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Indian stock market and companies daily report (February 10, 2012, Friday)

2012-02-10T00:11:00.000-08:00

The domestic markets are expected to open flat to negative tracking negative opening in most of the Asian markets. Indian markets rose on Thursday, with the Nifty index hitting a 27-week high, as optimism that Greek leaders are nearing an agreement on austerity measures, that could secure them a new €130bn bailout from the EU and the IMF, easing some of the concerns about the nation's ongoing going debt crisis.

Globally, U.S. stocks closed in green yesterday mainly on the back of positive news about Greece as well as some upbeat U.S. jobs data. The U.S. Labor Department reported that the initial jobless claims for U.S. fell to 358,000 in the week ended February 4th from the previous week's revised figure of 373,000. Indian investors, meanwhile, would keenly watch out for the domestic industrial production growth (Bloomberg estimate – 2.6%) for the month of December due to be released today. Also, consumer sentiment and trade balance data of the U.S. will be on radar.

Markets Today

The trend deciding level for the day is 17,773 / 5,392 levels. If Nifty trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17,937 – 18,043 / 5,444 – 5,476 levels. However, if Nifty trades below 17,773 / 5,392 levels for the first half-an-hour of trade then it may correct up to 17,667 – 17,503 / 5,360 – 5,307 levels.

3QFY2012 - Result Reviews

Tata Steel

For 3QFY2012, Tata Steel reported net loss on a consolidated basis due to weak performance from its European and Southeast Asian operations. Consolidated net sales increased by 13.8% yoy to Rs.33,103cr, above our estimate of Rs.30,992cr, mainly on account of increased average realizations in rupee terms. Standalone net sales increased by 12.3% yoy to Rs.8,305cr. Consolidated sales volumes stood at 5.8mn tonnes in 3QFY2012 compared to 5.9mn tonnes in 3QFY2011. Average realization/tonne decreased by 3.4% and 0.6% to US$975 and US$1,149 in Tata Steel India and Tata Steel Europe operations, respectively. However, EBITDA/tonne decreased by 7.1% and US$303 in Tata Steel India. EBITDA/tonne of Tata Steel Europe operations stood at US$(1) compared to US$25 in 3QFY2011 on account of higher raw-material costs. India operations EBITDA decreased by 9.5% yoy to Rs.2,553cr. European operations reported EBITDA of US$(147)mn and Southeast Asian operations reported EBITDA of US$(2)mn during the quarter. Consequently, consolidated EBITDA decreased by 49.9% yoy to Rs.1,717cr. Hence, Tata Steel reported net loss of Rs.603cr in 3QFY2012 compared to adjusted PAT of Rs.1,125cr in 3QFY2011. The company’s net debt has increased to US$9.5bn as on December 31, 2011, compared to US$8.5bn as on September 30, 2011. Tata Steel’s Jamshedpur 2.9mn tonnes brownfield expansion project remains on track to be completed during 4QFY2012. We maintain our Buy recommendation on the stock, while we keep our target price under review.

Hindalco

Hindalco’s standalone 3QFY2012 top line was above our estimate, while its bottom line was slightly below our expectation. The company’s net sales increased by 11.4% yoy to Rs.6,590cr (above our estimate of Rs.5,909cr) mainly on account of higher volumes in the aluminium and copper segments. In the aluminium segment, alumina, aluminium, wire rods and flat products production increased by 7.1%, 7.8%, 6.7% and 20.4% yoy to 343k, 146k, 25k and 56k, respectively. In the copper segment, copper cathode and CC rods production grew by 9.4% and 42.3% yoy to 88k and 38k, respectively. However, the aluminium segment’s EBIT decreased by 33.4% yoy to Rs.310cr due to increased input costs (mainly coal and crude derivatives). Nevertheless, the copper segment’s EBIT rose by 51.1% yoy to Rs.216cr due to higher treatment and refining charges and by-product credits. Overall, Hindalco’s EBITDA decreased by 3.3% yoy to Rs.716cr and EBITDA margin slipped by 165bp yoy to 10.9% during 3QFY2012. Interest expenses grew by 53.8% yoy to Rs.79cr and other income grew by 48.6% yoy to Rs.90cr. Consequently, net profit decreased by only 1.9% yoy to Rs.452cr (below our estimate of Rs.480cr). The company reported that all its expansion plans are on track. The stock is under review currently.

Ambuja Cements

During 4QCY2011, Ambuja Cements’ standalone top line increased strongly by 30.2% yoy to Rs.2,329cr on account of 17.5% yoy improvement in realization to Rs.4,197/tonne and a 10.8% yoy increase in volumes to 5.55mn tonnes. OPM declined by 60bp yoy to 19.1% on account of higher raw-material costs, power and fuel costs and freight costs. On the bottom-line front, net profit for the quarter rose by 17% yoy to Rs.302cr, aided by better operating performance, 72.2% yoy growth in other income to Rs.65cr and 53% saving in interest expense to Rs.10cr. Reported net profit was lower by Rs.33cr on account of an exceptional item relating to change in accounting method for stock options, adjusting for which net profit would have grown by 30% yoy. We continue to remain Neutral on the stock.

ACC

ACC posted 27.8% yoy growth in its standalone net sales to Rs.2,503cr on account of 17.8% growth in sales volumes and 20.3% higher realization. The company’s sales volumes for the quarter stood at 5.95mn tonnes, up 6.3% yoy, on account of higher capacity (on a yoy basis) operational at Wadi and Chanda during the quarter. Further, realization stood higher by 20.3% yoy to Rs.4,206/tonne. Despite the substantial yoy improvement in realization, OPM rose only marginally by 100bp due to the surge in operating costs. The company’s net profit rose by 83.8% yoy to Rs.470cr. The company’s profit was boosted by tax credit of Rs.228cr during the quarter (vs. 82cr in 4QCY2010), adjusted for which profit would have been at Rs.242cr higher by 39.3% yoy. We remain Neutral on the stock.

Apollo Tyres

Apollo Tyres (APTY) registered robust results for 3QFY2012 with consolidated top line posting better-than-expected 36.3% yoy (12.4% qoq) growth to Rs.3,228cr, aided by an 18.2% yoy (8.3% qoq) jump in volumes and 15.3% yoy (3.8% qoq) increase in net average realization. Domestic, Europe and South Africa revenue grew strongly by 46.2%, 26.3% and 27.9% yoy, respectively. Operating margin expanded by 202bp qoq to 10%, mainly due to 100bp savings on the raw-material front. As a result, adjusted net profit grew by 63.8% qoq to Rs.127cr. However, on a yoy basis, adjusted net profit reported modest 5.8% yoy growth, largely due to contraction in operating margin and higher interest expense (up 38.2% to Rs.73cr). During the quarter, APTY made a provision of Rs.29cr in relation to a penalty following settlement agreement with South Africa Competition Commission for the company’s operations in South Africa. At Rs.76, the stock is trading at 6.8x its FY2013E earnings. We retain our Buy recommendation on the stock; however, the target price is under review. We shall release a detailed result note soon.

MRF – 1QSY2012

MRF reported top-line growth of 32.7% yoy to Rs.3,138cr in 1QSY2012 from Rs.2,367cr in 1QSY2011. The company’s EBITDA margin came in at 9.0%, 174bp higher on a qoq basis, on account of a decrease in overall expenses as a percentage of sales. On the profitability front, MRF reported an increase of 9.7% yoy, from Rs.103cr to Rs.113cr. We maintain our Buy recommendation on the stock with a target price at Rs.9,647, based on a target PE of 8x its SY2013E earnings.

Page Industries

Page Industries announced its 3QFY2012 numbers. The company’s net sales increased by 28.4% yoy to Rs.172cr (Rs.134cr). EBITDA improved only by 6.3% yoy to Rs.30cr (Rs.28cr), despite higher revenue growth due to margin compression. EBITDA margin declined by 356bp yoy to 17.2% (20.7%), mainly due to higher raw-material cost, which increased to 51.2% of net sales in 3QFY2012 vs. 48.3% of net sales in 3QFY2011. Despite lower growth in EBITDA, PAT increased by 27.6% yoy to Rs.20cr (Rs.16cr), in-line with top-line growth on the back of higher other income, which increased by 78.2% to Rs.4cr and lower tax rate, which came in at 31.5% in 3QFY2012 vs. 41.6% in 3QFY2011. PAT margin declined marginally by 7bp yoy to 11.6%. We will be coming out with a detailed report post management interaction. We continue to maintain our Neutral recommendation on the stock.

FAG Bearings - 4QCY2011

FAG Bearings (FAG) registered a strong performance in 4QCY2011, with betterthan- expected net sales growth of 31.4% yoy (4.8% qoq) to Rs.350cr against our expectation of Rs.310cr. EBITDA margin contracted by 150bp yoy (170bp qoq) to 18.1% mainly due to higher raw-material expenses. Raw-material cost increased primarily on the trading part of the business, which we believe could be due to the depreciation of INR against the Euro. Purchase of traded goods as a percentage of sales jumped substantially by 480bp yoy during the quarter. However, 380bp yoy savings in other expenditure arrested further fall in margins. Led by strong top-line performance net profit posted better-than-expected 27.3% yoy growth to Rs.43cr. We expect the company to sustain its strong performance going ahead, led by likely easing of interest rates from 1QFY2013, which is expected to revive demand in the automotive and industrial segment. We maintain our Buy view on the stock; however, our target price is under review.

Anant Raj

Anant Raj Industries announced its 3QFY2012 numbers. Net sales declined by 25.9% yoy to Rs.92cr (Rs.124cr), well below our estimate. EBITDA declined by 36.5% yoy to Rs.49cr (Rs.77cr) due to lower revenue and margin compression. EBITDA margin declined by 888bp yoy to 53.2% (62.1%). Adjusted PAT declined by 37.3% yoy to Rs.31cr (Rs.50cr) and PAT margin declined by 622bp yoy to 31.5% (50.3%), almost in-line with EBITDA margin contraction. We will be coming out with a detailed report post management interaction. We have an Accumulate rating on the stock with a target price of Rs.78.

HAIL – 4QCY2011

Honeywell announced its 4QCY2011 numbers. The top line grew by 21% qoq to Rs.503cr in 4QCY2011 from Rs.412cr in 4QCY2010. Annual sales for CY2011 stood at Rs.1619, 19% higher from CY2010. The company's margin came in at 9.1%, 259bp higher on a qoq basis, on account of a decrease in raw-material and employee cost as percentage of sales. Net profit for the quarter rose by 31.5% yoy, from Rs.25.7cr to Rs.33.9cr. Annual net profit stood at Rs.107cr, 6.7% higher yoy. We maintain our Buy recommendation on the stock; our target price is under review.

Dishman Pharmaceutical

For 3QFY2012, Dishman Pharmaceutical posted net sales of Rs.265.5cr, registering 14.5% yoy growth. The company’s growth was driven by the MM segment, which reported 30.9% yoy growth. The CRAMS segment reported 6.9% yoy growth. The company’s OPM came in at 15.9%; however, adjusted for forex losses, it stood at 20.1%. The company reported higher tax expenses during the quarter. Consequently, net profit came in at Rs.16.7cr, lower than our expectation of Rs.19.8cr. However, given the traction in growth and improving profitability, we maintain our Buy rating on the stock; the target price is under review.

JK Tyre

JK Tyre (JKI) reported dismal set of results for 3QFY2012, posting net loss on the bottom-line front, led by higher interest expense and forex loss of Rs.38cr. For 3QFY2012, net sales grew strongly by 20.7% yoy (10.4% qoq) to Rs.1,423cr. Operating performance bounced back sequentially with EBITDA margin expanding by 297bp to 5.1%, driven by raw-material cost savings (100bp qoq) and decline in other expenditure (200bp qoq). JKI, however, posted net loss of Rs.21cr on account of an 87.8% yoy increase in interest expense to Rs.45cr and forex loss of Rs.38cr. The stock rating is currently under review.

3QFY2012 - Result Previews

DLF

DLF is expected to announce its 3QFY2012 results. We expect the company’s net sales to increase by 9.6% yoy to Rs.2,719cr. EBITDA margin is expected to contract by 377bp yoy to 43.7% on account of higher input costs. Net profit is expected to decline by 11.1% yoy to Rs.414cr. We maintain our Neutral rating on the stock.

RCom

Reliance Communication (RCom) is slated to announce its 3QFY2012 results. We expect the company to record revenue of Rs.4,968cr, up 3.7% qoq. Growth is expected primarily on the back of qoq flat ARPM at Rs.0.45/min and 1.0% qoq growth in MOU to 229min. EBITDA margin is expected to increase by 83bp qoq to 29.1%. PAT for the quarter is expected to come in at Rs.144cr. We maintain our Neutral view on the stock.

Britannia

Britannia is expected to announce its 3QFY2012 results. For the quarter, we expect Britannia to report healthy 18% yoy growth in revenue to Rs.1,271 due to improvement in sales mix. For the quarter, we expect the company to report an 11bp yoy margin improvement. Earnings for the quarter is expected to grow by 20% yoy to Rs.45cr on the back of healthy top-line growth. At the CMP, the stock is trading at 21.7 x F2013E EPS of Rs.22.5. We recommend Neutral on the stock.

Aurobindo Pharma

For 3QFY2012, Aurobindo Pharma is expected to post net sales of Rs.1,295cr, registering 20.8% yoy growth. The company is expected to post OPM of 12.1%, reporting a dip of 652bp yoy. Net profit is expected to come in at Rs.98.5cr, down 49% yoy. At the CMP, the stock is trading at 8.4x FY2013. We continue to maintain our Buy recommendation on the stock with a target price of Rs.166.

CCCL

Consolidated Construction Consortium (CCCL) is expected to post modest 8.0% yoy growth in its top line to Rs.535.9cr, given the slow-moving infra orders forming ~40% of its total order book. On the EBITDA front, we expect the company to continue to report a dismal performance and register a dip of 654bp yoy to 3.2%, in-line with management's guidance. Against this backdrop, the bottom line is expected to post loss of Rs.5.2cr in 3QFY2012 vs. profit of Rs.16.7cr in 3QFY2011. We continue to maintain our Neutral view on the stock.

Economic and Political News
- Current account deficit seen widening as exports struggle
- Government nods for JVs by defense PSUs
- Exports up 10.1%; Imports jump by 20.3% in January 2012

Corporate News
- Additional tax on diesel cars will further impede industry growth: M&M
- CEAT to set up Rs.250cr plant in Bangladesh
- Tata Global, PepsiCo JV eyes Rs.700cr turnover in the next five years
- Tulip Telecom CEO Sanjay Jain quits
- Unity Infraprojects bags orders worth Rs.485cr

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Indian stock market and companies daily report (February 09, 2012, Thursday)

2012-02-08T21:57:00.000-08:00

The domestic markets are expected to open in the red tracking flat to negative opening in most of the Asian markets. Indian markets posted a volatile trading session and closed in green on Wednesday amidst optimism towards the developments in Greece’s debt restructuring deal.

Globally, however U.S. and European stocks remained choppy and ended flat, as the markets waited for additional news from Greece. The Greek government, which is close to announce another round of spending cuts in order to secure bailout funds is also in negotiations with private creditors on a voluntary debt reduction.

Indian investors, meanwhile, would keenly watch out for the domestic industrial production growth (Bloomberg estimate-3%) for the month of December, due to be released on Friday. Also initial jobless claims data of the U.S. for the previous week due to be released today will be on radar.

Markets Today

The trend deciding level for the day is 17,699 / 5,363 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17,818 – 17,928 / 5,402 – 5,435 levels. However, if NIFTY trades below 17,699 / 5,363 levels for the first half-an-hour of trade then it may correct up to 17,588 – 17,469 / 5,330 – 5,292 levels.

TCS establishes JV with Mitsubishi for Japanese market

TCS has announced a 60:40 JV with Japan’s Mitsubishi Corp. to serve clients in the East Asian region. The companies will invest US$5mn to set up a delivery center in Japan. The JV company will offer a full service suite of IT, BPO and infrastructure services to Japanese corporations. TCS said that this JV comes against the backdrop of a strong yen, the globalization of supply chains and a growing trend toward overseas mergers and acquisitions, all of which act as catalysts for the increasing globalization of Japanese companies. This has brought heightened interest in the role of global IT services to link domestic and overseas operations.

The JV is important for TCS as the company derives only ~1% of its revenue from Japanese markets and 7% from the Asia Pacific region. This is a good opportunity for TCS in which it can leverage a partner like Mitsubishi and get an entry into the world's third largest economy and provide software services there. This will be positive in the sense that the market share of TCS in Japan will rise as a result of the partnership with Mitsubishi and the company will also have a presence across all geographies. We maintain our Accumulate rating on the stock with a target price of Rs.1,262.

3QFY2012 - Result Reviews

ONGC

ONGC’s 3QFY2012 profitability declined on account of increased subsidy burden. The company’s top line decreased by 2.5% yoy at Rs.18,124cr. ONGC’s crude oil net realization declined by 30.9% yoy to US$44.8/bbl on account of higher subsidy burden. The company shared a subsidy burden of Rs.12,536cr in 3QFY2012 vs. Rs.4,222cr of subsidy shared in 3QFY2011and Rs.5,713cr in 2QFY2012. Oil sales volumes decreased by 4.0% yoy to 5.6mn tonnes, while gas sales volumes decreased by 1.4% yoy to 5.0bcm during 3QFY2012. EBITDA margin slipped by 1,183bp yoy to 61.0% and EBITDA decreased by 23.6% yoy to Rs.11,051cr. The company’s depreciation and amortization expenses increased by 24.5% yoy to Rs.4,532cr due to higher dry well write-offs. The company reported one-time gain of Rs.3,142cr related to royalty reimbursed by Cairn India (initially paid by ONGC for August 2009-September 2011). Excluding this one-time gain, adjusted net profit decreased by 49.2% yoy to Rs.3,599cr. Reported net profit decreased by 4.8% yoy to Rs.6,741cr. For FY2013, ONGC has given oil and gas production guidance of 28.8mn tonnes (+4.0% yoy) and 27bcm (+7.0% yoy). The stock is under review currently.

Bharti Airtel

Bharti Airtel (Bharti) reported a mixed performance for 3QFY2012, with revenue coming in-line with our as well as street expectations, while it disappointed on the operating and profitability fronts due to higher depreciation and amortization expenses. Bharti’s consolidated revenue stood at Rs.18,477cr, up 6.9% qoq. Revenue from mobile services for India came in at Rs.10,176cr, up 4.0% qoq on the back of a 3.2% qoq increase in average revenue per minute (ARPM) to Rs.0.45/min. However, MOU declined by 1.0% qoq due to slow traffic growth. Revenue of mobile India business was also impacted because of the slight decline in VAS share (even when 3G services are launched in all the circles and this was seasonally a strong quarter for telecom companies), which decreased to 14.3% in 3QFY2012 from 14.5% in 2QFY2012. All this led to 2.2% qoq growth in ARPU to Rs.187/month. Zain Africa’s revenue stood at Rs.5,358cr, up 16.7% qoq, aided by addition of 2.5mn subscribers, taking its total subscriber base to 50.9mn and a 0.1% qoq increase in ARPM to US¢5.7/min. However, MOU declined by 2.5% qoq to 125min, which led to a 2.3% qoq fall in ARPU to US$7.1/month.

EBITDA margin of mobile India as well as Africa business increased by 0.18bp and 0.47bp qoq to 33.8% and 26.7%, respectively. However, EBITDA margin of all the other business segments declined sharply, which led to a 141bp qoq decline in Bharti’s consolidated EBITDA margin to 32.2%. PAT came in at Rs.1,011cr, down 1.5% qoq, negatively impacted by higher depreciation cost of Rs.3,585cr in 3QFY2012 vs. Rs.3,184cr in 2QFY2012 and higher tax rates. Net profit stood at Rs.1,011cr, down 1.5% qoq, negatively impacted by higher depreciation cost of Rs.3,585cr in 3QFY2012 vs. Rs.3,184cr in 2QFY2012 and higher tax rate of 35.2% vs. 32.4% in 2QFY2012. We maintain our Neutral rating on the stock.

Tech Mahindra

Tech Mahindra reported muted set of 3QFY2012 results. Dollar revenue came in at US$288.7mn, down 2.5% qoq due to a 0.5% qoq decline in volume and ~2.0% qoq negative cross-currency impact. Dollar revenue from BT declined by 7.8% qoq and revenue from non-BT grew by just 0.6% qoq. In rupee terms, revenue came in at Rs.1,445cr, up 8.4% qoq, largely aided by qoq rupee depreciation. EBITDA margin grew by 90bp qoq (lower than margin expansion reported by peers) to 16.2% because of depreciating rupee, which absorbed the negative impact of onsite wage hike given. PAT, including share from Satyam, came in at Rs.276cr. Overall results were weak. The only growth driver for the company is the non-BT business, as BT is retendering its contracts. The stock is currently under review.

Bharat Forge

For 3QFY2012, Bharat Forge (BHFC) reported an in-line 21.1% yoy (3.4% qoq) jump in its standalone revenue to Rs.941cr, driven by a 15.3% yoy (1.3% qoq) jump in domestic revenue and 29.2% yoy (7.6% qoq) jump in exports revenue. While volume in tonnage terms increased by 15.2% yoy (3.1% qoq) to 55,412MT on strong export demand, average net realization grew by 6% yoy (1.45% qoq), led by higher contribution from the non-auto segment. Strong growth in the CV segment and non-auto segment in the Europe and U.S. benefitted the company’s exports performance. On the operating front, margin improved by 38bp yoy (99bp qoq) to 24.7%, owing to better product-mix and decline in raw-material expenses. Net profit grew by 24.9% yoy (down 3% qoq) to Rs.103cr, led by strong operating performance. However, growth was restricted on account of forex loss of Rs.16.1cr. The stock rating is currently under review.

Orchid Chemicals

For 3QFY2012, Orchid Chemicals’ net sales came in at Rs.482.1cr, growth of 4.2% yoy. During 3QFY2012, API sales rose to Rs.353.3cr as compared to Rs.329.7cr in 3QFY2011. While sales were lower than expected, OPM came in at 23.7%, just in-line with our expectation of 24%. However, higher interest expense during the period led to lower-than-expected net profit. Net profit before exceptional items declined by almost 22.1% during the period. We maintain our Buy recommendation; however, the target price is under review.

Alembic Pharmaceuticals

For 3QFY2012, Alembic Pharmaceuticals’ net sales came in at Rs.383cr, up 15.0% yoy. During the quarter, exports rose by 45.4% yoy to Rs.165.6cr. While sales were just in-line with our estimate, OPMs came in at 18%, higher than our expectation of 14%. Net profit for the quarter came in at Rs.442.3cr. We maintain our Buy recommendation on the stock with a target price of Rs.77.

3QFY2012 - Result Previews

Tata Steel

Tata Steel is slated to report its consolidated 3QFY2012 results. We expect the company’s net sales to increase by 6.5% yoy to Rs.30,992cr, mainly on account of higher steel prices. However, EBITDA margin is expected to contract by 276bp yoy to 9.0% on account of higher raw-material costs (mainly in its European operations). Net profit is expected to decrease by 35.1% yoy to Rs.729cr. We maintain our Buy rating on the stock with a target price of Rs.510.

Hindalco

Hindalco's fully owned subsidiary, Novelis reported loss at the net level for the seasonally weak 3QFY2012. The company’s net sales decreased by 4.0% yoy to US$2.5bn due to lower volumes as well as aluminium price. Shipments of aluminum rolled products decreased by 9.4% yoy to 648kt, primarily due to destocking in Europe on the back of economic uncertainty and weakness in the electronics business in Asia. Adjusted EBITDA decreased by 10.5% yoy to US$213mn on account of higher costs and lower volumes. Also, EBITDA/tonne declined by 1.0% yoy to US$312 during the quarter. Novelis reported net loss of US$12mn compared to a loss of US$46mn in 3QFY2011. The company is witnessing recovery in demand during 4QFY2012; it remains on track to achieve EBITDA of ~US$1bn during FY2012.

Hindalco is slated to report its 3QFY2012 results. We expect the company’s standalone net sales to decrease by 0.1% yoy to Rs.5,909cr. EBITDA margin is expected to contract by 155bp yoy to 10.0% on account of rise in costs of key inputs (primarily coal). Net profit is expected to increase by 4.3% yoy to Rs.480cr. We keep our rating and target price under review.

Ambuja Cements

Ambuja Cements is expected to announce its 4QCY2011 results. On the top-line front, the company is expected to post strong growth of 23.2% yoy to Rs.2,204cr. Strong performance on the top-line front is expected to be driven by higher yoy realization growth (13.7%) and 8.4% yoy growth in dispatches. OPM is expected to increase by 104bp yoy to 21.2%. The company’s bottom line is expected to grow by 10.9% yoy to Rs.286cr. We maintain our Neutral view on the stock.

ACC

ACC is slated to announce its 4QCY2011 results. The company is expected to post top-line growth of 18.7% yoy to Rs.2,325cr, primarily on account of improvement in realization by 14.3%yoy. However, cost pressures are expected to outweigh realization growth and OPM is expected to contract marginally by 6bp yoy to 17.3%. The company’s bottom line is expected to decline by 14.5% yoy to Rs.219cr. We maintain our Neutral view on the stock.

Apollo Tyres

Apollo Tyres is slated to announce its 3QFY2012 results. On a consolidated basis, we expect the company to report a strong 22% yoy increase in revenue to Rs.2,900cr. Sequentially, EBITDA margin is expected to improve by 50bp to 8.5%, led by a sequential decline in raw-material prices. However, net profit is estimated to remain flat on a qoq basis to Rs.79cr. The stock rating is under review.

Anant Raj Industries

Anant Raj Industries is expected to announce its 3QFY2012 results. We expect the company’s net sales to increase by 3.1% yoy to Rs.128cr. EBITDA margin is expected to contract by 316bp yoy to 58.9% on account of higher input costs. Net profit is expected to decline marginally by 0.5% yoy to Rs.50cr. We maintain our Accumulate rating on the stock with a target price of Rs.78.

FAG Bearings – 4QCY2011

FAG Bearings is set to announce its 4QCY2011 results. We expect the company to deliver healthy 17% yoy growth in revenue to Rs.307cr. On the operating front, we expect FAG to post a 100bp yoy contraction in operating profit margin to 18.8%. However, net profit is expected to increase by healthy 14% yoy to Rs.39cr. The stock rating is under review.

Dishman Pharmaceuticals

For 3QFY2012, we expect, Dishman Pharmaceuticals to post net sales of Rs.305cr, up 5% yoy. OPM is expected to come in at in 17.9% vis-à-vis 23.1% in 3QFY2011. Consequently, net profit is expected to come in at Rs.19.8cr, down 30.5% yoy. We maintain our Buy recommendation on the stock with a target price of Rs.77.

Economic and Political News
- Direct tax mop up to miss Rs.5.3 lakh cr budget target
- Exports from SEZs grow 17% in April-December 2011
- IT, ITeS revenue crosses US$100bn milestone: Nasscom
- Indian IT export revenue expected to grow by 11-14% and domestic revenue
by 13-16% for FY2013: Nasscom
- January 2012 car sales rise by 7.2%

Corporate News
- Bharti seeing benefits from India call price hike
- Ceat to set up a 65 MT/day manufacturing facility in Bangladesh
- RIL in talks with airlines for fuel supply
- Tata Power explores prospects overseas
- Thomas Cook starts stake sale in Indian arm

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Indian stock market and companies daily report (February 08, 2012, Wednesday)

2012-02-07T21:34:00.000-08:00

The domestic markets are expected to open in the green tracking positive opening in most of the Asian markets. Indian markets snapped a five-day winning streak on Tuesday after the government revised down its economic growth forecast for the current fiscal year to 6.9% its slowest pace in three years.
Globally, US stocks recovered day’s lows and closed in green yesterday as Greek officials’ reportedly on reaching an agreement to enact the reforms needed to receive a new bailout. Buying interest remained relatively subdued, however, limiting the upside for the markets. Also, a US Labor Department report showed job openings rising to 3.38mn in December from 3.12mn in November showing continues progress in the job market. Indian investors, meanwhile, would keenly watch out for the domestic industrial production growth for the month of December due to be released on Friday.

Markets Today
The trend deciding level for the day is 17,679 / 5,357 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17,775 – 17,929 / 5,391 – 5,448 levels. However, if NIFTY trades below 17,679 / 5,357 levels for the first half-an-hour of trade then it may correct up to 17,526 – 17,429 / 5,301 – 5,267 levels.

L&T bags order worth Rs.1,880cr
Larsen & Toubro's (L&T) construction arm has bagged new orders worth over Rs.1,880cr under various business segments in 4QFY2012. A major chunk of the orders (Rs.1,048cr) has been bagged by the Infrastructure IC that includes an order from West Bengal Government’s state highway circle for building a four-lane elevated corridor under JNNURM. The division has also bagged two others from DMRC for construction of tunnels for the underground works between Mandi house and Jama Masjid, including three stations under Delhi MRTS-phase III. While in the water and effluent treatment business, L&T Construction has secured orders worth Rs.348cr from Gujarat Water Infrastructure Ltd. In the power transmission and distribution segment, new orders worth Rs.263cr have come and additional orders from various ongoing projects worth Rs.221cr have been bagged by L&T Construction.
At the CMP of Rs.1,354, the stock is trading at PE of 19.1x FY2013E earnings, which is below the historical trading multiple for L&T. We have used SOTP methodology to value the company to capture all its business initiatives and investments/stakes in the different businesses. Ascribing separate values to its parent business on a P/E basis and investments in subsidiaries on P/E, P/BV and mcap basis, our target price works out to Rs.1,607, which provides 18.7% upside from current levels. Hence, we maintain our Buy rating on the stock.

Direct import of ATF approved
Empowered Group of Ministers (EGoM) has approved the import of aviation turbine fuel (ATF) directly by airline companies, which we believe is a positive move for the aviation industry. If airline companies start to import ATF directly, we believe they can reduce the fuel cost on an average by 10-15%, which could help them improve their margins and profitability, as currently nearly 50% of the total operating cost is accounted by fuel cost. However, we believe direct import of fuel in the short to medium term will be very difficult, as airline companies do not have the required infrastructure to do so and, given the state of the industry, are not in any condition to invest capital to build the required infrastructure. The only other possibility for airline companies is to reach an agreement with oil marketing companies to use their infrastructure, which we believe will come at a cost, since oil marketing companies are at the losing end and will charge a premium to make up for the loss of profit from this policy.
Overall, we believe this move is aimed to make the industry more attractive for FDI in future and will create transparency on the pricing of ATF in India. Since, we do not expect any short to medium term monetary gain from this policy, we continue to maintain our Neutral stance on the sector. However, if FDI is approved for international airline companies in future, which we believe has a high possibility, we may change out rating.

3QFY2012 - Result Reviews
Mahindra and Mahindra
Mahindra and Mahindra (MM) reported robust top-line growth of 37% yoy (13.9% qoq) to Rs.8,387cr, driven by impressive volume growth of 24% yoy (6.7% qoq) and strong net average realization growth of 10.6% yoy (6.9% qoq). Volume performance was aided by sustained momentum in the automotive segment, which registered growth of 31.3% yoy (2.9% qoq). In the passenger UV segment, MM posted strong 22.9% yoy growth, retaining its dominant position with a market share of 57.8% (54% in 2QFY2012). The farm equipment segment, on the other hand, witnessed moderate growth of 12.2% yoy with domestic tractor volumes registering growth of 11.8% yoy. However, MM managed to improve upon its domestic market share, which increased to 42.9% (41.2% in 2QFY2012) at the end of 3QFY2012.
The company’s EBITDA margin contracted by 292bp yoy (14bp qoq) to 12.2%, largely driven by increased purchase of finished products (up 265% yoy and 75% qoq) from the manufacturing subsidiary, Mahindra Vehicle Manufacturers Limited (MVML). As a result, total raw-material cost as a percentage of sales increased by 515bp yoy (178bp qoq) to 74.3%. EBIT margin of the automotive and farm equipment segments declined by 412bp yoy (175bp qoq) and 283bp yoy (up 33bp qoq) to 8.2% and 15.6%, respectively. Thus, adjusted net profit posted modest 7.3% yoy (down substantially by 13.9% qoq) growth to Rs.662cr. Additionally, a 37.8% yoy (12% qoq) increase in depreciation expense impacted the bottom line during the quarter. AtRs.689, the stock is trading at 13x FY2013E earnings. We maintain Buy rating on the stock while the target price is under review.
Cadila
Cadila Healthcare (Cadila) reported lower-than-expected numbers for 3QFY2012, except on the sales front, where sales were mostly in-line at ~Rs.1,350cr. However, higher R&D expense during the quarter resulted in depression in operating margin, which came in at 17.1%. This coupled with forex losses during the quarter resulted in higher dip in net profit. The stock is trading at 17.5x FY2012E and 13.6x FY2013E earnings. We recommend Buy on the stock with a target price of Rs.965.
ITNL
For 3QFY2012, on a consolidated basis, IL&FS Transportation Networks (ITNL) posted a mixed set of numbers with strong growth on the top-line front, however the fall in EBITDAM and high interest cost led to lower-than-expected bottom-line growth. The company’s revenue for the quarter came in at Rs.1,268cr (Rs.734cr), registering 72.9% yoy/1.0% qoq growth, marginally lower than our estimate of Rs.1,306cr. EBITDA margin for the quarter stood at 25.3% vs. 30.6% in 3QFY2011, down 480bp and 310bp on a yoy and qoq basis, respectively, against our estimate of fall of 280bp on a yoy basis. This was mainly on account of increased contribution from the relatively low-margin C&EPC segment. ITNL’s interest cost during the quarter grew by 60.9% yoy/9.5% qoq to Rs.185cr, ahead of our expectation of Rs.178cr. On the earnings front, ITNL reported growth of 42.5% on a yoy basis to Rs.87.8cr, lower than our estimate of Rs.119.7cr on the back of lower EBITDAM and higher interest cost. Owing to the recent run-up in the stock price, we recommend Accumulate on the stock with a target price of Rs.227.
JK Lakshmi Cement
JK Lakshmi Cement reported 39.6% yoy top-line growth to Rs.440cr, aided by robust 23.7% yoy growth in realizations coupled with 12.8% growth in dispatches to 1.22mn tonnes. The company’s OPM rose by 1,352bp yoy to 21.4% due to strong improvement in realization even as freight costs, personnel expenses and other expenses increased by 8% yoy, 23% yoy and 9% yoy, respectively, on per tonne basis. The bottom line surged to Rs.49.2cr in 3QFY2012 from Rs.4.6cr in 3FY2011 due to strong operating performance and 59% yoy growth in other income to Rs.14.8cr. The Board of Directors have approved the buyback of equity shares up to an amount of Rs.97.50cr at a maximum price of Rs.70 per equity share (i.e. 1.39cr equity shares of Rs.5 each from the open market through Stock Exchanges). The stock is currently under review.

3QFY2012 - Result Previews
ONGC
ONGC is slated to announce its 3QFY2012 results. We expect the company’s top line to decrease by 17.3% yoy to Rs.17,200cr on account of higher subsidy. EBITDA margin is expected to decline by 1,354bp yoy to 51.5%. The bottom line is expected to decrease by 37.1% yoy to Rs.4,454cr. We maintain our Buy view on the stock with a target price of Rs.324.
Bharti Airtel
Bharti Airtel is slated to announce its 3QFY2012 results. We expect the company to record revenue of Rs.18,312cr, up 5.0% qoq on the back of 2.3% and 2.0% qoq growth in ARPM and MOU to Rs.0.44min and 432min, respectively. VAS as a share in mobility revenue is expected to move to 15.0% in 3QFY2012 from 14.5% in 2QFY2012. Consolidated EBITDA margin of the company is expected to increase by 40bp qoq to 34.1%. PAT is expected to be at Rs.1,445cr. We maintain our Neutral view on the stock.
Tech Mahindra
Tech Mahindra is slated to report its 3QFY2012 results. We expect the company to record 0.5% qoq growth in dollar revenue to US$296.2mn, majorly led by volume growth. Revenue from the BT account is expected to decline by 2.3% qoq while the non-BT business is expected to post 2.1% qoq growth. EBITDA margin is expected to enhance by 209bp qoq to 17.4% due to INR depreciation. PAT, excluding earnings from Mahindra Satyam, is expected to settle at Rs.184cr. We maintain our Accumulate rating on the stock with a target price of Rs.666.
Bharat Forge
Bharat Forge is slated to announce its 3QFY2012 results. On a standalone basis, we expect the company to deliver 22% yoy growth in revenue to Rs.917cr. EBITDA margin is expected to witness a contraction of 79bp yoy to 23.5%. As a result, net profit is expected to grow by 17% yoy to Rs.97cr, slightly slower than the top-line growth. The stock rating is under review.
Orchid
For 3QFY2012, Orchid Chemicals is expected to post net sales of Rs.555cr, growth of 20% yoy. The company’s margin is expected to come in at ~24%, in-line with 3QFY2011 operating margin. Overall, net profit is expected to grow by 16.8% to Rs.57cr. We maintain our Buy recommendation on the stock with a target price of Rs.270.
Alembic
For 3QFY2012, Alembic Pharmaceuticals is expected to post net sales of Rs.389cr and net profit of Rs.31.9cr. Growth would mainly be driven by exports sales. The company’s OPM is expected to come in at ~14.0% during the period. We maintain our Buy recommendation on the stock with a target price of Rs.77.

Economic and Political News
- Airlines get GoM nod to import fuel directly
- Annual budget for FY2012-13 will be presented on March 16, 2012
- Government pegs FY2012 economic growth at 6.9%
- GoM approves Air India debt recast
- Per capita income expected to cross Rs.60,000 in FY2012

Corporate News
- Government rejects RIL demand for gas price revision
- Infosys to strengthen presence in Oman
- Legal tangle delays NTPC's order placement of Rs.34,000cr
- UTV denies purchasing Dabangg 2 rights

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Indian stock market and companies daily report (February 07, 2012, Tuesday)

2012-02-07T01:11:00.000-08:00

The domestic markets are expected to open in the green tracking positive opening in most of the Asian markets. Indian markets extended their bull run on Monday, with shares hitting fresh 14.5 week highs in early trading as positive economic data from the US raised hopes the global economy will withstand the impact of Europe's debt crisis.
Globally, US stocks retreated from multi-year highs on Monday as Greece struggled for an agreement on spending cuts needed to ensure another round of rescue funds. Greece missed a deadline on enacting reforms necessary to receive a new bailout from the European Union and the International Monetary Fund. Selling pressure remained subdued, however, limiting the downside for the markets. Indian investors this week, meanwhile, would keenly watch out for the domestic industrial production growth for the month of December due to be released on Friday. Also, consumer comfort index of US which will be released on coming Thursday will be on radar.

Markets Today
The trend deciding level for the day is 17,711 / 5,360 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17,826 – 17,945 / 5,392 – 5,422 levels. However, if NIFTY trades below 17,711 / 5,360 levels for the first half-an-hour of trade then it may correct up to 17,592 – 17,476 / 5,392 – 5,297 levels.

L&T bags order worth Rs.1,937cr
Larsen & Toubro's (L&T) construction arm has bagged a road project worth Rs.1,937cr from the GVK Group to widen a highway in Madhya Pradesh. The contract involves designing, engineering and construction for four-laning of a major portion of Shivpuri-Dewas section of NH-3 totaling 235km. The construction period is 27 months.
At the CMP of Rs.1,383, the stock is trading at PE of 19.5x FY2013E earnings, which is below the historical trading multiple for L&T. We have used the SOTP methodology to value the company to capture all its business initiatives and investments/stakes in the different businesses. Ascribing separate values to its parent business on a P/E basis and investments in subsidiaries on P/E, P/BV and mcap basis, our target price works out to Rs.1,607, which provides 16.2% upside from current levels. Hence, we maintain our Buy view on the stock.

Upstream oil firms to bear higher subsidy
Media reports suggests that state-run upstream companies will share 38.0% of the revenue losses (under-recoveries) suffered by oil marketing companies (OMCs) due to selling fuels at discounted prices for the period April–December 2011. The upstream companies had shared 33.0% of under-recoveries during 1HFY2012. During April–December 2011, total under-recoveries of OMCs stood at Rs.97,300cr.
Thus, ONGC will have to bear subsidy burden of Rs.30,296cr for April–December 2011, which is expected to result in additional subsidy burden of Rs.12,536cr during 3QFY2012. We had pegged upstream companies share of under-recoveries at 38.0% for FY2012 and, thus, do not change our estimates. We maintain our Buy rating on ONGC with a target price of Rs.324.

3QFY2012 - Result Reviews
HUL
HUL posted a healthy set of numbers for the quarter, in-line with our estimates. The company’s top line grew by 16.4% yoy to Rs.5,853cr. Earnings for the quarter grew by 18% yoy, marginally above our estimate, to Rs.754cr. The company’s top line was driven by modest volume growth of 9% yoy. Overall, FMCG sales grew by 17% yoy, aided by 18% yoy growth in the home and personal care (HPC) and 13% yoy growth in foods businesses. During the quarter, the soaps and detergent (S&D) segment posted 21% yoy revenue growth, while its EBIT margin expanded by 573bp yoy to 13.5%. The packaged food business reported 13.5% yoy growth. The personal products segment grew by 14% yoy. At the operating level, OPM expanded by 271bp yoy to 15.1% for 3QFY2012. The company cut its ad spends and other expenses and negated the affect of gross margin pressure. We maintain our Neutral rating on the stock.
Nalco
Nalco reported disappointing 3QFY2012 results. The company’s net sales grew by 0.4% yoy to Rs.1,430cr (below our estimate of Rs.1,770cr). Raw-material costs as a percentage of net sales stood at 16.7% in 3QFY2012 compared to 8.4% in 3QFY2011. Further, power costs as a percentage of net sales stood at 39.7% compared to 31.1% in 3QFY2011. Hence, EBITDA decreased by massive 83.6% yoy to Rs.64cr and EBITDA margin contracted by 2,287bp yoy to 4.5%. Other income, however, grew by 46.4% yoy to Rs.131cr. Consequently, net profit decreased by 80.0% yoy to Rs.51cr (significantly below our estimate of Rs.224cr). We maintain our Neutral view on the stock.
GSK Consumer
For 4QCY2011, GSK Consumer reported a modest performance, which was below with our estimate on the revenue and earnings fronts. The company’s top line grew by 18.6% yoy to Rs.602cr (Rs.508cr). On the operating front, the company recorded a 127bp yoy decrease in its operating margin to 10.2%, primarily on account of higher ad spends and other expenditure. However, the fall in OPM was curbed by reducing the staff cost by 174bp yoy. Earnings for the quarter grew by 10.7% yoy to Rs.59cr (Rs.53cr) on account of higher other income. The stock is under review.
MOIL
MOIL’s 3QFY2012 results were slightly below our expectations. Net sales decreased 5.4% yoy to Rs.240cr (slightly below our estimate of Rs.248cr) which would be mainly on account of decrease in average realizations in our view. EBITDA decreased 11.1% yoy to Rs.109cr. EBITDA margin dipped 293bp yoy to 45.7% on account of slump in manganese ore prices. Other income stood flat yoy to Rs.50cr, while tax rate was higher at 33.2%, compared to 30.5% in 3QFY2011. Consequently, net profit decreased 11.9% yoy to Rs.102cr, slightly below our estimate of Rs.106cr. We maintain our Neutral view on the stock.
India Cements
For 3QFY2012, India Cements registered healthy 20.5% yoy growth in its top line to Rs.944cr on account of a substantial 16.2% yoy increase in cement realization to Rs.4,262/tonne and reasonable 6.9% yoy growth in dispatches to 2.18mn tones, as retail cement demand has picked up in South India, which is the company’s major market. Southern region posted demand growth of 3.3% yoy during the quarter. OPM rose by 443bp yoy to 20.9% due to better cement realization despite higher power and fuel and freight costs. Power and fuel cost per tonne increased by 7.4% yoy during the quarter on account on higher coal imports, costlier domestic coal and higher power tariffs in Andhra Pradesh. Freight costs per tonne were higher by 5.1% yoy on account of increased railway freight and higher price of petroleum products. The bottom line came at Rs.56cr, registering growth of 162.3% yoy. We maintain our Neutral view on the stock.
BGR Energy
BGR Energy (BGR) posted a mixed set of numbers for 3QFY2012. As expected, the company’s top line for the quarter stabilized on prior-year period’s high base; however, earnings exceeded estimates owing to better-than-expected show on the operating front. The company’s top line declined by 36.1% yoy to Rs.803.7cr (Rs.1,257cr), which was lower by 10.8% (below street) than our expectation of Rs.901.1cr. The downside in revenue mainly came from the construction and EPC segment, which declined by 38.8.% yoy to Rs.727.1cr (Rs.1,118cr). In contrast, the capital goods segment posted decent 19% yoy growth to Rs.75.2cr (Rs.63.2cr). On the EBITDA front, the company’s margin posted a positive surprise – EBITDAM eported a sharp expansion of 463bp yoy to 16.3%, against our estimate of 12%. Margin was mainly aided by lower raw-material costs, which contracted by 730bp yoy to 73.1% as a proportion of revenue. Segment wise, the capital goods as well and construction and EPC segment offered upside to the margin, expanding more than ~400bp. As is the case since the past few quarters, we believe the construction and EPC segment would have been positively impacted by higher execution of BoP projects.
Interest cost during the quarter rose by 175% yoy/53% qoq to Rs.46.2cr, probably due to enhanced working capital debt, in our view. Led by slumped revenue, PAT declined by 37.5% yoy to Rs.54.7cr (Rs.87.6cr), however striking EBITDAM influenced the bottom line considerably – PAT came in 16% higher than our (below street) estimate of Rs.47.2cr.
Order backlog at the end of the quarter stood at Rs.8,000cr, largely aided by the Rs.1,700cr worth of order secured during the quarter. Notably, with 9MFY202 totaling mere ~Rs.2,300cr, we believe it will be challenging for the company to exceed Rs.4,000cr plus revenue target for FY2012 (management guidance). We would like to hear management’s commentary on the company’s future outlook and get more details over the quarterly numbers post which we will revise our estimates and recommendation. Currently, we remain Neutral on the stock.
Bajaj Electricals
Bajaj Electricals (BEL) posted top-line growth of 15.1% yoy to Rs.794cr (Rs.690cr) in 3QFY2012. The lighting segment registered strong 18.8% yoy growth to Rs.200cr (Rs.168cr) and the consumer durable segment registered a 24.7% yoy increase to Rs.414cr (Rs.332cr). The E&P segment registered a 5.1% yoy decline to Rs.179cr (Rs.190cr). EBITDA declined by 8.6% yoy to Rs.65cr (Rs.71cr), largely due to margin compression. EBITDA margin declined by 212bp yoy to 8.2% (10.3%), mainly due to higher other expenditure, which increased to 12.7% of net sales vs. 10.7% in 3QFY2011. PAT declined by 19.1% yoy to Rs.33cr (Rs.41cr), while margin declined by 175bp yoy to 4.1% (5.9%). We will be coming out with a detailed report post management interaction. We continue to maintain our Buy rating on the stock with a target price of Rs.201.
NCC
Nagarjuna Construction Company (NCC) posted a poor set of numbers for 3QFY2012, below our and street expectations. The company’s top line declined by 5.4% yoy to Rs.1,264cr, which was marginally above our expectation of Rs.1,215cr (Consensus: Rs.1,271cr). On the EBITDAM front, the company’s margin stood at shocking 6.1% (10.3%), registering a dip of 350bp yoy and lower than our estimate of 9.5% due to provisions (~Rs.15cr) and time and cost overruns in few projects. Interest cost came in at Rs.69.4cr, registering a yoy jump of 58.3% but a decline of 2.2% on a sequential basis. On the bottom-line front, NCC reported loss of Rs.9.5cr in 3QFY2012 vs. profit of Rs.40.5cr in 3QFY2011, against our estimate of PAT of Rs.14.0cr (Consensus: Rs.26.4cr), owing to decline in top-line and dismal margin performance. The current outstanding order book of NCC stands at Rs.21,990cr, with order inflow of Rs.9,943cr for 9MFY2012. Owing to the abysmal performance in the quarter and recent run-up in the stock price, we recommend Neutral on the stock.
GIPCL
GIPCL posted 26.9% yoy growth in its top line to Rs.391cr, driven by higher fuel costs as generation remained flat at 1,181MU. Vadodara stations I and II had PAF of 96.1% (93.7% in 3QFY2011) and 95.1% (100% in 3QFY2011), respectively. SLPP I and II stations operated at PAFs of 83.9% (89.2% in 3QFY2011) and 61.6% (60% in 3QFY2011), respectively. OPM for the quarter stood at 24.1%, down 1,484bp on yoy basis due to higher gas prices. GIPCL’s 3QFY2012 bottom line fell by 30.6% yoy to Rs.17cr. We maintain our Buy rating on the stock, but the target price is under review.
SpiceJet
SpiceJet announced its 3QFY2012 numbers. The company’s net sales increased by 41.6% yoy to Rs.1176cr (Rs.830cr), on the back of fleet additions during the year. EBITDA declined by 117% yoy to negative Rs.19cr vs. positive Rs.114cr in 3QFY2011. EBITDA margin declined by 1,536bp yoy to negative 1.6% vs. positive 13.7% in 3QFY2011, mainly due to higher fuel costs, which increased to 50.4% of net sales vs. 37.5 in 3QFY2011. Consequently, PAT came in at negative Rs.39cr vs. profit of Rs.94cr in 3QFY2011. We will be coming out with a detailed report post management interaction. We continue to maintain our Neutral recommendation on the stock.
Siyaram Silk Mills
Siyaram Silk Mills announced its 3QFY2012 numbers. Net sales declined by 2.6% yoy to Rs.222cr (Rs.244cr). EBITDA declined by 2.0% yoy to Rs.29cr (Rs.30cr) due to lower revenue. EBITDA margin improved marginally by 9bp yoy to 13.2% (13.1%). PAT declined by 17.0% yoy to Rs.13cr (Rs.16cr), while margin declined by 103bp yoy to 5.9% (7.0%) largely due to higher depreciation and interest cost because of capacity expansion during the quarter. Depreciation increased by 18.1% yoy to Rs.6.3cr (Rs.5.4cr), while interest cost increased by 92.0% yoy to Rs.6.9cr (Rs.3.6cr). We will be coming out with a detailed report post management interaction. We continue to maintain our Buy view on the stock with a target price of Rs.426.

3QFY2012 - Result Previews
Mahindra and Mahindra
Mahindra and Mahindra (MM) is slated to announce its 3QFY2012 results. We expect the company’s top line to grow by robust 31.4% yoy to Rs.7,981cr, backed by impressive 24% yoy growth in total volumes. On the operating front, EBITDA margin is expected to witness a decline of 313bp yoy to 12% on account of increased purchases from manufacturing subsidiary MVML. As a result, the bottom line is expected to report a modest increase of 6% yoy to Rs.654cr. The stock rating is under review.
Cadila
Cadila Healthcare (Cadila) is expected to post yet another strong quarter with 12.6% yoy growth in its net sales to Rs.1,278cr on the back of robust growth on the domestic formulation and exports front. On the OPM front, we expect the company's OPM to dip by 160bp yoy to 21.3% on the back of favorable product mix. Cadila's net profit is expected to increase by 19.1% yoy to Rs.193cr, driven by top-line growth. We maintain our Buy rating on the stock with a target price of Rs.965.
ITNL
We expect IL&FS Transportation Networks (ITNL) to post a strong set of numbers for 3QFY2012 on account of higher number of projects in hand. The company’s revenue is expected to grow strongly by 78.0% yoy to Rs.1,306cr, led by underconstruction road BOT projects. We expect the company to register EBITDAM of 27.3%, down 279bp yoy, owing to higher contribution of the comparatively lowmargin E&C segment. Strong revenue growth is expected to reflect in the company’s earnings, which are expected to surge by 94.2% yoy to Rs.119.7cr. Owing to the recent sharp run-up in the stock price, we recommend an Accumulate view on the stock with a target price of Rs.227.
JK Lakshmi Cement
JK Lakshmi Cement is expected to announce its 3QFY2012 results today. We expect the company’s top-line to grow by 11.4% yoy to Rs.351cr on account of higher yoy realization. On operating front, margins are expected to improve by 550bp yoy to 13.4% aided by higher realization. The company’s net profit is expected to grow by 92% yoy to Rs.9cr (though on a lower base of last year). We recommend Neutral on the stock.

Economic and Political News
- Oil dips below US$114, Greek debt, Iran in focus
- India faces challenges on stable rating outlook, says S&P
- Upstream oil companies to bear 38% of subsidy share
- RBI marginally relaxes FX curbs for banks with big open positions

Corporate News
- LIC to pick 5% stake in Dena Bank
- Petronet in talks with Kerala government for power plant at Kochi
- PFC to raise Rs.40,000cr in FY2013
- SKS raises Rs.243cr via securitization

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Indian stock market and companies daily report (February 06, 2012, Monday)

2012-02-06T01:44:00.000-08:00

The domestic markets are expected to open in the green tracking gap up opening in most of the Asian markets. Indian markets ended higher on Friday for a fourth day in a row on the back of heavy buying by FIIs.
Globally, most of the US and European markets closed higher as traders reacted positively to a much better than expected report on the employment situation in the US in the month of January. With the stronger than expected job growth, the unemployment rate unexpectedly fell to 8.3% (lowest since February 2009) from 8.5% in the previous month. Also, a separate report from the Institute for Supply Management showed that non-manufacturing index rose to 56.8 in January from a revised 53.0 in December, with a reading above 50 indicating growth in the service sector.
Indian investors this week, meanwhile, would keenly watch out for the domestic industrial production growth for the month of December due to be released on Friday. Also, consumer comfort index of US which will be released on coming Thursday will be on radar.

Markets Today
The trend deciding level for the day is 17539 / 5,305 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17,696 – 17,787 / 5,355 – 5,385 levels. However, if NIFTY trades below 17,539 / 5,305 levels for the first half-an-hour of trade then it may correct up to 17,448 – 17,292 / 5,276 – 5,226 levels.

3QFY2012 - Result Reviews
DRL
For 3QFY2012, DRL posted a good set of numbers, much ahead of our expectations. The company’s net sales came in at Rs.2,769.2, growth of 46% yoy. Growth was driven by U.S. sales, which grew by 120% yoy. Other key geographies apart from Europe grew in double digits. Growth in the U.S. was led by the high value launch of Olanzapine 20 mg, new products launched in the past 12 months and strong volume growth across key products. This also aided significant improvement in the company’s gross margin and subsequently in OPM. The company’s OPM expanded by 12% yoy to 27%. Consequently, net profit grew by 88% yoy during the period. We maintain our Buy rating on the stock. The target price is under review.
Madras Cements
During 3QFY2012, Madras Cements’ top line rose by 27.9% yoy to Rs.741cr. The cement business posted 29.4% yoy growth in net sales to Rs.733cr on account of 19.1% yoy growth in dispatches (on a low base) and 8.6% yoy growth in realizations. The wind division’s revenue decreased by 38.8% yoy to Rs.7.7cr. Improved cement realization aided OPM to grow by 243bp to 28.0%, amidst cost pressures felt in freight expenses and other costs. The company’s bottom line increased by 76.7% yoy to Rs.77cr. We maintain our Neutral view on the stock.
HEG
HEG Ltd. reported revenue growth of 35% yoy to Rs.418cr for 3QFY2012 from Rs.310cr in 3QFY2011 due to increased prices of graphite electrodes and over 100% capacity utilization for the quarter. OPM for the quarter contracted by 1,059bp to 11.9% in 3QFY2012 from 22.4% in 3QFY2011 on account of higher other expenses and forex loss of Rs.35.5cr. PAT dipped by 37% yoy to Rs.24cr as compared to Rs.38cr in 3QFY2011. Tax rate was lower at 12% for the quarter compared to 21% in 3QFY2011. We maintain our Buy rating on the stock with a revised target price of Rs.236, based on a target P/B of 1.0x for FY2013E.
TVS Srichakra
For 3QFY2012, TVS Srichakra reported a mixed set of numbers. The company reported 21.1% yoy growth in its net sales, from Rs.287cr in 3QFY2011 to Rs.348cr in 3QFY2012. Net raw-material cost for the company increased by 23.7% yoy. Increased net raw-material cost along with higher other expenditure by 22.3% yoy led to a substantial decline in the operating profit of the company. Operating profit margin stood at 7.1%, a decline of 95bp yoy and 220bp qoq. The company’s profit declined by 33.1% yoy to Rs.7cr, which was Rs.10cr in the same quarter last year. We maintain our Buy recommendation on the stock. The stock price is under review.
Subros
Subros reported poor results for 3QFY2012, led by a yoy decline in volumes and increased interest expense. However, on a sequential basis, higher interest cost and depreciation expense impacted the company’s performance. Subros reported a 7.1% yoy decline in its net sales to Rs.254cr due to a 13% yoy drop in volumes. Net average realization improved by 6.7% yoy, thereby preventing further decline in the top line. On a sequential basis, net sales increased by 5.5% on account of a 9.1% increase in volumes. Operating margin improved by 107bp yoy (62bp qoq) to 8.5%, driven by raw-material cost savings (raw-material to sales ratio declined by 381bp yoy) due to commencement of local production of certain components (mainly evaporators). On the other hand, a 266bp yoy increase in staff cost restricted margin expansion to a certain extent. Net profit nosedived by steep 62.5% yoy (33.7% qoq) to Rs.2.1cr on account of an 88.1% yoy (21.3% qoq) increase in interest cost. The stock rating is currently under review. 3QFY2012 - Result Previews
HUL
HUL is expected to announce its 4QFY2011 results. We expect the company to report a healthy 15.7% yoy growth rate in its revenue to Rs.5,815cr and a 107bp yoy expansion in its operating margin to 13.1%. The company is expected to report 15.7% yoy growth in recurring earnings, owing to healthy revenue traction and an expansion in margins. We maintain our Neutral view on the stock.
Nalco
Nalco is slated to report its 3QFY2012 results. We expect net sales to increase by 24.2% yoy to Rs.1,770cr. However, EBITDA margin is expected to contract by 1,034bp yoy to 17.0% due to rise in prices of key inputs (primarily coal). Net profit is expected to decrease by 12.4% yoy to Rs.224cr. We maintain our Neutral view on the stock.
GSKCH – 4QCY2011
GSK Consumer (GSKCH) is slated to announce its 4QCY2011 numbers. For the quarter, we expect GSKCH to post healthy growth of 20% yoy in its top line to Rs.610cr, driven by growth in its core brands and new product launches. The bottom line is expected to register growth of 17.9% yoy to Rs.63cr, aided by top-line growth and margin expansion of 24bp yoy to 11.8%. We maintain our Neutral view on the stock.
MOIL
MOIL is slated to report its 3QFY2012 results. We expect net sales to decline by 2.1% yoy to Rs.248cr, mainly on account a decline in manganese ore prices. Nevertheless, EBITDA margin is expected to improve by 120bp yoy to 47.0% in 3QFY2012. Net profit is expected to increase by 0.4% yoy to Rs.106cr. We maintain our Neutral view on the stock.
India Cements
India Cements is expected to announce its 3QFY2012 results. We expect the company’s top line to grow by 18% yoy to Rs.922cr, primarily on account of 15.4% yoy growth in realization (though on a lower base of last year). The company’s margin is expected to improve by 220bp yoy to 14.3%, aided by higher realization. The company’s net profit is expected to grow by 19.2% yoy to Rs.26cr. We maintain our Neutral rating on the stock.
BGR Energy
For 3QFY2012, we expect BGR Energy's (BGR) top line to be under pressure due to high base created in 3QFY2011 and partly due to execution delays. The top line is expected to decline by 28.3% yoy to Rs.901.1cr. EBITDA margin is expected to come in at 12.0%. Interest cost is expected to stretch further (owing to hike in interest rates and enhanced working capital debt levels); which, along with slumped revenue, is likely to drag the bottom line down by 46.1% yoy to Rs.47.2cr. At the CMP, the stock is trading at 6.7x and 7.2x FY2012E and Fy2013E EPS, respectively. Currently, we remain Neutral on the stock.
Nagarjuna Construction Company
We expect subdued performance from Nagarjuna Construction (NCC) for this quarter. On the top-line front, NCC is expected to post a yoy decline of 9.0% to Rs.1,215cr. EBITDA margin is expected to be flat at 9.5%. On the earnings front, we expect NCC to post a decline of 65.4% yoy to Rs.14.0cr for the quarter. This would be primarily due to burgeoning interest cost (yoy jump of ~73.2%) and a decline in the company’s top line. Owing to the sharp run up in the stock price, we recommend Neutral on the stock.
GIPCL
GIPCL is expected to announce its 3QFY2012 results. The company is expected to register 15.5% yoy growth in its revenue to Rs.353cr, primarily on the back of higher volumes from 250MW SLPP station II. OPM is set to expand by 633bp to 33.1% due to higher availability of Surat II station. The company’s bottom line is expected to improve by 52.6% yoy to Rs.37cr in 3QFY2012. We maintain our Buy rating on the stock with a target price of Rs.95.

Economic and Political News
- Court quashes Swamy's petition, relief for Chidambaram
- Global food prices to ease in 2012: World Bank
- Government may lower STT in Budget to boost markets
- GoM meeting on ATF import, FDI, AI on Thursday
Corporate News
- Central Bank of India may recast loans to power utilities
- Fortis invests Rs.274cr in two Singapore healthcare ventures
- Mundra project may become an NPA: Tata Power
- Reliance Industries to charge US$0.15 marketing margin on CBM gas
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Indian stock market and companies daily report (February 03, 2012, Friday)

2012-02-02T21:47:00.001-08:00

The domestic markets are expected to open flat tracking mixed cues from the global markets. Asian shares were trading lower on increased loss forecasts by Asian companies as Europe’s debt crisis weighed on global sales.
The US markets remained subdued even as the weekly jobless claims report showed that claims fell by more than anticipated in the week ended January 28th as investors preferred to wait for the more definite monthly employment report from the Labor Department due to be released today.
Meanwhile Indian markets continued their good performance on Thursday also. The key thing about the recent rally is the higher volumes being registered, indicating positive investor sentiment and renewed investor appetite.

Markets Today
The trend deciding level for the day is 17,415/5,262 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17,521 – 17,611/5,298 – 5,326 levels. However, if NIFTY trades below 17,415/5,262 levels for the first half-an-hour of trade then it may correct up to 17,325 – 17,219/5,234 – 5,198 levels.

2G case verdict: 122 licenses cancelled, auction to follow
The Supreme Court today, in its judgment for the 2G case, cancelled 122 licenses given to telecom firms since January 2008. The cancelled licenses include 9 of Idea Cellular, 3 of Tata Teleservices, 9 of Swan Telecom, 21 of Loop Telecom, 21 of Videocon and 22 of Uninor. Telecom firms can operate the licences for four months at market rate payment. Moreover, Unitech Wireless and Swan Telecom have been fined Rs.5cr. Within two months, the TRAI will recommend fresh guidelines on the grant of new licenses and the government will make its decision after one month post the submission of recommendations.
Of the companies under our coverage, for Bharti Airtel and Reliance Communication none of the licenses were canceled as all licenses to them were issued before 2008. For Idea, the licenses have been cancelled for the following circles – Punjab, Karnataka, Tamil Nadu and Chennai, West Bengal, Orissa, Kolkata, Assam, North East and Jammu & Kashmir. These circles contribute ~10% to Idea’s overall revenue as of now and are EBITDA negative with margin at ~ negative 31%. Subscriber base from these circles is 17% of Idea’s total subscriber base. Idea paid Rs.685cr in January 2008 to acquire licenses in these circles and then invested ~Rs.970cr in the next couple of years to establish network in these circles. These investments done by the company are at a risk now due to the judgment passed. However, we believe if the government conducts an auction of the spectrum, Idea could emerge as one of the potential winners, given its huge subscriber base (~106mn) and better cash flow generation as against all the other players in the industry (ex. Bharti Airtel).
For other telecom players, licenses cancelled are as follows:
We believe this move will increase consolidation in the highly competitive telecom industry and the total number of players operating in the industry can come down to 9-10 from 14 currently. Also, Bharti and Vodafone appear to be the marginal beneficiaries due to the potential for rationalization in competition and further pricing stability. Operators such as Idea and Tata Teleservices may also benefit from this, but they will have to incur additional charges (from re-bidding at market prices) if they intend to maintain their pan-India presence. We remain Neutral on the telecom sector.

Banks unlikely to see a major impact of 2G license cancellation on their books
The Supreme Court has cancelled 122 licenses for mobile networks issued during A. Raja’s tenure as Telecom minister and has asked TRAI to make fresh recommendations on allotment of the licenses within four months.
According to SBI’s management the bank’s funded exposure to the affected companies’ stands at ~Rs.1,100cr, which is only a minor 0.14% of the overall loan book. Also, all loans are not expected to turn into NPAs as all the affected companies are likely to rebid for the licenses within four months. Also, according to the management, the non-funded exposure for the bank in form of guarantees to the affected companies, which are to the tune of Rs.3,400cr, are likely to stand cancelled as these guarantees were issued for the licenses.
According to IDBI’s management, the bank does not have a large exposure to the affected companies, while Central bank of India has exposure to only a couple of affected entities.

AL, BJAUT monthly sales numbers - January 2012
Ashok Leyland (AL)
AL reported better better-than-expected 33.6% yoy growth (13.3% mom) in total volumes to 10,300 units, driven largely by Dost sales, which reported 1,100 units during the month. Excluding Dost, volumes jumped 19.6% yoy (1.5% mom).
Bajaj Auto (BJAUT)
BJAUT posted marginally lower-than-expected 7.7% yoy (up 10.5% mom) growth in total volumes to 337,875 units for January 2012, largely due to modest 6.8% yoy growth in the motorcycle segment. Sequentially volumes improved by 11.7% during the month. Exports momentum also witnessed moderation as exports volumes grew by 13% yoy (down 2.3% mom). Three-wheeler volumes, on the other hand, posted healthy 14.4% yoy (3.4% mom) growth to 43,436 units.

Cement Dispatches – January 2012
ACC’s cement dispatches for January 2012 stood at 2.23mn tonnes, up by healthy 8.8% yoy. Even on mom basis, dispatches were up by 6.7%. Ambuja Cements’ dispatches stood at 1.92mn tonnes, up by modest 4.1% yoy. However, on mom basis, dispatches were flat. UltraTech cement dispatches stood at 3.72mn tonnes, up by strong 11.3% yoy. Higher cement dispatches growth of ACC and UltraTech over Ambuja Cements hints at demand scenario improvement in South India. We continue to remain Neutral on ACC and Ambuja Cements.

3QFY2012 - Result Reviews
Corporation Bank
For 3QFY2012, Corporation Bank registered a moderate set of results, with net profit growing by 5.2% yoy to Rs.402cr. Net interest income of the bank grew by muted 2.3% yoy to Rs.862cr. Non interest income growth, however, was robust at 67.0% yoy. Operating expenses of the bank increased by 29.1% yoy to Rs.826cr, while provisioning expenses increased by 20.6% yoy to Rs.301cr, leading to moderate PAT growth of 5.5% yoy.
The bank’s asset quality deteriorated during 3QFY2012, with both gross and net NPA levels increasing by 15.7% and 18.8% sequentially, respectively. As of 3QFY2012, gross NPA ratio stands at 1.35% (1.32% in 2QFY2012), while net NPA ratio stands at 0.96% (0.91% in 2QFY2012). Provisioning coverage ratio deteriorated by 186bp during 3QFY2012 to 62.9%. We recommend Accumulate on the stock with a target price of Rs.450.
Andhra Bank
For 3QFY2012, Andhra Bank posted a poor set of numbers with net profit declining by 8.4% yoy to Rs.303cr, which was dot in line with our estimates. Net interest income of the bank grew by healthy 17.1% yoy to Rs.984cr, while growth in non interest income was also healthy at 18.4% yoy to Rs.235cr. Relative lower operating expenses growth of 9.6% yoy resulted in PPP growing by healthy 22.5% yoy. However, provisioning expenses of the bank grew substantially by 80.2% yoy to Rs.309cr, which resulted in net profit declining by 8.4% yoy.
The bank’s asset quality remained under pressure with gross NPA ratio standing at 2.4% and net NPA ratio standing at 1.2%. Considering the recent turmoil in asset quality and hefty power exposure (~20% of loan book), we remain Neutral on the stock.
Thermax
Thermax announced its 3QFY2012 results, which were broadly in-line with our (below street) estimates. The top line posted muted growth of 2.3% yoy Rs.1,269cr (Rs.1,241cr), which was 5.4% higher than our estimates. The silent growth was along expected lines, mainly on account of high base created in 3QFY2011. Segment wise, the energy segment posted flat growth to Rs.993.1cr, while the environment segment grew by 2.8% yoy to Rs.302.4cr. On the operating front, EBITDA margin contracted by 114bp yoy to 10.7%, in-line with our estimates. Muted growth and margin compression led to a PAT decline of Rs.4.9% yoy to 95.3cr (Rs.100.2cr), slightly higher than our (below street) estimates of Rs.89.4cr.
Thermax trails its fortune towards industrial capex, especially in sectors such as metals, cement and oil and gas, which form its mainstream arena, for offering products and solutions in captive power and heating solutions. However, the tough macro climate prevailing since quite some time has paused additional investments in major industrial sectors, thereby halting new order disbursements. Likewise, the company has not reported any major order wins during the quarter.
However, with easing of inflationary pressures, the stock has rallied ~25% in the past few days, factoring in the possibility of softening of interest rates from the RBI and, hence, an uptick in industrial investments, post which Thermax will be best placed to gain from the revival. At the CMP, the stock is fairly valued at 14.6x and 15.5x FY2012E and FY2013E EPS, respectively. We would like to hear management's commentary on the company's future outlook and get more details over the quarterly numbers post which we will revise our estimates and recommendation. We maintain our Neutral rating on the stock.
Hexaware
Hexaware reported its 4QCY2011 results, which outperformed street as well as expectations on all the fronts. USD revenue came in at US$84.1mn, up 6.7% qoq, majorly led by 4.8% and 1.3% qoq volume and pricing growth. In INR terms, revenue came in at Rs.432cr, up 18.0% qoq. EBITDA and EBIT margins expanded by 427bp and 455bp qoq to 23.0% and 21.6%, respectively, largely aided by INR deprecation. PAT stood higher at Rs.88cr, up 36.3% qoq. Hexaware has been outperforming in the mid-cap space since six quarters by growing at a scorching 8.1% CQGR over 1QCY2010–4QCY2012. Management has guided for at least 20% yoy revenue growth for CY2012 to US$370mn, which is highest in the industry. This seems easily achievable by the company given the revenue visibility on account of six large deals signed in the past few quarters. We continue to be positive on the stock and maintain our Accumulate rating. The target price is currently under review.
Greenply Industries
Greenply Industries (GIL) announced strong 3QFY2012 numbers. Net sales increased by 32.1% yoy to Rs.419cr (Rs.414cr). The plywood segment registered 21.4 % yoy growth to Rs.243cr, while the laminate segment managed an 11.8% yoy increase to Rs.160. The MDF segment registered strong yoy growth of 373% to Rs.67cr on the back of higher utilization and realization during the quarter. EBITDA increased by 53.8% yoy to Rs.43cr, largely due to margin expansion. EBITDA margin increased by 146bp yoy to 10.4%, mainly due to a decline in raw-material cost, which declined to 52.5% of net sales in 3QFY2012 vs. 57.3% of net sales in 3QFY2011. This decline was partially offset by forex loss of Rs.6cr vs. forex gain of Rs.0.4cr in 3QFY2011. PAT increased by 96.0% yoy to Rs.14cr, while margin increased by 110bp yoy to 3.4%. We will be coming out with a detailed report post management interaction. We continue to maintain our Buy view on the stock with a target price of Rs.284.
Relaxo Footwear
For 3QFY12, Relaxo Footwear reported a 33.5% yoy growth in the topline from Rs.153cr in 3QFY2011 to Rs.204cr. Raw material cost stood at 53.3% of net sales which we expect to come down in the coming quarters with decrease in the rubber price. The operating profit margin came in at 9.3%, a 17bp increase from the same quarter last year. The company reported a profit of Rs.6cr in this quarter, an 80% yoy growth from Rs.3cr in the same quarter last year.
We expect the company’s revenue to increase at a CAGR of 18% to Rs.950cr and profit to increase at a CAGR of 44.3% to Rs.56cr over FY2011-13E. At the CMP of Rs.339, the stock is trading at a PE of 7.3x FY2013E earnings. We maintain our Buy rating on the stock with a target price of Rs.420, based on a target PE of 9x for FY2013E.

3QFY2012 - Result Previews
Madras Cements
Madras Cements is expected to announce its 3QFY2012 results. We expect the company’s top line to grow by 22.6% yoy to Rs.710cr on account of 10.4% yoy growth in dispatches and higher realization growth (10.2% yoy). The company’s operating margin is expected to improve only by 81bp yoy to 27% as cost pressures are expected to erode the entire realization growth. The company’s net profit is expected to grow by 38.9% yoy to Rs.60cr. We maintain our Neutral view on the stock.

Economic and Political News
- Mines Bill may be passed in the Budget session
- Global food prices to ease in 2012: World Bank
- Finance Ministry working on implications of 2G judgment on banks
- Finance Ministry to discuss power gear duty on February 6, 2012
- Panel of Ministers to meet again to finalize ONGC public issue

Corporate News
- Reliance Industries secures US$400mn loan guarantee from Italian SACE
- NTPC in talks with GAIL for sourcing gas supplies
- Coal India proposes Rs.5,684cr dividend to the government for FY2012

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Indian stock market and companies daily report (February 02, 2012, Thursday)

2012-02-01T22:09:00.001-08:00

The domestic markets are expected to open in the green tracking upbeat economic data releases from around the world.
The US markets closed higher as traders reacted positively to the latest batch of economic data. The strength on Wall Street was partly due to the release of a report from payroll processor ADP showing a continued increase in private sector employment in the month of January. A separate report from the Institute for Supply Management showing a continued expansion in manufacturing activity in the month of January also generated buying interest, with the index of activity in the sector reaching a seven-month high.
The release of the ISM report on U.S. manufacturing also came after the release of separate reports showing expansions in manufacturing activity in both Germany and China.
Indian shares ended firm near its 12-week high on Wednesday, as data showing expanding domestic manufacturing activity and upbeat auto sales numbers for January boosted investor sentiment. Indian investors meanwhile would keenly watch out for the weekly inflation numbers due to be released today.

Markets Today
The trend deciding level for the day is 17230 / 5,213 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17,398 – 17,495 / 5,267 – 5,299 levels. However, if NIFTY trades below 17,230 / 5,213 levels for the first half-an-hour of trade then it may correct up to 17,132 – 16,964 / 5,182 – 5,128 levels.

Auto sales numbers – January 2012
Maruti Suzuki (MSIL)
MSIL reported better-than-expected volume growth of 5.2% yoy (25.3% mom) to 115,433 units in January 2012, led by 22.4% (24.7% mom) and 54.3% yoy growth in the domestic compact (driven by Swift) and exports segment, respectively. Total domestic volumes, however, remained flat largely due to a 2.4% yoy decline (up 34.8% mom) in sales in the mini segment. Meanwhile, MSIL unveiled the all new compact Swfit Dzire priced at Rs.4.79lakhs (petrol) and Rs.5.8lakhs (diesel) with exciting new features and better fuel efficiency.
Mahindra & Mahindra (MM)
MM registered a healthy 12% yoy (8.3% mom) increase in its total volumes to 64,072 units on account of strong performance by the automotive segment, which grew by 21.8% yoy (4.6% mom). Performance of the automotive segment was driven by continued buoyancy in the four-wheeler pick-up (up 34.7% yoy/flat mom) and passenger UV (up 14.7% yoy/2% mom) segments. The CV segment also recorded strong volume performance, witnessing growth of 50.8% yoy (47.1% mom). The tractor segment posted a 5.6% yoy decline in volumes during the month; however, on a sequential basis, volumes improved by strong 18.1%.
Tata Motors (TTMT)
TTMT posted a strong 16% yoy (6.3% mom) increase in total sales to 87,467 units, driven by 16.3% (down 1.2% mom) and 15.5% yoy (19.6% mom) growth in the commercial vehicle (CV) and passenger vehicle (PV) segments, respectively. The CV segment’s performance was led by healthy 12.6% and 18.7% yoy growth in the medium and heavy commercial vehicle (MHCV) and light commercial vehicle (LCV) segments, respectively. In the PV segment, Nano, Indica and Indigo volumes grew by 15.2%, 8.9% and 9.6% yoy, respectively.
Hero MotoCorp (HMCL)
HMCL reported healthy 11.5% yoy (down 3.7% mom) growth in volumes to 520,272 units, led by continued momentum across all product segments. New product launches and refreshed product ranges continued to drive HMCL’s volume performance.
TVS Motor (TVSL)
TVSL posted a modest 5.1% yoy increase in total sales in January 2012 to 173,514 units, largely due to subdued sales in the motorcycle segment. While two-wheeler volumes grew by 5.8% yoy (1.9% mom), three-wheeler volumes declined by 29.9% yoy (down 4.8% mom). Growth in the two-wheeler segment was led by a strong 20.2% yoy increase in moped sales; however, scooter volume growth slowed down considerably and grew by 1.8% yoy (down 7.4% mom).

3QFY2012 - Result Reviews
Mahindra Satyam
Mahindra Satyam announced its 3QFY2012 results, which were in-line with our expectations on the revenue front but were higher than ours as well as street’s expectations on the operating and bottom-line fronts. Revenue came in at US$325mn, down 1.6% qoq, due to a 1.3% qoq decline in volume. Also, USD revenue of the company was impacted by 1.4% qoq due to unfavorable crosscurrency movement. In INR terms, revenue came in at Rs.1,718cr, up 8.9% qoq. The company’s EBITDA and EBIT margin increased by 87bp and 113bp qoq to 16.2% and 13.9%, respectively, despite giving wage hikes during the quarter because of steep INR depreciation. PAT came in at Rs.308cr, up 29.5% qoq, aided by forex gain of Rs.66cr, which led to other income of Rs.151cr in 3QFY2012 as against Rs.97cr in 2QFY2012. The stock is currently under review.
Ashok Leyland – 3QFY2012
Ashok Leyland (AL) registered poor bottom-line performance during 3QFY2012 due to significant erosion in operating margins, led by higher employee and other expenses. AL reported better-than-expected 29.3% yoy (down 6.9% qoq) growth in its top line to Rs.2,880cr, driven by a 15% yoy (6.1% qoq) increase in net average realization and 12.4% yoy growth in volumes. Average net realization improved to Rs.1,389,528 on account of price increases to mitigate raw-material cost pressures and emission norm changes. On the operating front, EBITDA margin witnessed a steep 340bp qoq contraction to 7.3% against our expectation of 10.1% due to higher employee and other expenses. Other expenditure to net sales ratio unexpectedly increased by 170bp qoq and 100bp yoy during the quarter. Raw-material cost remained more or less stable on a yoy and qoq basis, led by cooling of commodity prices. Driven by weak operating performance, net profit declined by 56.6% sequentially. However, on a yoy basis, net profit grew by 54.3%, largely due to low base of last year. The stock rating is currently under review.
Finolex cables
Finolex Cables announced its 3QFY2012 numbers. The company’s net sales declined by 2.6% yoy to Rs.499cr. The electrical cables segment continued its strong growth, registering 21.6% yoy growth to Rs.417cr. The communication segment, however, registered a 22.7% yoy decline to Rs.41cr. EBITDA for the quarter declined by 18.8% yoy to Rs.41cr, largely due to margin compression. EBITDA margin declined by 165bp yoy to 8.3%, mainly due to higher other expenditure, which increased to 10.4% of net sales in 3QFY2012 vs. 8.3% of net sales in 3QFY2012. During the quarter, PAT declined by 47.7% yoy to Rs.14cr and PAT margin declined by 237bp yoy to 2.7%. The company witnessed forex loss of Rs.8cr during the quarter. We will be coming out with a detailed report post the management call. We continue to maintain our Buy rating on the stock with a target price of Rs.51.

3QFY2012 - Result Previews
Corporation Bank
Corporation Bank is slated to announce its 3QFY2012 results. We expect net interest income of the bank to decline by 9.7% yoy to Rs.760cr. Non-interest income growth is expected to be strong at 40.7% yoy to Rs.372cr. While operating income is expected to be flat, operating expenses are expected to go up by 23.7% yoy to Rs.458cr, leading to pre-provisioning profits declining by 8.4% yoy to Rs.675cr. Provisioning expenses are expected to decline by 22.7% yoy. Net profit is expected to decline by 3.1% yoy to Rs.371cr. Currently, we have an Accumulate rating on the stock with a target price of Rs.450. Thermax
For 3QFY2012, we expect Thermax to report a 3.0% yoy decline in its top line to Rs.1,204cr, as high base effect created in 3QFY2011 and weak order inflows since the last couple of quarters will keep the company's revenue under strict check. The company's EBITDA margin is likely to compress by ~110bp yoy to 10.7% due to higher contribution of low-margin EPC contracts in the company’s aggregate revenue. Lower revenue and margin contraction are expected to drag down the company's PAT by 10.8% yoy to Rs.89.4cr. At the CMP, the stock is trading at 14.1x and 15.0x its FY2012E and FY2013E EPS, respectively. We remain Neutral on the stock.
Hexaware
Hexaware is slated to announce its 4QCY2011 results. We expect the company to post revenue growth of 4.1% qoq to US$82mn, majorly led by volume growth. In rupee terms, revenue is expected to come in at Rs.416cr, up 13.8% qoq. EBITDA margin is expected to expand by 140bp qoq to 20.1%. PAT is expected to come in at Rs.68cr. We maintain our Accumulate view on the stock with a target price of Rs.96.

Economic and Political News
- Manufacturing PMI jumps to 8-month high of 57.5
- December exports up 6.7% to US$25bn
- Fiscal deficit may be about 5.6% in FY2012: PMEAC
- Fertilizer industry wants higher gas price in new urea policy
- Outlook for the textiles industry in 2012 negative to stable: Fitch
- SEBI notifies IPP norms to help promoters dilute stake

Corporate News
- Coal India inks pact with worker unions on 25% hike in wages
- ICICI Bank to recast Rs.1,300cr loans in 4QFY2012
- ABG Shipyard bags Rs.500cr order from Shipping Corp.
- KEC International keen to take more business abroad

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Indian stock market and companies daily report (Febrauary 01, 2012, Wednesday)

2012-01-31T23:01:00.000-08:00

The domestic markets are expected to open in the green tracking positive developments in the European and the Asian markets. Asian stocks are trading positively, reversing earlier losses, after Chinese manufacturing index unexpectedly expanded and amid optimism about progress on the Greek debt deal. The US markets traded choppily as investors weighed optimism about the financial situation in Europe against a disappointing batch of U.S. economic data. The upward move in early trading on Wall Street came as traders reacted positively to the latest news out of Europe, including comments from Greek Prime Minister Lucas Papademos indicating that "significant progress" has been made in reaching a debt-swap agreement with bondholders. However, a disappointing housing report from Standard & Poor's showing a bigger than expected drop in U.S. home prices in the month of November limited the upside for the markets. Meanwhile Indian markets would keenly watch out for the imports and the exports figures due to be released today to get a clearer view on the fiscal situation that would pan out by the end of this fiscal year.

Markets Today
The trend deciding level for the day is 17,123/5,178 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17,281 – 17,368/5,236 – 5,274 levels. However, if NIFTY trades below 17,123/5,178 levels for the first half-an-hour of trade then it may correct up to 17,036 – 16,878/5,141 – 5,083 levels.

Coal India hints roll back in coal prices
Coal India’s Chairman Mr. N.C. Jha informed that Coal India will roll back the increase in prices (that was effective from January 2012) due to opposition from consumers such as power and cement companies. The company will announce a new notification for pricing that will replace the existing notification (January 1, 2011). Management indicated that although new prices will continue to be linked to Gross Calorific Value, price bands for the various grades would be revised so that overall impact will be revenue-neutral for Coal India. We maintain our Neutral rating on the stock.

3QFY2012 - Result Reviews
ICICI Bank
For 3QFY2012, ICICI Bank posted a healthy set of numbers with net profit growing by 20.3% yoy to Rs.1,728cr, which were mostly in-line with our estimates. Net interest income of the bank grew by healthy 17.3% yoy to Rs.2,712cr; however, growth in non-interest income was moderate at 8.2% yoy to Rs.1,892cr. Operating income of the bank grew by 13.4% yoy to Rs.4,604cr. Provisioning expenses declined by 26.4% yoy to Rs.341cr, leading to net profit growing by 20.3% yoy to Rs.1,728cr in 3QFY2012.
The bank’s asset quality improved during 3QFY2012, with gross and net NPA levels declining by 3.0% and 6.2% sequentially, respectively. As of 3QFY2012, gross NPA ratio stands at 3.8% (4.1% in 2QFY2012), while net NPA ratio stands at 0.8% (0.9% in 2QFY2012). NPA coverage ratio remains healthy at 78.9%. We maintain our Buy rating on the stock with a target price of Rs.1,061.
NMDC
NMDC reported its 3QFY2012 results, which were above our expectation. Net sales increased by 7.7% yoy to Rs.2,822cr (slightly above our estimate of Rs.2,745), which would be mainly due to higher iron ore realizations in our view. EBITDA increased by 11.6% yoy to Rs.2,261cr, in-line with the increase in sales. EBITDA margin expanded by 283bp yoy to 80.1%. Other income increased by 78.3% yoy to Rs.525cr due to higher yields as well as cash balances. Hence, PAT grew by 22.4% yoy to Rs.1,859cr (above our estimate of Rs.1,757). Going forward, despite some softness in global prices over the past six months, we do not expect NMDC to lower its prices meaningfully. We maintain our Buy rating on the stock, while we keep our target price under review.
PNB
For 3QFY2012, PNB registered a very moderate set of results with net profit growing by 5.5% yoy to Rs.1,150cr, which was below our estimates on account of higher provisioning expenses than estimated by us. Net interest income of the bank grew by 10.4% yoy t0 Rs.3,537cr. Non interest income growth was moderate at 10.6% yoy to Rs.954cr. Provisioning expenses increased by 32.5% yoy to Rs.946cr, leading to moderate PAT growth of 5.5% yoy.
The bank’s asset quality deteriorated during 3QFY2012, with gross and net NPA levels increasing by 25.1% and 38.9% sequentially, respectively. As of 3QFY2012, gross NPA ratio stands at 2.4% (2.1% in 2QFY2012), while net NPA ratio stands at 1.1% (0.8% in 2QFY2012). Provisioning coverage ratio deteriorated by 507bp during 3QFY2012 to 70.0%. We recommend Accumulate on the stock with a target price of Rs.1,059.
Dabur
Dabur reported a mixed performance for 3QFY2012. The company’s top line grew strongly by 34.5% yoy to Rs.1,453cr, driven by a healthy performance across business segments. Earnings grew by 11.9% yoy to Rs.173cr. The company reported a 416bp yoy decline in OPM due to increased input costs and a rise in ad spends and other expenses.
During 3QFY2012, the company’s domestic business growth stood at 16% yoy, while the international business (ex. acquisitions) grew by 38%yoy. The consumer care division grew by 15% yoy, with all categories registering healthy growth. Hobi and Namaste reported healthy top-line growth of 44% yoy and 16% yoy, respectively. We maintain our Accumulate rating on the stock. The target price is under review.
Crompton Greaves
Crompton Greaves (CG) 3QFY2012 results were significantly below our and consensus estimates. The company’s consolidated revenue grew strongly by 26.3% yoy to Rs.3,028cr (Rs.2,397cr), which was 14.3% higher than our estimate of Rs.2,649cr. The growth was largely driven by Power segment which posted consolidated 33.9% yoy growth to Rs.2,069cr (Rs.1,545cr) – while international power systems revenues grew by a strong 36.3% yoy (aided by the currency movement) the Domestic power systems business posted strong growth of 30.0% yoy. Industrial system segment also delivered a 32.1% yoy growth to Rs.503cr (Rs.381cr) on consolidated basis. On the other hand, Consumer segment posted a flattish growth with revenues of Rs.474.9cr (Rs.475.1cr). It is pertinent to note that the current quarter includes revenues from Emotron and QEI (acquired subsidiaries).
On the EBITDA front, margins witnessed a steep contraction of ~820bp yoy to 6.0%, primarily driven by high raw material costs which rose by 820bp yoy as a proportion to sales. Margin erosion was mainly attributable to Power system segment (both domestic and international segment), which has been facing increased cost and pricing pressures since past several quarters. Led by margin dip, the reported PAT plunged by 66.8% yoy to Rs.77.2cr (Rs.232.8cr), 42% below our (below street) expectations of Rs.133.6cr.
The stock is under review and we wait for further details in an analyst meet scheduled later in the day.
United Phosphorus
For 3QFY2012, United Phosphorous, posted a strong set of numbers. The company reported top-line growth of 55%, mainly driven by 70% yoy growth in the international business. Gross margin came in at 37%, registering a dip of 300bp yoy. Consequently, OPM came in at 19%, down 100bp yoy. The dip in OPM came in lower than the dip in the gross margin mainly on account of lower other expenditure. Overall, net profit came in at Rs.123cr, up 39%yoy. Management has given a guidance of 35-40% growth in revenue and 19-20% growth in OPM. We continue to maintain our Buy recommendation on the stock with a target price of Rs.182.
Ipca Laboratories
For 3QFY2012, Ipca Labs reported above-expectation performance on the back of strong international sales growth and significant margin expansion. The company’s top line increased by 31.8% yoy, with the domestic formulation business registering mere 6% growth. The company’s international formulations business, on the other hand, registered phenomenal growth of 73%. The company’s OPM stood at 24.6% in 3QFY2012 vs. 19.5% of 3QFY2011. Net profit was, however, flat on a yoy basis at Rs.63.9cr. Adjusted net profit of the company stood at Rs.103.8cr in 3QFY2012 vs. Rs.52.74cr in 3QFY2011. We continue to maintain our Buy recommendation on the stock with a target price of Rs.358.
Jagran Prakashan
For 3QFY2012, Jagran Prakashan (JPL) reported a healthy performance on the revenue front. The company reported top-line growth of 13.7% yoy/6.5% qoq to Rs.317cr. The company’s earnings declined on a yoy basis by ~32% as well as sequentially by ~10% and came in at Rs.41cr. The decline in earnings was due to a 496bp yoy contraction in operating margin on account of high raw-material prices because of increased circulation and forex losses. During the quarter, ad revenue grew by ~15% yoy. Circulation growth stood at ~9% yoy. Nonpublishing business revenue, which comprises event, outdoor and digital businesses, grew by 15% yoy each. The company also reported forex loss of Rs.8.7cr on account of foreign exchange fluctuations. The stock is under review.
TVS Motor
TVS Motor (TVSL) reported slightly lower-than-estimated net profit for 3QFY2012 mainly on account of high depreciation expense, lower other income and higher tax rate. Top line for the quarter registered in-line growth of 7% yoy (down 11.5% qoq), driven by a 6.3% yoy increase in net average realization. Volume performance, however, was sluggish as total volumes declined by 1.1% yoy (12.3% qoq) led by a 6.6% and 11.5% yoy decline in motorcycle and threewheeler volumes, respectively. EBITDA margin came in slightly ahead of our estimates at 6.9%, expanding by 83bp yoy (flat qoq), aided by higher net average realization and 99bp yoy savings in raw-material expenses (raw-material to sales ratio at 72.2% vs. 73.2% in 3QFY2011 and 74% in 2QFY2012). Net profit during the quarter registered modest 1.4% yoy growth (down 26.1% qoq) to Rs.57cr, largely due to lower other income and higher depreciation expense. At Rs.52, TVSL is trading at 9x FY2013E earnings. We retain our Buy rating on the stock with a revised target price of Rs.64, valuing the stock at 11x FY2013E earnings of Rs.5.8.
KEC International
KEC International’s (KEC) posted a strong set of numbers for 3QFY2012 which exceeded expectations. The company’s consolidated revenue grew strongly by 36.3% yoy to Rs.1,460cr (Rs.1,071cr), which was 15.0% higher than our estimate of Rs.1,266cr. The stellar growth was mainly due to strong execution in South Asia, delivering a robust 57% yoy growth from the region.
On the operating front, EBITDA margin posted a sharp contraction of ~400bp yoy to 7.7%, against our estimate of 8.5%. Margins were primarily impacted by higher raw material costs and sub-contracting expenses. New businesses of cable and telecom also remained low on profitability. Interest expense grew by 29.7% yoy to Rs.37.2cr, which was fully offset by an exceptional income to the tune of Rs.53.8cr. Aided by this extraordinary gain, PAT grew by 39% yoy to 80.6cr (Rs.58cr). Adjusted for this gain, PAT de-grew by 25.9% yoy to Rs.43cr, 16.6% higher than our (below street) estimate of Rs.36.9cr.
Management commentary remained active terms of growth trajectory – order book at the end of the quarter stood at Rs.9,200cr, majorly aided by the robust order inflows totalling Rs.2,500cr during the quarter. The strong order accretion since past few quarters is mainly attributable to the company’s diversified business operations, with equal exposure to domestic and international markets.
Amidst strong order wins recently, the stock has witnessed a substantial rally, gaining ~50% in past few days. At the CMP, the stock trades at reasonable valuations of 6.0x FY2013 PE. We believe stock price has factored in most of the positives and hence, further upside seems limited. Thus, we recommend Neutral on the stock. Based on the earnings commentary, we will revise our estimates and recommendation and release a detailed note shortly.

3QFY2012 - Result Previews
Mahindra Satyam
Mahindra Satyam (Satyam) is slated to announce its 3QFY2012 results. We expect the company to post revenue of US$339.2mn, up 2.7% qoq, majorly led by volume growth. In rupee terms, revenue is expected to come in at Rs.1,716cr, up 8.8% qoq, aided by INR depreciation against USD. EBITDA margin is expected to shrink by 45bp qoq to 14.9% because of negative impact due to wage hikes given during the quarter, which will be largely overshadowed by gains on account of INR depreciation. PAT is expected to come in at Rs.190cr. We maintain our Accumulate rating on the stock with a target price of Rs.82.
Ashok Leyland
Ashok Leyland (AL) is slated to announce its 3QFY2012 results. The company’s top line is expected to grow by strong 23% yoy, led by 12% and 10% yoy growth in volumes and net average realization, respectively. On the operating front, EBITDA margin is expected to witness a 265bp yoy expansion to 10.1%, owing to easing of raw-material cost pressures. Bottom line, however, is expected to jump by 150% yoy to Rs.108cr, largely due to low base of last year. The stock rating is under review.

Economic and Political News
- India's per capita income grew by 15.6% to Rs.53,331 in FY2011: Government
- India eyes US$100bn FDI in nuclear energy in 20 years: Anand Sharma
- Economy seen growing faster in FY2013: Kaushik Basu
- Possibility of another CRR cut on table: RBI
- RBI intends to use OMO’s to tackle cash shortfall
- DoT issues notices to private telecomm players for under reporting revenue

Corporate News
- SBI will need Rs.15,000cr a year to meet rising demand for loans: CFO
- Suzlon bags Rs.600cr order from CLP India to set up a 100MW power project
- TCS opens unit at Silicon Valley for mobility solutions

Open Demat Account in leading stock market Company in India: Angel Broking Ltd.

Indian stock market and companies daily report (January 31, 2012, Tuesday)

2012-01-30T21:19:00.000-08:00

The markets are expected to open weak following negative cues from the Asian markets. US Stocks turned in a relatively lackluster performance on Friday as GDP growth came in at 2.8%, below investor’s expectations. Also Economists were disappointed that much of the GDP growth in the fourth quarter was due to a positive contribution from private inventory investment. The U.S. consumer sentiment result which was also released on Friday was better than expected, but failed to lighten the session's negative mood.
Meanwhile Indian markets closed higher on Friday as investors pinned their hopes on the government unveiling a raft of investor-friendly policies in the upcoming budget. Also, weekly food inflation remained in the negative zone for the fourth consecutive week, reinforcing expectations of lower interest rates in the months to come.

Markets Today
The trend deciding level for the day is 17,200/5,195 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17,293 – 17,352/5,227– 5,249 levels. However, if NIFTY trades below 17,200/5,195 levels for the first half-an-hour of trade then it may correct up to 17,141 – 17,047/5,172 – 5,140 levels.

ITNL emerges as the lowest bidder for road BOT project worth Rs.1,818cr
IL&FS Transportation Networks Ltd. (ITNL) has emerged as the lowest bidder for four laning of Kiratpur to Ner-Chowk project worth Rs.1,818cr. This BOT project in Himachal Pradesh would be executed on DBFOT basis under Phase III. The project is on toll basis with a concession period of 28 years and construction period of three years. Further, NHAI would provide a grant of Rs.134.6cr to ITNL. This is positive for the company, as ITNL had not won any project in FY2012 owing to the aggressive bidding witnessed in the road sector. Considering the sharp run up in the share price (~39% in one month), we recommend Accumulate on the stock with an SOTP target price of Rs.227.

3QFY2012 - Result Reviews
NTPC
NTPC’s stand-alone top-line rose by 14.2% yoy to Rs.15,332cr aided by higher operational capacity. On a stand-alone basis, the company’s capacity was higher by 2,820MW on a yoy basis during the quarter. However, the OPM’s declined by 812bp yoy to 18.6% impacted by higher fuel costs. The depreciation and interest costs too rose by 26.3% yoy and 38.5% yoy respectively during the quarter. The company’s bottom-line was down by 10.2% yoy to 2,130cr. We recommend an Accumulate on the stock with a Target Price of Rs.199.
BHEL
BHEL’s 3QFY2012 results were broadly in-line with our and street estimates. The top line grew by 19.1% yoy to Rs.10,743cr (Rs.9,023cr), lower by 1.2% than our (above street) expectation of Rs.10,873cr. Growth was largely driven by the power segment, which posted robust growth of 58.3% yoy to Rs.8,711cr (Rs.5,502cr). The strong growth was offset by the industry segment, which posted an unexpected decline of 37.3% yoy to Rs.2,367cr (Rs.3,778cr).
On the operating front, the industry segment witnessed phenomenal EBITM expansion of more than 2,000bp yoy to 31.6% mainly due to execution of high rating orders (embedded with high margins). On the other hand, the power segment’s EBITM came off sharply by ~1200bp yoy mainly due to higher rawmaterial costs and other expenses. On an absolute basis, EBITDAM contracted by 360bp to19.4% (23.0%), in-line with our estimate of 20.0%. Depreciation cost increased by 29.1% yoy to Rs.186.8cr (Rs.144.7cr) partially offset by other income, which came in at Rs.196cr.
Led by the margin dip, PAT growth was subdued at 2.0% yoy to Rs.1,432cr (Rs.1,403cr), 2.2% lower than our (below street) estimate of Rs.1,465cr.
On the order book front, orders worth Rs.5,800cr were cancelled during the quarter and order intake remained dismal (no clarity over total inflow during the quarter), thus making 9MFY2012 order inflow tally at mere Rs.15,273cr. Order backlog of the company stood at Rs.1,45,541cr, a sequential decline of 9.0%. Earnings commentary by the management appeared passive mainly due to concerns outlined in the power sector (such as deepening fuel crisis and environmental clearances). Unlike the previous quarters, management refrained to offer any guidance on revenue as well order inflows, which raises a predicament over the company’s performance estimates for the coming quarters.
The business outlook is also soured given 1) delay in order finalizations amid concerns in the power sector; 2) weak investment capex due to high interest rate regime, which could take more time to gather momentum than earlier predicted; and 3) changing dynamics in the BTG space (read sector related). Given this, the attractive valuation of 9.5x FY2012E EPS and 10.5x FY2013E EPS is largely overshadowed. Given the long-term structural concerns, we remain Neutral on the stock. We will shortly come out with a detailed result update.
Canara Bank
For 3QFY2012, Canara Bank posted a poor set of results, with net profit declining by 20.8% yoy to Rs.876cr. Net-interest income of the bank declined by 9.6% yoy to Rs.1,919cr, as high prevailing interest rates led to higher cost of funds. However, non-interest income registered robust growth of 45.2% yoy to Rs.779cr, leading to operating income growing by muted 1.6% yoy. Although operating expenses declined by 1.9% yoy to Rs.1,121cr, provisioning expenses more than doubled to Rs.501cr, leading to a decline of 20.8% yoy in net profit.
The bank’s asset quality deteriorated during 3QFY2012, with both gross and net NPA levels rising by 5.4% and 4.8% sequentially, respectively. As of 3QFY2012 gross NPA ratio stands at 1.8% (1.7% in 2QFY2012), while net NPA ratio stands at 1.5% (1.4% in 2QFY2012).
At the CMP the stock is trading at 1.0x FY2013 ABV. We recommend a Neutral rating on the stock.
Bank of India
For 3QFY2012, Bank of India registered a moderate set of results, with net profit growing by 9.6% yoy to Rs.716cr. On the operating front, the bank’s performance was mostly muted (up 4.1% yoy); however, a 4.7% yoy decline in operating expenses led to pre-provisioning profit growing by 24.7% yoy to Rs.1,732cr. Higher provisioning expenses (up 39.2% yoy) negatively impacted profitability, leading to lower 9.6% yoy growth in net profit to Rs.716cr.
The bank’s asset quality improved during 3QFY2012, with gross and net NPA levels declining by 2.5% and 3.6% sequentially, respectively. As of 3QFY2012, gross NPA ratio stood at 2.7% (3.0% in 2QFY2012), while net NPA ratio stood at 1.8% (2.0% in 2QFY2012). Provisioning coverage ratio continued to remain low at 60.1% (59.1% in 2QFY2012).
At the CMP, the stock is trading at 1.1x compared to its historical range of 1.05-1.55x, with a median of 1.25x. We recommend Neutral on the stock.
Bhushan Steel
Bhushan Steel reported its 3QFY2012 results. The company's net sales grew by 23.9% yoy to Rs.2,407cr on account of increased realizations and sales volumes. EBITDA grew by 34.7% yoy to Rs.724cr on account of higher net sales. EBITDA margin expanded by 241bp yoy to 30.1%. During the quarter, interest expense grew by 124.6% yoy to Rs.229cr and depreciation expense grew by 165.8% yoy to Rs.152cr, as the company had capitalized its phase II expansion during FY2012. Hence, profit after tax decreased by 1.3% yoy to Rs.277cr. We maintain our Reduce rating on the stock; however, we keep our target price under review.
Indian Overseas Bank
For 3QFY2012, Indian Overseas Bank registered a poor set of results, with net profit declining by 53.3% yoy to Rs.108cr. On the operating front, the bank’s performance was moderate (up 8.1% yoy) as high prevailing interest rates led to higher cost of funds. Non-interest income of the bank increased by 17.0% yoy to Rs.411cr, leading to operating income growth of 10.2% yoy. High operating expenses, which rose by 19.6% yoy, and higher provisioning expenses (up 86.3% yoy) led to net profit declining by 53.3% yoy to Rs.108cr.
The bank’s asset quality remained under stress during 3QFY2012 as well. As of 3QFY2012, gross NPA ratio stood at 3.0%, while net NPA ratio stood at 1.2%. Provisioning coverage ratio continued to remain moderate at 71.7%.
At the CMP, the stock is trading at 0.6x FY2013 ABV. We maintain our Neutral stance on the stock.
Blue Star
Blue Star announced its 3QFY2012 numbers. The company’s net sales declined by 3.9% yoy to Rs.590cr (Rs.613cr). The electromechanical projects and packaged air-conditioning systems (EMPPACS) segment registered a 15.3% yoy decline to Rs.368cr (Rs.434cr), while the cooling product and professional electronic and industrial systems (PEIS) segments registered strong yoy growth of 28.1% and 16.0% to Rs.164cr and Rs.52cr, respectively. EBITDA came in at negative Rs.3cr in 3QFY2012 vs. positive Rs.47cr in 3QFY2011. EBITDA margin declined by 824bp yoy to negative 0.5%, mainly due to increased raw-material cost and other expenditure. Consequently, PAT came in at negative Rs.33cr. The company witnessed Rs.14cr of forex loss during the quarter. We will be coming out with a detailed report. We continue to maintain our Neutral rating on the stock.
Union Bank of India
For 3QFY2012, Union Bank of India posted a disappointing set of numbers, which were far below our as well as streets estimates, primarily due to higherthan- expected provisioning expenses. While NIMs improved by 10bp qoq and gross and net NPAs were largely stable on a sequential basis, substantially higher provisioning expenses dented the overall bottom line. Consequently, net profit took a hit and declined by 66% yoy and 44.1% qoq to Rs.197cr.
The bank’s advances and deposits growth picked up after a sluggish movement in 1HFY2012. Advances registered healthy growth of 6.1% qoq (16.8% yoy) and deposits increased by 5% qoq (10% yoy). CASA deposits of the bank registered healthy growth of 6.5% qoq (moderate 7.6% yoy), leading to a 45bp qoq increase in CASA ratio to 32.5%. Reported NIM of the bank improved by 10bp qoq to 3.3%. Cost-to-income ratio rose further to 45.9% in 3QFY2012 from 44.3% in 2QFY2012 and 40.2% in 3QFY2011. On the asset-quality front, pressures moderated considerably, with slippages declining to Rs.566cr from the average of Rs.940cr over the past four quarters. Gross and net NPAs on an absolute basis were largely stable sequentially. Gross and net NPA ratios improved on a sequential basis, from 3.5% to 3.3% and from 2.0% to 1.9%, respectively. Provision coverage ratio including technical write-offs improved from 60.5% in 2QFY2012 to 63.1% in 3QFY2012.
At the CMP, the stock is trading at 0.9x FY2013E P/ABV. We recommend a Neutral view on the stock.
Jyoti Structures
Jyoti Structures (JSL) announced its 3QFY2012 results, which were lower than our and street estimates. The top line posted modest growth of 6.5% yoy to Rs.587.2cr (Rs.551.3cr), lower by 10.0% from our estimate of Rs.652.7cr. On the EBITDA front, margin compressed by ~130bp yoy to 10.1%, which was along expected lines (est. 10.5%). The margin dip was primarily due to higher sub-contracting expenses, which shot up by ~880bp yoy to 28.3%, as a proportion to sales. Profitability was further impacted by high interest expenses, which soared by 46.5% yoy to Rs.34.7cr. This resulted into PAT plunging by 44.1% yoy to Rs.13.8cr (Rs.24.7cr) against our (below street) estimates of Rs.20.8cr.
At CMP, the stock trades cheaply at 3.5x and 4.1x, FY2012E and FY2013E, EPS respectively. The pessimism, viz. high interest expenses, low profitability and elongated working capital cycle, has clearly factored in the stock’s performance. We would like to get more insights from the earnings conference call, post which we will revise our estimates and recommendation. Meanwhile, we maintain our Buy recommendation on the stock with a target price of Rs.61.
Tata Sponge Iron Ltd.
For 3QFY2012, TSIL’s reported a 23.3% yoy decline in its revenue to Rs.131cr, as compared to Rs.170cr in 2QFY2011. The company’s EBITDA margin came in at 18.8%, lower by 167bp yoy, from 20.5% in 3QFY2011 due to increased employee expenses as a percentage of net sales from 2.9% in 3QFY2011 to 4% in 3QFY2012. Profit for the quarter stood at Rs.17cr as compared to Rs.22cr in 3QFY2011. We expect ramp up in sponge iron volume sales in FY2013E, which would lead to improvement in the top line. Hence, we maintain our Buy recommendation on the stock with a target price of Rs.382, based on a target P/B of 0.9x for FY2013E.
Hitachi Home & Life Solutions
For 3QFY2012, Hitachi Home & Life Solutions (HHLS) reported a 13% yoy decline in its revenue to Rs.107cr from Rs.124cr in 3QFY2011. Increased expenses for the quarter led to negative operating profit of Rs.5cr. The company reported a higher forex loss of Rs.3.7cr on ECB during the quarter as compared to Rs.1.2cr during 3QFY2011. Operating loss and increased depreciation and interest cost led to loss of Rs.10cr as compared to profit of Rs.1.7cr in 3QFY2011.
We expect the company’s sales volume to register a CAGR of 14.1% over FY2011-13E, which would lead to its profit increasing to Rs.30cr in FY2013E from Rs.29cr in FY2011. At the CMP of Rs.113, the stock is trading at attractive valuations with PE of 8.3x FY2013E earnings.
We maintain our Buy rating on the stock with a target price of Rs.157, based on target PE of 12x for FY2013E.

3QFY2012 Result Previews
NMDC
NMDC is slated to announce its 3QFY2012 results. We expect the company’s top line to grow by 4.7% yoy to Rs.2,745cr on account of increased sales volumes as well as realization. On the operating front, EBITDA margin is expected to improve by 58bp yoy to 77.5%. The bottom line is expected to grow by 15.7% yoy to Rs.1,757cr. We maintain our Buy rating on the stock with a target price of Rs.231.
Oriental Bank of Commerce
Oriental Bank of Commerce is scheduled to announce its 3QFY2012 results. Net interest income is expected decline by 1.4% yoy (up 2.6% qoq). Non-interest income is expected to increase by 25.7% yoy (up 4.9% qoq) to Rs.291cr. Consequently, operating income is expected to increase by 3.6% yoy to Rs.1,307cr. Operating expenses are expected to increase by 10.6% yoy to Rs.539cr, leading to pre-provisioning profit declining by 0.8% yoy to Rs.768cr. Provisioning expenses are expected to increase substantially by 67.5% yoy to Rs.321cr. Consequently, net profit is expected to decline by 26.1% yoy (up 79.9% qoq) to Rs.302cr.
At the CMP, the stock is trading at valuations of 0.7x FY2013E ABV. We recommend Neutral on the stock.
Indian Bank
Indian Bank is scheduled to announce its 3QFY2012 results. Net interest income is expected to grow moderately by 11.5% yoy (up 1.9% qoq) to Rs.1,157cr. Non-interest income is expected to increase by 20.6% yoy (decline of 12.4% qoq) to Rs.300cr. Consequently, operating income is expected to increase by 13.3% yoy to Rs.1,457cr. Operating expenses are expected to increase by 15.4% yoy to Rs.548cr, leading to pre-provisioning profit growing by 12.0% yoy to Rs.909cr. Provisioning expenses are expected to increase three-fold on a yoy basis to Rs.231cr (up 5.0% qoq). Consequently, net profit is expected to decline by 6.8% yoy (down 2.3% qoq) to Rs.458cr.
At the CMP, the stock is trading at valuations of 0.9x FY2013E ABV. We recommend Neutral on the stock.
Allahabad Bank
Allahabad Bank is scheduled to announce its 3QFY2012 results. Net interest income is expected to grow by healthy 29.3% yoy (up 3.1% qoq) to Rs.1,360cr. Non-interest income is expected to increase by 32.2% yoy (up 10.2% qoq) to Rs.341cr. Pperating expenses are expected to increase by 28.1% yoy to Rs.667cr, leading to pre-provisioning profit growing by 31.0% yoy to Rs.1,033cr. Provisioning expenses are expected to go up substantially by 56.1% yoy (decline of 10.6% qoq) to Rs.368cr. Consequently, net profit is expected to increase by lower 8.7% yoy (decline of 7.5% qoq) to Rs.452cr.
At the CMP, the stock is trading at valuations of 0.7x FY2013E ABV. We remain Neutral on the stock.
Sadbhav Engineering
We expect Sadbhav Engineering (SEL) to post robust 50.0% growth to Rs.714.3cr on the top-line front, owing to pick-up in the execution of captive road BOT projects. EBITDA margin is expected to witness a marginal fall of 40bp yoy to 10.7% for the quarter. On the earnings front, the company is expected to post healthy growth of 47.3% yoy to Rs.38.9cr, owing to strong performance at the revenue level.
At current levels, the stock is trading at valuations of 14.4x FY2013E earnings and 2.0x FY2013E P/BV on standalone basis. Based on a target P/E multiple of 9x and valuing the company’s BOT arm on DCF basis, our SOTP based target price works out to Rs.150. Hence, we maintain our Buy view on the stock.

Economic and Political News
- Fitch assigns 'stable outlook' to fertilizer in 2012
- Oil Ministry demands extra duty of Rs.80,000 on diesel vehicles
- Credit off-take up 17.1% as of mid-January

Corporate News
- Coal India plans to revise coal pricing from February 2011
- Network 18 Media plans rights issue of up to Rs.2,700cr
- Anti-coagulant injection issue resolved with USFDA: Dr. Reddy's

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Indian stock market and companies daily report (January 30, 2012, Monday)

2012-01-29T22:38:00.000-08:00

The markets are expected to open weak following negative cues from the Asian markets. US Stocks turned in a relatively lackluster performance on Friday as GDP growth came in at 2.8%, below investor’s expectations. Also Economists were disappointed that much of the GDP growth in the fourth quarter was due to a positive contribution from private inventory investment. The U.S. consumer sentiment result which was also released on Friday was better than expected, but failed to lighten the session's negative mood.
Meanwhile Indian markets closed higher on Friday as investors pinned their hopes on the government unveiling a raft of investor-friendly policies in the upcoming budget. Also, weekly food inflation remained in the negative zone for the fourth consecutive week, reinforcing expectations of lower interest rates in the months to come.

Markets Today
The trend deciding level for the day is 17,200/5,195 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17,293 – 17,352/5,227– 5,249 levels. However, if NIFTY trades below 17,200/5,195 levels for the first half-an-hour of trade then it may correct up to 17,141 – 17,047/5,172 – 5,140 levels.

ITNL emerges as the lowest bidder for road BOT project worth Rs.1,818cr
IL&FS Transportation Networks Ltd. (ITNL) has emerged as the lowest bidder for four laning of Kiratpur to Ner-Chowk project worth Rs.1,818cr. This BOT project in Himachal Pradesh would be executed on DBFOT basis under Phase III. The project is on toll basis with a concession period of 28 years and construction period of three years. Further, NHAI would provide a grant of Rs.134.6cr to ITNL. This is positive for the company, as ITNL had not won any project in FY2012 owing to the aggressive bidding witnessed in the road sector. Considering the sharp run up in the share price (~39% in one month), we recommend Accumulate on the stock with an SOTP target price of Rs.227.

3QFY2012 - Result Reviews
NTPC
NTPC’s stand-alone top-line rose by 14.2% yoy to Rs.15,332cr aided by higher operational capacity. On a stand-alone basis, the company’s capacity was higher by 2,820MW on a yoy basis during the quarter. However, the OPM’s declined by 812bp yoy to 18.6% impacted by higher fuel costs. The depreciation and interest costs too rose by 26.3% yoy and 38.5% yoy respectively during the quarter. The company’s bottom-line was down by 10.2% yoy to 2,130cr. We recommend an Accumulate on the stock with a Target Price of Rs.199.
BHEL
BHEL’s 3QFY2012 results were broadly in-line with our and street estimates. The top line grew by 19.1% yoy to Rs.10,743cr (Rs.9,023cr), lower by 1.2% than our (above street) expectation of Rs.10,873cr. Growth was largely driven by the power segment, which posted robust growth of 58.3% yoy to Rs.8,711cr (Rs.5,502cr). The strong growth was offset by the industry segment, which posted an unexpected decline of 37.3% yoy to Rs.2,367cr (Rs.3,778cr).
On the operating front, the industry segment witnessed phenomenal EBITM expansion of more than 2,000bp yoy to 31.6% mainly due to execution of high rating orders (embedded with high margins). On the other hand, the powersegment’s EBITM came off sharply by ~1200bp yoy mainly due to higher rawmaterial costs and other expenses. On an absolute basis, EBITDAM contracted by 360bp to19.4% (23.0%), in-line with our estimate of 20.0%. Depreciation cost increased by 29.1% yoy to Rs.186.8cr (Rs.144.7cr) partially offset by other income, which came in at Rs.196cr.
Led by the margin dip, PAT growth was subdued at 2.0% yoy to Rs.1,432cr (Rs.1,403cr), 2.2% lower than our (below street) estimate of Rs.1,465cr. On the order book front, orders worth Rs.5,800cr were cancelled during the quarter and order intake remained dismal (no clarity over total inflow during the quarter), thus making 9MFY2012 order inflow tally at mere Rs.15,273cr. Order backlog of the company stood at Rs.1,45,541cr, a sequential decline of 9.0%. Earnings commentary by the management appeared passive mainly due to concerns outlined in the power sector (such as deepening fuel crisis and environmental clearances). Unlike the previous quarters, management refrained to offer any guidance on revenue as well order inflows, which raises a predicament over the company’s performance estimates for the coming quarters.
The business outlook is also soured given 1) delay in order finalizations amid concerns in the power sector; 2) weak investment capex due to high interest rate regime, which could take more time to gather momentum than earlier predicted; and 3) changing dynamics in the BTG space (read sector related). Given this, the attractive valuation of 9.5x FY2012E EPS and 10.5x FY2013E EPS is largely overshadowed. Given the long-term structural concerns, we remain Neutral on the stock. We will shortly come out with a detailed result update.
Canara Bank
For 3QFY2012, Canara Bank posted a poor set of results, with net profit declining by 20.8% yoy to Rs.876cr. Net-interest income of the bank declined by 9.6% yoy to Rs.1,919cr, as high prevailing interest rates led to higher cost of funds. However, non-interest income registered robust growth of 45.2% yoy to Rs.779cr, leading to operating income growing by muted 1.6% yoy. Although operating expenses declined by 1.9% yoy to Rs.1,121cr, provisioning expenses more than doubled to Rs.501cr, leading to a decline of 20.8% yoy in net profit. The bank’s asset quality deteriorated during 3QFY2012, with both gross and net NPA levels rising by 5.4% and 4.8% sequentially, respectively. As of 3QFY2012 gross NPA ratio stands at 1.8% (1.7% in 2QFY2012), while net NPA ratio stands at 1.5% (1.4% in 2QFY2012).
At the CMP the stock is trading at 1.0x FY2013 ABV. We recommend a Neutral rating on the stock.
Bank of India
For 3QFY2012, Bank of India registered a moderate set of results, with net profit growing by 9.6% yoy to Rs.716cr. On the operating front, the bank’s performance was mostly muted (up 4.1% yoy); however, a 4.7% yoy decline in operating expenses led to pre-provisioning profit growing by 24.7% yoy to Rs.1,732cr. Higher provisioning expenses (up 39.2% yoy) negatively impacted profitability, leading to lower 9.6% yoy growth in net profit to Rs.716cr.
The bank’s asset quality improved during 3QFY2012, with gross and net NPA levels declining by 2.5% and 3.6% sequentially, respectively. As of 3QFY2012, gross NPA ratio stood at 2.7% (3.0% in 2QFY2012), while net NPA ratio stood at 1.8% (2.0% in 2QFY2012). Provisioning coverage ratio continued to remain low at 60.1% (59.1% in 2QFY2012).
At the CMP, the stock is trading at 1.1x compared to its historical range of 1.05-1.55x, with a median of 1.25x. We recommend Neutral on the stock.
Bhushan Steel
Bhushan Steel reported its 3QFY2012 results. The company's net sales grew by 23.9% yoy to Rs.2,407cr on account of increased realizations and sales volumes. EBITDA grew by 34.7% yoy to Rs.724cr on account of higher net sales. EBITDA margin expanded by 241bp yoy to 30.1%. During the quarter, interest expense grew by 124.6% yoy to Rs.229cr and depreciation expense grew by 165.8% yoy to Rs.152cr, as the company had capitalized its phase II expansion during FY2012. Hence, profit after tax decreased by 1.3% yoy to Rs.277cr. We maintain our Reduce rating on the stock; however, we keep our target price under review.
Indian Overseas Bank
For 3QFY2012, Indian Overseas Bank registered a poor set of results, with net profit declining by 53.3% yoy to Rs.108cr. On the operating front, the bank’s performance was moderate (up 8.1% yoy) as high prevailing interest rates led to higher cost of funds. Non-interest income of the bank increased by 17.0% yoy to Rs.411cr, leading to operating income growth of 10.2% yoy. High operating expenses, which rose by 19.6% yoy, and higher provisioning expenses (up 86.3% yoy) led to net profit declining by 53.3% yoy to Rs.108cr.
The bank’s asset quality remained under stress during 3QFY2012 as well. As of 3QFY2012, gross NPA ratio stood at 3.0%, while net NPA ratio stood at 1.2%. Provisioning coverage ratio continued to remain moderate at 71.7%. At the CMP, the stock is trading at 0.6x FY2013 ABV. We maintain our Neutral stance on the stock.
Blue Star
Blue Star announced its 3QFY2012 numbers. The company’s net sales declined by 3.9% yoy to Rs.590cr (Rs.613cr). The electromechanical projects and packaged air-conditioning systems (EMPPACS) segment registered a 15.3% yoy decline to Rs.368cr (Rs.434cr), while the cooling product and professional electronic and industrial systems (PEIS) segments registered strong yoy growth of 28.1% and 16.0% to Rs.164cr and Rs.52cr, respectively. EBITDA came in at negative Rs.3cr in 3QFY2012 vs. positive Rs.47cr in 3QFY2011. EBITDA margin declined by 824bp yoy to negative 0.5%, mainly due to increased raw-material cost and other expenditure. Consequently, PAT came in at negative Rs.33cr. The company witnessed Rs.14cr of forex loss during the quarter. We will be coming out with a detailed report. We continue to maintain our Neutral rating on the stock.
Union Bank of India
For 3QFY2012, Union Bank of India posted a disappointing set of numbers, which were far below our as well as streets estimates, primarily due to higherthan- expected provisioning expenses. While NIMs improved by 10bp qoq and gross and net NPAs were largely stable on a sequential basis, substantially higher provisioning expenses dented the overall bottom line. Consequently, net profit took a hit and declined by 66% yoy and 44.1% qoq to Rs.197cr.
The bank’s advances and deposits growth picked up after a sluggish movement in 1HFY2012. Advances registered healthy growth of 6.1% qoq (16.8% yoy) and deposits increased by 5% qoq (10% yoy). CASA deposits of the bank registered healthy growth of 6.5% qoq (moderate 7.6% yoy), leading to a 45bp qoq increase in CASA ratio to 32.5%. Reported NIM of the bank improved by 10bp qoq to 3.3%. Cost-to-income ratio rose further to 45.9% in 3QFY2012 from 44.3% in 2QFY2012 and 40.2% in 3QFY2011. On the asset-quality front, pressures moderated considerably, with slippages declining to Rs.566cr from the average of Rs.940cr over the past four quarters. Gross and net NPAs on an absolute basis were largely stable sequentially. Gross and net NPA ratios improved on a sequential basis, from 3.5% to 3.3% and from 2.0% to 1.9%, respectively. Provision coverage ratio including technical write-offs improved from 60.5% in 2QFY2012 to 63.1% in 3QFY2012.
At the CMP, the stock is trading at 0.9x FY2013E P/ABV. We recommend a Neutral view on the stock.
Jyoti Structures
Jyoti Structures (JSL) announced its 3QFY2012 results, which were lower than our and street estimates. The top line posted modest growth of 6.5% yoy to Rs.587.2cr (Rs.551.3cr), lower by 10.0% from our estimate of Rs.652.7cr. On the EBITDA front, margin compressed by ~130bp yoy to 10.1%, which was along expected lines (est. 10.5%). The margin dip was primarily due to higher sub-contracting expenses, which shot up by ~880bp yoy to 28.3%, as a proportion to sales. Profitability was further impacted by high interest expenses, which soared by 46.5% yoy to Rs.34.7cr. This resulted into PAT plunging by 44.1% yoy to Rs.13.8cr (Rs.24.7cr) against our (below street) estimates of Rs.20.8cr.
At CMP, the stock trades cheaply at 3.5x and 4.1x, FY2012E and FY2013E, EPS respectively. The pessimism, viz. high interest expenses, low profitability and elongated working capital cycle, has clearly factored in the stock’s performance. We would like to get more insights from the earnings conference call, post which we will revise our estimates and recommendation. Meanwhile, we maintain our Buy recommendation on the stock with a target price of Rs.61.
Tata Sponge Iron Ltd.
For 3QFY2012, TSIL’s reported a 23.3% yoy decline in its revenue to Rs.131cr, as compared to Rs.170cr in 2QFY2011. The company’s EBITDA margin came in at 18.8%, lower by 167bp yoy, from 20.5% in 3QFY2011 due to increased employee expenses as a percentage of net sales from 2.9% in 3QFY2011 to 4% in 3QFY2012. Profit for the quarter stood at Rs.17cr as compared to Rs.22cr in 3QFY2011. We expect ramp up in sponge iron volume sales in FY2013E, which would lead to improvement in the top line. Hence, we maintain our Buy recommendation on the stock with a target price of Rs.382, based on a target P/B of 0.9x for FY2013E.
Hitachi Home & Life Solutions
For 3QFY2012, Hitachi Home & Life Solutions (HHLS) reported a 13% yoy decline in its revenue to Rs.107cr from Rs.124cr in 3QFY2011. Increased expenses for the quarter led to negative operating profit of Rs.5cr. The company reported a higher forex loss of Rs.3.7cr on ECB during the quarter as compared to Rs.1.2cr during 3QFY2011. Operating loss and increased depreciation and interest cost led to loss of Rs.10cr as compared to profit of Rs.1.7cr in 3QFY2011.
We expect the company’s sales volume to register a CAGR of 14.1% over FY2011-13E, which would lead to its profit increasing to Rs.30cr in FY2013E from Rs.29cr in FY2011. At the CMP of Rs.113, the stock is trading at attractive valuations with PE of 8.3x FY2013E earnings.
We maintain our Buy rating on the stock with a target price of Rs.157, based on target PE of 12x for FY2013E.

3QFY2012 Result Previews
NMDC
NMDC is slated to announce its 3QFY2012 results. We expect the company’s top line to grow by 4.7% yoy to Rs.2,745cr on account of increased sales volumes as well as realization. On the operating front, EBITDA margin is expected to improve by 58bp yoy to 77.5%. The bottom line is expected to grow by 15.7% yoy to Rs.1,757cr. We maintain our Buy rating on the stock with a target price of Rs.231.
Oriental Bank of Commerce
Oriental Bank of Commerce is scheduled to announce its 3QFY2012 results. Net interest income is expected decline by 1.4% yoy (up 2.6% qoq). Non-interest income is expected to increase by 25.7% yoy (up 4.9% qoq) to Rs.291cr. Consequently, operating income is expected to increase by 3.6% yoy to Rs.1,307cr. Operating expenses are expected to increase by 10.6% yoy to Rs.539cr, leading to pre-provisioning profit declining by 0.8% yoy to Rs.768cr. Provisioning expenses are expected to increase substantially by 67.5% yoy to Rs.321cr. Consequently, net profit is expected to decline by 26.1% yoy (up 79.9% qoq) to Rs.302cr. At the CMP, the stock is trading at valuations of 0.7x FY2013E ABV. We recommend Neutral on the stock.
Indian Bank
Indian Bank is scheduled to announce its 3QFY2012 results. Net interest income is expected to grow moderately by 11.5% yoy (up 1.9% qoq) to Rs.1,157cr. Non-interest income is expected to increase by 20.6% yoy (decline of 12.4% qoq) to Rs.300cr. Consequently, operating income is expected to increase by 13.3% yoy to Rs.1,457cr. Operating expenses are expected to increase by 15.4% yoy to Rs.548cr, leading to pre-provisioning profit growing by 12.0% yoy to Rs.909cr. Provisioning expenses are expected to increase three-fold on a yoy basis to Rs.231cr (up 5.0% qoq). Consequently, net profit is expected to decline by 6.8% yoy (down 2.3% qoq) to Rs.458cr.
At the CMP, the stock is trading at valuations of 0.9x FY2013E ABV. We recommend Neutral on the stock.
Allahabad Bank
Allahabad Bank is scheduled to announce its 3QFY2012 results. Net interest income is expected to grow by healthy 29.3% yoy (up 3.1% qoq) to Rs.1,360cr. Non-interest income is expected to increase by 32.2% yoy (up 10.2% qoq) to Rs.341cr. Pperating expenses are expected to increase by 28.1% yoy to Rs.667cr, leading to pre-provisioning profit growing by 31.0% yoy to Rs.1,033cr. Provisioning expenses are expected to go up substantially by 56.1% yoy (decline of 10.6% qoq) to Rs.368cr. Consequently, net profit is expected to increase by lower 8.7% yoy (decline of 7.5% qoq) to Rs.452cr.
At the CMP, the stock is trading at valuations of 0.7x FY2013E ABV. We remain Neutral on the stock.
Sadbhav Engineering
We expect Sadbhav Engineering (SEL) to post robust 50.0% growth to Rs.714.3cr on the top-line front, owing to pick-up in the execution of captive road BOT projects. EBITDA margin is expected to witness a marginal fall of 40bp yoy to 10.7% for the quarter. On the earnings front, the company is expected to post healthy growth of 47.3% yoy to Rs.38.9cr, owing to strong performance at the revenue level.
At current levels, the stock is trading at valuations of 14.4x FY2013E earnings and 2.0x FY2013E P/BV on standalone basis. Based on a target P/E multiple of 9x and valuing the company’s BOT arm on DCF basis, our SOTP based target price works out to Rs.150. Hence, we maintain our Buy view on the stock.

Economic and Political News
- Fitch assigns 'stable outlook' to fertilizer in 2012
- Oil Ministry demands extra duty of Rs.80,000 on diesel vehicles
- Credit off-take up 17.1% as of mid-January

Corporate News
- Coal India plans to revise coal pricing from February 2011
- Network 18 Media plans rights issue of up to Rs.2,700cr
- Anti-coagulant injection issue resolved with USFDA: Dr. Reddy's

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Indian stock market and companies daily report (January 27, 2012, Friday)

2012-01-26T22:06:00.000-08:00

The markets are expected to open sideways tracking mixed cues from the Asian markets and as investors would be waiting for the outcome of crucial Greek debt talks.
US shares ended on a weak note on Thursday following some mixed economic data, with new home sales notably weak. Profit taking following recent strength also contributed to the downturn by the markets. The data came one day after the US Federal Reserve indicated that it would keep rates in the US at ultra-low levels until late 2014. European market closed to the upside on Thursday. The mere hope of movement in the stalled negotiations over an average debt in Greece helped to put investors in a better mood. Greece and its private creditors made progress on Thursday in talks on restructuring its debt. They will continue negotiating on Friday with the aim of sealing an agreement within a few days.
Indian shares ended a volatility marred session on the last day of January F&O series above important resistance levels on the back of bullish sentiments following easing of policy stance by the Reserve Bank of India.

Markets Today
The trend deciding level for the day is 17,075 / 5,154 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17,133 – 17,188 / 5,178– 5,198 levels. However, if NIFTY trades below 17,075 / 5,154 levels for the first half-an-hour of trade then it may correct up to 17,019 – 16,961 / 5,134 – 5,110 levels.

3QFY2012 Result Reviews
Bank of Baroda
For 3QFY2012, Bank of Baroda posted a healthy set of numbers on the operating front; however, slight deterioration in the asset quality was witnessed during the quarter. Provisioning expenses (Rs.850cr) grew substantially by 179.5% yoy, though they were mostly offset by traction in other income, which registered a robust performance, growing by 70.0% yoy to Rs.1,149cr. Consequently, net profit managed to grow by 20.7% yoy to Rs.1,290cr.
The bank’s businesses gathered pace during 3QFY2012, with advances growing by 9.1% qoq (25.8% yoy) and deposits growing by 6.1% qoq (24.0% yoy). The bank’s overseas book grew by 45.7% yoy, however removing the effect of INR depreciation over the past six months, growth was more normalized at ~25% yoy levels.
The bank witnessed slight deterioration in its asset quality, with gross and net NPA levels rising by 14.5% qoq and 18.5% qoq, respectively. Gross NPA ratio as of 3QFY2012 stood at 1.5% (1.4% in 2QFY2012), while net NPA ratio stood at 0.51% (.47% in 2QFY2012). Slippage levels, which have a quarterly run-rate of ~Rs.500cr, came in at Rs.952cr (annualized slippage ratio of 1.7%) for 3QFY2012.
The bank restructured accounts worth ~Rs.2,116cr in 3QFY2012, on which the bank made a provisioning of Rs.154cr. However, as a percentage of overall advances, restructured assets still remain at low 3.8% (much lower compared to other PSU banks). Also, the bank’s provision coverage ratio remained elevated at 80.5% for 3QFY2012. We maintain our Buy rating on the stock with a target price of Rs.906.
Sesa Goa
Sesa Goa reported is 3QFY2012 results. The company’s net sales increased by 16.3% yoy to Rs.2,617cr mainly due to increased iron ore sales volumes to 5.0mn tonnes (+5.4% yoy) as well as higher realization to US$94 (+10.0% yoy). Net sales were higher than our estimate of Rs.1,775cr due to higher-than-expected sales volumes. However, EBITDA declined by 11.8% yoy to Rs.1,085cr on account of increased export duty. Interest expense increased by 444.4% yoy to Rs.73cr. Hence, reported PAT decreased by 35.5% yoy to Rs.692cr.
The company reported exceptional item of Rs.178cr related to forex loss during the quarter. The company also reported share of profit from its associate (Cairn India) of Rs.122cr. Excluding exceptional items, adjusted PAT declined by 18.4% yoy to Rs.870cr (above our estimate of Rs.562cr). We keep our rating and target price under review.
Union Bank of India
For 3QFY2012, Union Bank of India posted a disappointing set of numbers, which were far below our as well as streets estimates, primarily due to higherthan- expected provisioning expenses. While NIMs improved by 10bp qoq and gross and net NPAs were largely stable on a sequential basis, substantially higher provisioning expenses dented the overall bottom line. Consequently, net profit took a hit and declined by 66% yoy and 44.1% qoq to Rs.197cr.
The bank’s advances and deposits growth picked up after a sluggish movement in 1HFY2012. Advances registered healthy growth of 6.1% qoq (16.8% yoy) and deposits increased by 5% qoq (10% yoy). CASA deposits of the bank registered healthy growth of 6.5% qoq (moderate 7.6% yoy), leading to a 45bp qoq increase in CASA ratio to 32.5%. Reported NIM of the bank improved by 10bp qoq to 3.3%. Cost-to-income ratio rose further to 45.9% in 3QFY2012 from 44.3% in 2QFY2012 and 40.2% in 3QFY2011. On the asset-quality front, pressures moderated considerably, with slippages declining to Rs.566cr from the average of Rs.940cr over the past four quarters. Gross and net NPAs on an absolute basis were largely stable sequentially. Gross and net NPA ratios improved on a sequential basis, from 3.5% to 3.3% and from 2.0% to 1.9%, respectively. Provision coverage ratio including technical write-offs improved from 60.5% in 2QFY2012 to 63.1% in 3QFY2012.
At the CMP, the stock is trading at 0.9x FY2013E P/ABV. We recommend a Neutral view on the stock.
TGBL
TGBL reported its 3QFY2012 results yesterday, which were in-line with our estimates. The company reported top-line growth of ~12% yoy to Rs.1,793cr, against our estimate of Rs.1,734cr. OPM came in at 9.6%, against our estimate of 9.9%. The company’s margins fell on account of higher raw-material costs and ad spends. TGBL reported an 11% yoy decline in its earnings to Rs.64.1cr, against our estimate of Rs.64.5cr. The stock is under review.
IRB Infra
For 3QFY2012, IRB reported a modest set of numbers, which were above our and street estimates. IRB’s top line witnessed growth of 11.5% yoy to Rs.745.5cr (Rs.668.8cr), ahead of our estimate of Rs.639.5cr. IRB’s operating margin stood at 45.8% (43.9%), in-line with our estimate of 45.9%. Interest cost came in at Rs.142.0cr (Rs.82.0cr), registering a jump of 73.2% yoy/0.6% qoq basis. Earnings for the quarter reported a decline of 0.7% to Rs.132.0cr (Rs.133.0cr), above our estimate of Rs.81.5cr on account of better-than-expected performance on the revenue front.
Our valuation of Rs.182/share for the consolidated business uses NPV/EV/EBITDA based valuation for BOT assets and the C&EPC arm, respectively. We factor in CoE of 14% and a traffic growth rate of 5/6/7% for its BOT assets. Owing to the recent run up in the stock, we recommend Accumulate with a target price of Rs.182.
Vijaya Bank
For 3QFY2012, Vijaya Bank registered an 18.1% yoy decline in its net profit to Rs.124cr, below our estimates, mainly due to higher provisioning expenses than built in by us. Due to higher prevailing interest rates, the bank’s NII suffered, declining by 11.5% yoy to Rs.475cr. Non-interest income of the bank registered a moderate performance, growing by 13.5% yoy to Rs.116cr. Although operating expenses of the bank declined by 7.4% yoy, provisioning expenses jumped up substantially by 45.7% yoy to Rs.167cr, leading to an 18.1% yoy decline in net profit. Bottom-line performance would have been worse without the support of a lower effective tax rate (7% in 3QFY2012 compared to 28.3% in 3QFY2011).
The bank’s asset quality remained under pressure in 3QFY2012 as well, with gross and net NPA rising by 20.7% and 31.0% qoq, respectively. Gross NPA ratio as of 3QFY2012 stood at 3.0% (2.5% in 2QFY2012), while net NPA ratio stood at 1.8% (1.4% in 2QFY2012). We continue to remain Neutral on the stock.

3QFY2012 Result Previews
NTPC
NTPC is set to announce its results. For 3QFY2012, we expect NTPC to record a 20.6% yoy increase in its top line to Rs.16,187cr, aided by commencement of new capacities and higher tariffs. However, OPM is expected to decline by 380bp yoy to 24.2%. Net profit is expected to decrease by 6.3% yoy to Rs.2,223cr due to lower other income and higher interest and depreciation costs. We recommend an Accumulate rating on the stock with a target price of Rs.199.
BHEL
BHEL is scheduled to announce its 3QFY2012 results. For the quarter, we expect the company to post top-line growth of 20.5% yoy to Rs.10,873cr. The company's operating margin is expected to compress by ~296bp yoy to 20.0%. Hence, bottom-line growth is expected to be subdued at 4.4% yoy to Rs.1,465cr. We remain Neutral on the stock.
Canara Bank
Canara Bank is scheduled to announce its 3QFY2012 results. We expect the bank to report a decline of 4.6% yoy in its net interest income to Rs.2,022cr. However, on the non-interest income front, the bank is expected to report robust growth of 48.2% yoy to Rs.795cr, leading to operating income growth of 6.1% yoy to Rs.2,817cr. Although operating expenses are expected to grow moderately by 5.5% yoy to Rs.1,206cr, provisioning expenses are expected to nearly double on a yoy basis (190.4% yoy) to Rs.457cr, leading to a decline of 17.5% yoy in net profit to Rs.912cr. We remain Neutral on the stock.
Bank of India
Bank of India is scheduled to announce its 3QFY2012 results. We expect the bank to report a decline of 1.3% yoy in net interest income to Rs.1,962cr. However, on the non-interest income front, the bank is expected to report healthy growth of 22.9% yoy to Rs.797cr, leading to operating income growth of 4.7% yoy to Rs.2,758cr. Although operating expenses are expected to decline by 2.5% yoy to Rs.1,216cr, provisioning expenses are expected to rise substantially by 42.6% yoy to Rs.710cr, leading to a decline of 4.4% yoy in net profit to Rs.624cr. We remain Neutral on the stock.
Jyoti Structures
Jyoti Structures is scheduled to announce its 3QFY2012 numbers. We expect the company to post decent top-line growth of 18.4% yoy to Rs.652.7cr. EBITDA margin is expected to contract marginally by ~91bp yoy to 10.5%. Interest cost is expected to increase due to higher working capital borrowings. Against this backdrop, the company's PAT is expected to decline by 16.0% yoy to Rs.20.8cr. We maintain our Buy rating on the stock with a target price of Rs.61.

Economic and Political News
- Government okays 10% disinvestment in Rashtriya Ispat
- Consumer Affairs Ministry opposes commodity transaction tax
- TRAI waives SMS limit for business houses

Corporate News
- RIL's gas pact with NTPC: EGoM to decide on February 14
- Ranbaxy to pay heavily for future US violations
- Dr Reddy's Labs in trouble with US health regulator again

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Indian stock market and companies daily report (January 24, 2012, Tuesday)

2012-01-23T22:50:00.000-08:00

The markets are expected to open in the green following positive opening across Asian markets, as optimism that European policy makers are making progress to tame the region’s debt crisis boosted the earnings outlook for Asian exporters.
US stocks put in a lackluster performance on Monday. The major averages finished the day near the unchanged mark, consolidating gains posted last week. European stocks finished the first day of the new trading week with a modest increase. European finance ministers balked at putting up more public money for Greece, calling on bondholders to provide greater debt relief in order to point the way out of the two-year-old debt crisis.
Indian shares moved sideways before ending on a flat note on Monday, as investors reacted to mixed quarterly results and lackluster global cues amid apprehensions over the outcome of Greece's talks with private creditors. Investors would be closely watching the RBI’s monetary policy review due today. We expect the RBI to maintain status quo on Repo and CRR.

Markets Today
The trend deciding level for the day is 16,732 / 5,042 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 16,804 – 16,856 / 5,063– 5,081 levels. However, if NIFTY trades below 16,732 / 5,042 levels for the first half-an-hour of trade then it may correct up to 16,679 – 16,607 / 5,004 – 5,025 levels

RBI Monetary Policy Preview – Reversal of rate cycle soon, but not just yet
In light of the considerable economic slowdown witnessed over the past year, the RBI’s policy tone turned more dovish in the last monetary policy review. However, the RBI has continually maintained that any easing of monetary stance will only follow a noteworthy decline in inflation levels. Positively, WPI figures, led by a substantial drop in food inflation, fell to a two-year low of 7.5% for December 2011. However, manufacturing products inflation continued to be relatively high at 7.4% (average of 6.3% over the past two years), which is above the RBI’s comfort levels. Also, considering the sequentially improved IIP (5.9% for November 2011 compared to contraction of 5.5% in October 2011) and the PMI data (54.2 for December 2011 compared to 51.0 for November 2011), the RBI may choose to maintain the repo rate in the upcoming monetary policy, rather than cutting it right away.
However, having said that, the manufacturing inflation, which came in higher than the primary inflation for December, possibly indicates that a large part of pass-through is already done with. Hence, in-line with food inflation, we expect manufacturing inflation to start cooling off as well in the coming few months, eventually leading to policy rate cuts by the RBI. Further, with GDP growth widely expected to be below 7% for FY2012, growth concerns are likely to increasingly influence the RBI’s policy rate stance going forward.
Hence, while we do not expect any rate cuts just yet, we do see a meaningful case for the RBI to start with the rate cut cycle soon in order to get growth back on track, provided inflation levels (particularly the core inflation levels) further moderate on expected lines.
Specifically for the upcoming monetary policy, of the 20 economists surveyed by Bloomberg, all expect a status quo on key policy rates. However, five of them expect a CRR cut (of which two expect a 25bp cut while three expect a 50bp cut). The RBI has been resorting to open market operations (OMO) for easing liquidity in the system (~Rs.73,000cr infused into the system over the past two months), however average LAF borrowing at Rs.1,17,700cr (over the past two months) is still way above the RBI’s comfort zone of +-1% of NDTL. With liquidity crunch persisting in the system and OMO not reaping the desired benefits, chances of a CRR cut in the monetary policy on January 24, 2011 cannot be ruled out, in our view.
To summarize, for the upcoming policy, we expect the RBI to maintain status quo on repo and CRR. Although we believe the RBI will continue with OMOs for liquidity infusion, chances of a CRR cut in the monetarily policy on January 24, 2011, cannot be ruled out.

KEC International secures orders worth Rs.371cr
KEC International (KEC) has secured orders totaling Rs.371cr for the construction of 400kV transmission lines in India. The orders are received from PGCIL (Rs.258cr) and Haldia Energy Limited, a subsidiary of CESC Ltd. (Rs.113cr). The completion period of these projects ranges from 18–26 months. The order book stands healthy at ~Rs.9,700cr (2.1x FY2011 revenue).
In a short span of time, KEC has registered strong order wins (Rs.1,970cr), from across the globe as well as various businesses verticals. Amidst strong order wins, the stock has witnessed a substantial rally in the past few days, gaining ~50%. We believe the latent potential of the company (globally diversified model) coupled with optimism surrounding the macro environment has clearly factored into the stock. At the CMP of Rs.53, the stock trades at reasonable valuations of 6.0x FY2013E EPS and further upside seems limited, in our view. Hence, we recommend Neutral on the stock.

IVRCL bags orders worth Rs.700cr
IVRCL has bagged orders aggregating to Rs.700cr across the water and buildings segments. The water and irrigation division bagged orders worth Rs.595.5cr and the buildings division received orders of Rs.106.0cr. With these orders, IVRCL’s order book stands at ~Rs.26,932cr (4.8x FY2011 revenue). We have valued IVRCL on an SOTP basis. The company’s core construction business is valued at P/E of 7x FY2013E EPS of 4.6 (Rs.32.4/share), whereas its stake in subsidiaries IVR Prime (Rs.15.5/share) and Hindustan Dorr-Oliver (Rs.3.8/share) has been valued on mcap basis, post assigning a 20% holding company discount.
At the CMP of Rs.45, the stock is trading at 9.8x FY2013E EPS and 0.6x FY2013E P/BV on a standalone basis. Therefore, on the back of the company’s robust order book-to-sales ratio (4.8x FY2011 revenue) and attractive valuations, we recommend Accumulate on the stock with a target price of Rs.52.

3QFY2012 Result Reviews
L&T
Larsen and Toubro (L&T) posted good set of numbers for 3QFY2012, which were above our and street expectations mainly on account of robust top-line growth and higher other income. L&T reported decent top-line growth of 22.7% yoy to Rs.13,999cr (Rs.11,413cr), above our estimates of 6.6% growth, mainly on account of pick-up in the E&C segment. We note that this performance was in spite of high base created in 3QFY2011 (L&T reported yoy top-line growth ~40.5%). On the EBITDA front, performance was below our expectations mainly on account of higher-than-anticipated MTM forex losses. L&T reported higher than anticipated other income, owing to higher income on its investments and dividend income from subsidiaries. Therefore, the bottom line came in at Rs.991.6cr (14.4% above our estimates).
As of 3QFY2012, L&T’s order backlog stands at Rs.1,45,768cr (Rs.1,14,882cr), 26.9% yoy growth, which is mainly on account of order inflow being higher than execution on absolute terms. Order inflow for the quarter grew by stunning 28.2% to Rs.17,129cr (Rs.13,366cr) covering some of the lost ground in 1HFY2012. For 9MFY2012, the order inflow stands at flat Rs.49,415cr (Rs.49,456). During the last quarter, management had significantly cut its order inflow guidance for FY2012, mainly to factor in the general slowdown faced by the sector, but this time they have refrained from the same and maintained their revised guidance (yoy 5% growth on order inflow and 25% on revenue front fo FY2012), which we believe factors in aggressive run rate for 4QFY2012 (yoy growth of 13.3% on order inflow and 32.0% on revenue front for 4QFY2012). We expect management to miss the guidance and pencil in 5% yoy de-growth in order inflow and 22.5% yoy growth in revenues for FY2012.
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 peers. We maintain L&T as our top pick in the sector and maintain Buy on the stock with a Target Price of Rs.1,466.
GAIL
GAIL’s 3QFY2012 top line came above our estimate, while its bottom line was inline with our estimate. The company’s top line grew by robust 34.6% yoy to Rs.11,260cr, above our estimate of Rs.9,587cr, mainly due to strong growth in the natural gas trading, petrochemical and LPG segments. The company’s fuel subsidy burden increased 28.0% yoy to Rs.536cr in 3QFY2012. Gross revenue of the natural gas trading, petrochemical and LPG segments grew by 35.5%, 53.7% and 32.6% yoy to Rs.9,150cr, Rs.878cr and Rs.965cr, respectively. GAIL’s pipeline throughput stood flat yoy to 119mmscmd; gas trading volume increased 1.9% yoy to 85mmscmd from 83mmscmd and petrochemical sales volume increased 40.0% yoy to 113kt in 3QFY2012. EBIT of the natural gas trading, petrochemical and LPG segments grew by 56.9%, 98.3% and 103.6% yoy to Rs.323cr, Rs.387cr and Rs.305cr, respectively. However, EBIT of the natural gas transmission and LPG transmission segments decreased by 6.7% and 8.2% yoy to Rs.621cr and Rs.78cr, respectively. Consequently, GAIL’s EBITDA increased by 30.9% yoy to Rs.1,745cr in 3QFY2012. However, EBITDA margin contracted by 44bp yoy to 15.5%. Other income decreased 88.8% yoy to Rs.21cr on account of lower cash balance. Tax rate increased to 32.7% in 3QFY2012 compared to 28.1% in 3QFY2011. Consequently, net profit grew by 7.7% yoy to Rs.1,042cr, slightly above our estimate of Rs.1,018cr. The company capitalized its forex loss of Rs.105cr in 3QFY2012. Consequently, there was no impact in the income statement due to foreign exchange fluctuation. We maintain our Buy recommendation on the stock, while we keep our target price under review.
Sterlite Industries
Sterlite Industries’ (Sterlite) results were above our expectations. Net sales increased by 23.5% yoy to Rs.10,246,cr above our estimate of Rs.8,798r. Net sales growth was driven by higher zinc sales volumes from the zinc segment and power segment. Revenue of the zinc and power segments grew by 36.9% and 346.7% yoy to Rs.3,755cr and Rs.591cr, respectively. Sterlite’s EBITDA grew by 17.2% yoy to Rs.2,318cr. EBIT of the copper and power segments grew by 67.8% and 178.3% yoy, respectively, to Rs.326cr and Rs.53cr, respectively. However, the aluminium segment reported an EBIT loss of Rs.23cr compared to EBIT of Rs.119cr in 3QFY2011. Aluminium cost of production at Balco increased by 22.0% yoy to Rs.98,234/tonne on account of increased prices of alumina and coal. Sterlite’s associate, Vedanta Aluminium also reported loss of Rs.893cr in 3QFY2012 (Sterlite’s share of loss - Rs.264cr) compared to loss of Rs.347cr in 3QFY2011. Other income grew by 83.6% yoy to Rs.877cr, significantly above our estimate. The company reported exceptional items related to forex loss of Rs.425cr in 3QFY2012 compared to Rs.29cr in 3QFY2011. Hence, adjusted net profit increased by 12.1% yoy to Rs.1,260cr in 3QFY2012, above our estimate of Rs.771cr. Reported net profit decreased by 16.4% yoy to Rs.920cr.
Balco is now nearing regulatory approvals for its 211mn tonne coal block. Approval of coal block by the regulatory authorities could potentially make Balco’s operations profitable.
We maintain our Buy recommendation on the stock, while we keep our target price under review.
Maruti Suzuki
Maruti Suzuki (MSIL) reported a mixed set of results for 3QFY2012, with the top line and bottom line coming in ahead of our estimates; however, the company’s operating margin continued to remain under pressure, largely on account of unfavorable currency movement. The top line registered a 17% yoy (flat qoq) decline to Rs.7,882cr, largely due to a 27.6% yoy (down 5.1% qoq) decline in volumes. Volume performance during the quarter was impacted on account of labor strike at Manesar plant and due to sluggish demand environment in domestic markets. Average net realization, however, improved by strong 14.1% yoy (7.1% qoq), led by better product mix, lower level of blended discounts and price increases carried out during the quarter. EBITDA margin witnessed a steep 421bp yoy (102bp qoq) contraction and stood at 5.3% due to lower volumes, mark-to-market (MTM) loss on commodity hedges and other expenditure. Higher other expenditure was on account of Yen appreciation versus the INR (MTM loss on royalty payments of ~Rs.78cr). As a result, net profit fell substantially by 63.6% yoy (14.5% qoq) to Rs.206cr. However, it was ahead of our estimates, led by higher other income and lower tax rate. At Rs.1,163, the stock is trading at 14.5x FY2013E earnings. The stock rating is currently under review.
Idea
For 3QFY2012, Idea Cellular (Idea) reported a good set of results. Revenue came in at Rs.5,031cr, up 8.9% qoq, on the back of 1.4% qoq growth in ARPM to Rs.0.433/min and subscriber growth of 6.2% qoq with end-of-period (EOP) subscriber base standing at 106.4mn. MOU also grew by 1.4% qoq to 369min in 3QFY2012 from 364min in 2QFY2012. VAS share in revenue grew to 13.7% from 13.2% in 2QFY2012. All this led to a 2.6% qoq jump in ARPU to Rs.159/month. EBITDA margin increased by 104bp qoq to 26.7%. PAT came in at Rs.201cr. We maintain our Neutral view on the stock.
Colgate
Colgate reported its 3QFY2012 results yesterday. The company’s top line grew by 20% yoy to Rs.670cr, 4.2% above our estimates. Growth was driven by price hikes. Earnings for the quarter grew by robust 74% to Rs.116cr on account of low base (same quarter last year, the company reported a decline in profit). Operating margin expanded by 591bp yoy on account of a steep cut in ad spends (down by 555bp yoy) and cut in staff costs (down by 140bp yoy). The company’s operating margin came in at 19.3%, against our estimate of 13.4%. We maintain our Neutral rating on the stock.
Shree Cements
Shree Cements’ (SRCM) 3QFY2012 top line rose by 61% yoy during the quarter to Rs.1,259cr. The cement business posted 44.9% yoy growth in net sales to Rs.1,081cr on account of substantial growth in dispatches and realizations. The power division’s revenue more than quadrupled to Rs.178cr on a low base on account of higher volumes. OPM rose by 695bp to 26.5% on account of better cement realization. SRCM’s depreciation rose by 78.9% yoy to Rs.235cr on account of the commissioning of the new 150MW power plant. The company’s bottom line rose by 115% yoy to Rs.59cr. We maintain our Neutral view on the stock.
Federal Bank
For 3QFY2012, Federal Bank reported 41.1% yoy (5.6% qoq) growth in its net profit to Rs.202cr, in-line with our estimates. While the bank witnessed sequential healthy growth in its operating income (12.6% qoq), higher provisioning expenses (up by 59.6% qoq) dented profitability growth to 5.6% qoq.
The bank’s asset quality remained under pressure during 3QFY2012 as well, with absolute gross and net NPAs rising by 9.1% and 24.5% sequentially, respectively. Gross NPA ratio deteriorated by 36bp qoq to 4.0%, while net NPA ratio deteriorated by 16bp to 0.7%
At the CMP, the stock is trading at valuations of 1.0x FY2013E ABV. Considering the recent deregulation of NRE FD rates (NRE deposits comprise ~12% of its total deposits) and that mid-size PSU banks with similar earnings outlook are trading at valuations of 0.5-0.7x, we remain Neutral on the stock.
DB Corp
For 3QFY2012, DB Corp’s top line grew by 13.6% yoy and 11.8% qoq to Rs.396cr. Consolidated ad revenue for the quarter grew by 9% yoy to Rs.306cr. Circulation revenue grew by impressive 17% yoy and 5.8% qoq on account of new edition launches in Maharashtra. The company reported a weak set of numbers on the earnings front, primarily on account pre-operative expenses of Rs.2cr and operating losses on four editions in Maharashtra and two additions in Jharkhand. The company reported a 29% yoy decline and 39% qoq growth in its recurring earnings. Recurring PAT for the quarter stood at Rs.56cr. Operating margin during 3QFY2012 fell steeply by 724bp yoy, though it expanded by 394bp qoq on account of new edition losses as well as forex losses. The stock is under review.
LMW
Lakshmi Machine Works Limited (LMW) announced its 3QFY2012 numbers. Net sales increased by 9.6% yoy to Rs.538cr (Rs.491cr). The textile machinery segment registered 11% yoy growth to Rs.471cr (Rs.425cr), while the other segments managed a 3.1% yoy increase to Rs.72 (Rs.70cr). EBITDA declined by 9.1% yoy to Rs.69cr (Rs.76cr), largely due to margin compression. EBITDA margin declined by 263bp yoy to 12.8% (15.4%), mainly due to higher raw-material cost, which increased to 63% of net sales vs. 58.2% in 3QFY2012. PAT declined by 13.5% yoy to Rs.40cr (Rs.46cr), while margin declined by 197bp yoy to 7.4% (9.3%). We will be coming out with a detailed report post management interaction. We continue to maintain our Buy rating on the stock with a target price of Rs.2,780.
KPIT
KPIT Cummins Infosystems (KPIT) reported better-than-expected 3QFY2012 results. Dollar revenue came in at US$73.4mn, up 4.3% qoq. In INR terms, revenue came in at Rs.379cr, up 16.6% qoq. EBITDA and EBIT margin of the company improved by 167bp and 171bp qoq to 15.3% and 11.8%, respectively, aided by ~300bp qoq due to INR depreciation. PAT stood at Rs.41cr. The company has revised its organic growth guidance of FY2012 USD revenue to 37-38% yoy from 25-29% yoy given previously. The stock is currently under review. We will be releasing a detailed result update shortly.
Ashoka Buildcon
For 3QFY2012, Ashoka Buildcon (ABL) reported a good set of numbers, in-line with our estimates. ABL’s top line witnessed robust growth of 49.3% to Rs.352.9cr (Rs.236.4cr), marginally lower than our estimate of Rs.360.6cr. ABL’s margins came at 19.6% (22.8%), lower than our estimate of 21.5%. On the earnings front as well, ABL reported decent growth of 17.5% to Rs.19.5cr (Rs.16.6cr), in-line with our estimate of Rs.21.0cr. Order book as of 3QFY2012 stood at Rs.3,912cr. We maintain our Buy view on the stock with target price of Rs.245.
3QFY2012 Result Previews
Cairn India
Cairn India is slated to report its results. The company’s net sales are expected to decrease by 5.8% yoy to Rs.2,917cr. However, its operating margin is expected to decline by 344bp yoy to 81.0%. Bottom line is expected to increase by 0.6% yoy to Rs.2,023cr. We maintain our Neutral view on the stock.
Lupin
Lupin is expected to announce its 3QFY2012 results. For the quarter, we expect the company to post a 39.0% yoy growth in its top-line to Rs.1,755cr. The company's OPM is expected to expand by 10bp yoy during the period to 19.7%. Earnings for the quarter are expected to register 62.9% yoy growth to Rs.261cr. We maintain Buy rating on the stock with a target price of Rs.593.
Yes Bank
Yes Bank is slated to announce its 3QFY2012 results. We expect the bank to report healthy NII growth of 26.6% yoy on the back of continuance of healthy balance sheet growth coupled with sequentially stable NIM. Non-interest income is expected to rise at healthy 24.4% yoy. Cost-to-income ratio is likely to deteriorate by ~150bp qoq as well as on a yoy basis to 37.2%. Pre-provision profit is expected to register reasonable growth of 23.1% yoy, while net profit is expected to increase by nearly similar (22.2% yoy) quantum at Rs.234cr. At the CMP, the stock is trading at 1.8x FY2013E ABV. We value the stock at 2.1x FY2013 ABV. Post the recent run-up in the stock, we recommend an Accumulate rating on the stock with a target price of Rs.330.

Economic and Political News
- RBI warns of persistent inflation, weaker growth
- Row over import duty on power equipment, PM action sought
- CEC team visits mining areas in Bellary district

Corporate News
- RIL assures SC of paying VAT on UP gas sale from Feb 1
- MMTC disinvestment may not happen in immediate future
- NTPC expects JV for Bangla project by month-end

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Indian stock market and companies daily report (January 23, 2012, Monday)

2012-01-23T01:06:00.000-08:00

The markets are expected to open sideways following flat opening across most of the Asian bourses. The muted start in Asia came amid lingering European uncertainty, after Greece failed to reach a debt-restructuring agreement over the weekend with holders of its sovereign bonds.
US stocks turned in a relatively lackluster performance during trading on Friday, as traders seemed somewhat reluctant to make any significant moves. A mixed reaction to the latest batch of earnings news contributed to the choppy trading seen throughout the session. European stocks were mixed on Friday, ending another strong week on a fairly lackluster note as markets looked for a resolution to the Greek debt debacle.
Indian shares continued to edge higher on Friday despite weak cues from European markets. The Supreme Court on Friday set aside a Bombay High Court judgment in the US$2bn tax case against British telecom giant Vodafone, boosting prospects for more FDI inflow into India. For current week, investors would be closely watching the RBI’s monetary policy review due on 24th January 2012.

Markets Today
The trend deciding level for the day is 16,713/5,039 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 16,814–16,890/5,074–5,099 levels. However, if NIFTY trades below 16,713/5,039 levels for the first half-an-hour of trade then it may correct up to 16,638–16,536/5,014–4,979 levels.

3QFY2012 Result Reviews
RIL
For 3QFY2012, Reliance Industries (RIL) reported higher-than-expected net sales, while its net profit was slightly below our estimates. Net sales increased by 42.4% yoy to Rs.85,135cr, above our estimate of Rs.78,364cr. Net sales growth was mainly driven by the petrochemicals segment (+23.8% yoy to Rs.19,781cr) and refining segment (+46.1% yoy to Rs.76,738cr). RIL’s EBITDA decreased by 23.7% yoy to Rs.7,285cr on account of lower profits from all the three main segments. The refining segment’s EBIT decreased by 30.8% yoy to Rs.1,685cr; the petrochemical segment’s EBIT decreased by 11.2% yoy to Rs.2,157cr; and the oil and gas segment’s EBIT decreased by 14.0% yoy to Rs.1,294cr during the quarter. Gross refining margins stood at US$6.8/bbl in 3QFY2012 compared to US$9.0 in 3QFY2011 and US$9.1/bbl in 2QFY2012. Production from KG-D6 stood at 41mmscmd in 3QFY2012 compared to 45mmscmd in 2QFY2012. Other income increased by 131.7% yoy to Rs.1,717cr, which resulted in net profit decreasing by only 13.6% yoy to Rs.4,440cr, slightly below our estimate of Rs.4,519cr.
During 3QFY2012, RIL turned into a net debt-free company, as its net debt stood at Rs.74,503cr and cash stood at Rs.74,539cr, as on December 31, 2011. RIL announced share buyback program of 12cr shares (Rs.10,440cr) through open market purchases at a buyback price not exceeding Rs.870. We maintain our Buy view on the stock, while we keep our target price under review.
ITC
For 3QFY2012, ITC declared steady growth in its top line and earnings (broadly in-line with our estimates). During the quarter, ITC declared top-line growth of 14.2% yoy to Rs.6,195cr, in-line with our estimates. The cigarette division registered 11% yoy growth in gross revenue (16.6% yoy growth in net revenue) on the back of price hikes taken in cigarettes. Amongst other segments, at net level, agri-business, paperboards and packaging and hotels posted growth of 6.8% yoy, 11% yoy and -1.1% yoy, respectively, while the non-cigarette FMCG business grew by robust ~24% yoy. Earnings for the quarter grew by robust 22.5% yoy to Rs.1,701cr, in line with our estimates. The company has been successful in reducing its losses in the non-cigarette FMCG business – loss during 3QFY2012 stood at ~Rs.47cr (Rs.74cr). We maintain Accumulate on the stock with a target price of Rs.219 based on our SOTP valuation.
Wipro
For 3QFY2012, Wipro’s IT services revenue came largely in-line with expectations at US$1,505.5mn, up 2.2% qoq, primarily led by pricing growth of 2.9% and 2.3% qoq (reported basis). In constant currency (CC) terms, pricing – onsite and offshore – grew by 4.3% and 3.6% qoq, respectively. Volume growth during the quarter was tepid at 1.8% qoq. In INR terms, revenue of the IT services segment came in at Rs.7,608cr, up 11.4% qoq, aided by INR depreciation against USD. Revenue from the consumer care and lighting segment grew strongly by 26.4% yoy, while the IT products segment reported merely 2.4% yoy revenue growth. EBIT margin of the IT services, IT products and consumer care and lighting business grew by 83bp, 77bp and 87bp qoq to 20.8%, 5.3% and 11.9%, respectively. Overall, EBITDA and EBIT margin of Wipro grew by 72bp and 88bp qoq to 19.8% and 17.2%, respectively. PAT came in at Rs.1,456cr.
For 4QFY2012, management has given a decent revenue guidance of US$1.520bn-1.550bn for the IT services segment, with qoq growth of 1-3%, which is slightly better than one of its peers, Infosys. Also, management maintained that the company will take another 1-2 quarters to grow at rates comparable to its peers. This implies poor annual growth for FY2012. Thus, we expect revenue CAGR for IT services (USD terms) to be muted at 12.8% over FY2011-13E. We value the company at 15.3x FY2013E EPS (15% discount to Infosys) of Rs.27.8, which gives us a target price of Rs.425. We maintain our Neutral rating on the stock.
Hindustan Zinc
For 3QFY2012, Hindustan Zinc’s (HZL) net revenue increased by 5.6% yoy to Rs.2,747cr (in-line with our estimate of Rs.2,574cr) on account of higher sales volumes. Zinc sales volumes grew by 6.5% yoy and 3.2% qoq to 190kt and lead sales volumes grew by 118.8% yoy and 83.9% qoq to 27kt due to ramp up in production from Dariba smelter (commissioned in June 2011). Silver sales volumes grew by 66.0% yoy and 18.2% qoq to 49kt. Zinc realization decreased by 4.9% yoy and 2.4% qoq to Rs.105,474/tonne, lead realizations decreased by 4.4% yoy and 5.0% qoq to Rs.114,074/tonne, while silver realization increased by 33.1% yoy but decreased by 9.2% qoq to Rs.52,449/kg. Hence, EBITDA margin contracted by 689bp yoy to 51.1% and EBITDA decreased by 7.0% yoy to Rs.1,402cr. Other income was higher by 84.4% yoy to Rs.382cr, which resulted in net profit growing by 0.6% yoy to Rs.1,274cr. Excluding exceptional items (Rs.6cr in 3QFY2012 and Rs.24cr in 3QFY2011), adjusted net profit declined by 0.7% yoy to Rs.1,280cr (in-line with our estimate of Rs.1,288cr). Reported net profit grew by 0.6% yoy to Rs.1,274cr.
The company’s cash and equivalents stood at Rs.16,255cr at the end of 3QFY2012 (cash per share Rs.38.4). The company is ramping up its Sindesar Khurd mine to 2mn tonnes by March 2012. We maintain our Buy rating on the stock, while we keep our target price under review.
Axis Bank
For 3QFY2012, Axis Bank reported healthy 23.7% yoy growth in its net profit to Rs.1,102cr, above our as well as street estimates. Stable NIMs, continuance of traction in other income growth and largely stable asset quality were the key highlights of the results.
Business growth momentum for the bank remained on track in 3QFY2012 as well. Advances grew by healthy 6.2% qoq; on a yoy basis, the base effect sedated the advances growth to 20.4%. Deposits accretion sustained the traction gained in 2QFY2012 into 3QFY2012 as well, with rise of 7.3% qoq and 33.9% yoy. CASA deposits on a daily average basis grew at a moderate pace of 13.2% yoy. CASA ratio remained steady around the 42% mark. The bank’s reported NIM for the quarter remained largely stable at 3.75% in spite of a 15bp qoq rise in cost of funds. However, going forward, management expects some moderation in NIMs. Asset-quality pressures were well in check, with annualized slippage ratio at 1.5%, in-line with trends witnessed in 2QFY2012 and FY2011. Restructuring for the quarter was also in-line with Rs.300cr witnessed in 2QFY2012. Gross and net NPA ratios were stable sequentially at 1.1% and 0.4%, respectively. The bank added 47 branches during the quarter. Tier-I CAR including profits stood at 9.6%.
The bank’s substantial branch expansion over the past 2-3 years (407 in FY2011 itself, a 41.4% yoy increase) is expected to yield meaningful results over FY2012-13, leading to more CASA market share gains. We are cautious on the asset-quality front and have built in higher delinquencies; however, we note that the rise in NPAs is likely to be well within manageable limits for Axis Bank. We remain positive on the bank, owing to its attractive CASA franchise, rapid branch expansion, multiple sources of sustainable fee income, strong growth outlook and A-list management. The stock is trading at 1.6x FY2013E ABV. We continue to maintain our Buy recommendation on the stock with a target price of Rs.1,299.
Ultra Tech Cement
Ultra Tech’s 3QFY2012 top line grew by 23.1% yoy to Rs.4,572cr, aided by robust 16.4% yoy growth in blended realization to Rs.4,313/tonne. The company’s domestic cement dispatches (incl. clinker and white cement) grew by 6.2% yoy to 9.97mn tonnes. However, the company faced cost pressures during the quarter on account of higher coal and freight costs. OPM for the quarter stood at 22.4%, up 283bp yoy. Net profit rose by 93.4% yoy to Rs.617cr, aided by better operating performance and lower interest costs. We continue to remain Neutral on the stock.
Asian Paints
Asian Paints (APL) posted its 3QFY2012 results, largely in line with our estimates. The company’s consolidated top line grew by 22% yoy to Rs.2,561cr (Rs.2,100cr), inline with our estimates. Earnings grew by 17% yoy to Rs.257cr (Rs.215cr), in line with our estimates. Operating profit dipped by 91bp yoy to Rs.397cr (Rs.345cr) due to high raw-material costs and other expenses (up 19bp yoy). The company’s EBITDA margins came in at 15.5% against our estimate of 15.7%. At the CMP, the stock is trading at 22x FY2013E EPS and is fairly valued. Hence, we maintain our Neutral view on the stock and wait for better entry opportunities.
JSW Steel
JSW Steel reported its standalone 3QFY2012 results. The company’s net sales grew by 35.5% yoy to Rs.7,860cr (in-line with our estimate of Rs.7,645cr). Net sales growth was driven by increased steel volumes (+20.0% yoy to 1.9mn tonnes) and realization (+18.2% yoy to Rs.43,401/tonne). Capacity utilization improved to 84% at Vijaynagar plant in 3QFY2012, compared to 30-60% during 2QFY2012. On the operating front, although JSW Steel’s EBITDA increased by 20.9% yoy to Rs.1,253cr, EBITDA margin slipped by 191bp yoy to 15.9% on account of higher raw-material prices. The company reported exceptional item related to forex loss of Rs.500cr during the quarter. The company also reported a tax reversal of Rs.141cr in 3QFY2012 compared to tax payable of Rs.147cr in 3QFY2011, which resulted in adjusted net profit growing by 74.8% yoy to Rs.668cr (higher than our estimate of Rs.482cr). Reported PAT declined by 56.0% yoy to Rs.168cr.
The company reported that its usable iron ore inventory at Vijaynagar plant (capacity – 10mn tonnes p.a.) is expected to last for the next 3-4 months. However, it opined that continuing steel production would remain a challenge until the mining ban is lifted in Karnataka. We recommend Accumulate on the stock with a target price of Rs.699.
GCPL
GCPL posted its 3QFY2012 results, above our estimates. The company’s consolidated top line grew by 36% yoy to Rs.1,344cr (Rs.989cr). Earnings grew by 40.6% yoy to Rs.167cr (Rs.119cr). Operating profit expanded by 302bp yoy to Rs.265cr (Rs.165cr) due to steep cut in ad spends. The company’s EBITDA margins came in at 19.7% against our estimate of 16.7%. The stock is under review.
Exide Industries
Exide Industries (EXID) reported better-than-expected operating performance for 3QFY2012, led by a sharp sequential improvement in operating margins. the company’s top line registered strong 19% yoy (6.3% qoq) growth to Rs.1,250cr driven by ~20% yoy volume growth in two-wheeler batteries and ~13% yoy increase in industrial battery volumes. However, demand continued to remain subdued in the four-wheeler OEM as well as the replacement segment. On the operating front, EBITDA margin improved substantially by 556bp sequentially, led by a 490bp and 130bp decline in raw-material expenses and other expenditure, respectively. On a yoy basis, raw-material expenses are still at elevated levels, as a result of which EBITDA margin contracted by 200bp. Net profit witnessed a sharp 103.9% qoq jump to Rs.104cr, aided by better-than-expected operating performance; however, it declined by 16.2% yoy. We expect the company to report improvement in its performance in 4QFY2012 as well, led by likely revival in demand in the four-wheeler OEM as well as replacement batteries segments. At Rs.126, the stock is trading at 16.5x FY2013E earnings. The stock rating is currently under review. We shall revise our estimates and release a detailed note post the earnings conference call with management.
Syndicate Bank
For 3QFY2012, Syndicate Bank reported 32% yoy growth in its net profit to Rs.338cr, ahead of our estimates, primarily on account of lower-than-estimated effective tax rate. On the PBT front, results were ~18% below our estimates due to higher-than-expected provisioning expenses. Muted business growth while maintaining NIM and stabilization of asset-quality pressures were the key highlights of the results.
During the quarter, business growth for the bank moderated a bit. The bank’s advances grew by muted 2.0% qoq and deposits increased by muted 1.4% qoq. Even on a yoy basis, business growth moderated to 14.9% yoy each as compared to 18.9% growth in advances and 21.5% rise in deposits in 2QFY2012. CASA deposits growth remained sluggish at 6.6% yoy (just 2.2% qoq), leading to a 237bp yoy dip in CASA ratio to 30.8%. However on a sequential basis CASA ratio improved albeit by a marginal 30bp to 30.8% on the back of a 5% qoq increase in current account deposits. The 22bp qoq rise in cost of deposits was largely offset by an almost similar increase in yield on advances, leading to sequentially stable NIM for the quarter at 3.45%. During 3QFY2012, asset-quality pressures for the bank subsided with slippages declining to Rs.550cr from the elevated Rs.971cr witnessed in 2QFY2012 (primarily on account of completion of switchover to system-based NPA
recognition platform). Consequently, the annualized slippage ratio declined to 1.9% from 3.6% in 2QFY2012 and 2.6% in 3QFY2011. The bank had strong upgradations (of ~Rs.350cr), which aided in registering a 1.9% qoq decline in gross NPAs on an absolute basis. Gross and net NPA ratios improved albeit marginally to 2.3% and 0.9%, respectively. Provision coverage ratio including technical write-offs remained at comfortable 78.5%
In our view, at the CMP, the stock is trading at attractive valuations of 0.6x FY2013E ABV. We recommend an Accumulate rating on the stock with a target price of Rs.99.
HT Media
For 3QFY2012, HT Media reported a weak performance on the revenue as well as the profitability front. The company’s top line grew by 13% yoy to Rs.522cr. Recurring earnings declined by 3.8% yoy on account of high raw material cost and staff cost.
Key highlights for the quarter: During the quarter, the company witnessed overall growth of ~10% yoy in ad revenue, driven by ~10.5% yoy growth in the English and ~8.7% yoy growth in the Hindi print segments; however, sequentially, ad revenue growth in English was higher at 9.9% and that in Hindi declined ~9.6% qoq. Further, the company witnessed a ~6.8% yoy increase in circulation revenue. OPM during the quarter contracted by 125bp yoy due to higher other expenditure. The stock is under review.
Bank of Maharashtra
For 3QFY2012, Bank of Maharashtra reported a strong performance with a healthy 50.2% yoy growth in its net profit to Rs.136cr, slightly lower than our estimate on account of higher tax provisioning (37% effective tax rate). On PBT basis, the reported figure of Rs.215cr was in line with our estimates (Rs.216cr).
The net interest income of the bank grew at a healthy 23.7% yoy to Rs.645cr. The non-interest income also registered a healthy growth of 21.3% yoy to Rs.150cr, leading to operating income growth of 23.2% yoy. The operating expenses (Rs.370cr) of the bank grew by a relatively lower 9.8% yoy, leading to a preprovisioning profit of 37.8% yoy. The provisioning expenses of the bank increased by 22.6% yoy (decline of 24.6% qoq) to Rs.210cr. While the PBT for the bank grew by an impressive 69.4% yoy, higher tax rate (37.1% in 3QFY2012 compared to 31.5% in 2QFY2012) led to net PAT growing by 50.2% yoy to Rs.136cr.
During 3QFY2012, advances for the bank de-grew by 0.3% qoq (up by 14.0% yoy), while deposit growth was also muted at 0.8% qoq (up by 11.4% yoy). CASA deposits growth at 1.5% qoq (13.6% yoy) was relatively higher compared to the overall deposit growth (saving account deposits rising by 2.1% qoq (12.2% yoy)), leading to CASA ratio for the bank improving sequentially by 29bp to 41.0%.
The bank shed around Rs.2,000cr of bulk deposits during 3QFY2012, taking the total bulk deposits to Rs.6000cr (8.6% of overall deposits). The cost of funds for the bank increased by a relatively lower 11bp qoq compared to 24bp qoq increase in the yield on advances. Consequently the reported NIMs witnessed a marginal improvement of 4bp to 3.3bp.
The bank’s asset quality remained healthy with both absolute Gross and Net NPAs declining by 4% sequentially. While the gross NPAs improved from 2.15% to 2.06%, the net NPA ratio improved from 0.57% to 0.54%. The bank restructured ~Rs.1,100cr of loans to the Rajasthan and Haryana SEBs during 3QFY2012, taking the outstanding restructured advances to Rs.3,100cr. The SEBs of UP and Gujarat have also approached the bank for restructuring and ~Rs.700cr of advances are expected to be restructured during 4QFY2012.
At the CMP, the stock is trading at reasonable valuations, in our view, of 0.7x FY2013E ABV vs. its five-year range of 0.6–1.2x and median of 0.9x. On the back of high NIM & CASA, moderate fee income and relatively better asset quality than peers, we expect the bank to deliver healthy 26.3% earnings CAGR over FY2011–13E. We value the stock at 0.8x and hence recommend an Accumulate rating with a target price of Rs.53.
HCC
For 3QFY2012, HCC’s reported a poor set of numbers with performance at the revenue and EBITDAM level coming in-line with our and street estimates; however, earnings plunged on account of provisions (expected future losses and cost revisions) worth Rs.166cr by the company. We believe these provisions are not exceptional in nature and pertain to the normal course of business. On the top-line front, HCC’s revenue declined by 5.6% yoy to Rs.946.0cr (Rs.1,003cr) against our estimate of Rs.982.0cr due to slowdown in order inflow and execution bottlenecks. EBITDAM came in at 11.7% (12.6%), a dip of 90bp yoy and marginally lower than our estimate of 11.9%. On the earnings front, HCC reported a loss of Rs.130.4cr vs. profit of Rs.7.9cr in 3QFY2011, against our estimate of loss of Rs.25.5cr owing to a decline in revenue, EBITDA margin and provisioning of Rs.166cr. Interest cost came at Rs.104.3cr, a decline of 39.4%/2.9% on a yoy/qoq basis. Owing to concerns such as slowdown in order inflow, high debt and stretched working capital, we remain Neutral on the stock.
Persistent
Persistent Systems (Persistent) reported weak set of 3QFY2012 results. The dollar revenues came in at US$51.7mn, up merely 0.3% qoq. The company’s onsite billing rates declined by 2.2% qoq. In rupee terms, revenues came in at Rs.268cr, up 12.4% qoq. The company’s EBITDA and EBIT margin grew by 696bp and 688bp qoq to 26.0% and 20.1%, majotly due to INR depreciation against USD. PAT stood at Rs.41cr, up 25.2% qoq. The stock is currently under review and we will be releasing a detailed result update shortly.
Patel Engineering
Patel Engineering (PEL) posted better-than-expected numbers for 3QFY2012. The company reported revenue growth of 42.5% on the consolidate top-line front to Rs.619.3cr (Rs.434.6cr), as against the dismal performance over the past few quarters and despite slowdown on the order inflow front for the past few quarters. On the operating front too, the company posted abnormally high margins at 18.0% (13.4%). This stellar performance on the top-line and operating fronts led to yoy bottom-line growth of 104.8% to Rs.20.0cr (Rs.9.8cr) in spite of a 63.4%/14.1% yoy/qoq jump in interest cost. We wait for further details from the management about the results. However, we are concerned about the growth prospects of the company in the long run and believe that it is facing structural issues (stretched balance sheet and slowing order inflows), which will take time to be sorted out. Further, there are better plays available in the infrastructure space than PEL. Hence, we maintain our Neutral view on the stock.

3QFY2012 Result Previews
L&T
For 3QFY2012, we expect Larsen and Toubro (L&T) to report revenue of Rs.12,171cr, registering 6.6% yoy growth. This subdued growth is on account of high base (3QFY2011 reported top-line growth of 40.5% yoy). We expect OPM to be flat at 11.1%. We project net profit at Rs.866.6cr, marginally up by 3.1% yoy. We believe the company would end the quarter with a total order inflow of ~Rs.10,000cr (Rs.13,366cr). An important thing to watch out for would be management's commentary on the outlook for the sector and how things pan out on the margin front going ahead. We do not expect INR depreciation to have a major impact on L&T's margins (L&T has foreign currency loans), given the company generates decent revenue from its international operations. At the CMP of Rs.1,274, the stock is trading at 17.9x FY2013E earnings and 2.7x FY2013E P/BV on a standalone basis. We have used the SOTP methodology to value the company to capture all its business initiatives and investments/stakes in different businesses. Ascribing separate values to its parent business on a P/E basis and investments in subsidiaries on P/E, P/BV and mcap basis, our target price works out to Rs.1,857, which provides 15.0% upside from current levels. We recommend Buy on the stock.
GAIL
GAIL is expected to announce its 3QFY2012 results. Transmission volumes for the quarter are likely to stay flat qoq. We expect the company to report top-line growth of 14.6% yoy to Rs.9,587cr. Operating margin is expected to contract by 44bp yoy to 15.5%. On the bottom-line front, we expect GAIL to report growth of 5.2% yoy to Rs.1,018cr. We maintain our Buy recommendation on GAIL with a target price of Rs.499.
Sterlite Industries
Sterlite Industries is slated to announce its 3QFY2012 results. The company’s top line is expected to grow by 6.1% yoy to Rs.8,798cr mainly due to higher sales volumes from its zinc business. On the operating front, EBITDA margin is expected to contract by 85bp to 23.0%. The bottom line is expected to decline by 30.2% yoy to Rs.771cr. We maintain our Buy recommendation on the stock with a target price of Rs.121.
Maruti Suzuki
Maruti Suzuki is scheduled to announce its 3QFY2012 results. We expect the company to report a 21% yoy (down 3.2% qoq) decline in its top line to Rs.7,335cr, as volumes registered a decline of 28% yoy (down 5.1% qoq) during the quarter. Volume growth was impacted due to slowdown in sales in the passenger vehicle segment and further due to labor strike at Manesar plant. The company’s EBITDA margin is expected to decline by 417bp yoy (100bp qoq) to 5.3%, mainly due to a sharp appreciation in Yen vs. INR and due to the negative impact of operating leverage. As a result, the bottom line is expected to decline by 68% yoy to Rs.179cr. The stock rating is under review.
Colgate
Colgate is expected to announce its 3QFY2012 results. For the quarter, we expect the company to post modest 15% yoy growth in its top line to Rs.643cr, aided by a mix of value and volume growth. Earnings for the quarter are expected to register 23% yoy growth to Rs.81cr on account of low base in 3QFY2011. Also, we estimate the operating margin to expand marginally by 80bp yoy to 14.2%. We maintain our Neutral rating on the stock.
Shree Cements
Shree Cements is expected to announce its 3QFY2012 results. The company is expected to post top-line growth of 38.8% yoy to Rs.1,082cr. The strong performance on the top-line front is primarily because of 24.3% growth in cement realization. Riding on higher cement realization, the company’s OPM is expected to expand by 628bp yoy to 25.8%. The company’s bottom line is expected to grow by 175% yoy to Rs.76cr. We maintain our Neutral view on the stock.
Federal Bank
Federal Bank is scheduled to announce its 3QFY2012 results. We expect the bank to report moderate NII growth of 13.9% on a yoy basis to Rs.510cr. Non-interest income growth is expected to be muted at 3.5% yoy (up 7.7% qoq) to Rs.126cr. Cost-to-income ratio is expected to remain largely steady at 38.5%. However, relatively faster rise in operating expenses on a yoy basis vis-à-vis operating income is expected to sedate pre-provision profit growth by 9.6% yoy to Rs.391cr. Provisioning expenses are expected to decline by 36.6% yoy on the back of relatively better asset-quality trends, leading to a 40.3% yoy increase in PBT to Rs.301cr. Overall, net profit growth is also expected to come in at 42% yoy at Rs.203cr.
At the CMP, the stock is trading at 1.0x FY2013E P/ABV, which is at a considerable premium to mid and small PSU banks with similar or better fundamentals. Also, the recent interest rate deregulation by the RBI is likely to put pressure on NIMs going forward. Hence, we maintain our Neutral recommendation on the stock.
KPIT
KPIT Cummins Infosystems (KPIT) is scheduled to announce its 3QFY2012 results. We expect the company to post revenue of US$71.9mn, up 2.2% qoq, majorly led by volume growth. In INR terms, revenue is expected to come in at Rs.365cr, up 12.4% qoq. EBITDA margin is expected to expand by 313bp qoq to 16.8%. PAT is expected to come in at Rs.37cr, aided by share of profits from Systime. We maintain our Accumulate rating on the stock with a target price of Rs.163.
Ashoka Buildcon
Ashoka Buildcon (ABL) is expected to post robust growth of 52.5% yoy on the consolidated revenue front to Rs.360.6cr on the back of under-construction captive road BOT projects, which will drive its E&C revenue. The E&C segment will continue to dominate the company’s revenue by contributing Rs.268.4cr (74.4%), while the BOT segment's share is expected to be Rs.92.2cr. EBITDAM is expected to come in at 21.5% (23.9%), registering a dip of 239bp yoy. We are expecting 26.0% yoy growth at the earnings level to Rs.21.0cr, led by revenue growth.
At the CMP of 205, the stock is trading at a discount to our FY2013E SOTP target price of Rs.245/share. The company’s road BOT SPVs have been valued on NPV basis (Rs.104/share). The construction segment has been valued at 5.0x EV/EBITDA basis (Rs.141/share). Hence, we maintain our Buy recommendation on the stock.

Economic and Political News
- Home ministry to have limited say in investments
- 2G: Order on plea to charge Chidambaram put up for Feb 4
- Acquisitions by foreign airline need FIPB nod

Corporate News
- Supreme victory for Vodafone in US$2bn Hutchison tax case
- Coal India plans selective price cuts benefiting power, cement sectors
- NTPC to set up 5MW solar farm in Andaman

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Indian stock market and companies daily report (January 19, 2012, Thursday)

2012-01-18T22:00:00.001-08:00

The markets are expected to edge higher following positive opening across most of the Asian bourses. The markets ended with modest losses yesterday after investors booked profits. In addition, crucial meeting in Greece between the government and private creditors cautioned the markets.
European stocks also snapped a 3-day winning streak as investors booked profits despite positive news flow from the region. Bond auctions in safe haven Germany and debt-ridden Portugal went off smoothly and IMF intended to raise its lending resources by US$500bn to avoid a contagion of eurozone’s debt crises. US bourses gained on IMF’s arrangement for the eurozone. In addition, better-than-expected quarterly results from Goldman Sachs also boosted the sentiments.
Domestically, some of the many indicators have shown improvement (satisfactory IIP numbers and easing of food inflation). However, the implementation of big ticket reforms, especially in the power sector, remains a key. In an important meeting yesterday, the prime minister has assured to chalk out a road map to resolve the issues faced by the power sector. Investors will closely watch the developments in the power sector, which weighs heavily on the economic growth.

Markets Today
The trend deciding level for the day is 16,451 / 4,956 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 16,518 – 16,585 / 4,981– 5,005 levels. However, if NIFTY trades below 16,451 / 4,956 levels for the first half-an-hour of trade then it may correct up to 16,385 – 16,318 / 4,931 – 4,906 levels.

RIL may announce a share-buyback program
RIL board will consider a share-buyback program on January 20, 2011, alongside its 3QFY2012 results. Given RIL’s cash pile of Rs.61,490cr (as on September 30, 2011) and the recent decline in share price, the buyback program does not surprise us. This move will address the concerns of deployment of cash (partly), thus we believe the buyback will be valueaccretive for shareholders. Moreover, RIL has ~30cr treasury shares, which ifextinguished could be potentially EPS accretive by 9.7%. We await further clarity on the buyback details and maintain our Buy rating on the stock with a target price of Rs.1,006.

KEC International secures order worth Rs.340cr
KEC International (KEC) has secured an order worth Rs.340cr for the construction of 765kV and 400kV transmission lines in Maharashtra and Gujarat. The order is secured from Bhopal Dhule Transmission company, a wholly owned subsidiary of Sterlite Technologies. The transmission lines are a part of Built-Own-Operate-Maintain (BOOM) project awarded by Power Finance Corporation to Sterlite Technologies.
In a short succession, KEC has pocketed orders worth Rs.1,650cr, which has strengthened its order book to ~Rs.9,340cr (2.0x FY2011 revenue). The latent potential of the company (globally diversified model and healthy return ratios of ~25%) coupled with optimism surrounding the macro environment has factored into the stock – the scrip has rallied ~40% so far in the calendar year. At the CMP of Rs.51, the stock trades at 5.7x FY2013E EPS. We recommend Accumulate on the stock with a target price of Rs.53.

Result Review
MindTree
For 3QFY2012, MindTree reported USD revenue growth of merely 2.3% qoq to US$103.7mn, as volumes declined by 0.8% qoq. However, the company reported a 3.4% qoq increase in price realization due to one-time transition revenue realized from a package implementation deal in Europe. In INR terms, revenue came in at Rs.520cr, up 13.8% qoq. The company’s EBITDA and EBIT margins improved by 438bp and 486bp qoq to 17.3% and 13.9%, respectively, largely on the back of gains derived from INR depreciation against USD. PAT stood at Rs.61cr, up 11.1% qoq, negatively impacted by Rs.2.5cr forex loss. We continue to be positive on the stock and will be releasing a detailed result update shortly.
Infotech
For 3QFY2012, Infotech reported revenue of US$81.7mn, up merely 0.4% qoq, on the back of 2.3% qoq volume growth. The NCE vertical witnessed volume growth of 2.0% qoq, while the ENGG vertical reported 2.3% qoq volume growth. In INR terms, revenue came in at Rs.416cr, up 11.8% qoq, aided by 1) 0.4% qoq volume growth, 2) 1.0% qoq positive impact because of increased price realization and 3) remaining gain on the back of INR depreciation against USD in 3QFY2012. The company reported 484bp and 473bp qoq expansion in its EBITDA and EBIT margins to 20.6% and 17.1%, respectively, aided by qoq INR depreciation against USD. PAT came in at Rs.34cr, impacted by forex loss. The stock is currently under review we will be releasing a detailed result update on it shortly.

Result Preview
HDFC Bank – 3QFY2012
HDFC Bank is expected to announce its 3QFY2012 results today. We expect the bank to report a rather moderate NII growth of 13.9% yoy to Rs.3,162cr. Non-interest income is expected to register growth of 15.8% yoy, leading to an operating income growth of 14.4% yoy. Due to relatively similar rise in operating expenses (14.6% yoy), pre-provision profit is expected to grow by 14.3% yoy. However, provisions are expected to decline by a substantial 42.5% yoy, leading to a healthy net profit growth of 30.5% yoy to Rs.1,419cr. At the CMP, the stock is trading at valuations of 3.2x FY2013E P/ABV, in our view. We maintain our Neutral recommendation on the stock.
Hero MotoCorp – 3QY2012
Hero MotoCorp (HMCL) is slated to announce its 3QFY2012 results. We expect the company’s top line to grow by healthy 18% yoy to Rs.6,012cr, driven by 11.3% yoy growth in volumes and a ~6% increase in average net realization, led by price increases. Operating margin (adjusted for change in accounting for royalty payments) is expected to expand by 126bp yoy to 12.4% on account of softening of commodity prices. As a result, we expect the bottom line (adjusted) to post a 24% yoy increase to Rs.629cr. The stock rating is under review.
Bajaj Auto - 3QFY2012
Bajaj Auto is scheduled to announce its 3QFY2012 results today. We expect the company’s top line to grow by a healthy 17% yoy to Rs.4,720cr led by 13.6% yoy growth in volumes and increase in average net realization. On the operating front, EBITDA margin is expected to remain largely flat at 20%. Thus, the bottom line is expected to grow by 19% yoy growth to Rs.791cr. The stock rating is under review.

Economic and Political News
- LAC seeks to double trade with India to US$50 bn in 2 yrs
- IEA cuts 2012 oil demand growth forecast
- Finance Minsiter wants US$56/bbl upstream subsidy: Govt. sources

Corporate News
- RCom plans Rs.7,500-cr IPO for Singapore unit
- I-T slaps Rs.1,067 cr tax notice on Bharti
- Sadbhav Engineering emerges lowest bidder for Rs.325cr mining order

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