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Indian stock market and companies daily report (October 22, 2013, Tuesday)
Indian markets are expected to open in the red tracking negative opening trades in the SGX Nifty and most of the Asian markets. SGX Nifty is trading lower by almost 30pts (roughly 0.5%).
US markets showed a lack of direction throughout the trading session on Monday before closing roughly flat, as traders appeared reluctant to make any significant moves following the strong upward move seen over the past several sessions. Traders also seemed to be staying on the sidelines ahead of the release of the monthly jobs report from the US Labor Department. Meanwhile, majority of the European markets ended the trading session on Monday with modest gains. Investors continue to watch corporate earnings reports from Europe and the United States, but remained cautious ahead of the release of the U.S. jobs report for the month of September. The highly anticipated report is expected to be released on Tuesday and is one of the many delayed pieces of economic data that will be released this week, now that the U.S. government is back up and running.
Indian markets ended the Monday's trading session largely unchanged, as investors looked ahead to a deluge of U.S. data due this week for further clues about how long the U.S. Federal Reserve will maintain its easy monetary policy.
The trend deciding level for the day is 20,878 /6,196 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 20,987 - 21,080 / 6,228 - 6,251 levels. However, if NIFTY trades below 20,878 / 6,196 levels for the first half-an-hour of trade then it may correct up to 20,785 - 20,676 / 6,173 - 6,140 levels.
TCS bags multi-million dollar IT deal from Bombardier
TCS has bagged a multi-million dollar deal from leading rail vehicles maker Bombardier Transportation for managing IT infrastructure of its newly commissioned data centres. Bombardier Transportation is a world leader in rail transportation with operations in over 60 countries. As part of the contract, TCS will provide remote infrastructure management of Bombardier Transportation's recently established data centres in Germany. The new data centres will establish a technology platform for Bombardier, through introduction of private cloud services paired with a high level of virtualization. TCS will also provide SAP Basis support to Bombardier Transportation. TCSRs. Central Europe operations (an operating area cutting across Germany and Austria) comprise over 4,000 professionals, servicing more than 80 leading German and Austrian companies. We maintain our Buy rating on the stock with a target price of Rs.2,500.
Bharti Airtel acquires 100% stake in Qualcomm's 4G company, WBSPL
Bharti Airtel announced that it has acquired 100% stake in Wireless Business Services (WBSPL), a company founded by US chipmaker Qualcomm. The company had acquired a 49% stake in WBSPL in May 2012 for US$165mn. At that price, the additional stake purchase would have cost Bharti Airtel an estimated US$165mn (~Rs.1,008cr). However, the company did not disclose the financial details of the deal. The Qualcomm exit news comes three years after the company participated in the broadband wireless access (BWA) auctions and bought licenses for US$1bn to offer high-speed internet services in the four circles of Mumbai, Delhi, Haryana and Kerala. Bharti Airtel has the similar spectrum in Punjab, Maharashtra, Kolkata and Karnataka. Bharti Airtel acquired a majority stake in WBSPL in July by increasing its stake to 51% from 49%. With this, Bharti Airtel will now have access to eight circles to launch 4G services. Thus, with eight BWA licenses in the 4G space, Bharti is now next only to Reliance Jio which has pan-India spectrum. Bharti Airtel has already launched 4G services in Bangalore, Pune, Kolkata, Chandigarh, Mohali and Panchkula. We maintain our Accumulate rating on Bharti Airtel.
MM signs wage settlement agreement with workers
According to media reports, Mahindra & Mahindra (MM) has finalized the long pending wage settlement agreement with the workers at the Nashik and Igatpuri plants. According to the terms of the contract, around 3,500 permanent workers at the two manufacturing plants would be entitled to a monthly wage hike of Rs.9,000 which would be spread across the three years. In return, the company has been assured of gradual increase in productivity by the labor union The company has been negotiating with the workers at the Nashik and Igatpuri plants since the last six months and also had to face tool down protests from the workers in March and April earlier due to delay in reaching the wage settlement agreement. We see this as a positive development for the company as it removes uncertainty related to the production loss on account of the strike and also ensures continuity of operations. We do not see any material impact of the wage hike on company's operating margins going ahead. We maintain our estimates for the company and maintain our Accumulate rating on the stock with an SOTP based target price of Rs.996.
HDFC- (CMP: Rs.810 / TP: - / Upside: -)
HDFC reported in-line standalone earnings performance for the quarter. Earnings at the PBT level, adjusted for dividends and sale of investments, for the company grew at healthy pace of 16.2% to Rs.1,464cr, in-line with expectations. Healthy loan book growth (19.2% yoy) and stability witnessed on the asset quality front (nearly flat Gross NPA ratio, on a sequential basis) were the key highlights from the results.
Net Interest Income for the company grew at 11.0% yoy to Rs.1,814cr, in line with expectations. Non-interest income for the company came in at Rs.95cr as compared to Rs.102 in 2QFY2013. Operating income and pre-provisioning profit grew at 9.9% and 9.3% yoy, respectively. Provisioning expenses for the company came in at Rs.15cr, lower than Rs.40cr in 2QFY2013. Overall, the company reported standalone earnings growth of 10.0% yoy to Rs.1,266cr. Given the challenging macro developments, we believe within the BFSI space, defensive names like HDFC may not underperform the rest of the sector in spite of its rich valuations. At CMP, HDFC's core business (after adjusting Rs.321/share towards the value of its subsidiaries) is trading at 3.2x FY2015E ABV. We maintain our Neutral rating on the stock.
Asian Paints (CMP: Rs.517/ TP: -/ Upside: -)
For 2QFY2014 Asian Paints posted a better than expected performance on the top-line, margins and bottom-line front. The company's consolidated top-line rose by 18.1% yoy to Rs.3,084cr aided by a healthy double digit volume growth in the domestic decorative business. OPM rose by 174bp yoy to 15.6% due to better realization and decline in the prices of key raw material titanium dioxide on a yoy basis. Net profit rose by 36.7% yoy to Rs.327cr aided by superior operating performance. We maintain a neutral rating on the stock.
Rallis India (CMP: Rs.159 /TP: - /Upside: -)
Rallis India posted good set of numbers for 2QFY2014. On the top-line front, Rallis reported healthy growth of 24.1% yoy to Rs.596.7cr. On the EBITDA front, the company reported almost a flat OPM, rising just by 10bps which came at 19.4% in 2QFY2014 V/s 19.3% in 2QFY2013.On the bottom line front, Rallis reported adjusted PAT of Rs.799cr, a growth of 33.6% yoy. We remain Neutral on the stock.
JK Lakshmi Cement (CMP: Rs.71/TP: Rs.79/Upside:-12%)
For 2QFY2014 JK Lakshmi Cement's top-line fell by 8.7% yoy to Rs.449cr impacted by poor demand in the company's key markets in Gujarat and North India. OPM stood at 12.5% down 1045bp on yoy basis. The company's bottom-line fell by 80% yoy to Rs.10.3cr impacted by poor operating performance. We recommend a buy on the stock with a target price of Rs.79.
Wipro (CMP: Rs.506/ TP: Rs.580/ Upside: 15%)
Wipro is slated to announce its 2QFY2014 results today. We expect the company's IT services segment to post revenues of US$1,637mn, up 3.0% qoq. Volume growth is expected to be ~3.3% qoq. At the consolidated level, we expect the company to record revenues of Rs.11,281 cr, up 16% qoq, aided by sharp INR depreciation. At a consolidated level, Wipro is expected to record ~74bp qoq inch up in its EBIT margin to 18.9%. PAT is expected to come in at Rs.1,907cr. We maintain our Buy rating on the stock with a target price of Rs.580.
Cairn India (CMP: Rs.331/ TP: Rs.364/ Upside: 10%)
Cairn India is slated to report its 2QFY2014 results today. Cairn India's net sales are expected to remain flat yoy at Rs.4,468cr. Its operating margin is however expected to decline by 177bps yoy to 75.9% due to increase in cess, whereas its bottom line is expected to decrease by 5.8% yoy to Rs.2,928cr. We recommend Accumulate rating on the stock with a target price of Rs.364.
Yes Bank (CMP: Rs.359 / TP: -/ Upside:- )
Yes Bank is slated to announce its 2QFY2014 results today. We expect the bank to report a strong NII growth of 30.5% yoy to Rs.684cr, primarily on back of strong advances growth of 24% yoy. Non-interest income is also expected to grow at a strong pace of 27.3% yoy to Rs.352cr. Operating expenses are expected to increase by 27.9% yoy to Rs.404cr. Provisioning expenses are expected to be higher at Rs.67cr as compared to Rs.32cr reported in 2QFY2013. Overall, we expect the bank to report healthy PAT growth of 23.7% yoy during the quarter to Rs.378cr. At the CMP, the stock is trading at 1.5x FY2015E ABV. We maintain our Neutral rating on the stock.
KPIT Technologies (CMP: Rs.145/ TP: Rs.155/ Upside: 7%)
KPIT Technologies (KPIT) is slated to announce its 2QFY2014 results today. We expect the company to post revenue of US$1 14mn, up 4.5%. In INR terms, the revenue is expected to come in at Rs.716cr, up 17% qoq. EBITDA margin is expected to increase by ~185bp qoq to 17.7%, majorly on the back of INR depreciation. PAT is expected to come in at Rs.70cr. We maintain Accumulate rating on the stock with a target price of Rs.155.
Economic and Political News
- GST talks near deadlock as states oppose Amendment Bill
- All aspects of FIR against Birla, Parakh would be probed: CBI
- DIPP considering offering interest subsidy to manufacturing
- DLF awards Rs.1,337cr construction contract to L&T
- Oil discovery in BPCL-Videocon block in Brazil
- Pratibha Industries bags Rs.322cr order from Rajasthan government
- Sadbhav Engineering bags Rs.264cr project from BCCL
- Alstom T&D bags Rs.1 05cr transformer order
- Ranbaxy gets CDSCO nod to sell malaria drug 'synriamTMRs.
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