State budgets: Walking the tight rope - Kotak Sec

State budgets: Walking the tight rope.

Aggregate states’ GFD/GDP at 2.6% in FY2018 indicates consolidation from the FY2017RE levels. But we are cautious on states achieving this as few states seem poised for some slippages. Further, GST implementation could have its own set of challenges on the revenue front. Though most of the UDAY-related expen

25/04/2017 5:43:08 PM | Posted in Special Event Reports read full news
Power Utilities Sector - The supply glut - Kotak Sec

The supply glut.

Capacity utilization of generation assets continue to drop even as the Street remains hopeful of a potential closing of the gap on account of (1) improving demand prospects under UDAY, (2) de-commissioning of old and inefficient capacities, and (3) lack of new investment in generation assets by the private sector. We do not share the o

21/04/2017 2:38:37 PM | Posted in Broking Firm Views - Sector Report read full news
Tightening the screws - Kotak Sec

Tightening the screws.

The RBI announced (1) additional disclosure requirements for banks that fail to adhere to prudential norms, thus putting the onus on banks to tighten their NPL recognition and provisioning norms and (2) requirement for boards of Indian banks to proactively assess risks across sectors and make provisions above the minimum regulato

21/04/2017 12:31:34 PM | Posted in Special Event Reports read full news
Near-normal monsoon on the cards - Kotak Sec

Near-normal monsoon on the cards.

The IMD forecasts the June-September monsoon at 96% of LPA, which qualifies as ‘normal’ southwest monsoons. The IMD noted that weak El Niño conditions could likely develop in the latter half of the season. We believe it is premature to conclude on effects on growth and prices. But after a normal mons

21/04/2017 12:24:33 PM | Posted in Special Event Reports read full news
Small need not be beautiful - Kotak Sec

Small need not be beautiful.

The sharp rally in stock prices, especially of mid-cap. and small-cap. names without any significant changes in underlying fundamentals, makes us uncomfortable about the nature of the rally. It is perhaps easier to believe the narratives around ‘undiscovered’ stocks rather than well-researched large-cap. names.

21/04/2017 12:16:59 PM | Posted in Special Event Reports read full news
Insurance Sector - Ending a strong year on a stronger note - Kotak Sec

Ending a strong year on a stronger note.

Private sector ended the year with 31% yoy APE growth in March translating into 26% growth for FY2017—highest in past nine years. HDFC Life had the most notable catch-up with 44% growth in March to end at 13% for the year; Bajaj Life, ICICI Life and SBI Life reported some fatigue. We tweak our APE estimat

19/04/2017 5:55:01 PM | Posted in Broking Firm Views - Sector Report read full news
FRBM report: Nub lies in implementation - Kotak Sec

FRBM report: Nub lies in implementation.

Targets fixed by the FRBM report seem achievable for the central government. The escape clause with a cap on slippages is also commendable. We believe that the report’s recommendation of setting up a Fiscal Council which will monitor the government’s fiscal health is crucial for long term setting of

19/04/2017 3:25:18 PM | Posted in Special Event Reports read full news
Liquidity surplus remained intact last week - Kotak Sec

* Liquidity surplus remained intact last week.

The weekly average surplus remained intact at ~Rs 4.4 tn for the week ending Apr 15 as against Rs 4.3tn the week prior ending Apr 7. Our calculations suggest that government’s surplus with RBI currently is likely to have reduced by ~400bn to around Rs 550bn, compared to ~Rs 950 bn in the previous we

18/04/2017 5:45:36 PM | Posted in Special Event Reports read full news
Metals & Mining Sector - 4QFY17 preview - when it shines the most - Kotak Sec

4QFY17 preview—when it shines the most.

Domestic metal names, both ferrous and non-ferrous will report strong earnings courtesy higher metal prices and strong volumes from ramp-up of projects. The earnings improvement of steel names will be led by higher volumes (peak seasonal demand & new projects) though we expect steady operating margins

14/04/2017 3:34:55 PM | Posted in Broking Firm Views - Sector Report read full news
Power Utility Sector Update - Kotak Sec

Supreme Court—denies compensation, but with a rider.

The Supreme Court has denied award of compensation for fuel cost under-recovery in the case of imported coal plants; however, it referred the case back to CERC to quantify the tariff relief to be provided to plants that had to resort to higher use of imported coal due to lack of availability of

14/04/2017 3:22:30 PM | Posted in Broking Firm Views - Sector Report read full news
Strategy - The bogus argument of `liquidity` - Kotak Sec

The bogus argument of ‘liquidity’.

We dismiss the oft-repeated argument about ‘liquidity’ as a key driver of the market as completely spurious, which has no relevance for market returns. As an extreme example, we note that any unexpected positive or negative event can lead to the ‘market’ being marked up or down sign

14/04/2017 11:28:41 AM | Posted in Special Event Reports read full news
Caught off guard on FPI flows - Kotak Sec

INR: Appreciate, for now, but be cautious.

The recent INR strength has been due to a confluence of favorable domestic and global conditions. While the appreciation is likely to continue in the short term, we need to be cautious on the medium term. Tightening global financial conditions, political and policy uncertainties and geopolitical risks would c

13/04/2017 11:56:28 AM | Posted in Special Event Reports read full news
Refining marketing - Kotak Sec

Refining > marketing.

We believe Street’s renewed rhetoric on the potential increase in marketing margins may take time to play out for OMCs given rising competition from private players over the next few years amid slower volume growth; a daily change in fuel prices, if implemented, will moderate earnings volatility to begin with. We expect O

13/04/2017 11:39:56 AM | Posted in Broking Firm Views - Sector Report read full news
Cement Sector - Earnings weakness persists - Kotak Sec

Earnings weakness persists.

An adverse combination of weak volumes, muted prices and increasing costs will put pressure on earnings of cement companies. Save for a few regional names, we expect EBITDA decline of up to 15% yoy. Regional names will likely report better volume growth as they continue to gain market share on expanded capacity base. Rich va

13/04/2017 11:32:37 AM | Posted in Broking Firm Views - Sector Report read full news
Buy Apollo Tyres Ltd For Target Rs.245.00 - Kotak Sec

We recently met the company. With new capacities coming on stream in India and Europe and demand environment improving, APTY is expected to witness healthy growth in revenues over the FY18-FY19. Further, ramp-up in the two wheeler space will also support growth for the company. Falling imports from China is positive for the truck/bus tyre demand. After witnessing a sharp increase, natural rubbe

30/03/2017 2:53:53 PM | Posted in Broking Firm Views - Long Term Report read full news
Accumulate Time Technoplast Ltd For Target Rs.130.00 - Kotak Sec

In our meeting with the promoters of Time Technoplast, the management shared outlook on its various businesses like Industrial packaging, Composite Cylinders, HDPE Pipes and Batteries. The management expects revenue growth of 15% and stable EBITDA margins in FY18.

The company is seeing strong demand for HDPE pipes from states like Telangana. It shelved plans to divest its battery busi

29/03/2017 2:55:44 PM | Posted in Broking Firm Views - Long Term Report read full news
Accumulate Carborundum Universal Ltd For Target Rs.305.00 - Kotak Sec

CUMI's growth in the coated and bonded abrasives segment in India and overseas is expected to last into FY18 as well. Sale of value-added premium products continues to remain strong across verticals. Improved economic activity would further lead to increased capacity utilization across verticals. Restructuring of Thukela and Foskor remains on track. The company recently announced that it is

27/03/2017 11:54:48 AM | Posted in Broking Firm Views - Long Term Report read full news
Oil extends gains as dollar and U.S. inventories fall

LONDON - Oil prices rose for a second day on Thursday, supported by U.S. data showing crude inventories had dipped after rising for nine weeks and a weaker dollar after the U.S. Federal Reserve signalled it would not hike rates faster than expected.

Brent crude oil was up 38 cents at $52.19 a barrel by 1050 GMT, recovering from Tuesday's slide to $50.25, its lowes

Sell Havells India Ltd For Target Rs.418.00 - Kotak Sec

HIL stock has appreciated sharply since our previous update (post Q3FY17 results). We believe that at current valuations (at PER 33.4x FY18 earnings) company's stock is trading expensive vis-à-vis and outperformance over the broader market is unlikely to last.

Havells board has recently approved the acquisition of Lloyd consumer durable business for an EV of Rs 16 Bn on deb

16/03/2017 2:32:08 PM | Posted in Broking Firm Views - Long Term Report read full news
Buy Fiem Industries Ltd For Target Rs.1,254.00 - Kotak Sec

FIEM is a leading player in automotive lighting/signaling equipment segment, catering largely to the two wheelers. The company also supplies rear view mirrors, sheet metals parts and plastic components to two /four wheeler segments. Recently, FIEM ventured into the LED lighting business. We expect the two wheeler industry to grow at a healthy rate over FY17- FY19E and FIEM would be a key benefi

15/03/2017 3:02:12 PM | Posted in Broking Firm Views - Long Term Report read full news
Buy VRL Logistics Ltd For Target Rs.340.00 - Kotak Sec

Healthy Outlook

VRL had reported strong set of numbers amidst demonetization in Q3FY17 and the management expects the healthy performance to continue in coming quarter as well. This would be on the back of 1) Government initiatives to improve road infrastructure; 2) Impending GST bill and Motor vehicle Act; 3) Effective management of fuel cost; 4) Effe

9/03/2017 12:46:38 PM | Posted in Broking Firm Views - Long Term Report read full news
Pharma Sector Update - Kotak Sec

We are suspending coverage on the Pharmaceutical sector for the time being. We will re-instate coverage on the same in due course. In the meantime, please treat all our existing recommendations (given in the table below) as closed.

A brief write-up on our covered stocks is as under:

 

Alembic Pharma Ltd (ALPM)

Alembic

28/02/2017 5:10:52 PM | Posted in Broking Firm Views - Sector Report read full news
Demonetization: The taxman cometh -  Kotak Sec

Demonetization: The taxman cometh.

India’s FY2018 taxation revenues may get an indirect boost from demonetization. As per the Indian Income Tax department, only 0.73 mn people out of 1.8 mn people have offered online explanation with respect to ‘suspicious’ cash deposits in their bank accounts in the demonetization period under the IT

28/02/2017 4:28:04 PM | Posted in Special Event Reports read full news
Accumulate Gujarat State Petronet Ltd For Target Rs.175 - Kotak Sec

Optimistic outlook: Pipeline tariff revision and higher gas volumes key triggers

GSPL's management is optimistic about tariff hike and has also indicated that hosting of public consultation document by PNGRB is a step in the right direction, and expects the process to be completed in CY17. Hence, future earnings growth will be supported by margin

24/02/2017 11:22:23 AM | Posted in Broking Firm Views - Long Term Report read full news
Easy come, easy go - Kotak Sec

Easy come, easy go.

The recent run-up in the Indian market may not sustain without better support from earnings and fundamentals. Global and domestic macro factors are generally less supportive and domestic demand conditions weak. 3QFY17 saw a strong recovery in earnings from a very low base in several sectors but underlying trends continue to be subdu

22/02/2017 11:57:34 AM | Posted in Special Event Reports read full news