market outlook 10th february 2012

8/3/2019 Market Outlook 10th February 2012

http://slidepdf.com/reader/full/market-outlook-10th-february-2012 1/9

Please refer to important disclosures at the end of this report Sebi Registration No: INB 010996539 1

Market OutlookIndia Research

February 10, 2012

Dealer’s Diary

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 theNifty 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.

Indices S2 S1 PIVOT R1 R2

SENSEX 17,503 17,667 17,773 17,937 18,043

NIFTY 5,307 5,360 5,392 5,444 5,476

News Analysis

3QFY2012 Result Reviews – Tata Steel, Hindalco, Ambuja Cements, ACC,

Apollo Tyres, MRF, Page Industries, FAG Bearings, Anant Raj, HAIL, Dishman

Pharmaceuticals, JK Tyre

3QFY2012 Result Previews – DLF, RCom, Britannia, Aurobindo Pharma, CCCL

Refer detailed news analysis on the following page

Net Inflows (February 08, 2012)

` cr Purch Sales Net MTD YTD

FII 4,405 3,955 451 7,449 18,529

MFs 717 687 30 (480) (2,335)

FII Derivatives (February 08, 2012)

` cr Purch Sales Net Open Interest

Index Futures 1,788 1,845 (58) 15,467

Stock Futures 1,920 2,179 (259) 30,347

Gainers / Losers

Gainers Losers

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

Jubilant Food 1,031 8.8 Manappuram Fin 46 (6.9)

Bhushan Steel 396 8.7 Adani Enter 393(4.3)

HDIL 98 8.5 Adani Power 71(3.5)

JSW Steel 819 7.9 Coromandel Intl 272 (3.4)

IVRCL 59 7.1 Shriram Trans 569 (2.8)

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

BSE Sensex 0.7 123.4 17,831

Nifty 0.8 44.2 5,412MID CAP 1.3 78.2 6,240

SMALL CAP 1.2 80.3 6,892

BSE HC (0.0) (1.7) 6,392

BSE PSU 0.7 54.9 7,674

BANKEX 1.9 219.4 12,069

AUTO 1.8 170.0 9,736

METAL 2.1 247.1 12,293

OIL & GAS (0.2) (21.4) 8,842

BSE IT 1.1 68.2 6,066

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

Dow Jones 0.1 6.5 12,891

NASDAQ 0.4 11.4 2,927

FTSE 0.3 19.5 5,895

Nikkei (0.2) (13.4) 9,002

Hang Seng (0.0) (8.5) 21,010

Straits Times (0.0) (1.0) 2,981

Shanghai Com 0.1 2.1 2,350

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

Infosys 1.0 0.6 $56.3

Wipro 1.3 0.2 $11.3

ICICI Bank 0.5 0.2 $37.9

HDFC Bank 1.2 0.4 $33.9

Advances / Declines BSE NSE

Advances 1,828 995

Declines 1,057 473

Unchanged 125 51

Volumes (` cr)

BSE 3,326

NSE 15,684



Market Outlook | India Research

February 10, 2012 2

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 ` 33,103cr, above our estimate of ` 30,992cr,

mainly on account of increased average realizations in rupee terms. Standalone

net sales increased by 12.3% yoy to ` 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 operationsEBITDA decreased by 9.5% yoy to ` 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 ` 1,717cr. Hence, Tata Steel reported net loss of ` 603cr in

3QFY2012 compared to adjusted PAT of ` 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 ` 6,590cr (above our estimate of ` 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 ` 310cr due to increased input costs (mainly coal

and crude derivatives). Nevertheless, the copper segment’s EBIT rose by 51.1%

yoy to ` 216cr due to higher treatment and refining charges and by-product

credits. Overall, Hindalco’s EBITDA decreased by 3.3% yoy to ` 716cr and EBITDA

margin slipped by 165bp yoy to 10.9% during 3QFY2012. Interest expenses grew

by 53.8% yoy to ` 79cr and other income grew by 48.6% yoy to ` 90cr.

Consequently, net profit decreased by only 1.9% yoy to ` 452cr (below our

estimate of ` 480cr). The company reported that all its expansion plans are on

track. The stock is under review currently.




February 10, 2012 3

Ambuja Cements

During 4QCY2011, Ambuja Cements’ standalone top line increased strongly by

30.2% yoy to ` 2,329cr on account of 17.5% yoy improvement in realization to

` 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 ` 302cr, aided by better operating performance,

72.2% yoy growth in other income to ` 65cr and 53% saving in interest expense to

` 10cr. Reported net profit was lower by ` 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 ` 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 ` 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 ` 470cr. The company’s profit was boosted by tax credit of ` 228cr

during the quarter (vs. 82cr in 4QCY2010), adjusted for which profit would have

been at ` 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 ` 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 ` 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 ` 73cr). During the quarter, APTY made a provision of ` 29cr in relation

to a penalty following settlement agreement with South Africa Competition

Commission for the company’s operations in South Africa. At ` 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.




February 10, 2012 4

MRF – 1QSY2012

MRF reported top-line growth of 32.7% yoy to ` 3,138cr in 1QSY2012 from

` 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 ` 103cr to ` 113cr. We maintain our Buy recommendation on the stock

with a target price at `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 ` 172cr ( ` 134cr). EBITDA improved only by 6.3% yoy

to ` 30cr ( ` 28cr), despite higher revenue growth due to margin compression.

EBITDA margin declined by 356bp yoy to 17.2% (20.7%), mainly due to higherraw-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 ` 20cr ( ` 16cr), in-line with top-line growth on the back of higher

other income, which increased by 78.2% to ` 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 - 4QCY2011FAG Bearings (FAG) registered a strong performance in 4QCY2011, with better-

than-expected net sales growth of 31.4% yoy (4.8% qoq) to ` 350cr against our

expectation of ` 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 `

43cr. We expect the company to sustain its strong performancegoing 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 ` 92cr ( ` 124cr), well below our estimate. EBITDA declined by 36.5%

yoy to ` 49cr ( ` 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 ` 31cr ( ` 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 `78.




February 10, 2012 5

HAIL – 4QCY2011

Honeywell announced its 4QCY2011 numbers. The top line grew by 21% qoq to

` 503cr in 4QCY2011 from ` 412cr in 4QCY2010. Annual sales for CY2011

stood at ` 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 ` 25.7cr to ` 33.9cr. Annual net profit stood at ` 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 ` 265.5cr,

registering 14.5% yoy growth. The company’s growth was driven by the MMsegment, 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 ` 16.7cr, lower than our expectation

of ` 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 ` 38cr. For

3QFY2012, net sales grew strongly by 20.7% yoy (10.4% qoq) to ` 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

` 21cr on account of an 87.8% yoy increase in interest expense to ` 45cr and forex

loss of ` 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 ` 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 ` 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 ` 4,968cr, up 3.7% qoq. Growth is

expected primarily on the back of qoq flat ARPM at ` 0.45/min and 1.0% qoqgrowth 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 ` 144cr. We maintain our

Neutral view on the stock.




February 10, 2012 6

Britannia

Britannia is expected to announce its 3QFY2012 results. For the quarter,

we expect Britannia to report healthy 18% yoy growth in revenue to ` 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 ` 45cr on the back of healthy top-line growth. At the CMP, the stock is

trading at 21.7 x F2013E EPS of `22.5. We recommend Neutral on the stock.

Aurobindo Pharma

For 3QFY2012, Aurobindo Pharma is expected to post net sales of ` 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 ` 98.5cr, down

49% yoy. At the CMP, the stock is trading at 8.4x FY2013. We continue tomaintain our Buy recommendation on the stock with a target price of `166.

CCCL

Consolidated Construction Consortium (CCCL) is expected to post modest 8.0%

yoy growth in its top line to ` 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 ` 5.2cr in 3QFY2012 vs. profit of ` 16.7cr in 3QFY2011.

We continue to maintain our Neutral view on the stock.

Quarterly Bloomberg Brokers’ Consensus Estimates

BPCL Ltd – (10/02/2012)

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

Net sales 48,753 36,665 33 42,282 15

EBITDA (79) 749 (111) (2,695) (97)

EBITDA margin (%) (0.2) 2.0 (6.4)

Net profit (692) 187 (470) (3,229) (79)

DLF Ltd – Consolidated (10/02/2012)


Net sales 2,536 2,480 2 2,532 0

EBITDA 1,162 1,178 (1) 1,173 (1)

EBITDA margin (%) 45.8 47.5 46.3

Net profit 422 466 (9) 372 13




February 10, 2012 7

Essar Oil Ltd – (10/02/2012)


Net sales 12,638 12,233 3 12,939 (2)

EBITDA 308 797 (61) 544 (43)EBITDA margin (%) 2.4 6.5 4.2

Net profit (125) 273 (146) (166) (25)

RCom Ltd – Consolidated (10/02/2012)


Net sales 5,195 5,004 4 4,689 11

EBITDA 1,639 1,668 (2) 1,357 21

EBITDA margin (%) 31.5 33.3 28.9

Net profit 218 480 (55) 252 (14)

Tata Chemicals Ltd – Consolidated (10/02/2012)


Net sales 3,140 2,860 10 3,540 (11)

EBITDA 551 441 25 674 (18)

EBITDA margin (%) 17.5 15.4 19.0

Net profit 190 165 16 275 (31)

Tata Power Ltd – Consolidated (10/02/2012)


Net sales 6,197 4,413 40 6,248 (1)

EBITDA 1,421 1,055 35 1,385 3

EBITDA margin (%) 22.9 23.9 22.2

Net profit 514 442 16 (1,219) (142)

Unitech Ltd – Consolidated (10/02/2012)


Net sales 682 660 3 626 9

EBITDA 171 209 (18) 138 24

EBITDA margin (%) 25.1 31.6 22.0

Net profit 107 111 (4) 92 16

IDFC Ltd – (10/02/2012)


Net profit 381 321 18 524 (27)

Shriram Transport Company Ltd – (10/02/2012)


Net profit 320 301 6 299 7

Suzlon Energy Ltd – (11/02/2012)

Particulars (`

cr) 3Q FY12E 3Q FY11 y-o-y (%) 2Q FY12 q-o-q (%)Net sales 5,232 4,433 18 5,071 3

Net profit (47) (254) (81) 48 (198)




February 10, 2012 8

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 ` 250cr plant in Bangladesh

Tata Global, PepsiCo JV eyes ` 700cr turnover in the next five years

Tulip Telecom CEO Sanjay Jain quits

Unity Infraprojects bags orders worth ` 485cr

Source: Economic Times, Business Standard, Business Line, Financial Express, Mint

Results Calendar

10/02/2012DLF, Tata Power Co., BPCL, IDFC, Rcom, Shriram Trans., Essar Oil, Sun TV Network, Reliance Capital, Unitech,Britannia, Aurobindo Pharma

11/02/2012 Suzlon Energy, Consolidated Co

12/02/2012 Areva

13/02/2012Coal India, St Bk of India, IOC, Sun Pharma, SAIL, Cipla, Reliance Infra., Tata Chemicals, Motherson Sumi,CESC, Punj Lloyd, Amara Raja Batteries

14/02/2012Tata Motors, Nestle, Reliance Power, Jaiprakash Asso., HDIL, Monnet Ispat, Graphite India, Simplex Infra, IVRCLInfra, Madhucon Proj, Indoco Remedies




February 10, 2012 9

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

DISCLAIMER

This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment

decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make

such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies

referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and

risks of such an investment.

Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make

investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this

document are those of the analyst, and the company may or may not subscribe to all the views expressed within.

Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and

trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's

fundamentals.

The information in this document has been printed on the basis of publicly available information, internal data and other reliablesources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as thisdocument is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report .

Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify,nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory,compliance, or other reasons that prevent us from doing so.

This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced,

redistributed or passed on, directly or indirectly.

Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or

other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in

the past.

Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in

connection with the use of this information.

Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to thelatest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may haveinvestment positions in the stocks recommended in this report.

market outlook 10th february 2012

Documents