Indian stock market and companies daily report (February 06, 2014, Thursday)
February 6, 2014, Thursday, 04:48 GMT | 00:48 EST | 10:18 IST | 12:48 SGT
Indian Markets are expected to open in the green today tracking positive start to SGX Nifty and most of the Asian indices.
US markets recovered from an early move to the downside but maintained negative bias throughout the trading session on Wednesday before closing mostly lower. The early weakness on Wall Street was partly in reaction to the release of a report from ADP and Moody's Analytics showing that employment in the US private sector increased by 175,000 jobs in January, as against expectations of 180,000 jobs. However, the negative sentiment was partly offset by a separate report from the ISM which showed that non-manufacturing index edged up to 54.0 in January from 53.0 in December.
Meanwhile, Indian markets posted modest gains on Wednesday, with the benchmark indices rebounding from a four-month low as investors indulged into bargain hunting tracking solid gains in US markets overnight. While reports on US weekly jobless claims, international trade, and labor productivity are likely to attract attention on Thursday, traders may be reluctant to make any significant moves ahead of the release of the US monthly jobs report on Friday.
The trend deciding level for the day is 20,209 / 6,004 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 20,342 - 20,422 / 6,046 - 6,070 levels. However, if NIFTY trades below 20,209 / 6,004 levels for the first half-an-hour of trade then it may correct 20,128 19,996 / 5,980 5,938 levels.
Engineers India: Offer for sale - Subscribe
Engineers India Ltd (EIL) is one of the leading design and engineering organizations in South Asia. The company provides engineering consultancy and EPC services, and is principally focused on the oil & gas and petrochemical industries.
Leadership position in project implementation in hydrocarbon business: EIL has developed indigenous technology and expertise for offshore platforms, oil & gas processing, oil refining, petrochemicals and pipeline projects over the last 48 years enabling it to provide a gamut of management services from project conception to commissioning in hydrocarbon business. EIL's leadership in project implementation and long-term relationships with its clients gives it a competitive advantage over its peers.
Diversified operations across sectors and geographies: Over the years, the company has diversified across various segments such as LNG, fertilizer, power, mining and metallurgy and infrastructure to encash the untapped infra opportunity not only in Indian but globally (presence in Middle East, Africa, Asia and Southeast Asia) as well and has an excellent track record of achieving the same. This will help the company to benefit from any recovery in the capex cycle both domestically and internationally.
Healthy order inflows over past couple of quarters: The company has secured orders worth Rs.1,800cr (up 39.5 % yoy) in 9MFY2014, taking the order backlog to Rs.3,820cr, implying an order backlog to sales ratio of 2.1x on a trailing basis. This includes a major order worth US$139mn bagged from Dangote Group in Nigeria for project management consultancy and EPC management.
Outlook and valuation: Although the company has reported weak revenues in 9MFY2014, the improvement in order inflows indicates recovery in revenue going forward. At the lower and upper limit of the price-band of Rs.145 and Rs.150, the stock is currently trading at valuations of 8.4x and 8.7x FY2015E Bloomberg EPS respectively which is lower than its 3-year average PE of 14.8x. Considering EIL's dominance in the hydrocarbon business and attractive valuations, we recommend Subscribe on the stock.
Auto Expo 2014
Day 1 of the Auto Expo 2014 saw strong action in the two-wheeler and compact sedan segments; however, there were no major small car launches on the first day of the Auto Expo. The ongoing Auto Expo indicates increasing competitive intensity in the compact sedan and scooters segment going ahead.
Major launches in the two-wheeler segment
Two-wheeler manufacturers unveiled number of models at the expo of which five were in the scooter segment. In the motorcycle segment, most of the products unveiled are in the premium segment. Hero MotoCorp launched two new models in the 100cc segment, Splendor Pro Classic and Passion TR, which are expected to be available from April 2014. The company also displayed three new concept vehicles for the future. Bajaj Auto launched two new Pulsars, Pulsar SS400 and Pulsar CS400 in the premium segment. Honda Motorcycles & Scooters India unveiled new Activa which would be available from April 2014. Yamaha and Suzuki Motorcycles too launched new scooters Alpha and LetS which are expected to launch shortly.
Compact Sedan and MPV major attraction
Passenger vehicle manufacturers targeted the fast growing compact sedan segment during the Auto Expo. Tata Motors and Hyundai introduced its compact sedans Zest and Xcent respectively ahead of the Auto Expo; while Ford unveiled a compact sedan Figo which is a concept vehicle. In the MPV space, Honda unveiled production ready Mobilio; whereas Tata Motors and General Motors showcased concept models, Nexon and Adra respectively. Market leader Maruti Suzuki unveiled two concept models, sedan Ciaz and crossover SX4 S-Cross.
BHEL (CMP: Rs.161/ TP: -/ Upside: -)
For 3QFY2014, BHEL's top-line performance was below our estimates. Top-line declined by 15.5% yoy to Rs.8,635cr (compared to our estimate of Rs.9,096cr) due to execution delays (partly on account of delay in payments by clients). Revenue from power segment declined by 11.9% yoy to Rs.7,319cr while revenue from Industry segment declined by 28.5% yoy to Rs.1,600cr. On the EBITDA front, the company's margin contracted by 457bp yoy to 1 1.4%. Consequently, Profit declined sharply by 41.2% yoy to Rs.695cr (in-line with our estimate of Rs.709cr). We maintain our Neutral recommendation on the stock as declining order backlog limits revenue visibility for BHEL.
GSK Consumer (CMP:Rs.4,356/TP:-/Upside:-)
For 4QCY2013 posted an 18.3% yoy growth in top-line to Rs.839cr aided by both higher volume and better realization. Gross margin fell by 260bp yoy and stood at 63.4%. The company's operating profit rose by 14.8% yoy to Rs.59cr. Bottom-line rose by 14.5% yoy to Rs.80cr aided by superior operating performance and a 22.8% yoy growth in other income. We maintain a neutral rating on the stock.
Ranbaxy Labs (CMP: Rs.340/ TP: / Upside: -)
Ranbaxy labs posted results better than expected, on the operational front. Ranbaxy Labs, posted sales of Rs.2859cr V/s Rs.2,758cr expected posting a yoy growth of 7.0%. The growth was all rounded, with both India and exports growing robustly. Indian formulation sales posted a growth of 8.5% yoy, while, the export sales in US grew by 19.7%, Eastern Europe & CIS grew by 20.4%, while eastern Europe grew by 4.4% yoy. On the other hand, APTAC & LATAM and Africa posted a dip in sales. The main positive factor was its OPM, which came in at 7.9% v/s 6.6% (2.5% in 4QCY2012), mainly on back of Gross Profit Margin improvement, which expanded by 665bps. However, on back of the extra-ordinaries, the company posted a net loss of Rs.158cr V/s Rs.493cr, adjusted for which, the adjusted net loss was around Rs.3cr V/s Rs.72cr.
In the concall, the company mentioned that it has met all commitments it made to the USFDA for its Mohali plant and that remediation was on track. On Taonsa plant, according to the management, only about 10-12% of its US sales were dependent on products from it. Overall, also the company has maintained that only a minor part of their sales would be impacted on back of the Taonsa plant being under import alert. We remain neutral on the stock.
Electrosteel Castings (CMP: Rs.14 / TP: Under Review / Upside: -)
Electrosteel CastingsRs. (ECL) 3QFY2014 net revenue increased by 3.9% yoy to Rs.491cr. However, raw material costs decreased by 7.3% yoy to Rs.236 and other operating income grew by 215.6% yoy to Rs.22cr. This resulted in EBITDA growing by 102.5% yoy to Rs.95cr. Interest expenses grew by 34.1% yoy to Rs.36cr and other income decreased by 92.3% yoy to Rs.3cr which resulted in reported net profit growing by only 2.7% yoy to Rs.34cr. The company reported an exceptional forex loss of Rs.3cr during 3QFY2014, compared to exceptional forex loss of Rs.6cr in 3QFY2013. Excluding these exceptional items, adjusted net profit decreased by 6.2% yoy to Rs.36cr. During the quarter, the company issued and allotted 1.7cr shares to promoters on a preferential basis at a price of Rs.13.85/share, which will result in equity infusion of Rs.24cr in the company. In our view, this preference issue has been undertaken to improve ECL's debt equity position which in turn will enable it to raise additional debt. The additional funds are likely to be deployed to fund expansion activities at its associate, Electrosteel Steels, where ECL holds 39.6% stake. We keep our rating and target price on the stock under review.
TTK Healthcare (CMP: Rs.500/ TP: -/ Upside: -)
TTKH reported a mixed set of numbers for 3QFY2014. Top-line rose by 5.0% qoq to Rs.106cr, in line with our estimate. The EBITDA margin stood at 5.4% for the quarter, flat on qoq basis. However, it came 167bp higher than our estimate on account of lower than expected raw material cost as a percentage of net sales. Consequently, the net profit came 43.4% (on lower base) higher than expectation at Rs.4cr, marginal decline of 3.4% on qoq basis.
On segmental basis, Food and consumer product business revenue grew by 20.5% and 5.2% respectively on qoq basis. However, on EBIT front, only food segment showed marginal improvement of 50bp on qoq basis to 22.5%. To a positive, consumer product business reported a reduction in its losses on qoq basis.
Recently, the National Pharma Pricing Authority (NPPA) sets a price cap of Rs.6.5 per piece of condom treating it as a drug. TTK has moved to the Madras High Court against the government's order. We await further clarity on this matter and hence the stock is currently under review.
Ambuja Cements (CMP: Rs.155/TP:-/Upside:-)
Ambuja Cements is expected to declare its 4QCY2013 results today. We expect the top-line to decline by 1.7% yoy to Rs.2,275cr on account of lower realization. OPM is expected to decline by 176bp yoy to 17.7% impacted by lower realization. Bottom-line is expected to decline by 9% yoy to Rs.193cr. We maintain our neutral rating on the stock.
Bank of Baroda (CMP: Rs.542/ TP: Rs.597/ Upside: 10.1%)
Bank of Baroda is scheduled to announce its 3QFY2014 results today. We expect the bank to report a moderate NII growth of 5.3% yoy to Rs.2,991cr. Non-interest income is also expected to grow moderately by 4.8% yoy to Rs.881cr. Operating expenses are expected to increase by 24.3% yoy to Rs.1,772cr, thereby leading to operating profit decline of 6.9% yoy to Rs.2,101cr. Provisioning expenses are expected to de-grow by 26.0% yoy to Rs.771cr. Overall Net profit is expected to grow by 11.7% yoy to Rs.1,1 30cr. At the CMP, the stock is trading at 0.6x FY201 5E ABV. We maintain our Accumulate recommendation on the stock, with a target price of Rs.597.
ACC (CMP: Rs.1,008/TP:Rs.1,225/Upside:8%)
ACC is expected to declare its 4QCY2013 results today. We expect the top-line to decline by 6.7% yoy to Rs.2,892cr. Tepid performance on the volume front coupled with weak realization is expected to lead to dismal performance on the top-line front. Further, top-line growth during the quarter is expected to be impacted by higher base as ACC's subsidiaries were amalgamated with the company in the corresponding quarter of last year. OPM is expected to expand by 263bp yoy to 15.5%. Bottom-line is expected to decline by 27.2% yoy to Rs.174cr. We maintain our Buy recommendation on the stock with a Target Price of Rs.1,225.
Aurobindo Pharma (CMP: Rs.491/ TP: / Upside: -)
Aurobindo Pharma is expected to post a net sales growth of 15.3% yoy to end the period at Rs.1790cr. The margins are likely to expand to 17.4% Vs 15.5% in the corresponding period of previous year, which will lead the net profit of Rs.186.7cr vs. a net profit of Rs.137.0cr in the corresponding period of previous year. We remain neutral on the stock.
Central Bank- (CMP: Rs.46 / TP: - / Upside: -)
Central Bank is slated to announce its 3QFY2014 results today. We expect the bank to report a Net Interest Income (NII) growth of 6.4% yoy to Rs.1,499cr. Noninterest income is expected to grow by 4.8% yoy to Rs.374cr. Operating expenses of the bank are expected to increase by 20.9% yoy at Rs.1,194cr, resulting in a 12.7% yoy decline in pre-provisioning profit to Rs.680cr. Provisioning expenses are expected to de-grow by 28.2% yoy to Rs.450cr. Overall Net Profit is expected to grow by 12.2% yoy to Rs.202cr. At the CMP, the stock trades at a valuation of 0.6x FY2015E ABV, which is higher compared to similar peers. We maintain our Neutral recommendation on the stock.
Economic and Political News
- Clear understanding that fossil fuel subsidies must go: Mayaram
- Services woes continue, PMI contracts for 7th straight month
- Doubtful if key legislations can be passed this Parliament session: P Chidambaram
- Tata Motors unveils SUV Nexon, ConnectNext concept cars
- SKS Microfinance to raise Rs.400cr via QIP in FY2015
- Hero MotoCorp unveils two new 100 cc bikes
- Kolte-Patil Developers pays Rs.350cr for 34 acres in Pune