The domestic markets are expected to open in the green tracking upbeat economic data releases from around the world.
The US markets closed higher as traders reacted positively to the latest batch of economic data. The strength on Wall Street was partly due to the release of a report from payroll processor ADP showing a continued increase in private sector employment in the month of January. A separate report from the Institute for Supply Management showing a continued expansion in manufacturing activity in the month of January also generated buying interest, with the index of activity in the sector reaching a seven-month high.
The release of the ISM report on U.S. manufacturing also came after the release of separate reports showing expansions in manufacturing activity in both Germany and China.
Indian shares ended firm near its 12-week high on Wednesday, as data showing expanding domestic manufacturing activity and upbeat auto sales numbers for January boosted investor sentiment. Indian investors meanwhile would keenly watch out for the weekly inflation numbers due to be released today.
Markets Today
The trend deciding level for the day is 17230 / 5,213 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17,398 – 17,495 / 5,267 – 5,299 levels. However, if NIFTY trades below 17,230 / 5,213 levels for the first half-an-hour of trade then it may correct up to 17,132 – 16,964 / 5,182 – 5,128 levels.
Auto sales numbers – January 2012
Maruti Suzuki (MSIL)
MSIL reported better-than-expected volume growth of 5.2% yoy (25.3% mom) to 115,433 units in January 2012, led by 22.4% (24.7% mom) and 54.3% yoy growth in the domestic compact (driven by Swift) and exports segment, respectively. Total domestic volumes, however, remained flat largely due to a 2.4% yoy decline (up 34.8% mom) in sales in the mini segment. Meanwhile, MSIL unveiled the all new compact Swfit Dzire priced at Rs.4.79lakhs (petrol) and Rs.5.8lakhs (diesel) with exciting new features and better fuel efficiency.
Mahindra & Mahindra (MM)
MM registered a healthy 12% yoy (8.3% mom) increase in its total volumes to 64,072 units on account of strong performance by the automotive segment, which grew by 21.8% yoy (4.6% mom). Performance of the automotive segment was driven by continued buoyancy in the four-wheeler pick-up (up 34.7% yoy/flat mom) and passenger UV (up 14.7% yoy/2% mom) segments. The CV segment also recorded strong volume performance, witnessing growth of 50.8% yoy (47.1% mom). The tractor segment posted a 5.6% yoy decline in volumes during the month; however, on a sequential basis, volumes improved by strong 18.1%.
Tata Motors (TTMT)
TTMT posted a strong 16% yoy (6.3% mom) increase in total sales to 87,467 units, driven by 16.3% (down 1.2% mom) and 15.5% yoy (19.6% mom) growth in the commercial vehicle (CV) and passenger vehicle (PV) segments, respectively. The CV segment’s performance was led by healthy 12.6% and 18.7% yoy growth in the medium and heavy commercial vehicle (MHCV) and light commercial vehicle (LCV) segments, respectively. In the PV segment, Nano, Indica and Indigo volumes grew by 15.2%, 8.9% and 9.6% yoy, respectively.
Hero MotoCorp (HMCL)
HMCL reported healthy 11.5% yoy (down 3.7% mom) growth in volumes to 520,272 units, led by continued momentum across all product segments. New product launches and refreshed product ranges continued to drive HMCL’s volume performance.
TVS Motor (TVSL)
TVSL posted a modest 5.1% yoy increase in total sales in January 2012 to 173,514 units, largely due to subdued sales in the motorcycle segment. While two-wheeler volumes grew by 5.8% yoy (1.9% mom), three-wheeler volumes declined by 29.9% yoy (down 4.8% mom). Growth in the two-wheeler segment was led by a strong 20.2% yoy increase in moped sales; however, scooter volume growth slowed down considerably and grew by 1.8% yoy (down 7.4% mom).
3QFY2012 - Result Reviews
Mahindra Satyam
Mahindra Satyam announced its 3QFY2012 results, which were in-line with our expectations on the revenue front but were higher than ours as well as street’s expectations on the operating and bottom-line fronts. Revenue came in at US$325mn, down 1.6% qoq, due to a 1.3% qoq decline in volume. Also, USD revenue of the company was impacted by 1.4% qoq due to unfavorable crosscurrency movement. In INR terms, revenue came in at Rs.1,718cr, up 8.9% qoq. The company’s EBITDA and EBIT margin increased by 87bp and 113bp qoq to 16.2% and 13.9%, respectively, despite giving wage hikes during the quarter because of steep INR depreciation. PAT came in at Rs.308cr, up 29.5% qoq, aided by forex gain of Rs.66cr, which led to other income of Rs.151cr in 3QFY2012 as against Rs.97cr in 2QFY2012. The stock is currently under review.
Ashok Leyland – 3QFY2012
Ashok Leyland (AL) registered poor bottom-line performance during 3QFY2012 due to significant erosion in operating margins, led by higher employee and other expenses. AL reported better-than-expected 29.3% yoy (down 6.9% qoq) growth in its top line to Rs.2,880cr, driven by a 15% yoy (6.1% qoq) increase in net average realization and 12.4% yoy growth in volumes. Average net realization improved to Rs.1,389,528 on account of price increases to mitigate raw-material cost pressures and emission norm changes. On the operating front, EBITDA margin witnessed a steep 340bp qoq contraction to 7.3% against our expectation of 10.1% due to higher employee and other expenses. Other expenditure to net sales ratio unexpectedly increased by 170bp qoq and 100bp yoy during the quarter. Raw-material cost remained more or less stable on a yoy and qoq basis, led by cooling of commodity prices. Driven by weak operating performance, net profit declined by 56.6% sequentially. However, on a yoy basis, net profit grew by 54.3%, largely due to low base of last year. The stock rating is currently under review.
Finolex cables
Finolex Cables announced its 3QFY2012 numbers. The company’s net sales declined by 2.6% yoy to Rs.499cr. The electrical cables segment continued its strong growth, registering 21.6% yoy growth to Rs.417cr. The communication segment, however, registered a 22.7% yoy decline to Rs.41cr. EBITDA for the quarter declined by 18.8% yoy to Rs.41cr, largely due to margin compression. EBITDA margin declined by 165bp yoy to 8.3%, mainly due to higher other expenditure, which increased to 10.4% of net sales in 3QFY2012 vs. 8.3% of net sales in 3QFY2012. During the quarter, PAT declined by 47.7% yoy to Rs.14cr and PAT margin declined by 237bp yoy to 2.7%. The company witnessed forex loss of Rs.8cr during the quarter. We will be coming out with a detailed report post the management call. We continue to maintain our Buy rating on the stock with a target price of Rs.51.
3QFY2012 - Result Previews
Corporation Bank
Corporation Bank is slated to announce its 3QFY2012 results. We expect net interest income of the bank to decline by 9.7% yoy to Rs.760cr. Non-interest income growth is expected to be strong at 40.7% yoy to Rs.372cr. While operating income is expected to be flat, operating expenses are expected to go up by 23.7% yoy to Rs.458cr, leading to pre-provisioning profits declining by 8.4% yoy to Rs.675cr. Provisioning expenses are expected to decline by 22.7% yoy. Net profit is expected to decline by 3.1% yoy to Rs.371cr. Currently, we have an Accumulate rating on the stock with a target price of Rs.450. Thermax
For 3QFY2012, we expect Thermax to report a 3.0% yoy decline in its top line to Rs.1,204cr, as high base effect created in 3QFY2011 and weak order inflows since the last couple of quarters will keep the company's revenue under strict check. The company's EBITDA margin is likely to compress by ~110bp yoy to 10.7% due to higher contribution of low-margin EPC contracts in the company’s aggregate revenue. Lower revenue and margin contraction are expected to drag down the company's PAT by 10.8% yoy to Rs.89.4cr. At the CMP, the stock is trading at 14.1x and 15.0x its FY2012E and FY2013E EPS, respectively. We remain Neutral on the stock.
Hexaware
Hexaware is slated to announce its 4QCY2011 results. We expect the company to post revenue growth of 4.1% qoq to US$82mn, majorly led by volume growth. In rupee terms, revenue is expected to come in at Rs.416cr, up 13.8% qoq. EBITDA margin is expected to expand by 140bp qoq to 20.1%. PAT is expected to come in at Rs.68cr. We maintain our Accumulate view on the stock with a target price of Rs.96.
Economic and Political News
- Manufacturing PMI jumps to 8-month high of 57.5
- December exports up 6.7% to US$25bn
- Fiscal deficit may be about 5.6% in FY2012: PMEAC
- Fertilizer industry wants higher gas price in new urea policy
- Outlook for the textiles industry in 2012 negative to stable: Fitch
- SEBI notifies IPP norms to help promoters dilute stake
Corporate News
- Coal India inks pact with worker unions on 25% hike in wages
- ICICI Bank to recast Rs.1,300cr loans in 4QFY2012
- ABG Shipyard bags Rs.500cr order from Shipping Corp.
- KEC International keen to take more business abroad
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