Reports » India

Indian stock market and companies daily report (October 17, 2012, Wednesday)

Contributed by Angel Broking

The Indian markets are expected to open in the green, tracking positive opening in most of the Asian markets, with expectations that policy makers around the world will succeed in reducing market risks and gradually turning the global economy around.

The US markets closed higher yesterday, buoyed by strong earnings from several major companies, including financial giant Goldman Sachs (GS), Coca-Cola and Johnson & Johnson, and reports that Spain is mulling a request for a line of credit from the European Union. A report showed a rebound in industrial production to 0.4% in September from -1.4% earlier in August. European stocks also gained ground, commodities rose and the euro held steady against the dollar after a key survey revealed German investor confidence improved for a second month in October, with the risks faced by the economy abating somewhat in the recent weeks.

Meanwhile the Indian markets fell yesterday notwithstanding firm global cues, as the opposition parties demanded a probe into the mounting controversy over a land deal between Robert Vadra and DLF. On the global front, other Asian stocks rose broadly, led by exporters on better-than-expected US retail sales data and easing concerns about a Greek exit from the Eurozone.

Markets Today

The trend deciding level for the day is 18,643 / 5,666 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 18,736 - 18,895 / 5,696 - 5,744 levels. However, if NIFTY trades below 18,643 / 5,666 levels for the first half-an-hour of trade then it may correct up to 18,484 - 18,391 / 5,618 - 5,587 levels.

Maruti Suzuki launches Alto 800 at Rs.2.44lakhs

Maruti Suzuki (MSIL) launched its much awaited new small car, Alto 800 in petrol and CNG options priced between Rs.2.44lakhs to Rs.3.56lakhs. The new Alto 800 is based on the existing Alto platform and is powered by a 796cc three-cylinder engine. According to the company, the new car has been developed at an investment of Rs.470cr (MSIL as well as vendors) and will be rolled out from the companyRs.s Gurgaon facility in three petrol and three factory fitted CNG variants. The new Alto 800 sports a fresh look, is more spacious and is 15% more fuel efficient than the previous model. The company has already received 10,000 bookings for the new Alto 800. The new car has been competitively priced and will take on HyundaiRs.s Eon and General MotorRs.s Chevrolet Spark which are available at Rs.2.75lakhs and Rs.2.85lakhs, respectively.

We expect the launch of the new car ahead of the festival season to revive the volumes of the company in the entry level segment which are down 21.2% yoy (as against 1.4% decline in total volumes) YTD in FY201 3. Further, MSIL is expected to begin exports (to Africa and Latin America) of the new car from January 2013, which will also lend momentum to the volumes. Nonetheless, due to challenging macro-environment, dampened consumer sentiments and increasing competition we expect MSIL to clock ~5% volume growth in FY2013. At Rs.1,367 the stock is trading at 14.8x FY2014E earnings which is in-line with its historical average of 15x. We maintain our Neutral rating on the stock.

Result Review

Shree Cement (CMP: Rs.4,049/TP:-/Upside:-)

Shree Cement (SRCM) posted a 55.4% yoy growth in its 1QFY2013 top-line, which is ahead of our estimates of a growth of 46.1% yoy. The stellar performance was on account of a 27.3% yoy growth (vs our estimate of a 26.2% yoy growth) in cement volumes coupled with a 10% yoy growth (vs our estimate of an 8.4% yoy growth) in cement realization. The power business too posted a multifold growth on a yoy basis in revenue to Rs.136cr (Rs.4.2cr in 2QFY2012). The OPM rose by 649bp yoy to 29.7% aided by better cement realization. The net profit stood at Rs.229cr up 51 9.8% on a yoy basis aided by a strong operational performance and 41.8% yoy decline in depreciation to Rs.94cr (Rs.162cr). We maintain our neutral view on the stock.

MindTree (CMP: Rs.677 / TP: Under review)

MindTree reported broadly in-line set of results for 2QFY2013. The volume as well as USD revenue growth was muted at 1.0% and 1.7%, respectively. USD revenue came in at US$107.3mn. In INR terms, revenue came in at Rs.596cr, up 5.9% qoq. Operating margins surprised positively with EBITDA growing by ~125bp qoq to 22.1%, despite having some negative impact of wage hike which got offset by operational efficiencies and INR depreciation. PAT came in at Rs.72cr, down 18.8% qoq, hit because of forex loss of ~Rs.42cr but this loss was partially recouped by lower tax outgo.

Because of muted growth in 1HFY2013, management lowered its revenue growth guidance from 11-14% earlier to less than 11% now, which doesnot bode very well with the company though this was already factored in our estimates keeping in mind the stretched growth rates required quarterly (FY2013E USD revenue growth - 9.5%). The company has recently set up a team to chase large deals and management indicated that large deal closure is happening but at a slower rate. We continue to be positive on the stock owing to its diversified revenue portfolio and past performance. The target price is currently under review.

Result Preview

HCL Technologies (CMP: Rs.584 / TP: Rs.632 / Upside: 8%)

HCL Technologies is slated to announce its 1QFY2013 numbers today. We expect the company to post revenue of US$1,119mn, 3.6% qoq growth. In rupee terms, the revenue is expected to grow by 3.9% qoq to Rs.6,153cr. EBITDA margin is expected to decline by 134bp qoq to 20.6% due to negative impact of wage hikes given during the quarter. PAT is expected to come in at Rs.786cr. The company is one of our preferred picks in the IT sector. We maintain Accumulate rating on the stock with target price of Rs.632.

Infotech Enterprises (CMP: Rs.191 / TP: - / Upside: -)

Infotech Enterprises is slated to announce its 2QFY2013 results today. We expect the company to post revenues of US$87mn, up 3.4% qoq majorly led by volume growth. In rupee terms, revenues are expected to come in at Rs.479cr, up 4.9% qoq. EBITDA margin is expected to decline by 20bp qoq to 18.5%. PAT is expected to come in at Rs.69cr. We maintain our Neutral view on the stock.

Economic and Political News

- Cabinet reshuffle likely on October 19

- Food subsidy already 36% more than 2012-2013 budget estimate

- Government to lift cap on food parks to attract private investors

- Government to drop airport fee in New Delhi, Mumbai

- Land Bill to be presented to cabinet by month-end

Corporate News

- Government nominees yet to sign revised plan for MA oilfield: RIL

- Jain Irrigation approves issue to raise Rs.610cr

- MarutiRs.s Manesar plant to produce 2,000 cars a day by Nov-end

- Welspun plans to buy back US$150mn convertible bonds