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Reports India

Indian stock market and companies daily report (April 28, 2014, Monday)

April 28, 2014, Monday, 06:13 GMT | 01:13 EST | 09:43 IST | 12:13 SGT
Contributed by Angel Broking

The Indian Markets are expected to open flat with a negative bias tracking SGX Nifty and mixed opening in the Asian markets.

The US markets on Friday partly offset the strong upward move seen over the past several sessions as stocks moved sharply lower during the day due to the concerns over the situation in Ukraine coupled with disappointing earnings news. Post the reports of Ukrainian forces killing several pro-Russian militants, traders exited riskier assets such as stocks as they fear possible Russian invasion over the weekend. In addition, Ford posted notable loss and Amazon provided disappointing guidance which further weakened the investor sentiments. Meanwhile, University of Michigan Confidence Index in U.S. came in at 84.1, beating an expectation of 83.0. European markets also tumbled on Friday amid escalating tensions between Russia and the West over Ukraine.

Back home, the Indian shares fell sharply on Friday as the India Meteorological Department forecasted that this year's southwest monsoon rains will be just below normal which sparked worries amongst investors.

Markets Today

The trend deciding level for the day is 22,761 / 6,808 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 22,866 - 23,044 / 6,844 - 6,905 levels. However, if NIFTY trades below 22,761 / 6,808 levels for the first half-an-hour of trade then it may correct 22,583 - 22,479 / 6,747 - 6,711 levels.

Result Review

ICICI Bank (CMP: Rs.1,269/ TP: Rs.1,606/ Upside: 26.5%)

ICICI Bank reported healthy operating performance during the quarter, which was in-line with our expectations. NII for the bank grew at healthy pace of 14.5% yoy to Rs.4,357cr, aided by healthy loan book growth of 16.7% (which was led by 23% growth in retail portfolio). Non-interest income grew strong by 34.8% yoy to Rs.2,976cr. The bank reported healthy pre-provisioning profit growth of 23.6% yoy. Overall earnings for the bank grew healthy at 15.1% yoy to Rs.2,652cr. On the asset quality front, absolute Gross NPAs increased marginally by 1.0% qoq, while net NPAs increased 5.8% qoq. Also, fresh additions to the bank's outstanding restructured book were at around Rs.2,156cr during the quarter (Rs.2,050cr additions in 3QFY2014). Overall, the bank's asset quality performance during the quarter was reasonable in light of prevailing macro environment. Though near term outlook for the bank remains challenging, given the current macro environment, from a structural point-of-view compared to peers, keeping in mind its robust franchise and capital adequacy (total CAR at 17.7% and Tier-I at 12.8%), it remains one of the preferred banks, in our view, from a medium term perspective. At the CMP the stock trades at 1.6x FY2016E ABV We maintain Buy with a price target of Rs.1,606.

Maruti Suzuki (CMP: Rs.1,956/ TP: Rs.2,170/ Upside: 11%)

For 4QFY2014, Maruti Suzuki (MSIL) reported lower-than-expected performance as input cost pressures coupled with compensation to dealers for excise duty cuts announced during the Interim Budget (amounting to Rs.143cr) and provisioning for employee benefit expenses (Rs.93cr) impacted the margins during the quarter. The financials however are not comparable yoy due to amalgamation of Suzuki Powertrain India (SPIL) in 4QFY2013. Meanwhile, the company has increased its dividend payout during the year to Rs.12/ share as against Rs.8/ share in FY2013.

The top-line recorded an in-line growth of 11.1% qoq to Rs.1 2,101cr driven largely by 12.7% qoq growth in volumes. Net average realization though declined 1.3% qoq as the company lowered its prices post the excise duty cuts announced during the Interim Budget. On the operating front, EBITDA margins surprised negatively, as it contracted 213bp sequentially to 10.3%, sharply lower than our expectations of 12%. The EBITDA margins were impacted owing to a) one time compensation to dealers (around 110bp impact on margins) to offset the impact of excise duty cuts which were passed on to the consumers and b) provision for employee benefits for the full year (around 60bp impact for prior period in 4QFY2014). Adjusted for the above two items, adjusted EBITDA margins came in at 11.9%, which was broadly inline with our estimates. Led by lower-than-expected operating performance, reported net profit at Rs.800cr came in sharply below our expectations of Rs.907.

We continue to remain positive on the long-term volume growth potential of the domestic passenger car industry, driven by economic growth and low penetration levels in the country. We expect MSIL to be the primary beneficiary of this structural growth story given its strong brand positioning, expanding portfolio, ability to successfully launch new vehicles and extensive rural/semi-urban network. We expect the company's volume growth to revive going ahead led by the new launches and gradual recovery in demand after three years of weak performance that the industry has witnessed. We maintain our Accumulate rating on the stock with a revised target price of Rs.2,170.

Axis Bank (CMP: Rs.1,534 / TP: Rs.1,922 / Upside: 25.2%)

Axis Bank delivered healthy operating performance for the quarter, which was inline with our estimates. NII expectedly grew at a healthy pace of 18.8% yoy, aided by advances growth of 16.8% yoy. Non-interest income performance was moderate with a 10.3% growth yoy. Opex grew 13.9% yoy on expected lines, which enabled bank to register pre-provisioning profits growth of 16.0% yoy. On the asset quality front, absolute Gross and Net NPAs increased by 4.6% and 2.1% qoq respectively, which given the context of current challenging macro environment, appears to be a moderate increase. Provisioning expenses for the bank came in lower by 15.1% yoy at Rs.505cr. Tax expense unexpectedly increased by 38.7% yoy to Rs.900cr which restricted earnings growth to 18.5% yoy at Rs.1,842cr. At CMP, the stock trades at relatively cheap valuations of 1.4x FY2016 ABV, which is well below our longer term fair value estimate for the bank. Though near term outlook for the bank remains challenging, given the current macro environment, from a structural point-of-view compared to peers, keeping in mind its robust franchise and capital adequacy (total CAR at 16.1%), it remains one of the preferred banks. In our view, from a medium term perspective we recommend investors to Buy the stock with a target price of Rs.1,922.

Bosch (CMP: Rs.10,716/ TP: Rs.11,424/ Upside: 7%)

Bosch (BOS) recorded strong results for 1QCY2014 driven by better-than-expected operating performance and boosted further by significant increase in other income led by treasury gains. BOS posted a strong top-line growth of 10.9% yoy (13.3% qoq) to Rs.2,450cr, sharply ahead of our estimates of Rs.2,230cr, led by 12.9% yoy growth in the automotive segment. The non-automotive segment though posted a modest growth of 4.9% yoy during the quarter. The overall growth was driven by continued momentum in exports, which witnessed a robust growth of ~35% yoy (~13% of sales); whereas, domestic sales too posted a healthy growth of ~9% yoy driven by strong off-take in domestic tractor sales. EBITDA margins improved better than our expectations and stood at 16.3% (up 640bp qoq) as against our expectations of 15.8%. The performance improvement was mainly on account of substantial decline in other expenditure (down 21.7% qoq) and aided by cost reduction initiatives. On a yoy basis though EBITDA margins contracted 102bp due to the negative impact of the INR depreciation on the raw-material cost front. Operating profit at Rs.399cr, up 4.4%, was ahead of our expectations of Rs.353cr. Net profit grew strongly by 25.6% yoy to Rs.326cr, significantly beating our expectations of Rs.240cr. The bottom-line benefitted from higher other income (up 59.3% yoy and 52.9% qoq) on account of treasury gains related to sale of certain investments.

We remain positive on the long term prospects of BOS due to its technological leadership and strong and diversified product portfolio. We expect the company's earnings growth to revive going ahead led by revival in the domestic automotive industry coupled with localization initiatives and expected emission norm change due to roll out in 2015. At the CMP, the stock is trading at 23.5x CY2015E earnings. We believe that BOS will continue to enjoy premium valuations. We maintain our Accumulate rating on the stock with a target price of Rs.11,424.

Exide Industries (CMP: Rs.126/ TP: Under review/ Upside: NA)

Exide Industries (EXID) posted strong results for 4QFY2014 beating consensus as well as our estimates by a wide margin. Top-line posted a healthy growth of 4.7% yoy (23.7% qoq) to Rs.1,613cr as against our expectations of Rs.1,476cr. We believe that healthy growth in replacement segment and higher off-take in the two-wheelers would have aided the top-line performance during the quarter. EBITDA margins stood at 13.6% (against our expectations of 13%) and recovered sharply from 10.9% in 3QFY2014 aided by improvement in capacity utilization levels and reduction in employee expenditure as a percentage of sales. Raw-material cost as a percentage of sales though surged 175bp qoq thereby restricting further expansion in operating margins. Consequently, operating profit grew 7.1% yoy (53.5% qoq) to Rs.219cr, ahead of our expectations of Rs.192cr. Other income during the quarter, however, declined significantly by 67.8% yoy to Rs.10cr as against our expectations of Rs.32cr; thereby impacting the bottom-line performance. Bottom-line at Rs.132cr (down 9.8% yoy) was still ahead of our expectations of Rs.1 27cr.

We would like to seek more clarity from the management on the drivers of the 4QFY2014 performance. At the CMP, the stock is trading at 16.7x FY2016E earnings. Our rating and target price is currently under review.

United phosphorus (CMP: Rs.230/ TP: Rs.283/ Upside: 23%)

UPL posted robust set of numbers for 4QFY2014. The company posted net sales of Rs.3296cr V/s Rs.2773cr in 4QFY2013, posting a yoy growth of 18.9%. On the operating front, it posted EBIDTA margins of 19.1% V/s 17.6% in 4QFY2013, an expansion of 147bps. The Gross Margins came in flat at 47.6%. Thus the main reason for the margin expansion came in through a 2.5% yoy dip in the employee expenses, whereas the other expenses rose by 18.8% yoy. The company during the quarter, had exceptional items to the extent of Rs.25.1 cr and prior period adjustments to the extent of Rs.23.9cr, adjusted for which the net profit came in at Rs.405cr V/s Rs.317cr, posting a yoy growth of 27.8%. We maintain our buy with a price target of Rs.283.

Kirloskar Oil Engines (CMP: Rs.198/ TP: Rs. 236/ Upside: 19%)

Kirloskar Oil Engines (KOEL) reported a mixed set of numbers for 4QFY2014. The top-line has come in line with our expectations at Rs.632cr, 7.6% higher yoy. However, the operating margin contracted by 236bp yoy to 11.6%, against our estimate of 13.1%. The disappointment was mainly because of higher-than-expected raw material cost as a percentage of net sales. Consequently the company reported a net profit of Rs.50cr, lower 16.1% on a yoy basis, and against our estimate of Rs.55cr.

On an annual basis, the company's top-line was almost flat at Rs.2,287cr. On account of higher raw material and employee costs, the company's operating margin contracted by 143bp yoy to 11.9%, against our expectation of 12.3%. Depreciation and other income was broadly in line with our expectation. For FY2014, the company has successfully reduced its working capital cycle to 4 days.

With capacity expansion already in place and minimum capex requirement in near future, we continue to be positive on the company from a longer term perspective. A revival in the economy coupled with operating leverage will be strong driving factors for the company's growth. Hence, we maintain our Buy recommendation on the stock with a target price of Rs.236 with a target PE of 15.0x FY2016E earnings.

Cera Sanitaryware Ltd (CMP: Rs.876/ TP: Rs.934/ Upside: 7%)

Cera Sanitaryware Ltd. (CSL) reported strong set of numbers for 4QFY2014. Top line surged by 38.1% yoy to Rs.218cr, 8.4% higher than our expectation of Rs.201cr. On operating front, EBITDA grew by whooping 69.4% yoy to Rs.35cr while margins expanded by 297 basis point yoy to 16.1% owing to decline in raw material cost by 271 bp yoy as percentage of sales. Consequently, net profit rose by 38.4% to Rs.19cr, amidst higher tax outgo (40.5% of PBT); however, higher than our estimate of Rs.12cr.

On annual front, top line for FY2014 grew by 36.0% to Rs.664cr as compared to our estimate of Rs.647cr. On EBITDA front, operating profit grew by 26.3% while margins contracted by 112bp to 14.3% in FY2014. Dip in margin is mainly attributable to the increased raw material expense by 218bp as percentage of sales. Bottom line for the year came in at Rs.52cr, higher by 7.8% yoy and our estimate of Rs.45cr. PAT margin came in at 7.8% vis-a-vis 9.5% previous year mainly on account of increased tax outgo of 37.0% of PBT (31.9% in FY2013). Considering the low-penetration level of sanitation in India and increasing awareness about the brand Rs.CeraRs. and its recently expanded capacity, Cera is well placed to benefit from the growth in the sanitaryware industry. We recommend Accumulate rating on the stock with a revised target price of Rs.934, based on a target P/E of 16x for FY2016E.

Result Preview

Hindustan Unilever (CMP: Rs.581/ TP:-/ Upside:-)

Hindustan Unilever is scheduled to declare its 4QFY2014 results today. We expect the top-line to grow by 12.1% yoy to Rs.7,139cr. OPM is expected to decline by 113bp yoy 17.6%. Bottom-line is expected to increase by 9.5% yoy to Rs.855cr. We maintain our Neutral recommendation on the stock.

Godrej Consumer (CMP: Rs.805/ TP:-/ Upside:-)

Godrej Consumer is expected to declare its 4QFY2014 results today. We expect the top-line to grow by 18% yoy to Rs.2,025cr. OPM is expected to increase by 153bp yoy to 14.3%. Bottom-line is expected to increase by 9.8% yoy to Rs.215cr. We maintain our Neutral recommendation on the stock.

Shree Cement (CMP: Rs.5,821/ TP:-/ Upside:-)

Shree Cement is expected to declare its 3QFY2014 results today. We expect the top-line to grow by 2.7% yoy to Rs.1,511cr. The OPM is expected to decline by 116bp yoy to 27.4%. Bottom-line is expected to decline by 8% yoy to Rs.252cr. We maintain our Neutral recommendation on the stock.

Alembic Pharmaceuticals (CMP: Rs.306/ TP: / Upside:-)

For 4QFY2014, Alembic is expected to post robust numbers. The company is expected to post net sales of Rs.492cr, a yoy growth of 31.1%. The sales growth will be driven by both exports and domestic sales. On the operating front, it is expected to post EBIDTA margins of 18.7%, an expansion of 160bps.On the net profit, we expect the company to post a net profit of Rs.70cr, a yoy growth of 60.1%. We maintain our neutral on the stock.

Economic and Political News

- FY2014 CAD not just fully financed but added US$28.5bn to reserves: FM

- Forex reserves fall by $31 mn: RBI

- Tough decisions needed to take bilateral trade to US$500bn: Powell

Corporate News

- DLF to raise Rs.900cr via CMBS; Crisil gives stable rating

- HPCL to shut crude unit at Mumbai refinery from Monday

- JSW Steel commissions 2.3mn tonnes capacity cold rolling facility

- Rel iance Cap eyes MCX stake, slams bourse for non-cooperation

- Suzlon bags 370 MW orders in first three months of 2014

- Strides Arcolab gets USFDA approval for Bangalore facility