The domestic markets are expected to open in red tracking negative opening in Asian markets. Asian markets turned in a mixed performance yesterday, as worries prevailed that the European debt crisis could spiral out of control and weigh on global growth if Greece were to exit the euro zone and default on its debt.
U.S markets declined yesterday as investors worried about political situation in Greece, which is headed for a new round of elections after lawmakers failed to form a coalition government. Moody's announcement that it had downgraded Italian banks also weighed on markets. Meanwhile, upbeat U.S. economic data helped to limit the downside for the markets as a report showed that Wells Fargo Housing Market Index jumped to 29 in May from 24 in April. Also, general business conditions index jumped to 17.1 in May from 6.6 in April.
Meanwhile, Indian markets rebounded on Tuesday as falling oil prices and the strengthening of rupee from a near record low against the dollar due to intervention from the RBI encouraged investors to cherry-pick battered stocks. Investors today will watch out for industrial production data of the U.S. for April 2012 (Bloomberg estimate – 0.6%) to be released today.
Markets Today
The trend deciding level for the day is 16,274 / 4,922 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 16,425 – 16,521 / 4,976 – 5,009 levels. However, if NIFTY trades below 16,274 / 4,922 levels for the first half-an-hour of trade then it may correct up to 16,177 – 16,027 / 4,889 – 4,836 levels.
Tata Motors reports flat global volumes for April 2012
Tata Motors (TTMT) reported flat global volume for April 2012 to 87,377 units (down 37% mom), led largely on account of a decline in global commercial vehicle (CV) volumes and lower-than-expected Jaguar and Land Rover (JLR) volumes. Global CV volumes declined by 8% yoy to 38,008 units due to an 8% yoy decline in domestic CV volumes. Global passenger vehicles, however, reported healthy volume growth of 7% yoy to 49,369 units, driven primarily by JLR performance. JLR volumes grew by 29.4% yoy to 25,143 units, led by 17% and 31.7% yoy growth in Jaguar and Land Rover sales, respectively. Nonetheless, JLR volumes for April 2012 were lower than expected and it reported a significant mom decline of 31%. At the current market price of Rs.290, the stock is trading at 7.0x and 4.1x FY2014E earnings and EV/EBITDA, respectively. We maintain our Accumulate rating on the stock with an SOTP-based target price of Rs.328.
Result Reviews
Shree Cement (CMP: Rs.2,662 / TP: - / Upside: -)
Shree Cement’s (SRCM) 4QFY2012 top line rose by 38.1% yoy during the quarter to Rs.1,478cr, in-line with our estimates. The cement business posted 25.1% yoy growth in its net sales to Rs.1,189cr on account of 16.7% yoy growth in dispatches to 3.36mn tonnes and 7.2% yoy growth in realization to Rs.3,794/tonne. OPM rose by 64bp to 25.3% on account of better cement realization, despite increased freight costs. The company’s bottom line rose by 73.8% yoy to Rs.115cr, on accountof superior operating performance and higher other income of Rs.77cr in 4QFY2012 (vs. Rs.20.7cr in 4QFY2011), which included Rs.37cr of write back of provisions relating to the previous years. We maintain our Neutral view on the stock.
Patel Engineering (CMP: Rs.90 / TP: - / Upside: -)
For 4QFY2012, Patel Engineering (Patel) posted a 14.5% yoy decline on the topline front to Rs.1,346cr. The company’s EBITDA margin for the quarter increased by 110bp on a yoy basis and came in at 9.5%. Interest and depreciation cost for the quarter came in at Rs.84cr and Rs.23cr, respectively. On the earnings front, the company posted a decline of 70.1% on a yoy basis to Rs.9cr, owing to poor performance on the revenue front and higher tax rate (52%). We maintain our Neutral view on the stock.
Dishman Pharma (CMP: Rs.43 / TP: Rs.92 / Upside: 114%)
For the quarter, Dishman Pharma (Dishman) reported sales below our expectations. However, the company’s net profit came in higher than expectations. For the quarter, the company posted sales of Rs.350cr, registering 1.7% yoy growth. On the operating front, gross and operating margin came in at 65.4% and 23.5%, respectively. OPM came in above our expectation of 17.8%. This aided net profit to come in at Rs.31.4cr, in comparison to Rs.28.5cr estimated for the quarter. Currently, the stock is valued at 3.3x FY2014E earnings. We maintain our Buy rating on the stock with a target price of Rs.92.
JK Tyre & Industries (CMP: Rs.78 / TP: Under Review /Upside: -)
JK Tyre & Industries (JKI) reported net profit of Rs.86cr for 4QFY2012 as against loss of Rs.21cr in 3QFY2012, led mainly on account of extraordinary income of Rs.81cr. For 4QFY2012, net sales grew by healthy 13.2% yoy (7.1% qoq) to Rs.1,524cr. Operating performance registered a sharp improvement with EBITDA margin expanding by better-than-expected 222bp yoy (264bp qoq) to 7.7%, driven mainly on account of improvement in raw-material cost (130bp yoy) as natural rubber prices witnessed a decline of 15.2% yoy during the quarter. As a result, operating profit jumped by 58.8% yoy (62.4% qoq) to Rs.118cr. However, a 55.3% yoy increase in interest expense to Rs.47cr resulted in adjusted net profit of Rs.31cr (Rs.17.5cr in 4QFY2011).
On the consolidated front, net sales witnessed 16.2% yoy growth to Rs.6,947cr, led by 16.8% and 13.4% yoy revenue growth in India and Mexico, respectively. However, the company reported net loss of Rs.32cr on account of extraordinary expense of Rs.47cr during the year. The stock rating is currently under review.
Result Previews
JK Lakshmi Cement
JK Lakshmi Cement (JKLC) is set to declare its 4QFY2012 results. For the quarter, we expect JKLC to post 5.9% yoy growth in its top line to Rs.439cr, driven by volume growth and higher realization. The company’s OPM is expected to increase by 87bp yoy to 19.4%. The bottom line is expected to register growth of 36% yoy to Rs.43.4cr. We maintain our Buy view on the stock with a target price of Rs.79.
Economic and Political News
- A Raja granted bail by Delhi court in 2G case
- DTC Bill to be introduced in monsoon session
- Electronics market to reach Rs.20lakh cr by 2020: Assocham
- India gold imports down 33% in April
- Kerala plans to raise Rs.1lakh cr for high speed rail corridor project
Corporate News
- Adani Group plans to bid for transmission projects
- Bharti Airtel under ED lens for alleged money laundering
- ITC's Sri Lankan arm buys land for hospitality project
- IVRCL bags orders worth Rs.653cr
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