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Reports India

Indian stock market and companies daily report (May 30, 2014, Friday)

May 30, 2014, Friday, 06:20 GMT | 02:20 EST | 10:50 IST | 13:20 SGT
Contributed by Angel Broking

The Indian markets are expected to open flat to negative tracking negative opening in SGX Nifty and most of other Asian markets.

The U.S. stock market rose Thursday, pushing the S&P 500 to an intraday high. Revised data from the Commerce Department showed that GDP fell by 1.0% in the first quarter compared to the initial estimate for a 0.1% growth. However, the investors shrugged off the GDP data showing contraction in economy and focused instead on better-than-expected jobless claims which fell to 300,000 in the week a decrease of 27,000 from the previous week's revised level. Also, pending home sales rose 0.4% in April signaling that sales of existing homes may pick up. European market, however, fell on Thursday reacting to the contraction in the U.S. economy during the first quarter.

Back home, the markets fell sharply on Thursday, dragged down by software exporters on concerns a strong rupee will hit their margins.

Markets Today

The trend deciding level for the day is 24,323 / 7,262 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 24,439 - 24,645 / 7,299 - 7,363 levels. However, if NIFTY trades below 24,323 / 7,262 levels for the first half-an-hour of trade then it may correct 24,11 8 - 24,001 / 7,198 - 7,161 levels.

RIL to acquire Network 18 Media for Rs.4,000cr

Reliance Industries (RIL) is acquiring Network 18 Media & Investments Ltd, including its subsidiary TV18 Broadcast for Rs.4,000cr. The Board of RIL has approved funding of up to Rs.4,000cr for acquisition of 78% stake in Network 18 Media & Investments, including its subsidiary TV18 Broadcast. The funding includes open offers to be made consequent to the acquisition. Network 18 is the owner of a suite of premier digital internet properties and e-commerce businesses such as,,,, and as well as broadcast channels including Colors, CNNIBN, CNBC TV18, IBN7 and CNBC Awaaz. According to RIL statement, this acquisition will differentiate Reliance's 4G business by providing a unique amalgamation at the intersect of telecom, web and digital commerce via a suite of premier digital properties

Result Review

Sun Pharmaceuticals (CMP: Rs.588/ TP: Rs.643/ Upside: 9.4%)

Sun Pharmaceuticals, posted good set of numbers, mostly in line with expectation, on the top line and OPM front, while the net profit came in better than expected. On sales front, the company posted sales of Rs.4044cr V/s expected Rs.4000cr, registering a yoy growth of 31.6%. The growth on the sales front, was aided by the exports, which grew by 21.4% yoy, while the domestic markets grew by robust 21.4% yoy. On the Operating front, the OPM's came in at 44.5% V/s 44.4% expected and 41.5% in 4QFY2013. However, inspite of the sales and OPM, been in line, higher other income, which grew by 90% yoy, aided the net profit to come in higher than expected. The net profit for the quarter came in at Rs.1,587.1cr, a yoy growth of 56.9%, higher than expected net profit of Rs.1,401cr. We recommend an Accumulate on the stock, with a price target of Rs.643.

Tata Motors (CMP: Rs.424/ TP: Under review/ Upside: -)

Tata Motors (TTMT) consolidated bottom-line (adjusted) for 4QFY2014 at Rs.4,327cr missed our expectations of Rs.4,831cr led by lower-than-expected JLR performance. While JLR performance aided the overall consolidated results, the top-line and bottom-line at JLR came in below our expectations. Although the consolidated performance was lower-than-expected, we would like to highlight that the miss at the bottom-line front was higher (by 10.4%) led by steep surge in interest expense at JLR as against a 3.2% miss on the operating front. At the standalone level, the company continued to post a loss which stood at Rs.770cr (adjusted) and EBITDA margins deteriorated to negative 7.5% from negative 5.9% in 3QFY2014. The standalone performance continues to be impacted due to the negative operating leverage following steep decline in volumes and increase in discounts and promotional spends.

The consolidated top-line registered a growth of 16.6% yoy to Rs.65,317cr, slightly lower than our expectations of Rs.68,395cr primarily due to lower-than-expected top-line growth at JLR. The JLR top-line registered a growth of 5.9% yoy to £5,349mn, which was lower than our expectations of £5,550mn. In INR terms, JLR revenues surged by 29.3% yoy to Rs.55,326cr led by the favorable currency movement. The performance at JLR was impacted due to a 3.4% qoq decline in net average realization. Volume growth at JLR too moderated to 4% due to the base effect. Standalone top-line at Rs.8549cr however, surprised positively driven by a strong 15.1% yoy growth in net average realization aided by superior product-mix. Consolidated EBITDA margin stood strong at 15.3% (up 136bp yoy and flat qoq), in-line with our expectations of 15.1%, driven by better-than-expected margin profile at JLR. JLR margins stood at 17.2% and benefitted from operating leverage benefits and favorable geography mix. Adjusted net profit increased 10.3% yoy (down 12.2% qoq) to Rs.4,327cr, however, it was lower than our expectations of Rs.4,831cr due to a steep 72.1% yoy (66% qoq) increase in interest expense. Higher interest expense can be attributed to the costs related to tendering and early redemption of JLR debt and reversal of gains on related bond call options. Additionally, depreciation expense too increased 33.2% yoy (9.3% qoq) which impacted the bottom-line results. Net profit at JLR stood at £449mn as against our expectations of £558mn.

Going ahead, we expect headwinds in the standalone business to continue in the near term due to weak macro-economic environment which is expected to continue impacting the domestic volumes. However, we expect JLR to sustain its strong performance driven by continued momentum in the global luxury vehicle market and aided further by the strong product launch pipeline and the success of the newly launched models. We retain our positive view on the stock. Our target price, however, is currently under review.

BHEL (CMP: Rs.243/ TP: / Upside: )

For 4QFY2014, BHEL's top-line and bottom-line performance were below our expectations. The company reported 21.7% yoy decline in top-line to Rs.15,031cr due to execution delays (on account of delays in obtaining necessary clearances). Power segment reported 21.4% yoy decline in revenues to Rs.12,21 1 cr while Industry segment reported 25.8% yoy decline in revenues to Rs.3,221 cr. On the EBITDA front, the company's margin contracted by 604bp yoy to 18.2%. Consequently, net profit declined sharply by 42.8% yoy to Rs.1,851cr. We maintain our Neutral recommendation on the stock as declining order backlog limits revenue visibility for BHEL.

Cipla (CMP: Rs.373/ TP: Rs.495/ Upside: 32.7%)

Cipla posted numbers much below expectations on net profit level, on back of lower than expected OPM, while the sales were above expectations. During the quarter the company, posted net sales of Rs.2,429cr V/s Rs.2,382cr expected, posting a yoy growth of 27.3%. The growth was aided by the exports, which grew by 31.5%, while the domestic sales grew by 19.3%. On the operating front, Its OPM (excluding technical know-how fees) came in at 16.8% V/s 21.2% expected; which lead the net profit to come in at Rs.261cr v/s Rs.361cr expected, down by 5.7% yoy. The dip in the OPM, was on back of the GPM declining by 4.3%, on back of higher proportion of the export mix, in the sales (62.6% V/s 60.3% in the last corresponding period). Currently, we have a buy with a target price of Rs.495.

Crompton Greaves (CMP: Rs.179/ TP: Rs.225/ Upside: 26%)

For 4QFY2014, Crompton Greaves (CG's) top-line performance was tad better than our expectations, growing by 11.2% yoy to Rs.3,767cr (our estimate of Rs.3,699cr). The company's international business posted an operating profit of Rs.3cr in 4QFY2014 compared to operating loss of Rs.64cr in 4QFY2013. Consequently, CG's consolidated EBITDA grew by 141.4% yoy to Rs.188cr and OPM expanded by 269bp yoy to 5.0% (in-line with our expectations). However, better than expected other income (up from Rs.5cr in 4QFY2013 to Rs.84cr in FY2014), led to better than expected adjusted profit of Rs.81cr compared to our estimate of Rs.68cr. We recommend Buy on the stock with a target price of Rs.225.

Ipca Labs (CMP: Rs.774/ TP: Rs.888/ Upside: 14.7%)

Ipca labs, posted results, above expectation on the net profit, but posted sales lower than expected. On the sales front, the Ipca Laboratories, posted sales of Rs.740cr V/s expected Rs.854cr for 4QFY2014, posting a growth of 12.3% yoy. The growth of the market was driven by formulations, which grew by 16% yoy, while the API grew by only 2% yoy. The domestic sales grew by 7.9% yoy, while exports grew by 14.5% yoy. The OPM, came in at 23.3% V/s 23.7% expected, expanding by 370bp yoy. Inspite of the same, the adjusted net profit is expected to grow by 57.6% yoy, on back of top-line growth. We recommend a buy on the stock, a price target of Rs.888.

Page Industries (CMP: Rs.6,158/ TP: Rs.6,927/ Upside: 12%)

Page Industries (Page) reported yet another strong quarter. The company's top-line grew by 33.4% yoy to Rs.279cr, marginally higher than our estimate of Rs.268cr, for 4QFY2014. This robust growth was aided by 16.4% volume growth and 15.2% value growth. The operating margin expanded substantially by 246bp yoy to 20.0% for the quarter majorly on account of lower other raw material cost a percentage of net sales. Moreover, it came in 151bp higher than our estimate of 18.5% because of lower-than-expected other expense. On account of robust topline growth and margin expansion on a yoy basis, the company reported a 48.7% growth in the profit to Rs.35cr, in-line with our expectation. The profit came in-line with our estimate of Rs.34cr despite of margin expansion as tax for the quarter was higher than expected. The company continues to pay handsome dividend at Rs.60 per share.

Given the huge market size, Page's predominant position, strong brand recall and capacity expansion plans for the next four years to cater to the increasing demand; we remain positive on the company's growth outlook. We continue to maintain Accumulate on the stock with a target price of Rs.6,927 with a target PE of 32x for FY2016E earnings.

Bajaj Electricals Ltd (CMP: Rs.320/ TP: Rs.441/ Upside: 37%)

Bajaj Electricals Ltd. (BEL) reported disappointing set of numbers for 4QFY2014. Top-line reported growth of 15.3% yoy to Rs.1,271 cr, higher than our estimate of Rs.1,214cr. The growth in top-line was mainly led by E&P segment which posted yoy growth of 54.1% to Rs.440cr. Lighting and luminous (LnL) segment grew marginally by 4.2% while Consumer durables (CD) dip by 2.0% yoy mainly due to low demand during the quarter. On EBITDA front, BEL reported profit of Rs.5.5cr, lower by 58.5% yoy while margins contracted by 77bp to 0.4% owing to higher other expenses. At EBIT levels, both CD and LnL segment reported margin of 3.6% and 3.0%; lower by 447bp and 488bp yoy respectively. Further, E&P segment, reported EBIT loss of Rs.20cr, 4.7% of the segment revenue as compared to EBIT loss of Rs.51 cr in 4QFY2013. Following the poor operating performance, BEL reported PAT loss of Rs.10.7cr vis-a-vis 0.63cr profit in same quarter last year.

On annual front, top-line for the year grew by 19.0% to Rs.4,090cr driven by robust growth of 27.0% in E&P segment, followed by 10.7% and 4.8% growth in LnL and CD segment. EBITDA for FY2014, dip by 26.1% to Rs.82cr while margins stood at 2.0%, lower by 130bp attributable mainly to increased raw material expense. On segmental front, EBIT for CD and LnL came in at 7.7% and 5.1% while E&P reported EBIT loss of Rs.103cr; thereby dragging the overall performance of the company. As a result, bottom line reported net loss of Rs.5.3cr for FY2014 as compared to profit of Rs.35cr previous year.

E&P segment which has been posting continued disappointing performance is expected to deliver positive results from 1QFY2015. Moreover, the current poor performance of CD and LnL segment too is considered an exception and is believed to post 15% growth (according as management) going forward. Hence, we recommend Buy rating on the stock with the target price of Rs.441 based on 0.8x EV/Sales for FY2016E.

Result Preview

Mahindra and Mahindra (CMP: Rs.1,178/ TP: -/ Upside: -)

Mahindra and Mahindra (MM) will be announcing its 4QFY2014 results today. At the standalone level, we expect the top-line to register a decline of ~8% yoy (~8% qoq) to Rs.9,675cr due to a ~4% and ~6% yoy decline in volumes and net average realization respectively. The volume growth continues to be impacted due to the severe decline in the passenger vehicle sales amid higher competition in the utility vehicle segment. While tractor segment revenues are expected to post a modest growth of ~2% yoy; automotive segment is expected to witness a steep decline of ~12% yoy. EBITDA margins are expected to remain flat sequentially as the benefits of cost cutting measures are likely to be mitigated by adverse product-mix. As a result, bottom-line is expected to decline ~12% qoq to Rs.824cr. On a yoy basis though, bottom-line is expected to increase modestly by 3.2% as EBITDA margins are expected to improve 82bp yoy led by cost control measures, price increases and better product-mix. We currently have a Neutral rating on the stock.

Aurobindo Pharmaceuticals (CMP: Rs.637/ TP: -/ Upside: )

Aurobindo Pharmaceuticals is expected to post a net sales growth of 27.8% yoy to end the period at Rs.1,985cr. The growth would be lead by the formulation export sales during the period. The margins are likely to expand to 28.8% V/s 14.3% in 4QFY2013, which will lead to a net profit of Rs.493cr (V/s a net profit of Rs.11 0cr in 4QFY2013). The operating margins, will expand on back of the operating leverage. On back of the rich valuations, we recommend a neutral on the stock.

BGR Energy (CMP: Rs.215/ TP: NA/ Upside: )

We expect BGR Energy (BGR) to report a subdued top-line growth of 5.0% yoy to Rs.1,117cr in 4QFY2014 as execution of a couple of major contracts is nearing end. On the operating front, EBITDA margin is likely to contract by 135bp yoy to 11.7% as execution is expected to skew in favor of EPC contracts over higher margin BOP projects. Consequently, the bottom-line is likely to remain almost flat yoy at Rs.55cr. We recommend Neutral rating on the stock.

Economic and Political News

- Government initiates process to raise FDI in defence to 100%

- RBI's fresh norms on new licences in next 4 months

- India overtakes China as Sri Lanka's main import source nation

Corporate News

- Apollo Hospitals to add 1,000 beds across 8 hospitals

- Isuzu to expand India dealer network, launches pick-up trucks

- Apollo Tyres to expand Chennai facility

- IFC plans US$21mn equity investment in SAMHI Hotels

- TVS Motor launches new WEGO

- Yes Bank to launch $500mn share sale