market outlook 9th february 2012

8/3/2019 Market Outlook 9th February 2012

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Please refer to important disclosures at the end of this report Sebi Registration No: INB 010996539 1

Market OutlookIndia Research

February 9, 2012

Dealer’s Diary

The domestic markets are expected to open in the red tracking flat to negative

opening in most of the Asian markets. Indian markets posted a volatile tradingsession and closed in green on Wednesday amidst optimism towards the

developments in Greece’s debt restructuring deal.

Globally, however U.S. and European stocks remained choppy and ended flat, as

the markets waited for additional news from Greece. The Greek government,

which is close to announce another round of spending cuts in order to secure

bailout funds is also in negotiations with private creditors on a voluntary

debt reduction.

Indian investors, meanwhile, would keenly watch out for the domestic industrial

production growth (Bloomberg estimate-3%) for the month of December, due to be

released on Friday. Also initial jobless claims data of the U.S. for the previous week

due to be released today will be on radar.Markets Today

The trend deciding level for the day is 17,699 / 5,363 levels. If NIFTY trades above

this level during the first half-an-hour of trade then we may witness a further rally

up to 17,818 – 17,928 / 5,402 – 5,435 levels. However, if NIFTY trades below

17,699 / 5,363 levels for the first half-an-hour of trade then it may correct up to

17,588 – 17,469 / 5,330 – 5,292 levels.

Indices S2 S1 PIVOT R1 R2

SENSEX 17,469 17,588 17,699 17,818 17,928

NIFTY 5,292 5,330 5,363 5,402 5,435

News Analysis TCS establishes JV with Mitsubishi for Japanese market

3QFY2012 Result Reviews – ONGC, Bharti Airtel, Tech Mahindra, Bharat

Forge, Orchid Chemicals, Alembic Pharmaceuticals.

3QFY2012 Result Previews – Tata Steel, Hindalco, Ambuja Cements, ACC,

Apollo Tyres, Anant Raj, FAG Bearings, Dishman Pharmaceuticals.

Refer detailed news analysis on the following page

Net Inflows (February 07, 2012)

` cr Purch Sales Net MTD YTD

FII 2,893 2,201 692 6,998 18,079

MFs 476 757 (281) (510) (2,365)

FII Derivatives (February 08, 2012)

` cr Purch Sales Net Open Interest

Index Futures 2,096 1,912 184 15,177

Stock Futures 1,758 2,322 (564) 29,223

Gainers / Losers

Gainers Losers

Company Price (`) chg (%) Company Price (`) chg (%)

JSW Energy 59 10.9 Bharti Airtel 354 (6.6)

IFCI 35 9.6 Jet Air India 331 (3.0)

Manappuram Fin 49 8.4 Hindustan Copp 296 (2.6)Reliance Cap 405 8.2 Pantaloon Retail 188 (2.6)

Bank of India 368 7.9 Voltas 97(2.4)

Domestic Indices Chg (%) (Pts) (Close)

BSE Sensex 0.5 84.9 17,707

Nifty 0.6 33.0 5,368MID CAP 1.5 88.3 6,161

SMALL CAP 0.9 60.2 6,812

BSE HC (0.1) (9.3) 6,394

BSE PSU 0.7 54.7 7,619

BANKEX (0.1) (15.4) 11,849

AUTO 0.7 67.4 9,566

METAL 1.6 190.4 12,046

OIL & GAS 1.1 96.2 8,863

BSE IT 1.7 99.1 5,997

Global Indices Chg (%) (Pts) (Close)

Dow Jones 0.0 5.8 12,884

NASDAQ 0.4 11.8 2,916

FTSE (0.2) (14.3) 5,876

Nikkei 1.1 98.1 9,016

Hang Seng 1.5 319.3 21,018

Straits Times 0.8 22.6 2,980

Shanghai Com 2.4 55.6 2,348

Indian ADRs Chg (%) (Pts) (Close)

Infosys (0.5) (0.3) $55.7

Wipro (1.6) (0.2) $11.2

ICICI Bank 0.1 0.0 $37.7

HDFC Bank 0.2 0.1 $33.5

Advances / Declines BSE NSE

Advances 1,724 933

Declines 1,170 522

Unchanged 105 64

Volumes (` cr)

BSE 3,630

NSE 17,128



Market Outlook | India Research

February 9, 2012 2

TCS establishes JV with Mitsubishi for Japanese market

TCS has announced a 60:40 JV with Japan’s Mitsubishi Corp. to serve clients in

the East Asian region. The companies will invest US$5mn to set up a delivery

center in Japan. The JV company will offer a full service suite of IT, BPO and

infrastructure services to Japanese corporations. TCS said that this JV comes

against the backdrop of a strong yen, the globalization of supply chains and a

growing trend toward overseas mergers and acquisitions, all of which act as

catalysts for the increasing globalization of Japanese companies. This has

brought heightened interest in the role of global IT services to link domestic and

overseas operations.

The JV is important for TCS as the company derives only ~1% of its revenue from

Japanese markets and 7% from the Asia Pacific region. This is a good opportunity

for TCS in which it can leverage a partner like Mitsubishi and get an entry into the

world's third largest economy and provide software services there. This will be

positive in the sense that the market share of TCS in Japan will rise as a result of

the partnership with Mitsubishi and the company will also have a presence across

all geographies. We maintain our Accumulate rating on the stock with a target

price of `1,262.

3QFY2012 - Result Reviews

ONGC

ONGC’s 3QFY2012 profitability declined on account of increased subsidy burden. The company’s top line decreased by 2.5% yoy at ` 18,124cr. ONGC’s

crude oil net realization declined by 30.9% yoy to US$44.8/bbl on account of

higher subsidy burden. The company shared a subsidy burden of ` 12,536cr in

3QFY2012 vs. ` 4,222cr of subsidy shared in 3QFY2011and ` 5,713cr in

2QFY2012. Oil sales volumes decreased by 4.0% yoy to 5.6mn tonnes, while gas

sales volumes decreased by 1.4% yoy to 5.0bcm during 3QFY2012. EBITDA

margin slipped by 1,183bp yoy to 61.0% and EBITDA decreased by 23.6% yoy to

` 11,051cr. The company’s depreciation and amortization expenses increased by

24.5% yoy to ` 4,532cr due to higher dry well write-offs. The company reported

one-time gain of ` 3,142cr related to royalty reimbursed by Cairn India (initially

paid by ONGC for August 2009-September 2011). Excluding this one-time gain,

adjusted net profit decreased by 49.2% yoy to ` 3,599cr. Reported net profit

decreased by 4.8% yoy to ` 6,741cr. For FY2013, ONGC has given oil and gas

production guidance of 28.8mn tonnes (+4.0% yoy) and 27bcm (+7.0% yoy).

The stock is under review currently.

Bharti Airtel

Bharti Airtel (Bharti) reported a mixed performance for 3QFY2012, with revenue

coming in-line with our as well as street expectations, while it disappointed on the

operating and profitability fronts due to higher depreciation and amortizationexpenses. Bharti’s consolidated revenue stood at ` 18,477cr, up 6.9% qoq.

Revenue from mobile services for India came in at ` 10,176cr, up 4.0% qoq on

the back of a 3.2% qoq increase in average revenue per minute (ARPM) to




February 9, 2012 3

` 0.45/min. However, MOU declined by 1.0% qoq due to slow traffic growth.

Revenue of mobile India business was also impacted because of the slight decline

in VAS share (even when 3G services are launched in all the circles and this was

seasonally a strong quarter for telecom companies), which decreased to 14.3% in3QFY2012 from 14.5% in 2QFY2012. All this led to 2.2% qoq growth in ARPU to

` 187/month. Zain Africa’s revenue stood at ` 5,358cr, up 16.7% qoq, aided by

addition of 2.5mn subscribers, taking its total subscriber base to 50.9mn and a

0.1% qoq increase in ARPM to US¢5.7/min. However, MOU declined by 2.5%

qoq to 125min, which led to a 2.3% qoq fall in ARPU to US$7.1/month.

EBITDA margin of mobile India as well as Africa business increased by 0.18bp

and 0.47bp qoq to 33.8% and 26.7%, respectively. However, EBITDA margin of

all the other business segments declined sharply, which led to a 141bp qoq

decline in Bharti’s consolidated EBITDA margin to 32.2%. PAT came in at

`

1,011cr, down 1.5% qoq, negatively impacted by higher depreciation cost of ` 3,585cr in 3QFY2012 vs. ` 3,184cr in 2QFY2012 and higher tax rates. Net

profit stood at ` 1,011cr, down 1.5% qoq, negatively impacted by higher

depreciation cost of ` 3,585cr in 3QFY2012 vs. ` 3,184cr in 2QFY2012 and

higher tax rate of 35.2% vs. 32.4% in 2QFY2012. We maintain our Neutral

rating on the stock.

Tech Mahindra

Tech Mahindra reported muted set of 3QFY2012 results. Dollar revenue came in

at US$288.7mn, down 2.5% qoq due to a 0.5% qoq decline in volume and

~2.0% qoq negative cross-currency impact. Dollar revenue from BT declined by

7.8% qoq and revenue from non-BT grew by just 0.6% qoq. In rupee terms,

revenue came in at ` 1,445cr, up 8.4% qoq, largely aided by qoq rupee

depreciation. EBITDA margin grew by 90bp qoq (lower than margin expansion

reported by peers) to 16.2% because of depreciating rupee, which absorbed the

negative impact of onsite wage hike given. PAT, including share from Satyam,

came in at ` 276cr. Overall results were weak. The only growth driver for the

company is the non-BT business, as BT is retendering its contracts. The stock is

currently under review.

Bharat Forge

For 3QFY2012, Bharat Forge (BHFC) reported an in-line 21.1% yoy (3.4% qoq)

jump in its standalone revenue to ` 941cr, driven by a 15.3% yoy (1.3% qoq)

jump in domestic revenue and 29.2% yoy (7.6% qoq) jump in exports revenue.

While volume in tonnage terms increased by 15.2% yoy (3.1% qoq) to 55,412MT

on strong export demand, average net realization grew by 6% yoy (1.45% qoq),

led by higher contribution from the non-auto segment. Strong growth in the CV

segment and non-auto segment in the Europe and U.S. benefitted the company’s

exports performance. On the operating front, margin improved by 38bp yoy

(99bp qoq) to 24.7%, owing to better product-mix and decline in raw-material

expenses. Net profit grew by 24.9% yoy (down 3% qoq) to ` 103cr, led by strongoperating performance. However, growth was restricted on account of forex loss

of ` 16.1cr. The stock rating is currently under review.




February 9, 2012 4

Orchid Chemicals

For 3QFY2012, Orchid Chemicals’ net sales came in at ` 482.1cr, growth of

4.2% yoy. During 3QFY2012, API sales rose to ` 353.3cr as compared to

` 329.7cr in 3QFY2011. While sales were lower than expected, OPM came in at

23.7%, just in-line with our expectation of 24%. However, higher interest expense

during the period led to lower-than-expected net profit. Net profit before

exceptional items declined by almost 22.1% during the period. We maintain our

Buy recommendation; however, the target price is under review.

Alembic Pharmaceuticals

For 3QFY2012, Alembic Pharmaceuticals’ net sales came in at ` 383cr, up 15.0%

yoy. During the quarter, exports rose by 45.4% yoy to ` 165.6cr. While sales werejust in-line with our estimate, OPMs came in at 18%, higher than our expectation

of 14%. Net profit for the quarter came in at ` 442.3cr. We maintain our Buy

recommendation on the stock with a target price of ` 77.

3QFY2012 - Result Previews

Tata Steel

Tata Steel is slated to report its consolidated 3QFY2012 results. We expect the

company’s net sales to increase by 6.5% yoy to ` 30,992cr, mainly on account of

higher steel prices. However, EBITDA margin is expected to contract by 276bp yoy to 9.0% on account of higher raw-material costs (mainly in its European

operations). Net profit is expected to decrease by 35.1% yoy to ` 729cr.

We maintain our Buy rating on the stock with a target price of `510.

Hindalco

Hindalco's fully owned subsidiary, Novelis reported loss at the net level for the

seasonally weak 3QFY2012. The company’s net sales decreased by 4.0% yoy to

US$2.5bn due to lower volumes as well as aluminium price. Shipments of

aluminum rolled products decreased by 9.4% yoy to 648kt, primarily due to

destocking in Europe on the back of economic uncertainty and weakness in the

electronics business in Asia. Adjusted EBITDA decreased by 10.5% yoy to

US$213mn on account of higher costs and lower volumes. Also, EBITDA/tonne

declined by 1.0% yoy to US$312 during the quarter. Novelis reported net loss of

US$12mn compared to a loss of US$46mn in 3QFY2011. The company is

witnessing recovery in demand during 4QFY2012; it remains on track to achieve

EBITDA of ~US$1bn during FY2012.




February 9, 2012 5

Hindalco is slated to report its 3QFY2012 results. We expect the company’s

standalone net sales to decrease by 0.1% yoy to ` 5,909cr. EBITDA margin is

expected to contract by 155bp yoy to 10.0% on account of rise in costs of key

inputs (primarily coal). Net profit is expected to increase by 4.3% yoy to `

480cr.We keep our rating and target price under review.

Ambuja Cements

Ambuja Cements is expected to announce its 4QCY2011 results. On the top-line

front, the company is expected to post strong growth of 23.2% yoy to ` 2,204cr.

Strong performance on the top-line front is expected to be driven by higher yoy

realization growth (13.7%) and 8.4% yoy growth in dispatches. OPM is expected

to increase by 104bp yoy to 21.2%. The company’s bottom line is expected to

grow by 10.9% yoy to ` 286cr. We maintain our Neutral view on the stock.

ACC

ACC is slated to announce its 4QCY2011 results. The company is expected to

post top-line growth of 18.7% yoy to ` 2,325cr, primarily on account of

improvement in realization by 14.3%yoy. However, cost pressures are expected to

outweigh realization growth and OPM is expected to contract marginally by 6bp

yoy to 17.3%. The company’s bottom line is expected to decline by 14.5% yoy to

` 219cr. We maintain our Neutral view on the stock.

Apollo Tyres

Apollo Tyres is slated to announce its 3QFY2012 results. On a consolidated

basis, we expect the company to report a strong 22% yoy increase in revenue to

` 2,900cr. Sequentially, EBITDA margin is expected to improve by 50bp to 8.5%,

led by a sequential decline in raw-material prices. However, net profit is estimated

to remain flat on a qoq basis to ` 79cr. The stock rating is under review.

Anant Raj Industries

Anant Raj Industries is expected to announce its 3QFY2012 results. We expect the

company’s net sales to increase by 3.1% yoy to ` 128cr. EBITDA margin is

expected to contract by 316bp yoy to 58.9% on account of higher input costs. Net

profit is expected to decline marginally by 0.5% yoy to ` 50cr. We maintain our

Accumulate rating on the stock with a target price of ` 78.

FAG Bearings – 4QCY2011

FAG Bearings is set to announce its 4QCY2011 results. We expect the company

to deliver healthy 17% yoy growth in revenue to ` 307cr. On the operating front,

we expect FAG to post a 100bp yoy contraction in operating profit margin to

18.8%. However, net profit is expected to increase by healthy 14% yoy to ` 39cr.The stock rating is under review.




February 9, 2012 6

Dishman Pharmaceuticals

For 3QFY2012, we expect, Dishman Pharmaceuticals to post net sales of ` 305cr,

up 5% yoy. OPM is expected to come in at in 17.9% vis-à-vis 23.1% in

3QFY2011. Consequently, net profit is expected to come in at ` 19.8cr, down

30.5% yoy. We maintain our Buy recommendation on the stock with a target

price of `77.

Quarterly Bloomberg Brokers’ Consensus Estimates

HPCL Ltd - (09/02/2012)

Particulars (` cr) 3Q FY12E 3Q FY11 y-o-y (%) 2Q FY12 q-o-q (%)

Net sales 42,218 33,903 25 37,030 14

EBITDA (340) 780 (144) (2,870) (88)

EBITDA margin (%) (0.8) 2.3 (7.7)Net profit (638) 211 (403) (3,364) (81)

ACC Ltd - Consolidated (09/02/2012)

Adani Enterprise Ltd - Consolidated (09/02/2012)


Net sales 9,632 5,640 71 10,079 (4)

EBITDA 1,407 940 50 1,398 1

EBITDA margin (%) 14.6 16.7 13.9

Net profit 615 474 30 663 (7)

Ambuja Cement Ltd – (09/02/2012)


Net sales 2,277 1,788 27 1,805 26

EBITDA 514 354 45 319 61

EBITDA margin (%) 22.6 19.8 17.7

Net profit 314 258 22 171 83

Hindalco Industries Ltd – (09/02/2012)


Net sales 6,618 5,918 12 6,220 6

EBITDA 706 740 (5) 669 5

EBITDA margin (%) 10.7 12.5 10.8

Net profit 438 460 (5) 503 (13)


Net sales 2,481 2,092 19 2,283 9

Net profit 247 249 (1) 159 55




February 9, 2012 7

Cummins India Ltd – (09/02/2012)


Net sales 1,039 958 8 1,070 (3)

EBITDA 159 180 (12) 176 (10)EBITDA margin (%) 15.3 18.7 16.4

Net profit 125 139 (10) 129 (3)

Tata Steel Ltd – Consolidated (09/02/2012)


Net sales 30,427 28,606 6 32,507 (6)

EBITDA 2,338 3,425 (32) 2,750 (15)

EBITDA margin (%) 7.7 12.0 8.5

Net profit 334 1,003 (67) 212 57

BPCL Ltd – (10/02/2012)


Net sales 48,753 36,665 33 42,282 15

EBITDA (79) 749 (111) (2,695) (97)

EBITDA margin (%) (0.2) 2.0 (6.4)

Net profit (692) 187 (470) (3,229) (79)

DLF Ltd – Consolidated (10/02/2012)


Net sales 2,536 2,480 2 2,532 0

EBITDA 1,162 1,178 (1) 1,173 (1)

EBITDA margin (%) 45.8 47.5 46.3

Net profit 422 466 (9) 372 13

Essar Oil Ltd – (10/02/2012)


Net sales 12,638 12,233 3 12,939 (2)

EBITDA 308 797 (61) 544 (43)

EBITDA margin (%) 2.4 6.5 4.2

Net profit (125) 273 (146) (166) (25)

Rcom Ltd – Consolidated (10/02/2012)


Net sales 5,195 5,004 4 4,689 11

EBITDA 1,639 1,668 (2) 1,357 21

EBITDA margin (%) 31.5 33.3 28.9

Net profit 218 480 (55) 252 (14)




February 9, 2012 8

Tata Chemicals Ltd – Consolidated (10/02/2012)


Net sales 3,140 2,860 10 3,540 (11)

EBITDA 551 441 25 674 (18)EBITDA margin (%) 17.5 15.4 19.0

Net profit 190 165 16 275 (31)

Tata Power Ltd – Consolidated (10/02/2012)


Net sales 6,197 4,413 40 6,248 (1)

EBITDA 1,421 1,055 35 1,385 3

EBITDA margin (%) 22.9 23.9 22.2

Net profit 514 442 16 (1,219) (142)

Unitech Ltd – Consolidated (10/02/2012)


Net sales 982 660 49 626 57

EBITDA 171 209 (18) 138 24

EBITDA margin (%) 17.4 31.6 22.0

Net profit 107 111 (4) 92 16

IDFC Ltd – (10/02/2012)


Net profit 381 321 18 524 (27)

Shriram Transport Company Ltd – (10/02/2012)


Net profit 320 301 6 299 7

Suzlon Energy Ltd – (11/02/2012)


Net sales 5,232 4,433 18 5,071 3

Net profit (47) (254) (81) 48 (198)




February 9, 2012 9

Economic and Political News

Direct tax mop up to miss ` 5.3 lakh cr budget target

Exports from SEZs grow 17% in April-December 2011

IT, ITeS revenue crosses US$100bn milestone: Nasscom

Indian IT export revenue expected to grow by 11-14% and domestic revenue

by 13-16% for FY2013: Nasscom

January 2012 car sales rise by 7.2%

Corporate News

Bharti seeing benefits from India call price hike

Ceat to set up a 65 MT/day manufacturing facility in Bangladesh

RIL in talks with airlines for fuel supply

Tata Power explores prospects overseas

Thomas Cook starts stake sale in Indian arm Source: Economic Times, Business Standard, Business Line, Financial Express, Mint

Results Calendar

09/02/2012 Adani Enterp., Tata Steel, Hindalco, Ambuja Cements, ACC, HPCL, Cummins India, GSPL, Page Industries, Apollo Tyres, FAG Bearings, Dishman Pharma, JK Tyre

10/02/2012DLF, Tata Power Co., BPCL, IDFC, Rcom, Shriram Trans., Essar Oil, Sun TV Network, Reliance Capital, Unitech,Britannia, Aurobindo Pharma

11/02/2012 Suzlon Energy, Consolidated Co

13/02/2012Coal India, St Bk of India, IOC, Sun Pharma, SAIL, Cipla, Reliance Infra., Tata Chemicals, Motherson Sumi,CESC, Punj Lloyd, Amara Raja Batteries

14/02/2012Tata Motors, Nestle, Reliance Power, Jaiprakash Asso., HDIL, Monnet Ispat, Graphite India, Simplex Infra, IVRCL

Infra, Madhucon Proj, Indoco Remedies




February 9, 2012 10

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

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market outlook 9th february 2012

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