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Reports India

Indian stock market and companies daily report (May 14, 2014, Wednesday)

May 14, 2014, Wednesday, 05:23 GMT | 00:23 EST | 09:53 IST | 12:23 SGT
Contributed by Angel Broking

The Indian Markets are expected to to open on a positive note today tracking positive start to SGX Nifty which is trading up by ~0.4%.

US stocks showed a lack of direction throughout the trading day on Tuesday after moving sharply higher over the course of the previous session. The lackluster performance was partially due to release of a report from the Commerce Department showing weaker than expected retail sales growth in the month of April. The report said retail sales edged up by 0.1% (expected 0.4%) in April after surging up by an upwardly revised 1.5% in March. Meanwhile, European stocks settled slightly higher after choppy session Tuesday, aided by gains among a few big companies posting better-than-expected earnings.

Back home, Indian shares recorded all-time high for a third consecutive session on Tuesday lifted by heavy capital inflows from foreign institutional investors (FIIs). Strong buying was witnessed across the markets on hopes of a strong government coming to power after various exit polls conducted projected a clear win for Narendra Modi led NDA in Lok Sabha elections. The actual results are slated to be announced on Friday.

Markets Today

The trend deciding level for the day is 23,890 / 7,1 16 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 24,050 - 24,229 / 7,165 - 7,221 levels. However, if NIFTY trades below 23,890 / 7,116 levels for the first half-an-hour of trade then it may correct 23,711 - 23,550 / 7,060 - 7,011 levels.

Result Review

Dr Reddy's Lab (CMP: Rs.2,730/ TP: Rs.3,634/ Upside: 33%)

DRL, posted numbers lower than the expectations. DRL, posted net sales of Rs.3408cr V/s Rs.3,881cr expected, posting a yoy growth of 4%. The main growth came in from the global generics, 21% yoy, while the PSAI declined by 35% yoy. The global generics, growth came in on back of the USA and India which grew by 31% yoy and 18% yoy respectively. Russia and CIS, on other posted flat growth. ROW, on the other hand posted gains of 48% yoy. The PSAI, on the other hand declined mainly on back of Europe and India, which declined by 46% and 39% respectively. On, the gross profitability, the GPM, expanded by 680bps to end the period at 57.2%. However, on back of the lower sales growth, higher SG&A expenses which grew by 18% and R&D expenses , which grew by 71% yoy respectively, lead the OPM to come in at 22.4% V/s 24.4% expected, up from 21.4%in 4QFY2013.Also, the other income dipped by 86% yoy. These factors, along aided the company to post a net profit of Rs.481.6cr V/s Rs.825cr expected, posting a dip of 16.0% yoy. We maintain our buy recommendation on the stock with a price target of Rs.3,634.

Bank of Baroda (CMP: Rs.878/ TP: / Upside: )

Bank of Baroda's operating numbers came above our estimates, while asset quality remained largely stable. On the operating front, NII for bank grew by 11.0% yoy (vs. loan book growth of 21.0%) in-line with estimates. Opex growth for the bank moderated to 2.6% (as compared to ~25% growth witnessed in last 3 quarters) which was in line our estimates. Overall the Pre-Provisioning operating profit grew by 18.2% yoy (aided by higher-than-estimated non-interest income). On the asset quality front bank witnessed improvement as slippages came in lower qoq at Rs.1,213cr (Rs.1,534cr in 3QFY14) while incremental restructuring came in sequentially at Rs.1,157cr (Rs.1,213cr in 3QFY14). Absolute gross NPAs remained flat qoq while absolute net NPAs decreased by 8.9% qoq. Overall earnings for the bank grew by 12.5% yoy. At CMP stock trades at 0.9x FY2016E ABV which factors in positives for bank hence we maintain our Neutral rating on the stock.

PNB- (CMP: Rs.800 / TP: Rs.982/ Upside: 22.7%)

PNB's operating numbers came below ours as well as street's estimates, while asset quality witnessed pressures (as compared to improvement witnessed in last quarter). On the operating front, NII for bank grew by 6.0% yoy (5.2% de-growth qoq) largely due to interest reversals on bad loans. Non-interest income grew 18.8% yoy higher than our estimates. Opex growth for the bank moderated to 5.9% (as compared to ~20% growth witnessed in last 2 quarters). Overall the PreProvisioning operating profit grew by 11.3% yoy (aided by higher-than-estimated non-interest income). On the asset quality front absolute gross NPAs increased by 13.8% qoq while absolute net NPAs increased by 9.2% sequentially. Slippages surged significantly qoq at Rs.4,182cr (Rs.1,505cr in 3QFY14) while incremental restructuring came at Rs.2,900cr (Rs.2,150cr in 3QFY14) both much higher than our estimates. Thus gross and net NPAs ratios increased by 29bp and 5bp qoq to 5.3% and 2.9% respectively. Overall earnings for the bank de-grew by 28.7% yoy. At CMP, the stock trades at relatively cheaper valuations of 0.7x FY2016E ABV compared to its peers. We recommend Buy rating on the stock.

Siyaram Silk Mills (CMP: Rs.340/ TP: Rs.423/ Upside: 24%)

Siyaram Silk Mills (SSM) reported strong set of numbers, way ahead than our estimates for 4QFY2014. The company's top line for the quarter grew substantially by 31.8% yoy to Rs.406cr, against our estimate of Rs.319cr. The operating margin was almost flat yoy at 10.6%, and in-line with our estimate of 10.3%, mainly because of the higher raw material cost as a percent of net sales. Interest and tax outgo for the quarter was Rs.8cr and Rs.11cr respectively. On account of strong revenue growth, the company reported a strong profit growth for the quarter which came in at Rs.20cr, 42.8% higher yoy and 22.7% higher than our estimate of Rs.16cr.

In order to improve the demand scenario, SSML was in process of launching new designs and attractive schemes, which we assume has helped in driving the sales. At CMP of Rs.340, the stock is trading at a PE of 3.2x FY2016E earnings. As we rollover to FY2016E, we maintain our Buy recommendation on the stock with the revised target price of Rs.423 based on a target P/E of 4.0x for FY201 6E. We may revise our target post management interaction.

Economic and Political News

- Government spends Rs.3,426cr on Lok Sabha polls

- BJP welcomes Obama's statement on working closely with new government

- Steel industry wants new government to push demand

- CAG will audit private companies, PPPs having revenue sharing pact

Corporate News

- L&T gets construction orders worth Rs.1,137cr in April-May 2014

- Indian Oil plans maintenance at Koyali, Haldia, Mathura refineries

- Reliance, BP slaps arbitration notice against govt, over gas pricing delay

- DM Healthcare planning IPO to raise US$250mn

- HCL Technologies wins global contract from Novartis

- Maruti Alto crosses 25lakh unit sales mark in domestic market

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