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Reports India

Indian stock market and companies daily report (July 18, 2014, Friday)

July 18, 2014, Friday, 05:46 GMT | 00:46 EST | 09:16 IST | 11:46 SGT
Contributed by Angel Broking

Indian markets are expected to open on a negative note with tracking negative opening on SGX Nifty along with negative global cues.

U.S. stock indices ended on a negative territory after news came that Malaysia Airlines passenger plane has crashed in eastern Ukraine. Further, European markets also closed in the negative territory as Ukraine worries resurfaced in the wake of fresh sanctions against Russia.

Back home, Indian indexes Sensex and Nifty ended a lackluster session slightly higher despite weak global cues. The broader indexes outperformed on the back of improving risk appetite as provisional data showed overseas investors turned net buyers in Indian equities after recent selling on previous trading session.

Markets Today

The trend deciding level for the day is 25,556 / 7,636 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 25,618 - 25,675 / 7,660 - 7,679 levels. However, if NIFTY trades below 25,556 / 7,636 levels for the first half-an-hour of trade then it may correct 25,499 - 25,438 / 7,617 - 7,593 levels.

Cipla- Incresaes satke in Meditab Specialities Private

Meditab Specialities Private Limited ("MSPL"), a wholly owned subsidiary of Cipla, has acquired 75% stake in Mabpharm Private Limited ("Mabpharm"). The Company was earlier holding 25% stake in Mabpharm. Consequent to the acquisition of the aforesaid stake, Mabpharm has now become 100% subsidiary of the Company. Mabpharm is inter alia engaged in development of monoclonal anitbodies for treatment of cancer and auto-immune diseases. We mainatin our accumulate on the stock with a target of Rs.480.

Cipla, Mylan, Micro Labs, Aurobindo, Emcure ink licensing pact for antiretrovirals with a UN unit

Medicines Patent Pool (MPP), a United Nations-backed organisation founded to increase access to HIV treatment and spur new innovation worldwide, has signed new sub-licensing agreements for the    manufacture of generic HIV medicines, atazanavir (ATV) and dolutegravir (DTG), with seven companies - of which six are from India. Indian companies who will supply generics to Medicines Patent Pool include Cipla, Mylan, Micro Labs, Aurobindo, Laurus Labsand Emcure.

MPP negotiates licences with key patent holders to speed access of low-cost, generic medicines to developing countries. To date, the MPP has signed agreements with Bristol Myers-Squibb, Gilead Sciences, F. Hoffmann-LaRoche, the US National Institutes of Health and ViiVHealthcare for eight antiretrovirals (ARVs) and one medicine for an HIV opportunistic infection.

Following its December agreement with Bristol-Myers Squibb for a licence on atazanavir, a WHO-preferred second-line therapy, MPP has signed its first sublicence with a Chinese generic firm,Desano, a supplier of active pharmaceutical ingredients (API) based in Shanghai, and with Aurobindo and Emcure, key manufacturers of generic antiretroviral medicines, for the production of low-cost atazanavir. The development is positive for both the companies under our coverage i.e Cipla and Aurobindo, which are key drug suppliers from India, but it not significantly change our estimates and hence we remain our neutral rating on Aurobindo and a accumulate on cipla with a target of Rs.480.

Crompton Greaves to demerge its Consumer business

Crompton Greaves has announced the demerger of its Consumer business. We believe this will lead to improvement in efficiency for each of the businesses.

Currently, the Power and Industrial segments are loss making, but there are high chances of they becoming profitable in future with an improvement in the economy and efficiency in operations. This will lead to re-rating of the Power business in terms of valuation.

The company's Consumer business is doing well, posting an EBIT margin of 11-12% along with 12-15% revenue growth. The business was being valued at a discount in the consolidated entity; the separation should improve its business outlook as well as valuation.

We maintain Buy with a target price of Rs.253/share.

Result Review

Rallis India (CMP: Rs.218/TP:/Upside:)

Rallis India, posted robust set of numbers. For the quarter, 1QFY2015, the company posted net sales of Rs.465.4cr V/s Rs.409.3cr in 1QFY2014 ,a yoy growth of 13.7% yoy. EBITDA margins came in at 11.9% V/s 12.9% during the last corresponding period; in spite of the 50.2% GPM V/s 48.3% in 1 QFY2014.This was mainly on back of a17.5% yoy rise in other expenses. Also during the quarter, the other income came in at Rs.6.3cr V/s Rs.4cr during the last corresponding period. Consequently, PAT came in at Rs.369.8cr V/s Rs.274.9cr, a 34.5% yoy. However, the adj net profit growth was 5.7% yoy during the period. We remain neutral on the stock.

TCS (CMP: Rs.2,381/ TP: Rs.2,778/Upside: -16.7%)

TCS announced better than expected results for 1QFY201 5. The USD sales growth for the qauter came in at 5.5% qoq to US$3,694mn V/s US$3,671 mn expected, mostly volume lead (5.7% qoq). In rupee terms, revenues came in at Rs.22,111cr V/s Rs.21,944cr expected, up 2.6% qoq. EBIT margins came in at 26.3% V/s 27.1% expected a 284bps decline qoq. However during the quarter, the company benefited to the extend of Rs.489.7cr, on back of change in the deprication policy and Rs.239.7cr on forex gains. Consequently, PAT came in at Rs.5,057cr V/s Rs.4,807.3cr expected, a dip of 4.5% qoq.We maintain our buy rating on the stock with a target price of Rs.2,778.

DB Corp (CMP: Rs.319 / TP: Rs.412 / Upside: 29%)

For 1QFY2015, DB Corp's reported disappointing results both on top-line and bottom-line front. The company reported ~9% yoy growth in top-line to Rs.Rs.489cr which was below our expectation mainly due to lower advertising revenue posting ~7% yoy growth to Rs.Rs.461cr. On the operating front, the company reported operating profit of ~Rs.Rs.135cr (up by ~1% yoy) and margin contracted by 211bp yoy on account of higher raw material cost (up 237bp yoy) and staff cost (up 59bp yoy).This led to lower PAT growth (which grew by ~4% yoy to Rs.Rs.79). We would revise our target price and rating post the earnings conference call.

Economic and Political News

- FDI jumps to 8-month high of $3.6 billion in May

- Modi seeks stronger economic ties with Latin America

Corporate News

- Tata Power Solar partners Bajaj Finance for selling products

- Glenmark to set up new manufacturing facility in US