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Shares of Trent hit a new high of Rs 3,849.75, surging 7 percent on the BSE in Thursday’s intra-day trade amid heavy volumes. In the past two trading days, Tata Group company has zoomed 27 percent after reporting a more-than-doubled net profit of Rs 343.60 crore in the December quarter (Q3FY24), on healthy operational performance. The company operates a portfolio of retail concepts, and posted a net profit of Rs 160.92 crore in the same quarter last year (Q3FY23).

Trent’s standalone revenue grew 52 percent year-on-year (YoY) at Rs 3,521 crore as against Rs 2,319 crore in the previous year’s quarter. Overall, operating earnings before interest and tax (EBIT) margin improved to 13 percent for Q3FY24 from 8.5 percent in Q3FY23.

Trent’s industry-leading revenue growth, driven by healthy SSSG and productivity, robust footprint additions, and healthy scale-up within the Zudio, offers a huge growth runway over the next three to five years. In Q3FY24, the company’s fashion concepts registered encouraging LFL growth of over 10 percent vis à-vis Q3FY23. During the quarter, Trent added 5 Westside and 50 Zudio stores across 36 cities including 13 new cities. This, along with raw materials (RM) cost tailwinds, led to a gross margin improvement. At 10:06 am; Trent stock was trading 6 percent higher at Rs 3,811.30, compared to a 0.18 percent rise in the S&P BSE Sensex. The average trading volumes on the counter jumped over fivefold. A combined 3.56 million equity shares representing 1 percent of the total equity of Trent have changed hands on the NSE and BSE.

According to Motilal Oswal Financial Services (MOFSL), Trent’s strong performance with 10 percent LFL growth and robust footprint additions remains an outlier within its retail coverage universe that is witnessing a challenging demand environment. Unlike peers that passed on the sharp RM price increases last fiscal, Trent absorbed the impact, seeing strong customer reception, and is now reaping the benefits as RM prices turn benign, the brokerage firm said in the result update. The company’s grocery segment, Star, with merely 67 stores and an annualized revenue of Rs 2,690 crore (FY24E) is seeing strong LFL growth. This presents a huge opportunity for growth. Its own brand strategy and curated range are witnessing strong customer reception, MOFSL said.

The brokerage firm in the result update said it assigned 45x EV/EBITDA to the standalone business (Westside and Zudio; premium over our Retail Universe, given its excellent growth), 2x EV/sales to Star Bazaar, and 15x EV/EBITDA to Zara on FY26E, and arrive at their target price of Rs 4,200.

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Shares of State Bank of India (SBI) hit a record high of Rs 670, gaining 3 percent on the BSE in Wednesday’s intraday trade, amid heavy volumes. In the past two trading days, the stock of the largest state-owned lender has rallied 4 percent on the back of a strong growth outlook over the medium term. The stock price of SBI surpassed its previous high of Rs 660.40 on December 20, 2023.

As many as 10.26 million equity shares of SBI changed hands cumulatively on the NSE and BSE in the first 32 minutes of trade.

Among PSU banks, SBI has a healthy provision coverage ratio (PCR), adequate capitalization, a strong liability franchise, and an improving asset quality outlook, making it the best play of the resilient Indian economy, according to analysts. They said that healthy business growth, along with stable margins and asset quality, is likely to boost profitability.

In the October-December quarter (Q3FY24), SBI reported a 35.5 percent year-on-year (Y-o-Y) decline in net profit at Rs 9,164 crore, due to Rs 7,100 crore provisions for pension liabilities. The bank had posted a net profit of Rs 14,205 crore in the same period of the previous year (Q3FY23).

Dinesh Khara, chairman, SBI said the one-time provisions (pension of Rs 5,400 crore, dearness allowance of Rs 1,700 crore) impacted the profitability in the third quarter. The bank expects to plow back Rs 40,000 crore in profits in FY24.

SBI’s Net Interest Income (NII) expanded by 4.59 percent to Rs 39,816 crore in Q3FY24, compared to Rs 38,069 crore in the same quarter a year ago.

Net interest margin (NIM) declined to 3.34 percent in Q3FY24, compared to 3.69 percent in Q3FY23. The management said SBI is guiding NIM to be around three basis points plus\minus around the current NIM (3.34 percent).

Asset quality continued to improve in Q3FY24.  The bank’s Gross Non-Performing Asset (GNPA) ratio was 2.42 percent at the end of December, improved by 72 basis points Y-o-Y. The net NPA ratio was at 0.64 percent, improved by 13 basis points Y-o-Y.

With stable asset quality, analysts at Axis Securities believe, credit costs would remain under control, thereby aiding the bank to deliver a sustainable return on asset (ROA). Thus, despite elevated opex and provision on wage revision, the brokerage firm believes, that improvement in asset quality would support the bank’s profitability in FY24.

The management anticipates lower wage provisions at Rs 5,400 crore in Q4. Consequently, we expect improved operating profitability in FY25, Motilal Oswal Financial Services (MOFSL) said.

The brokerage firm has maintained a ‘buy’ rating on SBI with a target price of Rs 800 per share. The bank has various levers such as the credito-to-deposit (CD) ratio and MCLR repricing to keep margins stable. Business growth remains robust, with signs of a recovery in the corporate segment, MOFSL said in the result update.

Asset quality remains healthy as the GNPA ratio improves further and the restructured book is well-managed at 0.5 percent of advances, while the SMA pool stands at 12bp of loans. The brokerage firm estimates SBI to deliver RoA/RoE of 1.1 percent/19.6 percent in FY25. 

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It is likely that Jio Cinema and Disney+ Hotstar may merge as a single entity, leading to a new and improved OTT experience unlike any other in India.

In a major move that can change entertainment and OTT viewing in India, Mukesh Ambani’s Reliance has signed a non-binding agreement with Walt Disney Co, taking the companies one step closer to the mega-merger between RIL and Disney Star.

Jio Cinema and Disney+ Hotstar are also included in the deal, likely to be merged together into one entity. Jio Cinema and Hotstar are direct rivals, but their potential merger could be a game-changer in India’s OTT industry.

The Reliance-Disney merger is expected to be finalized in February 2024, with Ambani’s firm set to have more control over the merged entity. The division of stake between Reliance and Disney will be 51-49, as per early details of the deal.

When the deal goes through, it will become the biggest entertainment merger of India. Under the agreement, the two companies will raise $1.5 dollars towards the merger, while Reliance will have more stake in the firm.

What can the Jio Cinema-Disney+ Hotstar OTT offer?

Jio Cinema and Disney+ Hotstar have been the two major players when it comes to bidding for IPL and international cricket tournament rights. With the potential merger on the cards, this bidding war could end forever.

After Reliance gains control over the Star India channels, cricket rights may be retained by Star for television while the OTT rights may be given to the merged Jio-Disney platform.

The merger between Jio Cinema and Disney+ Hotstar will create the biggest OTT platform in India, with the rights to cricket and football streaming, as well as HBO and WB content. It will also pull Hotstar out of the losses it has been incurring over the last year.

Meanwhile, the news about the merger between Reliance and Disney has sparked a mass exodus of users from Hotstar, which has been struggling for the past few years after losing the IPL rights and HBO deal.

The Reliance-Disney deal will not just bring a change to the OTT business, but also television viewing. The companies are currently ironing out the final details of the merger.

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The stock price of fintech giant Paytm has tumbled 42 percent in the last three days as it remained locked at the lower circuit throughout this period following RBI’s diktat mandating Paytm Payments Bank to halt nearly all banking services from March 1, citing supervisory and non-compliance issues. 

The stock is now back at its record low level of Rs 438.35 on BSE, which it last touched on Nov 23, 2022. The three-day selloff has eroded its market value by nearly Rs 20,500 crore.

Overall, a total of 68 equity mutual fund schemes across active and passive categories had exposure to Paytm till December 2023-end worth Rs 1,994 crore. 

Among these, the UTI Innovation Fund from the thematic fund category had the highest allocation to Paytm at 4.8 percent of its total AUM. This amounted to Rs 26.4 crore, as per data from Rupeevest and Value Research. 

It was followed by Quant Teck Fund, also a sectoral fund, with a 3.3 percent holding in Paytm worth Rs 7.6 crore. 

Another scheme from the fund house–Quant Mid Cap Fund–held 3.2 percent in the stock worth Rs 134 crore.

Nippon India Innovation Fund (thematic) was next in line with 3 percent of its AUM in Paytm valued at Rs 35 crore.

Mirae Asset-Focused Fund had the fifth highest holding at 2.9 percent worth Rs 269 crore. This was the second-highest exposure to Paytm in terms of total invested amount. 

Mirae Asset Large Cap Fund led the highest investment in the stock at Rs 430.4 crore, which was 1.13 percent of its total AUM.  

As per BSE data, the total stake held by DIIs in Paytm was 6.06 percent as of December quarter-end. Of this, mutual funds together held 4.99 percent and the rest was held by AIFs, insurance companies, and provident/pension funds. 

Foreign Institutional Investors (FIIs) had a 63.72 percent stake in the company as of December quarter-end. Of this, 45 percent was FDI ownership.

The remaining 18.64 percent was held by FPIs including BNP Paribas Arbitrage and Canada Pension Plan Investment Board, which together held a 3.1 percent stake in the company. 

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Shares of Larsen & Toubro (L&T) plunged 7 percent in Wednesday’s intra-day trade to Rs 3,387.40 on the BSE after the company reported lower-than-expected margins for the December quarter (Q3FY24) despite beating revenue estimates.

The company’s management also indicated the pace of new orders in the domestic market had slowed and there would be weakness for the two quarters between now and June 2024 owing to the Lok Sabha elections.

At 09:52 am, L&T was the top loser among the BSE Sensex and Nifty 50 stocks, down 6.5 percent. In comparison, the benchmark indices were up nearly 0.1 percent.

The stock had hit a record high of Rs 3,738.90 in Tuesday’s intra-day trade. In the past 10 months, it has zoomed 64 percent.

For the reporting quarter (Q3FY24), L&T’s earnings before interest, taxes, depreciation, and amortization (EBITDA) margin declined to 10.4 percent from 10.9 percent a year ago. 

The company posted a 15 percent year-on-year (YoY) rise in net profit at Rs 2,947 crore on the back of better operational performance and more orders.

Revenue was up 18.84 percent YoY to Rs 55,128 crore. Despite the slowdown, L&T expects to end FY24 with an order book of Rs 5 trillion and more than 20 percent growth in its full-year order inflow.

L&T reported a 5 percent/10 percent miss at PBT on our/consensus estimates, despite a beat on revenues. While the margin was sub-par, orders were boosted by recent wins in the Middle East, analysts at Kotak Securities said.

The brokerage has downgraded L&T to Sell (from Reduce) on an expensive 33X one-year forward core EPS multiple.

It finds it difficult to be liberal on multiples, given the growing share of fixed price contracts (42 percent versus 33 percent earlier) and related increase in margin volatility.

It flagged the high 30 percent share of Saudi Aramco in backlog and its reassessment of growth plans, weakening domestic orders before the start of the proposed path of fiscal consolidation and margin bottoming out at much lower levels than expected as other concerns. 

L&T reported a 5 percent/10 percent miss at PBT on our/consensus estimates, despite a beat on revenues. While the margin was sub-par, orders were boosted by recent wins in the Middle East, analysts at Kotak Securities said.

The brokerage has downgraded L&T to Sell (from Reduce) on an expensive 33X one-year forward core EPS multiple.

It finds it difficult to be liberal on multiples, given the growing share of fixed price contracts (42 percent versus 33 percent earlier) and related increase in margin volatility.

It flagged the high 30 percent share of Saudi Aramco in backlog and its reassessment of growth plans, weakening domestic orders before the start of the proposed path of fiscal consolidation and margin bottoming out at much lower levels than expected as other concerns. 

It thus expects margins to recover in coming quarters on executing legacy projects from the execution backlog.

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