Reports » India
Indian stock market and companies daily report (February 14, 2013, Thursday)
The Indian market is expected to open in the green, mirroring SGX Nifty which is trading marginally higher in the opening trades. Other Asian markets have also opened in the green.
The US markets extended the trend seen over the past few sessions and the stocks turned in another lackluster performance during trading on Wednesday. The major averages eventually ended the day mixed for the second consecutive session. Meanwhile, the European markets finished in positive territory on Wednesday. Investors were encouraged by the slower pace of decline in Eurozone industrial production and by retail sales data from the United States. Some better than expected earnings data also provided a boost to investor sentiment
Meanwhile Indian shares rose modestly on Wednesday, paring early gains, with IT stocks leading the gainers. The benchmark BSE Sensex ended the session up 47 points or 0.24% at 19,608, while the broader Nifty index rose by 10 points or 0.18% to 5,933.
The trend deciding level for the day is 19,635 / 5,942 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 19,696 - 19,784 / 5,961 - 5,988 levels. However, if NIFTY trades below 19,635 / 5,942 levels for the first half-an-hour of trade then it may correct up to 19,547 - 19,486 / 5,914 - 5,895 levels.
Trade deficit widens to US$20bn in January 2013
IndiaRs.s exports witnessed a marginal 0.8% growth in January 2013 after contracting for eight straight months. Imports during the month reported a growth of 6.1% yoy as compared to 28.8% yoy growth in January 2012. Oil imports reported 6.9% growth (as against a 53% yoy growth in January 2012) while nonoil imports reported a 5.7% yoy growth (as against 18.9% yoy growth in January 2012). The trade deficit for January 2013 widened to US$20.0bn as compared to a deficit of US$17.7bn in the previous month.
On a cumulative basis, exports in the April - January 2013 period contracted by 4.9% yoy in USD terms while import growth during the period remained flat. Even as oil imports in April - January 2013 reported 11.6% growth, non-oil imports during the FYTD period contracted by 5.2% yoy. The trade deficit in April - January 2013 widened to US$167.2bn as compared to US$154.9bn in the corresponding period of the previous year, reporting almost a 9% growth. The surge in our trade deficit at 11.7% of GDP in 2QFY2013 is the primary reason for a record-high current account deficit at 5.4% of GDP in 2QFY2013. In order to augment export growth we believe that this budget is likely to announce sops for exporters particularly in the manufacturing industry.
JLR posts strong growth in wholesale sales in January 2013
Jaguar and Land Rover (JLR) posted better-than-expected wholesale volume growth of 30.3% yoy (18.2% mom) to 38,173 units, against our expectations of 35,500 units. The growth was driven by strong performance across the Jaguar and Land Rover brands. Jaguar sales registered a robust 41.6% yoy (18.3% mom) growth led by the introduction of the model year 2013 models, XF Sportbrake, XF AWD and smaller engine variants of XF and XJ. Land Rover sales too grew at a robust rate of 28.2% yoy (1 8.2% mom) primarily driven by Evoque, Freelander and the new Range Rover. While, the Evoque and Freelander models continue to benefit from the availability of additional capacity; the new Range Rover grew on the back of ramp-up in deliveries.
The global sales of Tata Motors (TTMT) however, reported a sharp decline of 15.6% yoy to 101,1 12 units. This was primarily due to the poor performance by the domestic passenger (down 55.6% yoy) and medium and heavy commercial vehicle (down 53.6% yoy) segments. While, global commercial vehicle sales posted a decline of 10.9% yoy; global passenger vehicle volumes fell significantly by 19.3% yoy.
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.
3QFY2013 Result Review
Coal India (CMP- Rs.348/ TP: Rs.368/ Upside: 7%)
Coal India (CIL) results came in above our estimate on account of higher than expected sales volumes. Net sales grew by 12.9% yoy to Rs.17,325cr. Sales volumes grew by 9.2% yoy to 120mn tonnes (our estimate of 112mn tonnes) indicating companyRs.s focus on increasing offtake. Railway rakes availability stood at 214/day (CILRs.s requirements currently stand at 234/day). Realizations grew by 3.4% yoy although flat qoq to Rs.1,439/tonne. However, EBITDA decreased by 7.8% yoy to Rs.5,195cr due to higher staff costs. Other income grew by 27.2% yoy to Rs.2,361. Consequently, net profit grew by 8.7% yoy to Rs.4,395cr above our estimate of Rs.3,808cr. We maintain Accumulate rating on the stock.
NMDC (CMP: Rs.146/ TP: -/ Upside: -)
NMDCRs.s 3QFY2013 results were weaker-than-expected due to lower-than-expected sales volumes as well as realizations. NMDCRs.s net sales fell by 27.5% yoy to Rs.2,047cr (below our estimates of Rs.2,162cr) mainly due to lower volumes which declined 16.9% yoy to 5.32mn tonnes. Iron ore realizations also declined 13.1% yoy to Rs.3,820/tonne. EBITDA declined by 38.5% yoy to Rs.1,390cr and EBITDA margin contracted 1,218bp yoy to 67.9%. Other income grew by 5.9% yoy to Rs.556cr mainly due to higher cash balance. Consequently, net profit decreased by 30.5% yoy to Rs.1,292cr (below our estimate of Rs.1,518cr).
Tata Steel (CMP: Rs.376/ TP: -/ Upside: -)
Tata Steel reported disappointing set of results for 3QFY2013 mainly due to weaker-than-expected profitability performance from both its European and Indian operations. Its consolidated net sales declined by 3.0% yoy to 32,107cr (below of our estimate of Rs.38,228cr). Consolidated steel sales volumes increased 3.6% yoy to 5.83mn tonnes. Its India operations net sales grew by 12.8% yoy to Rs.9,370cr due to higher sales volumes (+16.6% yoy to 1.89mn tonnes). However, India operations EBITDA decreased 1.1% yoy to Rs.2,526cr mainly due to higher power and fuel cost and freight costs during the quarter. India operations EBITDA/tonne decreased 15.2% yoy to Rs.13,366. On the international front, Tata Steel EuropeRs.s (TSE) volumes declined by 9.9% yoy to 3.02mn tonne. TSE reported an EBITDA/tonne for US$(26) compared to a US$(44) in 3QFY2012 mainly due to lower realizations. The company reported a consolidated adjusted net loss of Rs.743cr vs. our estimate of a net profit of Rs.683cr.
Consolidated net debt increased to Rs.57,981 cr as on December 31, 2012, compared to Rs.47,657cr as on March 31, 2012. In light of lower-than-expected profitability for 3QFY2013, we are likely to lower our profitability estimates for FY2013 and we keep our rating and target price under review.
JSW Steel (CMP: Rs.870/ TP: -/ Upside: -)
JSW Steel reported consolidated 3QFY2013 results. Earlier, it had reported standalone results which were broadly in line with our expectations. JSW SteelRs.s consolidated 3QFY2013 top line grew by 5.5% yoy to Rs.8,887cr. The companyRs.s EBITDA was flat yoy at Rs.1,330cr however, EBITDA margin increased by 104bp yoy to 15.0%. The company reported exceptional item related to forex loss of Rs.268cr during the quarter. Interest expenses grew by 36.4% yoy to Rs.517cr and other income declined by 63.7% yoy to Rs.8cr. The company reported a share of loss from associate of Rs.73cr and hence, adjusted net profit (excluding exceptional items) decreased by 61.2% yoy to Rs.214cr. However the company reported a net loss of Rs.74cr vs. a net loss of Rs.48cr. We maintain Neutral on JSW Steel.
Madras Cements (CMP:Rs.242/TP:/Upside:-)
Madras Cements posted a 1 7.7% yoy growth in top-line to Rs.872cr, which was inline with estimates. We expect the top-line growth to be on account of a reasonably strong growth on the volumes front. OPM stood at 26.9% down by 107bp on yoy basis. Bottomline rose by 9.3% yoy to Rs.84cr. We maintain our Neutral rating on the stock.
Finolex Cables Ltd. (CMP: Rs.57 /TP: Rs.61/ Upside: 8%)
Finolex Cables Ltd. (FCL) reported mixed set of numbers for 3QFY2013. Top-line reported flat yoy growth of 7.0% to Rs.534cr, as compared to our estimate of Rs.580cr. Electrical cables and communication cables segments grew by 12.3% and 13.1% while copper rods segment registered a decline of 11% on yoy basis. EBITDA dip marginally by 2.4% yoy to Rs.43cr. However EBITDA margin was down by 53bp on a yoy basis to 8.0%. The dip in margin is attributable to total 53% yoy rise in selling & administration and other expenses. EBIT margin for Electrical cables segment dip by 40bp and came at 10.5% while communication cables segment reported a rise of 560bp in EBIT margin to 11.8%. Nevertheless Adjusted PAT grew by whooping 75% yoy to Rs.24cr on the back of low interest cost (low by 67.2% yoy) and extra-ordinary losses (low by 42.4% yoy). PAT margin too expanded from 2.7% in 3QFY2012 to 4.5% in 3QFY2013. We recommend Accumulate on the stock with target price of Rs.61 based on target PE of 6x for FY2014E earnings.
Unity Infraprojects (CMP: Rs.36/ TP: Under review/ Upside: -)
For 3QFY2013, Unity Infraprojects (UIP) posted better-than expected numbers on the revenue front and operating front which led to higher-than-expected earnings growth. On the top line front, UIP reported a growth of 12.6% yoy to Rs.551cr, which was in line with our expectation. On the EBITDAM front, the companyRs.s EBITDA margins stood at 13.9% (down 60bp on a yoy basis), which were above our estimate of 13%. Interest cost came in at Rs.43cr registering a growth of 28.2% yoy and 4.1% a qoq basis. On the bottom line level, UIP reported a growth of 13.8% yoy to Rs.28cr against our estimate of Rs.21cr owing to better-than-expected operating performance. We continue to maintain Buy rating on the stock and would revise our target price post concall with the management.
3QFY2013 Result Preview
SBI (CMP: Rs.2,255/ TP: Rs.2,600/ Upside: 15.3%)
State Bank of India is slated to announce its 3QFY2013 results today. We expect the bank to report a marginal decline of 1.8% yoy in its net interest income to Rs.11,256cr. Growth in non-interest income is expected to be healthy at 19.0% yoy to Rs.3,564cr. The operating expenses of the bank are expected to be higher by 11.4% yoy, leading to 4.5% yoy decline in its operating profit. The net profit is expected to register a moderate growth of 9.9% yoy to Rs.3,587cr, as provisioning expenses are expected to decline by 23.2% yoy to Rs.2,518cr on a high base. At the current market price, the stock trades at a valuation of 1.3x FY2014E ABV, after adjusting for subsidiaries. We maintain our Buy recommendation on the stock, with a target price of Rs.2,600.
Tata Motors (CMP: Rs.305/ TP: Rs.337/ Upside: 11%)
Tata Motors (TTMT) will be announcing its 3QFY2013 results today. On a standalone basis, we expect TTMT to register an ~12% yoy decline in revenues as total volumes witnessed a decline of ~10% yoy. Further, net average realizations and operating margins are also expected to remain under pressure on account of higher discounts. Nonetheless driven by Jaguar and Land Rover (JLR), TTMTRs.s consolidated revenue is expected to register a healthy growth of ~8% yoy to Rs.48,794cr. We expect JLR to register a strong revenue growth of ~ 19% yoy (~10% in GBP terms) driven by incremental volumes from Evoque and Freelander on easing capacity constraints at the Halewood plant. We expect consolidated EBITDA margins to contract 225bp yoy to 12.8% led by weak standalone operating performance and high base effect at JLR. Further adverse product-mix at JLR and domestic operations coupled with unfavorable currency movement will also weigh on margin performance. As a result, the bottom-line is expected to decline ~16% yoy to Rs.2,865cr. At the CMP of Rs.305, the stock is trading at 7.2x FY2014E earnings. Currently, we have an Accumulate rating on the stock with a target price of Rs.337.
GAIL (CMP: Rs.328/ TP: -/ Upside: -)
GAIL is expected to announce its 3QFY2013 results today. We expect the companyRs.s top-line to grow by 6.4% yoy to Rs.11,986cr on account of higher volumes. However, operating margin is expected to contract 7bp yoy to 15.6% on the back of higher depreciation and interest costs. On the bottom-line front, we expect GAIL to report an increase of 5.1% yoy to Rs.1,147cr. We maintain our Neutral view on the stock.
Dr. Reddy's Lab (CMP: Rs.1,906/ Target: -/ Upside: -)
DRL is expected to post a top-line de-growth of 2.5% to Rs.2,700cr, on the back of base impact. The company is expected to see strong traction in its Indian and Russian formulation businesses as well. The company is expected to post an OPM of 20.7%, down from 31.4%. On the net profit front, the company is expected to post a net profit of Rs.339cr, a de-growth of 33.9% over the last corresponding period. We recommend a Neutral on the stock.
LIC Housing (CMP: Rs.268/ TP: Rs.327/ Upside: 22%)
LIC Housing is expected to announce its 3QFY2013 results. The NII is expected to increase by 14.2% yoy to Rs.410cr, while non-interest income is expected to come in at Rs.22cr. Provisioning is expected to be at Rs.15cr as against a write-back of Rs.80cr in 3QFY2012. Hence, the PAT is expected to decline by 17.8% yoy to Rs.251cr. We recommend a Buy rating on the stock with a target price of Rs.327.
India Cements (CMP:Rs.82/TP:/Upside:-)
India Cements is slated to announce its 3QFY2012 results today. We expect the top-line to grow by 3.4% yoy to Rs.976cr. OPM is expected to increase by 96bp yoy to 20.2%. Bottom-line is expected to decline by 41.4% yoy to Rs.41cr. We maintain our Neutral rating on the stock.
FAG Bearings (CMP: Rs.1,421/ TP: Rs.1,807/ Upside: 27%)
FAG Bearings is set to announce its 4QCY2012 results today. We expect the company to post a modest revenue growth of 5% yoy (4% qoq) to Rs.369cr. The topline performance is expected to be impacted by a slowdown in the automotive and industrial sectors which are the primary drivers of the companyRs.s performance. On the operating front, we expect the company to post a 260bp yoy contraction in margins to 15.5% primarily due to adverse currency movement. As a result, net profit is expected to decline by 10% yoy to Rs.39cr. The stock rating is under review.
IVRCL (CMP: Rs.30/ TP: -/ Upside: -)
We expect IVRCL to continue to post a poor performance. On the revenue front, IVRCL is expected to post a yoy decline of 11.9% to Rs.1,059cr in 3QFY201 3 mainly on account of lower-than-expected execution. On the EBITDA margin front, we expect an expansion of 62bp yoy to 8.5%. On the earnings front, we expect a loss of Rs.13cr for the quarter against a profit of Rs.7cr in 3QFY2012, primarily on account of slowdown in execution and higher interest costs for the quarter. We maintain a Neutral rating on the stock.
Simplex Infrastructures (CMP: Rs.162 / TP: Rs.251 / Upside: 55%)
Simplex Infra is expected to post a decent performance on the revenue front, as we expect the top-line to register a 12.5% yoy growth to Rs.1,795cr for 3QFY2013. We expect the companyRs.s EBITDA margin to expand by 39bp yoy to 8.7%. The bottom-line is expected to be at Rs.28cr, registering a growth of 32.8% yoy. This is mainly on account of a better-than-expected performance at the operating level. We maintain a Buy on the stock, with a target price of Rs.251.
Economic and Political News
- Fuel shortage restraining growth in power sector: Scindia
- Government mulls 8% license fee on telecom tower cos under unified licensing
- Government may infuse Rs.20,000cr capital in PSU banks in FY2014
- Petrol, diesel prices may be hiked this week
- Bharti Airtel, Vodafone and RCom asked to cough up additional revenue share for spectrum usage from 2008 onwards
- GMR targets to slash debt by Rs.10,000cr during next fiscal
- Lanco Infratech may sell stake in three power plants to raise Rs.2,500cr
- Sebi freezes all bank accounts of two Sahara companies
- Tata Steel to raise Rs.13,000cr in six months for Kalinganagar project
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