1. Market Outlook
India Research
May 27, 2010
Dealer’s Diary Domestic Indices Chg (%) (Pts) (Close)
The key benchmark indices extended gains after a firm opening, triggered by BSE Sensex 2.3% 365.4 16,388
higher Asian stocks; however, the market came off its high levels in morning Nifty 2.2% 106.3 4,810
trade. The volatility in the market was immense, ahead of the expiry of the near- MID CAP 1.5% 96.0 6,585
month May 2010 contracts. The market extended gains to hit fresh intraday SMALL CAP 1.7% 137.8 8,314
highs in mid-afternoon trade, tracking the global indices, and finally ending the BSE HC 1.3% 66.3 5,290
session in green. The Sensex and Nifty closed with gains of 2.3% each. BSE BSE PSU 0.8% 72.7 8,675
mid-cap and small-cap indices also ended trade with gains of 1.5% and 1.7%,
BANKEX 1.8% 183.8 10,250
respectively. Among the front-liners, Hindalco, TCS, Tata Motors, JP Associates
AUTO 2.0% 144.7 7,296
and ICICI Bank were up by 5-7%, while Grasim Industries, Reliance
METAL 3.0% 416.6 14,388
Communication, ACC, BHEL and Maruti Suzuki were down 0-21%. In the mid-
OIL & GAS 1.5% 143.6 9,729
cap segment, Shree Global Tradefin, GMDC, Whirlpool, State Bank of
Travancore and JSW Holdings were up 7-12%, while Rajesh Exports, Gee Kay BSE IT 3.5% 171.8 5,107
Finance, GCPL, UB Holdings and Indian Hotels were down 3-7%.
Global Indices Chg (%) (Pts) (Close)
Markets Today Dow Jones -0.7% (69.3) 9,974
NASDAQ -0.6% (15.1) 2196
The trend deciding level for the day is 16289/4883 levels. If NIFTY trades
above this level during the first half-an-hour of trade then we may witness a FTSE 2.0% 97.4 5038
further rally up to 16509 – 16630/4959 – 5002 levels. However, if NIFTY Nikkei 0.7% 62.8 9,523
trades below 16289/4883 levels for the first half-an-hour of trade then it may Hang Seng 1.1% 211 19,196
correct up to 16168 – 15949/4841 – 4765 levels. Straits Times 1.7% 45 2696
Shanghai Com 0.1% 3.1 2,626
Indices S2 S1 R1 R2
SENSEX 15,949 16,168 16,509 16,630
Indian ADRs Chg (%) (Pts) (Close)
NIFTY 4,765 4,841 4,959 5,002 Infosys 0.6% 0.3 $55.6
Wipro -0.2% (0.0) $20.3
News Analysis Satyam 1.2% 0.1 $5.1
IVRCL bags three orders worth Rs568cr ICICI Bank -0.7% (0.3) $34.9
HDFC Bank 1.8% (2.5) $130.6
Mahindra & Mahindra buys 55% in Reva to power electric car biz
Result Reviews: Bajaj Electricals, BHEL, Cinemax, Mphasis, Tata Steel
Advances / Declines BSE NSE
Result Previews: CIL, Colgate, GSPL, Orchid Chemicals
Advances 1,886 990
Refer detailed news analysis on the following page.
Declines 933 330
Net Inflows (May 25, 2010) Unchanged 77 35
Rs cr Purch Sales Net MTD YTD
FII 1,753 3,175 (1,422) (10,449) 19,262 Volumes (Rs cr)
MFs 606 1,038 (433) (848) (8,077) BSE 3,234
NSE 13,506
FII Derivatives (May 26, 2010)
Open
Rs cr Purch Sales Net
Interest
Index Futures 8,324 7,130 1,194 18,139
Stock Futures 7,041 5,978 1,063 28,899
Gainers / Losers
Gainers Losers
Price Price
Company Chg (%) Company Chg (%)
(Rs) (Rs)
Gujarat Mnrl 120 9.0 Godrej Cons 312 (4.3)
Hindalco Inds 148 7.3 Indian Hotels 99 (3.0)
IDFC 152 6.8 Container Corp 1,217 (2.9)
GMR Infra 58 6.6 IOB 89 (2.7)
Piramal Health 533 6.6 Reliance Comm 135 (2.6)
Please refer to important disclosures at the end of this report Sebi Registration No: INB 0109965391
2. Market Outlook | India Research
IVRCL bags three orders worth Rs568cr
IVRCL Infrastructures and Projects Ltd (IVRCL) has bagged orders totaling Rs568cr. The
orders are spread across areas of transportation, water projects and building construction
and are expected to be completed within a time frame of 12–30months. The outstanding
order book of IVRCL stands at around Rs22,000cr or 3.7x of its FY2010E revenue. We
have valued IVRCL on an SOTP basis, valuing its core construction business at a FY2012E
target P/E of 14x. The company’s stake in Hindustan-Dorr Oliver and IVR Prime has been
valued on market-cap basis. We maintain Buy on the stock with a Target price of Rs240.
Mahindra & Mahindra buys 55% in Reva to power electric car biz
Mahindra & Mahindra (M&M) has bought a majority stake in electric car company Reva,
making a big bet on an alternative fuel technology that is yet to prove its viability despite
widespread focus and the millions spent by global automobile firms. M&M, the country’s
largest utility vehicle company, acquired a 55.2% stake in Reva, adding passenger cars to
the auto major’s electric vehicle portfolio that includes Bijlee, a three-wheel vehicle, and
Maxximo, an electric-powered mini-truck due for launch later this year. Reva’s promoters,
the Maini family, will hold 31% in Mahindra Reva Electric Vehicle Company, while Lon Bell,
the co-founder, will hold an 11% share. Employees with stock options will hold the rest.
For the new company, licensing technology will form only a small part of the overall
business that will focus primarily on the launch of new products. M&M did not reveal the
total value of the transaction. The Mahindra stake was acquired through a combination of
equity purchased from the promoters and a fresh equity infusion of over Rs45cr (about US
$10mn) that will be used to complete the construction of a new manufacturing facility in
Bangalore. The deal is good for both the companies. M&M will get a hold of a better
platform on the technological aspects for electronic vehicles (EV) since the company also
had plans to roll out its mini-trucks Maximo on an EV platform. Reva, on the other hand,
will benefit from M&M’s strong distribution network. We maintain Buy on M&M with a
Target Price of Rs651.
4QFY2010 Result Reviews
Bajaj Electricals
For 4QFY2010, Bajaj Electricals recorded a strong 19.3% yoy growth in its Top-line to
Rs784cr (Rs657cr), which was slightly ahead of our estimates. The top-line growth was
primarily driven by a strong execution in the Engineering and Projects (E&P) Division. The
OPM was above our estimates as well, at 11.8%, down from 12.6% in 4QFY2009.
However, the company paid taxes with regard to certain disallowances for the past three
years. Besides, loan worth Rs5.0cr extended to Hind Lamps Ltd, in which the company
holds 50%, was written off during the quarter. As a result, Net Profits declined by 21.1%
yoy to Rs37cr. Currently we have Neutral rating on the stock. However, we would revise
our estimates and rating post the earnings call.
BHEL
Bharat Heavy Electricals (BHEL) came out with its 4QFY10 results. Top-line for the quarter
grew 28.6% yoy to Rs13,559cr (Rs10,540cr). For the full year FY10, top-line numbers grew
25.3% yoy to Rs32,880cr. Bottom-line for the quarter grew 41.7% yoy to Rs1,910cr
(Rs1,347cr). For the full year FY10, bottom-line numbers grew 37.4% yoy to Rs4,311cr.
We maintain our Neutral recommendation on the stock.
May 27, 2010 2
3. Market Outlook | India Research
Cinemax India
Cinemax posted strong 4QFY2010 results on the revenue front and performed moderately
on the operating profit front, aided by a big-budget movie pipeline (spillover effect of
3idiots) and various cost rationalisation methods adopted by the company. The company
has added two screens in this quarter, taking a total of 90 screens and 24,539 seats under
operation. The company posted heartening top-line growth of 34.1% yoy to Rs44.8cr
(Rs33.4cr), slightly below our expectations. On the operating margin front, Cinemax
posted a 138bp yoy jump in operating margin to 9.2% (10.6%), driven by cost
optimisation methods, with a correction in almost all expenses incurred by the company,
except for the rent expense that increased by 655bp yoy. Due to the trickledown effect of
strong revenue and operating profit, the company’s bottom-line registered 353.1% yoy
growth to Rs4.4cr (Rs1.0cr) on a recurring basis. The stock is currently under review.
Mphasis
Consolidated revenue for the quarter ended April 30, 2010, was Rs1,220cr, an increase of
2.4% compared to Rs1,192cr in the previous quarter. Operating profit recorded growth of
2.6% sequentially and operating margin was maintained at 22.5%. Net profit, however,
remained flat at Rs267cr on lower gains on Forex. The group added 22 new clients,
including 14 through the HP Channel. We remain positive in the company’s growth
prospect. We maintain Buy with a Target Price of Rs872.
Tata Steel
Tata Steel’s standalone 4QFY2010 net revenue came in at Rs7463cr, registering growth of
14.9% yoy and 17.1% qoq, above our estimates. While blended realisations increased by
18.9% yoy and 9.9% qoq, sales volume declined by 3.4% yoy to 1.7mn tonnes, but was
higher by 6.5% qoq. EBITDA grew by 124.8% yoy to Rs3,255cr, as EBITDA margin
expanded 2,132bp to 43.6% on account of lower raw material costs. On a consolidated
basis, net revenue increased by 4.1% yoy and 5.0% qoq. In Europe, deliveries increased to
3.9mn tonnes as compared to 3.8mn tonnes in 3QFY2010 and 3.5mn tonnes in
4QFY2009. EBITDA/tonne for European operations increased to US $94 as compared to
US $37 in 3QFY2010. Consolidated EBITDA stood at Rs4750cr as compared to RS33cr in
4QFY2009. For 4QFY2010, Tata Steel reported consolidated net profit of Rs2434cr, which
was boosted by other income of Rs554cr on account of sale of stake in group companies.
We maintain our Buy rating on the stock with a Target Price of Rs697.
4QFY2010 Result Previews
Cairn India
Cairn India going to announce its 4QFY2010 results today. We anticipate average oil
production of 20,000bpd at the Mangala field during the quarter. Production from the
company’s mature fields—Ravva and Cambay—is likely to decline yoy. On account of the
ramp-up in production at the Rajasthan block, we expect the top-line during the quarter to
increase by 262% yoy to Rs658cr (Rs182cr). OPM is expected to expand by 2,672bp yoy to
74.4%. Net profit is expected to increase by 1072.7% yoy to Rs219cr. We maintain our
Accumulate rating on the stock with a Target Price of Rs315.
May 27, 2010 3
4. Market Outlook | India Research
Colgate-Palmolive India
Colgate is expected to announce its 4QFY2010 results today. For the quarter, we expect
the company to register modest top-line growth of 13.3% yoy to Rs516, aided by steady
volume growth. Earnings for the quarter are expected to grow 16.7% yoy to Rs98cr, aided
by a 199bp yoy margin expansion to 19.8%. We maintain our Accumulate view on the
stock with a Target Price of Rs752.
GSPL
Gujarat State Petronet Ltd. (GSPL) is going to announce its 4QFY2010 results today. The
top-line is expected to register growth of 115.3% during the quarter to Rs284cr (Rs132cr).
This is largely on account of improvement in volumes owing to gas flows from the KG
basin and higher LNG imports by Petronet LNG. We expect the company to transport
38mmscmd of gas during the quarter. EBITDA margin is likely to expand by 883bp yoy to
94.4% (85.5%), largely due to the benefits of operating leverage during the quarter.
Operating profit is likely to increase by 137.5% yoy to Rs268cr (Rs113cr). PAT during the
quarter is expected to be at Rs124cr (Rs35cr), registering a whopping yoy increase of
256.6%. We maintain our Buy recommendation on the stock, with a Target Price of Rs121.
Orchid Chemicals
For the 4QFY2010 results to be announced on a standalone basis, Orchid Chemicals is
expected to post sales of Rs408cr, registering 69.9% yoy growth. On the operating front,
the company is expected to post operating profit of 19.8%, compared to an operating loss
posted during the last corresponding period. Net profit is expected to be around
Rs125.2cr. We remain Neutral on the stock.
Economic and Political News
Cabinet nods to fast-track Government’s stake sale in PSUs
RBI cuts SLR by 50bp to stem liquidity crisis
Telecom minister seeks policy review for procuring Chinese equipment
Corporate News
Firms stare at MTM losses in June quarter on ECBs, FCCBs
HC adjourns TATA-Reliance power tussle until June 7
Jubiliant repays FCCBs worth US $50mn
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint
May 27, 2010 4
5. Market Outlook | India Research
Events for the day
BPCL Dividend, Results
Britannia Industries Dividend, Results
Cairn India Results
Colgate Palmolive Results
DB Corp. Dividend, Results
Engineers India Results
Essar Shipping Ports Results
Greenply Dividend, Results
GSFC Dividend, Results
Gujarat State Petronet Dividend, Results
Heritage Foods Dividend, Results
Jagran Prakashan Dividend, Results
Nagarjuna Fertilizers Results
Neyveli Lignite Results
Omaxe Dividend, Results
Orchid Chemicals Dividend, Results
SRF Polymers Dividend, Results
Tata Motors Dividend, Results
May 27, 2010 5
6. Market Outlook | India Research
Research Team Tel: 022-4040 3800 E-mail: research@angeltrade.com Website: www.angeltrade.com
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