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14 Oct 2020 by Pradeep U
Newsletter  - September 2020 - Research & Ranking

Even as we give finishing touches to this newsletter on a Saturday evening while relishing a cappuccino at Starbucks, it is the feeling of life going back to normal post-Unlock 5.0, which excites us the most. Hoping this improvement continues and very soon all of us can go back into watching movies, visit a religious place, work out in gym or take a dip in the pool.  Just as we pay our bill, we get the news that Maharashtra government is planning to lift entire lockdown by end November.

India finally sees some good news, 7 months into the pandemic and over 70 lakh Covid cases. The reproduction rate or the R value of Covid looks to be under control. For the last two weeks, R value has stayed below 1, which means that a single virus carrier is infecting less than one person on an average. This simply means that 100 infected people further infected 90-95 people, thus putting a speed breaker to the virus' exponential growth.

While most states have situation in control now, it’s the southern states which seem to not show material deceleration and Kerala latest resurgence has taken away some sheen off the good work it did in controlling the spread in April & May.

With most parts of Europe including UK discussing putting vertical lockdown selectively given the incidence of second wave, what is also clear is that people globally have come to terms with the fact that economy cannot come to a standstill and we need to continue living our daily lives with utmost precaution till the end of 2020 at least.

SEPTEMBER: MORE POSITIVES THAN NEGATIVES

INDUSTRY SPECIFIC EXAMPLES

LIFE INSURANCE- POSITIVE

Industry premium for the current month grew by 26% YoY led by both individual (30% YoY) and group (24% YoY) segments.

PHARMA: IPM REPORTS 4.5% GROWTH IN SEP-20- NEUTRAL

Sep-20: Growth returned to positive territory and volume decline slowed down. While volume still showed a negative 4%, price remained steady showing 4.6% YoY growth and new product launches rebounded showing 3.8% YoY growth. We also note that the growth is from a 'high base' as Sept'19 had reported 11.9% YoY growth. Sep qtr: IPM growth of 1% YoY with volumes -6.5%, price +4.6% and NI: +2.9%

MULTIPLEXES

Government in end September permitted theatres/multiplexes to open with 50% of capacity, along with SOP from Ministry of Information & Broadcasting. This is the final piece of retail to open. This is positive for other retailers also as Box Office is a key driver for footfalls in malls. Key Hindi movies in November, December to watch out will be Sooryavanshi and 83. The state of Maharashtra (+20% of box office collections) which is very important for Box Office collection, will most likely open in November.

Currently malls are seeing footfalls between 30 to 60 percent of Pre Covid, lower in big cities and higher in smaller cities. Box office performance in  Country like USA has been weak (US has very high daily Covid cases) , while Box Office has seen better performance on relative basis in South Korea and Sri Lanka where Covid cases are very limited.

RETAIL SPEND SUP 12% IN SEPT MOM

India's September retail spending rose 12% vs August levels with revival strongest in rural areas, as per data collated by CMS Info Systems, which handles cash movement and ATMs across the country. India's September retail spending rose 12% vs August levels with revival strongest in rural areas, as per data collated by CMS Info Systems, which handles cash movement and ATMs across the country. The biggest increase was seen in spending related to ecommerce, fast-moving consumer goods (FMCG), consumer durables, insurance, utility payments, healthcare, logistics and transportation, which surpassed January levels.

COMPANY SPECIFIC EXAMPLES - INDICATOR OF INDUSTRY TRENDS

REAL ESTATE - SOBHA (STRONG)

Sales of 0.89 msf in Q2FY21 valued at Rs. 6.9 bn, its share of sales stood at Rs. 5.3 bn, down ~5% YoY but up 35% QoQ. Volume was down 14% YoY but was up 37% QoQ. Considering the lockdown in Bengaluru during July and no new launches during the quarter, this is a reasonable performance.

PRIVATE BANKS: HDFC BANK (STRONG)

Deposit growth of 20% yoy in 2QFY21 and 24% in 1QFY21, and advances growth of 16% in 2QFY21 and 21% in 1QFY21

NBFC- HOUSING FINANCE: HDFC LTD (STRONG)

Individual loan disbursements in 2QFY21 were at 95% of the 2QFY20 levels – indicating that company have been able to reach near pre COVID levels in disbursements; Sept 2020 vs Sept 2019 have seen one of the strongest recovery in value in terms of Receipts / Approvals / disbursements up by 21% / 31%/ 11% YoY

2QFY21- Recovery rate of ~98% (excluding sale of raw gold), compared to the revenue of the corresponding quarter in the last year; Jewelry sales in September month have been decent, despite the inauspicious period of 'Shradh'; Even their watch and wearables were back at 55-57%. The walk-ins have picked up.

The pandemic has triggered a faster-than-expected adoption of digital and cloud.

Higher growth is not from one-off deals, but structural ones. The start of the first phase of a multi-year technology transformation cycle is underway.

Enterprises are building a cloud-based foundation, which would serve as a resilient, secure and a scalable digital core.

RETAIL: TITAN (STRONG)

2QFY21- Recovery rate of ~98% (excluding sale of raw gold), compared to the revenue of the corresponding quarter in the last year; Jewelry sales in September month have been decent,
despite the inauspicious period of 'Shradh'; Even their watch and wearables were back at 55-57%. The walk-ins have picked up.

IT: TCS (STRONG)

The pandemic has triggered a faster-than-expected adoption of digital and cloud. Higher growth is not from one-off deals, but structural ones. The start of the first phase of a multi-year technology transformation cycle is underway. Enterprises are building a cloud-based foundation, which would serve as a resilient, secure and a scalable digital core.

M A C R O E C O N O M I C V A R I A B L E S - S E P T E M B E R

  • Eway bills rose 10% to 57.4mn, highest monthly in last 2 years.
  • 1941 cr national e-toll collection, up 5% vs Feb 2020 levels.
  • Railway freight volumes up 15% yoy.
  • Manufacturing PMI at 56.8, 8-year high & up 11% yoy; Services PMI at 49.8 vs 41.8 in Aug; Reading above 50 indicates expansion, while sub-50 print signals contraction.
  • Exports up 5% yoy to $27.4 bn.
  • GST collections up 4% yoy and 10% mom to Rs.95480 cr.
  • Core data degrowth continues in Augustat 8.5% mainly on account of a decline in production of steel, refinery products and cement and IIP degrowth at 8%.
  • Passenger cars volume up 31%, highest in 26 months.