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Tuesday, 31 May 2016

31 May 2016 - Today's View & News

MARKET VIEW

Markets are likely to open on a positive note based on the global cues. As long as nifty is holding 7980 levels, bias remains positive with buy on dips for short term

Nifty Spot Levels 

Support 8125 – 8080
Resistance  8245 - 8295
MARKET UPDATE

SGX Nifty +14 pts (8202) from last trade 8188 , Nikkei -6 pts , Hangseng -12 pts , NOW @6.53am ,
‎US Mkt Clsd,  Bovespa -87 pts , Ftse Clsd  , Dax +46 pts  , Cac +14 pts  , Crude @ $49.49 brl (+0.16 ), Brent @ $49.76 brl (+0.44) , Gold @ $1211.40 (-5.30), Silver @ $16.03 (-0.23), Euro @ $1.1146, JPY @ $110.9200, INR @ $67.1687


Today's Corporate Action 31st May Ex Date

PAGEIND  Interim Dividend - Rs. - 22.0000

GLOBAL MARKET UPDATE

 Asian markets were mostly higher on Tuesday as traders digested better-than-expected industrial output data from Japan and worse-than-expected data from South Korea. The Nikkei 225 was up 0.49 percent after trading flat earlier in the session, while in South Korea, the Kospi climbed 0.39 percent.
Chinese mainland markets were performing better, with the Shanghai Composite up 2.12 percent and the Shenzhen composite up 2.418 percent

TOP NEWS

Alert: Strong results: Tata Motors Q4FY2016 results were ahead of our as well as consensus estimates, strong beat on JLR margins front
Consolidated revenues grew 20% yoy led by 17% growth in standalone topline and 13% growth in JLR. Operating margins at 14.1% improved 160 bps yoy coming higher than our estimate of 13%. JLR margins at 16.2% beat our estimates of 14.2% while the standalone operations margins at 7.1% were in line. Net Profit grew strongly 1.5x to Rs 4,573 coming ahead of our estimates of Rs 3,153 cr. (details in investment calls)

Weak Results: Sun Pharma Q4FY16 profit lower than expectation due to forex loss (in Taro); Buyback could support stock performance in the near term. Additionally, management has guided for 8-10% yoy growth in revenues for FY17, which was much below street expectations: Negative

Raymond forms FMCG unit for premium brands in skin and haircare segments
Raymond has carved out a fast moving consumer goods (FMCG) group to extend the eponymous apparel brand to over a dozen personal and home care products. The  company already has JK Helene Curtis , which sells Park Avenue deodorants, and JK Ansell, the maker of Kama Sutra condoms, with a combined annual revenue of Rs 800 crore. The new division will house Raymond products, along with new brands spread across skin and hair care segments. 

S&P rating upgrades for Banks: IOB: S&P revises rating from BB+/Watch Negative to BB/Stable , Syndicate Bank: S&P cuts rating from  BBB-/Negative to BB+/Stable, Bank Of India: S&P cuts rating from  BBB-/Negative to BB+/Stable

Downgrade: Union Bank: S&P cuts rating from  BBB-/Stable to BBB-/Negative

MSCI Index changes effective today
There would be changes in constituents for the MSCI Global Standard Indexes which will take place as of the close of May 31, 2016. Additions are Bajaj Finance, Havells India, Titan Company and Yes Bank. The deletions are Reliance Communications, Rural Electrification Corp. and United Breweries.
  
STRONG RESULT

KNR constructions  - Adjusted net profit for Q4FY2016 grows 50%YoY to Rs36.5 crore
KNR Constructions net revenues for Q4FY2016 rose by 15.7%YoY to Rs296 crore. Further EBITDA margins for the company expanded by 168BPS YoY to 15.2% which led to EBITDA growth of 30%YoY to Rs45 crore. Further adjusting for interest on income tax refunds (in other income) and reversal of tax provision of earlier years (in tax expense), the adjusted net profit for the quarter grew by 50%YoY to Rs36.5 crore. The company reported net profit (including above one off incomes) of Rs58 crore, a jump of 138%YoY.

Tata Motors Q4FY2016 results were ahead of our as well as consensus estimates. Consolidated revenues grew 20% yoy led by 17% growth in standalone topline and 13% growth in JLR. Operating margins at 14.1% improved 160 bps yoy coming higher than our estimate of 13%. JLR margins at 16.2% beat our estimates of 14.2% while the standalone operations margins at 7.1% were in line. Net Profit grew strongly 1.5x to Rs 4,573 coming ahead of our estimates of Rs 3,153 cr.

WEAK RESULT

Insecticide India Q4FY2016: Operational performance remains weak; earnings decline sharply
During the quarter company reported revenue of Rs178.1 crore growth of 11% YoY, however sharp increase in cost impacted the operational performance of the company for the quarter. OPM decline by 385 basis point to 4.7% hence earnings for the quarter decline by 92% YoY to Rs0.48 crore.

Orbit Exports Q4FY16- Weak operating  performance
·         For Q4FY16, Orbit exports posted weak performance with revenue decline of 21.6% yoy, owing to weak demand from the middle east and Latin American segment
·    Weak revenue growth coupled with increase in employee cost (+29% yoy), resulted in operating deleverage leading to 41% decline in operating profit. Consequently the operating profit margin also contracted by 697 basis point yoy.
·       Weak operating performance coupled with increased interest and lower other income (on account of forex fluctuation), resulted in 56% decline in net earnings.

· We have a Buy rating on the stock and would update post interaction with the management 

OTHER NEWS

Suprajit Engineering Q4FY16 Consolidated Results: Operating performance above estimates; lower other income dents profits
·      Suprajit Engineering reported a good set of nos for Q4FY16 on the operating front.
·   The consolidated top line at Rs 274 Cr was up 77% YoY and came in marginally   ahead of our estimates of Rs 265.5 Cr
·    The operating margins expanded 70 BPS YoY primarily on the back of a drop in other expenses and were significantly above our estimate of 15.8%.
·   However lower other income (Suprajit reported negative other income of Rs 0.7 cr) dragged the overall profitability.
·    Adjusted Net Profit at Rs 18.3 cr missed our estimates of Rs 23.4 cr.   

Lloyd Electric reports good growth in sales however margin pressure persists
Q4 revenue grew by 31% yearly on strong base to Rs 809.9 crore led by good growth in consumer durable sales. Margins came 300 bps lower at 13.4% due to surge in other expenses. PAT before exceptional item grew by 8% to Rs 54 crore. However, the company has written off loss of goods due to fire happened in FY2014 in this quarter which resulted in lower reported PAT at Rs8.6 crore.

ICICI Bank: appoints merchant bankers in order to list its insurance subsidiary
As per media flash, ICICI Bank moved further on its plans to list ICICI Pru Life by appointing 5 merchant bankers for the proposed IPO. The said IPO may value the insurance arm at $500-600 Mn which will result in further value unlocking for the parent. The bank has already announced its plan to list the life insurance businesses and we believe that the move is in line with their stance.

Jewellery players- Government rolls back 1% tax collection at source on cash buys of jewelry  worth Rs 2 lacs and also raises the threshold to earlier level of Rs 5 lac, move aim to revive jewelery demand – Positive for players like Titan, TBZ and PC Jewlers.

Apollo Tyres steps up focus on Malaysia
Apollo Tyres has set up an office in Malaysia, the third largest automotive market in the ASEAN region, as the company eyes expanding its presence in the country. The company's product range fits well with the Malaysian consumer requirements and with the support of key distribution and retail partners in Malaysia, Apollo Tyres has been able to penetrate most of the key replacement tyre market segments. In the ASEAN region, Apollo tyres already has presence in Thailand and Indonesia. Apollo will step up focus in this market with the establishment of the Apollo Tyres' Malaysian subsidiary.

Tata Motors: JLR lines up 3.75 billion pounds for new products, capacity expansion 
Tata Motors-owned Jaguar Land Rover plans to invest around 3.75 billion pounds during the current fiscal on expanding production capacity, new product launches and enhancing technologies. The investment will go into expansion of global production capacity, new technologies and new vehicles, such as the Jaguar F-PACE and the Range Rover Evoque Convertible that will unleash the potential of both brands in the future. 

Mahindra & Mahindra inks brand licence agreement with Pininfarina
Mahindra & Mahindra has entered into a brand licence agreement with Pininfarina for use of trademarks owned by the Pininfarina group including licensing of brand Pininfarina for automotive products after closing the deal to acquire 76.06% stake in the Turin-based company. Last year Mahindra group had announced to acquire Pininfarina for an overall outgo of over 50 million Euros (nearly Rs 370 crore) after months of negotiations

MORE NEWS

PE funds now want more or even the whole pie
Despite efforts, no results in agri-economy: Gadkari
Trai issues pre-consultation paper on net neutrality 
No TDS for PF withdrawals of up to Rs 50,000 from June 1
Tata Motors Q4 net surges 3-fold at Rs 5,177 cr
Sebi notifies winding down policy for depositories
'Govt, RBI trying to resolve payment issue with Venezuela'
Government announces rules for equalisation levy
Ficci survey pegs FY17 growth at 7.7%
Now ministers can approve non-plan proposals of upto Rs500 cr
Use black money disclosure window and 'sleep well': FM
S&P lowers long-term issuer credit rating on Bank of India
Don't extend diesel vehicle ban to other cities: Centre to NGT
PNB, BoI might skip dividend in FY17: FinMin
S&P, Fitch downgrade Rolta
L&T Infotech recalls 1,500 job offers
PSUs told to give vacant space for skill training centres
Oil prices dip on strong dollar, rising Canadian output
Fire at Subros forces Maruti to suspend production
Extend tax holiday for start-ups to 7 years: Nirmala to FinMin
JSW Group sees opportunity in a sectoral crisis
926 govt Web sites fail quality audit
Banks may continue to report bad loans issues for 2 more qtr
Mahindra Q4 profit rises 6% to Rs583.73 cr on higher SUV sales
Hindalco’s aluminium business back in the driver’s seat
Berger Paints profit surges 34% to Rs94.75 cr in March quarter
Reliance Communications Q4 net profit falls 22%
NTPC Q4 net profit dips 7.73% to Rs 2,716.41 crore           
Sensex gains for fifth day, rallies 72 points; Nifty settles  8,170
Christine Lagarde remote control makes Europeans doubt IMF role in Greek deal
Sebi orders attachment of 25 properties of 3 firms
MTNL posts net profit of Rs 174.58 cr for January-March
Australia miners merge, hope to boost lithium sales
SoftBank’s investments in India may surpass $10b
FM to take India story forward with Japanese investors
India to drive world for next 10 yrs: Goh Chok Tong
Investor education pays off, SIP accounts double
SBI becomes top merchant acquiring bank in country
PSUs lack good capital buffer, profitability: Moody's

 STOCK IN NEWS

1     L&T Infotech recalls 1,500 job offers
2.    NTPC profits continue to slide, income dips by 5%
3.    Subros fire puts brakes on Maruti's production
4.    Indian firms' ROE showing signs of stabilisation: HSBC
5.    JLR, commercial vehicle drive Tata Motors' growth
6.    Coal India hopes to win orders from Bangladesh
7.    Bajaj Allianz Q4 net up 44% Chennai floods dent FY16 net
8.    Mahindra Q4 profit jumps 14.4% on better UV, tractor sales
9.    S&P lowers long-term issuer credit rating on Bank of India
10. Berger Paints posts 60% increase in Q4 net at Rs 93 cr

STOCK UPDATE 

Mahindra & Mahindra
Reco : Buy
TGT : 1450 
Key Points 
·         Valuation: The demand environment for both the automotive (on the back of new launches) and the tractor segment (due to expectations of normal monsoon and low base over the last two years) looks encouraging. We have reduced our FY2017 and FY2018 earnings estimates by 11% each to factor in slightly lower margin performance in Q4FY2016 and higher depreciation (on the back of new launches) and taxation (given the expiry of tax incentives at Haridwar plant). We have however increased our SOTP-based price target to Rs1,450 (as against earlier TP of Rs1,407) as we roll over our target on FY2018 earnings and factor increased valuation of subsidiaries. We maintain Buy rating on the stock. 

Bharat Electronics
Reco : Buy
TGT : 3650

Key Points 
·       Maintain Buy with price target of Rs1,450: We have marginally tweaked our earnings estimate downward by 2/3% Fort FY17/18E to factor in lower than expected revenue performance; however earnings downgrade was restricted on account of better than expected margins exit rate for Q4FY16 (however, it will have Seventh Pay Commission impact in FY2017). BEL remains our preferred pick for defense play on account of its strong manufacturing and R&D base. Further, on operational front, good cost control, increasing indigenisation and discipline in working capital (improved in FY2016) and improving export order book will aid earnings growth over FY16-18 (13.7% CAGR). We reiterate Buy with an unchanged price target of Rs1,450.

Thomas Cook (India)
Reco : Buy
TGT : 255

Key Points 
·     Performance to improve in coming years; retained Buy: Kuoni’s acquisition will drive the core travel business of TCIL, and the VO business is expected to perform well. We expect HR business to grow in double digits with increase in the headcount and operating efficiencies should help in improving business margins. We expect TCIL’s revenues to grow at CAGR of 25% over FY2016-18 and expect OPM to improve by 100-200BPS p.a. Further, the company has cash and cash equivalents of ~Rs1100 crore which can be actively utilized for inorganic initiatives. Thus, in view of improving growth prospects of key businesses, we maintain our Buy recommendation with an unchanged price target of Rs255. 

Oil India
Reco : Hold
TGT : 400

Key Points

·     Retain Hold but raised price target to factor in higher energy prices outlook: We believe the short-to-medium term financial performance of OIL is heavily influenced by the volatility in crude oil prices. The international crude oil prices recently increased about 40% in the beginning of Q1FY17. If the prices sustain at the current level, there could be a positive revision in natural gas prices too, which was revised down around 20% by the government. Based on the better price indications and healthier than expected volume performance, we have revised upward our FY2017 earnings estimate by 20% and rolling over our valuation multiple to FY2018 earnings (introduced FY2018 estimates). In this backdrop, we have revised upward our price target to Rs400 but retain Hold recommendation on the stock.


Kalpataru Power Transmission
Reco : Buy
TGT : 290

Key Points 
·    Strong order book with healthy margin set path for earnings upgrade; raised PT to Rs290, Buy: Given the strong order book position, we are revising our revenue estimate largely in line with the management guidance for FY2017 and build in 10% growth thereafter in FY2018. Further, we expect OPM to be healthy around 10.5% and estimate earnings to grow at CAGR of 18% for the next 2 years. We have revised upward our earnings estimate for KPTL-stand-alone by roughly 15% and raise our price target to Rs290 (based on SoTP valuation). The stock is trading at 13x its FY2018 earnings while we see earnings growth CAGR of 18% for the next 2 years and the returns ratios are likely to improve too; therefore, we reiterate Buy on KPTL with a revised price target of Rs290 (earlier Rs265). 

Crompton Greaves
Reco : Reduce
TGT : 65

Key Points  

·   Another restructuring ahead; downgraded to Reduce as positives priced in: The major balance sheet clean-up and likely sale of the targeted assets are positive steps for the company. However, we believe, it will go through a lot of uncertainties in between before the company management could regain its focus in its domestic business. Based on the retained business numbers, we have roughly estimated earnings for FY2017 and FY2018. We built in recovery and stabilised operations in FY2018, however, at the current price these positives are largely priced in. Therefore, we downgrade our recommendation from Hold to Reduce with a price target of Rs65 (18x FY2018 earnings).

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