Market Outlook 19th January 2012

8/3/2019 Market Outlook 19th January 2012

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Market OutlooIndia Research

January 19, 2012

Dealer’s DiaryThe markets are expected to edge higher following positive opening acrossmost of the Asian bourses. The markets ended with modest losses yesterdayafter investors booked profits. In addition, crucial meeting in Greece between

the government and private creditors cautioned the markets.European stocks also snapped a 3-day winning streak as investors bookedprofits despite positive news flow from the region. Bond auctions in safe havenGermany and debt-ridden Portugal went off smoothly and IMF intended toraise its lending resources by US$500bn to avoid a contagion of eurozone’sdebt crises. US bourses gained on IMF’s arrangement for the eurozone. Inaddition, better-than-expected quarterly results from Goldman Sachs alsoboosted the sentiments.

Domestically, some of the many indicators have shown improvement(satisfactory IIP numbers and easing of food inflation). However, theimplementation of big ticket reforms, especially in the power sector, remains akey. In an important meeting yesterday, the prime minister has assured tochalk out a road map to resolve the issues faced by the power sector. Investors

will closely watch the developments in the power sector, which weighs heavilyon the economic growth.

Markets Today

The trend deciding level for the day is 16,451 / 4,956 levels. If NIFTY trades above

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

up to 16,518 – 16,585 / 4,981– 5,005 levels. However, if NIFTY trades below

16,451 / 4,956 levels for the first half-an-hour of trade then it may correct up to

16,385 – 16,318 / 4,931 – 4,906 levels.

Indices S2 S1 R1 R2

SENSEX 16,318 16,385 16,518 16,585 NIFTY 4,906 4,931 4,981 5,005

New s Analysis Reliance Industries may announce a share-buyback programme

KEC International secures order worth ` 340cr

3QFY2012 Result Review – MindTree, Infotech Enterprises

3QFY2012 Result Preview – HDFC Bank, Hero MotoCorp, Bajaj AutoRefer detailed news analysis on the following page

Net Infl ows (January 17, 2012)

` cr Purch Sales Net MTD YTD

FII 2,976 1,911 1,065 4,435 4,435

MFs 732 656 75 (584) (584)

FII Deri vatives (January 18 , 2012)

` cr Purch Sales Net Open Interest

Index Futures 1,622 1,992 (370) 13,565

Stock Futures 2,874 2,880 (6) 27,853

Gainers / Losers

Gainers Losers

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

Adani Enter 399 7.3 Essar Oi l 51 (11.5)

Jet Air India 247 5.0 Voltas 82 (11.0)

RIL 777 4.9 JSW Ispat 13 (6.2)

Unitech 27 3.7 Jain Irrigation 95 (5.7)

Reliance Infra 441 3.2 Alstom Projects 371 (5.5)

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

BSE Sensex (0.1) (14.6) 16,451

Nifty (0.2) (11.5) 4,956

MID CAP (1.2) (65.4) 5,590

SMALL CAP (1.0) (62.8) 6,196

BSE HC (0.4) (24.0) 6,104

BSE PSU (1.3) (94.1) 7,074

BANKEX (0.4) (45.5) 10,350

AUTO (1.1) (98.8) 8,657

METAL (2.2) (244.3) 10,927

OIL & GAS 3.1 246.7 8,149

BSE IT (2.2) (121.7) 5,513

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

Dow Jones 0.8 96.9 12,579

NASDAQ 1.5 41.6 2,770FTSE 0.2 8.4 5,702

Nikkei 1.0 84.2 8,551

Hang Seng 0.3 59.2 19,687

Straits Times (0.7) (20.5) 2,795

Shanghai Com (1.4) (32.0) 2,266

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

Infosys (0.2) (0.1) $51.8

Wipro 1.4 0.1 $10.4

ICICI Bank 1.1 0.3 $31.2

HDFC Bank 3.0 0.9 $29.4

Advances / Declines BSE NSE

Advances 1,062 413

Declines 1,751 1,054

Unchanged 103 40

Volumes (` cr)

BSE 2,485

NSE 12,187



Market Outlook | India Research

RIL may announce a share-buyback program

RIL board will consider a share-buyback program on January 20, 2011,alongside its 3QFY2012 results. Given RIL’s cash pile of `61,490cr (as on

September 30, 2011) and the recent decline in share price, the buybackprogram does not surprise us. This move will address the concerns ofdeployment of cash (partly), thus we believe the buyback will be value-accretive for shareholders. Moreover, RIL has ~ 30cr treasury shares, which ifextinguished could be potentially EPS accretive by 9.7%. We await furtherclarity on the buyback details and maintain our Buy rating on the stock with atarget price of ` 1,006.

KEC International secures order worth `340cr

KEC International (KEC) has secured an order worth `340cr for theconstruction of 765kV and 400kV transmission lines in Maharashtra and

Gujarat. The order is secured from Bhopal Dhule Transmission company, awholly owned subsidiary of Sterlite Technologies. The transmission lines are apart of Built-Own-Operate-Maintain (BOOM) project awarded by PowerFinance Corporation to Sterlite Technologies.

In a short succession, KEC has pocketed orders worth `1,650cr, which hasstrengthened its order book to ~ ` 9,340cr (2.0x FY2011 revenue). The latentpotential of the company (globally diversified model and healthy return ratiosof ~ 25%) coupled with optimism surrounding the macro environment hasfactored into the stock – the scrip has rallied ~ 40% so far in the calendaryear. At the CMP of `51, the stock trades at 5.7x FY2013E EPS. Werecommend Accumulate on the stock with a target price of `53.

Result Review

MindTree

For 3QFY2012, MindTree reported USD revenue growth of merely 2.3% qoqto US$103.7mn, as volumes declined by 0.8% qoq. However, the companyreported a 3.4% qoq increase in price realization due to one-time transitionrevenue realized from a package implementation deal in Europe. In INRterms, revenue came in at ` 520cr, up 13.8% qoq. The company’s EBITDAand EBIT margins improved by 438bp and 486bp qoq to 17.3% and 13.9%,respectively, largely on the back of gains derived from INR depreciationagainst USD. PAT stood at ` 61cr, up 11.1% qoq, negatively impacted by` 2.5cr forex loss. We continue to be positive on the stock and will bereleasing a detailed result update shortly.




Infotech

For 3QFY2012, Infotech reported revenue of US$81.7mn, up merely 0.4%qoq, on the back of 2.3% qoq volume growth. The NCE vertical witnessed

volume growth of 2.0% qoq, while the ENGG vertical reported 2.3% qoqvolume growth. In INR terms, revenue came in at `416cr, up 11.8% qoq,aided by 1) 0.4% qoq volume growth, 2) 1.0% qoq positive impact becauseof increased price realization and 3) remaining gain on the back of INRdepreciation against USD in 3QFY2012. The company reported 484bp and473bp qoq expansion in its EBITDA and EBIT margins to 20.6% and 17.1%,respectively, aided by qoq INR depreciation against USD. PAT came in at` 34cr, impacted by forex loss. The stock is currently under review we will bereleasing a detailed result update on it shortly.

Result Preview

HDFC Bank – 3QFY2012

HDFC Bank is expected to announce its 3QFY2012 results today. We expectthe bank to report a rather moderate NII growth of 13.9% yoy to ` 3,162cr.Non-interest income is expected to register growth of 15.8% yoy, leading toan operating income growth of 14.4% yoy. Due to relatively similar rise inoperating expenses (14.6% yoy), pre-provision profit is expected to grow by14.3% yoy. However, provisions are expected to decline by a substantial42.5% yoy, leading to a healthy net profit growth of 30.5% yoy to ` 1,419cr.At the CMP, the stock is trading at valuations of 3.2x FY2013E P/ABV, in ourview. We maintain our Neutral recommendation on the stock.

Hero MotoCorp – 3QY2012

Hero MotoCorp (HMCL) is slated to announce its 3QFY2012 results. Weexpect the company’s top line to grow by healthy 18% yoy to `6,012cr, drivenby 11.3% yoy growth in volumes and a ~ 6% increase in average netrealization, led by price increases. Operating margin (adjusted for change inaccounting for royalty payments) is expected to expand by 126bp yoy to12.4% on account of softening of commodity prices. As a result, we expectthe bottom line (adjusted) to post a 24% yoy increase to `629cr. The stockrating is under review.

Bajaj Auto - 3QFY2012

Bajaj Auto is scheduled to announce its 3QFY2012 results today. We expectthe company’s top line to grow by a healthy 17% yoy to `4,720cr led by13.6% yoy growth in volumes and increase in average net realization. On theoperating front, EBITDA margin is expected to remain largely flat at 20%.Thus, the bottom line is expected to grow by 19% yoy growth to `791cr. Thestock rating is under review.




Quarterly Bloomberg Brokers’ Consensus Estimates

Bajaj Auto Ltd - (19/ 01/2012)

Particulars (̀ cr) 3QFY12E 3Q FY11 y-o-y (%) 2Q FY12 q-o-q (%)

Net sales 4,956 4,028 23 5,046 (2)

EBITDA 1,006 849 18 1,057 (5)

EBITDA margin (%) 20.3 21.1 21.0

Net profit 782 667 17 726 8

Hero Motor Corp Ltd - (19/ 01/ 2012)


Net sales 6,010 5,110 18 5,784 4

EBITDA 850 569 49 919 (7)

EBITDA margin (%) 14.1 11.1 15.9

Net profit 629 429 47 604 4

HDFC Bank Ltd - (19/ 01/2012)


Net profit 1,369 1,088 26 1,193 15

Axis Bank Ltd - (20/ 01/2012)


Net profit 1,014 891 14 920 10

Exide Industries Ltd - (20/01/2012)


Net sales 1,209 1,049 15 1,175 3

EBITDA 144 160 (10) 90 59

EBITDA margin (%) 11.9 15.3 7.7

Net profit 92 124 (26) 51 80

ITC Ltd - (20/01/2012)


Net sales 6,393 5,453 17 5,974 7

EBITDA 2,332 2,029 15 2,219 5

EBITDA margin (%) 36.5 37.2 37.1

Net profit 1,630 1,389 17 1,514 8




JSW Steel Ltd - Consolidated (20/01/2012)

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

Net sales 7,960 5,965 33 8,134 (2)

EBITDA 1,132 1,016 11 1,394 (19)

EBITDA margin (%) 14.2 17.0 17.1

Net profit 194 292 (33) (669) (129)

Reliance Industries Ltd (20/01/2012)


Net sales 82,712 59,789 38 78,569 5

EBITDA 7,962 9,545 (17) 9,844 (19)

EBITDA margin (%) 9.6 16.0 12.5

Net profit 4,782 5,136 (7) 5,703 (16)

United Spirits Ltd (20/01/2012)


Net sales 2,109 1,960 8 1,791 18

EBITDA 315 285 10 332 -5

EBITDA margin (%) 14.9 14.6 18.5

Net profit 119 130 (9) 148 (20)

Wipro Ltd - Consolidated (20/ 01/2012)


Net sales 9,736 6,623 47 9,095 7

EBITDA 1,873 1,476 27 1,740 8

EBITDA margin (%) 19.2 22.3 19.1

Net profit 1,470 1,224 20 1,301 13

Hindustan Zinc Ltd - (20/01/2012)


Net sales 2,653 2,601 2 2,593 2

EBITDA 1,379 1,507 (8) 1,465 (6)

EBITDA margin (%) 52.0 57.9 56.5

Net profit 1,300 1,290 1 1,345 (3)




Asian Paints Ltd - Consolidated (21/01/2012)


Net sales 2,525 2,100 20 2,251 12

EBITDA 377 345 9 323 17EBITDA margin (%) 14.9 16.4 14.3

Net profit 241 220 9 209 15

Ultratech Cement Ltd - Consolidated (21/ 01/2012)


Net sales 4,475 3,715 20 3,910 14

EBITDA 929 733 27 652 42

EBITDA margin (%) 20.7 19.7 16.7

Net profit 469 319 47 279 68

Federal Bank Ltd - (23/ 01/ 2012)


Net profit 186 143 30 191 (3)

Gail Ltd - (23/01/2012)


Net sales 9,804 8,365 17 9,699 1

EBITDA 1,597 1,333 20 1,676 (5)

EBITDA margin (%) 16.3 15.9 17.3

Net profit 995 968 3 1,094 (9)

Idea Ltd - Consolidated (23/ 01/2012)


Net sales 4,909 3,953 24 4,608 7

EBITDA 1,292 948 36 1,187 9

EBITDA margin (%) 26.3 24.0 25.8

Net profit 163 243 (33) 106 54

Kotak Mahindra Bank - (23/ 01/2012)


Net profit 421 384 10 433 (3)




Larsen & Toubro (23/ 01/2012)


Net sales 13,434 11,322 19 11,245 19

EBITDA 1,392 1,238 12 1,174 19

EBITDA margin (%) 10.4 10.9 10.4Net profit 909 841 8 798 14

Maruti Suzuki India Ltd - Consolidated (23/01/2012)


Net sales 7,544 9,326 (19) 7,537 0

EBITDA 433 902 (52) 494 (12)

EBITDA margin (%) 5.7 9.7 6.6

Net profit 228 565 (60) 240 (5)

Sterlite Industries Ltd - (23/ 01/2012) Particulars (̀ cr) 3QFY12E 3Q FY11 y-o-y (%) 2Q FY12 q-o-q (%)

Net sales 9,342 8,294 13 10,134 -8

EBITDA 2,287 1,979 16 2,482 -8

EBITDA margin (%) 24.5 23.9 24.5

Net profit 1,156 1,101 5 998 16

Economic and Political News

LAC seeks to double trade with India to US$50 bn in 2 yrs

IEA cuts 2012 oil demand growth forecast

Finance Minsiter wants US$56/ bbl upstream subsidy: Govt. sources

Corporate News

RCom plans `7,500-cr IPO for Singapore unit

I-T slaps `1,067 cr tax notice on Bharti

Sadbhav Engineering emerges lowest bidder for `325cr mining orderSource: Economic Times, Business Standard, Business Line, Financial Express, Mint

Results Calendar19/ 01/ 2012 HDFC Bank, Bajaj Auto, Hero Motocorp

20/01/ 2012Reliance Industries, ITC, Wipro, Hind. Zinc, Axis Bank, JSW Steel , United Spirits, Exide Industries, Syndicate Bank, Rallis, HTMedia, Bank of Maharashtra, Hind. Const., NIIT

21/ 01/ 2012 UltraTech Cement, Asian Paints, Zee Entertainment, Patel Engg., Sarda Energy

22/ 01/ 2012 Persistent

23/01/ 2012Larsen & Toubro, GAIL, Sterlite Inds, Kotak Mah. Bank, Idea Cellular, Maruti, Colgate, Federal Bank, D B Corp, LMW, KPITCummins, Electrosteel Castings




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

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Market Outlook 19th January 2012

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