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Reports India

Indian stock market and companies daily report (July 30, 2014, Wednesday)

July 30, 2014, Wednesday, 03:42 GMT | 22:42 EST | 07:12 IST | 09:42 SGT
Contributed by Angel Broking


Indian markets expected to open on positive note tracking SGX Nifty and most of the Asian markets.

US market fell as President Barack Obama announced new sanctions against Russia and warned its actions in Ukraine are "setting back decades of progress," snuffing out earlier gains led by telephone stocks.

European markets ended positive following a two-day decline, as companies including Ferrovial SA and Next Plc reported better-than-expected results.

Back home, Indian markets were negative on Monday due to heavy selling in realty, metal and oil & gas stocks amid mixed European cues. Further, Indian markets were also witnessed some selling pressure due to ahead of monthly expiry of derivative contract on July 31.


Markets Today

The trend deciding level for the day is 26,024 / 7,757 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 26,149 - 26,306 / 7,792 - 7,834 levels. However, if NIFTY trades below


IPA & OPPI take NPPA to court

The Indian Pharmaceutical Alliance (IPA) and the Organisation of Pharmaceutical Producers of India (OPPI) have taken the National Pharmaceutical Pricing Authority (NPPA) to court over a recent pricing order mandating price ceilings of several drugs.

On July 10, 2014, the NPPA passed an order mandating capping prices of 108 formulation packs of 50 non-scheduled drugs in the anti-diabetic and cardiovascular segments, under Paragraph 19 of the Drugs (Prices Control).

The NLEM list was revised 10 years ago in consultation with industry groups, the World Health Organisation, and the ministry. The government can place a ceiling on prices of essential drugs, as mandated under the National List of Essential Medicines but if the NPPA has to fix prices falling outside the purview of essential (such as non-schedule) drugs, it can only do so using the Para 19 provision in "extraordinary situations".

While the NPPA maintained it was forced to step in to fix prices of the drugs owing to the significant price differential between same drugs belonging to different manufacturers, the industry bodies believe the price differences as to warrant action under the "extraordinary situation" clause.

The IPA's writ petition is coming up for listing in the Bombay High Court on July 30, 2014 while the OPPI's case, which is reportedly filed in Delhi High Court, will come up on August 2, 2014.

While, the outcome of the case is not know, the development is positive , as it will provide more clarity on the NPPA act, for the industry and aid the investments in the industry. This we maintain the recommendations on the industry.


Result Review

Alembic Pharmaceuticals (CMP: Rs.338/ TP:/ Upside :)

Alembic Pharmaceuticals, announced its 1QFY2015, which was mostly in line with the expectations. For the quarter, the company posted sales of Rs.492cr V/s Rs.506cr expected, posting a yoy growth of 15.6% yoy. The domestic sales came in at Rs.278cr, posting a yoy growth of 15.4%, while exports grew by 16.1% yoy. On the operating front, the OPM came in at 19.5% (18.5% expected) V/s 16.7% in 1QFY2014, an expansion of 280bps yoy, mainly on back of GPM expansion, which came in at 64.0% V/s 59.5% in 1 QFY2014.Thus, PAT came in at Rs.64.6cr V/s Rs.65.4cr expected, registering a yoy growth of 38.6%. We remain neutral on the stock.

United Phosphorus (CMP: Rs.311/ TP: 424/ Upside: 36%)

United Phosphorus, announced a good set of numbers for 1QFY2015. For the quarter, the company, posted a sales of Rs.2720cr V/s Rs.2409.7cr, posting a yoy growth of 12.9% yoy. The growth was driven by the India, which grew by 23% yoy, while USA grew by 19% yoy. Rest of the markets posted modest growth. However, most of the rise was accounted by the price and exchange impact, which was 6.0% and 3.0% yoy growth respectively, while volume rose by 3.0% yoy. On the operating front, the OPM came in at 17.9% V/s 17.0% in 1QFY2014, an expansion of 90bps yoy. As GPM's expanded by 51.5% V/s 49.1% in 1QFY2014.Thus, Adj. PAT came in at Rs.264cr V/s Rs.212.6cr expected, registering a yoy growth of 23.9%. During the quarter the company, the company posted extra ordinary gains of Rs.35.8cr, on back of its sale of the stake in the Brazilian subsidiary Sipcam UPL. We maintain our buy on the stock with a price target of Rs.424.

Ranbaxy Laboratories (CMP: Rs.590/ TP: / Upside:)

For the quarter, the company posted better than expected results. For the period, the sales came in at Rs.2,372.2cr V/s Rs. 2,583.9cr a yoy de-growth of 12.0%. The sales growth was impacted on back of the voluntary withdrawal of the API sales from the Dewas and Tonasa facilities, which lead the API sales from the region to de- grow by 81% yoy. Also the sales from the Asia Pacific and Latin America, which dipped by 26% yoy, on back of tender loss from Malaysia and Australia. The Africa region also posted a de-growth of 26% yoy. The key markets, like USA, posted a de-growth of 11% yoy during the period. India on other hand posted a 12 % yoy growth during the period.

On the operating front, the company posted an OPM of 10 % V/s 7.7% during the last corresponding period, which aided the adj. net profit to come in at Rs.83.9cr v/s a loss during the last corresponding. However on back of the Rs.237cr amount paid for the settlement, the company posted a net loss of Rs.185.9cr V/s a net loss of Rs.542.2cr during the last corresponding period. We remain neutral on the stock

Blue Star (CMP: Rs.295 / TP: Rs.384 / Upside: 29.9%)

For 1QFY2015, Blue Star reported strong set of numbers witnessing 9.7% yoy increase in top-line to Rs.845cr. On the operational front, employee and other expenses as a percentage of sales remained flat while raw material cost declined by 176bp yoy to 69.7% aiding in 129bp yoy improvement in EBITDA margin to 6.3%. Consequently, net profit for the quarter came in at Rs.31cr against Rs.23cr for 1QFY2014.

Cooling Product segment reported an impressive 22% yoy revenue growth while EMPPACS and PEIS segment revenue declined by 2.1% and 18.5% yoy basis, respectively. Segmental margins for the cooling products and PEIS improved by 391bps and 583bps on yoy basis, respectively; however, EMPPACs division margins declined by 427bps yoy. Poor performance by EMPPAC was largely due to slower execution of projects leading to low billing rate along with cost overruns in specific legacy projects. The management has guided for improvement in margins for EMPPAC due to low margin orders being smaller component of the order book. Carry forward order book as on 30st June 2014 increased by 9% to Rs.1,572cr compared to Rs.1,438cr as at 30th June, 2013.

Going forward, we expect EMPPAC's performance to rebound on the back of current revival in the economy and cooling products segment to continue its impressive run. At the current market price, the stock is trading at EV/sales of 0.8x for FY2016E. We maintain our Buy recommendation on the stock with a revised target price of Rs.384 based on a target EV/sales of 1x for FY2016E. We may revise our number post 1QFY2015 Earnings Call.


Result Preview

Lupin (CMP: Rs.1114/ TP:/ Upside:)

Lupin is expected to post robust results. For, the quarter, the company is expected to post sales of Rs.3181cr V/s Rs.2402.7cr in 1QFY2014, posting a yoy growth of 31.4% yoy, aided by robust growth in exports and domestic. On the operating front, the OPM is expected to come in at 24.3% V/s 22.1% in 1QFY2014, an expansion of 220bps yoy. Thus, PAT is expected to come in at Rs.581.3cr V/s Rs.401.1cr, registering a yoy growth of 44.9%. We remain neutral on the stock.

Cadila Healthcare (CMP: Rs.1129/ TP:/ Upside:)

Cadila is expected to post robust results. For, the quarter, the company is expected to post sales of Rs.2008cr V/s Rs.1608cr in 1QFY2014, posting a yoy growth of 24.9% yoy, aided by robust growth in exports and domestic business. On the operating front, the OPM is expected to remain flat at 16.0%. Thus, PAT is expected to came in at Rs.258.9cr V/s Rs.195.9cr, registering a yoy growth of 32.1%. We remain neutral on the stock.

Dr Reddys Lab (CMP: Rs.2,760/ TP: 3,399/ Upside: 23.2%)

Dr Reddys Lab (DRL) is expected to post robust results. For, the quarter, the company is expected to post sales of Rs.3800cr V/s Rs.2845cr in 1QFY2014, posting a yoy growth of 33.6% yoy, aided by robust growth in exports and domestic business. On the operating front, the EBIT is expected to come in at 18.9% V/s 13.3% during the last corresponding period. Thus, PAT is expected to came in at Rs.600cr V/s Rs.361cr, registering a yoy growth of 66.3%. We retain our buy on the stock with a price target of Rs.3399.


Economic and Political News

- GSM players add 2.10 million rural users in June: COAI

- Govt starts dumping probe into chemical imported from China

- Jute industry faces threat of ban on govt quota


Corporate News

- Ashok Leyland-Nissan JV expects to turn around in 3 yrs

- Cholamandal Investment to raise Rs 500cr

- Adani faces Greenpeace hurdle in Australia project