Indian stock market and companies daily report (February 22, 2012, Wednesday)

Indian domestic markets are expected to open flattish tracking global markets worldwide. Asian stocks fell for a second day and oil retreated from a nine-month high as Greece’s approval for a second bailout failed to spur confidence among investors.

Euro-zone finance ministers early Tuesday gave a green light to a second rescue package for Greece, unlocking a €130bn in bailout money for the cash-strapped nation. The new bailout would leave Greece with sufficient funds to repay a €14.5bn bond due on March 20. The European markets finished Tuesday's trading with modest losses, while US markets managed to close marginally in the green as deal on the Greek debt bailout prompted some profit taking.

Meanwhile Indian shares continued to extend their recent gains driven by positive developments in the Euro zone area. Investors worldwide would keenly watch out for German PMI and US home sales data due for release today.

Markets Today

The trend deciding level for the day is 18,339/5,597 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 18,502 – 18,575/5,632 – 5,657 levels. However, if NIFTY trades below 18,339/5,597 levels for the first half-an-hour of trade then it may correct up to 18,325 – 18,221/5,572 – 5,537 levels.

IPO Note: MCX LTD. – Subscribe

Sustainable competitive position: Multi Commodity Exchange of India Ltd. (MCX) is a leading commodities exchange, which received permanent recognition from Government of India on September 26, 2003. The company reported a market share of 87.3% as of December 2011. MCX is also the fifth largest commodity futures exchange globally in terms of the number of contracts. As of June 2011, MCX was the largest silver exchange, the second largest gold, copper and natural gas exchange and the third largest crude oil exchange for this period globally.

Growth strategy in place: MCX has introduced a variety of new commodity futures contracts; and since inception, the number of products offered by the company has grown from 15 to 49 as of December 31, 2011. MCX has 2,153 members nationwide with over 296,000 terminals, including CTCL spread over 1,572 cities and towns in India. The company intends to continue to increase the number of participants by introducing new products on its exchange by expanding to more geographical areas, which is expected to drive growth going ahead. Regulatory changes can also lent a fillip to MCX as currently option contracts are not allowed to be traded in commodity. Any changes in favor of MCX can lead to a major increase in revenue and profitability going ahead.

Outlook and valuation: MCX currently has zero debt on its book, and major capex to fuel growth has already been incurred by the company. Secondly, the company reported investment and cash worth Rs.1,324cr at the end of 9MFY2012, which works out to Rs.260/share. On an annualized basis, shares will be trading at 15.1x and 18.1x at the lower and upper band on FY2012E earnings, respectively, which we believe is fair compared to global peers, which trade at 18x-19x TTM EPS, and the recent off market deals value MCX’s Indian peers NSE and BSE at 22x-24x 9MFY2012 annualized earnings. We believe MCX being the only major commodity exchange in India and the world’s fifth largest exchange can witness strong growth in revenue and profitability going ahead, which makes its valuation much more attractive than global and Indian peers. Hence, we recommend Subscribe to the issue on account of the relatively fair valuations.

ECL receives MOEF nod for its iron ore mine

Electrosteel Castings (ECL) has received forest stage-I clearance for its iron ore mines located at Kodolibad, West Singhbhum, Jharkhand, from Ministry of Forests and Environment (MOEF). ECL expects to receive stage-II clearance in the coming 2-3 months and then sign mining lease with the state government. After signing the mining lease, ECL can develop the mine and resume production. The mine has reserves of 91mn tonnes with 64% Fe content. ECL expects to commence production from this mine in FY2013. However, procedural delays cannot be ruled out in our view.

With upcoming production from coking coal and iron ore, ECL will turn into a fully integrated steelmaker. Although there is lack of clarity on the timelines for commencement of meaningful production from its coking coal and iron ore mines, ECL’s margins are expected to be significantly higher than its peers once it reaches optimum production capacity at its mines. Moreover, ECL’s associate, Electrosteel Steels (34.8% stake) with 2.2mn tonnes of steel capacity is expected to benefit the most, as ECL will supply coking coal and iron ore from its mines to Electrosteel Steels at subsidized rates (cost + 20%).

We have a positive stance on ECL’s initiatives of gradually venturing into steel making through its associate Electrosteel Steels. Furthermore, the company’s backward integration initiatives through allocation of coking coal and iron ore mines are expected to result in cost savings from FY2013. The stock is currently trading at 0.4x each for FY2012E and FY2013E. We recommend Buy on the stock with an SOTP target price of Rs.32.

Economic and Political News
- Economic slowdown likely to be temporary: Finance Minister
- India’s January consumer price inflation (CPI) at 7.65%
- RBI may consider CRR cut at next policy review meeting: Deputy Governor
- Government ready for dialogue with states on NCTC

Corporate News
- Coal India to incur additional Rs.6,500cr burden due to new labor pact
- Suzlon arm, REpower wins 250MW order from French firm
- Tata Motors to launch 230 Nano showrooms in one year
- M&M looks to assemble products in Russia through SsangYong distributors
- HCL Infosystems bags Rs.278cr order from Tamil Nadu government
- Kingfisher assures of normal operations in 5-7 days

Online share trading in India, open demat account in leading stock market company in India: Angel Broking Ltd.

Indian stock market and companies daily report (February 17, 2012, Friday)

The domestic markets are expected to open in green following positive opening across most of the Asian markets. The domestic bourses snapped three day rally yesterday and ended with modest losses as delays over Greece bailout added mild concerns for investors. Selling pressure remained subdued, however capped the downside for the markets.

Globally, European markets remained jittery in absence of resolution to the Greek sovereign debt crisis. Traders also digested the news of possible downgrade of 17 global financial institutions by Moody’s. US bourses ended on a positive note, thanks to upbeat U.S. job data which offset the negative sentiment generated over Greece’s bailout delay and Moody’s possible downgrade. The U.S labor department reported fall in initial jobless claims to 348,000 for week ended February 11th from the previous week's revised figure of 361,000.

On the domestic front, soothing of inflationary pressures and hopefulness of monetary easing has helped the markets to hold strong breadth. On the global front, positive economic data in US and China’s pledge to support the eurozone is expected to renew the sentiments in the markets. Markets will closely track the developments in the domestic as well as global markets.

Markets Today

The trend deciding level for the day is 18,127 / 5,512 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 18,210 – 18,266 / 5,541 – 5,560 levels. However, if NIFTY trades below 18,127 / 5,512 levels for the first half-an-hour of trade then it may correct up to 18,071 – 17,987 / 5,493 – 5,465 levels.

Spain’s borrowing costs climb, while yields drop for France

Spain sold EUR4.07bn (US$5.29bn) of debt maturing in 2015 and 2019. Average yield on the bills maturing October 2019 increased to 4.83%, compared to 4.54% when securities were last offered on January 19, 2012. Further, the average yield of notes maturing in July 2015 increased to 3.33%, from 2.86% at the previous auction on February 2, 2012. While a bond maturing in January 2015 was sold to yield 2.96%. After the sale, even the yield on Spain’s 10-year benchmark bond climbed 9 basis points to 5.53%, increasing the spread over German bunds by 13 basis points to 371 basis points. Spain’s rising borrowing costs indicate that investors’ concern towards solvency of the country’s US$807bn public debt has increased. Spain’s debt to GDP ratio at 74% is better than that of Greece (198%) and Portugal (111%), but the problem with the country’s economy is that unemployment (as a percentage of working population) at 21% is alarmingly the highest among eurozone countries. Further, the country’s economy has contracted by 0.3% qoq in the last three months of 2011, as per Madridbased National Statistics Institute. Government of Spain has a very tough task in hand, to strike a proper balance between austerity and growth measures so as to bring back the country’s economy out of this debt crisis.

France also sold a total of EUR8.45bn of notes maturing in 2014, 2015 and 2019. Average yields on two-year notes maturing in 2014 fell to 0.89% from 1.05% at a previous auction on January 19, 2012.

Both the sales came three days after Moody’s cut the ratings of six European nations, including Spain, and revised its credit outlook on France to ‘negative’.

RCom gets RBI nod for FCCBs redemption

RCom has received approval from the RBI to refinance redemption of its outstanding FCCBs worth US$1.2bn (~`5,825cr), the due date of which is March 1, 2012. The company said that RCom will benefit from extended loan maturity of seven years and attractive interest cost of ~5%. The refinancing is being funded by the Industrial and Commercial Bank of China (ICBC), China Development Bank (CDB) and Export Import Bank of China (EXIM). We maintain our Neutral view on the stock.

Economic and Political News
- Government hopes to achieve road project target for FY12
- Par panel to discuss report on DTC, may suggest hiking IT exemption limit
- EGoM okays 5% stake sale in ONGC

Corporate News
- Panel to take up Sasan coal diversion issue next week
- ONGC to expedite work on major oil, gas project in KG Basin
- ITC buys 4.62% in Hotel Leela from Russell Credit
- Magma Fincorp plans to start gold finance biz in H1 of FY13
- Supreme Court quashes Ansaldo venture bid For NTPC contract
- Promoters stake up to 48.53% in Reliance Infra after buyback

Online Share Trading in India, Open demat account in leading stock market company in India: Angel Broking Ltd.

Indian stock market and companies daily report (February 16, 2012, Thursday)

The domestic markets are expected to open sideways following flat opening across most of the Asian markets. The domestic bourses surpassed the psychological 18,000 mark yesterday, reaching the highest level in more than six months. The surge followed the strong rally across Asian markets driven by China’s pledge to invest in the euro zone bailout. Data showing sustained buying of Indian stocks by FIIs also boosted sentiments.

Global cues remained mixed. European markets edged up slightly as China signaled help amidst data that showed contraction of the Germany economy in the fourth quarter. Along with the positive remarks from Chinese officials, US traders also digested the news that the second bailout to Greece could be delayed and the US bourses displayed volatility ending slightly negative.

On the domestic front, optimism has gradually crept in. Soothing of inflationary pressures and hopefulness of monetary easing has led to broad based FII inflows. On the global front, China’s support to the eurozone is likely to renew the optimism of fixing the eurozone debt crises. Currently holding strong breadth, the markets will trace new catalysts for the rally to sustain.

Markets Today

The trend deciding level for the day is 18,145 / 5,512 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 18,289 – 18,376 / 5,563 – 5,593 levels. However, if NIFTY trades below 18,145 / 5,512 levels for the first half-an-hour of trade then it may correct up to 18,058 – 17,914 / 5,481 – 5,430 levels.

PM initiates action to address issues of coal supply for power projects

The Prime Minister has approved suggestions made by the Secretary level Committee for solving the issue of coal deficit faced by Power sector. As per the approved suggestions, Coal India Limited (CIL) will sign FSAs with power plants that have entered into long-term PPAs with power distribution companies and have been commissioned/would get commissioned on or before 31st March 2015. For power plants that have been commissioned up to 31st December 2011, FSAs will be signed before 31st March 2012. The FSAs will be signed for full quantity of coal mentioned in the Letters of Assurance (LoAs) for a period of 20 years with trigger level of 80% for levy of disincentive and 90% for levy of incentive. In case of any shortfall in fulfilling its commitment under the FSAs from its own production, Coal India Limited will arrange for supply of coal through imports or through arrangement with State/Central PSUs who have been allotted coal blocks.

In our view this news is positive for the power sector considering that the fuel shortage is the key issue currently faced by the sector. CIL had not signed any FSA’s with private power generators after March 2009. The main contention between CIL and Power companies was with regard to formers’ stance of having a trigger level of 50% beyond which it would not get penalized. However, we have concerns with regard to ability of Coal India to ramp up production. The company’s ability to ramp up production depends on quicker and easier approvals from environment ministry with regard to forest and environment clearance. We await more clarity on this development.

Result Review

INEOS ABS Ltd. - 4QCY2011

INEOS reported its 4QCY11 numbers. Top line for the quarter was flat at Rs.211cr yoy. Annual sales stood at Rs.826cr, 7.7% lower than our estimates of Rs.896cr. Operating margin for the quarter fell by 980 bps yoy from 16.4% to 6.4% mainly due to substantial increase in the raw material cost as percent of sales. Net profit stood at Rs.9.5cr, 56% lower yoy. Annual net profit came in at Rs.54cr, 22% lower than our estimates of Rs.69cr. As we roll over to CY2013E, we continue to maintain our Buy recommendation on the stock with the revised target price of Rs.733, based on PE of 15x for CY2013E.

Result Preview

GSK Pharma - 4QCY2011

Glaxo Pharma is slated to announce its 4QCY2011 numbers. For the quarter, we expect the company to post healthy top-line growth of 17.5% yoy to Rs.577cr. The company’s bottom line is expected to register a decline of 20.5% yoy to Rs.116cr, aided by margin contraction of 350bp yoy to 30.6%. We maintain our Neutral view on the stock.

Economic and Political News
- India set to harvest record 250mn tonnes of Food grains
- Finance Minister asks states to promote investment in farm supply chain
- CII asks for continuation of 10% standard rate of excise duty in its pre-budget memo

Corporate News
- Future licences won't be linked to spectrum allocation: Sibal
- Government mulls options to allocate NTPC’s stake in ICVL
- Volvo rolls out three new variants at lower price points
- Akzo Nobel India board agrees to partial rollback of royalty rate to parent
- Sterlite Industries to pay US-based Asarco US $82.8mn in damages

Open Demat Account for online share trading in Angel Broking Ltd, is India’s best stock broking company

Indian stock market and companies daily report (February 15, 2012, Wednesday)

The domestic markets are expected to edge higher following positive opening across most of the Asian markets. Domestic equities ended with modest gains after WPI inflation dipped to 6.6% in January, its lowest level in more than two years. Global cues turned weak. European markets marginally declined following Moody's continual pessimism over the euro zone. Continuing its negative stance, Moody’s downgraded six eurozone nations. In addition, traders became increasingly cautious about the hurdles to a resolution to the Greek debt crisis. Amid concerns in Europe, US bourses displayed similar weakness and ended on a flat note.

On the domestic front, investor sentiment has firmed up considerably. Core inflation (non-food manufacturing) has declined for the second consecutive month, suggesting a strong case for monetary easing. Amid positive developments, the markets may hold strong breadth for some more time. Nonetheless, it will be watchful from here in that markets wait for the economy to indicate recovery that equities have partly factored in. The markets will closely track the pace of policy reforms. In addition, developments across the Eurozone will also offer directions to the markets.

Markets Today

The trend deciding level for the day is 17,827 / 5,407 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17,912 – 17,975 / 5,437 – 5,457 levels. However, if NIFTY trades below 17,827 / 5,407 levels for the first half-an-hour of trade then it may correct up to 17,764 – 17,679 / 5,387 – 5,357 levels.

WPI inflation eases to 26 month low of 6.6%; manufacturing inflation also comes down on expected lines

Wholesale price-based inflation for January 2012 eased to 6.6% yoy, falling from 7.5% yoy levels registered in December, 2011. Inflation levels of November 2011 were revised upwards from 9.1% to 9.5%. January2012 inflation levels of 6.6% yoy were slightly above Bloomberg estimate of 6.7%. Core (non-food manufacturing) inflation – which the RBI tracks closely – came in at 6.5% yoy as against 7.5% in December 2011.

Primary articles inflation came in at a low 2.3% yoy, ~82bp lower than the 3.1% yoy witnessed in December 2011 (a significant decline of 665bp over 8.2% yoy registered in November 2011). Food articles inflation fell into the negative territory (negative 0.5% yoy compared to 0.7% yoy in December, 2011 and 8.3% yoy in November, 2011) for the first time since the inception of the new base year (2004-05). Non-food articles inflation, which was as high as 18.2% yoy in August 2011, declined to 0.6% yoy (1.5% yoy in December 2011). However, over December 2011, non-food articles index rose by 2.4% mom (annualized growth of 28.2%) on account of higher prices of gaur seed, flowers, logs and timber, soyabean and groundnut seed and linseed amongst others. Inflation for minerals rose at a faster pace of 24.8% yoy compared to 21.9% yoy in December 2011.

Fuel and power inflation continued to be high at 14.2% yoy (average of 14% over the past six months), though which can be partly attributed to the sharp rupee depreciation. Within fuel and power, while both coal and mineral oil registered growth of 0.1% and 0.2%, respectively, electricity index remained unchanged.

Manufactured products, which have a weightage of ~65% in the overall WPI inflation, eased to 6.5% yoy from 7.4% yoy levels in December 2011 (average of 6.4% over the past two years). The mom growth in manufacturing index was reasonably high at 0.4%, leading to annualized growth of 5.1%. Manufacturing articles inflation was driven by higher prices of groundnut oil, gur, and mustard and rape seed oils. On the other hand, inflation in processed prawn, sugar and tea dust (blended) moderated vis-à-vis December 2011.

The spread between primary articles and manufactured products inflation, which was as high as 13.1% at the start of CY2011, remained in the negative territory (negative 4.2%) for the second consecutive month.

Consequent to the monetary tightening over the past one year, WPI figures, led by a substantial drop in food inflation, are at a 26-month low of 6.6% yoy (as of January 2012). Manufacturing products inflation, which had remained stiff at 7.4% yoy in December 2011, eased along expected lines to 6.5% yoy for January 2012. With manufacturing inflation coming in higher than the primary inflation for the second consecutive month, after a long spell of lagging it, in our view likely indicates that a large part of pass-through of primary inflation is already done with. Hence, in-line with food inflation, we expect manufacturing inflation to cool off further in the coming few months. If there is a consistent decline in overall WPI, including manufacturing inflation on these lines, in our view the RBI would then consider more decisive signaling through repo rate cuts as well (unlike just the CRR cut in the last monetary policy), possibly from April 2012.

3QFY2012 - Result Reviews

Tata Motors

On a consolidated basis, Tata Motors (TTMT) reported and impressive 44% yoy (25% qoq) growth in top-line to Rs.45,260cr aided by 42% yoy (29% qoq) growth in JLR revenues. JLR performance was driven by 36.7% yoy (26.9% qoq) increase in volumes and 4% yoy increase in net average realization. Volume performance at JLR continues to be driven by significant growth in China and Russia, where volumes grew by 81% and 34% yoy, respectively. Operating margins surprised positively as it expanded by 81bp yoy (264bp qoq) to 15.1%. Margin expansion was led by JLR, while India business continued to be under pressure. JLR EBITDA was up 38% yoy (50% qoq) to GBP682mn, with EBITDA margin at 18.2% (up 260bp), led by strong volume performance (Evoque, Jaguar XF 2.2), favourable forex and richer geography mix. Standalone EBITDA margin remained weak at 6.4%, down 380bp yoy (40bp qoq) on commodity inflation, higher discounting and marketing spends in PV business. Consolidated net profit surged 40.5% yoy (81.4% qoq) to Rs.3,406cr. The stock rating is currently under review. We shall revise our estimates and release a detailed result note soon.

Jaiprakash Associates

For 3QFY2012, Jaiprakash Associates (JAL) reported in-line performance on the revenue front but better-than-expected numbers on the EBITDAM and PAT level. On the top-line front, the company’s revenue increased by 12.1% on a yoy basis to Rs.3,305cr, which was exactly as per our estimate. The cement segment reported growth of 37.2% yoy; however, construction and real estate revenue declined by 1.7% and 27.6%, respectively, on a yoy basis. Blended EBITDA margin came in at 24.7%, down 400bp yoy and ahead of our expectation of 21.2%. The construction and real estate segments, with margins of 29.8% and 47.9%, respectively, led to good show on the margin front. Interest cost stood at Rs.448.5cr, up 32.6% yoy 10.8% qoq and marginally higher than our estimate of Rs.425.1cr. Depreciation cost came in at Rs.202.2cr, up 31.1% yoy and 14.8% qoq and higher than our estimate of Rs.184.9cr. The bottom line came in at Rs.205.0cr, a decline of 11.9% yoy and higher than our estimate of Rs.69.5cr due to high other income. Other income during the quarter jumped from Rs.3.0cr in 3QFY2011 to Rs.120.1cr in 3QFY2012, resulting in better-than-expected earnings performance. We maintain our Accumulate rating on the stock with an SOTP target price of Rs.88.

HDIL

HDIL announced its 3QFY2012 numbers. The company’s net sales declined by 8.8% yoy to Rs.423cr (Rs.463cr). EBITDA declined by 43.4% yoy to Rs.157cr (Rs.278cr), largely due to a decline in revenue and margin compression. EBITDA margin declined by 1,998bp yoy to 37.2% (59.9%), mainly due to increased cost of construction, up 24.2% of net sales in 3QFY2012 vs. 18.3% of net sales in 3QFY2011 and project interest, which increased to 33.4% of net sales in 3QFY2012 vs. 25.0% of net sales in 3QFY2011. Adjusted PAT declined by 31.7% yoy to Rs.156cr (Rs.228cr), while margin declined by 1,238bp yoy to 36.9% (49.2%). We will be coming out with a detailed report post management interaction. We currently have a Buy rating on the stock with a target price of Rs.115.

IVRCL

IVRCL reported a disappointing set of numbers for 3QFY2012, with lower-thanexpected performance on all fronts. The company’s revenue declined by 15.1% yoy to Rs.1,203cr and was below our estimate of Rs.1,374cr. On the EBITDA margin front, the company posted dismal margin of 7.9%, a dip of 200bp yoy against and below our estimate of 9.2%. Interest cost came in at Rs.66.1cr, an increase of 11.6% yoy/1.3% qoq. On the earnings front, IVRCL reported an 84.0% yoy decline to Rs.6.8cr, against our estimate of a 46.5% decline. This was on account of poor performance on the revenue and margin front and interest cost burden. We would come out with a detailed note post the conference call. Currently, the target price and rating are under review.

Simplex Infra

For 3QFY2012, Simplex Infra’s (Simplex) numbers came above our and street expectations on revenue and earnings front and marginally lower at EBITDAM level. On the top-line front, Simplex reported robust growth of 36.7% yoy to Rs.1,594cr, higher than our estimate of Rs.1,348cr (consensus Rs.1,145cr). EBITDAM dipped by 120bp yoy to 8.0% for the quarter, marginally lower than our estimate of 8.6%. Interest cost came at Rs.55.0cr a yoy/qoq jump of 52.0%/7.6% and in line with our estimate of Rs.54.3cr. PAT declined by 22.3% yoy to Rs.18.0cr, above our estimate of Rs.13.6cr (consensus Rs.14.9cr). Better-than-expected bottom-line performance was due to robust revenue growth. At the end of the quarter, the company’s order book stood at Rs.14,442cr (2.9x FY2011 revenue). Simplex had order inflow of Rs.1,018cr for the quarter. We maintain a Buy on the stock, with a Target Price of Rs.233.

Graphite India

Graphite India Limited (GIL) announced its 3QFY2012 numbers. The company’s net sales increased by 29.2% yoy to Rs.436cr (Rs.337cr). The graphite segment, which contributed around 85.6% to the total revenue, registered strong growth of 27.1% yoy to Rs.373cr (Rs.294cr), while the steel segment managed a 15.8% yoy increase to Rs.30cr (Rs.26cr). EBITDA increased by 21.1% yoy to Rs.89cr (Rs.73cr), largely due to higher revenue. EBITDA margin declined by 137bp yoy to 20.3% (21.7%), mainly due to higher raw-material cost, which increased to 42.6% of net sales in 3QFY2012 vs. 40.2% of net sales in 3QFY2011. PAT increased by 27.1% yoy to Rs.56cr (Rs.44cr). Despite a 137bp OPM contraction, PAT margin only declined by 21bp yoy to 12.9% (9.1%) due to lower tax provision and higher other income. Tax rate declined to 32.1% of PBT in 3QFY2012 vs. 33.2% of PBT in 3QFY2011, while other income increased by 96.8% to Rs.7cr in 3QFY2012 vs. Rs.4cr in 3QFY2011.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.102.

Economic and Political News
- Oil Minister rules out deregulation of diesel prices
- GoM to decide today on stake sale of ONGC, BHEL
- TRAI for 74% cap on foreign holding in telecom towers
- Government set to slash further subsidy on non urea fertilizers like DAP and
MOP for FY13

Corporate News
- Nasscom pegs 11-14% growth in Infotech, ITeS exports in FY13
- RIL's KG-D6 output may fall to 27 mmscmd next fiscal
- Bihar government approves Ultratech's proposal for grinding unit
- BSES gets Rs.5,000cr IDBI Bank loan to pay dues
- Orissa halts operations at SAIL iron ore mine
- Tata Power to invest US $125mn in Indonesian project
- Lanco to raise US $750mn for power biz

Online Share Trading in India, open demat account in leading stock market company in India: Angel Broking Ltd.

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

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
Open demat account in leading stock market company in India: Angelbroking Ltd.