Reports » India
Indian stock market and companies daily report (October 28, 2013, Monday)
Indian markets are expected to open in positive territory mirroring positive opening trades in the SGX Nifty and most of the Asian markets.
The US market moved mostly higher over the course of the trading day on Friday, extending the upward trend seen throughout the past two weeks. The strength on Wall Street was partly due to a positive reaction to the latest earnings reports, which have drawn increased attention since the end of the government shutdown. On the economic front, the Commerce Department released a report showing that durable goods orders rose by much more than expected, although the growth was largely due to a jump in orders for transportation equipment. Meanwhile, the European markets ended Friday's session with mixed results. Investor sentiment was negatively impacted by the unexpected dip in German business confidence. Some weaker-than-expected corporate financial results, also contributed to the negative mood. On the other hand, the U.K. economy expanded at the fastest rate since the second quarter of 201 0.
Back home, Indian markets moved in a narrow range before ending modestly lower on Friday, tracking weak global cues. Also, investors looked forward to the RBI policy meet next week amid speculation the central bank may hike repo rate further to curb inflation.
The trend deciding level for the day is 20,696 /6,149 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 20,770 - 20,856 / 6,171 - 6,197 levels. However, if NIFTY trades below 20,696 / 6,149 levels for the first half-an-hour of trade then it may correct up to 20,610 - 20,536 / 6,122 - 6,100 levels.
ITC (CMP: Rs.340/TP:-/Upside:-)
For 2QFY2014, ITC's net sales rose by a disappointing 8.8% yoy to Rs.7,776cr, which was below our estimates. While cigarettes business posted a modest top-line growth of 10% yoy impacted by higher than expected de-growth in volumes, the growth in other FMCG business too tapered to 16.1% yoy due to sluggishness in demand. Hotels business posted a growth of 13.8% yoy. However, Agri business posted a 12.4% yoy de-growth in net sales on a high base (wheat exports were high in 2QFY2013 due to shortfall in global crop output). Paperboards and packaging grew by 11.3% yoy. The company's operating margin rose by 324bp yoy to 39.7% aided by write back of Rs.1 58cr of liability towards rates and taxes pertaining to earlier years. Adjusting for the same the OPM stood at 37.7% up 120bp yoy. The company also wrote back Rs.35cr of interest pertaining to the aforesaid liability. Thus, while reported PAT rose 21.5% yoy, adjusted net profit came in below estimates at Rs.2,038cr (up 11% yoy). We maintain our Neutral view on the stock.
ICICI Bank - (CMP: Rs.1,022 / TP: Rs.1,187 / Upside: 16.2%)
ICICI Bank reported a healthy operating performance during the quarter, which was in line with our estimates and ahead of streetsRs.. NII grew at healthy pace of 19.9%, aided by healthy loan book growth of 16% and sequential improvement in overall margins to 3.31%. International NIMs improved by 20bp qoq to 1.8%, while domestic NIMs improved marginally by 2bp qoq to 3.65% (which was a positive surprise, given the tightened liquidity throughout the quarter). Non-interest income grew by 6.0% yoy to Rs.2,166cr, within which fee income registered a healthy growth of 16.7% yoy to Rs.1,994cr. Operating expenses grew by mere 4.6%, which aided the profitability. On the asset quality front, absolute Gross NPAs remained flat sequentially (as the bank witnessed higher write-offs during the quarter), while net NPAs, on an absolute basis increased 9.5% qoq (as PCR came off by 230bp qoq to 73.1%). The bank's restructured loan book increased 15% qoq to Rs.6826cr (2.3% of net advances), which was in-line with the management's guidance. Overall, the bank's asset quality performance during the quarter was reasonable in light of prevailing economic environment. Provisioning expenses for the bank increased by 23.0% yoy to Rs.625cr, of which a large part of it (Rs.279cr) was for Net MTM losses (the bank provided the entire MTM loss during the quarter). Overall, the bank reported healthy bottom-line growth of 20.2% yoy. At CMP, the stock is trading at 1.5x FY2015E ABV. We recommend a Buy rating on the stock, with a target price of Rs. 1181.
HUL (CMP: Rs.594/TP: -/Upside: -)
For 2QFY2014 Hindustan Unilever's (HUL) bottom-line performance was ahead of estimates. The company posted a net profit (before exceptional items) of Rs.883cr (up 10% yoy). The company's top-line growth stood at 9.6% as domestic consumer business posted an underlying volume growth of 5% Soaps and Detergent segment posted a 6% yoy growth in revenue, while Personal products posted a much improved 12% yoy growth (2% yoy growth in 1QFY2014). The growth in soaps was lead by healthy double digit growth in skin cleansing segment. However, there was price deflation in soaps as company passed on the benefit of low commodity costs to consumers. In skin care, growth stepped up to double digit aided by lower base and healthy sales pick up ahead of winter.Growth in Beverages segment stood at 16% yoy. OPM stood at 13.9% up 50bp on yoy basis despite the increase in advertisement expenses aided by lower raw material costs. We maintain a neutral rating on the stock.
GAIL (CMP: Rs.344/ TP:-/Upside :-)
GAIL's 2QFY2014 net sales and net profit were above our estimates due to better-than-expected performance from its Natural Gas trading segment. Its net sales increased by 22.7% yoy to Rs.13,945cr (above our estimates of Rs.12,559cr)) mainly due increase in net sales from Natural gas trading segment which grew by 27.7% yoy to Rs.12,378cr. The company's fuel subsidy burden stood at Rs.699cr in 2QFY2014, compared to Rs.786cr in 2QFY2013. Natural gas trading EBIT increased 99.0% to Rs.487cr; however, LPG segment reported a EBIT loss of Rs.228cr in 2QFY2014, compared to EBIT of Rs.66cr in 2QFY2013. Hence, GAIL's EBITDA grew by 1.8% yoy to Rs.1,405cr in 2QFY2014 and EBITDA margin contracted by 207bp yoy to 10.1%. Interest expenses grew by 314.2% yoy to Rs.108cr which resulted in net profit decreasing by 7.1% yoy to Rs.916cr (above our estimate of Rs.858cr). Looking ahead, our concerns on lower utilization of GAIL's pipelines remain. Hence, we maintain our Neutral rating on the stock.
Colgate Palmolive (CMP: ?1,279/TP:-/Upside:-)
For 2QFY2014 Colgate Palmolive India (Colgate) results were below expectations. Top-line rose by 15.8% yoy to Rs.896cr, which was in-line with estimates. The company's volume growth for the quarter stood at 1 0%, aided by a 9% yoy growth in the toothpaste category. The company enhanced its leadership in the toothpaste category and achieved a volume market share of 56.0% for January - September 2013 (54.6% in January - September 2012). OPM stood at 15.8% down 641bp on yoy basis, impacted by higher advertising expenses (up 212bp yoy) and higher other expenses (up 561bp yoy). The higher advertising expenses is attributed to the increased competition in the tooth paste segment post the entry of P&G into the segment through the launch of Oral-B pro-health brand. Net profit fell by 24.5% yoy to Rs.110cr. We maintain a neutral rating on the stock.
Bharat Forge (CMP: Rs.286/ TP: Under Review/ Upside: )
Bharat Forge (BHFC) reported strong results for 2QFY2014 beating our as well as consensus estimates driven by strong sequential growth on the exports front. Additionally, better-than-expected EBITDA margins led by higher exports realization and continued focus on cost control measures too aided the overall performance. For 2QFY2014, standalone revenues posted a strong sequential growth of 6.8% to Rs.845cr, ahead of our estimates of Rs.782cr, aided by a strong export revenue growth of 16.7%. The export performance was boosted by a strong growth across all the key geographies with Europe and US witnessing a growth of 17.3% and 12.8% qoq respectively. The domestic revenues however declined by 3.2% qoq on account of the slowdown in the domestic commercial vehicle industry. During the quarter, volumes and net average realization posted a growth of 3.7% and 2.6% qoq respectively. On the operating front, EBITDA margins improved 159bp qoq to 26.4%, better than our expectations of 24.4%, driven by the cost control measures and also due to favorable currency movement on the exports front. Led by a strong operating performance, net profit grew 6.4% qoq to Rs.96cr, significantly ahead of our expectations of Rs.80cr. At the CMP of Rs.286, the stock is trading at 13.4x FY2015 earnings. We maintain our Neutral rating on the stock.
Indian Overseas Bank- (CMP: Rs.48 / TP: - / Upside: -)
Indian Overseas Bank (IOB) reported weak operating performance for the quarter, with earnings de-growth of 16.3% (vs. our expectations of earnings decline of 18%). The bank's NII grew by 16.5% yoy (higher than loan book growth of 14.2% yoy). Non-interest income for the bank declined by 1 9.5% yoy to Rs.331cr. The bank booked transfer loss of Rs.96cr on transfer of investments from AFS/HFT book to HTM book, during the quarter. Operating expenses for the bank grew 16.7% yoy, much higher than the growth in operating income (7.6% yoy), thereby leading to operating profit decline of 2.0% yoy. The bank's provisioning expenses increased 12.4% yoy to Rs.620cr (which includes part provision for net MTM loss of Rs.1160cr). As of 2QFY2014, the net MTM loss, which is still not provided for stands at Rs.563cr. On the asset quality front, the bank witnessed continued weakness, as the absolute Gross NPAs increased Rs.870cr to Rs.8302cr (vs. quarterly increase of Rs.824cr in previous quarter), while the Net NPAs increased by Rs.295cr to Rs.4875cr (vs. quarterly increase of Rs.553cr in previous quarter). We await clarity from the management regarding the performance on slippages front during the quarter. Though the stock trades at near historic low valuations, the run rate of net NPAs accretion for the bank (quarterly average of Rs.424cr over the last two quarters) and unprovided net MTM loss (Rs.563cr), far outsize its profitability (quarterly average of Rs.130 over last two quarters). Hence, we maintain our Neutral rating on the stock. At the CMP, the stock trades at valuations of 0.4x FY2015E ABV. We maintain our Neutral recommendation on the stock.
Alembic Pharmaceutical (CMP: Rs.181 /TP: - /Upside: -)
Alembic Pharmaceuticals posted good set of numbers both on the top-line and bottom line. The top line came in at Rs.484cr for 2QFY2014 V/s expectations of Rs.456cr. The domestic formulation grew by 10% yoy, while the International generics and branded grew by 123% and 65% yoy respectively. Its OPM came in at 19.1% V/s expectation of 15.6% and an expansion of 3.4% yoy .The net profit came in at Rs.61.6cr grew by 45.1% yoy on account of an expansion in the OPM. We remain neutral on the stock.
TVS Motor (CMP: Rs.51/ TP: -/ Upside: -)
TVS Motor Company (TVSL) posted strong results for 2QFY2014 led by superior product-mix and strong exports performance (up 38.5% qoq) which led to a robust growth in net average realization (up 10% qoq). For the quarter, top-line posted a strong growth of 13% qoq (16.1% yoy) to Rs.1,988cr, ahead of our expectations of Rs.1,840cr, backed by a 10% qoq (11.8% yoy) growth in net average realization. The net average realization performance was aided by a superior product-mix (higher share of scooters, three-wheelers and exports) and also due to better realization on the exports front (Rs.60/ USD as against Rs.56/ USD in 1QFY2014). The volume performance though remained sluggish and posted a modest growth of 2.5% qoq (4.2% yoy) led by weakness in the domestic markets. Export volumes on the other hand registered a robust growth of 12.5% qoq (45.2% yoy) during the quarter. Led by a strong growth in export volumes and favorable exchange realization, export revenues posted a significant growth of 38.5% qoq to Rs.450cr. EBITDA margins improved by 27bp qoq (flat yoy) to 5.9%, in-line with our estimates of 5.8%, led by better product-mix and strong exports performance slightly offset by increase in other expenditure. Driven by strong operating performance, adjusted net profit posted a better-than-expected growth of 12.9% qoq (29.6% yoy) to Rs.59cr. During the quarter, the company divested its majority stake in TVS Energy Ltd. realizing a profit of Rs.30cr (exceptional item).
Going ahead, we expect the operating environment to improve for the company given that its new scooter launch, Jupiter has been accepted well by the markets. The company further intends to launch one more scooter in 2HFY2014 (upgraded Scooty) to consolidate its position in the segment. Additionally, the volumes would also get a boost from the new launches in the motorcycle segment, strong focus on exports and entry into Nigerian market. Additionally, operating margins are expected to remain stable, despite an expected increase in promotional activity, driven by improving product-mix and better exports realization. We revise our estimates marginally upwards to factor in the strong 2QFY2014 performance. Nonetheless, we believe that the strong outperformance by the stock (up by more than 40%) in the last one month factors most of the positives and leaves limited upside potential. We therefore maintain our Neutral rating on the stock.
HT Media (CMP: Rs.88 / TP: Rs.100 / Upside: 14%)
For 2QFY2014, HT Media's top-line performance was in-line with our estimates, growing by 4.7% yoy to Rs.535cr. The company reported 6.3% yoy growth in advertising revenue to Rs.387cr and 14.0% yoy growth in circulation revenue to Rs.64cr. On the operating front, OPM expanded by only 97bp yoy to 12.0% (compared to our expectation of 204bp yoy expansion) due to increase in other expenses as well as advertising and promotional expenses.
However, HT Media still posted 75.2% yoy growth in net profit to Rs.58cr aided by sharp increase of in other income to Rs.57cr (v/s Rs.24cr in 2QFY2013) due to Burda stake sale as well as HMVL stake sale. At the current market price, HT Media is trading at 10.5x FY2015E consolidated EPS of Rs.8.5. We recommend Accumulate on the stock with target price of Rs.100.
KEC Intl (CMP: Rs.31 / TP: Rs.36 / Upside: 16%)
For 2QFY2014, KEC International (KEC) reported subdued 6.6% yoy growth in its top-line to Rs.1,778cr on account of 31.6% yoy decline in SAE transmission segment to Rs.184cr and 56.2% yoy decline in power system segment to Rs.117cr. However, the company's operating margin expanded by 115bp yoy to 6.3% (compared to our estimate of 5.3%) on account of higher execution of projects in Asian and international transmission segments which have relatively high margins. Consequently, PAT grew by 34% yoy to Rs.22cr (our estimate of Rs.20cr) in spite of elevated interest (up 45.9% yoy to Rs.65cr).
During the quarter, the company reported 19.5% yoy growth in order inflow to Rs.1,758cr. The order book stood at Rs.10,200cr, up 8.7% yoy, implying order book coverage of 1.4x its trailing four quarters. We recommend Buy on the stock with a target price of Rs.36.
Sarda Energy and Minerals (CMP: Rs.107/ TP: Under review/ Upside: -)
Sarda Energy and Minerals (SEML) reported its 2QFY2014 numbers. The net sales declined by 21.1% yoy to Rs.277cr mainly due to poor performance from both steel and Ferro alloys segment which declined 23.7% and 1 1.8% to Rs.180cr and Rs.97cr respectively . The EBITDA declined 45.8% yoy to Rs.39cr and EBITDA margin fell by 640bps to 14.1%. The other income increased by 56.0% yoy to Rs.5cr, however the net profit declined by 75.0% yoy to Rs.7cr. We keep our rating and target price under review.
Maruti Suzuki (CMP: Rs.1,507/ TP: -/ Upside: -)
Maruti Suzuki (MSIL) is scheduled to announce its 2QFY2014 results today. We expect MSIL's top-line to register a modest sequential growth of ~2% to Rs.10,476cr led by ~3% qoq growth in volumes which was entirely driven by exports (up 61.3% qoq). Net average realization for the quarter is expected to decline by ~1% qoq due to adverse product-mix (higher share of entry level cars) and higher discounts. On the operating front, we expect EBITDA margins to contract ~60bp sequentially to 10.8% resulting in a ~10% qoq decline in net profit to Rs.570cr. On a yoy basis though, MSIL is expected to report an extremely strong performance due to the low base of last year (operations in 2QFY2013 were impacted due to the strike) and also due to favorable currency movement. At the CMP of Rs.1,507, the stock is trading at 14.4x FY2015 earnings. Currently, we have a Neutral rating on the stock.
Syndicate Bank- (CMP: Rs.74 / TP: - / Upside: -)
Syndicate Bank is slated to announce its 2QFY2014 results today. We expect the bank to report a Net Interest Income (NII) de-growth of 4.1% yoy to Rs.1,334cr. Non-interest income is also expected to de-grow by 2.4% yoy to Rs.264cr. Operating expenses of the bank are expected to be almost flat at Rs.803cr. Thus, Net Profit is expected to go down by 46.9% yoy to Rs.246cr on back of flat provisioning expense at Rs.487cr. At the CMP, the stock trades at a valuation of 0.4x FY2015E ABV. We maintain our Neutral recommendation on the stock.
GIPCL (CMP: Rs.59/TP: Rs.65 /Upside: 10.2%)
GIPCL is slated to announce its 2QFY2014 results. The company is expected to post 2.0% yoy growth in its top-line to Rs.367cr. On the operating front, OPM is likely to contract by 110bp yoy to 34.7% while net profit is expected to come in at Rs.53cr as against a loss of Rs.28cr in 2QFY2013. GIPCL is currently trading at valuations of 0.5x 2015E BV. We maintain Accumulate rating on the stock with a target price of Rs.65.
Dabur India (CMP: Rs.183/TP:-/Upside:-)
Dabur is expected to declare its 2QFY2014 results today. We expect the consolidated top-line to grow by 12.3% yoy to Rs.1,710cr aided by higher volumes. OPM is expected to decline by 59bp yoy to 16.8%. Bottom-line is expected to increase by 7.8% yoy to Rs.218cr. We maintain our Neutral recommendation on the stock.
Economic and Political News
- FinMin to engage with investors to ward off impact of QE tapering
- Govt to invite private companies to mine cheaper, faster coal
- M&A policy: Telecom Commission to review norms on Tuesday
- Coal India signs fuel supply pacts with 156 power units
- RINL suffers steep production loss due to heavy rains in Andhra Pradesh
- CCEA likely to take up Power Grid FPO this week
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