Indian stock market and companies daily report (February 03, 2014, Monday)
February 3, 2014, Monday, 05:16 GMT | 00:16 EST | 10:46 IST | 13:16 SGT
Indian Markets are expected to open in the red today tracking negative opening trades in SGX Nifty and most of Asian markets. Major Asian markets are trading lower after a slowdown in Chinese manufacturing growth has added to concern that the global economic recovery is faltering.
US markets ended on a negative note on Friday following disappointing earnings announcement from Amazon and Mattel. On the economic front, announcements were mostly mixed as consumer spending grew better than expected in December 2013 even as income levels remained unchanged. According to the Commerce Department release, personal income remained unchanged in December, against expectations of a 0.2% increase. However, personal spending rose 0.4% in December, exceeding economist estimates of a 0.2% growth.
Meanwhile, Indian markets ended higher on Friday, snapping a five-day losing streak. Trading during the week is likely to be impacted by earnings announcement by domestic and global companies along with US economic reports on employment, trade balance, manufacturing and services sector activity and weekly jobless claims.
The trend deciding level for the day is 20,512 / 6,085 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 20,575 - 20,635 / 6,102 - 6,115 levels. However, if NIFTY trades below 20,512 / 6,085 levels for the first half-an-hour of trade then it may correct 20,451 - 20,272 / 6,072 - 6,054 levels.
Real GDP growth for FY2013 revised lower to 4.5% from 5.0%
In its first revised estimates to FY2013 national income data by the Central Statistical office (CSO), real GDP growth for FY2013 has been revised lower to 4.5% from provisional estimates of 5.0% owing to downward revision across sectors. During FY2013, revised GDP growth estimates indicate agricultural sector growth at 1.4%, industrial sector growth at 1.0% and services sector growth at 7.0%.At the same though the second revision to FY2012 data indicates at an upward revision to growth at 6.7% from 6.2% reported earlier.
During FY2013, growth in real gross fixed capital formation, an indicator of the investment environment in the economy slumped to 0.7% as compared to 12.2% in the previous year. The savings rate further decelerated to 30.1% of GDP in FY201 3 as compared to 31.3% in FY2012 and 33.7% in FY2011.
We expect real GDP growth for FY2014 to remain subdued and range between 4.0-4.8%. Going ahead, though we expect real GDP growth for FY2015 to range between 5.8-6.3% supported by the performance of exports and revival in investment as well as consumption demand. Going into FY2015, we expect a recovery in non-farm GDP (to above 6% level) mainly owing to a revival in global growth and improved external demand conditions coupled with anticipated upturn in the domestic investment cycle from greater policy-related momentum post elections.
Auto Monthly - January 2014 Mahindra & Mahindra
Mahindra & Mahindra reported better-than-expected volumes led by a strong growth in the tractor sales. The automotive sales, however, continued its weak performance as passenger vehicle segment once again witnessed a steep decline in volumes. Total volumes declined 6.2% yoy to 62,794 units during the month. Tractor sales sustained its strong growth traction reporting an increase of 15.1% yoy due to strong farm output following good monsoon and in anticipation of a good rabi crop. The automotive segment (down 13.8% yoy) continued to report disappointing performance led by a sharp decline of 25.5% yoy in passenger vehicle sales. The passenger vehicle sales of the company remains impacted due to the sluggish demand environment and increased competition. The four-wheeler pick-up segment posted a modest growth of 4.5% yoy during the month.
Maruti Suzuki witnessed a 10.3% yoy decline in total volumes to 102,416 units, in-line with our expectations, mainly due to a 47.7% yoy decline in exports. Domestic volumes too posted a 6.3% yoy decline led by a 17% yoy decline in the Mini segment. The super compact segment, however, continued its strong run registering a growth of 12.7% yoy led by the Dzire. Compact segment posted a modest growth of 1.9% yoy driven by Swift. The utility vehicle (down 21.9% yoy) segment continues to post sluggish volumes led by slowdown in demand for diesel cars and also on account of higher competition from Ford and Renault. Sequentially, domestic volumes posted a strong growth of 11.5% yoy led by strong growth in compact (up 27.7% mom), super compact (24.7% mom) and vans sales (up 12.4% mom).
Tata Motors (TTMT) continued its poor run as the domestic commercial (CV) and passenger vehicle (PV) volumes contracted sharply following weak consumer demand, slowdown in industrial activity and increasing competition. Total volumes declined by 34.3% yoy to 40,481 units with the domestic CV and PV segments registering a sharp decline of 36.9% and 27% yoy respectively. Within the CV space, medium and heavy (MHCV) and light commercial vehicle segments witnessed a decline of 4% and 45.3% yoy respectively. While in the PV segment, utility vehicle and passenger cars witnessed a decline of 36.3% and 23.6% yoy respectively. On a sequential basis though, volumes grew by 7% led by 33.2% and 8.6% growth in passenger car and MHCV volumes respectively.
TVS Motor Company (TVSL) reported better-than-expected volume growth of 5.9% yoy to 186,313 units driven by strong volume growth in scooters and three-wheelers. Momentum in exports continued during the month as it posted a robust growth of 39.3% yoy led by 34.7% and 63.9% yoy growth in two-wheelers and three-wheelers respectively. Domestic sales, however, grew by 1.4% yoy largely led by 19.1% yoy growth in scooters led by the success of Jupiter. Motorcycle and moped sales remained sluggish during the month. On a sequential basis, volumes surged by a strong 16.8% yoy on the back of 17.8% and 11.9% growth in domestic and export sales respectively.
Godrej Consumer (CMP: Rs.751/TP:-/Upside:-)
Godrej Consumer's (GCPL) 3QFY2014 results were below estimates. The company posted a 17% yoy growth in top-line to Rs.1,979cr. The company's India and International businesses posted revenue growth of 13% yoy and 22% respectively. International business posted constant currency growth of 13%. Domestic growth was impacted by weak off-take in Household insecticides category, due to weak demand in southern and eastern states on account of poor monsoons. Soaps category posted value and volume growth of 6%, despite category de-growth in both in volume and value terms. Hair colors segment posted a strong 37% yoy value growth, which was significantly ahead of category growth. Growth in International front was lead by Africa business which posted a growth of 29% (constant currency growth of 21%). GCPL's OPM fell by 1 07bp yoy to 15.5%. OPM was impacted due to the divestment of foods business in Indonesia and also increase in fuel costs and wage hikes in the country. Bottom-line rose by 13.6% yoy to Rs.196cr. We maintain a neutral rating on the stock.
PNB (CMP: Rs.549/ TP: Rs.673/ Upside: 23%)
Punjab National Bank (PNB) reported improvement in asset quality numbers during the quarter. Advance growth for the bank came in moderate at 9.7% yoy, which reflected in NII growth of 13.1% yoy. Non-interest income de-grew by 3.3% yoy, thereby resulting in 9.7% yoy growth in operating income, in-line with our expectations. As expected, the bank reported yoy flat pre-provisioning profit. Over last eight quarters, the bank had witnessed severe asset quality pain, as both Gross and Net NPAs have more than doubled over the period. During 3QFY2014, in-line with management's guidance, slippages for the quarter more than halved on a yoy basis to Rs.1505cr (Slippage rate of 1.9%), while restructuring during the quarter were also lower qoq at Rs.2,150cr vs. Rs.2,700cr in 2QFY2014. Sequentially lower slippages resulted in flat Gross NPAs qoq. Provisioning expenses for the bank also nearly doubled yoy to Rs.1590cr, leading to 328bp qoq improvement in PCR to 58.6% and 5.5% qoq decline in Net NPAs. The bank strategically underwent a consolidation phase (marked with subdued growth in balance sheet) over last four-five quarters, but now targets to catch up with industry growth rates. The bank's management (which have been historically reasonably cautious on its asset quality), now believe that the worst is over in terms of asset quality and expect asset quality pressures to moderate hereon. However, we remain watchful on incremental asset quality pressures for the bank, in the near term, as negative surprises on the asset quality still cannot be entirely ruled out. At CMP, the stock trades at valuations at 0.5x FY2015E ABV. With increasing expectations of reversal in interest rate cycle in early part of next fiscal, from a medium term perspective, we recommend investors with higher risk appetite to Buy the stock.
MSS (CMP: Rs.204/ TP: -/ Upside: -)
Motherson Sumi Systems (MSS) recorded strong 3QFY2014 results driven by robust performance at the Samvardhana Motherson Reflectec (SMR) and Samvardhana Motherson Peguform (SMP) front. SMP turned profitable during the quarter recording a net profit of Rs.29cr (against a loss of Rs.49cr in 2QFY2014); while EBITDA margins at SMR touched double digit levels (sharp expansion of 130bp qoq to 10.1%) leading to a record net profit of Rs.59cr. On the standalone front, however, the company reported sluggish results due to slowdown in top-line growth and margin pressures.
For 3QFY2014, consolidated revenues grew strongly by 19.9% yoy (1 0.3% qoq) to Rs.7,989cr, ahead of our estimates of Rs.7,610cr, on the back of the strong growth in SMR and SMP revenues. The revenues at SMR and SMP grew at a robust rate of 30.2% (12.8% qoq) and 22.8% yoy (13.2% qoq) respectively driven by execution of new orders coupled with the favorable currency movement. The standalone entity though posted a modest 3.9% yoy (flat qoq) growth in the top-line due to the slowdown in the domestic markets. At the consolidated level, while the India revenues grew by 2.5% yoy (down 1.5% qoq); overseas revenues grew by 24.2% yoy (12.4% qoq) during the quarter. On the operating front, consolidated margins stood flat sequentially at 9.6% (up strongly by 195bp yoy), broadly in-line with our estimates of 9.9%, driven by improving capacity utilization levels at SMR and SMP. While raw-material cost pressures were witnessed during the quarter, continuous ramp-up at the new facilities mitigated the impact on the margins. While, SMR margins witnessed a sharp improvement of 130bp qoq to 10.1%, standalone margins contracted 170bp to 19% primarily due to commodity cost pressures. SMP margins remained flat sequentially at 5.9% during the quarter. Led by a strong operating performance, adjusted consolidated bottom-line increased by a strong 33.5% yoy to Rs.223cr.
We retain out positive view on the company as it continues to report sharp improvement in its operating performance, driven by its strategy of increasing the content per car, improvement in utilization levels at the new plants and profitability improvement measures at SMP. We maintain our Buy rating on the stock; however, our target price is under review.
Marico (CMP: Rs.213/ TP: Rs.254/ Upside: 19%)
Marico's 3QFY2014 top-line rose by 7.4% yoy to Rs.1,198cr. On a like-for-like basis (adjusted for the kaya business, demerged w.e.f October 17th 2013) top-line growth stood at 10% yoy. Domestic FMCG business posted a revenue growth of 9%, aided largely by price hikes. Volume growth for the domestic FMCG business stood at ~3% yoy. Revenue growth of Parachute coconut oil rigid packs, value added hair oil and Saffola stood at 6% yoy, 16% yoy and 7% yoy respectively. International business posted a revenue growth of 15% (volume growth of 1%) aided by favourable exchange rate impact of 12%. Constant currency growth for international business stood at 3% yoy. Marico's OPM stood at 16.7% up 273bp on yoy basis despite the steep increase in copra prices (up 78% yoy during the quarter) due to the price hikes taken by the company. The demerger of low margin kaya business too aided the expansion of OPM on yoy basis. Bottom-line rose by 32.3% yoy to Rs.135cr. We maintain our Buy recommendation on the stock with a Target Price of Rs.254.
Canara Bank (CMP: Rs.221/ TP: Rs.240/ Upside: 8%)
Canara Bank reported moderate operating numbers, while asset quality exhibited weakness. On the operating front, NII growth was moderate at 12.0% yoy (significantly lower compared to advance growth of 31.8% yoy), while non-interest income was flat on a yoy basis. Operating profit growth was subdued at 4.9% yoy. The bank witnessed asset quality weakness during the quarter, as added stressed assets of around Rs.6,000cr during the quarter. Annualized slippages rate for the quarter came in at 3.5% as compared to 2.5% qoq, while fresh restructuring came in at Rs.3,454cr (of which around Rs.2400cr was discoms restructuring under FRP).
Recoveries and upgrades were higher during the quarter at Rs.1,061cr compared to Rs.891cr in 2QFY2014. Provisioning expenses for the bank grew 68.0% yoy to Rs.1,052cr, leading to a sharp earnings de-growth of 42.4% yoy. Going forward, the management has guided for restructuring pipeline of Rs.3,300cr. Given the backdrop of prevailing macro environment, its high exposure to stressed sectors remains a cause of worry. At CMP, the stock trades at valuations of 0.4x FY201 5E ABV. We maintain our Accumulate recommendation on the stock.
IDBI Bank (CMP: Rs.55/ TP: -/ Upside: -)
IDBI bank reported weak operating performance for quarter. NII for bank grew by 5.3% yoy to Rs.1,488. Non-interest income de-grew by 38.8% yoy to Rs.532cr. Operating expenses were largely in-line at Rs.781cr. On the asset quality front bank witnessed moderate pressures with absolute gross NPA increase of 6.9% qoq. The provisioning expense for the bank grew by 7.3% yoy to Rs.1,033cr yoy thereby absolute net NPA levels remained flat qoq. Gross NPA ratio increased by 46bp while net NPA ratio increased by 11 bp sequentially. Overall earnings for bank de-grew by 75.1% yoy to Rs.104cr. At CMP the stock is trading at a valuation of 0.4x P/ABV FY2015E. We retain our Neutral rating on the stock.
Petronet LNG (CMP: Rs.110/ TP: -/ Upside: -)
Petronet LNG reported disappointing results for 3QFY2014. Although the company's net sales increased by 11.4% yoy to Rs.9,382cr (due to higher price of LNG), its cost of re-gasified LNG increased by 14.2% yoy to Rs.8,917cr. This resulted in EBITDA declining by 33.8% yoy to Rs.350cr. Other income grew by 44.9% yoy to Rs.22cr. However, interest and depreciation expenses increased by 168.7% and 115.7% yoy to Rs.78 and Rs.102cr, respectively, due to capitalization of Kochi terminal. Consequently, net profit declined by 57.4% yoy to Rs.136cr. Looking ahead, although earnings growth is likely to suffer in the coming one year on account of lower utilization levels at its recently commenced Kochi terminal, we believe valuations are undemanding at 9.2x FY2015 PE. Hence, we are likely to upgrade the stock. Currently, we keep our rating and target price on the stock under review.
Union Bank (CMP: Rs.108/ TP: Rs.119/ Upside: 10%)
Union bank reported modest asset quality pressures during quarter. On the operating front NII grew by 3.8% yoy (in spite of healthy advances growth of 20.0% yoy probably on back of interest reversals). Non-interest income grew by 6.3% yoy. Operating expenses grew higher by 17.8% (in line with expectations). Overall, pre-provisioning profit for the bank de-grew by 7.1% yoy. On the asset quality front, the bank witnessed moderate pressures, as Gross and Net NPA levels increased sequentially by around 9% respectively. Gross and Net NPA ratios for bank increased by 21bp and 1 1bp respectively. Slippages came in lower qoq at 2.3% (3.2% in 2QFY2014 and 1.5% in 3QFY2013) while recoveries and upgrades came lower at Rs.265cr against Rs.453cr run-rate for last four quarters. Provisioning expenses for bank decreased unexpectedly by 28.8% yoy, thus overall bottom-line witnessed growth of 15.4% yoy. At CMP, stock trades at 0.4x FY2015E P/ABV. Hence, we maintain our Accumulate recommendation on the stock.
OBC (CMP: Rs.174/ TP: -/ Upside: -)
Oriental Bank of Commerce (OBC) delivered subdued operating performance for the quarter, while asset quality witnessed moderate pressures. Net Interest Income for the bank remained largely flat yoy, while non-interest income de-grew by 9.8% yoy, leading to flattish operating income on a yoy basis. Pre-provisioning profit for the bank de-grew by 7.3% yoy. On the asset quality front, the bank witnessed moderate pressures, as the absolute Gross and Net NPA levels increased sequentially by 6.1% and 12.0% respectively. Provisioning expenses de-grew by 7.1% (though on a large base of 3QFY2013), thereby leading to PBT level earnings de-growth 7.8% yoy. Tax expense for bank came at Rs.73cr (against tax reversal of Rs.4cr in 3QFY201 3). Overall earnings declined by 31.3% yoy. We await clarity from the management regarding the asset quality performance during the quarter and outlook on the same going ahead. We maintain our Neutral rating on the stock. At the CMP, the stock is trading at 0.4x FY2015E ABV. We maintain our Neutral recommendation on the stock.
Syndicate Bank (CMP: Rs.85/ TP: -/ Upside: -)
Syndicate Bank reported subdued operating performance for the quarter. NII for the bank de-grew 2.9% yoy (vs. domestic advance growth of 7% yoy), while Noninterest income grew moderately by 8.6% yoy. At the pre-provisioning profit level, the bank reported 6.8% yoy decline. On the asset quality front, the bank witnessed stability, as absolute Gross and net NPA levels remained largely flat sequentially. Gross NPA ratio decreased by 8bp to 2.8%, while Net NPA ratio remained flat qoq. Provisioning expenses for the bank declined 13.4% yoy, which resulted in PBT level earnings growth of 3.7% yoy. However, the bank had much lower tax reversals during the quarter as compared to what it had in 3QFY2013 (at Rs.33cr in 3QFY2014 vs. Rs.174cr in 3QFY2013), which resulted in PAT de-growth of 25.3% yoy. We seek management comments on asset quality performance during the quarter and the outlook on asset quality and tax rate going ahead. Until then, we maintain our Neutral Rating on the stock. At the CMP, the stock trades at a valuation of 0.4x FY2015E ABV. We maintain our Neutral recommendation on the stock.
IRB Infra (CMP: Rs.77/ TP: Rs.106/ Upside: 37%)
For 3QFY2014, IRB Infrastructure (IRB) reported a healthy set of numbers and was above our expectations on the profitability front. The company's PAT came in above our expectation mainly on account of (a) Increase in BOT toll revenue due to operation of some BOT projects and (b) better than expected operational performance. IRB's consolidated revenues stood at Rs.877cr in 3QFY2014 (against our estimate of Rs.941cr), indicating a decline of 4.0% yoy. This was mainly due to (a) slow pick up in execution pace in its newly awarded under-construction BOT projects and (b) some of its projects such as Jaipur-Deoli and Tumkur-Chitradurga road BOT projects attaining completion (~95% complete). The E&C segment reported revenue of Rs.591cr (our estimate was Rs.605cr) registering a decline of 11.3% yoy and the BOT segment witnessed a growth of 12.2% yoy to Rs.315cr (our estimate was Rs.336cr). On the EBITDAM front, IRB's margin increase by 494bp yoy to 49.6% and was higher than our estimate of 45.0% owing to increase in BOT toll revenues due to operation of some BOT road projects. Interest cost came in at Rs.204cr, registering a jump of 28.0% on a yoy basis. At the earnings front, IRB reported a decline of 23.1% yoy to Rs.109cr against our estimate of Rs.102cr. The PAT was higher than our estimate mainly due to better-than-expected operational performance. IRB is looking at both organic and inorganic options for growth with a threshold of 18% equity IRR and intends to allot 20% of consolidated cash flow post debt repayment towards acquisitions. IRB has a robust order book of Rs.5,829.8cr (1.5x trailing E&C revenue, excluding O&M orders), which lends revenue visibility. Although a slowdown in order awarding by NHAI in road sector has been witnessed in 1HFY2014, IRB expects ordering activity to improve going ahead. We continue to remain positive on the stock and maintain our Buy rating with a target price of Rs.106.
PVR (CMP: Rs.536/ TP: -/ Upside: %)
For 3QFY2014, PVR's top-line and bottom-line performance were below our estimates as well as street estimates. Top-line grew by 68.3% yoy to Rs.336cr (8.6% below our estimate of Rs.368), due to absence of any big hits except Dhoom 3 in the quarter. The company's EBITDA margin also contracted by 274bp yoy to 14.2%. Consequently, net profit grew by only 56.5% yoy to Rs.14cr compared to our estimate of Rs.23cr. We maintain our Neutral rating on the stock.
HSIL (CMP: Rs.90/ TP: Rs.117/ Upside: 30%)
Hindustan Sanitaryware Ltd (HSIL) reported mixed set of numbers for 3QFY2014. Top line dip by 7.1% yoy to Rs.367cr, far below our estimate of Rs.478cr. Revenue from sanitaryware division grew by 15.9% yoy to Rs.213cr (58% of total revenue) while glassware division plunged by 27.2% yoy to Rs.153cr (42% of total revenue).
EBITDA, however surged by 8.5% to Rs.60.8cr while EBITDA margin expanded by 238bp yoy to 16.6% for the quarter. Margin expansion was mainly on account of reduced raw material expenses (by 346bp) as percentage of sales which was partially offset by increased employee cost by 146bp. EBIT margin for sanitaryware division expanded by 136bp yoy to 20.0% while for glassware division, EBIT margin eroded by 1,643bp from 3.9% in 3QFY2013 to 1.1% in current quarter.
Net profit, though dip marginally by 3.8% to Rs.12cr was better than our expecattions of Rs.10cr. As we rollover to FY2016E, we maintain our Buy recommendation on HSIL with a target price of Rs.117 valuing the business on SOTP basis (Sanitaryware division- 4x PE, Glassware division- 0.4x EV/Invested Capital) for FY2016E.
IFB Agro (CMP: Rs.192 / TP: Rs.229 / Upside: 19%)
For 3QFY2014, IFB Agro reported good set of numbers. Total income grew by 23.6% yoy to Rs.1 29cr, 34.6% higher than our estimate of Rs.96cr. The EBITDA grew by 19.9% yoy to Rs.16cr from Rs.13cr in 3QFY2013 driven by growth in total income during the quarter. The EBITDA margin has declined marginally by 38bp yoy to 12.5% from 12.9% in same quarter previous year. The net profit has increased by 28.7% yoy to Rs.9cr, higher than our expectation of Rs.7cr.
Marine product division reported 68.2% yoy jump to Rs.53cr in its total revenue. Spirit and liquor division revenue was flat on sequential basis and witnessed marginal growth of 4% yoy to Rs.76cr. The EBIT margins for marine product business improved by 375bp yoy to 7.1% and the spirit and liquor division margins dipped by 54bp yoy to 1 3.3%.
On 31st January 2014, the board has approved preferential allotment of 3.62lacs shares at a price of Rs.188 per share (premium of Rs.178 per share) to promoter group company, subject to approval of shareholders in the General Meeting. Going forward, we expect improvement in company's overall performance on the back of expansion of bottling capacity and penetrating in Hotel/Restaurant/Catering (HoReSo) and retail segment for its marine products. At the current levels, the stock is trading at a PE of 5.0x its FY2015E earnings and P/BV of 0.8x for FY2015E. We retain our Buy rating on the stock with a revised target price of Rs.229 based on a target PE of 6x for FY2015E.
Sarda Energy and Minerals (CMP: Rs.97/ TP: Under review)
Sarda Energy and Minerals (SEML) reported disappointing 3QFY2014 numbers. The net sales declined by 16.1% yoy to Rs.312cr mainly due to poor performance from steel segment which declined by 33.4% to Rs.183cr. The EBITDA declined 39.4% yoy to Rs.43cr in line with decrease in net sales. Although the other income increased by 111.1% yoy to Rs.8cr the net profit declined by 48.1% yoy to Rs.14cr. We keep our rating and target price under review.
Lupin (CMP: Rs.882/ TP: Rs.930/ Upside: -)
Lupin is expected to register a strong revenue growth of 19.8% to end the period at Rs.2,954cr. Its OPM is expected to expand by 30bp during the period to 23.4%. Its net profit is estimated to increase by 26.6% in 3QFY2014 to end the period at Rs.425cr. We maintain our Accumulate rating on the stock with a price target price of Rs.930.
GIPCL (CMP: Rs.55/ TP: -/ Upside: -)
GIPCL is slated to announce its 3QFY2014 results today. The company's top line is expected to decline by 1 1.0% yoy to Rs.329cr. On the operating front, OPM is likely to contract by 319bp yoy to 33.8% while net profit is expected to come in at Rs.46cr down by 34.4% yoy. GIPCL is currently trading at valuations of 0.4x 2015E BV. We remain Neutral on the stock.
Economic and Political News
- Our mandate is to bring down inflation: Raghuram Rajan
- Cabinet approves 5% SUC on new airwaves acquired in auction
- LPG cap hike, freeze on DBT credit negative for govt oil firms: Icra
- FAA downgrades India's aviation safety ranking
- November FDI inflows up 54.8% to US$1.64bn
- Tata Power sells stake in Arutmin Coal for US$500 m
- Berger Paints commissions new plant in AP
- RIL's KG-D6 spend exceeds approved limit: CAG audit