Indian stock market and companies daily report (February 10, 2014, Monday)
February 10, 2014, Monday, 05:23 GMT | 01:23 EST | 09:53 IST | 12:23 SGT
Indian Markets are expected to open in the green today tracking positive opening trades in the SGX Nifty and most of the Asian indices.
The US markets moved sharply higher during the trading session on Friday, adding to the strong gains posted in the previous session. The strength on Wall Street was partly due to the release of a report from the Labor Department showing a jump in employment as measured by the household survey. The report said non-farm payroll employment increased by 113,000 jobs in January following a slightly upwardly revised increase of 75,000 jobs in December. Economists had been expecting employment to climb by about 180,000 jobs. Despite the weaker than expected job growth, the unemployment rate still edged down to 6.6% in January from 6.7% in December. The unemployment rate had been expected to come in unchanged. Meanwhile, major European markets also ended the trading session on Friday in positive territory.
The Indian markets also rose modestly on Friday, mirroring firm global cues as better-than-expected U.S. initial jobless claims data boosted optimism about the January jobs report, due out later in the day, will point to continued improvement in the labor market.
The trend deciding level for the day is 20,370 / 6,058 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 20,457 - 20,538 / 6,085 - 6,107 levels. However, if NIFTY trades below 20,370 / 6,058 levels for the first half-an-hour of trade then it may correct 20,289 - 20,202 / 6,036 - 6,009 levels
CSO's advance estimate of real GDP growth for FY2014 at 4.9%
As per advance estimates released by the Central Statistical office (CSO), real GDP growth for FY2014 is estimated at 4.9%, a tad higher than market expectations of 4.7% and GDP growth of 4.5% FY2013. But despite the optically better print on the back of a lower base the internals are not encouraging. The data indicates that GDP growth during 2HFY2014 would come in above the 5%-mark at 5.2% as compared to 4.6% in 1HFY2014.
Agricultural and allied activities are expected to report better growth along expected lines at 4.6% as compared to 1.4% as food-grain production is estimated to grow by 2.3% as against a contraction of 0.8% in FY2013 largely owing to a normal monsoon and low base.
Impacted by contraction in Mining and Manufacturing, the industrial sector is estimated to clock dismal growth of 0.7% even on the back of a muted 1.0% growth during FY2013. Mining is estimated to contract by 1.9% over a 2.2% decline a year ago and Manufacturing is expected to report decline of 0.2% despite a low base of 1.1% growth in FY2013. The industrial sector is largely supported by the 6.0% expansion in Electricity, Gas & Water Supply as compared to growth of 2.3% in the segment during FY2013.
Services sector growth is expected to moderate slightly to 6.9% during FY2014 from 7.0% in the previous fiscal year owing in particular to deceleration in growth of Rs.Trade, Hotel, Transport and Communications.. This component accounts for about 27% share in GDP (almost equivalent to industry's share) and is expected to moderate substantially to 3.5%, the lowest growth in two decades impacted by dampening consumption demand. However the other services sector segments Rs.Finance, Insurance, Real Estate & Business ServicesRs. and Rs.Community, Social & Personal ServicesRs. are expected to clock healthier growth of 11.2% and 7.4% during FY2014 as compared to 10.9% and 5.3% in FY2013 respectively. We however believe there is likely to be downward pressure on the latter category as the government tightens discretionary expenditure dramatically in 4QFY2014 to meet its fiscal consolidation objective.
Demand-side GDP growth: On the demand-side, overall consumption continues to remain weak with growth at 4.4% as against 5.2% in FY2013 owing to deceleration of private as well government final consumption expenditure. The dismal investment environment in the economy is reflected in almost flat performance of real Gross Fixed Capital Formation (GFCF) even on a low base of 0.8% in FY2013. The share of GFCF has come down to 32.5% of GDP from 33.9% of GDP in FY2013 and 35.3% of GDP in FY2012.
During FY2014, exports growth is estimated to pick up to 8.0% as against 5.0% in the previous fiscal year largely due to the impact of recovery in external demand as well as INR depreciation during the year. On the other hand, sluggishness in domestic demand as well as curbs on gold imports to an extent are both likely to result in imports contracting by about 1.6% as compared to 6.6% growth in FY2013.
Going into FY201 5, 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.
Central Bank of India looks to sell stake in IL&FS
As indicated by media reports, Central Bank has begun the process of selling its 8.3% stake in IL&FS (Infrastructure Leasing and Financial Services Ltd) and has appointed bankers for the same. IL&FS is India's largest unlisted infrastructure developer and lender, in which Central Bank being one of the founder holds 8.3% stake. In FY2012, IL&FS was valued at about USD 5bn when the company raised capital by selling around 2% stake to LIC. Central Bank is likely to fetch around Rs.2,500-3,000cr by selling its stake, which would not only boost its profitability for the fiscal year in which sale is concluded, but also its capital. Pending clarity, we have not yet factored the proposed transaction in our estimates. The bank's asset quality performance was stable during 3QFY2014 (with sequentially lower stressed asset addition), however given the prevailing macro environment, we remain watchful of bank's asset quality performance in the near term. We maintain our Neutral rating on the bank.
IFB Agro to sell its IMFL business to Tilaknagar Industries
As per BSE announcements, Tilaknagar IndustriesRs. board approved the proposal to acquire IFB Agro's Indian Made Foreign Liquor (IMFL) business. This deal will include selling of vodka brand, Volga and gin brand, Blue Lagoon. These two brands are popular in Assam, West Bengal and Odisha. As a part of this strategy, it has already exited the third party bottling business and now it is in process of selling its leading IMFL brands. The deal size is still unknown and is subject to IFB Agro's board of directorsRs. approval. We await further clarification on the same. We maintain our Buy rating on the stock with a target price of Rs.249 based on a target PE of 6x for FY2015E.
Reliance Communication (CMP: Rs.125/ TP: Under review)
For 3QFY2014, Reliance Communication (RCom) results came a tad below our as well as street estimates. The company registered top-line of Rs.5,403, almost flat sequentially. Revenues from India business also stood almost flat on a qoq basis at Rs.4,637cr. Overall voice network traffic grew merely by 0.3% qoq to 101.9bn min, which is subdued considering 3Q is a strong quarter for telecom companies. Bharti and Idea also reported soft MOU performance, implying changing industry dynamics of slowing MOU due to free minutes being curtailed. In tandem with its peer companies, RCom also reported marginal increase in voice realization rate per minute (RPM) by 0.2% qoq to 43.5paise, aided by focus on paid and profitable minutes. The total data traffic was up 85.2% yoy at 41,702mn MB. The total data customer base has grown by 31.2% yoy to 36.2mn including 3G customers in 3QFY2014. EBITDA margin of the company came in at 34.8%, against our expectations of 34.2% which came in a positive surprise. PAT came in at Rs.108cr, down 54% qoq, impacted by 11% qoq jump in interest charges. Even though operational margins of the company has improved considerably, almost flat revenue growth since last few quarters remain a cause of concern. The stock is currently under review.
Cadila Healthcare (CMP: Rs.855/TP:-/Upside :-)
Cadila Healthcare 3QFY2014, results came above expectations on the net profit. On the Top-line, the company posted sales of Rs.1838cr V/s expectation of Rs.1,781 cr, registering a yoy growth of 17.7%. The growth was mainly lead by exports, which grew by 38.5% yoy, while domestic sales grew by 3.8% yoy. The domestic sales, was impacted on back of the 3.4% yoy formulation sales growth. The exports growth was mainly driven by the US markets, which grew by 61.1% yoy and emerging markets, which grew by 30.1%. Other key market Europe, posted a yoy growth of 6.0% yoy.
The, company's OPM came in at 14.2% V/s 16.0% expected and expanding by 64bps. The expansion in the OPM came in spite of the lower gross margins which collapsed by 4.7% yoy, was on back of a very low rise in the employee and other expenses during the quarter. The employee expenses rose by 1 2.8% yoy, while the other expenditure rose by 7.4% yoy. Also the R&D expenses, during the quarter, came in at 6.7% V/s 9.0% during the last corresponding period. The Adj. Net profit came in at Rs.189cr V/s Rs.167cr expected, registering a growth of 84% yoy on back of lower tax outgo and reduction in the interest expenses. We maintain our neutral rating on the stock
J&K Bank- (CMP: Rs.1,340 / TP: Rs.1,449 / Upside: 8.1%)
Jammu & Kashmir Bank (J&K Bank) reported moderate operating performance. NII grew at moderate pace of 8.8% yoy to Rs.647cr, despite 22% yoy growth in advances. Operating expenses growth at 17.3% yoy to Rs.293cr, in-line with expectations and was lower than the 25%+ growth witnessed for last few quarters. Operating profit remained largely flat yoy at Rs.441cr. On the asset quality front, the Gross NPA ratio decreased marginally by 4bp qoq to 1.7%, while net NPA ratio increased by 3bp qoq to 0.22%, which appears to a moderate increase, given the prevailing weak macro environment and low base of NPLs for bank. PCR for the bank dropped by 182bp qoq, but even then at 90%, it remains one of the highest in the industry. Overall net profit for the bank grew by 11.0% yoy to Rs.321cr. At the CMP, the stock is trading at 1.0x FY2015E ABV, at a premium to most PSU peers, factoring in its relatively much better asset quality performance in a challenging macro environment, leaving scope for moderate upside here on. Hence, we recommend an Accumulate rating on the stock.
Sun TV (CMP: Rs.363 /TP: 400/ Upside: 10.1%)
For 3QFY2014, Sun TV's top-line and bottom-line performance were below our estimates. The company reported subdued 4.6% yoy growth in top-line to Rs.508cr, primarily on account of 7.2% yoy decline in advertising revenue to Rs.272cr. Advertising revenue was hit due to transition to new TRAI dispensation which limits ad time to 12 minutes/hour. However, Subscription revenue continued to report robust 27.0 yoy growth to Rs.1 67cr.
On the operating front, the company's EBITDA margin contracted by 428bp yoy to 73.6% on account of subdued ad revenues and higher cost of content (up 56% yoy to Rs.53cr mainly due to multiple non-fiction shows telecasted during the quarter). Consequently, net profit declined by 2.2% yoy to Rs.186cr (compared to our estimate of 195cr). We recommend Accumulate on the stock with a target price of Rs.400.
Hexaware (CMP: Rs.140/ TP: Under review)
For 4QCY2013, Hexaware reported broadly in-line set of results on the revenue as well as profit front but disappointed marginally on the operating margin front. The USD revenue came in at US$100mn, up 1.3% qoq. In INR terms, revenue came in at Rs.620cr, almost flat on sequential basis. Revenue growth during the quarter was hit because of 6.5% qoq decline in revenues from its top client. The company's EBITDA margin declined by ~130bp qoq to 22.5% on account of 25% qoq rise in SG&A expenses. PAT came in at Rs.103cr, up 4.5% qoq. The revenue growth during the quarter was broad based and the company added 10 new clients. The company declared interim dividend of Rs.7.5 and final dividend of Rs.1.
With a new owner coming in, (Barings Private Equity Asia acquired ~42% stake in the company in October - 27.7% stake from the erstwhile promoters and 14.1% stake from General Atlantic), Hexaware has stopped giving out quarterly revenue guidance as well as bill rates. We remain keen to watch out company's strategy post the promoter change and operating performance for couple of quarters. Moreover, management indicated healthy traction in key verticals namely BFSI and healthcare & insurance along with healthy demand in North America and Europe. The stock is currently under review.
Corporation Bank- (CMP: Rs.251 / TP: - / Upside: -)
For 3QFY2014, Corporation Bank reported stable asset quality numbers, while operating performance was weak. Gross and Net NPA levels for the bank remained flat sequentially, as annualized slippage ratio for 9MFY2014 came in at 2.7% lower than 3.4% reported in 1HFY2014 and PCR for the bank increased sequentially by 200bp to 53.6%.
On the operating front, NII growth was moderate at 13.4% to Rs.1,002cr, lower compared to advance growth of 18% yoy dragged by 17bp yoy lower margins at 2.2%. Non-interest income (excl. treasury) grew at muted 2% yoy, dragged by lower recoveries from written-off accounts. Opex grew by 16.7% yoy, much higher than 5.5% yoy growth in operating income, thereby leading to a 2% yoy decline in pre-provisioning operating profit to Rs.744cr. Provisions more than doubled on a yoy basis to Rs.826cr (of which Rs.other provisionsRs. came in at Rs.332cr much higher than Rs.55cr in 3QFY2013; we await management clarity on Rs.other provisionsRs. made during the quarter), leading to a PBT level loss for the bank at Rs.83cr vs. a gain of Rs.353cr reported in 3QFY2013. However, tax writeback of Rs.209cr as compared to tax expenses of Rs.50cr aided the bank to report positive earnings of Rs.127cr, which was lower by 58.2% yoy. Given the current macroeconomic backdrop, we await clarity from the management regarding their outlook on the asset quality going ahead. We maintain our Neutral rating on the stock.
Andhra Bank- (CMP: Rs.55 / TP: - / Upside: -)
Andhra Bank witnessed continued asset quality pressures, while reporting weak operating performance. Gross and Net NPA levels for the bank increased by 13.6% and 5.1%, qoq respectively, on an already large base. Provisioning expenses for the bank during the quarter increased by 50.2% yoy to Rs.428cr. On the operating front, NII for the bank de-grew by 10.6% yoy to Rs.868cr. Non-interest income grew strongly by 27.2% yoy to Rs.303cr, thereby limiting the decline in operating income to 3.2% yoy to Rs.1,171 cr. Opex for the bank rose steeply by 30.6% yoy to Rs.650cr (though was in-line with our estimates), thereby resulting in 27% yoy decline in pre-provisioning operating profit to Rs.522cr. Overall the bank reported PAT de-growth of 82% yoy to Rs.46cr. We await management comments particularly regarding the asset quality performance during the quarter and outlook on the same going ahead, given its relatively high exposures particularly to sectors like power, iron & steel and textile and an overall weak macro environment. We maintain our Neutral rating on the stock.
Dena Bank- (CMP: Rs.54 / TP: - / Upside: -)
Dena Bank reported weak operating performance, while asset quality witnessed moderate pressures. NII grew moderately by 7.5% yoy, while non-interest income de-grew by 10.7%. Operating expenses grew 32.5% yoy, largely in-line with our expectations. Pre-Provisioning operating profit for the bank declined 1 6.3% yoy inline with our estimates. On the asset quality front, the bank witnessed moderate pressures, as Gross and net NPA ratios increased sequentially by ~5% respectively. PCR for the bank dropped 665bp yoy to 63.9%, even as provisioning expenses more than doubled yoy to Rs.382cr. At PBT level, the bank reported loss of Rs.12cr (as against profit of Rs.286cr in 3QFY2013), however tax reversals of Rs.79cr aided the bank to report PAT of Rs.68cr, registering a de growth of 67.2% yoy At the CMP, the stock trades at valuations of 0.4x FY2015E ABV. We maintain our Neutral recommendation on the stock.
Ashoka Buildcon -(CMP: Rs.60/ TP: under review)
For 3QFY2014, Ashoka Buildcon (ABL) reported a good set of numbers on the profitability front, which were significantly above our and consensus estimates. This was mainly due to higher-than-expected operating performance and lower-than-expected interest cost. ABL reported top-line decline of 2.9% yoy to Rs.419cr in 3QFY2014 which was lower than our estimate by 10.6%. On the EBITDAM front, ABL's margins came in at 22.7%, a growth of 379bp on a yoy basis and were ahead our estimate of 18.9%. This was mainly due to decrease in operating expense (down 6% yoy). On the bottom line, ABL reported a PAT of Rs.34cr (our estimate was Rs.23cr) in 3QFY2014, indicating a growth of 165.6% yoy. This was mainly on back of better-than-expected operational performance.. At CMP, the stock is trading at a P/E and P/BV of 8.0x and 0.8x FY2015E earnings respectively. We continue to maintain our Buy rating on the stock. However, our target price is currently under review. We shall revise our estimates post earnings conference call with the Management, which is scheduled on February 10, 2014 at 12.00pm.
JK Lakshmi Cement (CMP: Rs.66/TP:79-/Upside:-20%)
For 3QFY2014 JK Lakshmi Cement's results were below estimates on the operating front. The company's top-line rose by 1.8% yoy to Rs.503cr. Top-line growth is expected to have been driven by higher volumes as realization remained weak during the quarter. OPM stood at 1 2.6% down 725bp on yoy basis impacted by lower realization and higher freight costs. The company's bottom-line fell by 66% yoy to Rs.14.1cr impacted by poor operating performance. The con-call with the management of the company is scheduled for the day post which we will release a detailed result update. We recommend a buy on the stock with a target price of Rs.79.
Prakash Industries (CMP: Rs.36 / TP: - / Upside: -)
Prakash IndustriesRs. (Prakash) reported its results for 3QFY2014. Its net sales increased by 10.1% yoy to Rs.671cr and the EBITDA grew by 26.5% yoy to Rs.81cr due to lower raw material costs and consequently the PAT increased by 66.7% yoy to Rs.35cr. We keep our rating and target price under review.
Godawari Power and Ispat (CMP: Rs.74/ TP: Under Review/ Upside: -)
Godawari Power and Ispat (GPIL) reported a decline in both top-line as well as profitability for 3QFY2014. GPIL's net sales declined by 10.5% yoy to Rs.395cr however EBITDA increased by 18.5% yoy to Rs.64cr due to lower costs. The company's interest expenses increased by 43.4% yoy to Rs.33cr. There was an exceptional item related to write back of royalty amounting to Rs.10cr and consequently, the company reported an adjusted net loss of Rs.4cr. We keep our rating and target price under review.
Tata Motors (CMP: Rs.361/ TP: Rs.447/ Upside: 24%)
Tata Motors (TTMT) will be announcing its 3QFY2014 results today. We expect the standalone operations to register a bottom-line loss of ~Rs.570cr as volumes (down ~36% yoy) and operating margins (down ~80bp yoy to 0.6%) continue to disappoint led by the ongoing slowdown, adverse product-mix and higher discounts. Nevertheless, at the consolidated level, we expect TTMT to post a robust revenue growth of ~31% yoy (~6% qoq) to Rs.60,208cr driven by continued traction in JLR sales and translation gains. We expect JLR revenues to surge ~50% (~9% qoq to Rs.49,989cr) and ~31% (~8% qoq to GBP 4,999mn) yoy in INR and GBP terms respectively. We expect the company's EBITDA margins to expand ~160bp yoy to 13.8%, largely driven by superior product and geography mix at JLR and also due to favorable currency movement. Consequently, the bottom-line is expected to surge by ~86% yoy to Rs.3,353cr. On a sequential basis though, consolidated earnings are expected to decline ~12% as margins are expected to contract by ~140bp qoq due to unfavorable currency movement and also due to the absence of local incentives. Currently, we have a Buy rating on the stock with an SOTP target price of Rs.447.
NMDC (CMP: Rs.145/ TP: Under Review/ Upside: -)
NMDC is slated to announce its 3QFY2014 results today. We expect the company's top line to increase by 37.8% yoy to Rs.2,206cr on account of increase in iron ore sales volumes. On the operating front, EBITDA margin is expected to decrease by 77bp yoy to 67.2%. The bottom line is however expected to increase by 27.0% yoy to Rs.1,636cr due to higher other income. NMDC has raised the price of Iron ore fines by Rs.100/tonne to Rs.2,910/tonne for the month of February while keeping the rates for lumps same as in January. We are likely to raise our estimates after the 3QFY2014 results.We maintain our positive stance on the stock but keep our rating and target price under review.
JAL (CMP: Rs.40/ TP:-/ Upside:-)
We expect Jaiprakash Associates (JAL) to post a top-line decline of 3.6% yoy to Rs.3,309cr for the quarter. C&EPC revenue is expected to increase by 13.9% yoy to Rs.1,453cr. On the cement business front, we expect JAL to post a revenue of Rs.1,506cr on a volume of 3.4mt with realization of Rs.4,303/tonne, for the quarter. We expect the company to post a blended EBITDA margin of 26.1%, registering a growth of 296bp yoy for the quarter. On the bottom-line front, we expect a PAT of Rs.72cr, registering a yoy decline of 34.9% in 3QFY2014. This is mainly on account of a 13% yoy jump expected in the interest cost to Rs.600cr. We continue to maintain Neutral rating on the stock.
India Cements (CMP: Rs.55/TP:-/Upside:-)
India Cements is expected to announce its 3QFY2014 results today. We expect the company's top-line to remain flat on a yoy basis at Rs.1,086cr. OPM is expected to decline by 555bp yoy to 12.2% due to lower realization and higher operational costs. The company is expected to post a net loss of Rs.14cr for the quarter (vs. net profit of 26cr in 3QFY2013). We maintain our neutral rating on the stock.
BGR Energy (CMP: Rs.105/ TP: Rs.120/ Upside: 14.2%)
We expect BGR Energy (BGR)'s top-line to grow by 19.8% yoy to Rs.964cr on back of good execution of Construction and EPC contracts. However, its EBITDA margin is expected to contract by 244bp yoy to 11.3% as the company is executing relatively lower margin orders. Consequently, the bottom-line is likely to decline by 3.7% yoy to Rs.40cr. We recommend Accumulate rating on the stock with a target price of Rs.135.
Economic and Political News
- Economic growth could rise to 6-6.5% in next year: C Rangarajan
- India may produce record 263.2 MT foodgrains this year-Agriculture minister
- Nabard sanctions Rs 348.63 crore to state under RIDF
- DLF sells Aman Resorts for $358 million
- Sesa, JSW trade charges on price
- Wipro eyes $1 bn revenue from health care & life sciences by 2015