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Coforge misses Q2 earnings estimates, stock tanks over 10%

by 5paisa Research Team 25/10/2021

Mid-tier IT services firm Coforge (formerly NIIT Technologies) missed street estimates for quarterly earnings, disappointing investors who dumped its stock that tanked over 10% in the morning.

Coforge, which is majority owned by Baring Private Equity Asia, reported 21.6% year-on-year rise in consolidated net profit for the quarter ended September 30 to Rs 146.7 crore. On a sequential basis, net profit rose 18.7%.

Analysts had expected net profit upwards of Rs 160 crore.

Shares of Coforge fell as much as 11% in Monday morning trade to Rs 4,823.60 apiece, before paring the losses a tad.

EBITDA rose 34.6% year-on-year and 23.9% sequentially to Rs 292.3 crore during the quarter.

The company’s consolidated revenue for the quarter was up 36% over the year-ago period to Rs 1,569.4 crore. On a sequential basis, revenue rose 7.4%.

If one excludes the impact of acquisitions and divestitures, on an organic basis, revenue for the quarter was Rs 1,405.4 crore, up 21.8% over the previous year and 3.8% on a sequential basis. The firm had acquired a majority stake in SLK Global during the first quarter.

Coforge Q2: Other highlights

1) EBITDA margin rose to 17.4%, up from 14.4% in Q1 but lower than 17.8% in Q2 FY21.

2) Attrition has climbed to 15.3% during the quarter from 12.6% in the preceding quarter and 10.5% a year ago.

3) New client addition remained flat at 11 compared to preceding quarter and declined from 12 in the year-ago period.

4) Repeat business was 92% of the total as against 96% in the previous quarter and 89% in the same quarter last year.

Coforge management commentary

Sudhir Singh, Chief Executive Officer at Coforge, said the company’s investments in product engineering, cloud, data, automation and integration capabilities continue to power its path to being a $1 billion company next year.

“This is a landmark year for the firm as we anticipate that we shall grow revenues by at least 35% and our adjusted EBITDA by at least 40% over the previous year,” he said.

“Our ability to significantly improve margins in a supply constrained and escalating costs context while simultaneously driving exceptional growth is a testament to the execution capabilities of Team Coforge,” he added.

In view of sustained deal wins and incremental business from its customers, the company is now aiming for 22% growth (excluding SLK Global’s contribution) in constant currency terms during FY22. This is higher than the forecast of at least 19% growth indicated earlier.

This translates to at least 35% of consolidated (including SLK Global) growth in constant currency terms for the firm in FY22. The firm continues to target an adjusted EBITDA margin of 19% for the year.

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Buzzing Stock: ICICI Bank surges 12% on sequential asset quality improvement

Buzzing Stock: ICICI Bank surges 12% on sequential asset quality improvement
by 5paisa Research Team 25/10/2021

The NNPA ratio of the bank stood at 0.99%, the lowest since December 2014.

The stock of ICICI Bank hit lifetime highs on Monday of Rs 857.45 after the private lender’s September quarter numbers beat the Street estimates on nearly all metrics.

In Q2FY22, the private lender saw Net interest income (NII) increase by 25% YoY to Rs 11,690 crore, while the Net interest margin (NIM) was 4.00% in Q2-2022 from 3.89% Q2FY21. The core operating profit (profit before provisions and tax, excluding treasury income) increased by 23% YoY to Rs 9,518 crore in Q2FY22 from Rs 7,719 crore in the same quarter for the previous fiscal year.

Provisions (excluding provision for tax) declined by 9% YoY to Rs 2,714 crore in Q2FY22 from Rs 2,995 crore in Q2-2021. As a result of better operating performance and lower provisions for the quarter, profit after tax grew by 30% YoY to Rs 5,511 crore in Q2FY22 from Rs 4,251 crore Q2FY21.

In terms of asset quality, the bank’s net non-performing assets declined by 12% sequentially to Rs 8,161 crore and the net NPA ratio declined to 0.99% on September 30, 2021, from 1.16% on June 30, 2021. The net NPA ratio is the lowest recorded since December 2014. The Bank’s total capital adequacy stood healthy at 19.52% and Tier-1 capital adequacy was 18.53% compared to the minimum regulatory requirements of 11.08% and 9.08% respectively.

ICICI Bank has seen growth in digital and payment platforms during the quarter. There were about 1,500,000 activations of iMobile Pay from non-ICICI Bank account holders in Q2-2022, taking the total such activations to 4,000,000 within nine months of launch. The transactions by non-ICICI Bank account holders in terms of value and volume respectively were three times and 13 times higher in September 2021 compared to June 2021. Moreover, the value of mobile banking transactions increased by 62% YoY to Rs 406,501 crore in Q2FY22.

At noon on Monday, the stock of ICICI Bank Limited was trading at Rs 856.15, up by 12.78% or 97.05 per share as against a 0.68% gain in the benchmark index.

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Navin Fluorine International Q2FY22 performance is a bag of mixed feelings | Quarter 2 results

by 5paisa Research Team 25/10/2021

The quarterly performance of Navin Fluorine stood out in major segments except the CRAMs. For Q2FY22, the company reported a ~5% increase in standalone revenue on YoY basis, EBITDA margin grew by 90bps on QoQ basis, PAT margin marginally grew from 17.6% in Q1FY22 to 18.6% in Q2FY22.

The high value business grew by 1.5% YoY basis. Specialty chemical segment of the high value business led the performance on YoY basis, declaring a growth of 20% however, on QoQ basis, it had a negative growth of 8.3%. The specialty chemical segment charged up due to the rapid increase in exports that were up by 59% YoY basis. Due to inflation seen in raw material prices, the company reported a hike in prices which had little to no impact on margins and during this period, the company launched two new products. 
Despite a decent business performance in global markets, the domestic market business performance was fairly dull. It reported a marginal de-growth of 1.4% YoY basis. 

The CRAMs segment of the high value business declined by ~17% on YoY basis. The segment only bagged orders worth 40mn for the quarter, which is dramatically lower than the previous quarter which stood at 780mn. The growth was contributed by repeated orders from the customers. NFIL is driving hard to bring in new customers from the European and American markets. The product pipeline for the segment remains strong and growing. 

The Legacy business division of NFIL performed well on the basis of sale of inorganic fluorides but underperformed on the exports front of ref gases business. The overall revenue share of Legacy business (Ref. gases and inorganic fluorides) grew marginally from 36.5% in Q1FY22 to 37% Q2FY22, the domestic share revenue for the same grew by 7.4% QoQ basis and 29.1% YoY basis, and the exports revenue share decline by 4.3% QoQ basis and 21.1% YoY basis.
 

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Hindustan Zinc- 8% increase in Net revenue with a positive future outlook

by 5paisa Research Team 25/10/2021

Hindustan Zinc Limited is the only company in India that specializes an integrated production of lead and zinc. The company produces Zinc, lead, silver and cadmium. It is the world’s second largest producer of zinc.

In the second quarter of FY22 the mined metal production went up by 12% QoQ and 4% YoY. The production of refined zinc declined by 14% QoQ and 10% YoY while the production of lead also declined by 18% YoY. The silver production was in line with the lead production and was down 5% YoY. The FY22 Q4 target for silver production stands at 720 tonnes.

The cost of production of all the products increased drastically because of a staggering increase in the price of coal, met coke and diesel. Also due to the shutdown of maintenance the volume being produced by the company was dwindling. In retaliation to this, management has increased the ore reserves from 115MT to 150MT and even the cost guidance saw an upwards push in FY22. The cumulative capital expenditure for FY22 has been set at $250-300 million.

The Net revenue increased by 8% YoY to Rs.61.2 billion mainly due to the increase in net realizations which were sought after because of the decreased volume produced. Even though the EBITDA increased YoY by 13%, the quarterly growth was at a decline by 6% which can be attributed to very high input and operational cost and less volumes produced. The Profit after tax stood at Rs.20.2 billion which is 4% higher than last year but 4.7% lower than last quarter. The PAT margin declined by 132.9bps YoY from the second quarter of FY21. The Return on Equity has been estimated to increase from 22% in FY21 to 31.7% in FY22. A 33.4% increase in the EPS has been reported as possible by the analysts for FY22 as compared to the 17.3% increase that took place in FY21. The P/E value which stood at 16.9 in FY21 is estimated to decline to 12.6 in FY22 which may show that the company is undervalued.

Given the current scarcity of metals and coal, and the huge hike in raw material prices, the company is slowly adjusting to the new normal and building a new supply and operating chain around it. Given its strong valuations and a lower than CMP intrinsic value, buying the share at the correct time will mostly yield good profits to the investor.

 

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Chemical Sector update and views of industry policy expert, Dr. Uttam Gupta

by 5paisa Research Team 25/10/2021

In the recent discussion, industry policy expert Dr. Uttam Gupta gave a thumbs up to NBS Scheme for phosphatic fertilizers and compensation for gas price increase for urea companies, he touched upon key policy issues in the chemical sector.

The industry expert mentioned the critical situation of India in regards to dependence on Coal and Natural Gas. Coal contributes to ~60% of India’s primary energy basket and depends on 84.5% of oil and 50% gas through imports which needs to be reduced. 

The call highlighted that after a dramatic fall in the coal inventory, the situation is, however, improving as the domestic companies are gearing up to produce more coal. Hence, aiding in reduction of coal import bills. Coal India Limited has been trying to produce 1bn tonnes of coal out of the 1.5bn tonnes that the Indian government proposed to produce domestically. CIL could only produce 738mn tonnes in FY20. The zeal to become a zero-carbon country has also contributed to reduced import bills.

The Chinese market has faced a loss in the production of coal due to unrivaled flood in a key coal mining area which serves upto 25% share of total China’s coal output. China provides 46% share of the total global output.

The prices of natural gas are rocketing high as the commodity witnessed panic buying and obsession of Europe to ramp up on it to fulfill the zero-emission policy. The prices for APM gas domestically have increased year on year. The prices increased from US $1.79/mmbtu to US$2.9/mmbtu between April’21 and Oct’21 and these are likely to increase to US$5.9/mmbtu in 1HFY23 and US$7.65/mmbtu in 2HFY23. 

The spot price for the same at the start of the year was US$5.5-6/mmbtu which has now zoomed to US$33/mmbtu. 

On the other hand, crude oil prices have also drastically increased from US$60/bbl in January to US$85/bbl now. India’s fiscal deficits suffers upto US$2bn for every U$1/bbl increase. The Indian government that promised to reduce 10% of crude oil dependency has only failed to do so as the import dependency increased from 77% to 84.5% in FY21. Even the high excise duties do not seem to waiver until there are changes made in the stimulus policy.

The government’s NBS policy comes out in favor of DAP and NPK fertilizers being stepped up in case inputs costs rise. Since the prices of DAP seem to have appreciated by 60%, the government has again increased the subsidy. This is positive for the phosphatic industry leader, Coromandel International. The aggregate subsidy bill for Urea stood at Rs. 597bn and NBS for non-urea fertilizers stood at Rs600bn in FY22E. This is estimated to increase to Rs. 1,197bn higher than that FY22 budgeted allocation of Rs. 795.3bn, this also includes NBS worth Rs207bn for non-urea fertilizers. The shortage of supply, if faced, will be addressed by the government through PSUs and co-operative producers belonging to the fertilizer sector of the country.
 
 

 

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ICICI Prudential Life Insurance Company reports strong Q2 results with overall APE growth of 34.9% YoY basis.

by 5paisa Research Team 25/10/2021

ICICI Prudential Life Insurance Company (IPLI) reported strong growth of 43.5% YoY basis in 2QFY22 and 45.4% YoY basis in 1HFY22 in linked savings APE, sales of which were affected in last year due to covid-19. While Non-linked savings (excl. annuity) grew by 22.6% YoY basis (Rs. 4.6bn) in Q2FY22 and by 42% YoY basis in 1HFY22. The overall APE grew by 34.9% YoY basis (Rs. 19.8bn) in Q2FY22 and by 39.7% YoY basis in 1HFY22.

In 1HFY22, the company has successfully added 53 new partnerships. Non-ICICI Bank banca partners have delivered strong growth, reporting a 11-12% of the total banca share of 39%.

The overall retail protection grew by 21% YoY basis (Rs. 2.8bn) for 2QFY22 and by 23.3% YoY in 1HFY22. The growth was seen due to monetizing of its client pitching and engagements and ensuring that the covers are examined and correctly priced for the risk in the group term. Along with this, the upselling of critical illness covers now assures an enhanced sum. All these measures have effectively worked for the time being, however, moving forward there may be risks to this performance due to supply-side constraints and underwriting challenges which includes customers being reluctant to undertake physical medical examinations. Even with the challenges and risk, the management seems fairly positive towards medium to long term growth while the near-term outlook may be muted. 

As for the increasing reinsurance rates, the management is in discussions to come out with a final decision which may be a mix of hiked prices and tight underwriting norms. However, the company is confident that the heightened prices would be effectively passed onto the customers without actually causing a drastic impact. The company does not forestall any material changes in near-term due to reinsurance rate hike as retail protection growth is unlikely to pick up.
 

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