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Indian stock market and companies daily report (January 31, 2013, Thursday)

Contributed by Angel Broking

The Indian market is expected to open flat today, mirroring flat opening to SGX Nifty and weak opening to most of the Asian markets.

The US stocks ended modestly lower on Wednesday following the announcement by the Federal Reserve on the monetary policy. The Fed announced that it widely expects to keep interest rates unchanged and maintain its asset purchase program as part an effort to stimulate the economy. The comments from the Fed were backed up by a Commerce Department report showing that GDP unexpectedly fell by 0.1% in 4QCY2012 after surging up by 3.1% in 3QCY2012. Nonetheless, upbeat jobs data helped offset the negative sentiment generated by the GDP report, with payroll processor ADP reporting a bigger than expected increase in private sector employment in the month of January. ADP said private sector employment increased by 192,000 jobs in January compared to economist estimates for an increase of about 172,000 jobs.

Meanwhile, Indian shares rose marginally led by index heavyweight, Reliance Industries after the company raised US$800mn from overseas investors via a perpetual bond sale. Going ahead, earnings news is likely to be in focus on Thursday. Additionally, traders are also likely to keep an eye on reports on weekly jobless claims, personal income and spending, and Chicago-area business activity.

Markets Today

The trend deciding level for the day is 20,014 / 6,057 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 20,064 - 20,123 / 6,070 - 6,085 levels. However, if NIFTY trades below 20,014 / 6,057 levels for the first half-an-hour of trade then it may correct up to 19,955 - 19,906 / 6,043 - 6,029 levels.

Unity Infra projects bags ~Rs.235cr road project in Maharashtra

Unity Infraprojects has been awarded a Rs.235cr road project in Maharashtra. It is for the construction of major roads in Solapur city by Solapur Municipal Corporation. The project involves construction/improvement of major roads in Solapur city under the scheme of Maharashtra Suvarna Jayanti Nagarotthan Mahaabhiyan Yojana Road Project, Phase -I and has a construction period of 1 8 months. We continue to maintain our Buy rating on the stock with a target price of Rs.59.

3QFY2013 Result Review

Colgate Palmolive (CMP: Rs.1,385/TP:/Upside:-)

For 3QFY2013, Colgate Palmolive (Colgate) posted a 13.9% yoy growth in its topline to Rs.763cr, which was below our estimates. For 9MFY2013, the company achieved an overall volume growth of 9%, with toothpaste volume growth coming in at 10%. For 3QFY2013, OPM stood at 16.9% down 457bp yoy due to substantial 44% yoy increase in advertisement and promotional expenditure. Bottom-line fell by 4% yoy to Rs.111cr due to flat performance on the EBITDA front and higher tax outgo. We maintain our Neutral recommendation on the stock.

Central Bank - (CMP: Rs.83 / TP: - / Upside: -)

During 3QFY2013, Central Bank reported healthy operating performance, with operating income and operating profit growth of 15% yoy and 27% yoy, respectively. Earnings at PBT level were higher by 19% yoy, however due to tax write-back of Rs.29cr during the quarter compared to tax expenses of Rs.14cr during 3QFY2012, the bank managed higher Net profit growth of 59% yoy. On the asset quality front, gross and net NPA levels, were higher sequentially by 5% and 3%, respectively, on an absolute basis. Gross NPA ratio came in higher by 1 0bp qoq to 5.64%, while Net NPA ratio remained flat sequentially at 3.79%. As of 3QFY2013, Capital adequacy ratio for the bank came in at 10.76%. The Govt. is expected to infuse ~Rs.2,400 in the bank, which is likely to be at book dilutive valuations. At the CMP, the stock trades at valuations of 0.7x FY2014E ABV. We maintain our Neutral recommendation on the stock.

Idea (CMP: Rs.114 / TP: - / Upside: -)

Idea Cellular (Idea) reported its 3QFY2013, which were in-line with our estimates on the revenue front but disappointed on the operating as well as profitability front. The revenues came in at Rs.5,579cr, up 5.0% qoq, because of 7.0% qoq rise in MOU to 384min. Overall network traffic grew by 5.2% qoq to 132bn min. Overall subscriber base of Idea reduced by 1.6mn to 113.9mn in 3QFY2013. ARPM declined by 0.5% qoq to Rs.0.411/min due to reduction of VAS share in revenues to 13.6% from 14.6% which was a major negative surprise in the results. EBITDA margin declined by 36bp qoq to 26.4%. PAT came in at Rs.229cr, down 4.8% qoq, impacted by higher interest charges. The company remain surrounded by regulatory uncertainties related to spectrum and license fee payments. We maintain Neutral view on the stock.

Nalco (CMP: Rs.51/ TP: -/ Upside: -)

Nalco reported a better-than-expected PAT although its top-line was in line with our estimates. Net sales grew by 16.8% yoy to Rs.1,670cr (in line with our estimate of Rs.1,657cr). Its aluminum segment reported an EBIT loss of Rs.22cr, compared to a loss of Rs.150cr in 3QFY2012 which led to an improvement in the performance. Power costs as a percentage of net sales stood at 35.0%, compared to 39.7% in 3QFY2012. Further, staff costs (surprisingly) decreased 2.4% yoy to Rs.289cr. Hence, Nalco reported an EBITDA growth of 166.6% yoy to Rs.182cr. Other income, however, declined by 10.5% yoy to Rs.113cr; also, the tax rate also increased to 30.9% compared to 27.9% in 3QFY2012. Consequently, the company reported a net profit growth of 132.0% yoy to Rs.119cr (significantly above our estimate of Rs.63cr). We recommend Reduce rating on the stock while we keep our target price under review.

IPCA Labs (CMP: Rs.479/ TP: Rs.559/ Upside: 17%)

Ipca Labs posted a good set of numbers for 3QFY2013; however they were a bit lower than expected. The top-line grew by 15.5% to Rs.692cr (lower than our expectation of Rs.740 cr or 6.4%). The top-line growth was mainly driven by exports, which grew by 16.1%, while domestic markets posted a 13.2% yoy growth. The OPM came in line with expectations to end the period at 21.6%, a decline of 134bp. In spite of the same, the adjusted net profit grew by 37.5% yoy at Rs.88cr, on back of top-line growth. We revise our target price to Rs.559 and recommend Buy on the stock.

KEC International (CMP: Rs.59/ TP: Rs.78/Upside: 31%)

For 3QFY2013, KEC International (KEC) posted a strong top-line growth of 23.1% yoy to Rs.1,797cr, beating our expectations, on the back of strong execution of its robust order book. However, on the EBITDA front, the companyRs.s margin contracted by 197bp yoy (compared to our expectation of 146bp yoy contraction) on account of low margin orders in new segments. Consequently, PAT came in at Rs.29cr against our expectation of Rs.33cr. We recommend Buy on the stock.

PVR (CMP: Rs.274/ TP: -/ Upside: -)

For 3QFY2013, PVRRs.s top-line performance was better than our expectations. It posted a robust 45% yoy growth in its top-line to Rs.202cr, on back of good performance in movie exhibition business, with many successful releases during the quarter. However, the companyRs.s operating margin came in flat at 16.8% mainly on account of 182bp yoy increase in film distribution share as a percentage of net sales to 25.6%. Consequently, net profit came in flat at Rs.9cr. At the current market price, PVR is trading at 13.2x FY2014E consolidated EPS of Rs.19.6. We believe the stock is fairly valued and hence, maintain our Neutral rating on the stock.

Jyoti Structures (CMP: Rs.41/ TP: Rs.51/ Upside: 24%)

For 3QFY2013, Jyoti StructuresRs. top-line performance was in-line with our expectations. Top-line grew by 5.5% yoy to Rs.620cr. On the EBITDA front, the companyRs.s margin came in flat yoy at 9.9%. However, net profit was below our expectations, declining by 3.0% yoy to Rs.13cr. The stock is currently trading at 3.5x 2014E EPS of Rs.11.7. We recommend Buy on the stock.

3QFY2013 Result Preview

ICICI Bank - (CMP: Rs.1,214 / TP: Rs.1,397 / Upside: 15.0%)

ICICI Bank is slated to announce its 3QFY2013 results today. We expect the bank to report a strong net interest income (NII) growth of 29.4% yoy to Rs.3,510cr. Noninterest income growth is expected to be moderate at 9.0% yoy to Rs.2,064cr. Operating expenses of the bank are expected to be higher by 21.2% yoy, resulting in operating profit growth of 21.0% yoy. However, growth in net profit is expected to be limited at 17.1% yoy to Rs.2,024cr, on account of relatively higher increase in provisioning expenses (expected to be up by 36.4% yoy). At the CMP, the stock is trading at valuations of 1.9x FY2014E ABV (without adjusting value of subsidiaries). We maintain our Buy recommendation on the stock with a target price of Rs.1,397.

PNB - (CMP: Rs.834 / TP: Rs.933 / Upside: 11.8%)

Punjab National Bank is scheduled to announce its 3QFY2013 results today. We expect the bank to report a moderate NII growth of 8.0% yoy to Rs.3,820cr. The operating profit of the bank is expected to grow at a muted pace of 6.0% yoy to Rs.2,838cr. However, due to 27.0% yoy increase in provisioning expenses, Net Profit is expected to remain flat on a yoy basis at Rs.1,145cr. At the CMP, the stock is trading at 0.9x FY2014E ABV. We maintain our Accumulate recommendation on the stock with a target price of Rs.933.

Godrej Consumer (CMP: Rs.721/ TP: / Upside: -)

Godrej Consumer (GCPL) is expected to announce its 3QFY2013 results today. We expect the top-line to grow by 22.9% yoy to Rs.1,652cr. OPM is expected to decline by 374bp yoy to 16.0%. Bottom-line is expected to grow by 4% yoy to Rs.174cr. We maintain our Neutral recommendation on the stock.

Union Bank - (CMP: Rs.241 / TP: Rs.271 / Upside: 12.5%)

Union Bank is scheduled to announce its 3QFY2013 results today. We expect the bank to report a moderate 8.1% yoy growth in net interest income (NII) to Rs.1,925cr. Non-interest income is expected to remain almost flat on a yoy basis to Rs.581cr. Operating expenses are expected to increase by 6.3% yoy to Rs.1,158cr. However, provisioning expenses are expected to decline by 48.6% yoy to Rs.500cr, on high base of 3QFY2012. Consequently, net profit is expected to grow by 190.9% yoy to Rs.573cr. At the CMP, the stock is trading at 0.8x FY2014E ABV. We maintain our Accumulate recommendation on the stock with a target price of Rs.271.

Lupin (CMP: Rs.599/ TP: Rs.655/ Upside: 9%)

For 3QFY2013, Lupin is expected to register a growth of 17.2%. The OPM is expected to expand by 11 0bp for the period. In spite of the same the net profit is expected to increase by 10.1% only, on back of higher tax outgo. We recommend Accumulate on the stock with a target price of Rs.655.

Tata Global Beverages (CMP: Rs.144/ TP: / Upside: -)

Tata Global Beverages (TGBL) is expected to announce its 3QFY2013 results today. We expect the consolidated top-line to grow by 6.5% yoy to Rs.1,910cr. OPM is expected to decline by 121 bp yoy to 8.5%. Bottom-line is expected to grow by 32.3% yoy to Rs.110cr. We maintain our Neutral recommendation on the stock.

Thermax (CMP: Rs.572/ TP: -/ Upside: -)

For 3QFY2013, we expect Thermax to report a subdued top-line growth of 2.0% yoy to Rs.1,295cr on account of weak order inflows since the last couple of quarters. The companyRs.s EBITDA margin is likely to compress by 57bp yoy to 10.1%. Sluggish top-line performance and margin contraction are expected to result in a yoy fall of 9.1% in the PAT to Rs.87cr. We maintain our Neutral rating on the stock.

Jagran Prakashan (CMP: Rs.108/ TP: Rs.126/ Upside: 17%)

Jagran Prakashan (Jagran) is slated to announce its 3QFY2013 results. The companyRs.s top-line is expected to grow by 8.4% yoy to Rs.344cr driven by healthy advertising growth (aided by festive season). Its OPM is expected to expand by 67bp yoy to 25.3%. Strong operational performance and tax benefit due to accumulated losses at Nai Dunia subsidiary are expected to result in robust 25.6% yoy growth in net profit to Rs.52cr. At the current market price, Jagran is trading at 16.9x FY2014E consolidated EPS of Rs.7.1. We maintain Buy on the stock.

Economic and Political News

- Government looking at more steps to curb gold import: P Chidambaram

- Vodafone seeks withdrawal of second round of spectrum auction guidelines

- Power Ministry sends comments on coal price pooling to Coal Ministry

Corporate News

- L&T signs US$100mn offshore contract with Petronas

- SBI reduces its base rate by 5bp to 9.7%

- HDFC Bank cuts auto loan rates by 0.5%

- Suzlon signs 50MW order with Orange Renewable Power

- Neyveli Lignite to add 1,500MW of power capacity in FY201 4