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Reports India

Indian stock market and companies daily report (April 21, 2014, Monday)

April 21, 2014, Monday, 03:00 GMT | 22:00 EST | 06:30 IST | 09:00 SGT
Contributed by Angel Broking

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 stocks ended the session on mixed note after showing lack of direction on Thursday as traders seemed reluctant to make any significant move ahead of the long weekend. A mixed reaction to the latest batch of earnings news also contributed to the lackluster performance by the broader markets. Traders largely shrugged off the report from the Labor Department showing a smaller than expected increase in weekly jobless claims. The initial jobless claims inched up to 304,000, an increase of 2,000 from the previous week's revised level of 302,000; however it is still at the lowest level in almost seven years.

Meanwhile, Indian markets rose sharply on Thursday after global ratings agency S&P signaled it may upgrade India's rating outlook if the incoming government implements constructive policies that effectively addresses some of the credit weaknesses. Additionally, global cues too remained supportive following reassuring comments from the Federal Reserve Chief. Going ahead, traders would keenly watch for the outcome of the earnings releases as well as US economic reports on new and existing home sales and durable goods orders.

Markets Today

The trend deciding level for the day is 22,530 / 6,749 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 22,748 - 22,866 / 6,814 - 6,848 levels. However, if NIFTY trades below 22,530 / 6,749 levels for the first half-an-hour of trade then it may correct 22,41 1 - 22,193 / 6,715 - 6,650 levels.

Result Review

Reliance Industries (CMP: Rs.959, TP: Under Review, Upside: -)

Reliance IndustriesRs. (RIL) 4QFY2014 net profit came slightly below our estimate. Its net sales increased 13.1% yoy to Rs.95,193cr (below our estimate of Rs.100,726cr) due to increase in Refining segment sales (+12.5% yoy) and Petrochemical segment sales (+9.9% yoy). Gross refining margins (GRMs) stood at US$9.3/bbl in 4QFY2014 (US$7.6/bbl in 3QFY2014 and US$10.1/bbl in 4QFY2013) while the gas production from KG-D6 fields stood at 13.6mmscmd in 4QFY2014 compared to 12.3mmscmd in 3QFY2014. RIL's EBITDA increased by 3.0% yoy to Rs.10,367cr on account of improvement in profit from Refining segment (EBIT up 12.3% yoy to Rs.3,954cr) and Petrochemical segment (EBIT up by 10.6% yoy to Rs.2,096cr). Other income however declined by 9.2% yoy to Rs.2,036cr; hence, net profit was flat yoy at Rs.5,631cr (slightly below our estimate of Rs.5,703cr). We maintain our Buy rating on the stock while we keep our target price under review.

Wipro (CMP: Rs.586/ TP: Under review)

For 4QFY2014, Wipro results came in ahead of our expectations on all the broader fronts. The IT services revenue came in at US$1,720.2mn, up 2.5% qoq vs. expectation of ~2.3% qoq growth. Revenue growth during the quarter was broad based. At the consolidated level, Wipro's revenue came in at Rs.11,653.5cr, up 2.8% qoq. During 3QFY2014, Wipro's IT services EBIT margin grew by ~150bp qoq (after growth of ~50bp qoq in 3QFY2014 and ~250bp qoq in 2QFY2014) to 24.5%, which came in as a positive surprise, driven by improvement in utilization rates PAT came in at Rs.2,227 (estimate - Rs.2,142cr), up ~10% qoq.

The company added 59 new clients during the quarter and the active clients increased to 986 from 968 in 3QFY2014. Also, utilizations level improved significantly by ~170bp qoq to 67.7. For 1QFY2015, the management has given a USD revenue guidance of US$1,715mn-1,755mn, which translates into a revenue growth range of (0.5) -2% as against expectations of 1.5-3.0%. While the 4QFY2014 numbers came in well ahead of expectations, the revenue growth outlook for the next year disappointed. Wipro may face some bit of selling pressure post results in the near term. Wipro has recovered strongly from lower levels after posting better than expected results in the last two quarters but we believe it will still lag other larger peers such as TCS and HCL Tech in terms of revenue growth rates in FY2015. We currently maintain our Neutral view on the stock and wait for management commentary on discretionary spending and large deal wins. We would revise our target price and rating post the earnings conference call.

HCL Technologies (CMP: Rs.1,424/ TP: Under review)

For 3QFY2014, HCL Tech came out with better than expected set of results largely on all fronts, signaling the likelihood of a stronger year ahead. The dollar revenues came in at US$1,361mn, up 3% qoq (estimate - 2.6%), led by strong 5% qoq dollar revenue growth in Infrastructure management services (IMS). Excluding IMS, revenue growth of the company was becoming a concern in the past in this quarter the company shrugged that off by registering 2% qoq USD revenue growth in that. In INR terms, revenues came in at Rs.8,349cr, up 2% sequentially. EBIT margin of HCL Tech grew by ~90bp qoq to 24.6% as against our expectation of ~35bp qoq decline, which came in as a positive surprise. HCL Tech's EBIT margin has grown by more than 400bp on a yoy basis which is creditable task. Historically, operating margin has been a concern for HCL Tech but the company has shrug off all the concerns by consistently posting increase in operating margins since last seven quarters (excluding 2QFY2014). PAT stood tall at Rs.1,624cr, up 8.5% qoq, assisted by strong operational performance and higher other income.

HCL Tech won 12 transformational deals during the quarter and booked US$1bn+ TCV worth of deals, seventh consecutive quarter of signing ~US$1bn TCV worth of deals. HCL Tech has a strong position in one of the fastest growing service vertical of IMS and on the back of this the company has been growing largely at par with its peers. The concern of weak growth in core software services have been partially shrugged off by the company in the current set of results and management indicated that the deal pipeline in this area of services continues to remains healthy. Overall, the company performed exceptionally well on the margins front and we continue to remain positive on the stock for a longer-term perspective keeping in notice the company's deal signing trajectory and healthy operating performance since last several quarters.

Persistent Systems (CMP: Rs.1,066/ TP: Under review)

Persistent Systems reported inline set of results for its 4QFY2014. The dollar revenues came in at US$72.6mn, up 3.9% qoq, led by robust 14.4% qoq revenues growth in IP-led revenues. IT services revenue grew by 1.6% on a sequential basis. In INR terms, revenues came in at Rs.447cr, up 3.2% qoq. The company's EBITDA margin declined by ~80bp qoq to 27.0% due to increase in employee cost. PAT stood at Rs.67cr, up 4.7% qoq, negatively impacted by forex loss of Rs.87cr. The management remains confident of FY2015 with deal pipeline being strong and remains focused on increasing the share of IP-led revenues in its portfolio. The stock is currently under review and we would revise our target price and rating post the earnings conference call.

Result Preview

LIC Housing (CMP: Rs.269/ TP: 294/ Upside: 9.2%)

LIC Housing is expected to announce its 4QFY2014 results today. NII is expected to increase by 19.7% yoy to Rs.583cr, while non-interest income is expected to grew by 29.5% yoy to Rs.26cr. Operating expenses are expected to increase by 1 0.4% yoy to Rs.104cr, while Provision write back of Rs.22cr is expected against write back of Rs.3cr in 4QFY2013. Overall, we expect PAT to increase by 22.0% yoy to Rs.386cr. We recommend an Accumulate rating on the stock with a target price of Rs.294.

Hindustan Zinc (CMP: Rs.132/ TP: Rs.164/ Upside: 24%)

Hindustan Zinc is slated to announce its 4QFY2014 results today. The company's top-line is expected to decrease by 5.4% yoy to Rs.3,644cr mainly on account of lower realisations. EBITDA margin is also expected to decline by 177bp to 53.2% due to decrease in top-line. Its bottom-line is also expected to decrease by 1 5.3% yoy to Rs.1,849cr. We maintain our Buy rating on the stock with a target price of Rs.164.

Economic and Political News

- Forex reserves increase to $309.44 bn

- DoT approaches TRAI for next round of spectrum auction

- PMO cites strong growth data, trashes Rs.weakRs. PM criticism

Corporate News

- Aviva shortlists 3 insurers for 26% stake sale in Indian JV

- RIL divests 30% stake in Peru oil block

- LinkedIn hits 300 mn milestone, 50% traffic to come from mobile

- Infosys Europe revenue crosses $2 bn for 1st time