market outlook 1february 2012
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8/3/2019 Market Outlook 1February 2012
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Please refer to important disclosures at the end of this report Sebi Registration No: INB 010996539 1
Market OutlookIndia Research
February 1, 2012
Dealer’s Diary
The domestic markets are expected to open in the green tracking positive
developments in the European and the Asian markets. Asian stocks are tradingpositively, 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 thatwould 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.
Indices S2 S1 PIVOT R1 R2
SENSEX 16,878 17,036 17,123 17,281 17,368
NIFTY 5,083 5,141 5,178 5,236 5,274
News Analysis Coal India hints roll back in coal prices
3QFY2012 - Result Reviews – ICICI Bank, NMDC, PNB, Dabur,
Crompton Greaves, United Phosphorus, Ipca Laboratories, Jagran Prakashan,
TVS Motor, KEC International
3QFY2012 - Result Previews – Mahindra Satyam, Ashok Leyland
Refer detailed news analysis on the following page
Net Inflows (January 30, 2012)
` cr Purch Sales Net MTD YTD
FII 2,578 2,657 (80) 10,444 10,444MFs 378 709 (331) (1,944) (1,944)
FII Derivatives (January 31, 2012)
` cr Purch Sales Net Open Interest
Index Futures 2,150 1,768 383 11,727
Stock Futures 1,772 1,799 (26) 26,647
Gainers / Losers
Gainers Losers
Company Price (`) chg (%) Company Price (`) chg (%)
Tata Global 108 10.0 Glenmark Pharma 296 (5.2)
IVRCL 51 9.2 Coal India 326 (3.0)Havells India 480 8.2 Essar Oil 61 (1.9)
Bata India 688 7.4 JSW Energy 54 (1.6)
Aurobindo Pharma 115 7.1 PNB 940 (1.6)
Domestic Indices Chg (%) (Pts) (Close)
BSE Sensex 2.0 330.3 17,194
Nifty 2.2 112.0 5,199MID CAP 2.0 114.7 5,872
SMALL CAP 1.4 89.7 6,463
BSE HC 1.4 85.2 6,336
BSE PSU 1.1 82.2 7,357
BANKEX 3.8 421.6 11,391
AUTO 2.4 213.6 9,242
METAL 2.2 252.5 11,499
OIL & GAS 1.7 144.7 8,500
BSE IT 1.6 88.7 5,778
Global Indices Chg (%) (Pts) (Close)
Dow Jones (0.2) (20.8) 12,633
NASDAQ 0.1 1.9 2,814
FTSE 0.2 10.5 5,682
Nikkei (0.4) (34.2) 8,849
Hang Seng 1.6 328.7 20,439
Straits Times 0.1 2.8 2,894
Shanghai Com 0.6 13.6 2,333
Indian ADRs Chg (%) (Pts) (Close)
Infosys 1.3 0.7 $55.0
Wipro 1.5 0.2 $10.9
ICICI Bank 4.6 1.6 $36.2
HDFC Bank 1.4 0.4 $31.0
Advances / Declines BSE NSE
Advances 1,804
Declines 1,034 438
Unchanged 108 67
Volumes (` cr)
BSE 2,807
NSE 13,696
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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 ` 1,728cr, which were mostly in-line with our estimates.
Net interest income of the bank grew by healthy 17.3% yoy to ` 2,712cr; however,
growth in non-interest income was moderate at 8.2% yoy to ` 1,892cr. Operating
income of the bank grew by 13.4% yoy to ` 4,604cr. Provisioning expenses
declined by 26.4% yoy to ` 341cr, leading to net profit growing by 20.3% yoy to
` 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 `1,061.
NMDC
NMDC reported its 3QFY2012 results, which were above our expectation. Net
sales increased by 7.7% yoy to ` 2,822cr (slightly above our estimate of ` 2,745),
which would be mainly due to higher iron ore realizations in our view. EBITDA
increased by 11.6% yoy to ` 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 ` 525cr due to higher yields as well as cash balances. Hence, PAT grew by
22.4% yoy to ` 1,859cr (above our estimate of ` 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 ` 1,150cr, which was below our estimates on account of
higher provisioning expenses than estimated by us. Net interest income of the
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February 1, 2012 3
bank grew by 10.4% yoy t0 ` 3,537cr. Non interest income growth was moderate
at 10.6% yoy to ` 954cr. Provisioning expenses increased by 32.5% yoy to ` 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 `1,059.
Dabur
Dabur reported a mixed performance for 3QFY2012. The company’s top line
grew strongly by 34.5% yoy to ` 1,453cr, driven by a healthy performance across
business segments. Earnings grew by 11.9% yoy to ` 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 ` 3,028cr ( ` 2,397cr), which was 14.3% higher than our estimate of
` 2,649cr. The growth was largely driven by Power segment which posted
consolidated 33.9% yoy growth to ` 2,069cr ( ` 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 ` 503cr( ` 381cr) on consolidated basis. On the other hand, Consumer segment posted a
flattish growth with revenues of ` 474.9cr ( ` 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 ` 77.2cr ( ` 232.8cr), 42% below
our (below street) expectations of ` 133.6cr.
The stock is under review and we wait for further details in an analyst meet
scheduled later in the day.
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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 ` 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 ` 182.
Ipca Laboratories
For 3QFY2012, Ipca Labs reported above-expectation performance on the backof 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 ` 63.9cr. Adjusted net profit of the
company stood at ` 103.8cr in 3QFY2012 vs. ` 52.74cr in 3QFY2011. We
continue to maintain our Buy recommendation on the stock with a
target price of ` 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
` 317cr. The company’s earnings declined on a yoy basis by ~32% as well as
sequentially by ~10% and came in at ` 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. Non-
publishing business revenue, which comprises event, outdoor and digital
businesses, grew by 15% yoy each. The company also reported forex loss of
` 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 three-
wheeler 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
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February 1, 2012 5
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 ` 57cr,
largely due to lower other income and higher depreciation expense. At `
52, TVSLis trading at 9x FY2013E earnings. We retain our Buy rating on the stock with a
revised target price of `64, valuing the stock at 11x FY2013E earnings of `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 ` 1,460cr ( ` 1,071cr), which was 15.0% higher than our estimate of
` 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 ` 37.2cr, which was fully offset by an exceptional income to the tune of
` 53.8cr. Aided by this extraordinary gain, PAT grew by 39% yoy to 80.6cr ( ` 58cr).
Adjusted for this gain, PAT de-grew by 25.9% yoy to ` 43cr, 16.6% higher than
our (below street) estimate of ` 36.9cr.
Management commentary remained active terms of growth trajectory – order
book at the end of the quarter stood at ` 9,200cr, majorly aided by the robust
order inflows totalling ` 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
` 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 gainson account of INR depreciation. PAT is expected to come in at ` 190cr.
We maintain our Accumulate rating on the stock with a target price of `82.
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February 1, 2012 6
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 ` 108cr, largely due to low base of last year. The stock rating is
under review.
Quarterly Bloomberg Brokers’ Consensus Estimates
Ashok Leyland Ltd - (01/02/2012)
Particulars (`
cr) 3Q FY12E 3Q FY11 y-o-y (%) 2Q FY12 q-o-q (%)Net sales 2,934 2,227 32 3,095 (5)
EBITDA 296 166 78 331 (11)
EBITDA margin (%) 10.1 7.5 10.7
Net profit 120 43 177 154 (22)
Power Finance Corporation Ltd - (03/02/2012)
Particulars (` cr) 3Q FY12E 3Q FY11 y-o-y (%) 2Q FY12 q-o-q (%)
Net profit 718 659 9 419 71
Dr. Reddys Laboratories Ltd - (03/02/2012)
Particulars (` cr) 3Q FY12E 3Q FY11 y-o-y (%) 2Q FY12 q-o-q (%)
Net sales 2,480 1,899 31 2,268 9
Net profit 393 273 44 308 28
HPCL Ltd - (03/02/2012)
Particulars (` cr) 3Q FY12E 3Q FY11 y-o-y (%) 2Q FY12 q-o-q (%)
Net sales 42,218 33,903 25 37,030 14
EBITDA (340) 780 (144) (2,870) (88)
EBITDA margin (%) -0.8 2.3 -7.7
Net profit (638) 211 (403) (3,364) (81)
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Economic and Political News
India's per capita income grew by 15.6% to ` 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 ` 15,000cr a year to meet rising demand for loans: CFO
Suzlon bags ` 600cr order from CLP India to set up a 100MW power project
TCS opens unit at Silicon Valley for mobility solutions
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint
Results Calendar
01/02/2012 Mahindra Satyam, Ashok Leyland, UCO Bank, Finolex Cables
02/02/2012 Marico, Andhra Bank, Corporation Bank, Hexaware, Greenply
03/02/2012 Dr. Reddy's, Power Fin.Corpn., HPCL, Madras Cements, Prakash Industries, Subros
06/02/2012 HUL, Mundra Port, Adani Power, Nalco, GlaxoSmith Con, MOIL, Dena Bank, BGR Energy , India Cements,Nagarjuna Const., GIPCL
07/02/2012 M&M, Cadila Healthcare, GMR Infra., ITNL, SpiceJet, J K Lakshmi Cements
08/02/2012 ONGC, Bharti Airtel, Power Grid Corpn, Bharat Forge, Orchid Chemicals, Alembic Pharma
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Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com
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