Indian stock market and companies daily report (February 21, 2012, Tuesday)

The domestic markets are expected to open flat or marginally in green following higher closing across most of the western markets. Asian stock markets are trading flat as investors remain cautions and wait for European finance ministers in Brussels to approve a crucial second bailout for Greece.

The US markets traded choppily on Friday (closed on Monday) as the economic data releases painted a mixed picture with a report from the Conference Board showing that its index of leading economic indicators increased for the fourth consecutive month in January, while another report from the Labor Department showing only a modest increase in consumer prices in the month of January. Although investors seemed reluctant to make any significant moves going into the long weekend, optimism that European finance ministers will approve a new bailout package for Greece helped to keep traders from doing much profit taking. Meanwhile Indian shares rebounded on Friday after some consolidation the day before, with firm global cues supporting the liquidity-driven rally.

Markets Today

The trend deciding level for the day is 18,315/5,572 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 18,397 – 18,504/5,599 – 5,634 levels. However, if NIFTY trades below 18,315/5,572 levels for the first half-an-hour of trade then it may correct up to 18,208 – 18,126/5,537 – 5,511 levels.

Cement companies raise prices

Cement companies have raised prices in the northern and western regions in the range of Rs.7 to Rs.10 per bag with effect from February 17, 2011. The price hike follows the correction in the region during January due to the severe winter season, which affected construction activities. We believe the recent price hike is an effort by cement manufacturers to pass on the hike in operating costs. We are currently Neutral on the cement sector, as we believe valuations are significantly ahead of the cycle, but we maintain our Buy recommendation on JK Lakshmi Cement due to its attractive valuations, with a target price of Rs.79.

NMDC cuts ore prices; lowers volume guidance

NMDC has cut prices of iron ore fines and lumps by 20% and 3%, respectively, for 4QFY2012 on the back of the decline in global iron prices, the recent rupee appreciation and increased export duty on iron ore. The price cut by NMDC is higher than our expectations given the shortage of iron ore in the domestic markets.

NMDC has also lowered its sales volume guidance for FY2012 and FY2013. The company now expects sales volumes of 27mn tonnes and 30mn tonnes (earlier 30 mn tonnes and 33mn tonnes) for FY2012 and FY2013, respectively. Although the company has ~5mn tonnes of iron ore inventory at its mine pit-heads, however it faces logistical constraints to increase off take due to breakdown in slurry pipeline, lower availability of railway rakes and stricter regulations in transportation of iron ore in Karnataka. Considering the company’s revised sales volumes guidance, we lower our 4QFY2012 and FY2013 realization and sales volume estimates.

Although NMDC has a strong balance sheet, presence in sellers market (iron ore), low cost of production, high-grade mines and long mine life, we now expect sales volumes to witness a CAGR of only 5.2% over FY2011-2013. On account of lower volume growth and lower realization, NMDC’s bottom line is expected to grow by only 4.0% yoy during FY2013. Further, given the 23% rise in the stock price since January 1, 2012, we recommend Neutral on the stock.

Result Review – 4QCY2011

CRISIL announced its 4QCY2011 numbers. Net sales increased by 26.6% yoy to Rs.225cr (Rs.177cr) led by strong growth in the research segment. Research segments revenue increased by 34.0% yoy while the rating segment and advisory segments revenue increased by 14.1% and 7.0% respectively. EBITDA increased by 15.2% yoy to Rs.80cr (Rs.69cr) due to higher revenue. EBITDA margin declined by 352bps yoy to 35.6% (39.1%). PAT increased by 10.4% yoy to Rs.56cr (Rs.51cr) while margin declined by 366bps yoy to 24.8% (28.5%) almost in line with EBITDA margin contraction. We will be coming out with a detailed report post management interaction. We continue to maintain an Neutral rating on the stock.

Economic and Political News
- Government may let foreign individuals directly buy corporate debt
- Railways stares at a Rs.2lakh cr crunch
- Bankers agree to subscribe to Air India’s Rs.7,400cr bond issue

Corporate News
- Ashok Leyland's Optare eyes small bus market
- Frozen bank accounts led to disruptions: Kingfisher
- Essar Oil plans to raise Rs.3,000cr in next 15 months

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Indian stock market and companies daily report (February 13, 2012, Monday)

The domestic markets are expected to edge higher following positive opening across most of the Asian markets. Domestic indices fell modestly on Friday, as data showing a slowdown in December IIP numbers prompted investors to book some profits after recent sharp gains.

Globally, cues remained mixed. European markets slid moderately on Friday as apprehensions remained over the second bailout package for Greece. Eurozone finance ministers had deferred the approval of a second bailout package for Greece (€130bn), demanding Greece’s acceptance over a new set of austerity measures. U.S. bourses also ended on a negative note, tracing concerns stemming from the Eurozone.

On the domestic front, consistent shrinkage in manufacturing output emphasizes the need to trim rates by RBI. However, domestic bourses seemed to have marked down macroeconomic concerns and have firmed up considerably. Nonetheless, one cannot rule out the pessimism surrounding the Eurozone, which can reverse market directions. Markets will closely trace the developments in the domestic as well global markets.

Markets Today

The trend deciding level for the day is 17,755 / 5,383 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17,883 – 18,018 / 5,426 – 5,470 levels. However, if NIFTY trades below 17,755 / 5,383 levels for the first half-an-hour of trade then it may correct up to 17,621 – 17,492 / 5,339 – 5,297 levels.

Industrial production for December dips to 1.8%

Industrial production (IIP) growth slipped again, growing by weak 1.8% for December, after the strong rebound witnessed in November (growth of 5.9% compared to negative 4.7% growth for October). IIP index growth of 1.8% was the second slowest, after the contraction witnessed in October 2011, in more than two years. IIP growth was also below the median expectation of Bloomberg’s survey of economists (2.9%). The 12-month rolling industrial production growth, which has been on a declining trend since November 2010 (9.9%), slipped further to 4.7%.

The dip in IIP can mostly be attributed to slow growth in the manufacturing sector (growth of 1.8% compared to 6.6% in November 2011 and 8.7% in December 2010), which accounts for ~75% of the overall industrial production. In terms of industries, 15 of the 22 industry groups in the manufacturing sector registered positive growth during December. The slowdown in mining persisted with a contraction of 3.7% for December (5th consecutive month of contraction). Growth in electricity production continued to be healthy, growing by 9.1% in December.

As per use-based data, capital goods production data continued to be volatile, declining by steep 16.5%. Production of intermediate goods contracted by 2.8% in December, however growth in consumer goods and consumer durables remained strong, growing by 10.0% and 13.4%, respectively.

3QFY2012 - Result Reviews

DLF

DLF announced its 3QFY2012 numbers. The company’s net sales declined by 18.0% yoy and 19.7% qoq to Rs.2,034cr, coming in well below our estimate of Rs.2,719cr. EBITDA came in at Rs.823cr, down 30.2% yoy, on the back of lower revenue and OPM margin compression. OPM contracted by 706bp yoy to 40.4%, above our estimate of 43.7%. PAT declined by 44.6% yoy to Rs.258cr, which was well below our estimate of Rs.414cr, despite a sharp increase in other income, which increased by 217% yoy to Rs.362cr (Rs.114cr). The decline in PAT was largely due lower revenue, OPM contraction and higher interest cost during the quarter, which increased by 44.8% yoy to Rs.620cr in 3QFY2012. We continue to maintain our Neutral recommendation on the stock. We may revise our estimates and target price post management’s concall.

JSW Steel

JSW Steel reported higher-than-expected consolidated adjusted PAT during 3QFY2012. However, the company reported net loss of Rs.48cr in 3QFY2012 on account of exceptional losses. The company had reported better-than-expected standalone numbers for 3QFY2012 on January 20, 2012. Consolidated net sales grew by 40.9% yoy to Rs.8,405cr (slightly below our estimate of Rs.8,843cr). Net sales growth was driven by increases in steel volumes (+20.0% yoy to 1.9mn tonnes) and realization (+18.2% yoy to Rs.43,401/tonne). Consolidated EBITDA increased by 29.6% yoy to Rs.1,317cr. The company reported exceptional items related to forex loss of Rs.504cr and loss of Rs.55cr from JSW Ispat (associate company) during the quarter. Consequently, the company reported net loss of Rs.48cr in 3QFY2012, compared to net profit of Rs.292cr in 3QFY2011. However, adjusted net profit, excluding exceptional items, increased by 75.1% yoy to Rs.511cr (higher than our estimate of Rs.279cr). We remain Neutral on the stock.

CCCL

Consolidated Construction Consortium (CCCL) posted disappointing set of numbers for 3QFY2012, as expected. On the top line front the company posted 10.0% yoy decline to Rs.446.5cr, lower than our estimate of Rs.535.9cr. On the EBITDAM front, CCCL continued its dismal performance and registered a dip of 510bp yoy to 4.6%, which was higher than our estimate of 3.2%. Interest cost came in at Rs.18.3cr a yoy/qoq jump of 45.1%/6.4% respectively, and in line with our estimate of Rs.18.6cr. Owing to poor show at revenue and margin level, along with interest burden, the bottom line posted a loss of Rs.3.2cr in 3QFY2012 vs. profit of Rs.16.7cr in 3QFY2011 and against our estimate of loss of Rs.5.2cr. We maintain neutral view on the stock.

3QFY2012 - Result Previews

Coal India

Coal India is slated to report its 3QFY2012 results. We expect net sales to increase by 39.2% yoy to Rs.17,664cr, mainly on account of coal price increase taken during February 2011. However, EBITDA margin is expected to contract by 264bp yoy to 24.5% in 3QFY2012 on account of higher employee cost provision. Net profit is expected to increase by 39.0% yoy to Rs.3,650cr. We have a Neutral view on the stock.

State Bank of India

State Bank of India is scheduled to announce its 3QFY2012 results. We expect the bank to report healthy NII growth of 19.3% on a yoy basis (up 3.6% on a qoq basis). Non-interest income growth is expected to be moderate at 14.4% yoy. Operating income of the bank is expected to grow by healthy 18.0% yoy to Rs.14,584cr. Provisioning expenses are expected to increase substantially by 63.4% yoy, considering the cyclical headwinds to asset quality. Hence, net profit growth is expected to be moderate at 10.1% yoy to Rs.3,113cr. We currently have an Accumulate rating on the stock with a target price of Rs.2,364

Sun Pharmaceuticals

For 3QFY2012, Sun Pharma is likely to report 18.7% yoy growth on the sales front, mainly on the back of integration of Taro, which is expected to be the growth driver of export formulation sales. On the domestic front, Indian formulation sales are expected to report a muted performance. Despite strong top-line growth on account of the integration, operating profit margin is expected to expand by 690bp yoy, with margin likely to be around 34.4%. Net profit is expected to register growth of 21.4% yoy during the quarter. We recommend Neutral on the stock.

SAIL

SAIL is expected to announce its 3QFY2012 results. We expect the company’s top line to grow by 9.8% yoy to Rs.12,239cr, mainly on account of higher realization. However, EBITDA margin is expected to decline by 211bp yoy to 14.0% on account of higher input costs. The bottom line is expected to decline by 2.2% yoy to Rs.1,083cr. We maintain our Neutral rating on the stock.

Cipla

For 3QFY2012, Cipla is expected to post net sales growth of 10.7% yoy to Rs.1,662cr, driven by the domestic and exports performance. On the operating front, OPM (excluding technical know-how fees) is expected to come in at 21.8%, registering an expansion of 410bp yoy. Further, net profit is expected to increase by 26.8% yoy to Rs.295cr. We recommend Neutral on the stock.

Motherson Sumi Systems

Motherson Sumi Systems is scheduled to announce its 3QFY2012 results today. On a consolidated basis, we expect the company to report a healthy 13% yoy growth in revenues to Rs.2,343cr for the quarter. On the operating front, the company is expected to report a 282bp yoy contraction in margins to 8.6%. As a result, the net profit is expected to decline by 26% yoy to Rs.79cr. The stock rating is under review.

Areva T&D – 4QCY2011

For 4QCY2011, Areva T&D is expected to post subdued top-line growth of 4.2% yoy to Rs.1,383cr, mainly on account of lower volumes, pricing pressures and execution slowdown. Consequently, EBITDA margin is expected to compress by ~443bp yoy to 9.0%, although we expect a sequential improvement of ~100bp due to slight easing of pricing pressures. Led by muted growth and dip in margin, the company’s PAT is expected to decline by 35.5% yoy to Rs.56.8cr. At the CMP, the stock is trading at 25.9x and 21.9x CY2011E and CY2012E EPS, respectively. We remain Neutral on the stock.

CESC

CESC is expected to announce its 3QFY2012 results. The company is expected to register 25.6% yoy growth in its standalone top line to Rs.1,157cr, aided by higher sales volume and better realization. OPM is expected to be flat at 27.6%, while net profit is expected to increase by 33.9% yoy to Rs.147cr during 3QFY2012. We maintain our Buy rating on the stock with a target price of Rs.304.

Economic and Political News
- Exports up 10%, imports by 20% in January 2012: Commerce secretary
- Direct tax collection to miss Budget estimate
- Government may enhance tax deduction for housing loan in Budget

Corporate News
- Govt. notifies rules for competitive bidding for coal blocks
- Punjab’s industry strongly objects to 55% hike in power tariff
- Reliance Industries shuts distillation unit at Jamnagar facility for 3 weeks
- Tata Motors hikes prices by up to Rs 12,000; leaves Nano, Aria

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Indian stock market and companies daily report (February 03, 2012, Friday)

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 (Febrauary 01, 2012, Wednesday)

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
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