Reports » India
Indian stock market and companies daily report (February 28, 2013, Thursday)
The Indian market is expected to open in the green today mirroring positive opening trades in the SGX Nifty and most of the Asian markets. Asian markets are trading higher, as better-than-estimated US economic data has bolstered confidence in the global recovery. Moreover, the Indian markets will closely watch out for the Union Budget today.
The US market, after moving mostly higher over the course of the previous session, saw considerable further upside during the trading session on Wednesday. The substantial strength that emerged on Wall Street was partly due to a positive reaction to a pair of reports on durable goods orders and pending home sales. Traders also kept a close eye on Capitol Hill, where Bernanke, appearing before the House Financial Services Committee, reaffirmed his support for maintaining the FedRs.s highly accommodative monetary policy. Most of the European bourses finished in the green on Wednesday, rebounding from the weakness of the previous trading session, which was due to the uncertainty created by the results of the Italian parliamentary elections, where no single party or coalition secured enough seats to form a government on its own.
Meanwhile, Indian markets rose notably on Wednesday, after Ben Bernanke signaled that the Fed will stick to its easy monetary policy for a long time. The preBudget Economic Survey, tabled by Finance Minister yesterday, projected an optimistic 6.1 to 6.7% growth for the next fiscal and indicated that the downturn in growth is more or less over.
The trend deciding level for the day is 19,1 21 / 5,788 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 19,244 - 19,336 / 5,827 - 5,857 levels. However, if NIFTY trades below 19,121 / 5,788 levels for the first half-an-hour of trade then it may correct up to 19,029 - 18,906 / 5,758 - 5,720 levels.
Economic Survey paints an optimistic picture
The Economic Survey of India (ESI) tabled in Parliament, estimates real GDP growth for FY2014 to improve in the range of 6.1% to 6.7% even as the growth estimate for FY2013 has been revised to a moderate 5.0% and it further indicates that the downturn in growth is more or less over. The ESI also estimates headline WPI inflation to decline in the range of 6.2% to 6.6% for FY2013 owing to the moderation in core inflation. In January 2013, inflation moderated to a three year low of 6.62% as core inflation moderated for the fifth straight month to 4.1%.
The Survey highlights the current account deficit as one of the key concerns in the economy and it has acknowledged that there is limited room to increase exports in the near term. The CAD has widened to 4.6% in the first half of the fiscal year as compared to 4.0% in the first half of FY2012 as the trade deficit widened to 1 0.8% of GDP in the period. We expect it to touch almost 5% for FY2013, so we believe that attracting capital inflows in the economy is pertinent to finance the CAD. In this context, the Survey has rightly observed that long term and stable capital inflows should be accorded priority to minimize the reversal of capital in risk-off phases. At present, the maturity profile of IndiaRs.s external debt continues to be dominated by long-term loans. In the first half of FY2013, long-term external debt stood at US$280.8billion, ie 76.9% of total external debt, while the remaining 23.1% was short-term debt.
Another key concern in the economy is that the savings rate has decelerated dramatically to 30.8% from its peak level of 36.8% in FY2008. The high preference of households for savings in non-productive physical assets like gold is also adding to pressure on the already burgeoning trade and current account deficit and the saving - investment gap has also widened. In this regard, the forthcoming budget can take some steps to boost savings in financial assets, and thus discourage demand for gold, by increasing the tax saving deduction limit in investment instruments such as ELSS, equities, longer-duration fixed deposits, tax-free bonds etc.
The Survey also notes that a higher tax/GDP ratio is desirable to meet fiscal consolidation in the economy by broadening the base rather than increasing marginal tax rates in addition to prioritizing expenditure. It has termed the medium-term fiscal consolidation path of a fiscal deficit of 3% of GDP for FY2017 as credible owing to the recent reforms in diesel prices and efforts at curtailing expenditure.
L&T bags orders worth Rs.1,504cr in various segments
Larsen & Toubro (L&T) has bagged orders worth over Rs.413cr from Kiran Energy for construction of PV solar plants in Tamil Nadu in the solar segment. In the water segment, the company has bagged various orders worth over Rs.621cr. Also, it has bagged an order worth Rs.265cr from Tamil Nadu Generation and Distribution Corporation for power distribution work across various districts in Tamil Nadu. From ongoing projects, various orders worth Rs.205cr have been secured in the heavy civil business segment. We continue to maintain our Buy rating on the stock with a target price of Rs.1,788.
4QCY2012 Result Review
Bosch (CMP: Rs.8,862/ TP: Rs.9,570/ Upside: 8%)
Bosch (BOS) reported poor results for 4QCY201 2 largely due to contraction in operating margins which declined 82bp sequentially (429bp yoy) to 12.5%. Topline posted a subdued growth of 5.1% yoy (3.8% qoq) to Rs.2,132cr, which was slightly below our expectations of Rs.2,202cr. The poor performance can be attributed to the weakness in the medium and heavy commercial vehicle (MHCV) and tractor industries which are the key drivers of the companyRs.s performance. While the automotive segment posted a growth of 3.9% yoy (4.7% qoq) due to slowdown in OEM sales; non-auto segment registered a 6.2% yoy (down 2.7% qoq) growth. On the operating front, EBITDA margin declined by a sharp 429bp yoy to 12.5% primarily on account of increase in raw-material costs and employee expenditure. The raw-material cost as a percentage of sales surged 140bp yoy on account of INR depreciation; while, employee expenditure as a percentage of sales jumped 290bp yoy due to negative impact of change in actuarial assumptions and wage hikes given to the employees. On a sequential basis, the margins were impacted largely due to increase in employee and other expenditure which grew by 18.7% and 27.1% qoq. Therefore, net profit at Rs.172cr (down 38.8% yoy and 15.2% qoq) was lower than our expectations of Rs.199cr. The net profit performance was further impacted due to high depreciation expense (up 33.7% yoy) and higher tax rate (29.7% vs 22.5% in 4QCY2012). At the CMP of Rs.8,862, the stock is trading at 19.4x CY2014 earnings. We maintain our Accumulate rating on the stock with a target price of ?9,570.
Goodyear India (CMP: Rs.284/ TP: Rs.304/ Upside: 7.1%)
For 4QCY2012, Goodyear India reported a lower-than-expected top-line of Rs.384cr, marginally lower on a yoy basis from Rs.395cr in 4QCY2011. While for the full year CY2012, revenue declined by 2% yoy to Rs.1,486cr due to slowdown in auto industry. Increase in other expenses led to contraction of EBITDA margin by 248bp yoy from 8.7% in 4QCY201 1 to 6.2% during the quarter. Consequently, net profit for the quarter declined by 20.7% to Rs.16cr from Rs.20cr in 4QCY2011. EBITDA margin for CY2012 contracted by 39bp to 7.1%, inspite of a decline in raw material cost, which was offset by higher employee expense. Thus, net profit for CY201 2 declined by 14.9% yoy at Rs.56cr from Rs.66cr in CY2011. We maintain Accumulate rating on the stock with a target price of ?304 based on a target PE of 9x for CY2014E.
Mphasis - 1QFY2013 (CMP: Rs.389/ TP: Rs.396/ Upside: 5%)
Mphasis is slated to announce its 1QFY2013 results today. We expect the company to record revenues of US$250mn, up 0.8% qoq. In INR terms, revenues are expected to come in at Rs.1,353cr, up 3.5% qoq. EBITDA margin is expected to come down by 114bp qoq to 19.5%. PAT is expected to be at Rs.195cr. We currently maintain our Accumulate view on the stock with a target price of Rs.396.
Economic and Political News
- Power exchanges get extension to achieve statutory shareholding pattern
- India has negative trade balance with 110 countries: Government
- CBI seeks AgustaWestland deal documents from Defence Ministry
- Iron ore exports fall 68.27% in 10-month
- Lack of capacity addition may restrict Ambuja CementsRs. growth
- Jet agrees to let Etihad set the rules
- SBI increase deposits rates across select maturities by 25bp
- JSPL to increase stake in AustraliaRs.s Apollo Minerals
- Jet Airways sells Heathrow slots to Etihad for $70 mn
- Infosys moves consultants in Europe to Lodestone to remove overlapping
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