Indian stock market and companies daily report (February 12, 2014, Wednesday)
February 12, 2014, Wednesday, 05:37 GMT | 01:37 EST | 11:07 IST | 13:37 SGT
Indian Markets are expected to open in green tracking positive opening trades in the SGX Nifty and most of the Asian indices.
The US markets moved sharply higher on Tuesday as traders reacted positively to new Federal Reserve Chairperson Janet Yellen's first day of Congressional testimony. In prepared remarks, Yellen indicated that she expects a great deal of continuity in the Fed's approach to monetary policy. She predicted that the Fed would continue to reduce the pace of asset purchases in measured steps at future meetings but noted that purchases are not on a preset course. Yellen also reiterated that a highly accommodative policy will remain appropriate for a considerable time after the asset purchases end. The European markets also closed Tuesday's session in positive territory following Janet Yellen's testimony to continue Fed's recent policy.
Meanwhile, Indian markets posted modest gains on Tuesday, tracking firm cues from Asia and Europe. Investors are awaiting consumer inflation data on Wednesday and wholesale inflation data due out on Friday for cues on the RBI's likely policy stance in its next policy review meet on April 1.
The trend deciding level for the day is 20,385 / 6,066 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 20,421 - 20,479 / 6,079 - 6,095 levels. However, if NIFTY trades below 20,385 / 6,066 levels for the first half-an-hour of trade then it may correct 20,327 - 20,292 / 6,050 - 6,037 levels.
Trade deficit narrows to USD9.9bn in January 2014 owing to continued decline in imports
According to provisional data released by the commerce ministry, the trade deficit for January 2014 has come in at USD9.9bn as against USD10.1 bn in the previous month and USD19.0bn in January 2013. The improvement in trade balance continues to be mainly attributed to contraction in imports as a result of deterioration in domestic demand as well as curbs on gold imports.
Although positive, export growth remained moderate for the third straight month. Exports reported growth of 3.8% as compared to 3.5% in the previous month and
1.2% in January 2013. Imports contracted steeply for the eighth straight month by 18.1% during January 2014 as compared to 15.2% in December 2013 and growth of 6.3% in January 2013. This is mainly on account of non-oil imports reporting about 22.0% decline on sluggish demand environment in the economy. As a result of the policy of linking gold imports to exports, import of the previous metal has contracted sharply for the seventh consecutive month in January 2014 with about 77% decline as compared to a year ago. We expect the quantum of gold imports to come in about USD20-25bn lower during FY2014 as against USD54bn reported in FY2013. Oil imports reported decline of 10.1% even on the back of 1.4% contraction during January 2013.
Cumulatively, the trade deficit stands at USD120bn in the April to January period of FY2014 as compared to USD165.8bn in the corresponding period of the previous year ie about a 27% improvement. We believe that on the back of this significant moderation in the trade balance, the CAD for FY2014 as a whole is likely to range between 2-2.5% of GDP as compared to 4.8% of GDP in the previous fiscal year.
IT sector exports to grow 13-15% in FY2015: Nasscom
Industry lobby group Nasscom is predicting a much better FY2015 for the Indian IT-BPM industry. Better times are likely to come on the back of disruptive technologies, rising entrepreneurship and signs of recovery in the global markets. IT outsourcing sector is expected to see exports growing by 13-15% in the fiscal year starting in April, with improving US and European economies driving growth. Exports grew by 13% in FY2014 while domestic revenues grew by a little less than 10%, much lower than the expected growth of 13-15%. A strong buyer confidence together with a higher projected global IT spending and increased contract volume are making FY2015 look much better for the Indian IT and BPM industry, according to Nasscom. This is one of the most bullish growth target given by Nasscom in the last couple of years. The strong growth rate predcited by Nasscom is also in line with the positive commentary from the Indian IT companies during the announcement of the third quarter results. We continue to remain positive on Indian IT sector.
West Bengal government clears hurdle for NTPC project
The West Bengal govt. has decided to allot 98 acres additional land and also provide coal linkage to NTPC's 1600MW Katwa power project in West Bengal.The govt. has however put one condition of being supplied 85% of the power generated from the project. NTPC was previously unable to start the project because they had been allotted 500 acres land by the previous govt. but required 150 acres more land for the project. NTPC, along with its group companies, currently has 42,454MW of installed capacity. We maintain Accumulate rating on the stock with a target price of Rs.146
Dr Reddy's (CMP: Rs.2659/ TP: Rs.3008/ Upside: -13.1%)
Dr Reddy's results were mostly in line with estimates. On the sales front, Dr Reddy's sales came in at Rs.3,534cr V/s Rs.3,588cr, posting a growth yoy of 22.7%. The sales growth during the quarter was aided by the global generic sales, which posted a growth of 41% yoy, mainly driven by the USA and Emerging markets, which posted a yoy growth of 76% and 25% respectively. The OPM of 27.6% came in much ahead of 25.4%, as against 17.7% in the corresponding period of the previous year. However, a higher tax provision during the quarter, lead the reported net profit come in at Rs.618cr V/s expectation of Rs.736cr, a yoy growth of 63.5% over the last corresponding period. Also during the quarter, the company had reversal of the impairment charge on the intangible assets amounting to Rs.49.7cr, excluding which the adjusted net profit of Rs.584cr, a yoy growth of 54.3%. We maintain accumulate on the stock with a price target of 73008.
Tata Steel (CMP: Rs.390/ TP: Under Review / Upside : -)
Tata Steel's consolidated 3QFY2014 net sales and operating profit were above our estimate but the net profit was below our expectations due to higher than expected interest costs (Rs.1,108cr compared to our estimate of Rs.1,077cr) and tax rate (64.1% compared to our estimate of 33.0%). Its net sales increased 14.4% yoy to Rs.36,410 (marginally above our estimate of Rs.36,257cr). Consolidated steel sales volumes were flat yoy at 6.3mn tonnes in 3QFY2014. Its India operations net sales grew by 8.3% yoy to Rs.10,040cr while the sales volumes increased 9.5% yoy to 2.07mn tonnes. On the international front, Tata Steel Europe's (TSE) volumes increased by 5.6% yoy to 3.19mn tonne. The company's EBITDA increased 178.9% yoy to Rs.4,006cr due to lower base of the previous quarter, representing an EBITDA margin of 11.0%. Its tax rate stood at 64.1% due to absence of tax credit in its European operations (our estimate - 33.0%). Hence, its net profit was below our estimate of Rs.826cr and stood at Rs.503cr (net loss of Rs.763cr). We maintain our Buy rating on the stock while we keep our target price under review.
Gujarat Gas (CMP: Rs.235/ TP: Under Review/ Upside: -)
Gujarat Gas reported healthy 4QCY2013 results. The company's top line increased 2.3% yoy to Rs.780cr while the company's cost of goods sold declined
1.9% yoy to Rs.593cr. Hence, the EBITDA increased by 21.5% yoy to Rs.134cr. Other income also rose by 67.6% yoy to Rs.17cr. Consequently the company's net profit increased by 30.6% yoy to Rs.91cr. We would roll our estimates for to reflect CY15 numbers post the interactions with the management and hence keep our rating and target price under review.
FAG Bearings (CMP: Rs.1,594/ TP: Rs.1,751/ Upside: 10%)
FAG Bearings (FAG) posted mixed results for 4QCY2013 with top-line coming in slightly ahead of our expectations; while, EBITDA margins were lower-than-expected (down 108bp qoq to 12.4%) largely due to raw-material cost pressures. Bottom-line, however, was ahead of our expectations led by sharp yoy increase in other income. The top-line posted a strong growth of 7% qoq to Rs.403cr, which was slightly ahead of our expectations of Rs.388cr. The strong growth in the top-line was despite the weakness in the automotive and the industrial sectors which are the key growth drivers of the company. EBITDA margins declined sequentially (down 108bp qoq) to 12.4%, lower than our expectations of 13.9%, primarily due to raw-material cost pressures and sharp increase in other expenditure. Consequently, operating profit and net profit declined 1.6% and 2.7% qoq to Rs.50cr and Rs.35cr respectively. On a yoy basis though, net profit surged 17.6% led by strong top-line growth of 16% and aided further by sharp increase of 64.4% in other income. At the CMP, the stock is trading at 12.7x CY2015E earnings. We maintain our positive bias on FAG, considering its strong parentage, debt-free status and cash balance worth Rs.143/ share on the books. We maintain our Accumulate rating on the stock with a target price of Rs.1,751.
Bajaj Electricals Ltd (CMP: Rs.210/ TP: Rs.238/ Upside: 13%)
Bajaj Electricals Ltd. (BEL) reported mixed set of numbers for 3QFY2014. Top-line reported growth of 18.4% yoy to Rs.1,033cr, 5.1% higher than our estimate of Rs.983cr. The consumer durables (CD), Lighting and luminous (LnL) segment and E&P segment registered growth of 11.6%, 2.9% and 81.6% yoy respectively.
On EBITDA front, BEL reported profit of Rs.58cr, higher by 60.5% yoy, mainly attributable to dip of 207bp yoy in other expenses. Subsequently, EBITDA margins came in at 5.6% during the quarter, expansion of 146bp yoy. At EBIT levels, both CD and LnL segment reported margin of 9.6% and 5.2% respectively vis-a-vis
11.8% and 6.8% in the same quarter previous year. E&P segment, however, reported EBIT loss of Rs.14cr, 5.1% of the segment revenue as compared to EBIT loss of Rs.40cr in 3QFY2013. EBIT losses are assumed to be mainly due to unexpected hits from the closure of the older delayed sites.
Subsequently, PAT came in at Rs.20cr higher by 71.9% yoy while marginally lower than our estimate of Rs.21cr. We expect the robust performance of CD and Lnl segment to continue while disappointing performance of E&P segment projects to cease by the end of FY2014. As we rollover to FY2016E, we recommend accumulate rating on the stock with a revised target price of 7238 based on target PE of 14x for FY2016E.
JK Tyre & Industries (CMP: Rs.148/ TP: Rs.187/ Upside: 26%)
JK Tyre & IndustriesRs. (JKI) reported in-line results for 3QFY2014 as the company managed to maintain the EBITDA margins in excess of 11% despite the weak demand environment. The standalone top-line posted a strong growth of 11.6% yoy (flat qoq) to Rs.1,443cr, which was slightly lower than our expectations of Rs.1,497cr. We believe that strong growth in exports and healthy off take in the replacement segment could have attributed to the top-line performance amid slowdown in the OEM demand. EBITDA margins remained stable sequentially at
11.2%, better than our expectations of 10.6%. However, it surged sharply by 214bp yoy largely due to decline in raw-material costs, especially natural rubber, whose prices declined ~9% yoy. As a result, operating profit increased by 37.9% yoy (2.5% qoq) to Rs.162cr. Interest and depreciation expense during the quarter increased 20% yoy (11.2% qoq) and 43.5% yoy respectively due to the commissioning of the Chennai facility. Led by a strong operating performance, adjusted net profit stood at Rs.46cr, up 46% yoy. The Mexican subsidiary, Tornel, however, posted weak results as top-line reported a decline of 25% yoy (22.3% qoq) to Rs.291cr and EBIT declined by 29.3% yoy (41.9% qoq) to Rs.26cr with EBIT margins witnessing a sharp contraction of 300bp qoq to 8.8% primarily due to raw-material cost pressures. At the CMP, the stock is trading attractively 2x FY2015E earnings. We maintain our positive view on JKI as we believe that the company will continue to benefit from the healthy growth in the replacement segment which would ensure that the utilization levels at the Chennai plant remain at higher levels. Additionally, an improving product-mix in favor of radial tyres and expected stability in raw-material prices will aid margin expansion going ahead. We maintain our Buy rating on the stock with a target price of Rs.187.
Coal India (CMP: Rs.270/ TP: Rs.290/ Upside: 7%)
Coal India is slated to report its 3QFY2014 results today. We expect net sales to remain flat yoy at Rs.17,336cr while the EBITDA margin is expected to contract by 588bp yoy to 25.3% due to higher costs. Net profit is expected to decline by 15.6% yoy to Rs.3,724cr. We maintain our Accumulate rating on the stock with a target price of Rs.290.
Cipla (CMP: Rs.413 / TP: Rs.504/ Upside: -22.0%)
Cipla is expected to post a net sales of Rs.2,366cr. On the operating front, the OPM (excluding technical know-how fees) is expected to come in at 23.1%, and net profit is expected to come at Rs.439.3cr. We maintain our buy on the stock with a price target of Rs.504.
Apollo Tyres (CMP: Rs.119/ TP: -/ Upside: -)
Apollo Tyres (APTY) is slated to announce its 3QFY2014 results today. On a consolidated basis, we expect the company to register a top-line growth of ~5% yoy (down ~2% qoq) to Rs.3,368cr driven primarily by robust revenue growth in Europe aided by a favorable exchange rate. Domestic and South Africa revenues are however expected to decline by ~7% and ~4% yoy respectively due to weak demand environment. We expect EBITDA margins to improve marginally by ~30bp yoy to 12.2% (flat qoq) leading to an ~5% yoy (down ~14% qoq) growth in net profit to Rs.189cr. At the CMP, the stock is trading at 7.5x its FY2015E earnings. Currently, we have a Neutral rating on the stock.
Ramco Cements (CMP: Rs.166/TP:-/Upside:-)
Ramco Cements is expected to post its 3QFY2014 results today. We expect the topline to decline by 0.7% yoy to Rs.866cr, on account of fall in realizations due to poor demand scenario. OPM is expected to decline by 723bp yoy to 15.9%. Bottom-line is expected to decline by 73.6% yoy to Rs.22cr. We maintain a Neutral rating on the stock.
ITNL (CMP: Rs.113 / TP: Rs.156 / Upside: 38%)
We expect IL&FS Transportation Networks (ITNL) to post a mixed set of numbers for the quarter, with decent performance (on high base) on the revenue front, but muted show at the earnings level, owing to high interest cost. The company's consolidated revenue is expected to grow by 3.1% yoy to Rs.1,819cr for 3QFY2014. We expect the company to register an EBITDAM of 28.0%. Further, on the back of higher interest cost, which is expected to come in at Rs.362cr (up 27.2% yoy), we expect ITNL's earnings to remain flat yoy to Rs.105cr. We recommend Buy rating on the stock with target price of Rs.156.
HT Media (CMP: Rs.74/TP: Rs.95/Upside: 28%)
For 3QFY2014, we expect HT Media to report subdued 2.3% yoy growth in topline to Rs.560cr (impacted by selling of Burda print business during last quarter). However, OPM is expected to expand by 216bp yoy to 22.5%. Consequently, Net profit is expected to grow by 18.7% yoy to Rs.64cr. At the current market price, HT Media is trading at 8.4x FY2015E consolidated EPS of Rs.9.3. We maintain Buy on the stock with a target price of Rs.95.
NCC (CMP: Rs.27/ TP: 39/ Upside: 45%)
We expect a mixed performance from NCC for 3QFY2014. On the top-line front, the company is expected to post a healthy growth of 22.5% to Rs.1,451cr. This growth would mainly be due to lower base of last year. Its EBITDA margin is expected to grow by 76bp yoy to 8.0% for the quarter. On the earnings front, we expect the net profit to decline by 2.9% yoy to Rs.11cr. This would be primarily on account of high interest cost of Rs.108cr (up 9.1% yoy) owing to an elongated working capital cycle. We maintain Buy rating on the stock with the target price of Rs.39.
Economic and Political News
- IT sector bullish on exports growth: Nasscom
- RBI puts caps on banks exposure to group entities
- Compliance does not end with approval, says US FDA chief
- No sabotage at Toansa plant, says Ranbaxy
- Cipla calls for a re-look at pharma regulations in India
- Maruti bets on Celerio for sales turnaround