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August 18, 2017                                                              Please clear your cache, cookies and history regularly in order to view the updated content

>>09:18 AM

 

Alert: Infosys: Vishal Sikka resigns as MD & CEO of @Infosys ; Appointed as Executive Vice Chairman. UB Pravin Rao appointed as interim MD and CEO, stock to be in focus. Prima facie, we view this development as negative for Infosys

 

TOP NEWS

 

Tourism: Terror attack in Barcelona will halt the performance of the business and will reduce the tourist attraction in European countries – negative read through for Cox & Kings (especially for Meininger business) and Thomas Cook India

 

MCX: SEBI asks the exchange to place auditor’s report before board, take appropriate action (involved in treasury mismanagement) – stock to remain in focus …..(details in Other news)

 

Liquor: Half the liquor outlets remain shut post the highway liquor ban, liquor industry feels the pinch – negative for liquor companies (especially large companies such as United Spirits, United breweries and Radico Khaitan, which has pan India presence)

More than half of 30,000 liquor vendors have shut downed their shops on April 1 after the Supreme Court banned sale and serving of alcohol within 500 metre of state and national highways. Industry had initially expected most liquor shops and bars to either relocate or reopen in few months. But now expects the situation to normalise by next year. On the positive note, the top court last allowed authorities to de-notify state and national highways passing through municipal limits to let liquor vends along highways in cities and towns resume business.

 

HPCL: Government of Rajasthan and HPCL signed agreement to set-up refinery at Barmer; positive read through for HPCL

Rajasthan Government has signed an agreement with Hindustan Petroleum Corporation Limited (HPCL) to set up a joint venture company HPCL Rajasthan Refinery Limited to establish Rs 43,129 crore refinery-cum-Petrochemical Complex at Barmer as per media reports. HPCL will have 74% stake and the state government 26% partnership in the new company. Positive read through for HPCL.

 

UB HOLDINGS: BSE-NSE to suspend trading in the shares from Sep-8th 2017 due to noncompliance , Entire promoter holding frozen with immediate effect

 

Mindtree: Buyback starts on August 18 and end on September 1st 2017 ( Buyback price at Rs625 per share, will buyback 2.5% of paid up capital), stock to be in focus

 

 

INVESTMENT CALL

 

Thomas Cook India: stock update – Relatively stable performance (Reco – Hold, TP – Rs229)

·         Revenue grew in low double digits, margins remained flat: Thomas Cook India Limited’s (TCIL) consolidated revenue grew by 11.0% YoY to Rs.2,762 crore in Q1FY2018, driven by 20% growth in human resources (HR) services business and 10% growth in the vacation ownership business. Operating margin stood almost flat at 5.5% and operating profit grew by 7.4% YoY to Rs.152.5 crore during the quarter. This along with higher other income (up 34.8% YoY) led to PAT growing by 9.2% YoY to Rs.67.7 crore. However, the same is lower than our estimate Rs.73.1 crore due to lower-than-expected OPM for the quarter.

·         HR services and vacation ownership business posted decent performance: Revenue of the core travel and related services business grew by 5%, driven by double-digit growth in the domestic leisure travel business during the quarter. PBIT margin of the business stood flat at 5.6% during the quarter. HR services business (Quess Corp) continued to post strong performance with revenue growing by 20%, driven by organic and inorganic initiatives. PBIT margin of the business improved by 95BPS to 5.5% during the quarter. Headcounts in HR services business grew by 53.2% to ~1,95,000 in Q1FY2018. The company’s vacation ownership business (Sterling Holiday) registered 10% revenue growth on account of a 34% increase in average room rentals. Though the business is currently in the investment mode to improve the brand's prospects, its losses came down on sequential basis to Rs.0.4crore in Q1FY2018 from Rs.22.7crore in Q4FY2017.

·         Outlook – HR services and vacation ownership to maintain growth momentum; Travel business performance to improve: HR services business is expected to maintain the strong growth momentum as the company is planning to enter new geographies through the inorganic route. Margins of the business will improve on account of improvement in revenue mix by entering into higher-margin service contracts. We expect vacation ownership to turn profitable in FY2018. The integration of Kuoni’s domestic and international business with TCIL’s travel business would improve the growth prospects and cost optimisation in the coming years.

·         Valuation – Maintain Hold, but any significant improvement in performance would act as key trigger: We have reduced our earnings estimates by ~8% for FY2018 to factor in lower-than-earlier OPM, while we broadly maintain our estimates for FY2019. We believe travel and -related services and HR services businesses will be key growth pillars for TCIL in the long run. The company's foreign exchange business will continue to complement the travel and -related services business in the near to medium term. We maintain our Hold recommendation on the stock with unchanged price target of Rs.229. Any significant improvement in the operating performance in the coming quarters would act as a key trigger for the stock in the near term.

 

 

Q1FY2018 Oil & Gas Result Review: Inventory losses impact OMCs; Mid-stream benefits from volume growth

·         Refining (downstream) dented by inventory losses suppressing refining margins; OMCs also lose market share in domestic HSD/MS sales: Brent oil price declined by around 7% sequentially to $51/bbl in Q1FY2018, resulting in inventory loss of $2-3.4/bbl to oil marketing companies (OMCs). As a result, Indian Oil (IOCL)/Bharat Petroleum (BPCL)/Hindustan Petroleum (HPCL) reported weak Q1FY2018 gross refining margin (GRM) of $4.3/$4.9/$5.9 per barrel, which was down by 52%/19%/27% sequentially, though the benchmark Singapore GRM was largely flat QoQ at $6.4/bbl in Q1FY2018. On the other hand, Reliance Industries Limited (RIL) reported strong GRM of $11.9/bbl (up 3.5% YoY and QoQ) and its premium over the Singapore Complex GRM widened to $5.5/bbl in Q1FY2018 from $5.1/bbl in Q4FY2017. Public sector OMCs also witnessed loss in market share in the high-margin motor spirits (MS) and high-speed diesel (HSD) segments to private sector competitors.

·         Exploration (upstream) companies hurt by lower realisations: Oil and Natural Gas Corp. (ONGC)/Oil India reported a decline of 7.1%/7.8% QoQ (+10.7%/+12.3% YoY) in their net oil realisation to $51/$48.4 per barrel due to the drop in oil prices during the quarter. Along with lower realisation, the steep dip in other income led to a sharp decline in adjusted profit of ONGC and Oil India during the quarter.

·         Mid-stream companies in gas value chain performed well in Q1: Petronet LNG and GSPL reported healthy volume growth during the quarter, resulting in double-digit earnings growth. On the other hand, Gas Authority of India (GAIL) reported sequential volume decline across segments, except for LPG and liquid hydrocarbons (volume increased by 6.2% QoQ) in Q1. Consequently, PAT grew by only 8.2% during the quarter, partially affected by lower other income.

·         Outlook - Better GRMs to benefit OMCs; No trigger for improvement for upstream companies; Mid-stream companies to continue to outperform: The benchmark Singapore Complex GRM has increased to $7.6/bbl in Q2FY2018 till date vs. $6.4/bbl in Q1FY2018 (due to improvement in crack spreads for diesel and jet kerosene) and improvement in domestic demand is expected to drive volume growth of petroleum products by 6-7% annually. However, GST implementation is likely to have a negative impact on the profitability of OMCs and largely erode the benefit of improvement in refining margins and higher auto fuel consumption. However, RIL is likely to show healthy growth in refining and petchem businesses, partially aided by commissioning of its expansion projects. The earnings growth trajectory for upstream PSUs (ONGC and Oil India) would depend upon an increase in oil/gas price and oil/gas production. Given the muted guidance of flat oil and gas production and our expectations of range-bound oil price at $45-50/bbl, we expect subdued operating performance for upstream PSUs over FY2018-FY2019. We expect Petronet LNG to benefit from higher utilisation for Dahej terminal in Q2FY2018, as Dabhol LNG terminal remains closed during monsoon and demand for imported gas is likely to remain strong due to a sharp decline in spot LNG price to $5-6/mmbtu from the peak of $8-9/mmbtu in January 2017. Moreover, GSPL is expected to benefit from improved gas demand from manufacturing industries in Gujarat. Thus, we expect strong earnings growth for Petronet LNG and GSPL, led by volume growth.

·         Preferred picks: We prefer RIL in the downstream space, given the strong earnings growth outlook for its core businesses of refining and petrochemical with likely commissioning of its petcoke gasification and refinery off-gas cracker projects in 2HFY2018. Moreover, positive news flow on subscriber addition and better-than-expected financials of the telecom business would be an important re-rating trigger for RIL going forward. Petronet LNG is our preferred pick among mid-stream companies, given the earnings visibility on account of firm volume off-take commitment under the Use-or-Pay clause and robust RoE of 22-23%.

 

 

OTHER NEWS

 

Raymond: Acquires Ansell’s stake in Brand Kamasutra – positive as this will consolidate Raymond’s presence in FMCG Business 

Raymond Group acquires 50% of Ansell stake in JK Ansell Company for 100% ownership of its Sexual Wellness, personal care business under KamaSutra. This acquisition will pave the way for Raymond to further scale up the FMCG Business and unlock the immense potential of Brand KamaSutra globally and will draw synergies across FMCG Businesses that already has JK Helene Curtis, a group company of Raymond. Raymond FMCG Business currently has a strong retail presence through 0.25 million retail outlets including 90,000 pharmacies in the country and exports to South East Asia, Middle East and Africa. 

 

Tourism: India has registered a growth of over 15.7 per cent in foreign tourist arrivals (56.74 lakh arrivals as against 49.03 lakh in the corresponding period last year) from January to July this year, with many opting for e-visa facility – positive read thru for Thomas Cook, Cox & Kings domestic leisure travel businesses

 

IOCL: Resumes production at its PE and PP plants; positive read through 

Indian Oil Corp (IOCL) has completed maintenance turnaround at its polyethylene (PE) and polypropylene (PP) plants at Panipat. The plants were shutdown in mid-July for maintenance. PE plant has HDPE capacity of 0.3mmt and LDPE swing capacity of 0.2mmt while PP plant has capacity of 0.6mmt. Sentimentally positive for IOCL.

 

Maruti Suzuki: Launches the Ciaz – S, a sporty version of its sedan Ciaz with prices starting Rs 9.39 Lakh; Positive

Maruti Suzuki has launched a new variant of Ciaz named as Ciaz S priced at Rs 9.39 Lakh for petrol and Rs 11.55 Lakh (ex showroom Delhi) for diesel variant. T he Ciaz S has been refreshed with a spoiler pack – front, side and a rear underbody plus trunk-lid spoiler, adding a distinctive look and enhancing the aerodynamics of the car. The new variant would further strengthen the position of Ciaz in the passenger vehicle market and could lead to market share gains for the company

 

MCX: SEBI asks the exchange to place auditor’s report before board, take appropriate action – stock to remain in focus

SEBI has directed MCX to place the audit report findings before its board of directors and take appropriate action against those involved in treasury mismanagement. According to the report, the exchange had invested in schemes with very low corpus (less than Rs 500 crore) which was not in conformity with the policy of the exchange and despite having been earlier warned by the audit committee. The approval notes do not reveal the corpus of the scheme; the details were not shared with the investment committee subsequently.

 

HDFC Ltd: As per media reports the company is likely to file DRHP for HDFC life today, looks to dilute 15% stake – Positive read thru for HDFC Ltd

 

Somany Ceramics: Sudha Somany Ceramics, an Associate of Somany Ceramics is setting up a facility in Andhra Pradesh to produce about 5.00 million square meters of vitrified tiles. The same is expected to be commissioned in the last quarter of financial year 2018-19. Positive read thru for the stock.

 

Infosys: ATP in association with Infosys launches new PlayerZone bringing an enhanced digital experience for players

ATP and Infosys announced the launch of a new 'PlayerZone' app and website. The revamped PlayerZone, allows users to engage with each other and access information across a wide range of operational aspects related to life on Tour. The new app will increase engagement with the next generation of players and provide a central portal of information as players' progress through different stages of their career.

 

Bharti Airtel: To hold shareholders, creditors meet in September on Telenor merger deal.

 

Telecom: IMG meeting on telecom postponed to August 22

The Inter-Ministerial Group (IMG) constituted to suggest measures to ease the financial stress in the telecom sector, which was supposed to meet today, will now meet on August 22, and it is likely to come out with the final report on suggestions for the industry on the same day.“The meeting has been postponed to August 22 as some of the members were not available for the meeting on Friday. The IMG was set up on May 16 to work on the stress in balance sheets in the telecom sector, and has been studying balance sheets of the past three years (2014-15, 2015-16 and 2016-17) of telcos. Meanwhile, on its last its meeting on August 11, the IMG had discussed that a policy intervention may not be required as ‘green shoots’ in the telecom sector have started to appear in the first quarter.

 

 

 

 

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