The domestic markets are expected to open in the green tracking gap up opening in most of the Asian markets. Indian markets ended higher on Friday for a fourth day in a row on the back of heavy buying by FIIs.
Globally, most of the US and European markets closed higher as traders reacted positively to a much better than expected report on the employment situation in the US in the month of January. With the stronger than expected job growth, the unemployment rate unexpectedly fell to 8.3% (lowest since February 2009) from 8.5% in the previous month. Also, a separate report from the Institute for Supply Management showed that non-manufacturing index rose to 56.8 in January from a revised 53.0 in December, with a reading above 50 indicating growth in the service sector.
Indian investors this week, meanwhile, would keenly watch out for the domestic industrial production growth for the month of December due to be released on Friday. Also, consumer comfort index of US which will be released on coming Thursday will be on radar.
Markets Today
The trend deciding level for the day is 17539 / 5,305 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17,696 – 17,787 / 5,355 – 5,385 levels. However, if NIFTY trades below 17,539 / 5,305 levels for the first half-an-hour of trade then it may correct up to 17,448 – 17,292 / 5,276 – 5,226 levels.
3QFY2012 - Result Reviews
DRL
For 3QFY2012, DRL posted a good set of numbers, much ahead of our expectations. The company’s net sales came in at Rs.2,769.2, growth of 46% yoy. Growth was driven by U.S. sales, which grew by 120% yoy. Other key geographies apart from Europe grew in double digits. Growth in the U.S. was led by the high value launch of Olanzapine 20 mg, new products launched in the past 12 months and strong volume growth across key products. This also aided significant improvement in the company’s gross margin and subsequently in OPM. The company’s OPM expanded by 12% yoy to 27%. Consequently, net profit grew by 88% yoy during the period. We maintain our Buy rating on the stock. The target price is under review.
Madras Cements
During 3QFY2012, Madras Cements’ top line rose by 27.9% yoy to Rs.741cr. The cement business posted 29.4% yoy growth in net sales to Rs.733cr on account of 19.1% yoy growth in dispatches (on a low base) and 8.6% yoy growth in realizations. The wind division’s revenue decreased by 38.8% yoy to Rs.7.7cr. Improved cement realization aided OPM to grow by 243bp to 28.0%, amidst cost pressures felt in freight expenses and other costs. The company’s bottom line increased by 76.7% yoy to Rs.77cr. We maintain our Neutral view on the stock.
HEG
HEG Ltd. reported revenue growth of 35% yoy to Rs.418cr for 3QFY2012 from Rs.310cr in 3QFY2011 due to increased prices of graphite electrodes and over 100% capacity utilization for the quarter. OPM for the quarter contracted by 1,059bp to 11.9% in 3QFY2012 from 22.4% in 3QFY2011 on account of higher other expenses and forex loss of Rs.35.5cr. PAT dipped by 37% yoy to Rs.24cr as compared to Rs.38cr in 3QFY2011. Tax rate was lower at 12% for the quarter compared to 21% in 3QFY2011. We maintain our Buy rating on the stock with a revised target price of Rs.236, based on a target P/B of 1.0x for FY2013E.
TVS Srichakra
For 3QFY2012, TVS Srichakra reported a mixed set of numbers. The company reported 21.1% yoy growth in its net sales, from Rs.287cr in 3QFY2011 to Rs.348cr in 3QFY2012. Net raw-material cost for the company increased by 23.7% yoy. Increased net raw-material cost along with higher other expenditure by 22.3% yoy led to a substantial decline in the operating profit of the company. Operating profit margin stood at 7.1%, a decline of 95bp yoy and 220bp qoq. The company’s profit declined by 33.1% yoy to Rs.7cr, which was Rs.10cr in the same quarter last year. We maintain our Buy recommendation on the stock. The stock price is under review.
Subros
Subros reported poor results for 3QFY2012, led by a yoy decline in volumes and increased interest expense. However, on a sequential basis, higher interest cost and depreciation expense impacted the company’s performance. Subros reported a 7.1% yoy decline in its net sales to Rs.254cr due to a 13% yoy drop in volumes. Net average realization improved by 6.7% yoy, thereby preventing further decline in the top line. On a sequential basis, net sales increased by 5.5% on account of a 9.1% increase in volumes. Operating margin improved by 107bp yoy (62bp qoq) to 8.5%, driven by raw-material cost savings (raw-material to sales ratio declined by 381bp yoy) due to commencement of local production of certain components (mainly evaporators). On the other hand, a 266bp yoy increase in staff cost restricted margin expansion to a certain extent. Net profit nosedived by steep 62.5% yoy (33.7% qoq) to Rs.2.1cr on account of an 88.1% yoy (21.3% qoq) increase in interest cost. The stock rating is currently under review. 3QFY2012 - Result Previews
HUL
HUL is expected to announce its 4QFY2011 results. We expect the company to report a healthy 15.7% yoy growth rate in its revenue to Rs.5,815cr and a 107bp yoy expansion in its operating margin to 13.1%. The company is expected to report 15.7% yoy growth in recurring earnings, owing to healthy revenue traction and an expansion in margins. We maintain our Neutral view on the stock.
Nalco
Nalco is slated to report its 3QFY2012 results. We expect net sales to increase by 24.2% yoy to Rs.1,770cr. However, EBITDA margin is expected to contract by 1,034bp yoy to 17.0% due to rise in prices of key inputs (primarily coal). Net profit is expected to decrease by 12.4% yoy to Rs.224cr. We maintain our Neutral view on the stock.
GSKCH – 4QCY2011
GSK Consumer (GSKCH) is slated to announce its 4QCY2011 numbers. For the quarter, we expect GSKCH to post healthy growth of 20% yoy in its top line to Rs.610cr, driven by growth in its core brands and new product launches. The bottom line is expected to register growth of 17.9% yoy to Rs.63cr, aided by top-line growth and margin expansion of 24bp yoy to 11.8%. We maintain our Neutral view on the stock.
MOIL
MOIL is slated to report its 3QFY2012 results. We expect net sales to decline by 2.1% yoy to Rs.248cr, mainly on account a decline in manganese ore prices. Nevertheless, EBITDA margin is expected to improve by 120bp yoy to 47.0% in 3QFY2012. Net profit is expected to increase by 0.4% yoy to Rs.106cr. We maintain our Neutral view on the stock.
India Cements
India Cements is expected to announce its 3QFY2012 results. We expect the company’s top line to grow by 18% yoy to Rs.922cr, primarily on account of 15.4% yoy growth in realization (though on a lower base of last year). The company’s margin is expected to improve by 220bp yoy to 14.3%, aided by higher realization. The company’s net profit is expected to grow by 19.2% yoy to Rs.26cr. We maintain our Neutral rating on the stock.
BGR Energy
For 3QFY2012, we expect BGR Energy's (BGR) top line to be under pressure due to high base created in 3QFY2011 and partly due to execution delays. The top line is expected to decline by 28.3% yoy to Rs.901.1cr. EBITDA margin is expected to come in at 12.0%. Interest cost is expected to stretch further (owing to hike in interest rates and enhanced working capital debt levels); which, along with slumped revenue, is likely to drag the bottom line down by 46.1% yoy to Rs.47.2cr. At the CMP, the stock is trading at 6.7x and 7.2x FY2012E and Fy2013E EPS, respectively. Currently, we remain Neutral on the stock.
Nagarjuna Construction Company
We expect subdued performance from Nagarjuna Construction (NCC) for this quarter. On the top-line front, NCC is expected to post a yoy decline of 9.0% to Rs.1,215cr. EBITDA margin is expected to be flat at 9.5%. On the earnings front, we expect NCC to post a decline of 65.4% yoy to Rs.14.0cr for the quarter. This would be primarily due to burgeoning interest cost (yoy jump of ~73.2%) and a decline in the company’s top line. Owing to the sharp run up in the stock price, we recommend Neutral on the stock.
GIPCL
GIPCL is expected to announce its 3QFY2012 results. The company is expected to register 15.5% yoy growth in its revenue to Rs.353cr, primarily on the back of higher volumes from 250MW SLPP station II. OPM is set to expand by 633bp to 33.1% due to higher availability of Surat II station. The company’s bottom line is expected to improve by 52.6% yoy to Rs.37cr in 3QFY2012. We maintain our Buy rating on the stock with a target price of Rs.95.
Economic and Political News
- Court quashes Swamy's petition, relief for Chidambaram
- Global food prices to ease in 2012: World Bank
- Government may lower STT in Budget to boost markets
- GoM meeting on ATF import, FDI, AI on Thursday
Corporate News
- Central Bank of India may recast loans to power utilities
- Fortis invests Rs.274cr in two Singapore healthcare ventures
- Mundra project may become an NPA: Tata Power
- Reliance Industries to charge US$0.15 marketing margin on CBM gas
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