Reports » India
Indian stock market and companies daily report (October 24, 2013, Thursday)
Indian markets are expected to open flat tracking similar opening to SGX Nifty and other Asian markets. Meanwhile, China's manufacturing Purchasing ManagersRs. Index rose to 50.9 in October, up from September's final reading of 50.2.
The US market ended the day firmly in negative territory. The stocks remained stuck in the red throughout the trading session partly offsetting the strong gains posted over the past few sessions. This was mainly because of the profit booking following the upward trend shown by the markets over the past two weeks coupled with the disappointing earnings news. Also, a report from Bloomberg indicated that China's biggest banks tripled the amount of bad loans written off in the first half which generated negative sentiment among the investors. In the meanwhile, European market also finished in negative territory pulling back from near five year highs. This was mainly because of the weakness in bank stocks as the European Central Bank said that it would submit the euro zone's top banks to a comprehensive batch of tests next year to rebuild confidence in the banking sector.
Amid the weak global cues on talks of tighter money market conditions in China and concerns about the tepid US recovery, investors were prompted to take some profits off the table on Wednesday following recent sharp gains. Going ahead, traders would keenly watch the domestic earnings announcement alongwith the US Labor Department's report on weekly jobless claim.
The trend deciding level for the day is 20,760 /6,171 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 20,930 - 21,093 / 6,225 - 6,272 levels. However, if NIFTY trades below 20,760 / 6,171 levels for the first half-an-hour of trade then it may correct up to 20,598 - 20,427 / 6,124 - 6,070 levels.
Cadila Healthcare has received USFDA approval for initiating Phase I clinical trial of new drug candidate ZYDPLA-1
Cadila Healthcare (CDH) has received USFDA approval for initiating Phase I clinical trial of new drug candidate ZYDPLA-1, a gliptin to treat type 2 diabetes, which is expected offer higher patient convenience with once a week dosage than conventional once daily dosage. This is the second development from CDH's NCE pipeline post recent approval of Lipaglyn and highlights company's increasing focus on the anti-diabetics segment. ZYDPLA-1 is a novel DPP-4 inhibitor with improved delivery of once in a week oral dosage to manage Type-II diabetes versus conventional once daily dosage of other DPP-4 inhibitors. Once a week dosage is thus a convenient alternative for patients and it also helps control blood glucose levels. ZYDPLA-1 belongs to the class of Gliptins that have steadily gained higher acceptance in treatment of type-II diabetes. Robust NCE pipeline to render strong upsides over long term. The approval for IND underscores CDH's assets quality and its R&D capability and highlights the company's increasing focus on the anti-diabetics segment. The company has six NCE molecules in various stages of development. We maintain our buy on the stock with a price target of Rs.894.
Punj Lloyd sells stake in Olive Group Capital for $20 million
Punj Lloyd's Singapore based subsidiary Punj Lloyd Pte has sold its entire shareholding (27.78%) in Olive Group Capital ltd for a total consideration of US$20 million for a mix of initial and deferred consideration. The deferred consideration of approximately US$11 million shall be received with interest thereon. Punj Lloyd Group had invested ~US$14 million in Olive Group. The Company has also bagged an order worth Rs.275cr for setting up of various infrastructure facilities including civil, structural, mechanical, electrical & instrumentation, piping, cross country pipelines, horizontal direction drilling, equipment assembly, fabrication and erection, marine work, tankages work and electrical and other associated and miscellaneous works and rectification of defective works at a leading refinery in India. We continue to maintain our Neutral rating on the stock
Hindustan Zinc (CMP: Rs.135/ TP: Under Review/ Upside: NA)
Hindustan Zinc's (HZL) 2QFY2014 adjusted net profit was in line with our expectations. HZL's net revenue increased by 24.7% yoy to Rs.3,520cr (above our estimate of Rs.3,161cr) mainly due to increased sales volumes of zinc, lead and silver. Refined zinc production (integrated) volumes increased 28.0% yoy to 195kt due to higher production from Rampura Agucha mine and commencement of production from Zawar mines; refined silver production (integrated) volumes also grew 14.0% yoy to 83kt. Despite cost of zinc production rising by 8.0% yoy to Rs.50,522, EBITDA increased by 29.1% yoy to Rs.1,883cr. However, other income decreased by 48.7% yoy to Rs.267cr. The company reported an exceptional item of Rs.61cr related to employee VRS during the quarter. Excluding this exceptional item, adjusted net profit grew by 10.5% yoy to Rs.1,701cr (in line with our estimate of Rs.1,722cr). We maintain our Buy rating on the stock while we keep our target price under review.
Hero MotoCorp (CMP: Rs.2,088/ TP: -/ Upside: -)
Hero MotoCorp (HMCL) reported an in-line performance for 2QFY2014. The topline recorded a decline of 7% qoq to Rs.5,726cr which was in-line with our estimates of Rs.5,688cr. The top-line performance was impacted due to a 9.2% qoq decline in volumes led by slowdown in demand and competition from Honda Motors and Scooters India. While motorcycle sales declined by 11% qoq; scooters sales maintained its strong momentum and witnessed a growth of 4% qoq during the quarter. The company continued with the recent trend of losing market share in the motorcycle segment (down 170bp to 51.4% in 1HFY2014 as compared to 53.1% in FY2013) and gaining strength in the scooter segment (up 150bp to 20.2% in 1HFY2014). Net average realization however, grew strongly by 2.4% qoq driven by price hike which was carried out in 1QFY2014 and also due to superior product-mix led by favorable model-mix and higher share of spares revenue. EBITDA margins during the quarter declined slightly by 32bp qoq to 14.5%, broadly in-line with our expectations of 14.8%. While superior product-mix benefited EBITDA margins leading to an 80bp decline in raw-material expense as a percentage of sales; higher other expenditure arrested further expansion in margins. Adjusted EBITDA margins contracted 74bp qoq to 10.8%, against our expectations of 11.3%, as the performance was impacted due to the higher royalty outgo led by unfavorable forex movement. As a result, operating profit and net profit posted a decline of 9% and 12.2% qoq to Rs.833cr and Rs.481cr respectively. At the CMP of Rs.2,088, the stock is trading at 14.4x FY2015E earnings which is broadly in-line with historical estimates. We maintain our Neutral rating on the stock.
Ambuja Cements (CMP: Rs.197/ TP: -/ Upside: -)
For 3QCY2013 Ambuja CementsRs. (Ambuja) performance was below estimates. Ambuja's stand-alone top-line fell by 7.5% yoy to Rs.2,005cr impacted by steep fall in realization. While the company's volume rose by 1.2% yoy to 4.9mn tonnes, realization was down by a steep 8.6% yoy. OPM fell by 1,071bp yoy to 13.3% impacted by steep fall in realization and increase in freight costs and employee expenses. The company reported extraordinary income of Rs.25cr on account of profit on sale of residential flats. The company's adjusted PAT fell by 54% yoy to Rs.141cr. We maintain our neutral rating on the stock.
ACC (CMP: Rs.1,157/ TP: 1,225/ Upside: 5.8%)
For 3QCY2013 ACC's performance on the Margin and bottom-line front was below estimates. ACC's stand-alone top-line rose by marginal 3.2% yoy to Rs.2,508cr aided by the inclusion of the revenue of RMC business in the standalone financials due to the merger of subsidiary ACC Concrete with self (w.e.f 4QCY2012). The company's grey cement volumes rose by 2.6% yoy. However, realization was down by ~6% yoy. OPM fell by 763bpyoy to 11.1% primarily due to steep fall in realization and increase in power and fuel and freight costs. Bottom-line fell by 51% yoy to Rs.120cr. We maintain an Accumulate rating on the stock with a target price of Rs.1,225.
Exide Industries (CMP: Rs.126/ TP: Under Review/ Upside: NA)
Exide Industries (EXID) reported poor performance for 2QFY2014 due to a sharp 12% qoq decline in the top-line led by the subdued demand environment in the automotive and the industrial segments. The top-line declined by 12% qoq (6.5% yoy) to Rs.1,432cr, significantly lower than our expectations of Rs.1,644cr, mainly due to the demand slowdown in the automobile and industrial segments. While the demand on the OEM front was expected to remain sluggish, we believe that the company faced headwinds even in the automotive replacement segment. EBITDA margins declined 207bp sequentially to 14.1%, lower than our expectations of 15.5%, largely due to the unfavorable forex movement and also due to the lower operating leverage. Led by a weak operating performance, net profit declined 25.3% qoq to Rs.119cr, substantially lower than our estimates of Rs.160cr. At the CMP of Rs.126, the stock is trading at 14.8x FY2015 earnings. We would like to seek clarity from the management on the demand environment for the automotive replacement and industrial battery segments going ahead and also on the volume performance during the quarter. Until then, our rating is under review.
Ramco Cements (CMP: Rs.172/ TP:-/ Upside: -)
For 2QFY2014 Ramco CementsRs. performance was below estimates. The company's top-line fell by 9.4% yoy to Rs.905cr impacted by steep fall in realization. OPM stood at 13.0% down by a huge 1,837bp on yoy basis due to fall in realization and higher costs. The company's raw material, freight and power and fuel costs have risen substantially on a yoy basis. The company's bottom-line fell by 86.3% yoy to Rs.18.3cr impacted by poor operating performance. We maintain a neutral rating on the stock.
TTK Healthcare (CMP: Rs.523/ TP: Rs.614/ Upside: 15%)
TTKH reported a mixed set of numbers for 2QFY2014. Topline rose by 5.5% yoy to Rs.101cr from Rs.95cr in 2QFY2013. The EBITDA margin for the quarter has contracted by 87bp yoy to 5.6% despite a dip of 289bp in raw material cost which was offset by simultaneous increase of 375bp in employee and other cost. Consequently, net profit declined by 10.3% yoy to Rs.4cr in 2QFY2014.
On the topline front, Food and Pharmaceutical business grew by 34.6% and 7.0% yoy respectively. However, only Food segment showed improvement in EBIT margins from 11.1% in 2QFY2013 to 22.0% in 2QFY2014.
Recent ongoing restructuring (from being distributor to manufacturer) of condom business is expected to reap benefits from next year. We also expect the EBITDA margin to expand on account of increasing contribution from high margin food business, thus resulting in better profitability. At the current market price, the stock is trading at EV/sales of 0.9x and 0.8x for FY2014E and FY2015E, respectively. We recommend a Buy recommendation on the stock with a target price of Rs.614 based on the target multiple of 0.9x EV/sales of FY2015E.
NMDC (CMP: Rs.136/ TP: Rs.148/ Upside: 9%)
NMDC is slated to announce its 2QFY2014 results today. We expect the company's top line to decrease by 15.6% yoy to Rs.2,206cr on account of decrease in sales realizations. On the operating front, EBITDA margin is expected to decrease by 808bp yoy to 66.0%. The bottom line is expected to decrease by 22.3% yoy to Rs.1,305cr. We maintain our Accumulate view on the stock with a target price of Rs.148.
Idea Cellular (CMP: Rs.176/ TP: -/ Upside: -)
Idea Cellular is slated to announce its 2QFY2014 results today. We expect the company to record revenue of Rs.6,469cr, down 1% qoq. This is expected primarily on the back of 1.5% qoq decline in MOU to 392min with ARPM remaining flat sequentially at Rs.0.44/min. EBITDA margin of the company is expected to decline by ~100bp qoq to 30.8%. PAT is expected at Rs.427cr. We maintain Neutral rating on the stock.
IPCA Labs (CMP: Rs.674 /TP: Rs.724/ Upside: 7%)
We estimate Ipca LabsRs. top-line to grow by 8.8% yoy to Rs.824cr for 2QFY2014. Its OPM is expected to dip by 40bp yoy to end at 21.4%. The adjusted net profit is expected to de-grow by 24.7% yoy on account of a dip in the OPM. We recommend an accumulate rating on the stock with a price target of Rs.724.
Economic and Political News
- Rubber Board submits project for rubber development in North East
- Mobile economy to add US$400bn to India GDP: GSMA
- India set for bumper winter crops in wake of monsoon rains
- Companies to meet IMG on delays in coal blocks development
- NAFED floats tender to import onions amid high domestic prices
- SBI to get Rs.2,000cr as part of Rs.14,000cr banks fund infusion
- NTPC sets up panel for early restart of Dabhol power project
- Volvo aims to sell 20,000 units per annum in India by 2020
- Zydus Cadila gets USFDA nod for clinical trial of anti-diabetes molecule
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