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Indian stock market and companies daily report (February 06, 2013, Wednesday)

Contributed by Angel Broking

The Indian market is expected to open in the green today, mirroring SGX Nifty which is trading higher by ~0.4%. Most of the Asian markets are trading in the positive zone with gains in the range of 0.2% to 3.0%.

US markets staged a strong recovery on Tuesday after sliding on MondayRs.s trade. Stocks rebounded as traders saw the sharp pullback on Monday as a good buying opportunity. Markets were also buoyed by a private survey which showed that growth in ChinaRs.s services sector hit a four-month high in January. A separate report from the Institute for Supply Management showed that activity in the US service sector continued to expand in the month of January. European markets too rose on Tuesday with key benchmark indices gaining 0.4%-1%.

Meanwhile IndiaRs.s Key benchmark indices closed lower on Tuesday for the fourth consecutive session in a row. Going ahead, the market will keenly follow the statements by the government prior to the Union Budget.

Markets Today

The trend deciding level for the day is 19,670 / 5,958 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 19,707 - 19,755 / 5,969 - 5,982 levels. However, if NIFTY trades below 19,670 / 5,958 levels for the first half-an-hour of trade then it may correct up to 19,622 - 19,584 / 5,946 - 5,935 levels.

CCEA gives in-principle nod to coal price pooling proposal

Media reports suggests that the Cabinet Committee on Economic Affairs (CCEA) has given in-principle approval to the price pooling mechanism wherein the prices of domestic and imported coal will be averaged to get a uniform price for coal in the country. CCEA however has not given the actual terms of this mechanism and has asked the coal and power ministries to come out with the detailed terms and specifications of how the price must be determined. Currently, Coal India has FSARs.s with power companies without price pooling basis and it supplies imported coal at a cost plus basis. We await further clarity on this matter and until then maintain Accumulate on Coal India with a target price of Rs.368

BHEL secures Rs.2,854cr contract

BHEL has secured contract for supply of steam generator package for setting up of 1,980 MW thermal power project in Bihar. The order is worth Rs.2,854cr. The contract was awarded to BHEL by Nabinagar Power Generation, a joint venture of NTPC and Bihar State Electricity Board. We maintain Neutral recommendation on BHEL.

Exide Industries ties up with Shin-Kobe Electric Machinery Company

Exide Industries (EXID) has signed an additional agreement with JapanRs.s Shin-Kobe Electric Machinery Company (Shin-Kobe) to implement new manufacturing processes for automotive batteries. According to the agreement, Shin-Kobe will provide the technology and extensive technical support and assistance to EXID to enable it manufacture quality automotive batteries in its various plants in India. The new technology is expected to enable the company manufacture superior quality batteries and is also expected to result in cost reduction. EXID already has technical agreement with Shin-Kobe for automotive batteries and VRLA batteries for industrial applications. Additionally, the company also has technical collaboration with Furukawa Battery Company Limited, Japan and Changxing Noble Power Sourcing Company Limited, China. We see the signing of the additional agreement with Shin-Kobe as a positive development for EXID; however, the scope of the new agreement is not known entirely. At Rs.123, the stock is trading at 15.6x FY2014E earnings. We maintain our Accumulate rating on the stock with a SOTP based target price of Rs.131.

3QFY2013 Result Review

United Bank - (CMP: Rs.71 / TP: Under Review)

United Bank reported weak performance on operating as well as on the asset quality front during the quarter. While operating profit grew by moderate 7% yoy, aided by better-than-expected 58% yoy growth in non-interest income, Gross and Net NPA levels were higher sequentially by around 20%, on an absolute basis, the highest for the bank in past several quarters. Considering sequential deterioration in asset quality, the provisioning expenses for the bank increased by 1 26% yoy and hence earnings came declined by 81% yoy. At CMP, it trades at attractive valuations of 0.5x FY2014ABV. We await clarity from the management regarding asset quality pressures faced during the quarter and till then we keep our rating and target price under review.

3QFY2013 Result Preview

Cipla (CMP: Rs.408/ TP: / Upside: )

Cipla is expected to post a net sales growth of 18.3% to Rs.2,024cr, driven mainly by the domestic performance. On the operating front, the OPM (excluding technical know-how fees) is expected to come in at 24.9%, up by 470bp from the last corresponding period. This will aid the net profit to increase by 49.7% yoy to Rs.404cr.

Apollo Tyres (CMP: Rs.85/ TP: Rs.96/ Upside: 13%)

Apollo Tyres (APTY) is slated to announce its 3QFY2013 results today. We expect APTY to register a healthy growth of ~10% yoy in consolidated revenues to Rs.3,559cr driven by ~11% and ~12% yoy growth in domestic and South Africa revenues respectively. European operations are expected to register a modest growth led by an uncertain macro-economic environment. We expect the consolidated margins to improve 140bp yoy to 1 1.4% primarily on account of a sharp decline in rubber prices (down ~15% yoy). On the back of the improved operating performance, the adjusted net profit is expected to grow strongly by ~30% yoy to Rs.165cr. At Rs.85, the stock is trading at 5.7x its FY2014E earnings. We maintain our Accumulate rating on the stock with a target price of Rs.96.

MOIL (CMP: Rs.253/ TP: -/ Upside :-)

MOIL is slated to report its 3QFY2013 today. We expect its 3QFY201 3 net sales to increase by 11.8% yoy to Rs.268cr mainly on account of higher manganese ore price realizations. However, EBITDA margin is expected to contract by 291bp yoy to 42.8% in 3QFY2013. Net profit is expected to increase by 8.5% yoy to Rs.110cr. We maintain our Neutral rating on the stock.

IRB Infra (CMP: Rs.118 / TP: Rs.164 / Upside: 39%)

IRB Infrastructure Developers (IRB) is expected to post a mixed performance on a quarterly basis. We expect a revenue growth of 24.8% yoy for 3QFY2013 on the back of healthy execution pace in under construction BOT projects, leading to EPC (C&EPC) revenues of Rs.600cr (14.1%) for the quarter. The BOT segment is expected to report a healthy 30.0% yoy growth to Rs.330cr, leading to an overall top-line of Rs.930cr. We expect blended EBITDA margin at 44.0%, a dip of 184bp yoy. Depreciation for the quarter is expected to witness a yoy jump of 52.9%, owing to completion of the Surat-Dahisar project. We project a net profit before tax and after tax (post minority interest) at Rs.178cr and Rs.136cr, respectively, after factoring a blended tax rate of 25% for the quarter. We recommend Buy on the stock with target price of Rs.164.

JK Lakshmi Cement (CMP: Rs.140/TP:/Upside:-)

JK Lakshmi Cement is slated to announce its 3QFY2013 results today. We expect the top-line to grow by 21.0% yoy to Rs.531 cr. OPM is expected to decline by 37bp yoy to 21.1%. Bottom-line is expected to grow by 9.1% yoy to Rs.54cr. We maintain our Neutral view on the stock.

Economic and Political News

- Service sector expands at fastest pace in a year in Jan

- Steel policy on cards to iron out woes

- Charge low fares to prevent seats going empty: Govt

Corporate News

- Sebi clears Diageo-United Spirits open offer

- GSK spends Rs.4,800cr to raise India subsidiary stake

- Bharti to buy entire stake of Alcatel-Lucent in Indian JV

- Sun Pharma receives USFDA nod for anti-cancer injection

- NTPCRs.s Rs.1 2,000-cr stake sale on Feb 7