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Reports India

Indian stock market and companies daily report (May 27, 2014, Tuesday)

May 27, 2014, Tuesday, 06:33 GMT | 01:33 EST | 10:03 IST | 12:33 SGT
Contributed by Angel Broking

The Indian markets are expected to open flat to negative tracking SGX Nifty in the negative territory and mixed opening in other Asian markets.

The major indices of US market ended in positive territory near their highs on Friday, however, the US market remained closed on the occasion of memorial day on Monday. European markets closed higher on Monday with Italian banks soaring after European Parliamentary election results which showed strong gains for anti-European Union and Far-Right parties, especially in the U.K. and France. Also, the signs that the ECB will take fresh easing measures when it meets next week also buoyed stocks.

Meanwhile, Indian shares ended a volatile session on a flat note ahead of the swearing-in of the 15th primie minister, Narendra Modi, later in the evening. The investors will now look to the new government to announce strong reforms to propel the economic growth.

Markets Today

The trend deciding level for the day is 24,775 / 7,377 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 25,117 - 25,517 / 7,486 - 7,612 levels. However, if NIFTY trades below 24,775 / 7,377 levels for the first half-an-hour of trade then it may correct 24,375 - 24,034 / 7,251 - 7,142 levels.

Result Review

India Cement (CMP: Rs.99/ TP: Rs.130/ Upside: 35%)

For 4QFY2014 India Cements posted a weak performance on the operating front. The company's top-line fell by 9.9% yoy impacted by low demand and a sharp decline in prices in its key markets which are situated in South India. The company's cement sale volume was done by 9% yoy to 2.47mn tonnes. Net Plant realization was down by 6% yoy to Rs.3,057/tonne. OPM fell by 783bp on a yoy basis and stood at a low 6.9% impacted by weak realization. The company reported a net loss of Rs.31cr for the quarter impacted by a 58% yoy decline in operating profit to Rs.74cr. We maintain a Buy rating on the stock with a Target Price of Rs.130, considering its attractive valuations.

Subros (CMP: Rs.34/ TP: Rs.42/ Upside: 24%)

Subros reported strong set of results for 4QFY2014 driven entirely by better-than-expected operating performance. EBITDA margins for the quarter stood at 13.8%, highest in last five years, registering a sharp expansion of 429bp yoy. The margins performance was supported by lower raw-material expenses on account of the localization benefits and also due to favorable currency movement. Top-line declined 5.9% yoy to Rs.327cr as volumes declined by 11.7% yoy. Net average realization though grew strongly by 5.5% yoy. Bottom-line stood at Rs.13cr witnessing a strong growth of 41.1% yoy. Interest cost surged 24.8% yoy which surprised us negatively. We expect the company to continue reporting improvement in its performance as we believe that the company will benefit immensely from the expected revival in the passenger vehicle demand. At the CMP, the stock is trading at 6.5x FY2016 earnings. We maintain our Buy rating on the stock with a target price of Rs.42.

Result Preview

Bharat Forge (CMP: Rs.472/ TP: -/ Upside: -)

Bharat Forge (BHFC) is slated to announce its 4QFY2014 results today. We expect the standalone top-line to register a robust growth of ~27% yoy to Rs.858cr, driven by a strong volume growth of ~18% yoy led by continued traction in exports and also due to moderate uptick in domestic CV sales. Its net average realization too is expected to surge by ~8% yoy on account of better product-mix and favorable exchange rate. EBITDA margins are expected to improve significantly by ~440bp yoy to 25.4% led by improving utilization levels, superior product-mix and cost rationalization measures. Consequently the bottom-line is expected to witness an impressive growth of ~90% yoy to Rs.95cr. At the CMP, the stock is trading at 17.6x its FY2016E earnings. Currently, we have a Neutral rating on the stock.

Economic and Political News

- Current account deficit narrows to 0.2% of GDP in March quarter

- India aims to recover €228mn in Finmeccanica bank guarantees

- Government to give priority to 3 critical rail links to carry coal

- FinMin may reduce withholding tax for FIIs to boost corp bonds

- BoP more than doubles to US$7bn in March quarter

Corporate News

- Maruti launches CNG variant Celerio

- Diageo receives Sebi's clearance to acquire stake in United Spirits

- Pfizer walks away from US$118bn AstraZeneca deal