Daily Market Update – Aug 14th

unnamed Daily Market Update   Aug 14th


Hero Moto reported 95% fall in net profit profits to Rs.61 crore for the Jun-20 quarter. Total revenues for the quarter were also down by 63% at Rs.2972 crore. However despite the sharp fall in revenues, the net profits remained in the black due to 57% cut in total expenses. The EBITDA margin also fell to 3.6% for the quarter but the company has pointed out that if it had not been for the fixed costs during the lockdown period then the EBITDA margins would have been closer to 12%. For Hero Moto, the sales for the month of July were already at 95% of pre-COVID sales and hence Sep-20 quarter could be better.

Tata Steel reported a net loss of Rs.4648 crore for the Jun-20 quarter as against a net profit of Rs.714 crore in the Jun-19 quarter. Total revenues fell by almost one-third to Rs.24,481 crore as the pandemic related fall in sales resulted in a big dent on total revenues for the quarter. The company also managed to reduce its expenses by about 20% during the quarter in tune with lower revenues. Tata Steel had already been under pressure due to weak domestic demand on account of a nationwide shutdown. However, exports to China have been extremely buoyant in the last 2 months on higher order flows.

Cholamandalam Finance surprised on the positive side with net profits of Rs.589 crore for the Jun-20 quarter as against a net profit of Rs.350 crore in the Jun-19 quarter despite operating in extremely trying business conditions. Total income of the company was marginally up at Rs.3231 crore during the quarter. Chola Investment saw a 60% fall in loan disbursals but the assets under management expanded by 13% to Rs.70,286 crore. The insurance franchise of Chola is currently too small to make a significant impact on the overall group but it was the surge in investment AUM that clicked in the quarter.

Grasim, the holding company of the Aditya Birla group, reported 67% fall in net profits to Rs.621 crore for the Jun-20 quarter. Total revenues from operations also fell by 32% to Rs.13,621 crore. This was clearly an outcome of the unprecedented lockdown across large swathes of India leading to compression in demand and a major supply chain disruption. Only the VSF or the viscose staple fibre business comes directly under Grasim. The rest of the Grasim business comes as a holding company to businesses ranging from metals, cement and financial services.

The CPI inflation for the month of July 2020 came in at 6.93% just 7 bps shy of the 7% mark. Even the June inflation was revised upwards from 6.09% to 6.23%. This was driven higher by a surge in food inflation to 9.62%. The food inflation surge was caused by specific items of the food basket like vegetables, oils, fats, meat and pulses among others. This should get some respite once the actual Kharif numbers come in for the year, although the supply chain will still be a major issue. Core inflation was above the 5% mark, which is not too encouraging as it is the stickier aspect of inflation. This means the RBI may not be too keen to cut repo rates in October as CPI inflation has been above 6% tolerance levels for seven out of the last eight months. The action may actually shift to the December monetary policy.

Biological E of Hyderabad has inked pacts with Janssen Pharma as well as Baylor College for the COVID-19 vaccine. Janssen is a unit of J&J of the US and the agreement is for enhancement of manufacturing capacity for J&J’s vaccine candidate AD.26COV2.S, which is currently in Phase 2 clinical trials. In addition, Biological E has also licensed the recombinant protein COVID-19 vaccine candidate developed by Baylor College which is based on proven yeast-based express technology. Baylor will transfer the technology to Biological E for mass manufacture and commercialization of the formula for general use.

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