Nik's Diary
The Indian market
opened flat, mirroring SGX Nifty which is trading flat to marginally lower in
the opening trade. Major Asian markets – Hong Kong, China, Taiwan, Malaysia and
Japan are closed today. US markets ended higher on Friday partly due to a positive
reaction to a commerce department report showing a much narrower than expected
US trade deficit for the month of December, with the data potentially leading
to an upward revision to the disappointing fourth quarter GDP data. The report
showed that the US trade deficit fell almost 21% in December to US$38.5bn,
marking the biggest drop in four years, from a revised US$48.6bn in November,
while economists had expected the deficit to shrink to US$46.0bn. In another
positive sign for the global economy, a separate report released by the Chinese
National Bureau of Statistics showed that the Chinese trade surplus came in at
US$29.2bn in January compared to the US$24.2bn surplus expected by economists.
The Indian markets fell for the seventh session in a row as growth concerns and
weaker earnings overshadowed firm global cues.
Sun Pharmaceuticals -
RU3QFY2013
Sun Pharmaceutical Industries (Sun Pharma)
reported a much higher-thanexpected 3QFY2013 performance. Its net sales
reported a 33.0% yoy growth. The Adj. net profit grew by 31.9% yoy, driven by a
higher-than-expected improvement in sales and a higher-than-expected expansion
in the OPM, which in at 44.2% V/s expectation of 40.6%. Source: Angel Broking
M&M - RU3QFY2013
Mahindra and Mahindra (MM) reported slightly
lower-than-expected bottom-line performance for 3QFY2013 primarily due to
the contraction in EBITDA margins led by sequential decline in net average
realization. The top-line registered a strong growth of 28.5% yoy (9.8% qoq) to
`10,774cr; however it was lower than our expectations of `11,070cr largely due
to the sequential decline in net average realization in the AS (1% qoq) and
farm equipment segment (FES, 1.3% qoq). The top-line growth on a yoy basis was
driven by a robust volume (17.5% yoy) and net average realization growth in the
AS (22.5% yoy). Total volumes, however, posted a growth of 10.9% yoy (10.8%
qoq) as tractor sales witnessed a decline of 1.6% yoy on account of weak
domestic demand. The EBITDA margins contracted 96bp yoy (16bp qoq) to 11.2%
owing to raw-material cost pressures, which as a percentage of sales increased
153bp yoy (97bp qoq) to 75.9%. As a result, bottom-line came in at `836cr, a
growth of 26.3% yoy; however it was down 7.3% qoq largely due to absence of
dividend income from the subsidiaries. The bottomline benefitted from the
reduced tax rate on account of higher R&D spends. We broadly retain
our top-line and EBITDA margin estimates for FY2013/14. However our earnings
estimates are revised slightly upwards to factor in the lower tax-rate
going ahead as guided by the management. We expect AS to drive the total volume
growth of the company led by the success of the new launches (XUV5OO, Quanto
and Rexton) in the utility vehicle (UV) segment. We expect tractor volumes to
recover in FY2014 and clock a growth rate of 8% after posting a decline of 4%
in FY2013. At `883, MM is trading at 13.7x FY2014E earnings. Source: Angel Broking
Hindalco - RU3QFY2013
Hindalco’s reported lower than expected
performance both on the top line and bottom-line front. Hindalco’s net
sales grew 3.0% yoy to `6,790cr (below our estimate of `7,199cr)
mainly on account of lower than expected volumes. In aluminium segment, both
alumina and aluminium production fell by 5.0% yoy each to 326kt and 139kt
respectively. The downstream sales stood at 59kt. Aluminium segment net sales
declined by 0.9% yoy to `2,215cr mainly due to lower production at the
Belgaum refinery due to lack of bauxite availability. In copper segment, copper
cathode production decreased by 4.3% yoy to 84kt whereas CCR production
declined by 3.7% yoy to 37kt. However, the Copper segment net sales increased
by 5.5% yoy to `4,661cr. On the operating front, aluminium segment EBIT
decreased by 33.4% yoy to `206cr due to decrease in realizations coupled with
increase in fuel and power costs. Nevertheless, Copper segment EBIT however
improved by 4.3% yoy to `225cr. Overall, Hindalco’s EBITDA declined by 18.6%
yoy to `582cr and EBITDA margin slipped 228bp yoy to 8.6% during 3QFY2013. Interest
expenses increased substantially by 113.0% yoy to `169cr on the back of
new bonds raised during 1HFY2013. Other income was also higher by 93.2% yoy to
`174cr. The company reported an exceptional item of `144cr related to some
write-backs. Consequently, adjusted net profit declined by 35.8% yoy to
`289cr (below our estimate of `404cr). The company aims to start the
Mahan smelter by April 2013 while it is in the process of commissioning Utkal
refinery by March 2014. At current aluminium prices, we anticipate Mahan
smelter to make loss during FY14 as it will not be able to commence coal
production from the Mahan coal block until atleast 18 months in our view. Source:
Angel Broking
Canara Bank - RU3QFY2013
Canara Bank reported subdued operating
performance, as its pre-provisioning profit declined by 3.8% yoy, which was
in-line with our expectations. Asset quality pressures continued for the bank
during the quarter, as slippages remained elevated, which resulted in 24.9% yoy
increase in provisioning expenses and hence the bank witnessed 18.9% yoy
decline in its bottom-line. At the current market price, the stock trades at
cyclically moderate valuation of 0.8x FY2014E ABV vs. eight-year average
of 1.1x and range of 0.7-1.4x. Source: Angel Broking
Cadila Healthcare - RU3QFY2013
Cadila Healthcare reported below expected
numbers for 3QFY2013, except on the sales front. The company’s sales for the
quarter were just-in-line with estimates at `1,561cr.On the operating front,
the gross and operating margins came below expectations. This along with, a
higher tax expense during the quarter resulted in net profit coming in a tad
lower than expectations. Overall, the Adj. net profit came in at `103cr, a dip
of 31.0%. Management expects the company to be US $3bn by 2015. Source:
Angel Broking
Bharat Forge - RU3QFY2013
Bharat Forge (BHFC) reported disappointing
performance for 3QFY2013 led by severe weakness in the domestic as well as the
export markets which resulted in a volume decline of 32.4% yoy (19.1% qoq). For
3QFY2013, standalone revenue posted a significant decline of 28.5% yoy (22.5%
qoq) to `673cr led by 22.1% (9.3% qoq) and 33.2% yoy (33.5% qoq) decline
in domestic and export revenues respectively. BHFC witnessed significant
decline in revenues across all the geographies with the key markets of India,
US and Europe experiencing a decline of 24%, 24.2% and 42.4% respectively.
The net average realization however, registered a growth of 6.1% yoy as
it benefitted from the higher share of machining component. On the operating
front, margins contracted 424bp yoy (124bp qoq) to 21.2% which was below
our estimates of 23.3% primarily on account of lower utilization levels
(~50% in domestic operations). The company also initiated production cuts in an
attempt to reduce inventories and align production levels with the demand
environment. Hence operating profit and net profit registered a sharp decline
of 40.5% (26.8% qoq) and 53.9% yoy (48.5% qoq) respectively. BHFC also posted a
disappointing performance in its wholly owned overseas subsidiaries (wos) with
top-line registering a decline of 2.2% yoy. BHFC posted a net loss of
`6cr at wos as against a profit of `1cr in 3QFY2012. Even the
subsidiary in China posted a net loss of `12cr during the quarter. The
subsidiaries performance continues to be impacted due to the lower utilization
levels caused by downturn in the heavy truck market in China and decline in
demand in Europe. At `219, the stock is trading at 9.5x FY2014 earnings. Source:
Angel Broking
Gujarat State Petronet - RU3QFY2013
Gujarat State Petronet Ltd (GSPL) reported
disappointing 3QFY2013 results. Total operating revenues decreased by 2.8% yoy
to `266cr mainly due to decline in transmission volumes, partially offset by
higher tariffs. Transmission volumes for 3QFY2013 decreased by 16.0% yoy to
27.56mmscmd whereas transmission tariffs increased by 15.5% yoy to
`1/scm. EBIDTA also decreased by 4.9% yoy to `239cr mainly due to higher
operating expenses. Depreciation expenses rose by 3.8% yoy to `48cr. Tax rate
declined marginally to 33.0% in 3QFY2013 compared to 33.9% in 3QFY2012. Hence,
PAT decreased by 5.7% yoy to `119cr. Source: Angel Broking
BGR - RU3QFY2013
For 3QFY2013, BGR Energy's (BGR) top-line
growth came in flat yoy at `805cr. The 22% yoy decline in revenue from
the Capital Goods segment at `59cr (`75cr in 3QFY2012) was offset by a 2.4% yoy
growth in revenue from the Construction and EPC segment at `746cr (`729cr in
3QFY2012). On the operating front, the EBITDA margin contracted by 259bp yoy to
13.7%, mainly on account of a 289bp yoy contraction in margin of the
Construction and EPC segment. Interest cost grew by 9% yoy to `50cr (owing to
elevated interest rate scenario and enhanced working capital requirements).
Consequently, the net profit declined by 24% yoy to `41cr. Source:
Angel Broking
NCC - RU3QFY2013
For 3QFY2013, NCC posted poor performance
on the revenue front; however higher other income due to asset sale and lower
tax expense help boost the bottom line growth. On the top line front, NCC
reported a decline of 6.3% yoy to `1,184cr, which was significant lower than
our estimate of `1,427cr. On the EBITDAM front, the company’s EBITDA
margins stood at 7.2% (down 116bp sequentially), which were below our
estimate of 8.4%. This was mainly on back of lower-than-expected execution
during the quarter. Interest cost came in at `99cr a decline of 7.6% on a yoy
basis. On the bottom line level, NCC reported PAT of `11cr (was in line with
our estimate of `11cr) against a loss of 9cr in 3QFY2012 owing to higher other
income and lower tax expense. The current outstanding order book of NCC stands
at `18,799cr, with order inflow of `3200cr till date. Source:
Angel Broking
Subros - RU3QFY2013
Subros posted better-than-expected results
for 3QFY2013 driven by a strong volume growth of 30.7% yoy (41.1% qoq) leading
to a 28.6% yoy (17.1% qoq) growth in the top-line. The volumes during the
quarter were boosted by the festival demand and also due to the low base of
last year. The 3QFY2012 volumes were impacted due to the strike at one of its
largest customer, Maruti Suzuki. The EBITDA margin jumped 346bp yoy to 10.3%
primarily due to the operating leverage benefits. On a sequential basis too, it
expanded by 77bp. Hence, operating profit grew by 94% yoy (26.6% qoq) to `33cr.
Led by strong operating performance, the net profit stood at `6cr as against
`2cr in 3QFY2012 and `3r in 2QFY2013. At `28 the stock is trading at 5.5x
FY2014E earnings. Source: Angel Broking
Cravatex - RU3QFY2013
Cravatex reported poor set of numbers for
3QFY2013. Top-line plunged by 42.6% yoy to `49cr on a consolidated basis on
account of order lumpiness in the same quarter previous year. Net sales from
International segment and domestic segment fell significantly by 68% (due to
high base effect) and 39% yoy. The contribution from the domestic sales has
increased from 83% in 3QFY2012 to 89% in 3QFY2013. On the operating front the
EBITDA dip by 32.7% yoy to `4cr. However the EBITDA margins expanded by 109bp
yoy mainly on account of 52.2% lower raw material cost. On the segmental front,
the EBIT margin for the domestic segment contracted by 20bp yoy while the
international segment reported a margin of 5.7%, higher by 203bp yoy. The
company reported a bottom-line of `1.4cr, low by 52.3% yoy. Source: Angel Broking
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