Reports » India

Indian stock market and companies daily report (January 25, 2013, Friday)

Contributed by Angel Broking

The Indian market is expected to open with a positive bias mirroring positive start to SGX Nifty and most Asian indices. On the economic front, consumer prices in Japan declined for the seventh time in eight months, to 0.2% (ex. fresh food) in December 2012 as against inflation target of 2% by Bank of Japan (BoJ). This has raised hopes amongst investors of a stimulus package by the BoJ.

The US stocks ended on a mixed note on Thursday after markets remained volatile throughout the trading session. While upbeat jobs data and earnings news cheered the traders; disappointing quarterly results from technology giant Apple weighed on trader sentiments. Apple reported better-than-expected first quarter earnings but weaker-than-expected sales as iPhone sales missed expectations. On the economic front, data from the Labor Department surprised positively as initial jobless claims dipped to 330,000 from the previous weekRs.s unrevised figure of 335,000.

Meanwhile, the Indian markets fell on Thursday as investors booked profits following strong gains witnessed over the past weeks. Going ahead investors would be watchful of the earnings data coupled with report on US new home sales in the month of December.

Markets Today

The trend deciding level for the day is 19,960 / 6,031 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 20,036 - 20,148 / 6,054 - 6,088 levels. However, if NIFTY trades below 19,960 / 6,031 levels for the first half-an-hour of trade then it may correct up to 19,848 - 19,772 / 5,996 - 5,973 levels.

3QFY2013 Result Review

Sesa Goa (CMP: Rs.178/ TP: - /Upside: -)

For 3QFY2013, Sesa Goa (Sesa) reported disappointing results due to continuing iron ore ban in Goa. The net sales declined by 91.0% yoy to Rs.237cr on account of no iron ore sales due to mining ban in Goa. Its pig iron sales volumes fell by 8.8% yoy to 62kt while met coke sales rose 15.9% yoy to 80kt. The company reported an EBITDA loss of Rs.130cr compared to a positive EBITDA of Rs.895cr in 3QFY2012 mainly due to iron ore mining ban in Goa and Karnataka. The company reported an exceptional item related to VRS scheme amounting to Rs.69cr. As a result company reported PAT loss of Rs.172cr, compared to PAT of Rs.570cr in 3QFY2012. Sesa reported share of income from associate (Cairn India) of Rs.689cr during 3QFY2013. Excluding exceptional items and including share of profit from associates, adjusted PAT decreased 18.2% yoy to Rs.565cr. We maintain Neutral view on the stock.

L&T (CMP: Rs.1,586/ TP: Under review/ Upside: -)

Larsen and Toubro (L&T) posted a mixed set of numbers for 3QFY2013, with a decent growth on the revenue and order inflow front but steep fall in EBITDA margin (owing to higher-than-anticipated construction cost). The top-line at Rs.15,429cr, registered a growth of 10.3% yoy for the quarter. It was marginally lower than our estimate of Rs.15,790cr. The decent growth in revenues was mainly driven by pick up in execution in the engineering and construction (E&C) segment. The company reported an EBITDA of Rs.1,475cr, a growth of 9.8% yoy in 3QFY2013; EBITDA margin at 9.6% was below our estimate of 11.2%. On the bottom-line front, L&T reported a yoy growth of 13.2% to Rs.1,122cr higher than our estimate of Rs.1,020cr owing to huge surge in other income. Other income for the quarter grew 113.7% yoy to Rs.437cr led by higher treasury gains and gains from sale of property

As of 3QFY2013, L&TRs.s order backlog stands at Rs.162,334cr registering a growth of 11.4% yoy. Order inflow for the quarter came in at Rs.19,594cr (yoy increase of 14.1%) against our expectation of Rs.18,000cr.

For FY2013, the management continues to reiterate its guidance of 15-20% growth on both - revenue and order inflow. Given the healthy order inflow in 9MFY2012 we believe the company would meet its guidance, both on order inflows and the revenue front.

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 peers. We continue to remain positive on L&T; however owing to surge in its stock price we recommend an Accumulate rating while our target price is under review.

Ashok Leyland (CMP: Rs.24/ TP: Under Review/ Upside: -)

Ashok Leyland (AL) reported disappointing set of results for 3QFY2013 as operating margins collapsed to 4.3%, down 295bp yoy and 584bp qoq, during the quarter owing to higher discounts in the medium and heavy commercial vehicle (MHCV) segment, inferior product-mix and lower utilization levels. Further, higher interest cost led by increasing working capital requirements also impacted the performance at the PBT level. As a result, the company reported a PBT loss of Rs.84cr. However, on the net profit front, the company reported a Rs.74cr profit led by an exceptional gain of Rs.156cr (due to profit on sale of non-current investments). Nevertheless, adjusted for the exceptional gain, AL reported a net loss of Rs.82cr as against Rs.67cr profit in 3QFY2012 (Rs.143cr in 2QFY201 3).

For 3QFY2013, net sales posted a significant decline of 18% yoy (27.8% qoq) to Rs.2,381 cr as against our estimates of Rs.2,498cr. The disappointing performance was largely due to 29.5% yoy (30.7% qoq) decline in total volumes ex. Dost and 16.6% yoy (5.1% qoq) decline in net average realization owing to higher level of discounts and adverse product-mix. However, total volumes ex. Dost, declined by only 2.8% yoy (24.1% qoq). At the operating level, the company witnessed a substantial contraction in margins to 4.3% (down 295bp yoy) as against our estimates of 8.3%. This can be attributed to 340bp (370bp qoq) and 160bp yoy (300bp qoq) increase in other expenditure and staff cost as a percentage of sales respectively. As a result, adjusted net profit posted a loss of Rs.82cr for the quarter. At Rs.24, the stock is trading at 8.7x FY2014E earnings. We shall release a detailed result note post earnings conference call with the management which is scheduled today. Until then the stock rating is under review.

3QFY2013 Result Preview

Maruti Suzuki (CMP: Rs.1,537/ TP: -/ Upside: -)

Maruti Suzuki (MSIL) is scheduled to announce its 3QFY2013 results today. We expect MSIL to post a strong performance in 3QFY2013 (on a low base of last year due to the strike at Manesar plant) driven by ramp up in production at the Manesar plant post the strike in August 2012. We expect the top-line to register a strong growth of ~45% yoy (~36% qoq) to Rs.10,938cr driven by ~28% (~33% qoq) and ~14% yoy (~2% qoq) growth in volumes and net average realization respectively. The net average realization is expected to improve owing to increase in the proportion of diesel vehicle sales and price hike of ~1% in October 2012. We expect EBITDA margins to improve by ~140bp sequentially to 7.5% on account of favorable product-mix and currency movement and operating leverage benefits. Hence, the bottom-line is expected to surge —131% yoy to Rs.474cr, although on a lower base. At the CMP of Rs.1,537, the stock is trading at 16.2x FY2014 earnings which higher than its historical average of 15x. We therefore maintain our Neutral rating on the stock.

Economic and Political News

- RBI hikes FII limit in govt. securities and corporate bond by US$5bn each

- Finance Minister suggests higher taxes for the very rich

- Supreme Court asks CBI to file Coalgate probe status report

- Governments public debt rose to Rs.40 lakh cr in Dec 201 2 quarter

- India Inc raised US$1.15bn from overseas markets in Dec

Corporate News

- Diageo-United Spirits deal clearance work in progress: CCI

- JSPL bags Rs.500cr order from Power Grid Corporation

- Jaiprakash Associates defers share sale in Jaypee Infratech after prices fall

- Work resumes at Colgate plant in Goa

- RCom tower arm in talks for infra sharing deal

- JSPL bags Rs.500cr order from Power Grid

- Rallis India to up stake in Zero Waste Agro to 51% by FY14

- M&M launches SsangYong Rexton in Ahmedabad

- Suzlon Energy gets lenders nod for Rs.9,500cr CDR plan

- Bharti AirtelRs.s long-term debt loses "AAA" rating