Reports » India
Indian stock market and companies daily report (May 02, 2014, Friday)
The Indian Markets are expected to open on a positive note today tracking positive opening in SGX Nifty and most of the Asian markets.
The US market fluctuated throughout the trading day on Thursday before ending the session mixed as traders were reluctant to make any significant moves ahead ahead of the release of the Labor Department's monthly jobs report before the start of trading on Friday. Mixed batch of economic data, including encouraging reports on personal spending and manufacturing activity and disappointing readings on weekly jobless claims and construction spending also contributed to the choppy trading. European market remained closed on Thursday on account of World's Labor Day. The stocks ended mixed on Wednesday amid expectations that the U.S. Federal Reserve will scale back its asset-buying plan.
The Indian markets ended a volatile session modestly lower on Wednesday as investors remained wary ahead of the Federal Reserve's policy meeting tonight and U.S. non-farm payrolls data due on Friday. Also, investors are cautious as the seventh phase of Lok Sabha polls 2014 saw brisk voting in the most of the states. The Indian market remained closed on Thursday.
The trend deciding level for the day is 22,461 / 6,711 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 22,637 - 22,857 / 6,765 - 6,834 levels. However, if NIFTY trades below 22,461 / 6,71 1 levels for the first half-an-hour of trade then it may correct 22,242 - 22,066 / 6,642 - 6,588 levels.
US Federal Reserve cuts stimulus by another USD10bn
The US Federal Reserve has decided to cut its bond purchases by another USD 10bn by reducing USD5bn in purchase of mortgage backed securities and USD5bn in treasury securities. The quantum of monthly asset purchases would amount to USD45bn (USD25bn in treasury securities and USD20bn in mortgage-backed securities). The Fed has reduced asset purchases by USD10bn during each of its FOMC meetings since December 2013 compared to the pace of USD85bn announced in September 2012. The Fed reiterated its commitment to an accommodative monetary policy stance. The Fed notes that in determining how long to maintain the low target range for the federal funds rate, the Committee will assess progress (both realized and expected) toward its objectives of maximum employment and 2% inflation.
Auto Monthly - April 2014 Hero MotoCorp
Hero MotoCorp reported strong volume growth of 14.4% yoy to 571,054 units. The better-than-expected performance came on the back of continued traction in rural markets. According to the Management, initiatives taken by the company in the past few months, including new launches, customer-friendly initiatives and brand building activities aided the performance during the month.
Mahindra & Mahindra
Mahindra & Mahindra posted lower-than-expected volumes as slowdown in demand impacted the automotive and tractor segments adversely. Total volumes declined 11.8% yoy to 57,005 units led by 12.5% and 10.6% yoy decline in automotive and tractor sales respectively. The tractor sales during the month were impacted mainly due to the unseasonal rains in some parts of the country which impacted the sentiments of the farmers. The automotive sales witnessed a decline across all the segments with passenger vehicles, pick-up and three wheeler sales registering a significant decline of 12.5%, 19% and 12.5% yoy respectively. Automotive exports, however, grew strongly by 41.6% yoy during the month.
Maruti Suzuki reported extremely weak set of volumes at 86,196 units (down 11.4% yoy), which were lower than our estimates of 95,000 units led by weakness in domestic sales. The domestic sales declined 12.6% yoy as the company witnessed slowdown across all the segments post the seasonally strong month of March. Only the Compact segment defied the slowdown witnessing a growth of 9.9% yoy on the back of the successful launch of Celerio. While Mini segment registered a decline of 25.4% yoy; the Super Compact segment posted a decline of 17.7% yoy mainly due to the increase in competition post the launch of Hyundai's Xcent. The utility vehicle sales too declined 5.8% yoy during the month. Exports posted a modest growth of 4.4% yoy; nevertheless, it primarily came on a low base of last year.
Marico (CMP: Rs.204/ TP: Rs.254/ Upside: 24.5%)
For 4QFY2014 Marico posted a healthy performance aided by recovery in both its India and International businesses. The company's consolidated top-line rose by 7.3% yoy to Rs.1,069cr. Adjusted for the now demerged Kaya Business, the top-line growth stood at 17.4%. The company's India FMCG business grew by 16% aided by a 6% volume growth and price hikes taken by the company across portfolio. The company's international businesses posted a revenue growth of 21% during the quarter. The company's OPM increased by 228bp yoy to 14.2% despite the steep increase in copra prices due to reduction in employee, advertisement and other expenses. The demerger of Kaya business contributed substantially to the reduction in expenses. The company's bottom-line increased by 75% yoy to Rs.89cr, due to a 27.8% yoy increase in operating profit, higher other income and lower interest costs. We maintain a Buy rating on the stock with a target price of Rs.254.
IDBI Bank (CMP: Rs.68/ TP: Rs.76/ Upside:12.1% )
IDBI Bank delivered weak operating performance for the quarter, while asset quality remained largely stable. Net Interest Income for the bank grew moderate by 9.3% yoy at Rs.1,574cr, while non-interest income remained flat yoy, leading to a muted operating income growth of 5.4% yoy. Operating expenses de-grew by 11.9% yoy enabling pre-provisioning profit grew of 16.1% yoy. On the asset quality front, the bank witnessed stability, as the absolute Gross and Net NPA decreased sequentially by 0.5% and 6.1% respectively. Provisioning expenses grew by 37.9%, thereby leading to PBT level earnings de-growth of 10.1% yoy. Tax expense for bank came at Rs.134cr against Rs.171 cr. Overall earnings declined by 6.5% yoy to Rs.518cr. The stock is currently trading at a valuation of 0.4x P/ABV FY2015E. We maintain our Accumulate rating on the stock.
Petronet LNG (CMP: Rs.145/ TP: -/ Upside: -)
Petronet LNG reported disappointing results for 4QFY2014. Although the company's net sales increased by 23.2% yoy to Rs.10,428cr (due to higher price of LNG), its cost of re-gasified LNG increased by 24.2% yoy to Rs.9,934cr. This resulted in EBITDA declining by 11.0% yoy to Rs.387cr. Other income grew by 51.9% yoy to Rs.31cr. However, interest and depreciation expenses increased by 218.3% and 113.7% yoy to Rs.79cr and Rs.100cr, respectively, due to capitalization of Kochi terminal. Consequently, net profit declined by 30.9% yoy to Rs.169cr. The company has commenced operations at the 2nd jetty in Dahej from April 2014. Looking ahead, the earnings growth is likely to suffer in the coming one year on account of lower utilization levels at its recently commenced Kochi terminal and hence we believe that valuations at 10.7x FY2016 PE is fair. Hence, we maintain our Neutral rating on the stock.
KEC International (CMP: Rs.76/ TP: Rs.85/ Upside: 12%)
For 4QFY2014, KEC International's (KEC) top-line and bottom-line performance were below our estimates. The company reported flat yoy growth in its top-line to Rs.2,175cr (compared to our estimate of Rs.2,301cr), partly due to lower than estimated growth in Transmission and Distribution segment. On the EBITDA front, the company's margin expanded by 283bp yoy to 7.0%. Consequently, the company posted a profit of Rs.34cr in 4QFY2014 (lower than our estimate of Rs.47cr, on account of higher tax which includes prior-period tax item of Rs.9.6cr) compared to a loss of Rs.14cr in 4QFY2013. We recommend Accumulate on the stock with a target price of Rs.85.
Honeywell Automation India Ltd (CMP: Rs.3,118/ TP: -/ Upside: -)
Honeywell Automation India Ltd. (HAIL) reported mixed set of numbers for 1QCY2014. Top-line reported flat growth of 5.6% to Rs.407cr, in line with our estimates of Rs.414cr. EBITDA, however, grew by 58.0% yoy to Rs.38cr and was better than our expectation of Rs.24cr. EBITDA margin, too, expanded by 308bp yoy to 9.3% in the current quarter. Margin expansion is mainly attributable to dip in other expenses by 495bp yoy as percentage of sales from 22.7% in 1QFY2013 to 17.7% in 1QFY2014. On the back of robust operational performance, net profit grew by 67.4% to Rs.26cr while margin came in at 6.3%. Though the performance of the company has started improving gradually, we would wait for the consistency of the performance. Until then, we maintain our conservative stance and maintain Neutral rating on the stock.
Economic and Political News
- Core sector growth slows to 2.5% in March
- Economic growth may rise to 6% in 201 4-15: FM
- Fertil iser subsidy may go up over and above budgeted amount
- RBI may not ease rates till Jan 2015: ICRA
- Airtel to cut discounts; may raise tariffs to meet costs: CEO
- ArcelorMittal sells 78% stake in ATIC to HES Beheer
- GMR nets Rs.1,740cr from divestment of Istanbul Airport
- IOC to cut Panipat refinery runs by 50% from May 8
- United Spirits appoints Anand Kripalu as CEO
- Suzlon hopes to get new wind projects of 300-500 MW in FY2015
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