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Indian stock market and companies daily report (February 01, 2013, Friday)
The Indian market is expected to open flat today, mirroring flat opening to SGX Nifty and mixed start to most Asian indices following unexpected fall in Chinese PMI to 50.4 as against expectations of 51 by the economists.
The US stocks lacked direction throughout the trading day on Thursday and eventually ended in the red following mixed batch of economic data. According to the report from the Labor Department, initial jobless claims rose higher than expected to 368,000 in the week ended January 26th, from the previous week's unrevised figure of 330,000. However, on the positive side business activity in Chicago (according to ISM) climbed to 55.6 in January from a revised 50.0 in December 2012.
Going ahead, earnings news is likely to be in focus on Friday. Additionally, traders are also likely to keep an eye on US Labor DepartmentRs.s monthly jobs report. Further, reports on US manufacturing activity, consumer sentiments, and construction spending are also due to be released today.
The trend deciding level for the day is 19,923 / 6,039 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 19,981 - 20,066 / 6,053 - 6,072 levels. However, if NIFTY trades below 19,923 / 6,039 levels for the first half-an-hour of trade then it may correct up to 19,838 - 19,780 / 6,021 - 6,006 levels.
Growth for FY2012 revised downwards to 6.2%
As per the governmentRs.s first revised estimates, real GDP growth for FY2012 has been scaled down to 6.2% from the earlier quick estimate (QE) of 6.5%. This is because growth in the services sector, having the largest chunk in overall GDP growth has been revised to 8.2% (as against QE 8.9%). On the other hand growth in the primary and secondary sector has been revised upwards to 3.6% (as against 2.8% QE) and 3.5% (as against 3.4% QE) respectively.
On a positive note, real GDP growth for FY2011 has been augmented to 9.3% as compared to the earlier estimate of 8.4%. The real GDP growth has been marginally revised upwards for FY2010 as well at 8.6% as compared to the earlier estimate of 8.4%.
The per capita income in real terms (at constant prices) is estimated at Rs.38,037 for FY2012 as against Rs.36,342 in FY2011, witnessing a slower pace of increase at 4.7% during the year, as against an increase of 7.2% during the previous year.
Meanwhile the saving rate decelerated as Gross Domestic Saving (GDS) at current prices in FY2012 constituted 30.8% of GDP at market prices as against 34.0% in the previous year. This decline in FY2012 is mainly led by the deceleration in the rates of financial savings of household sector to 8.0% from 10.4% in FY2011, private corporate sector to 7.2% from 7.9% and that of public sector to 1.3% from 2.6%. The rate of capital formation at current prices in FY2012 too declined to 35% of GDP as compared to 36.8% of GDP in the previous year.
As far as growth during FY2013 is concerned, we expect it to have bottomed out at 5.3% in 2QFY2013. Real GDP growth for 1HFY2013 stands at 5.4% as against 7.3% in 1HFY2012. For FY2013 as a whole, we expect the economy to grow at 5.7% and with further improvement in the economic outlook we expect growth in the range of 6% - 6.5% for FY2014.
L&T Construction wins orders worth Rs.1,401cr
Larsen & Toubro has bagged various orders worth Rs.605cr in the power T&D segment. Also, L&T has bagged EPC orders worth Rs.320cr various civil works for the Sindhudurg airport project in Maharashtra. Further it has bagged Rs.476cr worth of orders from defence segment for designing and construction infrastructure facilities at an airbase in Uttar Pradesh. We continue to maintain our Accumulate rating on the stock with a target price of Rs.1,788.
Oil India auction floor price at Rs.510
The offer: The government of India will sell a 10% stake in Oil India through the auction of 6.01cr equity shares of face value Rs.10 each. There is no fresh issue of equity. Oil India has fixed the floor price of the issue at Rs.510 per share. We recommend investors to Subscribe to the shares.
One of the lowest cost producers: During FY2012, Oil IndiaRs.s cost of oil production stood at US$8.3/bbl, which is one of the lowest in our view. Its cost of natural gas production stood at US$1.4/mmbtu. Due to lower cost of production, Oil India enjoys robust operating margins (~30%) despite lower net realizations, on the back of subsidy sharing with Oil Marketing Companies (OMCs).
Rise in fuel prices could pave way for re-rating: Upstream oil PSU companies have been sharing under-recoveries by the downstream companies who sell diesel, kerosene and LPG cylinders at subsidized rates. As there is no concrete formula or methodology to determine the annual subsidy of any of these companies, investors have remained concerned over the lack of visibility on profitability of downstream and upstream companies. During FY2012, subsidy shared by Oil India rose by 123.3% yoy to Rs.7,352cr. However, given the rising under-recoveries, government has hinted at diesel price de-regulation (diesel contributes 60% to total underrecoveries). Hence, going forward, diesel price de-regulation is likely to result in lower subsidy burden on upstream companies including Oil India and thus higher realizations. Oil IndiaRs.s Management also expects the subsidy amount to decline significantly during FY2014.
Strong balance sheet paves way for acquisition of energy assets: As on September 30, 2012, Oil India had net cash of Rs.212/share on the balance sheet. Considering the operating cash flow and the companyRs.s capex requirements over the coming few years, we believe the company will maintain high cash balance, which could pave way for acquisition of oil and gas assets. The company aims to acquire shale gas assets in the US.
Outlook and valuation: Historically, Oil India stock has traded at a lower EV/1P Reserves compared to its global peers on account of lower realizations on crude oil (subsidy sharing with downstream companiesRs. results in lower net realizations). However, we believe that the governmentRs.s initiatives to raise (de-regulate) the price of diesel gradually should lead to lower subsidy sharing by upstream companies from FY2014 and hence, result in higher realizations. Consequently, we expect Oil IndiaRs.s valuation gap to narrow gradually with global peers. We derive a SOTP-based target price of Rs.600 and recommend investors with long-term horizon to Subscribe to the shares of Oil India.
3QFY2013 Result Review
Lupin (CMP- Rs.604/ TP: Rs.655/ Upside: 8%)
For 3QFY2013, Lupin reported net sales of Rs.2,466cr, up 38.4% yoy, ie higher than our estimate. The companyRs.s gross margin came in at 62.1%, lower than in the corresponding period of last year (65.1% in 3QFY2013). However, in spite of the same, on back of lower other expenses, the OPM came in at 23.1% vs 20.5% in 3QFY2012, and also higher than our expectation of 20.5%. In spite of higher taxation, the net profit grew only by 42.6% yoy to end the period at Rs.335cr. We recommend Accumulate on the stock with a target price of Rs.655.
GCPL (CMP: Rs.708/TP:/Upside:-)
GCPL posted a 25.8% yoy growth in top-line to Rs.1,691cr. Indian subcontinent business posted a 20% yoy growth in net sales to Rs.938cr aided by double-digit growth in Home care (28%), Soaps (20%) and Hair care (17%) segments. Indonesian and African business posted a top-line growth of 30% and 21.5% yoy respectively. OPM fell by 315bp yoy to 16.6%, due to steep 61% yoy increase in advertisement and promotion (A&P) expenses. A&P expenses as a percentage of sales went up by 236bp on a yoy basis. Bottom-line rose by a marginal 3% yoy to Rs.172cr impacted by OPM compression, lower other income and higher tax rate (up 293bp yoy to 26.2%) We maintain our Neutral recommendation on the stock
Mahindra Satyam (CMP: Rs.120 / TP: Under review / Upside: -)
For 3QFY2013, Mahindra Satyam reported higher than expected revenue as well as operating performance but disappointed on the bottomline front due to exceptional loss of Rs.294cr because of Abredeen claim settlement. Revenue came in at US$356mn, up 0.6% qoq, mainly led by 1.5% qoq volume growth. In INR terms, revenue came in at Rs.1,938cr, up 3.1% qoq. The companyRs.s operational performance was ahead of our expectations, with EBITDA margin growing by 5bp qoq to 21.6%. PAT came in at Rs.80cr, impacted by Rs.294cr of exceptional loss. Adjusting to the loss, the PAT came in at Rs.374cr (ahead of our estimates), up 34% qoq. The company continued to deliver operational exuberance with decent volume growth. We remain positive on the stock and the target price is currently under review.
Tata Global Beverages (CMP:Rs.150/TP:-/Upside:-)
Tata Global Beverages (TGBL) posted a 6.1% yoy growth in topline to Rs.1,902cr aided by favourable foreign currency translation impact, and was in-line with our estimates. Tea business posted a 9.3% yoy growth in topline to Rs.1,421cr aided by strong performance both in India and other markets such as Canada and Australia. Coffee business posted a marginal 1.2% yoy decline in its sales to 481cr. OPM rose by 27bp on yoy basis to 10% aided by a 238bp yoy decline in advertising and selling expenses. Despite lower topline, the coffee business posted a 20.1% yoy growth in its profits, aided by lower raw material costs and lower expenditure on advertisement. Adjusted Net profit rose by 15.3% yoy to Rs.92cr. We maintain a neutral recommendation on the stock.
Thermax (CMP: Rs.582/TP: -/Upside: - %)
For 3QFY2013, Thermax top-line and bottom-line performance was below our expectations. Top-line declined by 17.5% yoy to Rs.1,047cr on account of declining order book and delays in execution (may be due to client deferrals). The companyRs.s EBITDA margin came in flat at 10.7%. Consequently, Net Profit declined by 20.2% yoy to Rs.76cr. We maintain our Neutral rating on the stock.
Jagran (CMP: Rs.108/TP: Rs.126/Upside: 17%)
Jagran announced its 3QFY2013 results. The companyRs.s top-line grew by 7.8% yoy to Rs.342cr in-line with our expectation of Rs.344cr. The company reported 7.1% yoy growth in its advertising revenue to Rs.239cr and 12.2% yoy growth in its subscription revenue to Rs.70cr. OPM came in flat yoy at 24.6% in-line with our expectation of 25.0%. The tax benefit due to accumulated losses at Nai Dunia subsidiary resulted in robust 51.7% yoy growth in net profit to Rs.69cr. At the current market price, Jagran is trading at 16.9x FY2014E consolidated EPS of Rs.7.1. We maintain Buy on the stock.
Ashoka Buildcon (CMP: Rs.200/ TP: Under Review/ Upside: -)
Ashoka Buildcon (ABL) posted 3QFY2013 results below our estimates, primarily due to a slowdown in execution in the E&C segment. ABLRs.s top-line grew by 22.1% yoy to Rs.431cr in 3QFY2013 (Rs.353cr in 3QFY2012) against our estimate of Rs.522cr. On the EBITDAM front, ABLRs.s margins came at 18.9% (19.6% in 3QFY2012), lower than our estimate of 23%, owing to lower-than-expected revenue growth. On the bottom-line front, ABLRs.s PAT declined by 35.3% yoy to Rs.13cr (Rs.17.0cr in 3QFY2012) against our estimate of Rs.54cr. This was mainly on account of lower-than-expected operating performance and higher tax rate. At CMP, the stock is trading at P/E and P/BV of 13.4x and 0.8 FY2014E earnings. The stock rating is currently under review. We shall revise our estimates post earnings conference call with the Management which is scheduled on February 1, 2013 at 4.00 p.m.
3QFY2013 Result Preview
Bharti Airtel (CMP: Rs.339 / TP: - / Upside: -)
Bharti Airtel is slated to announce its 3QFY2013 results today. We expect the company to record a revenue of Rs.20,415cr, up 1% qoq. In domestic mobile servies, MOU is expected to go up by 3.0% qoq to 429min while ARPM is expected to remain almost flat qoq at Rs.0.43/min. Africa business is expected to post ~4% qoq growth in revenues. Consolidated EBITDA margin of the company is expected to improve by 20bp qoq to 31.5%. EBITDA margin of Africa business is expected to remain flat qoq at ~27%. PAT is expected to be at Rs.910cr. We maintain our Neutral view on the stock.
BHEL (CMP: Rs.228 / TP: - / Upside: - %)
We expect Bharat Heavy Electricals (BHEL) to post a subdued top-line growth of 5.3% yoy to Rs.11,110cr for 3QFY2013 as industrial slowdown continues to delay execution. On the EBITDA front, the companyRs.s margin is expected to be flat at 1 7.8%. Consequently, we expect PAT to come in flat yoy at Rs.1,425cr. We maintain our Neutral recommendation on the stock as we expect tepid order flow to continue going forward.
Marico (CMP: Rs.227/TP:/Upside:-)
Marico is expected to announce its 3QFY2013 results today. We expect the topline to grow by 21.2% yoy to Rs.1,283cr. OPM is expected to expand by 344bp yoy to 15.0%. Bottomline is expected to grow by 54.2% yoy to Rs.130cr. We maintain a neutral recommendation on the stock.
Indian Bank - (CMP: Rs.202 / TP: Rs.252 / Upside: 24.8%)
Indian Bank is scheduled to announce its 3QFY2013 results tomorrow. We expect the bank to report flat performance on the NII front at Rs.1,173cr. Growth in noninterest income is expected to be muted at 6.6% yoy to Rs.300cr. Operating expenses are expected to increase at a higher pace of 13.3% yoy to Rs.611cr, leading to 5.5% yoy decline in operating profit to Rs.862cr. However, net profit is expected to decline by higher 19.6% yoy, as it had lower effective tax rate in 3QFY2012, which we expect to come at normalize levels in 3QFY2013. At the CMP, the stock is trading at 0.7x FY2014E ABV. We recommend Buy rating on the stock, with a target price of Rs.252.
Corporation Bank - (CMP: Rs.457 / TP: Rs.534 / Upside: 16.8%)
Corporation Bank is scheduled to announce its 3QFY2013 results today. We expect the bank to report flat performance on the NII front at Rs.857cr. Non-interest income is expected to decline by 15.3% yoy to Rs.374cr. Operating expenses are expected to increase by 3.5% yoy to Rs.494cr, leading to 10.8% yoy decline in preprovisioning profit to Rs.737cr. Provisioning and tax expenses are expected to decline by 13.7% and 22.0% yoy, respectively, which would limit the decline in net profit to 5.1% yoy. At the CMP, the stock is trading at 0.7x FY2014E ABV. We recommend Buy rating on the stock, with a target price of Rs.534.
TVS Motor (CMP: Rs.44/ TP: Rs.46/ Upside: 6%)
TVS Motor is scheduled to announce its 3QFY2013 results today. We expect the company to report a moderate growth in top-line to Rs.1,826cr (up 3.7% yoy) largely led by ~6% yoy growth in net average realization. The volume growth however, remained subdued during the quarter (down 2.1% yoy) on account of extremely weak scooter sales (down 18.1% yoy) amidst rising competition and moderating demand environment. The motorcycle sales too remained sluggish posting a growth of ~2% yoy. We expect the EBITDA margin to remain flat on a yoy basis at 6.5%; however margins are expected to improve by ~50bp on a sequential basis led by superior product-mix. We expect the bottom-line to register a 4% yoy growth to Rs.59cr. At the CMP of Rs.44, the stock is trading at 7.6x FY201 4E earnings. Currently, we have an Accumulate rating on the stock with a target price of Rs.46.
Economic and Political News
- Government to come out with modified DTC Bill
- Government revises FY12 GDP to 6.2% from 6.5%
- Discretionary consumer spending falls: Credit Suisse
- L&T Construction secures orders worth Rs.1,401cr in Jan
- REpower bags order for wind farm in Canada
- DLF sells wind turbine project in Gujarat for Rs.282cr
- Lupin to launch generic drugs in US by March-end
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