Tuesday 28 February 2012

Indian stock market and companies daily report (February 29, 2012, Wednesday)


Indian Markets are expected to open in the green taking cues from the SGX Nifty and Asian markets which are trading higher in the opening trade. The US Markets edged up higher on Tuesday buoyed by a report from the Conference Board showing a substantial improvement in consumer confidence in the month of February. The strong consumer confidence numbers for February over shadowed the 4% drop in consumer durables orders for the month of January. US markets were also boosted by optimism about the impact of the European Central Bank's long term refinancing operation announcement which is due today. Dow Jones closed higher than 13,000 for the first time since May 2008. The major European markets which saw some volatility during the course of the day, ended the day on the upside.
Indian markets closed positively on Tuesday after snapping the four day losing streak. The markets would be tracking the GDP figures for 3QFY2012 due to be released today.

Markets Today

The trend deciding level for the day is 17,679 / 5,358 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17,828 – 17,926 / 5,409 – 5,442 levels. However, if NIFTY trades below 17,679 / 5,358 levels for the first half-an-hour of trade then it may correct up to 17,582 – 17,433 / 5,324 – 5,273 levels.

Nedgroup Insurance selects TCS BaNCS Insurance for policy administration

TCS announced that its universal financial services platform, TCS BaNCS, has been selected by Nedgroup Insurance Company, a South Africa-based short-term insurer specializing in homeowner’s cover, personal accident, vehicle-related covers and other value-added insurance products. TCS BaNCS Insurance, part of TCS BaNCS, will serve as the new policy administration system for Nedgropup’s short-term insurance services. TCS BaNCS serves the top banks in Africa through banking and capital markets suite of solutions; this will be TCS BaNCS’ first insurance customer in Africa. We maintain our Accumulate recommendation on the stock.

JSW Steel reports January production numbers

JSW Steel’s January 2012 crude steel production grew by 39% yoy and 5% qoq to 0.8mn tonnes. The company has iron ore inventory, which could last for another 4-5 months. The company is awaiting the Supreme Court’s decision to lift/partially lift the mining ban in Karnataka. We maintain our Neutral view on the stock.

Infotech Enterprises – Analyst meet update

We recently attended the analyst meet of Infotech Enterprises (Infotech) held at Hyderabad. The meet focused on giving investors an idea about the company’s systems and processes through presentation by various business heads, subvertical heads and demo of a range of company’s projects. The major take away from the meet was that the company is on the right track in terms of making investments to strengthen its product portfolio and is taking initiatives to improve its financial metrics. Infotech’s performance over the past six quarters has been mixed, with operational margins being the major disappointment, which the company is now focusing to improve.
Focus on systems and process to provide scalability: During the meet, Mr. BVR Mohan Reddy, Infotech’s Chairman and Managing Director, highlighted that the company is now focusing on strengthening its leadership along with improving its systems and processes and making them scalable. Further, the company will take in SAP integration, as currently three of the company’s subsidiaries are operating independently. Along with integrating processes, Infotech is trying to expand its footprint in other addressable markets with existing clients.
Healthy market opportunity: As per Zinnov Consulting, a leading IT consulting firm, the engineering market is expected to reach US$40bn by 2020 from US$10.4bn currently (led by industries such as aerospace, automotive, consumer electronics and telecom). Infotech, being a leader in the aerospace and telecom engineering spaces, has strong relationships with clients in these areas and, hence, can capitalize on this opportunity.
Focus on improving client mining: Infotech’s management is currently focusing on adding and increasing its wallet share from ‘must have’ accounts across its target verticals. The company is doing this by changing the incentive structure of customer-facing roles and is investing considerably to improve client mining and account management skills.
Outlook and valuation: Infotech has been witnessing a 5.2% CQGR in its USD revenue over 2QFY2011–3QFY2012 because of inorganic growth due to the acquisition of Daxcon and Wellsco. Further, the company has witnessed price increases from some of its selective clients, which instills confidence in the company’s performance going ahead. Thus, over FY2011-13E, we expect the company to post a USD and INR revenue CAGR of 17.6% and 23.2%, respectively.
Infotech has been consistently underperforming on the operating margin front, which the company is now focused to address by levers such as improving utilization level, rationalizing SG&A expenses and shifting more work offshore. This year, management expects the company’s operating margin to exit at ~17%, which can be easily achieved now, given the sharp INR depreciation. We expect EBITDA and PAT CAGR to be at 30.0% and 16.6% (lower due to tax rate moving to 33% from 17% in FY2011), respectively, over FY2011-13E.
At the CMP of Rs.144, Infotech is trading at 8.4x FY2013E EPS of Rs.17.1. We maintain our Accumulate recommendation on the stock with a revised target price of Rs.162.

Result Review – 4QCY2011

Bosch
For 4QCY2011, Bosch registered a strong 33.5% yoy jump in net profit to Rs.281cr driven by significant increase in other income and lower than expected depreciation expense. Top-line grew by an healthy 8.3% yoy to Rs.2,040cr.The company’s EBITDA margin witnessed a 109bp yoy expansion to 17.5% led by decline in staff cost and other expenditure due to which operating profit jumped 15.6% yoy to Rs.357cr. The stock rating in currently under review.
Abbott India
For 4QCY2011, Abbott India Ltd. (AIL) reported a ~6% qoq decline in its revenue to Rs.386cr, 10% below our estimate of Rs.424cr. For CY2011, the company's top line came in at Rs.1,477cr, marginally lower than our estimate of Rs.1,516cr. The company's results are not comparable to the previous year’s results on account of its amalgamation with Solvay Pharma India Ltd. (SPIL) during the year.
During the quarter, EBITDA margin came in at 11.9%, 106bp lower than our estimate of 13% on account of higher other income, which includes integration and amalgamation expenses; and stamp duty. Net profit stood at Rs.120cr, 11% below our expectation of Rs.135cr. We have slightly revised our earnings estimate downwards and expect the company's net profit to post a CAGR of ~30% over CY2011-13E.
We maintain our Buy rating on the stock with a revised target price of Rs.1,721, based on a target PE of 18x its CY2013E earnings.

Economic and Political News
- Higher import duty will hurt sector: Private power companies to PM
- January infra output reduces to 0.5% yoy
- Rising crude oil prices disturbing: Finance Minister

Corporate News
- ONGC, GAIL may offer Rs.9,800cr for Cove
- IOC gets state permit to draw river water for refinery
- GMR Infra in talks to sell US$200mn in road assets
- Essar Oil loses Rs.302cr insurance claim


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Indian stock market and companies daily report (February 28, 2012, Tuesday)


Analysis on markets today
Indian markets are expected to open in the red following the negative cues from the markets worldwide. The Asian markets which saw heavy selling in yesterday’s session have opened in red this morning.
The US markets staged a significant recovery after moving notably lower in early trading on Monday, eventually ending the session flat. Renewed concerns about the financial situation in Europe contributed to the initial weakness on Wall Street, with traders reacting negatively to a statement from the G20 finance ministers and central bank governors. Economic risks of European markets were in focus again during Monday's trading session. The continued rise in oil prices, due to the increasing tensions in the nuclear dispute with Iran, has investors concerned.
Meanwhile Indian shares hit a three-and-a-half week low on Monday as concerns that rising oil prices prompted investors to unwind long positions built up over the past few weeks. Further, the concerns over the political outcome post UP Assembly election results, to be declared next week too weighed down the markets.

Markets Today
The trend deciding level for the day is 17,601 / 5,333 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17,820 – 18,194 / 5,398 – 5,515 levels. However, if NIFTY trades below 17,601 / 5,333 levels for the first half-an-hour of trade then it may correct up to 17,227 – 17,007 / 5,216 – 5,151 levels.

Bharti selects Infosys as technology partner for airtel money
Bharti Airtel (Bharti) has picked up Infosys as its partner for ‘airtel money’ – a mobile wallet service by a mobile operator. Under this partnership, Infosys WallEdgeTM – the mobile commerce platform of Infosys will enable the mobile wallet service to support cashless payment and settlement needs of diverse customer segments. FinacleTM Digital Commerce is at the core of this platform. It facilitates the creation of a unique ecosystem of card issuers, merchants, and financial and retail institutions to offer customers a wide spectrum of payment options for their transactions. This platform will enable ‘airtel money’ customers to pay bills, recharge accounts, shop at over 7,000+ merchant outlets and transact online through multiple channels, including mobile phones, IVR and ATMs.
Infosys WallEdgeTM platform is delivered through private cloud; it creates a comprehensive shared services framework that allows members of the ecosystem to process payment instructions seamlessly and cost efficiently. We continue to maintain our Neutral view on Bharti and Accumulate rating on Infosys with a target price of Rs.3,047.

BHEL bags order worth Rs.774cr
BHEL has bagged order worth Rs.774cr from ONGC. The company will supply six onshore drilling rigs to ONGC. Various problems on the business front, envisaged in many of our earlier notes, are coming to the fore for BHEL – including dismal order intake, no signs of let up in competition (domestic and international) and order book growth under threat (9MFY2012 revenue exceeds 9MFY2012 order inflow) – all of which put serious concerns over the company’s long-term growth. Although we believe that on the valuation front the stock is undemanding at PE multiple of <11x its FY2013E earnings, we believe earnings would face severe strain going ahead, given the structural issues. Hence, we continue to maintain our negative stance on BHEL.

Result Review
Goodyear India Ltd- 4QCY2011 and CY2011
Goodyear India Ltd. (Goodyear) reported revenue growth of 16% yoy to Rs.395cr in 4QCY2011 against our expectation of 30% growth to Rs.441cr. The company's annual sales stood at Rs.1,516cr, 3% lower than our estimate of Rs.1,562cr for CY2011. Higher raw-material costs were offset by the decline in other expenses, resulting in EBITDA margin increasing marginally by 7bp to 8.7% in 4QCY2011 from 8.6% in 4QCY2010. For CY2011, EBITDA margin declined by 130bp yoy to 7.4% from 8.7% in CY2010 on account of higher raw-material costs and employee expenses. Net profit for 4QCY2011 stood at Rs.20cr, 10% lower yoy and 9% lower than our estimate of Rs.22cr.
As we roll over to CY2013E, we have revised our target price upwards to Rs.484, based on a target PE of 8x its CY2013E earnings with a Buy rating on the stock.

Result Preview
Bosch – 4QCY2011
Bosch is slated to announce its 4QCY2011 results. We expect the company’s revenue to post 10% yoy growth to Rs.1,930cr. On the operating front, the company is expected to post a 140bp yoy expansion in its operating margin to 17.8%. Hence, net profit is expected to register a 9% yoy increase to Rs.230cr. The stock rating is under review.

Economic and Political News
- Power Ministry moves cabinet note for duty on equipment imports
- Pvt. Firms may be allowed to bid for intra-state power transmission projects
- Govt. wont auction all 2G Band at one go

Corporate News
- Infosys not to get SEZ status: Mamata
- Investors of Sterlite, Sesa resist merger
- GVK in talks with UK’s BG to sell deep-water block stake
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