Indian stock market and companies daily report (May 16, 2012, Wednesday)

The domestic markets are expected to open in red tracking negative opening in Asian markets. Asian markets turned in a mixed performance yesterday, as worries prevailed that the European debt crisis could spiral out of control and weigh on global growth if Greece were to exit the euro zone and default on its debt.
U.S markets declined yesterday as investors worried about political situation in Greece, which is headed for a new round of elections after lawmakers failed to form a coalition government. Moody's announcement that it had downgraded Italian banks also weighed on markets. Meanwhile, upbeat U.S. economic data helped to limit the downside for the markets as a report showed that Wells Fargo Housing Market Index jumped to 29 in May from 24 in April. Also, general business conditions index jumped to 17.1 in May from 6.6 in April.
Meanwhile, Indian markets rebounded on Tuesday as falling oil prices and the strengthening of rupee from a near record low against the dollar due to intervention from the RBI encouraged investors to cherry-pick battered stocks. Investors today will watch out for industrial production data of the U.S. for April 2012 (Bloomberg estimate – 0.6%) to be released today.

Markets Today
The trend deciding level for the day is 16,274 / 4,922 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 16,425 – 16,521 / 4,976 – 5,009 levels. However, if NIFTY trades below 16,274 / 4,922 levels for the first half-an-hour of trade then it may correct up to 16,177 – 16,027 / 4,889 – 4,836 levels.

Tata Motors reports flat global volumes for April 2012
Tata Motors (TTMT) reported flat global volume for April 2012 to 87,377 units (down 37% mom), led largely on account of a decline in global commercial vehicle (CV) volumes and lower-than-expected Jaguar and Land Rover (JLR) volumes. Global CV volumes declined by 8% yoy to 38,008 units due to an 8% yoy decline in domestic CV volumes. Global passenger vehicles, however, reported healthy volume growth of 7% yoy to 49,369 units, driven primarily by JLR performance. JLR volumes grew by 29.4% yoy to 25,143 units, led by 17% and 31.7% yoy growth in Jaguar and Land Rover sales, respectively. Nonetheless, JLR volumes for April 2012 were lower than expected and it reported a significant mom decline of 31%. At the current market price of Rs.290, the stock is trading at 7.0x and 4.1x FY2014E earnings and EV/EBITDA, respectively. We maintain our Accumulate rating on the stock with an SOTP-based target price of Rs.328.

Result Reviews
Shree Cement (CMP: Rs.2,662 / TP: - / Upside: -)
Shree Cement’s (SRCM) 4QFY2012 top line rose by 38.1% yoy during the quarter to Rs.1,478cr, in-line with our estimates. The cement business posted 25.1% yoy growth in its net sales to Rs.1,189cr on account of 16.7% yoy growth in dispatches to 3.36mn tonnes and 7.2% yoy growth in realization to Rs.3,794/tonne. OPM rose by 64bp to 25.3% on account of better cement realization, despite increased freight costs. The company’s bottom line rose by 73.8% yoy to Rs.115cr, on accountof superior operating performance and higher other income of Rs.77cr in 4QFY2012 (vs. Rs.20.7cr in 4QFY2011), which included Rs.37cr of write back of provisions relating to the previous years. We maintain our Neutral view on the stock.
Patel Engineering (CMP: Rs.90 / TP: - / Upside: -)
For 4QFY2012, Patel Engineering (Patel) posted a 14.5% yoy decline on the topline front to Rs.1,346cr. The company’s EBITDA margin for the quarter increased by 110bp on a yoy basis and came in at 9.5%. Interest and depreciation cost for the quarter came in at Rs.84cr and Rs.23cr, respectively. On the earnings front, the company posted a decline of 70.1% on a yoy basis to Rs.9cr, owing to poor performance on the revenue front and higher tax rate (52%). We maintain our Neutral view on the stock.
Dishman Pharma (CMP: Rs.43 / TP: Rs.92 / Upside: 114%)
For the quarter, Dishman Pharma (Dishman) reported sales below our expectations. However, the company’s net profit came in higher than expectations. For the quarter, the company posted sales of Rs.350cr, registering 1.7% yoy growth. On the operating front, gross and operating margin came in at 65.4% and 23.5%, respectively. OPM came in above our expectation of 17.8%. This aided net profit to come in at Rs.31.4cr, in comparison to Rs.28.5cr estimated for the quarter. Currently, the stock is valued at 3.3x FY2014E earnings. We maintain our Buy rating on the stock with a target price of Rs.92.
JK Tyre & Industries (CMP: Rs.78 / TP: Under Review /Upside: -)
JK Tyre & Industries (JKI) reported net profit of Rs.86cr for 4QFY2012 as against loss of Rs.21cr in 3QFY2012, led mainly on account of extraordinary income of Rs.81cr. For 4QFY2012, net sales grew by healthy 13.2% yoy (7.1% qoq) to Rs.1,524cr. Operating performance registered a sharp improvement with EBITDA margin expanding by better-than-expected 222bp yoy (264bp qoq) to 7.7%, driven mainly on account of improvement in raw-material cost (130bp yoy) as natural rubber prices witnessed a decline of 15.2% yoy during the quarter. As a result, operating profit jumped by 58.8% yoy (62.4% qoq) to Rs.118cr. However, a 55.3% yoy increase in interest expense to Rs.47cr resulted in adjusted net profit of Rs.31cr (Rs.17.5cr in 4QFY2011).
On the consolidated front, net sales witnessed 16.2% yoy growth to Rs.6,947cr, led by 16.8% and 13.4% yoy revenue growth in India and Mexico, respectively. However, the company reported net loss of Rs.32cr on account of extraordinary expense of Rs.47cr during the year. The stock rating is currently under review.

Result Previews
JK Lakshmi Cement
JK Lakshmi Cement (JKLC) is set to declare its 4QFY2012 results. For the quarter, we expect JKLC to post 5.9% yoy growth in its top line to Rs.439cr, driven by volume growth and higher realization. The company’s OPM is expected to increase by 87bp yoy to 19.4%. The bottom line is expected to register growth of 36% yoy to Rs.43.4cr. We maintain our Buy view on the stock with a target price of Rs.79.

Economic and Political News
- A Raja granted bail by Delhi court in 2G case
- DTC Bill to be introduced in monsoon session
- Electronics market to reach Rs.20lakh cr by 2020: Assocham
- India gold imports down 33% in April
- Kerala plans to raise Rs.1lakh cr for high speed rail corridor project

Corporate News
- Adani Group plans to bid for transmission projects
- Bharti Airtel under ED lens for alleged money laundering
- ITC's Sri Lankan arm buys land for hospitality project
- IVRCL bags orders worth Rs.653cr

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Indian stock market and companies daily report (May 15, 2012, Tuesday)

The domestic markets are expected to open in red tracking negative opening in Asian markets. Most of the Asian markets ended lower yesterday as concerns over political uncertainty in Europe partially offset the positive sentiment generated by a weekend move by China's central bank to cut banks' reserve requirement ratio. U.S markets closed at more than three-month lows yesterday as investors worried about political uncertainty in Greece, as the debt-plagued nation could be forced to hold a new round of elections due to lawmakers' inability to form a coalition government. Also, China’s move of cut in reserve ration requirements to inject more liquidity into the system added to recent concerns about the outlook for growth in China.
Meanwhile, Indian stock markets extended losses for a fifth consecutive session on Monday after government data showed that the India's headline inflation accelerated to 7.23% in April, making it difficult for the RBI to moderate monetary policy. Markets would now watch out for retail sales growth data of the U.S. for April 2012 (Bloomberg estimate – 0.1%) to be released today.

Markets Today
The trend deciding level for the day is 16,244 / 4,913 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 16,363 – 16,509 / 4,952 – 4,996 levels. However, if NIFTY trades below 16,244 / 4,913 levels for the first half-an-hour of trade then it may correct up to 16,097 – 15,978 / 4,869 – 4,830 levels.

Primary and fuel inflation rises as manufacturing inflation remains stable
Wholesale price-based inflation for the month of April, 2012 came in at 7.2% yoy, slightly higher than 6.9% yoy levels registered in March, 2012. The inflation levels of February, 2012 were revised upwards from 6.95% yoy to 7.39% yoy. The April, 2012 inflation levels of 7.2% yoy were above the Bloomberg estimate of 6.7%. Core (non-food manufacturing) inflation – which the RBI tracks closely – remained stable at 4.56% yoy compared to 4.53% yoy in March, 2012.
Primary articles inflation remained at elevated levels of 9.7% yoy, c.10bp higher than the 9.6% yoy witnessed in March, 2012. The food articles inflation which had risen to 9.9% yoy in March 2012, jumped c60bp to 10.5% yoy for April 2012. The mom annualized growth in food inflation index stood at 58.5% as against 27.5% registered in February 2012 on account of higher prices of few fruits and vegetables. The Non-food articles inflation, which was as high as 18.2% yoy in August, 2011, came in at 1.6% yoy (-1.6% yoy in March, 2012). However, over March, 2012, the Non-food articles index rose by 3.3% mom (annualised growth of 39.3%) on account of higher prices of raw silk, rape and mustard seed, sesamum, soyabeen, and mesta and niger seed amongst others. Inflation for minerals registered an uptick to 66.8% yoy compared to 28.6% yoy in February, 2012.
Fuel & power inflation (11.0% yoy) witnessed annualized mom growth of 21.4% over March 2012. Coal Index (13.9% yoy) witnessed annualized mom growth of 161.9% over March 2012 (0.4% yoy), mainly on account of higher prices of non coking coal. The electricity index remained unchanged mom. Mineral oil inflation too moderated further to 13.7% yoy levels (lowest in 19 months). Although, electricity tariff hikes across different states are yet to be accounted for in inflationlevels, we expect RBI to have already factored the same in its calculations and hence do not expect any possible deviation in RBI’s monetary policy decisions based on possible uptick in electricity inflation index. The fuel hikes are also on cards; however with global outlook remaining grim, any further rise in fuel inflation levels is hence, in our view, expected to be capped.
Manufactured products which have a weightage of c.65% in the overall WPI inflation inched upwards slightly to 5.1% yoy from 4.9% - the lowest levels in more than 2 years observed in March, 2012. The annualized mom growth in manufacturing index stood at 11.8% in April, 2012. The core inflation (4.56% yoy for April 2012 compared to average of 7.3% yoy in FY2012) which the RBI tracks closely for its monetary policy decisions showed stability remained stable at 4.56% yoy compared to 4.53% yoy witnessed in March 2012, thus strengthening the hopes of further monetary easing by the central bank.

Result Reviews
L&T (CMP: Rs.1,160 / TP: Rs.1,641 / Upside: 42%)
Larsen and Toubro (L&T) posted a good set of numbers for 4QFY2012, which were broadly in-line with our expectations; however, the company disappointed on the order inflow front. On the top-line front, L&T reported decent top-line growth of 20.0% yoy to Rs.18,461cr, marginally below our estimate of Rs.18,945cr. On the EBITDA front, performance was as per our expectations, with the company reporting a yoy dip of 130bp to 13.9% against our expectation of 13.7%. On the bottom-line front, L&T reported yoy growth of 13.9% to Rs.1,920cr, marginally higher than our estimate of Rs.1,862cr, owing to exceptional gain (Rs.55cr) and lower tax rate (26.9%).
As of 4QFY2012, L&T’s order backlog stands at yoy growth of 11.0% to Rs.1,45,700cr. Order inflow for the quarter was disappointing at Rs.21,159cr (yoy decline of 30.0%) against our expectation of Rs.26,000cr, taking the order inflow for FY2012 to Rs.70,574cr, implying a yoy decline of 12.0%.
For FY2013, management has given a guidance of 15-20% growth for both revenue and order inflow. We believe that although the company can achieve this guidance on the revenue front, given its robust order backlog, it would be difficult to achieve 15-20% growth on the order inflow front, considering the challenging macro environment.
We believe L&T is best placed to benefit from the gradual recovery in capex cycle, given its diverse exposure to sectors, strong balance sheet and cash flow generation as compared to peers. We maintain L&T as our top pick in the sector and maintain our Buy rating on the stock with a target price of Rs.1,641.
JSW Steel (CMP: Rs.620 / TP: - / Upside: -)
JSW Steel reported better-than-expected standalone results for 4QFY2012 on account of higher-than-expected sales volumes. The company's net sales grew by 35.3% yoy to Rs.9,511cr (above our estimate of Rs.8,406cr). Net sales growth was driven by increased steel volumes (+33.3% yoy to 2.3mn tonnes) and realization (+6.0% yoy to Rs.43,003/tonne). Although JSW Steel’s net sales grew by 35.3% yoy, its EBITDA decreased by 0.1% yoy to Rs.1,652cr and EBITDA margin slipped by 616bp yoy to 17.4% on account of higher raw-material prices. The company reported exceptional item related to forex gain of Rs.199cr during the quarter. Interest expenses grew by 140.7% yoy to Rs.368cr. Hence, adjusted net profit decreased by 33.6% yoy to Rs.553cr (higher than our estimate of Rs.432cr). Reported PAT declined by 9.7% yoy to Rs.752cr. On a consolidated basis, the company reported net sales of Rs.10,153cr (+40.8% yoy), EBITDA of Rs.1,887cr (+13.6% yoy) and adjusted PAT of Rs.480cr (-39.6% yoy). The company expects to produce 8.5mn tonnes of steel during FY2013. We keep our rating and target price under review.
Ashok Leyland (CMP: Rs.26 / TP: Under Review / Upside: -)
Ashok Leyland (AL) reported in-line results for 4QFY2012. The company’s net sales registered healthy 12% yoy growth to Rs.4,311cr, led by strong volume growth of 20% yoy. Volume performance was boosted by the newly launched LCV Dost, which accounted for ~14% of total sales during the quarter. While volumes in the MHCV goods segment declined by 3% yoy, MHCV passenger volumes jumped by 26% yoy. Net average realization, however, witnessed a decline of ~8% yoy, largely on account of higher contribution from the lower priced Dost vehicle. EBITDA margin declined by 230bp yoy to 10.9% on account of lower-margin product Dost and due to a 47% yoy increase in other expenditure, which could be due to increased advertising spends. As a result, operating profit declined by 7.5% yoy to Rs.470cr. Net profit declined by 13.2% yoy to Rs.259cr, which was in-line with our expectation. Higher interest (up 32% yoy) and depreciation expense (up 24% yoy) also impacted the company’s bottom-line performance. We maintain our Buy rating on the stock; however, our target price is under review. We shall release a detailed result note post the earnings conference call with the management.
Abbott India (CMP: Rs.1,505 / TP: Rs.1,628 / Upside: 8.1%)
For 1QCY2012, Abbott India reported a muted set of numbers. The company's top line was marginally lower by 2.7% qoq, from Rs.386cr to Rs.376cr. Numbers are not comparable to 1QCY2011, as the company’s results were merged with that of Solvay Pharma in August 2011. The company's EBITDA margin contracted by 648bp qoq in 1QCY2012, mainly due to increased employee expenses and other expenses. Depreciation for the quarter increased by 25% qoq, while tax rate stood at 41.9%, thus leading to muted PAT. The company made provisions of Rs.18.69cr for change in its accounting for sales return and change its depreciation method to straight line method from written-down methods, resulting in write back of depreciation of Rs.29.08cr. This led to net profit of Rs.27.08cr, a 26.6% decline on a qoq basis. We expect the company to post better revenue going forward on the back of improved product portfolio and synergies to reduce costs going forward. Also, change in depreciation method will add to the bottom line. We recommend Accumulate on the stock with a revised target price of Rs.1,628, based on a target PE of 18x for CY2013.
Monnet Ispat & Energy (CMP: Rs.457 / TP: - / Upside: -)
Monnet Ispat reported a robust set of numbers for 4QFY2012. The company's net sales grew by 20.7% yoy to Rs.536cr mainly due to increased realizations. However, raw-material cost as a percentage of sales increased to 59.8% in 4QFY2012 compared to 55.7% in 4QFY2011. Hence, EBITDA increased only by 10.4% yoy to Rs.138cr, while EBITDA margin contracted by 34bp yoy to 25.7%. Interest expenses increased by 28.8% yoy to Rs.24cr, while other income increased by 20.0% yoy to Rs.12cr. Consequently, net profit grew by 13.6% yoy to Rs.83cr.
The company plans a capex of Rs.1,500cr for its upcoming power plants and Rs.800cr for steel capacity expansion during FY2013. The company reported that the implementation of 1,050MW power plant at Angul is on track, and it is expected to be operational in 2HFY2014.
We maintain our Buy recommendation on the stock; our target price is under review.
IVRCL (CMP: Rs.45 / TP: - / Upside: -)
IVRCL reported a disappointing set of numbers for 4QFY2012, with lower-thanexpected performance on all fronts. The company’s revenue declined by 22.1% yoy to Rs.1,598cr, below our estimate of Rs.1,682cr. On the operating margin front, the company posted dismal margin of 6.4%, reporting a dip of 230bp yoy, below our estimate of 8.0%. Interest cost came in at Rs.66.1cr, which was flat on a yoy as well as qoq basis. On the earnings front, IVRCL reported a 92.3% decline yoy to Rs.5cr, against our estimate of a 56.6% decline. This was on account of poor performance on the revenue as well as margin front. Post the conference call, we would come out with a detailed note. Currently, the target price and rating are under review.
Orchid Chemicals (CMP: Rs.161 / TP: Under review / Upside: -)
Orchid Chemicals reported sales and the net profit came in below expectations. For the quarter, the company posted sales of Rs.485cr, a dip of 8.1% yoy. On the operating front, the operating profits also dipped by 8.0%, almost stagnant at last year levels. For the full year the company has posted Rs.1839cr, registering a growth of 7.0% yoy, while the net profit came in at Rs.17.5cr. The full year OPM’s came in at 17.5%. For FY2013, the company has guided towards a 10-15% yoy growth on the topline. Currently the stock is under review.
Madhucon Projects (CMP: Rs.46 / TP: - / Upside: -)
For 4QFY2012, Madhucon Projects (MPL) reported a mixed set of numbers with revenue coming below our expectations; however, higher EBITDAM and other income resulted in better-than-expected earnings performance. On the top-line front, MPL posted a disappointing performance, with a yoy/qoq decline of 27.1%/30.8% to Rs.432cr, way below our expectation of Rs.659cr. EBITDAM came in at 11.8%, posting a jump of 120bp/340bp on a yoy/qoq basis against our expectation of 9.2%. Interest cost stood at Rs.27cr, registering a jump of 9.5% on a yoy basis, but down by 9.8% on a sequential basis. On the earnings front, the company posted a decline of 22.5% on a yoy basis at Rs.15cr, in-line with our expectation of Rs.14cr despite a higher tax rate (38.2%) on the back of higher EBITDAM and other income (Rs.14cr). We maintain our Buy view on the stock however the target price is under review.

Result Previews
JK Lakshmi Cement
JK Lakshmi Cement (JKLC) is set to declare its 4QFY2012 results. For the quarter, we expect JKLC to post 5.9% yoy growth in its top line to Rs.439cr, driven by volume growth and higher realization. The company’s OPM is expected to increase by 87bp yoy to 19.4%. The bottom line is expected to register growth of 36% yoy to Rs.43.4cr. We maintain our Buy view on the stock with a target price of Rs.79.
Dishman
For the 4QFY2012, Dishman is expected to post top-line growth of 11.3% yoy to Rs.383cr.The company is expected to post EBITDA of 17.8%, up 170bps yoy. On the net profit front, the company is expected to post net profit of Rs.28.5cr, registering 24.0% yoy growth. We maintain our buy with a target price of Rs.92.

Economic and Political News
- Government notifies free sugar exports
- Inflation rises to 7.23% in April, vegetable prices shoot up
- Mumbai home prices fell 9.1 % between March 2011-12: Knight Frank
- No plan to revamp Food Corporation India: Government
- Oil slides on euro zone, China fears

Corporate News
- Ashok Leyland Nissan inks Rs.4,150cr MoU with Tamil Nadu government
- Bhel bags Rs.380cr order for gas-based plant in Rajasthan
- Jain Irrigation announces buyout of 100% stake in JV firm
- Moody's downgrades ICICI, HDFC, Axis banks, LIC

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Indian stock market and companies daily report (May 11, 2012, Friday)

Indian markets are expected to open lower tracking mixed cues from the global markets. While major European markets rose on Thursday, US markets were mixed. Most of the Asian markets are trading in the red with SGX Nifty trading marginally lower by 0.5% in the opening session.
U.S markets had choppy trade on Thursday following the downward trend seen over the past several sessions. However, reports showing a reduction in initial jobless claims for the week to 367,000 provided some relief to the markets. While Nasdaq index fell marginally, Dow index and S&P index rose by 0.2% and 0.3% respectively. The German DAX index ended up 0.7%, while the French CAC 40 index and the U.K.'s FTSE 100 index gained 0.4% and 0.3% respectively. Meanwhile, Indian markets ended modestly lower on Thursday, erasing early gains. FII outflow fears continued to haunt investors despite a series of measures announced by the RBI recently to prop up the Rs., which hit a record low of 53.85 against the dollar the previous day. Markets would track the IIP data for expected to be released today.

Markets Today
The trend deciding level for the day is 16,490 / 4,985 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 16,602 – 16,784 / 5,020 – 5,074 levels. However, if NIFTY trades below 16,490 / 4,985 levels for the first half-an-hour of trade then it may correct up to 16,307 – 16,195 / 4,931 – 4,896 levels.

Cabinet clears MFI bill
The cabinet has cleared the Micro finance bill which will bring the micro lenders under the purview of the Reserve Bank. The MFI bill is positive for the micro finance institutions sector as it will supersede the state government laws, which has been in turmoil ever since the Andhra Pradesh government set stringent norms on lending and interest collection within the state. It is also positive for the Banking sector as it will help to reduce the MFI delinquencies on their books.

Result Reviews
NTPC (CMP: Rs.150/ TP: Rs.201/Upside 34%)
For 4QFY2012, NTPC posted a 4.8% yoy growth in its standalone net sales to Rs.16,264cr, in-line with our estimates, aided by higher capacity and better realization. OPM stood at 25.3%, up 180bp on yoy basis, despite the increase in fuel costs, on account of higher realizations. The company’s net profit declined by 6.8% yoy to Rs.2,594cr, due to higher interest, tax and depreciation. NTPC’s tax expense for the quarter stood at Rs.1,063cr vs. Rs.475cr in 4QFY2011. We maintain a Buy on the stock with a Target Price of Rs.201.
Cipla (CMP- Rs.323/ TP- /Buy)
Cipla reported better than expected result both on the net sales and profits. For the 4QFY2012, Cipla reported sales and net profit of Rs.1814cr and Rs.292cr, registering a yoy growth of 12.3% and 25.4% respectively. On the operating front, the Gross and Operating margins came in at 57.4% and 19.1% respectively. While both GPM and OPM expanded yoy, they were below expectations of 58.2% and 21.5%  respectively. However, inspite of the same, the net profit came in at higher than expectations of Rs.292cr, V/s expectations of Rs.282cr, mainly on of lower taxation and deprecation during the quarter than expected. Currently the stock is valued at 15.6xFY2014E earnings. We retain our Buy rating on the stock; however, target price is under review.
Lupin (CMP- Rs.543/ TP- Rs.656/ Buy)
Lupin reported just-in-line sales, while the net profit came in below expectations. For the quarter, the company posted sales of Rs.1932cr, a rise of 24.6% yoy. The growth on the advanced and emerging, both of which grew by 30% and 29% yoy respectively, aided the overall growth of the company. On the operating front, the Gross and Operating margins came in at 59.5% and 17.6% respectively. The  OPM’s were below expectations of 19.7%. This along with the higher tax along with the deprecations during the quarter aided the net profit to come at Rs.156cr, in comparison to the Rs.258cr estimated for the quarter. Currently the stock is valued at 16.6xFY2014E earnings. We maintain a buy on the stock with a target of Rs.656.
Cadila Healthcare (CMP- Rs.734/ TP- Rs.1016/ Buy)
Cadila Healthcare reported below than expected sales and net profit numbers. For the quarter, the company posted sales of Rs.1344cr, a rise of 15.0% yoy. The growth was primarily driven by domestic markets, which registered a yoy growth of 38.2%. Exports on the other hand grew yoy by 5.3% during the period. On the operating front, the Gross and Operating margins came in at 64.7% and 17.0% respectively. The OPM’s were below expectations of 18.7%. This along with the higher interest expenses during the quarter aided the net profit to come at Rs.171cr, in comparison to the Rs.200cr estimated for the quarter. Currently the stock is valued at 14xFY2014E earnings. We maintain a buy on the stock with a target of Rs.1016.
Canara Bank (CMP: Rs.419 / TP: Rs.532 / Upside: 27.0%)
For 4QFY2012, Canara Bank posted a weak set of results with net profit declining by 7.8% yoy to Rs.829cr. Bottom-line was dented by subdued net interest income, de-growth in fee income and higher operating expenses. The bank’s overall business growth remained moderate with advances growth of 11.3% yoy, largely aided by agriculture, infrastructure, and industrials segments. Deposits grew by 9.4% yoy. On the deposits side, calculated CASA ratio declined by 383bp yoy to  24.3%, due to decrease in current deposits by 39.5% yoy and 10.5% yoy growth in saving deposits. The bank’s reported NIMs remained flattish during 4QFY2012, as rise in yield on advances by 8bps qoq to 10.93% was completely offset by a similar rise in the cost of deposits to 7.35%. Commission and brokerage income de-grew during the quarter by 13.7% yoy to Rs.215cr.
On the asset quality front, gross and net NPA ratio for the bank remained at nearly the same levels on a qoq basis. Provision coverage ratio for the quarter also remained flat sequentially at 67.6%. During 4QFY2012, the bank restructured Rs.2,572cr worth of accounts, of which Rs.1,475cr was on account of restructuring of Air India. The bank did not restructure any SEB accounts during 4QFY2012, but expects Rs.5,385cr of SEB restructuring to occur in 1QFY2013 which would include discoms from the state of Rajasthan, Haryana and UP and Gujarat. The stock is  currently trading at cyclically moderate valuations of 0.7x FY2014E ABV vs. 5-year average of 1.0x and range of 0.7-1.4x, in our view largely factor in the negatives. Hence, we recommend Buy on the stock with a target price of Rs.532.
Apollo Tyres (CMP- Rs.82 / TP- /Under review)
For 4QFY2012, Apollo Tyres (APTY) registered a strong net sales growth of 18.4% yoy (flat qoq) to Rs.3,231cr driven by 8.8% yoy growth each in total volumes and net average realization. Indian operations were the prime driver of growth with total sales increasing by 28.2% yoy driven by 14% growth each in volumes and net average realization. While European operations witnessed slightly lower than expected growth of 8.7% yoy, poor performance in South Africa impacted the overall performance. South Africa operations witnessed 18% yoy decline in volumes led by poor demand and also on account of plant shutdown due to national as well as company specific issues.
On the operating front, margins expanded 110bp sequentially (flat on yoy basis) to 11.1%, mainly due to margin improvement in the domestic business (EBITDA margin improved 200bp yoy and 160bp sequentially) led by decline in rawmaterial expenses. However, weak performance in South Africa and Europe nullified the positive impact of strong domestic performance. While South Africa operations reported operating loss largely due to de-growth in volumes; Europe operations witnessed 200bp margin contraction sequentially during the quarter. Net profit declined 18.6% yoy to Rs.157cr mainly on account of higher interest (up 31.5%) and depreciation (up 22.1%) expense and lower other income (down 37%). Further higher tax rate (24.6% as against 8.4% in 4QFY2011) also impacted the bottom-line negatively.
Going ahead, we expect the domestic business to do well, led by pick-up in demand in the replacement segment, improvement in OEM demand and stable raw-material environment. However, South Africa and Europe operations are expected to remain under pressure due to demand slowdown. At Rs.82, the stock is trading at 6.5x FY2014E earnings. We retain our Buy rating on the stock; however, target price is under review.
Sintex Industries (CMP- Rs.61 / TP- / Under review)
Sintex Industries announced its 4QFY2012 results. The company’s net sales declined by 11.8% qoq and 30.1% yoy to Rs.1,024cr on the back of lower sales in the plastic segment. The plastic segment registered a 14.8% qoq and 33.2% yoy decline in revenue to Rs.892cr. The textile segment, on the other hand, witnessed 15.1% qoq and 2.2% yoy growth in revenue to Rs.132cr. The company’s EBITDA declined by 44.7% yoy to Rs.160cr (Rs.290cr) on the back of lower revenue and margin contraction. EBITDA margin contracted by 415bp yoy but expanded by 158bp qoq to 15.6% on account of lower other expenditure. Other expenditure as a percentage of sales declined to 13.0% in 4QFY2012 compared to 14.7% in 3QFY2012. PAT declined by 45.7% yoy to Rs.91cr (Rs.168cr) due to margin contraction on a yoy basis and lower revenue during the quarter. Consequently, PAT margin declined by 256bp yoy to 8.9% (11.5%). Currently, the stock is under review.
HEG (CMP – Rs.222/ TP-/ Under Review)
For 4QFY2012, HEG reported a disappointing set of numbers. The company's top line came in at Rs.407cr, 4.1% below our estimates of Rs.425cr; however, revenue increased by 44.7% on a yoy basis, mainly driven by higher prices of graphite electrodes. EBITDA margin plunged by 1470bp to 5.9% during the quarter due to increased power and fuel cost, which grew from 6% (as percentage of sales) to 8.1% and forex loss of Rs.48cr. Depreciation cost increased by 11% yoy due to commencement of the expanded capacity. Thus, the overall increase in expenses led to a fall in net profit by 85.5% yoy to Rs.5cr in the quarter as compared to Rs.34cr in 4QFY2011. The stock rating is under review.

Result Previews
Dr Reddys
For the 4QFY2012, Dr Reddys is expected to post top-line growth of 14% yoy to Rs.2,301cr, majorly driven by the U.S. market. The company is expected to see good traction in its Indian and Russian formulation businesses as well. The company is expected to post EBITDA of 32.0%, up 770bp yoy. On the net profit front, the company is expected to post net profit of Rs.526cr, registering 57.3% yoy growth. We maintain our neutral stance on the stock.
Indian Bank
Indian Bank is scheduled to announce its 4QFY2012 results. Net interest income is expected to grow by moderate 12.8% yoy (up 3.1% qoq) to Rs.1,170cr. Non-interest income is expected to increase by 13.1% yoy to Rs.281cr. Consequently, operating income is expected to increase by 12.8% yoy to Rs.1,451cr. Operating expenses are expected to increase by 13.7% yoy to Rs.540cr, leading to pre-provisioning profit growing by 12.3% yoy to Rs.912cr. Provisioning expenses are expected to increase three-fold on a yoy basis to Rs.236cr. Consequently, net profit is expected to increase only by 7.0% yoy to Rs.526cr. At the CMP, the stock is trading at valuations of 0.7x FY2014E ABV. We recommend a Buy rating on the stock with a target price of Rs.240.
Federal Bank
Federal Bank is scheduled to announce its 4QFY2012 results. We expect the bank to report healthy net interest income growth of 19.9% yoy to Rs.227cr. Non-interest income is expected to increase by 11.4% yoy to Rs.157cr. Cost-to-income ratio is expected to remain similar to 3QFY2012 levels at 38.7%. Pre-provision profit of the bank is expected to increase by 21.5% yoy to Rs.425cr. Net profit is expected to increase by healthy 32.2% to Rs.227cr. At the CMP, the stock is trading at valuations of 1.0x FY2014E P/ABV. We remain Neutral on the stock.

Economic and Political News
- India to grow at 7.5% in FY2013: UN Report
- Govt. directs coal firms to supply fuel to power plans via MoU route
- Oil companies demand subsidy for petrol losses

Corporate News
- SKS Micro Fin shuts 78 branches in Andhra Pradesh
- Allahabad Bank plans to revive US$500mn bond sale
- Unitech moves CLB against Telenor

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Indian stock market and companies daily report (May 10, 2012, Thursday)

Indian markets are expected to open flat with positive bias. While the performance of Asian markets is mixed, SGX Nifty is trading higher by 0.4%.
The US markets continues to be weighed down by uncertain political situation in Europe. During the day there were reports that Eurozone nations were debating about delaying the euro bailout payment to Greece due to the ongoing political uncertainty, resulting in strong selling pressure. However, this was later on denied by European Financial Stability Facility’s Board of Directors, aiding the markets to stage a partial recovery on Wednesday. The European markets were mixed on Wednesday, with DAX index gaining by 0.5% and CAC 40 index and FTSE 100 index down by 0.2% and 0.4% respectively.
Meanwhile, the Indian Markets hit their 16 week low weighed down by uncertainty in Europe and receding hopes of further rate cut, which could delay the economic recovery. FII selling pressure was high during the day. Further Rs. fell by 1.3% against the USD and closed at 53.85 vs. USD.

Markets Today
The trend deciding level for the day is 16,506 / 4,983 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 16,589 – 16,699 / 5,009 – 5,042 levels. However, if NIFTY trades below 16,506 / 4,983 levels for the first half-an-hour of trade then it may correct up to 16,396 – 16,313 / 4,949 – 4,923 levels.

Result Reviews
Punjab National Bank (CMP: Rs.768 / TP: Under review)
For 4QFY2012, Punjab National Bank (PNB) registered a weak set of results. The bank’s net profit grew by 18.6% yoy to Rs.1,424cr, which was above our estimates on account of lower effective tax rate than estimated by us. Net interest income of the bank grew by 9.3% yoy to Rs.3,310cr. Non-interest income growth was also moderate at 11.4% yoy to Rs.1,276cr. Provisioning expenses increased by 41.1% yoy to Rs.1,027cr, however a lower effective tax rate (25.4% in 4QFY2012) led to higher PAT growth of Rs.1,424cr.
The bank’s asset quality deteriorated significantly during 4QFY2012, with gross and net NPA levels increasing by 35.4% and 53.5% sequentially, respectively. As of 4QFY2012, gross NPA ratio stands at 2.9% (2.4% in 3QFY2012), while net NPA ratio stands at 1.5% (1.1% in 3QFY2012). The bank’s restructured book jumped up by 48.1% qoq, primarily on the back of restructuring of SEBs and Air India during 4QFY2012. Provisioning coverage ratio deteriorated by over 700bp during 4QFY2012 to 62.7%. We recommend Buy on the stock with a target price of Rs.1,102.
Ranbaxy Labs (CMP Rs.512, TP- : Neutral)
Ranbaxy labs reported below than expected results. For the quarter, the company reported Net sales and adj. net profits of Rs.3694.5cr and Rs.1246.4cr, a yoy growth of 72.4% and 209.1% respectively. Emerging markets contributed US $232mn, accounting for ~32% of total sales. Developed markets recorded US $470mn of sales and contributed 64% to total sales for the Company. API and others accounted for the remaining revenue of US $34mn for the quarter. The growth was mainly driven by Lipitor in US, resulting in US registering a growth of 145% to end the period at US $416mn., accounting for almost 57% of the overall sales. This also aided an improvement in the GPM’s and OPM’s. The GPM’s came in at 75.9% an expansion of 11.0% yoy. However the OPM’s came in at 25.0% (17.0%) an expansion of 8.0%. The other expenses, rose mainly on back of accured expenses and cliams recorded by the company towards a protion of profits payable by the company in realtion with sales of the product( which is estimated to be more than 10% of the total expenses for the 1QCY2012 and 4QCY2011. However, currently we maintain our Neutral stance on the stock.
ABB (CMP: Rs.747 / TP: - Under review)
ABB India (ABB) announced its 1QCY2012 results, which were disappointing on the top-line front, but the company’s bottom line exceeded expectations (when adjusted for notional MTM forex loss). The company’s top line for the quarter was flat at Rs.1,790cr (Rs.1,793cr previous year) and 12.8% lower than our estimate of Rs.2,053cr. Power products and low-voltage products were the only two segments that reported growth during the quarter at 4.1% and 11.5% yoy, respectively. ABB’s reported EBITDA margin declined by 22bp yoy, however when we adjust for the MTM exchange rate variation loss of Rs.32.7cr, adjusted EBITDA margin came in much higher at 7.3% against our estimate of 5.9%. Reported PAT came in at Rs.49.6cr, down 20% yoy. Order flow for the quarter was flat at Rs.1,632 (Rs.1,695), with order backlog standing at Rs.9,028cr. At current valuations of 35.2x CY2013E EPS, the stock is richly valued. We maintain our Sell recommendation on the stock; however, the target price is under review.
Union Bank (CMP: Rs.203 / TP: Rs.266 / Upside: 31.2%)
Union Bank reported its results for 4QFY2012. The bank reported 9.3% yoy growth in its NII to Rs.1,877cr, aided by higher credit growth. Non-interest income for the bank also increased by healthy 25.8% yoy to Rs.755cr, aided by sharp 65.3% yoy growth in recoveries. Operating expenses for the bank decreased by 28.6% yoy (5.1% qoq), which coupled with 13.6% yoy growth in operating income, aided the pre-provisioning profits to improve by 83.9% yoy. Net profit for the bank grew at much lower pace of 29.4% yoy to Rs.773cr on account of sharp increase in provisioning expenses incl. tax. The bank’s asset quality improved slightly on sequential basis, with both gross and net NPA ratio declining by 32bps and 18bps qoq, respectively. PCR though remained below comfortable levels and has declined sequentially by 92bps to 62.2%. We maintain our Buy recommendation on the stock with a target price of Rs.266.
IRB Infra (CMP: Rs.122 / TP: Rs.228 / Upside: 87%)
For 4QFY2012, IRB reported modest set of numbers with revenue coming in line with expectations but owing to better-than-expected EBITDAM, earnings were higher than estimates. IRB’s top line witnessed growth of 10.6% to Rs.848cr marginally ahead of our estimate of Rs.829cr. On the EBITDAM front, IRB’s margins came at 44.9% higher than our estimate of 42.2%. Depreciation came at Rs.102cr in line with our estimate. Interest cost came in at Rs.150cr a jump of 7.3%/5.6% on yoy/qoq basis. At the earnings front, IRB reported growth of 17.1% to Rs.120cr above our estimate of Rs.104cr on account of better than expected performance on the EBITDAM front.
Fundamentally, we have a target price of Rs.228 for IRB. However, we believe that the stock could remain volatile until clarity emerges on the issue of IRB’s Chairman Mr. V D Mahiskar being potentially involved in the killing of Satish Shetty (RTI activist) in 2010. Thus, this event could remain an overhang on the stock in the near term.

Result Previews
NTPC
For 4QFY2012, we expect NTPC to record a 6.1% yoy increase in its top line to Rs.16,468cr, driven largely by improved realization. The company’s operating margin is expected to increase by 289bp yoy to 27.5% due to better plant availability and expected grossing up of RoE under corporate tax rate for FY2012. Net profit is expected to decline marginally by 2.5% yoy to Rs.2,711cr. At the CMP, the stock is trading at 1.4x FY2014E P/BV. We maintain a Buy on the stock with a Target Price of Rs.201.
Canara Bank
Canara Bank is scheduled to announce its 4QFY2012 results today. We expect the bank to report a subdued 2.4% yoy growth in Net Interest Income to Rs.2,019cr. Non-interest income is expected to decline by 7.7% yoy to Rs.861cr. Operating expenses are expected to decline marginally by 1.3% yoy to Rs.1,196cr. Provisioning expenses are also expected to decline by 28.4% yoy to Rs.391cr, and would lead to 9.1% yoy growth in net profit to Rs.981cr. At the CMP, the stock is trading at 0.7x FY2014E ABV. We maintain our Buy recommendation on the stock with a target price of Rs.532.
Cipla
For the 4QFY2012, Cipla is expected to post muted net sales growth of 4.6% to Rs.1,690cr, mainly driven by the domestic formulation business, while export performance is expected to remain muted. On the operating front, OPM (excluding technical know-how fees) is expected to come in at 21.5%, registering an expansion of 610bp yoy. This would aid the company's net profit to increase by 31.8% yoy to Rs.282cr. We maintain our buy on the stock with a target price of Rs.380.
Lupin
For the 4QFY2012, Lupin, on the other hand, is expected to register top-line growth of 22.6%. The company's OPM is expected to expand by 190bp yoy during the period. However, net profit growth is expected to be lower at around 13.7% yoy on account of higher tax outgo. We maintain our buy on the stock with a target price of Rs.656.
Cadila Healthcare
For the 4QFY2012, Cadila is expected to post a good set of numbers, with 20.7% yoy growth in net sales to Rs.1,411cr on the back of robust growth on the domestic formulation and exports front. On the OPM front, we expect the company's OPM to expand by 270bp yoy to 18.4% on the back of favorable product mix. However, net profit is expected to increase by 7.8% yoy to Rs.193cr, mainly on the back of increased tax outgo. .We maintain our buy on the stock with a target price of Rs.1016.
Apollo Tyres
Apollo Tyres is slated to announce its 4QFY2012 results today. On a consolidated basis, we expect the company to report a strong 19% yoy growth in revenues to Rs.3,241cr. Sequentially, EBITDA margin is expected to improve 50bp to ~10.5% led by sequential decline in raw-material prices. We expect net profit to decline ~27% yoy to Rs.141cr. The stock rating is under review.

Economic and Political News
- Cabinet may mull Coal Regulatory Bill tomorrow
- India's urban consumer confidence edges up: survey
- Government to auction 54 coal blocks with 18 bn tonne reserves
- March factory output seen slowing further: Poll

Corporate News
- Fire at M&M Nasik plant, operations suspended
- ICICI Bank raises foreign currency deposit rates
- ONGC to foray into city gas, plans to set up ONGC Gas
- Lanco Infra gets Supreme Court nod for township project

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