Showing posts with label BSE Auto Index. Show all posts
Showing posts with label BSE Auto Index. Show all posts

Sunday, October 9, 2011

BSE / NSE Sectoral Analysis for Q2 results 2012

Angel Broking, in its latest research report, gave the following outlook on key sectors:

Automobile

Considering the near-term macroeconomic challenges, it expects the auto industry to register moderate volume growth of 12-13% for FY2012. However, it believe low penetration levels coupled with a healthy and sustainable economic environment and favourable demographics supported by increasing per capita income levels will drive long-term growth of the Indian auto industry. As such, it prefers stocks that have strong fundamentals, ability to deliver strong top-line performance and are available at attractive valuations. It continues to prefer companies in the auto sector with a strong pricing power and high exposure to rural and exports markets. Among auto heavyweights, it maintains our positive outlook on Maruti and M&M.

Banking

To overcome liquidity concerns and high inflation, the RBI has increased the key policy rates by 350bp over the past 15 months, which in turn has resulted in bankers raising their deposit rates by 250bp over the same period. As most of these deposit rate hikes were undertaken by banks during 2HFY2011 (215bp), upward deposit repricing is likely to be nearly over for most banks. Hence, it expects relatively lesser contraction in NIMs going forward (average NIM contraction of 21bp in 1QFY2012).

Also, with deposit mobilisation gaining traction over the past six months, liquidity conditions have improved immensely. Hence, unlike six months ago, when tight liquidity conditions were a major factor in pushing up lending rates, at present it see the upward bias to lending rates arising only from the monetary policy front, which too it believe is close to peak levels. However, it believes the key parameter monitorable over the next few quarters would be the asset quality. While the leftover pain of switchover to system-based NPA recognition for PSU banks is expected to be over in 2QFY2012 (unless there is an extension by the RBI for some accounts), it remain wary of the incremental asset-quality pressures that could arise due to the increase in lending rate hikes over the past one year. Hence, it prefers banks with a more conservative asset-quality profile, especially amongst mid caps (i.e., relatively lower yield on advances and switchover to system-based recognition system nearly complete) - this includes banks such as Syndicate Bank, Bank of Maharashtra and United Bank of India. Also, from a medium-term perspective, it continues to prefer large private banks with a strong structural investment case (within which it prefer Axis Bank and ICICI Bank from a valuation perspective).

Capital Goods

All companies in our CG universe have corrected sharply, justified by concerns brewing in the power sector. On the back of this backdrop, it prefers companies with strong growth visibility and diversified revenue streams. It follows a stock-specific approach, with Jyoti Structures and KEC being among our preferred picks. In the BTG space, it continues to maintain our negative stance, owing to concerns of heightened competition and slowdown in order inflows.

Cement

It expects cement demand to witness a considerable momentum going ahead and expect 2HFY2012 dispatch growth to be higher than 3.3% growth in 5MFY2012. However, excess capacity and other macro issues such as rising interest rates and policy inaction remain causes of concern. Most cement stocks under our coverage are fairly valued and, hence, it remains Neutral on them. However, it maintains our Buy recommendation on JK Lakshmi, which is available at attractive valuations of USD 32 on EV/tonne basis, based on FY2013 estimates.

FMCG

FMCG stocks have been volatile and have showed a mix performance during 2QFY2012. It highlight that FMCG companies have outperformed the Sensex and there is still a wide gap in the premium valuations. Though valuations show a breather from their peak levels.

While the long-term consumption story for the FMCG industry remains intact, any further re-rating from current valuations seems less likely given near-term concerns over 1) high inflationary scenario, 2) possible rise in inflation post the fuel price hike and 3) spike in input costs. Hence, it maintains our Underweight stance on the FMCG sector, as it does not expect any near-term positive triggers for the companies. Amongst heavyweights, it remains Neutral on ITC, HUL and Asian Paints. In mid caps, it has a Neutral stance on GSKCH and Marico. It maintains our Reduce rating on Nestle and Colgate due to their stretched valuations and waits for better entry opportunities. It maintains Accumulate on Britannia, Dabur and GCPL.

Infrastructure

Dry spell of project awarding, across sectors, to continue...: Since the last few quarters, there has been a significant slowdown in award activity across sectors. This is a major concern for the sector, given its direct correlation to revenue visibility. Against this backdrop, given the current policy paralysis and gloomy macro environment, which is expected to stay for the next few quarters, it is expecting subdued performance for our coverage universe in the near-to-medium term on the order inflow front.

...with the road sector being the only exception: NHAI has
invited bids of 4,600km up to August 2011, which includes 1,400km already awarded, 1,800km in the awarding process and bids for the balance 1,400km yet to be opened. However, the fact that the activity has only been witnessed at NHAI`s end has led to enhanced competition, which is evident from the huge difference in bidding prices amongst players. This is affecting project IRR and is leading to delays in achieving financial closure. However, NHAI is emerging as the winner in this highly competitive environment, with bidders offering a premium much higher than the expectations of NHAI.

Metals

Although base metal prices are likely to remain under pressure in the near term due to concerns on growth, high cost of production should lend support to prices. While the copper market is struggling with supply constraints, downside for aluminium prices is capped due to high energy cost. Zinc and lead prices are unlikely to see any major upside as the market remains in surplus.

It expects non-ferrous companies to register positive top-line growth of 4-61% yoy, owing to a surge in LME prices. However, while Hindalco and Sterlite are expected to report margin expansion of 145bp and 340bp yoy, respectively, Nalco and HZL are expected to witness a margin contraction by 122bp and 200bp yoy, respectively, on account of higher raw-material prices. It remains positive on Sterlite, HZL and Hindalco.

Pharmaceutical

With the expected earnings CAGR of 21% over FY2011-13E for our universe of stocks, it remains overweight on the sector, maintaining a positive future outlook and earnings growth. In the generic segment, it prefers Cipla, Lupin, Cadila Healthcare, Aurobindo Pharma and Indoco Remedies. In CRAMS, though the segment is currently witnessing some pressure, there have been indications of a gradual recovery and ramp up from most CRAMS players. Thus, with valuations rendering attractive, it recommend Dishman Pharma in this segment.

Power

With the power sector currently facing many headwinds such as fuel shortage, increasing fuel prices, falling merchant tariffs and poor SEB financial position, it believe players with cost-plus return models and assured fuel are better placed than others. It maintains our Buy view on NTPC, GIPCL and CESC.

Real Estate

The BSE Realty Index (down 12.7% yoy) is currently ruling near its life-time low seen in 2008. Short-term prospects for the sector look bleak due to project delays, low cash flow generation, high debt and rising interest costs. Further, refinancing of loans from banks has become difficult with rising interest cost and the banks having a cautious view on the sector. Having said that, it believes absorption and not price appreciation will drive residential growth over the next six quarters. Given the scenario, new launches have been launched at 10-15% discount to prevailing market rates, which would help developers to achieve higher booking, thereby generating higher cash flows. Further, high inventory is still hampering commercial recovery, though there has been an uptick in absorption levels. It expects rentals to remain firm at current levels with an uptick likely over the next 12-15 months. It believes stock performances are related to macro factors interspersed with company-specific issues such as the CCI penalty on DLF. It is positive on the long-term outlook of the realty sector, taking into account growing disposable income, shortage of 25mn houses in India and reasonable affordability. Given the current scenario, it expect modest correction in residential prices with the exception of certain micro markets, where prices are not overheated, and expect an uptick in the commercial segment over the next 12-15 months.

It prefers companies with visibility in cash flow, low leverage and strong project pipeline with attractive valuations. Our top picks are HDIL and ARIL, which are trading at 50% and 54% discount to their NAVs, respectively. It maintain our Neutral view on DLF, owing to concerns of weak operating cash flow, increasing gearing and just 12% discount to our one-year forward NAV.

Software

For CY2011, clients allocated 2-3% higher budgets for IT spending. Also, S&P 500 profits are expected to grow by 16% yoy for CY2011. Moreover, as per TPI`s recent report, deal pipelines of IT companies are expected to be higher in 2HCY2011, as indicated by the managements of selective companies such as HCL Tech and Infosys. This is also in tandem with the licence sales data from enterprise leader Oracle as well as higher number of deals expected to begin to resurface for vendor churn.

However, the global macro data is pointing towards a bleak outlook for future global corporate profits. Further, there is a huge amount of disconnect in terms of macro landscape and client behaviour. Thus, it expect tier-I IT companies (except Wipro) to replicate growth of 20% plus in FY2012. Further, it expects moderation in volumes to sub 15% only in FY2013. Moderate volumes and stable pricing (assumed) have resulted into FY2013 EBITDA margins moving down marginally by 0-65bp yoy for tier-I IT companies. However, EPS cuts have been of 5-9% for tier-I companies and 4-12% for tier-II companies (excluding Hexaware and MindTree) for FY2013. Thus, it has downgraded our one-year forward PE (x) targets of IT phoenixes by 10% to 20x (22x earlier) and 18x (20x earlier) for TCS and Infosys, respectively. It has now turned cautious from cautiously optimistic (during results of 1QFY2012) and prefers diversified players such as Infosys, TCS and HCL Tech (top pick) in tier-I IT companies. In case of tier-II IT companies, it likes Mahindra Satyam and Hexaware Technologies.

Telecom

For 2QFY2012, it expects revenue growth to be muted due to moderating growth in subscriber base, flat voice ARPM and declining MOU. Amongst the top three operators, it expects Bharti and Idea to post revenue growth of 0.6% and 0.3% qoq, respectively. RCom is expected to post a revenue decline of 0.6% qoq. On the EBITDA margin front, it expects margins to remain weak for Bharti, Idea as well as RCom, with margins declining by 88bp, 62bp and 21bp qoq to 32.7%, 26.0% and 32.2%, respectively. Players in the sector (especially RCom and Etisalat) continue to be haunted by issues related to the 2G scam. It believe industry dynamics point towards a possible consolidation in the long run and expect only select few operators, including Bharti, Vodafone, RCom, Idea, BSNL, Aircel and Uninor, to be the survivors out of the current 15 operators. Bharti continues to be our preferred pick amongst telcos due to its low-cost integrated model (owned tower infrastructure), potential opportunity to scale up in Africa, established leadership in revenue and subscriber market share, and relatively better KPIs. However, overall it remains Neutral on the sector.

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Sunday, July 3, 2011

BSE Auto Index Review - June 2011

The country's largest car-maker Maruti Suzuki reported 8.8% decline in total sales in the month of June compared to figures of same month last year which is lowest since July 2009 sales. While for the domestic market, the company registered a drop of 3.8pc in sales.

The export figure for the company also pointed to a downtrend, slipping over 32 pc.

Maruti Suzuki, which accounts for over half of the cars produced in India, was hit by a 13-day long strike at its Manesar plant over recognition of a new workers' union. The production loss during the strike amount to nearly Rs 630 cr with 13,500 cars less produced.

"Maruti Suzuki is still a top buying pick given the auto major was hit by a strike in the previous month", says Vineet Hetamasaria, VP-Research, PINC in an interview with ET Now.

Shares in Maruti Suzuki closed 1.3 pc lower on BSE at Rs 1143.55.

Check out leading losers in auto sector

TVS Motor declared positive numbers as the company registered 14% rise in June sales to 182,456 units. However the numbers did not excite the market.

Mitesh Thacker, in an interview with ET now said "TVS looks slightly better of the lot, once the stock crosses Rs 56 the stock might head to about Rs 60-61".

Speaking to ET Now, HS Goindi, Pres-Marketing, TVS Motor said, "The company will monitor growth in coming quarters and will be able to maintain 14% growth rate for the year."

The company's export market consist of countries such as Africa, Latin America region, Egypt and the management expects the export demand to be robust.

Commenting on margin pressure, Goindi said the company increased prices in the month of April and will review price hike soon. Shares in the company dropped little over 1 pc in trade today. The stock ended 0.4 pc lower at Rs 53.40 on BSE.

Tata Motors June overall vehicle sales fell 1 pc. This was a result of drop in sales of passenger vehicles in the domestic market while the exports saw a boost of 21 pc.

Shares in Tata Motors end marginally higher on the BSE. It touched a high of Rs 1007.90 and low of Rs 987.25 in trade.

"Autos are a mixed pack; Tata Motors has bounced back from lower levels but don't see strength in stock to scale up to Rs 1050 or Rs 1100 levels" said Sandeep Wagle, Founder & MD, APTART Technical Advisory Services, aptartindia.com in an interview with ET Now.

Mahindra & Mahindra June vehicle sales grew by 29 pc. Sales stood at 35,584 vehicles as against 27,562 vehicles in June 2010.

The exports for the company have grown by 38 pc in the month of June. The tractor segment has grown nearly 20 pc quarterly while on a monthly basis sales in segment grew by 40 pc in June.

"Increase in fuel prices, liquidity and raising rates may hurt sales in coming months", says Arun Malhotra, Sr VP, Automative Division in an interview with ET Now.

Shares in M&M dropped 1.4 pc to Rs 691.30. The stock has touched an intra-day low of Rs 688.10 and a high of Rs 711.00.

Our Recommendation :

Mahindra
Out of the large cap M&M can be bought on dips to around 650 for a target of 725 holding period of 3 months

Maruti - Avoid the share till year end as the sales are likely to be sluggish

2 Wheeler Universe

TVS Motor - buy on declines around 50 for a target of 60 for a holding of 2 months

Hero HOnda - a clear winner among 2 wheeler pack, buy on declines for a gain of 15% holding of 3 months

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Ingenious Investor
Equity Research Division

Ravina Consulting
Pattamal Plaza
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BANGALORE 560084

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Talk / SMS 08105737966

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Thursday, January 6, 2011

Apollo Tyres Sell

We recommend a sell in the stock of Apollo Tyres from a short-term perspective. It is seen from the charts of the stock that after recording an all-time high of Rs 88.8 in September 2010, it changed direction and has been on a medium-term downtrend. In early December, the stock encountered resistance at Rs 72 — a significant intermediate-term resistance level and resumed its downtrend. Moreover, the stock once more encountered resistance just below this key level around Rs 71, where its 200-day moving average also provided resistance and tumbled 4.7 per cent with good volumes on Wednesday.

With this decline, we observe that the stock has formed a bearish engulfing candlestick pattern that implies bearish reversal. The daily relative strength index has re-entered in to neutral region from the bullish zone and weekly RSI is hovering in the neutral region. Daily moving average convergence divergence oscillator is featuring in the negative territory and weekly MACD is on the verge of entering this territory, indicating a downward momentum. Our short-term forecast on the stock is bearish. We expect it to decline further until it hits our price target of Rs 65 or Rs 63 in the approaching trading sessions. Traders with short-term perspective can consider selling the stock with stop-loss at Rs 69.5.

Yoganand D.

BL Research Bureau

Bought to you by


Ingenious Investor

Equity Research Division


Ravina Consulting

Pattamal Plaza

3rd Cross Kamanahalli

BANGALORE 560084


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sowmya@ravinaconsulting.com

Talk / SMS 08105737966


Read - www.ingeniousinvestor.blogspot.com

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