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Reports India

Indian stock market and companies daily report (July 31, 2014, Thursday)

July 31, 2014, Thursday, 07:54 GMT | 03:54 EST | 12:24 IST | 14:54 SGT
Contributed by Angel Broking


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

US market closed mixed bagged on account of Q2 GDP data. Data also fueled speculation that Fed could begin raising interest rate sooner than previously anticipated.

European stocks fell as worse-than-forecast earnings from companies including Schneider Electric SE and Holcim Ltd. This overshadows a better-than-expected U.S. GDP growth report.

Back home, Indian markets edged higher amid by good corporate earnings which triggered some strong stock-specific movements. For the day market may remain volatile as traders roll over positions in F&O segment as near month contract expires today.


Markets Today

The trend deciding level for the day is 26,017 / 7,766 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 26,184 - 26,280 / 7,824 - 7,857 levels. However, if NIFTY trades below 26,017 / 7,766 levels for the first half-an-hour of trade then it may correct 25,921 - 25,754 / 7,733 - 7,675 levels.


Result Review

Lupin (CMP: Rs.1173/ TP:/ Upside:)

Lupin, posted results, marginally better than expectations, both on sales and net profit front, but much better than expected on the OPM front. For, the quarter, the company posted sales of Rs.3284cr V/s Rs.3181cr expected, posting a yoy growth of 35.7% yoy, aided by robust growth in exports and domestic. Formulations during the quarter posted a growth of 37% yoy, while API grew by 21% yoy. USA and India was the key high growth formulation market, which posted a yoy growth of 57% yoy and 29% yoy respectively, while Japan and South Africa, which grew by 17% and 16% yoy respectively.

On the operating front, the OPM came in at 32.2% V/s 24.3% expected and 22.1% in 1QFY2014, an expansion of 10.1% yoy. A huge part of the margin expansion came on back of the dip in other expenditure (which declined by 4.9% yoy) and gross margin expansion (66.3% V/s 63.9% in 1QFY2014). Thus, PAT came in at Rs.624.7cr V/s Rs.581.3cr expected, registering a yoy growth of 55.8%. We remain neutral on the stock.

Cadila Healthcare (CMP: Rs.1158/ TP:/ Upside:)

Cadila posted results mostly in line with expectations on sales front, while the OPM came in much higher and net profit marginally lower than expected. For, the quarter, the company posted sales of Rs.2020cr V/s Rs.2008cr expected, a yoy growth of 25.6%. The growth was driven by the exports which grew by 51.1% yoy, mainly driven by USA which grew by 87.6% yoy, while emerging markets posted 19.1% yoy. Another large market like Europe grew by 9.0% yoy. Domestic formulation market grew by 8.0% yoy during the period.

On the operating front, the OPM came in 17.1% V/s 16.0% expected a 100bps yoy expansion. This came in spite of the lower gross margin expansion, which dipped to 59.7% V/s 66.5% during the last corresponding period. This was mainly on back of the only 0.4% and 4.8% yoy rise in the R&D and other expenditure during the period. However, a significant rise in the tax expenses during the quarter, lead the Adj. PAT came in at Rs.240cr V/s Rs.195.9cr, registering a yoy growth of 22.7%. We remain neutral on the stock.

Dr Reddys Lab (CMP: Rs.2,822/ TP: 3,399/ Upside: 20.4%)

Dr Reddys Lab (DRL), reported numbers lower than expected on sales and net profit. For, the quarter, the company posted sales of Rs.3517cr V/s Rs.3800cr expected, posting a yoy growth of 24.0% yoy aided by robust growth in exports and domestic. The key generic market posted a yoy growth of 32%, while the PSAI de-grew by 6.0%. The Generic market growth was on back of the US and India, which grew by 51% yoy and 14% yoy respectively.

On the operating front, the EBIT came in line with expectation of 18.9%, in spite of 59% yoy growth in R&D expenses. This was an expansion of 370bps yoy. A part of it was aided by the expansion in the gross margins, which came in at 59.3% V/s 52.8% in 1QFY2014. Thus, PAT came in at Rs.550cr V/s Rs.600cr expected (the variance is mainly on back of lower than expected sales), registering a yoy growth of 52.0%. We retain our buy on the stock with a price target of Rs.3399.

Indoco Remedies (CMP: Rs.218/ TP:/ Upside:)

Indoco Remedies posted numbers lower than expected on sales and net profit front, expect the operating profit front. On sales the company posted a sale of Rs.198cr V/s Rs.206cr expected, posting a yoy growth of 33.7%. The growth was driven by both exports and domestic, which posted a yoy growth of 58.8% and 23.1% respectively. The domestic formulation sales grew by 24.4% yoy, much higher than the Industry growth of 8.8% yoy.

On the operating front, the OPM's came in 18.1% V/s 16.2% expected and an expansion of 560bps yoy, mainly on back of the gross margins, which expanded by 365bps yoy to end the period at 63.3% V/s 59.7% during the last corresponding period. Further the interest expenses during the quarter, dipped by 56.0% yoy, which aided the net profit come in at Rs.20cr V/s Rs.9.2cr in 1QFY2014, however lower than the Rs.23.9cr expected, mainly on back of lower than expected sales, higher than expected depreciation and lower other income. We maintain our neutral view on the stock, on back of valuations.

Goodyear India Ltd (GIL) (CMP: Rs.566/ TP: Rs.715/ Upside/ 26.4%)

For 2QCY2014, GIL reported good set of results. The top-line improved marginally by 2.5% yoy to Rs.433cr, which is slightly lower than our estimate of Rs.442cr. Raw material cost as a percentage of sales declined by 78bp to 70.7% while other expenses declined by 54bp to 13.6%. EBITDA came in 10.7% higher yoy to Rs.45cr while margins expanded by 78bp yoy to 10.3%. Consequently, the net profit came in 12.8% higher yoy to Rs.29cr, in-line with our estimates.

For 1HCY201 4, GIL's top-line has increased by 8% yoy to Rs.820cr while EBITDA for the period has increased by 19.1% yoy to Rs.84cr. Due efficient operating performance along with higher other income (most of it from 1QCY2014), net profit has increased by 22.8% yoy to Rs.57cr. After discounting its CY2015E cash reserves by 50%, the stock is trading at EV/EBITDA of 6.1x for CY2015E. We recommend Buy rating on the stock with a target price of Rs.715, based on a target EV/EBITDA of 8.0x for CY2015E.


Result Preview

HCL Tech (CMP: Rs.1597/ TP: Rs.1859/ Upside:16.4%)

HCL Technologies is slated to announce its 4QFY2014 numbers today. We expect the company to post revenue of US$1,407.5mn, up 3.4% qoq. In rupee terms, the revenue is expected to grow by 0.8% qoq to Rs.8,414cr. EBITDA margin is expected to decline by ~84bp qoq to 25.9%. PAT is expected to come in at Rs.1,629cr, up 0.3% qoq. We maintain our buy rating on the stock with a target price of Rs.1,859.

IPCA Labs (CMP: Rs.716/ TP: ^986/ Upside: 20.4%)

We expect the company to post a 15.2% yoy growth on the sales front, to end the period at Rs.913cr. The growth would be driven by the exports and domestic markets. On the operating front, the OPM is expected to be 22.9% V/s 19.9% in 1QFY2014, mainly on back of GPM expansion, which is expected to come in at 64.0% V/s 59.1% in 1QFY2014.Thus, PAT is expected to came in at Rs.147.8cr V/s Rs.108cr registering a yoy growth of 36.9%. We retain our buy on the stock with a price target of Rs.986.


Economic and Political News

- Power tariff hike to spur SMEs flight from UP

- Pharma body recommends two more seaports for exports

- US keen to invest in India's infra, manufacturing & skill development


Corporate News

- CESC to commission first phase of Haldia thermal unit in Oct

- Siemens bags Rs 411-crore contract from PGCIL

- ITC wants to enter beverage, chocolate sectors

Stock Market Forum