The domestic markets are expected to open in red tracing negative opening in most of the Asian bourses and the SGX Nifty, as reports say that China has ruled out any broader stimulus to boost its economy and Spain rating has been downgraded.
Globally, US markets closed notably higher on Tuesday after witnessing volatility in the morning trade, which was on account of some mixed news out of Europe. Most of the European markets also largely finished in positive territory on Tuesday. Spanish markets, however remained under pressure due to concerns over the country's banks. Expectations for further stimulus from China provided investors with optimism, globally.
Meanwhile, Indian benchmark indices gave up most of their early gains on Tuesday to close flattish, as a little bit of volatility in European markets on concerns over the outlook for Spanish banks and the slide in rupee following three days of gains prompted investors to pare their long positions.
Markets Today
The trend deciding level for the day is 16,464 / 4,997 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 16,519 – 16,599 / 5,013 – 5,035 levels. However, if NIFTY trades below 16,464 / 4,997 levels for the first half-an-hour of trade then it may correct up to 16,384 – 16,330 / 4,975 – 4,959 levels.
IRB emerges L1 for road projects worth Rs.2,400cr
IRB has emerged as the lowest bidder for the four-laning project of Goa/Karnataka Border to Kundapur section of NH-17 in Karnataka under NHDP phase IV on design, build, finance, operate and transfer (Toll) basis. The estimated cost of the project is Rs.2,400cr. The concession period is 28 years and construction period is 910 days. Further, IRB had sought Rs.536cr as viability gap funding (VGF) from NHAI. This project win would be after a year as IRB had won the Ahmedabad-Vadodara project in April 2011. Further, this is in-line with the company’s guidance of Rs.4,000cr-5,000cr of order inflow each year. We continue to maintain our Buy recommendation on the stock with a target price of Rs.166.
Result Reviews
ONGC (CMP: Rs.256, TP: Under Review)
ONGC’s 4QFY2012 results were above our expectations. The company’s top line increased 22.2% yoy at Rs.18,819cr. EBITDA margin expanded 932bp yoy to 42.6% and EBITDA increased by 56.4% yoy to Rs.8,019cr. The company’s depreciation and amortization expenses decreased 41.5% yoy to Rs.1,349cr. Net profit increased substantially by 102.2% yoy to Rs.5,644cr much ahead of our estimate of Rs.2,652cr. We recommend a Buy on the Stock with our target price under review.
Tata Motors (CMP: Rs.276 / TP: Rs.312 / Upside: 13%)
Consolidated performance a mixed bag: For 4QFY2012, Tata Motors (TTMT) reported impressive 44.3% yoy (12.5% qoq) growth in its top line to Rs.50,908cr, led by 51.5% yoy (10.6% qoq) growth in JLR sales, which were driven by a 48.2% yoy (13.6% qoq) jump in volumes and 4.4% yoy (flat qoq) improvement in net average realization. While Land Rover volumes jumped by 51% yoy, driven mainly by incremental volumes from Evoque (29,171 units during the quarter), Jaguar volumes jumped by 30% yoy due to the strong performance of the recently launched XF. The company’s operating margin, however, declined by 184bp qoq and stood at 13.2% primarily on account of increased other expenditure, which increased substantially by 36.3% qoq. Raw-material expenses, on the other hand, were stable during the quarter, which supported the margins. Led by tax credits of Rs.1,793.7cr related to carry forward income tax losses at JLR, reported net profit jumped sharply to Rs.6,234cr. Adjusted for tax credits, net profit came in better than expectations, registering 80.5% yoy growth to Rs.4,440cr.
Strong standalone performance: TTMT posted better-than-expected 14.4% yoy (22.9% qoq) growth during the quarter on account of 18.5% yoy (23.3% qoq) growth in volumes. Net average realization, however, declined by 3.6% yoy due to higher contribution of light commercial vehicles during the quarter. Operating margin improved substantially by 268bp qoq to 9.1%, mainly led by operating leverage benefits and a decline in raw-material expenses. Hence, net profit increased substantially by 225.5% sequentially to Rs.565cr.
At Rs.276, the stock is trading at 6.3x FY2014E earnings. We maintain our Accumulate rating on the stock with an SOTP target price of Rs.312.
Sun Pharmaceuticals (CMP - Rs.566, TP - Rs.634, Upside: 12%)
Sun Pharmaceuticals reported sales and the net profit came in much ahead of expectations. For the quarter, the company posted sales of Rs.2330cr, a growth of 59.4% yoy. The growth in the domestic and exports, both of grew robustly. The domestic formulations reported growth of 49%, while the US and ROW formulation sales during the quarter came in at 66% and 31% respectively. On the operating front, the Gross and Operating margins came in at 78.4% and 41.1% respectively. The OPM’s were were just in line with expectations. Thus, while the OPM’s were in line , higher sales growth and higher other income and lower interest expenses during the quarter aided the net profit growth of 85.3% yoy to end the period at Rs.820cr, in comparison to the Rs.775cr estimated for the quarter. We maintain our Accumulate with a target of Rs.634.
SAIL (CMP: Rs.93, TP: Under Review)
SAIL’s 4QFY2012 net sales were above our estimates; however, adjusted PAT came in below our estimates. SAIL’s 4QFY2012 net sales increased by 12.2% yoy to Rs.13,397cr (above our estimates of Rs.12,183cr) mainly due to increase in sales volumes in our view. Raw material costs and other expenditure increased 27.1% and 38.6% yoy to Rs.6,866 and Rs.1979cr, respectively, while power and fuel costs increased 26.2% yoy to Rs.1,156cr. EBITDA dipped 20.5 % yoy to Rs.1871cr and EBITDA margin contracted by 574bp yoy to 14.0% (in line with our estimate of 14.0%). The company reported an exceptional item related to forex gain of Rs.725cr in 4QFY2012, compared to exceptional gain of Rs.34cr in 4QFY2011. Hence, reported net profit increased by 3.0% yoy to Rs.1577cr. However, excluding exceptional items, adjusted net profit declined substantially by 43.1% yoy to Rs.852cr (below our estimate of Rs.1,263cr) in 4QFY2012. We maintain an accumulate rating on the stock keeping our target price under review
IPCA Labs (CMP - Rs.323, TP - Rs.443, Upside: 37%)
IPCA Labs reported sales and the net profit came in below expectations. For the quarter, the company posted sales of Rs.553cr, a growth of 16.7% yoy. On the operating front, the Gross and Operating margins came in at 60.4% and 18.7% respectively. The OPM’s were below expectations of 20.7%. This aided the net profit to come at Rs.76.6cr, in comparison to the Rs.64.9cr estimated for the quarter. We maintain our buy with a target of Rs.443.
Aurobindo Pharma (CMP - Rs.111, TP - Rs.175, Upside: 58%)
Aurobindo Pharmaceuticals reported sales and the net profit came in above expectations. For the quarter, the company posted sales of Rs.1170cr, a growth of 2.5% yoy. On the operating front, the Gross and Operating margins came in at 45.2% and 10.3% respectively. The OPM’s were below expectations of 13.9%. This aided the net profit to come at Rs.38.1cr, in comparison to the Rs.47cr estimated for the quarter. We maintain our buy with a target of Rs.175.
NCC (CMP: Rs.32, TP: Under review)
For 4QFY2012, NCC posted better-than expected numbers on the revenue and earnings front however the company disappointed on EBITDAM level. On the top line front, NCC reported jump of 21.4% yoy to Rs.1,755cr, which was higher than our expectation of Rs.1,429cr. On the EBITDAM front, the company’s margin were disappointing at 5.8%, a dip of 320bp on yoy basis and lower than our estimate of 7.4%. Interest cost came in at Rs.98cr a yoy jump of 19.9% but a decline of 8.1% on sequential basis. On the bottom line level, NCC reported a yoy decline of 69.7% to Rs.11cr, almost in line with our estimate of Rs.10cr despite posting higher revenue owing to lower EBITDAM and higher interest cost. The current outstanding order book of NCC stands at Rs.20,196cr, with order inflow of Rs.10,116cr for FY2012. We maintain Buy view on the stock however the target price is under review.
Result Previews
GAIL(CMP: Rs.330 / TP: Rs.392 / Upside: 19%)
GAIL is expected to announce its 4QFY2012 results. We expect the company’s top line to grow by 20.3% yoy to Rs.10,697cr. However, the company’s operating margin is expected to contract by 260bp yoy to 11.7%. On the bottom-line front, we expect GAIL to report growth of 1.9% yoy to Rs.798cr. We continue to maintain our Buy rating on GAIL with a target price of Rs.392.
Mahindra and Mahindra (CMP: Rs.656 / TP: Rs.793 / Upside: 21%)
Mahindra and Mahindra is slated to announce its 4QFY2012 results. We expect the company’s top line to grow by strong ~20% yoy to Rs.8,046cr, backed by ~12% yoy growth in total volumes and ~7% yoy growth in net average realization. The company’s EBITDA margin is expected to witness a decline of 132bp yoy to 11.4% on account of increased purchases from its manufacturing subsidiary, MVML, and lower share of tractors in the total volume mix. As a result, the bottom line is expected to remain flat on a yoy basis to Rs.610cr. We continue to maintain our Buy recommendation on the stock with a target price of Rs.793.
DLF (CMP: Rs.188, TP: -, Upside: -)
DLF is expected to announce its 4QFY2012 results. We expect the company’s top line to decline by 11.2% yoy to Rs.2,382cr. However, the company’s operating margin is expected to expand by 1,441bp yoy to 39.2%. On the bottom-line front, we expect DLF to report growth of 29.4% yoy to Rs.446cr. We continue to maintain our Neutral recommendation on DLF.
Colgate (CMP: Rs.1,216, TP: -, Upside: -)
Colgate is expected to announce its 4QFY2012results. For the quarter, we expect the company to post 16.4% yoy growth in its top line to Rs.677cr, aided by volume and realization growth. Net profit for the quarter is expected to grow by 15.0% yoy to Rs.131cr, aided by margin expansion of 348bp yoy to 25.0%. We maintain our Neutral view on the stock.
JP Associates (CMP: Rs.62, TP: Rs.98, Upside: 58%)
We expect Jaiprakash Associates (JAL) to post marginal top-line growth of 2.0% yoy to Rs.4,063cr for the quarter on the back of higher revenue contribution from the cement segment due to capacity addition. We expect the company to post blended EBITDA margin of 22.9%, an improvement of 150bp yoy for the quarter. The bottom line is expected to be at Rs.230.6cr, registering a yoy decline of 23.6% for the quarter. This is mainly on account of a 16.3% yoy expected jump in interest cost to Rs.470.9cr. We recommend Buy on the stock with an SOTP target price of Rs.98.
HDIL (CMP: Rs.67, TP: Rs.115, Upside: 72%)
HDIL is expected to announce its 4QFY2012 results. We expect the company’s top line to increase by 14.8% yoy to Rs.601cr. Operating margin is expected to expand by 1,105bp yoy to 59.9%. On the bottom-line front, we expect HDIL to report flat growth on a yoy basis to Rs.197cr. We continue to maintain our Buy recommendation on HDIL with a target price of Rs.115.
Anant Raj (CMP: Rs.47, TP: Rs.78, Upside: 66%)
Anant Raj is expected to announce its 4QFY2012 results. We expect the company’s top line to come in at Rs.177cr. However, operating margin is expected to contract by 2,704bp yoy to 44.7%. The company’s bottom line is expected to come in at Rs.55cr. We continue to maintain our Buy recommendation on Anant Raj with a target price of Rs.78.
Simplex Infra (CMP: Rs.212, TP: Rs.316, Upside: 49%)
Simplex Infra is expected to continue its healthy performance on a sequential basis, as we project 27.1% yoy top-line growth to Rs.1,738cr for 4QFY2012. We expect the company’s EBITDA margin to fall by 100bp to 9.0%. The bottom line is expected to be under pressure due to increased interest cost (expected jump of 62.2% yoy), resulting in a yoy decline of 15.1% to Rs.31.4cr for the quarter. We continue to maintain our Buy view on the stock with a target price of Rs.316.
GIPCL (CMP: Rs.62, TP: Rs.98, Upside: 58%)
GIPCL is expected to announce its 4QFY2012 results. We expect GIPCL to register flat top-line performance during the quarter. The company’s OPM is expected to decline by 1,201bp yoy to 27.4% on a high base on account of lower plant availability and lesser generation-linked incentives. The first unit of SLPPI plant (125MW) was not operational during 4QFY2012 due to damaged rotor. The bottom line is expected to decline by 71.9% yoy to Rs.23cr due to poor operational performance and higher base due to the tax write-back in 4QFY2011. We maintain our Buy view on the stock with a target price of Rs.98.
Economic and Political News
- Foreign retail investors can buy US$1bn Indian corporate debt: Govt.
- High Govt. borrowing may crowd out private sector: RBI
- Air India board refers Boeing compensation issue to Govt.
Corporate News
- Jindal Steel's US$2.1bn project gets Bolivian boot
- JSPL buys 10% in Gujarat NREs Oz unit
- Bharat Forge to sell loss-making US unit
