Reports » India

Indian stock market and companies daily report (August 23, 2010, Monday)

Contributed by Angel Broking

By Angel Broking

A bout of volatility was witnessed at the onset of the trading session as the key benchmark indices cut losses, soon after an initial slide. However, the intra-day recovery proved short-lived as the Sensex once again lost ground in morning trade, tracking weak Asian stocks. The market once again came off the lows in mid-morning trade as index heavyweight RIL bounced back. The market soon slipped into the red. Stocks moved in a narrow range in afternoon trade. The market remained subdued in mid-afternoon trade as European stocks reversed initial gains. Weakness persisted on the bourses in late trade. The Sensex and Nifty closed down by 0.3% and 0.2%, respectively. While, the BSE mid-cap index declined 0.1%, BSE small-cap index closed with gains of 0.1%. Among the front liners, DLF, L&T, Cipla, RIL and Hero Honda gained 1–4%, while Tata Motors, ICICI Bank, Wipro, HUL and ITC lost 1–3%. Among mid caps, Wockhardt, Jubilant Foodworks, BF Utilities, Gammon India and Brigade Enterprises gained 7–10%, while Chennai Petro, MVL, GSFC, HCC and Hindustan Oil declined by 4–7%.

Markets Today

The trend deciding level for the day is 18409 / 5530 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 18457 – 18512 / 5547 – 5563 levels. However, if NIFTY trades below 18409 / 5530 levels for the first half-an-hour of trade then it may correct up to 18354 – 18306 / 5514 – 5497 levels.

IPO Note: Gujarat Pipavav Port Ltd.

Gujarat Pipavav Port (GPPL) is the exclusive developer and operator of APM Terminals Pipavav—India’s first private sector port. The company is promoted by APM Terminals (holding 57.9% pre-issue), one of the largest container terminal operators in the world. The port is primarily engaged in multi-cargo and multi-user operations for container, bulk and LPG cargo.

GPPL is coming out with an IPO for Rs500cr through fresh issue of 10.4cr–11.9cr shares in the price band of Rs42–48 per share. The issue proceeds would be utilised for prepayment of loans, purchase of capital equipment and general corporate purpose.

Location advantages and quality infrastructure: The port is strategically located in Gujarat (at the mouth of the Gulf of Khambhat) and provides a convenient international trade gateway to Europe, Africa, America and the Middle East. The port offers vessel acceptance draught of 14.5 meters, which allows navigation for bulk vessels of ~81,600 MT and container vessels of 6,200 TEU capacities. The company owns 38.8% in a joint venture with Indian Railways, viz. Pipavav Railways Corporation (PRCL), providing rail connectivity to industrialised hinterland and is connected by 10km road to NH-8E.

Expensive valuations justified by substantial growth potential: At the lower band of Rs42, GPPL commands 2.5x CY2011E P/BV, a premium to its global peers, which trade at an average P/BV of 2.0x. However, it is at a substantial discount to the Mundra port, which trades at 5.9x FY2012E P/BV, which we believe is justified given the latter’s larger scale, revenue contribution from its SEZ and higher profitability growth. However, over the last couple of years, GPPL has exhibited strong growth rates at the operating level following an improvement in utilisation levels and growing traffic. GPPL also expects to retire high-cost debt utilising Rs300cr from the issue proceeds resulting in reduction in interest expenses from Rs115cr in CY2009 to Rs92cr in CY2011E. Consequently, we expect GPPL to report profit from CY2011E. Further, management has indicated to hike container tariffs in line with market dynamics with re-negotiation of contracts from CY2010. Consequently, we expect GPPL to report profit from CY2011E. We recommend Subscribe to the IPO at the lower price band with a long-term perspective.

Terminating coverage on Zee News, TV Today, Balaji, Inox and Cinemax

Due to the re-alignment of our coverage universe, we are terminating coverage on Zee News, TV Today, Balaji Telefilms, Inox and Cinemax India. Effective the coverage termination, the last rating issued for these stocks should not be relied upon going forward.

JK Tyre to increase tyre prices by 4–5% in September

JK Tyre is set to increase its products prices by 4–5% in the first week of September to offset rising input costs. The price hike comes on the back of the ~3% increase in tyre prices by the company in July. In 1QFY2011, natural rubber prices witnessed a steep increase (up ~70% yoy), and continue to inch upwards. Currently, the prices are ruling around Rs180– 185/kg. With the increase in prices set to happen in September, the company intends to protect its margins and offset the cost pressure on the raw-material front. On the utilisation front, JK Tyre is operating at the 95–96% level, buoyed by robust demand from OE makers. At the CMP of Rs175, JK Tyre is available at attractive valuations of 4.4x and 3.7x FY2011E and FY2012E EPS, respectively. We maintain a Buy rating on the stock with a Target Price of Rs238, at which level the stock would trade at 5x, 3.3x and 0.8x FY2012E EPS, EV/EBITDA and P/BV, respectively.

Economic and Political News
- GST set to miss April 2011 deadline as the bill will not be introduced in the parliament
- DTC may moderate tax rates: CBDT Chairman
- Orissa to move apex court over POSCO project
- Apparel exporters ask government to provide more sops in FTP
- Forex reserves down by US $4.6bn to US $282.8bn for the week ending August 13
- FICCI demands additional duty sops for steel exports

Corporate News
- JSPL resumes implementation of steel and iron ore mine project in Bolivia
- BPCL buys stake in Australian shale gas fields
- Tata Steel to invest Rs1,000cr in Orissa plants
- Cairn-Vedanta deal may not get ministry’s approval