}

Monday, 30 November 2015

F N A November 30, 2015

Sharekhan's Fundamental News and Analysis


November 30, 2015

Cipla ready to launch low-dose Efavirenz 400 mg – Positive News
Cipla Ltd. announced its readiness to supply its combinations Tenofovir/ Emtricitabine / Efavirenz and Tenofovir/ Lamivudine /Efavirenz with a dose of 400 mg of Efavirenz as a first-line initial therapy for HIV infection. According to UNAIDS, there are approximately 37 million worldwide people living with HIV of which around 15.8 million people are reported to be receiving antiretroviral therapy (ART). WHO recently announced that it recommended to make ART available to all HIV-infected patients as soon as they are tested positive. Reducing the dose of Efavirenz in current first-line combination therapy to 400 mg will contribute to reducing costs without modifying the effectiveness of treatment. Positive development as Cipla is one of the key player in Anti-retroviral Therapy.

Bharti Airtel outlines its network expansion plans; aims to spent Rs 60,000 crore in 3 years

Ahead of Reliance Jio launch in December, Bharti Airtel has outlined a sharp and focused ten point network expansion and optimization plan- called “Project Leap” under which the company is looking to (a) aggressively expand its base stations (double the count to 1.6 lac in 3 years time frame),  (b)expand fiber rollout as well as improve experience.  It plans to spend Rs 60,000 crore in the next three years time frame. We believe Airtel’s step towards aggressive expansion is inline with the competitive intensity building up in the telecom space ahead of launch of R-jio’s services. We maintain our Hold rating on the stock with a price target of Rs 380. 

Alert: Nestle India has resumed manufacturing of MAGGI Noodles at its Tahliwal (Himachal Pradesh) Factory. With this, the Company has resumed manufacture of MAGGI Noodles at all five Noodle manufacturing facilities – positive read through for the stock

TOP NEWS

Alert: Nestle India: Nestle India got into fresh controversy with Uttar Pradesh laboratories finds Maggi Pazzta sample with excess lead – sentimentally negative for Nestle India

Government talks with IFC for a strategic sale in IDBI bank 
The government is in talks with the International Finance Corp for the disposal of a stake in state-run IDBI Bank as it looks to kick off strategic sales of public sector entities. The World Bank arm that invests in private sector may pick up a 15% holding. This could be a fresh issue that will infuse more capital into the lender, a stake sale by the government or a combination of the two. The government currently holds a 76.5% stake and it is looking to lower this to 49%. 
Cipla weighs legal options after Delhi HC's patent ruling – Neutral read thru.
Cipla is exploring all legal options in the wake of Delhi High Court's ruling that it has infringed Swiss drug major Hoffman-La Roche's patent on lung cancer drug erlotinib hydrochloride sold under Tarceva. The court will also determine the quantum of damages Cipla owes to Roche after the former furnishes accounts.
Reliance Infrastructure plans assets sale to be debt free – Positive for Reliance Infrastructure
As per media reports, reliance infrastructure is expected to turn debt free on a standalone basis by 2017 and the company’s management is actively pursuing divestment goals to achieve target. The company is undergoing a major transformation after which it hopes to be become a defence major while continuing its strong interest in power distribution and EPC business.

Gulf Airlines eyeing stake in SpiceJet – Positive for SpiceJet
As per media reports, some of the gulf airlines have expressed an interest in SpiceJet but as per the management this will not be the right time to dilute the stake as the shares remain undervalued. SpiceJet is also planning to finalise an order for 150 single aisle jets from either Boeing or Airbus Group during FY2016. The development is positive for SpiceJet.

Alert: Hotel Industry: Russia has clarified on travel advisory (that they have not declared India in unsafe destination list); it accounts for 60% of overall tourist arrival in Goa during peak season – sentimentally positive for large hoteliers such as Indian Hotels and hotel Leelaventure etc

MACRO WRAP

GDP data for Q2FY16 would be announced today (30th November 2015) and as per the consensus estimates the GDP growth is expected to be 7.3% versus 7.0% QoQ
STRONG RESULTS

Strong operating performance by Siemens in spite of flattish revenue of Rs 3299 crore in Q2FY16. The operating margin expanded by 160 bps YoY to 8.5%. The operating profit grew by 27% to Rs 282 crore. However the net profit stood at Rs 219 crore compared with that of Rs 437 crore in Q2FY15 since both the profit figures contain exceptional items.       

INVESTMENT CALLS

Goods and service tax (GST) – hopes pinned on winter session
·         GST–Simplified indirect tax regime: The Goods and Service Tax (GST) aims to simplify the current indirect tax regime by bringing all central and state levies (like excise duty, sales tax, octroi, VAT and other countervailing duties) under one single head having uniform tax rate across goods and services (with some exclusions like electricity, alcohol and petroleum products).
·         Critical reform; to boost economic revival: The benefits are immense in terms of reducing economic distortions, creating a nationwide single tax market, widening of tax base and eliminating cascading of taxes (tax on tax). For manufacturing companies, it means level playing field for organised and unorganised sectors, and cost optimisation in terms of movement and warehousing of goods due to uniform tax rate. Consequently, it would have positive fallout on inflation, curtailing tax avoidance and creating buoyancy in the economy. According to official estimates, the implementation of GST could bring in incremental positive effect of 1.0-1.5% in the GDP depending upon the GST rate (likely range of 18-20% would mean tax saving of 3-4% for many manufacturing segments; a GST rate beyond 22% could be detrimental for business confidence and growth in near term) and in ideal conditions. However, the proposed GST bill has exclusions and an additional tax of 1% for inter-state movement for the initial two years which dilutes the essence of GST (to an extent) and limits positive impact on the economy.
·         Preferred Picks: (1) Maruti Suzuki India-Potential reduction in effective tax rate for mid-sized passenger vehicles; (2) Britannia Industries-Cost optimisation at each level of product value chain and competitive advantage could improve the growth prospects in long run; (3) Gateway Distriparks-With services across the distribution value chain, it will gain from incremental demand arising from the higher inter-state transport of products; (4) Century Plyboards-Organised players to gain market share with unorganised players losing tax advantage; and (5) Pantaloons Fashion & Retail-Set-off for service tax paid on lease rentals and inventory cost optimisation

OTHER NEWS

Delhi HC turns down Bayer plea on stroke drug against Dr Reddy's – Positive read thru.
The Delhi High Court has turned down an injunction petition filed by Bayer aimed at blocking Dr. Reddy's Labs from a potential commercial launch of its patented anti-coagulant drug Xarelto, whose active chemical ingredient is rivaroxaban. Xarelto tablets are used as blood thinners and are mainly prescribed to prevent a stroke. 
IVRCL likely to consider demerger plan in next board meeting – Positive for IVRCL
IVRCL is likely to hold a board meeting next week to discuss the possible demerger of property development and EPC business into a separate entity as it seeks to restructure its business operations for improving revenue prospects. The IVRCL management has already conveyed its proposal for demerger to its lenders, who together hold 43 per cent equity in the company. They are expected to make their stand known to the company next week. A decision in this regard would largely depend on the lenders' consent as they hold the substantial stake in the company while the promoters' group has a little less than 9 per cent holding.

Colgate India declares second interim dividend at Rs.3/share for the financial; earlier this month the company declared first interim dividend of Rs4/share – sentimentally positive for the stock
Government to give all households in West Bengal 4 energy efficient LED bulbs. The consumers would be able to get these bulbs on easy installment and government will provide assistance to the poor so that they can replace incandescent bulbs and tube lights at home. Positive for LED manufacturers like Surya Roshni, Havells, Bajaj electrical
International proxy firm Glass Lewis supports Suzuki’s Gujarat plan; neutral for Maruti
International advisory firm Glass Lewis has recommended minority shareholders to vote in favour of the proposed contract manufacturing agreement between Maruti Suzuki and its parent Suzuki Motor. Under the agreement The Gujarat plant will be setup as a100% subsidiary of the Suzuki Motor Japan and will supply to Maruti with no manufacturing mark-up. Among domestic proxy firms SES has advised in favour of the agreement while firms Institutional Investor Advisory Services (IiAS) and InGovern have opposed the deal. The voting on the agreement ends on 15th December and results will be declared on the 17th of December.

Eicher Motors’ subsidiary VECV has launched two new vehicles under the Pro series targeting the mining segment. The company has launched Pro 8031XM tipper and Pro 6025T box body vehicle. Positive for the company.

Bharat Forge to set up a Rs500cr defense facility in Telangana alongwith  JV partner Israel’s Rafael Advanced Defense Systems.

The government is looking at increasing renewable purchase obligation (RPO) targets from 3 per cent to 10 per cent so as to meet the one lakh MW solar capacity by 2022. Under the RPO discoms are mandated to purchase a certain amount of their power from renewable sources. If RPO is increased more number of renewable like solar & wind are used. Positive for renewable energy sector.

Reliance Industries is facing a 40 per cent cut in the marketing margin it charges on selling its KG-D6 gas to fertilizer and LPG plants after the government notified a ceiling of Rs 200/thousand scm. However the PBIT contribution of Oil & Gas segment to RIL total PBIT is very minuscule thus the earnings will not be affected significantly.


Friday, 27 November 2015

F N A November 27, 2015

November 27, 2015

TOP NEWS

Alert: Ashok Leyland has won an order worth $200 mln to supply 3,600 vehicles, including trucks and buses, to Cote D'Ivoire – Positive, could provide incremental annual volumes of 2-2.5%

Reliance Infra, Samtel and Bharat Electronics are likely beneficiaries of possible outsourcing contract from Dassault Aviation to manufacture Rafale fighter aircraft  -- Postive

Welspun Corp has won an order to supply 216,000 tn pipelines for an offshore project in North and South America -- Positive

RBI raises the loan limit to Rs 30,000 from 15000 ( tenure not less than 24 months)  for MFI-NBFCs– positive for SKS Micro finance
Based on the representations received from the micro finance NBFCs, the RBI has raised the loan limit to Rs 30,000 from Rs 15,000 earlier (the tenure of the loan shall not be less than 24 months). All loans necessarily be prepaid without any penalty. The move will help in increased borrowings and better leveraging of existing customer base for MFIs.

Government offers tax sops to spur shipbuilding  - Positive for ABG Shipyard, Bharati Shipyard, Western India Shipyard
As per media reports, the government has announced a slew of tax sops to spur shipbuilding in the country as a part of measures aimed at boosting the Make in India programme. These include exemption from customs and central excise duties on all raw materials and parts for use in the manufacture of ships, vessels, tugs and pusher crafts.

JP Associates – Formula One organizer seeks to encash bank guarantee of Rs350 crore – Negative for JP Associates
As per media reports, Formula One is seeking to encash Rs350 crore guarantee by JP Associates on the ground that it hadn’t paid the sport’s organizer money that had been contractually agreed upon. Bernie
Ecclestone led Formula One has moved the Bombay High Court in pursuit of the payment. The development is negative for JP Associates.

Ultratech closing in on Reliance Infrastructure’s cement units – Positive for Ultratech, Reliance Infrastructure
As per media reports, Ultratech is in talks to take over the cement units of Reliance Infrastructure. Reliance Infrastructure’s cement units were likely to fetch an enterprise valuation of Rs5000-5500 crore. Reliance Infrastructure put up its cement units for sale last month to reduce its Rs25,766 crore debt. The development is positive for Ultratech and Reliance Infrastructure.

INVESTMENT CALLS

JB Chemicals and Pharmaceuticals Ltd - Outlook remains uncertain due to currency headwinds; Book profit                      
·         Sluggish performance continued in Q2: In Q2FY2016, JB Chemicals and Pharmaceuticals Ltd (JBCPL) reported a subdued performance with a revenue growth of just 2%, while operating profit margin declined by 350BPS to 17%. This quarter was the fourth consecutive quarter of dismal operating performance by the company.
·         Volatility in currency affects exports in key emerging markets: JBCPL reported a moderate 3% growth in exports of formulation to Rs133 crore during Q2FY2016. The exports to the Rest of the World (RoW) markets (10% decline during the quarter) were affected due to lower demand and depreciation of market currencies against dollar.
·         Outlook remains bleak; Book profit: The volatility in currencies in key emerging markets is likely to have an effect on H2FY2016 performance too. Also, for FY2017, demand will continue to be weak as dollar is likely to strengthen further. Hence, the operating profit margin and profitability are likely to remain under pressure over the next few quarters. Hence, in view of bleak future, we advise our investors to Book profit from the stock.


OTHER NEWS

RBI allows foreign investors to buy bonds in default – positive read thru for Banking sector
RBI allowing foreign investors to buy corporate bonds that are either totally or partly in default ( tenure of more than 3 years. The is potential boost to the country's nascent distressed debt market and will help in expansion of bond markets.  In addition, this will provide an exit to existing investors and also help in reducing the level of stress in the banking sector.

Fortis Healthcare to acquire Religare Health Trust Trustee Manager for ~Rs100crore; strategically will help to focus on better utilization of assets but will increase debt burden – neutral for Fortis Healthcare 
Fortis Healthcare’s step down subsidiaries-Stellant Capital Advisory Services has entered into a share purchase agreement with RGAM investment advisors and other shareholders to acquire 100% equity stake in Religare Health Trust Trustee Manager (a company incorporated in Singapore) at consideration of USD 14.9 million (or Rs100crore). Since majority of assets owned by RHT are operated by Fortis and its subsidiaries, the acquisition will help the company to have more focused approach towards them strategically

Sebi penalizes Polaris promoter Arun Jain for insider trading, could be sentimentally negative for Intellect Design
SEBI has slapped a fine of Rs.1.84 crore on Arun Jain, chairman and managing director of Polaris Software Lab Ltd, Rs.19.69 lakh on R. Srikanth, the company’s ex-chief financial officer, for allegedly making illegitimate gains through trading in shares of the company while in the possession of unpublished price sensitive information in 2008.The order came after Sebi, on receiving an alert from the National Stock Exchange Ltd, conducted an investigation into the stock movement of Polaris between 21 April 2008 and 31 July 2008 to check for any possible violation of insider trading norms by the two individuals. The Sebi probe reportedly found Jain and Srikanth had traded in the shares of the company during the investigation period while being privy to the company’s price-sensitive information then.

Welpsun Corp: Bags order for supply of 216k MT line pipes, positive read-thru
Welpsun Corp Limited has announced that it has won an order for supply of 216k MT  line pipes for an onshore pipeline project in Americas. With the addition of this order, current order book of the Company has crossed 1040 K MTs worth Rs. 64 bn.

Heineken ups stake in United Breweries; buys shares worth Rs 39 crore (at Rs951.5 per share)
Heineken International BV has increased its stake in United Breweries as it bought shares worth Rs 39.48 crore in the company through an open market operation. Heineken International bought 4,25,000 shares, or 0.15 percent stake, in UBL for Rs 39.48 crore. The shares were bought from Yes Bank at an average price of Rs 951.50 per share. As on September 30, 2015, Heineken held 42.07 percent stake in UBL through three companies - Heineken International B V, Heineken UK Ltd and Scottish & Newscastle India Ltd.

L&T’s Transmission & Distribution has bagged orders worth Rs 1038 crore in the month of November – Positive for L&T (News came during market hour)

UK's Hardy Oil & Gas plc is in talks to acquire Reliance Industries' entire 90 per cent stake in a gas discovery GS-01 block off the Gujarat coast. RIL wants to exit GS-01 as it feels that reserves discovered so far are not economically significant. – Positive read thru for RIL


NMDC has cut iron ore prices by 12.5 per cent due to sharp decline in its demand from steel mills. In the last one year, NMDC has cut iron ore prices by over 50 per cent. Thus realisations of NMDC are coming down and in turn will affect profitability – Negative for NMDC

Morning view - 27 November 2015


MORNING VIEW

Market View

The domestic equity market is likely to open on a flat note on Friday, tracking mixed cues from Asian markets.  US market remaining close for Thanks Giving day.

Nifty Spot Levels

Support
7830 – 7817 – 7650
Resistance
7910 – 7952 - 8000

Stocks for the Day & Actions
Reliance Industries
UK's Hardy Oil & Gas plc said it is in talks to acquire Reliance Industries' entire 90 per cent stake in a gas discovery block off the Gujarat coast. 
Action to be taken
Initiation Range
Stop Loss
Target
Buy
988-990
975
1016-1020









Ashok Leyland
Ashok Leyland wins contract for 3600 vehicles worth $200 mn from Cote D'Ivoire.
Action to be taken
Initiation Range
Stop Loss
Target
Buy
94.10-94.25
96
97



*Stock mentioned above are in Sharekhan research coverage. We also like these Stocks for short-term.

Derivative Data Update
  

NIFTY PCR:
0.83
NIFTY IMPLIED VOLATILITY:
16.69
MARKET WIDE OPEN INTEREST:
Rs.1,58,976 Cr. and Rs. 64,677 Cr. Added in OI
Nifty Roll over:
68.30% vs 73.62%
Market-wide Rollover:
83.34% vs 83.92%
MAJOR OI GAINERS
Aurobindo Pharma (94%), Shriram Transport Finance Company (92%), Karnataka Bank (92%) and Tata Chemicals (91%)
MAJOR OI LOSERS
Mindtree (58%), Kaveri Seed Company (59%), Marico (59%) and Biocon (64%)

Stock in News

GAIL starts satellite monitoring of its gas pipeline network 
  1. Unilever aims to use only renewable energy by 2030 
  2. SRL Diagnostics may see exit of PE investors Avigo Capital, Jacob Ballas and IFC 
  3. Polaris insider trading: SEBI orders seizing of Rs 2 crore
  4. Govt shortlists 5 merchant bankers for CIL stake sale viz,  JM Finanacial, SBI Capital, ICICI Securities, Axis Capital & Kotak Mahindra bank
 Global Market & International Data Update
  
·         The major US indexes were virtually unchanged at the close of a quiet trading day on Wednesday with gains in healthcare and consumer stocks after data showed US modest economic growth.
·         Trading volume was low as many market participants were away in the last session before the U.S. Thanksgiving holiday. Markets will be closed Thursday and most of Friday afternoon.
·         The Dow Jones industrial average rose 1.2 points, or 0.01 percent, to 17,813.39.
Currency
Subject
Forecast
Previous
GBP
GDP (YoY)
2.3%
2.3%

 Stock Update - Investor Eye


Stock Update - Investor Eye

JB Chemicals
Reco – Book Profit
Cmp 282

Outlook remains uncertain due to currency headwinds; Book profit

Key points

  • Sluggish performance continued in Q2: In Q2FY2016, JB Chemicals and Pharmaceuticals Ltd (JBCPL) reported a subdued performance with a revenue growth of just 2%, while operating profit margin declined by 350BPS to 17%. This quarter was the fourth consecutive quarter of dismal operating performance by the company.

  • Volatility in currency affects exports in key emerging markets: JBCPL reported a moderate 3% growth in exports of formulation to Rs133 crore during Q2FY2016. The exports to the Rest of the World (RoW) markets (10% decline during the quarter) were affected due to lower demand and depreciation of market currencies against dollar.
Š
  • Outlook remains bleak; Book profit: The volatility in currencies in key emerging markets is likely to have an effect on H2FY2016 performance too. Also, for FY2017, demand will continue to be weak as dollar is likely to strengthen further. Hence, the operating profit margin and profitability are likely to remain under pressure over the next few quarters. Hence, in view of bleak future, we advise our investors to Book profit from the stock.

Thursday, 26 November 2015

F N A November 26, 2015

Sharekhan's Fundamental News and Analysis


November 26, 2015

ALERT: Bihar government announces ban on sale of Alcohol effective from April1, 2016 – negative for United Spirits, Radico Khaitan, Globus Spirits and other alocohol manufacturing companies


TOP NEWS

ALERT: Hero Motocorp: Bain Capital intended sale of 29.8 lakh shares of Hero Moto in open market to raise Rs760 crore – Negative; leads to supply hangover in stocks

Cong softens stand after govt assures discussion on its GST concerns – Positive for logistics, white goods, FMCG  stocks

Alert: South Korea finds emission cheating in Volkswagen Tiguan model, orders recall of 125,522 Volkswagen vehicles: Sentimentally negative for Motherson Sumi
South Korea said its own testing showed that Volkswagen AG intentionally manipulated a diesel emissions device in vehicles with an older engine, and ordered the recall of 125,522 cars. South Korea is the first country after the United States to announce measures based on its own testing to address the diesel emissions scandal that has engulfed Europe's biggest auto manufacturer. South Korea's environment ministry said it ordered Volkswagen Korea to submit a recall plan by Jan. 6, 2016, and also fined the unit 14.1 billion won ($12.31 million).

Sun Pharma: Management clarified that company has cancelled plans to invest in Wind energy in US, sentimentally positive  
Sun Pharmaceutical Industries Ltd has informed that some of the Company's subsidiaries were contemplating an investment in a wind energy project in the US. Subsequent to a further evaluation, these subsidiaries have decided not to proceed with this potential project. Our View: In the last one week it was largely reported in the media that, Sun Pharma is planning to invest around $225 mn in Wind energy in US through its subsidiary for tax benefits, however unrelatable area of investment was taken negatively by the investors, so after management clarification of not procedding with the investment is sentimentally positive for the stock.

Alert:  US FDA warns Dr Reddy's Laboratories of ban if flaws are not fixed – Negative; raises risk f import alert and also resolution could get prolonged.
Warning letter released by USFDA on given to Dr Reddys was strongly worded and indicates that the resolution would require third party intervention and so could get prolonged to around two years now. Moreover, the contents of letter also raises risk of import alert from the three plants now. We advise to stay away from the stock as it could languish over the next 18-24 months.

Lupin Receives FDA Approvals for Generic Loestrin Fe 1/20 and Loestrin 1.5/30 Tablets – Positive Read thru.
Lupin Receives FDA Approvals for Generic Loestrin Fe 1/20 and Loestrin 1.5/30 Tablets. Lupin’s US subsidiary, Lupin Pharmaceuticals Inc. shall commence promoting the product in the US shortly. Lupin's Blisovi Fe 1/20 Tablets and Blisovi 1.5/30 Tablets are the AB rated generic equivalent of Warner Chilcott's Loestrin Fe 1/20 Tablets and Loestrin Fe 1.5/30 Tablets and are indicated for the prevention of pregnancy in women. Loestrin Fe 1/20 had US sales of USD 139.7 million (IMS MAT September 2015) while Loestrin Fe 1.5/30 had US sales of USD 55.5 million (IMS MAT September 2015). Positive development as lupin has strong presence in oral contraceptive segment in US.

ITC - Restructuring at top level management (elevation of executive to top roles); move that’s open race for chairmanship post retirement of Mr.YC Deveshwar – positive from long term perspective as focus is to improve the growth prospects of Non-cigarette FMCG business

Gadkari wants to build 100 km of national highway per day – Positive for IRB Infrastructure, L&T, IL&FS Transportation, Ashoka Buildcon, Sadbhav Engineering, Gayatri Projects, KNR Construction among others
Byoed at construction of 18 km of national highways per day, the government is on target to build 30 km of highway per day by March, the minister’s unofficial target is to construct 100 km a day, as the country needs to expand the national highways coverage to 150,000 km from 90,000 km across the country.

INVESTMENT CALLS

Sensex Review - Q2FY16: H1 earnings weak but H2 to look much better
·         Earnings soft as expected; ex global cyclical growth appears reasonable: In Q2FY2016, the aggregate earnings growth for the Sensex companies (BSE-30) remained soft (down 2% year on year [YoY]) due to a slow pace of economic recovery and domestic demand coupled with pressure on global cyclicals (global commodity companies, ie metals and energy). However, excluding global cyclical (ex metals, energy and Tata Motors), the earnings showed a decent growth of 7% compared with Q2FY2015.
·         Earnings breadth relatively better:  The earnings breadth was relatively better as 20 out of the 30 Sensex companies showed a growth in earnings year on year (YoY) with 12 showing a double-digit growth. There was a mixed set of surprises as heavyweights like Zee Entertainment Enterprises Ltd (ZEEL), Dr Reddy’s Laboratories (DRL), State Bank of India (SBI), Tata Steel, NTPC  and Reliance Industries Ltd (RIL) delivered a positive surprise whereas Tata Motors (a one-off loss of Rs2,650 crore), Bharat Heavy Electricals Ltd (BHEL), Larsen and Toubro (L&T), Lupin, Sun Pharmaceutical Industries (Sun Pharma) surprised negatively. From a sectoral perspective, the financials and information technology (IT) services companies registered a double-digit growth while capital goods and pharma companies disappointed the most with their earnings performance.
·         Revenue momentum remains slack, margin expansion a silver line: The revenue growth has remained in the negative territory for the past few quarters (down 6% in Q2FY2016 for the Sensex companies) reflecting weak underlying demand. Barring the IT and financial companies, the top line growth of most of the sectors remained in low single digits or negative. Going ahead, the lag effect of a decline in the interest rates and the implementation of the Seventh Pay Commission’s recommendation remain the key enablers of a demand recovery over the medium term. The EBITDA margin improved by 48 basis points (BPS; YoY) which along with a lower interest cost supported the earnings.
·         Bracing for sub-10% earnings growth in FY2016; hopes pinned on H2 performance: The Q2FY2016 earnings season saw the consensus earnings estimate for the Sensex being downgraded by about 2%, implying a growth of 7-8% in FY2016 and of 18-20% in FY2017. Sectors like industrials and global cyclicals saw a higher downgrade compared with IT services and pharma while energy saw a marginal upward revision in the earnings estimates. Going ahead, hopes are pinned on the H2FY2016 performance led by a gradual improvement in the consumer demand (led by low inflation, a dip in interest rates) along with a low base effect (H2 of FY2015 was exceptionally weak).
·         Outlook–policy push and reasonable valuations: Of late, the government has initiated several executive-led reforms (revival of distribution companies, increase in foreign direct investment [FDI] in multiple sectors) and is trying to push the Goods and Services Tax (GST) bill in the upcoming session of the Parliament, reflecting its intention to shift focus to policy activism. The Sensex is trading at reasonable valuation (14.5x FY2017E earnings) even after factoring in the significant earnings downgrades it has suffered over the past six to eight months.

OTHER NEWS

ITC - Restructuring at top level management (elevation of executive to top roles); move that’s open race for chairmanship post retirement of Mr.YC Deveshwar – positive from long term perspective as focus is to improve the growth prospects of Non-cigarette FMCG business
Mr.YC Deveshwar, Chairman of ITC, elevated executives to greater roles in a move that could widen the field of possible successors to his post. Sanjiv Puri, who is going to be director of the fast-moving consumer goods (FMCG) business including cigarettes from next month, has also been given additional responsibility for the paperboard, paper, packaging and printing businesses from January 2016. Deveshwar elevated B Sumant, chief executive of the cigarette business and non-cigarette FMCG trade marketing and distribution, as president of the entire FMCG business. Mr.Hemant Malik was elevated as chief executive for both cigarette and FMCG distribution, in line with the theme of promoting younger people to top posts. Mr.Malik was earlier chief executive for the tobacco business. 

Berger Paints and Nippon Group to strengthen joint venture – positive read through for Berger Paints
Berger Paints and the Nippon group of Japan had agreed to strengthen their 49:51 joint venture for manufacture of coatings for plastic substrates — BNB Coating India Pvt Ltd. Both have now entered into a “non-binding understanding” to transfer some of their existing automotive paints businesses to the joint venture “at agreed values. While Berger would transfer its three- and four-wheeler paints business (passenger cars and sports utility vehicles), Nippon Paints (India) Pvt Ltd would transfer its four-wheeler paints business (other than commercial vehicles, auto parts, and ancillaries) to BNB Coating.

Nestle India - Government Wants More Tests to be done on Maggie – sentimentally negative for Nestle India
Even after being relaunched successfully in the domestic market, Nestle India’s Maggi noodles still seem to be in trouble due to a pending case against the company in the apex consumer court. The government told the apex consumer forum which is hearing its Rs.640-crore class action suit against Nestle India that it would like to test 31 more samples of Maggi instant noodles.

TCS: Sign a strategic agreement  with Gfi informatique to Accelerate smart cities programs in France
TCS announced a strategic partnership agreement on smart cities to meet the requirements of digital initiatives in public transportation, water, and energy and accelerate the adoption of digital technologies in France’s fast-growing and innovative smart cities market. Gfi Informatique and Tata Consultancy Services will offer the Intelligent Urban Exchange (IUX) advanced analytics solution developed by the TCS Digital Software & Solutions (DS&S) Group.  The TCS IUX software solution leverages real-time and historical data to close the loop between citizen and city needs and the supply of services, such as  transportation, water and energy. The contract is a culmination of DS&S Group’s knowledge of the global smart city market – a $1.6 trillion dollar opportunity by 2020 – and Gfi’s trusted relationships with local public sector organizations to provide system integration and localization in France.  

BGR Energy has bagged new orders worth Rs. 300 crore from Transmission Corporation of Telangana Ltd for construction of 400/220 kV substation at Julurupadu in Khammam district and construction of 400/220 kV AIS Substation at Nirmal in Telangana.  – Positive for BGR Energy (News came during market hours)

NBCC has bagged Rs 5,828 crore redevelopment project from AIIMS, involving construction of 3,000 flats in 2-3 years of time – Positive for NBCC (News came during market hours)

I G Petrochemicals has entered into JV through its wholly owned subsidiary IGPL (FZE) with M/s. Dubai Natural Gas Co. Ltd., UAE ("DUGAS") for the manufacturing of Maleic Anhydride with a capacity of 45,000 MTPA. IGPL will have exclusive rights to market this products. The products will be sold in middle east and India with a view to expand to other markets like Europe later on.

DLF promoters buy 23,00,000 shares – Positive for DLF
DLF’s promoters have bought 23,00,000 shares of the company through open market transactions for nearly Rs25 crore raising their stakes to 75% between 23-24 November. The development is positive for DLF.

BGR Energy has secured new orders worth Rs.300 crore, taking the total order book in hand to about Rs.8374. The orders include construction of two substation contracts from state utility Transmission Corporation of Telangana (TSTRANSCO) on turnkey basis. Positive read thru (news on market hour, last trade).
TAPI gas pipeline connecting Turkmenistan, Afghanistan, Pakistan and India will start from December 13.
Delhi's private power distribution units of BSES and Tata Power want to join the debt-recast package announced for state utilities arguing that cheaper debt under the scheme will help them cut tariffs. This development indicates package announced could get attention of several other SEB’s.
Urea maker SPIC in consolidation mode
Urea manufacturer Southern Petrochemical Industries Corporation (SPIC) is looking at a phase of consolidation with sustained operation. Company has 6 lac tonne urea manufacturing unit in Tuticorin which is operating to full capacity. The policy relating to use of naphtha as a feedstock is in place till natural gas is made available. So, the unit can operate unhindered till the availability of gas. As per company urea unit working to capacity, SPIC can look to a “steady state profit” in the coming financial year.

Bank of Baroda to refinance six stressed accounts—negative readthru
Bank of Baroda(BoB) plans to refinance its stressed corporate accounts and change management in certain cases whereby the bank, will infuse Rs 708 crore to refinance six corporate accounts ( Uttam Galva, Bhushan power& steel, Bajrang power, GMR, Adani Power), under refinance scheme popularly called 5/25. It will also undertake Strategic Debt Restructuring (SDR) in three corporate accounts including Electrosteels, Parekh Aluminium, Monnet Ispat (overseas account).  While these are the stressed accounts at the moment, the RBIs refinance scheme (5/25)  allows banks to refinance the loans over longer tenure and no provision is required; hence there will be no significant financial impact in near term on these accounts.
Indian Railways is working on above Rs 1 lakh crore to upgrade its safety and signal upgrades-Positive for railways signaling companies:
Indian Railways (IR) is working on a proposal to create a mega fund called Rashtriya Rail Sanraksha Kosh (RRSK), with a corpus of above Rs 1 lakh crore to upgrade its creaking infrastructure. The fund would be used to eliminate level-crossings, install collision avoidance systems, as well as for track renewal and signal upgrades. Positive read thru for companies like L&T, Kalindee Rail, Kernex Microsystem, KEC International and Kalpataru power.

As per media reports, Reliance Communications close to finalizing a deal to sell entire stake in Reliance Infratel, the deal values Reliance Infratel at around Rs 22,500 crore. According to the news piece, Reliance Infratel deal likely to be announced within 10 days.

Idea Cellular: Enters into agreement with Videocon for acquiring 4G airwaves in Uttar Pradesh (West) and Gujarat  for Rs3310 crore,  the deal seems expensive but it is strategically important  for Idea Cellular to improve its 4G footprints with impending launch from Reliance Jio and aggressive push from Bharti Airtel
Idea enters into agreement with Videocon for acquiring right to use spectrum, agreement for transfer of right to use spectrum for Gujarat & UP (West) circles, acquire right to use 1800 MHz spectrum from Videocon until 2032. The aggregate consideration for right to use spectrum transaction at Rs 3,310 crore , Idea will take over outstanding deferred payment liability of Videocon payable to Department of Telecommunications for Gujarat & UP (West) circles . Idea will use acquired spectrum to launch 4G (LTE) mobile broadband services in Gujarat & UP (West).

Lumax Auto: Signs JV W/Italian Co Sipal To Enter Into Indian Aerospace & Defence Sector, Lumax Auto will Hold 51% Stake In JV With Sipal

Just Dial  to buy back 10.6 lakh shares at Rs 1,550/share on a proportionate basis via tender offer, record date is December 4th 2015