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Bajaj Auto speeds past forecasts with 22% revenue growth in Q2; to set up finance arm

by 5paisa Research Team 27/10/2021

Bajaj Auto Ltd posted better-than-expected revenue for the quarter ended September 30, aided by high growth of intra-city vehicles and strong exports of two-wheelers making up for a decline in demand domestically.

The company’s revenue rose 22.4% to Rs 8,768 crore for the quarter as against Rs 7,156 crore in the same period last year. On a sequential basis, revenue increased 18.6% quarter on quarter. Analysts were expecting double-digit growth but the media projections were around 15-16% rise in sales.

Meanwhile, even as the company faced higher cost of raw materials, Bajaj Auto posted a consolidated net profit of Rs 2,040 crore and a profit of Rs 1,539 crore before exceptional item. This compares with a profit of Rs 1,194 crore in the second quarter of last year.

Bajaj Auto International Holdings BV, a 100% subsidiary of the company, held a 47.99% stake in KTM AG. The arm swapped a 46.50% stake in KTM AG for a 49.90% stake in Pierer Bajaj AG and booked a gain in fair value of Rs 501.23 crore as a one-time exceptional item during the quarter.

On a standalone basis, net profit rose 12% to Rs 1,275 crore year-on-year.

Bajaj Auto’s shares, which had previously corrected from a high of Rs 4,365 apiece, closed at Rs 3,777.45 on Wednesday, down 0.38% in a weak Mumbai market. The company declared results after trading hours.

Bajaj Auto Q2: Other highlights

1) Overall volume growth was pegged at 9%, in line with expectations.

2) Domestic two-wheeler sales declined 11% but three-wheeler sales rocketed 88% YoY;

3) Exports of two-wheelers rose 31% while that of three-wheelers increased 8%.

4) The firm faced an increase in the cost of raw materials, which was partially offset by an increase in prices.

5) EBITDA margins declined from 18.2% in Q2 FY21 to 16.4% last quarter but improved on a sequential basis.

6) As on September 30, after payment of dividend of Rs 4,051 crore, surplus cash and cash equivalents stood at Rs 17,526 crore as against Rs 19,097 crore as on June 30.

New initiative

The company said Wednesday its board has approved a plan to create a new non-banking finance arm that would be a captive wholly owned subsidiary. The new company will finance vehicles and, in particular, the two-wheelers, three-wheelers and light four-wheelers manufactured and/or marketed by Bajaj Auto or its related firms.

This could be a big move to deploy extra cash of the company. The name of the proposed company is Bajaj Auto Consumer Finance.

Interestingly, the move would pitch it against Bajaj Finserv, a financial services firm run by Sanjiv Bajaj, brother of Rajiv Bajaj, who runs Bajaj Auto.

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L&T adjusted profit climbs 56% in Q2 as order inflows rise, margins improve

by 5paisa Research Team 27/10/2021

Larsen & Toubro Ltd registered a sharp jump in adjusted profit for the second quarter, helped by higher sales and an improvement in earnings margins across some of its key businesses.

India’s biggest engineering and construction company said adjusted consolidated profit after tax rose 56% from a year earlier to Rs 1,723 crore for the three months through September. Adjusted profit excludes exceptional items and discontinued operations.

After including one-off items, consolidated net profit for the second quarter slumped 67% to Rs 1,819 crore from Rs 5,520 crore during the year-ago period, when it recorded a gain on the sale of its electrical and automation business to French company Schneider Electric.

L&T said the adjusted profit was driven by higher earnings of its software services business and improved margins from the projects and manufacturing portfolio as the coronavirus-induced stress in previous periods waned.

L&T also said that revenue from operations rose 12% to Rs 34,772 crore from Rs 31,034 crore in the corresponding quarter of last year. 

The company said it recorded a rebound in orders during the July-September period. During the second quarter, it bagged orders worth Rs 42,140 crore. This is 50% more than the figure it had clocked in the same period last year.

The EBITDA margin of the infrastructure segment, the biggest revenue generator for L&T, widened to 8.3% during the quarter ended September 30, 2021 from 6.4% a year earlier.

The EBITDA margin of the IT and technology services business, the second-biggest contributor to total revenue, expanded marginally to 23.3% from 23.2.%.

The hydrocarbon segment’s EBITDA margin narrowed a little, to 8.3% from 8.5%, but it secured orders valued at Rs 14,503 crore during the second quarter compared with just Rs 99 crore a year earlier.

L&T Q2: Other highlights

1) Consolidated order book at the end of the September was Rs 3.3 lakh crore, of which 23% was from overseas.

2) During Q2, 52% of the orders were international. Those amounted to Rs 22,116 crore.

3) Infrastructure segment received orders worth Rs 12,108 crore in Q2, down 17% over the year-ago period.

4) Power segment recorded order inflow of Rs 143 crore, reflecting stagnation of fossil fuel power plant prospects.

5) The heavy engineering segment recorded order inflow of Rs 648 crore, up 101%.

6) The IT and technology services business recorded customer revenue of Rs 7,876 crore, up 28%.

L&T commentary

The company said that with the progressive weakening of the second Covid-19 wave and sustained vaccination efforts, the overall business environment is looking more positive and that this should lead to the Indian economy registering good growth in the medium term. 

“Various high frequency indicators such as GST collections, auto sales, power consumption, import-export data indicate a sustained economic recovery,” L&T said. 

The engineering company said its focus remained on profitably executing its large projects, even as it looks to take advantage of the tailwinds and growth momentum in sectors such as IT. 

L&T also said that it is looking to optimise costs by automation and greater use of digital technologies, even as it looks to divest non-core assets in a phased manner and improve its working capital management. 

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Chart Busters: Top trading set-ups to watch out for on Thursday

Chart Busters: Top trading set-ups to watch out for on Thursday
by 5paisa Research Team 28/10/2021

On Wednesday, the benchmark index Nifty has opened flat and mostly traded in a narrow range of 83 points. However, the last hour of trading sessions witnessed a fall of nearly 136 points. The Nifty index has closed at 18210.95 with a loss of 57.45 points or 0.31%. The price action has formed a bearish candle. The Nifty Midcap 100 and Nifty Smallcap 100 has outperformed the benchmark indices on Wednesday. The advance-decline ratio was in the favour of advancers.

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

Minda Corporation: Considering the daily chart, the stock has given a downward sloping trendline resistance breakout. This breakout was confirmed by above 50-days average volume. Additionally, the stock has formed a sizeable bullish candle on breakout day which adds strength to the breakout. The stock is trading above its important short to long-term moving averages i.e. 20, 50, 100 and 200 DMA. It is also in a rising trajectory.

Interestingly, the daily RSI has also given downward sloping trendline resistance breakout. Currently, daily RSI is quoting at 64.70 and it is in rising mode. The weekly RSI has also surged above the 60 mark for the first time after August 2021. The MACD line just crossed the signal line, and the histogram became green. Moreover, it has also given the buy signal in Martin Pring’s long-term KST set-up. On the daily timeframe, ADX is 12.35 and suggests that the trend is yet to be developed. Directional indicators continue in the ‘buy’ mode as +DI continues above –DI.

In a nutshell, the stock has registered a bullish breakout along with volume confirmation. On the upside, the level of Rs 148 will act as minor resistance. While on the downside, the 8-day EMA will act as strong support for the stock.

K.P.R. Mill: Majorly, the stock is displaying a bullish trend as it is trading above its short and long-term moving averages. These averages are in the desired sequence, which suggests the trend is strong. For the last 22 trading sessions, the stock is trading in a falling channel. Currently, it is on verge of giving the channel breakout on the daily chart. On Wednesday, the stock has touched the upper trendline of the falling channel. On Wednesday, the stock has seen robust volume above the 50-days average volume. This shows the accumulation before the actual breakout happen. Daily RSI is trading above 50 levels, indicating a bullish setup for the stock. The fast stochastic is also trading above its slow stochastic line.

Going ahead, the stock is on verge of seeing a trendline breakout. If it moves above the Rs 482-Rs 485 zone, then we may see a sharp upside in the stock. On the downside, the 20-day EMA will act as strong support, which it is currently quoting at Rs 449 level.

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F&O Cues: Key support & resistance levels for Nifty 50

F&O Cues: Key support & resistance levels for Nifty 50
by 5paisa Research Team 28/10/2021

The level of 18,000 will act as key support while 18,300 will be a strong resistance.

In yesterday’s trade, the frontline equity indices lost some of the momentum gained on 26th October. The Nifty 50 opened with a positive note on October 27, however, it gave up all its gain after sell-off in the market in the second half of the day. By the end of the day, it was down by 0.31%.

Today is also the monthly options expiry day. Looking at yesterday’s trading action in the F&O market, it seems that the market is likely to close between 18,100 and 18,300 in today’s trade. The highest put writing was seen at strike price of 17950 (11,148 contracts added on October 27), followed by 18,050 (6458 contracts added on October 27), while there was put unwinding at strike price 17,000 (10551 contracts shed), followed by 17,400 (10546 contracts shed).

Highest total put open interest of 83,880 contracts stood at strike price 18,000, which will a strong support for the market in today’s trade. This is followed by strike price 18200, which saw a total put option of 79,932 contracts, while strike price 17,800 has 61,339 contracts in open interest.

In terms of overall open interest on the call option side, maximum open interest stood at a strike price of 18,500, which will act as a strong resistance. Total call open interest of 1,43,705 contracts stood at a strike price of 18,500. Aggressive call writing was seen at strike prices of 18,300 and 18,350, which will act as a first resistance level. Total open interest at the strike price of 18,300 stood at 1,39,864.

Following table shows the difference between call and put option at strike price near to max pain of 18200.

 

Strike Price  

Open Interest (Call option)  

Open Interest (Put option)  

Diff(Put – Call)  

17,900.00  

9019  

53653  

44634  

18,000.00  

21648  

83880  

62232  

18,100.00  

25256  

56507  

31251  

18200  

102076  

79932  

-22144  

18,300.00  

139864  

38895  

-100969  

18,400.00  

109926  

16672  

-93254  

18,500.00  

143705  

25801  

-117904  

The Nifty 50 put call ratio (PCR) closed at 0.0.68. A PCR above 1 is considered bullish while a PCR below 1 is considered bearish.

Following table shows the participant wise action of key players on the index options front.
 

   

Index Put Options  

Client Type  

Change of OI*  

% Change of OI*  

Oct 27 2021  

Oct 26 2021  

Oct 25 2021  

Client  

-84268  

32.18%  

-346093  

-261825  

-286667  

Pro  

58420  

-110.80%  

5695  

-52725  

-35095  

DII  

600  

0.93%  

64790  

64190  

64190  

FII  

25247  

10.08%  

275607  

250360  

257572  

*Change from Previous Day  

   

   

   

   

   

 

   

Index Call Options  

Client Type  

Change of OI*  

% Change of OI*  

Oct 27 2021  

Oct 26 2021  

Oct 25 2021  

Client  

177013  

1828.27%  

186695  

9682  

100769  

Pro  

-164760  

150.75%  

-274052  

-109292  

-191180  

DII  

0  

0.00%  

401  

401  

401  

FII  

-12254  

-12.35%  

86956  

99210  

90010  

*Change from Previous Day  

   

   

   

   

   

  

   

Net Change in Open Interest  

Client Type  

Change of OI*  

% Change of OI*  

Oct 27 2021  

Oct 26 2021  

Oct 25 2021  

Client  

261281  

96.23%  

532788  

271507  

387436  

Pro  

-223180  

394.54%  

-279747  

-56567  

-156085  

DII  

-600  

0.94%  

-64389  

-63789  

-63789  

FII  

-37501  

24.81%  

-188651  

-151150  

-167562  

*Change from Previous Day  

   

   

   

   

   

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Company manufacturing product with potential market value of $115 million- Sigachi Industries IPO

28/10/2021

Sigachi Industries IPO will open for subscription between 1 Nov to 3 Nov. Shares will be offered at a price band of Rs.161-Rs.163. The minimum investment value is set at Rs.14,670 (90 shares) with a Face value of Rs.10 each. The listing date is set as 15 November. 

About the company:
Sigachi Industries, incorporated in 1989, is a company that manufactures Microcrystalline Cellulose. This component is used as an excipient for finished dosages in the pharma sector. The company manufactures various different grades of this component starting from 15 microns all the way to 250 microns. The company manufactures 59 different grades of MCC at its three manufacturing plants in Gujarat and Hyderabad. The total MCC manufacturing capacity as of 31st March, 2021 stands at 13,128 MTPA from all its locations. 

Financials:
Sigachi has seen a continuous growth across all the parameters. Revenue exhibited a sharp rise of 36.2% YoY growth from Rs.144 crores in FY20 to Rs.198 crores in FY21. Profit after tax also grew by a whopping 49% in FY21. The PAT Margin witnessed a growth of 100bps i.e. a growth of 15% in FY21. 

About the IPO:
The company plans on raising approximately Rs.125 crores through this IPO. Sigachi is offering 76.95 lakh equity shares with a face value of Rs.10 each. The promoters of the company are Rabindra Prasad Sinha, Chidambarnathan Shanmuganathan, Amit Raj Sinha and RPS Projects & Developers. The promoters hold 53.32% stake in the company. The total shareholding of the promoters and the promoter group stands at 64.64%. The book running lead manager to this issue is Unistone Capital. 

Main objectives of the IPO:
    • Funding the capex for expansion of production capacity at the two Gujarat manufacturing facilities
    • General corporate purposes

Why should you invest in this IPO?
The market for Microcrystalline Cellulose is estimated to be valued at $115 million by FY23 and a 4 year CAGR of 6.3% is stated by analysts. This high growth is attributed to the increase in demand of cosmetics, processed foods and personal care products. Along with the uses mentioned above, MCC is also widely used as an anti-caking agent in various food products and also as a hot and cold stabilizer. Keeping this in mind we can also see that the Indian food and pharma market is ever growing and this high growth isn't about to plateau anytime soon.

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ITC Q2 profit, revenue rise but shares extend losses

by 5paisa Research Team 28/10/2021

Cigarette-to-hospitality conglomerate ITC Ltd has reported a 10% increase in its consolidated net profit for the second quarter as sales rose, but its shares continued to fall after touching a one-year high earlier this month.

Profit for the July-September climbed to Rs 3,714 crore from Rs 3,368 crore during the year-ago period. 

Sequentially, the profit after tax grew 13% from Rs 3,276 crore in the three months ended June.

The rise in profit was in line with the increase in revenue from operations, which grew 13% to Rs 14,844 crore from Rs 13,147 crore during the year ago period. 

The numbers were above the estimates projected by several analysts, even though cigarette sales volumes were lower than expected. Jeffries, however, said in a report that lower cigarette volumes were offset by higher margins. 

Shares of ITC, a stock market laggard in recent years, fell 3% in early afternoon trade to Rs 231.25 apiece on the BSE, where the benchmark Sensex was 0.8% lower. The shares have declined 12.5% from a one-year high of Rs 265.30 apiece on October 18, but are still up 41% from a one-year low touched in October last year.

ITC Q2: Other highlights

1) Profit before tax rose to Rs 5,055 crore from Rs 4,565 crore a year earlier.

2) Revenue from the cigarette segment increased to Rs 6,219 crore from Rs 5,627 crore a year ago.

3) The cigarette segment saw a 10% increase in profit before tax to Rs 3,762 crore.

4) Revenue from the FMCG business rose 1% on a year-on-year basis to Rs 10,623 crore.

5) Revenue from the hotels business jumped 253% to Rs 311 crore as the hospitality sector recovered from the impact of Covid-related lockdowns

6) Revenue from other businesses grew just 2.8% over the year-ago period to Rs 4,043 crore.

ITC commentary

The company said it saw a broad-based recovery across sales channels and markets, as the intensity of the pandemic declined and the pace of vaccination picked up in the country. 

Although there was an uptick in demand, the positives were also offset by a steep inflationary impact on input costs as well as supply chain disruptions. 

ITC also reported a significant growth in its revenue from its agribusiness. This was mainly on account of growing exports of commodities like wheat, rice and leaf tobacco, as well as its strong sourcing network and the customer relationships, which it was able to take advantage of. 

The company launched two new hotel brands, ‘Storii by ITC’ and ‘Momentos by ITC’. Two new hotels were also launched in the country under the brand ‘Welcome’.

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