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Reports India

Indian stock market and companies daily report (August 07, 2014, Thursday)

August 7, 2014, Thursday, 06:06 GMT | 01:06 EST | 09:36 IST | 12:06 SGT
Contributed by Angel Broking

Indian markets expected to open on Negative note tracking SGX Nifty and the Asian markets.

U.S. indices had a quiet trading session after US equities slipped to a two month low yesterday, sharp decline was seen in Sprint Corp. and Time Warner Inc. on failed deals offset gains in consumer-staples shares.

European stocks dropped to their lowest level in more than three months as concern mounted about a buildup of Russian troops along the border with Ukraine, and a report showed German factory orders unexpectedly fell.

Back home, Indian indices plunged as rupee slide against the dollar and it extended losses in late trade as European market dropped after weak economic reports in Germany and Italy.

Markets Today

The trend deciding level for the day is 25,730 / 7,691 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 25,837 - 26,009 / 7,722 - 7,773 levels. However, if NIFTY trades below 25,730 / 7,691 levels for the first half-an-hour of trade then it may correct 25,558 - 25,450 / 7,640 - 7,609 levels.

Lupin launches Basugine

Lupin announced a strategic distribution agreement with LG Life Sciences (South Korea) to launch Insulin Glargine, a novel insulin analogue under the brand name Basugine™. According to the agreement, Lupin would be responsible for marketing and sales of Basugine™ in India. The overall diabetes market size within the Indian Pharmaceutical Market (IPM) stood at Rs.6032cr growing at 18% (IMS MAT April 2014). The total insulin analogue market size is valued at Rs.585cr with 3 year CAGR of 24%. The total Glargine molecule market is Rs.21 8.5cr with 3 year CAGR of 23%. Lupin ranks 2nd in the conventional insulin market and grew more than the market at 10.82% in April 2014 (IMSD MAT), while the market grew at 8%.

Lupin is amongst the fastest growing players in the OAD (Oral Anti-Diabetes Drugs) market and also in the insulin segment Insulin Glargine is indicated for once - daily subcutaneous administration for the treatment of adult patients with type 1 diabetes mellitus or in type 2 diabetes mellitus; patients who need basal insulin (long acting) for controlling hyperglycemia. Lupin's entry into the insulin analogue market with launch of Basugine™ is a step in the right direction. Lupin's foray in this segment will help us further strengthen its Diabetes portfolio enabling it to grow deeper into the Diabetes segment and will fuel its growth in the years to come. We maintain our neutral view on the stock.

Result Review

Tree House (CMP: Rs.379/ TP: Rs.425/ Upside: 12%)

Tree House Accessories and Education Ltd. (THEAL) reported in-line numbers for 1QFY2015. Top-line for the quarter surged by 31.9% yoy to Rs.54cr in-line with our estimate of Rs.52cr, owing to additions of 15 pre-schools. EBITDA grew by 46.0% yoy to Rs.33cr while margins expanded by 600bp yoy to 61.7% (owing to reduced other expenses by 646bp). (Management expects to maintain the current margin levels.) Subsequently, Adjusted PAT too reported yoy growth of 30.5% to Rs.16cr, inline with our estimate of Rs.15cr. Going forward, with consistent expansion of preschools and extended geographical reach, THEAL is poised to register robust growth ahead. Hence, we continue to maintain our Accumulate rating on the stock with revised target price of Rs.425, based on 20x PE for FY2016E earnings.

ITD Cementation (CMP: Rs.358/ TP:- / Upside:-)

For 2QCY2014, ITD Cementation reported poor set of numbers. The revenue of the company for the quarter remained flat at Rs.337cr, 7% lower than our estimate of Rs.365cr. Owing to 293bp yoy increase in raw material cost and 52bp yoy increase in employee cost (both as a percentage of sales) to 34.5% and 12.5% respectively, the EBITDA declined by 27.7% yoy to Rs.28cr. EBITDA margins came in at 8.4% vis-a-vis our expectation of 11.7%. Interest expense for the quarter increased by 1 9% yoy to Rs.32cr and consequently, the company reported a net loss of Rs.2cr against net profit of Rs.5cr in the same quarter of last year. During the quarter, the board has approved the fund raising proposal of Rs.150cr through QIP. We believe that in the near term, the performance of the stock will depend on the success of QIP. At current market price, the stock is trading at PBV of 0.9x for CY2015E. We have a Neutral view on the stock but we may revise our number and target post management interaction.

MM Forgings (CMP: Rs.237/ TP: Rs.291 / Upside: 23%)

For 1QFY2015, the company reported impressive set of results. The top-line for the company increased by 25% yoy to Rs.125cr vis-a-vis our expectation of Rs.115cr. Owing to efficient operating performance, total expenditure as a percentage of sales declined by 367bp to 77.83% resulting in EBITDA margin improving to 22.2%. We had built in an EBITDA margin estimate of 18.4%. Consequently, net profit for the quarter doubled to Rs.13cr from Rs.7cr in the same quarter of the previous year. At current market price, the stock is trading at PE of 4.9x for FY2016E. We have a upgraded our rating to Buy on the stock with a target price of Rs.291 based on target P/E of 6.0x for FY2016E.

Result Preview

Aurobindo Pharma (CMP: ^722/ TP: / Upside:)

Aurobindo Pharma is slated to announce its 1QFY2015 numbers today. We expect the company to post revenue of Rs.2450cr, up 43.6% yoy, lead by exports. EBITDA margin is expected to come in at 16.7% V/s 17.2% during the last corresponding. PAT is expected to come in at Rs.282cr, up 64.6% yoy. We maintain our neutral rating on the stock.

Economic and Political News

- FIPB clears 14 FDI proposals worth Rs 1,528 cr    

- Oil meal exports fell by 37% to 1.15 LT in July

- Modi cabinet may liberalize FDI regime for defense, railway projects

Corporate News

- Oil PSUs seek subsidy of Rs 13,410 cr for Q1 FY15

- Apollo Tyres to invest euro 500 mn in Eastern Europe

- UltraTech eyes 25% growth in turnover during FY15