Author: Sandeep Singh

Sensex extends losses to third day as bank, pharma stocks weigh on D-Street

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Indian equity benchmarks suffered sharp losses on Wednesday amid continued selling pressure in financial and pharmaceutical stocks, tracking weakness across global peers ahead of the outcome of the US central bank’s policy review.

The S&P BSE Sensex index and the broader NSE Nifty50 barometer were on course to end lower for a third straight session, a day after the International Monetary Fund (IMF) lowered its growth forecast for India.

The IMF forecast India’s economy to grow 9.5 percent in 2021, three percentage points lower than its earlier forecast, citing a lack of access to vaccines and renewed waves of Covid-19 cases.

The Sensex fell as much as 776.03 points or 1.48 percent to 51,802.73 during the session and the 50-scrip benchmark slid to as low as 15,513.45, down 233 points or 1.48 percent from its previous close, before recovering some of those losses in afternoon deals. Analysts awaited more earnings reports from large caps for domestic cues.

At 12:21 pm, the Sensex traded 421.25 points or 0.80 percent lower at 52,157.51 while the Nifty50 was down 119.25 points or 0.76 percent at 15,627.20.

“Today’s decline is largely due to the correction in global markets. While the earlier underperformance in the Indian market was restricted to the banking pack, the recent weakness in pharmaceuticals is adding to pressure caused by profit booking. ,” Ajit Mishra, VP – Research at Religare Broking, told CNBCTV18.com.

Dr Reddy’s was the top laggard on both benchmarks, trading 2.99 percent lower. The Nifty Pharma index traded 0.64 percent lower, having slumped as much as 1.60 percent earlier, as selling pressure continued in the sector a day after the drug major’s Q1 performance disappointed Dalal Street.

“The pharma pack may continue to be under pressure in the short term, however, it looks positive from a long-term perspective,” Mishra said.

NTPC, Axis Bank, M&M, Cipla, Kotak Mahindra Bank, HDFC Bank, Tata Motors, Power Grid and SBI were among the other worst-hit components in the Nifty50 universe, trading between 1.60 percent and 2.03 percent lower.

On the other hand, Bharti Airtel, SBI Life, Divi’s Labs, IndusInd Bank, HUL, Bajaj Finserv, and Titan – up between 0.63 percent and 3.38 percent – were among the blue-chip gainers.

“Nifty50 has been hovering in the band of 15,450-15,900. FIIs’ withdrawal of funds in the cash market is causing short-term profit-taking,” Mishra added.

Analysts also weighed the pace of vaccinations against the number of Covid-cases, and the impact of the pandemic on the economy.

India logged 43,654 fresh coronavirus cases taking its tally to 3,14,84,605, while 640 more fatalities pushed the death toll to 4,22,022, Union Health Ministry data showed on Wednesday.

Barring the FMCG gauge, all sectoral indices on NSE traded lower. Banking and financial services shares were at the forefront of the selloff.

The Nifty Bank and Nifty Financial Services indices traded 1.48 percent and 1.19 percent respectively, while the Nifty FMCG gauge eked out a gain of 0.05 percent. The Nifty PSU Bank index was down 2.07 percent and the Nifty Private Bank barometer down 1.19 percent.

Broader markets also declined in line with headline indices, with the midcap and smallcap gauges down 0.80 percent and 1.02 percent in afternoon deals respectively.

“Amid nervousness over the Chinese tech crackdown and Fed meeting, domestic bourses witnessed a broad-based selloff… Globally, the Fed’s comment on economic recovery, inflation and monetary policy may provide a timeline to tampering, which will determine the near future of market mood,” said Vinod Nair, Head of Research at Geojit Financial Services.

Market breadth remained in favour of bears, as 1,129 stocks traded higher against 1,973 that succumbed to negative territory.

NSE’s India VIX index, which gauges the expectation of volatility in the near term, traded 8.33 percent higher at 14.34, having surged to as high as 20.79 earlier on Wednesday.

Maruti Suzuki, Nestle India, and Pfizer were among the companies slated to report their quarterly results later in the day.

Maruti Suzuki shares quoted 0.31 percent lower at 7,219.25 ahead of the earnings announcement, after falling as much as 1.54 percent earlier in intraday trade.

Equities in other parts of Asia remained at seven-month as markets continued to digest the storm in Chinese shares. The dollar rested with traders reluctant to place large bets ahead of the outcome of the Federal Reserve meeting.

European shares started the day on a positive note, with the United Kingdom’s FTSE benchmark last seen up 0.06 percent in early trade, while France’s CAC was up 0.19 percent and Germany’s DAX 0.16 percent.

The S&P 500 futures traded 0.07 percent lower, indicating a muted start on Wall Street later in the day.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Dr Reddy’s extends losses after Q1 earnings miss estimates. Here’s what brokerages say

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Dr Reddy’s Laboratories shares extended losses on Wednesday, a day after the drugmaker reported quarterly net profit that missed analysts’ estimates. The company’s shares tanked as much as 3.66 percent to Rs 4,666.95 on the BSE before recovering some of those losses in late morning deals.

Dr Reddy’s stock is on course to close lower for the third day in a row. At its intraday low, Dr Reddy’s shares were down 10.32 percent on a year-to-date basis, and 16.86 percent lower than their 52-week high of Rs 5,613.65.

During market hours on Tuesday, Dr Reddy’s had posted a 1.5 percent fall in net profit to Rs 570.8 crore for the first quarter of the current financial year on account of lower operating income.

Analysts in a CNBC-TV18 poll had estimated the pharmaceuticals company to post a net profit of Rs 700 crore over revenue of Rs 4,991.4 crore for the quarter ended June 30.

Revenue from operations, however, rose 11.4 percent to Rs 4,919.4 crore on a year-on-year basis. On the operational front, EBITDA decreased 12.3 percent to Rs 1,018.8 crore, while the EBITDA margin shrank by 560 bps to 20.7 percent from 26.3 percent.

Here’s what brokerages have to say about Dr Reddy’s stock and Q1 performance:

Credit Suisse

The brokerage downgraded Dr Reddy’s to ‘neutral’ from ‘outperform’, lowering its target price Rs 4,900 from Rs 5,200. The foreign brokerage said the company’s Q1 performance was impacted by higher selling, general and administrative expense (SG&A) cost. The supply of the Sputnik V vaccine from Russia has been limited and the company will likely miss the golden period of vaccine supply shortage in India, it added.

Morgan Stanley

It maintained an ‘overweight’ rating on Dr Reddy’s with a target of Rs 5,859. It expects new launches and operating leverage to drive a recovery in the margin for the company soon. The drug maker’s new health-tech initiative can create value in the medium term.

Goldman Sachs

The brokerage has a ‘neutral’ rating on Dr Reddy’s with a target of Rs 5,110. The US active pharmaceutical ingredients price erosion dents its margins, said the brokerage, which cut its FY22-24 EPS estimates by 6-13 percent.

Jefferies

It has a ‘buy’ rating on Dr Reddy’s with a target price of Rs 5,761 against Rs 6,209 earlier. The brokerage said Dr Reddy’s revenue, EBITDA and PAT missed its estimates, and the North America revenue came in flat with market share gains offsetting price erosion.

CLSA

“Dr Reddy’s results were below our estimates as a higher-than-expected return of costs pulled down operating margins. It reported strong sales in India and EMs, but API sales were weak. Despite higher SG&A/R&D costs, margin profile should improve in coming quarters due to limited competition in US launches and a stronger outlook for branded markets,” said CLSA, which reiterated a ‘buy’ call on the stock and lowered its SoTP-based target price from Rs 6,210 to Rs 5,930.

“Factoring in the Q1 miss, higher SG&A, and slow vaccine rollout, we cut our FY22-24CL EPS by 3-10 percent,” it added.

At 11:24 am, the stock traded 2.78 percent lower at Rs 4,709.85 on the bourse, underperforming the benchmark S&P BSE Sensex index, which was down 504.10 points or 0.96 percent at 52,074.66.

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Top stock tips by Sudarshan Sukhani, Mitessh Thakkar

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Here are the top buy-sell calls by market experts:

Sudarshan Sukhani — s2analytics.com

—Buy Pidilite for a target of Rs 2,410 with a stop loss at Rs 2,280

—Buy Coforge for a target of Rs 4,780 with a stop loss at Rs 4,680

—Sell Amara Raja for a target of Rs 709 with a stop loss at Rs 725

—Sell Zee Entertainment for a target of Rs 196+ with a stop loss at Rs 203

Mitessh Thakkar — mitesshthakkar.com

—Sell Cipla for a target of Rs 890 with a stop loss at Rs 925

—Buy Jindal Steel for a target of Rs 433 with stop loss at Rs 412

—Sell REC for a target of Rs 138 with a stop loss at Rs 148

—Sell Zee for a target of Rs 190 with a stop loss at Rs 205

Catch all live market updates here

Disclaimer: CNBCTV18.com advises users to check with certified experts before taking any investment decisions.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Rolex Rings IPO opens for subscription. Should you go for it?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The initial public offering (IPO) of Rolex Rings, a forging company, opened for subscription on Wednesday. Under the Rs 731-crore Rolex Rings IPO, which will close on July 30, shares will be offered in a price band of Rs 880-900 apiece.

The public offer is a combination of fresh issuance of shares worth Rs 56 crore and an offer for sale (OFS) by Rivendell PE LLC of up to 75 lakh equity shares worth Rs 675 crore.

Investors will be able to bid for a minimum of 16 shares, estimated at Rs 14,400 at the upper end of the price band, and in multiples thereof.

Proceeds from the fresh issuance will be utilised towards funding long-term working capital requirements and for general corporate purposes. The company will not receive any proceeds from the OFS.

On Tuesday, the company raised Rs 219.29 crore by allotting 24,36,666 shares to anchor investors at the upper price band of Rs 900 apiece ahead of the IPO.

Among the brokerages recommending subscribing to the Rolex Rings IPO are ICICI Direct, Reliance Securities and Ventura Securities, while Choice Broking has assigned a ‘subscribe with caution’ rating to the issue.

“A sticky clientele, increasing share of business amongst existing customers, improving operational efficiencies led by better utilisation and exit from corporate debt restructuring remain key catalysts for Rolex Rings,” said ICICI Direct, which has assigned a ‘subscribe’ rating to the issue.

Reliance Securities has assigned a ‘subscribe’ rating to the issue, stating that the company’s strong outlook and healthy balance sheet offer comfort.

“Its peers like Bharat Forge and RK Forgings command premium valuations despite generating subpar return ratio compared to RRL. We believe strong outlook for auto ancillary companies especially the forging companies with visible pick-up in demand around the globe should aid RRL to record healthy growth in the ensuing years,” the brokerage said.

“The company intends to derisk its business dependence on changes in power tariffs and reduce its carbon footprint through investment in renewable energy. As on date, the company operates windmills with installed capacity of 8.75 MW. It is in the process of expanding capacity of its solar projects by an installed capacity of 16 MW and has already placed purchase orders for equipment with installed capacity of 7.35 MW. The proposed expansion will help Rolex Rings in reducing its carbon footprint and expanding its profit margins,” HDFC Securities said.

“At the higher end of the price band, RRL is demanding a PE valuation of 28.2x. If we normalise the FY21 earnings, the demanded PE valuation comes out to be 39.4x, which we feel is stretched,” said brokerage Choice Broking, which has assigned a ‘subscribe with caution’ rating on the issue.

“The overall outlook for bearing rings and auto components industries remains positive. However, despite its presence in the lucrative industrials segment, the higher demanded valuation is a concern for investors,” it said.

Ventura Securities has recommended subscribing to the issue for long-term for a target price of Rs 1,177 (15 times the FY24 earnings).

“The target represents a potential upside of 31 percent from the offer price of Rs 900 over a period of 18-24 months. A better-than-expected recovery in the global economy, a rebound of the domestic automotive industry and the management’s guidance on higher capacity utilisation in the coming years bolster our confidence in improving revenue growth and profitability,” it said.

(Disclaimer: The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.)

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L&T ekes out gain despite Q1 miss; What brokerages say

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Larsen & Toubro (L&T) shares recovered initial losses to register a mild gain on Tuesday, a day after the engineering and construction major reported a 287 percent jump in net profit for the quarter ended June 30 but missed analysts’ estimates.

The infra conglomerate announced its Q1FY22 results on Monday after market hours, posting a net profit of Rs 1,174 crore for the first quarter of the current financial year. A CNBC-TV18 poll had predicted the company to report a profit of Rs 1,590 crore for the April-June period.

The company’s total income for the April-June period increased 38 percent to Rs 29,335 crore. Expenses came in at Rs 27,708.08 crore in the quarter ended June 30, as against Rs 21,367.63 crore in the corresponding period a year ago.

The L&T stock ended 0.41 percent higher at Rs 1,604.35 apiece on BSE, after briefly trading in negative territory in early deals on Tuesday. L&T shares outperformed the 30-scrip S&P BSE Sensex index, which extended losses to a second straight day to end down 273.51 points or 0.52 percent at 52,578.76.

Among the brokerages positive on the stock are Jefferies, Morgan Stanley, Citi, Anand Rathi, Motilal Oswal and ICICI Securities.

Domestic brokerage Motilal Oswal has retained a ‘buy’ call on the stock with a target price of Rs 1,853, stating that L&T remains the best play on the capex cycle in India. It said the company is poised for strong earnings growth momentum if and when order inflows gain pace while adding that fundamentals remain fairly strong and macro tailwinds are awaited.

L&T has rightly prioritised its balance sheet strength over growth during the second wave of the pandemic, Motilal Oswal further noted. While this wave brought on similar challenges as last year, the construction activity was allowed to continue, hence, the impact was much lower than that seen in FY21, it added.

Jefferies has a ‘buy’ call on L&T with a target price of Rs 1,900. The company’s Q1 EBITDA was 12 percent below expectations as engineering and construction sales missed estimates by 12 percent. Covid-induced delays including fatalities and local lockdowns impacted execution, the foreign brokerage said.

The company’s order flow was up 13 percent as against its FY22 guidance of 13-17 percent. Its prospect pipeline rose 42 percent and the L&T management is optimistic on the outlook, the brokerage added.

Citi has a ‘buy’ rating on the stock with a target price of Rs 1,785 apiece. The company posted a solid margin performance and expectedly soft execution, the brokerage said.

Morgan Stanley maintained an ‘overweight’ rating on the L&T stock with a target price of Rs 1,894. The brokerage said the company’s core revenue was a tad weak but its strong margin despite a rise in commodity prices was a big positive. It also said that L&T’s IT business also surprised positively.

The company’s improving labour availability, strong orderbook, healthy prospect list should drive core earnings, Morgan Stanley added.

Anand Rathi retained a ‘buy’ rating on the stock, stating that the company’s greater public sector exposure augurs well in the present context. “With a robust order book in hand and a sturdy pipeline, revenue assurance is healthy… Valuing the company on a sum-of-parts basis and at a 20x multiple for its core business, we arrive at a target price of Rs 1,932,” it said. At the current market price, that indicates an upside potential of 20 percent.

ICICI Securities maintained a ‘buy’ rating on Larsen & Toubro with a SoTP-based target revised to Rs 1,857 from Rs 1,760 earlier given the company’s focus on margins and asset sales.

“We believe both state and central governments will start focusing on investment towards infrastructure and job creation post normalisation of the pandemic situation. The focus on asset sales, especially Nabha Power and Hyderabad Metro, will boost cashflows in the medium to long term,” ICICI Securities said.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Glenmark Life Sciences IPO opens for subscription; should you invest?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The initial public offering (IPO) of Glenmark Life Sciences, the manufacturer of high-value active pharmaceutical ingredients (APIs), opened for subscription on Tuesday at a price band of Rs 695-720 per share.

The issue, which will close on July 29, comprises fresh issuance of 1.47 crore equity shares (worth around Rs 1,060 crore) and an offer for sale of up to 63 lakh shares by its parent company Glenmark Pharmaceuticals.

Glenmark Life Sciences had on Monday raised Rs 454 crore by allocating 63,06,660 equity shares to 19 anchor investors at Rs 720 apiece ahead of its initial share sale.

Read here: Glenmark Life Sciences IPO to open today; here are the key things to know

Among the brokerages bullish on the issue are Angel Broking, Anand Rathi, Religare Broking and Geojit Financial Services.

Brokerage firm Anand Rathi has assigned a ‘subscribe’ rating to the IPO citing the company’s leadership in select high-value non-commercialised APIs in chronic therapeutic areas, cost leadership, strong management, strong balance sheet, growing business, high return on net worth of 46.71 percent in FY21 and reasonable valuations.

“At the upper end of the IPO price band, Glenmark Life Sciences Ltd is offered at 25.09 times its FY21 earnings,” the brokerage added.

According to brokerage house Religare Broking, Glenmark Life Sciences is well placed in the API business with a product portfolio of 120 products including therapy areas like cardiovascular, CNS, diabetes and anti-infectives.

“Going forward, the company plans to diversify the customer base by increasing geographic market coverage, grow the CDMO business along with API and improve operating efficiency,” said Religare, which has a positive view on the company from a long-term perspective.

Vinit Bolinjkar, Head of Research, Ventura Securities, also recommends subscribing to the Glenmark Life IPO for long-term investing.

“Our target price of Rs 1,039 (18x FY24 earnings) represents a potential upside of 44 percent from the offer price of Rs 720 over a period of 18-24 months,” he said.

According to Angel Broking, Glenmark Life Sciences has strong relationships with the top global generic pharmaceutical companies worldwide, which ensures revenue visibility.

This company may not have long-term contracts with its clients, but their relationships extend for more than five years, said Angel Broking, which also recommends subscribing to the issue.

Geojit Financial Services believes the IPO is “fairly priced”. It has assigned a ‘subscribe’ rating to the issue.

The company has gradually built scale and reach in API offerings through economies of scale in manufacturing operations and a portfolio build-up, which has enabled it to service new markets and explore new product and service offerings to customers.

“Those looking to take advantage of long-term growth in the sector can invest in the issue with a long-term outlook,” said Gaurav Garg, Head of Research at CapitalVia Global Research.

“The company has shown robust growth in its revenue as well as PAT over last three years. The grey market premium of around 20 percent shows that investors can get decent listing gains from the issue,” he said.

Glenmark Life Sciences has a good performance execution and clean regulatory track record, said brokerage ICICI Direct, adding that it also has a ‘subscribe’ rating to the issue.

Hem Securities recommends subscribing to the issue for listing gains as well as for the long term. It is positive on the company’s strong clientele, strong focus on sustainability in operations and quality-focused compliant manufacturing and R&D infrastructure.

(Disclaimer: The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.)

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow