What are Derivatives and their need in the Indian Share Market

Derivative instrument is a contract between two parties that emphasizes conditions ( including dates that result in values of the underlying variables and notional amounts) under which payments can be made between both the parties.

Derivatives are used by investors for the following reasons:

1)            It provides leverage with a small movement in the underlying value that causes a large difference in the value of the derivative.

2)            One can often speculate and make a profit, if the value of the underlying asset goes in the way they expect.

3)            It mitigates the risk in the underlying, by making an entry in the derivative contract whose value moves in the opposite direction, stays in or out of a specific range and may reach a certain level.

4)            It can obtain exposure to the underlying where it may not be possible to trade in the underlying derivatives.

5)            It has the ability to create options, where the value of the derivative is linked to a specific condition or event.

When Derivatives allow risk related to the prices of the underlying asset to be transferred from one party to another, it is known as Hedging. Both the parties have a reduction in a future risk, however there is still a risk of the non-availability of the resource that may back-track because of the events unspecified by the contract such as natural damage, may cause problems on the contract.

Although a third party, which is also known as a clearing house, it insures a futures contract, not all derivatives can or will be insured against a counter-party risk.

Derivatives are also used to acquire risk, rather than hedging the risk. Thus, some investors or institutions can enter in a derivative contract to speculate on the value of the underlying asset.

These speculations look to purchase an asset in the future at a really low price which according to the derivative contract maybe a high price to sell the asset in the future when the market price is low.

An OTC or over-the-counter derivative is a contract that is privately traded and negotiated between two parties without going through an exchange.

Exchange-traded derivative contracts are those derivatives that can be traded via specialized derivative exchange or other exchanges. There is a market where derivatives exchange acts as an intermediary to all transactions and takes an initial margin from both the sides of the trade to act as a guarantee.

Online share trading in India, open demat account in Angel Broking for stock market trading

Indian stock market and companies daily report (May 30, 2012, Wednesday)

The domestic markets are expected to open in red tracing negative opening in most of the Asian bourses and the SGX Nifty, as reports say that China has ruled out any broader stimulus to boost its economy and Spain rating has been downgraded.
Globally, US markets closed notably higher on Tuesday after witnessing volatility in the morning trade, which was on account of some mixed news out of Europe. Most of the European markets also largely finished in positive territory on Tuesday. Spanish markets, however remained under pressure due to concerns over the country's banks. Expectations for further stimulus from China provided investors with optimism, globally.
Meanwhile, Indian benchmark indices gave up most of their early gains on Tuesday to close flattish, as a little bit of volatility in European markets on concerns over the outlook for Spanish banks and the slide in rupee following three days of gains prompted investors to pare their long positions.

Markets Today
The trend deciding level for the day is 16,464 / 4,997 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 16,519 – 16,599 / 5,013 – 5,035 levels. However, if NIFTY trades below 16,464 / 4,997 levels for the first half-an-hour of trade then it may correct up to 16,384 – 16,330 / 4,975 – 4,959 levels.

IRB emerges L1 for road projects worth Rs.2,400cr
IRB has emerged as the lowest bidder for the four-laning project of Goa/Karnataka Border to Kundapur section of NH-17 in Karnataka under NHDP phase IV on design, build, finance, operate and transfer (Toll) basis. The estimated cost of the project is Rs.2,400cr. The concession period is 28 years and construction period is 910 days. Further, IRB had sought Rs.536cr as viability gap funding (VGF) from NHAI. This project win would be after a year as IRB had won the Ahmedabad-Vadodara project in April 2011. Further, this is in-line with the company’s guidance of Rs.4,000cr-5,000cr of order inflow each year. We continue to maintain our Buy recommendation on the stock with a target price of Rs.166.

Result Reviews
ONGC (CMP: Rs.256, TP: Under Review)
ONGC’s 4QFY2012 results were above our expectations. The company’s top line increased 22.2% yoy at Rs.18,819cr. EBITDA margin expanded 932bp yoy to 42.6% and EBITDA increased by 56.4% yoy to Rs.8,019cr. The company’s depreciation and amortization expenses decreased 41.5% yoy to Rs.1,349cr. Net profit increased substantially by 102.2% yoy to Rs.5,644cr much ahead of our estimate of Rs.2,652cr. We recommend a Buy on the Stock with our target price under review.
Tata Motors (CMP: Rs.276 / TP: Rs.312 / Upside: 13%)
Consolidated performance a mixed bag: For 4QFY2012, Tata Motors (TTMT) reported impressive 44.3% yoy (12.5% qoq) growth in its top line to Rs.50,908cr, led by 51.5% yoy (10.6% qoq) growth in JLR sales, which were driven by a 48.2% yoy (13.6% qoq) jump in volumes and 4.4% yoy (flat qoq) improvement in net average realization. While Land Rover volumes jumped by 51% yoy, driven mainly by incremental volumes from Evoque (29,171 units during the quarter), Jaguar volumes jumped by 30% yoy due to the strong performance of the recently launched XF. The company’s operating margin, however, declined by 184bp qoq and stood at 13.2% primarily on account of increased other expenditure, which increased substantially by 36.3% qoq. Raw-material expenses, on the other hand, were stable during the quarter, which supported the margins. Led by tax credits of Rs.1,793.7cr related to carry forward income tax losses at JLR, reported net profit jumped sharply to Rs.6,234cr. Adjusted for tax credits, net profit came in better than expectations, registering 80.5% yoy growth to Rs.4,440cr.
Strong standalone performance: TTMT posted better-than-expected 14.4% yoy (22.9% qoq) growth during the quarter on account of 18.5% yoy (23.3% qoq) growth in volumes. Net average realization, however, declined by 3.6% yoy due to higher contribution of light commercial vehicles during the quarter. Operating margin improved substantially by 268bp qoq to 9.1%, mainly led by operating leverage benefits and a decline in raw-material expenses. Hence, net profit increased substantially by 225.5% sequentially to Rs.565cr.
At Rs.276, the stock is trading at 6.3x FY2014E earnings. We maintain our Accumulate rating on the stock with an SOTP target price of Rs.312.
Sun Pharmaceuticals (CMP - Rs.566, TP - Rs.634, Upside: 12%)
Sun Pharmaceuticals reported sales and the net profit came in much ahead of expectations. For the quarter, the company posted sales of Rs.2330cr, a growth of 59.4% yoy. The growth in the domestic and exports, both of grew robustly. The domestic formulations reported growth of 49%, while the US and ROW formulation sales during the quarter came in at 66% and 31% respectively. On the operating front, the Gross and Operating margins came in at 78.4% and 41.1% respectively. The OPM’s were were just in line with expectations. Thus, while the OPM’s were in line , higher sales growth and higher other income and lower interest expenses during the quarter aided the net profit growth of 85.3% yoy to end the period at Rs.820cr, in comparison to the Rs.775cr estimated for the quarter. We maintain our Accumulate with a target of Rs.634.
SAIL (CMP: Rs.93, TP: Under Review)
SAIL’s 4QFY2012 net sales were above our estimates; however, adjusted PAT came in below our estimates. SAIL’s 4QFY2012 net sales increased by 12.2% yoy to Rs.13,397cr (above our estimates of Rs.12,183cr) mainly due to increase in sales volumes in our view. Raw material costs and other expenditure increased 27.1% and 38.6% yoy to Rs.6,866 and Rs.1979cr, respectively, while power and fuel costs increased 26.2% yoy to Rs.1,156cr. EBITDA dipped 20.5 % yoy to Rs.1871cr and EBITDA margin contracted by 574bp yoy to 14.0% (in line with our estimate of 14.0%). The company reported an exceptional item related to forex gain of Rs.725cr in 4QFY2012, compared to exceptional gain of Rs.34cr in 4QFY2011. Hence, reported net profit increased by 3.0% yoy to Rs.1577cr. However, excluding exceptional items, adjusted net profit declined substantially by 43.1% yoy to Rs.852cr (below our estimate of Rs.1,263cr) in 4QFY2012. We maintain an accumulate rating on the stock keeping our target price under review
IPCA Labs (CMP - Rs.323, TP - Rs.443, Upside: 37%)
IPCA Labs reported sales and the net profit came in below expectations. For the quarter, the company posted sales of Rs.553cr, a growth of 16.7% yoy. On the operating front, the Gross and Operating margins came in at 60.4% and 18.7% respectively. The OPM’s were below expectations of 20.7%. This aided the net profit to come at Rs.76.6cr, in comparison to the Rs.64.9cr estimated for the quarter. We maintain our buy with a target of Rs.443.
Aurobindo Pharma (CMP - Rs.111, TP - Rs.175, Upside: 58%)
Aurobindo Pharmaceuticals reported sales and the net profit came in above expectations. For the quarter, the company posted sales of Rs.1170cr, a growth of 2.5% yoy. On the operating front, the Gross and Operating margins came in at 45.2% and 10.3% respectively. The OPM’s were below expectations of 13.9%. This aided the net profit to come at Rs.38.1cr, in comparison to the Rs.47cr estimated for the quarter. We maintain our buy with a target of Rs.175.
NCC (CMP: Rs.32, TP: Under review)
For 4QFY2012, NCC posted better-than expected numbers on the revenue and earnings front however the company disappointed on EBITDAM level. On the top line front, NCC reported jump of 21.4% yoy to Rs.1,755cr, which was higher than our expectation of Rs.1,429cr. On the EBITDAM front, the company’s margin were disappointing at 5.8%, a dip of 320bp on yoy basis and lower than our estimate of 7.4%. Interest cost came in at Rs.98cr a yoy jump of 19.9% but a decline of 8.1% on sequential basis. On the bottom line level, NCC reported a yoy decline of 69.7% to Rs.11cr, almost in line with our estimate of Rs.10cr despite posting higher revenue owing to lower EBITDAM and higher interest cost. The current outstanding order book of NCC stands at Rs.20,196cr, with order inflow of Rs.10,116cr for FY2012. We maintain Buy view on the stock however the target price is under review.

Result Previews
GAIL(CMP: Rs.330 / TP: Rs.392 / Upside: 19%)
GAIL is expected to announce its 4QFY2012 results. We expect the company’s top line to grow by 20.3% yoy to Rs.10,697cr. However, the company’s operating margin is expected to contract by 260bp yoy to 11.7%. On the bottom-line front, we expect GAIL to report growth of 1.9% yoy to Rs.798cr. We continue to maintain our Buy rating on GAIL with a target price of Rs.392.
Mahindra and Mahindra (CMP: Rs.656 / TP: Rs.793 / Upside: 21%)
Mahindra and Mahindra is slated to announce its 4QFY2012 results. We expect the company’s top line to grow by strong ~20% yoy to Rs.8,046cr, backed by ~12% yoy growth in total volumes and ~7% yoy growth in net average realization. The company’s EBITDA margin is expected to witness a decline of 132bp yoy to 11.4% on account of increased purchases from its manufacturing subsidiary, MVML, and lower share of tractors in the total volume mix. As a result, the bottom line is expected to remain flat on a yoy basis to Rs.610cr. We continue to maintain our Buy recommendation on the stock with a target price of Rs.793.
DLF (CMP: Rs.188, TP: -, Upside: -)
DLF is expected to announce its 4QFY2012 results. We expect the company’s top line to decline by 11.2% yoy to Rs.2,382cr. However, the company’s operating margin is expected to expand by 1,441bp yoy to 39.2%. On the bottom-line front, we expect DLF to report growth of 29.4% yoy to Rs.446cr. We continue to maintain our Neutral recommendation on DLF.
Colgate (CMP: Rs.1,216, TP: -, Upside: -)
Colgate is expected to announce its 4QFY2012results. For the quarter, we expect the company to post 16.4% yoy growth in its top line to Rs.677cr, aided by volume and realization growth. Net profit for the quarter is expected to grow by 15.0% yoy to Rs.131cr, aided by margin expansion of 348bp yoy to 25.0%. We maintain our Neutral view on the stock.
JP Associates (CMP: Rs.62, TP: Rs.98, Upside: 58%)
We expect Jaiprakash Associates (JAL) to post marginal top-line growth of 2.0% yoy to Rs.4,063cr for the quarter on the back of higher revenue contribution from the cement segment due to capacity addition. We expect the company to post blended EBITDA margin of 22.9%, an improvement of 150bp yoy for the quarter. The bottom line is expected to be at Rs.230.6cr, registering a yoy decline of 23.6% for the quarter. This is mainly on account of a 16.3% yoy expected jump in interest cost to Rs.470.9cr. We recommend Buy on the stock with an SOTP target price of Rs.98.
HDIL (CMP: Rs.67, TP: Rs.115, Upside: 72%)
HDIL is expected to announce its 4QFY2012 results. We expect the company’s top line to increase by 14.8% yoy to Rs.601cr. Operating margin is expected to expand by 1,105bp yoy to 59.9%. On the bottom-line front, we expect HDIL to report flat growth on a yoy basis to Rs.197cr. We continue to maintain our Buy recommendation on HDIL with a target price of Rs.115.
Anant Raj (CMP: Rs.47, TP: Rs.78, Upside: 66%)
Anant Raj is expected to announce its 4QFY2012 results. We expect the company’s top line to come in at Rs.177cr. However, operating margin is expected to contract by 2,704bp yoy to 44.7%. The company’s bottom line is expected to come in at Rs.55cr. We continue to maintain our Buy recommendation on Anant Raj with a target price of Rs.78.
Simplex Infra (CMP: Rs.212, TP: Rs.316, Upside: 49%)
Simplex Infra is expected to continue its healthy performance on a sequential basis, as we project 27.1% yoy top-line growth to Rs.1,738cr for 4QFY2012. We expect the company’s EBITDA margin to fall by 100bp to 9.0%. The bottom line is expected to be under pressure due to increased interest cost (expected jump of 62.2% yoy), resulting in a yoy decline of 15.1% to Rs.31.4cr for the quarter. We continue to maintain our Buy view on the stock with a target price of Rs.316.
GIPCL (CMP: Rs.62, TP: Rs.98, Upside: 58%)
GIPCL is expected to announce its 4QFY2012 results. We expect GIPCL to register flat top-line performance during the quarter. The company’s OPM is expected to decline by 1,201bp yoy to 27.4% on a high base on account of lower plant availability and lesser generation-linked incentives. The first unit of SLPPI plant (125MW) was not operational during 4QFY2012 due to damaged rotor. The bottom line is expected to decline by 71.9% yoy to Rs.23cr due to poor operational performance and higher base due to the tax write-back in 4QFY2011. We maintain our Buy view on the stock with a target price of Rs.98.

Economic and Political News
- Foreign retail investors can buy US$1bn Indian corporate debt: Govt.
- High Govt. borrowing may crowd out private sector: RBI
- Air India board refers Boeing compensation issue to Govt.

Corporate News
- Jindal Steel's US$2.1bn project gets Bolivian boot
- JSPL buys 10% in Gujarat NREs Oz unit
- Bharat Forge to sell loss-making US unit

Online share trading in India, open demat account in Angel Broking Ltd for share market

Indian stock market and companies daily report (May 25, 2012, Friday)

The domestic markets are expected to sideways tracking mixed cues from global markets. Asian markets rose today to follow a higher finish for the Dow industrials in the US, after comments from Italy’s prime minister eased some fears of an immediate Greek exit.
US markets, Stocks showed a lack of direction over the course of the trading day on Thursday, as seemed reluctant to make any significant moves. The choppy trading came after the markets saw considerable volatility over the course of the two previous sessions. Traders also digested some uninspiring US economic data, including a report from the Commerce Department showing a drop by a keyindicator of business spending. European markets began the session in negative  territory, following several weaker than expected economic reports from Europe. The market managed to turn around as the session progressed, helped in part by some positive economic results from the US.
Indian shares rebounded sharply from two days of losses on Thursday, as a steep hike in petrol prices fueled speculation that the government may hike diesel and LPG prices on Friday to cut the fuel subsidy bill and counter the perception of government inaction that has lowered the credibility of the UPA government among overseas investors.

Markets Today
The trend deciding level for the day is 16,136 / 4,894 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 16,338 – 16,454 / 4,959 – 4,996 levels. However, if NIFTY trades below 16,136 / 4,894 levels for the first half-an-hour of trade then it may correct up to 16,021 – 15,819 / 4,857 – 4,793 levels.

Bharti Airtel acquires a 49% stake in Qualcomm's BWA ops
Bharti Airtel (Bharti) has acquired a 49% stake in Qualcomm's broadband wireless access (BWA) business in India for US$165mn (~Rs.900cr). Under the agreement, Bharti has made an initial investment of about US$165mn to acquire 49% interest in Qualcomm Asia Pacific's India entities that hold BWA licenses in Delhi, Mumbai, Haryana and Kerala. Qualcomm had won spectrum for high-speed data services in the four circles through auction in June 2010 and paid Rs.4,912cr (~US$1bn) forthe same. Qualcomm had sold a 26% stake to Indian companies – Global Holding Corp. and Tulip Telecom – for about US$58mn to comply with the sector's foreign holding rules. The present deal has been made partly by way of acquisition of 26% equity interest held by Global Holding Corporation and Tulip Telecom and the balance by way of subscription of fresh equity in those entities. Bharti already has BWA licenses in four circles – Punjab, Maharashtra, Kolkata and Karnataka – and services have already been launched in the latter two. This deal will give Bharti access to four telecoms zones, including the lucrative Delhi and Mumbai cities, where it does not have its own 4G airwaves. We believe this is a positive development by the company and Bharti is the only telecom player in India that has launched 4G services. However, we maintain our Neutral view on the stock due to regulatory uncertainties prevailing in the sector.

Result Reviews
Madras Cements (CMP: Rs.136/ TP: - / Upside: -)
Madras Cements posted 32.9% yoy growth in its top line to Rs.912cr, in-line with our estimate. Top-line growth was aided by a 16.8% increase in volumes and 13.7% growth in realization. On a sequential basis, while volumes were higher by 23.1%, realization remained flat. OPM stood at 21.9%, down 288bp yoy, on account of a steep 28.3% and 52.9% increase in freight costs and other expenses. Freight costs were higher due to higher diesel costs and elevated railway freight rates. Net profit rose by 56% yoy to Rs.99.2cr, aided by higher other income. For the quarter, other income stood at Rs.31cr (vs. Rs.18cr in 4QFY2011). We continue to remain Neutral on the stock.
TVS Motor (CMP: Rs.33 / TP: Rs.55 / Upside: 66.7%)
TVS Motor (TVSL) reported net profit of Rs.57cr for 4QFY2012, in-line with our estimates. The company’s top line for the quarter remained flat on a yoy basis at Rs.1,627cr, as a 1.7% yoy dip in average realization completely offset the muted growth registered in total volumes. Volume performance was muted with growth of 1.7% yoy on the back of an 11.1% and 36.0% yoy decline in motorcycle and three-wheeler volumes, respectively. EBITDA margin came in at 6.1%, expanding by 49bp yoy aided by 58bp yoy savings in raw-material expenses (raw-material to sales ratio at 71.9% in 4QFY2012 vs. 72.4% in 4QFY2011 and 71.4% in 3QFY2012). Net profit during the quarter registered strong 37.3% yoy growth to Rs.57cr, largely due to lower tax expenses (Rs.5cr during the quarter as against Rs.20cr in 4QFY2011 and Rs.19cr in 3QFY2012). At the CMP, TVSL is trading at 5.9x FY2014E earnings. We maintain our Buy rating on the stock with a target price of Rs.55.
Hitachi Home (CMP – Rs.121, TP: Rs.160, Upside: 32%)
For 4QFY2012, Hitachi reported revenue of Rs.236cr, 4.3% below our estimate of Rs.246cr; while on a yoy basis, revenue grew marginally by 3.7%. The company's EBITDA margin stood at 6.6%, in-line with our estimate; however, it expanded slightly by 23bp yoy due to easing raw-material prices. Net profit declined by 13.4% yoy to Rs.7cr in 4QFY2012 from Rs.9cr in 4QFY2011. Due to attractive valuations at current levels with PE of 7.6x for FY2014E, we maintain our Buy recommendation on the stock with a target price of Rs.160, based on a target PE of 10x.

Result Previews
ITC
ITC is expected to announce its 4QFY2012 results. For the quarter, we expect ITC to report ~14.5% yoy growth in its top line to Rs.6,685cr, driven by price hikes taken by the company. The company’s net profit is expected to increase by ~20.1% yoy to Rs.1,539cr, driven by robust sales growth and margin expansion led by price hikes. At the CMP, the stock is trading at 22.2x FY2014E EPS. We maintain our Accumulate view on the stock with a target price of Rs.252.
Crompton Greaves
For 4QFY2012, we project Crompton Greaves to report modest top-line growth of 9.0% yoy to Rs.3,170cr, which can mainly be attributed to the power system segment, which has remained a drag since the past few quarters. In addition, we do not expect substantial growth from the overseas business, which is likely to keep growth under check. Weak capex cycle along with strained consumer sentiment is also likely to impact the company’s growth. On the EBITDA front, the company’s margin is expected to decline sharply by ~483bp yoy to 8.0%. However, we expect an uptick of 200bp sequentially, factoring in the cooling of commodity prices. Led by low revenue and margin contraction, the company’s PAT is expected to drop by 40.2% yoy to Rs.150.3cr. We recommend Buy on the stock with a target price of Rs.164.
MOIL
MOIL is slated to report its 4QFY2012. We expect its 4QFY2012 net sales to decrease by 4.5% yoy to Rs.251cr mainly on account a decline in manganese ore prices. EBITDA margin is expected to contract by 2,090bp yoy to 42.5% in 4QFY2012. Net profit is expected to decrease by 26.9% yoy to Rs.97cr. We maintain our Neutral view on the stock.

Economic and Political News
- Government hikes interest rate on SDS to 8.8% for 2012-13
- Government to meet on Friday to discuss raising diesel prices
- Delays in land acquisition stall road projects worth Rs.15,000cr
- RBI to take steps to arrest rupee fall: Finance Ministry

Corporate News
- Sun Pharma gets USFDA nod for nasal spray
- Mahindra & Mahindra taps Korean arm to crack China
- IOC may cut petrol prices if crude falls: chairman
- M&M eyes 100 MW from solar power projects
- Sun Pharma gets USFDA nod for nasal spray
- Mahindra & Mahindra taps Korean arm to crack China

Online share trading in India, open demat account in Angel Broking for stock market

Indian stock market and companies daily report (May 24, 2012, Thursday)

The domestic markets are expected to open in green tracking positive development on domestic front. The government has raised petrol price by massive (~10%) Rs.7.54/litre in order to recover losses to oil marketing companies (OMCs), which were selling petrol at lower prices. With this petrol price hike, the under-recovery (loss) due to selling petrol price at subsidized rates is expected to be lower by ~Rs.7,000cr for FY2013, positive for OMCs and ONGC. This unprecedented steep increase in petrol prices by the government signals its intention to lower fiscal burden through bold policy measures.
US markets, after showing a notable move to the downside in morning trading on Wednesday due to continued worries about the financial situation in Europe, which came as European leaders held a closely watched summit in Brussels. However, stocks staged a significant recovery over the latter part of the trading day which was attributed to reports out of the European summit regarding the steps that the leaders are willing to take to boost economic growth. European markets finished solidly to the downside on Wednesday reversing the gains from the previous two trading days on the back of concerns over the situation in Greece.
Indian shares fell on Wednesday, extending the previous session's sharp sell-off, as the rupee continued its downward spiral, breaching the 56 mark against the dollar amid a weaker euro and persisting domestic concerns over slowing economic growth and a widening fiscal deficit.

Markets Today
The trend deciding level for the day is 15,932 / 4,831 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 16,018 – 16,087 / 4,858 – 4,881 levels. However, if NIFTY trades below 15,932 / 4,831 levels for the first half-an-hour of trade then it may correct up to 15,863 – 15,777 / 4,808 – 4,781 levels.

Government raises petrol price by Rs.7.54/litre
The government has raised petrol price by massive (~10%) Rs.7.54/litre in order to recover losses to oil marketing companies (OMCs), which were selling petrol at lower prices. Without this hike, OMCs would stand to lose Rs.8,000cr in FY2013 (compared to Rs.4,870cr in FY2012) considering the 10% depreciation in INR against USD during the past three months. With this petrol price hike, the underrecovery (loss) due to selling petrol price at subsidized rates is expected to be lower by ~Rs.7,000cr for FY2013, which in turn would lower subsidy burden on upstream oil companies such as ONGC and GAIL. Hence it would be positive for OMCs and ONGC. However, at current crude prices, OMCs continue to lose Rs.512cr per day mainly due to selling diesel, kerosene and domestic LPG at lower prices. Nevertheless, the unprecedented steep increase in petrol prices by the government signals its intention to lower fiscal burden through bold policy measures. Any further steps by the government such as hike in prices of diesel, kerosene and LPG could be positive for OMCs and upstream companies.

Result Reviews
BHEL (CMP: Rs.208 / TP: - / Upside -)
BHEL announced a mixed set of 4QFY2012 results. The company reported a 6.6% increase in its top line to Rs.19,589cr, lower than our expectation of Rs.20,954cr. The quarter saw strong EBITDA margin expansion by 184bp yoy to 25.2%, which led to a 15% yoy increase in EBITDA, higher than our expectation. PAT for the quarter grew by 20.8% yoy to Rs.3,380cr (Rs.2,798cr), which was also higher than our expectation. At the CMP of Rs.208, the stock is trading at 8.8x and 8.6x on our FY2013E and FY2014E earnings estimates, respectively. Currently, we remain our Neutral view on the stock. We will revise our estimates and release a detailed results review shortly.
Tech Mahindra (CMP: Rs.612/ TP: Under review/ Upside: -)
Tech Mahindra reported a muted set of 4QFY2012 results. Dollar revenue came in at US$281.6mn, down 2.5% qoq, due to a decline in revenue from two clients in India because of cancellation of 2G license. Dollar revenue from BT grew by 3.1% qoq because BT did some one-time discretionary spend during the quarter. Revenue from non-BT accounts declined by 5.5% qoq. In rupee terms, revenue came in at Rs.1,419cr, down 1.8% qoq. EBITDA margin grew by 63bp qoq to 16.8%, aided by increased utilization level to 74% in 4QFY2012 from 73% in 3QFY2012. The company booked exceptional loss of Rs.68cr in the quarter as provisions made for uncovered dues from the above mentioned two parties which are winding their operations in India. Adjusted PAT, including share from Satyam, came in at Rs.302cr. Overall results were weak. The only growth driver for the company is non-BT business as BT is retendering its contracts. The stock is currently under review.
Tata Global (CMP: Rs.108/ TP: Rs.136/ Upside: 26%)
During 4QFY2012, Tata Global posted 10.7% yoy growth in consolidated net sales to Rs.1,724cr, aided by improved performance in most of its major markets coupled with foreign exchange translation impact. OPM stood at 8%, down 30bp yoy. On the bottom-line front, the company’s net profit fell by 36.4% yoy to Rs.54.2cr due to exceptional expense of Rs.40cr in 4QFY2012 as against exceptional gain of Rs.56cr in 4QFY2011. Exceptional expenses for the quarter related to cost incurred for long-term initiatives and new projects and loss on assets related to discontinued business initiatives, among others. We maintain our Buy recommendation on the stock with a target price of Rs.136.
Lakshmi Machine Works (CMP: Rs.1,521 / TP: Rs.2,609 / Upside: 72%)
Lakshmi Machine Works (LMW) announced below par numbers for 4QFY2012. The company’s net sales declined by 5.4% qoq and 6.1% yoy to Rs.502cr on the back of lower sales in the textile machinery division. The textile machinery division registered a 12.3% qoq and 8.9% yoy decline in revenue to Rs.413cr. The company’s others segment, however, witnessed 30.4% qoq and 7.4% yoy growth in revenue to Rs.93cr. The company’s EBITDA declined by 25.1% yoy to Rs.49cr on the back of lower revenue and margin contraction. EBITDA margin contracted by 246bp yoy to 9.7% on account of higher other expenditure. Other expenditure as a percentage of sales increased to 19.4% in 4QFY2012 compared to 14.5% in 4QFY2011. PAT declined by 84.2% yoy to Rs.7cr on the back of margin contraction, prior-period finance cost of Rs.5cr and higher tax provision due to prior-period tax adjustments of Rs.16cr, resulting in tax rate of 78.1% of PBT in 4QFY2012 vs. 25.6% of PBT in 4QFY2011. Consequently, PAT margin also declined by 687bp yoy to 1.4% (8.3%). Adjusted for prior-period adjustments, PAT came in at Rs.28cr, down 36.4% yoy. We currently have a Buy recommendation on the stock. We may revise our estimates and target price post an interaction with the management.
Jyothy Laboratories (CMP – Rs.192, TP – Rs.248, Upside: 29%)
For 4QFY2012, JLL reported a healthy set of numbers, ahead of our estimates. The company's top line (standalone) grew by 37.5% yoy to Rs.219cr, higher than our estimate of Rs.192cr for the quarter. This was mainly driven by volume growth coupled with improved realization. The company’s EBITDA margin improved by 614bp yoy to 16.6% for the quarter; however, it remained flat on a qoq basis. Though raw-material cost witnessed a sharp jump, the decrease in employee cost, which was mainly because of the reversal of incentives provided to the sales staff, helped the operating margin to maintain the previous level. Interest cost for the quarter increased to Rs.13.4cr. The company reported growth of 25.7% yoy in its profit, which came in at Rs.28cr. We maintain our Buy recommendation on the stock with target price of Rs.248 based on SOTP valuation.

Result Previews
Madras Cements
Madras Cements is set to declare its 4QFY2012 results. We expect the company to post top-line growth of 31.4% yoy to Rs.902cr on account of higher volumes and better realizations. OPM is expected to grow by 438bp yoy to 29.1%. We expect the company to post 65.8% yoy growth in its bottom line to Rs.106cr. We continue to remain Neutral on the stock.
TVS Motor
TVS Motor is scheduled to announce its 4QFY2012 results. We expect the company’s top line to report modest ~8% yoy growth to Rs.1,733cr, driven primarily by ~6% yoy growth in net average realization. Volumes during the quarter remained subdued (up ~2% yoy) as motorcycle volumes declined by ~11% yoy amidst rising competition and moderating demand environment. EBITDA margin is expected to expand by ~80bp yoy to 6.4%. However, the bottom line is expected to jump by 31% yoy to Rs.55cr mainly due to lower tax rate and improvement in operating margin. We maintain our Buy recommendation on the stock with a target price of Rs.55.

Economic and Political News
- Rupee breaches 56/dollar, despite RBI action
- 25% of loans to SEBs restructured
- June FTP set to bring stability to farm export

Corporate News
- RIL-led group gives up D4 gas block
- Aurobindo Pharma gets US nod for generic anti-HIV drug
- Suzlon to commission 138-MW project for South Africa

Online share trading in India, open demat account in Angel Broking for stock market trading

Indian stock market and companies daily report (May 16, 2012, Wednesday)

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

Online share trading in India, open demat account with Angel Broking for stock market