Reports » India
Indian stock market and companies daily report (November 15, 2012, Thursday)
The Indian market is expected to open in the red today, tracing negative opening trades in the SGX Nifty and most other Asian indices on the back of resistance to austerity measures in Europe, as well as uninspired economic data from the United States.
The US markets, after failing to maintain an initial upward move, moved substantially lower over the course of trading on Wednesday following the release of a disappointing report on US retail sales. Stocks accelerated to the downside after the US President made remarks signaling that a familiar battle over higher taxes may lead to continued gridlock on Capitol Hill. Meanwhile, in the recent monetary policy meeting of the Federal Reserve, it decided to continue purchasing $40 billion worth of mortgage-backed securities per month and determined that economic conditions are likely to warrant exceptionally low interest rates, at least through mid-2015. The European markets fell after GDP fell 7.2% yoy in 3QCY2012 and anti-austerity protests broke out across Europe.
Meanwhile, the Indian markets started the first session of Samvat 2069 on a weak note on Tuesday, mirroring weak global cues and also after the IIP data for SepRs.1 2 reported a decline of 0.4% yoy.
The trend deciding level for the day is 18,643 / 5,675 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 18,694 - 18,783 / 5,690 - 5,713 levels. However, if NIFTY trades below 18,643 / 5,675 levels for the first half-an-hour of trade then it may correct up to 18,553 - 18,502 / 5,652 - 5,637 levels.
Decline in IIP by 0.4% during September disappoints
As per the Quick Estimates on the Index of Industrial Production (IIP), industrial growth during September 2012 surprised negatively by reporting a de-growth of 0.4% yoy as compared to expectations of 2.8% yoy growth. The decline in industrial activity is disappointing mainly because moderate growth during the month was expected owing to healthy growth in the core sector during the month and the positive surprise by growth in August 2012. At the same time, the IIP for August 2012 has been revised downwards to 2.3% as compared to the earlier estimate of a 2.7% growth.
On a cumulative basis, in the April - September 2012 period, the index has reported a nearly stagnant growth of 0.1% after witnessing healthy growth of 5.1% in the corresponding period of the previous year. On a 3MMA basis too, growth remained at a low level of 0.5% during the month.
On a yoy basis, Mining witnessed an above 5.0% print after nearly 21 months, reporting 5.5% growth as compared to 1.9% growth in the previous month and de-growth of 7.5% in September 2011. However, this better-than-expected performance can be attributed to an exceptionally low base effect. The Manufacturing sector slipped into negative territory, contracting by 1.5% during the month as compared to 2.3% growth in August 2012. Electricity sector reported a modest growth of 3.9% during the month vis-a-vis growth of 9.0% in September 2011.
Under the Use-based classification, on a yoy basis, Basic goods reported moderate growth of 3.5% during the month as compared to s compared to 3.4% in the previous month. Intermediate goods reported growth of 1.8% during September 2012 as compared to a contraction of 1.4% in the corresponding period of the previous year. However, growth decelerated from the 2.7% level witnessed during the previous month.
The index for Capital goods continued to remain volatile and under severe stress witnessing de-growth of 12.2%, following a decline in growth by 4.4% in August 2012. It can be partially attributed to the high base in the previous year in spite of a 6.5% contraction.
After a positive print of 3.3% growth in Consumer goods sector in August 2012, growth witnessed a contraction of 0.3% in September 2012. This can be mainly attributed to a decline of 1.8% in Consumer durables while Consumer nondurables reported a growth of 1.1%.
On a fiscal year-to-date basis, the index has reported dismal growth of 0.1% as compared to growth of 5.1% during April - September 2011. Amongst other components, capital goods have witnessed the steepest decline by 13.7% during the period, reiterating concern over the deterioration in investment climate.
Since a turnaround in capex takes time and gets reflected with a lag, industrial production is expected to remain subdued even in the second-half of the fiscal and thus we believe that the industrial production print for FY2013 is likely to stabilize at a low level.
As far as a change in monetary policy stance is concerned, we continue to believe that at least in the near term inflation remains a concern for the Reserve Bank to ease rates. Post December 2012, we expect an easing of about 25 - 50 bps in the policy rate.
WPI inflation moderates slightly while CPI inflation remains high
Wholesale Price Index (WPI) inflation for the month of October 2012 eased to 7.45% after inching up to 7.81% during September 2012. Inflation for August 2012 has been revised upwards to 8.01%. On a month-on-month (mom) basis, headline WPI inflation grew at slower pace of a 0.2% in October as compared to 0.7% during September 201 2.
Primary articles inflation moderated and stood at 8.2% during the month as compared to 8.8% in the previous month driven by the moderation in price of food articles. Inflation in food articles decelerated for the fourth straight month and eased to 6.6% mainly driven the decline in vegetable prices by 7.4% on a high base while food grains remained high at 15.5%. Fuel and power inflation stood at 11.7% as compared to 11.9% in the previous month. Inflation in Manufactured products eased to 5.9% as compared to 6.3% in September 2012 however manufactured food products remained high at 9.8%. We believe that softening commodity prices have aided core inflation which decelerated to 5.6% as compared to 5.8% in the previous month.
CPI inflation nearly touched double digits at 9.75% in October as compared to 9.73% in the previous month. Rural inflation surged to 9.98% as compared to 9.79% in September and above the 9.46% inflation in urban areas which moderated slightly from 9.72% in the previous month. Food inflation stayed above double digits at 11.43% followed by that in clothing, bedding and footwear at 10.47%. Fuel inflation stood at 7.58% during the month.
Trade deficit widens to record-high during October 2012
IndiaRs.s trade deficit worsened further during October 2012 widening to USD 21 billion as compared to USD 18 billion in September 2012 and USD 17 billion in September 2011. The trend of de-growth in exports continued for the sixth straight month. However, exports in October 2012 contracted at a slower pace by 1.6% as compared to 10.8% in the previous month. At the same time, imports during the month expanded by 7.4% yoy in USD terms, the highest level in seven months, thereby leading to a record level of trade deficit. On a cumulative basis, exports for the April - October 201 2 period registered de-growth of 6.2% in USD terms while cumulative imports for the period declined by 2.7% yoy in USD terms.
Oil imports registered growth of 31.7% yoy in USD terms and this can be partially attributed to an increase in crude oil prices on a year-on-year basis. On the other hand, non-oil imports reported de-growth of 1.7% yoy in USD terms. Even on a cumulative basis in the fiscal year to date, non-oil imports witnessed a contraction of 8.2%.
2G auction ends in two days, half of blocks unsold
The auction of 2G telecom spectrum ended on a disappointing note for the government on Wednesday, just the second day of the process, with the Centre earning only Rs.9,407.64cr and more than half the blocks of airwaves on offer remaining unsold. The revenue collection is far short of the budget estimate of Rs.40,000cr, a figure that was subsequently revised to Rs.30,000cr. The auction was also wrapped up in just two days, in stark contrast to the 3G spectrum auctions of 2010 which went on for more than a month and fetched Rs.67,000cr. The tepid response could upset the governmentRs.s efforts to meet the revised fiscal deficit target of 5.3% of GDP set for 2012-13. In all, 101 out of the 144 blocks of spectrum on offer got bids. Metro cities of Delhi and Mumbai, which accounted for 40% of the base price of Rs.14,000cr for 5 MHz of 2G spectrum drew no bids.
Only five operators — Bharti Airtel, Vodafone, Telewings, Videocon, and Idea Cellular - participated in the auctions. Videocon and Idea won spectrum in seven circles while Telewings got spectrum in six circles. Bharti Airtel won in one circle while Vodafone got 14 circles. The auction process dragged on due to some excess demand in circles such as Uttar Pradesh (E) and (W) and Bihar, all Rs.CRs. circle circles where the reserve price was low. Of the total 22 circles, bids were received in only 18 circles, with four key circles with high reserve price - Karnataka, Delhi, Mumbai and Rajasthan - not drawing any bids. Barring Bihar, bidders got spectrum in all circles at the reserve price. Telewings and Videocon not bidding for pan India license indicates that pan India GSM telecom players will be limited to incumbent players - Bharti Airtel, Vodafone, Idea and RCom. Low participation in 2G auctions was widely expected given high reserve prices of 2G spectrum as well as other liabilities, like one-time spectrum fee and spectrum reframing, hanging on telecom companies. We maintain our Neutral view on telecom sector.
JLR retail sales up 10% yoy in October 2012
Jaguar and Land Rover (JLR) reported healthy volume growth of 10% yoy in October 2012 to 25,176 units. The sales for the October month were impacted due to the hurricane (Sandy) in US and in anticipation of 2013 model year products for Jaguar. The October retail sales for Land Rover registered a strong growth of 17% yoy to 22,166 units; Jaguar sales however, posted a decline of 24% yoy to 3,010 units primarily due to the impact of the hurricane in the USA and due to 2013 model year launches of XF and XJ across all major markets later in the year. The company would be reporting a detailed update on JLR volumes for October 2012 today. We maintain our Buy rating on the stock with an SOTP based target price of ?319.
Nestle to post a 7.8% yoy growth in topline to Rs.2,11 6cr, which was below our estimates. Domestic sales grew by 7.6% yoy mainly on account of better realizations and superior product mix. Exports to third parties has grown by 29.7%, while exports to affiliates declined by 4.7% yoy. INR depreciation impacted the growth in sales favourably by 11.6%. Sales growth was affected due to portfolio optimization and pricing for value in certain products. Gross margins improved by 255bp yoy despite higher input costs due to better realization and superior product mix. Employee costs increased by 65bp on a yoy basis. Other expenses too rose by 155bp on a yoy basis. Thus, OPM fell by 30bp yoy to 20.6%. Depreciation too rose by 86.8% on a yoy basis due to capacity addition carried out by the company Bottom-line rose by 2.3% yoy to Rs.267cr. We maintain a neutral view on the stock.
Bhushan Steel (CMP: Rs.493/TP: - /Upside: -)
Bhushan Steel reported its 2QFY2013 results. Net sales remained flat yoy to Rs.2,446cr. However, EBITDA decreased by 11.2% yoy to Rs.641 cr on account of increase in other expenses. Other expenses grew by 13.3% yoy to Rs.372cr despite flat yoy growth in net sales. Depreciation expense increased 36.5% yoy to Rs.207cr on account of increased capacity; however, interest expense (surprisingly) decreased 6.7% yoy to Rs.282cr despite increase in debt. Consequently, net profit decreased by 2.6% yoy to Rs.202cr. The companyRs.s gross debt has increased from Rs.19,81 7cr as on March 31, 2012 to Rs.23,649cr as on September 30, 2012. We maintain our Neutral view on the stock.
Jaiprakash Associates (CMP: Rs.91/ TP: under review)
For 2QFY2013, Jaiprakash Associates (JAL) reported mixed set of numbers with subdued revenue performance but higher-than-expected numbers on EBITDAM and PAT level. On the top-line front, companyRs.s registered a muted revenue growth of 3.5% yoy to Rs.3,005cr which was lower than our estimate of Rs.3,231cr. The cement segment had growth of 22.9% on a yoy basis however construction segment revenue decline by 17% on a yoy basis respectively. Blended EBITDA margins decline by 15bp/5bp on a yoy/qoq basis to 27.1% and was ahead of our expectation of 25.2%. Cement margins of 9.7% led to good show on the margins front. Interest cost stood at Rs.464cr an increase of 23.3% on a yoy basis and was flat on a sequential basis. Depreciation cost came at Rs.178cr a jump of 23.4% on yoy basis. Bottom-line came at Rs.128cr a dip of 48.5% on a yoy basis but higher our estimate due to higher EBITDAM and lower interest cost. The stock rating is currently under review.
Simplex Infra (CMP: Rs.190 / TP: Under Review)
For 2QFY2013, Simplex InfraRs.s (Simplex) reported modest set of numbers with revenue coming in line with expectations but owing to better-than-expected EBITDAM, earnings were higher than estimates. On the top-line front, Simplex reported a muted growth of 5.7% yoy to Rs.1,398cr, which was 1.6% higher than our estimate. EBITDAM dipped by 99bp yoy to 8.5% for the quarter, and was above our estimate of 8.1%. Interest cost came at Rs.69.0cr, indicating a growth of 35.4% yoy. Adjusted PAT declined by 50.4% yoy to Rs.12.0cr and was ahead of our estimate of Rs.10cr respectively. At the end of the quarter, the companyRs.s order book stood at Rs.15,203cr (2.4x trailing revenue). Simplex had order inflow of Rs.1,092cr for the quarter. The stock rating is currently under review. We shall revise our estimates post earnings conference call with the management which is scheduled on 15th November 2012 at 2.30pm.
S.Kumars Nationwide (CMP: Rs.14/ TP - Neutral, Upside: -)
For 2QFY2013, S.Kumars Nationwide (SKNL) reported a disappointing set of numbers. On a standalone basis, the companyRs.s top-line declined by 3.5% yoy to Rs.829cr, 12.6% lower than our estimate of Rs.948cr for the quarter. The companyRs.s EBITDA margin witnesses a substantial contraction of 207bp yoy to 18.9% for the quarter mainly on account of increase in raw material cost as a percent of net sales from 70.5% in 2QFY2012 to 74.7% in 2QFY2013. During the quarter, interest costs jumped by 28.3% yoy to Rs.127cr from Rs.99cr in 2QFY2012. The depreciation for the quarter stood at Rs.31 cr, an increase of 41.0% yoy. Consequently, the company reported a loss of Rs.1cr, a decline of 101.5% yoy, against our estimate of a profit of Rs.30cr for the quarter.
On a consolidated basis, SKNL reported a 2.0% yoy decline in its top-line to Rs.1,503cr. The Indian operation witnessed a growth of 2.9% yoy to Rs.1,250cr; however, the revenue from international operations witnessed a substantial decline of 20.4% yoy to Rs.253cr. The operating margin contracted by 237bp yoy and stood at 18.1% for the quarter, mainly on account of increase in raw material cost as a percentage of net sales. During the quarter, interest costs jumped by 43.6% yoy to Rs.181cr from Rs.126cr in 2QFY2012 resulting in a disappointing profit number. The company reported a profit of Rs.11cr for the quarter, a decline of 86.5% on a yoy basis. We maintain our Neutral recommendation on the stock. We may change our estimates post interaction with the management.
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