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
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