Indian stock market and companies daily report (February 14, 2012, Tuesday)

The domestic markets are expected to edge lower following weak opening across most of the Asian markets. With volatile spells, the domestic indices closed modestly higher yesterday. While better-than-expected results from SBI and easing concerns over Greece's debt concerns kept investors in an upbeat mood, profit taking after recent sharp gains capped the upside. Global cues remained mixed. European bourses ended with modest gains. Despite austerity measures approved by the Greek parliament, the concerns seem far from over for Greece, reflecting subdued interest in the markets. US bourses ended on a positive note, tracing developments in Greece.

On the domestic front, the corporate earnings season has fared satisfactorily so far, with no major negative surprises from the index heavyweights. In addition the macro indicators, especially inflation has trended lower in recent times, which has maintained positive vibe within the investors. Markets will closely track the monthly inflation numbers due to be released today. In addition, development across the eurozone will also offer directions to the bourses.

Markets Today

The trend deciding level for the day is 17,763 / 5,388 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17,860 – 17,947 / 5,424 – 5,457 levels. However, if NIFTY trades below 17,763 / 5,388 levels for the first half-an-hour of trade then it may correct up to 17,676 – 17,579 / 5,354 – 5,318 levels.

IRB achieves financial closure for Ahmedabad Vadodara road project

IRB has achieved financial closure for its Ahmedabad Vadodara project by tying up of project finance of Rs.3,300cr. The total cost of this project is Rs.4,880cr, out of which equity contribution by the company will be ~Rs.1,580cr and remaining will be funded through project finance of Rs.3,300cr. Out of this project finance, ~Rs.1,100cr can be drawn as ECB and remaining Rs.2,200cr as Rupee Term Loan. The weighted average blended cost of this project finance is ~10.5% p.a. A Consortium of Lenders comprising of Infrastructure Development Finance Company Ltd (IDFC) - Lead Institution, India Infrastructure Finance Company Ltd (IIFCL), Andhra Bank, Punjab National Bank, Indian Overseas Bank, Bank of India, Union Bank of India and ICICI Bank Ltd have financed this project. With this, the company has achieved financial closure for all the projects awarded to it by NHAI and there is no project pending financial closure. This development is positive for the company as it has not only managed to achieve financial closure within the stipulated time period (management’s guidance February 2012) but also has been successful in bringing down the blended interest cost to ~10.5% p.a. We have arrived at an SOTP-based target price of Rs.182/share, which implies an upside of 7.7%. Hence, we recommend an Accumulate rating on the stock.

IVRCL Group bags orders worth Rs.1,430cr

IVRCL Group has bagged orders aggregating to Rs.1,430cr across various segments. IVRCL Assets and Holdings Ltd., a subsidiary of IVRCL, bagged a road project (151km) connecting Rajasthan border and Haryana worth Rs.1,202cr. The project will be executed as BOT (toll) project and has been awarded by the Government of Haryana. The concession period is 20 years and the construction period is 30 months. For the balance orders, IVRCL's water, transportation and buildings divisions have bagged orders valued at Rs.111.1cr, Rs.71.9cr and Rs.45.1cr, respectively. Owing to the recent run-up (~58% in one month) in the stock price, we recommend Neutral on the stock.

3QFY2012 - Result Reviews

Coal India

Coal India’s 3QFY2012 sales were below our expectations; however, net profit beat our estimates on account of lower-than-expected staff cost and higher-thanexpected other income. Coal India’s 3QFY2012 net sales increased by 21.0% yoy to Rs.15,349cr (below our estimate of Rs.17,664cr) primarily due to higher average realization. Blended average realization on coal sales increased by 21.2% yoy to Rs.1,392/tonne; however, offtake stood flat yoy at 110mn tonnes. Production grew by 1.4% yoy to 115mn tonnes. EBITDA per tonne increased by 40.9% yoy to Rs.442 in 3QFY2012 on account of higher realization. The company’s EBITDA increased by 40.6% yoy to Rs.4,875cr, representing EBITDA margin of 31.8%. Other income grew by 48.4% yoy to Rs.1,856cr on account of higher cash balance and increased treasury yield. The company reported exceptional loss of Rs.5cr in 3QFY2012 and gain of Rs.12cr in 3QFY2011. Adjusted net income grew by 53.5% yoy to Rs.4,043cr (above our estimate of Rs.3,650cr). Considering the company’s 9MFY2012 production of 291mn tonnes, it is unlikely to meet its FY2012 production target of 440mn tonnes in our view. Further, we believe infrastructural bottlenecks are likely to result in modest sales volume growth during FY2012. We maintain our Neutral view on the stock.

State Bank of India

For 3QFY2012, SBI registered a net Profit growth of 15.4% yoy to Rs.3,263cr, which were above street estimates. The bank continued to impress on the net interest income front, registering a growth of 26.7% (up 10.0% qoq) yoy to Rs.11,466cr. The reported global NIMs of the bank improved sequentially by 26bp to 4.05%. The non-interest income of the bank declined by 35.8% yoy to Rs.2,126cr, primarily on account of sale of loss-making investments (Rs.1,090cr) during the quarter. However, the benefit also resulted in write back of provisions of Rs.867cr during 3QFY2012, which led to overall provisions increasing by a relatively smaller 17.3% yoy to Rs.2,407cr. The loan-loss provisioning though was higher at Rs.3,006cr , an increase of 84.2% yoy over Rs.1,632 levels registered in 3QFY2011.

The asset quality continued to disappoint with gross and net NPA levels increasing by 18.1% and 16.6% qoq, respectively. As of 3QFY2012 gross NPA ratio stands at 4.6% (4.2% in 2QFY2012), while net NPA ratio stands at 2.2% (2.0% in 2QFY2012). The provisioning coverage ratio deteriorated by 98 bp during 3QFY2012 to 62.5%. Currently, we have an accumulate rating on the stock with a target price of Rs.2,364.

Sun Pharmaceuticals

For 3QFY2012, Sun Pharmaceuticals posted higher-than-expected results. The company’s net sales and net profit came in at Rs.2,145cr and Rs.668cr, respectively. This translates into growth of 37% yoy and 12% on the top-line and bottom-line fronts, respectively. Net profit growth, however, came in lower than expected on account of forex losses of Rs.86.3cr. Adjusted for the same, net profit growth was much higher than expected. Key highlights of the quarterly numbers were growth in the U.S. business, which grew by 47% yoy. Domestic formulation, on the other hand, grew by 17% yoy. On the operating front, OPM came in at 45% in 3QFY2012 vs. 41.4% in 3QFY2011. We maintain our Neutral recommendation on the stock.

SAIL

SAIL’s 3QFY2012 net sales were below our estimates; however, adjusted PAT came in-line with our estimates. The company’s 3QFY2012 net sales decreased by 4.9% yoy to Rs.10,594cr (below our estimates of Rs.12,239cr) mainly due to lower sales volumes (-19.4% yoy to 2.6mn tonnes), partially offset by increase in realizations (+17.9% yoy to Rs.40,435/tonne). Raw-material cost and other expenditure (surprisingly) decreased by 10.6% and14.0% yoy to Rs.4,736 and Rs.762cr, respectively, while power and fuel cost increased by 27.1% yoy to Rs.1,128cr. EBITDA dipped by 10.3% yoy to Rs.1,581cr and EBITDA margin contracted by 89bp yoy to 14.9% (higher than our estimate of 14.0%). EBITDA/tonne decreased by 1.2% yoy to US$119 during the quarter. The company reported an exceptional item related to forex loss of Rs.466cr in 3QFY2012, compared to exceptional gain of Rs.33cr in 3QFY2011. Hence, PAT decreased by 42.9% yoy to Rs.632cr. However, excluding exceptional items, adjusted PAT grew by 2.2% yoy to Rs.1,098cr (in-line with our estimate of Rs.1,083cr) during 3QFY2012. The stock is under review currently.

Cipla

For 3QFY2012, Cipla posted net sales and net profit of Rs.1,735cr and Rs.269.1cr. While net sales came in higher than expected, net profit was marginally lower than expected. This was mainly on account of lower-than-expected OPM, which expanded by 246bp yoy to 20.2% vs. our expectation of 21.8%. Margin was mainly impacted on the back of 38.8% yoy growth in 3QFY2012. We remain Neutral on the stock.

Motherson Sumi Systems (MSS)

Motherson Sumi Systems (MSS) registered a strong 25% yoy growth in consolidated top line to Rs.2,690cr (adjusted for Peguform acquisition) led by 35.8% yoy growth in SMR revenue. SMR performance during the quarter benefitted from increasing utilization from the new plant at Hungary (US$12mn to the consolidated top-line). Domestic growth (up 1.4% yoy) was however muted due to disruption in production at its major clients, namely, Maruti Suzuki and Honda. During 3QFY2012, MSS consolidated the results of Peguform which reported a top-line of Rs.1,151cr.

On the operating front, consolidated margins declined 479bp yoy to 6.7% largely due to consolidation of Peguform which has lower operating margins compared to the standalone entity and SMR. Operating margins at SMR and standalone level improved sequentially led by improving utilization levels and easing of rawmaterial cost pressures. MSS posted a net loss of Rs.25cr for 3QFY2012 on account of forex loss (Rs.80cr) and various one-time expenses. During 3QFY2012, MSS incurred a Rs.78.9cr one-time cost related to Peguform acquisition and Rs.4.5cr towards goodwill write-off (Vacuform acquisition). We shall revise our numbers and come up with a detailed result note soon. The stock rating is currently under review.

Areva T&D – 4QCY2011 Result Review

Areva T&D India (now Alstom T&D India Ltd) reported its 4QCY2011 numbers. For 4QCY2011, the company reported revenues of Rs.683.3cr with EBITDA margin of 8.3% and PAT of Rs.30.2cr. However, it is pertinent to note that the numbers do not include the results of the Distribution business (de-merged business now operating under Schenider Electric Infrastructure Ltd). Hence, the results are not comparable against our estimates. We await more information and clarity on the de-merged operations post which we will revise our estimates and recommendation for Areva T&D. The stock is temporarily suspended from our coverage.

Amara Raja Batteries

Amara Raja Batteries (AMRJ) posted an impressive 44.1% yoy (9.1% qoq) growth in its top-line to Rs.613cr. The top-line growth was led by strong double digit volume growth in the industrial (telecom and UPS) and automotive (replacement) battery segments. During 3QFY2012, operating margins witnessed a 130bp yoy (165bp qoq) expansion to 17.3% led mainly due to 240bp and 110bp yoy contraction in other expenditure and staff costs. Raw-material cost as a percentage of sales however, increased by 220bp yoy mainly due to increase in lead prices. Led by strong operating performance and significant increase in other income, net profit registered a substantial 66.3% (27.1% qoq) growth to Rs.66cr. Due to strong performance in 3QFY2012, we have revised our earnings estimates upwards for FY2012/13E by 20.6%/19.4% due to upward revision in top-line and operating margins. After the recent run-up in the stock price (~35% in last one month) the stock is trading at 9.7x FY2013E earnings. We recommend Accumulate on the stock with a revised target price of Rs.299.

CESC

During 3QFY2012, CESC reported 10.6% yoy growth in its standalone net sales to Rs.1,019cr, aided by minimal 3.3% yoy increase in volumes to 2,005MUs and 7.1% yoy improvement in realizations. The OPM’s for the company contracted by 589bp yoy to 19.6% impacted by higher power and fuel costs and billing to customers on old tariff, as tariff order for FY2011-12 is still awaited. Further with the new tariff order still pending, the company had charged provisions. However, these provisions could be reversed on obtaining the order. Thus, the company’s bottom-line came in at Rs.74cr, down by 32.7% yoy well below our estimates. We maintain our Accumulate recommendation on the stock with a Target Price of Rs.304.

Punj Lloyd

For 3QFY2012, Punj posted 27.5% yoy top-line growth to Rs.2,701cr. The company’s EBITDA margin for the quarter stood at 0.5% against 4.5% in 3QFY2011. Interest and depreciation came in at 137.2cr and Rs.89.2cr respectively. However, on account of other income of Rs.319.5cr Punj reported profit of Rs.70.3cr against a loss of Rs.62.1cr in 3QFY2011 on the earnings front. Order inflow for Punj Lloyd in 9MFY2012 was Rs.12,364cr against Rs.9,978cr in FY2011 with an order backlog of Rs.28,270cr (3.6x FY2011 revenue). We maintain our Neutral view on the stock.

Madhucon Projects

For 3QFY2012, Madhucon Projects (MPL) reported decent set of numbers, higher than our and street expectations. On the top line front MPL posted stellar performance with yoy growth of 77.5% to Rs.624.9cr, way above our expectations of Rs.436.8cr and consensus estimate of Rs.392.0cr. OPM stood at 8.4% posting a steep dip of 430bps against our expectations of 11.4%. Interest cost stood at Rs.29.8cr a jump of 93.5% on yoy basis but a decline of 6.4% on a sequential basis. On the earnings front, the company posted a decline of 34.5% on yoy basis at Rs.7.5cr against our expectations of Rs.1.8cr (consensus Rs.5.4cr). We maintain Buy on the stock with target price of Rs.77.

3QFY2012 - Result Previews

Tata Motors

Tata Motors (TTMT) will be announcing its 3QFY2012 results today. On a consolidated basis, we expect the company’s top line to grow by a strong 34% yoy to Rs.42,221cr driven by a robust 37% yoy growth in JLR volumes. On the operating front, EBITDA margin is expected to contract by 235bp yoy to 11.8% due to cost pressures and decline in realization because of the Evoque. As a result, the bottom line is expected to grow by a modest 5.6% yoy Rs.2,560cr. The stock rating is under review.

JP Associates

We expect Jaiprakash Associates (JAL) to post modest top-line growth of 12.1% yoy to Rs.3,304cr for the quarter. We expect flat E&C revenue at Rs.1,264cr. On the cement front, we expect JAL to post revenue of Rs.1,543cr – volume of 4.7mt with realization of Rs.3,250/tonne for the quarter. The real estate sector is expected to post top-line growth of 5.0% yoy to Rs.446.8cr.Overall, we expect JAL to post OPM of 21.2%, down 749bpyoy, on account of abysmal OPM of 11.0% expected in the cement segment. The bottom line is expected to come in at Rs.69.5cr, registering a yoy decline of 70.1% for 3QFY2012. We recommend an Accumulate on the stock with an SOTP target price of Rs.88.

IVRCL

For 3QFY2012, we expect IVRCL to post a 3.0% yoy decline in its revenue to Rs.1,374cr. On the EBITDA margin front, we expect a 70bp yoy dip to 9.2%. On the earnings front, we expect a steep decline of 46.5% yoy to Rs.22.6cr, primarily due to higher interest costs for the quarter and a decline in the top line. Owing to the recent run-up (~58% in one month) in the stock price, we recommend Neutral on the stock.

Simplex Infra

For Simplex, we project decent top-line growth of 15.7% yoy to Rs.1,348cr for 3QFY2012. We expect EBITDA margin to remain under pressure at 8.6%, given its exposure to foreign currency loans. Therefore, the bottom line is expected to be under pressure due to increased interest cost (yoy expected jump of ~50.0%), resulting in a yoy decline of around 41.4% to Rs.13.6cr for the quarter. We maintain a Buy on the stock, with a Target Price of Rs.233.

Economic and Political News
- US $ 500bn stashed by Indians in banks abroad: CBI
- US $ 300bn export target is achievable this fiscal: DGFT
- Government to sell stake in ONGC, BHEL to raise Rs.14,500cr in FY2012
- Centre for 6% road tax on cars, two-wheelers

Corporate News
- RBI to meet banks soon on issue of rising bad loans
- HCL Tech bags infra management contract with Statoil
- Muthoot Finance to raise Rs.500-cr via public issue of NCDs
- Oil companies seek compensation for losses on petrol

Online share trading in India, Open demat account with leading stock market Company: Angel Broking Ltd.

Indian stock market and companies daily report (February 10, 2012, Friday)

The domestic markets are expected to open flat to negative tracking negative opening in most of the Asian markets. Indian markets rose on Thursday, with the Nifty index hitting a 27-week high, as optimism that Greek leaders are nearing an agreement on austerity measures, that could secure them a new €130bn bailout from the EU and the IMF, easing some of the concerns about the nation's ongoing going debt crisis.

Globally, U.S. stocks closed in green yesterday mainly on the back of positive news about Greece as well as some upbeat U.S. jobs data. The U.S. Labor Department reported that the initial jobless claims for U.S. fell to 358,000 in the week ended February 4th from the previous week's revised figure of 373,000. Indian investors, meanwhile, would keenly watch out for the domestic industrial production growth (Bloomberg estimate – 2.6%) for the month of December due to be released today. Also, consumer sentiment and trade balance data of the U.S. will be on radar.

Markets Today

The trend deciding level for the day is 17,773 / 5,392 levels. If Nifty trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17,937 – 18,043 / 5,444 – 5,476 levels. However, if Nifty trades below 17,773 / 5,392 levels for the first half-an-hour of trade then it may correct up to 17,667 – 17,503 / 5,360 – 5,307 levels.

3QFY2012 - Result Reviews

Tata Steel

For 3QFY2012, Tata Steel reported net loss on a consolidated basis due to weak performance from its European and Southeast Asian operations. Consolidated net sales increased by 13.8% yoy to Rs.33,103cr, above our estimate of Rs.30,992cr, mainly on account of increased average realizations in rupee terms. Standalone net sales increased by 12.3% yoy to Rs.8,305cr. Consolidated sales volumes stood at 5.8mn tonnes in 3QFY2012 compared to 5.9mn tonnes in 3QFY2011. Average realization/tonne decreased by 3.4% and 0.6% to US$975 and US$1,149 in Tata Steel India and Tata Steel Europe operations, respectively. However, EBITDA/tonne decreased by 7.1% and US$303 in Tata Steel India. EBITDA/tonne of Tata Steel Europe operations stood at US$(1) compared to US$25 in 3QFY2011 on account of higher raw-material costs. India operations EBITDA decreased by 9.5% yoy to Rs.2,553cr. European operations reported EBITDA of US$(147)mn and Southeast Asian operations reported EBITDA of US$(2)mn during the quarter. Consequently, consolidated EBITDA decreased by 49.9% yoy to Rs.1,717cr. Hence, Tata Steel reported net loss of Rs.603cr in 3QFY2012 compared to adjusted PAT of Rs.1,125cr in 3QFY2011. The company’s net debt has increased to US$9.5bn as on December 31, 2011, compared to US$8.5bn as on September 30, 2011. Tata Steel’s Jamshedpur 2.9mn tonnes brownfield expansion project remains on track to be completed during 4QFY2012. We maintain our Buy recommendation on the stock, while we keep our target price under review.

Hindalco

Hindalco’s standalone 3QFY2012 top line was above our estimate, while its bottom line was slightly below our expectation. The company’s net sales increased by 11.4% yoy to Rs.6,590cr (above our estimate of Rs.5,909cr) mainly on account of higher volumes in the aluminium and copper segments. In the aluminium segment, alumina, aluminium, wire rods and flat products production increased by 7.1%, 7.8%, 6.7% and 20.4% yoy to 343k, 146k, 25k and 56k, respectively. In the copper segment, copper cathode and CC rods production grew by 9.4% and 42.3% yoy to 88k and 38k, respectively. However, the aluminium segment’s EBIT decreased by 33.4% yoy to Rs.310cr due to increased input costs (mainly coal and crude derivatives). Nevertheless, the copper segment’s EBIT rose by 51.1% yoy to Rs.216cr due to higher treatment and refining charges and by-product credits. Overall, Hindalco’s EBITDA decreased by 3.3% yoy to Rs.716cr and EBITDA margin slipped by 165bp yoy to 10.9% during 3QFY2012. Interest expenses grew by 53.8% yoy to Rs.79cr and other income grew by 48.6% yoy to Rs.90cr. Consequently, net profit decreased by only 1.9% yoy to Rs.452cr (below our estimate of Rs.480cr). The company reported that all its expansion plans are on track. The stock is under review currently.

Ambuja Cements

During 4QCY2011, Ambuja Cements’ standalone top line increased strongly by 30.2% yoy to Rs.2,329cr on account of 17.5% yoy improvement in realization to Rs.4,197/tonne and a 10.8% yoy increase in volumes to 5.55mn tonnes. OPM declined by 60bp yoy to 19.1% on account of higher raw-material costs, power and fuel costs and freight costs. On the bottom-line front, net profit for the quarter rose by 17% yoy to Rs.302cr, aided by better operating performance, 72.2% yoy growth in other income to Rs.65cr and 53% saving in interest expense to Rs.10cr. Reported net profit was lower by Rs.33cr on account of an exceptional item relating to change in accounting method for stock options, adjusting for which net profit would have grown by 30% yoy. We continue to remain Neutral on the stock.

ACC

ACC posted 27.8% yoy growth in its standalone net sales to Rs.2,503cr on account of 17.8% growth in sales volumes and 20.3% higher realization. The company’s sales volumes for the quarter stood at 5.95mn tonnes, up 6.3% yoy, on account of higher capacity (on a yoy basis) operational at Wadi and Chanda during the quarter. Further, realization stood higher by 20.3% yoy to Rs.4,206/tonne. Despite the substantial yoy improvement in realization, OPM rose only marginally by 100bp due to the surge in operating costs. The company’s net profit rose by 83.8% yoy to Rs.470cr. The company’s profit was boosted by tax credit of Rs.228cr during the quarter (vs. 82cr in 4QCY2010), adjusted for which profit would have been at Rs.242cr higher by 39.3% yoy. We remain Neutral on the stock.

Apollo Tyres

Apollo Tyres (APTY) registered robust results for 3QFY2012 with consolidated top line posting better-than-expected 36.3% yoy (12.4% qoq) growth to Rs.3,228cr, aided by an 18.2% yoy (8.3% qoq) jump in volumes and 15.3% yoy (3.8% qoq) increase in net average realization. Domestic, Europe and South Africa revenue grew strongly by 46.2%, 26.3% and 27.9% yoy, respectively. Operating margin expanded by 202bp qoq to 10%, mainly due to 100bp savings on the raw-material front. As a result, adjusted net profit grew by 63.8% qoq to Rs.127cr. However, on a yoy basis, adjusted net profit reported modest 5.8% yoy growth, largely due to contraction in operating margin and higher interest expense (up 38.2% to Rs.73cr). During the quarter, APTY made a provision of Rs.29cr in relation to a penalty following settlement agreement with South Africa Competition Commission for the company’s operations in South Africa. At Rs.76, the stock is trading at 6.8x its FY2013E earnings. We retain our Buy recommendation on the stock; however, the target price is under review. We shall release a detailed result note soon.

MRF – 1QSY2012

MRF reported top-line growth of 32.7% yoy to Rs.3,138cr in 1QSY2012 from Rs.2,367cr in 1QSY2011. The company’s EBITDA margin came in at 9.0%, 174bp higher on a qoq basis, on account of a decrease in overall expenses as a percentage of sales. On the profitability front, MRF reported an increase of 9.7% yoy, from Rs.103cr to Rs.113cr. We maintain our Buy recommendation on the stock with a target price at Rs.9,647, based on a target PE of 8x its SY2013E earnings.

Page Industries

Page Industries announced its 3QFY2012 numbers. The company’s net sales increased by 28.4% yoy to Rs.172cr (Rs.134cr). EBITDA improved only by 6.3% yoy to Rs.30cr (Rs.28cr), despite higher revenue growth due to margin compression. EBITDA margin declined by 356bp yoy to 17.2% (20.7%), mainly due to higher raw-material cost, which increased to 51.2% of net sales in 3QFY2012 vs. 48.3% of net sales in 3QFY2011. Despite lower growth in EBITDA, PAT increased by 27.6% yoy to Rs.20cr (Rs.16cr), in-line with top-line growth on the back of higher other income, which increased by 78.2% to Rs.4cr and lower tax rate, which came in at 31.5% in 3QFY2012 vs. 41.6% in 3QFY2011. PAT margin declined marginally by 7bp yoy to 11.6%. We will be coming out with a detailed report post management interaction. We continue to maintain our Neutral recommendation on the stock.

FAG Bearings - 4QCY2011

FAG Bearings (FAG) registered a strong performance in 4QCY2011, with betterthan- expected net sales growth of 31.4% yoy (4.8% qoq) to Rs.350cr against our expectation of Rs.310cr. EBITDA margin contracted by 150bp yoy (170bp qoq) to 18.1% mainly due to higher raw-material expenses. Raw-material cost increased primarily on the trading part of the business, which we believe could be due to the depreciation of INR against the Euro. Purchase of traded goods as a percentage of sales jumped substantially by 480bp yoy during the quarter. However, 380bp yoy savings in other expenditure arrested further fall in margins. Led by strong top-line performance net profit posted better-than-expected 27.3% yoy growth to Rs.43cr. We expect the company to sustain its strong performance going ahead, led by likely easing of interest rates from 1QFY2013, which is expected to revive demand in the automotive and industrial segment. We maintain our Buy view on the stock; however, our target price is under review.

Anant Raj

Anant Raj Industries announced its 3QFY2012 numbers. Net sales declined by 25.9% yoy to Rs.92cr (Rs.124cr), well below our estimate. EBITDA declined by 36.5% yoy to Rs.49cr (Rs.77cr) due to lower revenue and margin compression. EBITDA margin declined by 888bp yoy to 53.2% (62.1%). Adjusted PAT declined by 37.3% yoy to Rs.31cr (Rs.50cr) and PAT margin declined by 622bp yoy to 31.5% (50.3%), almost in-line with EBITDA margin contraction. We will be coming out with a detailed report post management interaction. We have an Accumulate rating on the stock with a target price of Rs.78.

HAIL – 4QCY2011

Honeywell announced its 4QCY2011 numbers. The top line grew by 21% qoq to Rs.503cr in 4QCY2011 from Rs.412cr in 4QCY2010. Annual sales for CY2011 stood at Rs.1619, 19% higher from CY2010. The company's margin came in at 9.1%, 259bp higher on a qoq basis, on account of a decrease in raw-material and employee cost as percentage of sales. Net profit for the quarter rose by 31.5% yoy, from Rs.25.7cr to Rs.33.9cr. Annual net profit stood at Rs.107cr, 6.7% higher yoy. We maintain our Buy recommendation on the stock; our target price is under review.

Dishman Pharmaceutical

For 3QFY2012, Dishman Pharmaceutical posted net sales of Rs.265.5cr, registering 14.5% yoy growth. The company’s growth was driven by the MM segment, which reported 30.9% yoy growth. The CRAMS segment reported 6.9% yoy growth. The company’s OPM came in at 15.9%; however, adjusted for forex losses, it stood at 20.1%. The company reported higher tax expenses during the quarter. Consequently, net profit came in at Rs.16.7cr, lower than our expectation of Rs.19.8cr. However, given the traction in growth and improving profitability, we maintain our Buy rating on the stock; the target price is under review.

JK Tyre

JK Tyre (JKI) reported dismal set of results for 3QFY2012, posting net loss on the bottom-line front, led by higher interest expense and forex loss of Rs.38cr. For 3QFY2012, net sales grew strongly by 20.7% yoy (10.4% qoq) to Rs.1,423cr. Operating performance bounced back sequentially with EBITDA margin expanding by 297bp to 5.1%, driven by raw-material cost savings (100bp qoq) and decline in other expenditure (200bp qoq). JKI, however, posted net loss of Rs.21cr on account of an 87.8% yoy increase in interest expense to Rs.45cr and forex loss of Rs.38cr. The stock rating is currently under review.

3QFY2012 - Result Previews

DLF

DLF is expected to announce its 3QFY2012 results. We expect the company’s net sales to increase by 9.6% yoy to Rs.2,719cr. EBITDA margin is expected to contract by 377bp yoy to 43.7% on account of higher input costs. Net profit is expected to decline by 11.1% yoy to Rs.414cr. We maintain our Neutral rating on the stock.

RCom

Reliance Communication (RCom) is slated to announce its 3QFY2012 results. We expect the company to record revenue of Rs.4,968cr, up 3.7% qoq. Growth is expected primarily on the back of qoq flat ARPM at Rs.0.45/min and 1.0% qoq growth in MOU to 229min. EBITDA margin is expected to increase by 83bp qoq to 29.1%. PAT for the quarter is expected to come in at Rs.144cr. We maintain our Neutral view on the stock.

Britannia

Britannia is expected to announce its 3QFY2012 results. For the quarter, we expect Britannia to report healthy 18% yoy growth in revenue to Rs.1,271 due to improvement in sales mix. For the quarter, we expect the company to report an 11bp yoy margin improvement. Earnings for the quarter is expected to grow by 20% yoy to Rs.45cr on the back of healthy top-line growth. At the CMP, the stock is trading at 21.7 x F2013E EPS of Rs.22.5. We recommend Neutral on the stock.

Aurobindo Pharma

For 3QFY2012, Aurobindo Pharma is expected to post net sales of Rs.1,295cr, registering 20.8% yoy growth. The company is expected to post OPM of 12.1%, reporting a dip of 652bp yoy. Net profit is expected to come in at Rs.98.5cr, down 49% yoy. At the CMP, the stock is trading at 8.4x FY2013. We continue to maintain our Buy recommendation on the stock with a target price of Rs.166.

CCCL

Consolidated Construction Consortium (CCCL) is expected to post modest 8.0% yoy growth in its top line to Rs.535.9cr, given the slow-moving infra orders forming ~40% of its total order book. On the EBITDA front, we expect the company to continue to report a dismal performance and register a dip of 654bp yoy to 3.2%, in-line with management's guidance. Against this backdrop, the bottom line is expected to post loss of Rs.5.2cr in 3QFY2012 vs. profit of Rs.16.7cr in 3QFY2011. We continue to maintain our Neutral view on the stock.

Economic and Political News
- Current account deficit seen widening as exports struggle
- Government nods for JVs by defense PSUs
- Exports up 10.1%; Imports jump by 20.3% in January 2012

Corporate News
- Additional tax on diesel cars will further impede industry growth: M&M
- CEAT to set up Rs.250cr plant in Bangladesh
- Tata Global, PepsiCo JV eyes Rs.700cr turnover in the next five years
- Tulip Telecom CEO Sanjay Jain quits
- Unity Infraprojects bags orders worth Rs.485cr

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Indian stock market and companies daily report (January 30, 2012, Monday)

The markets are expected to open weak following negative cues from the Asian markets. US Stocks turned in a relatively lackluster performance on Friday as GDP growth came in at 2.8%, below investor’s expectations. Also Economists were disappointed that much of the GDP growth in the fourth quarter was due to a positive contribution from private inventory investment. The U.S. consumer sentiment result which was also released on Friday was better than expected, but failed to lighten the session's negative mood.
Meanwhile Indian markets closed higher on Friday as investors pinned their hopes on the government unveiling a raft of investor-friendly policies in the upcoming budget. Also, weekly food inflation remained in the negative zone for the fourth consecutive week, reinforcing expectations of lower interest rates in the months to come.

Markets Today
The trend deciding level for the day is 17,200/5,195 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17,293 – 17,352/5,227– 5,249 levels. However, if NIFTY trades below 17,200/5,195 levels for the first half-an-hour of trade then it may correct up to 17,141 – 17,047/5,172 – 5,140 levels.

ITNL emerges as the lowest bidder for road BOT project worth Rs.1,818cr
IL&FS Transportation Networks Ltd. (ITNL) has emerged as the lowest bidder for four laning of Kiratpur to Ner-Chowk project worth Rs.1,818cr. This BOT project in Himachal Pradesh would be executed on DBFOT basis under Phase III. The project is on toll basis with a concession period of 28 years and construction period of three years. Further, NHAI would provide a grant of Rs.134.6cr to ITNL. This is positive for the company, as ITNL had not won any project in FY2012 owing to the aggressive bidding witnessed in the road sector. Considering the sharp run up in the share price (~39% in one month), we recommend Accumulate on the stock with an SOTP target price of Rs.227.

3QFY2012 - Result Reviews
NTPC
NTPC’s stand-alone top-line rose by 14.2% yoy to Rs.15,332cr aided by higher operational capacity. On a stand-alone basis, the company’s capacity was higher by 2,820MW on a yoy basis during the quarter. However, the OPM’s declined by 812bp yoy to 18.6% impacted by higher fuel costs. The depreciation and interest costs too rose by 26.3% yoy and 38.5% yoy respectively during the quarter. The company’s bottom-line was down by 10.2% yoy to 2,130cr. We recommend an Accumulate on the stock with a Target Price of Rs.199.
BHEL
BHEL’s 3QFY2012 results were broadly in-line with our and street estimates. The top line grew by 19.1% yoy to Rs.10,743cr (Rs.9,023cr), lower by 1.2% than our (above street) expectation of Rs.10,873cr. Growth was largely driven by the power segment, which posted robust growth of 58.3% yoy to Rs.8,711cr (Rs.5,502cr). The strong growth was offset by the industry segment, which posted an unexpected decline of 37.3% yoy to Rs.2,367cr (Rs.3,778cr).
On the operating front, the industry segment witnessed phenomenal EBITM expansion of more than 2,000bp yoy to 31.6% mainly due to execution of high rating orders (embedded with high margins). On the other hand, the powersegment’s EBITM came off sharply by ~1200bp yoy mainly due to higher rawmaterial costs and other expenses. On an absolute basis, EBITDAM contracted by   360bp to19.4% (23.0%), in-line with our estimate of 20.0%. Depreciation cost increased by 29.1% yoy to Rs.186.8cr (Rs.144.7cr) partially offset by other income, which came in at Rs.196cr.
Led by the margin dip, PAT growth was subdued at 2.0% yoy to Rs.1,432cr (Rs.1,403cr), 2.2% lower than our (below street) estimate of Rs.1,465cr. On the order book front, orders worth Rs.5,800cr were cancelled during the quarter and order intake remained dismal (no clarity over total inflow during the quarter), thus making 9MFY2012 order inflow tally at mere Rs.15,273cr. Order backlog of the company stood at Rs.1,45,541cr, a sequential decline of 9.0%. Earnings commentary by the management appeared passive mainly due to concerns outlined in the power sector (such as deepening fuel crisis and environmental clearances). Unlike the previous quarters, management refrained to offer any guidance on revenue as well order inflows, which raises a predicament over the company’s performance estimates for the coming quarters.
The business outlook is also soured given 1) delay in order finalizations amid concerns in the power sector; 2) weak investment capex due to high interest rate regime, which could take more time to gather momentum than earlier predicted; and 3) changing dynamics in the BTG space (read sector related). Given this, the attractive valuation of 9.5x FY2012E EPS and 10.5x FY2013E EPS is largely overshadowed. Given the long-term structural concerns, we remain Neutral on the stock. We will shortly come out with a detailed result update.
Canara Bank
For 3QFY2012, Canara Bank posted a poor set of results, with net profit declining by 20.8% yoy to Rs.876cr. Net-interest income of the bank declined by 9.6% yoy to Rs.1,919cr, as high prevailing interest rates led to higher cost of funds. However, non-interest income registered robust growth of 45.2% yoy to Rs.779cr, leading to operating income growing by muted 1.6% yoy. Although operating expenses declined by 1.9% yoy to Rs.1,121cr, provisioning expenses more than doubled to Rs.501cr, leading to a decline of 20.8% yoy in net profit. The bank’s asset quality deteriorated during 3QFY2012, with both gross and net NPA levels rising by 5.4% and 4.8% sequentially, respectively. As of 3QFY2012 gross NPA ratio stands at 1.8% (1.7% in 2QFY2012), while net NPA ratio stands at 1.5% (1.4% in 2QFY2012).
At the CMP the stock is trading at 1.0x FY2013 ABV. We recommend a Neutral rating on the stock.
Bank of India
For 3QFY2012, Bank of India registered a moderate set of results, with net profit growing by 9.6% yoy to Rs.716cr. On the operating front, the bank’s performance was mostly muted (up 4.1% yoy); however, a 4.7% yoy decline in operating expenses led to pre-provisioning profit growing by 24.7% yoy to Rs.1,732cr. Higher provisioning expenses (up 39.2% yoy) negatively impacted profitability, leading to lower 9.6% yoy growth in net profit to Rs.716cr.
The bank’s asset quality improved during 3QFY2012, with gross and net NPA levels declining by 2.5% and 3.6% sequentially, respectively. As of 3QFY2012, gross NPA ratio stood at 2.7% (3.0% in 2QFY2012), while net NPA ratio stood at 1.8% (2.0% in 2QFY2012). Provisioning coverage ratio continued to remain low at 60.1% (59.1% in 2QFY2012).
At the CMP, the stock is trading at 1.1x compared to its historical range of 1.05-1.55x, with a median of 1.25x. We recommend Neutral on the stock.
Bhushan Steel
Bhushan Steel reported its 3QFY2012 results. The company's net sales grew by 23.9% yoy to Rs.2,407cr on account of increased realizations and sales volumes. EBITDA grew by 34.7% yoy to Rs.724cr on account of higher net sales. EBITDA margin expanded by 241bp yoy to 30.1%. During the quarter, interest expense grew by 124.6% yoy to Rs.229cr and depreciation expense grew by 165.8% yoy to Rs.152cr, as the company had capitalized its phase II expansion during FY2012. Hence, profit after tax decreased by 1.3% yoy to Rs.277cr. We maintain our Reduce rating on the stock; however, we keep our target price under review.
Indian Overseas Bank
For 3QFY2012, Indian Overseas Bank registered a poor set of results, with net profit declining by 53.3% yoy to Rs.108cr. On the operating front, the bank’s performance was moderate (up 8.1% yoy) as high prevailing interest rates led to higher cost of funds. Non-interest income of the bank increased by 17.0% yoy to Rs.411cr, leading to operating income growth of 10.2% yoy. High operating expenses, which rose by 19.6% yoy, and higher provisioning expenses (up 86.3% yoy) led to net profit declining by 53.3% yoy to Rs.108cr.
The bank’s asset quality remained under stress during 3QFY2012 as well. As of 3QFY2012, gross NPA ratio stood at 3.0%, while net NPA ratio stood at 1.2%. Provisioning coverage ratio continued to remain moderate at 71.7%. At the CMP, the stock is trading at 0.6x FY2013 ABV. We maintain our Neutral stance on the stock.
Blue Star
Blue Star announced its 3QFY2012 numbers. The company’s net sales declined by 3.9% yoy to Rs.590cr (Rs.613cr). The electromechanical projects and packaged air-conditioning systems (EMPPACS) segment registered a 15.3% yoy decline to Rs.368cr (Rs.434cr), while the cooling product and professional electronic and industrial systems (PEIS) segments registered strong yoy growth of 28.1% and 16.0% to Rs.164cr and Rs.52cr, respectively. EBITDA came in at negative Rs.3cr in 3QFY2012 vs. positive Rs.47cr in 3QFY2011. EBITDA margin declined by 824bp yoy to negative 0.5%, mainly due to increased raw-material cost and other expenditure. Consequently, PAT came in at negative Rs.33cr. The company witnessed Rs.14cr of forex loss during the quarter. We will be coming out with a detailed report. We continue to maintain our Neutral rating on the stock.
Union Bank of India
For 3QFY2012, Union Bank of India posted a disappointing set of numbers, which were far below our as well as streets estimates, primarily due to higherthan- expected provisioning expenses. While NIMs improved by 10bp qoq and gross and net NPAs were largely stable on a sequential basis, substantially higher provisioning expenses dented the overall bottom line. Consequently, net profit took a hit and declined by 66% yoy and 44.1% qoq to Rs.197cr.
The bank’s advances and deposits growth picked up after a sluggish movement in 1HFY2012. Advances registered healthy growth of 6.1% qoq (16.8% yoy) and deposits increased by 5% qoq (10% yoy). CASA deposits of the bank registered healthy growth of 6.5% qoq (moderate 7.6% yoy), leading to a 45bp qoq increase in CASA ratio to 32.5%. Reported NIM of the bank improved by 10bp qoq to 3.3%. Cost-to-income ratio rose further to 45.9% in 3QFY2012 from 44.3% in 2QFY2012 and 40.2% in 3QFY2011. On the asset-quality front, pressures moderated considerably, with slippages declining to Rs.566cr from the average of Rs.940cr over the past four quarters. Gross and net NPAs on an absolute basis were largely stable sequentially. Gross and net NPA ratios improved on a sequential basis, from 3.5% to 3.3% and from 2.0% to 1.9%, respectively. Provision coverage ratio including technical write-offs improved from 60.5% in 2QFY2012 to 63.1% in 3QFY2012.
At the CMP, the stock is trading at 0.9x FY2013E P/ABV. We recommend a Neutral view on the stock.
Jyoti Structures
Jyoti Structures (JSL) announced its 3QFY2012 results, which were lower than our and street estimates. The top line posted modest growth of 6.5% yoy to Rs.587.2cr (Rs.551.3cr), lower by 10.0% from our estimate of Rs.652.7cr. On the EBITDA front, margin compressed by ~130bp yoy to 10.1%, which was along expected lines (est. 10.5%). The margin dip was primarily due to higher sub-contracting expenses, which shot up by ~880bp yoy to 28.3%, as a proportion to sales. Profitability was further impacted by high interest expenses, which soared by  46.5% yoy to Rs.34.7cr. This resulted into PAT plunging by 44.1% yoy to Rs.13.8cr (Rs.24.7cr) against our (below street) estimates of Rs.20.8cr.
At CMP, the stock trades cheaply at 3.5x and 4.1x, FY2012E and FY2013E, EPS respectively. The pessimism, viz. high interest expenses, low profitability and elongated working capital cycle, has clearly factored in the stock’s performance. We would like to get more insights from the earnings conference call, post which we will revise our estimates and recommendation. Meanwhile, we maintain our Buy recommendation on the stock with a target price of Rs.61.
Tata Sponge Iron Ltd.
For 3QFY2012, TSIL’s reported a 23.3% yoy decline in its revenue to Rs.131cr, as compared to Rs.170cr in 2QFY2011. The company’s EBITDA margin came in at 18.8%, lower by 167bp yoy, from 20.5% in 3QFY2011 due to increased employee expenses as a percentage of net sales from 2.9% in 3QFY2011 to 4% in 3QFY2012. Profit for the quarter stood at Rs.17cr as compared to Rs.22cr in 3QFY2011. We expect ramp up in sponge iron volume sales in FY2013E, which would lead to improvement in the top line. Hence, we maintain our Buy recommendation on the stock with a target price of Rs.382, based on a target P/B of 0.9x for FY2013E.
Hitachi Home & Life Solutions
For 3QFY2012, Hitachi Home & Life Solutions (HHLS) reported a 13% yoy decline in its revenue to Rs.107cr from Rs.124cr in 3QFY2011. Increased expenses for the quarter led to negative operating profit of Rs.5cr. The company reported a higher forex loss of Rs.3.7cr on ECB during the quarter as compared to Rs.1.2cr during 3QFY2011. Operating loss and increased depreciation and interest cost led to loss of Rs.10cr as compared to profit of Rs.1.7cr in 3QFY2011.
We expect the company’s sales volume to register a CAGR of 14.1% over FY2011-13E, which would lead to its profit increasing to Rs.30cr in FY2013E from Rs.29cr in FY2011. At the CMP of Rs.113, the stock is trading at attractive valuations with PE of 8.3x FY2013E earnings.
We maintain our Buy rating on the stock with a target price of Rs.157, based on target PE of 12x for FY2013E.

3QFY2012 Result Previews
NMDC
NMDC is slated to announce its 3QFY2012 results. We expect the company’s top line to grow by 4.7% yoy to Rs.2,745cr on account of increased sales volumes as well as realization. On the operating front, EBITDA margin is expected to improve by 58bp yoy to 77.5%. The bottom line is expected to grow by 15.7% yoy to Rs.1,757cr. We maintain our Buy rating on the stock with a target price of Rs.231.
Oriental Bank of Commerce
Oriental Bank of Commerce is scheduled to announce its 3QFY2012 results. Net interest income is expected decline by 1.4% yoy (up 2.6% qoq). Non-interest income is expected to increase by 25.7% yoy (up 4.9% qoq) to Rs.291cr. Consequently, operating income is expected to increase by 3.6% yoy to Rs.1,307cr. Operating expenses are expected to increase by 10.6% yoy to Rs.539cr, leading to pre-provisioning profit declining by 0.8% yoy to Rs.768cr. Provisioning expenses are expected to increase substantially by 67.5% yoy to Rs.321cr. Consequently, net profit is expected to decline by 26.1% yoy (up 79.9% qoq) to Rs.302cr. At the CMP, the stock is trading at valuations of 0.7x FY2013E ABV. We recommend Neutral on the stock.
Indian Bank
Indian Bank is scheduled to announce its 3QFY2012 results. Net interest income is expected to grow moderately by 11.5% yoy (up 1.9% qoq) to Rs.1,157cr. Non-interest income is expected to increase by 20.6% yoy (decline of 12.4% qoq) to Rs.300cr. Consequently, operating income is expected to increase by 13.3% yoy to Rs.1,457cr. Operating expenses are expected to increase by 15.4% yoy to Rs.548cr, leading to pre-provisioning profit growing by 12.0% yoy to Rs.909cr. Provisioning expenses are expected to increase three-fold on a yoy basis to Rs.231cr (up 5.0% qoq). Consequently, net profit is expected to decline by 6.8% yoy (down 2.3% qoq) to Rs.458cr.
At the CMP, the stock is trading at valuations of 0.9x FY2013E ABV. We recommend Neutral on the stock.
Allahabad Bank
Allahabad Bank is scheduled to announce its 3QFY2012 results. Net interest income is expected to grow by healthy 29.3% yoy (up 3.1% qoq) to Rs.1,360cr. Non-interest income is expected to increase by 32.2% yoy (up 10.2% qoq) to Rs.341cr. Pperating expenses are expected to increase by 28.1% yoy to Rs.667cr, leading to pre-provisioning profit growing by 31.0% yoy to Rs.1,033cr. Provisioning expenses are expected to go up substantially by 56.1% yoy (decline of 10.6% qoq) to Rs.368cr. Consequently, net profit is expected to increase by lower 8.7% yoy (decline of 7.5% qoq) to Rs.452cr.
At the CMP, the stock is trading at valuations of 0.7x FY2013E ABV. We remain Neutral on the stock.
Sadbhav Engineering
We expect Sadbhav Engineering (SEL) to post robust 50.0% growth to Rs.714.3cr on the top-line front, owing to pick-up in the execution of captive road BOT projects. EBITDA margin is expected to witness a marginal fall of 40bp yoy to 10.7% for the quarter. On the earnings front, the company is expected to post healthy growth of 47.3% yoy to Rs.38.9cr, owing to strong performance at the revenue level.
At current levels, the stock is trading at valuations of 14.4x FY2013E earnings and 2.0x FY2013E P/BV on standalone basis. Based on a target P/E multiple of 9x and valuing the company’s BOT arm on DCF basis, our SOTP based target price works out to Rs.150. Hence, we maintain our Buy view on the stock.

Economic and Political News
- Fitch assigns 'stable outlook' to fertilizer in 2012
- Oil Ministry demands extra duty of Rs.80,000 on diesel vehicles
- Credit off-take up 17.1% as of mid-January

Corporate News
- Coal India plans to revise coal pricing from February 2011
- Network 18 Media plans rights issue of up to Rs.2,700cr
- Anti-coagulant injection issue resolved with USFDA: Dr. Reddy's

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