Indian stock market and companies daily report (February 13, 2014, Thursday)
February 13, 2014, Thursday, 05:08 GMT | 00:08 EST | 10:38 IST | 13:08 SGT
Indian Markets are expected to open flat with a positive bias tracking flat opening trades in the SGX Nifty and mixed opening in most of the Asian indices.
The US markets showed lack of direction for most of the trading session, before closing mixed. The choppy trading seen for most of the trading day came as traders seemed reluctant to make any significant moves amid a lack of major U.S. economic data. Uncertainty about the near-term outlook for the markets also likely kept traders on the sidelines following the volatility seen over the past month. Traders were also looking ahead to Thursday, which will see the release of some key economic data along with new Fed Chair Janet Yellen's second day of testimony on Capitol Hill. Meanwhile, majority of the European markets continued their recent upward trend on Wednesday. Investor sentiment received a boost from strong Chinese trade data and positive corporate financial results. Chinese export and import growth accelerated unexpectedly at the start of the year, defying expectations that the economy is set for a slowdown in early 201 4.
The Indian markets rose on Wednesday following strong global cues underpinning sentiment after Federal Reserve Chairman Janet Yellen emphasized continuity with the policy approach taken by her predecessor.
The trend deciding level for the day is 20,464 / 6,089 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 20,501 - 20,553 / 6,101 - 6,119 levels. However, if NIFTY trades below 20,464 / 6,089 levels for the first half-an-hour of trade then it may correct 20,412 - 20,375 / 6,072 - 6,060 levels.
Interim Railway Budget 2014-15, a no-show
The Interim Railway Budget for 2014-15 has refrained from any major policy measures or capex related increases. Passenger fares as well as freight tariffs have been left unchanged in line with market expectations. Being an election year, the interim railway budget would seek approval for Rs.Vote-on-AccountRs. in Parliament for meeting railwaysRs. expenditure during the initial 4 months of the financial year. The operating ratio for FY2014 deteriorated to 90.2% as compared to budgeted estimated of 87.8% and level of 90.2% in FY2013 suggesting deterioration in financial health.
On Foreign Direct Investment (FDI) in the rail sector, the budget positively stated that a proposal is under consideration by the government. While the plan outlay for FY2015BE has been envisaged to increase by 8.3% to Rs.64,305cr; the FY2014RE itself at Rs.59,359cr has come in about 6.3% below the budgeted estimate of Rs.63,363cr. Of the budgeted plan investment, Rs.30,223cr is expected to be financed through gross budgetary support.
The Gross Traffic Earnings for FY2014RE reported 13.6% growth over a year ago, lower than the budgeted growth estimate of 1 6.2%. This slippage can be attributed to optimistic projection for Passenger earnings in FY2014BE at 34.8% largely on account of over-estimation for Passenger earnings from second class segment. In FY2014RE, the rise in Passenger earnings has come in at 19.7% and during FY2015BE the segment is expected to report reasonable 20.7% growth. The Ordinary Working Expenses during FY2015BE are estimated to increase by 14.0% to Rs.110,649cr largely owing to Rs.additional requirements on account of fresh recruitment, increase in dearness allowance rates, increase in fuel bill, higher lease charges payable to IRFC and general inflationary increases.Rs. The operating ratio for FY2014 deteriorated steeply to 90.8% as against the budgeted estimated of 87.8%. The 60bp increase in the ratio from 88.8% attained during FY2013 indicates worsening in railwaysRs. financial health after having reported an improvement of about 470bp during FY2013. This can be largely attributed to slippage in revenue growth as well as increase in operating expenses. During FY2015 however, the operating ratio is estimated to decelerate to 89.8%.
The passenger as well as freight tariff has been left unchanged as expected ahead of upcoming general elections but during the course of the year, the fuel component in tariffs (of both passenger and freight rates) has been adjusted through the fuel adjustment component (FAC) in order to reflect changes in fuel costs. Moreover, the Union Cabinet has cleared a proposal for setting up of Railway Tariff Regulatory Authority in January 2014 to institutionalize a regulatory mechanism at arm's-length for pricing of passenger and freight services. It will also advise the Central Government on fixation of tariff, based on cost of operations and factors impinging it, to help generate requisite surpluses. We believe that this is a positive and its implementation is likely to depoliticize railway tariff.
The government would be presenting the Interim Union Budget for 2014-15 on February 17, 2014 and we do not expect any major policy announcements in the same. We believe that the government is likely to curtail the deficit at the budgeted level of 4.8% of GDP by significant cuts in plan expenditure from the budgeted levels, rolling-over discretionary expenditure into the next fiscal year as well as aggressively seeking to garner proceeds from non-tax revenues and disinvestment receipts.
CPI Inflation moderates on easing food inflation
The combined (rural + urban) Consumer Price Index (CPI) inflation during January 2014 moderated by 108bp to 8.79% as compared to 9.87% in December 2013. The deceleration can be mainly attributed to easing of food inflation which accounts for almost 50% weightage in the index. Food articles inflation came off to a 22-month low at 9.87% as against 11.97% in the previous month and 14.45% in November 2013. Fuel inflation too moderated at 6.54% as compared to 6.98% in December 2013. But nonetheless Core CPI inflation inched slightly higher for the third straight month to 8.1 1% as compared to 8.09% in December 2013 and 7.97% in November 2013. We expect the RBI to hold monetary policy rates in its forthcoming policy on April 1, 2014.
Consumer durables continues to weigh on IIP
As per Quick Estimates on the Index of Industrial Production (IIP), industrial growth in December 2013 reported de-growth of 0.6% as compared to contraction of 1.3% in the previous month and a similar 0.6% in December 2012. Excluding the performance of electricity sector the IIP would have reported de-growth of 1.3% during the month.
In terms of sector-wise classification, the Mining sector reported 0.4% growth as against decline of 3.1% in December 2012 largely on account of contraction in coal production during the month coupled with continued de-growth in natural gas production. During the month the Manufacturing sector reported contraction of 1.6% over 0.8% de-growth in December 2012. The production in Electricity sector reported healthy 7.5% growth as compared to 5.2% in December 2012 and it has supported the overall performance of the index.
As per the use-based classification, Capital Goods index posted a de-growth of 3.0% despite 1.1% contraction in December 2012. Consumer durables contracted (for the thirteenth straight month) by a steep 16.2%, weighing on overall production as domestic demand environment continues to remain weak.
JLR registers strong volume growth in January 2014
JLR recorded a strong retail sales growth of 12.1% yoy in January 2014 to 39,1 06 units. The volumes grew at a strong double digit rate in China (up 38.9% yoy) and North America (up 16.9% yoy) led by strong momentum in the recently launched models. UK and Europe, however, witnessed 4.3% and 1.9% yoy decline in volumes during the month. Jaguar maintained its strong sales run, posting a robust growth of 21.5% yoy to 7,000 units, led by continued growth in the XF and XJ models and boosted further by incremental sales of the F type model. Geographically, Jaguar posted an impressive growth in China (up 64.9% yoy) and North America (up 32% yoy); however, sales in the UK and Europe declined sharply by 9.4% and 1 3.4% yoy respectively. Land Rover too grew by 1 0.3% yoy to 32,106 units, driven by continued ramp-up of the new Range Rover (up 4.4% mom) and the new Range Rover Sport. Evoque sales, however, registered a decline of 5.4% yoy (13.6% mom). Geographically, the growth was strong across China and North America which clocked a strong growth of 33% and 13,3% yoy respectively.
We expect headwinds in the standalone business to continue in the near term due to weak macro-economic environment which is expected to continue impacting domestic volumes. Nevertheless, we expect JLR to sustain its strong performance driven by continued momentum in the global luxury vehicle market and aided further by the strong product launch pipeline and the success of the newly launched models. We retain our Buy rating on the Tata Motors stock with an SOTP based target price of Rs.451.
Coal India (CMP- Rs.270/ TP: -/ Upside: -)
Coal India (CIL) 3QFY2014 top-line was below our estimate; however, its bottom-line was slightly above our estimates. The company's net sales decreased by 2.3% yoy to Rs.16,928cr (below our estimate of Rs.17,336cr) due to decrease in sales volumes (down 3.0% yoy to 117mn tonnes). However, blended realizations were flat yoy to Rs.1,448/tonne. Although CIL had taken a price hike for its FSA coal, its e-auction realizations declined 20.7% yoy to Rs.2,332/tonne. CIL's EBITDA decreased by 4.8% yoy to Rs.4,081cr mainly due to lower volumes and higher staff costs (up 5.0% yoy to Rs.6,980cr). Other income decreased by 7.5% yoy to Rs.2,1 82cr which resulted in net profit decreasing by 11.4% yoy to Rs.3,894cr (above our estimate of Rs.3,724cr). We keep our rating and target price under review.
Cipla (CMP:Rs.413 / TP: Rs.504/ Upside: -22.0%)
Cipla posted numbers, was above expectations on sales front, while OPM and net profit came below expectations. On sales, front, the company posted sales of Rs.2553cr V/s expected Rs.2,366cr, posting a yoy growth of 23.3%. The sales growth was driven by exports, which posted a yoy growth of 31.9%, while the domestic formulations posted a yoy growth of 12.6%.OPM, came in at 17.2%, impacted by 46.4% yoy rise in the salary cost , which was impacted by the annual salary increments adjusting for , which the OPM would have been ~20% V/s 23.1% in 3QFY2013. Thus, the net profit came in at Rs.284.3cr V/s Rs.439.3cr expected, posting a dip of 1 6.4% yoy.We maintain our buy on the stock with a price target of Rs.504.
Bhushon Steel (CMP: Rs.458/TP: - /Upside: -)
Bhushan Steel reported a loss at the bottom-line due to higher interest costs for 3QFY2014. The company's net sales declined 3.8% yoy to Rs.2,318 cr due to disruption in operations after the explosion in the blast furnace during the trial run and hence the EBITDA decreased by 23.6% yoy to Rs.601cr. Depreciation expense increased 1 6.9% yoy to Rs.242cr and interest costs increased 147.4% yoy to Rs.432cr due to capitalization of its projects. Consequently the company reported a net loss of Rs.55cr, compared to a profit of Rs.221cr in 3QFY2014. We keep our rating and target price under review.
Apollo Tyres (CMP: Rs.118/ TP: -/ Upside: -)
For 3QFY2014, Apollo Tyres (APTY) reported better-than-expected consolidated results led by strong performance at Europe and South Africa. While the adjusted top-line was broadly in-line with our expectations; adjusted bottom-line was sharply above our estimates driven by EBITDA margin expansion at Europe and South Africa. The adjusted standalone results, however, missed our estimates due to EBITDA margin pressures on account of substantial increase in other expenditure. During the quarter, the company for the first time recorded other operating income (on a cumulative basis at Rs.84cr) which relates to VAT and sales tax refunds from the Tamil Nadu government in relation to the Chennai plant. Additionally, the company also reported exceptional expenses in connection with the termination of the Copper acquisition which were netted against profit on sale of certain assets in South Africa.
Consolidated top-line for the quarter grew strongly by 10.6% yoy (3.7% qoq) to Rs.3,559cr aided by 33.4% and 10.4% yoy growth in Europe and standalone revenues respectively. Nevertheless, standalone revenues were boosted by other operating income of Rs.84cr; adjusted for which the consolidated top-line was broadly in-line with our estimates of Rs.3,447cr. Adjusted standalone top-line grew marginally by 5.3% yoy during the quarter. Consolidated EBITDA margins surprised positively and stood at 16%, up 410bp yoy (282bp qoq). Even after adjusting for other operating income, consolidated margins at 13.9% (up 200bp yoy and 70bp qoq) came in ahead of our expectations of 12.2%. The adjusted margin performance was led by sharp improvement in operating performance at Europe and South Africa. However, the standalone adjusted operating margins (reported margins at 13.8%) declined by 256bp qoq to 10.4%, lower than our expectations of 12%, primarily due to significant increase in other expenditure.
Driven by better-than-expected operating performance consolidated net profit on an adjusted basis grew strongly by 50.5% yoy (8.9% qoq) to Rs.272cr, ahead of our expectations of Rs.189cr. The reported consolidated bottom-line stood at Rs.338cr, up 87.2% yoy and 54% qoq. The stock rating is currently under review.
Page Industries (CMP: Rs.5,633/ TP: -)
Page Industries (Page) continues to report strong set of numbers. The company's top-line grew by 39.9% yoy to Rs.303cr, 9.8% higher than our estimate of Rs.276cr, for the quarter. The strong sales growth was driven by equal contribution from volume growth and price hike. Blended volume growth for the quarter was 18.6% yoy and average realization increased by 18.0% yoy to Rs.118/piece of garment. The operating margin expanded by 121 bp yoy to 18.2% for the quarter majorly on account of lower other expenses as a percentage of net sales. However, it came 92bp lower than our estimate of 19.1% because of higher-than-expected raw material cost. On account of robust top-line growth and margin expansion on a yoy basis, the company reported a 36.3% growth in the profit to Rs.35cr, in-line with our expectation. The profit came in-line with our estimate of Rs.34cr despite of margin expansion as other income was lower than expected.
Given the huge market size, Page's predominant position, strong brand recall and capacity expansion plans for next four years to cater to the increasing demand; we remain positive on the company's growth outlook. At the CMP, the stock is trading at a PE of 33.4x FY2015E earning. However, we reiterate recommended Neutral on the stock due to high valuation and recent run up in stock price.
MOIL Ltd (CMP: Rs.224/TP: Under review /Upside: -)
MOIL's 3QFY2014 operating results and adjusted net profit came in above our expectations. Net sales increased by 15.5% yoy to Rs.264cr (above our estimate of Rs.251 cr). EBITDA increased by 1 9.2% yoy to Rs.137cr and EBITDA margin expanded by 161bps yoy to 51.9% due to higher sales. Other income increased by 77.2% yoy to Rs.113cr which included a one-time write-back of provision worth Rs.44cr. Adjusting for this write back, net profit was flat yoy at Rs.114cr (above our estimate of Rs.107cr). We keep our rating and target price under review.
Ramco Cements (CMP: Rs.172/TP:-/Upside:-)
For 3QFY2014, Ramco Cements (Ramco) results were in-line with estimates. The company's top-line remained flat yoy at Rs.868cr. Ramco's key markets, which are situated in South India continue to be impacted by low demand and poor pricing scenario. OPM fell by 782bp on a yoy basis to 15.4% on account of lower realization and higher costs. Ramco's operating costs per tonne rose during the quarter due to higher freight costs and other expenses. The company's net profit for the quarter fell by 69% yoy to Rs.26cr. We maintain a neutral rating on the stock.
GMDC (CMP: Rs.104/ TP: -/ Upside: -)
GMDC reported decline in net sales and profits on account of lower volumes. The company's net sales declined by 1 7.5% yoy to Rs.291 cr due to weak performance of mining segment (down 27.6% to Rs.227cr). Mining segment decline is likely on account of decline in sales volumes in our view. The company's EBITDA declined 21.9% yoy to Rs.185cr due to decline in sales. However, on the positive side, its Power business reported turned around and reported an EBIT of 33cr compared to an EBIT loss of Rs.0.6cr in 2QFY2014 and EBIT loss of Rs.2cr in 3QFY2013. The tax rate for 3QFY2014 increased to 37.2% compared to 32.2% in 3QFY2013 and hence, the company's net profit declined by 26.7% to Rs.82cr. Given, the decline in stock price lately, we maintain our positive view on the stock, while we keep our target price under review.
ITNL (CMP: Rs.108 / TP: Rs.140/Upside: 30%)
For 3QFY2014, IL&FS Transportation Networks (ITNL) reported a good set of numbers which were above our estimates on both- revenue and profitability front. ITNL reported good performance on the top-line front owing to pick up execution in it's under construction projects; while earnings were ahead our estimate mainly due to better-than-expected execution and tax reversal during the quarter. ITNL's consolidated revenue increase by 1 1.4% yoy to Rs.1,966cr in 3QFY2014, which was above our estimate of Rs.1,819cr. EBITDA margins decrease sequentially by 1,242bp to 24.8% (25.5%) in 3QFY2014, against our estimate of 28.0%. This was mainly on account of increase in construction expense (up 6% yoy) and employee cost (up 28% yoy) during the quarter. Interest cost grew by 46.3% yoy to Rs.416cr in 3QFY2014 and was higher than our estimate by 15.0%. On the earnings front, ITNL reported subdued growth of 5.5% yoy to Rs.110cr against our estimate of Rs.105cr mainly on account of better-than-expected revenue performance and tax reversal during the quarter. We continue to maintain Buy rating on the stock with our target price of Rs.156, indicating an upside of 30% from current levels.
NCC (CMP: Rs.26 / TP: Under review/Upside: -)
NCC posted poor set of numbers for 3QFY2014 below our and street expectations on the profitability front. The poor performance in lower profitability was primarily due to lower-than-expected operating performance and high interest expense during the quarter. On the top line front, NCC reported a growth of 25.7% yoy to Rs.1,489cr, which was in line with our estimate of Rs.1,451cr. On the EBITDAM front, the company's EBITDA margins stood at 6.2% (down 134bp sequentially) and was below our estimate of 8.0%. This was mainly on back of higher raw material expense (up 56% yoy) and construction expense (56% yoy) during the quarter. Interest cost came in at Rs.117.9cr, indicating a growth of 19.2% yoy. On the bottom line level, NCC reported a loss of Rs.7cr (our estimate was a profit of Rs.7cr) in 3QFY2014 against a profit of 11cr in 3QFY2013. This was mainly due to lower-than-expected operating performance and high interest expense during the quarter. The current outstanding order book of NCC stands at Rs.19,612cr as on 3QFY2014, with order inflows of ~Rs.5,865cr till date. We continue to remain positive on the stock with Buy rating on it. The target price is currently under review.
HT Media (CMP: Rs.73/TP: Rs.95/Upside: 30%)
For 3QFY2014, HT Media's top-line and bottom-line performance were better than our expectations. Top-line grew by 4.8% yoy to Rs.573cr (ahead of our estimates of Rs.560cr). The company reported robust 17.7% yoy growth in circulation revenue to Rs.67cr, primarily driven by increase in realization per copy. Advertising revenue also posted healthy growth of 8.8% yoy to Rs.452cr, driven by increase in advertising yields and volumes. However, OPM contracted by 89bp yoy to 15.1%. Consequently, Net profit grew by 24.9% yoy to Rs.67cr (ahead of our estimate of Rs.64cr). We maintain Buy on the stock with a target price of Rs.95.
Finolex Cables Ltd. (CMP: Rs.80 /TP: Rs.96/ Upside: 19%)
Finolex Cables Ltd. (FCL) reported mixed set of numbers for 3QFY2014. Top-line reported 5.4% yoy growth to Rs.563cr, 7.02% lower than our estimate of Rs.606cr. Electrical cables and copper rods segments grew by 0.3% and 170.3% respectively; however communications cables segment dip by 13.4% in the quarter compared to same quarter previous year.
EBITDA for the quarter grew marginally by 3.1% while EBITDA margin contracted by 17bp on a yoy basis to 7.9%. For electrical cables, communications cable segment and copper rods segment, EBIT margin dip by 103bp, 378bp and 167bp yoy to 9.5%, 8.0% and 2.4% respectively. Subsequently, net profit declined by 7.0% yoy to Rs.24.5cr, better than our estimate of Rs.20.1cr while margins stood at 4.3%, lower by 58bp yoy. As we rollover to FY2016E, we recommend Buy rating on the stock with revised target price of Rs.96 based on target PE of 7x for FY2016E earnings.
ONGC (CMP: Rs.283/TP: Rs.318 / Upside: 12%)
ONGC is slated to announce its 3QFY2014 results today. We expect the company's top line to increase by 3.1% yoy to Rs.21,643cr. On the operating front, EBITDA margin is expected to contract by 77bp yoy to 53.3%. Nevertheless, the bottom line is expected to to remain flat yoy at Rs.5,558cr. We maintain our Accumulate view on the stock with a target price of Rs.318.
Sun Pharmaceuticals (CMP:Rs.611 / TP: / Upside: -)
Sun Pharma for 3QFY2014 is likely to clock a 29.7% yoy growth on the sales front to end the period at Rs.3700cr, led by both exports and domestic sales. Operating profit margins is expected to decline by 210bp to end the period to be around 42.1%. However, inspite of the same, the net profit is expected to post a growth of 1 9.6% yoy to end the period at Rs.1054cr. We remain neutral on the stock.
United Spirits (CMP: Rs.2,365/TP:-/Upside:-)
United Spirits is expected to declare its 3QFY2014 results today. We expect the standalone top-line to grow by 7.5% yoy to Rs.2,337cr. OPM is expected to decline by 70bp yoy to 1 0.6%. Bottom-line is expected to increase by 42.2% yoy to Rs.115cr. We maintain our Neutral recommendation on the stock.
Hindalco (CMP: Rs.104/ TP:-/ Upside :-)
Hindalco is slated to report its 3QFY2014 results today. We expect standalone net sales to remain flat yoy at Rs.6,775cr. EBITDA margin is however expected to be flat yoy at 8.6% on account of lower aluminium prices. However, net profit is expected to decrease by 22.5% yoy to Rs.224cr due to higher interest and depreciation costs.
On a separate note, Essar Energy reported that its unit Mahan Coal Ltd has secured "Stage II" forest clearance from India's ministry of environment and forests (MoEF) for its Mahan coal block in Madhya Pradesh. Mahan coal block is jointly allotted to Essar Energy and Hindalco. This is positive news for Hindalco as it will make its Mahan smelter cost-competitive once it commence production from this block in two years. However, this clearance is subject to fulfillment of certain conditions. Mahan Coal will now be required to sign a mining lease agreement with the state of Madhya Pradesh before commencing mining operations. The stock is likely to react positively due to this. However, we keep our rating and target price under review.
Economic and Political News
- Retail inflation eases to 2 yr-low
- US trade panel begins critical hearings on Indian's IPR regime
- CCEA clears Rs 3,333 a tonne raw sugar export subsidy
- TV ratings: Relief for TAM with stay on cross-holding norms
- OVL to raise $2.5 bn in offshore funds
- HZL divestment: Bids invited from merchant bankers