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Indian stock market and companies daily report (January 16, 2013, Wednesday)

Contributed by Angel Broking

The Indian market is expected to open flat to negative mirroring the negative opening of most of the Asian markets.

US markets ended slightly higher Tuesday after mixed economic data and before major earnings releases, while further losses for Apple Inc. weighed on the technology sector. The early weakness on Wall Street was partly due to worries about continued gridlock in Washington regarding the debt ceiling. While President Barack Obama has indicated that he will not debate raising the debt limit, Republicans have called for any increase in the debt ceiling to be tied to additional spending cuts. Meanwhile, a report showed that retail sales rose by 0.5% (Estimate - 0.2%) in December following a revised 0.4% increase in November. A separate report from the Labor Department showed a slightly bigger than expected drop in producer prices in December.

Indian shares rose for a second straight session yesterday led by gains in rate-sensitive realty and banking stocks on increasing bets that the RBI is going to have a rate cut later this month.

Markets Today

The trend deciding level for the day is 19,968 / 6,048 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 20,055 - 20,124 / 6,077 - 6,098 levels. However, if NIFTY trades below 19,968 / 6,048 levels for the first half-an-hour of trade then it may correct up to 19,900 - 19,813 / 6,027 - 5,998 levels.

Bharti Airtel replaces India CEO Sanjay Kapoor; Gopal Vittal to take over

Bharti AirtelRs.s CEO for India and South Asia, Sanjay Kapoor, will quit in March amid speculation that the proposed reorganization of IndiaRs.s largest telecom company forced his hand. He will be replaced by Gopal Vittal, group director (special projects), who will take over as the India CEO from March 1, 2013. Vittal had last year joined Bharti Group from Hindustan Unilever. Vittal will report to Sunil Mittal. Bharti Airtel did not give any reason for the change in the top management but said Kapoor has decided to pursue his future aspirations outside of Bharti. Kapoor joined Bharti Cellular Ltd as its COO in 1998 and soon took over as its CEO to develop Delhi Circle as the foundation stone of Bharti AirtelRs.s growth. Kapoor will continue his association with the Bharti Group and be on the board of Indus Towers Ltd and Bharti Global Ltd. Vittal, who rejoined Bharti last year after a stint with IndiaRs.s largest consumer goods maker Hindustan Unilever, will focus on increasing market share and margins and also on growing alternate revenue streams such as 3G data and mobile money. Owing to recent run up in the stock price, we maintain our Neutral rating on the stock.

TTMT's global sales down sharply in December 2012

Tata Motors (TTMT) reported a sharp decline of 13.9% yoy (3.3% mom) in global wholesale volumes for December 2012 to 98,968 units. This was primarily owing to the poor performance by the domestic passenger and medium and heavy commercial vehicle segments. While, global commercial vehicle sales posted a decline of 3.4% yoy (up 5.7% mom); global passenger vehicle volumes fell significantly by 23.2% yoy (11.6% mom). Jaguar and Land Rover (JLR) too posted lower-than-expected wholesale volume growth of 4.2% yoy (down 6.8% mom) to 32,282 units against our expectations of 34,500 units. Land Rover sales during the month posted a muted growth of 2.2% yoy (down 5.5% mom) to 26,838 units. However, Jaguar sales posted a strong growth of 15.2% yoy (down 13% mom) led by the dispatches of the all-wheel-drive XF and XJ models to US and smaller engine versions of XF and XJ to China. We wait for more clarity from the management on December volumes and will come up with a detailed report soon. Due to limited upside from current levels we maintain our Neutral rating on the stock.

Maruti Suzuki to hike car prices by up to Rs.20,000

Maruti Suzuki (MSIL) has announced a price hike of up to Rs.20,000/ unit (~5% of net sales) effective from January 16, 2013 to offset the impact of adverse currency movements on its margins. MSILRs.s current import content stands at ~26% of net sales (including royalty and indirect consumption) and is denominated in JPY. While the currency movement has turned favorable for the company over the past one month (~6% depreciation in JPY vs. INR); JPY has appreciated by ~15% against INR YTD in FY2013. We expect the current price increase along with ~1% price hike taken in October 2012 and recent depreciation of JPY to enable the company to improve its operating performance in FY2014E. We currently factor in EBITDA margin improvement of 130bp to 8.6% in FY2014E. Nonetheless, at the CMP of Rs.1,546 the stock is trading at 16.3x FY2014E earnings which is higher than its historical average of 15x. Thus, we maintain our Neutral rating on the stock.

3QFY2013 Result Review

Axis Bank (CMP: Rs.1,422 / TP: Rs.1,594 / Upside: 12.1%)

During 3QFY2013, Axis Bank reported a 22.2% yoy growth in its net profit to Rs.1,347cr, which was in-line with our estimates. Sequential improvement in NIMs, robust growth in fee income and stable NPA ratios, were the key highlights from the results.

NIMs improve sequentially on better yields; NPA levels remain stable: During 3QFY2013, the bank reported healthy growth in business, with advances and deposits registering a growth of 20.7% and 17.2% yoy, respectively. The growth in the loan book was primarily on account of strong traction witnessed in the retail loan book, particularly home and auto loan segments, which grew by 31.0% and 33.4% yoy, respectively. Growth in the large and mid-corporate segment remained moderate at 12.5% yoy. CASA deposits grew by moderate 12.7% yoy, aided by strong growth of 21.6% in savings deposits, even as current deposits grew at subdued pace of 2.0% yoy. Overall, reported NIMs improved by 11 bp qoq to 3.57%, largely on account of improvement in the yields. The bank registered a healthy growth in its non-interest income excluding treasury, largely driven by strong growth in fee income from the retail and agri & SME segments. On the asset quality front, slippages came in at Rs.541cr, as against Rs.628cr witnessed in 2QFY2013. As guided by the management, slippages and restructuring taken together have amounted to ~Rs.900cr in 3QFY2013 and ~Rs.2,900cr in 9MFY2013. Even going ahead, the management expects a similar run rate in slippages and restructuring to continue for next few quarters. Along with sequentially lower slippages, the bank also reported sequentially higher recoveries and upgrades at Rs.180cr, which helped it to contain the increase in its gross and Net NPA levels, on an absolute basis to around 3.8%. Gross and Net NPA ratio remained stable sequentially at 1.1% and 0.33%, respectively. The bankRs.s PCR (provisioning coverage ratio) improved to 81.0% in 3QFY2013 from 80.0% in 2QFY2013. Additionally, the bank restructured advances worth Rs.368cr during the quarter, thereby taking its total restructured book to Rs.4,257cr.

Outlook and valuation: Axis Bank is trading at 1.9x FY2014E ABV - more than 50% discount to HDFC Bank vs. an average discount of 35% over the past five years (which we believe over-discounts asset quality concerns). We remain positive on the bank, owing to its attractive CASA franchise, multiple sources of sustainable fee income and reasonable growth outlook. We maintain our Accumulate recommendation on the stock with a target price of Rs.1,594.

South Indian Bank (CMP: Rs.29 / TP: Rs.33 / Upside: 14%)

During 3QFY2013, South Indian Bank reported 25.4% growth in net profit to Rs.128cr. On the operating profit level, growth was even stronger at 31.5% yoy. Key highlights from the results were sequential improvement in the asset quality and the NIMs.

The bank reported healthy growth in its business, with advances witnessing a growth of 17.5% yoy, while deposits registering a growth of 15.1% yoy. On the asset quality front, the bank witnessed improvement, with gross and net NPA levels coming down sequentially by 4.3% and 18.7%, respectively. Gross and Net NPA ratios came in lower sequentially by 12bp and 18bp, respectively to 1.6% and 0.7%. The bankRs.s PCR improved by 735bp to 58.6%. At CMP, the stock trades at 1.2x FY2014E ABV. We maintain an Accumulate recommendation on the stock, with a target price of Rs.33.

3QFY2013 Result Preview

Bajaj Auto (CMP: Rs.2,118/ TP: -/ Upside: -)

Bajaj Auto (BJAUT) is scheduled to announce its 3QFY2013 results today. We expect the companyRs.s revenues to register a healthy growth of ~8% yoy (~9% qoq) to Rs.5,405cr owing to ~5% yoy (~8% qoq) growth in volumes and ~4% (~2% qoq) yoy growth in net average realization. We expect the net average realization to benefit from better product-mix and favorable foreign exchange rate on the exports front. On the operating front, EBITDA margin is expected to improve ~30bp sequentially (down ~100bp yoy) to 18.7%, benefitting from better product-mix and export realization. As a result, the bottom-line is expected to grow by ~9% yoy. Nonetheless, it is expected to decline 5% yoy largely on account of contraction in operating margins. At the CMP of Rs.2,11 8, the stock is trading at 1 6.7x FY2014E earnings. Currently, we have a Neutral rating on the stock.

Yes Bank (CMP: Rs.528 / TP: Rs.559 / Upside: 5%)

Yes Bank is slated to announce its 3QFY2013 results today. We expect the bank to report a healthy NII growth of 29.2% yoy to Rs.553cr. Non-interest income is also expected to grow strongly by 31.9% yoy to Rs.279cr. Operating expenses are expected to increase by 38.6% yoy to Rs.333cr. Provisioning expenses are expected to increase to Rs.43cr as compared to low base of Rs.22cr in 3QFY2012. Consequently the PAT is expected to go up by 21.1% yoy to Rs.308cr. At the CMP, the stock is trading at 2.7x FY2014E ABV. We recommend an Accumulate rating on the stock with a target price of Rs.559.

Economic and Political News

- Exporters urge immediate implementation of GST in budget

- Decision on spectrum pricing in 3 weeks: Sibal

- Indian Railway Fin Corp to raise Rs.8,886cr via tax-free bonds

- Steel prices to go up further in February

- Venture Capital investments drops by 30%

Corporate News

- BHEL renovates, commissions hydro power plant in Tajikistan

- Bharti AirtelRs.s CEO Sanjay Kapoor to quit; Gopal Vittal to take over

- HCL Infosystems spins off 3 businesses into separate units

- Hero MotoCorp workers want up to Rs.18,000 hike in monthly salary over 3 years

- Qatar Airways denies SpiceJet deal talks