DM Stocks

2023-01-18 07:20:34 HDFC AND HDFCBANK - MERGED ENTITY TO HAVE~$6BN inflow in MSCI (From domestic sales note) Open / Comment

2023-01-18 07:03:02 Open / Comment

2023-01-18 06:44:21 Global recovery key: Steel outlook improved, but Hindalco top-pick (CLSA)

Global newsflows would continue to dominate outlook for the Indian metals sector. A faster reopening in China and stimulus has provided a new lease of life for the sector, although on ground demand improvement is still elusive. Post CNY demand would be key for further rerating. US recession now looks imminent but could be shallower than earlier expectations. While domestic demand is resilient, large steel capacity addition could keep dependence on exports high. We expect steel prices to rise in the near term (in line with or at a discount to import parity) before softening in the following quarters. While we turn incrementally positive on ferrous, we continue to prefer Hindalco over steel names. We upgrade Tata Steel to O-PF and JSPL to U-PF.

Stock calls: Hindalco top pick; worst looks behind for steel companies
While we turn incrementally positive on ferrous, we continue to prefer Hindalco over steel. Rise in steel prices should provide support to steel stocks in the near term, but we expect the excitement to fizzle out in the back half of the year.
We change estimates and TPs to incorporate update price and spread estimates. For steel, while we believe 2QFY23 has seen trough profitability, steady state profitability is likely to be higher than historical median (in INR terms).
Hindalco (BUY; TP Rs580 from Rs515): Resilient aluminium price and lower global cost should support domestic earnings. In the near term, rebound of Novelis’ profitability would be key to watch, while expansion projects are crucial in the medium term.
Tata Steel (up to O-PF, TP Rs135 from Rs90): Biggest beneficiary of a demand drive upcycle in China. Visibility on Kalinganagar expansion and Europe profitability is key.
JSPL (up to U-PF, TP Rs610 from Rs430): Pick-up in domestic infrastructure demand augurs well. Strong medium term capacity addition fairly priced in. Expansion projects would be key to watch for.
Maintain SELL on JSW (TP Rs640 from Rs480); U-PF on Vedanta (TP Rs295 from Rs275). Open / Comment

2023-01-16 07:58:06 TechM- Screaming Buy (Sales note from domestic brokerage)

- Analyst meet on 3rd Feb likely announcement of new CEO

- 5 capex cycle (in past 3G,4G cycle TECHM communication revenue have grown in high double digit CAGR)

- Dividend payout at 95% (highest in IT pack) , FCF yield at 4.5%

- management won’t do any acquisitions ahead

- pressure from M&M board to stay in best corporate governance practice (financial frugal, less acquisitions, margin recovery, market cap focus)

- TECHM has always done better in margin recovery play and now margins at bottom

- stock trades at 15x on FY24 (inline with its 10 year average multiple)

- higher payout, 5G capex, margin recovery play makes a strong buy at these cheap valuations

- stock is down 40% from top

- better choice than Wipro Open / Comment

2023-01-13 06:52:20 SEBI allows the reintroduction of mini contracts in Non-Precious Metal - Positive for MCX as it could lead to a 7-8% increase in Futures ADTO

SEBI has now allowed exchanges (incl MCX) to reintroduce multiple contracts (esp. Mini Contracts) in non-precious metals (i.e., other than gold & silver) such as Base Metal (Aluminum, Copper, Lead and Nickel, and Zinc) and Crude.
(https://www.sebi.gov.in/legal/circulars/jan-2023/allowing-stock-exchanges-to-launch-multiple-contracts-on-the-same-commodity-in-commodity-derivatives-segment_67220.html)

SEBI asked commodity derivative exchanges incl. MCX to discontinue multiple contracts in non-precious metals (Base Metal and Crude) from Jan-2020 onwards.

The change in the stance of SEBI is to increase the participation of investors and to cater to all value chain participants (after a representation from all exchanges)

The change in stance shall come into force from immediate effect.

This is significantly positive for MCX. Mini contracts before it got discontinued in Jan-2020 contributed ~25% of total base metals futures ADTO and ~15-20% of Crude futures ADTO.

Arbitragers who were very active in mini contracts (before Jan-20) due to potential price difference trade in mini contracts vs. main contracts are expected to increase activity in the commodity derivate market and increase overall ADTO.

Base Metal in 9MFY23 and FY22 contributed 16% and 22% respectively of total futures ADTO, while Crude contributed in 9MFY23 and FY22 contributed 17% and 16% respectively of total futures ADTO.

The reintroduction of mini contracts by MCX in non-precious metal should increase overall futures ADTO by ~7-8%. MCX can also introduce mini contracts in Options which shall further add to overall ADTO.

However, the technology transition from 63 Moons to TCS could potentially be a hindrance to re-introduce mini contracts on an immediate basis for MCX.

Regards, Sanketh/ Arjun, Spark Institutional Equities. Open / Comment

2023-01-12 12:25:50 Cyient first look seems good numbers Open / Comment

2023-01-11 07:48:14 Open / Comment

2023-01-11 07:47:50 Open / Comment

2023-01-10 05:40:23 Tata Consultancy Services - Mixed results, commentary suggests moderation in growth

TCS reported a mixed set of results with beat on revenue, while margins and headcount addition were below expectation. Revenue in constant currency (CC) was up 2.3% QoQ in 3QFY23, better than our expectation of 1.8%. Growth was broad-based across verticals. Deal wins have been a tad lower at USD 7.8 bn vs. ~USD 8.4 bn for an average of the past few quarters. However, deal wins were in line with the management's guidance of a TCV run-rate of USD 7-9 bn per quarter. Overall, commentary suggests some moderation in growth momentum with increasing number of cost initiative deals and no significant acceleration in cloud transformation deals. Margin came in a tad lower than expectation at 24.5%, however, increased 50 bps QoQ aided by INR depreciation and operational efficiency. We cut our TP to INR 3,600 (from INR 3,700) as we marginally lower our CC growth forecast and margin assumptions. We also cut our rating to HOLD from BUY on lack of an upside. Open / Comment

2023-01-06 08:44:24 Days high voltas Open / Comment