Market Update 27 Oct. 2020 – Kotak Mahindra Bank surprises the street

Rise in PVC prices boosts margins for Finolex

Leading PVC pipe maker Finolex Industries posted a sharp rise in its EBITDA margin at 24.7% for Q2FY20 as against 14.2% last year. The rise in margins is a result of better price realisations and lower costs. The growth was also supported by its PVC resin segment—contributing 42% of total revenues—which benefited from rising PVC prices. Domestic supply-side issues and rise in international PVC prices resulted in a ~40% surge in PVC rates. The stock gained 3.5% for the day and its peers Supreme Industries (+4.91%) and Jain Irrigation (+2.1%) too traded in the green. Generally, PVC price hikes are passed through to the customers, resulting in inventory gains for the pipe makers.

Ceat back on track after dismal Q1

In Q2, the RPG Group-owned tyre maker’s revenues grew to ₹1,978 crore, up 76% over the previous quarter, and 17% over the same quarter last year. Compared to a net loss of ₹35 crore Q1, the company made a net profit of ₹182 crore in Q2. The net profit was supported by a deferred tax credit, resulting from the amalgamation of its wholly-owned subsidiary Ceat Specialty Tyres. Higher sales and lower raw material costs have helped to increase its Q2 margin, which stood at 15.5% (versus 10.4% last year). The stock hit an intraday high of nearly 11% and closed with a gain of 1.1%. Tyre stocks have been on a roll this month, with JK Tyres (21.3%), Ceat (14.5%), MRF (14.5%) and Apollo Tyres (14.3%) seeing double-digit gains.

Kotak Mahindra Bank surprises the street

Kotak Mahindra Bank has beaten street expectations with its Q2 results. It reported a standalone net profit of ₹2,184 crore, up 27% as compared to the same period last year, versus the market expectation of ₹1,600 crore. In comparison, market leader HDFC Bank posted net profit growth of ~18%. Kotak’s earnings were boosted by a growth of 17% in net interest income*, lower provisions and higher treasury income. Since the start of Q2 till yesterday, shares of Kotak had risen 4% and underperformed the Nifty Bank index, which has gained 13% in the same period. Today, however, the stock rose 11.7% and covered lost ground after its results were announced.
(*Net interest income is the difference between the interest a bank earns from its lending activities and the interest it pays to depositors). 

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