Reports » India
Indian stock market and companies daily report (October 21, 2013, Monday)
Indian markets are expected to open positively tracking positive opening trades in the SGX Nifty and most of the Asian markets. Asian markets are trading higher amid speculations that the US Federal Reserve will delay stimulus cuts.
US markets moved mostly higher over the course of the trading day on Friday, extending the upward trend seen in recent sessions. The strength on Wall Street came as the resolution of the latest fiscal crisis in Washington allowed traders to pay more attention to the earnings news from big-name companies. Positive sentiment was also generated following a report release from the Chinese National Bureau of Statistics showing that Chinese GDP saw a faster rate of growth in the third quarter. Meanwhile, majority of the European markets ended the trading session on Friday in positive territory. Sentiments received a boost following encouraging GDP data release from China. Investors were also encouraged by some stronger than expected earnings reports from the United States.
Indian markets rallied on Friday and closed at their highest levels in nearly three years. Sentiment was boosted by positive global cues following encouraging GDP data out of China and speculation that the Federal Reserve may not begin to taper QE until well into 2014.
The trend deciding level for the day is 20,767 /6,154 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 21,048 - 21,213 / 6,237 - 6,284 levels. However, if NIFTY trades below 20,767 / 6,154 levels for the first half-an-hour of trade then it may correct up to 20,602 - 20,322 / 6,106 - 6,023 levels.
Relief for RCom, Tata Tele as licenses not to be scrapped
In a major relief to the dual technology (those offering services on both the GSM and CDMA platform) telecom license holders, Tata Teleservices and Reliance Communications (RCom), the department of telecommunications (DoT) has decided their licenses will not be scrapped. The decision is based on the legal advice of senior advocate P P Rao, consulted by DoT on the matter. This was after various groups, including industry body Assocham, the COAI, and Idea Cellular managing director Himanshu Kapania, insisted the Supreme Court's order in February 201 2 that cancelled 2G licences, should lead to quashing of 141 Unified Access Service (UAS) licenses, instead of only 122. Tata Teleservices holds 19 such licenses and R-Com has 22 across the country. At present, Tata Teleservices offers CDMA services in 19 telecom zones and RCom's CDMA service is available in all 22 circles across the country. We maintain our Neutral rating on Rcom.
PVR to sell and lease back Anupam Complex
PVR has entered into an agreement to sell its Anupam cine-complex in South Delhi for Rs.52cr and lease back the property to operate the theatre. PVR has robust expansion plans and aspires to add 90 screens in FY2014 itself. However, with cinemax acquisition already stretching its balance sheet, PVR will prefer to fund its capex plans through internal accruals instead of additional debt. The sale and lease back of Anupam property will release substantial capital to fund its future projects. According to the company's press release, this move will enable the company to improve its ROCE and focus on the core operating business of operating and managing multiplex properties across the country on long-term lease basis. We remain Neutral on the stock.
L&T (CMP: Rs.872 /TP: Rs.1,006 /Upside: 16%)
Larsen and Toubro (L&T) posted good set of numbers for 2QFY2014, which were above our and street expectation on both, revenue and profitability front. This was mainly on the back of strong execution performance and higher-than-expected other income. On the top-line front, L&T reported healthy growth of 10% yoy to Rs.14,510cr, which was above our and street estimate of Rs.14,000cr and Rs.14,253cr respectively. The healthy growth in revenues was mainly driven by (a) strong execution in the engineering and construction (E&C) and heavy engineering segment and (b) execution pick up in International orders. On the EBITDA front, performance was as per our expectations with the company reporting a yoy dip of 100bp to 9.7% in 2QFY2014 against our expectations of 9.5%. On the bottom line front, L&T reported adjusted PAT of Rs.978cr, indicating a growth of 12.2% yoy and was ahead than our estimate by 11.4%. This was mainly on the back of strong execution performance and higher other income (up 36.4% yoy).
L&T's order backlog stands at Rs.176,036cr as of 2QFY2014, registering a growth of 11.0% yoy. The company has secured orders worth Rs.26,533cr and Rs.51,692cr in 2QFY2014 and 1HFY2014 respectively.
For FY2014, the management continues to reiterate its guidance of 15-17% growth in revenue and 20% growth in order inflow. The guidance is mainly based on (a) high share of exports in both order inflows and revenues (power T&D and hydrocarbon) and (b) continued momentum in infrastructure segment (building and factories, railways, airports, etc).
We believe L&T is best placed to benefit from the gradual recovery in the capex cycle, given its diverse exposure to sectors, strong balance sheet and cash flow generation as compared to its peers. We continue to maintain Buy rating on the stock with a target price of Rs.1,006.
For 2QFY2014 Ultratech's bottomline performance was below estimates. Net profit at Rs.264cr (down 52.0% yoy) came in below estimates primarily due to lower realizations. Topline fell by 4.2% yoy to Rs.4,502cr. Domestic clinker and cement sales volume remained flat at 9.1mn tonnes. OPM fell by 687bp yoy to 15.0% due to lower realization and increase in freight and raw material costs. Further, the benefit arising out of softening in imported coal prices was partly offset by depreciation in INR. However, optimization of the fuel mix helped in controlling the power and fuel costs to some extent. We maintain a neutral rating on the stock.
Petronet LNG (CMP: Rs.128, TP: -, Upside: -)
Petronet LNG reported disappointing set of results for 2QFY2014. The company's net sales grew by 25.8% yoy to Rs.9,493 mainly due to higher prices of LNG during the quarter. The volumes for the company declined 8.9% yoy to 123TBTU mainly due to lower tolling volumes from GAIL and GSPC. The cost of LNG re-gasified increased by 29.9% yoy to Rs.9,032cr. This, alongside lower tolling volumes (-37.8% yoy to 12TBTU) resulted in EBITDA declining by 29.8% yoy to Rs.364cr. The other income decreased by 34.8% yoy to Rs.16cr. Interest and depreciation expenses increased by 22.1% and 27.7% yoy to Rs.39 and Rs.60cr, respectively, as the company capitalized 5MTPA Kochi terminal during the quarter. Consequently, the net profit declined by 42.3% yoy to Rs.182cr. We keep our rating and target price on the stock under review.
Federal Bank- (CMP: Rs.71/ TP: -/ Upside: -)
Federal Bank announced better than expected numbers both on operating as well as on the asset quality front. On the operating front, Net Interest Income (NII) grew at a moderate pace of 8.4% yoy to Rs.548cr (better than estimates). Non-interest income grew at muted 2.9% yoy to Rs.143cr. The operating expenses of the bank grew by 14.3% yoy to Rs.338cr, thus pre provisioning profit grew marginally by 1.2% yoy to Rs.354cr. Provisioning expense came in at Rs.11cr as against Rs.30cr in 2QFY2013. On the asset quality front, gross NPAs, on an absolute basis, remained flat sequentially, while net NPAs increased by 10.1%. At CMP, the stock trades at a valuation of 0.8x FY2015E ABV. We maintain our Neutral recommendation on the stock.
Persistent Systems (CMP: Rs.720/ TP: Under review)
Persistent Systems reported its 2QFY2014 results which came in way ahead of our as well as street expectations largely on all fronts. The dollar revenues came in at US$68.5mn, up 8.6% qoq, led by robust 38% qoq growth in IP-led revenues. IP-led revenues came in at US$13mn and now contribute 19% to the company's overall revenues. In INR terms, revenues came in at Rs.432cr, up 21%. The company's EBITDA margin grew substantially by ~420bp qoq to 26.0%, aided by strong volume growth as well as INR depreciation. PAT stood at Rs.61 cr, up 6.5% qoq, negatively impacted by forex loss of Rs.10cr as against gain of Rs.18cr in 1QFY2014. The management remains confident of FY2014 with deal pipeline being strong and remains focused on increasing the share of IP-led revenues in its portfolio. Owing to recent sharp run up in the stock price, we currently maintain Neutral rating on the stock. We would revise our target price and rating post the earnings conference call.
HDFC- (CMP: Rs.793 / TP: - / Upside: -)
HDFC is expected to announce its 2QFY2014 results today. The NII is expected to increase by 12.6% yoy to Rs.1,841cr. The non-interest income is expected to come in at Rs.41cr, as compared to Rs.102cr reported in 2QFY2013. Operating Income and Operating profit are expected to grow by 8.4% and 7.5% respectively. Provisioning is expected to be Rs.49cr, an increase of 21.4% yoy. Consequently the PAT is expected to increase by 5.1% yoy to Rs.1,209cr. At CMP, the stock trades at 4.0x FY2015 ABV. We recommend Neutral rating on the stock.
Asian Paints (CMP: Rs.487/TP:-/Upside:)
Asian Paints is expected to declare its 2QFY2014 results today. We expect the topline to grow by 10.8% yoy to Rs.2,898cr aided by both higher volumes and better realizations. OPM is expected to decline marginally by 26bp yoy to 13.6%. Bottom-line is expected to increase by 7.8% yoy Rs.258cr. We maintain our Neutral recommendation on the stock.
JK Lakshmi Cement (CMP: Rs.74/TP: Rs.79/Upside: 6%)
JK Lakshmi Cement is expected to post its 2QFY2014 results today. We expect the topline to decline by 7.8% yoy to Rs.453cr. OPM is expected to decline by 909bp yoy to 13.9%. Bottom-line is expected to decline by 88% yoy to Rs.6cr. We recommend an accumulate rating on the stock with a target Price of Rs.79.
Economic and Political News
- RBI says no plans to turn off OMCs1 dollar swap window
- Indian government's IT spending to touch US$6.4bn in 2013: Gartner
- Indirect tax collections up 5.1% in H1
- Bharti Airtel acquires 100% stake in Wireless Business Services Limited
- Bajaj Auto to launch two more models in Discover brands by end of FY2014
- Hindalco unlikely to get tapering coal linkage for power plant
- Gujarat Ind Power cancels LoI issued to LancoInfra for projects worth Rs.3,294cr
- Jubilant Life Sciences receives USFDA nod for 2 generic drugs
- CMS wins contract worth Rs.450cr to deploy ATMs
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