Category: Business

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Asian shares advance on Wall St jobs rally, OPEC plus deal

Shares advanced Monday in Asia, buoyed by surprisingly strong U.S. jobs figures that helped power a surge on Wall Street on Friday. Crude oil prices rose after major oil producing nations agreed to extend a production cut of nearly 10 million barrels of oil a day through the end of July to counter the blow to demand from the coronavirus pandemic.
U.S. crude for July delivery added 27 cents to $39.82 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, gained 54 cents to $42.84 per barrel.

Japan’s Nikkei 225 index rose 0.9% to 23,075.73 as the government reported the economy contracted at a 2.2% annual rate in the January-March quarter, better than the initially estimated minus 3.4%. Private sector spending was better than earlier reported, the Cabinet Office said. However, the first quarter came before Japan felt the full impact of partial shutdowns at home due to a nationwide state of emergency that has since been lifted.

Elsewhere in Asia, Hong Kong’s Hang Seng climbed 0.4% to 24,871.34 and the Shanghai Composite index also gained 0.4%, to 2,941.92. In South Korea, the Kospi edged 0.2% higher to 2,186.11. Australia’s markets were closed for a holiday. Shares rallied on Wall Street on Friday, with the S&P 500 gaining another 2.6% to 3,193.93, its eighth gain in 10 trading sessions, after a report said more American jobs were added than expected in May.

That raised hopes that the worst of the recession may have already passed. But economists cautioned that many risks still loom on the long road to a full recovery. Amid the recent wave of May data releases, however, one should nevertheless be cautioned against reading too much into any single month-on-month change, particularly during such times of uncertainty,” Jingyi Pan of IG said in a commentary.

Employers added 2.5 million workers to their payrolls, when economists were expecting them instead to slash another 8 million jobs. That news gave investors some welcome validation for the S&P 500’s rally of more than 40% since late March.

The U.S. benchmark is now down just 5.7% from its record set in February after plunging nearly 34% earlier this year when recession worries were peaking. The Dow Jones Industrial Average gained 3.2% to 27,110.98, and the Nasdaq composite rose 2.1%, to 9,814.08. The Russell 2000 of small-cap stocks jumped 3.8%.

The yield on the 10-year Treasury rose to 0.90% on Monday from 0.88% late Friday. Moving largely in tandem with expectations for economic growth and inflation, it is seen as a harbinger of risk and has shown much more caution than stocks recently.

Promises of immense aid from Congress and the Federal Reserve have helped convince investors that the worst-case scenario of a major financial crisis is unlikely, touching off the rally that began in late March. More recently, buying has been driven by hopes that economies will swiftly recover from the worst downturn in decades as governments relax lockdowns.

Analysts and economists warn a full recovery for the U.S. economy is still far ahead, with the unemployment rate above 13%, nearly quadruple where it was at the start of the year, and on par with its level during the the Great Depression.

The biggest uncertainty is whether major virus outbreaks will return, leading to further shutdowns. And after an initial burst of hiring as businesses reopen, the recovery could slow in the fall or early next year unless most Americans grow confident they can safely shop, travel, eat out and fully return to their other spending habits, economists say.

Tensions between the United States and China are also raising worries the world’s two largest economies might resume their trade war. Some investors are also worried about volatility that could be created by this fall’s U.S. elections. Ahead of the weekend video conferencing meeting of OPEC and other major oil producers, benchmark U.S. crude oil for July delivery rose $2.14 to settle at $39.55 a barrel Friday. Brent crude oil rose $2.31 to $42.30 a barrel. In April, it plunged to near $20 a barrel as the pandemic clobbered demand.

OPEC and its allies chose to extend their production cut of about 10% of global output through the end of July to curb excess production that has been depressing prices as global aviation remains largely grounded due to the pandemic. OPEC has 13 member states and is largely dominated by oil-rich Saudi Arabia.

The additional countries involved part in the so-called OPEC Plus accord have been led by Russia, with Mexico under President Andrés Manuel López Obrador playing a considerable role at the last minute in the initial agreement.
In currency dealings, the dollar fetched 109.48 Japanese yen, down from 109.59 yen on Friday. The euro rose to $1.1294 from $1.1288.

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Aurobindo Pharma share price surges 159% since March; does it have more upside left? Check target price

Pharmaceutical giant Aurobindo Pharma might have posted a strong January-March quarter with profits after tax surging 29.7% on-year basis and gross margins going up 2.9% from a year-ago period, but the stock has little steam left now after jumping over 159% since its March lows. Trading at Rs 761 per share on Friday morning, the stock has helped investors pocket mammoth gains even during a time when the overall equity market sentiment was weak globally. However, now the rally has almost reached its peak. While some brokerage firms are revising their calls, some retail their previous analysis but the target price set by all is almost close to where the stock price is now.

Aurobindo Pharma has been gradually treading up the complexity curve for sterile products, with a range of approvals, including colored products, PFS products, large volume lyophilized products, and complex API products. For sterile sales in the USA to reach US$400-500 million, analysts say the firm will need progress in other complex filings such as triamcinolone injectable, iron products, peptides, and depot injections. “ However, progress in these areas has been understandably slow, while its inhalation (pMDI’s as well as Advair, though none in clinics) and biosimilars (Avastin filing for the EU in 1QFY22) products are yet to be filed, with meaningful profit contribution unlikely before FY2024,” said analysts at Kotak Securities. The brokerage has downgraded the stock from ADD to REDUCE with a fair value of Rs 730.

Shares of Aurobindo Pharma after seeing a strong rally in the previous months are now among some of the stocks on the bourses that are positive year-to-date. The stock price is up 67% since the beginning of the year. Aurobindo Pharma also maintains a strong cash balance on account of anticipation of the Sandoz deal, which will be deployed back in business, according to the company. With strong focus on the future, management expects the firm to file 50-60 products over the coming few years. With this increase in R&D cost is also expected to shoot up.

“Over FY20–22E, Aurobindo Pharma’s R&D is likely to increase, EBITDA margin would remain flat, and earnings would rise at a 6% CAGR. With the OAI status at four facilities and a warning letter at a fifth one, execution risks persist.,” said Edelweiss Securities. The brokerage said the stock is trading at 15x FY22E earnings as it maintains the HOLD call with a target price of Rs 825 per share. Interestingly when foreign investors were leaving the Indian markets, FII investment in Aurobindo Pharma went from 21.4% at the end of December 2019 to 22.3% at the end of the March quarter. Although the stock has a BUY rating from Motilal Oswal the target price is at Rs 880 per share. The brokerage firm said it remains positive on Aurobindo Pharma on account of a robust ANDA pipeline, pending approval, as well as a niche product pipeline build-up for the developed markets.

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Saregama India share price more than doubles since March, stock rallies 20% on Facebook deal

Saregama India share price was locked in a 20 per cent upper circuit at Rs 400.70 apiece on Thursday after the music and entertainment company announced a global deal with social media giant Facebook. Saregama will license its music for video and other social experiences across Facebook and Instagram. Saregama India shares have surged over 45 per cent since Monday’s close of Rs 275.25 per share. However, the stock has rallied over 116 per cent from its March low of Rs 185. The stock opened at Rs 368 and quoted day’s high of 400.70 and low of Rs 355 in the session so far. With this partnership, “millions of Facebook users will be able to add music from our vast catalogue to stories and videos they create and share,” said Vikram Mehra, Managing Director of Saregama India.

Despite this 45 per cent rally in just four days in the stock, Saregama India is still sitting nearly 45 per cent below its 52-week high. Under this new partnership, users will be able to add music to videos, stories via music stickers and other creative content. The company said that people will also be able to add songs to their Facebook Profile. “At Facebook, we believe music is an integral part of self-expression and bringing people closer together and creating memories that last,” Manish Chopra, Director and Head of Partnerships, Facebook India, said.

Formerly known as The Gramophone Company of India Ltd, Saregama owns the largest music archives in India. “We are very proud to partner with Saregama that will allow people on our platforms, globally, to use their favourite retro Indian music to further enrich their content on our platforms,” Manish Chopra added. With today’s rally in the stock, the market capitalisation of Saregama India stands at Rs 698.26 crore.

In a separate statement to BSE, Saregama India informed that the board of directors of movies and entertainment company is scheduled to meet on Friday, June 5, 2020, to consider and approve audited financial results of the company for the quarter and financial year ended March 31, 2020. It will also consider the recommendation of dividend for the financial year 2019-20, if any.

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Britannia share price hits 52-week high for second straight day; surges over 7% on surprise Q4 profit

Britannia Industries share price rallied over 7 per cent to hit a fresh 52-week high of Rs 3,704.55 in Wednesday’s trade as the bread and biscuit maker reported 26 per cent rise in consolidated net profit for the March quarter at Rs 375 crores. The company had clocked a profit at Rs 297.23 crore in the corresponding period of the previous fiscal year. Britannia Industries has hit a 52-week high for the second consecutive session today, surpassing the previous high of Rs 3,479.55. Britannia Industries stock price has surged 76 per cent from its March low of Rs 2,100.55 per share.

At 10.20 AM, Britannia Industries was trading 5.66 per cent higher at Rs 3,645.65 apiece on the BSE as compared to a 1.15 per cent rise in the S&P BSE Sensex.”There was an impact on sales during late-March, growth for Apr-May just about exploded at 20% and 28% respectively. This is difficult to explain, though there are many theories one can think of: pantry up-stocking (then how did May continue to grow at such a high rate?), increased consumption since most people are at home (what about the shortfall in out-of-home / on-the-go consumption?), feeding migrant workers, etc.,” JM Financial said in its latest research report.

Revenue of Britannia Industries increased by 2.9 per cent to Rs 2,946 crore as compared to Rs 2,861 crore last year. However, it declined by 3.3 per cent sequentially. The company said that lockdown has impacted its growth revival. “After 9 months of moderate growth, we started to see growths coming back in the first 2 months of this quarter which was then hit by COVID-19 and lockdown in March impacting the revenue & net profit growths by an estimated 7-10%,” said Varun Berry, Managing Director, Britannia Industries. In April this year, the company had announced an interim dividend of Rs 35 per share for the previous financial year.

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