Market Outlook 6th February 2012

8/3/2019 Market Outlook 6th 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 6, 2012

Dealer’s Diary

The domestic markets are expected to open in the green tracking gap up opening

in most of the Asian markets. Indian markets ended higher on Friday for a fourthday in a row on the back of heavy buying by FIIs.

Globally, most of the US and European markets closed higher as traders reacted

positively to a much better than expected report on the employment situation in the

US in the month of January. With the stronger than expected job growth, the

unemployment rate unexpectedly fell to 8.3% (lowest since February 2009) from

8.5% in the previous month. Also, a separate report from the Institute for Supply

Management showed that non-manufacturing index rose to 56.8 in January from a

revised 53.0 in December, with a reading above 50 indicating growth in the

service sector.

Indian investors this week, meanwhile, would keenly watch out for the domestic

industrial production growth for the month of December due to be released on

Friday. Also, consumer comfort index of US which will be released on comingThursday will be on radar.

Markets Today

The trend deciding level for the day is 17539 / 5,305 levels. If NIFTY trades above

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

up to 17,696 – 17,787 / 5,355 – 5,385 levels. However, if NIFTY trades below

17,539 / 5,305 levels for the first half-an-hour of trade then it may correct up to

17,448 – 17,292 / 5,276 – 5,226 levels.

Indices S2 S1 PIVOT R1 R2

SENSEX 17,292 17,448 17,539 17,696 17,787

NIFTY 5,226 5,276 5,305 5,355 5,385

News Analysis 3QFY2012 - Result Reviews – DRL, Madras Cements, HEG, TVS Srichakra,

Subros

3QFY2012 - Result Previews – HUL, Nalco, GSKCH, MOIL, India Cements,

BGR Energy, NCC, GIPCL

Refer detailed news analysis on the following page

Net Inflows (February 02, 2012)

` cr Purch Sales Net MTD YTD

FII 5,125 2,990 2,135 4,228 15,308

MFs 803 916 (113) 72 (1783)

FII Derivatives (February 03, 2012)

` cr Purch Sales Net Open Interest

Index Futures 1,590 1,482 107 12,408

Stock Futures 1,749 1,487 262 27,550

Gainers / Losers

Gainers Losers

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

Bajaj Finserv 495 8.8 Reliance Comm 94 (3.3)

Tata Global 119 8.3 Hindalco Inds 153 (3.1)

CESC 269 6.9 Hindustan Copp 299 (3.0)India Cements 94 6.8 Financial Tech 775 (2.9)

Sintex Inds 98 6.6 Jindal Steel 556 (2.7)

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

BSE Sensex 1.0 173.1 17,605

Nifty 1.1 56.0 5,326MID CAP 1.3 76.3 6,046

SMALL CAP 1.2 77.6 6,687

BSE HC 1.7 106.7 6,412

BSE PSU 1.1 80.4 7,486

BANKEX 1.4 163.5 11,644

AUTO 0.8 74.6 9,523

METAL (1.1) (131.1) 11,875

OIL & GAS 1.1 97.3 8,689

BSE IT 0.9 52.6 5,912

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

Dow Jones 1.2 156.8 12,862

NASDAQ 1.6 46.0 2,906

FTSE 1.8 105.0 5,901

Nikkei (0.5) (44.9) 8,832

Hang Seng 0.1 17.5 20,757

Straits Times 0.6 16.9 2,918

Shanghai Com 0.8 17.9 2,330

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

Infosys 2.9 1.6 $57.1

Wipro 2.1 0.2 $11.5

ICICI Bank 3.1 1.1 $38.3

HDFC Bank 3.4 1.1 $33.5

Advances / Declines BSE NSE

Advances 1,692

Declines 1,200 560

Unchanged 111 83

Volumes (` cr)

BSE 2,923

NSE 13,650



Market Outlook | India Research

February 6, 2012 2

3QFY2012 - Result Reviews

DRL

For 3QFY2012, DRL posted a good set of numbers, much ahead of ourexpectations. The company’s net sales came in at ` 2,769.2, growth of 46% yoy.

Growth was driven by U.S. sales, which grew by 120% yoy. Other key

geographies apart from Europe grew in double digits. Growth in the U.S. was led

by the high value launch of Olanzapine 20 mg, new products launched in the

past 12 months and strong volume growth across key products. This also aided

significant improvement in the company’s gross margin and subsequently in

OPM. The company’s OPM expanded by 12% yoy to 27%. Consequently, net

profit grew by 88% yoy during the period. We maintain our Buy rating on the

stock. The target price is under review.

Madras Cements

During 3QFY2012, Madras Cements’ top line rose by 27.9% yoy to ` 741cr. The

cement business posted 29.4% yoy growth in net sales to ` 733cr on account of

19.1% yoy growth in dispatches (on a low base) and 8.6% yoy growth in

realizations. The wind division’s revenue decreased by 38.8% yoy to ` 7.7cr.

Improved cement realization aided OPM to grow by 243bp to 28.0%, amidst cost

pressures felt in freight expenses and other costs. The company’s bottom line

increased by 76.7% yoy to ` 77cr. We maintain our Neutral view on the stock.

HEG

HEG Ltd. reported revenue growth of 35% yoy to ` 418cr for 3QFY2012

from ` 310cr in 3QFY2011 due to increased prices of graphite electrodes and

over 100% capacity utilization for the quarter. OPM for the quarter contracted by

1,059bp to 11.9% in 3QFY2012 from 22.4% in 3QFY2011 on account of higher

other expenses and forex loss of ` 35.5cr. PAT dipped by 37% yoy to ` 24cr as

compared to ` 38cr in 3QFY2011. Tax rate was lower at 12% for the quarter

compared to 21% in 3QFY2011. We maintain our Buy rating on the stock with a

revised target price of `236, based on a target P/B of 1.0x for FY2013E.

TVS Srichakra

For 3QFY2012, TVS Srichakra reported a mixed set of numbers. The company

reported 21.1% yoy growth in its net sales, from ` 287cr in 3QFY2011 to ` 348cr

in 3QFY2012. Net raw-material cost for the company increased by 23.7% yoy.

Increased net raw-material cost along with higher other expenditure by 22.3% yoy

led to a substantial decline in the operating profit of the company. Operating

profit margin stood at 7.1%, a decline of 95bp yoy and 220bp qoq. The

company’s profit declined by 33.1% yoy to ` 7cr, which was ` 10cr in the same

quarter last year. We maintain our Buy recommendation on the stock. The stock

price is under review.




February 6, 2012 3

Subros

Subros reported poor results for 3QFY2012, led by a yoy decline in volumes and

increased interest expense. However, on a sequential basis, higher interest cost

and depreciation expense impacted the company’s performance. Subros reported

a 7.1% yoy decline in its net sales to ` 254cr due to a 13% yoy drop in volumes.

Net average realization improved by 6.7% yoy, thereby preventing further decline

in the top line. On a sequential basis, net sales increased by 5.5% on account of

a 9.1% increase in volumes. Operating margin improved by 107bp yoy (62bp

qoq) to 8.5%, driven by raw-material cost savings (raw-material to sales ratio

declined by 381bp yoy) due to commencement of local production of certain

components (mainly evaporators). On the other hand, a 266bp yoy increase in

staff cost restricted margin expansion to a certain extent. Net profit nosedived by

steep 62.5% yoy (33.7% qoq) to ` 2.1cr on account of an 88.1% yoy (21.3% qoq)

increase in interest cost. The stock rating is currently under review.

3QFY2012 - Result Previews

HUL

HUL is expected to announce its 4QFY2011 results. We expect the company to

report a healthy 15.7% yoy growth rate in its revenue to ` 5,815cr and a 107bp

yoy expansion in its operating margin to 13.1%. The company is expected to

report 15.7% yoy growth in recurring earnings, owing to healthy revenue traction

and an expansion in margins. We maintain our Neutral view on the stock.

Nalco

Nalco is slated to report its 3QFY2012 results. We expect net sales to increase by

24.2% yoy to ` 1,770cr. However, EBITDA margin is expected to contract by

1,034bp yoy to 17.0% due to rise in prices of key inputs (primarily coal). Net

profit is expected to decrease by 12.4% yoy to ` 224cr. We maintain our Neutral

view on the stock.

GSKCH – 4QCY2011

GSK Consumer (GSKCH) is slated to announce its 4QCY2011 numbers. For the

quarter, we expect GSKCH to post healthy growth of 20% yoy in its top line to

` 610cr, driven by growth in its core brands and new product launches. The

bottom line is expected to register growth of 17.9% yoy to ` 63cr, aided by

top-line growth and margin expansion of 24bp yoy to 11.8%. We maintain our

Neutral view on the stock.




February 6, 2012 4

MOIL

MOIL is slated to report its 3QFY2012 results. We expect net sales to decline by

2.1% yoy to ` 248cr, mainly on account a decline in manganese ore prices.

Nevertheless, EBITDA margin is expected to improve by 120bp yoy to 47.0% in

3QFY2012. Net profit is expected to increase by 0.4% yoy to ` 106cr. We

maintain our Neutral view on the stock.

India Cements

India Cements is expected to announce its 3QFY2012 results. We expect the

company’s top line to grow by 18% yoy to ` 922cr, primarily on account of 15.4%

yoy growth in realization (though on a lower base of last year). The company’s

margin is expected to improve by 220bp yoy to 14.3%, aided by higher

realization. The company’s net profit is expected to grow by 19.2% yoy to ` 26cr.

We maintain our Neutral rating on the stock.

BGR Energy

For 3QFY2012, we expect BGR Energy's (BGR) top line to be under pressure due

to high base created in 3QFY2011 and partly due to execution delays. The top

line is expected to decline by 28.3% yoy to ` 901.1cr. EBITDA margin is expected

to come in at 12.0%. Interest cost is expected to stretch further (owing to hike in

interest rates and enhanced working capital debt levels); which, along with

slumped revenue, is likely to drag the bottom line down by 46.1% yoy to ` 47.2cr.

At the CMP, the stock is trading at 6.7x and 7.2x FY2012E and Fy2013E EPS,

respectively. Currently, we remain Neutral on the stock.

Nagarjuna Construction Company

We expect subdued performance from Nagarjuna Construction (NCC) for this

quarter. On the top-line front, NCC is expected to post a yoy decline of 9.0% to

` 1,215cr. EBITDA margin is expected to be flat at 9.5%. On the earnings front,

we expect NCC to post a decline of 65.4% yoy to ` 14.0cr for the quarter. This

would be primarily due to burgeoning interest cost (yoy jump of ~73.2%) and a

decline in the company’s top line. Owing to the sharp run up in the stock price,

we recommend Neutral on the stock.

GIPCL

GIPCL is expected to announce its 3QFY2012 results. The company is expected to

register 15.5% yoy growth in its revenue to ` 353cr, primarily on the back of

higher volumes from 250MW SLPP station II. OPM is set to expand by 633bp to

33.1% due to higher availability of Surat II station. The company’s bottom line is

expected to improve by 52.6% yoy to ` 37cr in 3QFY2012. We maintain our Buy

rating on the stock with a target price of `95.




February 6, 2012 5

Quarterly Bloomberg Brokers’ Consensus Estimates

Adani Power Ltd - (06/02/2012)

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

Net sales 1,098 503 118 1,072 2

EBITDA 526 273 93 519 1

EBITDA margin (%) 47.9 54.3 48.4

Net profit 211 109 94 177 19

Adani Ports & SEZ Ltd - (06/02/2012)


Net sales 643 421 53 588 9

EBITDA 440 310 42 411 7

EBITDA margin (%) 68.4 73.6 69.9

Net profit 303 228 33 273 11

Hindustan Unilever Ltd - (06/02/2012)


Net sales 5,879 5,027 17 5,522 6

EBITDA 857 725 18 827 4

EBITDA margin (%) 14.6 14.4 15.0

Net profit 700 638 10 689 2

Mahindra & Mahindra Ltd - (07/02/2012)Particulars (` cr) 3Q FY12E 3Q FY11 y-o-y (%) 2Q FY12 q-o-q (%)

Net sales 7,985 6,074 31 7,307 9

EBITDA 998 924 8 874 14

EBITDA margin (%) 12.5 15.2 12.0

Net profit 687 735 (7) 737 (7)

GMR Infra Ltd - Consolidated (07/02/2012)


Net sales 1,814 1,359 33 1,812 0

EBITDA 513 381 34 501 2

EBITDA margin (%) 28.3 28.1 27.7

Net profit (63) (22) 184 (63) 1

Power Grid Corporation Ltd - (08/02/2012)


Net profit 739 591 25 709 4




February 6, 2012 6

Bharti Airtel Ltd - Consolidated (08/02/2012)


Net sales 18,427 15,759 17 17,270 7

EBITDA 6,288 5,021 25 5,815 8EBITDA margin (%) 34.1 31.9 33.7

Net profit 1,347 1,303 3 1,027 31

ONGC Ltd - (08/02/2012)


Net sales 21,127 18,586 14 22,616 (7)

EBITDA 13,119 13,531 (3) 14,469 (9)

EBITDA margin (%) 62.1 72.8 64.0

Net profit 6,859 7,083 (3) 8,642 (21)

Economic and Political News

Court quashes Swamy's petition, relief for Chidambaram

Global food prices to ease in 2012: World Bank

Government may lower STT in Budget to boost markets

GoM meeting on ATF import, FDI, AI on Thursday

Corporate News

Central Bank of India may recast loans to power utilities

Fortis invests ` 274cr in two Singapore healthcare ventures Mundra project may become an NPA: Tata Power

Reliance Industries to charge US$0.15 marketing margin on CBM gas Source: Economic Times, Business Standard, Business Line, Financial Express, Mint

Results Calendar

06/02/2012HUL, 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

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

09/02/2012 Tata Power Co., BPCL, IDFC, Shriram Trans., JSW Steel , Sun TV Network, Britannia, Aurobindo Pharma

10/02/2012Reliance Capital, Pantaloon Retail, Aurobindo Pharma, Eros International, BPCL, Apollo Hospitals, Britannia,MTNL, SUN TV, Tata Power, RCom




February 6, 2012 7

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

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Market Outlook 6th February 2012

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