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Indian stock market and companies daily report (August 27, 2012, Monday)

Contributed by Angel Broking

Indian markets are expected to open flat with a negative bias following SGX Nifty and Asian indices which are trading mixed.

The US markets on Friday showed a substantial turnaround benefiting from a positive reaction to the latest reports regarding the worldRs.s central banks. The major indices moved sideways throughout the trading day; however it ended the day firmly in the positive territory due to a report indicating that the European Central Bank is considering setting yield band targets under a new bond buying program. Federal Reserve Chairman Ben Bernanke also re-iterated that US central bank has more tools, if needed, to stimulate the economy. Meanwhile, the Commerce DepartmentRs.s report on durable goods orders for July showed a much bigger than expected increase in durable goods orders. Also the Philadelphia Housing Sector Index inched up by 1.3%, closing at four-year high.

Going ahead, the investors would be watchful of a slew of data which is scheduled to be released this week. Traders are likely to keep an eye on reports on consumer confidence, pending home sales, personal income and spending, and Chicago area business activity. On the domestic front, the key data to watch out for would be the quarterly GDP growth rate for 1QFY2013 which would be released on August 31, 2012.

Markets Today

The trend deciding level for the day is 17,777/ 5,386 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17,829 - 17,874/5,401 - 5,414 levels. However, if NIFTY trades below 17,777/5,386 levels for the first half-an-hour of trade then it may correct up to 17,732 - 17,680/5,372 - 5,357 levels.

L&T to shut switchgear unit in China

As per media reports, Larsen & Toubro (L&T) has decided to shut down its switchgear unit in China due to low growth and stringent competition from local low-cost producers. Accordingly, the companyRs.s plan to exit the business is awaiting Chinese government clearance. L&T had forayed into the switchgear space in China in 2006 with the establishment of the factory at Wuxi in Jiangsu province through Larsen & Toubro (Wuxi) Electric Company Ltd (LTW), a wholly-owned subsidiary of L&T International FZE, Sharjah. LTW mainly used to cater to the Chinese market. LTW manufactures air circuit breakers (ACB) and moulded case circuit breakers (MCCB). The factory is equipped with manufacturing facilities, quality control and testing equipment. The sale of the circuit breaker business might be in line with L&TRs.s strategy of focusing on the core businesses and sell small businesses to unlock value. We recommend Accumulate on the stock with a target price of Rs.1,553.

Cadila Healthcare inks pact with CanadaRs.s Microbix

Cadila Healthcare has announced the closing of a definitive agreement regarding re-launch of Kinlytic (urokinase) in North American markets with Canada based biotechnology player Microbix Biosystems Inc. The market size for urokinase in the US is estimated to be around US $400mn. Zydus had signed a letter of intent (LoI) with Mircrobix in January this year to market the thrombolytic drug, urokinase in North America.

Urokinase is used in clearing pulmonary embolisms and intravenous catheter blockages, and has been administered to over four million patients since it was first approved in the US in 1978. This life saving drug has been unavailable to patients since 2009 due to lack of an approved manufacturing facility. Microbix acquired all rights to urokinase in 2008 and has been working to re-introduce the drug since that time.

Under the agreement, Microbix has licensed to Zydus Cadila all its rights and expertise relating to urokinase. On the other hand, Zydus Cadila will make all further investments related to regulatory approvals, product development, manufacturing as well as marketing the drug. Zydus will be manufacturing the drug at its own biologics facility. This would help Microbix to avoid any major manufacturing scale up as well as validation costs.

Microbix will also receive significant royalties on all sales of urokinase together with a multi-million dollar milestone payment upon ZydusRs. touching of US $100mn annual sales mark. The deal is positive for the company and would start contributing meaningfully from FY2016. Hence, we maintain our estimates and maintain our accumulate recommendation on the stock with a target price of ?953.

JSW Steel reports moderate steel production numbers for July 2012

JSW Steel reported moderate growth in steel production for 1QFY2013. Crude steel production grew by 13% yoy to 0.68mn tonnes. Flat rolled products production grew by 15% yoy to 0.49mn tonnes and long rolled products production grew by 24% yoy to 0.14mn tonnes during the quarter. JSW Steel stated that capacity utilization at its Vijayanagar plant (10mn tonnes p.a.) declined to from ~80% in 1QFY2013 to ~75% in July 2012 due to constraints in availability of good-quality iron ore to run the furnaces at full capacity. At the current price level, we maintain our Neutral view on the stock.

Home ministry bars Punj Lloyd from participating in port projects on security grounds

As per media reports, the union home ministry has barred Adani Port and Special Economic Zone, Lanco Infratech and Punj Lloyd - from participating in two major port projects on security grounds. Punj Lloyd have been denied security clearance for the coal import terminal at the government-controlled Mormugao Port in Goa. Existing norms say companies have to get security clearance from the ministries of home, defence and external affairs before building a port or an import terminal. The process can stretch over many months and delay the projects. Sometimes, denial of permission on security grounds can disqualify bidders. We maintain our Neutral view on Punj Lloyd.

Jyoti Structures announces order wins worth Rs.1,491cr

Jyoti Structures announced that it has received, domestic as well as export orders for a total consideration of Rs.1,491cr. The orders include 400kv transmission lines on turnkey basis in India and Kenya along with certain rural electrification projects. Project duration for the orders is 18 to 24 months. Order wins of Rs.1,491cr remains strong compared to our expectations of Rs.2,834cr for FY2013E. We maintain Buy rating on the stock with a Target Price of Rs.59.

Economic and Political News

- ICRA lowers GDP forecast to 5.7%

- Lower rate alone canRs.t prop up economy: RBI

- Sebi bars companies from buying shares through staff trusts

Corporate News

- GVK gets okay for US$10bn Alpha coal mine, rail project

- Reliance Power plans to raise Sasan plant capacity by 50%

- SC issues notice to Tata Motors in Singur land row