Reports » India
Indian stock market and companies daily report (February 13, 2013, Wednesday)
The Indian market is expected to open flat to positive, mirroring SGX Nifty which is trading marginally higher in the opening trades.
The US markets witnessed relatively lackluster performance throughout the trading session as traders seemed to be staying on the sidelines ahead of President Barack ObamaRs.s State of the Union address later in the evening. Markets are likely to take cue from the presidentRs.s remarks regarding the automatic government spending cuts looming at the end of the month. Investors will be also watching for any developments from the G-20 meeting, which will be held on Friday. Meanwhile, MoodyRs.s Investors Service said the downside risks to the global economic recovery have diminished since the end of last year, but a slow pace of economic growth is still likely in many economies.
Meanwhile Indian shares rose in yesterdayRs.s trading session, snapping an eight-day losing streak, with investors shrugging off disappointing IIP (-0.6% for December 2012) and inflation data (CPI Inflation at 10.79% for January 2013).
The trend deciding level for the day is 19,543 / 5,912 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 19,602 - 19,643 / 5,938 - 5,953 levels. However, if NIFTY trades below 19,543 / 5,912 levels for the first half-an-hour of trade then it may correct up to 19,502 - 19,443 / 5,897 - 5,871 levels.
Industrial production declines by 0.6%, CPI reaches a high of 10.8%
As per Quick Estimates on the Index of Industrial Production (IIP), industrial activity contracted by 0.6% yoy as compared to de-growth of 0.8% in November 201 2 yoy and 2.7% yoy in December 2011. The IIP print surprised negatively with a contraction as against consensus estimate of 1.0% growth during the month. In the April - December 2012 period, the index reported subdued 0.8% growth as compared to 3.7% growth in the corresponding period of the previous year. Growth in IIP for November 2012 has been revised downwards to contract by 0.8% yoy as compared to the earlier estimate of contraction of 0.1% yoy as estimates of manufacturing, capital goods and consumer goods were revised downwards.
On a sectoral basis, Mining witnessed a 4.0% decline during the month as weakness in the sector persisted on account of decline in production of coal and natural gas. The Manufacturing sector, accounting for 75.5% of the overall index reported a 0.7% contraction during the month as compared to growth of 2.8% in December 2011. Growth in Electricity paced at 5.2% as compared to 2.4% in the previous month however it was lower than 9.1% growth reported in December 2011. On a cumulative basis, in the April - December 2012 period, Mining sector contracted by 1.9%, Manufacturing slowed to 0.7% while Electricity sector reported 4.5% growth.
Under the Use-based classification, the Capital goods index continued to remain volatile, reporting a 0.9% de-growth during the month as compared to 8.5% degrowth in the previous month and 16.0% de-growth in December 2011. The capital index has persistently reported a double-digit contraction on a FYTD basis since the beginning of the fiscal year. In the April - December 2012 period, it contracted by 10.1% as compared to the corresponding period of the previous year. Consumer goods production which was boosted in October 2012 (13.7% growth) on account of pre-festival season demand has also contracted in December 2012 by 4.2% as compared to healthy 10.1% growth in the corresponding period of the previous year. The weakness particularly evident in consumer durables which contracted by 8.2% is likely owing to drawing down of piled up inventories as slowdown in demand continues.
We believe that the IIP numbers during the April - December 2012 period indicate that there is a broad-based slowdown across sectors particularly manufacturing, capital goods and consumer goods as compared to performance in the corresponding period of the previous year. The November 2012 IIP figure has also been revised downwards adding to the disappointment over the CSORs.s modest quick estimate of 5.0% real GDP growth in FY2013. We continue to believe that the overall IIP print for FY2013 is likely to come in below the 3.0% growth reported in FY2012.
At the same time, the new series for Consumer Price Index (CPI) inflation continued its upsurge to reach a high of 10.8% in January 2013 as compared to 10.6% in December 2012. This is because inflation in food and beverages comprising 50% of the index inched upwards to 13.4% as compared to 13% in the previous month. Inflation in rural areas reported 10.9% growth higher than 10.7% inflation growth in urban areas.
As far as RBIRs.s monetary policy stance is concerned, it is likely to be more supportive towards growth and we expect a 25 bp cut in the repo rate in March, maintaining our view of a further 50 bp - 75 bp repo cut for the rest of the fiscal year.
Indian IT exports to grow 12-14% in FY2014: Nasscom
Indian IT outsourcing sectorRs.s exports are expected to grow by 12-14% in FY2014 to as much as US$87bn, according to the National Association of Software and Services Companies (Nasscom), the industry lobby. Exports from the industry, which counts the United States and Europe as its biggest markets, were estimated to have grown 10.2% to US$75.8bn in FY2013. Domestic revenues are expected to grow at 13-15% to reach Rs.1.18lakh cr to Rs.1.20lakh cr as per Nasscom, adding that a rise in global technology spending and opportunities from adoption of disruptive technologies would propel growth in FY2014. In addition, as per NasscomRs.s strategic review - In FY2014, the industry expects to hire more or less the same numbers recruited during the year. The sector employed three million professionals and added more than 1.8lakh personnel in FY2013. NasscomRs.s growth projections for the FY2014 are on the expected lines. We continue to remain positive on Indian IT sector.
JLR retail sales up by a strong 32.3% yoy in Jan's 2013
Jaguar and Land Rover (JLR) reported a strong retail volume growth of 32.3% yoy (3.8% mom) in January 2013 to 34,877 units driven by strong growth in Jaguar and Land Rover volumes. Total volumes ex. Evoque too posted a strong growth of 32.6% yoy (2.9% mom) led by easing of capacity constraints on the Freelander model and dispatches of the new Range Rover, smaller engine and all-wheel-drive (AWD) variants of XF and XJ. The volume performance for the month was broadly in-line with our estimates of 35,000 units.
The Jaguar sales registered a robust 40.3% yoy (16.6% mom) growth led by strong growth in the XF and XJ models which grew by 36.8% and 70.4% yoy respectively. The introduction of the model year 2013 models, XF Sportbrake, XF AWD and smaller engine variants of XF and XJ were the primary growth drivers for Jaguar. The Jaguar sales were up in all the major markets with China and UK witnessing a growth of 164% (53.2% mom) and 33.1% yoy (12.5% mom) respectively.
The Land Rover sales too grew at a robust rate of 30.9% yoy (1.6% mom) primarily driven by Evoque, Freelander and the new Range Rover. The Evoque and Freelander models continue to benefit from the availability of additional capacity which led to a 31.6% (6% mom) and 56.5% yoy (28% mom) growth respectively. The new Range Rover too posted a strong growth of 80.7% mom as the company continues to ramp-up the deliveries of the new model. Land Rover sustained its growth momentum across all the geographies and registered record January sales in several countries, including the UK, US and Germany. While China sales grew strongly by 61.2% yoy; the sales in UK, US and Rest of the World increased by 33.2%, 29.1% and 23.3% yoy respectively.
We retain our positive view on JLR and expect the company to sustain its growth momentum driven by Evoque and new product launches (Range Rover, Range Rover Sport, Jaguar XF Sportbrake and AWD and smaller engine variants of XF and XJ models). We maintain our Accumulate rating on the stock with an SOTP based target price of Rs.337.
Hindalco's subsidiary Novelis reports 3QFY2013 results
HindalcoRs.s subsidiary Novelis reported its 3QFY2013 results. The companyRs.s topline declined by 5.7% yoy to US$2321mn on account of lower volumes and falling aluminium prices. The EBITDA however increased by 28.7% yoy to US$184mn due to lower raw material costs and therefore the company reported a PAT of US$3mn compared to a PAT loss of US$11 mn in 3QFY2012. We maintain our Neutral view on Hindalco.
3QFY2013 Result Review
SAIL (CMP: Rs.81/ TP:-/ Upside :-)
SAILRs.s reported disappointing 3QFY2013 results as both net sales and net profit were below our estimates due to lower than expected sales volumes. SAILRs.s 3QFY2013 net sales declined by 0.9% yoy to Rs.10,495cr (below our estimates of Rs.11,730cr) mainly due to lower realizations partially offset by higher volumes. The companyRs.s realizations stood at Rs.35,168/tonne, compared to Rs.37,326/tonne in 3QFY2012. Staff costs and other expenditure increased 11.6% and 23.5% yoy to Rs.2,081 and Rs.1,865cr, respectively. EBITDA therefore decreased by 28.0% yoy to Rs.1,138cr and EBITDA margin contracted by 408bp yoy to 10.8%. The company reported an exceptional item related to forex loss of Rs.31cr in 3QFY2013, compared to exceptional loss of Rs.466cr in 3QFY2012. Hence, reported net profit decreased by 23.4% yoy to Rs.484cr. However, excluding exceptional items, adjusted net profit declined by 53.1% yoy to Rs.515cr (significantly below our estimate of Rs.716cr) in 3QFY2013.
We expect SAILRs.s operational and financial performance to be impacted by 1) inability to maintain/raise sales volumes amidst slower demand growth; 2) higher employee costs, and 3) delays/cost overruns in its brownfield expansion projects. SAIL is on the verge of expanding its saleable steel production capacity from 12.5mn tonnes to 24.0mn tonnes by FY2015. However, the current rich valuation discounts its anticipated volume growth over FY2012-FY2016E. Hence, we recommend reduce in SAIL but keep our target price under review.
Motherson Sumi Systems (CMP: Rs.190/ TP: -/ Upside: -)
Motherson Sumi Systems (MSS) registered a better-than-expected operating performance for 3QFY2013 driven by strong growth in the standalone operations and at the Samvardhana Motherson Reflectec (SMR) front. For 3QFY2013, consolidated revenues registered a strong sequential growth of 13.1% to Rs.6,663cr which was better than our expectations of Rs.6,168cr. The top-line growth was led by a strong performance at the standalone level (up 10.5%) and also on the SMR (up 16.4%) and Samvardhana Motherson Peguform (SMP, up 12.8%) front. On a yoy basis, top-line grew by 73.5% largely on account of consolidation of SMP operations which contributed Rs.3,332cr to the top-line. SMR revenues were driven by pick-up in order execution at the new plants in Hungary, Brazil and Thailand. While the revenues in India grew by a healthy 9.7% qoq (27.8% yoy); revenues outside India grew strongly by 13.6% qoq (87.4% yoy).
On the operating front, consolidated margins improved ~70bp sequentially (~100bp yoy) to 7.6% led by significant improvement in performance in standalone operations (margins improved 380bp qoq to 18.9%) and at the the SMR (margin improvement of 200bp to 7%) front. This was primarily on account of increasing capacity utilization levels across the key plants. The operating performance at the SMP level too remained stable during the quarter. Led by strong operating performance, consolidated EBITDA jumped 24.3% qoq (99% yoy) to Rs.509cr. Nevertheless, the bottom-line declined 25.1% qoq to Rs.103cr as MSS witnessed a forex loss of Rs.64cr related to the foreign currency loans. The depreciation expense too increased 17.5% qoq which had a negative impact on the profitability. While the bottom-line at SMR grew robustly to Rs.15cr (against Rs.6cr in 2QFY2013); SMP reported a net loss of Rs.34cr as against Rs.8cr profit in 2QFY2013 owing to the forex loss of Rs.52cr.
At Rs.190, the stock is trading at 16.6x FY2014 earnings. We are still in the process of revising our estimates. The stock rating is under review.
HTMedia (CMP: Rs.103/TP: Rs.121/Upside: 17%)
For 3QFY2013, HTMediaRs.s top-line and bottom-line performance was better than our expectations. The companyRs.s top-line grew by 4.4% yoy to Rs.547cr (v/s our expectation of Rs.535cr). Advertising revenue grew by 2% yoy to Rs.415cr, primarily driven by volume growth. The circulation revenue grew by 12.3% yoy to Rs.56.5cr driven by combination of higher circulation and higher realization per copy.
The OPM expanded by 109bp yoy to 16% aided by 134bp yoy decline in consumption of raw materials. Consequently, profit grew by healthy 11.4% yoy to Rs.56cr. At the current market price, HTMedia is trading at 12.5x FY2014E consolidated EPS of Rs.8.3. We maintain Buy on the stock.
CCCL (CMP: Rs.15 / TP: - / Upside: -)
CCCL posted a dismal set of numbers once again for the quarter. Lower-than-expected performance at both revenue and EBITDAM front along with high interest cost led to loss for the quarter. On the top-line front, revenues declined by 1.8% yoy to Rs.438cr (Rs.446cr) and was lower than our estimate of Rs.491cr. The major disappointment continues on the margin front, as the company posted abysmal EBITDA margin of 3% (down 160bp yoy) against our expectations of 6.2%. The main reason for decline in margins is commodity price pressures, along with increase in employee cost and high labour cost. Further, on the bottom-line front the company posted a loss of Rs.14cr vs a loss of Rs.2cr in 3QFY2012 and against our expectations of a profit of Rs.3cr, mainly on account of a fall in margin and higher interest cost (Rs.24cr, a jump of 33% yoy). CCCL had an order inflow of Rs.568cr in 9MFY2013, taking its outstanding order book to Rs.3725cr. The company has disappointed on the earnings front and posted erratic margins since the last few quarters. Hence, we maintain our Neutral view on the stock.
3QFY2013 Result Preview
Coal India (CMP: Rs.345, TP: Rs.382, Upside: 11%)
Coal India is slated to report its 3QFY2013 results today. We expect net sales to increase by 5.5% yoy to Rs.16,190cr mainly on account of higher volumes. However, EBITDA margin is expected to contract by 569bp yoy to 31.0% due to higher staff costs and lower e-auction realizations. Net profit is also expected to decrease by 5.8% yoy to Rs.3,808cr. We maintain our Accumulate view on the stock.
Tata Steel (CMP: Rs.385, TP: Rs.463, Upside: 20%)
Tata Steel is expected to report its consolidated 3QFY2013 results. We expect net sales to increase by 15.5% yoy to Rs.38,228cr mainly on account of improved performance from Indian operations. EBITDA margin is expected to improve by 285bp yoy to 8.0%. The net profit is expected to be Rs.683cr. We maintain our Buy rating on the stock with a target price of Rs.463.
Madras Cements (CMP: Rs.235/TP:/Upside:-)
Madras Cements is slated to announce its 3QFY2013 results today. The company is expected to post a 17.4% yoy growth in top-line to Rs.870cr. OPM is expected to decline by 177bp yoy to 26.2%. Bottom-line is expected to remain flat at Rs.77cr. We maintain our Neutral rating on the stock.
Economic and Political News
- New bidding norm for power projects ready: Scindia
- Factory output shrank 0.6% in December
- Micro insurance norms to be out soon
- Royal Dutch Shell India unit to invest $1 bn for LNG terminal
- Thomas Cook India's Centre of Learning to offer MBA in tourism
- Honda launches new CR-V at Rs 19.95 lakh
- Dr ReddyRs.s gets 93% OctoPlus shares
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