towards addressing part of the deferred liabilities associated with the spectrum acquired in the auction of 2015. The liabilities carried an interest cost of 10 per cent, as disclosed by the company in an exchanges filing.

Following a day of carnage on D-street when both the benchmark indices closed down around 1.5% on Tuesday, both Sensex and Nifty continued their downward spiral to open in the red.

At 9:26 am, Sensex was down 160.80 points or 0.23%, at 70,370.55, and Nifty was down 22.60 points or 0.11%, at 21,216.20.

Following a day of carnage on D-street when both the benchmark indices closed down around 1.5% on Tuesday, both Sensex and Nifty continued their downward spiral.

In pre-open, Sensex was down 329.20 points or 0.47%, at 70,041.35, and Nifty was down 98.05 points or 0.46%, at 21,140.75.

Following an eventful weekend, the Indian stock market had an enthusiastic opening on Tuesday, but as the day unfolded, it came under sell-off pressure and witnessed a bearish reversal. The Nifty 50 index finished 1.54% lower at the 21,238 level, the BSE Sensex crashed 1,053 points and closed at the 70,370 mark whereas the Bank Nifty index tanked 1,043 points and ended at the 45,015 level. Vaishali Parekh, Vice President — Technical Research at Prabhudas Lilladher believes that the Nifty 50 index has crucial support placed at 21,100 to 21,000 levels. The Prabhudas Lilladher expert went on to add that the 50-stock index breaching below this crucial support decisively would further weaken the market bias and anticipated further intensified selling on Dalal Street. (Read the full report here.)

Bajaj Auto will announce its October-December quarter results for fiscal 2023-24 (Q3FY24) on Wednesday, January 24. The two and three-wheeler major is expected to report robust growth in net profit and revenue driven by volume growth, price hikes, and a better product mix in favour of premium vehicles, according to estimates by analysts and leading brokerage houses. The net profit of the auto original equipment manufacturer (OEM) is expected to rise 33 per cent year-on-year (YoY) to ₹1,987 crore and revenue may rise 31 per cent to ₹12,258 crore. The surge is likely driven by a 22 per cent YoY growth in volumes and rise in average selling price (ASP) on rich product mix. (Read the full story here.)

The Indian stock market indices, Sensex and Nifty 50, are likely to remain choppy on Wednesday amid mixed global cues and after a sharp decline seen in the previous session.

The trends on Gift Nifty indicate a gap-up start for the Indian benchmark index. The Gift Nifty was trading around 21,264 level as compared to the Nifty futures’ previous close of 21,202. (Read the full story here)

The domestic equity indices, Sensex and Nifty 50, are expected to open on a cautious note Wednesday after a sharp slump in the previous session and amid mixed global market cues.

Asian markets traded lower, while the US stock market ended mixed overnight as investors looked out for key economic data and corporate earnings.

On January 23, the domestic equity benchmark indices suffered steep losses on an across-the-board sell-off amid mixed global cues.

The Sensex plunged 1,053.10 points, or 1.47%, to end at 70,370.55, while the Nifty 50 closed 333.00 points, or 1.54%, lower at 21,238.80. (Read the full story here)