Market Outlook 25th July 2011
Market Outlook 25th July 2011
Market Outlook 25th July 2011
Markets Today
The trend deciding level for the day is 18,668/5,641 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 18,80218,881/5,661-5,688 levels. However, if NIFTY trades below 18,668/5,614 levels for the first half-an-hour of trade then it may correct up to 18,58818,454/5,587-5,540 levels.
Indices SENSEX NIFTY S2 18,454 5,540 S1 18,588 5,587 R1 18,802 5,661 R2 18,881 5,688
News Analysis
Government to allow 51% FDI in organised multi-brand retail Bharti hikes pre-paid mobile tariffs HCL Tech inks `567-cr deal with UK's Mecom DRL acquires JB Chemicals prescription portfolio in Russia 1QFY2012 Result Review Axis Bank, UBI, GCPL, Colgate, Allahabad Bank, FAG Bearings, NIIT 1QFY2012 Result Preview RIL, NTPC, Sterlite, BOI, OBC
Refer detailed news analysis on the following page
Net Inflows (July 21, 2011) ` cr Purch FII MFs 1,953 696
NSE
FII Derivatives (July 22, 2011) ` cr Index Futures Stock Futures Gainers / Losers Gainers Company Gujarat State Pet Idea Cellular Tata Teleservices Shree Renuka Sug Mphasis Price (`) 108 85 22 74 444 chg (%) 9.7 6.8 5.8 5.6 5.3 Company Exide Inds Lanco Infra Container Corp Titan Inds GTL Losers Price (`) 150 21 1,121 222 74 chg (%) (3.3) (1.7) (1.5) (1.4) (1.4)
1
Net 641 97
Godrej Consumer
For 1QFY2012, Godrej Consumer (GCPL) posted a mixed performance. Consolidated top-line growth was strong at 39.6% yoy to `997cr, led by recent acquisitions; domestic revenue growth stood at 21% yoy. Recurring earnings declined by 22.6% yoy to `64cr, despite strong top-line growth due to a 346bp yoy contraction in OPM. The OPM contracted due to increased staff cost, ad spends and other expenses. However, reported earnings grew strongly by 94.2% yoy due to extraordinary income of `175.2cr to `239cr. The stock is under review.
Colgate
Colgate reported a weak set of numbers for the quarter. Top-line growth stood at 15.6% yoy, 1.4% above our estimates, driven by volumes. Earnings declined by 17.7% yoy, owing to a sharp contraction in OPM and higher tax from the manufacturing plant in Baddi. Operating margin contracted by 709bp yoy on account of spike in ad spends and other expenses. At the CMP, the stock is trading at 26.3x FY2013E EPS. Hence, we retain our Reduce rating on the stock with a revised target price of `869 (`874), based on 23x FY2013E EPS, in-line with its historical valuation.
Allahabad Bank
For 1QFY2012, Allahabad Bank reported 20.4% yoy growth in its net profit to `418cr, ahead of our and streets estimates. Healthy business momentum with relatively lower compression in reported NIM and stable asset quality were the key highlights of the result. The bank managed to buck the trend of a sequential decline in advances, displayed so far by its peers. The banks advances grew healthily by 5.5% qoq and 30.4% yoy. With the widening differential between fixed deposit interest rates and savings account rate, the pace of growth in CASA deposits moderated further to 15.6% yoy from 20.7% in 4QFY2011. CASA ratio came off by ~150bp qoq to 32.0% as the bank had lower flows from government-related businesses. Considering the relatively lower share of CASA deposits base, the bank surprised positively by reporting just ~9bp sequential compression in reported NIM to 3.4% despite a 10bp qoq uptick in 4QFY2011. Faster growth in the high-yielding SME segments advances and lending rate hikes aided in increasing the overall yield on advances by 87bp qoq. Slippages for the quarter normalised, with the annualised slippage ratio declining to 0.6% from the peak levels of 4.5% in 4QFY2011 (0.7% in 1QFY2011). Overall asset quality improved in 1QFY2012 with gross and net NPAs declining by 2.6% qoq and 20.1% qoq, respectively. Provision coverage ratio, including technical write-offs, improved ~400bp qoq to comfortable 79.9%. Taking into account the banks stable CASA deposits base, healthy capital adequacy and strong advances growth, at 1.0x FY2013E ABV, the stock looks reasonably priced. The pending switchover to system-based NPA recognition for agricultural loans (~14% exposure) and small loan accounts is likely to remain a near-term overhang on the stock. Hence, we recommend Neutral on the stock.
NIIT
For 1QFY2012, NIIT reported a decent performance, which was in-line with our expectations. The consolidated revenue came in at `321cr, up 15.5% yoy. Revenue from ILS, SLS and CLS businesses increased by 15.7%, 5.0% and 18.4% yoy to `177.8cr, `40.3cr and `163.0cr, respectively. Blended EBITDA margin declined by 75bp yoy to 10.3% due to a 162bp and 472bp yoy margin decline in ILS and SLS businesses to 9.6% and 12.2%, respectively. However, the CLS segment posted a 102bp yoy increase in its EBITDA margin to 8.9%. PAT came in at 13.1cr, up 1.1% yoy. We maintain Buy on the stock with a target price of `69.
NTPC
NTPC is expected to announce its 1QFY2012 results. We expect the company to record a 16.6% yoy increase in its top line to `15,094cr, aided by volume growth due to the commencement of new plants. Operating profit is expected to increase by 15.1% yoy to `3,849cr. Net profit is expected to increase by 13.5% yoy to `2,091cr. We maintain an Accumulate rating on the stock with a target price of `202.
July 25, 2011 5
Sterlite
Sterlite is slated to announce its 1QFY2012 results. The top-line is expected to grow by 72.2% yoy to `10,200cr mainly due to higher sales volume and realisations for its zinc business. On the operating front, EBITDA margin is expected to improve by 350bp to 28.0%. The bottom line is expected to grow by 68.6% yoy to `1,700cr. We maintain Buy on the stock with a target price of `216.
Bank of India
Bank of India is scheduled to announce its 1QFY2012 results. We expect the bank to report healthy NII growth of 24.2% yoy to `2,161cr. Non-interest income growth is expected to be rather moderate at 11.0% yoy. Overall operating income growth is expected to come in at 20.8% yoy, however a faster 29.5% yoy rise in operating expenses is expected to lead to rise in cost-to-income ratio above 42%. Higher provisions are expected to ease off net profit growth to 6.7% yoy to `773cr. At the CMP, the stock is trading at attractive valuations, in our view, of 1.1x FY2013E ABV. We maintain our Buy view on the stock with the target price of `498.
Corporate News
Government okays US$7.2bn Reliance-BP deal SpiceJet promoter pledges 87% of stake Tata Sons revokes 21.6mn pledged shares of Tata Power
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint
Events for the day Bank of India Bank of Maharashtra Edelweiss Capital Geometric Jyoti Structures Mastek Novartis India NTPC Oriental Bank of Commerce Patni Computer RIL Sterlite Industries Zee News
Results Results Results Results Results Results Results Results Results Results Results Results Results
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