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Indian stock market and companies daily report (August 26, 2010, Thursday)

Contributed by Angel Broking

By Angel Broking

The markets edged lower at the onset of the trading session, following weak cues from the Asian markets. The Sensex hit a fresh intraday low in morning trade as the market extended initial losses. A strong intraday rebound was witnessed in afternoon trade as European indices opened in the green; however, the markets came off the higher levels later. A sharp slide in late trade pushed the key benchmark indices to the day's lows at the fag end of the trading session. The Sensex closed down by 0.7% and the Nifty closed down by 0.8%. BSE mid-cap and BSE small-cap also witnessed declines and closed down by 1.5% and 1.4%, respectively. Among the front liners, Sterlite Industries,  ONGC, ITC, TCS and Infosys gained 0–1%, while DLF, Tata Steel, Hindalco, Cipla and Hero Honda lost 2–4%. Among mid caps, FDC, Ruchi Soya, Brigade  Enterprises, Oriental Bank of Commerce and BASF India gained 2–7%, while BF Utilities, State Bank of Travancore, EIH, State Bank of Bikaner and Jaipur and IBN18 Broadcast declined 6–10%.

Markets Today

The trend deciding level for the day is 18216 / 5574 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 18276 – 18372 / 5495 – 5527 levels. However, if NIFTY trades below 18216 / 5574 levels for the first half-an-hour of trade then it may correct up to 18120 – 18060 / 5441 - 5420 levels.

Hotel room tariffs set to increase

With the onset of the key winter season, hoteliers are planning to increase the average room rates (ARRs) by ~10–15% from September 2010 as they expect tourist traffic to improve. Hotels in India traditionally increase rates before the crucial winter season every year. However, the economic slowdown and the terrorist attacks in the country in 2008 had reduced the number of travelers over the last two seasons, resulting in ARRs crashing by ~25–30% on the back of lower occupancy levels. As per hoteliers, considering the level of 2008–09 as the benchmark, the industry is inching closer to those levels in terms of booking volumes. Even though demand in the leisure travel segment may take longer to revive, demand from the business segment, besides local tourists, is likely to push up occupancy rates (ORs). ORs are expected to rise to ~70% during the upcoming season (October 2010–March 2011), thereby providing opportunity to hoteliers to firm up their ARRs. We expect TAJ GVK to be one of the prime beneficiaries of  hese changing dynamics. Hence, we continue to maintain Buy on the stock with a Target Price of Rs240.

Cipla – AGM key takeaways

We attended the 74th Annual General Meeting (AGM) of Cipla. Following are the key takeaways from the AGM:

- For FY2011, management expects the company’s top line to grow by 7–10%.

- In order to maintain the company’s leading position in the pharma industry,  management plans to incur in excess of Rs1,000cr on the capex front in the near future for expanding the company’s existing API facilities (Patalganga, Kurkumbh and Bengaluru); setting up an R&D centre at Patalganga and expanding the existing centre at Vikhroli; and investment in biotechnology (India and China) and stem cell therapy.

- On the biotechnology front, management expects to launch the first biosimilar product in early CY2012.

- Management has also announced the acquisition of domestic pharma company Meditab Specialties for a consideration of Rs133.4cr. Meditab Specialities has mall and mid-size formulation facilities at multiple locations. This acquisition will help  Cipla consolidate its business in various countries, including China and Africa.

The stock is currently trading at 22.4x FY2011E and 18.0x FY2012E earnings. We maintain Buy on the stock with a Target Price of Rs360.

Economic and Political News
- India to speed up trade talks with EU, Japan and Malaysia
- Rs50,000cr infrastructure fund to be set up by early next fiscal: Montek Singh Ahluwalia
- State firms not to counterbid for Cairn: Oil Ministry
- Inflation a major concern: RBI

Corporate News
- State Bank of Mysore to come with rights issue at Rs540/share with 3:10 ratio
- Cummins India plans Rs750cr ramp-up
- Mahindra & Mahindra to complete Ssangyong acquisition in 4 months
- Religare promoters make 20% open offer in the firm at Rs457/share
- Royalty rates on radio to shift to revenue sharing from fixed fee regime
- Piramal Healthcare plans to sell Thane land: Reports