RIL rallied over 20% since last AGM: Investors eye GigaFiber, Jio Phone 3 launch

The stock rallied from Rs 964 recorded on 5th July 2018 when RIL held its 41st AGM, to Rs 1,162 registered on Friday, 9 August, which translates into a rally of over 20 percent.

India’s second-largest company by market capitalisation, Reliance Industries will hold its 42nd annual general meeting (AGM) on Monday, August 12 in Mumbai which would be eyed by both investors as well as analyst community.

The stock rallied from Rs 964 recorded on 5th July 2018 when RIL held its 41st AGM, to Rs 1,162 registered on Friday, 9 August, which translates into a rally of over 20 percent.

Investors could see the launch of Jio Phone 3, commercial rollout and pricing of Jio’s broadband service GigaFiber, and the triple play plan for GigaFiber that bundles broadband, landline as well as television services, are also expected to be announced at the RIL AGM, CNBC-TV18 said quoting market sources.

Jio Phone 2 was launched at the last AGM and carried a price tag of Rs 2,999. Its next iteration, Jio Phone 3, is expected to be priced at Rs 4,500, the report added.

AK Prabhakar, Head of Research at IDBI Capital expects the launch of triple play plan for GigaFiber which bundles broadband with DTH as well as a telephone in one package. Pricing is something which will be watched by the D-Street.

The pricing for the broadband plans is expected to be in line with peers but RIL will sweeten the deal by making it a triple play —a combination of broadband-landline-TV OTT service. A base price of ranging between Rs 500-600 for GigaFiber is expected, according to CNBC-TV18 report.

Apart from Jio broadband rollout as well as the launch of Jio Phone 3, some analysts will also keep a close eye on the deleveraging plan, expansion on the retail front, as well as any important development on the refining front.

"Focus will be more on its retail, telecom business expansion plan, and fund mobilisation. Also, towards its oil refining business front some important announcement is expected," Sanjeev Jain, VP Equity Research at Sunness Capital India Pvt Ltd, told Moneycontrol.

Last week, Credit Suisse said that the company is expected to remain free-cash-flow negative over FY20-21, just as it has been for the last six years. The report further added that liabilities have dramatically gone up to $65 billion in FY19 from $19 billion in FY15.

Reliance Industries, the country's largest company by market capitalisation, reported a consolidated profit after tax of Rs 10,104 crore for the June quarter, up 6.8 percent from a year ago. The net profit also beat a poll of analysts which had pegged the profits at Rs 9,852 crore.

“Investors would watch out for some news from RIL on how it can substantially deleverage its balance sheet through either induction of a partner in the refinery business because there were some talks of a deal with Saudi Aramco,” Ajay Bodke CEO- PMS Prabhudas Lilladher told Moneycontrol.

The analyst would watch out for a medium-term plan for monetizing their stake in the refinery, retail, fiber, and tower business because the company has become net debt company from a net cash company amid expansion plans.

The second thing that investors would watch out for would be the return ratios, said Bodke. He further explained that with increased contribution of consumer-focused business like retail and telecom – investors would expect the return ratio of the company to move northwards to just premium valuations compared to pure-play refining and Petro companies.

Across the globe, refining and pro companies’ trade at a low PE ratio because they are capital intensive, explained Bodke.

Source: https://www.moneyco ntrol.com/news/business/markets/ril-rallies-over-20-since-last-agm-investors-eye-gigafiber-jio-phone-3-launch-4320371.html

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Market Live By CapitalStars 05/August/2019

Nifty below 10,900 in pre-opening, Sensex falls 250 pts; rupee opens weak

Trends on SGX Nifty indicate a negative opening for the broader indices in India.

Market at pre-opening: Benchmark indices are trading weak in the pre-opening session.

The Sensex is down 46.70 points or 0.13% at 37164.92, and the Nifty down 66.40 points or 0.60% at 10931.

Brokerage view on stocks: 

CLSA on SBI

Buy call, target cut to Rs 380 from Rs 420 per share

Higher slippage disappoints; Q1 net profit below expectations due on higher credit cost

Key disappointment was rise in its delinquency ratio to 3.4% of the past year loans

Jefferies on SBI

Buy call but cut target to Rs 370 from Rs 375 per share

Quarter did not have much to cheer about

Cut our EPS estimate for FY20 by 7.8% & FY21/22 by 3.2/5.5%

Kotak Institutional Equities on SBI

Maintain buy call on the stock; cut target to Rs 390 from Rs 410 per share

Reported a weak start to fy20 with slippages at 3% of loans

Higher slippage from agriculture & SME is seasonal in nature & less worrying

IDFC Securities on SBI

Management has revised guidance of core RoA to 0.5%-.6% from 0.6-0.7%

Cut earnings & target to Rs 365 per share; maintains outperform on inexpensive valuation

See downside risks to earnings from a weak macro, High Pension Costs & a larger watchlist

Citi on SBI

Maintain buy call with target cut to Rs 400 from Rs 415 per share

Healthy loan growth, slippages increase in Q1

Q1 net profit below our/consensus estimates

Morgan Stanley on ITC

Overweight on the stock with target at Rs 360 per share

Q1 results were weaker than we expected

Except for FMCG, EBIT growth across all business segments missed our estimate

HSBC on ITC

Q1 cigarette volume growth of 3-4% slightly below expectations

While valuation undemanding, taxation path remains a key risk

Maintain buy call, cut target to Rs 320 from Rs 330 per share

CLSA on ITC

Remain buyers on the stock with target at Rs 365 per share

Double-digit growth remained elusive for company cigarette biz which grew 8% in Q1

FMCG business reported strong EBITDA growth despite moderate topline show

Stock provides attractive risk-reward

IDFC Securities on ITC

Results in-line with 3% YoY volume growth on a base of 2%

From Q2FY20e onwards base becomes further unfavourable

Downgrade to neutral with target at Rs 275 per share

Kotak Institutional Equities on ITC

Cigarette volume growth was modest at 3% (Our Estimate) despite stable taxation

See a likely leg down in EBIT growth potential to 7-9% from 9-11%

FMCG sales growth moderated to 8% (From 11-12%)

Add rating on the stock, cut target to Rs 315 from Rs 335 per share

Citi on HDFC

Buy call, raise target to Rs 2,570 from Rs 2,360 per share

Q1 AUM growth moderates further; spreads stable

Liability side should benefit from falling wholesale costs

Raise FY20 net profit estimate by 8% to factor Gruh stake sale

CLSA on HDFC

Maintains buy call with target at Rs 2,770 per share

Q1 net profit boosted by gain on Gruh Fin stake sale

Asset quality faced some pressure with downgraded exposure to Jet Airways

HDFC remains our top pick

Kotak Institutional Equities on HDFC

Retain add with target at Rs 2,325 per share

Q1 moderate on account of muted growth on non-retail book & higher funding cost

Expect its affordable housing business to drive medium-term growth

Jefferies on HDFC

Buy call, increase target to Rs 2,435 from Rs 2,310 per share

Bottomline was boosted by Gruh stake sale, though growth slowed

Cut FY21/22e EPS estimate by 7-9%, forecast AUM CAGR of 13.4%

Kotak Institutional Equities on Nestle India

Maintain reduce with target at Rs 10,700 per share

Earnings weighed down by weak gross margins mainly due to sharp rise in milk prices

Domestic revenues grew a strong 13% YoY

CLSA on Nestle India

Outperform stays, raise target to Rs 12,415 from Rs 11,750 per share

Q2 clearly indicates management rising obsession with growth, which is the key positive

Announcement on capex also points to its growth ambition

Cut EPS by 2-5%, but this is due to a special dividend, which warrants a cut in other income

Citi on Exide

Buy call with target cut To Rs 265 from Rs 290 per share

Cut revenue estimates by 7% over FY20-22, primarily due to cuts in our auto segment revenues

May see a rebound in FY22 if cycle revives

Increase margin estimates slightly given weak lead prices & fructifying cost-reduction moves

Citi on Ceat

Buy call with target cut to Rs 1,280 from Rs 1,400 per share

Q1 steady replacement demand, weak OEM offtake

OEM demand has been very weak & reflected in sharp correction in stock price

Cut FY20-22 earnings estimates by 3-10%

CLSA on GSPL

Buy call; target raised to Rs 285 from Rs 270 per share

Q1 net profit stood in-line with our estimate

EBITDA/EBIT in-line as 3% beat on volume offset by a miss on tariffs

Volumes for Gujarat Gas could lead to earnings upgrades

CLSA on Inox Leisure

Retain buy call with target raised to Rs 402 from Rs 394 per share

Q1 revenue grew by 19% YoY driven by healthy screen additions

Cut FY20/21 estimates by 26% to incorporate the impact of Ind-As

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India Inc performance: Hits and misses of June quarter earnings

Dr Reddy's Labs, ICICI Bank, State Bank of India and HDFC reported profit while

on the other hand, Bharti Airtel disappointed the Street.

Quite a number of companies have declared their numbers for the June quarter, which include top names that have either surprised or disappointed the Street.

However, experts say that there is a possibility that double-digit earnings growth could be seen after the September quarter.

Dr Reddy's Labs, ICICI Bank, State Bank of India and HDFC reported profit while on the other hand, Bharti Airtel disappointed the Street.

“Earnings have been a mixed bag but more importantly the commentary post earnings has been not encouraging, which is a cause of concern. The hits are quite clear like Asian Paints, ICICI Bank, Dabur, Infosys, HUL and Reliance Industries,” Naveen Kulkarni, Head of Research, Reliance Securities told Moneycontrol.

“However, there have been quite a few misses like Axis bank, MMFS and auto stocks. The misses have been more than the hits at this juncture,” he said.

The June quarter is likely to mimic the March quarter with financials leading the growth, while consumer discretionary, consumer staples, industrials, material, and real estate could well post declining trend sequentially in the top-line growth.

Sectors like auto and auto ancillaries, consumer discretionary and FMCG will get affected by the slowdown in demand.

Bharti Airtel: Profit turns to loss

Telecom major Bharti Airtel on August 1 reported a consolidated net loss of Rs 2,866 crore for the quarter that on ended June 2019, as against a profit of Rs 107.2 crore for the quarter that ended on March 2019. Revenue of the company was up marginally at Rs 20,737.9 crore versus Rs 20,602.2 crore.

The earnings before interest, tax, depreciation and amortization (EBITDA) grew 24.8 percent to Rs 8,492.6 crore as against Rs 6,806.4 crore. However, the margin expanded by 700 bps to 41 percent, up from 33 percent.

Global research firm Morgan Stanley has an equal-weight on the stock with target at Rs 360 per share. CLSA has a buy rating, but has cut its target to Rs 390, down from Rs 415 per share and has cut EBITDA estimates by 2-5 percent to factor in higher costs.

Dr Reddy's Labs: Net profit up 45 percent YoY

Dr Reddy's Laboratories on June 29 reported a net profit of Rs 662.8 crore for the quarter that ended on June 31, a jump of 45 percent year-on-year basis, which was led by a one-time gain. The increase in net profit is due to a one-off receipt of Rs 350 crore from Celgene, pursuant to a settlement agreement related to Revlimid brand capsules in Canada. Revenues grew 3 percent YoY at Rs 3,843.4 crore.

The company said that growth was led by contribution from new products and increase in volumes, but was partly offset by price erosion and adverse foreign exchange movement.

BofAML has a buy rating on the stock with target at Rs 3,052 signalling an upside of 15 percent, while Nomura also has a buy with target at Rs 3285.

ICICI Bank: Profit backed by lower provisioning, healthy NII growth

ICICI Bank posted a profit of Rs 1,908 crore for the June quarter (Q1) over lower provisioning and healthy NII growth. It was against a loss of Rs 119.55 crore reported in the year-ago period and a profit of Rs 969.06 crore for the previous quarter. The profit was partly impacted by lower other income.

Net interest income grew (NII) by 26.8 percent year-on-year to Rs 7,737.43 crore for quarter that ended on June 2019 with a healthy loan growth of 15 percent YoY, which beat analyst expectations. NII was expected at Rs 7,427.1 crore, according to a poll of analysts conducted by CNBC-TV18.

Research house Jefferies has retained a buy call on ICICI Bank and raised its target price to Rs 480, up from Rs 455 per share. According to CLSA the company is a high-conviction buy with target at Rs 530 per share.

State Bank of India: Standalone profit of Rs 2,312.20 crore

State Bank of India reported a standalone profit of Rs 2,312.20 crore for the quarter ended June 2019, aided by lower provisioning with stable asset quality. Higher other income and operating income also boosted profitability, though tepid NII growth limited profits.

The bank had reported a loss of Rs 4,875.85 crore in the corresponding period last fiscal. On a quarter-on-quarter basis, it reported a whopping 176 percent jump in profit against Rs 838.40 crore in March quarter. Net interest income grew by 5.2 percent year-on-year to Rs 22,938.8 crore in June quarter 2019.

HDFC: 46 percent jump in profit at Rs 3,203.10 crore

Housing Development Finance Corporation (HDFC) has reported 46 percent jump in its Q1FY20 net profit at Rs 3,203.10 crore against Rs 2,190 in the same quarter last year. Revenue of the company was up 30.6 percent at Rs 12,990.29 crore against Rs 9,947.35 crore

The profit from the sale of investments was at Rs 1,894 crore, while impairment on financial instruments at Rs 890 crore versus Rs 20 crore, YoY.

Axis Bank: Sharp rise in profit

Private sector lender Axis Bank's profit for the June quarter (Q1) grew sharply by 95 percent year-on-year to Rs 1,370 crore, but provisioning and slippages remained higher. It was supported by NII, other income and operating profit. The profitability was higher due to the low base in a year-ago period. The bank had reported a profit of Rs 701 crore in Q1FY19.

Net interest income increased 13 percent year-on-year to Rs 5,843.65 crore in the quarter ended June 2019, with 13 percent loan growth YoY. Gross slippages remained higher at Rs 4,798 crore at the end of June quarter 2019, against Rs 4,337 crore in the corresponding period of the last fiscal and Rs 3,012 crore in Q4FY19.

Hero MotoCorp: Brokerages mixed after jump in profit

Hero MotoCorp reported a whopping 38.3 percent year-on-year (YoY) increase in June quarter profit on account of one-time gain with respect

to reversal of a calamity fund. Profit during the quarter increased to Rs 1,256.7 crore, up from Rs 909.2 crore in the corresponding period of last

fiscal.

Revenue from operations declined 8.8 percent YoY to Rs 8,030.3 crore in the quarter ended June 2019, with sales volume degrowth at 12.5 percent YoY.

Credit Suisse maintained its outperform rating on Hero MotoCorp quarter results, but slashed its target price to Rs 2,710, down from Rs 2,920 earlier. Morgan Stanley maintained its underweight call on Hero MotoCorp after the announcement of its Q1 results, but reduced its target price to Rs 2,143 from, down from Rs 2,459 earlier.

Tech Mahindra: Profit dips 15.3 percent

Tech Mahindra on July 30 reported a 15.3 percent fall in its Q1FY20 net profit at Rs 959 crore against Rs 1,132.5 crore for the quarter that ended on March 2019. The company's rupee revenue was down 2.7 percent quarter-on-quarter (QoQ) at Rs 8,653 crore as against Rs 8,892.3 crore and dollar revenue was down 1.6 percent at $1,247.1 million against $1,267.5 million QoQ.

Earnings before interest and taxes (EBIT) fell 27.4 percent at Rs 992.8 crore, while margin was down 390 bps at 11.5 percent. In the constant currency terms, the revenue growth was at 3.7 percent.

Citi has a neutral rating with target at Rs 705, while Credit Suisse has an outperform rating with target cut to Rs 730 per share.

Ashok Leyland: Nomura stays neutral despite PAT of Rs 274.96 crore

Hinduja Group flagship Ashok Leyland has recorded consolidated net profit for the April-June 2019 period at Rs 274.96 crore.The city-based heavy commercial vehicle major clocked consolidated net profit at Rs 463.78 crore during the same period last fiscal.

For the financial year ending March 31, 2019, consolidated net profit was at Rs 2,194.60 crore. Total income for the April-June quarter was at Rs 6,612.42 crore as against Rs 7,193.79 crore registered year ago.

Nomura has maintained neutral rating on the stock and cut the target price to Rs 72 per share. The research house sees risk of a steeper downcycle and is not expecting an upcycle before FY22.

Source: https:// www.moneycontrol.com/news/business/markets/india-inc-performance-the-hits-and-misses-of-june-quarter-earnings-4282481.html

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HDFC Bank could report more than 20% growth in Q1 profit, NII

Key issues to watch for would be the outlook on SME & retail book as management indicated some stress in same, and trends in digital banking/payments and various initiatives.

HDFC Bank, which has the highest weightage in the Nifty50, is expected to report more than 20 percent growth in profit, net interest income (NII) and pre-provision operating profit on July 20.

Loan growth could also be healthy, driven by corporate advances who may provide strong support after the NBFC slowdown. However, there may be a slight slow-down of growth on the retail book.

HDFC Bank fell 1.16 percent ahead of June quarter earnings, but in last nine months, it gained 21 percent, giving major support to benchmark indices."NII is expected to grow by 25 percent YoY driven by stable NIM and healthy loan book growth. The NIM is expected to be stable even with rising cost of fund on account of increase in unsecured high yielding portfolio," said Narnolia which expects profit growth at 24 percent and pre-provision operating profit at 25 percent YoY for the quarter.

The brokerage expects income growth from fees to remain moderate, given that it is impacted by regulatory changes in mutual fund distribution fee income.

However, the bank's management had earlier said it expects the growth of 15-16 percent in fee income at some point of time going ahead.

According to ICICI Direct, profit growth is likely to be around 23.4 percent, NII at 22.4 percent and pre-provision operating profit 25.8 percent in Q1 compared to year-ago.

"Advances run rate is expected to slow down at around 17 percent YoY. The retail segment, which has been the growth engine in recent quarters, is seen remaining behind led by a cautious approach in unsecured lending products and a slowdown in auto sales. Corporate segment growth may remain healthy as the bank continues to remain a beneficiary of NBFC slowdown, as seen last quarter," ICICI Direct said, adding that asset quality is expected to remain steady.

Motital Oswal also said asset quality is expected to remain stable, with gross non-performing assets at around 1.3 percent for Q1 FY20.

Key issues to watch for would be the outlook on SME and retail book as management indicated some stress in same, and trends in digital banking/payments and various initiatives.
Source: https:// www.moneycontrol.com/news/business/earnings/hdfc-bank-could-report-more-than-20-growth-in-q1-profit-nii-4225391.html

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