Query Board
This section gives decisive investment rationales to our subscribers on the stock queries they have raised to our research team.
Tata Motors Group (Tata Motors) is a leading global automobile manufacturing company. Looking at the quarterly trends on a consolidated basis, for Q1FY21 the company reported net sales of Rs31,481.46 crore, a decrease of 48.25 per cent as against the net sales of Rs60,830.16 crore for Q1FY20. For Q1FY21, the company gained operating profit of Rs1,289.23 crore, contracting by 65.1 per cent compared to the operating profit of Rs3,693.93 crore gained in Q1FY20. It incurred net loss of Rs8,384.22 crore in Q1FY21 while the company incurred net loss of Rs3,434.25 crore incurred in Q1FY20. On the annual front, in FY20 the company reported net sales of Rs258,594.36 crore, a decrease of 13.57 per cent over the net sales of Rs299,190.59 crore reported in FY19. For FY20, operating profit decreased by 24.14 per cent to Rs20,960.22 crore from Rs27,629.64 crore reported in FY19. Tata Motors incurred net loss of Rs10,975.23 crore in FY20 as compared to the net loss of Rs28,933.70 crore incurred in FY19. The company is focusing on cost-cutting and monetisation of non-core assets. Demand recovery is visible across western markets for its ‘Jaguar’ products. With the festive season approaching soon, the demand for other products is also expected to rise. Hence, we recommend HOLD.
Graphite India Limited (GIL) is a pioneer in India for the manufacture of graphite electrodes as well as carbon and graphite speciality products. On a consolidated basis, for Q1FY21 the company reported net sales of Rs409 crore, a decrease of 57.7 per cent compared to the net sales of Rs967 crore for Q1FY20. For Q1FY21 the company incurred an operating loss of Rs63 crore as against operating profit of Rs352 crore gained in Q1FY20. Graphite India incurred a net loss of Rs76 crore in Q1FY21, whereas the company posted net profit of Rs221 crore gained in Q1FY20. On the annual front, in FY20 the company reported net sales of Rs3,094 crore, a decrease of 60.63 per cent over the net sales of Rs7,858 crore, reported in FY19. For FY20, operating profit decreased by 98.18 per cent to Rs95 crore from Rs5,233 crore reported in FY19. Graphite India gained net profit of Rs52 crore in FY20, which is a contraction by 98.47 per cent compared to the net profit of Rs3,399 crore gained in FY19. The management has attributed this significant drop in profits due to the ongoing pandemic. Global and domestic demand for graphite products has been impacted by lower steel production. FY21 is expected to remain a challenging year for the company as graphite products’ demand is expected to be low. Hence, we recommend AVOID.
State Bank of India operates in four business segments, namely, treasury, corporate banking, retail banking and other banking business. The treasury segment includes investment portfolio and trading in foreign exchange contracts and derivative contracts. The corporate banking segment comprises the lending activities of its corporate accounts group, mid-corporate accounts group and stressed assets management group. The retail banking segment consists of branches in its national banking group, which primarily comprises personal banking activities.
On the quarterly front, the net interest earned by the bank in the first quarter of FY21 came in at Rs69,939.97 crore as against Rs65,594.42 crore in the corresponding quarter of the previous fiscal, an increase of 6.62 per cent. The total income in Q1FY21 was Rs87,984.33 crore, an increase of 5.65 per cent from Rs83,278.08 crore in Q1FY20. The profit after tax rose by 63.85 per cent to reach Rs5,203.49 crore in Q1FY21 from Rs3,175.86 crore in Q1FY20. For Q1FY21 the GNPA percentage was 5.44 per cent as compared to 7.53 per cent in Q1FY20. The CRAR ratio in Q1FY21 was 13.40 per cent which was 12.89 per cent in Q1FY20. Net interest earned by the bank in FY20 came in at Rs269,851.66 crore, an increase of 6.53 per cent from Rs253,322.17 crore in FY19.
The total income earned by the bank in FY20 was Rs362,229.09 crore, an increase of 9.69 per cent from Rs330,220.88 crore earned in the previous fiscal. The profit after tax in FY20 increased by 492.26 per cent to reach Rs18,176.83 crore as against Rs3,069.07 in FY19. The company reported GNPA ratio of 6.15 per cent for FY20 and 7.53 per cent for FY19. In FY20, the CRAR ratio was 13.06 per cent whereas in FY19 it was 12.72 per cent. Asset quality has improved with the NPA ratio coming down. There is visibility on recoveries in the near term and the moratorium book has come down. The bank’s non-banking subsidiaries are also fuelling growth. Net interest margin has also improved. Hence, we recommend BUY.
Cipla Limited is one of the leading pharmaceutical companies in India. The company focuses on development of new formulations and has a wide range of pharmaceutical products. Its product portfolio includes over 1,500 products across a wide range of therapeutic categories. Cipla primarily develops medicines to treat respiratory, cardiovascular disease, arthritis, diabetes, weight control and depression, and other medical conditions. They are the world’s largest manufacturer of antiretroviral drugs. Looking at the quarterly trends on a consolidated basis, for Q1FY21 the company reported net sales of Rs4,276.89 crore, an increase of 9.82 per cent compared the net sales of Rs3,894.46 crore for Q1FY20. For Q1FY21 the company gained operating profit of Rs1,114.19 crore, expanding by 13.34 per cent compared to the operating profit of Rs983.01 crore gained in Q1FY20. Cipla gained net profit of Rs571.43 crore in Q1FY21, which is an expansion by 21.41 per cent compared to the net profit of Rs470.65 crore gained in Q1FY20. On the annual front, in FY20 the company reported net sales of Rs16,694.85 crore, an increase of 4.53 per cent over the net sales of Rs15,970.97 crore reported in FY19. For FY20, operating profit decreased by 0.66 per cent to Rs3,550.19 crore from Rs3,573.88 crore reported in FY19. Cipla gained net profit of Rs1,546.98 crore in FY20, an expansion of 2.48 per cent compared to the net profit t of Rs1,509.61 crore gained in FY19. Cipla’s Q1FY21 results were strong because of good growth across regions and higher than expected cost savings. Growth has been driven by new launches like the Albuterol inhaler. The domestic market is expected to grow faster because of opportunities driven by the pandemic. The company’s domestic growth was driven by strong performance across three verticals – prescription business, trade generics and consumer health, and also because of benefits of the ‘One India’ strategy and the corona virus portfolio. The company’s digital initiatives have also received a good response. Hence, we recommend HOLD.
Housing and Urban Development Corporation (HUDCO), a Miniratna company, plays a key role in various government schemes to develop Indian housing and urban infrastructure. The company is a technofinancing public sector enterprise engaged in the field of housing and infrastructure development. It provides long-term finance for construction of houses for residential purposes or undertakes housing and urban development programmes in the country. The company focuses on housing finance and urban infrastructure finance. Housing finance loans include loans for social housing, residential real estate and HUDCO Niwas.
Looking at the quarterly trends on a consolidated basis, for Q1FY21 the company reported net sales of Rs1,764.25 crore, a decrease of 1.82 per cent compared to the net sales of Rs1,796.97 crore for Q1FY20. For Q1FY21 the company gained an operating profit of Rs1,470.85 crore, contracting by 14.79 per cent compared to the operating profit of Rs1,726.10 crore gained in Q1FY20. HUDCO gained net profit of Rs203.43 crore in Q1FY21, which is a contraction by 39.4 per cent compared to the net profit of Rs335.62 crore gained in Q1FY20. On the annual front, in FY20 the company reported net sales of Rs7,492.63 crore, an increase of 35.84 per cent over the net sales of Rs5,515.72 crore, reported in FY19.
For FY20, operating profit increased by 42.3 per cent to Rs7,028.05 crore from Rs4,939.02 crore reported in FY19. The company gained net profit of Rs1,708.42 crore in FY20, which is an expansion by 44.76 per cent compared to the net profit of Rs1,180.15 crore gained in FY19. HUDCO’S Q1FY21 performance was affected because of the lockdown. However, its performance for FY20 was impressive. Construction activities that had been stopped amid the pandemic have now resumed. Going forward, the government’s focus on housing will also lead to an increase in demand for home credit. Hence, we recommend HOLD.
Kotak Mahindra Bank has four strategic business units – consumer banking, corporate banking, commercial banking and treasury. Its corporate segment mainly includes providing loans to the corporate segment whereas the retail banking segment includes providing loans to non-corporate customers. Commercial banking includes accepting deposits, offers related to account services, various loans and savings accounts. The treasury service segment includes interest earnings on investments portfolio. On the quarterly front, the net interest earned by the bank in the first quarter of FY21 came in at Rs8,421.69 crore as compared to Rs8,289.30 crore reported for the corresponding quarter of the previous fiscal, registering an increase of 1.6 per cent.
The total income in Q1FY21 was Rs12,323.15 crore, an increase of 1.6 per cent from Rs12,129.56 crore in Q1FY20. The profit after tax fell by 4.48 per cent to reach Rs1,840.44 crore in Q1FY21 as against Rs1,926.85 crore in Q1FY20. For Q1FY21 the GNPA percentage was 0.27 per cent as compared to 0.20 per cent in Q1FY20. The CRAR ratio in Q1FY21 was 21.23 per cent and in Q1FY20 it was 17.80 per cent. The net interest earned by the bank in FY20 came in at Rs33,474.16 crore, an increase of 12.21 per cent from Rs29,831.22 crore in FY19. The total income earned by the bank in FY20 was Rs50,299.69 crore, an increase of 9.58 per cent from Rs45,903.36 crore earned in the previous fiscal.
Its profit after tax in FY20 increased by 20.89 per cent to reach Rs8,607.08 crore as against Rs7,119.70 in FY19. The company reported GNPA ratio of 0.22 per cent for FY20 and 0.19 per cent for FY19. In FY20, the CRAR ratio was 17.89 per cent whereas in FY19 it was 17.50 per cent. The bank’s key operating measure such as NII has shown improvement in the last quarter despite the expected weakening of the banking sector. The bank saw strong growth in deposits during June. Going ahead, Kotak Mahindra Bank intends to focus on lending to SMEs, mortgages and selective corporates with a view of doing largely secured business. Hence, we recommend HOLD.
(Closing price as of October 06, 2020)