Indian stock market and companies daily report (January 24, 2014, Friday)
January 24, 2014, Friday, 04:05 GMT | 00:05 EST | 08:35 IST | 11:05 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 moved sharply lower over the course of the trading day on Thursday after showing a lack of direction during the past few sessions. The weakness on Wall Street was partly due to concerns about the outlook for the global economy following the release of a report showing a contraction in Chinese manufacturing activity. Preliminary survey by Markit and HSBC showed that their index of Chinese manufacturing activity fell to 49.6 (expected 50.3) in January from 50.5 in December, with a reading below 50 indicating a contraction. European markets ended the day in negative owing to weak Chinese manufacturing data.
On domestic front, the Indian markets rose for a fourth consecutive session on Thursday, although gains remained modest following weak global cues and amid caution ahead of the upcoming RBI policy meeting next week.
The trend deciding level for the day is 21,349 / 6,339 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 21,434 - 21,494 / 6,362 - 6,378 levels. However, if NIFTY trades below 21,349 / 6,339 levels for the first half-an-hour of trade then it may correct 21,289 - 21,204 / 6,323 - 6,300 levels.
Cairn India (CMP: Rs.325/ Target Price: Under Review/ Upside: -)
Cairn India 3QFY2014 top-line and EBITDA were slightly above our expectations; however, its adjusted net profit was below our estimate due to lower than expected other income and higher than expected tax rate. The company's top line increased by 16.9% yoy to Rs.5,000cr (above our expectation of Rs.4,952cr) due to increases in both volumes as well as realizations. The company's gross production averaged 224,493boepd (+10.0% yoy) during the quarter. Gross crude oil realization stood flat yoy to US$96.3/bbl (although it increased in INR terms due to Rupee depreciation against the USD). EBITDA grew by 17.1% yoy to Rs.3,848cr in line with increase in top-line. The company recorded an exceptional item related to valuation of stock options of Rs.155cr during 3QFY2014. Other income decreased by 22.7% yoy to Rs.140cr (below our expectations) and tax expenses grew by 256.7% yoy to Rs.115cr. Hence, despite 17.1% yoy growth in EBITDA, adjusted net profit grew by only 4.1% yoy to Rs.3,039cr (below our estimate of Rs.3,291cr). We maintain our Buy rating on the stock while we keep our target price under review.
Amara Raja Batteries (CMP: Rs.339/ TP: Under Review/ Upside: -)
Amara Raja Batteries (AMRJ) reported an extremely strong performance for 3QFY2014, beating our as well as consensus estimates, led by a robust operating performance. The company's results have been commendable given that the market leader, Exide Industries, witnessed sharp decline in the top-line and deterioration in EBITDA margins during 3QFY2014.
For 3QFY2014, AMRJ's top-line surged 13.4% yoy (6.9% qoq) to Rs.863cr driven by continued traction in the automotive replacement segment in our view. Additionally, increase in supplies to HMSI could also have benefited the top-line during the quarter. According to the company, while in the industrial battery segment demand for UPS batteries remained subdued, price increases and better product-mix aided the top-line. On the operating front, EBITDA margins improved 141 bp yoy (flat qoq) to 17.4% owing to superior product-mix and operating leverage benefits. As a result, the operating profit surged 23.4% yoy (5.9% qoq) to Rs.150cr. Led by a robust operating performance, net profit grew 17.4% yoy to Rs.95cr. On a sequentially basis, net profit stood flat as tax rate increased to 33% as opposed to 29.4% in 2QFY2014.
AMRJ has announced an ambitious capital expenditure plan of Rs.760cr to ease the capacity constraints across the product segments that it is facing currently. We expect the company to sustain its growth momentum going ahead, led by widening reach, strong product offerings and increasing capacity. We maintain our Accumulate rating on the stock; our target price is currently under review.
Indian Bank- (CMP: Rs.109/ TP: Rs.126 / Upside: 15.9%)
Indian bank reported weak operating performance, while asset quality reported improvement aided by sale to ARCs. On the operating front, Net Interest Income for the bank de-grew by 4.6% yoy at Rs.1,091cr, while non-interest income remained flat at Rs.243cr, in-line with our estimates. Operating expenses grew 10.3 % yoy and resulted in pre-provisioning profit de-growth of 15.5% yoy Rs.632cr, which was on expected lines. On the asset quality front, the bank reported improvement, as its absolute Gross NPA decreased sequentially by 8.2% on back of sale of assets worth Rs.390cr to ARCs. While the Net NPA levels decreased by 11.4% sequentially. Provision expenses for bank came in at Rs.238cr as compared to Rs.412cr in 3QFY2013. Overall earnings for bank de-grew by 20.0% yoy. Over the last two years, the bank has faced severe asset quality pressures, as Gross and Net NPAs propelled from 1.4% and 0.8%, respectively to 3.4% and 2.2% now. Going ahead, the management has exuded confidence in maintaining its asset quality at current levels. With relatively healthy capital adequacy (amongst the best within PSUs), the stock currently trades at moderate valuations of 0.4x FY2015E ABV. We recommend Buy rating on the stock.
Blue Star (CMP: Rs.163 / TP: Rs.193 / Upside: 19%)
Blue Star reported a disappointing set of results with 8.8% yoy decline in its net revenue to Rs.546cr for 3QFY2014. On the operational front, EBITDA de-grew by 41.4% yoy to Rs.14.9cr from Rs.25.4cr in 3QFY2013 owing to increased employee expenses and other expenditure as percentage of sales. A dip of 1 37bp in raw material cost is set off by an increase in ~287bp in staff cost and other expenditure, resultantly EBITDA margin dipped by 152bp yoy to 2.7% from 4.2% in same quarter previous year. Consequently, net profit fell by 47.7% yoy to Rs.2.8cr.
In 3QFY2014, Cooling Product segment reported flat yoy revenue growth while EMPPACS and PEIS segment revenue declined by 11.9% and 11.4% yoy basis, respectively. Segmental margins for the cooling products and PEIS improved by mere 52bps and 33bps on yoy basis, respectively; however, EMPPACs division margins decline by 60bps yoy. The profit from EMPPACS segment has declined by 21% yoy due to slower execution of projects as well as correction in the estimates of project revenues. Carry forward order book as on 31st December 2013 increased by 6.6% to Rs.1,737cr compared to Rs.1,628cr as at December 31, 201 2. We believe that performance for 3QFY2014 was affected mainly due to cyclical nature of business. However, going forward, we expect improvement in company's overall performance with the gradual recovery in macro-economic conditions. We maintain our Buy recommendation on the stock with a target price of Rs.193 based on a target PBV of 3.5x for FY2015E. We may revise our number post Q3FY2014 Earnings Call.
UCO Bank- (CMP: Rs.78 / TP: - / Downside: -)
UCO Bank is slated to announce its 3QFY2014 results tomorrow. We expect the bank to report a strong Net Interest Income (NII) growth of 39.4% yoy to Rs.1,642cr. Non-interest income is expected to grow healthy at 18.1% yoy to Rs.224cr. Operating expenses of the bank are expected to be higher by 19.5% yoy to Rs.641cr. Pre-provisioning profit is expected to increase by 47.4% yoy to Rs.1,225cr. Provisioning is expected to increase 6.3% yoy at Rs.773cr. Net Profit is expected to go increase to Rs.372cr from Rs.102cr in 3QFY13 (in spite of increase in provision expense at Rs.79cr against Rs.1cr in 3QFY2013). At the CMP, the stock trades at a valuation of 0.7x FY2015E. We maintain our Neutral recommendation on the stock.
Economic and Political News
- Govt. trying to meet divestment target: Seelam
- Railway Ministry for expanding train network to remote areas
- Govt. banks stare at mid-level crisis
- Aurobindo Pharma gets USFDA nod for anti-diabetes tablets
- Unichem Laboratories gets USFDA nod for Metronidazole tablets
- Jet Airways offers low fares for subsidiary
- Sugar firms losses to aggravate as realisations much lower