Indian stock market and companies daily report (April 27, 2012, Friday)

The Indian markets are expected to open flat to negative, tracing mixed opening in the major Asian bourses and flat opening in the SGX Nifty.
Globally, U.S. stocks moved mostly higher over the course of the trading day on Thursday, adding the gains posted in the previous session. The markets benefited from upbeat housing data, which helped to overshadow another disappointing jobs report. A report released from the National Association of Realtors showed a better than expected increase in pending home sales in the month of March. European markets finished mixed on Thursday, following the strong gains from the previous two sessions. The weaker than expected sentiment result from the Eurozone dragged the markets lower.
Meanwhile, Indian shares ended a lackluster trading session slightly lower on Thursday, as traders rolled over the positions in the derivatives segment. Most Asian markets edged higher on Thursday, as a rally on Wall Street overnight on relief over the Fed's assessment of the U.S. economy and strong U.S. corporate earnings.

Markets Today
The trend deciding level for the day is 17,136 / 5,195 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17,188 – 17,245 / 5,210 – 5,231 levels. However, if NIFTY trades below 17,136 / 5,195 levels for the first half-an-hour of trade then it may correct up to 17,079 – 17,027 / 5,174 – 5,158 levels.

Result Reviews
Idea (CMP: Rs.83 / TP: - / Upside: -)
For 4QFY2012, Idea Cellular (Idea) reported healthy revenue growth; however, the company disappointed marginally on the operating front. Revenue came in at Rs.5,370cr, up 6.7% qoq, on the back of 2.7% qoq growth in MOU to 379min and subscriber growth of 5.9% qoq with end-of-period subscriber base standing at 112.7mn. However, the company’s ARPM declined by 2.5% qoq to Rs.0.42/min, which the company said is due to market place battle and overcapacity. EBITDA margin decreased by 146bp qoq to 25.3% due to higher license costs. PAT came in at Rs.239cr, up 18.8% qoq, aided by ~20% qoq lower interest costs. We remain Neutral on the stock.

MRF – 2QSY2012 Review (CMP – Rs.11,236, TP - Rs.13,106, Upside: 17%)
For 2QSY2012, MRF reported top-line growth of 25.4% yoy to Rs.2,993cr, slightly higher than our estimate of Rs.2,929cr. This was mainly driven by improvement in exports and better replacement demand. The company’s EBITDA margin improved by 160bp yoy to 10.9% in 2QSY2012 on the back of softening rawmaterial prices, mainly rubber, which constitutes ~60% of the total raw-material cost for the company. Profit for the quarter surged by 63% yoy to Rs.150cr as compared to Rs.92cr in 2QSY2011. We expect MRF’s adjusted PAT to post a 42.4% CAGR over SY2011-13E, driven by better demand and stabilizing rubber prices. We maintain our Buy recommendation on the stock with a target price of Rs.13,106, based on a target P/E of 8.0x for SY2013E.

Vesuvius India – 1QCY2012 Review (CMP – Rs.422, TP - , Upside -)
For 1QCY2012, VIL reported top-line growth of 15.8% yoy to Rs.139cr, marginally lower than our estimate of Rs.142cr, however on a sequential basis, the revenue declined by 6.1%. The company’s EBITDA margin dipped by 376bp yoy to 14.9% in 1QCY2012 on the back of increased raw material prices. Profit remained flat yoy at Rs.12cr as compared to Rs.13cr in 1QCY2011. The company has acquired 15 acres of land in Visakhapatnam for setting up its fifth plant. We expect improvement in production volume due to the commencement of the newly expanded Kolkata plant; however the demand outlook is not favourable. Moreover, volatility in raw material prices is also a concern. Hence, we recommend a Neutral on the stock.

Result Previews
ICICI Bank
ICICI Bank is slated to announce its 4QFY2012 results. We expect the bank to report moderate net interest income growth of 13.3% yoy to Rs.2,844cr. Non-interest income growth is expected to be healthy at 23.8% yoy to Rs.2,032cr. Pre-provision profit of the bank is expected to rise by 22.5% yoy. Net profit is expected to increase only by 18.3% yoy to Rs.1,719cr on account of higher provisioning expenses (expected to increase by 24.1% yoy) and higher tax outgo (expected to increase by 34.1% yoy). At the CMP, the stock is trading at attractive valuations of 1.4x FY2014E ABV (without adjusting value of subsidiaries). We maintain our Buy view on the stock with a target price of Rs.1,135.
Axis Bank
Axis Bank is slated to announce its 4QFY2012 results. We expect the bank to report healthy NII growth of 32.4% yoy to Rs.2,252cr. NIM, on a sequential basis, is likely to remain flat with a downward bias. Non-interest income is expected to increase by relatively moderate 9.4% yoy to Rs.1,586cr. Pre-provision profit of the bank is expected to register growth of 22.8% yoy. However, owing to higher provisioning burden (an increase of 104.7% yoy), net profit is expected to increase by relatively low 13.6% yoy to Rs.1,159cr.
The stock is currently trading at attractive valuations of 1.5x FY2013E ABV – more than 50% discount to HDFC Bank, despite similar earnings quality, profitability and growth expectations over FY2013-14. Hence, we maintain our Buy recommendation on the stock with a target price of Rs.1,550.
Hexaware- 1QCY2012
Hexaware is slated to announce its 1QCY2012 results. We expect the company to post revenue growth of 4.0% qoq to US$88mn, majorly led by volume growth. In INR terms, revenue is expected to come in at Rs.440cr, up 1.8% qoq. EBITDA margin is expected to decline by 140bp qoq to 21.6% due to qoq INR appreciation against USD. PAT is expected to come in at Rs.77cr. We maintain our Neutral view on the stock.
HCC
For Hindustan Construction Company (HCC), we project a 15.0% yoy decline in revenue for 4QFY2012 to Rs.1,022cr due to slowdown in execution on account of gloomy macro environment. On the EBITDA front, we expect a dip of 200bp yoy to 11.8% on the back of muted margin performance in the past two quarters. On the bottom-line front, we expect loss of Rs.23.2cr in 4QFY2012 against profit of Rs.22.6cr in 4QFY2011 due to poor show expected on the revenue and margin front and owing to escalating interest cost, which is expected to post a yoy jump of 24.8%. We continue to maintain our Neutral view on the stock.

Economic and Political News
- India to receive normal monsoon this year
- Government mulls hike in MNREGA wages
- IT waiver to private PF trusts may extend till March 2013

Corporate News
- Government proposes a board for growth of auto sector
- Government may reject Coal India's mininum penalty clause in FSA
- ONGC wants Centre to offset additional cess on crude
- United Phosphorous to move tribunal against CCI fine
- Sesa Goa to begin exploration in Liberia mines this week
- Mahindra to market SsanYong cars in South Africa
- Rabobank sells 3.4% stake in Yes Bank for Rs.453cr

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