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INDIGO Q2- Still grounded post lock-down? Analysts predict potential downside of 23%

by 5paisa Research Team 12/11/2021

Air travel has picked up significantly since the lock- down norms were eased but it still remains very weekend focused. The weekday demand for the industry still remains 30%-35% below the pre-Covid levels, however November and December seems to be shaping up pretty well for the industry as people take long holidays during the winter season, along with Diwali vacations. The recovery for international demand is still in a precarious position.

Another detrimental fact for this industry is that the government currently has a cap on the fares. It is expected that this cap will be removed by early next year. According to analysts, the fare prices could fall significantly after the cap is reduced because the airlines focus more on loading more passengers than earning more from one passenger. The airlines will surely lower the fares to attract more and more customers.

The management of Indigo reported that corporate travel is steadily picking up as well and is back to almost 50% of the pre-Covid levels. Indigo being the airlines with the most corporate market share, was the most impacted. After Jet airways failed, Indigo picked up a large number of corporate customers. Due to their comparatively low prices and frequent flights and good connectivity, they were able to capture a large part of this market. But now with the advent of Tata+ Air India, Indigo is in a lurch. Assuming that Tata Group has a huge domestic and international network along with high quality products could lead to Indigo losing a big part of their market share. The company will have to start targeting leisure travel in this scenario. And the company can expect to gain more customers from the bottom end all the while losing customers from the top corporate end.

The biggest cost for the company, jet fuel has been rising since the last few months and currently stands at $95/bbl. Even though the price has been capped by the government, the lower tail of the price is also very high. In Q3 since the demand for fuel might be lower, the government may remove the capping which may in-turn lead to the fuel prices trading at higher levels than the current price. Even the airport costs are on the rise due to the drastic fall in demand because of the pandemic. They have been spending more on infrastructure.

The Q2 results of Indigo were much better than analysts expected. Indigo’s loss narrowed significantly this quarter to Rs.14.4 billion owing to the increase in air travel in the festive season. The company witnessed a per passenger yield as 9.6% YoY at Rs.4.19, which is the highest yield after 2014. A negative net worth of Rs.45 billion was reported by the company as compared to the Rs.1.1 billion at the end of March 2021. In the last 18 months the company has lost almost Rs.104 billion of net worth. The management of Indigo reported that their first priority is to fix the balance sheet of the company.

Talking about the liquidity, the company reported a free cash of Rs.63.5 billion in Q2 FY22 as compared to Rs.56 billion in Q1 FY22. This can be partially attributed to the fact that advanced sales have picked up in this quarter and are expected to continue well into Q3 as well. The debt of the company, excluding operating lease liabilities was down from Rs.47 billion, a Rs.10 billion decrease. According to the CFO, the company raised liquidity worth Rs.12 billion in Q2 FY22.

The company also added 11 new aircraft during Q2 and returned 13A320ceo aircraft too. The company stated that they will not be able to carry out their scheduled plan of returning 100 CEO aircraft this year but the capacity growth is set to resume again in 2024.

On a con call the CEO of Indigo mentioned that Akasa airlines will make make the low cost air travel industry much more competitive and if Tata group decides to launch a low cost airlines then the competition will be tremendous. He also expects the Q3 results to be up by 40% QoQ which is just 14% below the pre-Covid levels. The cargo business is expected to remain very strong owing to the small size of the market and less players.

Analysts have raised their forecasts for the next quarter, keeping in mind the Q2 results. Despite this, a REDUCE call has been given and the price target has been reduced from Rs.1525 to Rs.1300 with a potential downside of 23%.

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Closing Bell: Markets stage a comeback, Sensex gains 767 points, Nifty closes above 18100

Closing Bell: Markets stage a comeback, Sensex gains 767 points, Nifty closes above 18100
by 5paisa Research Team 12/11/2021

Indian equity markets snapped the three-day losing streak and ended higher on Friday.

Domestic benchmark indices broke the three-day losing streak on November 12, led by gains in industry heavyweights like Infosys, HDFC, Reliance Industries, Tech Mahindra, Larsen & Toubro, Bajaj Finance and Tata Consultancy Services. During today's trading session, the Sensex went up by 831 points at the day's highest level and the Nifty 50 index moved above its important psychological level of 18,100 ahead of retail inflation data due later in the day.

At the closing bell on Friday, the Sensex was up 767.00 points or 1.28% at 60,686.69, and the Nifty was up 229.20 points or 1.28% at 18,102.80. On the market breadth, around 1556 shares have advanced, 1628 shares declined, and 143 shares are unchanged.

Among the top gainers on the BSE were Tech Mahindra, Bajaj Finserve, Bharti Airtel, HDFC and Infosys. Top losers of the day include Bajaj Auto, Tata Steel, NTPC, Power Grid Corporation and Axis Bank.

On sectoral basis, IT, power, capital goods and realty rose by 1% each. In the broader markets, the BSE midcap and smallcap indices ended in the green.

The trending stock of the day was Fino Payments Bank, which made a weak stock market debut on Friday as the stock opened for trading at Rs 544 on the NSE as against its issue price of Rs 577 per share, marking a discount of nearly 6%.

In other news, October retail inflation report will be out at 5:30 pm today. The Reuters poll is forecasting it to likely hover near a six-month low, which would give the central bank room to stay pat on interest rates for now.

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Zomato- Losses increase but a potential upside of 37% expected?

by 5paisa Research Team 12/11/2021

The company has reported a higher than expected revenue growth of 140% YoY with a major push from the food delivery business. Zomato witnessed a higher than expected EBITDA loss of Rs.3.1 billion in Q2 FY22 which is a huge leap from the Rs.1.7 billion loss in Q1 FY22. This loss has been attributed to a lower contribution margin which fell from 2.8% in Q1 FY22 to 1.2% in Q2 FY22, and higher spending on ads. The company reported a Net loss of Rs.435 crore in Q2 FY22 versus the Rs.230 crore loss reported in Q2 FY21.

Increase in loss can be due to the following reasons:

1. Increased investments in the food delivery sector

2. Higher spending on branding and marketing to increase the customer base. The amount spent increased by Rs.0.4 billion QoQ

3. Unpredictable weather and fuel costs have increased the delivery costs by Rs.5 QoQ.

The food delivery business has witnessed a huge growth of 158% YoY and it contributed to 83% of the reported revenues. The dine-out segment of the business has remained a drag on the resources even in this quarter whereas the hyperpure business has seen a rapid upscale of 49% QoQ.

After a hiatus of 2 years, the company has started food delivery services in emerging cities. Even though the demand is not very high, once the customers try restaurant food and the habit sinks in, the sky is the limit. This will lead to more and more restaurants opening up to meet the demand of the customers and in-turn increasing the company’s business substantially. To support this point, Zomato has noticed a 30% increase in order frequency in cities where the number of restaurants are more.

Zomato has been on an investment spree over the last 6 months. It invested $100 million in Grofers in early August,2021. The total investment now stands at $275 million. Currently Zomato is in the process of selling Fitso to Curefit for a whopping $50 million. Another $50 million will be invested in cash, in Curefit to acquire a 6.4% shareholding. Zomato also plans on investing $75 million in Shiprocket for an 8% stake. Final documents have been signed for a 16% stake in Magicpin for $50 million.

The revenue estimates have been increased to 14-15% for the period of FY22-24. Analysts expect Zomato to be good for the long term given its high growth rate and thus retain a BUY call with a price target of Rs.170. Morgan Stanley and Goldman Sachs have set their price target as Rs.185 as they believe that the second quarter was driven by a strong user acquisition.

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Berger Paints- 1% decline in profit but a potential upside of 21%?

by 5paisa Research Team 12/11/2021

Berger Paints reported a small decline in profit of 1%, at Rs.219 crore for the quarter ended September 2021-22 as opposed to the Rs.221 crore profit in Q2 FY21. This year the profit has been impacted by the high raw material costs and the pandemic, in unison. The cost of materials has shot up from Rs.750 crore to a whopping Rs.1,303 crore.

Revenue from operations showed a significant increase of 27.70% YoY, from Rs.1,743 crore in Q2 FY21 to Rs.2,225 crore in Q2 FY22. But, the total expenses witnessed an increase of Rs.468 crore in Q2 FY22. The EBITDA margin has been compressed by 333bps YoY.

Management commentary on the demand side, which is scheduled for 12 November, is eagerly awaited by analysts. Meanwhile, a 12 month price target of Rs.935, with a potential upside of 21% has been estimated by analysts.

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Penny Stock Update: These stocks gained up to 10.00% on Friday

Penny Stock Update: These stocks gained up to 10.00% on Friday
by 5paisa Research Team 12/11/2021

Today on the last trading day of the week, the Indian equity market closed up positive. BSE TECk index is the top gainer which is up by 2.03%.

On the last trading day of the week, the Indian equity market closed up on a positive note. In today’s trade, all the sectoral indices closed up with a green mark.

After Nifty 50 and BSE Sensex closed in red for 3 days in a row, today they closed in positive, up by 229.15 points i.e., 1.28% and 767.00 points i.e., 1.28% respectively. Stocks pulling the BSE Sensex index up is Reliance Industries Ltd, HDFC Ltd, Infosys Ltd, Bajaj Finserv Ltd and Bajaj Finance Ltd. Whereas, stocks that dragged the BSE Sensex down is Bajaj Auto Ltd, Tata Steel Ltd, Power Grid Corp Ltd, NTPC and Axis Bank Ltd. Besides, Stocks pulling the Nifty 50 index up are the same as BSE Sensex while stocks pulling the Nifty 50 index down are IOC, Hero Motorcorp Ltd, Axis Bank Ltd, Tata Steel Ltd and Bajaj Auto Ltd.


In Friday's trading session the S&P BSE TECk, S&P BSE Information Technology, S&P BSE Telecom and S&P BSE Realty are top gainers. BSE TECk index consisting of stocks such as Tanla Platforms Ltd, Vodafone Idea Ltd, Larsen & Toubro Infotech Ltd, Tech Mahindra Ltd, Sterlite Technologies Ltd and Wipro Ltd is the top gainer. 

Here is the list of penny stock that gained up to 10.00% on a closing basis on Friday, November 12, 2021:

Sr No.              

Stock              

LTP               

Price Gain%              

1.              

Manugraph India Ltd  

12.65  

10.00  

2.              

Sel Manufacturing Company Ltd  

8.10  

9.46  

3.              

JIK Industries Ltd  

0.70  

7.69  

4.              

Antarctica Ltd  

0.85  

6.25  

5.              

Visagar Polytex Ltd  

0.85  

6.25  

6.              

Tantia Constructions Ltd  

8.40  

5.00  

7.              

Sintex Industries Ltd  

8.45  

4.97  

8.              

Sintex Plastics Technology Ltd  

9.55  

4.95  

9.              

Hilton Metal Forging Ltd  

17.05  

4.92  

10.              

Kavveri Telecom Products Ltd  

7.50  

4.90  

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Bank of Baroda- 24% rise in PAT| Potential to grow more?

12/11/2021

A solid earnings growth of 24% YoY from Rs.1,679 crore to Rs.2,088 crore, was reported by the bank along with a 6% YoY increase in operating profit. The revenue increased by 8% YoY and the non-interest income also grew by 23% YoY due to higher treasury gains and more recoveries from write-offs.

The gross non performing loans decreased by 75bps QoQ to 8.1% and the Non performing loans fell by 20bps to 2.8%. The collection efficiency increased in Q2 FY22 to 96% from the 93% in Q1 FY22.

According to the management, a recovery of Rs.10-15 billion from the corporate NPA accounts can be expected. The bank has no contingency provision buffer. There is a 10% YoY growth in retail loans which was driven by 23% YoY increase in auto loans, 5% rise in home loans, 6% increase in mortgages and 11% YoY increase in educational loans.

The domestic deposit growth was a small 3% YoY which was supported by a strong CASA growth of 13% YoY. The Capital adequacy ratio increased by 110bps QoQ to 15.5%. The NII increased by 2% to Rs.7,566 crore. The Rs.877 crore recovery from DHFL was very welcomed by the bank.

The CEO, Sanjiv Chadha said that he expects the bank’s loan growth to be very close to double digits this financial year.

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