www.angelbroking.com Market Outlook February 3, 2016 Market Cues Indian markets are expected to open in red tracking the SGX Nifty and its asian peers. US markets ended in red as the sell-off on Wall Street came amid a notable decrease by the price of crude oil, with crude for March delivery down by $1.74 to $29.88 a barrel. Traders may have been looking ahead to the release of some key economic data in the coming days, including the closely watched monthly jobs report due out on Friday. The European markets dropped sharply, adding to the weakness of the previous session. Concerns about oversupply is weighing on crude prices as rumored talks between Russia and OPEC regarding production cuts have failed to materialize. Disappointing earnings reports from energy giant BP and Swiss bank UBS also contributed to the negative mood among investors. Indian markets fell tracking weak global markets as oil extended Monday's steep losses. Meanwhile, as widely expected, the Reserve Bank of India (RBI) kept its key policy rates unchanged, seeking to wait for the government's budget statement at the end of February. Metal stocks like Vedanta and Tata Steel fell about 8 percent each on concerns over the health of the Chinese economy. News & Result Analysis Lupin has launched its Metformin HCl ER Tablets Result Review: Amara Raja Batteries, Minda Industries, HSIL Detailed analysis on Pg2 Investor’s Ready Reckoner Key Domestic & Global Indicators Stock Watch: Latest investment recommendations on 150+ stocks Refer P6 onwards Top Picks Company Sector Rating CMP (`) Target (`) Upside (%) Amara Raja Batteries Auto & Auto Ancillary Buy 861 1,040 20.7 HCL Tech IT Buy 874 1,038 18.8 Larsen & Toubro Construction Buy 1,122 1,310 16.8 LIC Housing Finance Financials Buy 452 592 30.9 Navkar Corporation Others Buy 197 265 34.2 More Top Picks on Pg5 Key Upcoming Events Date Region Event Description Previous Reading Consensus Expectations Feb 04 UK BOE Announces rates 0.50 0.50 Feb 05 US Change in Nonfarm payrolls (thousands) 292 190 Feb 10 India Exports YoY% (% Change) (14.70) -- Feb 10 India Imports YoY% (% Change) (3.90) -- 6.( Domestic Indices Chg (%) (Pts) (Close) BSE Sensex (1.2) (286) 24,539 Nifty (1.3) (100) 7,456 Mid Cap (1.7) (182) 10,295 Small Cap (1.3) (137) 10,765 Bankex (1.7) (291) 17,066 Global Indices Chg (%) (Pts) (Close) Dow Jones (1.8) (296) 16,154 Nasdaq (2.2) (103) 4,517 FTSE (2.3) (138) 5,922 Nikkei (0.6) (115) 17,751 Hang Seng (0.8) (149) 19,447 Shanghai Com 2.3 61 2,750 Advances / Declines BSE NSE Advances 868 385 Declines 1,843 1,175 Unchanged 112 52 Volumes (` Cr) BSE 2,938 NSE 17,360 Net Inflows (` Cr) Net Mtd Ytd FII 405 405 (9,668) MFs 586 6,703 75,995 Top Gainers Price (`) Chg (%) Justdial 592 4.5 Ubl 808 3.8 Atul 1,496 3.3 Niittech 548 3.0 Southbank 19 3.0 Top Losers Price (`) Chg (%) Hcc 20 (9.0) Suzlon 17 (8.6) Sail 39 (7.9) Vedl 65 (7.8) Tatasteel 232 (7.2) As on February 02, 2016
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Market Outlook February 3, 2016
Market Cues
Indian markets are expected to open in red tracking the SGX Nifty and its asian peers.
US markets ended in red as the sell-off on Wall Street came amid a notable decrease by the price of crude oil, with crude for March delivery down by $1.74 to $29.88 a barrel. Traders may have been looking ahead to the release of some key economic data in the coming days, including the closely watched monthly jobs report due out on Friday.
The European markets dropped sharply, adding to the weakness of the previous session. Concerns about oversupply is weighing on crude prices as rumored talks between Russia and OPEC regarding production cuts have failed to materialize. Disappointing earnings reports from energy giant BP and Swiss bank UBS also contributed to the negative mood among investors.
Indian markets fell tracking weak global markets as oil extended Monday's steep losses. Meanwhile, as widely expected, the Reserve Bank of India (RBI) kept its key policy rates unchanged, seeking to wait for the government's budget statement at the end of February. Metal stocks like Vedanta and Tata Steel fell about 8 percent each on concerns over the health of the Chinese economy.
News & Result Analysis Lupin has launched its Metformin HCl ER Tablets Result Review: Amara Raja Batteries, Minda Industries, HSIL Detailed analysis on Pg2
Investor’s Ready Reckoner
Key Domestic & Global Indicators
Stock Watch: Latest investment recommendations on 150+ stocks
Refer P6 onwards
Top Picks Company Sector Rating
CMP (`)
Target(`)
Upside (%)
Amara Raja Batteries Auto & Auto Ancillary Buy 861 1,040 20.7
HCL Tech IT Buy 874 1,038 18.8
Larsen & Toubro Construction Buy 1,122 1,310 16.8
LIC Housing Finance Financials Buy 452 592 30.9
Navkar Corporation Others Buy 197 265 34.2
More Top Picks on Pg5
Key Upcoming Events Date
Region
Event Description Previous
ReadingConsensus
Expectations
Feb 04 UK
BOE Announces rates 0.50 0.50
Feb 05 US
Change in Nonfarm payrolls (thousands) 292 190
Feb 10 India
Exports YoY% (% Change) (14.70) --
Feb 10 India
Imports YoY% (% Change) (3.90) --
6.(
Domestic Indices Chg (%) (Pts) (Close)
BSE Sensex (1.2) (286) 24,539
Nifty (1.3) (100) 7,456
Mid Cap (1.7) (182) 10,295
Small Cap (1.3) (137) 10,765
Bankex (1.7) (291) 17,066
Global Indices Chg (%) (Pts) (Close)
Dow Jones (1.8) (296) 16,154
Nasdaq (2.2) (103) 4,517
FTSE (2.3) (138) 5,922
Nikkei (0.6) (115) 17,751
Hang Seng (0.8) (149) 19,447
Shanghai Com 2.3 61 2,750
Advances / Declines BSE NSE
Advances 868 385
Declines 1,843 1,175
Unchanged 112 52
Volumes (` Cr)
BSE 2,938
NSE 17,360
Net Inflows (` Cr) Net Mtd Ytd
FII 405 405 (9,668)
MFs 586 6,703 75,995
Top Gainers Price (`) Chg (%)
Justdial 592 4.5
Ubl 808 3.8
Atul 1,496 3.3
Niittech 548 3.0
Southbank 19 3.0
Top Losers Price (`) Chg (%)
Hcc 20 (9.0)
Suzlon 17 (8.6)
Sail 39 (7.9)
Vedl 65 (7.8)
Tatasteel 232 (7.2) As on February 02, 2016
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Market Outlook February 3, 2016
Lupin has launched its Metformin HCl ER Tablets
Lupin announced that its US subsidiary, Lupin Pharmaceuticals Inc. has launched its Metformin HCl ER Tablets, 500 mg and 1000 mg to market a generic equivalent of Santarus Inc.’s Glumetza® HCl ER Tablets, 500 mg and 1000 mg. Lupin’s Metformin HCl ER Tablets, 500 mg and 1000 mg are the AB-rated generic equivalent of Santarus Inc.’s Glumetza® HCl ER Tablets, 500 mg and 1000 mg strengths. It is indicated as an adjunct to diet and exercise to improve glycemic control in adults with type II diabetes mellitus. Lupin is eligible for 180 days of generic drug exclusivity for its Metformin HCl ER Tablets, 500 mg and 1000 mg. Glumetza® HCI ER Tablets had US sales of US$450.4mn (IMS MAT September 2015).
The company is likely to gross sales of US$ 25-30mn during the 180-day exclusivity and given the low contribution on overall sales, the product is unlikely to contribute significantly to the bottom line. Thus, we maintain our neutral stance on the stock.
Result Review
Amara Raja Batteries (CMP: `861/ TP: `1,040 /Upside: 21%)
Amara Raja Batteries Ltd (ARBL) 3QFY2016 results were ahead of estimates driven by strong operating performance. Revenues grew 16% yoy to `1,225 cr coming in line with estimates. Both automotive (led by market share gains) and the industrial segment (led by strong demand in telecom) posted healthy double digit growth. Given the soft lead prices and a better product mix, ARBL margins improved 240 bp yoy to 18.7% coming in higher than our estimate of 17.4%. ARBL reported highest ever margins in the last six years. Given the robust operating performance, Net profit at `136 cr came in ahead of our estimates of `126 cr. We currently have Buy rating on the stock.
Y/E Sales OPM PAT EPS ROE P/E P/BV EV/EBITDA EV/Sales
Minda Industries Ltd (MIL) posted yet another set of strong quarterly numbers beating our estimates. For 3QFY2016, MIL revenues grew 13% yoy to `626 cr which was in line with our estimates. MIL continues to outpace industry growth on back of new product introduction which has enabled it to increase the content/vehicle. MIL operating margins improved sharply 210 bp yoy to 9.4% coming in ahead of our estimates of 8.5%. Given the strong operating performance the Net profit at `31.4 cr almost doubled on yoy basis and was ahead of our estimates of `25 cr. We continue to maintain our positive stance on the stock and upgrade our target price to `1,047 based on (16x FY2017 EPS).
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Market Outlook February 3, 2016
Y/E Sales OPM PAT EPS ROE P/E P/BV EV/EBITDA EV/Sales
March (` cr) (%) (` cr) (`) (%) (x) (x) (x) (x)
FY2016E 2,523 8.7 87 55.0 19.3 14.8 2.8 7.0 0.6
FY2017E 2,890 9.0 104 65.4 18.7 12.4 2.3 5.6 0.5
HSIL (CMP: `273/ TP: `303/ Upside: 10.8%)
HSIL reported a good set of numbers of numbers for 3QFY2016. The top-line grew by 9.5% yoy to `506cr which is marginally higher than our estimate of `499cr. The Building Products business grew by 17.3% yoy to `268cr while Packaging Products business posted a muted growth of 2.0% yoy decline to `239cr.
The raw material cost increased by 323bp yoy to 35.8% of sales and employee cost grew by 65bp yoy to 12.0%. However, the other expenses declined by 231bp yoy to 33.4% of sales subsiding increase in expenses. The EBITDA margin declined by 157bp yoy to 18.8% (against our estimate of 19.7%) and EBITDA came in at `95cr which is in-line with our estimate of `98.
The EBIT margin for the Building Products declined by 229bp yoy to 16.2% but the same has increased by 76bp on qoq basis. The packaging products business margin increased by 140bp yoy and 455bp qoq to 14.8%.
The interest expense has come down by ~51%% yoy to `10cr as a result of reduction in debt. Mainly on account of lower interest expense, the bottom line grew by 22.0% yoy to `37 which is in-line with our estimate of `38cr.
At current market price, the stock is trading at 15.9x its FY2017 earnings. We maintain our Accumulate rating on the stock with a target price of `303. We may change our rating post 3QFY2016 result conference call
Y/E Sales OPM PAT EPS ROE P/E P/BV EV/EBITDA EV/Sales
March (` cr) (%) (` cr) (`) (%) (x) (x) (x) (x)
FY2016E 2,095 16.5 112 15.6 8.2 19.3 1.5 6.8 1.4
FY2017E 2,353 16.6 137 18.9 9.4 15.9 1.4 6.0 1.2
Economic and Political News Govt may announce incentives for solar projects in Budget
GST Bill: Govt will leave no stone unturned, says Venkaiah Naidu
India could raise $12.65 billion in overseas loans to boost irrigation: Reports
Corporate News Adani's coal mine project in Australia gets environmental approval
IndianOil plans to build strong upstream portfolio
SREI Infra to raise `17,500 crore in debt next fiscal
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Market Outlook February 3, 2016
Quarterly Bloomberg Brokers Consensus Estimate
Indian Oil Corporation Ltd - February 3, 2016 Particulars (` cr) 3QFY16E 3QFY15 y-o-y (%) 2QFY16 q-o-q (%)
Net sales 80,543 1,06,927 (24.7) 85,114 (5.4)
EBITDA 3,929 (2,477) 258.6 695 465.3
EBITDA margin (%) 4.9 -2.3 0.8
Net profit 2,068 (2,638) 178.4 97 2,032.0
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Market Outlook February 3, 2016
Top Picks ★★★★★ Large Cap
Company Market Cap
(` Cr) CMP
(`)Target
(`) Upside
(%) Rationale
Amara Raja Batteries 14,715 861 1,040 20.7 To outpace battery industry growth due to better technological products leading to market share gains in both the automotive OEM and replacement segments.
Ashok Leyland 25,826 91 111 22.3 Earnings to grow strongly given the MHCV cyclical upturn. Focus on exports and LCV's provides additional growth avenue.
HCL Tech 1,23,146 874 1,038 18.8 The stock is trading at attractive valuations and is factoring all the bad news.
HDFC Bank 2,66,629 1,056 1,262 19.6 Strong visibility for a robust 20% earnings trajectory, coupled with high quality of earnings on account of high quality retail business and strategic focus on highly rated corporates.
Infosys 2,69,845 1,175 1,347 14.7 Back on the growth trend, expect a long term growth of 14% to be a US$20bn in FY2020.
Larsen & Toubro 1,04,445 1,122 1,310 16.8
Well positioned to benefit from such expected gradual recovery in the overall domestic capex cycle, given its presence across various infrastructure segments, its execution capabilities, and its strong balance sheet.
LIC Housing Finance 22,816 452 592 30.9
LICHF continues to grow its retail loan book at a healthy pace with improvement in asset quality. We expect the company to post a healthy loan book which is likely to reflect in a strong earnings growth.
Source: Company, Angel Research
Mid Cap
Company Market Cap
(` Cr) CMP
(`) Target
(`)Upside
(%) Rationale
Blue Star 3,181 354 439 24.1
Favourable outlook for the AC industry to augur well for Cooling products business which is out pacing the market growth. EMPPAC division's profitability to improve once operating environment turns around.
Garware Wall Ropes 771 353 473 34.2 Change in business focus towards high-margin chronic & lifestyle segments and increasing penetration in Europe and US
Jagran Prakashan 5,131 157 189 20.4
Economic recovery to have favourable impact on advertising & circulation revenue growth. Further, the acquisition of a radio business (Radio City) would also boost the company's revenue growth.
Navkar Corporation 2,816 197 265 34.2 Massive capacity expansion along with rail advantage at ICD as well CFS augurs well for the company
Radico Khaitan 1,526 115 156 36.0 Earnings boost on back of stable material prices and favourable pricing environment. Valuation discount to peers provides additional comfort
Siyaram Silk Mills 998 1,065 1,354 27.2 Strong brands and distribution network would boost growth going ahead. Stock currently trades at an inexpensive valuation.
Surya Roshni 635 145 201 38.8 Structural shift in the Lighting industry towards LED lighting will drive growth.
Source: Company, Angel Research
Date Company
Feb 3, 2016 KEC International, Mangalam Cement, Hexaware, IOC, The Byke Hospitality
Feb 4, 2016 Bajaj Auto, ABB, J K Lakshmi Cements, Mphasis, Tata Steel, GSPL, Styrolution, Visaka Industries, Aventis, MT Educare
Feb 5, 2016 Bosch India, Vijaya Bank, Goodyear, Lupin, Cadila Healthcare, Divi's Lab., Tata Power Co., PTC India, Radico Khaitan
Feb 6, 2016 Prakash Industries, TVS Srichakra
Feb 8, 2016 JK Tyre, GlaxoSmith Con, Hitachi, Sterling Tools, Ipca labs
Feb 9, 2016Motherson Sumi, Apollo Tyres, Ramco Cements, Allahabad Bank, Britannia, SAIL, Hindalco, MOIL, GAIL, Petronet LNG, Dr Reddy's, Aurobindo Pharma, CESC
Feb 10, 2016Tata Chemicals, Tata Global, Automotive Axle, Ambuja Cements, ACC, India Cements, Rural Elec.Corp., Bank of Maharashtra, Bajaj Electrical, Finolex Cables, GSK Pharma, NHPC
Feb 11, 2016Tata Motors, Ashok Leyland, BHEL, BGR Energy , Indian Bank, ONGC, Indraprasth Gas, Page Industries, GIPCL, Coffee Day Enterprises Ltd
Feb 12, 2016 M&M, FAG Bearings, Nestle, BPCL, HPCL, Sun Pharma
Feb 13, 2016 Adani Power
Result Calendar
Source: Bloomberg, Angel Research
Global economic events release calendar
Date Time Country Event Description Unit Period Bloomberg Data
Last Reported Estimated
Feb 3, 2016 2:25PM Germany PMI Services Value Jan F 55.40 55.40
Feb 4, 2016 7:00PM US Initial Jobless claims Thousands Jan 30 278.00 276.50
5:30PM UK BOE Announces rates % Ratio Feb 4 0.50 0.50
Feb 5, 2016 7:00PM US Change in Nonfarm payrolls Thousands Jan 292.00 190.00
7:00PM US Unnemployment rate % Jan 5.00 5.00
Feb 10, 2016 India Imports YoY% % Change Jan (3.90) --
India Exports YoY% % Change Jan (14.70) --
3:00PM UK Industrial Production (YoY) % Change Dec 0.90 --
Feb 12, 2016 7:30AM India Industrial Production YoY % Change Dec (3.20) --
3:30PM Euro Zone Euro-Zone GDP s.a. (QoQ) % Change 4Q A 0.30 --
12:30PM Germany GDP nsa (YoY) % Change 4Q P 1.80 --
Feb 15, 2016 12:00PM India Monthly Wholesale Prices YoY% % Change Jan (0.73) --
China Exports YoY% % Change Jan (1.40) (2.00)
Feb 16, 2016 3:00PM UK CPI (YoY) % Change Jan 0.20 --
Feb 17, 2016 7:00PM US Housing Starts Thousands Jan 1,149.00 --
7:00PM US Building permits Thousands Jan 1,204.00 --
3:00PM UK Jobless claims change % Change Jan (4.30) --
7:45PM US Industrial Production % Jan (0.36) --
US Producer Price Index (mom) % Change Jan (0.70) --
Feb 18, 2016 7:00AM China Consumer Price Index (YoY) % Change Jan 1.60 --
Feb 19, 2016 7:00PM US Consumer price index (mom) % Change Jan (0.10) --
8:30PM Euro Zone Euro-Zone Consumer Confidence Value Feb A (6.30) --
Feb 22, 2016 2:00PM Germany PMI Manufacturing Value Feb P 52.30 --
Feb 23, 2016 8:30PM US Existing home sales Million Jan 5.46 --
8:30PM US Consumer Confidence S.A./ 1985=100 Feb 98.10 --
Feb 24, 2016 8:30PM US New home sales Thousands Jan 544.00 --
Feb 25, 2016 3:00PM UK GDP (YoY) % Change 4Q P 1.90 --
3:30PM Euro Zone Euro-Zone CPI (YoY) % Jan F 0.40 --
Feb 26, 2016 7:00PM US GDP Qoq (Annualised) % Change 4Q S 0.70 --
Source: Company, Angel Research; Note: *December year end; #September year end; &October year end; Price as on February 02, 2016
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February 03, 2016
Stock Watch
Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com
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