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Reports India

Indian stock market and companies daily report (April 23, 2014, Wednesday)

April 23, 2014, Wednesday, 05:50 GMT | 00:50 EST | 10:20 IST | 12:50 SGT
Contributed by Angel Broking

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

US markets ended on a positive note on Tuesday reflecting positive sentiments following a series of announcements on the merger and acquisitions worth US$66bn in the US pharmaceuticals space. On the economic front, the National Association of Realtors released a report showing a marginal 0.2% drop in existing home sales in the month of March to a seasonally adjusted annual rate of 4.59mn units. Meanwhile, European stocks rallied on Tuesday, as trading resumed after a four-day Easter holiday break.

On domestic front, Indian stocks ended marginally lower on Tuesday after hitting record highs for the second consecutive session earlier in the day. Investors adopted a cautious stance ahead of the expiry of April series derivative contracts today and market holiday on Thursday in view of the parliamentary elections. Going ahead, trading on Wednesday is likely to be impacted by the expiry of the April derivative contracts and earnings announcements.

Markets Today

The trend deciding level for the day is 22,780 / 6,820 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 22,832 - 22,905/6,833 - 6,852 levels. However, if NIFTY trades below 22,780/6,820 levels for the first half-an-hour of trade then it may correct 22,706 - 22,654/6,802 - 6788 levels.

Result Review

HDFC Bank (CMP: Rs.726/ TP: Rs.865/ Upside: 19%)

HDFC bank continued its trend of delivering consistent earnings performance quarter after quarter and registered a bottom-line growth of 23.1% yoy for 4QFY2014. The bank's loan book grew by 26.4% yoy (21.8% yoy adjusted for foreign currency loans during special window) which aided NII growth of 15.3% yoy. Margins for the bank increased by around 20bp qoq to 4.4% on back of FCNR (B) deposits utilization. Non-interest income for the bank grew at moderate pace of 11.0%. While operating income grew by 14.0%, opex remained largely flat in line with our expectations, which aided pre-provisioning profit to grow by 27.6% yoy. On the asset quality front, the absolute gross NPA levels decreased by 0.9% qoq while absolute net NPA for the bank increased by 2.8% qoq, which given the context of current macro challenges, appears to be a moderate increase. Overall, the bank reported earnings growth of 23.1% yoy. The stock is currently trading at a valuation of 2.8x P/ABV FY2016E. We recommend Buy rating on the stock.

MLIFE (CMP: Rs.382/TP: Rs.478/ Upside: 25%)

For 4QFY2014, Mahindra Lifespace Developers (MLIFE) reported 15.6% yoy decline in its standalone top-line to Rs.86cr. The standalone EBITDA decreased by 71.2% yoy to Rs.5cr, owing to lower-than-expected revenue recognition and increase in staff cost (up 22.6% yoy) during the quarter. On the earnings front, the company reported a PAT of Rs.19cr, indicating a decline of 17.5% yoy. This was mainly on account of lower other income and sluggish sales during the quarter. On a consolidated level, MLIFE reported a revenue of Rs.189cr and PAT of Rs.30cr, suggesting a profit for its subsidiaries at the net level. We recommend a Buy rating on the stock with a target price of Rs.478.

MRF (CMP: Rs.21,879/ TP: Under Review)

For 2QSY2014, MRF reported mixed set of numbers. The company reported a topline growth of 13.5% yoy to Rs.3,299cr, higher than our estimate of Rs.3,084cr. However, the EBITDA margin for the quarter contracted by 278bp yoy and came in at 12.5% against our estimate of 14.2% mainly because of the increase in raw material cost, employee cost and other expenses as a percentage of net sales. Raw material expense escalated on account of higher rubber prices (at 190/kg) which is expected to decline (at Rs.150/kg) in the coming quarters. Depreciation for the quarter increased by 13.7% yoy to Rs.106cr while the interest cost came in at Rs.63cr, 29.6% higher yoy. Consequently, net profit for the quarter declined by 18.9% yoy to Rs.171cr, 19.1% lower than our estimate of Rs.211cr. Currently, the stock is under review.

Result Preview

Cairn India (CMP: Rs.364/ TP: - / Upside: -)

Cairn India is slated to report its 4QFY2014 results today. Cairn India's net sales is expected to increase 20.3% yoy to Rs.5,250cr due to increase in both production and realizations. Its operating margin is also expected to expand by 237bps yoy to 77.0% and the bottom line is expected to increase by 28.3% yoy to Rs.3,289cr. We maintain our Neutral view on the stock.

Ultratech (CMP: Rs.2,204/ TP:-/ Upside: -)

Ultratech is expected to announce its 4QFY2014 results today. We expect the topline to grow by 3.5% yoy to Rs.5,580cr. OPM is expected to decline by 468bp yoy to 19.1% due to higher costs. Bottom-line is expected to decline by 25.7% yoy to Rs.540cr. We maintain our Neutral recommendation on the stock.

Yes Bank (CMP: Rs.434/ TP: Rs.514/ Upside: 18%)

Yes Bank is slated to announce its 4QFY2014 results today. We expect the bank to report a healthy NII growth of 9.4% yoy to Rs.698cr, on back of advances growth of 15.0% yoy. Non-interest income is expected to grow healthy by 22.5% yoy to Rs.465cr. Operating expenses are expected to increase by 23.0% yoy to Rs.472cr. Provisioning is expected to be lower at Rs.50cr as compared to Rs.98cr reported in 4QFY2013. Hence, we expect the bank to report healthy PAT growth of 21.6% yoy during the quarter to Rs.440cr. At the CMP, the stock is trading at 1.5x FY2016E ABV. We recommend a Buy rating on the stock.

Economic and Political News

- Food Ministry starts review of raw sugar subsidy amidst WTO pressure

- Milk production grew by 19% and crossed 121mn tonnes: Assocham

- SC pulls up Centre for not handing over probe related to Black Money to SIT

- RBI may set new pricing norms for state debt in phases

Corporate News

- Hindustan Zinc will rework mining plans to boost volumes

- GAIL India cancels contract to lay pipeline in Tamil Nadu

- Kedaara Capital invests Rs.200cr in Mahindra Logistics

- International Tractors signs pact with L&T Finance for vehicle loans

Stock Market Forum