PremiumInvestors will remain wary until there are clearer signs the deadlock between Democrats and Republicans may break before the government runs out of money. Treasury Secretary Janet Yellen said the chances are “quite low" that the US can pay all its bills by mid-June.
Infosys launches Infosys Topaz, an AI-first offering to accelerate business value for global enterprises using generative artificial intelligence.
Revenue grew by 12.7% YoY to Rs14.9bn (PLe:Rs13.0bn). Consumer Products/Lighting/EPC revenue grew by 9.5%/1.0%/59.8% YoY respectively.
Gross margins expanded by 300bps YoY to 28.2% (PLe: 30.7%).
EBITDA grew by 39.8% YoY to Rs888mn (PLe:Rs805mn). Margins expanded by 120bps YoY to 6.0%. (PLe:6.2%), mainly with improvement in gross margin.
PBT grew by 45.6% YoY to Rs862mn (PLe:Rs663mn).
Adjusted PAT grew by 39.3% YoY to Rs587mn (PLe:Rs496mn).
Consumer Products reported expansion in EBIT margin by 190bps YoY to 7.1%, while Lighting reported contraction in EBIT margin by 170bps YoY to 7.4%.
The stock currently trades at 36x/29x FY24/FY25 earnings.
Good growth in consumer products in a tough market, despite demand slowdown and pricing constraints. EPC has exited the year with positive EBIT after a span of 3 years.
We change our FY24/25E earnings by 2.7%/-3% to factor in actual FY23. Bharat Petroleum Corporation (BPCL) reported better than expected Q4 results with EBITDA of Rs111.5bn (+163% Q/Q; PLe: ₹69.4bn) and PAT of Rs78.4bn (+300% Q/Q; PLe: Rs49.2bn) led by better than expected refining profitability (Q4 GRMs USD20.6 /bbl). FY23 EBIDTA/PAT at Rs109.5bn (-42%YoY) and Rs35.4bn (-64%YoY) was hit by sharp losses on marketing business. However, improving marketing environment will drive near term earnings as Q1FY24E; blended marketing margins are at ~Rs7/ltr post drop in international diesel prices to ~$90 (recent peak of USD170/bbl) along with range bound oil prices due to global recessionary pressure and high interest rates, despite increased demand from China.
We believe BPCL along with other OMCs, are all well placed to benefit from improving marketing situations and healthy refining profitability. Reiterate ‘BUY’ with a PT of Rs425 based on 6.0 x EV/E FY24E (7x earlier) as business stabilises.
Pemetrexed injection is used in the treatment of Non-small cell lung cancer & Malignant pleural mesothelioma as approved in the Prescribing Information.
Oil prices slipped on Tuesday as investor concern over the risk of a U.S. debt default dampened risk appetite, although a tighter market due to a seasonal rise in gasoline demand and supply cuts from OPEC producers lent support.
President Joe Biden and House Speaker Kevin McCarthy ended talks on Monday with no agreement on how to raise the U.S. government's $31.4 trillion debt ceiling and will keep talking with just 10 days before a possible default.
Brent crude fell 26 cents, or 0.3%, to $75.73 a barrel, while U.S. West Texas Intermediate (WTI) crude slipped by 24 cents, or 0.3, to $71.81. Both had risen earlier in the session.
On standalone basis, utilization reaching to 85-90% leaves little room for volume growth hence we modeled it for ~4% CAGR over FY24-25E and incremental revenue growth will be guided by the NSR. EBITDA/te confined to Rs617 as total operating cost remained elevated with a minor correction sequentially. However, margins are expected to improve (+Rs950/te) with the easing of operating cost and improving NSR (product mix/premiumization) by FY25E.
We value JKLC on SOTP basis; continue to value standalone entity at 7x EV/EBITDA on FY25E, while its subsidiary UCWL valued at US$80 EV/te on FY25E arriving at a TP of Rs863 with an ADD rating.
Following scorching temperatures reaching 45°C on Monday, Delhi and other northwest Indian states can expect some respite starting Tuesday. The India Meteorological Department (IMD) has forecast heavy rainfall over Himachal Pradesh on Tuesday and Punjab on Wednesday, due to the formation of a fresh western disturbance that is set to move over northwest India from Tuesday to Friday.
As per the weather system, gusty winds of 50-60 kmph are anticipated in Punjab, Haryana, Chandigarh, and Delhi on Wednesday, while Uttarakhand will experience them on Wednesday and Thursday. Hailstorms are predicted in Himachal Pradesh on Tuesday, Haryana on Wednesday, and northern parts of Rajasthan between Wednesday and Thursday.
JSW Steel and JFE Steel have signed an agreement to set up a JV company to manufacture the entire range of cold rolled grain-oriented electrical steel (CRGO) products at Vijaynagar in Karnataka.
In 2021, JSW Steel and Japan's JFE Steel signed a memorandum of understanding (MoU) to conduct a joint feasibility study to establish a CRGO manufacturing joint venture in India.
Consumer confidence among urban Indians improved in May, showing a 3.2 percentage points increase in the primary consumer sentiment index compared to the previous month, according to Refinitiv-Ipsos.
The monthly primary consumer sentiment index (PCSI) is an aggregation of four sub-indices that captures how a set of consumers feel about their jobs, economic expectations, investment climate and personal financial conditions.
Interestingly, in May, all four sub-indices reported an uptick compared to the previous month.
The PCSI employment confidence or job sub-index is up 4.4 points; the PCSI economic expectations sub-index is up 2.3 points while the PCSI investment climate sub-index is up 2.5 points. The PCSI current personal financial conditions sub-index is up 3 points over last month. (Read here)
The Indian rupee was little changed near its three-month low on Tuesday as bullish bets on the greenback weighed but expectations that the central bank will step in to sell dollars to prevent a further sharp depreciation held it in a tight band.
The rupee was last at 82.81 to the U.S. dollar, against 82.8275 in the previous session. The currency hit a low of 82.85 on Monday, its lowest since 27 February.
The U.S. dollar index stood firm near 103.26, after rallying nearly 2% in the past two weeks.
Prime minister Narendra Modi unveiled a multi-pronged development plan aimed at boosting India’s presence in strategic Pacific Islander countries during the third edition of the Forum for India–Pacific Islands Cooperation.
“Climate change, natural disasters, hunger, poverty, and various health-related challenges were already prevalent. Now, new issues are emerging. Barriers are arising in the supply chains of food, fuel, fertilizer, and pharmaceuticals," the prime minister said.
Oil prices continued to climb on Tuesday with investors expecting a tighter market led by a seasonal rise in gasoline demand and supply cuts from OPEC producers, though concerns over the risk of a U.S. debt default capped gains.
Brent crude futures rose 28 cents, or 0.37%, to $76.27 a barrel, while U.S. West Texas Intermediate (WTI) crude was at $72.36 a barrel, up 31 cents, or 0.43%.
It was the second day of gains after Brent rose 0.5% on Monday. WTI gained 0.6%, amid a 2.8% increase in U.S. gasoline futures ahead of the Memorial Day holiday on May 29 that traditionally marks the start of the peak summer fuel demand season.
Adani Ports became the first of Adani Group's 10 listed entities to recoup all losses triggered by Hindenburg Research’s report in January, as shares rallied for the third straight day on Tuesday.
All 10 Adani stocks climbed in early trading, with shares of Adani Ports and Special Economic Zone Ltd. surging as much as 7.7%. Flagship Adani Enterprises Ltd. soared almost 19% following a similar jump on Monday. The gains follow a Supreme Court panel report, released last week, that found no conclusive evidence of stock-price manipulation as alleged by US short-seller Hindenburg.
The combined market value of 10 Adani stocks has surged about $22 billion since Thursday’s close. The value wipeout since Hindenburg’s report now stands at around $105 billion, down from as much as $153 billion at its worst.
Indian equities climbed higher on Tuesday, led by advances in IT and Adani group of stocks, even as invetsors monotored US debt ceiling talks.
Ten of the 13 major sectoral indexes ROSE, with the metal index jumping nearly 3%. Adani Enterprises Ltd , which has a weightage of 17% in the metal index, jumped over 12% and was the top gainer on Nifty 50.
All Adani group stocks surged between 2% and 13%, and extended gains after markets regulator Securities and Exchange Board of India said that it drew a blank in probe into suspected violations in overseas investments in the group.
Technical Outlook
The Nifty started the week on a positive note and gradually inched northward as intraday dips were bought into. As a result, daily price action formed a bull candle carrying higher high-low, indicating continuance of positive bias as index witnessed follow through strength to Friday’s hammer like candle.
Going ahead, we expect Nifty to resolve higher and head towards upper band of consolidation placed at 18500 in coming weeks wherein small caps to relatively outperform the benchmark. In the process, bouts of volatility owing to monthly expiry week coupled with global volatility cannot be ruled out. Thus, buy on dips would continue to be the prudent strategy to adopt. Structurally, our positive stance is further validated by following observations:
Emergence of buying demand from lower band of consolidation (18000) coincided with 20 days EMA, signifies robust price structure
The Bank Nifty is hovering in the vicinity of ALL Time High. The resilience in Bank Nifty (which carries 38% weightage in Nifty) displays inherent strength
We expect Nifty small cap space to witness catch up activity as many small cap stocks which are not part of small cap index are coming out of large consolidations. Highlighting point is that, the Nifty midcap index is just 2% away from its All Time High whereas Nifty small cap index is still 17% away. Thus, quality small cap stocks should be in focus
FII’s inflows have remained sturdy in May which is a key supporting factor for acceleration of structural uptrend ahead
Today's calls
Intraday – RIL, Coforge
Positional – ACC, Intellect Design
India will allow the export of cough syrups only after samples are tested in a government laboratory, according to a government notice.
Any cough syrup must have a certificate of analysis issued by a government laboratory before it is exported, effective 1 June, the government said in a notice dated 22 May.
STOCK IN FOCUS
IndiGo (CMP 2,290)
We reiterate our BUY rating on INDIGO with a Target Price of Rs2,750, valuing the stock at an EV/EBITDAR multiple of 6x FY25E.
Intraday Picks
UPL (PREVIOUS CLOSE: RS670) BUY
For today’s trade, long position can be initiated in the range of Rs667-663 for the target of Rs683 with a strict stop loss of Rs657.
LT (PREVIOUS CLOSE: RS2,217) BUY
For today’s trade, long position can be initiated in the range of Rs2,206-2,192 for the target of Rs2,260 with a strict stop loss of Rs2,164.
CIPLA (PREVIOUS CLOSE: RS925) BUY
For today’s trade, long position can be initiated in the range of Rs918-912 for the target of Rs953 with a strict stop loss of Rs894.
We downward revise our FY24/FY25 earnings by 6.1%/8.1% to factor Crompton’s growth/margin guidance in its core portfolio, which expected to report lower margins against historical levels along with lower growth guidance in Butterfly. The company is currently working on stabilizing its pump/light business with 1) competitive pricing, 2) launch of new SKUs and 3) GTM in lighting segment, which will impact its margin.
Crompton has also guided that incremental growth will come from kitchen appliance business of Crompton & Butterfly, lighting business and large appliance business in coming years. We believe stock will be range bound considering growth & margin guidance given by management. However, it is trading at lower valuation and would be good bet for next 2-3 years, considering opportunity of re-rating with management change as Crompton franchise has strong market share in fans and pumps.
We estimate Sales/EBITDA/Adj. PAT CAGR of 10.8%/14.7%/20.7% over FY23-25E and revise our target price to Rs371 @ 35x FY25 EPS (Rs406 earlier). Maintain BUY.
A major trend in FPI investment is the steady increase in inflows to Japan, India, South Korea and Indonesia and the declining enthusiasm for China. The Chinese market has been steadily declining in recent days in response to poor corporate results. The reverse is happening in India where FPIs have invested ₹26591 crores in May till 23rd.
Nifty is poised for a rally, but a breakout will happen only when a resolution to the US debt ceiling impasse is visible.
Adani stocks have rallied in response to the Supreme Court expert panel’s remark that “ at this stage, taking into account the explanations provided by SEBI, supported by empirical data, prima facie, it would not be possible for the committee to conclude that there has been a regulatory failure around the allegation of price manipulation."
The high integrity of the members of the panel must have given confidence to investors to buy the beaten down stocks. Some short covering also would have contributed to the rally. However, from the valuation perspective, Adani stocks are not undervalued.
The Centre will reduce the subsidy provided under FAME-II (Faster Adoption of Manufacturing of Electric Vehicles in India) scheme applicable on electric two-wheelers registered on or after June 1, 2023.
The Heavy Industries Ministry has notified the changes. For electric two-wheelers, the demand incentive will be ₹10,000 per kWh. The cap on incentives for electric two-wheelers will be 15% of the ex-factory price of vehicles from 40% at present.
The Faster Adoption and Manufacturing of Electric and Hybrid Vehicles (FAME) India scheme commenced on 1 April 2019, for a period of three years, which was further extended for a period of two years up to 31 March 2024.
On Monday, after the flat opening, the Nifty traded above 18,200 after making a day low of 18,178 & remained up throughout the day. Nifty formed a big positive higher high candle on the daily chart after taking support at 20 periods moving average.
Till the time Nifty holds at 18,100 level, the index can be expected to go long. While on the downside, if Nifty trades below 18,100, it can be followed by 18,000 and 17,870. Market is moving in the range of 18100 to 18450 levels.
Intraday traders can look for long opportunities above 18,350 only if the closing comes above 18,350 in 15 min chart. Traders can look for fresh shorts only if Nifty breaks the 18,200 level & remains below for 15 min to ensure short.
Adani Power Ltd will contest an order issued by the Registrar of Companies (RoC), Ahmedabad, imposing penalty on three senior executives for alleged breaches connected to related party transactions over three years till FY20.
The RoC had in an order issued on 16 May imposed penalty on three senior executives of Adani Power, including chairman Gautam Adani.
The three officials have been asked to pay ₹75,000 each in penalty within three months out of own resources, but have the chance to contest the same within 60 days, showed the order posted in the website of the ministry of corporate affairs. (Read here)
Shares of Coal India, BPCL, Adani Power, Glenmark Pharma, Zee, among others, will be in focus today.
JSW Energy, Akzo Nobel India, Amara Raja Batteries, Ashok Leyland, Bajaj Electricals, Biocon, CMS Info Systems, Dishman Carbogen Amcis, Dixon Technologies (India), NMDC, TTK Healthcare, and Unichem Laboratories are among companies set to announce quarterly earnings today.
Nifty futures on Singapore Exchange rose 30 points to 18,365.5 in early deals on Tuesday, indicating a positive start for Indian benchmark.
On Monday, BSE Sensex gained 234 points to close at 61,963, while the Nifty 50 closed 111 points higher at 18,314.
US equity futures rose after President Joe Biden and House Speaker Kevin McCarthy said they had a productive talk on the debt ceiling.
The mildly positive but cautious tone flowed through into Asian stocks, with benchmarks in Japan, South Korea and Australia opening higher Tuesday. While Biden said that he and McCarthy had agreed default was off the table in ongoing talks, investors remain on tenterhooks.
Contracts for the S&P 500 and the Nasdaq 100 increased about 0.3% while an index of Asian shares also rose 0.3%.
In Asia, concern is growing about China’s tepid post-pandemic recovery, which is having a negative impact on key commodity prices such as iron ore and copper. Both have both tumbled in recent trading days.
Overnight, Wall Street stocks struggled for direction ahead of White House negotiations with Republican leaders to avert a US debt crisis.
The Dow Jones Industrial Average finished down 0.4% at 33,286.58. The broad-based S&P 500 was flat at 4,192.66, while the tech-rich Nasdaq Composite Index gained 0.5 percent to 12,720.78.
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