Daily BriefsIndia

India: Bajaj Finance Ltd, CarTrade, LIC Housing Finance, TVS Motor , Firstsource Solutions, Laurus Labs, Marico Ltd, Shriram Transport Finance, Solar Industries India, Tech Mahindra and more

In today’s briefing:

  • Bajaj Finance: Undergoing Major Transformation Towards Becoming a Fintech Company
  • CarTrade Tech IPO Initiation: Shifting Gears
  • LIC Housing Finance – Unmitigated Disaster
  • TVS Motor: Weak Quarter Impacted by the Pandemic
  • Firstsource Solutions: Top Client De Growth Impacts Revenues
  • Laurus Labs: Strong Performance Driven by Formulations
  • HSIE Results Daily: Marico, JSW Energy, Container Corporation and More
  • Shriram Transport Finance Company Ltd. Rs Q1FY22 Result Update
  • Solar Industries India: Strong Earnings Momentum Continues
  • HSIE Results Daily 30 July 2021: Tech Mahindra, SRF Ltd, Colgate Palmolive and More

Bajaj Finance: Undergoing Major Transformation Towards Becoming a Fintech Company

By Ankit Agrawal, CFA

Bajaj Finance Ltd (BAF IN) reported weaker than expected Q1FY22 earnings led by weakening asset quality and subdued growth due to adverse impact from the second wave of COVID. On the other hand, it reported strong advancement in its next phase transformation of becoming an app based fintech ecosystem. With this app based ecosystem, we think BAF is gearing up to be the next big fintech in the country. If all goes well, we won’t be surprised to see BAF getting bigger than Paytm, PhonePe, etc. over time. BAF has an inherent advantage over its peers in the form of a large vetted and wealthy customer base as well as in-house products that can be tailored as per customer requirements. BAF’s fintech peers, on the other hand, acquire customers through significant discounts and cash burn. Also, these peers have limited in-house products and have to rely mostly on third-party products that provide limited leeway for customization. While, BAF’s current valuations are around fair at 65-70x on a normalized profit base (i.e. ex of COVID impact), we think BAF still has potential to surprise on earnings growth led by its new Fintech avatar. 


CarTrade Tech IPO Initiation: Shifting Gears

By Arun George

Cartrade (0056989Z IN) is a leading online destination for auto consumers in India. CarWale and BikeWale, key brands owned by CarTrade, ranked number one on relative online search popularity when compared to their key competitors over the last three years, according to Google Trends data. CarTrade’s shareholders include Warburg Pincus (34.44% of fully diluted shares), Temasek (26.48%), JP Morgan (11.93%) and March Capital (7.09%). 

CarTrade is looking to raise Rs28 billion ($375 million) through an IPO in India, according to press reports. The IPO comprises a pure offer for sale of 18.53 million shares by its existing shareholders and promoters. The IPO is set to launch on 9 August.  

India was the fifth largest car market in the world in 2019 and is forecasted to become the third-largest auto market in the world as measured by volume in 2025, according to RedSeer. The COVID-19 pandemic has also resulted in a shift in preference towards used cars as people limit their use of public transportation. Indian auto OEMs spent only 14% of their total ad budgets on digital advertising, which is significantly lower than the global average of 42% in 2020, according to RedSeer. 

The growing auto market combined with the rising penetration of digital ad spend presents an attractive opportunity for auto transaction platforms such as CarTrade. CarTrade is capitalising on this market opportunity as evidenced by its highly popular platforms, solid organic growth, strong margins and healthy cash generation. Overall, we think that CarTrade is an attractive play on India’s new economy sector.


LIC Housing Finance – Unmitigated Disaster

By Thomas J. Monaco

*Credibility Gap Widens: LIC Housing Finance (LICHF.IN) [LIC] reported FY 1Q22 bottom-line results of INR 1.5 bn, declining INR 2.5 bn (61.5%) linked quarter. Negative operating jaws, were the culprit, as costs increased INR 469 mn (21.1%) whilst revenues declined INR 2.6 bn (16.7%); and

*Very Negative Credit Delta: Despite the limited NCOs, net new NPLs at LIC still skyrocketed INR 44.7 bn or 190.3% on an annualized basis linked quarter significantly accelerating from a very high INR 12.6 bn (62.0%) during FY 4Q21. By our calculation, if the large blip in credit continues, LIC management ought to think about adding another INR 158 bn to the reserve – which amounts to 78% of stated equity at just 50% cover of NPLs.


TVS Motor: Weak Quarter Impacted by the Pandemic

By Chola Wealth Direct

Commodity cost impact and margins: The commodity cost impact in 1QFY22 was offset by a favorable product mix, cost-saving initiatives, and product price hikes. During the quarter & subsequently beginning Q2’FY22 the company undertook a price hike of 1.1% in Apr’21 and 2.4% in Jul’21. The management is confident of normalizing EBITDA margins, and recovery in volumes…

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Firstsource Solutions: Top Client De Growth Impacts Revenues

By ICICI Securities Limited

About the stock: Firstsource Solutions (FSL) provides business process services to BFSI, communication, media, tech and healthcare.

  • The company generates 68% revenues from the US and 31% from the UK
  • FSL has witnessed healthy revenue improvement (up 19% YoY in FY21) and 100 bps improvement in EBIT margins in FY21
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Laurus Labs: Strong Performance Driven by Formulations

By ICICI Securities Limited

About the stock: Laurus Labs operates in the segment of Generic APIs & FDFs (formulations), custom synthesis and biotechnology. Major focus in APIs is on ARV, oncology and other APIs.

  • It has eight manufacturing units (five FDA approved sites) with 61 DMFs, 27 ANDAs filed (two Para IV, seven first to file), 292 Patents filed (150 granted)
  • Laurus acquired Richore Life Sciences to diversify in area of recombinant animal origin free products, enzymes as well as building biologics CDMO
Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

HSIE Results Daily: Marico, JSW Energy, Container Corporation and More

By HDFC Securities

HSIE Results Daily Marico: Marico posted in-line revenue growth, however margin was a miss. Revenue/EBITDA grew by 31/3% (HSIE 31/7%). Domestic revenue and volume grew 31/21%, 7/2% 2-year CAGR, a good show despite the COVID pressure. PCNO saw volume growth of 12% YoY, albeit on a low base (- 11%), impacted by extended lockdowns in its core south and west markets. VAHO registered 35% YoY value growth (-32% in the base year) and saw 70bps share gain. Saffola remained a torchbearer (clocked 60/24% value/volume growth), aided by improved penetration and +450bps volume share gain.

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Shriram Transport Finance Company Ltd. Rs Q1FY22 Result Update

By Edelweiss

Asset quality outcome better than expectations

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Solar Industries India: Strong Earnings Momentum Continues

By ICICI Securities Limited

It also leads the exports share from India, which is around 70% in industrial explosive and initiating system It exports to 51 countries in the world and has recently expanded its…

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HSIE Results Daily 30 July 2021: Tech Mahindra, SRF Ltd, Colgate Palmolive and More

By HDFC Securities

HSIE Results Daily Tech Mahindra: We maintain a BUY rating on Tech Mahindra (TechM), based on better-than-expected revenue performance, healthy net-new deal wins (in both telecom and enterprise segments), and in-line margins. TechM delivered 3.9% QoQ CC growth, which was broad-based across verticals. The focus on large deal wins (net-new TCV of USD 815mn), following a healthy Q4 (Telefonica deal), improves growth visibility. The key attributes that underscore our positive outlook are (1) the largest deal win in the healthcare vertical (patient care modernisation); (2) healthy growth in BPS; (3) increase in intake of freshers after six quarters; (4) improvement in 5G related deals (~50% of telecom deals are related to 5G); and (5) continued growth momentum in enterprise segment, led by technology, BFSI and manufacturing verticals.

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