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Market Outlook 070812

Market Outlook 070812

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Published by Angel Broking

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Published by: Angel Broking on Aug 07, 2012
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11/30/2013

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Market Outlook 
 
 August 7, 2012
 
 www.angelbroking.com
 
Market Outlook 
 
 August 7, 2012
Dealer’s Diary 
Indian markets are expected to open flat, tracing flat to marginally positiveopening trades in the SGX Nifty and the major Asian bourses. Most of the Asianbourses have edged slightly higher ahead of a Bank of Japan policy meetingtomorrow, after Germany backed a ECB bond buying plan to ease the region’sdebt crisis.The US markets gave back ground in the latter part of the trading session onMonday, but still ended the session mostly higher after seeing early strength andextended the substantial upward move seen during the last trading session. Traderscontinued to react positively to last Friday's monthly jobs report, which showedmuch stronger than expected job growth in the month of July. The Europeanmarkets also edged higher on Monday, as sentiment was influenced by positivenews out of Greece and the U.S. jobs data released in the previous session.Meanwhile, the Indian markets rose sharply on Monday, extending rally of lastweek, as upbeat U.S. employment data as well as modest growth in the U.S.service sector in July, eased worries looming over global growth.
Markets Today 
The trend deciding level for the day is 17,393 / 5,279 levels. If NIFTY trades abovethis level during the first half-an-hour of trade then we may witness a further rally up to 17,472 – 17,531 / 5,297 – 5,311 levels. However, if NIFTY trades below17,393 / 5,279 levels for the first half-an-hour of trade then it may correct up to17,333 – 17,254 / 5,265 – 5,247 levels.
Indices S2 S1 PIVOT R1 R2
SENSEX 17,254 17,333 17,393 17,472 17,531NIFTY 5,247 5,265 5,279 5,297 5,311
News Analysis
 
Britannia to pay royalty for using Wadia group name
 
 Aurobindo Pharma gets approval for Montelukast Tablets
 
Sadbhav Engineering emerges L1 for
 ` 
378cr irrigation projects
 
IVRCL bags orders worth
 ` 
620cr
 
1QFY2013 Result Reviews- DLF, SAIL, Cadila Healthcare, Andhra Bank,Britannia, LMW, Relaxo Footwear, Prakash Industries
 
1QFY2013 Result Previews- J&K Bank, MOIL, Aurobindo Pharma 
Refer detailed news analysis on the following page
 
Net Inflows (August 3, 2012)
`
cr Purch Sales Net MTD YTD
FII 1,510 1,342 168 979 54,260MFs 420 508 (88) (44) (8,122)
FII Derivatives (August 6, 2012)
`
cr Purch Sales Net Open Interest
Index Futures
1,234 853 381 14,194
Stock Futures
1,406 792 615 24,098
Gainers / Losers
Gainers LosersCompany Price (
`
)
chg (%)
Company Price (
`
)
chg (%)
RIL
785
5.7
Britannia Inds
460
(3.0)
REC
206
5.3
Godrej Cons
618
(2.8)
Reliance Cap
350
 4.4
BPCL
344
(2.4)
Gujarat State Pet
75
 4.3
India Cements
85
(2.2)
 Wockhardt
1,054
 4.3
Pipavav Defence
61
(2.2)
Domestic Indices Chg (%) (Pts) (Close)
BSE Sensex
1.3
215.0 17,413Nifty 
1.3
66.9 5,283MID CAP
0.5
32.4 6,105SMALL CAP
0.8
51.5 6,597BSE HC
0.6
41.3 7,317BSE PSU
0.3
20.8 7,090BANKEX 
1.4
163.2 11,998 AUTO
1.7
153.6 9,173METAL
1.0
99.0 10,301OIL & GAS
3.0
245.9 8,352BSE IT
(0.1)
(6.2) 5,346
Global Indices
Chg (%)
(Pts) (Close)
Dow Jones
0.2
21.3 13,118NASDAQ
0.7
22.0 2,990FTSE
0.4
21.5 5,809Nikkei
 2.0
171.2 8,726Hang Seng
1.7
332.5 19,999Straits Times
0.7
20.5 3,072Shanghai Com
1.0
22.1 2,155
Indian ADRs
Chg (%)
(Pts) (Close)
INFY
1.5
0.6 $40.7 WIT
1.0
0.1 $8.0IBN
1.2
0.4 $35.0HDB
(0.3)
(0.1) $35.9
Advances / Declines BSE NSE
 Advances 1,676 492Declines 1,162 989Unchanged 121 70
Volumes (
`
cr)
BSE 1,685NSE 8,639
 
 
 www.angelbroking.com
Market Outlook 
 August 7, 2012
Britannia to pay royalty for using Wadia group name
Britannia Industries, Bombay Dyeing and Manufacturing, and Go Airlines (India)will have to pay royalty to the parent for using the ‘Wadia Group’ brand nameand for sharing common services. Both the royalty and shared service costs will bepaid to the group holding company Nowrosjee Wadia and Sons Ltd (NWS). Wadiagroup chairman Nusli Wadia stated that all group outfits — listed and unlistedwould be subjected to royalty. As per the agreement, Wadia group can charge upto 0.25% towards royalty, but it plans to keep it at 0.1%. Further, the groupcompanies will also shell out up to 0.25% of their net sales as costs for sharingcommon services including legal, taxation and treasury, offered by the promotergroup. We believe this is negative for Britannia.
We continue to maintain our Buyrecommendation on Britannia with a target price of
`
633.
 Aurobindo Pharma gets approval for Montelukast Tablets
 
 Aurobindo Pharma has announced that it has received the final approvals fromthe US Food & Drug Administration (USFDA) to manufacture and marketMontelukast Sodium Tablets 10mg (ANDA 202468) and Montelukast SodiumChewable Tablets 4mg and 5mg (ANDA 202096). The products are ready for afirst-day launch. Montelukast Sodium Tablets 10mg and Chewable Tablets 4mgand 5mg are the generic equivalent of Merck & Co. Inc’s Singulair Tablets 10mgand Chewable Tablets 4mg and 5mg respectively.The annual sales of Montelukast Sodium Tablets 10mg is approximately US$3.5billion and that of Montelukast Sodium Chewable Tablets is US$1.1 billion for thetwelve months ending March 2012 according to IMS. The products have beenapproved out of its Unit VII (SEZ) formulations facility in Hyderabad, India. Aurobindo now has a total of 157 ANDA approvals (131 final approvals including1 from Aurolife Pharma LLC and 26 tentative approvals) from the USFDA. Overall,the company expects around 7-8 players in the product. Given the size of theproduct, the product can contribute around US $20-30mn for the full year.However, this has already been included in our financials and the 15% yoy growthrevenue target for the FY2013.
At the current market price, the stock trades at 9.0x FY2014E earnings.
 
Wemaintain our estimates and Buy recommendation with a target price of
`
156.
Sadbhav Engineering emerges L1 for 
 ` 
378cr irrigation projects
Sadbhav Engineering (SEL) has emerged lowest bidder for five irrigation projects inGujarat. These projects are being awarded by Sardar Sarovar Narmada NigamLimited, Gandhinagar, Gujarat for aggregating contract value of
 ` 
378cr. Theorder back of the company stands at ~
 ` 
7,591cr (3.0x FY2013 revenues)providing revenue visibility. At current levels, the stock is trading at valuations of12.8x FY2014E earnings and 1.9x FY2014E P/BV on standalone basis. Based ona Target P/E multiple of 8x and valuing the company’s BOT arm on DCF basis,our SOTP based Target Price works out to
 ` 
182.
Hence, we recommend Buy onthe stock.
 
 
 
 www.angelbroking.com
Market Outlook 
 August 7, 2012
IVRCL bags orders worth
 ` 
620cr 
IVRCL has bagged orders worth
 ` 
620cr in the transportation, buildings and powerdivisions. The transportation division has received orders worth
 ` 
301.7cr from Rail Vikas Nigam Ltd. The order involves 2 packages and has been awarded to IVRCL-MRT (JV) with a completion period of 42 months. The buildings division hasreceived orders to the tune of
 ` 
257.1cr which include an order worth
 ` 
132.7crfrom the roads and buildings department, Government of Andhra Pradesh, and a
 ` 
52.8cr order from the Department of Atomic Energy. The power division hassecured an order worth
 ` 
61.0cr from the City and Industrial DevelopmentCorporation of Maharashtra Ltd, Mumbai.
We maintain our Buy view on the stockwith a sum of the parts (SoTP) based target price of
`
61.
Result Reviews
DLF (CMP:
`
211/ TP:-/ Upside :-)
DLF reported disappointing 1QFY2013 results as both net sales and net profitwere below our estimates. DLF’s sales declined by 10.1% yoy and 16% qoq, whichwas lower than our expectation. The revenue came in at
 ` 
2,198cr for the quarterbelow our expectation of
 ` 
2,550cr. EBITDA declined 3.6%, as there was EBITDA margins expansion by 300bps to 48.6% during the quarter. PAT was down 18.3%for the quarter, due to higher than expected interest cost which has been eatinginto profitability. PAT came in at
 ` 
293cr during the quarter down 18.3% yoy. Wewill come out with a detailed note post the analyst call.
We maintain Neutral ratingon the stock.
Y/E Sales OPMPATEPSROEP/EP/BVEV/EBITDAEV/SalesMarch (
`
cr) (%)(
`
cr)(
`
)(%)(x)(x)(x)(x)
FY2013E
9,878
 
44.71,631106.521.51.414.06.3
FY2014E
12,033
 
46.12,27713.48.715.51.311.15.1
 
SAIL (CMP:
`
85/ TP:-/ Upside :-)
SAIL reported disappointing 1QFY2013 results as both net sales and net profitwere below our estimates on account of lower-than-expected sales volumes. SAIL’s1QFY2013 net sales declined by 1.6% yoy to
 ` 
10,641cr (below our estimates of
 ` 
13,249cr) mainly due to lower volumes in the quarter which were down 9.1% yoy to 2.5mn tonne. Power and fuel costs and other expenditure rose 20.3% yoy and119.7% yoy to
 ` 
1,224 and
 ` 
1,710cr, respectively. Raw material costs declined by 12.4% yoy to
 ` 
4,335cr due to a decrease in coal costs in our view. Hence, theEBITDA increased by 15.5% yoy to
 ` 
1,515cr and EBITDA margin improved by 210bp yoy to 14.2% (slightly below our estimate of 14.0%). The company reportedan exceptional item related to forex loss of
 ` 
257cr in 1QFY2013, compared to anexceptional forex loss of
 ` 
12cr in 1QFY2012. Hence, the reported net profitdecreased by 15.8% yoy to
 ` 
696cr. However, excluding exceptional items, theadjusted net profit increased by 13.6% yoy to
 ` 
953cr (below our estimate of
 ` 
1,077cr) in 1QFY2013. Currently, SAIL is trading at rich valuations of 8.4x and

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