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Monday, 31 August 2015

F N A August 31, 2015

Sharekhan's Fundamental News and Analysis


August 31, 2015

L&T won water supply project worth Rs 1489 crore from Rajasthan Utility; Positive for L&T
L&T construction wins orders valued Rs 1489 crores for water supply projects in Rajasthan. The water and effluent treatment strategic business group of L&T construction has won turnkey orders worth Rs 1489 crores in three packages, from public health engineering department, Ajmer under the Rajasthan rural water supply and fluorosis mitigation project (Nagaur).   The scope of projects include construction of 5310 ML raw water reservoir, a 250 MLD water treatment plant, pumping stations and other allied works including operating & maintenance

TOP NEWS

Aurobindo Pharma has received USFDA approval for Raloxifene Hydrochloride (market size of Rs2500 crore). Positive for the company
Aurobindo Pharma has received the final approval from the US Food & Drug Administration (USFDA) to manufacture and market Raloxifene Hydrochloride Tablets. Raloxifene Hydrochloride Tablets are indicated for treatment and prevention of osteoporosis in postmenopausal women (increase in loss of bones mass). The product has an estimated market size of US$404 million (Rs2500 crore) for the twelve months ending June 2015 according to IMS. Recently company has received many USFDA approval which will help company to clock strong revenue in coming quarters.

Bharti Airtel & Idea Hike Post-paid Data Tariffs By 20% In Delhi – Positive for Bharti Airtel and Idea (could lead to across India hikes in tariffs)

Gas pricing formula to be finalized soon; The premium will be given  to new discoveries said Petroleum Minister, Dharmendra Pradhan. The existing fields will not benefit hence negative for ONGC and RIL.

ONGC, partners including OIL to invest $24 billion in Mozambique gas field – Positive for ONGC, BPCL & OIL
ONGC and its partners will invest about $24 billion in producing natural gas from Rovuma Area 1 field off Mozambique and converting it into liquid fuel (LNG) for export by ships to consumers like India. ONGC Videsh Ltd, holds 16 per cent stake in Rovuma Area 1 while BPCL holds another 10 per cent and Oil India 4 per cent stake in the field and all three together hold more stake than operator Anadarko of the US (26.5 per cent). The partners have so far committed $16 billion and hope to achieve financial closure of the remaining by early January. Rovuma Area 1 has recoverable resources in excess of 75 trillion cubic feet and the project will have an ultimate capacity to produce 20 million tonnes of LNG annually and will be the world's largest LNG export site after ExxonMobil-run Ras Laffan in Qatar. 

MACRO WRAP

The GDP growth numbers for Q1FY16 will be released today and consensus estimates stand at 7.4% Vs 7.5% growth seen in Q4FY15

INVESTMENT CALLS

Maruti Suzuki India Stock Update: Annual report analysis; maintain Buy with a revised PT of Rs4,700
  • PV industry grows by 3.9% in FY2015: The domestic automobile industry turned a corner in FY2015 and posted a growth of 3.9% vis-à-vis the sharp 6.6% decline in the preceding year. The election of a stable government at the centre aided in boosting consumer confidence especially in urban India. However, the growth was not broad-based as only six of the eighteen passenger vehicle (PV) manufacturers posted a growth and sales had to be supported by high discounts and promotions.
  • MSIL outperforms with a strong 11.1% growth: The market leader, Maruti Suzuki India Ltd (MSIL), pulled further ahead of the rest of the pack and reported a growth of 11.1% as compared with a 1.3% fall for the rest of the industry. The strong outperformance was on the back of a strong product line-up, new model launches, shift in preference towards petrol models and excellent distribution network especially in rural India.
  • Management sets 2020 sales target of 2 million annual sales: The management has set out a target of two million annual sales by 2020 and is focusing on new products and segments to achieve the same. The recently launched premium crossover S-Cross, and upcoming compact sports utility vehicle (SUV) and a premium hatchback are aimed at expanding segments. The next generation, premium Nexa outlets are aimed at providing a differentiated buying experience for discerning customers and gain a foothold in segments wherein it has little presence.
  • Largest network expansion in 10 years: The management has also laid out a roadmap for expansion of its sales and service network to achieve its two-million-unit target. It added 309 sales outlets in FY2015 which is the highest addition in the last ten years. Importantly, the expansion was targeted at increasing geographical spread and the company managed to add 300 cities to its coverage.
  • Maintain Buy with revised PT of Rs4,700: In FY2015, MSIL has demonstrated the strength of its business model with the quantum of the outperformance as compared with its peers. The management plans of launching new models and entering new segments especially the compact SUV segment are expected to further aid in a market share expansion. Additionally, the strong network expansion would lay the foundation to achieve its 2020 target. We continue to remain positive on the stock and reiterate our positive stance with a revised price target of Rs4,700 (earlier Rs4,650), discounting FY2017E EBITDA at 10.5x. In our estimates we have not yet factored in a demand boost due to the payout from the seventh pay commission are pending clarity on the timeline for the same. 

OTHER NEWS

Sun Pharma faces class action suit in US over 2009 plant closures of subsidiary arm Caraco Pharmaceutical Laboratories: Potentially negative for the stock, if company loss the Class action suit (during market hours)
As per media reports a faces class action suit filed against a Sun Pharma subsidiary arm Caraco Pharmaceutical Laboratories in US by workers over plant closure that took place in 2009. The US Circuit Court of Appeals ruled  that Caraco did not comply with norms while closing two of its units in Detroit and Farmington Hills. However company have given warning earlier related to extraordinary expenses due to unexpected circumstances.

Sun Pharma voluntary recall of Bupropion Hydrochloride from the US market: Sentimentally negative for the stock
Sun Pharma voluntary recall under class III for 35235 bottles (60 counts) of Bupropion Hydrochloride from the US market for failed dissolution specification. Bupropion is an antidepressant used to treat major depressive disorder and seasonal affective disorder. 
Wockhardt Limited recall Lisinopril Tablets USP bottles from the USA market: Negative for the company
Wockhardt Limited initiated voluntary recall under class II of 1,704 and 3,378 bottles of its Lisinopril Tablets USP bottles from the USA market. Lisinopril tablets USP are indicated for the treatment of hypertension in adult patients and paediatric patients 6 years of age and older to lower blood pressure.

Crude oil bounces back records highest single day gain since 2008 – Positive for Oil & Gas exploration and production companies
Crude oil prices bounced back after consistently weakening from the level of $64/bbl since early June. The price is steady near  $47/bbl after falling to low of $43/bbl. The higher crude oil prices are expected improve the net realisations of production companies as there is no subsidiary burden to share. The companies which are expected to benefit are ONGC, Oil India, Cairn India.

Novartis India: FIPB approved transfer of OTC division to GSK Consumer

Dish TV in pact with Hungama for musical service, positive read-thru

IOC to invest Rs 16000 crore to produce synthetic ethanol – Positive read thru
Indian Oil Corp. Ltd (IOCL), the nation’s biggest refiner, plans to spend Rs.16,000 crore ($2.4 billion) to build a plant for producing synthetic ethanol as it seeks to secure supplies of the biofuel to meet mandatory blending norms. The company will seek investment approval from its board next year, after which the facility, to be located at Paradip in eastern India, will take about four years to complete

Coal India -majority of trade unions rejected the government’s appeal to call off their strike on September 2: Sentimentally negative for CIL
As per media reports, the majority of central trade unions on rejected the government’s appeal to call off their countrywide strike on September 2, except the RSS-backed Bharatiya Mazdoor Sangh.  A day after talks with the inter-Ministerial panel, led by Finance Minister Arun Jaitley, to discuss their 12-point charter of demands submitted by 11 trade unions, the unions decided to go ahead with the strike. They are demanding withdrawal of “pro-corporate” labour law amendments, disinvestment of public sector units, the land acquisition Bill, minimum wages of not less than Rs 15,000/month among others.

HDFC Bank wins Best Asian Bank 2015 award
HDFC Bank is the newly crowned winner of this year’s Best Asian Bank award, a standout among the 15 winners of 2015 FinanceAsia’s Country Awards programme for generating high growth and steady profitability as well as maintaining a low nonperforming loans ratio and high asset quality. HDFC Bank’s is among the best performing banks and is well recognized outside India too. We have buy rating on HDFC Bank with price target of Rs 1260.

ITC to expand Savlon brand in health and home care segments – long term positive
ITC plans to extend its recently acquired antiseptic brand Savlon to half-a-dozen new categories as it enters the health and home care segments to take on Reckitt Benckiser and expand its FMCG portfolio. Savlon will be launched in categories including hand wash, hand sanitizer, shower gel and floor, glass and toilet cleaners. By the end of next year, ITC plans to bring nearly 100 different packs across variants within these categories, each competing directly with Reckitt Benckiser brands.
ITC has strong distribution system, which it can leverage upon in the long run. Thus expanding its footprints in the underpenetrated health and home care segments is long term positive for the company.

Acrysil eyes Rs 1,000-crore sales in 7 years, to enter new geographies – positive read through for the stock
Acrysil is targeting over seven-fold increase in total turnover at Rs 1,000 crore in 7 years as it enters new product categories. Commercial kitchen equipment business used by restaurants is an untapped category dominated mostly by unorganised players with Chinese imports. The company see a massive opportunity in this category. It is also planning to introduce bathroom solutions across the country by January 2016. After acquiring a company in the UK last year, Acrysil is scouting for more acquisitions overseas to enter new markets. Acrysil sells its kitchen products under 'Carysil' brand while bathroom products will be sold in India under its premium German brand Sternhagen.

JSW Energy considering to refinance Rs 6000 crore of debt under 5/25 refinance scheme- positive read thru
JSW Energy is in talks with banks to refinance debt worth Rs.6,000 crore under the so-called 5/25 refinance scheme for long-gestation infrastructure projects, according to media reports. JSW Energy will refinance the debt component of theRs.9,700 crore transaction to buy two hydropower assets from Jaiprakash Power Ventures Ltd. Under the 5/25 scheme, banks can extend loan repayment periods up to 25 years, with an option of refinancing the loan every five years.

Govt not to go ahead with OIL stake sale soon – Sentimentally positive
As per media reports, the government is not likely to sell a 10% stake in Oil India soon as the company will not get a good valuation at current low oil prices. The government had planned to sell 10% (60.10 million) shares; at current market price would have fetched the government Rs.2,813.31 crore. Given the current scenario where international oil prices have dipped to $48/bbl the valuation will be unattractive for sale.

Apollo Hospitals to expand operations in Bangladesh (plans to open one more hospital in Chittagong), Kolkata (India; planning to come up 200 beds hospital) – positive read through

Auto sales estimates for August 2015

Bajaj Auto
Aug-15
Aug-14
YoY(%)
Jul-15
MoM(%)
YTDFY16
YTDFY15
YoY(%)
Motorcycles
   292,000
   284,302
2.7%
   282,433
3.4%
  1,449,668
  1,427,001
1.6%
Three-wheelers
     47,000
     52,538
-10.5%
     47,798
-1.7%
     232,592
     217,561
6.9%
Total sales
   339,000
   336,840
0.6%
   330,231
2.7%
  1,682,260
  1,644,562
2.3%
Exports of above
   166,000
   175,127
-5.2%
   164,690
0.8%
     807,186
     786,849
2.6%
Hero MotoCorp
Aug-15
Aug-14
YoY(%)
Jul-15
MoM(%)
YTDFY16
YTDFY15
YoY(%)
Two-wheelers
   495,500
   558,609
-11.3%
   487,580
1.6%
  2,628,933
  2,803,602
-6.2%
TVS Motor
Aug-15
Aug-14
YoY(%)
Jul-15
MoM(%)
YTDFY16
YTDFY15
YoY(%)
Motorcycle
     82,000
     83,186
-1.4%
     77,397
5.9%
     414,369
     391,698
5.8%
Scooters
     70,750
     66,269
6.8%
     69,626
1.6%
     302,505
     281,799
7.3%
Mopeds
     61,000
     66,291
-8.0%
     61,021
0.0%
     312,806
     306,740
2.0%
Total two-wheelers
   213,750
   215,746
-0.9%
   208,044
2.7%
  1,029,680
     980,237
5.0%
Three-wheelers
     10,250
        9,820
4.4%
     10,277
-0.3%
       50,756
       43,766
16.0%
Overall Sales
   224,000
   225,566
-0.7%
   218,321
2.6%
  1,080,436
  1,024,003
5.5%
Tata Motors (standalone)
Aug-15
Aug-14
YoY(%)
Jul-15
MoM(%)
YTDFY16
YTDFY15
YoY(%)
MHCV domestic
     11,000
        9,141
20.3%
     11,808
-6.8%
       55,225
       46,024
20.0%
LCV domestic
     13,000
     16,287
-20.2%
     12,879
0.9%
       64,873
       80,658
-19.6%
Passenger vehicles domestic
     10,475
     10,975
-4.6%
     10,389
0.8%
       52,513
       44,724
17.4%
Exports
        4,850
        4,480
8.3%
        5,078
-4.5%
       23,439
       19,074
22.9%
Total
     39,325
     40,883
-3.8%
     40,154
-2.1%
     196,050
     190,480
2.9%
M&M
Aug-15
Aug-14
YoY(%)
Jul-15
MoM(%)
YTDFY16
YTDFY15
YoY(%)
Utility vehicles
     13,375
     13,911
-3.9%
     13,204
1.3%
       75,933
       80,439
-5.6%
Cars + Vans
        1,300
        1,410
-7.8%
        1,252
3.8%
          6,677
          9,107
-26.7%
Passenger vehicles
     14,675
     15,321
-4.2%
     14,456
1.5%
       82,610
       89,546
-7.7%
LCV < 3.5T
     10,900
     11,794
-7.6%
     11,230
-2.9%
       54,580
       56,413
-3.2%
LCV > 3.5T
           510
           320
59.4%
           604
-15.6%
          3,130
          2,586
21.0%
MHCV
           315
           277
13.7%
           314
0.3%
          1,636
          1,322
23.8%
Commercial vehicles
     11,725
     12,391
-5.4%
     12,148
-3.5%
       59,346
       60,321
-1.6%
Three wheelers
        4,500
        5,433
-17.2%
        4,483
0.4%
       21,149
       22,383
-5.5%
Total domestic sales
     30,900
     33,145
-6.8%
     31,087
-0.6%
     163,105
     172,250
-5.3%
Exports
        3,400
        2,030
67.5%
        3,565
-4.6%
       15,414
       11,101
38.9%
Total automotive sales
     34,300
     35,175
-2.5%
     34,652
-1.0%
     178,519
     183,351
-2.6%
Tractors - domestic
     14,000
     13,733
1.9%
     14,273
-1.9%
       87,423
     102,032
-14.3%
Tractors - exports
        1,200
        1,273
-5.7%
        1,187
1.1%
          5,595
          4,936
13.4%
Total tractors
     15,200
     15,006
1.3%
     15,460
-1.7%
       93,018
     106,968
-13.0%
Maruti
Aug-15
Aug-14
YoY(%)
Jul-15
MoM(%)
YTDFY16
YTDFY15
YoY(%)
Mini- Alto, Wagon R
     38,250
     34,686
10.3%
     37,752
1.3%
     180,803
     166,174
8.8%
Compact- Swift, Ritz, Celerio, Dzire
     48,050
     46,759
2.8%
     48,381
-0.7%
     226,355
     209,372
8.1%
Super Compact- DzireTour
        3,250
        1,328
144.7%
        3,370
-3.6%
       14,529
          5,802
150.4%
Mid Size- Ciaz
        4,500
             50
8900.0%
        2,099
114.4%
       19,973
             802
2390.4%
Executive- Kizashi
               -  
               -  
NA
               -  
NA
                 -  
                 -  
NA
Total passenger cars
     94,050
     82,823
13.6%
     91,602
2.7%
     441,660
     382,150
15.6%
UVs- Gypsy, Ertiga
        6,700
        5,491
22.0%
        6,916
-3.1%
       29,166
       26,389
10.5%
Vans- Omni, Eeco
     10,250
        9,990
2.6%
     11,887
-13.8%
       56,273
       50,501
11.4%
Total domestic sales
   111,000
     98,304
12.9%
   110,405
0.5%
     527,099
     459,040
14.8%
Export
     12,000
     12,472
-3.8%
     11,307
6.1%
       58,942
       53,010
11.2%
Total sales
   123,000
   110,776
11.0%
   121,712
1.1%
     586,041
     512,050
14.4%
Ashok Leyland
Aug-15
Aug-14
YoY(%)
Jul-15
MoM(%)
YTDFY16
YTDFY15
YoY(%)
MHCV sales
        8,350
        5,830
43.2%
        8,803
-5.1%
       38,642
       26,515
45.7%
LCV sales
        2,225
        2,501
-11.0%
        2,219
0.3%
       11,145
          9,644
15.6%
Total sales
     10,575
        8,331
26.9%
     11,022
-4.1%
       49,787
       36,159
37.7%
Eicher Motors
Aug-15
Aug-14
YoY(%)
Jul-15
MoM(%)
YTDFY16
YTDFY15
YoY(%)
CVs - Domestic
        2,825
        2,571
9.9%
        3,050
-7.4%
       16,530
       14,855
11.3%
CVs - Export
           475
           456
4.2%
           602
-21.1%
          2,283
          2,819
-19.0%
CVs - Total sales
        3,300
        3,027
9.0%
        3,652
-9.6%
       18,813
       17,674
6.4%
Motorcycles
     42,250
     26,643
58.6%
     40,760
3.7%
     188,823
     128,089
47.4%
Escorts
Aug-15
Aug-14
YoY(%)
Jul-15
MoM(%)
YTDFY16
YTDFY15
YoY(%)
Domestic
        3,050
        3,147
-3.1%
        3,362
-9.3%
       20,961
       24,562
-14.7%
Exports
           100
           477
-79.0%
             68
47.1%
             494
          1,228
-59.8%
Total sales
        3,150
        3,624
-13.1%
        3,430
-8.2%
       21,455
       25,790
-16.8%