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Market Outlook:
Technology results –
Mindtree, HCL Tech good set of number, Infosys upping revenue guidance was major positive
Banks Q2FY23 preview
SBI - Strong loan growth of ~17-18% YoY expected in this quarter; one of the highest in last 5 years. NII growth seen at ~7% YoY due to high base in Q2FY22. Slippages expected at ~|8000-9000 crore, overall NPA provisions seen moderating to |6600 crore. Investment provisions write-back can lead to reduced overall provisions, thus expect strong profit growth at ~| 9270 crore.
IndusInd Bank - IndusInd Bank has reported robust business growth with 18% YoY and 5% QoQ growth in advances to ₹ 2.59 lakh crore. Healthy disbursement is expected to enable steady margins and NII at ₹ 4265 crore, up 16.6% YoY. Building of business capabilities to keep CI higher at 44.2%, however, lower credit cost at ~45 bps (non annualised) to boost earnings at ₹ 1760 crore; up 10% QoQ and 58% YoY. Asset quality is expected to remain steady with GNPA ratio at 2.3%.
Bajaj Finance - Better than expected AUM growth at 31% YoY & 3.4% QoQ to |218350 crore, was reported by BAF. Increase in ticket size had offset marginal moderation in customer accretion (26 lakh vs 27.2 lakh). NII seen to surge at 35% YoY to | 7212 crore with steady margin. Provision to witness marginal uptick to | 830 crore. With C/I ratio under control, PAT estimated to increase 90% YoY & 8% QoQ to | 2815 crore.
FMCG Results
Pharma Results
Pharma companies are expected to report a decent Q2FY23 numbers amid strong YoY growth in domestic formulations and a stable US portfolio amid favorable currency movement and some key launches. The universe is expected to post YoY growth of ~12%.
Domestic formulations are expected to post robust growth of 12% YoY on the back of 1) uptick in volumes of chronic and sub-chronic therapies 2) full quarter impact of price hikes and 3) benefits from new introductions and field force expansion.
On the US front, we expect 9% YoY growth (despite base business price erosion) to be driven by 1) new launches, 2) continued momentum in specialty/complex portfolio and 3) ~8% YoY INR depreciation vis-à-vis last quarter.
Stock Preference with good Q2FY23 expectations-
Laurus Labs- We expect 28% YoY sales growth to be backed by robust CRAMs order book.
Sun Pharma - We expect 16% YoY sales growth on the back of strong domestic growth and strong US specialty growth.
Hospitals are likely to maintain revenue growth tempo in Q2FY23 on the back of 1) rise in elective surgeries 2) higher in-patient volume and 3) improving international patients and insurance payee mix. We expect 5% sequential revenue growth of our Hospitals universe.
Strong trajectory is also expected on the EBITDA front on the back of maturing profile of hospitals, reduction in ALOS along with ramp up in occupancy and ARPOB levels with improved case mix. We expect 20% sequential EBITDA growth of our Hospitals universe.
Stock Preference with good Q2FY23 expectations-
Narayana Hrudayalaya - 8% sequential revenue growth and 9% sequential EBITDA growth
Apollo Hospitals- 7% sequential revenue growth and 17% sequential EBITDA growth
Chemical Results
Chemical companies are likely to maintain strong sales growth trajectory for Q2FY23 amid strong traction from Specialty chemicals and agro chemicals segments besides healthy CRAMs order book. Most of the players have initiated aggressive capex over the last few quarters which expected to maintain the momentum. Our Chemical universe is expected to register ~32% YoY sales growth.
On EBITDA front the universe is expected to post robust growth of 46%YoY as increase in key raw material prices and power and fuel cost is likely to get offset by better realization and healthy product mix.
Stock Preference with good Q2FY23 expectations-
Sumitomo Chemicals- 30% YoY revenue growth expected on the back of key agri- molecules in the domestic markets.
Neogen Chemicals- ~48% YoY revenue growth expected on the back of commissioning of new plant in the Organic Chemicals segment.
Astec Life sciences – ~144% YoY growth expected on the back of better utilization of Herbicides plant and spillover of orders from the earlier quarter.
Capital Goods & Defence Results
Metals Results
Q2FY23 to be a muted quarter for metal players on the back of subdued pricing
Q2FY23 is likely to be a subdued quarter for majority of Metal companies On subdued pricing. Q2FY23 would also be the first full quarter impacted by export duty (Export duty was levied in May’22). On a QoQ basis steel prices are down ~Rs. 12000-13000/tonne sequentially (~16%-17% QoQ), while for Q2FY23 Aluminium prices are down ~18% QoQ. On the back of weakness witnessed in steel pricing, EBITDA/tonne of steel companies is likely to witness a decline of ~ Rs 4000 – Rs 11000/tonne on a QoQ basis.
Coal India to be a standout performer, aided by healthy e-auction realisations
Within the Metal space Coal India is likely to be a standout performer aided by healthy e-auction realisations. For Q2FY23, Coal India is likely to report sales volume of 154 Million tonne (MT), up 5% YoY. E-auction realisations is likely to come in at Rs 4800/tonne (up 11% QoQ and 201% YoY). E-auction volumes is likely to come in at 16 MT in Q2FY23 as compared to 21 MT in Q2FY22.
For Q2FY23, we expect CIL's consolidated topline to increase 24% YoY to Rs. 28960 crore. Consolidated EBITDA margin is likely to come in at 30.7% for Q2FY23E compared to 16.9% in Q2FY22. For Q2FY23E, we expect Coal India to clock an EBITDA/tonne of | 575/tonne as compared to | 267/tonne in Q2FY22. Ensuing consolidated PAT for the quarter is likely to come at | 6251 crore, up 113% YoY.
Stock preference - Coal India -(CMP – Rs 235, target Rs – 275, upside 17% - Rating - BUY)
Consumer Discretionary Results
Hidden Gems
Federal Bank (CMP – Rs 128 Target Price - 150)
Strong performance on growth, earnings as well as asset quality front.
Credit growth (provisional number already announced) remain robust at 19.9% YoY, thus NII came at Rs 1762 crore, up 19.1% YoY and 9.8% QoQ
Robust other income reported at Rs 609 crore, up 24% YoY, while opex increased at a slower pace (9.5% YoY) resulting in strong growth in PPP at 33% YoY to Rs 1212 crore
Provision came higher at Rs 268 crore i.e 17 bps of advances (non-annualised). However, robust top-line and operational efficiency led to 52% YoY growth in PAT at Rs 704 crore, ahead of estimates.
Asset quality continued to remain resilient with 23 bps QOQ decline in GNPA ratio to 2.46%.
Disclaimer: ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. I-Sec is a SEBI registered with SEBI as a Research Analyst vide registration no. INH000000990. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The non-broking products / services like Research, etc. are not exchange traded products / services and all disputes with respect to such activities would not have access to Exchange investor redressal or Arbitration mechanism.
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