It is expected that the Indian markets to open in green tracking flat to positive opening in most Asian markets , reinforced by the passage of the bill to end the government shutdown sixteen days and raise the roof therefore debt , the House and Senate passed a bill .
U.S. exchange markets significantly on Thursday after showing a notable shift downward in the opening. The initial weakness was due to profit booking after the surge of Wednesday , however , the selling pressure waned not long after opening . The subsequent recovery of the actions came as traders continue to digest the news that lawmakers could finally end the tax dispute in Washington. Both the House of Representatives and Senate passed a bill to end the government shutdown sixteen days and raise the debt ceiling , which was then signed by President Barack Obama. Meanwhile, most European markets ended in negative territory . Investors breathed a sigh of relief after U.S. lawmakers to reach a last-minute deal to avoid a potential default leads to rebound in the afternoon trading session .
Indian Indian markets fell on Thursday, with IT stocks pacing the decliners after the dispute over U.S. tax matters has been postponed to a later date , rather than resolve .
The trend deciding level for the day is 20474/6063 levels . If NIFTY trades above this level during the first half hour of trade then we may witness an act further to 20572-20728 / 6094-6141 levels . However, if NIFTY following operations 20474/6063 levels for the first half hour of trade then it may correct up to 20317-20219 / 6015-5985 levels .
Reports NMDC turnover better than expected for 2QFY2014
NMDC reported sales of 6.5 million tons ( +11.1 % yoy ) during 2QFY2014 , which was higher than our estimate of 5.8 million tonnes . Their production volumes also grew by 11.1 % yoy to 6.1mn tonnes. By October 2013 , NMDC had hiked global prices for iron ore Rs.100/tonne to Rs.4 , 300 per tonne after steel prices and the prices of sponge iron increased by 5.3 % during September . Moreover, steel commanders ( including power supplies, such as SAIL and RINL ) have reported sales volumes better than expected for 2QFY2014 , indicating a rebound in domestic demand. We maintain our Accumulate rating on the stock with a target price of Rs.148 .
Sadbhav Engineering has emerged as the highest bidder for Bharat Coking coal supply
Sadbhav Engineering has been declared the highest bidder ( L1 ) for the project worth Rs.302.3cr in connection with the offering invited by Bharat Coking Coal Ltd ( a subsidiary of Coal India Ltd . ) , Dhanbad . The scope of work includes hiring HEMM for OB removal and extraction and transportation of coal from IV ( B ) , III , II l (T ) and | ( B ) Patch seams Dhansar J Kusunda Colliery Area. We maintain our Buy rating on the stock with a target price of Rs.99 .
HCL Technologies ( CMP : Rs.1 , 083 / TP : – / The good: – )
For 1QFY2014 , HCL Tech slightly disappointed in the revenue front , but significantly exceeded expectations in operating performance and on the global front line. The dollar revenues grew 3.5 % QoQ to U.S. $ 1270 billion, led by a strong 8.8 % qoq dollar revenue growth in infrastructure management services ( IMS ) . Excluding IMS , the revenue growth was subjected to 1 % qoq. In INR terms , revenue stood at Rs.7 , 961 , up 14 % from the previous quarter . HCL Tech EBIT margin increased substantially by ~ 310bp qoq to 23.8 % despite giving wage increases during the quarter, which is a commendable task . Historically , the operating margin has been a concern for HCL Tech but the company has ignored all concerns in consistently increasing operating margins for six quarters. PAT stood tall to Rs.1 , 416cr , 1 9% from the previous quarter , helped by strong operating profits .
HCL Tech gained 9 transformation deals during the quarter and reserved USA TCV worth $ 1bn + deals , maintaining sustained momentum ~ U.S. firm TCV $ 1bn worth of deals each quarter. HCL Tech has a strong position in one of the fastest growing services vertical IMS and on the back of this, the company has grown largely on par with their peers. The concern that the company is left with is the smooth growth in core software services for four consecutive quarters and that it would remain vigilant . Overall, the company performed exceptionally well in front margins. Currently the population is under review .
Axis Bank ( CMP : Rs.1 , 095 / TP : Rs.1 , 293 / The good: 18.1 % )
Axis Bank delivered strong performance in the quarter, with revenue growth of 21.3 % yoy to Rs.1 , 362cr , which was in line with oursRs . and ahead of streetsRs . expectations. NII grew strongly by 26.2 % , again in line with oursRs . and ahead of streetsRs . Rs.2 expectations , 937cr . Non-interest income of the bank grew at a moderate pace of 10.9 % yoy to Rs.1 , 766cr . Overall , operating income grew 20 % yoy to Rs.4 , 703cr and earnings before provisions grew by 26.2 % yoy to Rs.2 , 750cr . Net interest margins of the bank fell 7 bp to 3.79 % from the previous quarter , which was much less than the decrease of the peers as well as expectations . On the front of the quality of assets, gross and net non-performing assets for the bank absolute grew 10 % and 6 % , respectively , from the previous quarter , which given the current difficult macro context seems to be a modest increase . At CMP , the stock is trading at valuations of 1.2x FY2015 ABV ( around 60 % discount to HDFC Bank) , which is also below our estimate of long-term fair value for the bank. In the short term, given the weak macroeconomic environment and cautious outlook for the sector, as shares Axis Bank can not meet the estimates of fair value, but from a structural point of view , compared with their peers, given its franchise and capital adequacy , remains one of the preferred banks , in our view , from a medium-term perspective .
DB Corp ( CMP : Rs.247 / TP : Rs.282 / backward : 14 % )
For 2QFY2014 , leading performance of DB Corp was in line with our estimates. First line of the company grew by 14.7 % yoy to Rs.434cr on the back of 16.7% growth of advertising revenues and 14.0 % of growth in circulation revenue .
Despite incurring pre -operative marketing and launch costs of new editions Rs.2cr and Rs.5cr forex loss , operating profit of DB Corp grew by 27.3 % yoy to Rs.110cr . OPM expanded by 248bp yoy to 25.2% in operating losses in emerging issues to Rs.8cr Rs.10cr reduced . Consequently , net profit grew 28 % yoy to Rs.62cr . At current market price , DB Corp trades at 15x FY201 consolidated EPS of Rs.16.9 5E . We maintain accumulate in action with target price of Rs.282 .
South Bank India – ( CMP : Rs.21 / TP : – / The good: – )
South Indian Bank gave results better than expected earnings , however , asset quality witnessed continual pressure . At the operational level , net interest income of the bank grew at a healthy pace of 22.3 % yoy , while noninterest income de- grew by 15.5 % yoy ( after answering MTM loss ~ Rs.20cr ) , leading to a 14.9 % yoy growth in operating income . Operating expenses grew much higher than expected by 25.0 % year on year and therefore , growth in pre-provisioning profit is capped at 6.2 % yoy. On the front of asset quality , the bank witnessed continued weakness , since the absolute levels of gross and net NPA increased by 24.7 % and 26.2 % , respectively. Provision expense de- grew by 64.7 %, which allowed the bank to clock revenue growth of 30.5 % yoy. In recent quarters, the asset quality of the bank has witnessed pressures . Therefore, given the weak macro environment we remain cautious in action. At the CMP , the stock is trading at 0.8x FY2015E ABV . We recommend a Neutral rating on the stock.
Infotech Enterprises ( CMP : Rs.240 / TP : -/Upside : – )
Infotech Enterprises reported online revenue growth for 2QFY2014 while operating margin and bottomline came ahead of our expectations , as well as the street. Revenues reached U.S. dollar $ 88mn , up 1.8 % from the previous quarter , with the help of ~ 2 % increase in volume from the previous quarter . Growth path for the company resumed after three quarters with 3 out of 4 business units publish more than 4.5 % growth QoQ in constant currency. In INR terms , revenue was Rs.549cr , up 14 % from the previous quarter . The company’s EBITDA margin increased by ~ 320bp qoq to 19.8 % , driven by INR depreciation benefits and operational efficiencies that were partially offsetted by continued investments in branding , sales and new offices. The operating margin of the company eventually expanded into sequentially after five consecutive quarters of poor performance. PAT stood tall in Rs.72cr , 33% . Management said the company has a healthy pipeline visibility much to maintain the growth momentum . Currently the population is under review .
L & T ( CMP : Rs.837 / TP : Rs.1 , 002 / Upside: 20 % )
For 2QFY2014 , we expect Larsen & Toubro ( L & T ) to record an income of Rs.14 , 000cr , indicating a growth of 6.1 % yoy. This growth can be attributed to the large order book of the company ( ~ Rs.1.65trillion ) and robust order inflows . On the EBITDA front , we expect the company’s margin to witness a decline of 116bp yoy to 9.5 %. We forecast net profit to increase by 0.7 % yoy to Rs.878cr in 2QFY2014 . Entry order estimate the company to be at ~ Rs.30 , 000cr during the quarter , which is in line with management guidance of 15-20 % growth in order book for the full year .
At the CMP , the stock is trading at 16.1x FY2015E earnings and 2.2x FY2015E P / BV , independently. We used the- of-the -parts methodology sum ( SOTP ) to value the company to capture all its business initiatives and investments / stakes in the different businesses. Ascribing separate values to its core business of form and investments in subsidiaries on P / E, P / BV and MGAP basis , our target price works out to Rs.1 , 002 P / E . We continue to recommend Buy rating on the stock .
Ultratech Cement ( CMP : Rs.1 , 961/TP : -/Upside : – )
Ultratech Cement is expected to announce its 2QFY2014 results tomorrow. We expect the first line to decline by 2.0% yoy to Rs.4 , 607cr due to lower realization. OPM is expected to decline by 191 bps yoy to 20.1%. Bottom -line is expected to decline by 13.5 % yoy to Rs.476cr . We maintain our Neutral recommendation on the stock.
Federal Bank ( CMP : Rs.69 / TP : – / The good: – )
Federal Bank is slated to announce its 2QFY2014 results tomorrow . We expect the bank to report interest income ( NII ) Net growth moderated to 5.0 % yoy to Rs.531cr . Are expected to report non-interest income growth of 10.6 % yoy to Rs.125cr . It is expected that the bank’s operating expenses to be higher by 10.1 % yoy to Rs.326cr therefore expects operating profit de- grew by 5.5 % yoy. It is expected that provision expenses to increase by 134.8 % yoy to Rs.72cr thus recording net profit de- growth of 13.4 % yoy in Rs.186cr . At the CMP , the stock is trading at a valuation of 0.8 x 0.8 x FY2014E FY2015E ABV . We maintain Neutral recommendation on the stock.
Economic and Political News
– Cabinet approves hike in wheat MSP Rs.50/qtl
– Government Scraps import tariff of gold and silver to the U.S. And U.S. $ 418/10g $ 699/kg respectively
– Raising funds through capital falls 68% in 1HY2014
– Panel to expedite coal broker Rs.8000cr Odhisa
– Pharma approval time lengthens product as regulators around the world go by strict
– Bajaj Auto expects to sell more than 4 million vehicles in FY2014
– Bharti Airtel increases its stake in the firm founded Qualcomm 4G 93.45 %
– BGR Energy bags U.S. $ 246mn for overseas
– IL & FS Engineering gets Rs.150cr rural electrification project
– JSPL to acquire majority stake in Gujarat NRE Coking Coal
– Mumbai police arrest former head NSEL , Anjani Sinha
– Lupin requested increase FII holding to 49 %