In the week gone by, global market looked settled after comments from the US expert, Dr. Anthony Fauci stating that the new virus might be less effective than earlier feared. Scientists' discovery of the Omicron coronavirus variant at the end of November has rocked stock markets across the globe over the last two weeks. Market also got confidence after Pfizer said its third dose of vaccine can neutralize the Omicron variant. Investors are keenly awaiting the US inflation data in order to gauge the Fed’s decision on rolling back economic stimulus. There is an expectation that the Fed would decide its timing to increase the pace of tapering its asset purchase program in its upcoming meeting. Moreover it is also expected that Fed may announce preponing of the interest rate cut timing, which it had earlier announced that would take up from the month of September 2022. In economic news, the Labor Department said first-time jobless claims pulled back by much more than expected last week. Japan's wholesale inflation hit a record 9.0% in November, pushing gains for a ninth straight month, a sign upward pressure on prices from supply bottlenecks and rising raw material costs were broadening. Now Chinese markets are in focus after China Evergrande Group and Kaisa Group Holdings Ltd. officially defaulted on their dollar debt. The Omicron variant has also whipsawed oil prices, which are highly sensitive to changes in expectations of demand.
Indian equity market continued its volatile trade tracking global cues and persistent selling by the foreign players. As expected, RBI retained the key lending rate, repo, at 4 percent, and maintained its stance as "accommodative". While India has emerged as the fastest-growing major economy the RBI’s decision will further support growth and hasten the economy’s return to normalcy. Meanwhile, Credit Suisse expects the economy to continue to show positive surprises and record up to 9 percent growth in the next fiscal. Net flows into equity mutual funds rose to a four-month high of Rs 11,615 crore in November on a strong SIP book despite extreme volatility in markets. Meanwhile, the focus will remain on the global cues and updates regarding the new variant. It is expected that easing fears over the Omicron variant will continue to temper optimism in the markets.
On the commodity market front, it was a week of recovery in which most of the commodities recovered on mild intensity of Omicron amid fall in dollar index. CRB too revived and closed near 240 levels. After a three week fall, gold saw marginal buying from lower levels, however, better jobless data amid mild intensity of Omicron will keep it in a range of 47000-48800. After a nonstop six week fall, crude finally got some support on fall in dollar index amid expectation of mild intensity of Omicron and delay in Iran deal. Crude will; see marginal upside; may trade in slim spread of 5100-5500. Base metals may see limited rise on issues in Chinese real estate despite better import data of China. Unemployment Rate, Core Inflation Rate and Inflation Rate, BoE Interest Rate Decision of UK, ECB Interest Rate Decision. ECB Press Conference, BoJ Interest Rate Decision, Fed Interest Rate Decision, Fed Interest Rate Decision, Retail Sales and Markit Manufacturing PMI Flash of US, GDP of New Zealand etc load of data and events scheduled this week, which will give direction to the commodities.
SMC Global Securities Ltd. (hereinafter referred to as “SMC”) is a registered Member of National Stock Exchange of India Limited, Bombay Stock Exchange Limited and its associate is member of MCX stock Exchange Limited. It is also registered as a Depository Participant with CDSL and NSDL. Its associates merchant banker and Portfolio Manager are registered with SEBI and NBFC registered with RBI. It also has registration with AMFI as a Mutual Fund Distributor.
SMC is a SEBIregistered Research Analyst having registration number INH100001849. SMC or its associates has not been debarred/ suspended by SEBI or any other regulatory authority for accessing /dealing in securities market.
SMC or its associates including its relatives/analyst do not hold any financial interest/beneficial ownership of more than 1% in the company covered by Analyst. SMC or its associates and relatives does not have any material conflict of interest. SMC or its associates/analyst has not received any compensation from the company covered by Analyst during the past twelve months. The subject company has not been a client of SMC during the past twelve months. SMC or its associates has not received any compensation or other benefits from the company covered by analyst or third party in connection with the research report. The Analyst has not served as an officer, director or employee of company covered by Analyst and SMC has not been engaged in market making activity of the company covered by Analyst.
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SAFE HARBOR STATEMENT: Some forward statements on projections, estimates, expectations, outlook etc are included in this update to help investors / analysts get a better comprehension of the Company's prospects and make informed investment decisions. Actual results may, however, differ materially form those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, Impact of competing products and their pricing, product demand and supply constraints. Investors are advised to consult their certified financial advisors before making any investments to meet their financial goals.
bring down net debt-equity ratio. The company is also doing some office assets with Blackstone which is under construction. Once those are completed and rented, maybe those will also be pushed into their REIT or it will participate along with them.
Despite the challenging environment, Prestige has clocked highest quarterly sales and collections. The new sales were backed by the healthy response to newly launched project, Prestige Great Acres and the existing inventories across geographies. Prestige Great Acres was sold out within one day of launch without any advertisement campaign. The strong performance reflected the increasing consumer preference to own a Prestige group's residential property. Thus, it is expected that the stock will see a price target of Rs.552 in 8 to 10 months’ time frame on a current P/BV of 2.8x and FY23 BVPS of Rs.197.31.
company has qualified from large number of customers. Further, the company is also seeing opportunities in combined cycle (uses to make power from gas) orders in the 30 MW category.
The company has been securing orders both from India and major international markets such as Central America, South America, North America, Turkey, South East Asia, Europe, Middle East, and North Africa. The Management has also mentioned that enquiry levels remained healthy both in domestic and exports market. Thus, it is expected that the stock will see a price target of Rs.214 in 8 to 10 months’ time frame on a target P/Bv of 7.5x and FY23 BVPS of Rs.28.54.
The stock closed at Rs 2471.65 on 10th December, 2021. It made a 52-week low at Rs 853.80 on 21st December, 2020 and a 52-week high of Rs. 2648.00 on 11th October, 2021. The 200 days Exponential Moving Average (DEMA) of the stock on the daily chart is currently at Rs 1956.89.
Short term, medium term and long term bias are looking positive for the stock as it is trading in higher highs and higher lows on charts. Apart from this, it is forming a “Bull Flag” pattern on weekly charts which is bullish in nature. Last week, stock has given the pattern breakout along with high volumes and also has managed to close above the same so buying momentum may continue for coming days. Therefore, one can buy in the range of 2430-2440 levels for the upside target of 2700-2750 levels with SL below 2300 levels.
The stock closed at Rs 602.25 on 10th December, 2021. It made a 52-week low of Rs 490.50 on 19th March, 2021 and a 52-week high of Rs. 700.00 on 16th July, 2021. The 200 days Exponential Moving Average (DEMA) of the stock on the daily chart is currently at Rs 584.85.
After decent correction from yearly high, stock was consolidated in wide range of 530-600 levels for few weeks and formed a “Continuation Triangle” on weekly charts, which is considered to be bullish. Last week, stock tried to give the breakout of pattern but couldn’t hold the high due to market’s volatility but still managed to close in positive territory with decent volumes. On the technical indicators front, RSI and MACD are also suggesting buying for the stock. Therefore, one can buy in the range of 590-595 levels for the upside target of 650-670 levels with SL below 570 levels.
Disclaimer : The analyst and its affiliates companies make no representation or warranty in relation to the accuracy, completeness or reliability of the information contained in its research. The analysis contained in the analyst research is based on numerous assumptions. Different assumptions could result in materially different results.
The analyst not any of its affiliated companies not any of their, members, directors, employees or agents accepts any liability for any loss or damage arising out of the use of all or any part of the analysis research.
SOURCE: RELIABLE SOFTWARE
Charts by Reliable software
Indian markets recovered smartly from its recent lows and Nifty indices ended the week above 17500 mark, taking cues from firm global markets & strong domestic factors. From derivative front, short covering was observed at 17200 & 17300 strike while put writers added hefty open interest at 17400 strike. Implied volatility (IV) of calls closed at 14.26 % while that for put options closed at 14.96. The Nifty VIX for the week closed at 16.60%. PCR OI for the week closed at 1.45. on the technical front, once again Nifty has managed to close above its 100 days exponential moving average but still feeling shy to break above its 50 days exponential moving average on daily charts. For upcoming week, we believe that once Nifty surpass 17600 levels decisively, then we could witness next round of short covering which could leap Nifty towards 17750 levels as well. On downside, 17400 & 17250 would act as a strong support for the index.
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**The highest call open interest acts as resistance and highest put open interest acts as support.
# Price rise with rise in open interest suggests long buildup | Price fall with rise in open interest suggests short buildup
# Price fall with fall in open interest suggests long unwinding | Price rise with fall in open interest suggests short covering
Turmeric futures (Apr) closed in green for the third successive week but witnessed some resistance at higher levels. It is likely to trade positive towards 9200 with support at 8500. Currently, prices are up 40% y/y on expectation of lower production due to persistence rains in southern parts of the country. However, normal export volume is keeping prices under control. In the first 7-months (Apr-Oct) of FY 2021/22, exports down 23% to 89,850 tons Vs last year but higher by 6.5% if compared with 5-year average. Jeera futures (Jan) closed higher last week on improving physical demand due to slow sowing progress in main producing state – Gujarat. It is expected to trade sideways with support at 15665 levels and resistance at 16475 levels. As per respective Agriculture Dept data, area under jeera in Gujarat as on 06-Dec was only 2.38 lakh ha Vs 3.81 lakh hac last year while in Rajasthan jeera is sown in 4.66 lakh hac. As per Govt. data, exports of jeera for Apr-Oct down by 17% Y/Y at 1.50 lakh tonnes compared to 1.82 lt last year. Dhaniya futures (Jan) surged higher but witnessed profit booking and likely to trade in a range with support at 8240 and resistance at 8930. Area under coriander in Gujarat as on 06-Dec is pegged at 1,08,923 hac which is 126% area compared to normal area but last year it was 1,15,969 hac while sowing is also progressing in MP and Rajasthan but there are reports of lower area as farmers shifted to Oilseeds and pulses crop. As per govt. data, exports have been down 12.7% during Apr-Oct period to 28,800 tonnes Vs 33,000 tonnes last year but 8.6% higher compared to 5-year average.
Bullion counter fell for fourth straight week, Gold prices were down amid FED tightening policy, and rising yields reduced stimulus and rising fear for Omicron. Reduced stimulus and interest rate hikes tend to push government bond yields higher, raising the opportunity cost of holding gold, which bears no interest. With the narrative shifting back to central banks' tightening policy, which was likely to boost the U.S. dollar, any upside in gold is likely to be limited. Also gold is getting pressure from the rising Treasury yields, but the upside on yields is fairly limited. Investors are now waiting for the Fed policy meeting in the coming week. Gold is defending the lower end of the $1,770- $1,810 range because investors are worried about a hawkish Fed pivot, but there's still enough uncertainty around the Omicron variant, which could delay rate hiking cycles, to support gold. Markets are already pricing in three rate hikes for 2022, so the bar for a hawkish surprise is high and that's why longer-term gold investors aren't so worried about the taper, though it could weigh on gold in the near term. Investors also took stock of U.S. jobless claims dropping to their lowest in more than 52 years last week as labor market conditions continued to tighten amid an acute shortage of workers. Ahead in the week, gold prices may continue to trade with a bearish bias, at present, it is trading near short-term resistance of 48400 above its resistance holds near 49500. Break and sustain above the level may push prices on the upside and on the downside, we may expect it may take support near 45800. Silver may trade in the wide range of 58000-62000.
Soybean futures (Jan) closed lower last week after surging for fourth consecutive weekly gains due to higher arrival and rabi oilseed sowing is progressing at robust pace. Prices are likely to trade sideways to lower with support at 5700 levels and resistance at 6750 levels. Stock limit imposed by Rajasthan and UP Government to keep prices in check but still prices are higher by over 51% y/y as farmers and traders are holding back their new season crop in anticipation of higher prices and selling limited quantities. Equally, oil millers and stockists are also buying and stocking soybean. As per SOPA, soybean arrivals in October were lower at 15 lakh tonnes (lt) compared to 18 lt last year. Soybean production in India revised higher by 8% m/m to 11.9 mt by USDA in Nov monthly report. In a recent development, Govt has decided not to give approval for additional import of GM soybean meal in the country, as it will produce enough for the domestic consumption. Edible oil prices closed in red for the third consecutive week tracking weak International prices and expectation of good supply next season due to expectation of higher oilseed production from the rabi oilseeds. Moreover, the Biden administration proposed cutting back biofuel mandates may pressurise edible oil prices. Malaysian palm oil futures traded weak on reports of lower exports and higher production in Indonesia. Indonesia’s November production is seen 2%-3% higher. As per SEA, edible oil imports were down by 38.4% in Oct m/m while the stocks at port down 15% m/m. Ref Soy oil futures (Jan) may trade in range with support at 1142 and resistance at 1220 while CPO futures (Dec) likely to trade sideways in range of 1053-1129.
Crude oil prices surged to their biggest weekly gain since late August, as the easing concerns over the Omicron coronavirus variant on global growth and fuel demand drove market sentiment. Benchmark Brent and WTI were both on course to rise more than 6% in previous week, even after a brief profit-taking, their first weekly gain in seven weeks. The oil market had recovered about half the losses it suffered since the Omicron outbreak on Nov. 25 as early studies suggest getting three doses of Pfizer's PFE.N vaccine offers protection against the Omicron variant. There is still some lingering concern on whether the Omicron variant may push border movement restrictions during the festive season. Prices are under pressure as China's domestic air traffic, once the world's envy after a fast rebound during the pandemic, is faltering amid a zero-COVID policy that has led to tighter travel rules in Beijing and weaker consumer confidence after repeated small outbreaks. Ahead in the week, prices may trade in the wide range where both side movements could be witnessed and the range is 4800-5700 levels. Natural gas prices were down on week on week basis but prices rebounded from the support. The recent selloff in natural gas prices has eased fears over widespread inflation, with many wondering just a few months ago how expensive it would be to heat their home during the winter months. The weather in the mid-West is expected to be much, much warmer than normal near record highs, and the rest of the country is also expected to see warm weather conditions. Ahead in the week natural gas prices may take support near 275 levels as long as prices sustain above it chances are there to test 315 levels on the higher side.
Cotton futures (Dec) closed little higher last week after 5-weeks of negative return as physical buying is back in the country and likely to trade sideways with support at 30000 and resistance at 31900 levels. Current prices are higher 55% y/y on concerns over production, slow arrivals and better demand for exports. USDA cut world cotton production for 2021/22 by 0.18% to 121.56 million bales in its latest monthly release but no change for India cotton production. Overall availability will be lower than last year, while consumption expected to rise in the country. Domestic mills have procured less due to high price thus; demand from mills may increase further in the coming weeks. Guar seed futures (Jan) closed positive last week after it slipped to three and half month lows and expected to trade higher towards 6200 levels with support at 5600 levels. In Nov, prices declining due to sluggish export demand and new season arrivals. Currently, prices are up 50% y/y on expectation of lower production, multi-year lower stocks and good export demand. The arrival of new season guar seed may decline as prices slipped to one-month low. In Oct, Guar gum exports are higher by 60% y/y at 27,150 tonnes while exports in 2021/22 (Apr-Oct) are up by 46% y/y at 1.85 lakh tonnes. Castor Seed (Jan) witnessed second weekly loss and expected to trade sideways to lower towards 6100 levels with resistance at 6500 levels. Currently, there is muted demand from the traders due to uncertainties over exports to China due to third wave of CORONA. We have witnessed persistent export demand throughout the year for castor oil and meal but expectation of new season arrival in next two month may keep prices under control.
Base metals may trade with weak bias as government restrictions to temper the spread of the Omicron variant may dent risk appetite. Tougher COVID-19 restrictions in England escalated concerns over the impact the new variant could have on economic growth. A liquidity crisis triggered by debt worries at property giant China Evergrande Group has weighed on investor sentiment towards the vast real estate sector. Fed may go for taper and earlier-thanexpected interest rate hike which strengthen the dollar. Copper may move towards 700 levels with resistance of 750 levels. While prices for copper may supported by low inventories, there are pressure from cooling growth in top consumer China and the tightening of U.S. monetary policy. However, recently China's central bank said it would cut the amount of cash that banks must hold as reserves, its second such move this year, releasing long-term liquidity to bolster slowing economic growth. This move can provide some support to the base metals. Nickel may fall to 1470 levels with resistance of 1590 levels. China's Tsingshan Holding Group started producing nickel matte - an intermediate nickel product that can be processed into chemicals for electric vehicle batteries - in Indonesia. Zinc can move in the range of 264-288 levels. European physical zinc premiums have shot higher since Glencore said its 100,000-tonne per year Portovesme zinc sulphide plant would stop producing zinc by the end of December. Lead can move in the range of 180-190. Aluminum may move to 225 levels with support of 204 levels. Fitch Solutions has forecast aluminium production at 69.95 million tonnes (mt) next year compared with 67.6 mt this year, while utilisation is projected to increase to 63.99 mt from 62.36 mt this year.
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LEAD MCX (DEC)contract closed at Rs. 185.30 on 09th Dec 2021 . The contract made its high of Rs. 193.75 on 18th Nov’2021 and a low of Rs. 183.20 on 22nd Nov’2021. The 18- day Exponential Moving Average of the commodity is currently at Rs 185.47. On the daily chart, the commodity has Relative Strength Index (14-day) value of 47.834.
One can sell near Rs. 187 for a target of Rs. 180 with the stop loss of 191.
ALUMINIUM MCX (NOV) contract was closed at Rs. 214.45 on 09th Dec’2021. The contract made its high of Rs. 262.10 on 15th Oct’2021 and a low of Rs. 203.10 on 05th Nov’2021. The 18-day Exponential Moving Average of the commodity is currently at Rs. 213.35. On the daily chart, the commodity has Relative Strength Index (14-day) value of 50.372.
One can buy near Rs. 213 for a target of Rs. 223 with the stop loss of Rs 208.
JEERA NCDEX (JAN) contract closed at Rs. 16245.00 on 09th DEC’2021. The contract made its high of Rs. 16860.00 on 24th Nov’2021 and a low of Rs. 15650.00 on 11th Nov’2021. The 18-day Exponential Moving Average of the commodity is currently at Rs. 16127.03. On the daily chart, the commodity has Relative Strength Index (14-day) value of 53.179.
One can sell near Rs. 16200 for a target of Rs. 15200 with the stop loss of Rs. 16700.
It was a week of recovery in which most of the commodities recovered on mild intensity of Omicron amid fall in dollar index. CRB too revived and closed near 240 levels. After a three week fall, gold saw marginal buying from lower levels whereas silver closed weak. Some downside in dollar index from higher side also stimulated buying. After a nonstop six week fall, crude finally got some support on fall in dollar index amid expectation of mild intensity of Omicron. However market gains were muted as government’s re-imposed restrictions to limit the spread of Omicron, including Britain ordering people to work from home again, Denmark closing restaurants, bars and schools and China halting group tourist trips from Guangdong. Whereas natural remained traded in weaker territory. Forecasts for milder U.S. weather and lower heating demand over the next two weeks than previously expected, weighed on the sentiments. Improvement in Chinese import data and other supported base metals counter, except nickel. Chinese copper imports rose 31.7% in November, beating the 19.8% rise in October and well above a forecast for a 20.6% gain. Concerns over a possible default of cash-strapped China Evergrande Group resurfaced after the property developer failed to make coupon payments to some offshore bondholders by the end of a 30-day grace period. European physical zinc premiums have shot higher since Glencore said its 100,000-tonne per year Portovesme zinc sulphide plant would stop producing zinc by the end of December. Refined nickel inventories in ShFE warehouses were at 5,563 tonnes last week, hovering near a record low of 4,455 tonnes hit in August. LME stocks of the metal fell 58% from April to 110,358 tonnes, their lowest since December 2019.
Soyabean faced hurdle near 6900 as rabi oilseed sowing is progressing at robust pace whereas refined soya was in a range. CPO was up in both MCX and BMD. Moreover, stock limit imposed by Rajasthan and UP Government to keep prices in check but still prices are higher by over 51% y/y as farmers and traders are holding back their new season crop in anticipation of higher prices and selling limited quantities. Soya oil erased gain after US proposal to scale back biofuel blending mandates and as concerns over the Omicron coronavirus variant. Guar counter revived after five week fall on multi-year lower stocks and good export demand. The arrival of new season guar seed may decline as prices slipped to one-month low. In Sep, Guar gum exports are higher by 30% y/y at 24,800 tonnes while exports in 2021/22 (Apr-Sep) are up by 43% y/y at 1.58 lakh tonnes. Castor surrendered its previous gain as there is muted demand from the traders due to uncertainties over exports to China due to third wave of Covid.
Highlights
Global benchmarks Brent and West Texas Intermediate crude were fell recently as tight supplies eased with U.S. strategic petroleum reserve (SPR) sales decision. Crude oil prices fell significantly on November 26, and the Brent spot price began December below $70/b. The drop in prices followed the identification of the new COVID-19 Omicron variant, which raised the possibility that petroleum demand could decline in the near term. Meanwhile, International Monetary Fund said the global lender is likely to lower its global economic growth estimates because of the new variant.
Indian Rupee continued its losing streak this week to touched 18 months low after frequent omicron variant news headlines kept volatility higher in the various rupee pairs. Additionally RBI policy announcement was more dovish than expected which push rupee further lower. Going forward rupee may face further weakness ahead of crucial Fed policy before winding this calendar year. We think rupee may fall further to 75.85 before it retraces towards 75.00 in the coming days. The pound weakened on expectations the Bank of England will opt for caution at their meeting next week, despite recent data showing a strong labor market and firm wage growth. Boris Johnson advises the public that due to concerns over the new Omicron variant, Plan B will need to be initiated. Citizens are now urged to work from home and use vaccine passports for large venues. It is reported the plan to curb the spread of the virus may cost the economy £2 billion a month. Meanwhile euro slightly weakened this week despite much better trade data than expected out of Germany. Ahead of ECB policy next week we do think euro has scope to fall further below 85.00 vs rupee.
USD/INR (DEC) contract closed at 75.5925 on 09-Dec-21. The contract made its high of 75.6100 on 09-Dec-21 and a low of 75.1975 on 06-Dec-21 (Weekly Basis). The 21-day Exponential Moving Average of the USD/INR is currently at 75.2667.
On the daily chart, the USD/INR has Relative Strength Index (14-day) value of 68.77.One can buy at 75.50 for the target of 76.50 with the stop loss of 75.00.
GBP/INR (DEC) contract closed at 99.8750 on 09-Dec-21. The contract made its high of 100.4675 on 07-Dec-21 and a low of 99.7550 on 09-Dec-21 (Weekly Basis). The 21-day Exponential Moving Average of the GBP/INR is currently at 100.4800.
On the daily chart, GBP/INR has Relative Strength Index (14-day) value of 44.13. One can sell at 100.50 for a target of 99.50 with the stop loss of 101.00.
| 09th Dec | China Evergrande Group has officially been declared in default. |
| 09th Dec | UK threatens to impose tariffs on more US goods in dispute over steel duties |
| 08th Dec | ECB executive Schnabel warns that QE is inflating asset prices |
| 08th Dec | CPI inflation is projected at 5.3% for 2021-22: RBI Governor Shaktikanta Das. |
| 08th Dec | US demands halt to Nord Stream 2 if Russia invades Ukraine |
| 07th Dec | New German finance minister signals openness on EU fiscal rules |
| 07th Dec | Omicron adds to doubts over ECB’s commitment to further stimulus |
| 06th Dec | UK jobs boom poses inflation risk, Bank of England official warns |
| 06th Dec | UK to trial ‘smart’ customs border to reduce post-Brexit trade frictions |
EUR/INR (DEC) contract closed at 85.6925 on 09-Dec-21. The contract made its high of 87.0750 on 07-Dec-21 and a low of 84.9500 on 06-Dec-21 (Weekly Basis). The 21-day Exponential Moving Average of the EUR/INR is currently at 85.4713.
On the daily chart, EUR/INR has Relative Strength Index (14-day) value of 50.72. One can buy at 85.40 for a target of 86.40 with the stop loss of 84.90.
JPY/INR (DEC) contract closed at 66.6975 on 09-Dec-21. The contract made its high of 66.7975 on 06-Dec-21 and a low of 66.365 on 07-Dec-21 (Weekly Basis). The 21-day Exponential Moving Average of the JPY/INR is currently at 66.2985.
On the daily chart, JPY/INR has Relative Strength Index (14-day) value of 57.80. One can buy at 66.50 for a target of 67.50 with the stop loss of 66.00.
(2.5/5)
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Considering the P/E valuation, on the upper end of the price band of Rs.796 the stock is priced at pre issue P/E of 67.02x on an estimated annualised FY22 EPS of Rs.11.88. Post issue, the stock is priced at a P/E of 71.54x on its EPS of Rs.11.13. Looking at the P/B ratio at Rs.796, pre issue, book value of Rs. 71.67 of P/Bvx 11.11x. Post issue, book value of Rs.123 of P/Bvx 6.47x.
Considering the P/E valuation, on the upper end of the price band of Rs.780, the stock is priced at pre issue P/E of 65.68x on an estimated annualised FY22 EPS of Rs.11.88. Post issue, the stock is priced at a P/E of 70.10x on its EPS of Rs.11.13. Looking at the P/B ratio at Rs.780, pre issue, book value of Rs. 71.67 of P/Bvx 10.88x. Post issue, book value of Rs.123 of P/Bvx 6.34x.
Incorporated in 2006, Medplus Health Services is India's second-largest pharmacy retailer in terms of the number of stores and revenue. The company offers pharmaceutical and wellness products i.e. medicines, vitamins, medical devices, test kits, and fast-moving consumer goods i.e. home and personal care products, baby care products, sanitizers, soaps, and detergents, etc. It is also the first pharmacy retailer in India to offer an omnichannel platform wherein customers can purchase products through stores, place orders over the telephone, online orders, and a Click and Pick facility. As of June 31, 2021, the company has a strong pharmacy retail network of 2,165 stores across Tamil Nadu, Andhra Pradesh, Telangana, Karnataka, Odisha, West Bengal, and Maharashtra.
India’s Second Largest Pharmacy retailer: The company is the second largest pharmacy retailer in India, in terms of (i) revenue from operations for the financial year 2021, and (ii) number of stores as of March 31, 2021. For the financial year 2021, its total revenue from operations represented approximately 15% share of the organized pharmacy retail market in India. The company expects that its (i) well-established brand, (ii) genuine and good quality pharmaceutical products offering, (iii) wide product offering, (iv) ability to achieve high fulfillment rates, (v) offering of neighborhood convenience with large store footprint, and (vi) ability to offer competitive pricing to its customers, will continue to drive its gains in market share.
High Density Store Network Enhancing Omni-channel Proposition: Its customers have multiple options, including (i) purchasing products at one of its stores, or (ii) placing an order through a telephone call to receive delivery of their purchased products, or (iii) placing an order online to receive delivery of their purchased products, or (iv) “Click and Pick”, by placing an order online and picking up their purchased products from one of its stores
Lean Cost Structure and Technology Driven Operations: The company believes that its (i) scale of operations, (ii) wholly-managed and operated supply chain and distribution infrastructure, (iii) strong and integrated technology backbone, and (iv) focus on maintaining cost efficient operations gives it an advantage over its competitors.
Strengthen Its Market Position by Increasing Store Penetration in Existing Clusters and Developing New Clusters: The company intends to capitalize on the shift from unorganized to organized retail of pharmaceutical products in India, taking advantage of the low base of organized pharmacy retail penetration and increasing penetration of mobile and internet usage in India, and strengthen its market position by (i) increasing its store penetration and customer reach in existing clusters and (ii) developing new clusters in other states and cities. To establish its presence in new geographies, it intends to use its cluster based approach and replicable store roll-out process, as well as concurrently develop the required supply chain and distribution infrastructure, including establishing primary warehouses in these states to serve as distribution hubs, building fleets of delivery vehicles and hiring delivery personnel.
Further Develop Its Omni-channel Platform with a Hyperlocal Delivery Model: The company plans to further develop its omni-channel platform with the aim to increase online sales revenue contribution to its total revenue from operations. The company intends to leverage its growing store network and focus on deliveries through its growing number of larger format stores, as they tend to be better stocked and are more closely linked to its supply chain and distribution infrastructure.
Increase Its Share of Private Labels and Enhance Its Stock Keeping Unit (“SKU”) Mix: The company believes that the company is well-positioned to purchase and stock more private label products, as the company is less constrained by minimum order quantity requirements imposed by suppliers due to the scale of the purchases the company is able to make. To increase its sales of private label products, the company also plans to (i) market and advertise its private label products as good quality products offered at competitive prices and (ii) conduct training of its sales staff and award them with financial incentives for identifying customer needs and cross-selling its private label products, and continue to support them with its technology framework that provides them with point-of-sale assistance and prompts.
MedPlus Health Services is into pharmacy retail and health support services and this business is largely working capital intensive. The company adopts an omnichannel strategy in that it offers online selling as well as brick-and-mortar selling services through a centralized mechanism. However, there has been an instance of negative cash flows in the last three financial years. Its operations are subject to high working capital requirements, and have incurred substantial indebtedness. Cash surplus and long term investors may consider investing in the issue.
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DSP Investment Managers have launched two ETFs, including first of its kind passive fund tracking the Nifty Midcap 150 Quality 50 Index. The DSP Nifty Midcap 150 Quality 50 ETF is a quality-focused mid cap ETF that offers investors an option to invest in quality mid-cap companies with the potential of higher profitability, lower leverage & relatively stable earnings. The second new product, DSP Nifty 50 ETF will invest in all the 50 companies from the Nifty 50 Index. The New Fund Offer for subscription till December 17. According to a press release, DSP Nifty Midcap 150 Quality 50 ETF follows a zerobias, rule-based strategy by replicating the Nifty Midcap 150 Quality 50 Index, without fund manager decision bias. This index selects 50 companies from the parent Nifty Midcap 150 index based on ‘Quality Scores’ using metrics like return on equity, financial leverage (except for financial services companies) and earning per share (EPS) growth variability of each stock analysed during the previous 5 financial years. Being a passive fund, it will also have a lower expense ratio than most actively managed mid-cap funds.
Indian mutual fund investors would soon be able to invest in silver ETFs. Two fund houses Mirae Asset Mutual Fund and Aditya Birla Sun Life Mutual Fund have filed documents with the regulator for approval. This is after the markets regulator SEBI laid down operating norms for silver ETFs in late November. Once the regulator gives its nod, the fund houses will open their schemes to investors.
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