Indian stock market and companies daily report (January 28, 2014, Tuesday)
January 28, 2014, Tuesday, 05:10 GMT | 00:10 EST | 10:40 IST | 13:10 SGT
Indian Markets are expected to open in red tracking negative opening in most of the Asian markets amid anxiety over sharp outflows of funds from emerging markets. Investors today will watch out for RBI's decision on key rates in its monetary policy.
US markets ended lower in yesterday's session reflecting lingering concerns about emerging markets as well as the likelihood of further tapering by the Federal Reserve. The Fed is holding a two-day monetary policy meeting beginning on Tuesday, and traders will be closely watching any comments regarding the outlook for its asset purchase program following December's decision to begin scaling back stimulus. Meanwhile, a Commerce Department report showing a much steeper than expected drop in new home sales in December, also weighed on the markets. The report stated that new home sales tumbled 7.0% to an annual rate of 414,000 in December from the revised November rate of 445,000.
On domestic front, the Indian markets tumbled on Monday, extending Friday's sell -off, on anxiety over global economic recovery and growing concerns about the ability of developing countries to prop up their economies amid slowing growth in China and dwindling capital flows as the Federal Reserve begins to suck out excess liquidity out of the system.
The trend deciding level for the day is 20,765 / 6,152 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 20,842 - 20,976 / 6,173 - 6,210 levels. However, if NIFTY trades below 20,765 / 6,152 levels for the first half-an-hour of trade then it may correct 20,631 - 20,554 / 6,115 - 6,093 levels.
Telecom firms to pay spectrum usage charges at 5% of revenue
Telecommunication companies buying airwaves in an Indian auction next month will pay 5% of their revenue as an annual fee, a ministerial panel decided on Monday, a move that means lower payments for bigger carriers Bharti Airtel and the Indian unit of Vodafone. This move scraps the 3-8% fee range the country currently levies in an effort to coax previously reluctant operators into taking part in India's third attempt at auctioning two frequency bands. The new rate is higher than the 3% flat rate suggested by an independent sector regulator, which had proposed abolishing the current levy of five different rates depending on the quantum of spectrum held by a carrier.
After two previous attempts to pull off the sale were boycotted by major mobile phone operators that complained minimum bid prices were too high, India cut sharply the floor bid price for the February auction, helping it lure interest from eight carriers including the market leaders. Bharti and Vodafone, who are expected to buy spectrum in the February auction to renew their permits in some key cities, are expected to benefit from the 5% cap because they currently pay around 6% of their revenue in annual fees in those markets. But smaller carriers that pay less than 5% currently will tend to move towards the 5% rate gradually if they buy more spectrum from the auction. The total spectrum fee for carriersRs. existing spectrum and new spectrum from the February auction will be calculated based on a weighted average of the old and new fee. Companies like Reliance Jio, which bought 4G spectrums in 2010 auction, will continue to pay 1% of their revenue as annual fee for that spectrum. We currently maintain our Neutral rating on the stock.
Government imposes 5% export duty on iron ore pellets
Media reports suggest that the government has imposed 5% export duty on iron ore pellets. The move is taken to discourage pellet exports and to ensure adequate supply of iron ore for the domestic steel makers. Iron ore fines and lumps attract a duty of 30% but until now pellets did not attract any export duty. However we do not see any material impact of this export duty on the financials of our coverage companies and hence we maintain our estimates and rating on our coverage stocks.
NTPC ties up USD 430mn loan from Japan Bank for International Co-operation (JBIC)
NTPC has tied up a USD 430mn (~ Rs.2,700cr) funding from Japan Bank for International Co-operation (JBIC) for two projects; Kudgi and Auraiya projects. The loan comprises a USD 350mn term loan to finance the supplies and services from Japan as well as India for the Kudgi Super Thermal Power Project Stage-I (3x800 MW) which is located in Karnataka. This part-fixed part-floating rate loan has a maturity of 15 years. The remaining loan of USD 80mn would be used to finance the renovation and modernisation of gas turbines at 652 MW Auraiya Gas Power Station located in Uttar Pradesh. This loan is on a fixed rate basis and has a maturity of 12 years. Both the loans have been provided without any sovereign guarantee on a standalone basis. Currently NTPC has an installed capacity of 42,454MW. We maintain our neutral rating on the stock.
HUL (CMP: Rs.576/ TP: -/ Upside: -)
For 3QFY2014, HUL's top-line rose by 9.4% yoy to Rs.7,038cr. Domestic consumer business rose by 10% yoy, with a volume growth of 4% yoy. Soaps and Detergents division posted a growth of 14.5% aided by healthy volume growth in the skin cleansing segment. Laundry segment too posted a healthy growth aided by premium categories. Personal products division posted a healthy growth of 12.5% aided by healthy growth skin care, oral and hair care segments. The relaunch of Fair & Lovely aided the growth in the skin care segment. Oral care segments posted healthy performance aided by double digit growth in both Pepsodent and Close up. Strong growth in Hair care segment was led by brands such as Dove and Sunsilk. Beverages division posted a growth of 7.2%% aided by double digit growth in tea. OPM rose by 130bp yoy to 14.8% aided by higher gross margin (up 113bp yoy) and lower employee costs. Adjusted Net Profit rose by 18.3% yoy to Rs.1,039cr aided by higher operating profit and lower tax rate. We maintain a neutral rating on the stock.
Idea Cellular (CMP: Rs.145/ TP: Under review)
For 3QFY2014, Idea Cellular (Idea) reported broadly in-line set of results. Idea's consolidated revenue grew by 3% qoq to Rs.6,613cr. The mobility segment's revenue grew by 5% qoq to Rs.6,535cr, on the back of on back of 4% qoq growth in total Minutes of usage to 145bn min and 107.6% yoy in data volume. MOU grew by 2.2% qoq to 376min; ARPM grew by 0.4% sequentially to Rs.0.45/min and thus, ARPU grew by 3% on a qoq basis to Rs.169/month. The company clamped down on promotional minutes resulting in the ARPM improvement. The VAS contribution remained largely flat on a qoq basis at 16.1% because of steep decline in nom-data VAS. The higher mobile data adoption has primarily led to VAS growth with data revenue as % of service revenue improved from 3.8% to 9.5% in last one year, also increased to 16.1% (15.2% in 4QFY2013) further improving overall ARPM. Idea's subscriber base increased by 1.6mn subscribers during the quarter with the end of period (EoP) subscriber base standing at 128.7mm. Idea's EBITDA margin slipped marginally by ~10bp qoq to 31.1%, due to increase in marketing and subscriber acquisition costs. PAT came in at Rs.468cr, up 4.5% qoq, led by strong revenue growth. The stock is currently under review.
Shree Cement (CMP: Rs.4,230/ TP: -/ Upside: -)
For 2QFY2014 Shree CementsRs. results were below estimates. The company posted a 7.7% yoy decline in top-line to Rs.1,318cr. Cement division posted a top-line growth of 8.4% yoy to Rs.1,180cr despite the steep fall in realizations aided by higher volumes (up 18% yoy). Power division posted a 56% yoy decline in net revenue impacted by fall in both volumes (down 30% yoy) and realization (down 13% yoy). OPM fell by 537bp yoy to 20.5% impacted by steep fall in cement realizations. Bottom-line fell by 47% yoy to Rs.120cr. We maintain a neutral rating on the stock.
Allahabad Bank (CMP: Rs.80/ TP: -/ Upside: -)
Allahabad Bank reported weak asset quality performance during the quarter, continuing the trend witnessed over last five quarters. Over the last five quarters until 3QFY2014, the bank's asset quality has faced tremendous pain, as absolute Gross NPAs have tripled, while net NPAs have quadrupled. Even during the quarter, absolute gross and Net NPAs continued the northward movement and grew by 13.6% and 11.9%, qoq respectively. On the operating performance front, while NII came in flat, in-line with expectations, non-interest income grew 59.2% yoy and aided the bank to report operating profit growth of 17.4%. Overall, the bank reported muted earnings growth of 4.7% yoy. Going ahead, we remain watchful on the bank's asset quality, as we take into account its exposure to stressed sectors and an overall weak macro environment. We retain our Neutral rating on the stock. At the CMP, the stock is trading at 0.4x FY2015E ABV. We maintain our Neutral recommendation on the stock.
Siyaram Silk Mills (CMP: Rs.270/ TP: Rs.315/ Upside: 17%)
Siyaram Silk Mills (SSM) reported marginally lower than expected numbers for 3QFY2014. The company's top line for the quarter grew by 10.5% yoy to Rs.308cr, against our estimate of Rs.319cr as the dampened customer sentiment weighs the festive season. The operating margin dipped by 99bp yoy to 10.2%, in-line with our estimate mainly because of lower than expected other expenses (mainly lower ad spends). Interest and tax outgo for the quarter was Rs.7cr each, both marginally lower than our estimates. Consequently, profit for the quarter came in at Rs.14cr against our estimate of Rs.15cr.
In order to improve the demand scenario, SSML is panning for new designs and schemes for the coming festive season which will help in driving the sales. At CMP of Rs.270, the stock is trading at a PE of 3.4x FY2015E earnings. We maintain our estimates and Buy recommendation on the stock with the target price of Rs.319 based on a target P/E of 4.0x for FY2015E.
NTPC (CMP: Rs.129/ TP: -/ Upside: -)
NTPC is slated to announce its 3QFY2014 results today. The company is expected to post 2.0% yoy growth in its top-line to Rs.16,090cr. On the operating front, OPM is likely to expand by 37bp yoy to 25.7% while net profit is expected to increase by 2.7% yoy and come in at Rs.2,668cr. NTPC is currently trading at relatively cheap valuations of 1.2x 2015E BV; however, awaiting CERC Final Regulations 20142019 which are due shortly, we remain Neutral on the stock.
Maruti Suzuki (CMP: Rs.1,701/ TP: -/ Upside: -)
Maruti Suzuki (MSIL) is scheduled to announce its 3QFY2014 results today. We expect MSIL to register a strong earnings growth of ~24% yoy to Rs.620cr despite a ~2% yoy decline in the top-line to Rs.10,928cr as EBITDA margins are expected to improve ~31 0bp yoy to 11.1% on a low base and also due to favorable currency movement and Suzuki Powertrain India (SPIL) merger. Nonetheless, on a sequential basis, we expect the top-line to register a growth of ~4%, driven by a ~5% qoq growth in volumes on the back of the festival demand during the quarter. EBITDA margins are likely to decline by ~150bp qoq due to adverse product-mix, higher discounts and unfavorable forex movement (impact on vendors import). As a result, earnings are expected to decline by ~7% sequentially during the quarter. At the CMP, the stock is trading at 15.1x FY2015E earnings. Currently, we have a Neutral rating on the stock.
JSW Steel (CMP: Rs.915/ TP: Rs.848/ Downside: 8%)
JSW Steel is slated to announce its 3QFY2014 results today. The results are not comparable with 3QFY2013 as JSW Steel has merged with JSW Ispat during 4QFY2013. We expect its standalone net sales to be Rs.11,358cr. The operating margin is expected to be at 19.6% and the net profit is expected to be at Rs.618cr. We maintain our Reduce rating on the stock with a target price of Rs.848.
Ipca labs (CMP: Rs.768/ TP: -/ Upside: -)
We estimate Ipca LaboratoriesRs. top-line to grow by 19.0% to Rs.824cr for 3QFY2014. The OPM is expected to dip by 100bp yoy to 20.6%. The adjusted net profit is expected to grow by 39.5% yoy on back of dip in tax outgo. We remain neutral on the stock.
Economic and Political News
- Duty on tobacco products raised by 10-20% across all categories
- India's gems and jewellery imports decline 11% in December
- Maharashtra to turn revenue-deficient after 20% power tariff cut
- Non-operating textile units in Punjab grew at 35% CAGR during 2000-2010
- Review on curbs on gold imports by FY2014-end: FM
- Ashok Leyland makes US$14mn equity infusion in German subsidiary
- Diesel price de-regulation not to affect Isuzu's India plans
- JSW Steel hikes prices by up to Rs.1,200/tn
- Mahindra to invest Rs.500cr on commercial vehicle development
- Neyveli Lignite plans to add 8,455 MW capacity in 10 years
- ONGC inks MoU with Mitsui for co-operation in pursuing gas opportunities
- Panel recommends green nod to NMDC's coal projects in MP
- Tata Motors to shift production from Lucknow plant to Uttarakhand
- TCS bags e-governance project in Odisha after HP exit