Bayer CropScience reported disappointing 1QFY2011 results with 20% revenue growth and an 8% decline in profit. EBITDA margin contracted to 11% from 14% due to a 358 basis point drop in gross margins. While the company is expected to benefit from high commodity prices, its stock price is nearing the analyst's revised target valuation after recent gains. The analyst maintains a Neutral rating.
Rallis India reported strong results for the first quarter of fiscal year 2012. Revenue grew 48.7% year-over-year to Rs. 292 crore, driven primarily by higher revenue from Metahelix, which Rallis acquired in December 2010. Standalone revenue also rose 17% on higher volumes. EBITDA margin expanded significantly to 14.7% due to higher margins in seeds and improvements in standalone business. While the results were good, the analyst remains neutral on the stock due to its fair valuation.
SAIL's 4QFY2010 results were in line with estimates. Revenues grew 1.8% to Rs11,955cr due to higher sales volumes and average realization. EBITDA margins expanded significantly to 25.9% due to lower raw material costs and consumption, leading to a 40.2% rise in net income to Rs2,085cr. While demand is expected to remain strong, the company maintains a neutral outlook given rich valuations and plans for a public offering limiting further upside.
Blue Star reported a 25.2% year-over-year increase in net sales for the first quarter of fiscal year 2011, though margins declined and profit fell. While sales grew across all segments, higher input costs and lower commission income caused operating margins to drop 281 basis points year-over-year to 9.2%. Net profit declined 10% year-over-year due to the margin pressure and a change in accounting policy. However, the company's order backlog grew nearly 15% and the outlook for large orders remains positive.
McNally Bharat Engineering Co. Ltd. (MBE) reported disappointing financial results for the first quarter of fiscal year 2011, with revenues, earnings, and margins coming in below previous estimates. While MBE's order backlog remains strong at Rs. 4,803 crores, providing high revenue visibility, its subsidiary McNally Sayaji also saw subdued performance. However, analysts maintain a 'Buy' recommendation due to MBE's experience in various sectors, ongoing government infrastructure spending, and significant projected market opportunities over the next few years totaling Rs. 51,600 crores. Estimates have been revised downward to account for the weak quarterly performance.
Reliance Industries reported lower-than-expected earnings for 1QFY2011. While net operating income rose 86.7% year-over-year due to growth in refining revenues, EBITDA was below estimates due to lower petrochemical sales volumes and refining margins. Net profit grew 32.3% year-over-year, meeting estimates. The analyst maintains a 'Buy' rating based on the company's growth outlook and believes it is undervalued relative to its peers.
HUL reported disappointing 1QFY2011 results, with profits declining 4% due to a 34% rise in advertising spending. While revenue grew 7% driven by 11% volume growth, operating margins contracted significantly by 289 basis points. Higher competitive intensity in categories like detergents and soaps drove the increase in advertising. Weak profit growth and uncertain earnings outlook despite modest revenue growth lead us to maintain a reduce rating on the stock.
Bajaj Hindusthan reported lower-than-expected results for the third quarter of 2010, with revenue increasing 82% year-over-year but profit declining. Higher raw material costs and increased sales of levy sugar at a loss impacted margins. While volume increased for both sugar and distillery, realization declined for distillery. The outlook remains challenging due to expected higher sugar production weighing on prices. The company maintained a neutral rating given fair valuation.
Jain Irrigation Systems reported financial results for the fourth quarter of fiscal year 2010 that were ahead of estimates. Revenue grew 37% year-over-year driven by strong growth in the micro irrigation systems segment. Net profit increased significantly due to foreign exchange gains, while adjusted net profit grew 40% on higher sales and stable margins. However, margins were slightly lower than the previous year due to higher raw material costs for onions. While growth is expected to continue across segments, the stock price is nearing fair value, leading to a downgrade from "Buy" to "Accumulate."
Rallis India reported strong results for the first quarter of fiscal year 2012. Revenue grew 48.7% year-over-year to Rs. 292 crore, driven primarily by higher revenue from Metahelix, which Rallis acquired in December 2010. Standalone revenue also rose 17% on higher volumes. EBITDA margin expanded significantly to 14.7% due to higher margins in seeds and improvements in standalone business. While the results were good, the analyst remains neutral on the stock due to its fair valuation.
SAIL's 4QFY2010 results were in line with estimates. Revenues grew 1.8% to Rs11,955cr due to higher sales volumes and average realization. EBITDA margins expanded significantly to 25.9% due to lower raw material costs and consumption, leading to a 40.2% rise in net income to Rs2,085cr. While demand is expected to remain strong, the company maintains a neutral outlook given rich valuations and plans for a public offering limiting further upside.
Blue Star reported a 25.2% year-over-year increase in net sales for the first quarter of fiscal year 2011, though margins declined and profit fell. While sales grew across all segments, higher input costs and lower commission income caused operating margins to drop 281 basis points year-over-year to 9.2%. Net profit declined 10% year-over-year due to the margin pressure and a change in accounting policy. However, the company's order backlog grew nearly 15% and the outlook for large orders remains positive.
McNally Bharat Engineering Co. Ltd. (MBE) reported disappointing financial results for the first quarter of fiscal year 2011, with revenues, earnings, and margins coming in below previous estimates. While MBE's order backlog remains strong at Rs. 4,803 crores, providing high revenue visibility, its subsidiary McNally Sayaji also saw subdued performance. However, analysts maintain a 'Buy' recommendation due to MBE's experience in various sectors, ongoing government infrastructure spending, and significant projected market opportunities over the next few years totaling Rs. 51,600 crores. Estimates have been revised downward to account for the weak quarterly performance.
Reliance Industries reported lower-than-expected earnings for 1QFY2011. While net operating income rose 86.7% year-over-year due to growth in refining revenues, EBITDA was below estimates due to lower petrochemical sales volumes and refining margins. Net profit grew 32.3% year-over-year, meeting estimates. The analyst maintains a 'Buy' rating based on the company's growth outlook and believes it is undervalued relative to its peers.
HUL reported disappointing 1QFY2011 results, with profits declining 4% due to a 34% rise in advertising spending. While revenue grew 7% driven by 11% volume growth, operating margins contracted significantly by 289 basis points. Higher competitive intensity in categories like detergents and soaps drove the increase in advertising. Weak profit growth and uncertain earnings outlook despite modest revenue growth lead us to maintain a reduce rating on the stock.
Bajaj Hindusthan reported lower-than-expected results for the third quarter of 2010, with revenue increasing 82% year-over-year but profit declining. Higher raw material costs and increased sales of levy sugar at a loss impacted margins. While volume increased for both sugar and distillery, realization declined for distillery. The outlook remains challenging due to expected higher sugar production weighing on prices. The company maintained a neutral rating given fair valuation.
Jain Irrigation Systems reported financial results for the fourth quarter of fiscal year 2010 that were ahead of estimates. Revenue grew 37% year-over-year driven by strong growth in the micro irrigation systems segment. Net profit increased significantly due to foreign exchange gains, while adjusted net profit grew 40% on higher sales and stable margins. However, margins were slightly lower than the previous year due to higher raw material costs for onions. While growth is expected to continue across segments, the stock price is nearing fair value, leading to a downgrade from "Buy" to "Accumulate."
Deccan Chronicle Holdings (DCHL) reported a 7% year-over-year increase in revenue and an 18.4% increase in profits for the first quarter of fiscal year 2011. Revenue was in line with expectations at Rs231.8 crore, driven by a 7% increase in advertising revenue. Profits increased due to a 281 basis point expansion in operating margins and a lower effective tax rate of 14%. The company continued to benefit from low newsprint prices. While advertising revenue growth was driven by higher rates, management expects advertising volumes to recover going forward. DCHL maintained its buy rating based on attractive valuations and growth prospects.
- Greenply Industries reported higher-than-estimated 1QFY2011 results, with net sales growing 47.7% year-over-year to Rs262 crore, driven by capacity expansion and higher utilization.
- EBITDA grew 28.6% to Rs31 crore, though EBITDA margin contracted 174 basis points to 11.7% due to higher raw material costs.
- Net profit declined 4.9% to Rs10 crore due to increased depreciation and interest expenses from a new plant.
1) ONGC reported lower than expected results for the first quarter of fiscal year 2011 due to lower crude oil and natural gas production as well as a decline in net realizations.
2) Total operating income declined 8.7% year-over-year to Rs. 13,823 crore, while net profit declined 24.5% to Rs. 3,661 crore.
3) While performance is expected to improve going forward due to fuel price reforms, the analyst maintains an "Accumulate" rating on ONGC shares due to limited downside risk and potential for further reforms in the oil sector.
For 1QFY2011, NMDC reported a 97% increase in net sales to Rs2,518cr driven by higher iron ore realizations and sales volume. Net profit grew 94.4% to Rs1,504cr due to strong top-line growth. EBITDA margin expanded significantly by 726bps to 81.5% despite higher royalty charges. The company aims to increase production capacity to 50mn tonnes by FY2014-15 through mine expansion projects, however volume growth faces risks from ongoing Naxal activities in its mine areas. At the current market price, the stock trades at lower multiples compared to its historical averages.
United Phosphorus reported a 10% year-over-year decline in revenues for the first quarter of fiscal year 2011, which was below analyst estimates. Adjusted profit after tax was up slightly at Rs192 crore versus Rs186 crore in the prior year period. Higher other expenses restricted improvement in operating margins. The company maintained its full year revenue growth guidance of 8-10% and expects a 200 basis point expansion in EBITDA margins. Despite the revenue miss in the quarter, analysts maintained a buy rating on the stock due to attractive valuations and growth opportunities in the generic agricultural chemicals market.
1) Jain Irrigation Systems (JISL) reported 27% year-over-year revenue growth to Rs726 crore for the first quarter of FY2011, which was slightly ahead of estimates.
2) EBITDA margin of 23% exceeded expectations and adjusted profit after tax grew 52% year-over-year despite being 9% below estimates.
3) The micro irrigation systems and PVC sheet segments saw particularly strong growth of 44% and 61% respectively during the quarter, driving overall results.
BHEL reported strong results for the first quarter of fiscal year 2011, with revenues growing 16% and profits growing 42% over the same quarter last year. The bottom line growth was driven by lower raw material costs and improved operating efficiencies. While revenue growth was moderate, earnings before interest, taxes, depreciation, and amortization grew substantially due to a 350 basis point expansion in operating margins. Management has guided that order inflows for the full fiscal year will be between Rs58,000-60,000 crore and the order backlog remains robust at Rs148,000 crore as of the end of the quarter. However, competition is increasing in the power equipment market, which could limit BHEL's ability
GlaxoSmithKline Pharma reported lower-than-expected 2QCY2010 results with net sales of Rs. 498 cr, up 8.9% YoY, and net profit of Rs. 129 cr, up 3.7% YoY. Sales were impacted by supply constraints in the vaccine segment. While operating margins improved, other income declined by 28.9% YoY. Given the company's rich valuations trading at 31.5x CY2010 earnings, Angel Research maintains a Sell rating with a target price of Rs. 1,700.
- Dishman reported 1QFY2011 results which were primarily in line with estimates, boosted by higher other income. Net sales were down 11.3% YoY due to subdued CRAMS segment performance.
- Operating profit margin contracted 140bps to 22% due to sales de-growth. However, net profit was maintained due to higher other income.
- The company maintained FY2011 guidance of 15-20% top-line growth and 25% operating margin, expecting a robust second half of FY2011.
SpiceJet reported strong financial results for the 1st quarter of FY2011, with net sales growing 34.9% year-over-year to Rs708cr, above expectations. Operating margins expanded significantly to 8.3% due to higher passenger loads. Net profit increased 109.6% to Rs55cr, also above estimates, driven by improved operating efficiency. The analyst maintains an 'Accumulate' rating on SpiceJet, expecting sales and profits to grow rapidly in the coming years as the company expands its fleet and benefits from strong industry demand fundamentals.
Lupin reported in-line results for the first quarter of fiscal year 2011, with net sales of Rs1,312 crore, operating profit margin of 20%, and net profit of Rs196 crore. Key drivers of growth included strong sales of generic drugs in the US market, as well as expansion of Lupin's domestic field force in India. While the company saw a delay in FDA approval for oral contraceptive drugs, management does not expect this to impact its competitive position. The analyst maintains an 'Accumulate' rating for Lupin based on its scale in key markets like the US and India, as well as its pipeline of generic drug approvals.
GSK Consumer reported a 14.5% year-over-year increase in revenue to Rs537 crore for the second quarter of 2010, below analyst estimates. Earnings grew 30% to Rs71.8 crore, ahead of estimates, driven by margin expansion from lower advertising spending and higher other income. While the company's core brands Horlicks and Boost saw healthy volume growth of 10% and 17% respectively, overall volume growth moderated to around 10%. Looking forward, the company expects advertising spending to increase in the second half of the year with the national rollout of new product Horlicks Foodles.
TAJGVK reported a 27.6% year-over-year growth in net sales to Rs61 crore for the first quarter of FY2011, driven by rising occupancy rates and average room rates. Operating profit grew 46.7% due to higher sales absorbing fixed costs, and net profit increased 106.7% as improved operating performance flowed down to the bottom line. Going forward, the company expects to benefit from the economic recovery and expanding presence across markets like Hyderabad, Chennai, and Bangalore through both organic and inorganic growth initiatives. The analyst maintains a buy rating on TAJGVK due to its dominant position, expansion plans, and attractive valuation at current levels.
Marico reported disappointing quarterly results, with top-line growth of only 6% year-over-year and flat earnings growth, below estimates. However, a significant gross margin expansion of 644 basis points year-over-year was a positive surprise. While underlying volume growth remained strong at 14%, top-line growth was constrained by price cuts. The outlook remains neutral given concerns around value growth and slowing growth at Kaya.
CESC reported a 33.7% year-over-year growth in revenue for the first quarter of fiscal year 2011, driven by the commissioning of its new 250MW Budge-Budge power plant. However, operating margins declined from the previous quarter due to a 90.6% year-over-year increase in other expenses. While revenue beat estimates, net profit growth was moderate at 4.8% year-over-year due to higher expenditure, growing at a faster pace than revenues. The company continues construction on its 600MW Chandrapur and Haldia power projects.
Asian Paints reported strong quarterly results that beat estimates. Revenue grew 25% year-over-year to Rs. 1,830 crore, driven by 18-20% volume growth and 2-3% price-led growth. Earnings grew 26% to Rs. 222 crore due to operating leverage, although gross margins contracted due to rising input costs. The analyst maintains an Accumulate rating and revised target price of Rs. 2,773, expecting sustained 15.5% volume growth, price hikes of 8%, and operating margins around 18%.
ONGC reported higher than expected results for the fourth quarter of fiscal year 2010 driven by increased net realizations and other operating income. Earnings before interest, taxes, depreciation, and amortization were above estimates due to higher other income. Depreciation costs were also higher than expected. The company maintained an accumulate rating and target price of Rs1,233 based on the positive impact of increased gas prices and potential for further reforms in the oil and gas sector.
Deccan Chronicle Holdings reported quarterly results below estimates due to political unrest in Andhra Pradesh. Revenue grew 6.3% year-over-year to Rs191.7 crore, below estimates, due to weak circulation and advertising revenue. Earnings declined 20.2% to Rs6.5 crore due to lower revenue and higher taxes, despite gross margin expansion from lower paper costs. The analyst maintains a Buy rating but lowers revenue and earnings estimates and the target price to Rs193 per share based on discounted valuation of the print business and IPL team.
GlaxoSmithKline Pharmaceuticals reported financial results for the first quarter of 2010 that were ahead of estimates. Net sales increased 18.4% year-over-year to Rs541.1 crore, driven by growth in the vaccine and dermatology segments. Operating margin expanded to 37% from 36% in the prior year quarter due to an improved product mix. Net profit grew 12.6% to Rs161.2 crore. The analyst maintains a "Reduce" rating on the stock and sets a target price of Rs1,700, citing rich valuations of 29.1 times estimated 2010 earnings.
Hindalco's subsidiary Novelis reported strong results for 4QFY2010. Top-line grew 24.8% year-over-year to US $2.42 billion as sales volumes increased 16.1% year-over-year. Adjusted EBITDA spiked 336% year-over-year to US $231 million. Novelis is focusing on increasing capacity in emerging markets, announcing plans to expand capacity in Brazil by 50% at a cost of US $300 million. Following the expiration of Novelis's metal price ceiling contracts and expected benefits from price increases and cost savings, the report maintains a "Buy" recommendation on Hindalco.
The document provides a market summary for May 21, 2010 including:
1) Key indices like Nifty and Sensex opened lower but closed slightly higher despite losses in sectors like realty and auto.
2) Top gainers were led by ONGC and top losers by JP Associates. Oil & gas and PSU sectors saw gains while realty saw losses.
3) The analyst maintains a bearish outlook and recommends shorting the market on any bounce between defined resistance levels, with stop losses at 5020.
The document provides a summary of derivative market activity in India for June 29, 2010. Open interest in Nifty futures increased by 2.52% while open interest in Mini Nifty futures rose by 13.22%. Key points covered include changes in open interest and premium levels for various contracts, implied volatility, total open interest in the market, and top gainers and losers by change in open interest.
Deccan Chronicle Holdings (DCHL) reported a 7% year-over-year increase in revenue and an 18.4% increase in profits for the first quarter of fiscal year 2011. Revenue was in line with expectations at Rs231.8 crore, driven by a 7% increase in advertising revenue. Profits increased due to a 281 basis point expansion in operating margins and a lower effective tax rate of 14%. The company continued to benefit from low newsprint prices. While advertising revenue growth was driven by higher rates, management expects advertising volumes to recover going forward. DCHL maintained its buy rating based on attractive valuations and growth prospects.
- Greenply Industries reported higher-than-estimated 1QFY2011 results, with net sales growing 47.7% year-over-year to Rs262 crore, driven by capacity expansion and higher utilization.
- EBITDA grew 28.6% to Rs31 crore, though EBITDA margin contracted 174 basis points to 11.7% due to higher raw material costs.
- Net profit declined 4.9% to Rs10 crore due to increased depreciation and interest expenses from a new plant.
1) ONGC reported lower than expected results for the first quarter of fiscal year 2011 due to lower crude oil and natural gas production as well as a decline in net realizations.
2) Total operating income declined 8.7% year-over-year to Rs. 13,823 crore, while net profit declined 24.5% to Rs. 3,661 crore.
3) While performance is expected to improve going forward due to fuel price reforms, the analyst maintains an "Accumulate" rating on ONGC shares due to limited downside risk and potential for further reforms in the oil sector.
For 1QFY2011, NMDC reported a 97% increase in net sales to Rs2,518cr driven by higher iron ore realizations and sales volume. Net profit grew 94.4% to Rs1,504cr due to strong top-line growth. EBITDA margin expanded significantly by 726bps to 81.5% despite higher royalty charges. The company aims to increase production capacity to 50mn tonnes by FY2014-15 through mine expansion projects, however volume growth faces risks from ongoing Naxal activities in its mine areas. At the current market price, the stock trades at lower multiples compared to its historical averages.
United Phosphorus reported a 10% year-over-year decline in revenues for the first quarter of fiscal year 2011, which was below analyst estimates. Adjusted profit after tax was up slightly at Rs192 crore versus Rs186 crore in the prior year period. Higher other expenses restricted improvement in operating margins. The company maintained its full year revenue growth guidance of 8-10% and expects a 200 basis point expansion in EBITDA margins. Despite the revenue miss in the quarter, analysts maintained a buy rating on the stock due to attractive valuations and growth opportunities in the generic agricultural chemicals market.
1) Jain Irrigation Systems (JISL) reported 27% year-over-year revenue growth to Rs726 crore for the first quarter of FY2011, which was slightly ahead of estimates.
2) EBITDA margin of 23% exceeded expectations and adjusted profit after tax grew 52% year-over-year despite being 9% below estimates.
3) The micro irrigation systems and PVC sheet segments saw particularly strong growth of 44% and 61% respectively during the quarter, driving overall results.
BHEL reported strong results for the first quarter of fiscal year 2011, with revenues growing 16% and profits growing 42% over the same quarter last year. The bottom line growth was driven by lower raw material costs and improved operating efficiencies. While revenue growth was moderate, earnings before interest, taxes, depreciation, and amortization grew substantially due to a 350 basis point expansion in operating margins. Management has guided that order inflows for the full fiscal year will be between Rs58,000-60,000 crore and the order backlog remains robust at Rs148,000 crore as of the end of the quarter. However, competition is increasing in the power equipment market, which could limit BHEL's ability
GlaxoSmithKline Pharma reported lower-than-expected 2QCY2010 results with net sales of Rs. 498 cr, up 8.9% YoY, and net profit of Rs. 129 cr, up 3.7% YoY. Sales were impacted by supply constraints in the vaccine segment. While operating margins improved, other income declined by 28.9% YoY. Given the company's rich valuations trading at 31.5x CY2010 earnings, Angel Research maintains a Sell rating with a target price of Rs. 1,700.
- Dishman reported 1QFY2011 results which were primarily in line with estimates, boosted by higher other income. Net sales were down 11.3% YoY due to subdued CRAMS segment performance.
- Operating profit margin contracted 140bps to 22% due to sales de-growth. However, net profit was maintained due to higher other income.
- The company maintained FY2011 guidance of 15-20% top-line growth and 25% operating margin, expecting a robust second half of FY2011.
SpiceJet reported strong financial results for the 1st quarter of FY2011, with net sales growing 34.9% year-over-year to Rs708cr, above expectations. Operating margins expanded significantly to 8.3% due to higher passenger loads. Net profit increased 109.6% to Rs55cr, also above estimates, driven by improved operating efficiency. The analyst maintains an 'Accumulate' rating on SpiceJet, expecting sales and profits to grow rapidly in the coming years as the company expands its fleet and benefits from strong industry demand fundamentals.
Lupin reported in-line results for the first quarter of fiscal year 2011, with net sales of Rs1,312 crore, operating profit margin of 20%, and net profit of Rs196 crore. Key drivers of growth included strong sales of generic drugs in the US market, as well as expansion of Lupin's domestic field force in India. While the company saw a delay in FDA approval for oral contraceptive drugs, management does not expect this to impact its competitive position. The analyst maintains an 'Accumulate' rating for Lupin based on its scale in key markets like the US and India, as well as its pipeline of generic drug approvals.
GSK Consumer reported a 14.5% year-over-year increase in revenue to Rs537 crore for the second quarter of 2010, below analyst estimates. Earnings grew 30% to Rs71.8 crore, ahead of estimates, driven by margin expansion from lower advertising spending and higher other income. While the company's core brands Horlicks and Boost saw healthy volume growth of 10% and 17% respectively, overall volume growth moderated to around 10%. Looking forward, the company expects advertising spending to increase in the second half of the year with the national rollout of new product Horlicks Foodles.
TAJGVK reported a 27.6% year-over-year growth in net sales to Rs61 crore for the first quarter of FY2011, driven by rising occupancy rates and average room rates. Operating profit grew 46.7% due to higher sales absorbing fixed costs, and net profit increased 106.7% as improved operating performance flowed down to the bottom line. Going forward, the company expects to benefit from the economic recovery and expanding presence across markets like Hyderabad, Chennai, and Bangalore through both organic and inorganic growth initiatives. The analyst maintains a buy rating on TAJGVK due to its dominant position, expansion plans, and attractive valuation at current levels.
Marico reported disappointing quarterly results, with top-line growth of only 6% year-over-year and flat earnings growth, below estimates. However, a significant gross margin expansion of 644 basis points year-over-year was a positive surprise. While underlying volume growth remained strong at 14%, top-line growth was constrained by price cuts. The outlook remains neutral given concerns around value growth and slowing growth at Kaya.
CESC reported a 33.7% year-over-year growth in revenue for the first quarter of fiscal year 2011, driven by the commissioning of its new 250MW Budge-Budge power plant. However, operating margins declined from the previous quarter due to a 90.6% year-over-year increase in other expenses. While revenue beat estimates, net profit growth was moderate at 4.8% year-over-year due to higher expenditure, growing at a faster pace than revenues. The company continues construction on its 600MW Chandrapur and Haldia power projects.
Asian Paints reported strong quarterly results that beat estimates. Revenue grew 25% year-over-year to Rs. 1,830 crore, driven by 18-20% volume growth and 2-3% price-led growth. Earnings grew 26% to Rs. 222 crore due to operating leverage, although gross margins contracted due to rising input costs. The analyst maintains an Accumulate rating and revised target price of Rs. 2,773, expecting sustained 15.5% volume growth, price hikes of 8%, and operating margins around 18%.
ONGC reported higher than expected results for the fourth quarter of fiscal year 2010 driven by increased net realizations and other operating income. Earnings before interest, taxes, depreciation, and amortization were above estimates due to higher other income. Depreciation costs were also higher than expected. The company maintained an accumulate rating and target price of Rs1,233 based on the positive impact of increased gas prices and potential for further reforms in the oil and gas sector.
Deccan Chronicle Holdings reported quarterly results below estimates due to political unrest in Andhra Pradesh. Revenue grew 6.3% year-over-year to Rs191.7 crore, below estimates, due to weak circulation and advertising revenue. Earnings declined 20.2% to Rs6.5 crore due to lower revenue and higher taxes, despite gross margin expansion from lower paper costs. The analyst maintains a Buy rating but lowers revenue and earnings estimates and the target price to Rs193 per share based on discounted valuation of the print business and IPL team.
GlaxoSmithKline Pharmaceuticals reported financial results for the first quarter of 2010 that were ahead of estimates. Net sales increased 18.4% year-over-year to Rs541.1 crore, driven by growth in the vaccine and dermatology segments. Operating margin expanded to 37% from 36% in the prior year quarter due to an improved product mix. Net profit grew 12.6% to Rs161.2 crore. The analyst maintains a "Reduce" rating on the stock and sets a target price of Rs1,700, citing rich valuations of 29.1 times estimated 2010 earnings.
Hindalco's subsidiary Novelis reported strong results for 4QFY2010. Top-line grew 24.8% year-over-year to US $2.42 billion as sales volumes increased 16.1% year-over-year. Adjusted EBITDA spiked 336% year-over-year to US $231 million. Novelis is focusing on increasing capacity in emerging markets, announcing plans to expand capacity in Brazil by 50% at a cost of US $300 million. Following the expiration of Novelis's metal price ceiling contracts and expected benefits from price increases and cost savings, the report maintains a "Buy" recommendation on Hindalco.
The document provides a market summary for May 21, 2010 including:
1) Key indices like Nifty and Sensex opened lower but closed slightly higher despite losses in sectors like realty and auto.
2) Top gainers were led by ONGC and top losers by JP Associates. Oil & gas and PSU sectors saw gains while realty saw losses.
3) The analyst maintains a bearish outlook and recommends shorting the market on any bounce between defined resistance levels, with stop losses at 5020.
The document provides a summary of derivative market activity in India for June 29, 2010. Open interest in Nifty futures increased by 2.52% while open interest in Mini Nifty futures rose by 13.22%. Key points covered include changes in open interest and premium levels for various contracts, implied volatility, total open interest in the market, and top gainers and losers by change in open interest.
The indices opened flat but traded choppily throughout the day. Metal, auto and realty stocks declined while IT stocks gained. The indices are currently trading in a range between 18,326-18,810/5496-5653 on the downside and 19,132-19,094/5740-5700 on the upside. A break above these resistance levels could lead to further gains while a break below support could result in losses extending to 17,805-17,950/5350-5400. Pivot levels for 50 Nifty stocks are provided.
The document provides a derivative report for India from July 22, 2010. Key points include:
1) Nifty futures open interest increased 1.03% while Minifity increased 10.56% as the market closed at 5399.35.
2) Several stock options saw changes in open interest levels both increasing and decreasing.
3) Put-call ratios and implied volatility decreased slightly.
4) Analysis of bullish and bearish option strategies on Nifty are presented.
Godrej Consumer Products reported results for the first quarter of fiscal year 2011. While revenue grew strongly by 47% due to recent acquisitions, recurring earnings grew only 9% due to margin contraction, higher interest costs, and increased taxes. Domestic revenue excluding recent acquisitions declined 7% as sales of soaps fell 9% due to high bases and inventory destocking, while hair color sales grew only 4%. The company upgraded its outlook for the stock to "Buy" based on strong future earnings growth prospects.
The summary is:
1) The derivative report analyzes the performance of the Nifty futures, options, and key stocks from the previous trading session on July 18, 2011.
2) It provides details on changes in open interest, premium levels, volatility, and turnover for various derivatives contracts.
3) Trading strategies and technical analysis is also given for some stocks along with risk-reward profiles of sample spreads trades for the Nifty.
This document summarizes a derivative report from India Research dated July 13, 2011. Some key points:
- The Nifty futures open interest increased 0.51% while Minifty futures open interest rose 8.2% as the market closed at 5526.15.
- Implied volatility of at-the-money options increased from 18% to 19.75%. PCR-OI decreased from 1.20 to 1.15.
- Total open interest of the market is Rs. 125,816 crore and stock futures open interest is Rs. 33,500 crore.
- FII were net sellers of Rs. 969 crore in the cash market segment. Put-call
BHEL reported strong results for 4QFY2010 and FY2010, with revenues growing 28.6% and profits growing 41.7% for the quarter. Operating margins expanded due to lower raw material costs, though this was partially offset by higher other expenses. Order inflows grew 45.1% for the quarter. For FY2010-2012, revenues are expected to grow at a CAGR of 19.7% and profits at 21.5%. However, the analyst maintains a Neutral rating due to structural concerns in the industry.
The key Indian indices gained around 1.8-1.9% boosted by positive global cues and sustained buying by foreign institutional investors. Auto and capital goods stocks witnessed strong buying, while mid and small cap indices also rose about 1.1% each. The market closed at one-week highs led by gains in Bharti Airtel, Hindalco, ITC and L&T.
The key Indian stock market indices fell on weak global economic data and concerns over European sovereign debt. The Sensex and Nifty closed down 0.7% and 0.8% respectively. Metals and banking stocks witnessed heavy losses, while oil and gas stocks gained slightly. Looking ahead, the market may see further declines if the indices remain below their intraday low levels in early trade, but could rally if those levels are surpassed.
- The open interest in Nifty futures increased by 6.94% while Minifty futures open interest decreased by 9.56% as the market closed at 5987.70 levels. Nifty November futures closed at a premium of 76.25 points.
- FIIs were net sellers in the index futures, stock futures, and cash market segments totaling Rs 950 crore. Put-call ratios for Nifty and other stocks decreased.
- Technical recommendations were given to trade HDFCBANK with a target price of Rs 2350 and JINDALSAW with a target price of Rs 228 based on chart analysis.
HUL reported a 10.7% rise in revenue to Rs. 4,681 crore for the quarter, driven by a 14% increase in volume growth. However, operating profit declined 7.8% to Rs. 563.1 crore due to a 242 basis point drop in operating margin to 12%. Recurring profit fell 6.7% to Rs. 525.7 crore despite an 82% jump in other income, on account of margin contraction and a 790 basis point rise in taxes. Volume growth was strong across categories like soaps, detergents and personal care, though profitability was impacted by higher overheads and competitive intensity in detergents.
The market summary provides an overview of the day's trading activity in the Indian stock market. Key indices like Nifty and Sensex opened flat but declined through the day, closing down 0.69% and 0.71% respectively. Top gainers were led by BPCL at 4.73% gain, while top losers were led by HCLTECH at 2.72% loss. Metals and IT sectors underperformed, falling 1.9% and 1.24% respectively. The report analyzes technical indicators and suggests the market may see further consolidation or minor correction if key support levels are broken.
- Greenply Industries reported a 54.6% year-over-year increase in standalone quarterly revenue to Rs259 crore, exceeding estimates, driven by higher capacity utilization and realizations in plywood and laminates.
- Net profit increased 54.7% to Rs13.3 crore, also ahead of estimates, due to lower interest and depreciation expenses.
- The report maintains a buy recommendation, as the company is well-positioned to benefit from capacity expansions in laminates and a new MDF plant, while its stock trades at a discount to earnings estimates.
The Nifty futures open interest decreased by 28.45% while the Minifity futures open interest decreased by 13.34% as the market closed at 6143.40. The Nifty October future closed at a premium of 32.90 points against a premium of 10.85 points in the previous session, while the November future closed at a premium of 44.20 points. The PCR-OI decreased from 2.00 to 1.36. FIIs were net buyers of Rs. 1,825 crores in the cash market segment and significant build up was seen in the 6200 and 6300 call option series.
The document provides a summary of derivative market activity in India on August 12, 2010. It notes that open interest in Nifty futures increased while Minifity futures decreased. The Nifty August future closed at a discount. Implied volatility of at-the-money options increased. Few stocks saw positive cost of carry. OI increased most for EDUCOMP and IVRCLINFRA futures while decreasing for JINDALSTEL and IBREALEST. The put-call ratio for Nifty decreased.
Infosys reported a 4.3% quarter-over-quarter growth in revenues to Rs. 6,198 crore for the first quarter of fiscal year 2011, backed by a 7.6% growth in volumes. However, earnings before interest and taxes (EBIT) margins fell by 1.8% due to annual wage hikes. Infosys revised its fiscal year 2011 revenue growth guidance upwards from 16-18% to 19-21% in rupee terms and maintained its earnings per share growth guidance of 7.2-11.5%. The growth was broad-based across services and verticals led by the banking, financial services and insurance sector.
- Indian stock indices rose to their highest levels in 25 months, with the Sensex and Nifty gaining 1.4% and 1.5% respectively, lifted by sustained buying in index pivotals.
- Regional stocks were mixed, with metal and auto stocks rising on firm commodity prices and strong auto sales, while IT stocks declined due to a stronger rupee.
- In corporate news, steel makers raised prices for the third time in 2010 due to higher raw material costs, while ACC reported a 3.5% drop in cement dispatches for March.
Derivatives Report - September 16, 2010Angel Broking
The document provides a summary of derivative market activity in India for September 16, 2010. Key points include:
- Open interest for Nifty futures increased 4.21% while for Minifity futures it rose 2.51% as the market closed at 5860.95.
- Nifty September futures closed at a discount of 0.85 points versus a premium of 16.45 points previously. October futures closed at a premium of 9.75 points.
- Total open interest in the market was Rs. 2,03,458 crore with stock futures open interest at Rs. 51,389 crore.
Ramky Infrastructure is tapping the IPO market to raise Rs. 530 crores through a fresh issue of equity shares and an offer for sale. The company operates in the construction and infrastructure development sectors across six segments. It has a diversified presence across various states in India. Ramky has a robust order backlog of Rs. 7,432 crores providing revenue visibility. It is expected to grow at a CAGR of 31.7% over FY2010-12 driven by its strong order book and presence in growing segments like water and waste water. The company has delivered healthy return ratios over 20% in the past through careful project selection and efficient resource utilization.
Rallis India reported 1QFY2011 results that were below expectations due to lower-than-estimated EBITDA margins of 11.6%, despite revenue growth of 21.8% that exceeded estimates. While revenue growth was driven by strong domestic demand and export revival, higher other expenses restricted improvement in operating margins. Looking ahead, management expects industry growth of 10-12% in FY2011 on expectations of normal monsoons, and the company is positioned to outpace industry growth. However, the brokerage maintains a Neutral rating given margins were below estimates and the stock is trading at fair valuations.
Rallis India reported a 14.7% increase in revenue to Rs. 368 crore for the second quarter of FY2011, which was below Angel Research's estimate. EBITDA margin was 24.3%, higher than estimated due to lower other expenses. Net profit increased 28.4% to Rs. 59 crore, in line with estimates. Domestic sales grew 18% by volume due to good monsoons. Management expects the domestic agrochemical industry to grow 12-15% for the quarter. Rallis maintained its FY2011-12 estimates of 21% sales and 36% profit CAGR. The stock trades at 15x estimated FY2012 EPS.
Exide Industries reported a 35.1% increase in net profit for 1QFY2011 compared to the previous year. Net sales grew 27.5% year-over-year to Rs1,152 crore, exceeding estimates. Earnings before interest, taxes, depreciation, and amortization margins improved from the previous quarter due to a decline in other expenditures. The analyst maintains an "Accumulate" rating for Exide Industries due to reasonable valuations and expects net sales and profit to grow annually over the next two years.
Hindalco reported financial results for the first quarter of fiscal year 2011. Net revenue increased 32.9% year-over-year to Rs. 5,146 crore, driven by higher aluminum and copper volumes and prices. EBITDA grew 9.9% to Rs. 832 crore while net profit increased 11.2% to Rs. 534 crore. Hindalco is expanding aluminum production capacity significantly over the next few years, which is expected to drive further revenue and profit growth. The analyst maintains a Buy recommendation on Hindalco shares.
Colgate Palmolive reported first quarter results for fiscal year 2011 with revenues growing 13% year-over-year to Rs. 528.8 crores, slightly below estimates. Earnings beat estimates due to a sharp rise in gross margins of 662 basis points year-over-year. Volume growth was 13% overall led by 14% growth in toothpaste and 19% growth in toothbrushes. The analyst maintains a "Reduce" rating due to the stock being highly expensive trading at 23.4 times estimated fiscal year 2012 earnings per share given muted earnings growth estimates.
Exide Industries reported a 35.1% increase in net profit for the first quarter of fiscal year 2011. Net sales grew 27.5% due to a substantial increase in both original equipment and replacement auto battery sales. While raw material costs increased, operating margins improved on a quarter-over-quarter basis due to a decline in other expenditures and average lead prices. The analyst maintains an "Accumulate" rating for Exide Industries due to reasonable valuations and expectations for continued double-digit revenue and earnings growth over the next two fiscal years.
Hindalco reported strong results for the first quarter of fiscal year 2011. Revenue grew 29.2% year-over-year to Rs. 2,533 crore, driven by a 12.7% increase in aluminum shipments. Adjusted EBITDA more than doubled to Rs. 263 crore, resulting in adjusted EBITDA margins of 10.4%. However, net profit declined 65% to Rs. 50 crore due to higher interest and tax expenses. Management expects continued growth in demand and benefits from capacity expansions. The stock currently trades at attractive valuations and the analyst maintains a Buy rating with a target price of Rs. 204.
Bharat Forge reported strong results for 1QFY2011 with net sales growing 75.7% year-over-year to Rs 630.1 crore, beating estimates. Operating margins improved significantly to 25.2% due to lower raw material costs and higher utilization levels. Net profit was Rs 59.4 crore, exceeding expectations due to improved volumes and operating leverage. The analyst recommends accumulating the stock given the better-than-expected performance and revised upward estimates.
Cipla reported 1QFY2011 results that were ahead of estimates, with operating margins improving sequentially. While domestic formulation sales grew only 3.6% due to lower generic sales, export sales increased 14.4% due to growth in ARV and anti-asthma segments. Operating margins expanded to 20.9% due to lower other expenses. Net profit grew 6.5% to Rs257cr from higher margins and other income. The company expects its new Indore facility to start contributing significantly over the next 6-12 months and sees this aiding substantial future growth. The report recommends buying the stock.
1) Marico reported a 13.4% increase in quarterly revenue to Rs. 790.1 crore, above estimates, led by 16% volume growth in its core brands Parachute and Saffola.
2) Earnings grew 27% to Rs. 73.7 crore after adjusting for tax rate declines, despite margins contracting.
3) The analyst upgrades Marico stock from "Reduce" to "Neutral" and increases earnings estimates by 2-3% based on strong volume growth and lower taxes boosting profits.
Dabur reported a mixed set of results for the first quarter of fiscal year 2011. While revenue growth was strong at 23% due to a record 20% increase in volume, earnings growth disappointed at 17% due to margin contraction and higher taxes. Revenue was boosted by double-digit growth in consumer care division categories like oral care, health supplements, and home care. However, earnings fell short of estimates due to a rise in advertising spending squeezing margins. The company also announced an acquisition and a bonus share issue.
- Alembic reported lower than expected sales and profits for 1QFY2011 due to weak performance in its export API segment and slower than expected growth in domestic formulations.
- However, interest costs declined significantly due to lower debt levels and the company's decision to demerge its pharmaceutical business from other businesses is expected to unlock value by allowing each business to focus on its core operations.
- The analyst maintains a 'Buy' rating and has set a target price of Rs. 74 per share based on separate valuations of the demerged pharmaceutical and API businesses as well as the company's land assets.
Steel Authority of India reported a 1.7% decline in EBITDA to Rs. 1,843 cr for the first quarter of FY2011, below Angel Research's estimate, due to lower sales volume and higher staff costs. Net profit declined 11.3% to Rs. 1,177 cr for the same reasons. While steel prices increased, sales volume fell 15.5% from a year ago. Staff costs rose sharply due to additional provisions for employee benefits. Going forward, the company is expected to benefit from strong domestic demand, but capacity expansion benefits will only be seen after FY2012. Angel Research maintains a Neutral rating on the stock.
Bharat Forge (BFL) reported a 92.8% year-over-year growth in standalone net sales for the fourth quarter of fiscal year 2010, exceeding expectations. Operating margins improved substantially to 22.8% due to lower raw material costs and operating leverage. BFL recorded a net profit of Rs. 61.3 crore for the quarter, above estimates. At the consolidated level, BFL reported a 46.7% year-over-year increase in revenues for the fourth quarter and completed the process of restructuring its global subsidiaries.
Bajaj Electricals reported a 35.2% year-over-year growth in net sales for the first quarter of fiscal year 2011, driven by strong growth in lighting and consumer durables. However, operating margins declined to 8.4% from 10% in the previous year due to higher raw material costs. Net profit increased 37.3% despite a decline in operating margins, aided by lower interest costs. Management expects sales growth of over 20% for fiscal year 2011 but anticipates pressure on margins to continue in the next quarter before improving in the second half of the year.
Wipro reported financial results for the first quarter of fiscal year 2011, with revenues growing 3.1% over the previous quarter and 12.6% over the same quarter last year. Operating profit margins expanded due to effective currency hedges, and net income grew 9% over the previous quarter and 30.5% over the first quarter of fiscal year 2010. The company's performance was driven by strong volume growth in IT services revenues, with new client additions and large deal wins during the quarter. The analyst maintained an "Accumulate" rating on Wipro stock, with a target price representing 13% upside.
JP Associates reported a 51.8% year-over-year increase in net sales for the first quarter of FY2011, driven by strong growth in the cement, construction, and real estate verticals. However, operating margins declined significantly from 28% to 21.2% due to margin pressure, resulting in a 57.6% decrease in recurring earnings. While reported profits were up 5% due to exceptional gains, underlying earnings were down. The analyst maintains a buy rating but expects margins to recover, and forecasts JP Associates will become one of the fastest growing conglomerates in cement, power, and real estate.
TCS reported strong financial results for the 1QFY2011 quarter that exceeded analyst estimates. Revenue grew 6.2% quarter-over-quarter to Rs. 8,217 crore, driven by an 8.1% increase in business volumes. Operating margins declined slightly due to wage increases and currency fluctuations impacting costs. Net profit declined 5.3% due to higher foreign exchange losses and taxes. The analyst maintains a positive outlook due to TCS's strong deal pipeline and hiring growth, but notes concerns around the European economic situation and currency movements. The stock is recommended as an "Accumulate" with a target price of Rs. 920.
Ipca Laboratories reported lower than estimated quarterly results due to higher raw material costs and lower contributions from its Export Branded Generic segment. Net sales grew 15.4% driven by domestic formulations and export APIs. Operating margins grew but were below estimates at 17.8% versus projected 22.5%. For the full year, net sales grew 22.1% while operating margins were 21%. The company expects sales growth of 18-20% in fiscal year 2011 with operating margins of 21-22%.
Jagran Prakashan reported a 16% year-over-year increase in revenue for the first quarter of fiscal year 2011, aided by 18% growth in advertising revenue. Operating margins expanded significantly by 301 basis points year-over-year due to a 221 basis point increase in gross margins from lower newsprint prices and cost controls. However, earnings growth was lower at 12% due to a steep decline in other income compared to the prior year quarter. Going forward, the company expects advertising revenue growth of 17-18% for fiscal year 2011 and margin expansion, positioning it for strong earnings growth, though near-term quarters may be weaker without seasonal tailwinds.
The Indian markets are expected to open higher, tracking gains in most Asian markets. Spain has asked for a bailout of up to €100 billion for its banking system. Chinese exports grew more than expected in May. In India, shares extended gains for a fifth session despite weak global cues as major central banks held off on additional stimulus. The key support and resistance levels for the Nifty are 5,023 and 5,114 respectively. L&T has bagged orders worth Rs. 483 crore to build commercial vessels in Qatar. Vedanta Resources has acquired a 24.5% stake in Raykal Aluminium for Rs. 201 crore.
Axis Bank reported a 27.0% year-over-year increase in net profit to Rs. 942 crore for the first quarter of fiscal year 2012, in line with analyst estimates. Business growth momentum slowed as advances declined 7.4% quarter-over-quarter and deposits fell 3.0% quarter-over-quarter, moderating the bank's cash-deposit ratio to 40.5% from 41.1% last quarter. However, asset quality remained healthy with slippage ratio declining to 0.8% and gross and net NPA ratios stable.
1) For 1QFY2012, Electrosteel Castings reported 16.4% sales growth but margins declined due to higher raw material costs. EBITDA fell 18.2% and net profit declined 7.2%.
2) While sales volumes grew, costs increased more due to a rise in raw material costs as a percentage of sales.
3) The company maintains a buy recommendation due to initiatives in steelmaking and backward integration that should lower costs starting in FY2013 and valuation remains attractive.
1) For 1QFY2012, Persistent Systems reported revenues of ₹224 crore, up 5.2% over the previous quarter and 23.6% over the same period last year.
2) EBITDA was ₹40 crore, up 5.3% over the previous quarter but margins declined.
3) PAT was ₹28 crore, down 16.8% over the previous quarter due to higher taxes.
4) Management maintained revenue guidance of 29% growth for FY2012 and expects PAT to remain flat despite higher tax rates.
HT Media reported a 22.7% year-over-year increase in revenue to ₹494 crore for the first quarter of FY2012. Revenue was also up 5.8% quarter-over-quarter. Advertising revenue grew 17% year-over-year, with 18% growth in English and 15% growth in Hindi. Operating profit rose 11.8% year-over-year to ₹87.8 crore due to higher other income and lower tax rates, although operating margins contracted by 174 basis points. The company maintained its Accumulate rating based on expectations of continued revenue growth and margin expansion.
The market ended lower, with the Sensex and Nifty closing down 0.3%. Mid- and small-cap indices closed higher. Select heavyweights like Hindalco Industries and BHEL gained 1-3%, while TCS and Tata Motors lost 1-2%. In corporate news, Motherson Sumi Systems agreed to acquire an 80% stake in Peguform for €141.5 million. HDFC Bank, Cadila Healthcare, Crompton Greaves, and Ashok Leyland are scheduled to announce their quarterly results. The trend for the day will be decided by whether Nifty trades above or below the levels of 18,533/5,572 in early trade.
- GSM subscriber additions in India continued their declining trend in June 2011, with net additions of 9.6 million, down 10% from the previous month.
- All major operators except BSNL reported a drop in subscriber additions. Bharti and Vodafone each added 2.1 million subscribers.
- The total GSM subscriber base reached 598.8 million in June 2011, with Bharti, Vodafone, Idea and BSNL maintaining their major market shares.
The document provides a technical analysis of the Indian stock market indices Sensex and Nifty for the week of July 16, 2011. It summarizes that the indices declined over 1.5% for the week and are currently trading in a range between 18,326/5496 on the downside and 19,132/5740 on the upside. It notes that a break above or below this range would dictate the direction of the upcoming trend. The analysis also lists pivot levels for 50 Nifty stocks to watch in the coming week.
The document provides a summary of derivative market activity in India for July 18, 2011. Key points include:
- Nifty futures open interest increased 0.67% while Mini Nifty increased 3.48% as the market closed at 5581.10
- Nifty July futures closed at a premium of 5.85 points and August futures at a premium of 22.60 points
- Implied volatility of at-the-money options decreased from 18% to 17.3%
- Total open interest in the market was Rs. 135,158 crore with stock futures open interest at Rs. 34,675 crore.
- The key Indian stock indices declined slightly, with the Sensex and Nifty closing down 0.3%.
- GSM subscriber additions in India continued their declining trend in June across most major operators such as Idea, Bharti Airtel, and Vodafone. Total GSM subscriber addition was 9.6 million, down 10% from the previous month.
- Tata Motors reported flat annual global sales growth in June 2011 compared to the previous year.
- South Indian Bank reported a 41.2% year-over-year increase in net profit to Rs. 82 crores for the first quarter of fiscal year 2012, slightly below analyst estimates.
- Business growth remained strong, with advances growth of 31.2% and deposits growth of 35.5% year-over-year. However, net interest margins compressed by 29 basis points sequentially to 2.8% due to a sharp rise in the bank's cost of deposits.
- Non-interest income was boosted by treasury gains, but fee income growth was modest. Asset quality was stable with gross and net NPAs rising marginally, and provision coverage at a comfortable 73.1%.
Bajaj Auto reported marginally lower-than-expected results for the first quarter of fiscal year 2012, with net sales growth of 22.8% year-over-year driven by a 17.7% increase in volumes. However, operating margins contracted by 145 basis points quarter-over-quarter to 19.1% due to a 150 basis point increase in raw material costs. As a result, net profit grew by 20.5% year-over-year to ₹711 crore, which was slightly below analyst estimates. Going forward, the analyst expects further margin pressure and has revised downward its earnings estimates for fiscal years 2012 and 2013 to factor in higher raw material costs and changes to export incentives.
1) Tata Consultancy Services (TCS) reported strong results for the first quarter of fiscal year 2012, outperforming expectations with revenue growth of 6.3% over the previous quarter and 31.4% over the same quarter of the previous fiscal year.
2) A key highlight was 7.4% quarter-over-quarter growth in business volumes. While profit margins declined due to wage hikes, net profit remained flat due to foreign exchange gains.
3) Management maintained a positive outlook, highlighting strong demand environment and deal pipeline, and expects pricing increases later in the fiscal year.
The document summarizes the Indian stock market outlook and performance on July 15, 2011. It reports that domestic indices closed with modest gains of 0.1-0.4%, while global indices declined. Wholesale price inflation in India rose to 9.44% in June 2011, above estimates and persisting above 9% for seven months, driven by increases in primary articles and fuel costs. Key benchmark levels are identified for determining if the market may continue rallying or correct in the near term.
The summary is:
1) The derivative report analyzes the movement in Nifty futures, options, and individual stocks between July 14-15, 2011.
2) Nifty futures open interest decreased while mini Nifty open interest increased as the market closed at 5599.80.
3) Implied volatility of at-the-money options increased from 17.6% to 18%.
The Sensex and Nifty indices opened lower and traded with volatility, closing marginally lower. On the sectoral front, Realty, Banks and Healthcare gained while IT and FMCG fell. The advance-decline ratio favored advancing stocks. On the daily chart, prices tested but did not close above the downward gap area of 18,679-18,589/5,601-5,580 levels. Immediate resistance is seen at 18,735/5,633, while 18,449/5,541 is crucial support.
1) Infosys reported modest revenue growth of 3.2% qoq for 1QFY2012. EBITDA and margins declined due to wage hikes.
2) Guidance for 2QFY2012 revenue growth was lower than expected at 3.5-5% qoq. Annual revenue growth guidance was unchanged.
3) The analyst revised EPS estimates down and cut the target price to INR 3,200 due to macro concerns and muted guidance.
The daily technical report provides the following information:
1) The Sensex and Nifty indexes opened with a downside gap and remained negative throughout the day, with the realty, IT, and auto sectors among the major losers.
2) On the daily chart, the indexes tested the 20-day simple moving average for support and closed above it, while the RSI and ADX indicators show a negative crossover.
3) The report recommends selling REL. INFRA. futures with a stop loss of Rs. 579.05 and target of Rs. 552.00.
The key points from the document are:
1) Domestic indices tumbled over 1% as global stocks fell on concerns over the spreading eurozone debt crisis.
2) High intraday volatility was seen in the market as it reacted to disappointing industrial production growth data and reports of a cabinet reshuffle.
3) Infosys reported a 4.3% rise in quarterly revenue but margins declined due to wage hikes, while its full-year revenue guidance remained unchanged.
1) Infosys reported modest revenue growth of 3.2% qoq for 1QFY2012. EBITDA and margins declined due to wage hikes.
2) Guidance for 2QFY2012 revenue growth was lower than expected at 3.5-5.0% qoq. Annual revenue growth guidance remained unchanged.
3) The brokerage firm revised down its target price for Infosys to INR 3,200 per share and recommended accumulating the stock.
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1. 1QFY2011 Results Update | Agrichemical
July 21, 2010
Bayer CropScience NEUTRAL
CMP Rs830
Performance Highlights Target Price -
(Rs cr) 1QFY11 1QFY10 % yoy Angel Est % Diff Investment Period -
Revenue 721 602 20 736 (2)
Stock Info
EBITDA 76 83 (8) 102 (25)
Sector Agrichemical
EBITDA margin (%) 11 14 (320)bp 14 (319)bp
Market Cap (Rs cr) 3,280
Reported PAT 52 56 (8) 69 (25)
Beta 0.4
Source: Company, Angel Research
52 Week High / Low 911/293
Bayer CropScience (BCS) reported disappointing set of numbers for 1QFY2011. Avg. Daily Volume 41,217
Total sales for the quarter grew 20% yoy to Rs721cr, while EBITDA margin stood Face Value (Rs) 10
at 11% yoy as against our estimate of 14%. Reported PAT came in at Rs52cr BSE Sensex 17,977
(Rs56cr), down 8% yoy. Going ahead, we expect the company to be on strong Nifty 5,399
growth trajectory on the back of high agro-commodity prices. On the bourses, Reuters Code BAYE.BO
due to the recent run-up in price the stock is currently trading at fair valuations. Bloomberg Code BYRCS@IN
Hence, we maintain our Neutral stance on the stock.
Lower EBITDA margin restricts profit growth: The company’s 1QFY2011 results Shareholding Pattern (%)
were below our expectations, as sales grew 20% yoy vis-à-vis our estimate of 22% Promoters 71.1
yoy growth. Gross margins declined by 358bp to 27%, which led to 320bp MF / Banks / Indian Fls 9.1
contraction in EBITDA margin to 11% (14%). FII / NRIs / OCBs 4.0
Indian Public / Others 15.9
Outlook and Valuation: The second quarter is usually the best for the company
due to the seasonal nature of the industry. We maintain our estimates and expect
BCS to register a CAGR of 15.3% and 22.9% in net sales and profit over
Abs. (%) 3m 1yr 3yr
FY2010-12E, respectively. We expect the company to post EPS of Rs44.6 and
Sensex 2.9 19.4 15.5
Rs51.8 in FY2011E and FY2012E, respectively. Our revised SOTP target price is
Bayer CropScience 4.6 177.8 221.0
Rs824 (Rs722) wherein we have valued the core business at 12x FY2012E EPS
fetching Rs621/share, and have factored in 20% (50%) discounted value for the
Thane land translating into Rs203/share post tax. However, at current levels, the
stock is trading close to our revised target post the recent run-up in the price.
Hence, we maintain our Neutral rating on the stock.
Key Financials (Consolidated)
Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
Total Revenues 1,483 1,724 1,995 2,294
% chg 19.7 16.3 15.7 15.0
Adj Profit 100 135 176 205
% chg 92.7 34.7 30.1 16.1
EBITDA Margin (%) 11.5 12.6 12.6 12.8
EPS (Rs) 25.4 34.3 44.6 51.8
P/E (x) 32.6 24.2 18.6 16.0
P/BV (x) 7.3 5.9 4.6 3.7
RoE (%) 24.5 26.8 27.7 25.5
RoACE (%) 31.3 35.1 33.9 32.8 Sageraj Bariya
EV/Sales (x) 2.2 1.8 1.6 1.3 40403800 extn 346
EV/EBITDA (x) 19.4 14.6 12.4 10.3 sageraj.bariya@angeltrade.com
Source: Company, Angel Research
Please refer to important disclosures at the end of this report 1
3. Bayer CropScience | 1QFY2011 Result Update
Sales growth below expectation
BCS reported lower-than-expected 1QFY2011 results wherein total revenues grew
by 20% as against our estimate of 22%.
Exhibit 2: Sales growth below expectation
800 25
700 21
20 20
600 17
15
500
(Rs cr) 10
(%)
400
5
300
0 0
200
100 (6) (5)
0 (10)
1QFY10 2QFY10 3QFY10 4QFY10 1QFY11
Total Revenue % YoY
Source: Company, Angel Research
Contraction in gross margin leads to decline in EBITDA margin
Gross margins declined by 358bp to 27.1% (30.7%). As a result, overall EBITDA
margin fell by 320bp to 10.6% (13.8%).
Exhibit 3: Margin trend
50
43 41
40 40
33
30 30
20
17
14
10 10 11
0 1
1QFY10 2QFY10 3QFY10 4QFY10 1QFY11
Gross margin (%) EBITDA %
Source: Company, Angel Research
July 21, 2010 3
4. Bayer CropScience | 1QFY2011 Result Update
Overall earnings below estimates
Total earnings for the quarter dipped by 8% yoy v/s our estimate of 22% yoy
growth due to lower EBITDA margin. BCS reported PAT of Rs52cr (Rs56cr).
Exhibit 4: PAT trend
70
60
60 56
52
50
40
(Rs cr)
30
21
20
10
0
(10) (4)
1QFY10 2QFY10 3QFY10 4QFY10 1QFY11
Source: Company, Angel Research
July 21, 2010 4
5. Bayer CropScience | 1QFY2011 Result Update
Investment Arguments
Leader in Indian markets: BCS is a leader in the Indian agrichemical sector with a
market share of 23%. The company's domestic revenues registered steady CAGR
of 19% over CY2005-FY2010, which indicates it’s stronghold in the domestic
business. Moreover, going ahead, we believe there exists substantial opportunity
for BCS to grow its domestic business considering the abysmal penetration of
pesticides in India. It may be noted that India consumes an average 0.48kg of
pesticides per hectare (ha) compared to 4.5kg/ha in USA and 10.7kg/ha in
Japan.
Exports - Riding the outsourcing bandwagon: BCS's export revenues registered
15% CAGR during CY2005-FY2010. Around 80% of the company's export
revenues come from outsourcing by Bayer AG's group companies. We believe this
indicates the company’s strong ability to grow internationally despite its parent
having a global presence. Globally, Bayer AG has a revenue base of Euro33bn, of
which 17% (Euro5.6bn) is from crop protection. Hence, if Bayer AG were to
outsource 10% of its requirements from its various global subsidiaries, we believe
that BCS would immensely benefit from the same.
Outlook and Valuation
The second quarter is usually the best for the company due to the seasonal nature
of the industry. We maintain our estimates and expect BCS to register a CAGR of
15.3% and 22.9% in net sales and profit over FY2010-12E, respectively. We
expect the company to post EPS of Rs44.6 and Rs51.8 in FY2011E and FY2012E,
respectively. Our revised SOTP target price is Rs824 (Rs722) wherein we have
valued the core business at 12x FY2012E EPS fetching Rs621/share, and have
factored in 20% (50%) discounted value for the Thane land translating into
Rs203/share post tax. However, at current levels, the stock is trading close to our
revised target post the recent run-up in the price. Hence, we maintain our Neutral
rating on the stock.
Exhibit 5: Key Assumption
FY2011E FY2012E
Revenue Growth 15.7 15.0
Gross Margins 38.5 38.5
Staff cost (% of sales) 8.2 8.2
Other cost (% of sales) 17.7 17.5
EBITDA Margins 12.6 12.8
Source: Company, Angel Research; Note: * - numbers are for 15 months
July 21, 2010 5
11. Bayer CropScience | 1QFY2011 Result Update
Research Team Tel: 022 - 4040 3800 E-mail: research@angeltrade.com Website: www.angeltrade.com
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Disclosure of Interest Statement Bayer CropScience
1. Analyst ownership of the stock No
2. Angel and its Group companies ownership of the stock Yes
3. Angel and its Group companies' Directors ownership of the stock No
4. Broking relationship with company covered No
Note: We have not considered any Exposure below Rs 1 lakh for Angel, its Group companies and Directors.
Ratings (Returns) : Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)
Reduce (-5% to 15%) Sell (< -15%)
July 21, 2010 11