Market Outlook
January 22, 2018
Market Cues
Domestic Indices
Chg (%)
(Pts)
(Close)
Indian markets are likely to open flat tracking global indices and SGX Nifty.
BSE Sensex
0.7
251
35,512
US stocks moved mostly higher over the course of the last trading session mainly
Nifty
0.7
78
10,895
due to the shrugging off concerns about a potential government shutdown. The Dow
Mid Cap
0.8
136
17,765
Jones ended on an upside front of 0.2% at 26,072 and the Nasdaq Composite
Small Cap
0.9
170
19,456
edged up to 7,336 with an upside front of 0.6%.
Bankex
1.5
456
30,473
U.K. shares were little changed as oil and retail stocks came under selling pressure,
offsetting gains in the mining sector following stronger-than-expected GDP data
Global Indices
Chg (%)
(Pts)
(Close)
from top metals consumer China. The FTSE 100 was up by 0.4% to close at 7,731.
Dow Jones
0.2
54
26,072
Nasdaq
0.6
40
7,336
On domestic front, Indian shares continued to move higher to hit fresh record highs
for the third straight session and the GST Council decided to cut tax rates on 29
FTSE
0.4
30
7,731
products and 53 services, in what is seen as the biggest overhaul since the launch of
Nikkei
0.2
45
23,808
GST. The Sensex edged up to 0.7% at 35,512 while the Nifty ended at 10,895 with
Hang Seng
0.4
133
32,255
an upside of 0.7%.
Shanghai Com
0.4
13
3,488
News Analysis
Advances / Declines
BSE
NSE
Result Review: HCL Tech (CMP: `958 / TP: `1,014/ Upside: 5.8%)
Advances
1,402
910
Result Review: Wipro (CMP: `328 /`289 TP: / Upside: -11.9%)
Declines
1,510
886
Detailed analysis on Pg2
Unchanged
131
52
Investor’s Ready Reckoner
Volumes (` Cr)
Key Domestic & Global Indicators
BSE
5,498
Stock Watch: Latest investment recommendations on 150+ stocks
Refer Pg5 onwards
NSE
33,320
Top Picks
Net Inflows (` Cr)
Net
Mtd
Ytd
CMP
Target
Upside
Company
Sector
Rating
(`)
(`)
(%)
FII
1,918
5,236
5,236
Blue Star
Capital Goods Accumulate
773
867
12.1
*MFs
(344)
4,244
4,244
Dewan Housing Finance
Financials
Buy
613
712
16.2
Asian Granito
Other
Accumulate
584
651
11.5
Top Gainers
Price (`)
Chg (%)
Navkar Corporation
Other
Buy
200
265
32.6
KEI Industries
Capital Goods Accumulate
393
436
11.0
Gruh
691
16.3
More Top Picks on Pg4
Cyient
653
12.4
Swanenergy
229
7.7
Key Upcoming Events
Previous
Consensus
Jublfood
2,092
7.7
Date
Region
Event Description
Reading
Expectations
Radico
365
7.0
Jan23
Germany PMI Manufacturing
63.30
Jan24
Euro Zone Euro-Zone Consumer Confidence
0.50
Top Losers
Price (`)
Chg (%)
Jan24
Germany PMI Services
55.80
Jan24
US
Existing home sales
5.81
5.68
Religare
52
(4.9)
Jan24
UK
Jobless claims change
5.90
Videoind
22
(3.5)
More Events on Pg7
Strtech
376
(3.2)
Kansainer
528
(2.8)
Ambujacem
269
(2.7)
As on January 19, 2018
Market Outlook
January 22, 2018
News Analysis
Result Review: HCL Tech (CMP: `958 / TP: `1,014/ Upside: 5.8%)
HCL Tech, for 3QFY2018 posted better than expected results. The sales came in at
US$1,988mn v/s US$1,977mn expected and V/s US$1,929mn in 2QFY2018,
registering a qoq growth of 3.1%. On constant Currency (CC) terms, the company
posted a qoq growth of 3.3%. In rupee terms, revenues came in at `12,808cr V/s
`12,795cr expected V/s `12,434cr in 2QFY2018, up 3.1% qoq.
In terms, of the geography the USA posted a qoq 4.9% CC growth, Europe posted
a 1.9% qoq CC growth & ROW posted a 3.9% CC dip during the quarter. In
terms, of the verticals, the Manufacturing and Retail & CPG were the key growth
driver for the company registering a CC qoq growth of 6.6%. Life Sciences &
Healthcare posted a qoq CC growth of 2.4%, while Financial Services posted a
moderate 1.4% CC qoq growth during the quarter.
On EBIT front, the company posted an EBIT of 19.6% V/s 19.7% expected V/s
19.7% in 2QFY2018. The margins held up only up on back of 85.8% capacity
utilization V/s 86.0% in 2QFY2018. Consequently, the PAT came in at `2,194cr
V/s `2,168cr expected V/s `2,188cr in 2QFY2018, growth of 0.3% qoq.
In terms of guidance, the company expects FY'2018 revenues to grow between
10.5-12.5% in Constant Currency. The above constant currency guidance
translates to 12.1% to 14.1% in US$ terms based on December 31, 2017 rates.
Operating Margin (EBIT) for FY’2018 is expected from 19.5% to 20.5%.
We maintain our accumulate rating on the stock, with a price target of `1,014.
Y/E
Sales OPM
PAT
EPS ROE P/E P/BV EV/EBITDA EV/Sales
March
(` cr)
(%)
(` cr)
(`)
(%)
(x)
(x)
(x)
(x)
FY2018E
50,099
22.1
8,857
62.8
22.4
15.3
3.4
10.5
2.3
FY2019E
54,608
22.1
9,537
67.6
20.6
14.2
2.9
9.1
2.0
Result Review: Wipro (CMP: `328 /`289 TP: / Upside: -11.9%)
Wipro, posted numbers in line with expectations on the EBIT front, while sales and
net profit came below expectations. Company’s IT services posted a flat qoq
growth in USD revenues to US$2,014mn V/s US$2,035mn expectations V/s
US$2,013mn in 2QFY2018. On Constant Currency (CC) terms, the company
posted a 0.9% qoq growth. In rupee terms, consolidated revenues came in at
`13,669cr V/s `13,450cr expectations V/s `13,423cr in 2QFY2018, up 1.8% qoq.
The growth in terms of geography the growth was mainly driven by Europe (4.7%
qoq CC growth), India & Middle East (1.4% qoq CC growth) business. In terms of
verticals, the growth was driven by the BFSI (4.4% qoq CC growth) and Healthcare
(2.5% qoq CC growth) segments. The key vertical of the company Energy, Natural
Resources and Utilities (6.1% qoq Cc de-growth). Manufacturing and Technology,
posted a flat CC qoq growth during the period. Digital revenue surpassed 25% of
its IT Services business.
On EBIT front, the company posted an EBIT of 16.8% V/s 16.8% in 2QFY2018; in
line with expectations. Consequently, the Adj. PAT came in at `2,255cr V/s
`2,147cr expected V/s `2,191cr in 2QFY2018, growth of 2.9% qoq. During the
quarter, company reported an impact of
`317.5cr, made with respect to
Market Outlook
January 22, 2018
insolvency of a customer post the balance sheet date. Thus reported PAT came in
`1,937cr, registering a qoq dip of 11.6%.
On, the operational front the company had utilization levels of 71.0% V/s 72.9%
in 2QFY2018. The attrition rate during the quarter was 15.9% V/s 15.7% in
2QFY2018. In terms of the client addition, the company added 79 clients. It
added one client in the US$75mn+, 2 in the US$50mn. For 4QFY2018, the
company has given, guidance of US$2,033-US$2,073mn, a CC qoq growth of 1-
3%.
Overall, the current quarter numbers were below expectations. Going forward into
the next quarter, the company is given a guidance, which is higher and is in line
with its earlier commentary that they expect a gradual improvement form
4QFY2018. The client additions have been healthy, with good additions in the
high sales ticket sizes also. While Wipro has been improving its operating
performance, its top line growth has been muted. Thus as we move into FY2019,
for Wipro its imperative it grows its sales, along with improving its operating
leverage. As of now, on back of the valuations, we maintain our reduce rating on
the stock, with a price target of `289.
Y/E
Sales OPM
PAT
EPS ROE P/E P/BV EV/EBITDA EV/Sales
March
(` cr)
(%)
(` cr)
(`)
(%)
(x)
(x)
(x)
(x)
FY2018E
54,164
22.3
9,156
18.8
15.8
17.5
2.9
9.1
2.0
FY2019E
56,544
22.3
9,488
19.5
14.8
16.8
2.7
8.3
1.9
Economic and Political News
Mauritius largest source of FDI in India followed by US, UK: Reserve Bank
Indian crypto currency investors get I-T notices as trading hits Rs 224bn
Swiss President to discuss trade pacts with Modi in Davos next week
Corporate News
Tata Trusts' MD moves HC against quashing of summons to Cyrus Mistry
Mercedes-Benz India becomes 1st to launch BS-VI-compliant locally-made
car
Trai directs Reliance Communications to refund unspent money of customers
Rio Tinto eyes tie-up with Chhattisgarh miners, execs meet CM in Australia
Market Outlook
January 22, 2018
Quarterly Bloomberg Brokers Consensus Estimate
Axis Bank - Jan 22, 2018
Particulars ( ` cr)
3QFY18E
3QFY17
y-o-y (%)
2QFY18
q-o-q (%)
PAT
818
579
41.2
432
89.3
Havells - Jan 22, 2018
Particulars ( ` cr)
3QFY18E
3QFY17
y-o-y (%)
2QFY18
q-o-q (%)
Sales
1,987
1,506
31.9
1,777
11.8
EBIDTA
260
192
35.4
256
1.5
%
13.1
12.8
14.5
PAT
168
152
10.5
171
(1.8)
Asian Paints - Jan 22, 2018
Particulars ( ` cr)
3QFY18E
3QFY17
y-o-y (%)
2QFY18
q-o-q (%)
Sales
4,552
3,937
15.6
4,265
6.8
EBIDTA
886
776
14.2
801
10.6
%
19.5
19.7
18.8
PAT
559
489
14.3
593
(5.8)
Market Outlook
January 22, 2018
Top Picks
Market Cap
CMP
Target
Upside
Company
Rationale
(` Cr)
(`)
(`)
(%)
Strong growth in domestic business due to its
leade`hip in acute therapeutic segment. Alkem expects
Alkem Laboratories
26,531
2,219
2,441
10.0
to launch more products in USA, which bodes for its
international business.
We expect the company would report strong
Asian Granito
1,757
584
651
11.5
profitability owing to better product mix, higher B2C
sales and amalgamation synergy.
Favorable outlook for the AC industry to augur well for
Cooling products business which is out pacing the
Blue Star
7,419
773
867
12.1
market growth. EMPPAC division's profitability to
improve once operating environment turns around.
With a focus on the low and medium income (LMI)
consumer segment, the company has increased its
Dewan Housing Finance
19,212
613
712
16.2
presence in tier-II & III cities where the growth
opportunity is immense.
Loan growth is likely to pick up after a sluggish FY17.
Lower credit cost will help in strong bottom-line
Karur Vysya Bank
8,380
115
160
38.7
growth. Increasing share of CASA will help in NIM
improvement.
High order book execution in EPC segment, rising B2C
KEI Industries
3,078
393
436
11.0
sales and higher exports to boost the revenues and
profitability
Expected to benefit from the lower capex requirement
Music Broadcast
2,254
395
475
20.3
and 15 year long radio broadcast licensing.
Massive capacity expansion along with rail advantage
Navkar Corporation
3,007
200
265
32.6
at ICD as well CFS augur well for the company
Strong brands and distribution network would boost
Siyaram Silk Mills
3,489
744
851
14.3
growth going ahead. Stock currently trades at an
inexpensive valuation.
Market leadership in Hindi news genre and no. 2
viewership ranking in English news genre, exit from the
TV Today Network
2,701
453
500
10.4
radio business, and anticipated growth in ad spends
by corporate to benefit the stock.
After GST, the company is expected to see higher
volumes along with improving product mix. The
Maruti Suzuki
2,81,579
9,321
10,619
13.9
Gujarat plant will also enable higher operating
leverage which will be margin accretive.
We expect loan book to grow at 24.3% over next two
GIC Housing
2,408
447
655
46.5
year; change in borrowing mix will help in NIM
improvement
We expect CPIL to report net Revenue/PAT CAGR of
~17%/16% over FY2017-20E mainly due to healthy
7,701
347
400
15.4
growth in plywood & lamination business, forayed into
Century Plyboards India
MDF & Particle boards on back of strong brand &
distribution network.
We expect sales/PAT to grow at 13.5%/20% over next
LT Foods
2,968
93
128
37.9
two years on the back of strong distribution network &
addition of new products in portfolio.
We expect sales/PAT to grow at 13%/16% over next
two years on the back of strong healthy demand in
Ruchira Papers
440
196
244
24.3
writing & printing paper and Kraft paper. Further,
China had banned making paper from waste pulp
which would benefit Indian paper companies.
We expect financialisation of savings and increasing
Aditya Birla Capital
39781
177
230
30.6
penetration in Insurance & Mutual fund would ensure
steady growth.
Source: Company, Angel Research
Market Outlook
January 22, 2018
Fundamental Call
Market Cap
CMP
Target
Upside
Company
Rationale
(` Cr)
(`)
(`)
(%)
CCL is likely to maintain the strong growth trajectory
CCL Products
3,906
294
360
22.6
over FY18-20 backed by capacity expansion and new
geographical foray
We forecast Nilkamal to report top-line CAGR of ~9%
to `2,635cr over FY17-20E on the back of healthy
Nilkamal
2,883
1,932
2,178
12.7
demand growth in plastic division. On the bottom-line
front, we estimate ~10% CAGR to `162cr owing to
improvement in volumes.
We expect sales/PAT to grow at 9%/14% over next two
years on the back of healthy demand growth in
Shreyans Industries
280
203
247
21.9
printing. Further, China had banned making paper
from waste pulp which would benefit Indian paper
companies.
The prism has diversified exposure in the different
segment such as Cement, Tile & ready mix concrete.
Prism Cement
7,143
142
160
12.8
Thus we believe, PCL is in the right place to capture
ongoing government spending on affordable housing
and infrastructure projects.
Source: Company, Angel Research
