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Reports India

Indian stock market and companies daily report (August 11, 2014, Monday)

August 11, 2014, Monday, 04:47 GMT | 23:47 EST | 08:17 IST | 10:47 SGT
Contributed by Angel Broking

Indian markets expected to open on gap up tracking SGX Nifty and the global markets.

U.S. indices moved higher sharply due to optimism of de-escalation of Ukraine crisis backed by increased in labour productivity in USA. The market, however, offset the concern about authorization of airstrikes against northern Iraq by USA.

European market ended flat to negative, offsetting losses in the morning session on signs of tension easing in Ukraine. However, markets were lackluster mainly due to dying hopes of further stimulus from European central bank.

Indian markets closed negative on weak global cues and the geopolitical concerns on Iraq, as US authorized air-strikes against northern Iraq. The market remained lower for the whole trading day on account of profit booking. Depreciating rupee and increasing crude price further added concerns on Indian economy.

Markets Today

The trend deciding level for the day is 25,323 / 7,567 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 25,413 - 25,497 / 7,594 - 7,619 levels. However, if NIFTY trades below 25,323 / 7,567 levels for the first half-an-hour of trade then it may correct 25,239 - 25,149 / 7,542 - 7,515 levels.

USFDA lists violations at Ratlam API facility of Ipca Labs

With regards to the IPCA's 483 on the Ratlam API facility, the USFDA has listed six serious deviations on inspection done between 14-18 July 2014. The FDA issued the company a so-called "Form 483", in which the agency outlined half a dozen violations including data integrity issues at the company's Ratlam plant in Madhya Pradesh. The observations mostly relate to the company's laboratory practices and staff training, and may lead to more severe warnings or even an import ban if not addressed properly.Fast resolution of the issue is important, as Ratlam facility is very important for Ipca Labs because it supplies API both to Silvassa and Indore plant and they have voluntarily stopped shipments from that facility but if these issues are not taken care of, there is a possibility of a warning letter or an import ban by USFDA. Meanwhile, the company after the issue of the 483 had slated that they hope to resolve these issues in the next four-six months, hence as of now we are not changing our estimates of the company, however in worst case scenario the company's net profit in FY2016, can result in a 12.6% dip and the stock would tarde at Rs.752(at 15xFY2016E earnings). Thus as of now we retain our buy on the stock, with a price target of Rs.986.

Result Review

Finolex Cables Ltd. (CMP: Rs.200 /TP: -/ Upside: -)

Finolex Cables Ltd. (FCL) reported marginally lower set of numbers for 1QFY201 5. Top-line grew by 3.3% yoy to Rs.572cr, 5.9% lower than our estimate of Rs.608cr. Electricals cables (EC) reported growth of 7.2% yoy to Rs.508cr while Communication cables (CC) remained flat at Rs.48cr. Copper rods (CR) segment, however, dip by 51.3% in the quarter compared to same quarter previous year. EBITDA for the quarter grew by 9.1% to Rs.56cr, in-line with our estimate, while EBITDA margin expanded by 52bp on a yoy basis to 9.8% mainly attributable to lower raw material and employee cost. EBIT margin For EC and CR segment expanded by 92bp and 58bp yoy to 11.9% and 5.7% respectively. For CC segment, margin dip by 708bp to 5.1%. Subsequently, bottom line grew by 2.4% yoy to Rs.35cr, 6.1% lower than our estimate of Rs.37cr while PAT margins are at 6.1%. Considering the overall flat performance of the company coupled with the recent run-up in the stock, we recommend Neutral rating on the stock.

Banco Products (India) (CMP: Rs.128/ TP: Rs.150 / Upside: 1 7%)

For 1QFY2015, Banco Products reported consolidated numbers that were slightly below our expectations. The top-line for the quarter improved by 3.8% yoy to Rs.323cr vis-a-vis our expectation of Rs.342cr. Owing to 167bp yoy increase in raw material cost and 89bp yoy increase in employee expenses, both as a percentage of sales, EBITDA margins declined by 204bp yoy to 12.5%, against our estimates of 14.5%. Consequently, the net profit for the quarter declined by 13.4% yoy to Rs.24cr. At current market price, the stock is trading at PE of 7.7x for FY2016E. We maintain our Buy recommendation on the stock with a revised price target of Rs.150 based on target PE of 9.0x for FY2016E.

TVS Srichakra (CMP: Rs.667/ TP: Rs.822 / Upside: 23%)

For 1QFY2015, TVS Srichakra reported excellent set of numbers. The revenue for the quarter improved by 17.3% yoy to Rs.447cr, above our expectation of Rs.440cr. The EBITDA margin expanded by 208bp yoy to 8.1% largely due to decline in raw material cost as percentage of sales, which dropped by 492bp yoy to 61.9% resulting in EBITDA of Rs.36cr. We had built in an EBITDA margin expectation of 7.1%. Consequently, the net profit for the quarter improved by 146.6% yoy to Rs.17cr, beating our estimate of Rs.13cr. At current market price, the stock is trading at PE of 5.7x for FY2016E. We maintain our Buy recommendation on the stock with a revised price target of Rs.822 based on target PE of 7.0x for FY2016E.

Economic and Political News

- Govt likely to raise sugar export subsidy to Rs.3,371/tonne

- India only received investment bid in multi brand from Tesco: Govt

- SEBI approves eatablishing REITs

Corporate News

- Siemens bag Rs.228 cr orders from Reliance Industries

- Alstom T&D bags Rs.240cr contract from TN Transmission

- Godrej Properties to develop townhomes in Bangalore