Reports » India
Indian stock market and companies daily report (August 16, 2013, Friday)
Indian markets are expected to open in the red following negative start to SGX Nifty and weak opening to most of the Asian indices on concerns that the Federal Reserve would start the tapering process soon
US stocks moved sharply lower on Thursday as several upbeat economic reports spurred thinking that the Federal Reserve will begin to scale back its monthly bond buying program in September. The substantial weakness came following the release of a slew of U.S. economic data, including a report from the Labor Department showing that initial jobless claims fell to their lowest level in almost six years. The initial jobless claims fell to 320,000 in the week ended August 10th against expectations of 330,000. A separate Labor Department report showed that the consumer prices rose in line with estimates in July, while the National Association of Home Builders reported homebuilder confidence at a nearly eight-year high in August.
Meanwhile, Indian stocks ended on a positive note on Wednesday led by renewed buying by FII's and firm global cues following signs of economic revival in the Euro Zone. The domestic markets were closed on Thursday due to the Independence Day holiday. Going ahead, trading on Friday may be impacted by release of another set of economic data, including reports on housing starts, labor productivity, and consumer sentiments.
The trend deciding level for the day is 19,321/ 5,729 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 19,439 - 19,510 / 5,768 - 5,793 levels. However, if NIFTY trades below 19,321/ 5,729 levels for the first half-an-hour of trade then it may correct up to 19,250 - 19,132 / 5,703- 5,665 levels.
RBI announces measures to rationalize forex outflows
The RBI has announced additional measures to support the INR by stemming foreign exchange outflows by Indian residents. On August 14, 2013 the RBI announced the following measures:
- Reducing the limit for Overseas Direct Investment (ODI) under automatic route for all fresh ODI transactions, from 400% of the net worth of an Indian Party to 100% of its net worth. This reduced limit would also apply to remittances made under the ODI scheme by Indian Companies for setting up unincorporated entities outside India in the energy and natural resources sectors. This reduction in limit, however, would not apply to ODI by Navratna PSUs, ONGC Videsh Limited and Oil India in overseas unincorporated entities and incorporated entities, in the oil sector.
- Reducing the limit for remittances made by Resident Individuals, under the Liberalised Remittance Scheme (LRS Scheme), from USD 200,000 to USD 75,000 per financial year. Resident Individuals have, however, now been allowed to set up Joint Venture (JV)/Wholly Owned Subsidiary (WOS) outside India under the ODI route within the revised LRS limit.
- While current restrictions on the use of LRS for prohibited transactions, such as, margin trading and lottery would continue, use of LRS for acquisition of immovable property outside India directly or indirectly will, henceforth, not be allowed.
These steps come in the backdrop of government's measures aimed at curbing gold imports through duty hikes, liberalizing caps on FDI limits, attracting capital flows through ECB/ trade finance, PSU quasi-sovereign bonds for infrastructure and attracting NRI deposits etc. The RBI has also taken some strong measures since July 2013 including tightening liquidity in the system, open market sales, linking gold imports to exports, direct forex intervention and the recent curbs on forex outflows. Owing to these steps and more anticipated actions, the INR is likely to get some respite against the free fall. The INR has depreciated by about 12% since the beginning of 2013.
RBI exempts incremental FCNR (B) and NRE term deposits from CRR/SLR, deregulates interest rates on NRE term deposits
In an attempt to attract more foreign inflows, RBI has exempted incremental FCNR (B) deposits as also NRE deposits with reference base date of July 26, 2013 and having maturity of minimum three years, mobilized by banks from maintenance of CRR and SLR. However, any transfer from NRO accounts to NRE accounts shall not qualify for such exemptions. Further, it has deregulated the interest rates on NRE deposits (which was earlier capped at rates offered for comparable domestic rupee deposits), in order to pass on the benefit of exemption provided on such deposits. The banks are likely to pass on the benefit of CRR/SLR exemption by hiking their NRE term deposits rates proportionately. These measures have more to do with attracting more foreign flows.
WPI inflation surprises negatively
The Wholesale Price Index (WPI) based inflation for July 201 3 came in at 5.79% as compared to 4.86% in the previous month and 7.52% in July 2012. The headline print for July 2013 surprised negatively by coming in much higher than market expectations of 5.0%, thus breaching the sub-5% level witnessed in the three preceding months. On a sequential basis, the pick-up can be seen across the broad components - primary articles, fuel & power and manufactured products. The uptick can be attributed to factors such as rise in vegetable and fuel prices and the pass through impact of INR depreciation. ffl Core (non-food, non-fuel) inflation inched up to 2.3% from 2.1% in June 2013, reflecting the impact of imported inflation. Headline inflation for May 2013 has been revised lower by 11 bp to 4.58% from 4.69% reported earlier owing to a downward revision in primary articles inflation. We believe that the recent inflation readings suggesting pass through of INR depreciation into WPI inflation and still-elevated Consumer Price Index (CPI) inflation at 9.6% are likely to limit flexibility in the policy stance in the near-term.
Higher vegetable prices pushed up inflation in primary articles to 8.99% during July 2013 as compared to 8.14% in the previous month. Vegetable inflation accelerated by 46.6% as components such as onions and ginger reported a rise of 145% and 275% respectively.
Inflation in fuel and power paced up on expected lines reflecting higher revision of petrol, diesel and ATF prices due to pass-through of higher crude prices. Inflation in fuel and power index came in double-digits at 11.31% as against a moderate 7.12% in the previous month and 8.39% in July 2013.
The secular trend of deceleration in manufactured inflation since the past nine months has come to a halt with a slight uptick during the month. Manufactured articles reported an inflation of 2.81% in July 201 3 as compared to 2.75% in June 2013 and 5.87% in the corresponding period of the previous year.
The Reserve Bank of India has so far taken a number of strong liquidity tightening measures in order to contain volatility in the exchange rate without hinting at any change in policy rates possibly owing to growth considerations. But the overhang of global and domestic factors affecting the INR is likely to continue in the near term. In addition, we believe that the recent inflation readings suggesting pass through of INR depreciation into WPI inflation and still-elevated Consumer Price Index (CPI) inflation at 9.6% are likely to limit flexibility in the policy stance in the near-term.
RIL discovers new gas in Cauvery basin
Reliance Industries (RIL) has discovered new gas reserves in its deepwater Cauvery block, which has the potential to produce approximately 15mmscmd of gas. However, as per Directorate General of Hydrocarbons the details on the production would be known after the detailed appraisal. We await further clarity over the capex requirements, estimates reserves, production timelines, regulatory approvals etc. Until then, we maintain our Neutral rating on the stock.
TTMT global sales continues to slide, JLR posts strong growth in July
Tata MotorsRs. (TTMT) global sales sustained it's downwards slide in July 2013, declining by 13.8% yoy to 87,566 units, led by poor performance in the domestic passenger and commercial vehicle segments. While, global commercial vehicle sales posted a decline of 14.4% yoy; global passenger vehicle volumes declined by 13.3% yoy. On a mom basis, global volumes grew by 3.7% driven by the robust growth witnessed at Jaguar and Land Rover (JLR).
JLR posted an extremely strong growth of 30.6% yoy (15.1% mom) to 35,162 units, which was ahead of our expectations of 32,500 units. The growth was led by the strong performance of the Jaguar and Land Rover models on the back of the success of the new launches and easing of capacity constraints. Jaguar continued its impressive run, posting a growth of 76.5% yoy (16% mom) to 7,174 units driven by the growth in the F-type and XF model due to the introduction of the Sportbrake, AWD and smaller engine variants. Land Rover sales too recorded a robust growth of 22.4% yoy (14.9% mom) to 27,988 units.
Meanwhile, JLR has recalled 2,929 cars in the United States for two issues, one having to do with possible vehicle stalling and the other for power windows that could pinch. While Jaguar is recalling 940 model year 2013 XF 2-liter GTDi cars for possible stalling issues; the company is also recalling 1,989 model year 2011-2014 XK convertible cars because the power windows may inadvertently be activated and pinch or injure an arm or finger. Jaguar dealers will inspect both the models and provide the necessary service free of cost to the customers. While the quantum of the current recall is small, we believe that repeated occurrence of such events may lead to quality concerns amongst consumers.
We expect JLR to sustain its strong performance going ahead, driven by continued momentum in the global luxury vehicle market and aided further by the strong product launch pipeline and the success of the models launched in 4QFY2013. We expect JLR volumes to grow at ~13% CAGR during FY2013-15E and PAT to grow at ~15% CAGR during the same period. We retain our positive view and recommend an Accumulate rating on the stock with an SOTP based target price of Rs.355.
Lupin settles patent ligation for generic version of Ranexa
In June 2010, Lupin notified Gilead, that it had submitted an abbreviated new drug application to the U.S. Food and Drug Administration requesting permission to manufacture and market a generic version of sustained release ranolazine. In the notice, Lupin alleged that ten of the patents associated with Ranexa® (ranolazine) are invalid, unenforceable and/or will not be infringed by Lupin's manufacture, use or sale of a generic version of Ranexa. In July 2010, after reviewing the notice, Gilead concluded that Lupin infringed its valid and enforceable patents and filed a lawsuit against Lupin in U.S. District Court in New Jersey for infringement of its patents for Ranexa. The trial took place in April and May 201 3.
Prior to issuance of the court's decision, on August 9, 2013, Lupin and Gilead have reached an agreement to settle the patent litigation. Under the agreement, subject to certain conditions, Lupin would be allowed to launch a generic version of Ranexa on Feburary 27, 2019. Ranexa generates approximately US$400mn of sales in US. We maintain our maintain our accumulate with a price target of Rs.904.
Bosch to temporarily suspend production at its plants
According to a filing with the BSE, Bosch has announced that it will suspend the production at its Nashik and Jaipur facilities in August 2013 in a phased manner. While the operations at the Nashik plant will be suspended on 16th and 17th August 2013; the Jaipur plant will witness production shutdown on 19th and between 21st and 23rd August 2013. The production shutdown announced is basically to avoid unnecessary buildup of inventory and align the production as per the market demand. The domestic automotive industry remains the primary driver of company's revenue and weak domestic demand on account of sluggish economic growth, increasing fuel prices and weak consumer sentiments has affected the company's operating performance in 1HCY2013. Nevertheless, we remain positive on the long term prospects of BOS due to its technological leadership and strong and diversified product portfolio. At Rs.8,517 the stock is trading at 20.1x CY2014E earnings. We maintain our Accumulate rating on the stock with a target price of Rs.9,096.
SAIL (CMP: Rs.44/ TP: -/ Upside: -)
SAIL's 1QFY2014 adjusted net profit was better than our estimate on account of lower than expected raw material costs and higher than expected other income. Its net sales decreased 5.0% yoy to Rs.1 0,1 06cr (lower than our estimate of Rs.10,452cr) mainly due to lower realizations (-8.7% to Rs.38,870/tonne) partially offset by higher volumes (+4.0% to 2.6mn tonnes). The raw material cost and power and fuel cost declined by 6.4% and 5.8% to Rs.4,057cr and Rs.1,153cr, respectively. However, its staff costs grew by 15.2% yoy to Rs.2,295cr which resulted in its EBITDA declining by 36.2% yoy to Rs.967cr. Excluding forex loss of Rs.88cr, its adjusted net profit de-grew by 43.5% yoy to Rs.539cr (higher than our estimate of Rs.486cr). We maintain our Neutral rating on the stock.
Bhushan Steel (CMP: Rs.460/TP: - /Upside: -)
Bhushan Steel reported disappointing 1QFY2014 results. Net sales declined 13.6% yoy to Rs.2,374cr. EBITDA also decreased by 14.6% yoy to Rs.737cr in line with decline in top-line. Depreciation expense increased 13.0% yoy to Rs.234cr on account of increased capacity and the interest costs increased 6.6% yoy to Rs.403cr. Consequently, net profit decreased by 63.1% yoy to Rs.76cr. We maintain our Neutral view on the stock.
LIC Housing (CMP: Rs.181/ TP: -/ Upside: -)
LIC Housing Finance reported healthy set of numbers for the quarter, in-line with our estimates. NII growth came in healthy at 24.9% yoy to Rs.473cr, which aided pre-provisioning profit to grow by 26.8% yoy to Rs.441cr. Provisioning expenses for the quarter came in at Rs.17cr, a decline of 60.7% yoy (vs. expectations of Rs.19cr), and hence earnings expectedly grew by 36.3% yoy to Rs.311 cr. We await clarity from the management regarding the asset quality profile of its developer loan book (which as of 1QFY2014 stands at around Rs.2,400cr, 3.0% of its loan book). Recent RBI measures expose LIC Housing to margin pressures, given its wholesale funding nature. We would prefer to wait and watch macro developments in the near term, before we revisit our outlook and rating on the stock. Currently, we maintain our Neutral rating on the stock.
Nalco (CMP: Rs.28 /TP: - /Upside: -)
Nalco's 1QFY2014 results were below our estimates on both, top-line and bottom-line front. Its net sales decreased 10.6% yoy to Rs.1,537cr (lower than our estimate of Rs.1,798cr) which could be on account of lower realizations in our view. Staff costs and other expenses rose 13.4% and 16.7% yoy to Rs.321 and Rs.361cr, respectively. Consequently, EBITDA declined by 49.8% yoy to Rs.153cr. Other income grew by 27.4% yoy to Rs.1 79cr. Hence, its net profit de-grew by 28.4% yoy to Rs.1 60cr (significantly lower than our estimate of Rs.245cr). Considering lower aluminium prices and sticky staff costs, we expect Nalco's profitability to remain under pressure over the coming one year. Hence, we maintain our Neutral rating on the stock.
Amara Raja Batteries (CMP: Rs.277/ TP: Under Review)
Amara Raja Batteries (AMRJ) reported extremely strong performance for 1QFY2014 beating ours as well as consensus estimates. For 1QFY2014, top-line recorded a robust growth of 28.4% yoy (11.2% qoq) to Rs.894cr despite the adverse macro-economic environment. The top-line was driven by the sustained growth in the four-wheeler replacement battery segment though the OEM demand remained muted. The two-wheeler battery segment too registered a significant growth as the company commenced supplies to Honda Motorcycle and Scooters India during the quarter. The growth in the industrial battery segment remained strong as well led by robust demand for telecom batteries in the replacement segment. According to the Management, the growth was restricted due to the capacity constraints in the automotive as well the industrial battery segments. On the operating front, EBITDA margins expanded strongly by 235bp qoq to 16.3% mainly on account of the savings on the raw-material front. The company also benefitted from superior product-mix during the quarter. On a yoy basis though, margins contracted 89bp due to sharp increase in other expenditure probably on account of higher advertisement expenditure. Led by a strong operating performance, net profit grew 28.5% yoy (64.6% qoq) to Rs.98cr.
AMRJ has announced an ambitious capital expenditure plan of Rs.760cr to ease the capacity constraints across the product segments that it is facing currently. We expect the company to sustain its growth momentum going ahead, led by widening reach, strong product offerings and increasing capacity. Our rating and target price is currently Under Review. We shall update the same post our interaction with the management.
Abbott India (CMP: Rs.1,366/ TP: Rs.1,628/ Upside:19%)
For 2QCY2013, Abbott India reported lower than expected results at all fronts. The company reported a sales growth of 6.9% on yoy basis at Rs.440cr, which was 3.7% lower than our estimate of Rs.457cr. EBITDA margin contracted by 1 16bp yoy and came at 9.6%, 1 85bp lower than our estimate primarily due to higher raw material cost as a percent of net sales. Tax expense for the quarter was Rs.14.7cr (33.1% of PBT). Consequently, the net profit was flat on yoy basis at Rs.30cr. However, the net profit was 18.0% lower than our estimate of Rs.36cr on account of lower top-line growth and contraction in operating margin. At current levels, the stock is trading at a PE of 16.8x its CY2014E earnings. With clear strategy of pushing its best brands and focus on nutrition and OTC drug portfolios and continuous new launches, we remain positive on the growth outlook of AIL. At current levels, the stock is trading at a PE of 16.8x its CY2014E earnings. We maintain our Buy recommendation on the stock with a revised target price of Rs.1,628 based on a target PE of 20x for CY2014E.
Monnet Ispat & Energy (CMP: Rs.103 / TP: Under Review)
Monnet Ispat reported disappointing 1QFY2014 results. The net sales declined by 9.7% yoy to Rs.470cr mainly due to weak performance from steel business. EBITDA declined by 15.7% yoy to Rs.115cr due to higher staff cost and other expenditure which grew by 6.5% and 17.6% to Rs.27cr and Rs.50cr respectively. Interest expenses and depreciation expenses grew by 29.5% and 20.2% yoy to Rs.39cr and Rs.26cr respectively on account of capitalization of various projects. Consequently, net profit decreased by 23.4% yoy to Rs.52cr. We maintain our Buy view on the stock but keep our target price under review.
Electrosteel Castings (CMP: Rs.12/ TP: Under Review)
Electrosteel Castings (ECL)'s 1QFY2014 adjusted net profit grew by 22.7% yoy. Its net sales increased 8.8% yoy to Rs.466. Its raw material costs as a percentage of sales declined to 52.9% in 1 QFY2014, compared to 54.3% in 1QFY2013. Also, its other operating income grew by 42.1% yoy to 26cr. Consequently, its EBITDA grew by 236.7% yoy to Rs.38cr. Excluding forex loss of Rs.45cr, its adjusted net profit grew by 161.8% yoy to Rs.45cr. We maintain our Buy rating on the stock while we keep our target price under review.
JK Tyre & Industries (CMP: Rs.92/ TP: Rs.154/ Upside: 67%)
JK Tyre & IndustriesRs. (JKI) reported strong results for 1QFY2014 led by EBITDA margin expansion of 325bp yoy (221 bp qoq) to 12.1% driven by softening of natural rubber prices (down 12.6% yoy). The top-line posted a muted growth of 4% yoy to Rs.1,484 due to the slowdown in the OEM demand. Nevertheless, EBITDA margins witnessed a substantial improvement of 325bp yoy (221bp qoq) to 12.1% as natural rubber prices declined 12.6% yoy leading to a 612bp yoy (280bp qoq) reduction in raw-material cost a percentage of sales. Employee and other expenditure as a percentage of sales however, grew by 140bp and 1 50bp yoy respectively, restricting further expansion in margins. Aided by strong operating performance, the operating profit and adjusted net profit posted a robust growth of 42.3% (31.5% qoq) and 52.6% yoy (96.5% qoq) to Rs.179cr and Rs.68cr respectively. The depreciation (up 42.7% yoy) and finance expense (up 30.2% yoy) continue to remain at elevated levels due to the commissioning of the Chennai plant. During the quarter the company incurred an exceptional expense of Rs.34cr primarily due to the unfavorable currency movement. The company's Mexican subsidiary, Tornel, too posted an impressive performance during the quarter. While the top-line grew marginally by 2.3% yoy to Rs.400cr; EBIT posted a substantial growth of 114.8% to Rs.59cr with EBIT margins increasing by ~800bp aided by decline in input costs. At the CMP of Rs.92, the stock is trading at 2.1 x FY2015E earnings. We maintain our Buy rating on the stock with a target price of Rs.154.
Simplex Infrastructures (CMP: Rs.50/TP: under review)
For 1QFY2014, Simplex Infrastructures (SINF) reported a mixed set of numbers which were above our estimates on the profitability front. SINF reported slow execution due to stagnant order book and delayed payments from clients; however owing to stellar operational performance earnings were above our estimate. On the top-line front, the company reported revenues of Rs.1,395cr registering a decline of 12.0% yoy, which was 7.8% lower than our estimate. EBITDAM came in at 10.8% showing an improvement of 114bp/ 104bp on a yoy/qoq basis and was above our estimate of 9.4%. Interest cost grew by 17.3% yoy to Rs.82cr for the quarter. The company reported adjusted PAT of Rs.16cr in 1QFY2014, a decline of 43.1% yoy which was above our estimate of Rs.14cr respectively. This was mainly owing to stellar operational performance during the quarter. The company has an order book of Rs.15,843cr (2.8x trailing revenue) in 1QFY2014. SINF had secured order worth Rs.1,685cr in 1QFY2014. The stock rating and target price is currently under review. We shall revise our estimates post earnings conference call with the management which is scheduled on August 19, 2013 at 4pm.
Economic and Political News
- RBI cuts overseas investment cap to keep outflows under check
- Government mulls one-time diesel price hike of Rs.2-3
- Government sets textiles exports target at USD43bn for FY2014
- If opposition supports we can table Insurance Bill tomorrow: FM
- LIC debt investment cap raised to 20%
- ONGC to intensify exploration in Tripura
- Yet to hear from Stemcor on our EoI: Tata Steel
- DPSC may sign power distribution franchisee agreement for Gaya
Stock Market Forum
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5 December 2013
- U.s.market update
5 December 2013
- The Oil prices ended up the day on a bright note
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- Global mount money calls and updates
5 December 2013
- Intraday Free Stock Calls for NSE Intraday trading
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- brent crude oil updates ,energy calls and trend
4 December 2013
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3 December 2013
- Petrichor (PTP.V) Closes First Tranche Convertible Debenture Financing for Gross Proc
3 December 2013
- Red Eagle Mining (RD.V) Completes Preliminary Economic Assessment for the San Ramon G
3 December 2013
- India's FDI investment reduce in Q2 of FY14
3 December 2013