market outlook 2nd february 2012

8/3/2019 Market Outlook 2nd February 2012

http://slidepdf.com/reader/full/market-outlook-2nd-february-2012 1/6

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

Market OutlooIndia Research

February 2, 2012

Dealer’s Diary

The domestic markets are expected to open in the green tracking upbeat economic

data releases from around the world.The US markets closed higher as traders reacted positively to the latest batch of

economic data. The strength on Wall Street was partly due to the release of a

report from payroll processor ADP showing a continued increase in private sector

employment in the month of January. A separate report from the Institute for

Supply Management showing a continued expansion in manufacturing activity in

the month of January also generated buying interest, with the index of activity in

the sector reaching a seven-month high.

The release of the ISM report on U.S. manufacturing also came after the release of

separate reports showing expansions in manufacturing activity in both Germany

and China.

Indian shares ended firm near its 12-week high on Wednesday, as data showingexpanding domestic manufacturing activity and upbeat auto sales numbers for

January boosted investor sentiment. Indian investors meanwhile would keenly

watch out for the weekly inflation numbers due to be released today.

Markets Today

The trend deciding level for the day is 17230 / 5,213 levels. If NIFTY trades above

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

up to 17,398 – 17,495 / 5,267 – 5,299 levels. However, if NIFTY trades below

17,230 / 5,213 levels for the first half-an-hour of trade then it may correct up to

17,132 – 16,964 / 5,182 – 5,128 levels.

Indices S2 S1 PIVOT R1 R2

SENSEX 16,964 17,132 17,230 17,398 17,495

NIFTY 5,128 5,182 5,213 5,267 5,299

News Analysis Auto sales numbers - January 2012

3QFY2012 - Result Reviews – Satyam, Ashok Leyland, Finolex cables,

3Q FY2012 - Result Previews – Corporation Bank, Thermax, Hexaware Refer detailed news analysis on the following page

Net Inf lows (January 31, 2012)

` cr Purch Sales Net MTD YTD

FII 3,451 2,814 636 11,081 11,081

MFs 761 664 97 (1,855) (1,855)

FII Derivatives (February 01, 2012)

` cr Purch Sales Net Open Interest

Index Futures 1,354 1,781 (427) 11,606

Stock Futures 1,625 1,965 (340) 27,105

Gainers / Losers

Gainers Losers

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

IVRCL 56 11.1 Indian Oil Corp. 272 (5.8)

IFCI 31 8.6 Titan Industries 197 (2.7)

Power Finance 184 8.5 Coal India 317 (2.6)

Crompton Greaves 144 8.1 HPCL 288 (2.4)

REC 204 7.2 BPCL 560 (2.0)

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

BSE Sensex 0.6 107.0 17,301

Nifty 0.7 36.5 5,236MID CAP 1.1 65.5 5,937

SMALL CAP 1.7 110.3 6,574

BSE HC 0.1 8.0 6,344

BSE PSU (0.2) (10.7) 7,346

BANKEX 0.3 37.2 11,428

AUTO 2.0 186.9 9,429

METAL 3.0 341.1 11,840

OIL & GAS 0.7 60.6 8,561

BSE IT (0.1) (6.4) 5,771

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

Dow Jones 0.7 83.6 12,717

NASDAQ 1.2 34.4 2,848

FTSE 1.9 109.1 5,791

Nikkei 0.1 7.3 8,810

Hang Seng (0.3) (57.1) 20,333

Straits Times (0.1) (1.9) 2,905

Shanghai Com (1.1) (24.5) 2,268

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

Infosys 0.9 0.5 $55.5

Wipro 1.2 0.1 $11.0

ICICI Bank 1.3 0.5 $36.7

HDFC Bank 1.9 0.6 $31.6

Advances / Declines BSE NSE

Advances 1,868 1,060

Declines 980 430

Unchanged 113 71

Volumes (̀ cr)

BSE 4,846

NSE 16,815



Market Outlook | India Research

February 2, 2012 2

Auto sales numbers – January 2012

Maruti Suzuki (MSIL)

MSIL reported better-than-expected volume growth of 5.2% yoy (25.3% mom) to

115,433 units in January 2012, led by 22.4% (24.7% mom) and 54.3% yoy

growth in the domestic compact (driven by Swift ) and exports segment,

respectively. Total domestic volumes, however, remained flat largely due to a

2.4% yoy decline (up 34.8% mom) in sales in the mini segment. Meanwhile, MSIL

unveiled the all new compact Swfit Dzire priced at `4.79lakhs (petrol) and

` 5.8lakhs (diesel) with exciting new features and better fuel efficiency.

Mahindra & Mahindra (MM)

MM registered a healthy 12% yoy (8.3% mom) increase in its total volumes to

64,072 units on account of strong performance by the automotive segment,which grew by 21.8% yoy (4.6% mom). Performance of the automotive segment

was driven by continued buoyancy in the four-wheeler pick-up (up 34.7% yoy/flat

mom) and passenger UV (up 14.7% yoy/2% mom) segments. The CV segment

also recorded strong volume performance, witnessing growth of 50.8% yoy

(47.1% mom). The tractor segment posted a 5.6% yoy decline in volumes during

the month; however, on a sequential basis, volumes improved by strong 18.1%.

Tata Motors (TTMT)

TTMT posted a strong 16% yoy (6.3% mom) increase in total sales to 87,467

units, driven by 16.3% (down 1.2% mom) and 15.5% yoy (19.6% mom) growth in

the commercial vehicle (CV) and passenger vehicle (PV) segments, respectively.

The CV segment’s performance was led by healthy 12.6% and 18.7% yoy growth

in the medium and heavy commercial vehicle (MHCV) and light commercial

vehicle (LCV) segments, respectively. In the PV segment, Nano, Indica and Indigo

volumes grew by 15.2%, 8.9% and 9.6% yoy, respectively.

Hero MotoCorp (HMCL)

HMCL reported healthy 11.5% yoy (down 3.7% mom) growth in volumes to

520,272 units, led by continued momentum across all product segments. New

product launches and refreshed product ranges continued to drive HMCL’s

volume performance.

TVS Motor (TVSL)

TVSL posted a modest 5.1% yoy increase in total sales in January 2012 to

173,514 units, largely due to subdued sales in the motorcycle segment. While

two-wheeler volumes grew by 5.8% yoy (1.9% mom), three-wheeler volumes

declined by 29.9% yoy (down 4.8% mom). Growth in the two-wheeler segment

was led by a strong 20.2% yoy increase in moped sales; however, scooter volume

growth slowed down considerably and grew by 1.8% yoy (down 7.4% mom).




February 2, 2012 3

3QFY2012 - Result Reviews

Mahindra Satyam

Mahindra Satyam announced its 3QFY2012 results, which were in-line with our

expectations on the revenue front but were higher than ours as well as street’s

expectations on the operating and bottom-line fronts. Revenue came in at

US$325mn, down 1.6% qoq, due to a 1.3% qoq decline in volume. Also, USD

revenue of the company was impacted by 1.4% qoq due to unfavorable cross-

currency movement. In INR terms, revenue came in at `1,718cr, up 8.9% qoq.

The company’s EBITDA and EBIT margin increased by 87bp and 113bp qoq to

16.2% and 13.9%, respectively, despite giving wage hikes during the quarter

because of steep INR depreciation. PAT came in at `308cr, up 29.5% qoq, aided

by forex gain of `66cr, which led to other income of `151cr in 3QFY2012 as

against `97cr in 2QFY2012. The stock is currently under review.

Ashok Leyland – 3QFY2012 Ashok Leyland (AL) registered poor bottom-line performance during 3QFY2012

due to significant erosion in operating margins, led by higher employee and

other expenses. AL reported better-than-expected 29.3% yoy (down 6.9% qoq)

growth in its top line to `2,880cr, driven by a 15% yoy (6.1% qoq) increase in net

average realization and 12.4% yoy growth in volumes. Average net realization

improved to `1,389,528 on account of price increases to mitigate

raw-material cost pressures and emission norm changes. On the operating front,EBITDA margin witnessed a steep 340bp qoq contraction to 7.3% against our

expectation of 10.1% due to higher employee and other expenses. Other

expenditure to net sales ratio unexpectedly increased by 170bp qoq and 100bp

yoy during the quarter. Raw-material cost remained more or less stable on a yoy

and qoq basis, led by cooling of commodity prices. Driven by weak operating

performance, net profit declined by 56.6% sequentially. However, on a yoy basis,

net profit grew by 54.3%, largely due to low base of last year. The stock rating is

currently under review.

Finolex cables

Finolex Cables announced its 3QFY2012 numbers. The company’s net sales

declined by 2.6% yoy to `499cr. The electrical cables segment continued its

strong growth, registering 21.6% yoy growth to `417cr. The communication

segment, however, registered a 22.7% yoy decline to ` 41cr. EBITDA for the

quarter declined by 18.8% yoy to `41cr, largely due to margin compression.

EBITDA margin declined by 165bp yoy to 8.3%, mainly due to higher other

expenditure, which increased to 10.4% of net sales in 3QFY2012 vs. 8.3% of net

sales in 3QFY2012. During the quarter, PAT declined by 47.7% yoy to ` 14cr and

PAT margin declined by 237bp yoy to 2.7%. The company witnessed forex loss of

` 8cr during the quarter. We will be coming out with a detailed report post the

management call. We continue to maintain our Buy rating on the stock with a

target price of `51.




February 2, 2012 4

3QFY2012 - Result Previews

Corporation Bank

Corporation Bank is slated to announce its 3QFY2012 results. We expect netinterest income of the bank to decline by 9.7% yoy to ` 760cr. Non-interest

income growth is expected to be strong at 40.7% yoy to `372cr. While operating

income is expected to be flat, operating expenses are expected to go up by 23.7%

yoy to ` 458cr, leading to pre-provisioning profits declining by 8.4% yoy to

` 675cr. Provisioning expenses are expected to decline by 22.7% yoy. Net profit is

expected to decline by 3.1% yoy to ` 371cr. Currently, we have an Accumulate

rating on the stock with a target price of ` 450.

Thermax

For 3QFY2012, we expect Thermax to report a 3.0% yoy decline in its top line to

` 1,204cr, as high base effect created in 3QFY2011 and weak order inflows since

the last couple of quarters will keep the company's revenue under strict check.

The company's EBITDA margin is likely to compress by ~ 110bp yoy to 10.7% due

to higher contribution of low-margin EPC contracts in the company’s aggregate

revenue. Lower revenue and margin contraction are expected to drag down the

company's PAT by 10.8% yoy to `89.4cr. At the CMP, the stock is trading at 14.1x

and 15.0x its FY2012E and FY2013E EPS, respectively. We remain Neutral on the

stock.

Hexaware

Hexaware is slated to announce its 4QCY2011 results. We expect the company to

post revenue growth of 4.1% qoq to US$82mn, majorly led by volume growth. In

rupee terms, revenue is expected to come in at `416cr, up 13.8% qoq.

EBITDA margin is expected to expand by 140bp qoq to 20.1%. PAT is expected to

come in at ` 68cr. We maintain our Accumulate view on the stock with a target

price of `96.

Quarterly Bloomberg Brokers’ Consensus Estimates

Power Finance Corporation Ltd - (03/02/ 2012)

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

Net profit 718 659 9 419 71

Dr. Reddy Laboratories Ltd - (03/ 02/ 2012)

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

Net sales 2,480 1,899 31 2,268 9

Net profit 393 273 44 308 28




February 2, 2012 5

Economic and Political News

Manufacturing PMI jumps to 8-month high of 57.5 December exports up 6.7% to US$25bn

Fiscal deficit may be about 5.6% in FY2012: PMEAC

Fertilizer industry wants higher gas price in new urea policy

Outlook for the textiles industry in 2012 negative to stable: Fitch

SEBI notifies IPP norms to help promoters dilute stake

Corporate News

Coal India inks pact with worker unions on 25% hike in wages

ICICI Bank to recast `1,300cr loans in 4QFY2012

ABG Shipyard bags `500cr order from Shipping Corp.

KEC International keen to take more business abroad

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

Results Calendar

02/02/2012 Marico, Andhra Bank, Corporation Bank, Hexaware, Greenply

03/02/2012 Dr Reddy's, Power Fin.Corpn., Madras Cements, Prakash Industries, Subros

06/02/2012 HUL, Mundra Port, Adani Power, Nalco, GlaxoSmith Con, MOIL, Dena Bank, BGR Energy , India Cements,Nagarjuna Const., GIPCL

07/02/2012 M&M, Cadila Healthcare, GMR Infra., ITNL, SpiceJet, J K Lakshmi Cements

08/02/2012 ONGC, Bharti Airtel, Power Grid Corpn, Bharat Forge, Orchid Chemicals, Alembic Pharma

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




February 2, 2012 6

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 wayresponsible 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. WhileAngel 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 2nd february 2012

Documents