Reports » India

Indian stock market and companies daily report (September 02, 2010, Thursday)

Contributed by Angel Broking

By Angel Broking

The market extended gains in morning trade and turned range bound in mid-morning trade. Strong global cues pushed the market sharply higher in the second half of trade. The market spurted to the day's high in mid-afternoon trade and extended gains in late trade as European stocks and US index futures rose. Strong auto sales, expansion in the manufacturing sector in August 2010 and resumption of buying by foreign funds underpinned sentiments. All the sectoral indices on the BSE were in green and the market breadth was strong.  The Sensex and Nifty closed up by 1.3% each. BSE mid-cap and the small-cap indices closed up by 1.7% and 1.8%, respectively. Among the front liners, RCOM, Hindalco Industries, Sterlite Industries, Bharti Airtel and Tata Steel gained 3–5%, while Hero Honda, HDFC and ONGC lost 0–2%. Among mid caps, STC, FDC, United Breweries, Dredging Corp. and State Bank of Mysore gained 10–14%, while Allcargo Global, Shree Global Tradefin, Jain Irrigation, Fresenius Kabi Oncology and GSK Consumer lost 2–4%.

Markets Today

The trend deciding level for the day is 18153 / 5451 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 18280 – 18353 / 5499 - 5527 levels. However, if NIFTY trades below 18153 / 5451 levels for the first half-an-hour of trade then it may correct up to 18080 – 17953 / 5424 - 5376 levels.

Auto sales numbers - August 2010

Maruti Suzuki (Maruti)

Maruti reported yet another month of record sales registering growth of 23.6% yoy to 104,791 units (84,808) in August 2010. This includes 12,117 units of exports, down  18.4% yoy. The exports growth was negative as expected as the company is deliberately cutting down on exports to focus on meeting the domestic demand ahead of the festival season. In August 2010, the company sold 92,674 units in the domestic market, up 32.5% yoy. Maruti continued its growth momentum in the domestic A2, A3 and C segments, registering 25.7%, 34% and 114.5% growth respectively, in August 2010. Maruti introduced a variant of its best-selling Alto model Alto-K10 with a K series engine and CNG variants of five car models in August.

Mahindra & Mahindra (M&M)

M&M reported robust growth of 28.1% yoy in total sales to 42,338 units (33,059 units) in August 2010, led by the 29% yoy growth in auto volumes and 26% growth in tractor volumes. The utility vehicle segment grew 14% yoy to 12,994 units (11,443), while the four-wheeler pick up range of products grew 45% to 7,533 units. Three-wheelers posted 39% yoy growth in volumes to 5,074 units (3,652) in August 2010. On the farm equipment side of business, domestic tractor sales grew 23% whereas exports increased by a substantial 102%.

Tata Motors

Tata Motors’s total sales (including exports) stood at 65,938 units, reporting growth of 32% yoy in August 2010. Domestic sales of commercial vehicles (CV) and passenger vehicles (PV) for August 2010 stood at 60,781 units, up 29% yoy. Sales of Tata CV's in August 2010 in the domestic market came in at 35,585 units, growing 20% yoy. Light commercial vehicles (LCV) sales grew 11% yoy to 20,734 units. Medium and heavy commercial vehicle (M&HCV) sales stood at 14,851 units, increasing 34% yoy. The PV business reported total sales and distribution off-take of 27,008 units (25,196 Tata + 1,812 Fiat) in August 2010, a rise of 34% compared to 20,146 units (17,364 Tata + 2,782 Fiat) in August 2009. Sales of Tata PV's were at 25,196 units, growing 45% yoy. Sales of Tata Nano stood at 8,103 units. Sales from the Indica range were at 7,531 units, lower by 22% yoy. The Indigo range recorded sales of 6,678 units, growing 151% yoy. The Sumo/Safari range accounted for sales of 2,884 units, higher by 11% yoy.

Hero Honda (HH)

HH reported robust sales of 424,617 units in August 2010 aided by healthy growth in the motorcycle and scooter segment (Pleasure reported sales of over 27,000 units in August 2010). Although volumes grew by a marginal 2.3% for the month, the numbers are encouraging as it comes on a high base. With new launches scheduled ahead of the festival season, the sales momentum for HH is expected to remain strong.

TVS Motor (TVS)

TVS reported an impressive 33.5% yoy growth in overall volumes to 170,735 units (127,875 units) led by strong growth in all segments of the two- and three-wheeler market. Domestic sales grew 30.6% yoy to 151,707 units (116,128), while exports reported stellar 62% growth to 19,028 units (11,747). Among the two-wheelers, the scooter segment grew 43.1% yoy, while the motorcycle segment grew 30.2% yoy. Three-wheelers posted yet another month of significant growth, surging 251% to 3,626 units (1,033 units).

Bajaj Electricals bags orders worth Rs408cr

Bajaj Electricals has bagged three orders worth Rs408cr in the engineering and procurement (E&P) division. The largest order is worth Rs324cr for its transmission line towers (TLT) business, which is to be executed over the next two years. The second order is worth Rs61.5cr for rural electrification in Chhindwara, Madhya Pradesh, which is to be executed over 18–24 months. The third order, worth Rs22.5cr, is for the company’s high mast and street lighting business, which will be executed over the next 2–3 months.

We view the receipt of these orders positively, as they strongly improve the company’s revenue visibility. Currently, the company’s order book stands at Rs1,150cr, which is about 1.5x FY2010 sales of the E&P division, giving decent revenue visibility to the company. Top-line growth is expected to be supported by the company’s other divisions as well. However, the company’s margins are expected to remain under pressure. Currently, the stock is trading at 13.5x its FY2012E EPS, factoring in most of the growth. We maintain a Neutral rating on Bajaj Electricals.

Bajaj Hindusthan announces financial closure of power SPV

Bajaj Hindusthan (BJH) has announced the financial closure of the power special purpose vehicle (SPV) project, under which it plans to develop a 450MW power plant next to its existing plant sites. BJH holds a 26% share in SPV (BJH has invested approximately Rs193cr in the SPV). The total project cost is estimated at Rs2,230cr, which would be financed by Debt:Equity of 2:1.

Further, SPV has signed a PPA for 90% of its production with the state government and plans to sell 10% in the merchant power market. SPV has also placed an order for key equipment and expects its plants to be commissioned by August 2011. However, given the sluggish implementation pace of power projects in the industry, we expect power plants to be commissioned by September 2012. We estimate benefits accruing from the SPV project to be at Rs12/share.

We are currently not factoring in any upside from this development, as we are valuing the stock on 1x SY2011E EV/IC. We continue to maintain our Neutral rating on BJH.

Sun Pharma announces 180-day exclusivity for generic version of Strattera

Sun Pharma announced that US FDA has granted approval of its ANDA for generic version of Strattera (patent expiry May 2017). The company would have 180-days exclusivity over the product. This generic atomoxetine hydrochloride capsules includes six strengths: 10mg, 18mg, 25mg, 40mg, 60mg and 100mg. Atomoxetine hydrochloride capsules are indicated for the management of attention deficit hyperactivity disorder in children aged six and older, teens and adults. Annual sales in the US for these strengths of branded and generic atomoxetine hydrochloride capsules are estimated at over $530mn. However, the timing of the launch is uncertain as Eli Lilly has won a court order banning the generic version until the patent appeal is decided. Further, we expect this to be a co-exclusive opportunity for the company. Our back-of-the-envelop calculation shows that the drug has the potential to contribute an NPV of Rs3-4/share (revenues of US $21mn and net profit of US $15mn) during the co-exclusivity period. The stock is currently trading at 24.5x FY2011E and 20.7x FY2011E earnings. We recommend Neutral on the stock.

TCS strengthens position in UK life and pension industry through new wins

TCS’s UK-based subsidiary Diligenta, which provides BPO services to the UK life and pension sectors, has won new contracts from the Phoenix Group and Old Mutual  International. The new contract with the Phoenix Group is an extension by another six years till 2018. Both the Phoenix Group and Old Mutual International contracts are expected to increase the number of policies administered from 3.6mn to 5.0mn and generate ?250mn over the next eight years. This is a positive development for TCS as it will help it further strengthen its presence in UK’s life and pension sectors. We maintain an Accumulate on the stock, with a Target Price of Rs920.

Economic and Political News

- Fiscal deficit fell 42% to Rs91k cr during April-July
- India's July exports up 13.2% yoy
- Govt says no to fresh gas allocation from KG-D6
- Coal India may not need anchor investors to support IPO

Corporate News

- RIL notifies fourth gas strike in D3 block of KG basin
- ONGC can decide on bidding for Cairn India by October
- HDFC raises benchmark lending rates
- Elder Pharma plans US $50mn QIP issue