Market this week 20-5-2022

Market this week 20-5-2022

Ambuja-ACC purchase by Adani Group: Expensive value means much higher earnings are necessary to maintain a reasonable ROE.

The Adani Group has spent a lot of money to become the second-largest cement company in the world. Holcim paid $10.5 billion for its Ambuja and ACC stakes, implying an EV/T of $164 per tonne. This is the most money ever spent for a cement contract in recent years. Binani Cement was purchased by Ultratech Cement for $150 per tonne in 2018.

Now the new cement giant must focus on preserving its profit margins. To achieve double-digit ROE and ROCE, it may have to remain to the high end of the market.

According to a Jefferies research, greenfield and brownfield projects must generate EBITDA/T of Rs 1,500 and Rs 900, respectively, to achieve a 10.6% ROE and ROCE. To achieve similar margins – a ROE of 10.8% and a ROCE of 10.7% – the Adani Group business will need to generate an EBITDA/T of Rs 2,000.

Eicher Motors is up 5% after reporting a better-than-expected fourth-quarter earnings; UBS forecasts a further 21% gain.

After the company announced its Q4 earnings, Eicher Motors’ stock jumped over 5% in the morning session on May 16.

Eicher Motors announced on May 13 that its consolidated profit after tax (PAT) for the quarter ended March 2022 was Rs 610 crore, up 16 percent from Rs 526 crore a year ago. Profit increased by 34% sequentially from Rs 456 crore in the preceding quarter.

The maker of the renowned Royal Enfield motorcycle recorded an 8.6% increase in consolidated revenue to Rs 3,193 crore from Rs 2,940 crore in the previous year’s similar period. Revenues increased by 11% sequentially from Rs 2,881 crore in the previous quarter. From April 2021 to March 2022, PAT increased by 25% to Rs 1,677 crore, up from Rs 1,347 crore in FY21.

Due to rising raw material prices and greater operating costs, Amber Enterprises has cut its circuit by 20%.

Amber Enterprises Ltd’s stock has dropped 20%, its worst drop since its IPO, as increasing raw material and operating expenses hurt the company’s margins and bottom line.

On the BSE, the stock touched a low of Rs 2,701.20. The stock was trading at Rs 2,701.20 on the BSE at 2.40m, down 20% from its previous close. The stock went public on January 30, 2018, with an IPO price of Rs 859 per share. The IPO netted the company roughly Rs 600 crore.

Amber Enterprises’ revenue climbed by 21% year over year to Rs 1,937 crore, owing to higher volume and price realisations. Net profit plummeted 22% year on year to Rs 59 crore, while operational costs increased 25% to Rs 1,804 crore.

The shares of Avenue Supermarts is up 3% after the company reported a 3% increase in net earnings in the fourth quarter.

Avenue Supermarts Ltd, which owns and operates the retail chain D-Mart, had its stock gain 6.5 percent in early trading on May 16 after the firm reported a 3 percent year-over-year increase in net profit. However, during the fourth quarter ending March 2022, the consolidated net profit fell 22 percent to Rs 427 crore.

The stock was trading at Rs 3448.85 per share on the BSE at 10:45 a.m., up 6.61 percent, while the benchmark Sensex was up 467.05 points, or 0.88 percent, at 53,260.67. Revenue declined 5% from Rs 9,218 crore to Rs 8,787 crore in the third quarter. Revenue increased 19% year over year.

January 2022 got off to a great start, but the Omicron wave of Covid19 slowed things down by the middle of the month. The high margin and discretionary items are usually the hardest hit by these waves. Recovery takes 40–50 days once limitations are removed or anxiety from a Covid wave subsides, as has been the case in the past. “Because Omicron was a lesser wave, it had a much smaller negative impact,” stated Neville Noronha, CEO and Managing Director of Avenue Supermarts Limited.

Tata Motors’ stock is up over 9% following Q4 earnings.

Tata Motors’ stock rose about 9% last Friday, a day after the company posted a consolidated net loss of Rs 992.05 crore for the fourth quarter ended March.

On the BSE, the shares rose 8.67 percent to Rs 404.35. It rose 11.73 percent to Rs 415.75 during the day. It soared 8.51 percent to Rs 404 per share on the NSE.

During the day, 29.42 lakh shares were traded on the BSE and nearly 7.14 crore shares were traded on the NSE. Tata Motors, the country’s largest automaker, posted a combined net loss of Rs 992.05 crore for the fourth quarter ended March, despite obstacles such as semiconductor shortages and rising prices.

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