Indian markets are expected to open flat with a slightly negative bias. Most of the Asian markets are trading in the positive zone. However, SGX Nifty is trading marginally lower, down 0.1%.
U.S. markets showed a lack of direction during trading on Monday as traders expressed uncertainty about the situation in Europe following recent French presidential election results. The markets recovered from weakness seen in early trade but ended the day nearly flat. European markets remained cautious due to the uncertainty about the European debt crisis after the elections. The situation in Greece is currently seen as a greater risk than the outcome of French presidential election.
Meanwhile, Indian shares staged partial recovery from sharp previous-session losses, amid weak global trend in global markets, after Finance Minister Pranab Mukherjee postponed the enforcement of General Anti-Avoidance Rules (GAAR) by one year until fiscal 2013/14.
Markets Today
The trend deciding level for the day is 16,790 / 5,076 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17,067 – 17,221 / 5,163 – 5,212 levels. However, if NIFTY trades below 16,790 / 5,076 levels for the first half-an-hour of trade then it may correct up to 16,636 – 16,360 / 5,027 – 4,939 levels.
Result Reviews
HDFC (CMP: Rs.664 / TP: - / Upside: -)
HDFC reported a healthy set of numbers with net profit growing by 16.1% yoy to Rs.1,326cr, which were above our estimates due to higher net interest income than expected by us. The loan growth was also strong at 20% yoy. The NIMs for the company rose on account of higher yield on advances and lower borrowing costs (most of the borrowings done at the fag end of quarter). The cost pressures of these borrowings however could be visible form 1QFY2012 onwards. The asset quality also remained stable with gross and net NPA levels remaining at similar levels on a yoy basis. We currently have a Neutral rating on the stock.
Bosch (CMP: Rs.8,873 / TP: Rs.9,317 / Upside: 5%)
Bosch (BOS) registered a healthy top-line growth of 10% yoy (12.5% qoq) to Rs.2,295cr, in-line with our expectation of Rs.2,086cr. Top-line growth was driven by 8.1% yoy growth in the auto segment and a strong 21.4% yoy growth in the nonauto segment. The auto segment performance was driven primarily by ~15% growth in the after-market segment. While diesel systems segment reported a ~8% yoy growth; gasoline systems segment registered a flat growth on account of slowdown in the passenger car industry (petrol variants). Exports too grew at a sluggish pace of ~3% and stood at Rs.250cr mainly on account of slowdown in Europe.
BOS recorded better-than-expected margins of 20.8%; an increase of 192bp yoy and 331bp qoq primarily due to decline in raw-material expenses. Raw-material expenses declined during the quarter led by cost savings due to localization benefits and strategic buying decisions carried out by the company. Thus, operating profit grew by 21.2% yoy (33.8% qoq) to Rs.478cr. As a result, net profit registered a strong 22.4% yoy (19.5% qoq) growth to Rs.336cr.
At Rs.8,873, the stock is trading at 19.5x and 19.1x CY2013E earnings, respectively. We recommend Accumulate rating on the stock with a target price of Rs.9,317 valuing it at 20x CY2013E earnings.
Glaxo Pharmaceuticals (CMP 2,126, TP- : Neutral)
Glaxo Pharmaceuticals reported lower-than-expected sales growth. The company’s net profit also came in below expectations. For the quarter, the company posted sales of Rs.622.8cr, registering 3.3% yoy growth. On the operating front, gross and operating margin came in at 57.9% and 31.4%, respectively, below our expectation of 61.1% and 34.3%, respectively. Consequently, net profit came in at Rs.122.9cr vs. our expectation of Rs.200.1cr. Currently, the stock is valued at 22.1x CY2013E earnings. We maintain our Neutral stance on the stock.
GSK Consumer (CMP: Rs.2,701/ TP: -/ Upside :-)
For 1QCY2012, GSK Consumer (GSKCHL) posted 14.5% yoy growth in its net sales to Rs.813cr, aided by 7% volume growth and an 8% price increase. The company’s flagship brands Horlicks and Boost posted volume growth of 9.4% and 2.1%, respectively. During the quarter, sales were, to an extent, affected by low orders from CSD (contributes around 8% to overall sales) during February and March, adjusting for which volume growth would be 9.5%. OPM fell by 57bp yoy to 19.9% due to higher costs of inputs such as barley and skimmed milk powder. The company’s bottom line rose by 19.3% yoy to Rs.132cr. We recommend a neutral on the stock.
South Indian Bank (CMP: Rs.23 / TP: - / Upside: - )
South Indian Bank reported its results for 4QFY2012. The bank reported 28.4% yoy growth in its NII to Rs.285cr, which was in line with our estimates. Non-interest income for the bank also increased by 37.8% on a yoy basis to Rs.83cr. However, operating expenses for the bank increased at much higher pace of 58.3% yoy (32.2% qoq), which capped the growth in pre-provisioning profits to 6.4% yoy. Net profit for the bank grew by 49.1% yoy to Rs.122cr, on back of decrease in provisioning expenses by 53.3% yoy. On the asset quality front, both gross and net NPA ratio increased marginally on a sequential basis by 3bp and 4bp, respectively and PCR declined by 382bp qoq to 71.4%. We maintain our Neutral recommendation on the stock.
Result Previews
Asian Paints
Asian Paints is set to declare its 4QFY2012 results. For the quarter, we expect Asian Paints to post 22.4% yoy growth in its consolidated top line to Rs.2,405cr, driven by volume growth and price hikes. The company’s OPM is expected to decline by 101bp yoy to 13.7%. The company’s bottom line is expected to register growth of 17.4% yoy to Rs.219cr. We maintain our Neutral view on the stock.
Hindalco
Hindalco is slated to report its 4QFY2012 results. We expect the company’s standalone net sales to decrease by 1.2% yoy to Rs.6,680cr. However, EBITDA margin is expected to contract by 165bp yoy to 11.9% on account of a decline in aluminium prices and rise in costs of key inputs (primarily coal). Net profit is expected to decrease by 27.1% yoy to Rs.516cr. We recommend a Buy rating on the stock with a target price of Rs.136.
Central Bank
Central Bank is scheduled to announce its 4QFY2012 results today. We expect the bank to report a Net Interest Income (NII) de-growth of 13.9% yoy to Rs.1,230cr. Non-interest income is also expected to decline by 24.9% yoy to Rs.393cr. However, operating expenses are expected to decline at much higher 38.9% yoy to Rs.990cr (due to one-off staff related provisioning in 4QFY2011). Provisioning expenses are expected to increase by 55.7% yoy to Rs.477cr, and would lead to 4.0% yoy degrowth in net profit to Rs.127cr. At the CMP, the stock is trading at 0.8x FY2014E ABV. We maintain our Neutral recommendation on the stock.
CESC
CESC is expected to register 28.1% yoy growth in its standalone top line to Rs.1,081cr, aided by improved realization. During the quarter, CESC got the approval from WBERC for increasing the tariff for Kolkata region on an average by 13%. Post this order, the company would charge its customers at a higher rate with retrospective effect. The company’s OPM for the quarter is expected to expand by 385bp yoy to 33.0%. Net profit is expected to increase by 62.9% yoy to Rs.182cr. We maintain our Buy view on the stock with a target price of Rs.342.
Dena Bank
Dena Bank is scheduled to announce its 4QFY2012 results. We expect the bank to report reasonable growth of 4.4% qoq (21.0% yoy) in its net interest income to Rs.565cr. Non-interest income is also expected to show healthy traction by growing at 36.2% yoy (29.1% qoq) to Rs.173cr. Consequently, overall operating income is expected to grow at a healthy pace of 9.3% qoq. Operating expenses for the bank are expected to increase sequentially by 8.5% to Rs.306cr. While provisioning expenses are expected to decline by 24.9% qoq, a sharp increase of 58.4% qoq is expected in tax expenses, which would limit net profit growth for the bank at moderate levels of 11.7% to Rs.209cr. At the CMP, the stock is trading at 0.5x FY2014E ABV. We maintain our Buy recommendation on the stock with a target price of Rs.118.
Economic and Political News
- Government slashes capital gains tax for PE investors
- CEA requests Power Ministry to seek PMO help on fuel pact
- Government eases 30% sourcing condition for single brand retail
Corporate News
- Maruti operations unaffected by Suzuki’s recall of swifts
- Kingfisher to start paying January salaries: Mallya
- Ramky infra bags Rs.1,249cr orders
U.S. markets showed a lack of direction during trading on Monday as traders expressed uncertainty about the situation in Europe following recent French presidential election results. The markets recovered from weakness seen in early trade but ended the day nearly flat. European markets remained cautious due to the uncertainty about the European debt crisis after the elections. The situation in Greece is currently seen as a greater risk than the outcome of French presidential election.
Meanwhile, Indian shares staged partial recovery from sharp previous-session losses, amid weak global trend in global markets, after Finance Minister Pranab Mukherjee postponed the enforcement of General Anti-Avoidance Rules (GAAR) by one year until fiscal 2013/14.
Markets Today
The trend deciding level for the day is 16,790 / 5,076 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17,067 – 17,221 / 5,163 – 5,212 levels. However, if NIFTY trades below 16,790 / 5,076 levels for the first half-an-hour of trade then it may correct up to 16,636 – 16,360 / 5,027 – 4,939 levels.
Result Reviews
HDFC (CMP: Rs.664 / TP: - / Upside: -)
HDFC reported a healthy set of numbers with net profit growing by 16.1% yoy to Rs.1,326cr, which were above our estimates due to higher net interest income than expected by us. The loan growth was also strong at 20% yoy. The NIMs for the company rose on account of higher yield on advances and lower borrowing costs (most of the borrowings done at the fag end of quarter). The cost pressures of these borrowings however could be visible form 1QFY2012 onwards. The asset quality also remained stable with gross and net NPA levels remaining at similar levels on a yoy basis. We currently have a Neutral rating on the stock.
Bosch (CMP: Rs.8,873 / TP: Rs.9,317 / Upside: 5%)
Bosch (BOS) registered a healthy top-line growth of 10% yoy (12.5% qoq) to Rs.2,295cr, in-line with our expectation of Rs.2,086cr. Top-line growth was driven by 8.1% yoy growth in the auto segment and a strong 21.4% yoy growth in the nonauto segment. The auto segment performance was driven primarily by ~15% growth in the after-market segment. While diesel systems segment reported a ~8% yoy growth; gasoline systems segment registered a flat growth on account of slowdown in the passenger car industry (petrol variants). Exports too grew at a sluggish pace of ~3% and stood at Rs.250cr mainly on account of slowdown in Europe.
BOS recorded better-than-expected margins of 20.8%; an increase of 192bp yoy and 331bp qoq primarily due to decline in raw-material expenses. Raw-material expenses declined during the quarter led by cost savings due to localization benefits and strategic buying decisions carried out by the company. Thus, operating profit grew by 21.2% yoy (33.8% qoq) to Rs.478cr. As a result, net profit registered a strong 22.4% yoy (19.5% qoq) growth to Rs.336cr.
At Rs.8,873, the stock is trading at 19.5x and 19.1x CY2013E earnings, respectively. We recommend Accumulate rating on the stock with a target price of Rs.9,317 valuing it at 20x CY2013E earnings.
Glaxo Pharmaceuticals (CMP 2,126, TP- : Neutral)
Glaxo Pharmaceuticals reported lower-than-expected sales growth. The company’s net profit also came in below expectations. For the quarter, the company posted sales of Rs.622.8cr, registering 3.3% yoy growth. On the operating front, gross and operating margin came in at 57.9% and 31.4%, respectively, below our expectation of 61.1% and 34.3%, respectively. Consequently, net profit came in at Rs.122.9cr vs. our expectation of Rs.200.1cr. Currently, the stock is valued at 22.1x CY2013E earnings. We maintain our Neutral stance on the stock.
GSK Consumer (CMP: Rs.2,701/ TP: -/ Upside :-)
For 1QCY2012, GSK Consumer (GSKCHL) posted 14.5% yoy growth in its net sales to Rs.813cr, aided by 7% volume growth and an 8% price increase. The company’s flagship brands Horlicks and Boost posted volume growth of 9.4% and 2.1%, respectively. During the quarter, sales were, to an extent, affected by low orders from CSD (contributes around 8% to overall sales) during February and March, adjusting for which volume growth would be 9.5%. OPM fell by 57bp yoy to 19.9% due to higher costs of inputs such as barley and skimmed milk powder. The company’s bottom line rose by 19.3% yoy to Rs.132cr. We recommend a neutral on the stock.
South Indian Bank (CMP: Rs.23 / TP: - / Upside: - )
South Indian Bank reported its results for 4QFY2012. The bank reported 28.4% yoy growth in its NII to Rs.285cr, which was in line with our estimates. Non-interest income for the bank also increased by 37.8% on a yoy basis to Rs.83cr. However, operating expenses for the bank increased at much higher pace of 58.3% yoy (32.2% qoq), which capped the growth in pre-provisioning profits to 6.4% yoy. Net profit for the bank grew by 49.1% yoy to Rs.122cr, on back of decrease in provisioning expenses by 53.3% yoy. On the asset quality front, both gross and net NPA ratio increased marginally on a sequential basis by 3bp and 4bp, respectively and PCR declined by 382bp qoq to 71.4%. We maintain our Neutral recommendation on the stock.
Result Previews
Asian Paints
Asian Paints is set to declare its 4QFY2012 results. For the quarter, we expect Asian Paints to post 22.4% yoy growth in its consolidated top line to Rs.2,405cr, driven by volume growth and price hikes. The company’s OPM is expected to decline by 101bp yoy to 13.7%. The company’s bottom line is expected to register growth of 17.4% yoy to Rs.219cr. We maintain our Neutral view on the stock.
Hindalco
Hindalco is slated to report its 4QFY2012 results. We expect the company’s standalone net sales to decrease by 1.2% yoy to Rs.6,680cr. However, EBITDA margin is expected to contract by 165bp yoy to 11.9% on account of a decline in aluminium prices and rise in costs of key inputs (primarily coal). Net profit is expected to decrease by 27.1% yoy to Rs.516cr. We recommend a Buy rating on the stock with a target price of Rs.136.
Central Bank
Central Bank is scheduled to announce its 4QFY2012 results today. We expect the bank to report a Net Interest Income (NII) de-growth of 13.9% yoy to Rs.1,230cr. Non-interest income is also expected to decline by 24.9% yoy to Rs.393cr. However, operating expenses are expected to decline at much higher 38.9% yoy to Rs.990cr (due to one-off staff related provisioning in 4QFY2011). Provisioning expenses are expected to increase by 55.7% yoy to Rs.477cr, and would lead to 4.0% yoy degrowth in net profit to Rs.127cr. At the CMP, the stock is trading at 0.8x FY2014E ABV. We maintain our Neutral recommendation on the stock.
CESC
CESC is expected to register 28.1% yoy growth in its standalone top line to Rs.1,081cr, aided by improved realization. During the quarter, CESC got the approval from WBERC for increasing the tariff for Kolkata region on an average by 13%. Post this order, the company would charge its customers at a higher rate with retrospective effect. The company’s OPM for the quarter is expected to expand by 385bp yoy to 33.0%. Net profit is expected to increase by 62.9% yoy to Rs.182cr. We maintain our Buy view on the stock with a target price of Rs.342.
Dena Bank
Dena Bank is scheduled to announce its 4QFY2012 results. We expect the bank to report reasonable growth of 4.4% qoq (21.0% yoy) in its net interest income to Rs.565cr. Non-interest income is also expected to show healthy traction by growing at 36.2% yoy (29.1% qoq) to Rs.173cr. Consequently, overall operating income is expected to grow at a healthy pace of 9.3% qoq. Operating expenses for the bank are expected to increase sequentially by 8.5% to Rs.306cr. While provisioning expenses are expected to decline by 24.9% qoq, a sharp increase of 58.4% qoq is expected in tax expenses, which would limit net profit growth for the bank at moderate levels of 11.7% to Rs.209cr. At the CMP, the stock is trading at 0.5x FY2014E ABV. We maintain our Buy recommendation on the stock with a target price of Rs.118.
Economic and Political News
- Government slashes capital gains tax for PE investors
- CEA requests Power Ministry to seek PMO help on fuel pact
- Government eases 30% sourcing condition for single brand retail
Corporate News
- Maruti operations unaffected by Suzuki’s recall of swifts
- Kingfisher to start paying January salaries: Mallya
- Ramky infra bags Rs.1,249cr orders
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