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Reports India

Indian stock market and companies daily report (February 07, 2014, Friday)

February 7, 2014, Friday, 06:18 GMT | 01:18 EST | 10:48 IST | 13:18 SGT
Contributed by Angel Broking


Indian Markets are expected to open in the green today tracking positive opening trades in the SGX Nifty and most of the Asian indices.
 
US markets moved sharply higher during the trading session on Thursday. The strength on Wall Street was partly due to the release of a report from the Labor Department showing a bigger-than-expected drop in initial jobless claims in the week ended February 1st. The report said initial jobless claims fell to 331,000, a decrease of 20,000 from the previous week's revised figure of 351,000. Major European markets also closed ended the trading session on Thursday in positive territory after both the European Central Bank and the Bank of England made no changes to interest rates. ECB President Mario Draghi also said that there were no signs of deflation in the euro area and that inflation expectations remain firmly anchored.
 
Meanwhile, Indian markets fluctuated between gains and losses before closing modestly higher, led by gains in metal, auto and FMCG stocks. Firm cues from Asia and Europe underpinned sentiment, even as investors looked ahead to the critical U.S. jobs data due on Friday.
 
 
Markets Today
 
The trend deciding level for the day is 20,250 / 6,017 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 20,419 - 20,528 / 6,068 - 6,100 levels. However, if NIFTY trades below 20,250 / 6,017 levels for the first half-an-hour of trade then it may correct 20,141 - 19,971 / 5,985 - 5,934 levels.
 
 
Electrosteel Castings associate Electrosteel Steel reported 3QFY2014 results
 
Electrosteel Castings (ECL)Rs. associate, Electrosteel Steel (ESL) reported its 3QFY2014 results. Net sales grew by 72.7% yoy to Rs.95cr and it reported a positive EBITDA of Rs.3cr compared to an EBITDA loss of Rs.15cr in 3QFY2013. The interest costs for the company increased by 20.5% yoy to Rs.41cr and hence the company reported a net loss of Rs.53cr compared to a loss of Rs.63cr in 3QFY2013. The company is under the CDR process for restructuring its debt to the tune of Rs.6,181 cr and hence the board has approved to issue equity shares to promoters on preferential basis for Rs.223cr. We keep our rating and target price for Electro^ee! Castings under review.
 
 
Result Review
 
Ambuja Cements (CMP: Rs.155/TP:-/Upside:-)
 
For For 4QCY2013 Ambuja CementsRs. stand-alone top-line fell by 5.3% yoy to Rs.2,191cr. While realization fell 3.5% on yoy basis, volume was down by 1.9% yoy to 5.25mn tonnes. OPM stood at 13.9% down 537bp on yoy basis, impacted by lower realization. Operating costs per tonne rose by 2.8% yoy due to higher freight costs and other expenses. Bottom-line rose by 49% yoy to Rs.317cr aided by tax write back of Rs.100cr. We maintain a neutral rating on the stock.
 
Bank of Baroda (CMP: Rs.538/ TP: Rs.597/ Upside: 11.0%)
 
Bank of Baroda's operating numbers came slightly above estimates, while asset quality performance came broadly in-line with management's guidance. On the operating front, NII for bank grew by 7.6% yoy (vs. loan book growth of 18%) slightly ahead of our estimates. As witnessed in past, opex growth for the bank remained higher compared to peers at 26% yoy, but was in line our estimates. Overall the operating profit de-grew by 3% yoy (slightly higher than our estimates aided by higher-than-estimated operating income).
 
On the asset quality front, slippages came in sequentially lower at Rs.1,553cr, while incremental restructuring came in at Rs.1,213cr, which was lower than ours and streetsRs. expectations. Gross and Net NPAs increased sequentially by 10% and 5%, qoq respectively during the quarter. Provisioning expenses de-grew 25% yoy in-line with our expectations. PBT level Earnings for the bank grew by 17% yoy, however 84% yoy increase in tax expense (on back of Rs. 272cr deferred tax liability for special reserve created during quarter) limited the earnings growth to modest 4% yoy. Going ahead, the management has guided for stable to improving asset quality outlook (with slippages likely to remain at similar levels qoq, while restructuring expected to be higher qoq). At CMP, the stock is trading at 0.6x FY2015E ABV. We maintain our Accumulate recommendation on the stock, with a target price of Rs.597.
 
ACC (CMP: Rs.1,019/ TP: 1,225/ Upside: 20%)
 
For 4QCY2013 ACC's performance was below estimates on the operating front. The company's stand-alone top-line fell by 13.1% yoy to Rs.2,693cr. While realization remained flat on yoy basis, volume was down by 1.5% yoy to 5.85mn tonnes. Further, top-line performance during the quarter was impacted by higher base as ACC's subsidiaries (involved in RMC business) were amalgamated with the company in the corresponding quarter of last year. OPM stood at 12.9%, up 42bp yoy basis on low base of 4QCY2012 (impacted by amalgamation of low margin RMC business). Bottom-line rose by 16.4% yoy to Rs.279cr aided by tax write back of Rs.7 6cr. We maintain a Buy rating on the stock with a target price of Rs.1,225.
 
Aurobindo Pharma (CMP: Rs.493/ TP: / Upside: -)
 
Aurobindo Pharma, posted good set of numbers much ahead of expectations. For the quarter, the company posted sales of Rs.2136cr, V/s expected Rs.1790cr, registering a growth of 37.6% yoy. The grow was mainly driven by the US formulations, which grew by 81.4% yoy, along with the ARV and EU formulation sales, which posted a yoy growth of 25.4% and 36.6% yoy respectively. API sales on the other hand grew by 12.8% yoy. The increased contribution from the formulations, which was at 65.8% V/s 56.6% during the last corresponding period, aided the gross margins to expand by 8.3% yoy. This along with operating leverage aided the OPM to expand by 14.4% yoy to end the period at 29.9% V/s 15.5% during the last corresponding period. This lead the reported net profit come in at Rs.418cr V/s Rs.92cr in 3QFY2014 and the adjusted net profit to come in at Rs.416cr V/s Rs.137cr during the last corresponding period. We would be revisiting our numbers and rating on the stock.
 
MRF - 1QSY2014 (CMP: Rs.19,365/ TP: Rs.21,698/ Upside: 12%)
 
For 1QSY2014, MRF reported a topline growth of 5.8% yoy to Rs.3,201cr, slightly higher than our estimate of Rs.3,106cr. The EBITDA margins came in at 13.1%, a marginal drop of 24bp yoy. The raw material cost as a percentage of net sales decline by 171bp yoy which was offset with a rise in employee cost and other expenses by 104bp and 91bp, respectively on yoy basis. Interest cost for the quarter came in higher than our estimate at Rs.59cr. Consequently, net profit for the quarter came flat on yoy basis at Rs.180cr, 13.6% lower than estimate. At current market price, the stock is trading at a PE of 8.0x for SY2015E and P/B of 1.5x for SY2015E. We recommend a Accumulate on the stock with a target price of Rs.21,698, based on a target P/E of 9.0x for SY2014E.
 
Central Bank- (CMP: Rs.47 / TP: - / Upside: -)
 
During 3QFY2014, Central Bank reported stable asset quality performance, while operating numbers came ahead of estimates. Key highlights from the result were a) healthy NII growth at 28.2% yoy (aided by margin jump of more than 50bp), b) moderate non-interest income (excl. treasury) performance with 8.9% yoy growth, c) Opex grew more than 25% yoy for fourth consecutive quarter at 30.9% yoy, d) asset quality reported stability as slippages more than halved (annualized slippage rate of 2.6% for the quarter), and e) effective tax rate came in at 70.9% for the quarter (remained unexplained even after management concall).
 
Sequentially lower slippages result in stable NPA levels: During the quarter, the bank's loan book grew at a moderate 13.0% yoy, while deposits grew at relatively lower 9.8% yoy, as the bank reduced its share of bulk deposits and CDs to total deposits (23.0% as of 3QFY2014, as compared to 25.7% a year ago). CASA ratio remained largely stable at 32.6%. Reported NIMs for the bank improved 54bp qoq to 3.0%, aided by 93bp improvement in yield on advances (which were depressed in previous quarter on account of higher slippages). Growth in the bank's non-interest income (excluding treasury) was moderate at 8.9% yoy, dragged by 9.2% yoy decline in fee income, even as forex income doubled on a yoy basis. The bank's reported stable asset quality performance during the quarter, as annualized slippages ratio came in at 2.6%, compared to 6.0% in 2QFY2014. Recoveries/ upgrades performance was lower sequentially at Rs.790cr compared to Rs.862cr reported in 2QFY2014. Lower slippages aided flat Gross NPA levels for the bank, while higher NPA provisioning ensured 230bp improvement in PCR and 2.1% qoq decline in absolute net NPA levels. The bank restructured loans worth ~Rs.900cr during the quarter, lower than Rs.1250cr restructured in 2QFY2014. Going ahead, the Management expects a restructuring of ~Rs.1,500cr for 4QFY2014.
 
Outlook and valuation: Over the last two years until 3QFY2014, the bank had faced tremendous asset quality pain, as its Gross NPA ratio has increased from 2.9% to 6.5% and share of standard restructured advances to net advances has increased from 5.1% to 14.8%. Traditionally while major asset quality pressure came from the infrastructure sector (including power which forms ~50% of restructured book), but off late, given the weak economic environment, other stressed sectors/over-leveraged companies also contributed to the asset quality pain. Though the asset quality performance was stable during the quarter (with sequentially lower stressed asset addition), given the prevailing macro, we would remain watchful of bank's asset quality performance. Moreover, the bank's CET 1 ratio stands at 7.1% (even after the recent book dilutive infusion of Rs.2,000cr from GoI), which would limit growth prospects. We maintain our Neutral rating on it.
 
Gujarat State Petronet (CMP: Rs.58 / TP: Under Review)
 
Gujarat State Petronet Ltd (GSPL) reported weak results for 3QFY2014. Total operating revenues declined by 7.8% yoy to Rs.245cr due to lower volumes. Transmission volumes for 3QFY2014 decreased by 26.7% yoy to 63mmscmd. EBIDTA declined by 13.3% yoy to Rs.207cr in line with decline in top-line. Interest expenses rose by 12.9% yoy to Rs.35cr and hence, PAT decreased by 26.7% yoy to Rs.87cr. We keep our target price and rating under review.
 
Honeywell Automation India (CMP: Rs.2,590/ TP: -/ Upside: -)
 
Honeywell Automation India Ltd. (HAIL) reported mixed set of numbers for 4QCY2013. Top-line reported yoy dip of 3.7% to Rs.452cr, 14.0% lower than our estimates of Rs.526cr. EBITDA, though dip by 18.8% yoy to Rs.42cr was better than our expectation of Rs.32cr. EBITDA margin, however, contracted by 213bp yoy to 9.4% in current quarter. Dent in the EBITDA margin is mainly attributable to rise in raw material cost as percentage of sales from 56.1% in 4QFY2012 to 59.0% in 4QFY2013. On the back of flat growth in top-line coupled with poor operational efficiency, net profit dipped by 19.2% to Rs.29cr while margin came in at 6.4%.
 
On annual front, for CY2013E, HAIL's top-line reported flat growth of 2.8% to Rs.1,707cr marginally lower than our estimate of Rs.1,787cr. EBITDA dip by 3.3% to Rs.118cr (higher than our estimate of Rs.106cr) leading to margin contraction of 50bp to 6.9%. Despite poor operating performance, strong other income of Rs.19cr (1.1% of net sales vis-a-vis 0.7% in CY2012) lead adjusted PAT to rise marginally by 1.2% to Rs.86cr (higher than expected Rs.75cr) while PAT margin stood at 5.0%.
Considering the consistent poor performance of the company coupled with prevailing economic slowdown, we maintain our conservative stance and maintain Neutral rating on the stock.
 
Tree House (CMP: Rs.225/ TP: Rs.313/ Upside: 38%)
 
Tree House Accessories and Education Ltd. (THEAL) reported in-line numbers for 3QFY2014. Owing to addition of 18 pre-schools in 3QFY2014, top-line surged by 36.7% yoy to Rs.39.7cr on expected lines with our estimate of Rs.39.0cr. EBITDA grew by 50.4% yoy to Rs.24.5cr while margins expanded by 564bp yoy to 61.7% (owing to reduced other expenses by 480bp). On the back of strong operating performance, adjusted PAT too reported yoy growth of 50.2% to Rs.12.1cr, in-line with our estimate of Rs.11.5cr. With consistent expansion of pre-schools, THEAL is poised to register robust growth ahead. Hence, we maintain our Buy recommendation on the stock with target price of Rs.313, based on 18x PE for FY2015E earnings.
 
 
Result Preview
 
Reliance Communications (CMP: Rs.136/ TP: -/ Upside: -)
 
Reliance Communication (RCom) is slated to announce its 3QFY2014 results today. We expect to company to record revenues of Rs.5,484cr, up ~2% qoq. This is expected primarily on the back of qoq flat ARPM at Rs.0.46/min and 2.0% qoq growth in MOU to 288min. EBITDA margin is expected to decline by ~95bp qoq to 34.0%. PAT is expected to come in at Rs.256cr. We maintain our Neutral view on the stock.
 
Cadila Healthcare (CMP: Rs.855/ TP: -/ Upside: -)
 
Cadila Healthcare is expected to post a sales growth of 14.1% to Rs.1,781 cr in 3QFY2014E. We expect the company's OPM to expand by 240bp yoy to 16.0%. Net profit is expected to grow by 62.5% yoy to Rs.167cr, on back of lower tax outgo. We maintain our neutral rating on the stock.
 
Sun TV (CMP: Rs.364/ TP: -/ Upside: -)
 
For 3QFY2014, Sun TV is expected to register 10.4% yoy growth in top-line to Rs.536cr on the back of strong growth in subscription revenue. Advertising growth is expected to be subdued due to TRAI's order to limit advertising per hour to 12 minutes. On the EBITDA front, the company's margin is expected to contract by 386bp yoy to 73.6% due to higher cost of content. Consequently, we expect SUN TV to post a subdued growth of 2.6% yoy to Rs.195cr. We recommend Neutral on the stock.
 
Hexaware (CMP: Rs.134/ TP: Rs.142/ Upside: 6%)
 
Hexaware is slated to announce its 4QCY2013 results today. We expect the company to post revenue growth of 5% qoq to US$102mn. In rupee terms, revenues are expected to come in at Rs.632cr, up 1.7% qoq. EBITDA margin is expected to decline by ~25bp qoq to 23.5. PAT is expected to come in at Rs.104cr. We maintain our Accumulate rating on the stock with a target price of Rs.142.
 
Corporation Bank- (CMP: Rs.248 / TP: - / Upside: -)
 
Corporation Bank is slated to announce its 3QFY2014 results today. We expect the bank to report a Net Interest Income (NII) growth of 7.6% yoy to Rs.951cr. Noninterest income is expected to de-grow by 8.3% yoy to Rs.355cr. Operating expenses of the bank are expected to increase by 14.7% yoy at Rs.587cr, resulting in a 5.3% yoy decline in pre-provisioning profit to Rs.719cr. Provisioning expenses are expected to grow by 16.3% yoy to Rs.472cr. Overall Net Profit is expected to de-grow by 36.9% yoy to Rs.191cr. At CMP, the stock trades at a valuation of 0.4x FY2015E ABV. We maintain our Neutral recommendation on the stock.
 
Andhra Bank (CMP: Rs.55 / TP: - / Upside: -)
 
Andhra Bank is scheduled to announce its 3QFY2014 results today. We expect the bank to report a moderate NII growth of 5.9% yoy to Rs.1,029cr. Non-interest income is also expected to de-grow by 4.3% yoy to Rs.228cr. Operating expenses are expected to increase by 26.9% yoy to Rs.631cr, thereby leading to operating profit decline of 12.1% yoy to Rs.626cr. Provisioning expenses are expected to increase by 57.2% yoy to Rs.448cr, on a low base. Overall Net profit is expected to de-grow by 53.4% yoy to Rs.120cr. At CMP, the stock is trading at 0.4x FY2015E ABV. We maintain our Neutral recommendation on the stock.
 
KEC International (CMP: Rs.53 /TP: Rs.62, Upside: 16.9%)
 
For 3QFY2014, KEC International (KEC) is expected to register a double digit topline growth of 14.1% yoy to Rs.2,050cr on the back of strong execution of its robust order book. On the EBITDA front, the company's margin is expected to expand by 64bp yoy to 6.4%. Consequently, we expect PAT to grow by 21.5% yoy to Rs.36cr in spite of elevated interest costs. We recommend Buy on the stock with a target price of Rs.62.
 
Ashoka Buildcon - 3QFY2014 (CMP: Rs.59 / TP: Rs.74/ Upside: 25%)
 
For 3QFY2014, Ashoka Buildcon (ABL) is expected to post a consolidated revenue of Rs.468cr, indicating a growth of 8.7% yoy. The under-construction captive road BOT projects will drive its E&C revenue. The E&C segment will continue to dominate the company's revenue by contributing Rs.396cr (up 8.9% yoy) while the BOT segment's share is expected to be Rs.72cr (up 2.8% yoy). On the margin front, we expect ABL's EBITDAM to increase by 8bp yoy to 19%. On the earnings front, we expect the company to post a growth of 84.1% yoy to Rs.23cr mainly on account of pick up in execution and lower base of last year. We maintain our Buy recommendation on the stock with a target price of Rs.74.
 
JK Lakshmi Cement (CMP: Rs.65/ TP: Rs.79/ Upside: 22%)
 
JK Lakshmi Cement is expected to post its 3QFY2014 results today. We expect the topline to decline by 4.6% yoy to Rs.471cr. OPM is expected to decline by 524bp yoy to 14.6%. Bottom-line is expected to decline by 55.7% yoy to Rs.18cr. We recommend a Buy on the stock with a target Price of Rs.79.
 
 
Economic and Political News
 
- Economy to grow by 4.7% in FY2014: NCAER
 
- U rea price hike possible only after general elections: India Ratings
 
- CCEA approves Rs.10 per quintal hike in sugarcane FRP
 
 
Corporate News
 
- M&M aims to invest Rs.5,000cr in next three years
 
- Maruti Suzuki launches Celerio model priced up to Rs.496,000
 
- SAIL, Sasan and others assure 41MT of coal output in FY2014