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Indian stock market and companies daily report (October 23, 2013, Wednesday)
Indian markets are expected to open flat to positive tracking similar opening to SGX Nifty. Most of the Asian indices though are trading on a positive note on speculation that Federal Reserve's monthly bond purchases would continue into foreseeable future.
US markets ended on a positive note on Tuesday benefitting from a positive reaction to the weaker than expected September jobs report. According to a Labor Department release, non-farm payroll employment increased by 148,000 jobs in September compared to expectations of an increase of about 180,000 jobs. While the report suggests some economic sluggishness, the data reinforced expectations that the Federal Reserve will maintain its asset purchase program at the current pace for the foreseeable future. Traders largely shrugged off a separate report from the Commerce Department showing that construction spending rose by more than expected in August to reach its highest level in over four years.
Indian markets fell slightly on Tuesday's trading session, as investors adopted a cautious approach ahead of the US jobs report for September which was due for release later in the day. Going ahead, the trading activity is likely to be guided by the domestic as well as global earnings announcements.
The trend deciding level for the day is 20,875 /6,202 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 20,939 - 21,013 / 6,221 - 6,240 levels. However, if NIFTY trades below 20,875 / 6,202 levels for the first half-an-hour of trade then it may correct up to 20,801 - 20,736 / 6,183 - 6,163 levels.
L&T has bagged orders worth Rs.1,333cr
L&T's water & Renewable Energy business has secured orders ~Rs.1,095cr from various customers. This includes a major order for construction of underground drainage system in nine towns of Jamnagar and Porbandar districts of Gujarat from Gujarat Water Supply and Sewerage board. Also, in the Buildings & Factories segment, it has secured order from HLL Lifecare for expansion of and modernization of an old hospital and institute building at JIPMER, Puducherry worth Rs.138cr. We continue to maintain our Accumulate rating on the stock with target price of Rs.1,006.
Lupin receives final approval for its NDA for Antara
Lupin received final approval for its supplemental New Drug Application (sNDA) for Antara (Fenofibrate) capsules, 30 mg & 90 mg strengths from the United States Food and Drug Administration (FDA). Lupin Pharmaceuticals Inc. (LPI), the company's US subsidiary would commence marketing the product shortly. LPI currently markets and promotes Antara Capsules, 43 mg & 130 mg strengths. The new drug would be manufactured by Lupin. Lupin's Antara capsules enjoy strong brand equity with primary care physicians treating patients for high LDL-C, Total-C, triglycerides, Apo-B and low HDL-C. Antara capsules are prescribed for adjunct treatment of hypercholesterolemia (high blood cholesterol), mixed dyslipidemia and hyper-triglyceridemia (high triglycerides) in combination with diet. Antara, is one of the key products for Lupin in its branded US business, which contributes around 8% of its topline. With the new dosages now part of its product portfolio, the company will be able to hold onto its market-share, which is threatened on back of the entry of the generic players in the market for the 43 mg and 130 mg strengths. We maintain our neutral stance on the stock.
Wipro (CMP: Rs.515/ TP: Under review/ Upside: -)
For 2QFY2014, Wipro results were broadly inline with our estimates on the revenue terms while exceeded expectations on the operational as well as on the bottomline front. The IT services revenue came in at US$1,631mn, up 2.8% qoq vs. expectation of ~3% qoq growth; though in constant currency terms revenues grew by 3.2% - highest in last seven quarters. Revenue growth during the quarter was broad based. At the consolidated level, Wipro's revenue came in at Rs.10,992cr, up 13% qoq. During 2QFY2014, Wipro's IT services EBIT margin grew considerably by ~250bp qoq (vs. our expectation of ~120bp qoq gain) to 22.5%, as currency benefits and the improved execution offseted the wage hike impact. On the consolidated level, EBIT margin grew by ~220bp qoq to 20.4%. PAT stood tall at Rs.1,942 (estimate - Rs.1,907cr), up 19% qoq.
The company added 45 new clients during the quarter but the active clients decreased to 942 from 946 in1QFY2014. Also, utilizations increased by 140bp to 66.1% from 64.7% (historic lows) in 1 QFY201 4. For 3QFY2014, the management has given a USD revenue guidance of US$1,660mn-1,690mn, which translates into a qoq growth of 1.8-3.6% which is largely inline with our estimate of 2-3.5% and shows a sign on stability as well as consistency in terms of revenues. We believe that the initial signs of gains from restructuring initiatives have started showing and expect Wipro to do well in the quarters ahead. We currently maintain our Buy rating on the stock and wait for management commentary on discretionary spending and large deal wins. We would revise our target price and rating post the earnings conference call.
Cairn India (CMP: Rs.333, TP: Under Review/ Upside: -)
Cairn India 2QFY2014 results were above our expectations on top-line front while its adjusted net profit was in line with our estimate. The company's top line increased by 4.7% yoy to Rs.4,650cr (above our expectation of Rs.4,468cr) mainly due to increase in realizations of crude oil in INR terms as INR depreciated against the USD in this quarter. Gross crude oil realization decreased by 1.0% yoy to US$95/bbl. The company's gross production averaged 213,299boepd ( + 3.0% yoy) during the quarter. EBITDA grew by 2.4% yoy to Rs.3,533cr in line with increase in top-line. The company recorded an exceptional forex gain of Rs.429cr during 2QFY2014, compared to forex loss of Rs.786cr in 2QFY2013. Other income decreased by 50.2% yoy to Rs.111cr which resulted in adjusted net profit (excluding exceptional forex gain) declining by 4.9% yoy to Rs.2,956cr (in line with our estimate of Rs.2,928cr). Cairn India reiterated that it remained on track to exit FY2014 with a gross production target of over 225,000boepd including over 200,000boepd from the Rajasthan block. We maintain our Buy rating on the stock while we keep our target price under review.
Yes Bank - (CMP: Rs.372 / TP: -/ Upside:- )
Yes Bank reported a strong operating performance during the quarter, which was in line with our estimates and ahead of streetsRs.. NII grew at strong pace of 28.2% to Rs.672cr, in-line with our expectations. Non-interest income grew by 61.2% yoy to Rs.446cr, partly aided by one-off gains to the tune of Rs.111cr, pertaining to MTM gains on interest rate swaps. Overall, pre-provisioning profits grew by 47.1% yoy to Rs.713cr. On the asset quality front, Gross NPA ratio increased sequentially by 6bp to 0.28%, while net NPA ratio remained largely stable at 0.04%. During the quarter, the bank witnessed Rs.113cr of MTM loss on its AFS book, which it chose to provide for entirely, utilizing the exceptional gains on the Non-interest income line. As a result, the provisioning expenses for the bank increased to Rs.179cr against Rs.32cr in 2QFY201 3 and hence, the bank reported bottom-line growth of 21.3% to 371cr. At CMP, the stock is trading at 1.6x FY2015 ABV. We recommend a Neutral rating on the stock.
Jyothy Laboratories (CMP: Rs.199/ TP: Under Review)
Jyothy Laboratories (JLL) yet again reported a strong set of numbers for 2QFY2014, in-line with our expectations on both the top-line and bottom-line fronts. The top-line grew by 33.0% yoy to Rs.306cr. The soaps and detergent segment witnessed a growth of 35.2% on yoy basis. A key positive surprise in the result is upturn in revenue from the home care segment, which grew by 36.5% yoy to Rs.78cr. The operating margin came in at 13.9%, marginally ahead of our estimate of 13.3%. Though the change in sales mix in favor of Maxo is good news, it however led to a contraction in JLL's operating margin by 130bp on a sequential basis as it's a low margin product. The company reported a profit of Rs.29cr during the quarter as against a profit of a mere Rs.1.3cr as in 2QFY2013.
The company is planning to issue 1,50,00,000 equity shares to promoters, subject to necessary approvals. Also, company is taking zero coupon NCDs of Rs.400cr, payable after three years with premium, which will help the company in maintaining financial liquidity in the growth phase. Given the successful amalgamation and restructuring, we remain positive on the company from a longer term perspective. We recommend Accumulate on the stock; however, stock price is currently under review.
KPIT (CMP: Rs.147 / TP: Under review/ Upside: -)
KPIT Technologies (KPIT) reported its 2QFY2014 results which were broadly in-line with our estimates on revenue front but disappointed on the operating as well as on the bottomline front. The dollar revenues came in at US$1 12mn, up 3.1% qoq. In INR terms, revenues came in at Rs.703cr, up 15% qoq. The key negative surprise in the result was that the EBITDA margin of the company declined by ~40bp qoq to 15.5% despite added benefits due to sharp INR depreciation. Management indicated that they invested the gains into the business to continue growing at a fast pace and this rupee depreciation has provided an additional opportunity to invest in the right areas. In addition, the company added 360 net employees into the system with a total additional cost impact of Rs.3.5cr during the quarter. PAT came in at Rs.67cr, up 11% qoq. Overall, the performance from the company was disappointing keeping in view that 2Q is traditionally a strong quarter for Indian IT companies and IT companies had robust benefits from INR depreciation during the quarter. The stock is currently under review.
MLIFE (CMP: Rs.419/ TP: Under Review / Upside :-)
For 2QFY2014, Mahindra Lifespace Developers (MLIFE) posted good set of numbers which were above consensus estimates, both on the revenue and profitability fronts. MLIFE's standalone revenue for the quarter came in at Rs.96cr, i.e a growth of 14.9% yoy which was above consensus estimate of Rs.87cr. During the quarter, standalone EBITDA decreased by 18.4% yoy to Rs.12cr, owing to increase in project cost (up 31% yoy) and staff cost (up 14% yoy). On earnings front, the company's PAT came in at Rs.26cr (down 16.7% yoy) in 2QFY14 against consensus estimate of Rs.23.5cr. On a consolidated level, MLIFE reported a revenue of Rs.196.2cr and PAT of Rs.19.4cr, suggesting a profit for its subsidiaries at net level. During the quarter, the company has signed two new customers (one each in DTA and SEZ) at Mahindra World City, Jaipur. The company has also launched second tranche inventory of Antheia Ph-I, Pimpri, Pune during the quarter. Currently, the target price and rating is under review. We shall revise our estimates post earnings conference call with the management.
Hindustan Zinc (CMP: Rs.134/ TP: Rs.151/ Upside: 13%)
Hindustan Zinc is slated to announce its 2QFY2014 results today. The company's top-line is expected to increase by 12.0% yoy to Rs.3,161cr mainly on account of higher silver and zinc performance. EBITDA margin is expected to expand modestly by 262bp to 53.9% due to increase in top-line. Its bottom-line is also expected to increase by 11.5% yoy to Rs.1,722cr. We maintain our Accumulate rating on the stock with a target price of Rs.151.
Hero MotoCorp (CMP: Rs.2,070/ TP: -/ Upside: -)
Hero MotoCorp (HMCL) is slated to announce its 2QFY2014 results today. The company has registered a volume decline of ~9% qoq during the quarter, which is expected to result in an ~8% qoq decline in the top-line to Rs.5,688cr. The volumes of the company continue to be impacted by demand slowdown and also due to competition from HMSI. On the operating front, we expect EBITDA margins (adjusted for royalty payments) to contract ~30bp sequentially at 11.3%. Consequently, the bottom-line is expected to decline by ~11% qoq to Rs.488cr. On a yoy basis, the company is expected to register a strong performance due to the base effect and also on account of the favorable currency movement. We expect the top-line and bottom-line to post a strong growth of ~10% and ~11% yoy respectively. At Rs.2,070, the stock is trading at 14x its FY2015E earnings. Currently, we have a Neutral rating on the stock.
Ambuja Cements (CMP: Rs.196/ TP: -/ Upside: -)
Ambuja Cements is expected to declare its 3QCY2013 results today. We expect the top-line to decline by 2.3% yoy to Rs.2,118cr on account of lower realization. OPM is expected to decline by 489bp yoy to 19.2% impacted by lower realization. Bottom-line is expected to decline by 16.7% yoy to Rs.253cr. We maintain our neutral rating on the stock.
ACC (CMP: Rs.1,136/TP:Rs.1,225/Upside:8%)
ACC is expected to declare its 3QCY2013 results today. We expect the top-line to increase by 4.4% yoy to Rs.2,551cr. OPM is expected to decline by 439bp yoy to 14.6% due to lower realization. Bottom-line is expected to decline by 19.9% yoy to Rs.199cr. We maintain our Accumulate recommendation on the stock with a Target Price of Rs.1,225.
Exide Industries (CMP: Rs.129/ TP: Rs.141/ Upside: 9%)
Exide Industries (EXID) is slated to announce its 2QFY2014 results today. We expect the company to register a revenue growth of ~2% qoq (~9% yoy) to Rs.1,664cr led by steady growth in the auto replacement segment and price increases carried out in 1QFY2014, although the same would be slightly offset by weak OEM demand. We expect EBITDA margins to contract ~70bp qoq to 15.5% despite the price increases, primarily due to increase in lead prices and also on account of the INR depreciation. As a result, the net profit is expected to remain flat on a sequential basis to Rs.160cr. At Rs.129, the stock is trading at 15.1 x FY2015E earnings. Currently, we have an Accumulate rating on the stock with a target price of Rs.141.
Ramco Cements (CMP: Rs.173/ TP: -/ Upside: -)
Ramco Cements is expected to post its 2QFY2014 results today. We expect the topline to decline by 6.0% yoy to Rs.939cr. OPM is expected to decline by 1,088bp yoy to 20.5%. Bottom-line is expected to decline by 54.1% yoy to Rs.61cr. We maintain a Neutral rating on the stock.
Economic and Political News
- Govt. plans three-phase exploration strategy on shale gas
- FM rules out lifting ban on import of gold coins
- Special RBI measures got India US $9.6bn in forex: FM
- Odisha asks SAIL to raise RSP capacity to 10 MTPA by 2017
- CCI may soon take up NHPC's power project for clearance
- Next CCEA meet to decide on duty hike of refined edible oil: K V Thomas
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