Fw: ValueGuide: Adrift but not for long

 

 

Sharekhan ValueGuide [May 07, 2012]  Sharekhan www.sharekhan.com

Summary of Contents  EQUITY FUNDAMENTALS THE STOCK IDEAS REPORT CARD FROM SHAREKHAN'S DESK Adrift but not for long  The market has been stuck in a narrow range for the past two months. Despite a slew of major events domestically (namely, the Union Budget with controversial tax amendments and GAAR provisions, an unexpected 50-basis-point rate cut in the annual monetary policy review, downgrade of India's outlook by Standard & Poor's (S&P) and rising trade deficit among others) and the flow of varied data from global economies, the market has been unable to break out of the range on either side. Though stock-specific volatility has increased lately, the benchmark indices haven't gone anywhere in the past couple of months. MARKET OUTLOOK The heat is on Macro concerns mount, government must clean up its act: The Reserve Bank of India (RBI) has kick-started the interest rate reversal cycle by a surprise reduction of 50 basis points in the policy rates, but macro challenges and policy blunders remain the key concerns for stock market investors. The rising twin deficits, the current account deficit and the fiscal deficit, are putting pressure on the rupee against the major other currencies as well as causing structural liquidity issues in the domestic banking system despite fund infusion by the RBI through CRR cuts and open market operations. In such an environment where inflation is also inching up again after softening for four consecutive months, the RBI has limited room to move ahead with further monetary easing initiatives and the ball is squarely in the government's court now.  S&P sounds the warning bell: The leading global rating agency, Standard and Poor's (S&P), has sounded the warning bell by downgrading India's rating outlook to negative from stable on macro concerns and the government's policy inaction. It has reaffirmed the "BBB-" rating but warned of one-in-three probability of a potential rating downgrade over the next 24 months if the situation does not improve. However, S&P's peer and another global rating agency, Moody's, has reaffirmed its "Baa3" rating for India which provides some solace to the bewildered policy makers of the country.  Global trends: weak macros but robust corporate results: Economic activity in the USA continues to point to a sluggish recovery but the scenario in Europe has deteriorated in the recent past. The UK has announced contraction in its economy for the second consecutive quarter and the other major European countries like France and Germany are also witnessing a drop in manufacturing activity. The peripheral East European countries continue to struggle and move from one crisis to another with each round of fund raising done at higher cost/yields. However, amid the weak economic environment, the corporate results globally have surprised positively and beaten consensus expectations especially in the USA. So far 75% of the S&P 500 companies have declared results for Q1 of 2012. Of these about 70% have reported earnings above expectations, 10% in line with expectations and 20% below estimates. The robust corporate results and easy liquidity are supporting the equity markets globally especially the US market as of now. India Inc: Q4 results a mixed bag; downgrades pick up again: In India corporate earnings have come under pressure due to high input cost, rising financing cost and uncertainty in the external environment.  In the past three quarters the earnings of the Sensex companies have grown in single digits, ie at 7% in Q1FY2012, 8.1% in Q2FY2012 and 4.1% in Q3FY2012. The Q4FY2012 results declared so far (of BSE 100 companies) follow the trend and earnings have grown by 7.2% (ex oil companies). But the earnings downgrades have picked up again after a lull of a couple of months. However, the Sensex' consensus earnings estimate for FY2013 has been downgraded substantially (by 15%) over the last 15 months and largely factors in most of the negatives. Thus, the downgrade cycle is close to peaking out and there could be scope for some positive surprises if the liquidity improves domestically and the government moves ahead with policy reforms. Market stuck in a range; but not for long: After the spurt in early 2012, the benchmark indices have been stuck in a narrow range for the past couple of months. There has been a flurry of negative news flow: the uncertainty related to foreign taxation laws (GARR), retrospective amendment to the Income Tax Act (Vodafone case), Spain debt crisis, confusing policy signals and the veiled threat by S&P of a possible rating downgrade in future. But the benchmark indices have neither breached the key support nor broken down. The market has not even gained on the back of the positive surprises such as the 50-basis-point rate cut by the RBI and the initial indication of a normal monsoon.  Valuations are supportive; see opportunity in adversity: The range-bound movement is in line with our expectation expressed in our last Market Outlook report, released on March 3, 2012. However, the macro challenges and policy blunders have turned the bias negative and a breakdown from the range looks imminent (as compared with the earlier expectations of an upmove post-consolidation) due to the mounting macro concerns and other tactical factors. However, if the benchmark indices manage to successfully navigate through the heated macro conditions this summer, the upside momentum could pick up in the second half of the year. For investors, any substantial correction in the near term would be a summer discount sale as the risk-reward ratio has turned quite attractive. SHAREKHAN TOP PICKS Sharekhan top picks  SWITCH IDEAS Automobiles: Closing M&M to Maruti Switch call SWITCH IDEAS UPDATE It's a hat trick   STOCK IDEAS Mcleod Russel India: Take a sip when it is hot STOCK UPDATES Axis Bank: Strong operating performance Bajaj Corp: Volume growth momentum sustained Bharat Electronics: Price target revised to Rs1,805  Godrej Consumer Products: Price target revised to Rs590 HCL Technologies: Price target revised to Rs550 HDFC Bank: In line performance ICICI Bank: Robust growth in profits; maintain Buy  IDBI Bank: Q4 earnings beat expectations, slippages decline India Cements: Price target revised to Rs110 Infosys: Price target revised to Rs2,440 Mahindra Lifespace Developers: A higher other income boosts Q4 PAT Maruti Suzuki India: 'Dziring' a 'Swift' recovery Polaris Financial Technology: Price target revised to Rs190 Reliance Industries: Earnings largely supported by other income Tata Consultancy Services: Price target revised to Rs1,364 UltraTech Cement: Impressive performance, earnings ahead of estimates Wipro: Price target revised to Rs450 Yes Bank: Earnings up by 34% YoY, CASA ratio inches up  SHAREKHAN SPECIAL Q4FY2012 IT earnings review  SPECIAL REPORTS Power: Power tariff hikes come as a relief Coal: Revised royalty on coal to have insignificant impact SECTOR UPDATES Transmission and distribution: PGCIL ordering picks up, but so does competition VIEWPOINT FAG Bearings: Savli factory to be the game changer SKF India: Slower growth comes with a buy-back rider  EQUITY TECHNICALS  Sensex: Bearish Triangle  EQUITY DERIVATIVES  Derivative view: Policy paralysis  COMMODITY FUNDAMENTALS  Macro-economy Crude oil: Can fall to $93 level on economy, inventories Precious metals: Supported by weak Indian Rupee; insipid performance Base metals: Likely to be volatile but can fall further Major economic events in May 2012   COMMODITY TECHNICALS  Gold: Bearish triangle Silver: Gliding down Light sweet crude oil: Reaching boiling point Copper: Next round of attack NG: Relief for bulls Nickel: Trend remains down  CURRENCY FUNDAMENTALS  Currency market: Rupee declines for second month in a row INR-USD CMP: Rs53.44 INR-GBP CMP: Rs86.43 INR-EUR CMP: Rs70.35 INR-JPY CMP: Rs66.34  CURRENCY TECHNICALS  USD-INR: Channelised rise GBP-INR: Higher territory EUR-INR: Marching north JPY-INR: Climbing up  PMS DESK Sharekhan PMS funds: Fund manager's view and product performance ProPrime - Top Equity ProPrime - Diversified Equity ProTech - Diversified ProTech - Nifty Thrifty ProTech - Trailing Stops  ADVISORY DESK  Monthly performance of Advisory products MID Trades Derivative Trades  MUTUAL FUNDS DESK  MF PICKS Sharekhan's top mutual fund picks (equity)  Sharekhan's top SIP fund picks  EARNINGS GUIDE Click here to read report: Sharekhan ValueGuide   Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the companies mentioned in the article.

 

Fw: Sharekhan Top Picks

 

 

Top Picks [May 05, 2012]  Sharekhan www.sharekhan.com

Summary of Contents SHAREKHAN TOP PICKS Despite drifting within a range during the better part of the last month, both the benchmark indices slipped in the past one week to close at more than a three-month low. Given the market conditions, the Top Picks basket also declined by 2.6% since our last update on March 30, 2012. However, it continues to outperform the benchmark indices and the CNX Mid-cap Index for the third consecutive month. In April this year, the Nifty and the Sensex declined by 3.9% and 3.3% respectively whereas the CNX Mid-cap Index fell by 7.4%. We are making some significant changes in the Top Picks basket this month. We are reducing the basket's exposure to certain sectors like tyres and cement due to media reports related to potential penalties by Competition Commission of India. Thus, Apollo Tyres and Madras Cement move out. Moreover, the weaker than expected Q4FY2012 results of Bharat Electronics, Marico and Bank of Baroda make us remove all three from the basket. At the same time, we are including ITC and Mcleod Russel in the Top Picks basket as part of the readjustment to increase the basket's exposure to the FMCG sector. The other two additions are Raymond and NIIT Technologies. Raymond is a domestic consumption story at attractive valuations even without considering the optional value of its land bank. NIIT Technologies is our preferred mid-cap pick in the information technology sector. It has a strong order book and would be among the beneficiaries of the weakening rupee. We are taking in only four stocks as compared with the five stocks that we are pulling out as part of our strategy to create some cash to exploit volatility-driven opportunities. Since the beginning of 2009, the Top Picks basket has handsomely outperformed the benchmark indices, Nifty and Sensex, which is quite evident from its performance graph. What's more, the outperformance is consistent with its record of doing better in 26 months out of the total 40 months under review. This implies a strike rate of 65% during the period. Click here to read report: Sharekhan Top Picks Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the companies mentioned in the article.

Fw: Equity Mutual Funds - The best vehicle for wealth creation in the long run

 

 Investor Information Series  

 

Equity Mutual Funds : The best vehicle for wealth creation in the long run

 

In today's scenario, Equities play vital role in every retail investors portfolio.

 

The best option to participate in equities is to invest through "Equity Mutual Funds" as it provides proper diversification, professional management and spreads out the risk.

 

Investing systematically in Equity Mutual Funds (SIP) brings down the risk further as you invest in a rising market and also in a falling market. 

 

Providing few top performing Equity Mutual Funds:

 

Fund Name	Launch Date	Lump Sum Return as a % as on 30/04/2012			Value Research Rating
		3 Yrs	5 Yrs	Since Inception
Birla Sun Life Frontline Equity Plan A	Aug – 2002	20.18	9.55	24.44	****
DSP BlackRock Top 100 Equity	Feb – 2003	19.52	10.73	28.54	*****
Franklin India Bluechip	Nov – 1993	20.88	9.59	23.60	*****
HDFC Top 200	Sep – 1996	22.75	12.23	22.82	*****
ICICI Pru Focused Bluechip Equity	May – 2008	22.88	-	12.92	*****
SBI Magnum Equity	Nov – 1990	21.01	8.42	15.43	*****
UTI Equity	May – 1992	22.86	10.67	11.46	****

 

For more informations, kindly contact your nearest branch of Integrated.

 

For list of branches, please visit www.integratedindia.in

 

Risk Factors :Mutual Funds investments are subject to market risks. Please read scheme information document carefully before investing.

 

Fw: Investor's Eye: Update - ICICI Bank (Robust growth in profits; maintain Buy); Viewpoint - Idea Cellular (Strong traffic growth enhances revenue, but policy uncertainty continues)

 

 

Investor's Eye [April 27, 2012]  Sharekhan www.sharekhan.com

Summary of Contents STOCK UPDATE ICICI Bank Cluster: Apple Green Recommendation: Buy Price target: Rs1,070 Current market price: Rs861 Robust growth in profits; maintain Buy  Result highlights ICICI Bank's Q4FY2012 earnings were significantly ahead of our as well as the street's estimates as the net profit grew by 31% year on year (YoY; 10% quarter on quarter [QoQ]) to Rs1,902 crore. The growth in profits was driven by a strong growth in the net interest income (NII) and non interest income. Aided by a 30bps sequential increase in the net interest margin (NIM; 3.01% vs 2.7% in Q3FY2012) the NII grew by 23.7% YoY (14.5% QoQ). The transmission of base rate, rise in investment yields and rundown of securitisation losses fueled growth in NIM. Business growth remained healthy as advances grew by 17.3% YoY (3.1% QoQ) whereas the deposits grew by 13.3% YoY. The current account - savings account (CASA) ratio remained stable at 43.5% while the average CASA balances were 39% in Q4FY2012. The non interest income increased by 35.8% YoY (17.8% QoQ) on account of a strong growth in the dividend income and treasury profits. The fee income growth remained subdued as it declined by 3.5% YoY. Improvement in asset quality continued for the seventh quarter in a row as the gross and net non performing assets (NPAs) declined to 3.62% and 0.73% respectively. The provision coverage ratio (PCR) also improved during the quarter to 80.4% from 78.9% in Q3FY2012. The bank restructured an additional Rs1,400 crore of advances during the quarter taking the total restructured book to Rs4,256 crore (1.7% of advances). Valuation: ICICI Bank's Q4FY2012 results mark a significant improvement in margins and asset quality, leading to an improvement in the earning profile. We expect the bank's earnings to grow at a compounded annual growth rate (CAGR) of 15% YoY (FY2012-14) contributing to an return on assets (ROA) of 1.5%. We maintain our Buy recommendation on the stock with a sum of the parts (SOTP) based target price of Rs1,070.       VIEWPOINT Idea Cellular        Strong traffic growth enhances revenue, but policy uncertainty continues Idea Cellular (Idea)'s Q4FY2012 results displayed strong operational and execution strength by the company wherein in a tough quarter it continued to gain subscribers as well as traffic growth with expansion on the margin front. What happened in the quarter gone by? Strong top line driven by traffic growth: The top line grew at 6.7% sequentially, that is by an approximately 3.2% higher rate than our estimate. The same was largely led by high tariff growth, increased share of value added services (VAS; at 14.3% vs 13.7% in Q3FY2012) and roaming revenues. Reported OPM down; adjusted profit sees expansion: The reported operating profit margin (OPM) was down 145 basis point on a sequential basis from 26.7% in Q3FY2012 to 25.3% in Q4FY2012, largely led by an increase in the network operating cost (+60 basis points quarter on quarter [QoQ]) coupled with license and WPC charges (+260 basis points QoQ). Thus the operating profit grew by a mere 1% and stood at Rs1,357 crore. This reported figure includes a one time charge of Rs150 crore booked by the company in its network operating cost. Adjusting for the same , the OPM expanded by 50 basis points on a Q-o-Q basis.  Net profit growth supported by low interest and low effective tax rate: Despite a modest rise in the operating profit, the net profit for the quarter rose by 18.9% on a sequential basis. The same was led by lower finance cost (-21% QoQ; due to repayment of Rs1,826 crore worth of loans) coupled with a dip in the effective tax rate (the tax rate stood at 30.8% in Q4FY2012 vs 32.8% in Q3FY2012). Click here to read report: Investor's Eye   Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the companies mentioned in the article.

Fw: Investor's Eye: Update - Yes Bank (Earnings up by 34% YoY, CASA ratio inches up), Raymond (Liquidation drive to clear inventory results in poor earnings), Bharat Electronics (Price target revised to Rs1,805)

 

Investor's Eye [April 26, 2012]  Sharekhan www.sharekhan.com

Summary of Contents STOCK UPDATE Yes Bank Cluster: Emerging Star Recommendation: Buy Price target: Rs431 Current market price: Rs357 Earnings up by 34% YoY, CASA ratio inches up Result highlights Yes Bank's Q4FY2012 results came in line with our estimates as the net profit grew by 33.6% year on year (YoY; up 7% sequentially) to Rs272 crore. The profit growth was on account of a strong growth in the net interest income (NII) and non-interest income. The NII grew by 28.6% YoY (up 4.8% sequentially) to Rs448 crore, which was very much in line with our estimate. The growth in the NII was contributed by a steady increase in customer assets (credit + credit substitutes) and stable net interest margin (NIM).  The advances excluding credit substitutes grew by 10.6% YoY (the same including the credit substitutes grew by 20.3% YoY) whereas the deposits grew by 7% YoY and 4.7% quarter on quarter (QoQ). The current account and savings account (CASA) ratio expanded by 254 basis points QoQ to 15% led by an impressive growth in the savings deposits (up 108% QoQ). The non-interest income reported a strong growth of 42.6% YoY and 26% QoQ led by the financial advisory business (up 26.6% QoQ) and the financial market segment(42.4% QoQ). The operating expenses increased by 18.3% QoQ causing the cost-to-income ratio to increase to 39.8% from 37.6% in Q3FY2012.  There was not much change in the asset quality compared with the Q3FY2012 levels as the gross and net non-performing assets (NPAs) were at 0.22% and 0.05% respectively. The provision coverage ratio (PCR) of the bank stood at 79.2% as against 80.4% in Q3FY2012. The restructured advances stood at 0.53% of the total advances. Yes Bank continues to report a strong growth in its earnings contributed by an uptick in the core income and a robust growth in the fee income. The margins have remained steady at around 2.8% levels and could improve in the coming period due to an increase in the CASA ratio and building up of the retail, and short and medium enterprises (SME) book. The growth in the advances was moderate in FY2012 as the bank focused on consolidation while the asset quality remained the best in the industry. We have factored an equity dilution in FY2013 as the bank plans to raise equity of around $500 million in FY2012. We expect Yes Bank's earnings to grow at a compounded annual growth rate (CAGR) of 27% over FY2012-14 leading to a return on asset (RoA) of over 1.5%. We maintain our Buy rating on the stock with a price target of Rs431.        Raymond Cluster: Ugly Duckling Recommendation: Buy Price target: Rs500 Current market price: Rs404 Liquidation drive to clear inventory results in poor earnings Result highlights Q4FY2012 - good revenue growth; dismal earnings result of increased discounting: Raymond's consolidated Q4FY2012 revenues grew by a strong 13.1% year on year (YoY) to Rs949 crore, led by growth in textiles, garmenting and the denim businesses, each of which grew at a Y-o-Y pace of 24.4%, 40.5% and 14% respectively for the quarter. Despite a robust show on the revenue front, the earnings plunged 89% YoY to Rs3.2 crore due to margin compression (as a result of heavy discounting done for inventory liquidation) coupled with an increase in the interest charge. For the quarter, the company added 46 stores, while same store sales showed a healthy 15% growth.  Earnings revision: The management in its commentary sounded committed to its core strategy of focusing on its four power brands and enhancing its already strong network with new stores in the hinterlands (smaller towns and cities). But for the short term ie H1FY2013, it sounded cautiously optimistic. Building the same momentum in our estimates we have revised our earnings for FY2013, with new EPS at Rs Rs32.8 and have also introduced our FY2014 estimates where we expect Raymond to report an earning per share (EPS) of Rs39.7 for the year.  Strong brand play - we maintain Buy: Raymond's Q4FY2012 performance has been resilient in the light of challenging macroeconomics (demand slowdown, high input cost pressure) . We believe that Raymond, with its continuous focus towards its power brands and strong distribution franchise, is all set to encash on the strong secular consumer wave waiting ahead. Hence we continue with our bullish view on the company. Further, any development with regard to the Thane land in the form of either joint development or disposal would lead to value unlocking and provide significant cash for the company. We continue to maintain our Buy rating on the stock and our revised sum of the part (SOTP) based target price of Rs500 (valuing the core business at 10x FY2014E earnings plus 50% value for the Thane land bank parcel).      Bharat Electronics Cluster: Apple Green Recommendation: Buy Price target: Rs1,805 Current market price: Rs1,466 Price target revised to Rs1,805 Result highlights Weak operational performance, other income the saviour: Bharat Electronics Ltd (BEL) closed FY2012 with a poor performance on the revenue front which had an impact on the margins and the bottom line. Against a full year sales target of Rs6,200 crore, the company reported sales of Rs5,710 crore. The fourth quarter is the strongest for BEL with more than 40% of the full year's revenues delivered in the quarter. In FY2012, the fourth quarter contributed 40% of the total revenues of the company. However, in FY2012 there was a revenue lag starting from the middle of the year which could not be recouped. Also, the company faced delays in accepting deliveries from its customers, mainly government and quasi government organisations. For the quarter ended March 2012, BEL reported a 3.3% fall in its revenues to Rs2,232.1 crore. The EBITDA margin was down 1,140 basis points to 11.5% affected by a higher input cost. However, on the back of a 62.9% jump in the other income to Rs212.3 crore the fall in the net profit was restricted to 25.5% at Rs333.8 crore. Margins remain under pressure: The margins of the company remained under pressure with the EBITDA margin down 1,140 basis points to 11.5% in Q4FY2012. The gross profit margin (GPM) of the company was down 1,170 basis points to 32% on account of input cost pressure. For FY2012, the EBITDA margin stood at 7.8% against 16.2% in FY2011. One of the reasons for the dip in the margin could be the the depreciation of the rupee as one-third of the company's expenses is in foreign currency. Another reason would be that the share of the revenues from the defence sector was down to 73% from 80% during the period. Finally, the delay in accepting deliveries from clients, generally government and quasi government organisations, would have led to pressure on the margins. FY2013 revenue target at Rs6,300 crore: For FY2012, BEL reported net sales of Rs5,645.3 crore, up 3.2% with the EBITDA margin down to 7.8% from 16.2% in FY2011 and the net profit down 12.2% at Rs756.3 crore. For FY2013 the management has set a revenue target of Rs6,300 crore, implying a growth of 10.3% over FY2012. In FY2013, the company would be working on many strategically important projects in the areas of weapon systems, electronic warfare systems, shipborne systems, coastal surveillance system, network centric systems, night vision devices, Satcom and communications.  Valuation and view: BEL has reported a poor show for FY2012 on account of the execution of the low-margin non-defence business as well as a delay in decision making by its customers. BEL remains one of the best plays in the defence capital expenditure space. With the increase in the defence budget and the focus on modernisation of the defence technology, BEL is best placed to take a sizeable pie of the defence spend. The order book at 4.5x FY2012 sales gives BEL strong revenue visibility for at least the next two to three years. The huge cash reserve gives the stock further support. The key risks, however, remain the timely delivery of orders and the margin performance, which has deteriorated through FY2012. We have introduced our FY2014 estimates and rolled over our PE multiple in this note. We maintain our Buy rating on the stock with a revised price target of Rs1,805 (Rs1,893 earlier) in view of the strong long-term growth outlook for the company. Click here to read report: Investor's Eye   Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the companies mentioned in the article.

Fw: Special LIVE trading session on Saturday April 28, 2012

 

Dear Customer, This is to inform you that The National Stock Exchange of India Ltd (NSE) and Bombay Stock Exchange Ltd (BSE) will be conducting a special LIVE trading session on Saturday, April 28, 2012. Market timings for special live trading session on Saturday, April 28, 2012 in Capital market segment will be as follows: NSE & BSE Saturday, April 28, 2012 Time Market Open 11:15 hrs Market Close 12:45 hrs Closing session start 13:05 hrs Closing session end 13:15 hrs Market timings for the F&O Segment on Saturday April 28, 2012 will be as follows: NSE Saturday, April 28, 2012 Time Normal Market Open 11:15 hrs Normal Market Close 12:45 hrs Please note: The daily mark to market settlement for Futures and premium settlement for Options for trades done in F&O Segment on Saturday, April 28, 2012 will take place on Monday, April 30, 2012. Shares bought on April 27, 2012 should not be sold on , April 28, 2012 as trades done on both these days will be settled together Wednesday, May 02, 2012. The timings for pay-in schedule for stocks sold on April 27, 2012, and April 28, 2012 will be at 09.30 a.m. and 1.30 p.m. respectively.

If you require any clarifications or assistance, you may please write to us at cs@indiainfoline.com or Reach our Customer Care Desk at (022) 40071000 or at our zonal customer service numbers: North 011-49315020, East 033-44048600, Maharashtra-022-40609292, Gujarat and Madhya Pradesh 079-40271800, South-080-40547030. Regards, Loveena Khatwani Head, Customer Service India Infoline Limited