market outlook 1february 2012

8/3/2019 Market Outlook 1February 2012

http://slidepdf.com/reader/full/market-outlook-1february-2012 1/8

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



Market Outlook | India Research

February 1, 2012 2

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




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.




February 1, 2012 4

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




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.




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)


Net sales 2,480 1,899 31 2,268 9

Net profit 393 273 44 308 28

HPCL Ltd - (03/02/2012)


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)




February 1, 2012 7

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




February 1, 2012 8

Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com

DISCLAIMER

This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment

decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make

such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies

referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and

risks of such an investment.

Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make

investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this

document are those of the analyst, and the company may or may not subscribe to all the views expressed within.

Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and

trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's

fundamentals.

The information in this document has been printed on the basis of publicly available information, internal data and other reliablesources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as thisdocument is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report .

Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify,nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory,compliance, or other reasons that prevent us from doing so.

This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced,

redistributed or passed on, directly or indirectly.

Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or

other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in

the past.

Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in

connection with the use of this information.

Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to thelatest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may haveinvestment positions in the stocks recommended in this report.

market outlook 1february 2012

Documents