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Reports India

Indian stock market and companies daily report (May 09, 2014, Friday)

May 9, 2014, Friday, 04:46 GMT | 00:46 EST | 09:16 IST | 11:46 SGT
Contributed by Angel Broking

The Indian Markets are expected to open flat today tracking flat opening in SGX Nifty and most of the Asian markets.

US Stocks showed a lack of direction over the course of the trading day on Thursday, as traders weighed mostly positive catalysts against concerns about valuations. The lackluster performance on Wall Street came despite the release of a report from the Labor Department showing that jobless claims pulled back by more than expected in the week ended May 3rd. The Labor Department said jobless claims fell to 319,000, a decrease of 26,000 from the previous week's revised level of 345,000. Economists had expected jobless claims to drop to 325,000.

Meanwhile, European stocks rallied on Thursday after European Central Bank President Mario Draghi hinted at possible stimulus. The ECB decided to maintain the main refinancing rate unchanged at a record low 0.25%, for the sixth month in a row. ECB President Mario Draghi's statement that deflation risks may compel the ECB to use "unconventional instruments" to jumpstart the region's economy hinted at possible stimulus.

Indian shares rose marginally in cautious trading, paring early gains. Investors took some profits off the table at higher levels as caution ahead of elections results due next week offset positive sentiment globally. The election results will be announced on May 16.

Markets Today

The trend deciding level for the day is 22,355 / 6,662 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 22,432 - 22,521 / 6,686 - 6,712 levels. However, if NIFTY trades below 22,355 / 6,662 levels for the first half-an-hour of trade then it may correct 22,266 - 22,189 / 6,636 - 6,612 levels.

BHFC's German subsidiary wins EUR250mn multiyear contract

Bharat Forge (BHFC) has announced that its German subsidiary, Bharat Forge Aluminumtechnik GmbH & Co KG (BFAT) has won a multiyear contract worth EUR250mn from a German OEM to supply suspension components. According to the Management, BFAT over the past few years has developed a unique technology which has put the company at the forefront in the fast growing aluminum component industry which is finding increasing use in the passenger vehicles. BFAT currently has aluminum forging capacity of 20,000MT and plans to create additional capacity by adding a new press line which will be commissioned in January 2015. The plant is being set up in the state of Saxony at Brand-Erbisdorf at the cost of EUR31mn and which is funded by internal accruals, debt raising and state subsidies. We believe that the new order announcement is very important for BHFC and is expected to pave the way for more orders going ahead as the OEM's are increasingly using lightweight aluminum technology to enhance the performance. At the CMP, the stock is trading at 15.5x FY2016E earnings. We maintain our positive view on the company and maintain our Buy rating on the stock with a target price of Rs.485.

Result Review

Union Bank - (CMP: Rs.135/ TP: Rs.167 - / Upside: 23.2%)

Union Bank reported moderate numbers on the NII as well as asset quality front. On the operating front, NII growth was weak at 3.7% yoy, while non-interest income de-grew 11.6% yoy, largely in-line with our expectations. Operating expenses grew by 28.7% yoy thus operating profit de-grew by 21.7% yoy. The bank witnessed asset quality pressures during the quarter, as absolute Gross and Net NPAs for bank increased by 9.0% and 5.8% sequentially. Thus Gross and Net NPAs increased by 23bp and 7bp to 4.1% and 2.3% respectively qoq. Provisioning expenses for the bank grew 40.4% yoy to Rs.921cr, leading to a PBT level decline of 61.2% yoy. Tax reversals of Rs.180cr enabled bank to limit earnings de-growth to 26.7% yoy at Rs.579cr. At CMP, the stock trades at valuations of 0.4x FY2016E ABV. We maintain our Buy recommendation on the stock.

Finolex Cables Ltd. (CMP: Rs.140 /TP: Rs.149/ Upside: 6.6%)

Finolex Cables Ltd. (FCL) reported mixed set of numbers for 4QFY2014. Top-line reported flat growth of 2.7% yoy to Rs.649cr, 10.9% lower than our estimate of Rs.729cr. Communication cables (CC) reported strong growth of 33.2% yoy to Rs.67cr while Electrical cables (EC) reported flat growth of 3.1% yoy to Rs.563cr. Copper rods (CR) segment, however, dip by 47.7% in the quarter compared to same quarter previous year. EBITDA for the quarter grew by 12.7% while EBITDA margin expanded by 103bp on a yoy basis to 11.6% mainly attributable to lower raw material and employee cost. For EC and CC segment, EBIT margin expanded by 126bp and 346bp yoy to 15.0% and 16.9% respectively. For CR segment, margin dip by 682bp. Owing to negative tax outgo coupled by strong other income, bottom line grew by 47.6% yoy to Rs.69.3cr while PAT margins are at 10.7%, 451bp higher yoy.

On annual front, top-line reported flat growth of 3.9% to Rs.2,359cr lead by robust growth of 14.0% in CC segment while EC segment reporting flat growth of 1.6%. EBITDA for FY201 4 too grew marginally by 8.0% to Rs.247cr with margin expansion of 40bp to 10.5%. On segmental front, both EC and CC reported EBIT margin expansion of ~40bp to 12.6% and 13.8% respectively. Subsequently, net profit grew by 8.8% yoy to Rs.208cr, while margins improved by 239bp to 8.8%. Although the CC segment reported strong performance during the quarter (owing to the recently bagged orders by the company), its EC segment which is considered to be the stable business of the two has been flat. Additionally, owing to the recent runup in the stock, we recommend Accumulate rating on the stock with revised target price of Rs.149 based on target PE of 9x for FY2016E earnings.

Result Preview

Ranbaxy labs (CMP: Rs.469/TP:-/Upside:-)

Ranbaxy is expected to post a growth of 8.9% with sales at Rs.2,657cr during 5QFY2014. Its OPM is expected to be at 6.4% Vs 4.0% in 1QCY2013. The net profit, on the other hand, is likely to come in at Rs.240cr, vs Rs.46cr during the corresponding period of last year. The growth in net profit would mainly be on back of the base effect.We remain neutral on the stock.

GSK Consumer (CMP:Rs.4,163/TP:-/Upside:-)

GSK Consumer is expected to declare its 5QFY2014 results today. We expect the top-line to grow by 17.0% yoy to Rs.1,100cr aided by both higher volumes and better realizations. OPM is expected to increase by 47bp yoy to 18.6%. Bottom-line is expected to increase by 21.5% yoy to Rs.190cr. We maintain our Neutral recommendation on the stock.

HT Media (CMP: Rs.92 / TP: Rs.105 / Upside: 14.1%)

HTMedia is slated to announce its 4QFY2014 results. The company is expected to report tepid 6.3% yoy growth in its top-line to Rs.532cr mainly on the back of absence of revenues from Burda JV segment which was sold off in 2QFY2014. On the EBITDA margin front, the company's margins are expected to be flat yoy at 14%. Consequently, net profit is expected to grow by 14% yoy to Rs.46cr. We recommend Accumulate on the stock with the target price of Rs.105.

Economic and Political News

- Subsidy logic seems to have eluded Parekh: FM

- Even strong reforms may not help too much, says Moody's

- El N ino may impact growth by 1.75%: Assocham

Corporate News

- FinMi n nixes India Post's plan to set up a bank

- Bharat Forge's German subsidiary wins euro 250mn deal

- Yes Bank to seek regulatory clarity on Madhu Kapur as promoter