Wednesday, 9 August 2017

9 August 2017 - Views & News


ALERT: Indian Oil Corp (IOCL) management reported core GRM of $6.44/bbl for Q1FY18 lower than our and street calculation of $7.7/bbl -- Negative read thru for IOCL 
As  per management of Indian Oil Corp (IOCL), the core GRM (excluding inventory loss) in Q1FY2018 was at $6.44/bbl (based on daily spot prices) and the same is lower than our and street calculation of $7.7/bbl (based on reported inventory loss of $3.4/bbl calculated on fortnightly prices). We believe that recent rally of 12% in IOCL stock price post Q1FY2018 results was primarily driven by upgrade in the consensus GRM estimates and the same does not seem sustainable given lower core GRM calculation by IOCL management – Negative for IOCL.  

TVS Motors: Launches Jupiter Classic edition priced at Rs55,266; expects double digit growth for 2wheeler industry for FY2018 – Positive ..(details in other news)

Ramkrishna Forgings: RBI has hiked FPI (Foreign Portfolio Investments) limit from 24% to 49%; Positive read thru

Sun Pharma: Taro (~70% owned by Sun Pharma) reports disappointing Q1FY2018 numbers – Negative for Sun (Sun pharma will report numbers on 11th August 2017)……(details in investment calls)

Dr Reddy: As per media reports, German regulator inspected company’s unit 2 in Bachupally and has received 483 observations – Negative for Dr Reddy; Clarification from management is awaited.

Aurobindo: In race to buy Mallinckrodt's generic drugs business in the US – Positive read thru
As per media reports, Aurobindo pharma and Intas are in race to buy  Mallinckrodt's generic drugs business in the US. The deal is valued at $ 2 bn (~Rs 12500 crore). The deal is currently in preliminary stage. Mallinckrodt generic business will fit well with the Aurobindo Pharma's as Aurobindo is one of the leading  manufacturer of API (Active Pharmaceutical Ingredient) – Long term positive for Aurobindo if it can close the deal; deal could result in increase in debt.

Crompton Greaves Consumer (CGCEL): Offers Rs1440crore to buy Kenstar from Videcon group; positive read thru for CGCEL
As per media report, Crompton Greaves Consumer Electricals Ltd (CGCEL) has offered to pay around Rs1,440 crore to buy home appliances brand Kenstar from Videocon group as a leveraged buyout. But the deal hinges on a “sustainable sales guarantee” clause that private equity-backed CGCEL wants to include in the final agreement. This is basically to ensure that the sales numbers of Kenstar quoted by Videocon do not deviate drastically in the near future from what has been stated.  We had already highlighted about the talks between the parties and believe that given the strong balance sheet and healthy cash flows of CGCEL, any inorganic growth would help company to expand its product portfolio and would be long term positive.

Ratnamani Metals: Secures order for 80,000 MT carbon steel pipes, positive for the stock

Ratnamani Metals received a new domestic order of 80,000 MT for the supply of Carbon Steel Coated pipes. The order is expected to be completed in the next 12 months.


Godrej Consumer Products: Launched hair care range for salons under the brand Godrej Professional to enhance the growth prospects of hair colour segment - Positive read thru
Godrej Consumer Products (GCPL) is focusing on building its relationship in the retail market and scaling its hair colour business by launching Godrej Professional range of hair care products for professional salons in India. The professional salon hair product market in India is about Rs1200crore and is growing in the range of 8-9%p.a. The brand is launched with 21 shades of hair colour, colour shampoos and shampoo mask used largely in the retail salon formats. View: With this GCPL is focusing on tapping the entire hair care market in India. It already has premium hair care –B Blunt in its portfolio and the new launch with complement it to tap the professional salon space which is gaining good traction in the urban markets.   

Jubilant FoodWorks: to invest Rs100 crore in its Domino's Pizza brand over the next one year to improve the product prospects – positive read through
Jubilant FoodWorks (JFL) will invest around Rs 100 crore over the next 12 months to relaunch its pizza offerings in the country. The company will invest major chuck of this sum in product upgrade and rest on marketing campaigns. The company said though it has improved the pizza, there will not be any price increase for the customers. 

TVS Motors: Launches Jupiter Classic edition priced at Rs55,266; expects double digit growth for 2wheeler industry for FY2018 – Positive
TVS Motors has launched the new variant of its scooter named as Jupiter Classic. The new scooters has enhanced features like windshield, USB Charger and pillion back rest. The scooter is powered by an all-aluminum, low-friction 110cc engine and is priced at Rs 55,266 (ex showroom Delhi). The new variant will enable TVS to sustain strong sales of Jupiter brand. Also, the company expects a double digit growth for 2wheeler industry for FY2018 after a flat sales in past few years.

Power: Jharkhand manages to renegotiate solar tariffs after UP
Solar power developers who won the mega auction of 1,200 MW of projects in Jharkhand 16 months ago have agreed to reduce tariffs, which will help them sign power purchase agreements. Jharkhand is the second state after Uttar Pradesh to renegotiate solar tariffs arrived at through an auction. But while UP went back on signed PPAs, Jharkhand has not actually signed any because the state distribution company found it too costly. Developers had offered a tariff of Rs 4.99 per unit of power to the Jharkhand Renewable Energy Development Agency (JREDA) at a recent meeting. Among projects offered at 45 different locations in the state, winning bids ranged from Rs 5.08 to Rs 7.95, depending on size and location of the project. The agency has not yet taken a decision and the matter may even be discussed by Jharkhand cabinet at its next meeting likely later this week.

BHEL: CAG accuses BHEL of inadequate efforts to improve performance and suggested some measures like diversification into new areas to improve its performance. Neutral

Bank of India:  Aims to raise Rs626 crore via selling 29.96% stake in its associate company i.e. STCI Finance – Positive read thru

Axis Bank: Cuts savings interest rate by 50 BPS to 3.5% for deposits up to Rs50 Lakh – Positive read thru as it will help to bring down the cost of funds

RIL: Plans to refinance its majority of its $12billion debt
Reliance Industries Limited (RIL) plans to refinance a significant portion of about $12billion of its borrowings that is likely to mature over the next three years. RIL is expected to issue bonds to repay its debt as per media reports.

PVR: Sells bowling & entertainment format bluO to Smaaash
PVR stated that it has sold its premium bowling and entertainment format bluO entertainment to Smaaash Entertainment for Rs 86 crore. bluO is a joint venture between PVR and Major Cineplex Group of Thailand, in which PVR owns 51% stake.

Wipro: Partners with Excelfore to offer secure connectivity solutions for autonomous vehicles, positive read-thru
Wipro and Excelfore announced a global partnership to offer secure connectivity solutions for next generation smart and autonomous vehicles. This partnership combines Excelfore’s Smart Mobility Networks solutions with Wipro’s global systems integration and managed services expertise to enable connected car solutions for automotive original equipment manufacturers (OEMs) and Tier 1 equipment makers.

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