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Indian stock market and companies daily report (January 08, 2013, Tuesday)

Contributed by Angel Broking

The Indian market is expected to open flat to negative tracking the flat opening of SGX Nifty. Most of the Asian markets are trading in the red.

US stocks saw moderate weakness during trading on Monday, giving away some ground after moving sharply higher last week. However, the selling pressure was relatively subdued, and the market held on to the bulk of its recent gains. The major averages ended the day in negative territory but well off their lows for the session. The European markets finished in negative territory on Monday, as investors took profits following the strong gains at the end of the previous trading week. Investors are continuing to evaluate the potential impact of the debt ceiling situation in the US and are preparing for the beginning of the US earnings season.

Indian shares fell on Monday, with selling accelerating late in the session, weighed down by weakness in other Asian markets and European stocks as investors moved to the sidelines awaiting cues from central bank meetings in Europe and the UK this week and the fourth-quarter U.S. earnings season.

Markets Today

The trend deciding level for the day is 19,734 / 6,003 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 19,814 - 19,936 / 6,028 - 6,068 levels. However, if NIFTY trades below 19,734 / 6,003 levels for the first half-an-hour of trade then it may correct up to 19,61 2 - 19,532 / 5,963 - 5,938 levels.

Government imposes 20% import duty on some Chinese flat steel products

Bloomberg has reported that the government has imposed 20% import duty on some of the flat steel products from China in order to protect domestic steel mills from threat of imports. During January- September 2012, total steel imports by India have increased by 46.3% yoy to 5.9mn tonne. The duty imposed is expected to be effective for a period of 200 days. Steel stocks rose by 2-5% post this announcement. Iron and steel imports together constitute about 2.5% - 3.0% of IndiaRs.s total imports and we note that the recent rise in steel imports by India have been originating mainly from FTA countries (South Korea, Japan etc) which attract very low import duty. We do not expect a meaningful rise in domestic steel prices due to the import duty. Further, we also believe that the move is unlikely to have any material impact on curbing overall imports in the economy. Thus, we maintain our estimates and ratings on the stocks.

Marico announces business, corporate and organization restructuring

The Board of Directors of Marico has approved the restructuring of businesses, corporate entities and organization involving a) the demerger of Kaya Skin Care Solutions into a separate company by name Marico Kaya Enterprises Ltd (MAKE) and b) formation of a unified FMCG business with operations in India and abroad headed by a single CEO. The restructuring plan would be effective from April 1, 2013.

As per the proposed Kaya demerger plan, MAKE will become the holding company of Kaya Ltd (India) and Kaya entities in the Middle East and South East. Currently the promoters of Marico have a 60% stake in Marico and post demerger the shareholding structure of MAKE will be identical to MaricoRs.s current shareholding structure. Shareholders of Marico will be allotted one share of MAKE for every 50 shares held in Marico. The equity shares of MAKE will be listed in both BSE and NSE after all the statutory approvals are obtained.

Marico currently has three business verticals namely a) Indian Consumer products business b) International FMCG business and c) Kaya Skin Care Solutions (Kaya) with operations in India and abroad. Post the restructuring, Kaya Skin Care solutions would operate as a separate listed entity (MAKE). The Indian and International FMCG businesses which were till date headed by two different CEOs will be unified and will be headed by a single CEO.

Kaya has been a loss making venture for Marico. During FY2012, it made a loss of Rs.29cr at the PBIT level on net sales of Rs.279cr (a loss of Rs.33cr in FY2011). Demerger of the loss making venture would result in better return ratios for Marico. At the CMP, Marico is trading at 28x FY2014E earnings. We maintain a Neutral on Marico.

Bajaj Auto launches new 100cc vehicle, Discover 100T

Bajaj Auto (BJAUT) has launched a new 100cc motorcycle, Discover 100T at a price of Rs.50,500 ex. showroom Delhi. The new motorcycle will be powered by the companyRs.s DTS-i technology and is likely to deliver 10.2PS of power and offer a fuel efficiency of 87kmpl. The Discover 100T is based on the all new Discover platform through which Discover 125ST has already been launched. The new motorcycle has been positioned by the company at the upper end of the less than 110cc segment. We expect the launch of Discover 100T along with the existing, Discover 100 to strengthen BJAUTRs.s positioning in the less than 110cc segment. Currently, BJAUT has ~20% market share in the segment which is dominated by Hero MotoCorp (~70% market share) through its flagship models Splendor and Passion. BJAUT is targeting a market share of ~30% in the less than 110cc segment over the next two years. We believe that the new launch will enable BJAUT to further ramp up its domestic volumes going ahead. The company is already benefitting from the new launches of Discover 125ST (July 2012) and Pulsar 200NS (June 2012) which accounts for ~15% of the companyRs.s motorcycle volumes. At the CMP of Rs.2,194 the stock is trading at 17.3x FY2014E earnings which is slightly higher than its historical average. Hence, we maintain our Neutral rating on the stock.

FIRs.s turn down Glaxo's open offer price

As per media reports financial institutions, led by Life Insurance Corporation, have declined to participate in the open offer announced by GlaxoSmithKline (GSK) for its Indian subsidiary GlaxoSmithKline Consumer Healthcare (GSK consumer) in November 2012. The institutions, which jointly hold 32% stake believe the open offer price of Rs.3,900/share is unattractive. The tendering period for open offer is expected to begin from January 17th 201 3. At the CMP GSK consumer is trading at P/E of 32.5x FY2014E estimates. We maintain a Neutral view on GSK consumer.

Bank of Maharashtra to consider raising capital

The board of Bank of Maharashtra is scheduled to meet on January 10, 2013 to consider the proposal to raise capital by issuing equity shares upto 20cr by means of FPO and/or rights issue and/or QIP in FY2014. As of 2QFY2013, CAR for Bank of Maharashtra remained one among the lowest at 10.7%, with tier-I at 7.1%. At CMP, the issue would aid the company to raise a sum of upto Rs.1,280cr, thereby aiding its tier-I capital adequacy by nearly 200bps. Recently the bank had also successfully issued tier-II bonds worth Rs.1,000cr. After the recent run up in stock price, the stock now trades at 0.8x FY2014E ABV and hence, we recommend neutral view on the stock.

Economic and Political News

- Disinvestment in Oil India, NTPC soon: DK Mittal

- Round 2 of spectrum auction on March 11

- Govt kick starts process of CIL restructuring

Corporate News

- Tata Motors introduces 4-yr warranty on heavy truck range

- REpower signs contracts for wind farm in UK

- Opto to supply medical devices to Chicago transit system