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Indian stock market and companies daily report (March 22, 2013, Friday)

Contributed by Angel Broking

Indian markets are expected to open in the red tracking negative opening trades in SGX Nifty and most of the Asian markets.

The US markets moved mostly lower on Thursday, offsetting the gains posted in the previous session. The correction came as worries about the situation in Cyprus overshadowed a batch of largely upbeat US economic data. The major averages ended the day in negative territory but off their lowest levels of the session. Meanwhile the European markets also finished in negative territory on Thursday. Uncertainty surrounding Cyprus continued to weigh on investor sentiment after the countryRs.s lawmakers blocked a bank tax and the ECB gave the country an ultimatum. Weaker-than-expected European economic data also contributed to the negative mood

Indian shares ended a volatile session lower on Thursday amid worries that the ongoing political uncertainty may derail reforms. Investors fear that the government may resort to populist measures with an eye on elections scheduled in early 2014. Global cues were subdued, further dampening investor sentiments.


Markets Today

The trend deciding level for the day is 18,859 / 5,688 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 18,962 - 19,131 / 5,728 - 5,798 levels. However, if NIFTY trades below 18,859 / 5,688 levels for the first half-an-hour of trade then it may correct up to 18,690 - 18,588 / 5,619 - 5,578 levels.


SAIL OFS- Avoid

The Government of India is divesting 5.8% stake in SAIL via an OFS. The issue comprises of an offer for sale of 24.03cr equity shares of face value of Rs.10 each. SAIL has fixed the OFS floor price at Rs.63 per share (at a 1.4% discount to its closing price as on March 21, 2013).

Slow progress on capacity continues: SAIL is increasing its saleable steel production capacity from 12.4mn tonne to 20.2mn tonne by FY2015 at a capex of Rs.72,000cr. We expect robust profitability from these plants, with captive iron ore backing the upcoming steel expansion. Also, we expect SAILRs.s older loss-making plants to be modernized as part of its modernization program. However, the company has reported delays in its expansion projects over the last few quarters. Going forward, we do not rule out further delays and cost over-runs in its expansion plans.

Sales volumes continue to disappoint: SAIL reported disappointing sales volumes for 9MFY2013 in the midst of lower steel demand. Lower-than-expected volumes reflect lower demand in India as well as lack of focus on marketing by SAIL, in our view. Given the slowdown in steel demand in India, and rising imports from FTA countries (which attract lower import duty), we remain skeptical over SAILRs.s sales volume growth during FY2014.

Outlook and valuation: We expect SAILRs.s operational and financial performance to remain weak during FY201 4 due to its: 1) inability to maintain/raise sales volumes amidst slower steel demand in India; 2) higher fixed costs, and 3) delays/cost overruns in its brownfield expansion projects. SAIL is on the verge of expanding its saleable steel production capacity from 12.5mn tonne to 24.0mn tonne by FY2015. However, we believe that there is still time to play the volume growth story of SAIL. Moreover, it is expensively valued at the offer-for-sale (OFS) floor price of Rs.63 (7.2x FY2015E EV/EBITDA). Hence, we recommend investors to Avoid subscribing to SAIL OFS.


ONGC strikes three new discoveries

ONGC has notified three new discoveries, viz West Godavari PML block in KG Onland Basin, NELP block KG-OSN-2001/1, and Agartala Dome Extension- II PML. However, currently there is no clarity on the potential reserves, capex requirement, production timeliness etc. Also, ONGCRs.s Board has finalized on a capex of Rs.4,050cr for its Mumbai High and two major process complexes which handle and process acidic and corrosive gases. We continue to maintain our Buy rating on the stock with a target price of Rs.356.


L&T bags order worth Rs.2,080cr

Larsen & Toubro (L&T) has bagged new orders worth Rs.1,385cr in the building segment for the construction of residential towers in various cities in North India. In the power T&D segment, the company has bagged orders worth Rs.585cr from various customers including a major order from Bangalore Metrorail Corporation (BMRC) and Power Grid Corporation of India. Also, L&T has bagged orders worth Rs.110cr from various ongoing jobs in water and solar and infrastructure business. We continue to maintain our Buy rating on the stock with a target price of Rs.1,788.


Sadbhav Engineering bags Rs.1,210cr road BOT project from NHAI

Sadbhav Engineering has been declared the successful bidder by National Highways Authority of India (NHAI) for 4-laning of Rohatak to Hissar stretch of NH-10 in the state of Haryana. The estimated total cost of the project is Rs.1,210cr and has a concession period of 22 years, which includes 30 months of construction period. We continue to maintain our Buy rating on the stock with a target price of Rs.157.


Economic and Political News

- CCI clears five oil and gas blocks

- Electrical equipment industry sees 11% fall in revenue

- Fertiliser subsidy payment of Rs.31,580cr may remain outstanding

- Government may ask Rs.2,764cr as onetime fee from cancelled licences

- Textiles Min asks firms to invest in technical textiles

- UK tax cut to help Indian companies


Corporate News

- Karnataka HC approves Wipro's demerger plan

- Jet Airways seeks additional international traffic rights

- L&T Construction secures orders of Rs.2,080cr