Fw: Sharekhan Special: Monthly economy review

 

 

Sharekhan Special [December 26, 2012]  Sharekhan www.sharekhan.com

Summary of Contents SHAREKHAN SPECIAL Monthly economy review   Economy: IIP growth surges due to base effect; inflation continues to moderate In October 2012 the Index of Industrial Production (IIP) grew by 8.2% after declining by 0.7% in September 2012. The higher than expected growth in the IIP in October was due to a lower base effect and a strong festive season-driven rebound in the manufacturing segment (up 9.6%) during the month. The uptick in the consumer durables and capital goods segments, which grew by 13.2% and 7.5% respectively, also aided the overall surge in the IIP during October 2012. The IIP growth for September has been revised to -0.7% from the provisional estimate of -0.4%. Therefore, based on the three-monthly moving average, the IIP growth stands at 3.3% as against 0.3% in October 2011. The Wholesale Price Index (WPI)-based inflation came at 7.24% (lower than the markets' expectations) in November 2012 as against 7.81% in October 2012. The month-on-month (M-o-M) decline in inflation was due to a decline in the fuel group inflation and the manufactured goods inflation. However, the inflation rate for August 2012 has been revised upwards to 8.07% from 7.81% as per the provisional estimate. India's trade deficit in November 2012 softened marginally to $19.29 billion after worsening the most in at least 17 years in October 2012 to $21.0 billion. The trade deficit increased by 21.8% year on year (YoY). The exports decreased by 4.2% YoY (down 1.6% in October 2012) to $22.30 billion while the imports increased by 6.4% YoY (up 7.4% in October 2012) to $41.59 billion. Banking: RBI leaves rates unchanged; deposit growth at a record low of 12.8% In the mid-quarter policy review, the Reserve Bank of India (RBI) surprised the markets by holding the repo and the cash reserve ratio (CRR) rates as the markets were expecting a 25-basis-point cut in the CRR. According to the RBI, the recent policy initiatives taken by the government have improved sentiments in the market but the pitfalls in the global economy remain, especially the US fiscal cliff and the contagion risks to the other economies. The liquidity has tightened due to the rising government balances. The RBI expects to manage it via open market operations (OMOs). Further, the RBI expects the inflation rate to moderate in Q4FY2013. The central bank has also reiterated its guidance of an easing monetary policy by the beginning of Q4FY2013 in order to address the growth concerns. The credit offtake registered a growth of 17.0% YoY (as on November 30, 2012), which was higher than the 16.2% year-on-year (Y-o-Y) growth recorded in the previous month (as on November 2, 2012).  The deposits registered a growth of 12.8% YoY (as on November 30, 2012), which was lower than the 13.4% Y-o-Y growth recorded in the previous month (as on November 2, 2012). The growth in the deposits has been subdued due to the higher yields offered by the other debt instruments and advance tax outflows. Consequently, the growth in the deposits has remained below the RBI's guidance of 15.0%. A slower growth in the deposits compared with the advances remains a concern for the banks. Consequently, the credit/deposit ratio (CD) for the banks increased to 76.0% in the year till date (YTD) FY2013 from 73.9% during the same period of the previous year. The yields on government securities (G-Secs; of ten-year maturity) stood at 8.14% as on December 24, 2012, lower than the average of 8.20% maintained in November 2012. Moreover, the five-year and ten-year G-Sec yields declined by 9 to 11 basis points on an M-o-M basis. The yields declined due to the OMO of ~Rs31,000 crore (since December 4th) and expectations of the easing of the rates. Equity market: FIIs remain net buyers During the month-to-date (MTD) period of December 2012 (December 3-21, 2012), the foreign institutional investors (FIIs) were net buyers of equities and the domestic mutual funds were net sellers of equities. For the MTD period of December 2012 (December 3-21, 2012), the FIIs bought equities worth Rs17,310 crore while the mutual funds sold equities worth Rs2,984 crore. Banking stocks outperform In the last one month, the BSE Bankex has increased by 7.6% as compared with an increase of 4.2% in the Sensex. The outperformance of the BSE Bankex as compared with the broader index was primarily led by the rally in the public sector banks (PSBs) due to expectations of economic reforms, banking reforms [The Banking Laws (Amendment) Bill, 2011, and the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Bill, 2011.] and the RBI's guidance for monetary easing in Q4FY2013. Moreover, with the passage of banking bills the RBI may expedite the process of issuing new banking licences.   Click here to read report: Sharekhan Special   Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.

Fw: Investor's Eye: Update - Glenmark Pharmaceuticals (Price target revised to Rs600), FMCG (Falling palm oil prices positive for soap makers)

 

 

Investor's Eye [December 24, 2012]  Sharekhan www.sharekhan.com

Summary of Contents     STOCK UPDATE Glenmark Pharmaceuticals Recommendation: Buy Price target: Rs600 Current market price: Rs520 Price target revised to Rs600 Key points Agreement with Forest Labs to fetch $9 million in revenues: Glenmark Pharmaceuticals (Glenmark Pharma) has entered into an agreement with Forest Laboratories Inc (Forest Labs) to develop novel mPGES-1 inhibitors to treat chronic inflammatory conditions, including pain. Under the terms of agreement, Forest Labs will make a $6-million up-front payment and provide an additional $3 million to support the next phase of work. Forest Labs will make other future payments in FY2014 to support the ongoing mPGES-1 inhibitors programme. This programme is currently under pre-clinical trials. We consider it an important development for the company having positive repercussions in the long term.  Strong performance in branded generics business continues: Glenmark Pharma has posted an impressive growth in the domestic branded formulation business (a revenue growth of more than 25% in the 12 months ended November 2012, as per the secondary sales data), mainly boosted by the cardiovascular and the respiratory segments. Growth in other geographies is also expected to grow more than 20% on account of new product launches in the niche segments. We introduce FY2015 estimate; roll over valuation to average earnings for FY2014 and FY2015; maintain Buy with a price target of Rs600: We have fine-tuned our estimates for FY2013 and FY2014, taking cues from the recent performance of Glenmark Pharma in the domestic market and stronger research and development (R&D) pipeline. We have also introduced earnings estimate for FY2015 in this copy and rolled over our price target to average earnings for FY2014 and FY2015. Our revised price target of Rs600 includes Rs89 for R&D pipeline and Rs511 for Glenmark Pharma's core business (15x average earnings for FY2014E and FY2015E). SECTOR UPDATE FMCG Falling palm oil prices positive for soap makers Key points Malaysian palm oil stock rises on account of lower exports: The Malaysian palm oil stock increased by 2.6 million tonne on a year-on-year (Y-o-Y) basis to 23.0 million tonne over the period of January-November 2012. This was largely on account of lower exports to some of the key exporting countries (including China, the USA and Pakistan). The palm oil exports were down by 3% year on year (YoY) with China's exports declining by 14% YoY to 3.2 million tonne over the same period.  Palm oil prices corrected from the high: The increase in inventory levels has led to a correction in the palm oil prices in the recent past. The Malaysian palm oil is currently trading close to Malaysian Ringgit 2,100 per tonne, which is 30% lower than the previous year's price. The prices started correcting from May 2012 but the correction was significant from September 2012 onwards, as inventory levels were inching up due to lower exports (refer the tables below).  Malaysian government slashes tax on palm oil exports: The Malaysian government has decided to withdraw the tax-free export quota for crude palm oil and introduced a new export tax structure that is set to take effect from January 1, 2013. The government will set a tax rate for the export of crude palm oil for January 2013 by using the average sales price from November 10, 2012 to December 9, 2012 as the reference price. This turns out to be zero tax for importers. The government will announce the tax levy on the 15th of every month using the Malaysian Palm Oil Board prices. Positive for soap and detergent manufacturers in India: Palm oil accounts for around 20-30% of the raw materials for some of the FMCG companies in India. The declining palm oil prices and the revised export tax structure would improve the fundamentals of many fast moving consumer goods (FMCG) companies (largely soap manufacturers) in India as these companies import palm oil largely from Malaysia. Large soap manufacturers such as Hindustan Unilever Ltd (HUL) and Godrej Consumer Products Ltd (GCPL) import palm oil to meet their large requirements for production of soaps and other personal wash products. This would result in better profitability for these companies in the coming quarters. Any further decline in the prices of palm oil and the other inputs essential for manufacturing soaps and detergents would provide us an opportunity to upgrade the earnings estimates and price targets for the FMCG companies under our coverage. Further, the decline in the prices of palm oil at international levels and the increased import of Malaysian palm oil by India would affect the prices of palm oil at the domestic level. Hence, it will be beneficial for the other FMCG companies that have palm oil as one their key inputs and procure domestically. Click here to read report: Investor's Eye   Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.

Bse Holidays 2013

Trading Holidays for the calendar year 2013

SI.NO. Holidays Date Day 1 Holi 27th March 2013 Wednesday 2 Good Friday 29th March 2013 Friday 3 Ram Navmi 19th April 2013 Friday 4 Mahavir Jayanti 24th April 2013 Wednesday 5 Maharashtra Day 1st May 2013 Wednesday 6 Ramzan Id 9th August 2013 Friday 7 Independence Day 15th August 2013 Thursday 8 Ganesh Chaturthi 9th September2013 Monday 9 Mahatma Gandhi Jayanti 2nd October 2013 Wednesday 10 Bakri ID 16th October 2013 Wednesday 11 Diwali-Balipratipada 4th November 2013 Monday 12 Moharram 14th November 2013 Thursday 13 Christmas 25th December 2013 Wednesday

• Muhurat Trading shall be held on Sunday, November 03, 2013 (Diwali – Laxmi Puja). Timings of Muhurat Trading shall be notified subsequently.
• The Exchange may alter / change any of the above Holidays, for which a separate circular shall be issued in advance

Source: bseindia.com

Fw: Sharekhan's top SIP fund picks

 

 

Mutual Gains [December 19, 2012]  Sharekhan www.sharekhan.com

Summary of Contents MUTUAL GAINS Sharekhan's top SIP fund picks Large-cap funds Multi-cap funds Birla Sun Life Frontline Equity Fund - Plan A  ICICI Prudential Discovery Fund Birla Sun Life Top 100 Fund Reliance RSF - Equity Principal Large Cap Fund Reliance Equity Opportunities Fund Reliance Top 200 Fund SBI Magnum Global Fund 94 SBI Magnum Bluechip Fund UTI Opportunities Fund BSE Sensex BSE 500 Mid-cap funds Tax saving funds Franklin India Prima Fund BNP Paribas Tax Advantage Plan HDFC Mid-Cap Opportunities Fund Franklin India Taxshield IDFC Premier Equity Fund - Plan A HSBC Tax Saver Equity Fund Kotak Midcap Fund ICICI Prudential Taxplan SBI Magnum Sector Funds Umbrella-Emerg Buss Fund Reliance Tax Saver (ELSS) Fund BSE Midcap S&P Nifty Fund focus Kotak Midcap Fund - Growth Click here to read report: SIP fund picks Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.

Fw: Sharekhan's top equity mutual fund picks

 

 

Mutual Gains [December 19, 2012]  Sharekhan www.sharekhan.com

Summary of Contents MUTUAL GAINS Sharekhan's top equity mutual fund picks Large-cap funds Mid-cap funds Multi-cap funds Birla Sun Life Frontline Equity Fund - Plan A IDFC Sterling Equity Fund ICICI Prudential Discovery Fund - Growth Birla Sun Life Top 100 Fund Kotak Midcap Fund Canara Robeco Equity Diversified - Growth ICICI Prudential Focused Bluechip Equity Fund - Ret HDFC Mid-Cap Opportunities Fund Reliance Equity Opportunities Fund - Growth Reliance Top 200 Fund SBI Magnum Sector Funds Umbrella - Emerg Buss Fund SBI Magnum Global Fund 94 - Growth UTI Wealth Builder Fund - Series II IDFC Premier Equity Fund - Plan A UTI Opportunities Fund - Growth Indices Indices Indices BSE Sensex BSE MID CAP BSE 500 Tax saving funds Thematic funds Balanced funds Canara Robeco Equity Taxsaver - Growth Birla Sun Life India GenNext Fund - Growth Birla Sun Life 95 - Growth Reliance Tax Saver (ELSS) Fund - Growth Canara Robeco FORCE Fund - Reg - Growth HDFC Balanced Fund - Growth Franklin India Taxshield - Growth Sundaram Rural India Fund - Reg - Growth Reliance RSF - Balanced - Growth ICICI Prudential Taxplan - Growth L&T India Special Situations Fund - Growth UTI Balanced Fund - Growth BNP Paribas Tax Advantage Plan - Growth UTI India Lifestyle Fund - Growth ICICI Prudential Balanced - Growth Indices Indices Indices CNX500 S&P Nifty Crisil Balanced Fund Index Fund focus Birla Sun Life India GenNext Fund Click here to read report: Top equity mutual fund picks   Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.

Fw: Investor's Eye: Update - Hindustan Unilever, Transmission and distribution

 

Investor's Eye [December 13, 2012]  Sharekhan www.sharekhan.com

Summary of Contents     STOCK UPDATE Hindustan Unilever Recommendation: Hold Price target: Under review Current market price: Rs520 Event Update: Unilever Indonesia hikes royalty payments to Unilever  Key points The event-Unilever Indonesia increases royalty payment to its parent Unilever: Unilever's Indonesian subsidiary, PT Unilever Indonesia, has approved a hike in royalty payments to its parent Unilever. Unilever Indonesia has agreed to pay a 5% fee and a maximum of 3% actual cost recovery as compared with the existing 3.5% fee.  Fears about similar changes in HUL's royalty fee structure: The hiking of royalty fees for Unilever Indonesia has led to fears of a similar action on Hindustan Unilever (HUL). HUL currently pays a royalty fee of 1% of the net sales for using the brands and trademarks held by Unilever. HUL has been paying 1% royalty to Unilever since August 1999 when for the first time entered it into a technical collaboration agreement with Unilever. The same was revised in December 2009, wherein additional products were added to the arrangement. The products added included product categories, where technical inputs are provided by Unilever, and products of specified categories manufactured by third-party manufacturers, where technical inputs developed by Unilever were made available to them.  It is not necessary that a similar action will be taken with respect to HUL. However, it has dented sentiments on the stock. Any adverse development on the royalty payment issue could result in an additional pressure on the margin. We believe that in the current challenging environment, with the volume growth moderating, the company may be unable to resort to price hikes to offset the impact of royalty payments.    Valuation-at a premium to long-term average multiples, any negative cue creates selling pressure: At the current market price of Rs520, the stock trades at 29.9x its FY2014E earnings per share (EPS) of Rs17.4 and 26.3x its FY2015E EPS of Rs19.8. The business fundamentals remain intact but the valuation is not cheap anymore, which led to selling pressure on negative cues. However, given the strong brand equity and quality of management, we believe that the company is likely to trade at a premium. Hence, we maintain our Hold rating on the stock with price target under review. SECTOR UPDATE Transmission and distribution Still not out of the wood; though there are signs of competition softening   Key points Relatively weaker flow YTD: The order awarding activity of Power Grid Corporation of India Ltd (PGCIL) picked up in September at around Rs1,873 crore. However, October and November (part of Q3FY2013) have broadly recorded average ordering to the tune of ~Rs700 crore in each month. In Q3FY2013, we expect that PGCIL will find it difficult to catch up with order flow compared with that of Q3FY2012, given the year-till-date (YTD) order flow. However, going by the historical trend, significant (almost 40-50%) ordering is expected in Q4FY2013.  Transmission line segment remained the highest contributor, while KPTL and KEC regained the market share: Among segments, order from the transmission line segment remained the highest growth contributor in YTDFY2013, contributing around 35% (excluding transmission line order of high-voltage direct current [HVDC] multi-terminal system worth Rs2,500 crore during June 2012). In the transmission line segment, we observed that (KEC; 17%) and Kalpataru Power Transmission Ltd (KPTL; 14%) regained their market share YTD.  Rise in share of international players; a trend or aberration?: Overall, the domestic players dominated the PGCIL order flow for many years. However, in YTDFY2013, the market share of international players touched around 21% YTD. Even this is relative higher compared with the market share of 10% in FY2012, excluding HVDC order worth Rs2,495 crore. However, it is still early to believe that there is a change in trend. Competition still alive; though there are signs of softening: Competition has intensified in the last couple of years but our interaction with several companies hints that the intensity is softening. We also found that in the sub-station and transmission segments, the average bidder per contract stepped down from FY2011 to FY2013. In case of the transmission line segment, the average bidders were six in YTDFY2013 compared with nine in FY2012 and seven in FY2011. In the sub-station segment, the average bidders were eight in FY2011 which dropped to six in YTDFY2013. In the conductor segment, the average bidder remained around four in YTDFY2013.  Further, we found that the percentage of orders that received bid from more than ten participants fell from 48% in FY2011 to 12% in FY2012 and 19% in YTDFY2013. The transmission line segment also replicated the trend. However, the conductor segment defers from this trend as there is an increase in the number of bidding per contract from FY2011 to YTDFY2013.  Near- to medium-term order flow to taper down from PGCIL; though global opportunity visible: Our interaction with the management of PGCIL revealed that around Rs70,000 crore of orders were already placed by the company out of the total approved investment worth Rs85,500 crore for the 12th five-year plan. Out of the approved investment, around Rs15,000 crore of ordering is pending. PGCIL would require additional orders worth Rs15,000 crore to touch the target of Rs100,000 crore. So, we believe that till the end of FY2015, ordering could be around Rs30,000 crore on the higher side from the PGCIL. Ordering from the PGCIL crossed Rs18,000 crore in FY2011 and Rs22,000 crore in FY2012, which should not be above Rs15,000 crore on an average in the next two years. Hence, we maintain our cautious stance. Nevertheless, opportunity from the international market is likely to remain buoyant driven by the aging infrastructure requiring replacement, investment driven by American Recovery and Reinvestment Act and finally due to a smart grid and focus on renewable sources. Click here to read report: Investor's Eye   Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.