Indian stock market and companies daily report (February 22, 2012, Wednesday)

Indian domestic markets are expected to open flattish tracking global markets worldwide. Asian stocks fell for a second day and oil retreated from a nine-month high as Greece’s approval for a second bailout failed to spur confidence among investors.

Euro-zone finance ministers early Tuesday gave a green light to a second rescue package for Greece, unlocking a €130bn in bailout money for the cash-strapped nation. The new bailout would leave Greece with sufficient funds to repay a €14.5bn bond due on March 20. The European markets finished Tuesday's trading with modest losses, while US markets managed to close marginally in the green as deal on the Greek debt bailout prompted some profit taking.

Meanwhile Indian shares continued to extend their recent gains driven by positive developments in the Euro zone area. Investors worldwide would keenly watch out for German PMI and US home sales data due for release today.

Markets Today

The trend deciding level for the day is 18,339/5,597 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 18,502 – 18,575/5,632 – 5,657 levels. However, if NIFTY trades below 18,339/5,597 levels for the first half-an-hour of trade then it may correct up to 18,325 – 18,221/5,572 – 5,537 levels.

IPO Note: MCX LTD. – Subscribe

Sustainable competitive position: Multi Commodity Exchange of India Ltd. (MCX) is a leading commodities exchange, which received permanent recognition from Government of India on September 26, 2003. The company reported a market share of 87.3% as of December 2011. MCX is also the fifth largest commodity futures exchange globally in terms of the number of contracts. As of June 2011, MCX was the largest silver exchange, the second largest gold, copper and natural gas exchange and the third largest crude oil exchange for this period globally.

Growth strategy in place: MCX has introduced a variety of new commodity futures contracts; and since inception, the number of products offered by the company has grown from 15 to 49 as of December 31, 2011. MCX has 2,153 members nationwide with over 296,000 terminals, including CTCL spread over 1,572 cities and towns in India. The company intends to continue to increase the number of participants by introducing new products on its exchange by expanding to more geographical areas, which is expected to drive growth going ahead. Regulatory changes can also lent a fillip to MCX as currently option contracts are not allowed to be traded in commodity. Any changes in favor of MCX can lead to a major increase in revenue and profitability going ahead.

Outlook and valuation: MCX currently has zero debt on its book, and major capex to fuel growth has already been incurred by the company. Secondly, the company reported investment and cash worth Rs.1,324cr at the end of 9MFY2012, which works out to Rs.260/share. On an annualized basis, shares will be trading at 15.1x and 18.1x at the lower and upper band on FY2012E earnings, respectively, which we believe is fair compared to global peers, which trade at 18x-19x TTM EPS, and the recent off market deals value MCX’s Indian peers NSE and BSE at 22x-24x 9MFY2012 annualized earnings. We believe MCX being the only major commodity exchange in India and the world’s fifth largest exchange can witness strong growth in revenue and profitability going ahead, which makes its valuation much more attractive than global and Indian peers. Hence, we recommend Subscribe to the issue on account of the relatively fair valuations.

ECL receives MOEF nod for its iron ore mine

Electrosteel Castings (ECL) has received forest stage-I clearance for its iron ore mines located at Kodolibad, West Singhbhum, Jharkhand, from Ministry of Forests and Environment (MOEF). ECL expects to receive stage-II clearance in the coming 2-3 months and then sign mining lease with the state government. After signing the mining lease, ECL can develop the mine and resume production. The mine has reserves of 91mn tonnes with 64% Fe content. ECL expects to commence production from this mine in FY2013. However, procedural delays cannot be ruled out in our view.

With upcoming production from coking coal and iron ore, ECL will turn into a fully integrated steelmaker. Although there is lack of clarity on the timelines for commencement of meaningful production from its coking coal and iron ore mines, ECL’s margins are expected to be significantly higher than its peers once it reaches optimum production capacity at its mines. Moreover, ECL’s associate, Electrosteel Steels (34.8% stake) with 2.2mn tonnes of steel capacity is expected to benefit the most, as ECL will supply coking coal and iron ore from its mines to Electrosteel Steels at subsidized rates (cost + 20%).

We have a positive stance on ECL’s initiatives of gradually venturing into steel making through its associate Electrosteel Steels. Furthermore, the company’s backward integration initiatives through allocation of coking coal and iron ore mines are expected to result in cost savings from FY2013. The stock is currently trading at 0.4x each for FY2012E and FY2013E. We recommend Buy on the stock with an SOTP target price of Rs.32.

Economic and Political News
- Economic slowdown likely to be temporary: Finance Minister
- India’s January consumer price inflation (CPI) at 7.65%
- RBI may consider CRR cut at next policy review meeting: Deputy Governor
- Government ready for dialogue with states on NCTC

Corporate News
- Coal India to incur additional Rs.6,500cr burden due to new labor pact
- Suzlon arm, REpower wins 250MW order from French firm
- Tata Motors to launch 230 Nano showrooms in one year
- M&M looks to assemble products in Russia through SsangYong distributors
- HCL Infosystems bags Rs.278cr order from Tamil Nadu government
- Kingfisher assures of normal operations in 5-7 days

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Indian stock market and companies daily report (February 14, 2012, Tuesday)

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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Indian stock market and companies daily report (February 13, 2012, Monday)

The domestic markets are expected to edge higher following positive opening across most of the Asian markets. Domestic indices fell modestly on Friday, as data showing a slowdown in December IIP numbers prompted investors to book some profits after recent sharp gains.

Globally, cues remained mixed. European markets slid moderately on Friday as apprehensions remained over the second bailout package for Greece. Eurozone finance ministers had deferred the approval of a second bailout package for Greece (€130bn), demanding Greece’s acceptance over a new set of austerity measures. U.S. bourses also ended on a negative note, tracing concerns stemming from the Eurozone.

On the domestic front, consistent shrinkage in manufacturing output emphasizes the need to trim rates by RBI. However, domestic bourses seemed to have marked down macroeconomic concerns and have firmed up considerably. Nonetheless, one cannot rule out the pessimism surrounding the Eurozone, which can reverse market directions. Markets will closely trace the developments in the domestic as well global markets.

Markets Today

The trend deciding level for the day is 17,755 / 5,383 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17,883 – 18,018 / 5,426 – 5,470 levels. However, if NIFTY trades below 17,755 / 5,383 levels for the first half-an-hour of trade then it may correct up to 17,621 – 17,492 / 5,339 – 5,297 levels.

Industrial production for December dips to 1.8%

Industrial production (IIP) growth slipped again, growing by weak 1.8% for December, after the strong rebound witnessed in November (growth of 5.9% compared to negative 4.7% growth for October). IIP index growth of 1.8% was the second slowest, after the contraction witnessed in October 2011, in more than two years. IIP growth was also below the median expectation of Bloomberg’s survey of economists (2.9%). The 12-month rolling industrial production growth, which has been on a declining trend since November 2010 (9.9%), slipped further to 4.7%.

The dip in IIP can mostly be attributed to slow growth in the manufacturing sector (growth of 1.8% compared to 6.6% in November 2011 and 8.7% in December 2010), which accounts for ~75% of the overall industrial production. In terms of industries, 15 of the 22 industry groups in the manufacturing sector registered positive growth during December. The slowdown in mining persisted with a contraction of 3.7% for December (5th consecutive month of contraction). Growth in electricity production continued to be healthy, growing by 9.1% in December.

As per use-based data, capital goods production data continued to be volatile, declining by steep 16.5%. Production of intermediate goods contracted by 2.8% in December, however growth in consumer goods and consumer durables remained strong, growing by 10.0% and 13.4%, respectively.

3QFY2012 - Result Reviews

DLF

DLF announced its 3QFY2012 numbers. The company’s net sales declined by 18.0% yoy and 19.7% qoq to Rs.2,034cr, coming in well below our estimate of Rs.2,719cr. EBITDA came in at Rs.823cr, down 30.2% yoy, on the back of lower revenue and OPM margin compression. OPM contracted by 706bp yoy to 40.4%, above our estimate of 43.7%. PAT declined by 44.6% yoy to Rs.258cr, which was well below our estimate of Rs.414cr, despite a sharp increase in other income, which increased by 217% yoy to Rs.362cr (Rs.114cr). The decline in PAT was largely due lower revenue, OPM contraction and higher interest cost during the quarter, which increased by 44.8% yoy to Rs.620cr in 3QFY2012. We continue to maintain our Neutral recommendation on the stock. We may revise our estimates and target price post management’s concall.

JSW Steel

JSW Steel reported higher-than-expected consolidated adjusted PAT during 3QFY2012. However, the company reported net loss of Rs.48cr in 3QFY2012 on account of exceptional losses. The company had reported better-than-expected standalone numbers for 3QFY2012 on January 20, 2012. Consolidated net sales grew by 40.9% yoy to Rs.8,405cr (slightly below our estimate of Rs.8,843cr). Net sales growth was driven by increases in steel volumes (+20.0% yoy to 1.9mn tonnes) and realization (+18.2% yoy to Rs.43,401/tonne). Consolidated EBITDA increased by 29.6% yoy to Rs.1,317cr. The company reported exceptional items related to forex loss of Rs.504cr and loss of Rs.55cr from JSW Ispat (associate company) during the quarter. Consequently, the company reported net loss of Rs.48cr in 3QFY2012, compared to net profit of Rs.292cr in 3QFY2011. However, adjusted net profit, excluding exceptional items, increased by 75.1% yoy to Rs.511cr (higher than our estimate of Rs.279cr). We remain Neutral on the stock.

CCCL

Consolidated Construction Consortium (CCCL) posted disappointing set of numbers for 3QFY2012, as expected. On the top line front the company posted 10.0% yoy decline to Rs.446.5cr, lower than our estimate of Rs.535.9cr. On the EBITDAM front, CCCL continued its dismal performance and registered a dip of 510bp yoy to 4.6%, which was higher than our estimate of 3.2%. Interest cost came in at Rs.18.3cr a yoy/qoq jump of 45.1%/6.4% respectively, and in line with our estimate of Rs.18.6cr. Owing to poor show at revenue and margin level, along with interest burden, the bottom line posted a loss of Rs.3.2cr in 3QFY2012 vs. profit of Rs.16.7cr in 3QFY2011 and against our estimate of loss of Rs.5.2cr. We maintain neutral view on the stock.

3QFY2012 - Result Previews

Coal India

Coal India is slated to report its 3QFY2012 results. We expect net sales to increase by 39.2% yoy to Rs.17,664cr, mainly on account of coal price increase taken during February 2011. However, EBITDA margin is expected to contract by 264bp yoy to 24.5% in 3QFY2012 on account of higher employee cost provision. Net profit is expected to increase by 39.0% yoy to Rs.3,650cr. We have a Neutral view on the stock.

State Bank of India

State Bank of India is scheduled to announce its 3QFY2012 results. We expect the bank to report healthy NII growth of 19.3% on a yoy basis (up 3.6% on a qoq basis). Non-interest income growth is expected to be moderate at 14.4% yoy. Operating income of the bank is expected to grow by healthy 18.0% yoy to Rs.14,584cr. Provisioning expenses are expected to increase substantially by 63.4% yoy, considering the cyclical headwinds to asset quality. Hence, net profit growth is expected to be moderate at 10.1% yoy to Rs.3,113cr. We currently have an Accumulate rating on the stock with a target price of Rs.2,364

Sun Pharmaceuticals

For 3QFY2012, Sun Pharma is likely to report 18.7% yoy growth on the sales front, mainly on the back of integration of Taro, which is expected to be the growth driver of export formulation sales. On the domestic front, Indian formulation sales are expected to report a muted performance. Despite strong top-line growth on account of the integration, operating profit margin is expected to expand by 690bp yoy, with margin likely to be around 34.4%. Net profit is expected to register growth of 21.4% yoy during the quarter. We recommend Neutral on the stock.

SAIL

SAIL is expected to announce its 3QFY2012 results. We expect the company’s top line to grow by 9.8% yoy to Rs.12,239cr, mainly on account of higher realization. However, EBITDA margin is expected to decline by 211bp yoy to 14.0% on account of higher input costs. The bottom line is expected to decline by 2.2% yoy to Rs.1,083cr. We maintain our Neutral rating on the stock.

Cipla

For 3QFY2012, Cipla is expected to post net sales growth of 10.7% yoy to Rs.1,662cr, driven by the domestic and exports performance. On the operating front, OPM (excluding technical know-how fees) is expected to come in at 21.8%, registering an expansion of 410bp yoy. Further, net profit is expected to increase by 26.8% yoy to Rs.295cr. We recommend Neutral on the stock.

Motherson Sumi Systems

Motherson Sumi Systems is scheduled to announce its 3QFY2012 results today. On a consolidated basis, we expect the company to report a healthy 13% yoy growth in revenues to Rs.2,343cr for the quarter. On the operating front, the company is expected to report a 282bp yoy contraction in margins to 8.6%. As a result, the net profit is expected to decline by 26% yoy to Rs.79cr. The stock rating is under review.

Areva T&D – 4QCY2011

For 4QCY2011, Areva T&D is expected to post subdued top-line growth of 4.2% yoy to Rs.1,383cr, mainly on account of lower volumes, pricing pressures and execution slowdown. Consequently, EBITDA margin is expected to compress by ~443bp yoy to 9.0%, although we expect a sequential improvement of ~100bp due to slight easing of pricing pressures. Led by muted growth and dip in margin, the company’s PAT is expected to decline by 35.5% yoy to Rs.56.8cr. At the CMP, the stock is trading at 25.9x and 21.9x CY2011E and CY2012E EPS, respectively. We remain Neutral on the stock.

CESC

CESC is expected to announce its 3QFY2012 results. The company is expected to register 25.6% yoy growth in its standalone top line to Rs.1,157cr, aided by higher sales volume and better realization. OPM is expected to be flat at 27.6%, while net profit is expected to increase by 33.9% yoy to Rs.147cr during 3QFY2012. We maintain our Buy rating on the stock with a target price of Rs.304.

Economic and Political News
- Exports up 10%, imports by 20% in January 2012: Commerce secretary
- Direct tax collection to miss Budget estimate
- Government may enhance tax deduction for housing loan in Budget

Corporate News
- Govt. notifies rules for competitive bidding for coal blocks
- Punjab’s industry strongly objects to 55% hike in power tariff
- Reliance Industries shuts distillation unit at Jamnagar facility for 3 weeks
- Tata Motors hikes prices by up to Rs 12,000; leaves Nano, Aria

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Indian stock market and companies daily report (February 09, 2012, Thursday)

The domestic markets are expected to open in the red tracking flat to negative opening in most of the Asian markets. Indian markets posted a volatile trading session and closed in green on Wednesday amidst optimism towards the developments in Greece’s debt restructuring deal.

Globally, however U.S. and European stocks remained choppy and ended flat, as the markets waited for additional news from Greece. The Greek government, which is close to announce another round of spending cuts in order to secure bailout funds is also in negotiations with private creditors on a voluntary debt reduction.

Indian investors, meanwhile, would keenly watch out for the domestic industrial production growth (Bloomberg estimate-3%) for the month of December, due to be released on Friday. Also initial jobless claims data of the U.S. for the previous week due to be released today will be on radar.

Markets Today

The trend deciding level for the day is 17,699 / 5,363 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17,818 – 17,928 / 5,402 – 5,435 levels. However, if NIFTY trades below 17,699 / 5,363 levels for the first half-an-hour of trade then it may correct up to 17,588 – 17,469 / 5,330 – 5,292 levels.

TCS establishes JV with Mitsubishi for Japanese market

TCS has announced a 60:40 JV with Japan’s Mitsubishi Corp. to serve clients in the East Asian region. The companies will invest US$5mn to set up a delivery center in Japan. The JV company will offer a full service suite of IT, BPO and infrastructure services to Japanese corporations. TCS said that this JV comes against the backdrop of a strong yen, the globalization of supply chains and a growing trend toward overseas mergers and acquisitions, all of which act as catalysts for the increasing globalization of Japanese companies. This has brought heightened interest in the role of global IT services to link domestic and overseas operations.

The JV is important for TCS as the company derives only ~1% of its revenue from Japanese markets and 7% from the Asia Pacific region. This is a good opportunity for TCS in which it can leverage a partner like Mitsubishi and get an entry into the world's third largest economy and provide software services there. This will be positive in the sense that the market share of TCS in Japan will rise as a result of the partnership with Mitsubishi and the company will also have a presence across all geographies. We maintain our Accumulate rating on the stock with a target price of Rs.1,262.

3QFY2012 - Result Reviews

ONGC

ONGC’s 3QFY2012 profitability declined on account of increased subsidy burden. The company’s top line decreased by 2.5% yoy at Rs.18,124cr. ONGC’s crude oil net realization declined by 30.9% yoy to US$44.8/bbl on account of higher subsidy burden. The company shared a subsidy burden of Rs.12,536cr in 3QFY2012 vs. Rs.4,222cr of subsidy shared in 3QFY2011and Rs.5,713cr in 2QFY2012. Oil sales volumes decreased by 4.0% yoy to 5.6mn tonnes, while gas sales volumes decreased by 1.4% yoy to 5.0bcm during 3QFY2012. EBITDA margin slipped by 1,183bp yoy to 61.0% and EBITDA decreased by 23.6% yoy to Rs.11,051cr. The company’s depreciation and amortization expenses increased by 24.5% yoy to Rs.4,532cr due to higher dry well write-offs. The company reported one-time gain of Rs.3,142cr related to royalty reimbursed by Cairn India (initially paid by ONGC for August 2009-September 2011). Excluding this one-time gain, adjusted net profit decreased by 49.2% yoy to Rs.3,599cr. Reported net profit decreased by 4.8% yoy to Rs.6,741cr. For FY2013, ONGC has given oil and gas production guidance of 28.8mn tonnes (+4.0% yoy) and 27bcm (+7.0% yoy). The stock is under review currently.

Bharti Airtel

Bharti Airtel (Bharti) reported a mixed performance for 3QFY2012, with revenue coming in-line with our as well as street expectations, while it disappointed on the operating and profitability fronts due to higher depreciation and amortization expenses. Bharti’s consolidated revenue stood at Rs.18,477cr, up 6.9% qoq. Revenue from mobile services for India came in at Rs.10,176cr, up 4.0% qoq on the back of a 3.2% qoq increase in average revenue per minute (ARPM) to Rs.0.45/min. However, MOU declined by 1.0% qoq due to slow traffic growth. Revenue of mobile India business was also impacted because of the slight decline in VAS share (even when 3G services are launched in all the circles and this was seasonally a strong quarter for telecom companies), which decreased to 14.3% in 3QFY2012 from 14.5% in 2QFY2012. All this led to 2.2% qoq growth in ARPU to Rs.187/month. Zain Africa’s revenue stood at Rs.5,358cr, up 16.7% qoq, aided by addition of 2.5mn subscribers, taking its total subscriber base to 50.9mn and a 0.1% qoq increase in ARPM to US¢5.7/min. However, MOU declined by 2.5% qoq to 125min, which led to a 2.3% qoq fall in ARPU to US$7.1/month.

EBITDA margin of mobile India as well as Africa business increased by 0.18bp and 0.47bp qoq to 33.8% and 26.7%, respectively. However, EBITDA margin of all the other business segments declined sharply, which led to a 141bp qoq decline in Bharti’s consolidated EBITDA margin to 32.2%. PAT came in at Rs.1,011cr, down 1.5% qoq, negatively impacted by higher depreciation cost of Rs.3,585cr in 3QFY2012 vs. Rs.3,184cr in 2QFY2012 and higher tax rates. Net profit stood at Rs.1,011cr, down 1.5% qoq, negatively impacted by higher depreciation cost of Rs.3,585cr in 3QFY2012 vs. Rs.3,184cr in 2QFY2012 and higher tax rate of 35.2% vs. 32.4% in 2QFY2012. We maintain our Neutral rating on the stock.

Tech Mahindra

Tech Mahindra reported muted set of 3QFY2012 results. Dollar revenue came in at US$288.7mn, down 2.5% qoq due to a 0.5% qoq decline in volume and ~2.0% qoq negative cross-currency impact. Dollar revenue from BT declined by 7.8% qoq and revenue from non-BT grew by just 0.6% qoq. In rupee terms, revenue came in at Rs.1,445cr, up 8.4% qoq, largely aided by qoq rupee depreciation. EBITDA margin grew by 90bp qoq (lower than margin expansion reported by peers) to 16.2% because of depreciating rupee, which absorbed the negative impact of onsite wage hike given. PAT, including share from Satyam, came in at Rs.276cr. Overall results were weak. The only growth driver for the company is the non-BT business, as BT is retendering its contracts. The stock is currently under review.

Bharat Forge

For 3QFY2012, Bharat Forge (BHFC) reported an in-line 21.1% yoy (3.4% qoq) jump in its standalone revenue to Rs.941cr, driven by a 15.3% yoy (1.3% qoq) jump in domestic revenue and 29.2% yoy (7.6% qoq) jump in exports revenue. While volume in tonnage terms increased by 15.2% yoy (3.1% qoq) to 55,412MT on strong export demand, average net realization grew by 6% yoy (1.45% qoq), led by higher contribution from the non-auto segment. Strong growth in the CV segment and non-auto segment in the Europe and U.S. benefitted the company’s exports performance. On the operating front, margin improved by 38bp yoy (99bp qoq) to 24.7%, owing to better product-mix and decline in raw-material expenses. Net profit grew by 24.9% yoy (down 3% qoq) to Rs.103cr, led by strong operating performance. However, growth was restricted on account of forex loss of Rs.16.1cr. The stock rating is currently under review.

Orchid Chemicals

For 3QFY2012, Orchid Chemicals’ net sales came in at Rs.482.1cr, growth of 4.2% yoy. During 3QFY2012, API sales rose to Rs.353.3cr as compared to Rs.329.7cr in 3QFY2011. While sales were lower than expected, OPM came in at 23.7%, just in-line with our expectation of 24%. However, higher interest expense during the period led to lower-than-expected net profit. Net profit before exceptional items declined by almost 22.1% during the period. We maintain our Buy recommendation; however, the target price is under review.

Alembic Pharmaceuticals

For 3QFY2012, Alembic Pharmaceuticals’ net sales came in at Rs.383cr, up 15.0% yoy. During the quarter, exports rose by 45.4% yoy to Rs.165.6cr. While sales were just in-line with our estimate, OPMs came in at 18%, higher than our expectation of 14%. Net profit for the quarter came in at Rs.442.3cr. We maintain our Buy recommendation on the stock with a target price of Rs.77.

3QFY2012 - Result Previews

Tata Steel

Tata Steel is slated to report its consolidated 3QFY2012 results. We expect the company’s net sales to increase by 6.5% yoy to Rs.30,992cr, mainly on account of higher steel prices. However, EBITDA margin is expected to contract by 276bp yoy to 9.0% on account of higher raw-material costs (mainly in its European operations). Net profit is expected to decrease by 35.1% yoy to Rs.729cr. We maintain our Buy rating on the stock with a target price of Rs.510.

Hindalco

Hindalco's fully owned subsidiary, Novelis reported loss at the net level for the seasonally weak 3QFY2012. The company’s net sales decreased by 4.0% yoy to US$2.5bn due to lower volumes as well as aluminium price. Shipments of aluminum rolled products decreased by 9.4% yoy to 648kt, primarily due to destocking in Europe on the back of economic uncertainty and weakness in the electronics business in Asia. Adjusted EBITDA decreased by 10.5% yoy to US$213mn on account of higher costs and lower volumes. Also, EBITDA/tonne declined by 1.0% yoy to US$312 during the quarter. Novelis reported net loss of US$12mn compared to a loss of US$46mn in 3QFY2011. The company is witnessing recovery in demand during 4QFY2012; it remains on track to achieve EBITDA of ~US$1bn during FY2012.

Hindalco is slated to report its 3QFY2012 results. We expect the company’s standalone net sales to decrease by 0.1% yoy to Rs.5,909cr. EBITDA margin is expected to contract by 155bp yoy to 10.0% on account of rise in costs of key inputs (primarily coal). Net profit is expected to increase by 4.3% yoy to Rs.480cr. We keep our rating and target price under review.

Ambuja Cements

Ambuja Cements is expected to announce its 4QCY2011 results. On the top-line front, the company is expected to post strong growth of 23.2% yoy to Rs.2,204cr. Strong performance on the top-line front is expected to be driven by higher yoy realization growth (13.7%) and 8.4% yoy growth in dispatches. OPM is expected to increase by 104bp yoy to 21.2%. The company’s bottom line is expected to grow by 10.9% yoy to Rs.286cr. We maintain our Neutral view on the stock.

ACC

ACC is slated to announce its 4QCY2011 results. The company is expected to post top-line growth of 18.7% yoy to Rs.2,325cr, primarily on account of improvement in realization by 14.3%yoy. However, cost pressures are expected to outweigh realization growth and OPM is expected to contract marginally by 6bp yoy to 17.3%. The company’s bottom line is expected to decline by 14.5% yoy to Rs.219cr. We maintain our Neutral view on the stock.

Apollo Tyres

Apollo Tyres is slated to announce its 3QFY2012 results. On a consolidated basis, we expect the company to report a strong 22% yoy increase in revenue to Rs.2,900cr. Sequentially, EBITDA margin is expected to improve by 50bp to 8.5%, led by a sequential decline in raw-material prices. However, net profit is estimated to remain flat on a qoq basis to Rs.79cr. The stock rating is under review.

Anant Raj Industries

Anant Raj Industries is expected to announce its 3QFY2012 results. We expect the company’s net sales to increase by 3.1% yoy to Rs.128cr. EBITDA margin is expected to contract by 316bp yoy to 58.9% on account of higher input costs. Net profit is expected to decline marginally by 0.5% yoy to Rs.50cr. We maintain our Accumulate rating on the stock with a target price of Rs.78.

FAG Bearings – 4QCY2011

FAG Bearings is set to announce its 4QCY2011 results. We expect the company to deliver healthy 17% yoy growth in revenue to Rs.307cr. On the operating front, we expect FAG to post a 100bp yoy contraction in operating profit margin to 18.8%. However, net profit is expected to increase by healthy 14% yoy to Rs.39cr. The stock rating is under review.

Dishman Pharmaceuticals

For 3QFY2012, we expect, Dishman Pharmaceuticals to post net sales of Rs.305cr, up 5% yoy. OPM is expected to come in at in 17.9% vis-à-vis 23.1% in 3QFY2011. Consequently, net profit is expected to come in at Rs.19.8cr, down 30.5% yoy. We maintain our Buy recommendation on the stock with a target price of Rs.77.

Economic and Political News
- Direct tax mop up to miss Rs.5.3 lakh cr budget target
- Exports from SEZs grow 17% in April-December 2011
- IT, ITeS revenue crosses US$100bn milestone: Nasscom
- Indian IT export revenue expected to grow by 11-14% and domestic revenue
by 13-16% for FY2013: Nasscom
- January 2012 car sales rise by 7.2%

Corporate News
- Bharti seeing benefits from India call price hike
- Ceat to set up a 65 MT/day manufacturing facility in Bangladesh
- RIL in talks with airlines for fuel supply
- Tata Power explores prospects overseas
- Thomas Cook starts stake sale in Indian arm

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