Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us  
Google
Web www.equitybulls.com
Research

| More

India Equity Strategy Report - Quarterly flipbook - HDFC Securities

Posted On: 2020-11-19 04:38:22


Mr. Varun Lohchab, Head Institutional, HDFC Securities

Quarterly flipbook: Q2 - Upgrades at last!

Q2FY21 was a strong quarter, beating expectations across most sectors, led by margin surprises and in-line revenue performance. Revenues rebounded at a faster pace than costs post the lockdown, resulting in earnings beat. Key highlights of the quarter: (1) Q2 margins beat estimates across multiple sectors such as Cement, IT, Chemicals, Pharma, Paints, Durables, AMCs, Brokers, Gas Distribution etc. due to (a) sharp cost-cutting initiatives leading to lower SG&As (A&P, travel expenses, etc.) and (b) improved pricing power in the wake of lower competition; (2) positive management commentaries on Sep/Oct exit run-rate of revenues as unlocking led to sharp demand rebound in multiple sectors; (3) market share gains for the larger companies; (4) much improved collection trends for lenders; (5) continued uptick in capital markets activity, leading to strong performance for brokers and exchanges.

70% of our coverage universe of 150 stocks beat Q2 earnings and 65% of them saw earning upgrades for FY21/FY22, which is quite commendable. Q2FY21 saw aggregate PAT beat of 30% resulting in 4.1/2.4%% PAT upgrade for FY21/FY22. Given the positive base effect from Q4, markets would focus more at QoQ trends in revenues and costs compared to Q2 levels, which has become a benchmark. Given the sharp rally in markets and Nifty valuations at 21x FY22 PE, absolute upsides look capped at index level. However, we still see a favorable risk-reward on the economy-facing sectors and spotting bottom-up investment ideas across sectors for next 12-24 months.

Our preferred sectors continue to be IT, Chemicals, Pharma, Telecom, Insurance, large Banks, Cement, Durables and Gas while we remain underweight on Consumption (Staples, Discretionary and Autos). Our large-cap picks in the model portfolio include Infosys, ITC, SBI Life, ICICI Bank, Axis Bank, L&T, Bharti. Within mid-caps, we like Mphasis, Max Life, IGL, Radico, Gujarat Gas, Crompton Consumer, Alkyl Amines, Galaxy Surfactants, JK Cement, and KNR Construction.

Q2FY21 results: Cement, Banks and IT were the standout performers- Significant and broad-based earnings beat were visible in Cement, Banks/NBFCs and IT, leading to strong EPS upgrades for FY21/FY22. Chemicals, Pharma, and Gas Distribution stocks also delivered positive margin surprises. Earning misses were more prevalent in Consumer Staples, Consumer Discretionary (ex-Paints), Energy, and Insurance. So, what happens to FY21/FY22 earnings?

Given Q2 trends and management commentaries for our coverage universe, we have seen aggregate PAT change by 4.1%/+2.4% for FY21/FY22. We are now building in +3.3%/+37.1% YoY growth for aggregate PAT for FY21/FY22 respectively. Nifty consensus EPS for FY22 has also increased by 2-3% post Q2.

Our view: Index absolute upsides capped, bottom-up opportunities still visible across sectors as economic recovery plays out in FY22/FY23- While our sector preference has remained largely unchanged in last 6 months, post sharp rally of 70% from March lows and valuations at 21x FY22 PE, index upsides look capped for next 6 months. However, we still see enough bottom-up investment ideas across most sectors. The economy-facing ones like Banks, Cement, Infrastructure, Real Estate, Utilities, and Gas still have room for re-rating while IT, Pharma look fairly valued with earnings driven upsides. Consumer Staples and Discretionary face PE de-rating risks, given stretched valuations.

Model portfolio: increasing bias towards economy facing and value sectors. We further add weights in ITC, UNSP and SBI. Also adding GAIL and GSPL to portfolio.


Source: Equity Bulls

Click here to send ur comments or to feedback@equitybulls.com



Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only. www.equitybulls.com, its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. www.equitybulls.com or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.





Other Headlines:

Vardhman Special Steel - Q2FY21 Company Update - ICICI Direct

Initiating Coverage - Advanced Enzyme Technologies - ICICI Direct

L&T - Secures Large Contract - Nov 25, 2020 - Angel Broking

Alembic Pharmaceuticals - Tentative Approval for JV - Angel Broking

Drug launch by Lupin - Tacrolimus Capsules - Angel Broking

Gujarat Gas - Nov 25, 2020 - Angel Broking

Metropolis Healthcare - Nov 25, 2020 - Angel Broking

NTPC - Showcase of strength & competitiveness - ICICI Securities

Telecom - Market Share TRACKER - Bharti is narrowing the gap on incremental market share vs RJio - ICICI Securities

Cochin Shipyard - Q2FY21 Result Update - ICICI Direct

Engineers India - Q2FY21 Result Update - ICICI Direct

Rupee - Nov 24, 2020 - Reliance Securities

FMCG Sector Update - Recovery unlocked; lower growth divergence - HDFC Securities

Engineers India - Consultancy segment outperformance - ICICI Securities

Engineers India - Q2 FY21 Result Update - YES SECURITIES

Motherson Sumi Systems - Company Update - Virtual Investor Conference - ICICI Direct

Mutual Fund Review - November, 2020 - ICICI Direct

Sadbhav Engineering - Q2FY21 Company Update - ICICI Direct

IRB Infrastructure - Q2FY21 Company Update - ICICI Direct

Vodafone Idea fund raising - Angel Broking

Rupee - Nov 23, 2020 - Reliance Securities

Crude Oil - Nov 23, 2020 - Reliance Securities

Q2FY21 Bank Result Quick Review - Angel Broking

Banks & NBFC's Sector Update Report - Yet another watershed moment? - HDFC Securities

Galaxy Surfactants - EBITDA/kg has an upside risk - ICICI Securities

Diagnostics - COVID-19 tests continue to trend higher - ICICI Securities

Banking & Financial Services - Sector Update - Nov 22, 2020 - ICICI Direct

Dalmia Bharat Sugar - Q2FY21 Company Update - ICICI Direct

Balkrishna Industries - Industry export growth momentum continues - ICICI Securities

Covid Recovery Pulse - Festive positivity continues in auto retails, E-way bill generation improves... - ICICI Direct

Quant Pick - Exide Industries - ICICI Direct

Shankara Building Products - Q2FY21 Company Update - ICICI Direct

Triveni Engineering - Q2FY21 Company Update - ICICI Direct

Initiating Coverage on Sudarshan Chemical - Leaping into the league of giants - HDFC Securities

Earnings Wrap Q2FY21: Earnings outperform, post Covid recovery picks up steam - ICICI Direct

Vodafone Idea Positive development beneficial for IDFC first bank - Angel Broking

Lakshmi Vilas Bank - Angel Broking

WIPRO Buyback record date announcement - Angel Broking

TCS buyback record date announcement - Angel Broking

Banks Sector Update - Collection efficiency - a positive surprise! - HDFC Securities

Quant Pick - Max Financial Services - ICICI Direct

Graphite India - Q2FY21 Result Update - ICICI Direct

Gladiator Stocks - Maruti Suzuki India - ICICI Direct

Exide Industries - Q2FY21 Result Update - ICICI Direct

Mishra Dhatu Nigam - Execution outlook remains strong - ICICI Securities

Bharat Electronics - Diversifying into multiple revenue streams - ICICI Securities

Wipro Ltd - Virtual Analyst Meet Update - ICICI Direct

Avadh Sugar & Energy - November 2020 - Company Update - ICICI Direct

Mahindra Lifespace Developers - H1FY21 Company Update - ICICI Direct

Quant Pick - Godrej Consumer Products - ICICI Direct



Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2019