Reports » India
Indian stock market and companies daily report (April 17, 2014, Thursday)
The Indian Markets are expected to open flat today with a positive bias tracking SGX Nifty which is trading higher by 0.2%. Most of the Asian markets are trading in the positive territory.
US markets rose higher on Wednesday reacting positively to the latest earnings news as well as remarks by Federal Reserve (Fed) Chairman Janet Yellen that the central bank will keep benchmark interest rates at exceptionally low levels for a considerable time. Yellen acknowledged that economic growth slowed over the winter but suggested that a significant part of the weakness was due to unusually cold winter. The Fed also released a report showing a bigger than expected increase in industrial production in the month of March. Meanwhile European markets rebounded on Wednesday amid encouraging economic news from China and the U.K.
Indian markets fell for a third consecutive session on Wednesday, as concerns about rising inflation and private forecasts that India is bracing for a below-normal monsoon this year overshadowed firm global cues.
The trend deciding level for the day is 22,353 / 6,696 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 22,458 - 22,639 / 6,728 - 6,780 levels. However, if NIFTY trades below 22,353 / 6,696 levels for the first half-an-hour of trade then it may correct 22,172 - 22,067 / 6,644 - 6,613 levels.
BJAUT union threatens strike at Chakan plant
According to media reports, employee union at Bajaj Auto's (BJAUT) Chakan plant has threatened to go on an indefinite strike from April 28, 2014. In a notice issued to the company Management, Vishwa Kalyan Kaamgar Sanghatana (VKKS) has demanded an issuance of 500 shares at a discounted price of Rs.10 to each permanent worker at the plant. Additionally, the union has also stated that the company continues to harass the workers and is not using its CSR funds for the workers. We would await more clarity on this front and would be watchful of the future developments. We however do not see any major impact of the strike on company's production and expect the company to manage its production levels by shifting the operations to Aurangabad facility. It is important to note that the company resorted to similar strategy at the time of the strike last year which was also based on similar demands by the workers and the production at the Chakan plant was shut for 50 days. The Chakan plant has an installed capacity of 1.2mn units annually (~22% of the total installed capacity) and manufactures products like Pulsar, Avenger, Ninja and KTM. We believe that the Chakan plant is currently operating at around 50-60% utilization levels. We maintain our Buy rating on the stock with a target price of Rs.2,460.
RCom raises call rates by up to 20% for prepaid customers
RCom has raised tariffs by up to 20% in call rates for pre-paid customers, who account for a major chunk of the company's 117mn subscribers. While headline rates will rise 7% - from 1.5 paise a second to 1.6 paise a second - rates on discounted plans will rise by 20%. The changes will come into effect on April 25. RCom indicated that the current rate rises are part of the company's continued efforts to reduce free and discounted minutes and offset the ever-rising costs of input materials. The latest hike in headline tariffs by RCom is unlikely to see any similar moves by operators as RCom offers both CDMA as well as GSM services and has been under the cloud of a large number of free minutes which were being used by their subscribers. In the last few years, it has been gradually trying to reduce their exposure. We continue to remain Neutral on RCom.
TCS (CMP: Rs.2,351/ TP: Under review)
TCS reported its 4QFY2014 results with revenue a bit lower than expectations while net profit stood marginally higher than higher than estimates on account of healthy forex gains. The dollar revenue grew by 1.9% qoq to US$3,503mn. The company registered volume growth of 2.5% qoq. The company's performance was impacted due to flat qoq Indian business revenues and decline in MEA business revenue. Europe led growth in major markets, while UK and North America continue to grow in line with the company average. In INR terms, revenue came in at Rs.21,551cr, up 1.2% qoq. EBIT margin of the company declined by 60bp qoq to 29.1% as the company increased its S&M investments. With this level of operating margin, now the margin gap between TCS and Infosys stands more than 450bp. Bottomline of company grew substantially by 2.3% qoq to Rs.5297cr, supported by other income of Rs.699cr as against gain of Rs.539cr in 3QFY2014.
TCS closed 9 large deals during 4QFY2014. Management sounded confident of growing higher than the industry. Management indicated that the company has a robust demand pipeline across markets and the company see a unique opportunity to strategically partner and participate with clients but India business will continue to be soft for next couple of quarters due to impending elections. TCS has given gross hiring target of 55,000 for FY2015 and has announced wage hike of 2-4% for onsite employees and ~10% for employees based in India. We continue to remain positive on TCS remain positive on for a longer-term perspective keeping in notice the company's consistent performance and industry leading operating margins. The target price is currently under review.
Mindtree (CMP: Rs.1,381/ TP: Under review)
For 4QFY2014, MindTree's revenue and PAT came largely inline with the expectations but operating margin stood ahead of expectations. The dollar revenues came in at US$133mn, up 4.4% qoq, led by volume growth of 2.2% on a sequential basis. In INR terms, revenue came in at Rs.824cr, up 4.2% qoq. MindTree's EBITDA margin increased by ~200bp sequentially to 21.5% in 4QFY2014, which came in as a positive surprise. This was led by sequentially lower SG&A spends and inch up in utilization rates. PAT came in at Rs.98cr impacted by forex loss of Rs.43cr as against loss of Rs.27cr in 3QFY2014. MindTree's management indicated that the deal pipeline of the company remains healthy and it expects to beat Nasscom's 2014-15 growth forecast of 13-15%, aided by increased client spending and higher contract wins as the macro-economic environment improves in the United States and Europe.
The company has declared third interim dividend of Rs.5 per share, and final & special dividend of Rs.5 per share each for completion of 15 years in business. The company's board has also recommended a 1:1 bonus share issue for completion of 15 years in business. We continue to remain positive on the stock owing to its diversified revenue portfolio and past performance. The target price is currently under review.
Reliance Industries (CMP: Rs.941/ TP: Rs.1,075/ Upside: 14%)
Reliance Industries Ltd. (RIL) is scheduled to announce its 4QFY2014 results on Friday. We expect the company's top line to increase by 19.6% yoy to Rs.100,726cr due to INR depreciation against the US$ leading to higher petrochemical prices (in rupee terms). We expect the company's operating margin to contract by 136bp yoy to 7.9% while the company's bottom-line is expected to be increase only by 2.0% yoy to Rs.5,703cr due to poor performance from Oil & Gas segment. We maintain our Accumulate rating on the stock with a target price of Rs.1,075.
HCL Technologies (CMP: Rs.1,409/ TP: Rs.1,550/ Upside: 10%)
HCL Technologies is slated to announce its 3QFY2014 numbers today. We expect the company to post revenue of US$1,353mn, up 2.5% qoq. In rupee terms, the revenue is expected to grow by 2.3% qoq to Rs.8,374cr. EBITDA margin is expected to decline by ~35bp qoq to 25.6%, on account of dip in utilization level expected. PAT is expected to come in at Rs.1,543cr, up 3% qoq. We maintain our Accumulate rating on the stock with a target price of Rs.1,550.
Wipro (CMP: Rs.572/ TP: -/ Upside: -)
Wipro is slated to announce its 4QFY2014 results today. We expect the company's IT services segment to post revenues of US$1,713mn, up 2.0% qoq. Volume growth is expected to be ~2.2% qoq. At the consolidated level, we expect the company to record revenues of Rs.11,772cr, up 4% qoq. At a consolidated level, Wipro is expected to record ~30bp qoq inch up in its EBIT margin to 21.0%. PAT is expected to come in at Rs.2,142cr. We maintain our Neutral rating on the stock.
Economic and Political News
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- NSE approves merger of Wadala Commodities with Godrej Industries
- Piramal to buy 20% in Shriram Capital for Rs.2,000cr
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