Indian stock market and companies daily report (February 21, 2012, Tuesday)

The domestic markets are expected to open flat or marginally in green following higher closing across most of the western markets. Asian stock markets are trading flat as investors remain cautions and wait for European finance ministers in Brussels to approve a crucial second bailout for Greece.

The US markets traded choppily on Friday (closed on Monday) as the economic data releases painted a mixed picture with a report from the Conference Board showing that its index of leading economic indicators increased for the fourth consecutive month in January, while another report from the Labor Department showing only a modest increase in consumer prices in the month of January. Although investors seemed reluctant to make any significant moves going into the long weekend, optimism that European finance ministers will approve a new bailout package for Greece helped to keep traders from doing much profit taking. Meanwhile Indian shares rebounded on Friday after some consolidation the day before, with firm global cues supporting the liquidity-driven rally.

Markets Today

The trend deciding level for the day is 18,315/5,572 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 18,397 – 18,504/5,599 – 5,634 levels. However, if NIFTY trades below 18,315/5,572 levels for the first half-an-hour of trade then it may correct up to 18,208 – 18,126/5,537 – 5,511 levels.

Cement companies raise prices

Cement companies have raised prices in the northern and western regions in the range of Rs.7 to Rs.10 per bag with effect from February 17, 2011. The price hike follows the correction in the region during January due to the severe winter season, which affected construction activities. We believe the recent price hike is an effort by cement manufacturers to pass on the hike in operating costs. We are currently Neutral on the cement sector, as we believe valuations are significantly ahead of the cycle, but we maintain our Buy recommendation on JK Lakshmi Cement due to its attractive valuations, with a target price of Rs.79.

NMDC cuts ore prices; lowers volume guidance

NMDC has cut prices of iron ore fines and lumps by 20% and 3%, respectively, for 4QFY2012 on the back of the decline in global iron prices, the recent rupee appreciation and increased export duty on iron ore. The price cut by NMDC is higher than our expectations given the shortage of iron ore in the domestic markets.

NMDC has also lowered its sales volume guidance for FY2012 and FY2013. The company now expects sales volumes of 27mn tonnes and 30mn tonnes (earlier 30 mn tonnes and 33mn tonnes) for FY2012 and FY2013, respectively. Although the company has ~5mn tonnes of iron ore inventory at its mine pit-heads, however it faces logistical constraints to increase off take due to breakdown in slurry pipeline, lower availability of railway rakes and stricter regulations in transportation of iron ore in Karnataka. Considering the company’s revised sales volumes guidance, we lower our 4QFY2012 and FY2013 realization and sales volume estimates.

Although NMDC has a strong balance sheet, presence in sellers market (iron ore), low cost of production, high-grade mines and long mine life, we now expect sales volumes to witness a CAGR of only 5.2% over FY2011-2013. On account of lower volume growth and lower realization, NMDC’s bottom line is expected to grow by only 4.0% yoy during FY2013. Further, given the 23% rise in the stock price since January 1, 2012, we recommend Neutral on the stock.

Result Review – 4QCY2011

CRISIL announced its 4QCY2011 numbers. Net sales increased by 26.6% yoy to Rs.225cr (Rs.177cr) led by strong growth in the research segment. Research segments revenue increased by 34.0% yoy while the rating segment and advisory segments revenue increased by 14.1% and 7.0% respectively. EBITDA increased by 15.2% yoy to Rs.80cr (Rs.69cr) due to higher revenue. EBITDA margin declined by 352bps yoy to 35.6% (39.1%). PAT increased by 10.4% yoy to Rs.56cr (Rs.51cr) while margin declined by 366bps yoy to 24.8% (28.5%) almost in line with EBITDA margin contraction. We will be coming out with a detailed report post management interaction. We continue to maintain an Neutral rating on the stock.

Economic and Political News
- Government may let foreign individuals directly buy corporate debt
- Railways stares at a Rs.2lakh cr crunch
- Bankers agree to subscribe to Air India’s Rs.7,400cr bond issue

Corporate News
- Ashok Leyland's Optare eyes small bus market
- Frozen bank accounts led to disruptions: Kingfisher
- Essar Oil plans to raise Rs.3,000cr in next 15 months

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Indian stock market and companies daily report (February 07, 2012, Tuesday)

The domestic markets are expected to open in the green tracking positive opening in most of the Asian markets. Indian markets extended their bull run on Monday, with shares hitting fresh 14.5 week highs in early trading as positive economic data from the US raised hopes the global economy will withstand the impact of Europe's debt crisis.
Globally, US stocks retreated from multi-year highs on Monday as Greece struggled for an agreement on spending cuts needed to ensure another round of rescue funds. Greece missed a deadline on enacting reforms necessary to receive a new bailout from the European Union and the International Monetary Fund. Selling pressure remained subdued, however, limiting the downside for the markets. 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 17,711 / 5,360 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17,826 – 17,945 / 5,392 – 5,422 levels. However, if NIFTY trades below 17,711 / 5,360 levels for the first half-an-hour of trade then it may correct up to  17,592 – 17,476 / 5,392 – 5,297 levels.

L&T bags order worth Rs.1,937cr
Larsen & Toubro's (L&T) construction arm has bagged a road project worth Rs.1,937cr from the GVK Group to widen a highway in Madhya Pradesh. The contract involves designing, engineering and construction for four-laning of a major portion of Shivpuri-Dewas section of NH-3 totaling 235km. The construction period is 27 months.
At the CMP of Rs.1,383, the stock is trading at PE of 19.5x FY2013E earnings, which is below the historical trading multiple for L&T. We have used the SOTP methodology to value the company to capture all its business initiatives and investments/stakes in the different businesses. Ascribing separate values to its parent business on a P/E basis and investments in subsidiaries on P/E, P/BV and mcap basis, our target price works out to Rs.1,607, which provides 16.2% upside from current levels. Hence, we maintain our Buy view on the stock.

Upstream oil firms to bear higher subsidy
Media reports suggests that state-run upstream companies will share 38.0% of the revenue losses (under-recoveries) suffered by oil marketing companies (OMCs) due to selling fuels at discounted prices for the period April–December 2011. The upstream companies had shared 33.0% of under-recoveries during 1HFY2012. During April–December 2011, total under-recoveries of OMCs stood at Rs.97,300cr.
Thus, ONGC will have to bear subsidy burden of Rs.30,296cr for April–December 2011, which is expected to result in additional subsidy burden of Rs.12,536cr during 3QFY2012. We had pegged upstream companies share of under-recoveries at 38.0% for FY2012 and, thus, do not change our estimates. We maintain our Buy rating on ONGC with a target price of Rs.324.

3QFY2012 - Result Reviews
HUL
HUL posted a healthy set of numbers for the quarter, in-line with our estimates. The company’s top line grew by 16.4% yoy to Rs.5,853cr. Earnings for the quarter grew by 18% yoy, marginally above our estimate, to Rs.754cr. The company’s top line was driven by modest volume growth of 9% yoy. Overall, FMCG sales grew by 17% yoy, aided by 18% yoy growth in the home and personal care (HPC) and 13% yoy growth in foods businesses. During the quarter, the soaps and detergent (S&D) segment posted 21% yoy revenue growth, while its EBIT margin expanded by 573bp yoy to 13.5%. The packaged food business reported 13.5% yoy growth. The personal products segment grew by 14% yoy. At the operating level, OPM expanded by 271bp yoy to 15.1% for 3QFY2012. The company cut its ad spends and other expenses and negated the affect of gross margin pressure. We maintain our Neutral rating on the stock.
Nalco
Nalco reported disappointing 3QFY2012 results. The company’s net sales grew by 0.4% yoy to Rs.1,430cr (below our estimate of Rs.1,770cr). Raw-material costs as a percentage of net sales stood at 16.7% in 3QFY2012 compared to 8.4% in 3QFY2011. Further, power costs as a percentage of net sales stood at 39.7% compared to 31.1% in 3QFY2011. Hence, EBITDA decreased by massive 83.6% yoy to Rs.64cr and EBITDA margin contracted by 2,287bp yoy to 4.5%. Other income, however, grew by 46.4% yoy to Rs.131cr. Consequently, net profit decreased by 80.0% yoy to Rs.51cr (significantly below our estimate of Rs.224cr). We maintain our Neutral view on the stock.
GSK Consumer
For 4QCY2011, GSK Consumer reported a modest performance, which was below with our estimate on the revenue and earnings fronts. The company’s top line grew by 18.6% yoy to Rs.602cr (Rs.508cr). On the operating front, the company recorded a 127bp yoy decrease in its operating margin to 10.2%, primarily on account of higher ad spends and other expenditure. However, the fall in OPM was curbed by reducing the staff cost by 174bp yoy. Earnings for the quarter grew by 10.7% yoy to Rs.59cr (Rs.53cr) on account of higher other income. The stock is under review.
MOIL
MOIL’s 3QFY2012 results were slightly below our expectations. Net sales decreased 5.4% yoy to Rs.240cr (slightly below our estimate of Rs.248cr) which would be mainly on account of decrease in average realizations in our view. EBITDA decreased 11.1% yoy to Rs.109cr. EBITDA margin dipped 293bp yoy to 45.7% on account of slump in manganese ore prices. Other income stood flat yoy to Rs.50cr, while tax rate was higher at 33.2%, compared to 30.5% in 3QFY2011. Consequently, net profit decreased 11.9% yoy to Rs.102cr, slightly below our estimate of Rs.106cr. We maintain our Neutral view on the stock.
India Cements
For 3QFY2012, India Cements registered healthy 20.5% yoy growth in its top line to Rs.944cr on account of a substantial 16.2% yoy increase in cement realization to Rs.4,262/tonne and reasonable 6.9% yoy growth in dispatches to 2.18mn tones, as retail cement demand has picked up in South India, which is the company’s major market. Southern region posted demand growth of 3.3% yoy during the quarter. OPM rose by 443bp yoy to 20.9% due to better cement realization despite higher power and fuel and freight costs. Power and fuel cost per tonne increased by 7.4% yoy during the quarter on account on higher coal imports, costlier domestic coal and higher power tariffs in Andhra Pradesh. Freight costs per tonne were higher by 5.1% yoy on account of increased railway freight and higher price of petroleum products. The bottom line came at Rs.56cr, registering growth of 162.3% yoy. We maintain our Neutral view on the stock.
BGR Energy
BGR Energy (BGR) posted a mixed set of numbers for 3QFY2012. As expected, the company’s top line for the quarter stabilized on prior-year period’s high base; however, earnings exceeded estimates owing to better-than-expected show on the operating front. The company’s top line declined by 36.1% yoy to Rs.803.7cr (Rs.1,257cr), which was lower by 10.8% (below street) than our expectation of Rs.901.1cr. The downside in revenue mainly came from the construction and EPC segment, which declined by 38.8.% yoy to Rs.727.1cr (Rs.1,118cr). In contrast, the capital goods segment posted decent 19% yoy growth to Rs.75.2cr (Rs.63.2cr). On the EBITDA front, the company’s margin posted a positive surprise – EBITDAM  eported a sharp expansion of 463bp yoy to 16.3%, against our estimate of 12%. Margin was mainly aided by lower raw-material costs, which contracted by 730bp yoy to 73.1% as a proportion of revenue. Segment wise, the capital goods as well and construction and EPC segment offered upside to the margin, expanding more than ~400bp. As is the case since the past few quarters, we believe the construction and EPC segment would have been positively impacted by higher execution of BoP projects.
Interest cost during the quarter rose by 175% yoy/53% qoq to Rs.46.2cr, probably due to enhanced working capital debt, in our view. Led by slumped revenue, PAT declined by 37.5% yoy to Rs.54.7cr (Rs.87.6cr), however striking EBITDAM influenced the bottom line considerably – PAT came in 16% higher than our (below street) estimate of Rs.47.2cr.
Order backlog at the end of the quarter stood at Rs.8,000cr, largely aided by the Rs.1,700cr worth of order secured during the quarter. Notably, with 9MFY202 totaling mere ~Rs.2,300cr, we believe it will be challenging for the company to exceed Rs.4,000cr plus revenue target for FY2012 (management guidance). We would like to hear management’s commentary on the company’s future outlook and get more details over the quarterly numbers post which we will revise our estimates and recommendation. Currently, we remain Neutral on the stock.
Bajaj Electricals
Bajaj Electricals (BEL) posted top-line growth of 15.1% yoy to Rs.794cr (Rs.690cr) in 3QFY2012. The lighting segment registered strong 18.8% yoy growth to Rs.200cr (Rs.168cr) and the consumer durable segment registered a 24.7% yoy increase to Rs.414cr (Rs.332cr). The E&P segment registered a 5.1% yoy decline to Rs.179cr (Rs.190cr). EBITDA declined by 8.6% yoy to Rs.65cr (Rs.71cr), largely due to margin compression. EBITDA margin declined by 212bp yoy to 8.2% (10.3%), mainly due to higher other expenditure, which increased to 12.7% of net sales vs. 10.7% in 3QFY2011. PAT declined by 19.1% yoy to Rs.33cr (Rs.41cr), while margin declined by 175bp yoy to 4.1% (5.9%). We will be coming out with a detailed report post management interaction. We continue to maintain our Buy rating on the stock with a target price of Rs.201.
NCC
Nagarjuna Construction Company (NCC) posted a poor set of numbers for 3QFY2012, below our and street expectations. The company’s top line declined by 5.4% yoy to Rs.1,264cr, which was marginally above our expectation of Rs.1,215cr (Consensus: Rs.1,271cr). On the EBITDAM front, the company’s margin stood at shocking 6.1% (10.3%), registering a dip of 350bp yoy and lower than our estimate of 9.5% due to provisions (~Rs.15cr) and time and cost overruns in few projects. Interest cost came in at Rs.69.4cr, registering a yoy jump of 58.3% but a decline of 2.2% on a sequential basis. On the bottom-line front, NCC reported loss of Rs.9.5cr in 3QFY2012 vs. profit of Rs.40.5cr in 3QFY2011, against our estimate of PAT of Rs.14.0cr (Consensus: Rs.26.4cr), owing to decline in top-line and dismal margin performance. The current outstanding order book of NCC stands at Rs.21,990cr, with order inflow of Rs.9,943cr for 9MFY2012. Owing to the abysmal performance in the quarter and recent run-up in the stock price, we recommend Neutral on the stock.
GIPCL
GIPCL posted 26.9% yoy growth in its top line to Rs.391cr, driven by higher fuel costs as generation remained flat at 1,181MU. Vadodara stations I and II had PAF of 96.1% (93.7% in 3QFY2011) and 95.1% (100% in 3QFY2011), respectively. SLPP I and II stations operated at PAFs of 83.9% (89.2% in 3QFY2011) and 61.6% (60% in 3QFY2011), respectively. OPM for the quarter  stood at 24.1%, down 1,484bp on yoy basis due to higher gas prices. GIPCL’s 3QFY2012 bottom line fell by 30.6% yoy to Rs.17cr. We maintain our Buy rating on the stock, but the target price is under review.
SpiceJet
SpiceJet announced its 3QFY2012 numbers. The company’s net sales increased by 41.6% yoy to Rs.1176cr (Rs.830cr), on the back of fleet additions during the year. EBITDA declined by 117% yoy to negative Rs.19cr vs. positive Rs.114cr in 3QFY2011. EBITDA margin declined by 1,536bp yoy to negative 1.6% vs. positive 13.7% in 3QFY2011, mainly due to higher fuel costs, which increased to 50.4% of net sales vs. 37.5 in 3QFY2011. Consequently, PAT came in at negative Rs.39cr vs. profit of Rs.94cr in 3QFY2011. We will be coming out with a detailed report post management interaction. We continue to maintain our Neutral recommendation on the stock.
Siyaram Silk Mills
Siyaram Silk Mills announced its 3QFY2012 numbers. Net sales declined by 2.6% yoy to Rs.222cr (Rs.244cr). EBITDA declined by 2.0% yoy to Rs.29cr (Rs.30cr) due to lower revenue. EBITDA margin improved marginally by 9bp yoy to 13.2% (13.1%). PAT declined by 17.0% yoy to Rs.13cr (Rs.16cr), while margin declined by 103bp yoy to 5.9% (7.0%) largely due to higher depreciation and interest cost because of capacity expansion during the quarter. Depreciation increased by 18.1% yoy to Rs.6.3cr (Rs.5.4cr), while interest cost increased by 92.0% yoy to Rs.6.9cr (Rs.3.6cr). We will be coming out with a detailed report post management interaction. We continue to maintain our Buy view on the stock with a target price of Rs.426.

3QFY2012 - Result Previews
Mahindra and Mahindra
Mahindra and Mahindra (MM) is slated to announce its 3QFY2012 results. We expect the company’s top line to grow by robust 31.4% yoy to Rs.7,981cr, backed by impressive 24% yoy growth in total volumes. On the operating front, EBITDA margin is expected to witness a decline of 313bp yoy to 12% on account of increased purchases from manufacturing subsidiary MVML. As a result, the bottom line is expected to report a modest increase of 6% yoy to Rs.654cr. The stock rating is under review.
Cadila
Cadila Healthcare (Cadila) is expected to post yet another strong quarter with 12.6% yoy growth in its net sales to Rs.1,278cr on the back of robust growth on the domestic formulation and exports front. On the OPM front, we expect the company's OPM to dip by 160bp yoy to 21.3% on the back of favorable product mix. Cadila's net profit is expected to increase by 19.1% yoy to Rs.193cr, driven by top-line growth. We maintain our Buy rating on the stock with a target price of Rs.965.
ITNL
We expect IL&FS Transportation Networks (ITNL) to post a strong set of numbers for 3QFY2012 on account of higher number of projects in hand. The company’s revenue is expected to grow strongly by 78.0% yoy to Rs.1,306cr, led by underconstruction road BOT projects. We expect the company to register EBITDAM of 27.3%, down 279bp yoy, owing to higher contribution of the comparatively lowmargin E&C segment. Strong revenue growth is expected to reflect in the company’s earnings, which are expected to surge by 94.2% yoy to Rs.119.7cr. Owing to the recent sharp run-up in the stock price, we recommend an Accumulate view on the stock with a target price of Rs.227.
JK Lakshmi Cement
JK Lakshmi Cement is expected to announce its 3QFY2012 results today. We expect the company’s top-line to grow by 11.4% yoy to Rs.351cr on account of higher yoy realization. On operating front, margins are expected to improve by 550bp yoy to 13.4% aided by higher realization. The company’s net profit is expected to grow by 92% yoy to Rs.9cr (though on a lower base of last year). We recommend Neutral on the stock.

Economic and Political News
- Oil dips below US$114, Greek debt, Iran in focus
- India faces challenges on stable rating outlook, says S&P
- Upstream oil companies to bear 38% of subsidy share
- RBI marginally relaxes FX curbs for banks with big open positions

Corporate News
- LIC to pick 5% stake in Dena Bank
- Petronet in talks with Kerala government for power plant at Kochi
- PFC to raise Rs.40,000cr in FY2013
- SKS raises Rs.243cr via securitization

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Indian stock market and companies daily report (February 07, 2012, Tuesday)

The domestic markets are expected to open in the green tracking positive opening in most of the Asian markets. Indian markets extended their bull run on Monday, with shares hitting fresh 14.5 week highs in early trading as positive economic data from the US raised hopes the global economy will withstand the impact of Europe's debt crisis.
Globally, US stocks retreated from multi-year highs on Monday as Greece struggled for an agreement on spending cuts needed to ensure another round of rescue funds. Greece missed a deadline on enacting reforms necessary to receive a new bailout from the European Union and the International Monetary Fund. Selling pressure remained subdued, however, limiting the downside for the markets. 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 17,711 / 5,360 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17,826 – 17,945 / 5,392 – 5,422 levels. However, if NIFTY trades below 17,711 / 5,360 levels for the first half-an-hour of trade then it may correct up to  17,592 – 17,476 / 5,392 – 5,297 levels.

L&T bags order worth Rs.1,937cr
Larsen & Toubro's (L&T) construction arm has bagged a road project worth Rs.1,937cr from the GVK Group to widen a highway in Madhya Pradesh. The contract involves designing, engineering and construction for four-laning of a major portion of Shivpuri-Dewas section of NH-3 totaling 235km. The construction period is 27 months.
At the CMP of Rs.1,383, the stock is trading at PE of 19.5x FY2013E earnings, which is below the historical trading multiple for L&T. We have used the SOTP methodology to value the company to capture all its business initiatives and investments/stakes in the different businesses. Ascribing separate values to its parent business on a P/E basis and investments in subsidiaries on P/E, P/BV and mcap basis, our target price works out to Rs.1,607, which provides 16.2% upside from current levels. Hence, we maintain our Buy view on the stock.

Upstream oil firms to bear higher subsidy
Media reports suggests that state-run upstream companies will share 38.0% of the revenue losses (under-recoveries) suffered by oil marketing companies (OMCs) due to selling fuels at discounted prices for the period April–December 2011. The upstream companies had shared 33.0% of under-recoveries during 1HFY2012. During April–December 2011, total under-recoveries of OMCs stood at Rs.97,300cr.
Thus, ONGC will have to bear subsidy burden of Rs.30,296cr for April–December 2011, which is expected to result in additional subsidy burden of Rs.12,536cr during 3QFY2012. We had pegged upstream companies share of under-recoveries at 38.0% for FY2012 and, thus, do not change our estimates. We maintain our Buy rating on ONGC with a target price of Rs.324.

3QFY2012 - Result Reviews
HUL
HUL posted a healthy set of numbers for the quarter, in-line with our estimates. The company’s top line grew by 16.4% yoy to Rs.5,853cr. Earnings for the quarter grew by 18% yoy, marginally above our estimate, to Rs.754cr. The company’s top line was driven by modest volume growth of 9% yoy. Overall, FMCG sales grew by 17% yoy, aided by 18% yoy growth in the home and personal care (HPC) and 13% yoy growth in foods businesses. During the quarter, the soaps and detergent (S&D) segment posted 21% yoy revenue growth, while its EBIT margin expanded by 573bp yoy to 13.5%. The packaged food business reported 13.5% yoy growth. The personal products segment grew by 14% yoy. At the operating level, OPM expanded by 271bp yoy to 15.1% for 3QFY2012. The company cut its ad spends and other expenses and negated the affect of gross margin pressure. We maintain our Neutral rating on the stock.
Nalco
Nalco reported disappointing 3QFY2012 results. The company’s net sales grew by 0.4% yoy to Rs.1,430cr (below our estimate of Rs.1,770cr). Raw-material costs as a percentage of net sales stood at 16.7% in 3QFY2012 compared to 8.4% in 3QFY2011. Further, power costs as a percentage of net sales stood at 39.7% compared to 31.1% in 3QFY2011. Hence, EBITDA decreased by massive 83.6% yoy to Rs.64cr and EBITDA margin contracted by 2,287bp yoy to 4.5%. Other income, however, grew by 46.4% yoy to Rs.131cr. Consequently, net profit decreased by 80.0% yoy to Rs.51cr (significantly below our estimate of Rs.224cr). We maintain our Neutral view on the stock.
GSK Consumer
For 4QCY2011, GSK Consumer reported a modest performance, which was below with our estimate on the revenue and earnings fronts. The company’s top line grew by 18.6% yoy to Rs.602cr (Rs.508cr). On the operating front, the company recorded a 127bp yoy decrease in its operating margin to 10.2%, primarily on account of higher ad spends and other expenditure. However, the fall in OPM was curbed by reducing the staff cost by 174bp yoy. Earnings for the quarter grew by 10.7% yoy to Rs.59cr (Rs.53cr) on account of higher other income. The stock is under review.
MOIL
MOIL’s 3QFY2012 results were slightly below our expectations. Net sales decreased 5.4% yoy to Rs.240cr (slightly below our estimate of Rs.248cr) which would be mainly on account of decrease in average realizations in our view. EBITDA decreased 11.1% yoy to Rs.109cr. EBITDA margin dipped 293bp yoy to 45.7% on account of slump in manganese ore prices. Other income stood flat yoy to Rs.50cr, while tax rate was higher at 33.2%, compared to 30.5% in 3QFY2011. Consequently, net profit decreased 11.9% yoy to Rs.102cr, slightly below our estimate of Rs.106cr. We maintain our Neutral view on the stock.
India Cements
For 3QFY2012, India Cements registered healthy 20.5% yoy growth in its top line to Rs.944cr on account of a substantial 16.2% yoy increase in cement realization to Rs.4,262/tonne and reasonable 6.9% yoy growth in dispatches to 2.18mn tones, as retail cement demand has picked up in South India, which is the company’s major market. Southern region posted demand growth of 3.3% yoy during the quarter. OPM rose by 443bp yoy to 20.9% due to better cement realization despite higher power and fuel and freight costs. Power and fuel cost per tonne increased by 7.4% yoy during the quarter on account on higher coal imports, costlier domestic coal and higher power tariffs in Andhra Pradesh. Freight costs per tonne were higher by 5.1% yoy on account of increased railway freight and higher price of petroleum products. The bottom line came at Rs.56cr, registering growth of 162.3% yoy. We maintain our Neutral view on the stock.
BGR Energy
BGR Energy (BGR) posted a mixed set of numbers for 3QFY2012. As expected, the company’s top line for the quarter stabilized on prior-year period’s high base; however, earnings exceeded estimates owing to better-than-expected show on the operating front. The company’s top line declined by 36.1% yoy to Rs.803.7cr (Rs.1,257cr), which was lower by 10.8% (below street) than our expectation of Rs.901.1cr. The downside in revenue mainly came from the construction and EPC segment, which declined by 38.8.% yoy to Rs.727.1cr (Rs.1,118cr). In contrast, the capital goods segment posted decent 19% yoy growth to Rs.75.2cr (Rs.63.2cr). On the EBITDA front, the company’s margin posted a positive surprise – EBITDAM  eported a sharp expansion of 463bp yoy to 16.3%, against our estimate of 12%. Margin was mainly aided by lower raw-material costs, which contracted by 730bp yoy to 73.1% as a proportion of revenue. Segment wise, the capital goods as well and construction and EPC segment offered upside to the margin, expanding more than ~400bp. As is the case since the past few quarters, we believe the construction and EPC segment would have been positively impacted by higher execution of BoP projects.
Interest cost during the quarter rose by 175% yoy/53% qoq to Rs.46.2cr, probably due to enhanced working capital debt, in our view. Led by slumped revenue, PAT declined by 37.5% yoy to Rs.54.7cr (Rs.87.6cr), however striking EBITDAM influenced the bottom line considerably – PAT came in 16% higher than our (below street) estimate of Rs.47.2cr.
Order backlog at the end of the quarter stood at Rs.8,000cr, largely aided by the Rs.1,700cr worth of order secured during the quarter. Notably, with 9MFY202 totaling mere ~Rs.2,300cr, we believe it will be challenging for the company to exceed Rs.4,000cr plus revenue target for FY2012 (management guidance). We would like to hear management’s commentary on the company’s future outlook and get more details over the quarterly numbers post which we will revise our estimates and recommendation. Currently, we remain Neutral on the stock.
Bajaj Electricals
Bajaj Electricals (BEL) posted top-line growth of 15.1% yoy to Rs.794cr (Rs.690cr) in 3QFY2012. The lighting segment registered strong 18.8% yoy growth to Rs.200cr (Rs.168cr) and the consumer durable segment registered a 24.7% yoy increase to Rs.414cr (Rs.332cr). The E&P segment registered a 5.1% yoy decline to Rs.179cr (Rs.190cr). EBITDA declined by 8.6% yoy to Rs.65cr (Rs.71cr), largely due to margin compression. EBITDA margin declined by 212bp yoy to 8.2% (10.3%), mainly due to higher other expenditure, which increased to 12.7% of net sales vs. 10.7% in 3QFY2011. PAT declined by 19.1% yoy to Rs.33cr (Rs.41cr), while margin declined by 175bp yoy to 4.1% (5.9%). We will be coming out with a detailed report post management interaction. We continue to maintain our Buy rating on the stock with a target price of Rs.201.
NCC
Nagarjuna Construction Company (NCC) posted a poor set of numbers for 3QFY2012, below our and street expectations. The company’s top line declined by 5.4% yoy to Rs.1,264cr, which was marginally above our expectation of Rs.1,215cr (Consensus: Rs.1,271cr). On the EBITDAM front, the company’s margin stood at shocking 6.1% (10.3%), registering a dip of 350bp yoy and lower than our estimate of 9.5% due to provisions (~Rs.15cr) and time and cost overruns in few projects. Interest cost came in at Rs.69.4cr, registering a yoy jump of 58.3% but a decline of 2.2% on a sequential basis. On the bottom-line front, NCC reported loss of Rs.9.5cr in 3QFY2012 vs. profit of Rs.40.5cr in 3QFY2011, against our estimate of PAT of Rs.14.0cr (Consensus: Rs.26.4cr), owing to decline in top-line and dismal margin performance. The current outstanding order book of NCC stands at Rs.21,990cr, with order inflow of Rs.9,943cr for 9MFY2012. Owing to the abysmal performance in the quarter and recent run-up in the stock price, we recommend Neutral on the stock.
GIPCL
GIPCL posted 26.9% yoy growth in its top line to Rs.391cr, driven by higher fuel costs as generation remained flat at 1,181MU. Vadodara stations I and II had PAF of 96.1% (93.7% in 3QFY2011) and 95.1% (100% in 3QFY2011), respectively. SLPP I and II stations operated at PAFs of 83.9% (89.2% in 3QFY2011) and 61.6% (60% in 3QFY2011), respectively. OPM for the quarter  stood at 24.1%, down 1,484bp on yoy basis due to higher gas prices. GIPCL’s 3QFY2012 bottom line fell by 30.6% yoy to Rs.17cr. We maintain our Buy rating on the stock, but the target price is under review.
SpiceJet
SpiceJet announced its 3QFY2012 numbers. The company’s net sales increased by 41.6% yoy to Rs.1176cr (Rs.830cr), on the back of fleet additions during the year. EBITDA declined by 117% yoy to negative Rs.19cr vs. positive Rs.114cr in 3QFY2011. EBITDA margin declined by 1,536bp yoy to negative 1.6% vs. positive 13.7% in 3QFY2011, mainly due to higher fuel costs, which increased to 50.4% of net sales vs. 37.5 in 3QFY2011. Consequently, PAT came in at negative Rs.39cr vs. profit of Rs.94cr in 3QFY2011. We will be coming out with a detailed report post management interaction. We continue to maintain our Neutral recommendation on the stock.
Siyaram Silk Mills
Siyaram Silk Mills announced its 3QFY2012 numbers. Net sales declined by 2.6% yoy to Rs.222cr (Rs.244cr). EBITDA declined by 2.0% yoy to Rs.29cr (Rs.30cr) due to lower revenue. EBITDA margin improved marginally by 9bp yoy to 13.2% (13.1%). PAT declined by 17.0% yoy to Rs.13cr (Rs.16cr), while margin declined by 103bp yoy to 5.9% (7.0%) largely due to higher depreciation and interest cost because of capacity expansion during the quarter. Depreciation increased by 18.1% yoy to Rs.6.3cr (Rs.5.4cr), while interest cost increased by 92.0% yoy to Rs.6.9cr (Rs.3.6cr). We will be coming out with a detailed report post management interaction. We continue to maintain our Buy view on the stock with a target price of Rs.426.

3QFY2012 - Result Previews
Mahindra and Mahindra
Mahindra and Mahindra (MM) is slated to announce its 3QFY2012 results. We expect the company’s top line to grow by robust 31.4% yoy to Rs.7,981cr, backed by impressive 24% yoy growth in total volumes. On the operating front, EBITDA margin is expected to witness a decline of 313bp yoy to 12% on account of increased purchases from manufacturing subsidiary MVML. As a result, the bottom line is expected to report a modest increase of 6% yoy to Rs.654cr. The stock rating is under review.
Cadila
Cadila Healthcare (Cadila) is expected to post yet another strong quarter with 12.6% yoy growth in its net sales to Rs.1,278cr on the back of robust growth on the domestic formulation and exports front. On the OPM front, we expect the company's OPM to dip by 160bp yoy to 21.3% on the back of favorable product mix. Cadila's net profit is expected to increase by 19.1% yoy to Rs.193cr, driven by top-line growth. We maintain our Buy rating on the stock with a target price of Rs.965.
ITNL
We expect IL&FS Transportation Networks (ITNL) to post a strong set of numbers for 3QFY2012 on account of higher number of projects in hand. The company’s revenue is expected to grow strongly by 78.0% yoy to Rs.1,306cr, led by underconstruction road BOT projects. We expect the company to register EBITDAM of 27.3%, down 279bp yoy, owing to higher contribution of the comparatively lowmargin E&C segment. Strong revenue growth is expected to reflect in the company’s earnings, which are expected to surge by 94.2% yoy to Rs.119.7cr. Owing to the recent sharp run-up in the stock price, we recommend an Accumulate view on the stock with a target price of Rs.227.
JK Lakshmi Cement
JK Lakshmi Cement is expected to announce its 3QFY2012 results today. We expect the company’s top-line to grow by 11.4% yoy to Rs.351cr on account of higher yoy realization. On operating front, margins are expected to improve by 550bp yoy to 13.4% aided by higher realization. The company’s net profit is expected to grow by 92% yoy to Rs.9cr (though on a lower base of last year). We recommend Neutral on the stock.

Economic and Political News
- Oil dips below US$114, Greek debt, Iran in focus
- India faces challenges on stable rating outlook, says S&P
- Upstream oil companies to bear 38% of subsidy share
- RBI marginally relaxes FX curbs for banks with big open positions

Corporate News
- LIC to pick 5% stake in Dena Bank
- Petronet in talks with Kerala government for power plant at Kochi
- PFC to raise Rs.40,000cr in FY2013
- SKS raises Rs.243cr via securitization

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Indian stock market and companies daily report (February 06, 2012, Monday)

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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