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Reports India

Indian stock market and companies daily report (April 22, 2014, Tuesday)

April 22, 2014, Tuesday, 05:59 GMT | 00:59 EST | 09:29 IST | 11:59 SGT
Contributed by Angel Broking

The Indian Markets are expected to open flat today with tracking slightly negative opening on SGX Nifty while most of the Asian markets are trading mixed.

US stocks moved mostly higher over the course of session on Monday extending the strong upward move that was seen last week. The strength that emerged on the Wall Street reflected positive reaction to the latest earnings news which generated some buying interest, as the quarterly results have thus far been better than most had feared. Positive sentiment may also have been generated by a report from the Conference Board showing a bigger than expected increase by its leading economic indicators index which rose by 0.8% in March after climbing by 0.5% in February, against economist estimates of 0.7% increase.

Back home, Indian markets rose modestly to hit fresh record highs on Monday aided by continued foreign fund inflows. Banks extended last week's gains after the Reserve Bank of India fully sold the Rs.20,000cr worth of bonds on offer at its biggest bond auction ever held on Thursday.

Markets Today

The trend deciding level for the day is 22,732 / 6,810 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 22,828 - 22,891/6,833 - 6,849 levels. However, if NIFTY trades below 22,732/6,810 levels for the first half-an-hour of trade then it may correct 22,669 - 22,574/6,795 - 6,771 levels.

Supreme Court allows mining to resume in Goa

The Supreme Court has lifted mining ban in Goa with some pre-conditions. The iron ore mining will be restricted to a capacity of 20mn tonnes annually. Resumption of iron ore mining is positive for Sesa Sterlite as it had mined 14mn tonnes from Goa during FY2011, although the new capacity is likely to be much lower. However, we believe the eventual start-up of production is likely to take its own time due to regulatory hurdles as witnessed in Karnataka. We expect meaningful production from FY2016. Also, since Goan ore is mainly used for exports, it is unlikely to have any material impact on domestic iron ore pricing. We await further clarity from Sesa Sterlite. Until then, we maintain our estimates and Accumulate rating on the stock with a target price of Rs.228.

GSM subscriber base rises by 1.16% in March

GSM operators have added a total of 8.26mn subscribers in March, a 1.16% rise from the previous month, taking the total user base to 721.9mn, according to data released by Cellular OperatorsRs. Association of India (COAI), with Idea Cellular topping the chart. Idea Cellular added 2.24mn users, taking its total subscriber base to 135.8mn and its market share rose to 18.81% during the month. The second-largest operator Vodafone India added 2.22mn users during the month, increasing its total user base to 166.56mn as of March-end with a 23.07% market share. Bharti Airtel reported addition of 1.89mn users with its total subscriber base standing at 205.39mn users with 28.45% market share. Aircel reported addition of 1mn users during the month, increasing its user base to 70.15mn. Among the circles, Uttar Pradesh (East) added the maximum of 1.09mn users in March, increasing its total base to 63.86mn.

TCS merges Japan units with Mitsubishi to create US$600m company

TCS has inked an agreement with Mitsubishi Corporation to form a new IT services company of significant scale in the Japanese market with annual turnover of over ~US$600mn and over 2,400 employees. Under the agreement, India's largest software services firm will merge TCS Japan and Nippon TCS Solution Center with IT Frontier Corporation (ITF), the fully owned arm of Mitsubishi. The new company is yet to be named. TCS will hold a 51% stake and Mitsubishi 49% in the merged entity. The deal is a cash and equity deal, and cash payout by TCS is ~US$50mn. The new entity is expected to be operational from July if approvals are in place and is expected to report revenue of ~US$300mn over the remaining nine months of the financial year. This deal lends TCS an edge in the Japanese market with local manpower, client references as well as other Japanese clients in Hi-tech, Manufacturing, BFSI and Retail verticals. TCS Japan, before the merger, had revenue of about US$100mn and fewer than 1,000 employees. We continue to remain positive on the stock with target price of Rs.2410.

Result Review

Hindustan Zinc (CMP: Rs.132/ TP: Under Review/ Upside: -)

Hindustan Zinc's (HZL) 4QFY2014 net profit was in line with our estimate. HZL's net revenue decreased by 6.8% yoy to Rs.3,589cr (slightly below our estimate of Rs.3,644cr) mainly due to lower silver sales volumes and lower prices. Average zinc, lead and silver prices declined by 1.0%, 8.0% and 32.0%, yoy respectively, which was partially offset by 14.0% INR depreciation against the USD. Refined zinc production was flat yoy at 182kt whereas refined silver production volumes declined 16.0% yoy to 91 kt. The cost of zinc production rose by 24.0% yoy to Rs.55,467, and hence EBITDA decreased by 17.0% yoy to Rs.1,755cr. The other income increased by 42.9% yoy to Rs.589cr and depreciation expenses also increased by 67.5% yoy to Rs.204cr. Hence, net profit declined by 13.8% yoy to Rs.1,881cr (in line with our estimate of Rs.1,849cr). We maintain our Buy rating on the stock while we keep our target price under review.

Result Preview

HDFC Bank (CMP: Rs.717/ TP: Rs.865/ Upside: 21%)

HDFC bank is expected to announce healthy set of results for 4QFY2014. The NII is expected to increase by 16.3% yoy to Rs.4,993cr, while non-interest income is expected to increase by 22.5% yoy to Rs.2,209cr, thus achieving a healthy operating income growth of 18.1% yoy. Operating profit is expected to grow by 34.4% yoy, due to largely flat operating expenses yoy. Provisioning is expected to be Rs.424cr compared to Rs.301cr in 3QFY2013. Consequently the PAT is expected to increase by 26.1% yoy to Rs.2,384cr. The stock is currently trading at a valuation of 2.8x P/ABV FY2016E. We retain our Buy rating on the stock.

Economic and Political News

- Pakistan not considering granting MFN status to India

- Financial crisis severe, Kerala goes for borrowing second time in April

- Supreme Court allows iron ore mining in Goa

Corporate News

- IOC buys 3mn barrels West African crude

- Alstom bags EUR30mn contract from BHEL

- GMR may bid for Ahmedabad airport's privatization

- Alstom T&D India bags EUR8.4mn contract from PowerGrid Corp.