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Indian stock market and companies daily report (October 03, 2012, Wednesday)

Contributed by Angel Broking

The Indian markets are expected to open flat to positive tracing positive opening in most Asian markets. Asian stocks have opened higher today on speculation that China will step up measures to stimulate the world's second-largest economy.

US stocks turned-in a lackluster performance over the course of the trading day on Tuesday, as traders focused on the latest headlines out of Europe. Early strength was generated by a report from Reuters indicating that Spain is ready to request a bailout as early as next weekend. However, Spanish Prime Minister Mariano Rajoy later denied the report, saying that a bailout request from Spain is not "imminent". The remarks by Rajoy pulled stocks down off their early highs, as they led to renewed uncertainty about the timing of a Spanish bailout.

Indian shares rose modestly on Monday, with the rupee's strength and firmer European cues underpinning sentiments. Positive manufacturing data following subdued performance over the past two months, healthy growth in auto sales in September and easing euro-zone debt worries also boosted investor sentiments.

Markets Today

The trend deciding level for the day is 18,803 / 5,712 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 18,860 - 18,896 / 5,730 - 5,741 levels. However, if NIFTY trades below 18,803 / 5,712 levels for the first half-an-hour of trade then it may correct up to 18,767 - 18,709 / 5,701 - 5,683 levels.

PNGRB rejects RIL's demand to prematurely raise KG D6 natural gas price

The Petroleum and Natural Gas Ministry (PNGRB) has rejected the demand by Reliance Industries (RIL) to hike gas prices before April 2014. It stated that the price of natural gas was fixed by the Empowered Group of Ministers (EGoM) for a mutually agreed period of five years and any premature revision at this stage will put a huge financial burden on the government. PNGRB also rejected RIL's demand that KG-D6 gas price should be tripled from April 2014 from the current price of US$4.20/mmbtu. We maintain our Neutral rating on the stock

Auto sales numbers - September 2012

Tata Motors

Tata Motors (TTMT) reported marginally better-than-expected volumes for September 2012 led by a strong 15.2% yoy (11.4% mom) growth in the light commercial vehicle (LCV) sales. Total volumes though registered a decline of 3.8% yoy (up 5.5% mom) to 75,773 units as passenger vehicle (PV) sales declined by 17.2% yoy (2.8% mom). The weakness in the PV segment was on account of sharp fall in Indica (down 23% yoy), Indigo (down 52% yoy) and utility vehicle volumes (down 15% yoy). Nano volumes on the other hand jumped 87% yoy during the month. The commercial vehicle sales recorded a modest growth of 3.2% yoy (9.4% mom) mainly on account of 16.6% yoy (up 5.3% mom) decline in medium and heavy commercial vehicle sales which continue to be impacted by slowdown in the industrial activity.

Ashok Leyland

Ashok Leyland (AL) registered a 20.7% yoy (12.6% mom) growth during the month on the back of the strong momentum in the small commercial vehicle, Dost. Total volumes ex-Dost registered 11.7% yoy (up by a strong 15.1% mom) decline to 7,596 units on account of sluggish demand led by slowdown in economic activity. However, Dost's sales continued to be strong at 3,027 units.

Mahindra and Mahindra

Mahindra and Mahindra (MM) continued with its strong sales momentum in the automotive segment registering a 9.5% yoy (5.5% mom) growth to 48,342 units. Total volumes however, registered a 0.6% yoy decline (up by a strong 15.8% mom) to 68,427 units led by 18.6% yoy decline in the farm equipment segment. The automotive segment continues to drive the overall volumes led by 22.4% yoy growth (9.1% mom) in the passenger vehicle segment which was driven by the XUV5OO. The four-wheeler pick-up segment posted a healthy growth of 7.4% yoy (1.1% mom).

Maruti Suzuki

Maruti Suzuki (MSIL) reported better-than-expected volumes for the month as the company resumed manufacturing at its Manesar plant. Total sales grew 9.8% yoy (73.6% mom) to 93,988 units driven by 12.7% yoy growth in domestic volumes. Domestic sales (up 12.7% yoy and 77.1% mom) benefitted from the strong growth in the super compact and the utility vehicle segments which were driven by new launches Dzire and Ertiga, respectively. The mini segment witnessed a 4.9% yoy (77.5% mom) growth which was encouraging given that the segment has registered yoy growth after sixteen consecutive months of decline. Exports on the other hand declined 23.1% yoy (up 28.9% mom) to 5,187 units during the month.

Hero MotoCorp

Hero MotoCorp (HMCL) registered extremely weak volumes for September 2012 as total volumes declined by 26.4% yoy (8.8% mom) to 404,787 units. Decline in volumes during the month was higher than expected and was as a result of slowdown in demand and inventory pile-up (around six weeks) at the dealer end. While the upcoming festival season may lead to slight improvement in volumes, we do not see any significant uptick in demand during the festival season.

Bajaj Auto

Bajaj Auto (BJAUT) reported in-line volumes for September 2012, with total volumes posting a decline of 13.8% yoy to 360,152 units. While motorcycle volumes registered a decline of 15.1% yoy led by weak domestic demand; threewheeler volumes fell by 3.5% yoy mainly due to weakness in the export markets. Exports too declined by 6.1% led by lower dispatches to Sri Lanka. On a sequential basis though, volumes improved 4.4% driven by new launches Pulsar 200NS and Discover 125ST.

TVS Motor

TVS Motor (TVSL) posted marginally better-than-expected sales (up 10% mom) for the month driven by sharp sequential jump in motorcycle (up 18.9% mom) and three-wheeler (28.1% mom) volumes. Total volumes however witnessed a decline of 29.7% yoy to 170,097 units as total two-wheeler volumes fell by 23.5% yoy. All the product segments of the company (ex. three-wheelers) registered sharp fall in volumes on a yoy basis with motorcycle and scooter sales declining by 29.7% and 28.3% yoy, respectively. Export volumes too plunged sharply, reporting a 27.5% yoy decline to 18,818 units. However, TVSL registered its highest ever monthly three-wheeler sales during the month with 5,005 units, up 36% yoy. During the month, TVSL launched a new 125cc motorcycle, Phoenix, which could provide impetus to company's volumes going into the festival season.

Cement dispatches - September 2012

ACC posted a marginal 4% yoy growth in its dispatches during September to 1.8mn tonnes. The marginal growth in September follows de-growth of 6.5% and 6.9% posted by the company in July and August respectively. For 1HFY2013, ACC's dispatches have de-grown by a marginal 0.5%, as against the industry growth (for 5MFY2013) of 4-5% yoy. We continue to remain neutral on ACC.

NTPC agrees to sign new FSA

NTPC has agreed to sign the new fuel supply agreement (FSA) with Coal India. The new agreement will be for new units at existing power plants. The new FSA have 80% trigger point compared to older FSA (applicable to units that came up prior to January 2010) which had 90% trigger point. Other power producers backing NTPC's stance are likely to sign the new FSA soon. This development is positive for NTPC. However, we remain Neutral on NTPC on account of macro-issues such as fuel shortage, land acquisition delays etc plaguing the sector which are likely to delay NTPC's capacity expansion plans.

SAIL reports production numbers for 2QFY2013

Sail reported a 7% yoy increase in its hot metal production to 3.6mn tonne during 2QFY2013. Its saleable steel production increased 4% yoy to 3.2mn tonne. The production numbers are broadly in line with our estimates. We maintain our Neutral rating on the stock.

Apollo Tyres to raise US$150mn through QIB issue

The board of directors of Apollo Tyres (APTY) has approved raising of US$150mn (Rs800cr) through placement of shares to qualified institutional buyers (QIB). The company has also approved increasing the investment limit of foreign institutional investors to 40% from 30% of the paid-up-capital. While the management has not stated the reason for raising the fund, we believe that it could probably be utilized towards capacity expansion. We estimate that the proposed equity infusion of US$150mn may likely result in equity dilution of 15-16%. At '92 the stock is trading at 6.5x FY2014E earnings. Currently we have an Accumulate rating on the stock with a target price of ?99.

USL, Diageo set to raise a toast

As per media reports, the deal between United Spirits (USL) and Diageo is expected to be announced on Thursday. The media reports say, as part of the deal, Diageo would pick up a 25% stake in USL which would be closed in three tranches. As per the terms of the transaction, the promoters of USL UB Holdings will sell around 77.5% of their 18.03% stake, in USL. In the second tranche, Diageo will buy 2.64% treasury stocks of USL, owned by USL Benefit Trust. In the third tranche, United Spirits will make a preferential allotment to Diageo, giving it a 25% stake in USL. We continue to remain neutral on USL.

Economic and Political News

- Exports fall 10% in August

- Final guidelines on GAAR in 20 days: Govt.

- NPA levels in 2011-12 highest in 5 yrs: RBI

Corporate News

- Airtel moves High court over DoT notice

- GAIL Signs pact with Gazprom

- IL&FS wins Gurgaon transportation order

- Mahindra satyam-Tech Mahindra merger gets high court nod