Hyderabad-headquartered Aurobindo Pharma came up with its financials for the quarter ended September 30 with both revenues and net profit shrinking year-on-year even after factoring out the impact of a key business disposal.

The company’s consolidated net profit declined 13.7% to Rs 697 crore compared with the year-ago period. On a sequential basis, net profit slid 9.5%.

This was partly due to the disposal of its Natrol unit. However, even after factoring out the impact of the asset that had contributed to the financials last year, Aurobindo recorded lower business activity. Consolidated net profit after discounting Natrol declined 2.1% year-on-year.

Consolidated revenue declined 8.3% to Rs 5,941.9 crore compared with the same period last year but rose 4.2% sequentially compared to the first quarter. Factoring out the impact of Natrol disposal, revenue declined 2.1%.

The company’s share price has corrected sharply by a third since May. It declined 2.55% to close at Rs 672.4 apiece on the BSE in a strong Mumbai market on Monday.

Aurobindo Pharma Q2: Other Highlights

1) EBIDTA before forex and other income stood at Rs 1,186.7 crore.

2) EBITDA margin was 20%, compared with 21.2% in the first quarter and 21.3% a year earlier.

3) R&D spend was Rs 399 crore, 6.7% of revenue. This is up from 6.3% for April-June.

4) Received final approval for seven ANDAs including two injectables from the US FDA.

5) US formulations revenue grew 6.9% YoY to Rs 2,967.6 crore.

6) Europe formulation revenue stood at Rs 1,662 crore, an increase of 9.7%.

7) Revenue from growth markets declined 13.5% YoY and grew by 17.3% QoQ to Rs 386.3 crore.

8) API revenue for the quarter was at Rs 780.6 crore versus Rs 829 crore in the corresponding period last year.

9) The board declared an interim dividend of Rs 1.50 per share.

Aurobindo Pharma management commentary

N. Govindarajan, managing director of the company, said business performance across most of the segments was robust, aided by a gradual pick-up in demand and gradual market share gains.

“However, profitability was impacted by cost pressure on some of the key raw materials as well as higher logistic costs,” he said.

Govindarajan said Aurobindo is leveraging the opportunity to streamline its working capital to improve cashflows and will continue to see the benefits of these measures over the next few quarters.

“We are pleased with the steady progress in our complex generic product development and look forward to executing the same to enhance our business growth and profitability.”

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On Monday, the benchmark index Nifty has marked the low of 17836.10 and thereafter recovered nearly 250 points. The index settled above the 18000 mark. The price action has formed a bullish candle with a long lower shadow. The long lower shadow indicates buying interest at lower levels. The leading indicator, 14-period daily RSI has given a positive crossover, which is a bullish sign.

Here are the top trading set-ups to watch out for Tuesday.

J.K. Cement: Majorly, the stock is displaying a bullish trend as it is marking the sequence of higher tops and higher bottoms. Further, it is trading above its short and long-term moving averages. These averages are in ascending order, which suggests the trend is strong.

On Monday, the stock has given downward sloping trendline breakout on the daily chart. This breakout is confirmed by robust volume. Additionally, the stock has formed a sizeable bullish candle on breakout day, which adds strength to the breakout. The momentum indicators and oscillators are also suggesting bullish momentum. The leading indicator, 14-period daily RSI has also given a downward sloping trendline breakout, which is a bullish sign.

On the daily timeframe, ADX is quoting at 16.41 which suggests that the trend is yet to be developed. Directional indicators continue in the ‘buy’ mode as +DI continues above –DI. Based on the above observations, we expect the stock to continue its upward movement and test levels of Rs 3930 followed by Rs 4000 in the short term.

Muthoot Finance: The stock is oscillating in the range of Rs 1638.85- Rs 1402.40 for the last 63 trading sessions. On Monday, the stock has given a 63-days consolidation breakout on the daily chart. Further, on breakout day the volume was expanded by nearly 8 times of 50-days average volume, which indicates important buying interest. The 50-days average volume was 9.02 lakh while on Monday the stock has registered a total volume of 71.64 lakh.

Currently, the stock is trading above its short and long-term moving averages. These averages are in a rising trajectory. Interestingly, the daily RSI is oscillating in a sideways range, i.e. 40-60 zone since the last 52 trading sessions. On Monday, RSI has given consolidation breakout and surged above the 60 mark. The RSI is trading above its 9-day average and both are in a rising trajectory. The fast stochastic is trading above its slow stochastic.

Based on the above observations, we expect the stock to continue its upward movement and test levels of Rs 1770 followed by Rs 1850 in the short term.

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Nifty F&O action for November 11 expiry shows 17,900 will act as key support now.

Nifty 50 re-claimed the 18,000 mark on Monday after a gap of 12 days. On November 08 Nifty 50 saw a gap up opening, however, it soon fell into negative territory. Nevertheless, after 1130 hours it started to gain steadily and closed near the intra-day high by the end of the day. At close, Nifty was up 0.85% or 151.7 points to 18068.5. This is the second day in a row when Nifty 50 gained, despite Nifty Bank closing in the red.

Activity on the F&O market for the weekly expiry on November 11, 2021, now clearly shows that 18,500 will act as a strong resistance for this week. The highest call option open interest (91,666) for Nifty 50 stood at a strike price of 18,500. In terms of the highest addition of open interest in the call options front was at 18,500 in the last trading session. A total of 44,489 open interest was added at this strike price. The next highest call option open interest stands at 20,000 where total open interest stood at 71,651.

In terms of put activity, the highest put writing was seen at strike price of 17900 (74,231 open interest added on November 08), followed by 18,000 (45,686 open interest added on November 08), while there was put unwinding at strike price 17,000, followed by 16,700.

Highest total put open interest (104,498) stood at a strike price of 17,900. This is followed by a strike price of 17,800, which saw a total put option open interest of 71,606 contracts.

Following table shows the difference between call and put option at strike price near to max pain of 18000. Max pain has moved up from 17,900 to 18,000 mark in yesterday’s trade.

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Divis Lab’s Q2FY22 growth was majorly driven by Custom synthesis segment and Nutraceuticals segment. The overall revenue growth was a robust 40% YoY to Rs. 20bn in 1HFY22, while for the same time period, Generic API segment suffered by declining to 6.3% YOY to Rs. 16.6bn. Gross margin remained flat at 67.1% YoY, EBITDA margin declined by 180bp to 41.5% YoY, EBITDA rose by 9% YoY to Rs. 8.3bn, PAT grew at 15% YoY to Rs. 6.1bn. 

Exports stood at 88% of sales, of which 72% came from export sales in the US and Europe. Inventory levels are high for both CS and Generics to ensure a seamless supply chain and it has enough capacity to meet the demands of Molnupiravir. 

The backward integration in products for which Divis Lab holds 70% market share has been completed while It is yet to achieve backward integration on new introductions which will be done once they reach a considerable market share. 

In the API segment, no impurities were found in DIVI’s Sartan APIs, Nitrosamine or Azido, hence this should help drive up sales and gain market share. Even though the Generic API segment declined by 6.3% YoY 1HFY22, it is estimated that the revival of the segment will be supported by increase in market share of existing molecules by backward integration and addition of 16 new molecules that are under various development stages. Its strength and scale is estimated to increase 15% revenue CAGR in the Generic API segment to Rs. 47bn over FY21-23E.

On the contrary, which Divis has the one of the best recovery in iodine recovery rates, the pricing is key to remain competitive in media products. The commercialization of these products is expected in the next 1-2 years as it is already working on validation batches.

Divis has successfully built long-lasting relationships with its innovators on the basis of its chemistry and process skills, manufacturing scale from clinical to commercial qualities, and project execution. The supply contract for Molnupiravir API with Merck/MSD proves that DIVI is a favourite of global innovators for critical projects. It also has the requisite chemistry skills to work on any further Antiviral drug, including, the treatment of COVID-19. 

Divis is estimated to achieve 41% CAGR in CS to Rs. 56bn over FY21-23E given its technical leadership and large scale facilities. The company expects the construction of Kakinada to begin as soon as the land is handed over since the legal hurdles are settled. The estimated capex is ~Rs. 10-20bn and will be spread over the next 2-3 years. DIVI has already incurred capex worth ~Rs. 25bn since FY18. At present, the WIP capex stands at Rs. 4.3bn, which will be completed in FY22 and in the second half, an additional INR3b expected to be spent.
 

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In the concall hosted by Mr Sumant Kathpalia, MD & CEO of IndusInd Bank, stated that the recent allegations against the bank regarding the evergreening of loans in its MFI subsidiary (Bharat Financial Inclusion Limited – BFIL) and the disbursements of loans without customer consent were baseless and inaccurate. He further clarified that chaos of the disbursements to ~84k accounts without customer consent happened due to a technical glitch. However, only 26k clients (of the total) were active, with a loan outstanding of Rs. 340m which is 0.12% of MFI loans. He also clarified that the company has provisions against the portfolio.

He also disposed of media articles circulating other allegations of top-level executives resigning from their posts. Mr. Rao, Non-Executive Chairman of BFIL who resigned in September this year, continues to work as an advisor with the IIB. The company supported their argument by mentioning their strong governance structure and risk framework remain strong; it has strengthened these over the years through strict supervision.

The management has maintained its loan growth and credit cost guidance as given during the 2QFY22 results. It expects loan growth to be 16–18%, and CASA ratio in excess of 40% by FY23E. CASA deposits (of the total deposits) is estimated to grow at 14.6% to Rs. 1227.4bn for FY22E. The credit cost of 160–190bp with an additional 50bp for Vodafone, the total credit cost guidance stands at 240bp. 

In Q2FY22, the MFI book for IIB stood at Rs. 281bn, which is, ~12.7% of loans, CAGR for past two years stood at 22%, NPAs in the MFI book stood at Rs. 9.05bn, which is, 3% of MFI loans, while the restructured book stood at Rs. 9.07bn, which is, 3.2% of MFI loans, with ~55% of customers completing at least three loan cycles. The PAT is estimated to grow to 69.5% to Rs. 48.1bn, NII to grow to 13.4% to Rs. 153.3bn and deposits to grow at 16% to Rs. 2972bn for FY22E.

Overall, the bank expects credit costs to range at 6–8% in the MFI business, with growth likely to remain strong. The total SMA book within MFI stood at Rs 50.5bn as of 31st Oct’21. SMA 0-30 dpd stood at INR26b, 30-60 dpd at Rs. 10.6bn, with the balance in 60+ dpd (including NPAs). ECLGS disbursements in MFI loans stood at Rs. 6bn.
The company stated that the business continues to do well with collection efficiency improving to 94.6%, surpassing pre-COVID levels in Oct’21. However, MFI, in Kerala and West Bengal remain lower, while other states are showing healthy trends. 
 

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