While inflation in the US appears to have peaked, aggressive policy tightening by central banks risks pushing the global economy into a recession. The World Bank last week added to the gloomy outlook, warning of one of the sharpest slowdowns.
PL Stock Report – Federal Bank (FB IN) and Siemens (SIEM IN)
Prabhudas Lilladher Pvt Ltd stock recommendations on:
Federal Bank (FB IN): Rating: BUY | CMP: Rs140 | TP: Rs175
Quick Pointers:
§ Core earnings beat of 16% led by better NIM driven by lower funding cost.
§ Fees in 9MFY23 grew strongly by 43% YoY; current run-rate should sustain.
FB again surpassed its previous quarter best, with core earnings at Rs7.75bn, beating PLe by ~16% led by NIM beat which came in at 3.89% (PLe 3.66%) as funding cost was lower at 4.9% (PLe 5.1%). Bank further raised steady state NIM guidance from 3.30% to 3.35-3.40%. We too increase NIM for FY23E by 12bps and FY24/25E by ~6bps each as 1) high yielding book, which touched Rs62bn, could double in 2+ years and 2) upward deposit repricing could be slower to peers (~60% of deposits as at FY22 have a maturity >3 years). Fee income in 9MFY23 has risen by 43% to Rs12.9bn and bank expects current run-rate to continue. Hence, we increase FY23 PAT by 6% and FY24/25E PAT by ~2% each. With consistent beat in core profitability, re-rating should continue for FB. Rolling forward to FY25E ABV, we raise TP to Rs175 from Rs165, maintaining multiple at 1.5x. Reiterate BUY.
Siemens (SIEM IN): Rating: ACCUMULATE | CMP: Rs2,944 | TP: Rs3,290
Event Update – Awarded Rs260bn locomotive order
§ Siemens to deliver 1,200 electric locomotives (9000hp) over 11-year period and provide 35 years of full service maintenance.
§ It is single biggest order in the history of Siemens Ltd in India.
§ Siemens will design, manufacture, commission and test the locomotives.
§ The state-of-the-art locomotives will be used for freight transport throughout the Indian Railways network and are specified to haul loads of 4,500 tons at a maximum speed of 120 km per hour.
§ Locomotive will be equipped with advanced propulsion systems that are produced locally in Siemens factories in India.
§ The locomotives will be assembled in the Indian Railways factory in Dahod, Gujarat. Maintenance will be performed in four Indian Railways depots located in Vishakhapatnam, Raipur, Kharagpur and Pune.
PL View:
We believe, this order win will boost Siemens Motion business revenue growth going forward. We remain positive on SIEM from a long-term perspective given its 1) strong and diversified presence across industries, 2) focus on digitization and automation products, 3) product localization and 4) healthy balance sheet. The stock is currently trading at PE of 61.4x/52.1x/45x SY23E/24E/25E earnings. We have Accumulate rating on stock with TP of Rs3,290, valuing it at PE of 54x Mar’25
Media index struggles amidst an otherwise strong market; all stocks trading in red
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Federal Bank share price target raised after strong Q3 results. What brokerages recommend
Private sector lender Federal Bank posted a 54% rise in its profit at ₹804 crore in the third quarter ended December 2022 (Q3FY23), on higher net interest income and improved asset quality. The bank had posted a net profit of ₹522 crore in the same quarter a year ago.
The brokerage house has reiterated ‘Buy’, rating Federal Bank shares a top mid-cap pick as it believes Federal is set to deliver a higher RoA of 1.4% through FY25E versus average RoA of 0.9% over the last five years. With a de-risked book, fintech partnerships gaining traction and market share acquisition in loans, Edelweiss expects the bank to deliver strong EPS CAGR of 28% over FY22–25E. The brokerage’s target price on the bank stock stands revised to ₹180 per share (from ₹160). (Read More)
Adani Ent share price trades lower despite ₹20,000-crore FPO buzz
Adani Enterprises’ share price is in focus on Tuesday amidst news reports of a likely ₹20,000-crore follow-on public offer (FPO). The stock opened lower for second consecutive day despite the FPO buzz in the market. At the time of writing, this Adani stock traded at ₹3,597.60 apiece down by ₹21.40 or 0.59% on BSE. Its market cap has dipped to around ₹4.10 lakh crore.
The stock has touched the day’s low of ₹3,560.05 apiece — resulting in an overall drop of over 1.6% from the previous session. This would also be the second consecutive day of fall of Adani Enterprises stock in the current week.
The Adani group company has filed papers with stock exchanges for the proposed issue, said an Economic Times report. (Read More)
Foxconn Replaces iPhone Business Chief After Tumultuous Year
Key Apple Inc. manufacturing partner Foxconn Technology Group has appointed a new boss for its iPhone assembly business after a tumultuous year in China, highlighting the company’s efforts to ready a new generation of leaders to help it navigate a post-Covid world.
Michael Chiang was first identified in his new role at Taiwan-based Foxconn’s annual year-end party on Sunday, succeeding longtime leader Wang Charng-yang as head of the division responsible for iPhone assembly. Chiang was recently promoted to chief of the A business group as Wang steps back to focus on a role on the board, according to people familiar with the matter.
The appointment is part of efforts by Chairman Young Liu of Foxconn’s flagship unit Hon Hai Precision Industry Co. to elevate younger executives to maintain the company’s supply chain leadership in the face of growing competition from Chinese contenders. Foxconn may also face new rivals in India as Apple seeks to further diversify its production footprint following pandemic-related supply snarls and draconian restrictions that wrought havoc on device output in China. (Bloomberg)
IndusInd Bank drags in today’s session as it sheds 1%
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Gold prices today fall from all-time highs, silver drops
Gold dipped in India futures market today after hitting an all-time high on Monday. On MCX, gold slipped to ₹56,456 per gram, off about ₹100 from its all-time high of ₹56,562. Silver futures dipped 0.2% to ₹69,655 per kg. In global markets, gold prices inched lower, weighed by an uptick in the dollar. Spot gold was down 0.4% at $1,910.48 per ounce but the losses were capped by hopes of slower interest rate hikes by the Federal Reserve. The dollar gained 0.2%. A stronger dollar turns gold less attractive to buyers with other currencies.
“On the global side, China’s GDP was in focus. It jumped by 3% year-on-year in 2022, indicating that the Chinese economy has made new headway despite multiple issues. Other economic data from the same region remains better than expected and thus could support a Yuan. Now, all eyes will be on the UK job report and EU ZEW Economic Sentiment, said Amit Pabari, MD of CR Forex Advisors. (Read More)
FMCG index leads the market rally as it jumps more than a per cent with most stocks in green
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Rupee falls 31 paise to 81.89 against US dollar
The rupee depreciated 31 paise to 81.89 against the US dollar in early trade on Tuesday weighed down by a rebound in American currency and firm crude oil prices.
Sustained foreign fund outflows further dented investor sentiments, forex traders said.
At the interbank foreign exchange, the domestic unit opened weak at 81.79 against the dollar, then fell to 81.89, registering a decline of 31 paise over its last close.
In the previous session on Monday, the rupee settled at 81.58 against the US dollar.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, rose 0.18 per cent to 102.38.
Brent crude futures, the global oil benchmark, advanced 0.19 per cent to USD 84.62 per barrel.
In the domestic equity market, the 30-share BSE Sensex was trading 280.06 points or 0.47 per cent higher at 60,373.03. The broader NSE Nifty advanced 44.90 points or 0.25 per cent to 17,939.75. (PTI)
India central bank’s new proposal on loan loss provisions to raise bank capital needs – analysts
The Indian central bank’s discussion paper suggesting banks make provisions on bad loans using an expected credit loss (ECL) method could raise capital requirements for lenders, analysts said.
On Monday evening, the Reserve Bank of India released the paper proposing a shift away from the current method – where loan loss provisions are made after a default – to one where banks will need to assess the probability of default upfront and provision accordingly.
The potential impact of a shift to the ECL mechanism on bank capital could be significant, said the RBI, which is yet to give a timeline for implementing the new rules.
If implemented, banks will be given at least a year to transition, it said.
The new mechanism will recognise problems ahead of time and make the banking system more resilient in the long run but could raise capital requirements significantly particularly for government owned banks, analysts at Macquarie Research said. (Reuters)
IT Index gains at early trading with most stock remaining higher
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Hindustan Unilever surges in early trading as the stock jumps more than a per cent
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China’s 1st recent population fall with 850,000 people fewer at 2022 end: Report
Amid an aging society and plunging birthrate, China has announced its first overall population decline. The National Bureau of Statistics reported the country had 850,000 fewer people at the end of 2022 than over the previous year, according to The Associated Press.
Addressing a briefing on Tuesday, the bureau said that left a total 1.411.75 billion, with 9.56 million births against 10.41 million deaths. It counts only the population of mainland China while excluding Hong Kong, Macao and self-governing Taiwan as well as foreign residents. (Read More)
Indices flat at open with minor gains as FMCG and IT stocks gain, while Metal drags
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Byju’s rolls out virtual sales plan amid concerns
Amid mis-selling concerns, edtech giant Byju’s has replaced its existing direct sales with a new internal sales strategy to avoid mis-selling and expand the reach of customers through a virtual process over zoom.
The edtech decacorn, which claims to have over 150 million registered learners, rolled out a four-tier tech-driven internal sales, which begins with educating an incoming lead about Byju’s product portfolio and its new refund policy over a live Zoom session that is recorded for future audit, the company said on Monday. The refund for a product is also done over a Zoom call, the company further said. The new inside sales strategy, launched in October, is announced amid increased criticism against the edtech firm for aggressively pitching its courses through its on-field sales push. (Read More)
Bitcoin, ether, dogecoin, other crypto prices today fall. Check latest rates
Bitcoin price today gained to trade above $21,000 even as the world’s largest and most popular digital token was trading with cuts of nearly a per cent at $21,102. It crossed the level on Saturday, first since November 8, 2022. The price of Bitcoin was stuck in a narrow range around $16,000 to $17,000 for weeks before the latest breakout. The global cryptocurrency market cap today was up almost flat in the last 24 hours to $1.02 trillion, as per the data by CoinGecko.
“BTC is currently trading around the $21,000 mark, remaining relatively stable over the last 24 hours. It experienced a significant increase of 25% already this year, with most of the gains happening since last Tuesday when it was hovering around $17,400. This surge is likely driven by renewed investor confidence in the U.S. central bank’s ability to control inflation without harming the economy. Ether, following a similar pattern to Bitcoin, has also seen an increase in value, reaching a two-month high before falling slightly. On the other hand, MANA, the native token of the 3D virtual reality platform Decentraland, has increased by more than 16%,” said CEO and Co-founder, Edul Patel, Mudrex. (Read More)
Sensex start flat at the preopen session; ONGC, Reliance, Siemens India, NTPC in focus
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Geojit Financial Services views on today’s market: FIIs are playing it safe by moving money to cheaper markets where there is valuation comfort
Dr V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services: The dominant trend impacting the near-term texture of the market is the sustained selling by FIIs for the eleventh time this month. There is selling even in bluechip names like HDFC Bank, that too, after impressive Q3 results. The simple logic behind sustained FII selling is that India is the only large market where FIIs are still sitting on good profits after the disastrous 2022 performance in most global markets. FIIs are playing it safe by moving money to cheaper markets where there is valuation comfort. The sustained FII selling has turned the near-term structure of the market weak. The best investment strategy in the present weak market would be to systematically buy high-quality large-caps in performing sectors like banking, capital goods, telecom and construction-related segments. Soon, India’s strong fundamentals will bring cheer to the market.
Reliance Securities Stock in Focus for Today: ABB
STOCK IN FOCUS
ABB (CMP 2,872): In view of strong capex uptick, high earnings growth and backing by ABB global, we have our BUY rating with a Target Price of Rs3,500.
Intraday Picks
POWERGRID (PREVIOUS CLOSE: 216) BUY
For today’s trade, long position can be initiated in the range of Rs212-214 for the target of Rs220 with a strict stop loss of Rs210.
LT(PREVIOUS CLOSE: 2137) SELL
For today’s trade, short position can be initiated in the range of Rs2150- 2160 for the target of Rs2105 with a strict stop loss of Rs2180.
BANKBARODA (PREVIOUS CLOSE: 186) SELL
For today’s trade, short position can be initiated in the range of Rs187- 189 for the target of Rs181 with a strict stop loss of Rs191.
Oil Extends Decline Ahead of Chinese GDP Data and OPEC Outlook
Oil dropped as investors waited for data on China’s economy and a market outlook from the Organization of Petroleum Exporting Countries that may yield clues about supply and demand in 2023.
Global benchmark Brent fell toward $84 a barrel after shedding 1% on Monday. Beijing is due to release fourth-quarter economic growth data. The figures are expected to show a marked slowdown even as most traders look ahead to a likely rebound in energy demand following the dismantling of virus curbs.
In addition to the backward-looking data from China, OPEC is scheduled to release its monthly analysis of the global oil market. The wider 23-nation OPEC+ group agreed to collectively reduce supplies by 2 million barrels a day from November, and then hold steady for the rest of this year.
Crude has had a rocky start to 2023, sinking in the opening week on concerns over a global slowdown before rebounding. Aside from China, oil has found support from growing expectations that the Federal Reserve is nearing an end to its aggressive series of interest-rate hikes and a weakening dollar. (Bloomberg)
INDIA BONDS-Bond yields seen little changed ahead of state debt sale
Indian government bond yields may remain largely unchanged in early session on Tuesday as traders await supply through sale of debt from states.
The benchmark 10-year yield could move in a range of 7.31%-7.35%, a trader with a private bank said. The yield ended higher at 7.3283% on Monday, the second consecutive session of rise.
Bond yields have corrected again after last week’s fall, and with a very small quantum of the state debt, it should not make any material difference to the overall supply-demand dynamics, the trader said.
Four Indian states aim to raise 67 billion rupees ($820.27 million) through the sale of bonds against the scheduled 220 billion rupees.
Indian states may not borrow as much as the record 3.41 trillion rupees in the January-March quarter, which will help keep the spread between state and central government bond yields in check, analysts had said after the release of state debt calendar for this quarter. (Reuters)
Stocks to Watch: ONGC, Reliance, NTPC, Siemens, Dabur, Paytm, BoM, JSW Ispat Special Products, Samvardhana Motherson, Coal India, and Spencer Retail
ICICI Prudential, ICICI Lombard, Bank of India, Delta Corp, Tata Investment Corp, and Metro Brands will be among the stocks in focus as they declare their December quarter earnings today. (Read More)
Gold prices seen rising towards record highs as rate rises near end
Gold prices are expected to rise towards record highs above $2,000 an ounce this year, albeit with a little turbulence, as the United States slows the pace of rate hikes and eventually stops increasing them, according to industry analysts. Spot prices of the precious metal have shot above $1,900 an ounce, surging by about 18% since early November as inflationary pressures recede and markets anticipate less aggressive monetary policy from the U.S. Federal Reserve.
Fast-rising interest rates hammered gold prices last year, kicking them as low as $1,613.60 in September from a high of $2,069.89 in March – just shy of a record peak in 2020. (Read More)
Federal Bank share price target raised after strong Q3 results. What brokerages recommend
Private sector lender Federal Bank posted a 54% rise in its profit at ₹804 crore in the third quarter ended December 2022 (Q3FY23), on higher net interest income and improved asset quality. The bank had posted a net profit of ₹522 crore in the same quarter a year ago.
The bank’s net Interest Income (NII), the difference between interest earned and expended, for the quarter grew by over 27% to ₹1,957 crore from 1,539 crore in the year ago quarter. Federal Bank reported a strong quarter – third in a row. Given Federal’s notable RoA expansion in 9MFY23E, analysts at Edelweiss are confident the bank can deliver strong earnings and RoA ahead. (Read More)
JSW Ispat Special Products Q3 net loss widens to ₹97.98 crore
JSW Ispat Special Products Limited (JISPL) on Monday said its consolidated net loss widened to ₹97.98 crore in the December quarter.
The company had posted a ₹27.12 crore net loss in the year-ago period, according to a statement.
Its total income fell to ₹1,110.33 crore from ₹1,476.46 crore during the October-December period of the previous year.
Debt-laden Monnet Ispat & Energy Limited (MIEL) was acquired jointly by a consortium of Aion Investments Private Limited (AION) and JSW Steel Limited and later renamed as JSW Ispat Special Products Limited. (PTI)
Airlines face hurdles to cashing in on China re-opening
US and European airlines will benefit from pent-up demand for travel to China after its recent border reopening, but route approvals, fresh COVID-19 testing rules and not enough large aircraft remain barriers to rising sales, analysts and industry officials say.
Travel is returning to China, the world’s largest outbound tourism market worth $255 billion in 2019, after the country ended mandatory quarantines on Jan. 8. Airfares from China are now 160% higher than before the pandemic, data from travel firm ForwardKeys shows, due to limited supply. (Read More)
Global recession likely in 2023: World Economic Forum survey
With geopolitical tensions continuing to shape the global economy and anticipate further monetary tightening in the United States and Europe, a majority of the World Economic Forum’s Community of Chief Economists have expected a global recession in 2023. The findings were found in the The January 2023 Chief Economists Outlook’ by the World Economic Forum’s Centre for the New Economy and Society.
As per the survey, almost two-thirds of chief economists believe a global recession is likely in 2023; of which 18% consider it extremely likely – more than twice as many as in the previous survey conducted in September 2022. A third of respondents consider a global recession to be unlikely this year. (Read More)
BoM to raise up to ₹1,000 crore through QIP in Q4FY23
The state-owned Bank of Maharashtra (BoM), which reported solid Q3 results, announced on Monday that it aims to raise up to ₹1,000 crore via qualified institutions placement (QIP) in the January-March quarter pr Q4FY23 in order to comply with Sebi’s minimum public shareholding (MPS) standards. A S Rajeev, managing director of BoM, stated that the bank has commenced the procedure to comply with Sebi’s (the Securities and Exchange Board of India) regulations.
“It will be done in a piecemeal manner and we are looking at QIP between ₹500 and ₹1,000 crore in the current quarter,” MD said by adding that going forward other means would be explored for dilution of the government’s stake. (Read More)
HDFC Bank to miss quarterly deposit target of ₹1 trillion
HDFC Bank’s plan to ramp up its deposit mobilization to ₹1 trillion per quarter may hit a wall, as the pricing war over deposits heats up, analysts said. The private sector lender, which is in a merger process with its parent HDFC Ltd, had set the target during a roadshow in September. The management sought to mop up ₹4 trillion, or roughly 25% of its current deposit base, per year.
However, the third quarter earnings reveal that it fell short of its expectations. At the end of December, the bank posted an incremental deposit growth of ₹59,796 crore, compared to ₹68,648 crore in the previous quarter. Its total deposit book stood at ₹17.3 trillion as of 31 December. (Read More)
India to boost coal imports to cope with harsh weather, freight snags
India’s power utilities will likely boost coal imports this year to cope with surges in demand, made worse over the past year by extreme temperatures, and with freight bottlenecks that are disrupting domestic coal supplies, analysts and officials said. A steady rise in industrial electricity use in recent years has left utilities in India, one of the world’s fastest growing major economies and the second-largest coal consumer and importer, with limited leeway to confront extraordinary demand or hiccups in supply. (Read More)
Centre cuts windfall tax on crude oil to Rs1,900 per tonne
The union government has lowered the windfall tax on the sale of locally-produced crude oil to ₹1,900 per tonne from ₹2,100 per tonne after a gap of two weeks. Centre has also reduced additional excise duty on the export of aviation turbine fuel (ATF) to ₹3.5 per litre from earlier ₹4.5 per litre and has reduced export duty on diesel to ₹5 per litre, including cess, from the previous levy of ₹6.5 per litre, said a finance ministry notification.
Global oil prices have largely been subdued of late. At the time of writing the story, the March contract of Brent on the Intercontinental Exchange is at $84.44 per barrel, lower by 0.99% from its previous close. (Read More)
European shares shine on Monday, dollar dims as BOJ battles bond bears
Stocks continued their new year rally on Monday as optimism over the global economy, inflation coming under control and China’s reopening offset concerns the Bank of Japan (BOJ) might temper its super-sized stimulus policy at a pivotal meeting this week.
The yen climbed to its highest since May after rumours swirled the BOJ might hold an emergency meeting on Monday as it struggles to defend its new yield ceiling in the face of massive selling, sending the dollar to a seven-month low.
The region’s STOXX 600 benchmark rose 0.3% by 1145 GMT driven by healthcare stocks which gained 0.6%, and Britain’s FTSE at 7856 inched towards a record 7903.
MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.37%, with hopes for a speedy Chinese reopening giving it a gain of 4.2% last week.
The fragile rally in equities that has characterised the opening weeks of the year could be tested from a number of angles this week, however, as world leaders, policymakers and corporate CEOs gather for the World Economic Forum (WEF) in Davos. (Reuters)
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