Eicher Motors falls 5% on weak December motor cycle sales; Motilal Oswal maintains buy

The company's December total motor cycles sales were down 13 percent at 58,278 units against 66,968 units, YoY.

Shares of Eicher Motors slipped 5.6 percent intraday Wednesday after company reported weak motor cycle numbers for the month December 2018.

The company's December total motor cycles sales were down 13 percent at 58,278 units against 66,968 units, YoY.

Meanwhile, its CV sales for the month was up 2.4 percent at 6,236 units versus 6,087 units. Its exports went up 41 percent at 2,252 units against 1,601 units, YoY.

According to Motilal Oswal Royal Enfield is a big disappointment; lower Royal Enfield volume estimates for the current and the next financial year by 46,000 and 89,000 respectively.

It cuts EPS estimates by 6 percent and 9 percent for the current and the next financial year respectively.

Meanwhile brokerage house maintained buy call on share with target of Rs 24,760 per share.

According to Morgan Stanley, auto sales end the year on a weak note. Year-end inventory clearance & weak consumer sentiment lead to another month of muted volumes.

It prefers OEMs that have support ahead from model launches like Maruti Suzuki, M&M & Eicher Motors.

At 09:35 hrs Eicher Motors was quoting at Rs 22,000, down Rs 1,184.05, or 5.11 percent on the BSE.

Source: https://www .moneycontrol.com/news/business/stocks/eicher-motors-falls-5-on-weak-december-motor-cycle-sales-motilal-oswal-maintains-buy-3344761.html 

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Bodal Chemicals benefits from favourable demand-supply dynamics

We remain positive on the traction towards vertical integration and capacity expansion.

Dyes and dyes intermediates major Bodal Chemicals posted a recovery in topline growth, in the quarter under review, aided by better realisations, volume and exports.

Bodal Chemicals: Q2 update – Margin expansion

Bodal Chemicals’ reported a 43 percent YoY sales growth in Q2FY19 driven by increase in volume, improved realizations, higher exports and better product mix. Dyestuff volume increased by 54 percent YoY on account of higher contribution from the new capacity commissioned last fiscal (12000 tonne in March’18). Blended capacity utilisation of dyestuff facility is now about 72 percent. Further, dyes intermediates volume increased as well by 12 percent (21 percent in Q1 FY19). Export sales (47 percent of sales), with 179 percent increase YoY, has been another strong lever for the company.

Raw material prices have remained elevated though management updates that most of the input prices have stabilized, particularly that of caustic soda and PNCB (Para-nitro chloro benzene).  Standalone operating profit, adjusting for forex, has improved by 250 bps YoY on account of both moderation in inputs and higher realizations.

Allied businesses on an improving track

The company expects improved performance for Trion Chemicals JV wherein operations started towards the end of Q1 FY19. Some of the raw material prices have softened and company expects business to break even by the end of fiscal year. In case of SPS Processors, subsidiary has witnessed considerable improvement in topline (2.3 times QoQ) and bottomline (1.8 times QoQ) on account of better realisations for dye intermediates.

However, thionyl chloride project completion has got delayed to Q4 FY19.

Acceleration in dyestuff share of sales

Product mix is improving. Dyestuff sales contribution has improved from 29 percent of sales to 35 percent of sales in Q2 FY19. Ramp up in utilization of new capacity is noteworthy, which is about ~60 percent in the second quarter after commissioning. Further dyestuff share is expected to improve, even more, as management has decided to increase dyestuff capacity by 6000 tonne by Q1 FY20 (estimated cost: Rs 26 crore). It is noteworthy that this expansion is ahead of the original schedule and would put the total dyestuff capacity to 35000 tonne after expansion.

In the near term, softening of product prices post quick surge in Q1FY19 can moderate revenue momentum. However, overall we remain positive on the traction towards vertical integration and capacity expansion. Also reiterate that ongoing environmental restrictions in both China and India is helpful is keeping a favourable supply-demand dynamics for the integrated players like Bodal Chemicals (7.9x FY20e).

Source: https://www .moneycontrol.com/news/business/moneycontrol-research/bodal-chemicals-benefits-from-favourable-demand-supply-dynamics-3097751.html

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Max India’s decision to check out of healthcare shines spotlight on regulatory risks

The owner’s decision to exit seems to be a mixture of personal and business reasons. But the regulatory risks in the business have played a bigger role in the decision, for certain.

Max India’s decision to exit the healthcare business flies in the face of conventional thinking that India’s private healthcare business is one with immense potential. The reality appears to be somewhat different.

A trend of consolidation has taken root in the sector, with institutional money funding entrepreneurial ambitions. While IHH Healthcare eventually got hold of Fortis Healthcare, let’s not forget that the TPG-Manipal Health combine was also interested.

They will continue to be on the lookout for targets. IHH Healthcare’s acquisition itself signals tougher competition, as the parent company has deep pockets and expertise in running hospitals.

Then there are the regulatory risks that Max faces. In its FY2018 annual report, it lists them out. It has cited mandatory cashless treatment of road accident cases that will be reimbursed at government-determined rates.

Then there’s the well-known issue of price capping of coronary stents and knee implants. Margins on syringes were capped after intervention by the National Pharmaceutical Pricing Authority. The guidelines for treating patients belonging to the economically weaker sections were also made more stringent. These affected its performance in FY18, and its revenue and Ebitda both declined.

The dust on many of these issues has settled down. But the fear that more regulatory risks may be waiting has not gone away. The industry feels threatened that the measures which were acceptable till some years ago are now being seen as extortionist. That may change the way the promoter, the majority shareholder in the business, perceives the business risk.

In fact, the September quarter results had shown Max Healthcare’s performance improve with its Ebitda margin recovering sequentially. In its conference call post-results, the company management had talked about a 5-7 year investment plan that would see its number of beds double to 5,000 in number. It said that the long-term trajectory was intact.

So, what changed their mind then? The group chairman Analjit Singh’s interviews to Mint and Business Standard have some answers. He talks about how the business has changed in two years (in September 2016 he had told Mint that this was a focus business for them with huge growth opportunities).

The concentration in the National Capital Region had become a risk for them. He talks about a 10-year timeframe in which to invest and scale up this business to make it viable. It appears that he did not have the appetite to invest that kind of capital and devote that kind of time to the business. And, he does not seem to have had anyone else he could depend on to do it too.

The owner’s decision to exit seems to be a mixture of personal and business reasons. But the regulatory risks in the business have played a bigger role in the decision, for certain. After acquiring Max Healthcare, Radiant Life Care and KKR will now attempt to prove that their business model can work despite the existing risks in the business and new ones that may be lying in wait.

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Oil plunges 6% as economic slowdown fears grip market

U.S. crude futures settled at $42.53 a barrel, down $3.06 or 6.7 percent in the session. Brent crude futures settled down $3.35, or 6.2 percent at $50.47 a barrel. The market settled early ahead of the Christmas holiday.

Oil prices plunged more than 6 percent to the lowest in more than a year on Monday, pulling back sharply late in the session as fears of an economic slowdown rattled the market.

U.S. crude futures and global benchmark Brent fell to the lowest since 2017 during the session, putting both benchmarks on track to lose about 40 percent in the quarter.

"What's happening in the stockmarket is raising fears that the economy is grinding to a halt and thereby will basically kill any future oil demand," said Phil Flynn, an analyst at Price Futures Group in Chicago. "They're pricing in a slowdown in the economy if not a recession, with this drop."

The price decline during the quarter is likely to cause producers to throttle back on their output, he said.

U.S. crude futures have hit the lowest since June 22, 2017, as jitters have grown about the impact of an escalating U.S.-China trade dispute on global growth and crude demand. Brent crude is at its lowest since Aug. 17, 2017.

Markets across asset classes have come under pressure as a U.S. government shutdown intensified growth concerns. Investors have flocked to safe-haven assets such as gold and government debt at the expense of crude oil and stocks.

A gauge of stocks worldwide hurtled towards an eighth straight decline on Monday as investors ignored the U.S. Treasury secretary's actions to reinforce confidence in the economy and U.S. President Donald Trump criticized the Federal Reserve as "the only problem our economy has."

The U.S. Senate has been unable to break an impasse over Trump's demand for more funds for a wall on the border with Mexico, and a senior official said the shutdown could continue until Jan. 3.

U.S. crude futures settled at $42.53 a barrel, down $3.06 or 6.7 percent in the session. Brent crude futures settled down $3.35, or 6.2 percent at $50.47 a barrel. The market settled early ahead of the Christmas holiday.

Brent fell 11 percent last week and hit its lowest since September 2017, while U.S. futures slid to their lowest since July 2017, bringing the decline in the two contracts to 35 percent for the quarter.

The macroeconomic picture and its impact on oil demand continue to pressure prices. Global equities have fallen nearly 9.5 percent so far in December, their biggest one-month slide since September 2011, when the euro zone debt crisis was unfolding.

The U.S.-China trade dispute and the prospect of a rapid rise in U.S. interest rates have brought global stocks down from this year's record highs and ignited concern that oil demand will be insufficient to soak up any excess supply.

The Organization of the Petroleum Exporting Countries and allies led by Russia agreed this month to cut oil production by 1.2 million barrels per day from January.

Should that fail to balance the market, OPEC and its allies will hold an extraordinary meeting, United Arab Emirates Energy Minister Suhail al-Mazrouei said on Sunday.

"Oil ministers are already taking to the airwaves with a 'price stability at all cost' mantra," said Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore.

Source: https://www .moneycontrol.com/news/business/markets/oil-plunges-6-as-economic-slowdown-fears-grip-market-332339If you want more information regarding the Market News & many other tips like Intraday Tips, MCX Normal Calls, Bullion Market Tips, Share Market Services, NSE & BSE Market Tips, Free MCX Market Tips , MCX Premium Tips, Bullion Energy Tips, commodity market tips.

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GST rate cuts try to be pragmatic, populist and helpful to some industries

The rate cuts are likely to fall short of the Street’s expectations, as rates on goods such as cement and some auto parts that were in the highest 28 percent slab were not reduced.

The GST Council has decided to cut tax rates on a number of goods and a few services. While the notional revenue loss has been pegged at Rs 5500 crore, the government will hope that better compliance and consumption growth can compensate for lower rates.

The rate cuts are likely to fall short of the Street’s expectations, as rates on goods such as cement and some auto parts that were in the highest 28 percent slab were not reduced.

There was political messaging that was visible in the rate cuts. Taxes on walking sticks were cut from 12 percent to 5 percent, a nod to senior citizens who form an important vote bank. Similarly, the rate differential in movie tickets above Rs 100 and below that was maintained. Also, taxes for televisions were lowered but only for screens up to 32inches. With elections around the corner, the government will be keen to reiterate that it’s on the side of the common man.

Let’s look at some of the main rate cuts

The multiplex industry will be happy with the reduction in GST rates, from 28 percent to 18 percent on tickets above Rs 100 and from 18 percent to 12 percent on tickets below Rs 100. Since most tickets in metro locations are above Rs 100, the reduction will benefit them. The rate reduction from 28 percent has been a long-standing demand of multiplex operators. They will eventually benefit from lower taxes, although initially they may have to lower ticket prices to pass on benefits to consumers. Listed companies such as PVRand Inox Leisure should benefit.

In auto components, those falling in one category HS Code 8483, comprising transmission shafts, gears and gearboxes have also seen rates decline from 28 percent to 18 percent. This will benefit companies although the net benefit depends on how much input tax credit is being availed.

The government has also clarified on the taxation on supply of renewable energy plants, including solar power plants. While the devices and parts used to make these plants were taxed at 5 percent GST, since these plants may be set up as part of a comprehensive contract, disputes arise on the levy of tax. Thus, the tax could be 5 percent or 18 percent leading to confusion. Now, where there is an engineering services contract to set up a renewable energy plant, 70 percent of the gross value will be treated as goods with a 5 percent tax and the rest will be treated as services. This will lead to a more certain tax regime for such projects.

Although the breadth of cuts may have disappointed some, the government could introduce one more round of tax cuts when the interim budget is presented.

Among the decisions of the GST Council, the rate cuts may have got all the attention, but the setting up of a 7-member group of ministers merits equal attention. GST revenues have been falling short of original estimates, especially in some states, and this GoM has been tasked with finding out why. While the process may take time, it could set the stage for some structural changes to the GST superstructure.

It is this shortfall in revenue that is staying the government’s hand from taking up a bolder rationalisation of tax rates.

Source: https://www .moneycontrol.com/news/business/economy/quick-take-gst-rate-cuts-try-to-be-pragmatic-populist-and-helpful-to-some-industries-3319991.html 

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