Monday, 29 February 2016

29 February 2016 - Today's View & News

Domestic equity benchmarks are likely to open on a cautious note, as investors keenly wait for Union Budget of the new financial year.

Nifty Spot Levels

6990 – 6946 – 6869
7050 – 7090 - 7145
  Recommended Action on Stocks  
The expectations in budget are that there will be a likely increase in excise duty on cigarette.
Action to be taken
Initiation Range
Stop Loss

Emami to invest Rs 500 crore to set up cement grinding unit in Kolkata
Action to be taken
Initiation Range
Stop Loss

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

  1. UltraTech Cement says -Agreement with Jaiprakash Associates to be withdrawn as High Court declined the approval
  2. PSU banks' NPAs may increase to average 7 percent in Q4FY16: Sources
  3. Finance ministry to encourage PSU banks to publicly declare wilful defaulters
  4. Dr Reddy’s Labs recalls Paricalcitol capsules in US
  5. Gammon India lenders to convert part of debt into equity at Rs 11.89/share as part of CDR
  6. Sharp Corp, Japan to issue shares to Hon Hai Precision Industry & FoxConn
  7. L&T to sell 49 percent in insurance arm: BS
  8. Indiabulls Real Estate to raise Rs 500 crore: BS
  9. Reliance Industries introduces two entry level range of LYF smartphones in sub Rs 7000 category
  10. Aurobindo Pharma   gets tentative US FDA approval for Ritonavir tablet (used to help control HIV infection)
  11. SBI gets shareholders nod to raise Rs 15,000 crore: PTI
  12. Emami to invest Rs 500 crore to set up cement grinding unit in Kolkata: PTI
  13. PVR   says Competition Commission of India (CCI) proposes certain modifications w.r.t DT Cinemas' acquisition
  14. Coal India   says board to meet on March 5 to consider payment of interim dividend
  15. Corporation Bank   : ICRA downgrades ratings of lower tier bonds from ICRA AA+ to ICRA AA (stable)
  16. Filatex allotted 1.15 crore warrants to promoters at Rs 45/share
  17. Gayatri Projects   JV with Sembcorp launches 2640 MW power complex
  18. JMC Projects   operations in Kurukshetra Expressway have resumed
  19. United Breweries   commenced supplies of beer upon commissioning of brewery in Rajasthan
  20. Cupid   received order from DKT India worth Rs 2.95 crore
  21. Smartlink board meet today to consider buyback
  22. Zee Media   to acquire 80 percent stake in Today Merchandise & Today Retail Network
  23. Reliance Communications   , Aircel to hold 50 percent each in new merged company: ET
 Update - Derivatives

Rs. 1,58,742 Cr. and Rs.13,566 Cr. added in OI
Nifty Call :
Addd 68.70 lakh shares
Nifty Put :
Added 47.26 lakh shares
Arvind (18%), Jain Irrigation (18%), BEML (10%), Bharti Infratel (10%) and Reliance Power (8%)
Syndicate Bank (-7%), Pidilite Industries (-6%), NHPC (-5%), Hindustan Zinc (-5%) and Kotak Mahindra Bank (-3%)

 Stock Updates from Sharekhan

Punnj Lloyd
Reco – Book out
Cmp 22

Pain persists, long way to go; Book out

Key points

  • Weakening execution and high leverage eroding net worth: Punj Lloyd’s 9MFY2016 earnings were severely affected with consolidated revenues down by 33% at Rs3,561 crore YoY and operating loss almost 100% up at Rs583 crore on account of no movement in a set of projects, freezing of working capital limits and delay in award of new projects won. Further, its consolidated net debt at Rs7,067 crore has extended loss for the company with quarterly interest expense rate at almost Rs300 crore. Consequently, we believe the company’s consolidated net worth which stood at Rs966 crore in FY2015 is likely to get completely eroded.
  • Marred with claims and account receivables: Punj Lloyd has been targeting Rs3,500 receivables, major ones being from ONGC (Rs1,730 crore) and Qatar Petroleum (100 million dollars) for the past one year. The management is expecting claims from ONGC to settle around in Q4FY2017 and in Q1FY2017 for Qatar Petroleum. The company has been able to receive only Rs340-crore claims during 9MFY2016. The only silver lining has been healthy order booking (Rs6,400 crore) and L1 position (Rs3,000 crore) during FY2016. However, the Libya order backlog (Rs7,457 crore) has seen no traction at all.
  • Mammoth task to restructure business; Book out: We believe the focus of the company during FY2017 will be on cleaning up its balance sheet with settlement of claims and maintaining execution through mobilisation advances to be received from new projects. In the meanwhile, the significant losses at the consolidated level is likely to totally erode its net worth and liquidity crunch to be faced through the year for debt servicing will put further delay in recovery in restructuring its balance sheet. We have been negative on the stock with Reduce rating. With growing uncertainty on possible revival and clean-up of its books, we Book out the stock from our active coverage.
  • Risk to our call: A faster-than-expected receipt in claims and significant deleveraging are the risks to our take on the stock. 

Dr Reddy recall’s Paricalcitol capsules in US due to reports of breakage and leakage. It’s a class III recall; meaning that use/exposure to product is not likely to cause adverse reaction – Negative for Dr Reddy.

UltraTech acquires Jaiprakash Associates' cement plants for Rs 16,500 crore (USD 107 per tone): Positive for Jaiparkesh Associate, Ultratech and ICICI Bank 

Aurobindo Pharma gets tentative nod form USFDA for Ritonavir; used to help control HIV infection – Positive for Aurobindo

Bank Board Bureau set up with Mr Vinod Rai ( former CAG Chief) as Chairman—positive readthru for PSBs

Economic survey stress on need to introduce more hybrid and genetically modified seeds to improve farm productivity – Sentimentally Positive for Monsanto, Kaveri Seeds

Kansai Nerolac’s (news came in market hours) Japanese promoter Kansai Paint Co. Ltd has acquired additional 2.02 percent (to 71.29%) stake in Kansai Nerolac for Rs287crore (at price of Rs263 per share) – sentimentally positive for Kansai Nerolac

Indian Hotels through its overseas subsidiary Samsara Properties divested 1.24% stake in Belmond for $11.96 Million (over Rs82crore) to repay debt – positive read through for the stock

Survey calls for big changes in agri-sector, bats for GM crops: If implemented positive for Seeds companies ( Kaveri Seeds) and Monsanto
Suzlon bagged a 71.40MW wind power project from Gujarat Industries Power Company Ltd (GIPL). Suzlon will execute the project on a turnkey basis provide operation and maintenance services for 20 years. (Market Hour News)
Reliance has introduced two entry-level range of LYF smartphones, LYF Wind 6 and LYF Flame 1 in sub-Rs 7,000 category.

L&T is planning to sell 49% stake in its wholly owned subsidiary L&T General Insurance Company to a foreign entity as per media reports. The deal is expected to be finalised in the next three to six months. It is estimated that the deal could fetch L&T Rs 1,500 crore. – This is as per its asset monetization drive and Positive for L&T

The southern grid will get an additional 4,000 MW of power in the next one year to mitigate the woes of electricity-deficit states announced Union Power Minister Piyush Goyal. This is positive for Power sector as a whole and key beneficiary could be PTC India. 

Mindtree shareholders approve bonus shares, top brass rejig

Zee Media to acquire 80% stake in India Today companies

Andhra Bank’s Board of Directors have approved raising of Rs 136.5 crore by  issuance of 2,88,53,210 equity shares at Rs. 47.3 per share on preferential basis to Life Insurance Corporation of India

 Update on Global Market 

·         Wall Street ended lower on Friday in a feeble end to another week of strong gains after concerns about the timing of future interest rate hikes offset gains in materials and energy stocks.
·         The Commerce Department said gross domestic product expanded at a 1-percent annual rate in the fourth quarter, an upward revision from its previous estimate of 0.7 percent growth.
·         The data exacerbated concerns that the US Federal Reserve could raise rates sooner rather than later.
·         The economy grew at a rate of 2 percent in the third quarter.
·         The Dow Jones industrial average fell 0.34 percent to end at 16,639.97 points.
Nationwide HPI (MoM) (Feb)

German Retail Sales (MoM) (Jan)
CPI (YoY) (Feb)
Current Account (Q4)

Chicago PMI (Feb)
Pending Home Sales (MoM)

Manufacturing PMI (Feb)

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