Market Mantra: Technicals - Bank of Baroda (Buy), ACC (Sell); F&O - ABB (Long), Everest Kanto Cylinder (Long); Reports - Quarterly Results: Wipro, JSW Steel, Yes Bank, KPIT Cummins, TVS Motors, Radico Khaitan; Mgmt Mantra - Shopper's Stop

 

 

Market Mantra

 

Market outlook                                                                   

That Tightening feeling again!

 

We can let circumstances rule us, or we can take charge and rule our lives from within.

 

Possibilities of further monetary tightening by China spooked world markets even as investors mulled results from top US banks. Tightening fears may not be misplaced after all, China’s Q4 GDP accelerated to 10.7% from 8.9% in Q3.

  

We expect a shaky start as most Asian markets are in red or flat. The outlook remains murky. The key indices will continue to consolidate at least till the RBI policy meet. Budget will be another major event as it will indicate the Government’s views on ‘stimulus exit’.

 

India Infoline Q3 Consolidated Income was up 39%yoy and Net Profit rose 100% yoy. Income stood at Rs3.19bn, up 1.9 % qoq and 38.7% yoy. PBT was at Rs968.5mn,up 113.5% yoy

 

We expect ONGC to report 21% YoY growth in revenues and 107.6% YoY jump in PAT. ICICI Bank is expected to post 7.2% YoY gain in its net interest income while net profit is forecast to grow 15.1% YoY.

 

Trading ideas (Time period: 1-3 days)

Bank of Baroda (BUY, CMP Rs563, Target Rs585): The stock had been facing stiff resistance around the levels of Rs559-562 from last few trading sessions. On Wednesday, the stock attempted to cross the crucial resistance levels and closed above it. The upmove was accompanied with impressive volumes. Moreover, on the weekly chart, the price movement has formed a higher bottom formation. We expect the stock to rally in the medium term. Traders can buy the stock in the range of Rs560-565 for a target of Rs585. It is advisable to maintain a stop loss of Rs552.

 

ACC (SELL, CMP Rs952, Target Rs915): On the daily charts, ACC has given a close well below its critical resistance levels of Rs982 for a second session in a row. Moreover, the stock has broken below its short-term moving average. We expect the weakness to continue in the near term with daily RSI also showing a downward trend. Movement of the momentum indicators denote that the stock could trudge lower over the near term. Any fall from these levels could drag the stock lower towards Rs920 and below. We recommend a high-risk sell on the stock between the levels of Rs958-946 with a stop loss of Rs968 for a target of Rs915.

 

Derivative strategies (Time period: Till expiry)

±       Long ABB Jan Future @ Rs857 for the target price of Rs880 and stop loss placed at Rs848.

Lot size: 500

Remarks: Net maximum profit of Rs11,500 and net maximum loss Rs4,500.

 

±       Long Everest Kanto Cylinder (EKC) Jan Future @ Rs159 for the target price of Rs170 and stop loss placed at Rs155.

Lot size: 2,000.

Remarks: Net maximum profit of Rs22,000 and net maximum loss Rs8,000.

 

Commodities – Metals (Time period: Intra-day)

Trade recommendation

Commodity	Strategy	Levels	Target	Stop-Loss
Gold - Feb	Sell	Below 16640	16590, 16550	16675
Silver - Mar	Sell	Below 27680	27523, 27370	27810
Copper - Feb	Buy	Above 340	342.5, 345	338.2
Zinc - Jan	Sell	Below 112	111, 110	112.9
Lead - Jan	Sell	Below 105.4	104.2, 103.2	106.4
Aluminum - Jan	Trade as per calls given during trading session.
Nickel - Jan	Buy	864-867	880, 890	854.6
Crude Oil - Feb	Sell	Below 3580	3550, 3520	3605
Natural Gas - Jan	Buy	Around 251	254, 257	248.7

 

Commodities – Agro (Time period: Intra-day)

Trade recommendation

Commodity	Strategy	Levels	Target	Stop-Loss
Pepper - Feb	Sell	Below 13450	13300, 13160	13545
Jeera - Feb	Sell	Below 12350	12210, 12080	12435
Turmeric - Apr	Sell	Belo w 6700	6750, 6710	6735
COCUDAKL - Feb	Sell	Below 1190	1178, 1165	1196.5
Chana - Feb	Sell	2355-2360	2330, 2300	2375
Guar seed - Feb	Buy	At 2460	2485, 2510	2440
Soya bean - Feb	Sell	Below 2205	2180, 2160	2225
Soya oil - Feb	Sell	460-461	456, 453	462.8
Maize - Feb	Sell	Below 920	910, 900	926.8
Mentha oil -  Jan	Buy	Above 593	596, 599	590

 **Strict Stop-Loss  *Book Partial Profits               

 

Mutual funds

Fund focus
ICICI Prudential Dynamic Plan					Invest
Fund manager	Sankaran Naren		Min investment				Rs5,000
Latest NAV	Rs93.4		Entry load				Nil
NAV 52 high/low	Rs94/44		Exit load				1% <1 year
Latest AUM	Rs1,822cr		Latest dividend (under dividend option)				12% (21-Aug-09)
Type	Open-ended		Benchmark				S&P Nifty
Class	Equity-diversified		Asset allocation	Equity (78%), Debt (0%), Cash (22%)
Options	Growth & dividend		Expense ratio			1.9%

 

 

Result Update: Wipro Ltd (Q3 FY10) – Market Performer

CMP Rs725, Target Price Rs705, Downside 2.8%

 

±       IT services revenue growth marginally ahead of expectations driven by India, Middle East and Emerging markets

±       Strong volume growth in Global IT but pricing decline materially; broad-based growth across verticals and service lines   

±       Company improves margin by 80bps qoq; IT services margin was maintained

±       Q4 FY10 revenue guidance above expectations at 3-5% growth; margin could come-off significantly over next few quarters

±       Maintain Market Performer rating on Wipro

 

Result Update: JSW Steel (Q3 FY10) – BUY

CMP Rs1,153, Target Price Rs1,357, Upside17.7%

 

±       Q3 FY10 revenue growth was flat on a qoq basis, as decrease in sales volume was offset by higher realisations

±       Increase in share of value added products and lower share of semis led to a 4.6% qoq increase in realisations

±       Sales volume fell 2.0% qoq to 1.42mn tons, the decline was restricted due to previous quarter inventory liquidation

±       EBIDTA/ton remained flat at Rs7,667 in Q3 FY10, impact of higher realisations was negated by a jump in raw material costs

±       JSW has lowered its FY10 production target by 6%; however, maintains its EBIDTA/ton guidance of US$150

±       Strong volume growth coupled with raw material integration would to lead to earnings CAGR of 139% over FY09-12E

±       Upgrade to BUY with a revised target price of Rs1,357

 

Result Update: Yes Bank (Q3 FY10) – Market Performer

CMP Rs273, Target Price Rs291, Upside 6.8%

 

±       Net interest income up 70% yoy; Net profit, however, witnessed moderate 19% yoy growth

±       Non-interest declined 16% sequentially, financial market and TPP income came in lower  

±       Raise full year loan growth estimate to 60% yoy, expect loan book CAGR of 38% over FY09-12E

±       Adequately capitalised, returns ratio remains the best

±       Raise FY11 net profit estimates by 11% and target price to Rs291; Downgrade to MP due to limited positive triggers

 

Result Update: KPIT Cummins Infosystems (Q3 FY10) – Market Performer

CMP Rs134, Target Price Rs136, Upside 1.2%

 

±       Marginal de-growth in organic dollar revenues; 8.6% qoq growth in company revenues including Sparta  

±       Cummins revenues grow after four quarters of decline; significant growth in Manufacturing and US revenues       

±       OPM contracts sharply by 520bps qoq to 21.3%; lower forex losses lead to a flat net profit on sequential basis

±       Downgrade KPIT to Market Performer post the steep rally in the stock

 

Result Update: TVS Motors (Q3 FY10) – SELL

CMP Rs78, Target Price Rs66, Downside 15.9%

 

±       Total volumes of TVS motors rise 22% yoy for Q3 FY10

±       Realizations increased by 2.9% compared to Q3 FY09 on account of substantial jump in three wheeler sales

±       OPM stood at 7.7%, up 256bps on yoy basis driven by lower raw material costs

±       Net profit jumped to Rs235mn from a loss of Rs0.1mn in Q3 FY09

±       Company declared an interim dividend of Re 0.70 per share

±       Valuations expensive at 17.5x FY12E EPS of Rs4.4, Maintain SELL with a revised price target of Rs66

 

Result Update: Radico Khaitan (Q3 FY10) – Market Performer

CMP Rs119, Target Price Rs125, Upside 5.0%

 

±       Radico Q3 revenue growth of 34% yoy was the highest since at least  Q1 FY07 driven by 31% rise in IMFL sales

±       OPM improves 137bps on premiumisation of brands - increase in sale of mainline IMFL brands

±       Higher tax rate eats in to pre tax profits; pre-exceptional PAT up 65% yoy

±       Raise FY11 EPS on robust volume growth and upgrade to MP with a revised TP of Rs125

 

Management Mantra: Govind Shrikhande, President & CEO, Shopper’s Stop

Govind Shrikhande is the Customer Care Associate, President & CEO at Shopper’s Stop Ltd. He has been with SSL since April 2001. Prior to being appointed to the post of President and CEO, he served at SSL as Executive Director & CEO. Prior to that he was the Director - Buying and Merchandising and has been part of the turnaround team at SSL. As the President and CEO, Mr. Shrikhande is responsible for the Day to Day Operations at SSL that includes all formats of the Company. Mr. Shrikhande has a rich experience of Textiles, Apparel and Retail industry. Before joining SSL, he was associated with Mafatlal and Johnson & Johnson. He was part of the team that launched Arvind Denim and Arrows brands. Mr. Shrikhande has also worked with Bombay Dyeing & Co.

 

Corporate Snippets

±      ONGC to shell out Rs35bn as fuel subsidy for Q3 FY10. (BL)

±      OIL India to shell out Rs4.67bn as fuel subsidy for Q3 FY10. (BL)

±      Lyondell Chemical's creditors' committee failed to end the company's control of its bankruptcy case after a lawyer said a rival bid from Reliance Industries may be more attractive. (FE)

±      LIC objects L&T’s plans to enter life insurance business. (ET)

±      Bharti Walmart, JV between Bharti Enterprises and Walmart Stores Inc for wholesale cash and carry and backend supply chain management operations, has opened its first agricultural cooperative centre in Sirhind, Punjab. (FE)

±      CAG has sought government’s intervention to access financial records of Cairn India operated Rajasthan oil fields. (ET)

±      RCom has asked communications ministry to reject Parakh audit report and alleged that the report was issued for malafide purpose, based on uncorroborated facts and done without any discussions with the company. (ET)

±      Credit growth seen at 20% next year, says SBI. (BS)

±      NTPC to get into LNG chain by leveraging the upcoming Dabhol LNG terminal. (BL)

±      Reliance ADAG group is all set to fork out US$250-300mn for its Hollywood venture.  (BS)

±      JSW Steel to set-up 1600MW power plant in West Bengal with an investment of Rs96.8bn. (BS)

±      Ashok Leyland to invest Rs1.2bn to raise its aluminum high-pressure die cast annual capacity to 10,000tons. (BL)

±      The Supreme Court has sought reply from IOC in a dispute related to a US$29.75mn contract for laying 19.5km long submersible pipeline in the sea off Paradip port. (FE)

±      Tata Communication to invest Rs5bn in Pune data centre. (ET)

±      Lupin has received USFDA approval for its plant in Madhya Pradesh. (ET)

±      HDIL has raised additional debt of Rs4.25bn. (ET)

±      Alok Industries plans to exit real estate business and offload stakes in international retail subsidiaries. (ET)

±      Mercator Lines has bagged an order worth Rs10bn for a seven year period for chartering a mobile offshore production unit. (ET)

±      Mastek has announced the acquisition of Kognitio's data migration offering comprising its data factory tool kit (DFTK) and data migration methodology. (FE)

±      T Rowe Price has bought a 26% stake in UTI Asset Mangement Company and UTI Trustee Company for Rs6.5bn. (ET)

±      Bharti Biotech starts phase one trials of H1N1 vaccine. (BL)

±      Godfrey Philips to launch chewing products with an investment of Rs1.2bn. (BL)

 

Economic snippets

±      Government has proposed to ease FDI approval norms by raising the ceiling of automatic approval to R10bn from Rs6bn currently. (BS)

±      India issues demarche to China on trade barriers. (FE)

±      The government plans to allow major ports to fix tariff on their own in order to give them a level-playing field with minor ports. (FE)

±      Peak power demand deficit to widen to 12.6% in 2010. (BL)

±      Finance minister raises concern over high inflation. (BL)

±       Government is likely to issue guidelines for 3G auction today. (BS)

Results Table

Companies	Revenue	YoY growth	PAT	YoY growth
HDFC	27,056	(7.3)	6,712	22.7
Wipro	6,963	5.0	1,217	21.2
TVS Motor	10,895	25.4	235	0.0
Yes Bank	2,109	69.5	1,259	19.0
Triveni Eng	4,872	33.3	729	204.2
JK Tyre	7,987	2.4	538	-
Dr reddy's Lab	17,114	(5.6)	(2,331)	-
HDIL	4,089	30.3	1,628	115.1
Radico Khaitan	2,378	34.2	115	-
JSW Steel	47,960	46.7	4,218	-
Gayatri Projects	3,392	32.3	153	44.3
Nitin Fire	984	44.0	140	71.6

 

 

 

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