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Larsen & Toubro reports stellar performance in Q2FY22 despite COVID challenges

by 5paisa Research Team 29/10/2021

L&T's 2QFY22 operational results were better than estimated, and the margins reported in both the segments were exceptional.  Core business performance was affected by COVID challenges and uncertainties, however, margins fared better and were unhindered. Despite COVID challenges, in 2HFY22, the company believes that the long term business prospects remain promising and expects traction towards the core business and GATI Shakti remains a key pivotal theme to revive and put the Indian Economy on a growth trajectory.

Operational performance reported better than estimated margins in both segments. Sales stood at 12% YoY (Rs. 348bn), core segment revenue stood at Rs. 228bn, up 12% YoY and segment revenue stood at Rs.  120bn (13%) YoY basis, EBITDA stood at Rs. 40bn, service margins stood at 18.2% (+80bps) YoY while core business margins stood at 8% (+56bps) YoY and Adjusted PAT was reported at Rs. 17.2bn, up by 56%, YoY basis.

Core business (ex-services) sales registered strong growth of 12% YoY while margins positively improved to 8% (+60bps) YoY basis as L&T adopted a calibrated approach in executing projects supported by cashflow availability and improvement in infrastructure segment. Domestic E&C segment grew by 27% YoY in 2QFY21 whereas Overseas E&C revenue declined by 22% YoY. The Infrastructure sector margins improved to 8.3% by 190bps YoY whereas margins in the Heavy engineering & defence, hydrocarbon and power sector remained under pressure and declined 140, 20, and 40bps YoY respectively, partially due to offsetting the margin improvement of the infrastructure segment. 

Execution has resumed at all sites, with sites operating with labour availability at pre-COVID levels. Execution can witness sharp pick up going ahead as productivity related challenges are broadly addressed, order backlog remains healthy 
and company has not seen any cancellations of awarded orders. 
During 2QFY22, delays in deliveries due to COVID heavily impacted the order inflow which stood at Rs. 421bn (up by +50% YoY), and working capital cycle for 2QFY22 stood at 22% vs 26.7% in 1HFY21, L&T extremely healthy ordering pipeline at Rs.6.8t which includes domestic orders worth Rs. 4.7t and international orders worth Rs. 2.1t. The backlog in orders stands at INR3.3t (+11% YoY) which provides strong revenue visibility and comfort on Core E&C revenue.
 

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Titan Q2 results | Titan’s sales performance and high EBIT margins drives earnings growth

by 5paisa Research Team 29/10/2021

Titan's robust margin expansion and earnings growth was driven by stellar sales performance along with the rate of expansion in EBIT margin across all its businesses in Q2FY22. 

Titan's total revenue excluding bullion segment sales grew by 76% YoY to Rs. 7.03bn and including bullion sales, grew 66% YoY. Jewellery revenue, including bullion sale, grew 64% YoY, EBIT margin was higher than pre-pandemic levels and sales during the quarter were primarily driven by higher wedding sales (+81% YoY) vs sales in FY21 and FY22. Titan expects for a favourable festive season followed by a wedding season which would drive sales and profitability. During 1HFY22, Titan opened 15 Tanishq stores and is targeting to open another 20 stores in 2HFY22. The management believes that an EBIT margin of 12-13% is sustainable going ahead.

In Q2FY22, revenue for watches & wearables segment grew 72% YoY to Rs. 6.87bn. E-commerce channel reported sales stood at 25% vs 18% of sales in pre-pandemic period whereas retail channel recovery stood at +90% of pre-pandemic levels. Tier-2 cities have posted better recovery than when compared to Metros. The EBIT of watches and wearables segment stood at Rs. 920mn in 2QFY22 vs loss of Rs. 40mn in 2QFY21. Better scale of operations and expansion in gross margin improved the profitability and will continue this trend going forward. The main focus is on analog watches to drive sales and has gained share in its multi brand outlets. 

On the other hand, Titan's eyewear revenue surpassed pre-pandemic levels during 2QFY22 and reported a revenue growth of 70% YoY at Rs. 1.6bn and the highest ever EBIT margin of 23%. The jump in the EBIT margin was caused by changes to improve gross margin and cost reduction in the last 18 months. However, going ahead, the company stated that it will be difficult to sustain these margins during the next few quarters. Higher contribution of own brands has been one of the key factors aiding gross margins during the quarter.
 

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ITC Q2 results | Pre-COVID volumes in cigarette and strong performance in Paperboard segment drives recovery

by 5paisa Research Team 29/10/2021

ITC's 2QFY22 performance was driven by recovery in cigarette volumes and strong performance in the paperboard segment. Overall net sales stood at Rs. 1,27,310mn grew 13.8% YoY and 4.2% QoQ, PAT stood at Rs. 36,972mn, grew 14.4% YoY and 22.7% QoQ, and EBITDA stood at 13.7% (down by 6 bps) YoY and 15.6% (up by 357 bps) QoQ.

Cigarette net segment grew 10.3% with volume growth of 10% on a low base, FMCG sales grew 6% on a high base of 15% and Paperboard segment sales grew strongly by 25%.

The cigarette segment saw a faster recovery in demand and volumes in 2nd wave compared to 1st wave with exit cigarette volumes were back to pre-COVID levels. The EBIT of the segment grew by 10%. Easing restrictions and increasing mobility helped increase volumes on a sequential basis. However, East India and Kerala did not contribute much to this recovery growth. In the quarter, the company launched differentiated offerings like Classic Connect, Gold Flake Neo Smart Filter, Gold Flake Kings Mixpod, American Club Smash, Wave Boss and Flake Nova and 5s pack of Gold Flake Premium, Capstan Special and Flake Mint in line with evolving consumer preferences and in focus markets, it launched modernised and refreshed packs of Flake Excel, Wills Navy Cut Filter, Berkeley Hero.

Snacks, confectionery, and beverages performed well while discretionary or out-of-home categories recorded strong growth in the FMCG segment. Despite moderate growth witnessed in staples and convenience foods, the revenue generated was above pre-COVID levels. Input cost inflation impacted the margins which declined by 40bps to 10%, however, FMCG EBITDA remained unhindered and grew by 2%. EBIT margin remained stable at 6.7% on account of operating leverage and lower depreciation. Notably, availability in rural markets was enhanced through the scale-up of the stockist network (2x of last year), market coverage and direct outlet servicing at 1.4x and 1.1x of last year. 

Exports and cartons segment were the key growth drivers of the Paperboard segment. With the aid of in-house manufacturing of pulp, the margins remained stable even with input cost inflation in play. Paperboard segment EBIT grew 22% but margins contracted by 20bps to 22.4%. Despite shortage in availability of shipping containers/port congestion faced by Agri segment, EBIT grew 15% driven by favourable mix but revenue declined by 7%. Hotel revenue was back to 4QFY21 levels with easing restrictions. The strong recovery in occupancy levels and ARRs, but remained below pre-COVID levels.

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Penny Stock Update: These stocks gained up to 11.11% on Friday

Penny Stock Update: These stocks gained up to 11.11% on Friday
by 5paisa Research Team 29/10/2021

On Friday equity market closed on a volatile note. BSE Basic Material is the top gainer while the BSE Energy index is the top loser in today’s trade.

In today’s trade Indian equity market was volatile, some sectoral indices closed up in green whereas some indices closed down in red.

In Friday's trading session Nifty 50 and BSE Sensex continued the downward trend and they were down by 185.60 points i.e., 1.04% and 677.77 points i.e., 1.13%. Stocks pulling the BSE Sensex index up are UltraTechCement, ICICI Bank, Tata Steel, Dr Reddy’s Labs and Maruti Suzuki. Whereas, stocks that dragged the BSE Sensex down are Reliance Industries, Infosys, Kotak Mahindra, HDFC, and Larsen & Toubro. Moreover, stocks pulling Nifty 50 up are the same as BSE Sensex stocks and Shree Cements. While, Stocks pulling Nifty 50 down are Reliance Industries, Infosys, HDFC, Kotak Mahindra and Larsen & Toubro.

In today’s trade, S&P BSE Basic Materials, S&P BSE Realty, S&P BSE SENSEX Next 50 and S&P BSE Healthcare closed up positive. BSE Basic Materials index consisting of stocks such as Paushak Ltd, NACL Industries Ltd and Kuantum Papers Ltd is top gainers up by 10.00%.

On Friday, most of the indices closed in red mark among which top losers are S&P BSE Energy, S&P BSE TECk, S&P BSE BANKEX and S&P BSE SENSEX 50. BSE Energy index that consists of stocks such as Aegis Logistics Ltd, Reliance Industries Ltd, Asian Energy Services Ltd and Savita Oil Technologies Ltd is top losers, shedding up to 3.61%.

Here is the list of penny stock that gained up to 12% on a closing basis on Friday, 29 October 2021: 

Sr No.       

Stock       

LTP        

Price Gain%       

1.       

Oriental Trimex Limited  

10.00  

11.11  

2.       

Flexituff Ventures International Ltd  

15.55  

7.24  

3.       

Stampede Capital Ltd  

10.50  

5.00  

4.       

Rohit Ferro-Tech Ltd  

17.9  

4.99  

5.       

Morarjee Textiles Ltd.  

19.00  

4.97  

6.       

Sintex Plastics Technology Ltd  

6.35  

4.96  

7.       

Thomas Scott India Ltd  

18.00  

4.96  

8.       

Atlanta Ltd  

14.85  

4.95  

9.       

Melstar Information Technologies Ltd  

4.25  

4.94  

10.       

Visa Steel Ltd  

16.05  

4.90  

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Bajaj Finance reports 22% AUM growth but margins and asset quality yet to return to normalcy

by 5paisa Research Team 29/10/2021

Bajaj Finance reported AUM growth of 22% YoY and 5% QoQ, 7-12% QoQ growth in consumer durables, personal loans, SME and rural segments, operating costs increased 76% YoY and 48% QoQ led by higher collection costs, increased manpower and branch additions, restructuring book in Q2FY22 stood at Rs. 4.26bn and provisions against restructuring stood at Rs. 2.89bn (19.1% PCR). The cost-to-income ratio is expected to decline to 33-34% by 4QFY22 from 38% in 2QFY22 as collection costs subside.
    
Going forward, the company is increasing its focus on sourcing loans through its various digital channels and expects to source 500,000 EMI card customers digitally from 3QFY22 onwards and generate 500,000 loans/quarter from its EMI store in the next one year. To increase its growth potential and diversify its loan book, the company is creating advances in North and East India.
 
The company expects loan loss provisioning to normalize to Rs. 7-8bn quarterly run rate from 3QFY22 onwards however, the FY22e credit cost guidance remains unchanged at Rs. 46bn. The One-Time Restructuring book increased to Rs. 15.12bn as on September 2021 from Rs. 12.87bn as of end of June 2021. The stage 2 and 3 assets are likely to decline to Rs. 78-80bn from Rs. 100.65bn (as on end of September 2021. Asset quality is expected to normalize by March 2022 and gross stage 3 to reduce to between 1.7-1.8% and net stage 3 to between 0.7-0.8%. The company expects the margins to normalize from Q3FY22 in the range Rs. 1.8-2bn.
 
With its future outlook of +20% loan book growth, one can expect , +4.5% RoA and 45% EPS CAGR estimate over FY22-24e places its operating metrics and profitability distinctly above its set of peers.
The potential key drivers that could lead to higher growth could be successful digital transformation and augmentation of fintech capabilities, stronger customer acquisition and cross-selling of products. The company is dipping its toes in the Fintech space with their new consumer app and merchant app which may be introduced in December 2021 and February 2022 respectively.
 
On the flip side, moderation in growth and high competitive pressure on yields could prove to be challenges the company needs to overcome in the near future.

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Cipla Q2 results | 9.6% growth in revenue and PAT rises to Rs. 711 Cr

by 5paisa Research Team 29/10/2021


India sales increased 15.6% YoY at Rs. 24.2bn on core therapies growth but decreased 10.8% QoQ on account of lower COVID-19 sales. Cipla believes the broader Indian pharmaceuticals market (IPM) can sustain 10-12% annual sales growth without any obstacles in the way. The Indian market sales grew on account of demand in core therapies portfolio (e.g. respiratory, urology, cardiac, etc.), it expects to continue outperformance for its Rx sales (~85% of sales) growth vs the market. Over the next 2 to 3 years, the company expects to increase CHC sales to 12% of total company sales from the current ~7% level.
 
US sales grew 0.7% YoY and QoQ at USD $142mn were steady with traction in key respiratory launches (gProventil and gBrovana) balancing the deterioration of base portfolio. It has garnered ~16% volume share in the US albuterol inhalers market and has room for higher volumes but its main focus remains on the consistency of supplies in a highly complex supply chain. US sales are expected to be in the USD $140-150mn range for the rest of FY22, supported by the scale-up in respiratory sales, improving reach in institutional channels and new launches. The company is dealing with formalities for gAdvair and is waiting for final FDA approval for gAbraxane and clearance for its Goa facility for manufacturing. 

The company reported 8% YoY increase (Rs. 9.9bn) from the SAGA segment. South African private market region alone accounted for 20% YoY revenue growth in constant currency terms. Even the emerging markets saw a strong recovery after slump in supply in the previous quarter.

On 25 August 2021, Cipla expanded its operations by entering into a joint venture (JV) agreement with Kemwell Biopharma Private Limited, a leading biopharmaceutical Contract Development and Manufacturing Organisation (CDMO), to develop, manufacture and commercialise biosimilars for global markets. 

Cipla spent Rs. 2.7bn for research and development in 2QFY22. The company expects R&D to be capped at ~7% of sales. The trajectory depends on the progress in clinical trials for its pipeline assets, and it earmarked capex of Rs. 8-9bn for FY22. The company’s focus remains on measured investments towards respiratory products, specialty portfolio, debt reduction and strategic inorganic growth opportunities. 

Cipla maintained a net cash position as of 2QFY22. Delays in the resolution of pending cGMP issues at its Goa plant can delay approval and launch of gAbraxane in the US, delays in key launches and poor execution in the US, Indian formulations growth slowdown and higher and longer R&D slowing down the pace of operating margin improvements could be the few of the things in the list of risks that may hinder Cipla’s future prospects.
 

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