Reports » India
Indian stock market and companies daily report (October 18, 2013, Friday)
Indian markets are expected to open in green tracking flat to positive opening in most of the Asian markets bolstered by the passing of bill to end the sixteen-day government shutdown and raise the debt ceiling by both, the House and the Senate passed a bill.
US markets turnaround significantly on Thursday after showing a notable move to the downside at the opening. The initial weakness was due to the profit booking following the wednesday's rally; however, selling pressure waned not long after the open. The subsequent rebound by stocks came as traders continued to digest news that lawmakers were finally able to end the fiscal standoff in Washington. Both, the House and the Senate passed a bill to end the sixteen-day government shutdown and raise the debt ceiling which was later signed by the President Barack Obama. Meanwhile, majority of the European markets ended in negative territory. Investors breathed a collective sigh of relief after U.S. lawmakers managed to come to a last minute agreement to avoid a potential default leading to rally in the late trading session.
Indian markets Indian fell on Thursday, with IT stocks pacing the decliners after the standoff over U.S. fiscal issues has been postponed until a later date rather than solved.
The trend deciding level for the day is 20,474 /6,063 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 20,572 - 20,728 / 6,094 - 6,141 levels. However, if NIFTY trades below 20,474 / 6,063 levels for the first half-an-hour of trade then it may correct up to 20,317 - 20,219 / 6,015 - 5,985 levels.
NMDC reports better-than-expected sales volume for 2QFY2014
NMDC reported sales volumes of 6.5mn tonnes (+11.1% yoy) for 2QFY2014, which was higher than our estimate of 5.8mn tonnes. Its production volumes also grew by 11.1% yoy to 6.1mn tonnes. For October 2013, NMDC had hiked its iron ore lump prices by Rs.100/tonne to Rs.4,300/tonne after steel prices and sponge iron prices rose by 3-5% during September. Moreover, steel majors (including PSUs such as SAIL and RINL) have reported better-than-expected sales volumes for 2QFY2014, indicating some uptick in domestic demand. We maintain our Accumulate rating on the stock with a target price of Rs.148.
Sadbhav Engineering has emerge as lowest bidder in Bharat Coking Coal bid
Sadbhav Engineering has been declared as lowest bidder (L1) for project worth Rs.302.3cr in respect of the bid invited by Bharat Coking Coal ltd (a subsidiary of Coal India ltd.), Dhanbad. The scope of work involves hiring of HEMM for removal of OB and extraction and transportation of coal from IV (B), III,II l(T) & |(B) seams of Patch-J of Dhansar Colliery of Kusunda Area. We continue to maintain our Buy rating on the stock with target price of Rs.99.
HCL Technologies (CMP: Rs.1,083/ TP: -/ Upside: -)
For 1QFY2014, HCL Tech marginally disappointed on the revenue front but exceeded expectations considerably on the operational performance as well as on the overall bottomline front. The dollar revenues grew by 3.5% qoq to US$1,270mn, led by strong 8.8% qoq dollar revenue growth in Infrastructure management services (IMS). Excluding IMS, revenue growth was subdued at 1% qoq. In INR terms, revenue came in at Rs.7,961, up 14% qoq. EBIT margin of HCL Tech grew substantially by ~310bp qoq to 23.8% despite giving wage hikes during the quarter, which is a commendable task. Historically, operating margin has been a concern for HCL Tech but the company has shrug off all the concerns by consistently posting increase in operating margins since last six quarters. PAT stood tall at Rs.1,416cr, up 1 9% qoq, aided by strong operating gains.
HCL Tech won 9 transformational deals during the quarter and booked US$1bn + TCV worth of deals, maintaining its sustained momentum of signing ~US$1bn TCV worth of deals every quarter. HCL Tech has a strong position in one of the fastest growing service vertical of IMS and on the back of this the company has been growing largely at par with its peers. The concern that remains with the company is soft growth in core software services for four quarters in a row and we would remain watchful for this. Overall, the company performed exceptionally well on the margins front. The stock is currently under review.
Axis Bank (CMP: Rs.1,095/ TP: Rs.1,293/ Upside: 18.1%)
Axis Bank delivered healthy performance for the quarter, with earnings growth of 21.3% yoy to Rs.1,362cr, which was in-line with oursRs. and ahead of streetsRs. expectations. NII grew strongly by 26.2%, again in-line with oursRs. and ahead of streetsRs. expectations to Rs.2,937cr. Non-interest income for the bank grew at moderate pace of 10.9% yoy to Rs.1,766cr. Overall, operating income grew by 20% yoy to Rs.4,703cr and pre-provisioning profits grew by 26.2% yoy to Rs.2,750cr. Net Interest margins for the bank declined by 7bp qoq to 3.79%, which was much lesser decline than peers as well as the expectations. On the asset quality front, the absolute Gross and Net NPAs for the bank grew by 10% and 6% qoq respectively, which given the context of current challenging macros appears to be a moderate increase. At CMP, the stock trades at valuations of 1.2x FY2015 ABV (at around 60% discount to HDFC Bank), which is also below our longer term fair value estimate for the bank. In the near term, given the weak macro environment and cautious outlook for the sector, stocks such as Axis Bank may undershoot fair value estimates, but from a structural point-of-view compared to peers, keeping in mind its franchise and capital adequacy, it remains one of the preferred banks, in our view, from a medium term perspective.
DB Corp (CMP: Rs.247 / TP: Rs.282 / Upside: 14%)
For 2QFY2014, DB Corp's top-line performance was in-line with our estimates. The company's top-line grew by 14.7% yoy to Rs.434cr on the back of 16.7% yoy growth in advertising revenue and 14.0% yoy growth in circulation revenue.
In spite of incurring a pre-operative marketing and launch expenditure of Rs.2cr for new editions and forex loss of Rs.5cr, DB Corp's operating profit grew by 27.3% yoy to Rs.110cr. OPM expanded by 248bp yoy to 25.2% as operating losses in emerging editions reduced from Rs.10cr to Rs.8cr. Consequently, net profit grew by 28% yoy to Rs.62cr. At the current market price, DB Corp is trading at 15x FY201 5E consolidated EPS of Rs.16.9. We maintain Accumulate on the stock with the target price of Rs.282.
South Indian Bank - (CMP: Rs.21/ TP: - / Upside: -)
South Indian Bank delivered better than expected earnings performance; however, asset quality witnessed continued pressures. On the operating front, Net Interest Income for the bank grew at a healthy pace of 22.3% yoy, while non-interest income de-grew by 15.5% yoy (after providing for MTM loss of ~Rs.20cr), leading to growth of 14.9% yoy in operating income. Operating expenses grew much higher than expectations by 25.0% yoy and hence, growth in pre-provisioning profit was capped at 6.2% yoy. On the asset quality front, the bank witnessed continued weakness, as the absolute Gross and Net NPA levels, increased by 24.7% and 26.2% respectively. The provisioning expenses de-grew by 64.7%, which enabled the bank to clock earnings growth of 30.5% yoy. During the last few quarters, the asset quality for the bank has witnessed pressures. Hence given the weak macro environment we remain cautious on stock. At the CMP, the stock is trading at 0.8x FY2015E ABV. We recommend a Neutral rating on the stock.
Infotech Enterprises (CMP: Rs.240/ TP: -/Upside: -)
Infotech Enterprises reported inline revenue growth for 2QFY2014 while the operating margin and bottomline came in way ahead of our as well as street expectations. The dollar revenues came in at US$88mn, up 1.8% qoq, aided by ~2% qoq volume growth. Growth trajectory resumed for company after three quarters with 3 out of 4 business units posting more than 4.5% qoq growth in constant currency. In INR terms, the revenue came in at Rs.549cr, up 14% qoq. The EBITDA margin of the company grew by ~320bp qoq to 19.8%, driven by benefits from INR depreciation and operational efficiencies which were partially offsetted by continued investments in branding, sales and new offices. Operating margin of the company finally expanded on a sequential basis after five continuous quarters of underperformance. PAT stood tall at Rs.72cr, up 33%. Management indicated that the company has a healthy deal pipeline visibility to sustain the growth momentum. The stock is currently under review.
L&T (CMP: Rs.837/ TP: Rs.1,002/ Upside: 20%)
For 2QFY2014, we expect Larsen & Toubro (L&T) to record a revenue of Rs.14,000cr, indicating a growth of 6.1% yoy. This growth can be attributed to the company's large order book (~Rs.1.65trillion) and robust order inflows. On the EBITDA front, we expect the company's margin to witness a decline of 116bp yoy to 9.5%. We project the net profit to increase by 0.7% yoy to Rs.878cr in 2QFY2014. We estimate the company's order inflow to be at ~Rs.30,000cr for the quarter, which is in-line with the Management's guidance of 15-20% growth in order book for the full year.
At the CMP, the stock is trading at 16.1x FY2015E earnings and 2.2x FY2015E P/BV, on a standalone basis. We have used the sum-of-the-parts (SOTP) methodology to value the company to capture all its business initiatives and investments/stakes in the different businesses. Ascribing separate values to its parent business on a P/E basis and investments in subsidiaries on P/E, P/BV and mcap basis, our target price works out to Rs.1,002. We continue to recommend Buy rating on the stock.
Ultratech Cement (CMP: Rs.1,961/TP: -/Upside: -)
Ultratech Cement is expected to announce its 2QFY2014 results tomorrow. We expect the top-line to decline by 2.0% yoy to Rs.4,607cr due to lower realization. OPM is expected to decline by 191 bp yoy to 20.1%. Bottom-line is expected to decline by 13.5% yoy to Rs.476cr. We maintain our Neutral recommendation on the stock.
Federal Bank (CMP: Rs.69/ TP: -/ Upside: -)
Federal Bank is slated to announce its 2QFY2014 results tomorrow . We expect the bank to report a moderate Net Interest Income (NII) growth of 5.0% yoy to Rs.531cr. Non-interest income is expected to report de-growth of 10.6% yoy to Rs.125cr. Operating expenses of the bank are expected to be higher by 10.1% yoy to Rs.326cr thus operating profit is expected to de-grew by 5.5% yoy. Provision expenses are expected to increase by 134.8% yoy to Rs.72cr thus registering Net Profit de-growth of 13.4% yoy at Rs.186cr. At the CMP, the stock trades at a valuation of 0.8x FY2014E ABV and 0.8x FY2015E. We maintain Neutral rating on the stock.
Economic and Political News
- Cabinet approves hike in wheat MSP by Rs.50/qtl
- Government cuts import tariff of gold and silver to US$418/10g and US$699/kg respectively
- Fund raising via rights issue drops 68% in 1HY2014
- Panel to expedite Rs.8000cr coal corridor in Odhisa
- Pharma product approval time gets longer as regulators around the world go strict
- Bajaj Auto expects to sell more than 4mn vehicles in FY2014
- Bharti Airtel increases stake in Qualcomm-founded 4G firm to 93.45%
- BGR Energy bags US$246mn overseas order
- IL&FS Engineering gets Rs.150cr rural electrification project
- JSPL to acquire majority stake in Gujarat NRE Coking Coal
- Mumbai police arrest ex NSEL head, Anjani Sinha
- Lupin applies for increase in FII holding to 49%
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