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

Open Demat Account in leading stock market company in India for Online Share Trading

Indian stock market and companies daily report (January 05, 2012, Thursday)

Indian markets are expected to open lower following negative cues from the European markets and the Asian markets. Asian stocks are trading in the red after Italy’s biggest bank said it needs to raise more capital, spurring concern that the European debt crisis is worsening.

Indian shares ended a choppy session modestly lower on Wednesday, with key benchmarks indices losing less than half a percent each, as investors took some profits after a two-day rally.

European shares snapped a four-day streak of gains on Wednesday as UniCredit SpA’s plan to sell shares fueled concern that banks need to raise capital to weather the debt crisis. US market traded lower in the first half due to profit taking, with some traders cashing in on Tuesday's strong gains amid lingering concerns about the European debt crisis and the outlook for the global economy. The downward momentum was partly offset by the release of a report from the Commerce Department showing a rebound in new orders for U.S. manufactured goods, leading to US markets ending marginally in the green.

Markets Today

The trend deciding level for the day is 15,903/4,754 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 15,984 - 16,086/4,779 - 4,808 levels. However, if NIFTY trades below 15,903/4,754 levels for the first half-an-hour of trade then it may correct up to 15,802 - 15,721/4,725 - 4,700 levels.

Cement Dispatches – December 2011

UltraTech reported cement dispatches for December 2011, which were up by strong 10.6% yoy to 3.62mn tonnes. However, for 3QFY2012, growth in dispatches has been modest at 5.9%. In December 2011, the company managed to post better growth in dispatches compared to Ambuja Cements' growth, which reported modest growth of 5.7% yoy. We continue to remain Neutral on UltraTech.

KEC International secures orders worth Rs.1,253cr

KEC International (KEC) has bagged orders totaling Rs.1,253cr across various business verticals. In the transmission and distribution space (T&D), the company secured orders worth Rs.976cr. Order intake in MENA region stood at Rs.414cr (Rs.310cr and Rs.104cr worth of orders from Saudi Arabia and Afghanistan, respectively). SAE Towers secured orders worth Rs.154cr. In addition, Rs.350cr worth of orders came from the U.S., Kenya and Philippines. Notably, only one order came from the domestic T&D space (Rs.59cr), thus demonstrating the company’s globally diversified strength. The completion time of all these orders ranges from 12-27 months. In addition to the above, the company bagged orders in the business verticals of water (Rs.123cr), cables (Rs.105cr) and telecom (Rs.49cr). The current order book of the company stands at Rs.9,000cr.

KEC’s globally diversified model has enabled it to gain an edge over its domestic peers in the T&D space. While domestic players have struggled to secure orders amid the slowdown, KEC has consistently maintained its average quarterly run rate of Rs.1,200 since the past several quarters. In addition, new businesses of water, railway and telecom are faring well (pace of new orders is gradually increasing). Hence, given the latent potential of the company and healthy return ratios (25%), the valuations of 4.3x FY2013E EPS (well below its historic PE multiple average of 14.0x) are compelling. We recommend Buy with a target price of Rs.45.

Economic and Political News
- Government defers decision on PSU disinvestment via buyback-
- Finance Ministry rules out floating rates in postal savings
- Global food prices expected to remain high: FAO

Corporate News
- ONGC finds four more potential reserves
- Bosch to invest Rs.3,000cr in India on expanding capacity
- Hero MotoCorp unveils three new products at Auto Expo, New Delhi
- TCS adds 200 clients on its SME platform iON
- Dhanlaxmi Bank raises NRE term deposit rates

Open demat account with leading stock trading company in India: Angel Broking ltd.

Indian stock market and companies daily report (January 04, 2012, Wednesday)

Indian markets are expected to open in the green following positive cues from the European markets and the Asian markets. Asian stocks trading in the green after U.S. manufacturing increased at the fastest pace in six months. Indian shares rallied on Tuesday as inflation worries seem to be abating and the Reserve Bank of India said it might ease monetary policy to address concerns about economic growth.
The US markets ended in the green as markets benefited from positive reactions to the latest batch of economic data. The early rally on Wall Street was partly due to the release of a report showing a modest rebound in Chinese manufacturing activity in the month of December. A separate report showing a notable drop in German unemployment also generated some buying interest. Stocks saw continued strength following the release of a report from the Institute for Supply Management showing that its index of activity in the U.S. manufacturing sector rose to a six-month high in December.

Markets Today
The trend deciding level for the day is 15,850/4,738 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 16,060 – 16,180/4,800– 4,835 levels. However, if NIFTY trades below 15,850/4,738 levels for the first half-an-hour of trade then it may correct up to 15,730 – 15,520/4,703 – 4,641 levels.

Cement Dispatches – December 2011
Ambuja Cements’ dispatches stood at 1.93mn tonnes for December 2011, up by modest 5.7% yoy on a high base of last year. For CY2011, the company’s dispatches grew marginally by 4.2% to 20.96mn tonnes. During CY2010, the company added 2mtpa of capacity, post which its overall capacity stands at 27mtpa. We continue to remain Neutral on Ambuja Cements.

Reliance Industries gets nod to develop new D6 fields
The government has approved Reliance Industries' US$1.5bn plan to develop the new D6 block, which has the potential to produce additional 10mmscmd gas. RIL and, its partner, BP have four months to start work on the project as the KG D6 block faces adverse weather during the rest of the year. Until further clarity on the anticipated production from the block, we maintain our estimates and maintain our Buy rating on the stock with a target price of Rs.1,006.

HCC bags order worth Rs.289cr
Hindustan Construction Company (HCC) has received a Letter of Acceptance (LOA) for a Rs.289cr contract to construct a bulk water transmission system for  Gujarat Water Infrastructure Limited, a Government of Gujarat Undertaking. The work involves construction of a 57km-long water transmission pipeline between Dhanki and Maliya villages under the Swarnim Gujarat Saurashtra-Kutch, Water Grid Programme. The project will be completed in 12 months. With this order, HCC’s outstanding order book now stands at ~Rs.16,967cr (4.1x FY2011 revenue). We maintain our Neutral view on the stock.

Economic and Political News
- DoT to demand Rs.1,593cr from companies for under-reporting revenue
- Government may okay Rs.300cr for marketing support to MSMEs
- Union Budget to be presented on March 16, 2012
- Companies Bill may be cleared in Budget session: Law Minister

Corporate News
- RIL to fund Network 18’s Eenandu stake buy
- IDFC to raise upto Rs.4,500cr via infra bonds
- Bajaj Auto unveils its first-ever four-wheeler, RE60, in New Delhi
- Suzlon Energy bags order to supply 57 wind turbines in the U.S.

Open demat account with leading stock trading company in India: AngelBroking Ltd.

Indian stock market and companies daily report (January 03, 2012, Tuesday)

Indian markets are expected to open in the green following positive cues from the European markets and the Asian markets. Asian stocks rose as manufacturing growth from Australia, China and India added to optimism that the region’s economies will withstand Europe’s unresolved sovereign debt crisis. Indian shares ended a choppy session modestly higher on Monday after the government said it would allow qualified foreign investors direct access to Indian stock markets from January 15. While the manufacturing PMI for India jumped to a six month high of 54.2, cheering investors, slowdown in exports to 3.9% yoy for the month of November restricted major upside movement in domestic equities. European stocks though kicked off the New Year in style on Monday, as the markets open for business rallied on hopes that 2012 will bring an end to the region's sovereign debt crisis. Also, German factory sector contracted less than initially estimated in December which led to further gains for European markets on Monday.

Markets Today

The trend deciding level for the day is 15,473/4,624 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 15,588 – 15,658/4,659 – 4,681 levels. However, if NIFTY trades below 15,473/4,624 levels for the first half-an-hour of trade then it may correct up to 15,403 – 15,288/4,601 – 4,566 levels.

Auto sales update – December 2011

Maruti Suzuki (MSIL)

MSIL registered a 7.1% yoy (flat mom) decline in overall volumes to 92,161 units, led by weak performance in domestic markets. Domestic performance during the month witnessed a 13.4% yoy (6.5% mom) decline to 77,475 units, primarily due to subdued demand for passenger cars. Export volumes, however, overshadowed the weak domestic performance, as it recorded impressive 50.5% yoy (65% mom) growth to 14,686 units. The mini segment registered a decline of 15.6% yoy (flat mom), while the compact segment posted flat yoy (6.8% mom) growth. Production during the month was impacted, as the company’s plants were shut for six days in December on account of annual maintenance.

Hero MotoCorp (HMCL)

HMCL reported in-line growth of 7.8% yoy (0.7% mom) in total volumes to 540,276 units. New product launches and refreshed product ranges continued to support HMCL’s volume momentum across product segments. Management has indicated that it further intends to consolidate the company’s leadership position with new product launches and network expansion.

Bajaj Auto (BJAUT)

BJAUT posted lower-than-expected volumes for December 2011, led by moderate growth in the motorcycle segment. Total volumes recorded modest growth of 10.4% yoy (18.4% mom decline) to 305,690 units, primarily due to weak 8.2% yoy (substantial fall of 20.6% mom) growth in the motorcycle segment. Three-wheelers, on the other hand, sustained their strong momentum, reporting 26.8% yoy (down 1.2% mom) growth. Exports also maintained their growth trajectory, witnessing growth of 25.5% yoy (down 7.4% mom) in December 2011.

TVS Motor (TVSL)

TVSL reported poor numbers for December 2011, as total volumes declined by 0.8% yoy (2.9% mom) to 170,428 units. The weak performance can be attributed to slowdown in TVSL’s motorcycle segment, which declined by 7.7% yoy (9.5% mom). The scooters and mopeds segments also witnessed moderate growth of 7.2% (1.1% mom) and 2% yoy (flat mom), respectively, in December 2011. Three-wheeler volumes during the month fell steeply by 26.5% yoy (6.8% mom) to 2,523 units.

Govt. raises export duty on iron ore; Sesa Goa to be the worst hit

The government has raised export duty on iron ore to ad valorem 30% on lumps and fines, with effect from December 30, 2011, compared to 20% earlier. Iron ore exports from India have already declined by 25.2% to 35.4mn tonnes from April- October 2011 on account of export ban in Karnataka, stringent measures in issuing export permits in Odisha, a sharp decline in international iron ore price  and increased export duty. Post the export duty hike, rise in rail freight and the recent iron ore price decline are expected to severely affect iron ore exports from India. Before the export duty hike (as per Federation of Indian Mineral Industries), total iron ore exports during FY2012 were estimated to be 60mn tonnes compared to its previous estimate of 75.0mn tonnes. We now expect iron ore exports to be lower than 60mn tonnes during FY2012.

We do not expect any impact on NMDC’s financials due to hike in export duty, as we do not anticipate any exports of iron ore by NMDC during FY2012 and FY2013. However, we have lowered Sesa Goa’s EBITDA estimates for FY2012 and FY2013 by 8.1% and 9.1% to Rs.3,314cr and Rs.3,712cr, respectively. Also, we believe some of the Karnataka iron ore would now be sold domestically. Nevertheless, we believe the current stock price discounts negatives such as acquisition of a minority stake in the unrelated oil business via acquisition of Cairn India’s stake, increased export duty, higher railway freight and lower volumes from Goa mines. We recommend Buy on the stock with an SOTP-based target price of Rs.195 (Rs.213 earlier).

L&T bags orders worth Rs.2,056cr

Larsen & Toubro's (L&T) construction arm has bagged new projects worth Rs.2,056cr across various categories in December 2011. Of these projects, two orders worth Rs.1,262cr in the water and effluent treatment segment was bagged by the company. In the buildings and factories category, a project worth Rs.388cr was bagged for constructing residential towers. In the rail infrastructure segment, orders aggregating to Rs.406cr have been grabbed from various clients. With these orders, the company’s outstanding order book stands at ~Rs.1,52,609cr (3.5x FY2011 revenue), providing good revenue visibility. This order booking takes the company’s total declared orders to ~Rs.10,420cr in 3QFY2012 against orders worth Rs.13,336cr received in 3QFY2011. The drying up of order inflows is one of the major concerns for the stock and has led to underperformance in the recent past.

At the CMP of Rs.1,009, the stock is trading at PE of 9.7x FY2013E earnings, after adjusting for investments, which is below the historical trading multiple for L&T and we believe factors in most of the negatives surrounding the stock. We have used the SOTP methodology to value the company to capture all its business initiatives and investments/stakes in the different businesses. Ascribing separate values to its parent business on a P/E basis and investments in subsidiaries on P/E, P/BV and mcap basis, our target price works out to Rs.1,453, which provides 44.0% upside from current levels. Hence, we maintain our Buy recommendation on the stock.

IVRCL bags orders worth Rs.732cr

IVRCL has bagged orders aggregating to Rs.732cr across the buildings, transportation, mining, water and solar power divisions. The company’s buildings division has secured orders worth Rs.404.6cr, including those from the Indian Institute of Science Education and Research, Bhopal; Indian Oil Corporation Ltd.; Jindal Steel & Power Ltd.; and National Institute of Biomedical genomics, West Bengal. While the transportation division secured an order worth Rs.251.4cr from Mahanadi Coalfields Ltd., the mining division bagged an order worth Rs.45.4cr from Hindustan Copper Ltd. Further, orders worth Rs.19.4cr and Rs.11.4cr have been bagged for water and solar power projects, respectively. With these orders, IVRCL’s order book stands at ~Rs.26,232cr (4.6x FY2011 revenue).

We have valued IVRCL on an SOTP basis. The company’s core construction business is valued at P/E of 6x FY2013E EPS of 4.6 (Rs.27.8/share), whereas its stake in subsidiaries, IVR Prime (Rs.10.9/share) and Hindustan Dorr-Oliver (Rs.2.9/share), has been valued on mcap basis, post assigning a 30% holding company discount. At the CMP of Rs.29, the stock is trading at 6.3x FY2013E EPS and 0.4x FY2013E P/BV on a standalone basis. Thus, on the back of the company’s robust order book-to-sales ratio (4.6x FY2011 revenue) and attractive valuations, we maintain our Buy view on the stock with a target price of Rs.42.

Economic and Political News
- November exports rise 3.9% to US$22.3bn yoy
- November imports rise 24.5% to US$35.9bn yoy
- No outside control must be imposed on media: PM

Corporate News
- ONGC to invest Rs.15,000cr in KG gas find
- Coal India expects higher revenue to offset wage hikes
- M&M tractor sales for December 2011 rise marginally

Share Market Update on Central Bank of India for 1QFY2012

Share Market Update on Central Bank of India for 1QFY2012 with a Neutral recommendation.

For 1QFY2012, Central Bank of India posted a 16.6% yoy decline in its net profit primarily due to higher provisions. However, results were above our estimates on lower-than-estimated operating expenses. A sharp sequential dip in NIM and high slippages despite the pending switchover to system-based NPA platform were the key highlights of the results. We maintain our Neutral view on the stock.

NIM dips on lower yield on investments; slippages remain elevated: The bank’s business momentum slowed during the usually lean quarter. Advances declined by 2.8% qoq (up 17.2% yoy) and deposits increased by 3.6% qoq (up 20.3% yoy). CASA deposits growth moderated to 14.7% yoy, resulting in a 259bp qoq decline in CASA ratio to 32.6%. Bulk deposits and CDs constituted a relatively higher ~33% of total deposits. The reduction in CASA ratio and the higher interest rate environment resulted in a sharp 72bp qoq rise in cost of deposits to 6.8%. The yield on advances went up by 77bp qoq to 11.4%. Reported NIM declined sharply by 48bp qoq to 3.0% primarily due to fall in yield on investments (fall of 73bp qoq). The sequential decline in NIM was exacerbated by the benefit of interest on income tax refund of ~`130cr in 4QFY2011. Overall asset quality of the bank deteriorated during the quarter, with annualised slippage ratio remaining elevated at 1.8% (1.1% in 1QFY2011) and net NPAs rising by 27.7% qoq. Slippages remained elevated at 1.8% as compared to 1.1% in 1QFY2011. Provision coverage ratio including technical write-offs declined to 65.2% from 67.6% in 4QFY2011. The bank is yet to switchover to the system-based NPA recognition platform, which could result in a substantial rise in slippages given the bank’s rural branches (37%) and a relatively large agri (16%) portfolio.

Outlook and valuation: At the CMP, the stock is trading at cheap valuations of 0.8x FY2013E ABV compared to its trading range of 0.5–1.5x with a median of 1.1x since listing in 2007. However, due to near-term asset-quality concerns because of system-based NPA recognition, we remain Neutral on the stock.