Indian stock market and companies daily report (January 23, 2014, Thursday)
January 23, 2014, Thursday, 07:08 GMT | 03:08 EST | 12:38 IST | 15:08 SGT
Indian Markets are expected in the red tracking SGX Nifty which is trading lower. Most of the Asian markets too are trading in the negative territory.
US markets turned in a lackluster performance throughout the trading day on Wednesday, extending the trend seen over the past several sessions. The choppy trading came as traders digested another mixed batch of earnings news. The major averages eventually closed mixed for the fourth consecutive session. European markets ended Wednesday's session with mixed results. The markets were positive in early trade after the International Monetary Fund upgraded its global growth forecast. However, investors became concerned that the Bank of England may decide to hike interest rate earlier than previously expected, following the larger than expected drop in the U.K. unemployment rate.
Back home, Indian markets rose for a third consecutive session on Wednesday, with optimism about quarterly earnings and firm global cues underpinning sentiment. The benchmark S&P/BSE Sensex swung between gains and losses before ending up 86.55 points or 0.41 percent at 21,338.
The trend deciding level for the day is 21,295 / 6,325 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 21,421 - 21,504 / 6,363 - 6,388 levels. However, if NIFTY trades below 21,295 / 6,325 levels for the first half-an-hour of trade then it may correct 21,211 - 21,085 / 6,301 - 6,263 levels.
Bosch to suspend manufacturing at the Nashik plant in Jan14
Bosch has announced that it will temporarily suspend manufacturing at the Nashik plant for a period of two days on January 27 and January 28, 2014. The shutdown has been announced in the wake of the slowdown in demand and to avoid buildup of inventory and align the production in-line with the market demand. The domestic automotive industry remains the primary driver of company's revenue and weak domestic demand on account of sluggish economic growth, increasing fuel prices and weak consumer sentiments has affected the company's operating performance. Nevertheless, we remain positive on the long term prospects of the company given its technological leadership and strong and diversified product portfolio. At the CMP, the stock is trading at 21.2x CY2015E earnings. We maintain our Buy rating on the stock with a target price of Rs.11,215.
HDFC- (CMP: Rs.842 / TP: - / Upside: -)
HDFC reported in-line standalone earnings performance for the quarter. PBT level earnings, adjusted for dividends and sale of investments, for the company grew at healthy pace of 17% to Rs.1,647cr, in-line with expectations. Robust Individual advances growth (24% yoy) and stability witnessed on the overall asset quality front (Gross NPA at 0.77%) were the key highlights from the results.
NII for the company grew at 17% yoy to Rs.1,905cr, largely aided by healthy 19% yoy growth in its total loan book. Non-interest income for the company came in at Rs.46cr as compared to Rs.104 in 3QFY2013. Operating income and preprovisioning profit grew at 13% and 12% yoy, respectively to Rs.1,951cr and Rs.1,783cr, in line-with expectations. Provisioning expenses for the company expectedly came in at Rs.25cr, lower than Rs.40cr during 3QFY2013. Overall, the company reported standalone earnings growth of 12% yoy to Rs.1,278cr.
The stock has surged significantly from the lows witnessed in the month of September 2013 and currently, HDFC's core business (after adjusting Rs321/share towards the value of its subsidiaries) trades at 3.5x FY2015E ABV, which in our view, offers limited scope for upside here on. Hence, we maintain our Neutral rating on the stock.
L&T (CMP: Rs.1,005 /TP: Rs.1,237 /Upside: 23%)
For 3QFY2014 excluding the performance of hydrocarbon business Larsen and Toubro (L&T) posted decent set of numbers. During the quarter, the company has demerge and transfer all the assets and liabilities of the hydrocarbon business to its wholly owned subsidiary L&T Hydrocarbon Engineering ltd (LTHE) w.e.f December 20, 2013. On the top-line front, the company excluding the performance of hydrocarbon business registered a growth of 11.8% yoy to Rs.14,388cr in 3QFY2014. The healthy growth in revenues was mainly driven by (a) strong execution in the engineering and construction (E&C) and (b) execution p up in International orders. On the EBITDA front, company reported a yoy increase of 186bp to 11.6% against our expectations of 10.0%, owing to better-than-expected execution. On the bottom line front, L&T reported a yoy growth of 22.4% to Rs.1,241cr which was higher than our estimate of Rs.1,1 16cr. This was mainly on the back of better-than-expected execution and one time exceptional gain of Rs.104cr.
L&T's order backlog stands at Rs.1,71,184cr (excluding the hydrocarbon business orders) as of 3QFY2014, registering a growth of 13.0% yoy. Order inflows for the quarter came in at Rs.21,722cr (up 21.0% yoy) which does not includes orders from hydrocarbon business against our expectation of Rs.25,000cr.
For FY2014, given the current macro environment and 9MFY2014 performance the management has slightly revised its guidance of revenue and order inflow guidance to 15% and 15-20% growth respectively. The guidance is mainly based on (a) high share of exports in both order inflows and revenues (power T&D and hydrocarbon) and (b) continued momentum in infrastructure segment (building and factories, railways, airports, etc).
We believe L&T is best placed to benefit from the gradual recovery in the capex cycle, given its diverse exposure to sectors, strong balance sheet and cash flow generation as compared to its peers. We continue to maintain Buy rating on the stock with a target price of Rs.1,237.
Dabur India (CMP: Rs.161/TP:-/Upside:-)
For 3QFY2014 Dabur's consolidated net sales rose 16.8% yoy to Rs.1,904cr and was in-line with estimates, Top-line growth was aided by volume growth of 9.2% and price hikes undertaken by the company. Domestic FMCG business grew by 14% yoy, aided by healthy growth in health supplements (up 19.5% yoy), digestive (up 17.7% yoy) and home care segments (up 16% yoy). International business grew by 26% yoy aided by good performance in GCC, Egypt and Nigeria. However, the company posted lower than estimated OPM. OPM fell by 115bp yoy to 15.4% due to higher advertising (up 80bp yoy) and staff costs. As per the management, advertising expenses rose on account of new product launches such as Dabur Ratnaprash, Vatika Enriched Oilve Hair Oil, Odonil 1 Touch Air Fresheners and a new herbal shampoo for the South market. Net Profit stood at Rs.244cr up 15.4% on yoy basis. We maintain a neutral rating on the stock.
Alembic Pharma (CMP: Rs.228/ TP: /Upside:)
For 3QFY2014, Alembic Pharmaceutical, delivered numbers much above expectations. The net sales in at Rs.484cr V/s Rs.420cr expected, registering a yoy growth of 31.3%. The growth was driven by the exports which posted sales of Rs.1493cr V/s Rs.761cr, registering a yoy growth of 96.1%.The domestic sales on the hand posted sales of Rs.2570cr V/s Rs.2277cr, registering a yoy growth of 12.9%, with domestic formulation growth of 15% yoy. The company's OPM's came in at 21.0% V/s 16.6% expected posting an expansion of 226bps. While the operating profits grew by 47.2% yoy, higher taxation during the quarter, lead the company to post net profit growth of 37.0% yoy to end the period at Rs.65.4cr V/s expectation of Rs.45cr. We maintain our Neutral rating on the stock.
KPIT (CMP: Rs.184 / TP: Under review/ Upside: -)
KPIT Technologies (KPIT) reported its 3QFY2014 results which came in below our expectations on all fronts. The dollar revenues came in at US$110mn, down 2.3% qoq, impacted by lower billing days during the quarter as well as extended furloughs at some of the company's larger customers leading to unanticipated revenue loss of ~US$2mn. Offshore revenues grew marginally and there was volume growth of around 2% in offshore, whereas a volume decline of 2% in onsite business. Overall, for the quarter the volume growth was 1.2%. In INR terms, revenues came in at Rs.678cr, down 3.5% sequentially. EBITDA margin of the company declined by ~10bp qoq to 15.4%. Management indicated that SAP SBU had the biggest impact on revenues due to loss in billing days in 3QFY2014. As a result, the revenues declined sequentially and this had a negative impact on the SBU margins. SAP SBU continued to be in red at the operating margin level in 3QFY2014. PAT came in at Rs.61cr, down 9% on a qoq basis, impacted by soft operating performance. Overall, the performance from the company was weak keeping in view the performance from its peers. The stock is currently under review.
Cairn India (CMP: Rs.323/ TP: Rs.380 / Upside: 18%)
Cairn India is slated to report its 3QFY2014 results today. Cairn India's net sales are expected to remain increase 15.8% yoy at Rs.4,952cr due to increase in both production and realizations. Its operating margin is also expected to expand by 32bps yoy to 77.1% and the bottom line is expected to increase by 12.7% yoy to Rs.3,291 cr. We recommend a Buy rating on the stock with a target price of Rs.380.
Indian Bank- (CMP: Rs.107/ TP: Rs.126 / Upside: 18.3%)
Indian Bank is scheduled to announce its 3QFY2014 results today. We expect the bank to report a flattish NII at Rs.1,130cr. Non-interest income is also expected to be largely flat at Rs.243cr. While, operating expenses are expected to grow by 14.3% yoy to Rs.726cr, provisioning expenses are expected to decline to by 58.4% yoy at Rs.171cr in 3QFY201 3. Hence, Net profit is expected to de-grow by 5.1% yoy to Rs.314cr on back of higher taxes at Rs.162cr. At the CMP, the stock is trading at 0.4x FY2015E ABV. We maintain Buy recommendation on the stock.
Economic and Political News
- Moody's Analytics predicts better economic management under Modi
- Global coffee exports drop 11% in Oct-Nov on weak prices
- Growth to slip to 4.8% in FYRs.14; to improve next year: Crisil
- ONGC eastern offshore gas output may hit 2 MMSCMD by Sept
- Alstom T&D India inks Rs 106 crore contract from RIL
- LIC stake in Axis Bank crosses 10%