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Reports India

Indian stock market and companies daily report (June 02, 2014, Monday)

June 2, 2014, Monday, 05:26 GMT | 01:26 EST | 09:56 IST | 12:26 SGT
Contributed by Angel Broking

Indian markets are expected to open flat today following flattish start to SGX Nifty. Most of the Asian indices though are trading in the positive zone with Japan's Nikkei trading up by ~2%. India's GDP expanded at a lower than expected rate of 4.7% in FY2014, posting second consecutive year of below 5% growth.

US stocks showed a lack of direction throughout the trading day on Friday before ending the session mixed. A mixed batch of US economic data contributed to the choppy trading on Wall Street, although the S&P 500 still managed to reach a new record closing highs. According to a Commerce Department report, personal spending unexpectedly dipped by 0.1% in April after surging up by 1.0% in March. The unexpected drop in spending came despite a continued increase in personal income, which rose by 0.3% in April. Meanwhile, MNI Indicators released a separate report not long after the open showing that its reading on Chicago-area business activity unexpectedly rose to a seven-month high of 65.5in May.

The Indian markets ended a range-bound session slightly lower on Friday, as caution set in ahead of GDP data slated for release later in the day and the next RBI policy meeting scheduled for June 3. Going ahead, US monthly jobs report and monetary policy decision by Reserve Bank of India and European Central Bank could be the key events market participants would keep an eye upon during the week.

Markets Today

The trend deciding level for the day is 24,245/7,207 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 24,326 - 24,435/7,295 - 7,361 levels. However, if NIFTY trades below 24,245/7,207 levels for the first half-an-hour of trade then it may correct 24,136 - 24,055/7,141 - 7,053 levels.

Result Review

Mahindra & Mahindra (CMP: Rs.1,231/ TP: Rs.1,345 / Upside: 9%)

Mahindra & Mahindra's (MM) reported results for 4QFY2014 are not comparable (yoy as well as sequential) due to the merger of Mahindra Trucks and Buses Ltd's. truck business (MTBL) with the company. The full year impact of the results of the truck business of MTBL has been incorporated in the 4QFY2014 results of MM. For MM + MVML, the reported top-line and bottom-line stood at Rs.10,214cr and Rs.915cr respectively with EBITDA margins of 10.4%. The truck business has been incurring losses and hence the reported margins contracted 400bp yoy during the quarter. The reported financials also included tax benefits of Rs.298cr arising from the carry forward unabsorbed past losses and deferred tax positions of the trucks business of MTBL.

Excluding the impact of MTBL merger, MM +MVML, top-line recorded a better-than-expected growth of 4.3% yoy to Rs.10,413cr. EBITDA margins, however, registered a decline of 160bp qoq to 13.4%, which were lower than our expectations of 14%. The automotive division continued to struggle given the weak consumer sentiments and slowdown in the utility vehicle sales. The domestic tractor segment though continued to witness strong traction with volumes increasing by 14.4% yoy during the quarter. The EBITDA margins were impacted primarily owing to adverse product-mix, with the share of higher margin tractor business in the total volumes at ~29% as against ~38% in 3QFY2014. The EBIT margins in the automotive and tractor business witnessed a decline of 60bp and 50bp qoq respectively to 11.3% and 17.1% respectively. Consequently, adjusted bottom-line stood at Rs.923cr, a decline of ~8% qoq.

We retain our positive view on MM given its diversified business model which we believe enables the company to face the macroeconomic challenges better than its competitors. We maintain our Accumulate rating on the stock with a target price of Rs.1,345.

Aurobindo Pharmaceuticals (CMP: Rs.637/ TP: -/ Upside :)

Aurobindo Pharmaceuticals posted numbers better than expected on the OPM and net profit. On the sales front, the company posted growth of 48.4% yoy to end the period at Rs.2,306cr. Formulation Sales up by 75.8% to Rs.1613.5cr (Rs.918.0cr). API Sales up by 13.2% yoy to Rs.754.8cr (Rs.666.8cr). The margins are likely to expand to 31.2% V/s expected 28.8% V/s 14.3% in 4QFY2013, which will lead to an adj. net profit of Rs.510.5cr V/s Rs.493.2cr expected (V/s a net profit of Rs.110cr in 4QFY2013). The operating margins, expanded on back of the operating leverage. On back of the rich valuations, we recommend a neutral on the stock.

Blue Star (CMP: Rs.270/ TP: Rs.325/ Upside: 20%)

Blue Star reported mixed set of results for 4QFY2014. Top-line for the company grew 1.2% yoy to Rs.869cr against Rs.858cr in the same quarter of previous year. On Operational front, EBITDA grew 49.5% yoy to Rs.30cr on the back of 395bp decline in raw material cost as a percentage of sales and EBITDA margins improved by 111 bp to 3.4%. Other income for the quarter increased by 68.6% yoy to Rs.35cr and as a result, the net profit jumped by 130.7% yoy to Rs.43cr.

In 4QFY2014, Cooling Product segment reported 15.6% yoy revenue growth while EMPPACS and PEIS segment revenue declined by 5.7% and 14.2% yoy basis, respectively. Segmental margins for the cooling products improved by 106bps and PEIS improved by 90ps; however, EMPPACs division margins declined by 25bps yoy. Going forward, we expect company's overall performance to improve on the back of recovery in macro-economic conditions and pending legacy orders coming off the books in first half of FY2015. We maintain our Buy recommendation on the stock with a target price of Rs.325 based on a target EV/Sales of 0.9x for FY2016E.

Cravatex (CMP: Rs.367/ TP: Rs.442/ Upside : 20%)

Cravatex reported mixed set of numbers for 4QFY2014. Top-line grew marginally by 18.6% yoy to Rs.54cr on a standalone basis in-line with our estimate of Rs.52cr. Net sales from domestic segment grew by 23.7% yoy to Rs.52.3cr while international segment's revenue fell significantly by 50.5% yoy to Rs.1.6cr. The contribution from the domestic sales has increased from 93% in 3QFY2013 to 97% in 4QFY2014. On the operating front the EBITDA dip by 10.0% yoy to Rs.3cr while EBITDA margins dipped by 180bp yoy to 5.7%. On the segmental front, the EBIT margin for the domestic segment expanded by 69bps yoy to 5.8% while the international segment's margin reported loss of ~8% of the segment revenue. Consequently, the company reported a bottom-line of Rs.1.3cr, low by 27.7% yoy as compared to our estimate of Rs.1.7cr.

On annual front, top-line reported growth of 10.3% to Rs.1 85cr, in-line with our estimate of Rs.183cr on standalone basis. Revenue from domestic segment grew by 19.7% to Rs.174cr while International segment reported dip of 49.8% to Rs.11cr. Contribution of domestic segment to total sales has increased from 87% last year to 94% in FY2014. EBITDA for the year came in flat at Rs.12cr while margins dip by 70bp. On segmental front, EBIT margins for both the segment dipped, 95bp for domestic while 963bp for international segment. On the back of poor operating performance coupled with 50% higher interest outgo of Rs.8cr and relatively lower other income, bottom-line plunged by 47.8% to Rs.4cr while margins stood at 2.2%, 250bp lower. Despite conservative stance owing to consistent poor performance of the company we expect it to improve going forward on the back of stabilizing currency and expected robust growth prospects under the regime of new government. We revise our recommendation to Buy with a target price of Rs.442 based on target EV/Sales of 0.7x for FY2016E.

Economic and Political News

- Fiscal deficit narrows to 4.5% in FY2014

- RBI's foreign exchange reserves fall for first time in over a month

- CII pitches for extending stimulus package in Union Budget

- Marine products exports up 42% to $5 billion in 201 3-14

Corporate News

- Rel iance turns to African crude in shale boom spin-off

- DLF sales bookings up 7% in FY14 to Rs.4,070 cr; debt falls

- Discovery Network to launch 3 new channels in India

- OnMobile appoints Rajiv Pancholy as CEO