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Indian stock market and companies daily report (February 04, 2013, Monday)
The Indian market is expected to open flat today with a positive bias, mirroring SGX Nifty which is trading marginally in the grain. Most of the Asian markets are trading in the positive zone with gains in the range of 0.3% to 1.3%.
US markets rose higher on Friday buoyed by expectations of a mild recovery in the economy and hopes that the Federal Reserve would continue with loose monetary policy to support the growth. European markets too rose on Friday, tracking positive news from US and improvement in PMI for non manufacturing sector reported by China for January.
Key benchmark indices in India dropped in choppy trade after the results of a private survey showed that manufacturing output expanded at its slowest pace in three months in January 2013 as new orders grew at a weak pace and as power outages continued to hurt industrial activity. Sensex and Nifty sliding to the three week closing low.
The trend deciding level for the day is 19,828 / 6,012 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 19,920 - 20,058 / 6,040 - 6,081 levels. However, if NIFTY trades below 19,828 / 6,012 levels for the first half-an-hour of trade then it may correct up to 19,690 - 19,598 / 5,970 - 5,942 levels.
Auto sales numbers - January 2013
Ashok Leyland (AL) reported in-line volumes in January 2013 as Dost sales recovered after an unexpected fall in December 2012. The Dost volumes surged 79.2% sequentially to 3,698 units. The medium and heavy commercial vehicle (MHCV) segment however, continued its downward momentum and witnessed a significant decline of 25.4% yoy. Nonetheless, on a sequential basis, MHCV volumes grew by 31.2%.
Tata Motors (TTMT) reported lower-than-expected sales for January 201 3 with total volumes registering a decline of 29.5% yoy (-6% mom) to 61,660 units led by sharp decline of 28.1% yoy (-6.4% mom) in domestic sales. Light commercial vehicle sales continued momentum posting a strong growth of 14.7% yoy (down 9.2% mom). However, MHCV sales witnessed a considerable decline of 53.6% yoy leading to a 11.8% yoy (9.8% mom) decline in commercial vehicle sales. The MHCV segment continues to be impacted by the slowdown in industrial activity in the country and due to lack of freight demand. On the passenger vehicle front, total domestic volumes fell sharply by 55.6% yoy, largely on account of 60.3% yoy (flat mom) decline in passenger car sales.
Mahindra and Mahindra
Mahindra and Mahindra (MM) reported a modest volume growth of 4.5% yoy (11.5% mom) in January 2013 as the farm equipment segment continued to post decline in sales. However, the automotive segment registered a healthy growth of 10.7% yoy (9.3% mom) driven by continued momentum in the passenger vehicle segment (robust growth of 32.9% yoy) on the back of the new launches XUV5OO, Quanto and Rexton. The three-wheeler and exports segments however registered a sluggish growth with volumes declining by 5.1% and 50.4% yoy respectively. In the farm-equipment segment, MM posted a decline of 9.8% yoy led by weakness in domestic markets, which posted a decline of 8.6% yoy during the month.
Maruti Suzuki (MSIL) reported better-than-expected volumes in January 2013, primarily driven by a strong sequential growth in the Mini segment led by the new Alto. Total volumes registered a decline of 1.1% yoy; however they surged sharply by 20% on a sequential basis to 114,205 units. On a sequential basis, the Mini (up 41.7%), Compact (up 6.8%), Super Compact (up 30.5%) and the Utility Vehicle (up 11.9%) segments were the primary drivers of growth resulting in a strong 25.5% growth in the domestic markets. Export sales however, posted a decline of 22.3% yoy (14.5% mom) during the month; thereby restricting the overall growth.
Hero MotoCorp (HMCL) registered better-than-expected performance in January with total sales posting a growth of 7.2% yoy (3% mom) to 557,797 units driven by the new launches, Ignitor, Passion X-Pro and Maestro.
BJAUT reported an in-line volume growth of 2.9% yoy (1.1% mom) to 347,624 units driven by a healthy growth of 9.8% yoy (2% mom) in export sales. Domestic sales however remained flat on a yoy as well as sequential basis. Motorcycle sales grew by a modest 2.4% yoy (1% mom) driven by the new launches, Discover 125ST and Pulsar 200NS. The three-wheeler segment registered a healthy growth of 6.5% yoy (1.5% mom) led by issue of fresh permits in states like Delhi, Karnataka and Jaipur. During the month, the company launched a new 100cc motorcycle, Discover T at a price of Rs.50,500 ex. showroom Delhi.
TVS Motor (TVSL) posted better-than-expected volumes in January 2013 registering a total volume growth of 1.4% yoy (12.6% mom) to 175,931 units. On a sequential basis, strong growth was witnessed across the two-wheeler product segments with scooters posting a 24.8% growth and motorcycle sales registering a growth of 7.2% led by Phoenix. The moped segment witnessed a growth of 12.9% mom during the month. The three-wheeler sales too maintained momentum and posted an impressive growth of 83.9% yoy (down 1.5% mom).
Cigarette packs may show nicotine levels
As per media reports Food Safety and Standards Authority of India (FSSAI) has proposed to make it mandatory for companies to specify the amount of nicotine and tar on cigarette packs. Citing the absence of adequate research facilities to verify the amount of nicotine and tar in cigarettes, companies in India have resisted the move for some time. If the new rule comes into place it would be a negative for cigarette manufacturers such as ITC. We maintain our neutral rating on ITC.
Ultratech eyes ABG cement unit
UltraTech Cement is in talks to purchase an incomplete 6.7mtpa cement plant in Gujarat owned by ABG Cement (ABGCL). As per the media reports both the companies have already finished three rounds of negotiations. While Ultratech is believed to have offered US$130/tonne, ABG Cement is asking for US$156/tonne. We believe that if the deal goes through it would be positive for Ultratech as it would be able to consolidate its position in the Gujarat market which is witnessing healthy demand for cement. We maintain our neutral rating on Ultratech.
Ceat registers a 23.8% yoy growth in tyre production in December 2012
As per the filing with the BSE, Ceat has registered a strong 23.8% yoy growth in tyre production in December 2012. The growth was led by a strong 42.7% and 22.8% yoy growth in the motorcycle and small commercial vehicle segments respectively. The passenger vehicle segment too registered a strong growth of 15.9% yoy during the month. The companyRs.s radial facility at Halol continues to ramp-up and registered a growth of 109% yoy on a low base of last year. At Rs.105, the stock is trading at attractive levels of 2.6x FY2014E earnings. We continue to maintain our Buy rating on the stock with a target price of Rs.163.
3QFY2013 Result Review
Bharti Airtel (CMP: Rs.330 / TP: Under review / Upside: -)
For 3QFY2013, Bharti AirtelRs.s (Bharti) revenue as well as operating margins came in-line with, however its bottom-line disappointed because of higher interest charges, forex loss and higher tax. The company reported flat revenue growth with revenues coming in at Rs.20,253cr. During 2QFY2013, Bharti had ~Rs.600cr of gain due to a TDSAT favorable ruling so adjusting to that, revenues would have grown by 3% qoq, largely in line with expectations. The Indian mobility business reported decent KPIs with 4.4% qoq growth in MOU to 435min. Mobile traffic grew by 3.0% qoq to 240bn min. Average revenue per minute (ARPM) remained flat qoq at Rs.0.43/min. Consequently, the average revenue per user (ARPU) grew by 4.3% qoq to Rs.185/month. Churn level came back to comfortable position after seven quarters and stood at 5.9%. In USD terms, the revenue from Zain Africa increased by 3.3% qoq to US$1,133mn, as MOU increased by 4.5% qoq to 144min. The ARPU, however, declined by 2.4% qoq to US$6.2/month. ARPM declined substantially by 6.7% qoq to 4.3US$/min, as traffic growth was driven on the back of discounted on-net minutes as well as tariff cut in Nigeria.
BhartiRs.s consolidated EBITDA margin declined by 78bp qoq to 30.5% qoq. This was because of higher network costs. Segment-wise, India and South Asia, and Africa reported 73bp and 70bp margin decline to 30.2% and 26.5%, respectively. PAT came in at Rs.284cr, down 61% qoq, hit by higher interest costs, forex fluctuations (Rs.216cr forex loss) and higher tax expense with tax rate coming in at ~70%. Tax rate increased as one deferred tax asset in Africa had to be derecognized.
On the domestic business front, despite the festival season telecom operators did not resort to various discounts and promotions to drive subscriber additions. Recently, telecom operators have reduced discounts and promotional vouchers, which would lead to improvement in realized tariffs and in turn to ARPM. Africa operations are expected to continue to weigh upon the companyRs.sRs. performance. The companyRs.s board has elevated its international operations head Manoj Kohli to the post of managing director. The target price is currently under review.
BHEL (CMP: Rs.225 / TP: - / Upside: - )
For 3QFY2013, Bharat Heavy Electricals (BHEL) disappointed both on top-line and bottom-line front. Top-line was below our expectations and street estimates declining by 4.9% yoy to Rs.10,220cr (due to revenue deferrals). On the EBITDA front, the companyRs.s margin came in lower at 16.0% (against our estimate of 17.8%), contracting by 338bp yoy. Consequently, PAT declined by 17.5% yoy Rs.1,425cr. BhelRs.s order book has witnessed continuous decline in last few quarters due to weak order infows and currently stands at Rs.1,13,700cr, a decline of 22.4% yoy. We maintain our Neutral recommendation on the stock as we expect tepid order flow to continue going forward.
Marico (CMP: Rs.230/TP: - /Upside :- )
For 3QFY2013, Marico posted a 10.9% yoy growth in top-line to Rs.1,164cr, which was below our estimates. Volume growth for the quarter stood at 9%.
Domestic consumer business posted value and volume growth of 16% yoy and 15% yoy respectively. The international business posted a flat performance on the top-line front due to challenging business environment in some of the countries in which the company has operations. On a constant currency basis the company posted a de-growth of 3% yoy on the top-line front due to degrowth in Middle East and strikes in Bangladesh. OPM rose by 241bp on a yoy basis to 13.9% aided by 353bp yoy expansion in gross margins due to lower copra prices. Average copra prices in 3QFY2013 were about 23% lower on a yoy basis. The companyRs.s advertising expenses as a % of sales went up by 90bp on a yoy basis, which offset the decline in copra prices to some extent. Net profit rose by 21.6% yoy to Rs.102cr, aided by superior operating performance. We maintain our Neutral rating on the stock.
Indian Bank - (CMP: Rs.203 / TP: Rs.245 / Upside: 20.9%)
For 3QFY2013, Indian Bank reported muted operating performance, as its operating income and operating profit declined by 4.7% and 17.9% yoy, respectively. Provisioning expenses for the bank increased by 74.3% yoy and hence earnings at PBT level declined by 50.2% yoy. The bank witnessed lower effective tax rate of 1.8% during the quarter compared to 22.1% in 3QFY2012, which limited the decline in net profit to 37.1% yoy.
On the asset quality front, the bank witnessed substantial deterioration qoq, as gross and Net NPA levels jumped up sequentially by 60.6% and 70.0%, respectively, on an absolute basis. We await clarity from the management on the substantial deterioration witnessed in the asset quality front. Gross and Net NPA ratio came higher sequentially by 1 12bp and 84bp, respectively to 3.2% and 2.2%. The bankRs.s PCR dipped sequentially by 974bp to 61.2%. At the CMP, the stock is trading at valuations of 0.7x FY2014E ABV. We recommend Buy rating on the stock with a target price of ?245.
Corporation Bank - (CMP: Rs.428 / TP: Rs.517 / Upside: 20.7%)
For 3QFY201 3, Corporation Bank reported subdued operating performance, as its operating income and operating profit declined by 2.5% and 8.1% yoy, respectively, which was in-line with our expectations. Provisioning expenses for the bank increased by 34.7% yoy, on account of higher slippages during the quarter and hence earnings at PBT level declined by 32.7% yoy. The bank witnessed lower effective tax rate of 14.1% during the quarter compared to 23.3% in 3QFY2012, which limited the decline in net profit to 24.6% yoy.
On the asset quality front, the bank witnessed sequentially deterioration, as annualized slippage ratio jumped up to 2.8% from 1.8% in 2QFY2013, leading to 1 7.2% and 25.6% qoq increase in gross and Net NPA levels, respectively, on an absolute basis. The management has guided for significant recoveries/upgrades, out of the 3QFY2013 slippages. Gross and Net NPA ratio came higher sequentially by 21 bp and 25bp, respectively to 2.2% and 1.6%. The bankRs.s PCR dipped sequentially by 242bp to 58%. At the CMP, the stock is trading at valuations of 0.6x FY2014E ABV. We recommend Buy rating on the stock with a target price of Rs.51 7.
TVS Motor (CMP: Rs.43/ TP: Rs.47/ Upside: 9%)
For 3QFY2013, TVS Motor Company (TVSL) reported lower-than-expected results on the bottom-line front primarily owing to EBITDA margin pressures. The EBITDA margin remained stable on a sequential basis at 5.9%, lower than our expectations of 6.5%, led by higher promotional expenditure related to the launch of Phoenix and the festival season.
TVSL registered a modest growth of 1.3% yoy (6.4% qoq) in its top-line to Rs.1,799cr due to a 2.1% yoy (up 6.7% qoq) decline in volumes led by the slowdown in the two-wheeler industry and increasing competition. On the operating front, the EBITDA margin came in at 5.9%, witnessing a decline of 1 30bp yoy (flat qoq) primarily due to higher promotional expenditure related to the launch of Phoenix and also on account of the festival season. The raw-material cost as a percentage of sales however, remained stable on a yoy as well as qoq basis. Consequently, the net profit posted a decline of 7.2% yoy (up 16.1% qoq on higher volumes) to Rs.52cr as against our expectations of Rs.59cr. On the positive side, interest expense declined 15.1% yoy (22.4% qoq) as the company reduced its interest bearing debt by Rs.180cr in 9MFY2013. At Rs.43, TVSL is trading at an attractive valuation of 8.1x FY2014E earnings. We therefore maintain our Accumulate rating on the stock with a target price of Rs.47.
TTK Healthcare (CMP: Rs.496 / TP: 655/ Upside: 32%)
TTKH reported a mixed set of numbers for 3QFY2013. Top-line came in at Rs.92cr, a 6.4% increase on a yoy basis from Rs.87cr in 3QFY2012 and 7.1% higher as compared to our estimate of Rs.86cr. However, the company reported a disappointing EBITDA margin of 3.9% for the quarter, 327bp contraction on a yoy basis from 7.2% in 3QFY2012 primarily due to margin contraction in Pharmaceutical business and Medical Device business. Consequently, net profit declined by 26% yoy to Rs.3cr during the quarter as compared to Rs.4cr in same quarter last year. Going forward we expect the EBITDA margin to expand on account of increasing contribution from high margin food business, thus resulting in better profit. At the current market price, the stock is trading at EV/sales of 0.7x for FY2014E, which we believe is attractive. Hence, we maintain our Buy recommendation on the stock with a target price of Rs.655 based on a target EV/sales of 1.0x for FY2014E.
3QFY2013 Result Preview
Bank of Baroda - (CMP: Rs.868 / TP: - / Upside: -)
Bank of India is scheduled to announce its 3QFY2013 results today. We expect the bank to report NII growth of 14.0% yoy to Rs.3,027cr. Non-interest income is expected to decline by 24.9% yoy to Rs.863cr. Operating expenses are expected to be higher by 17.2% yoy, while provisioning expenses are expected to increase by 15.4% yoy. Net profit is expected to decline by 11.2% yoy to Rs.1,145cr. At CMP, the stock is trading at valuations of 1.0x FY2014E P/ABV. Currently, we have a Neutral recommendation on the stock. The bankRs.s management has changed recently and we would have a relook at our rating/outlook on the stock, post the results.
United Spirits (CMP: Rs.1,866/TP: /Upside:-)
United Spirits (USL) is expected to announce its 3QFY2013 standalone results today. We expect the top-line to grow by 1 7.7% yoy to Rs.2,300cr. OPM is expected to increase by 377bp yoy to 13.2%. Bottom-line is expected to grow by 88.4% yoy to Rs.89cr. We maintain our Neutral recommendation on the stock.
ITNL (CMP: Rs.199 / TP: Rs.225 / Upside: 13%)
We expect IL&FS Transportation Networks (ITNL) to post a strong set of numbers for 3QFY2013 owing to healthy order book and pick up in execution. The companyRs.s revenue is expected to grow strongly by 24.2% yoy to Rs.1,575cr, led by under-construction road BOT projects. We expect the company to register an EBITDAM of 28.0%, down 503bp qoq, owing to higher contribution of the comparatively low-margin E&C segment. Strong revenue growth is expected to reflect in the companyRs.s earnings, which are expected to surge by 22.5% yoy to Rs.108cr. We recommend Accumulate rating on the stock with target price of T225.
Economic and Political News
- Withdraw MAT on SEZs: Assocham
- RBI to set up new monitoring system to check export data flaws
- CCEA may take up coal price pooling proposal this week
- BoB, BoI, Canara Bank cut lending rates by 0.25%
- Govt grants Maharatna status to BHEL, GAIL
- Bharti Airtel may issue bonds of up to $1 bn in FY13
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