Market Outlook
October 27, 2015
Market Cues
Domestic Indices
Chg (%)
(Pts)
(Close)
Indian markets are expected to open on a Flat to Negative note tracking the SGX
BSE Sensex
(0.4)
(109)
27,362
Nifty and most Global markets.
Nifty
(0.4)
(35)
8,261
After a substantial rally in the previous two sessions, US markets showed weakness
Mid Cap
(0.5)
(58)
11,081
and closed on a flat note as traders were reluctant in participating ahead of Federal
Small Cap
(0.7)
(82)
11,437
Reserve’s (Fed) Monetary Policy announcement on Wednesday.
Bankex
(0.6)
(129)
20,349
Major European markets closed yesterday’s trading session on a negative note as
traders booked profits after the extended gains. Additionally, there was little
economic data to drive trading action and traders were also reluctant ahead of Fed
Global Indices
Chg (%)
(Pts)
(Close)
announcement.
Dow Jones
(0.1)
(24)
17,623
Indian markets erased its early gains and closed yesterday’s trading session in the
Nasdaq
0.1
3
5,035
negative zone as domestic companies reported earnings that continued to
FTSE
(0.4)
(27)
6,417
disappoint traders.
Nikkei
0.6
122
18,947
Hang Seng
(0.2)
(36)
23,116
News & Result Analysis
Shanghai Com
0.5
18
3,430
Result Review: HDFC, UPL, Wonderla Holidays, Hindustan Media Ventures, Blue
Star Ltd, Hitachi Home.
Result Preview: Lupin, Alembic Pharma, Maruti Suzuki, TVS Motors
Advances / Declines
Bse
Nse
Detailed analysis on Pg2
Advances
968
496
Investor’s Ready Reckoner
Declines
1,753
1,018
Key Domestic & Global Indicators
Unchanged
143
75
Stock Watch: Latest investment recommendations on 150+ stocks
Refer P8 onwards
Volumes (` Cr)
BSE
2,665
Top Picks
NSE
14,166
CMP
Target
Upside
Company
Sector
Rating
(`)
(`)
(%)
Axis Bank
Financials
Buy
521
674
29.4
Net Inflows (` Cr)
Net
Mtd
Ytd
HCL Tech
IT
Buy
863
1,132
31.2
FII
725
5,039
(28,839)
ICICI Bank
Financials
Buy
285
370
29.7
MFs
(156)
(2,244)
56,129
Power Grid
Power
Buy
136
170
25.1
TCS
IT
Buy
2,535
3,165
24.8
Top Gainers
Price (`)
Chg (%)
More Top Picks on Pg7
Gsfc
75
8.5
Key Upcoming Events
Niittech
552
4.9
Previous
Consensus
Date
Region
Event Description
Reading
Expectations
Bajajfinsv
1,907
4.1
Oct 27
UK
GDP(YoY)
2.4
-
Godrejind
380
3.9
Oct 27
US
Consumer Confidence
103.0
102
Bhel
218
3.7
Oct 28
US
FOMC rate decision
0.25
0.25
Oct 28
Germany
Unemployment change (000's)
2.0
-
Top Losers
Price (`)
Chg (%)
Sreinfra
47
(7.6)
Jswenergy
88
(5.2)
Asianpaint
817
(4.7)
Justdial
1,004
(4.6)
Jpinfratec
13
(4.6)
As on October 26, 2015
Market Outlook
October 27, 2015
Result Review
HDFC (CMP: `1,313/ TP: -/Upside: -)
HDFC reported in-line standalone earnings performance for the quarter. PBT level
earnings, adjusted for dividends and sale of investments, for the company grew at
4.3%, which was slightly below expectations. Individual loan book growth was 23%
yoy (after adding back the loans sold in the preceding 12 months) whereas the
corresponding reported loan book growth was 14.0% which was lower than
expected. This was likely due to greater amount of loans sold to HDFC bank in
recent quarters. Asset quality was stable with Gross NPA at 0.71%. NII for the
company grew at 6.2% yoy due to lower than expected loan growth. Non-interest
income for the company came in at `486.6cr as compared to `242.2cr in
2QFY2015. The increase is attributed to the dividend income from HDFC Bank,
which in FY 2015 was received in first quarter, whereas in FY 2016, it has been
received in this quarter. Operating income and pre-provisioning profit grew at
16.7% and 17.8% yoy, respectively. Provisioning expenses came in at `52cr,
marginally higher than `50cs for 1QFY2016. Overall, the company reported
standalone earnings growth of 18.2% yoy.
HDFC continues to post good set of numbers despite sluggish economic
environment. Overall, we expect HDFC to post a healthy PAT CAGR of 15.3% over
FY2015-17E. The stock has surged significantly from the lows witnessed in the
month of August 2015 and currently, HDFC’s core business (after adjusting
`482/share towards the value of its subsidiaries) trades at 4.5x FY2017E ABV,
which in our view, offers limited scope for upside here on. Hence, we maintain our
Neutral rating on the stock.
Y/E
Op. Inc
NIM
PAT
EPS ABV ROA ROE
P/E P/ABV
March
(` cr)
(%)
(` cr)
(`)
(`)
(%)
(%)
(x)
(x)
FY2016E
10,883
3.4
6,764
43.0
216.7
1.1
25.9
30.6
6.1
FY2017E
12,799
3.4
7,969
50.6
240.3
1.1
26.7
25.9
5.5
UPL (CMP: `448 / TP: `510 /Upside:13.8%)
For 2QFY2016, the company posted a 4.2% growth in sales to end the period at
`2729cr. Its key markets India and Latin America posted a yoy 5% and 8%
respectively. ROW and USA, posted a yoy growth of 12% and 10% respectively.
The only market which posted a dip was Europe, which posted a 10% yoy dip in
the sales. The volume growth during the period was 13% yoy, while price increases
contributed around 2% yoy. Exchange rate on the other hand, dipped by 11% yoy.
On operating front, the Gross margins came in at
49.9% V/s
50.5% in
2QFY2015, which aided the OPM to come in at 16.5% V/s 16.7% in 2QFY2015.
This led the company to post a 12.3% yoy dip in the PBT excluding the extra-
ordinaries and profits from associates and subsidiaries. However, a higher share
of profitability from associates and subsidiaries, the company posted an Adj. PAT
of `190cr V/s `180cr, a yoy growth of 5.8%. We maintain our Accumulate on the
stock with a price target of `510.
Market Outlook
October 27, 2015
Y/E
Sales OPM
PAT
EPS ROE P/E P/BV EV/EBITDA EV/Sales
March
(` cr)
(%)
(` cr)
(`)
(%)
(x)
(x)
(x)
(x)
FY2016E
13,698
20.0
1,376
32.1
21.4
14.0
2.7
10.3
1.8
FY2017E
15,752
20.0
1,651
38.5
21.3
11.6
2.3
8.6
1.5
Wonderla Holidays (CMP: `315 / TP: `322 /Upside: -)
Wonderla Holidays 2QFY2016 results have come in ahead of our expectations.
The company’s top-line for the quarter grew by a healthy ~26% yoy to `43cr (our
estimate was of `38cr), mainly due to healthy growth in footfalls and increase in
average realisation. On the operating front, the company reported
margin improvement by
265bp yoy to 34%, primarily on account of lower
employee, advertisement and other expenses. The net profit grew by ~86% yoy
to `12cr due to improvement in performance at the operating level, higher other
income and lower taxes.
Going ahead, we expect the company to report a healthy growth in footfalls with it
setting up a new amusement park in Hyderabad, which would be operational in
FY2017. Moreover, the company has negative working capital, negligible debt,
and is able to post a healthy return ratio, which makes the balance sheet all the
more attractive. Currently, the stock is trading close to our target price; we will
update our investment recommendation on the stock shortly, i.e. post results
conference call.
Hindustan Media Ventures (CMP: `272 / TP: `295 /Upside: 8%)
For 2QFY2016, Hindustan Media Ventures Ltd (HMVL) reported earnings above
our estimates. The top-line grew by ~14% yoy to ~`227cr, mainly due to decent
growth in both the segments, i.e. (a) advertising revenues reported a ~18% yoy
growth and (b) circulation revenues reported a ~8% yoy growth. For the quarter,
the company reported an operating profit of ~`52cr, up ~33% yoy. Further, the
company’s operating margin expanded by 334bp yoy to 22.9% for the quarter,
primarily on account of lower raw material prices which were down 452bp as a
percentage of sales, mainly due to decrease in newsprint costs. The net profit grew
by ~43% yoy to ~`45cr due to improvement in performance at the operating level
and higher other income. Currently, we have an Accumulate rating on the stock.
Blue Star Ltd (CMP: `360/ TP: `388 / Upside: 7.7%)
For 2QFY2016, Blue Star reported numbers that were broadly in line with our
estimates. The standalone top-line for the quarter reported an impressive 12.3%
yoy increase to `717cr. This is in-line with our estimate of `714cr. The Electro
Mechanical Projects and Packaged Air-conditioning Systems (EMPPAC) business
revenue grew by 14.8% yoy to `459cr, the Cooling Products business revenue
grew by an impressive 19.1% yoy to `246 and PEIS business revenue de-grew by
66.0% yoy to `12cr. On operating front, the EBITDA margin expanded by 54bp
yoy to 3.8% vis-à-vis our estimate of 3.3%. The raw material cost as a percentage
of sales increased by 136bp yoy to 70.2% but this was made up by 109bp yoy and
81bp yoy decline in Employee and Other expenses to
8.9% and
17.1%,
respectively. The EBIT margins for EMPPAC, Cooling Products and PEIS were 5.7%,
5.7% and 17.2% respectively. On account of lower other income and adjusting for
Market Outlook
October 27, 2015
exceptional expenses arising from VRS related expenses of `16cr, the net profit de-
grew by 24.3% yoy to `7cr, against our estimate of `4cr.
Going ahead, we expect Blue Star to maintain its performance on the back of
improving conditions for the EMPPAC business and superior performance from the
Cooling Products business. The company has significantly increased its distribution
network to 2250 dealers as compared to 1950 dealers during the same period in
the previous year which helped in enhancing revenue of the Cooling Products
business.
At the current market price, the stock is trading at EV/Sales of 0.8x for FY2017E.
We maintain our Accumulate rating on the stock and with a target price of `388
based on target EV/Sales of 0.9x for FY2017E. We may revise our numbers post
2QFY2016 earnings call.
Y/E
Sales OPM
PAT
EPS ROE P/E P/BV EV/EBITDA EV/Sales
March
(` cr)
(%)
(` cr)
(`)
(%)
(x)
(x)
(x)
(x)
FY2016E
3,641
5.4
94
10.4
19.7
34.5
6.5
18.1
1.0
FY2017E
4,196
6.1
140
15.5
26.0
23.2
5.6
13.7
0.8
Hitachi Home (CMP: `1,518/ TP: -/ Upside: -)
For 2QFY2016, the company reported disappointing set of numbers. The top-line
declined by 1.2% yoy to `251cr, far lower than our estimate of `320cr. The muted
performance can be attributed to lower realizations which had impacted some
players in the industry on the back of excess inventory build-up. Operating
expenses as a percentage of sales grew by 7.4% on yoy basis. This was due to
387bp yoy increase in raw materials as a percentage of sales to 63.5% and
398bp yoy increase in other expenses as a percentage of sales. As a result, the
company reported operating net loss of `5cr. On account of higher depreciation
and lower other income, the company reported a net loss of `11cr against
estimated net profit of `6cr.
At the current market price, the stock is trading at PE of 30.1x for FY2017E.
Although Hitachi Home has strong parental support in terms of technological
support and is expected to benefit from consolidation of its operations (to Gujarat),
the valuations remain expensive. Hence we maintain our Neutral view on the
stock.
Y/E
Sales OPM
PAT
EPS ROE P/E P/BV EV/EBITDA EV/Sales
Mar
(` cr)
(%)
(` cr)
(`)
(%)
(x)
(x)
(x)
(x)
FY2016E
1,780
8.1
63
23.2
18.4
63.8
10.8
28.7
2.3
FY2017E
2,082
8.8
90
33.1
21.7
44.7
8.8
22.4
2.0
Preview
Lupin (CMP: `2,053 / TP: -/Upside: -)
For 2QFY2016, the company is expected to post a 5.0% growth in sales to end
the period at `3272cr, mainly driven by domestic markets. On operating front, the
Gross margins are expected to come in at 65.7%, same as last year during the
corresponding period. Consequently, the OPM is expected to come in at 24.6%
Market Outlook
October 27, 2015
V/s 24.9% in 2QFY2015. The net profit is expected to come in at `578.6cr V/s
`630.0cr, a yoy dip of 8.2%. We maintain our Neutral stance on the stock.
Y/E
Sales OPM
PAT
EPS ROE P/E P/BV EV/EBITDA EV/Sales
March
(` cr)
(%)
(` cr)
(`)
(%)
(x)
(x)
(x)
(x)
FY2016E
13,092
25.0
2,266
50.4
22.8
40.7
8.4
27.5
6.9
FY2017E
15,110
27.9
2,891
64.3
23.4
31.9
6.7
20.8
5.8
Alembic Pharma (CMP: `679 / TP: -/Upside: -)
For 2QFY2016, the company is expected to post a 37.3% growth in sales to end
the period at `750cr. primarily driven by gAbilify launch in the US. Conservative
estimate suggest ~USD20mn sales from gAbilify in 2QFY2016.On operating
front, the OPM is expected to come in at 27.8% V/s 19.5% in 2QFY2015. The net
profit is expected to come in at `177.3cr V/s `77.3cr, a yoy growth of 129.4%. We
maintain our Neutral stance on the stock.
Y/E
Sales OPM
PAT
EPS ROE P/E P/BV EV/EBITDA EV/Sales
March
(` cr)
(%)
(` cr)
(`)
(%)
(x)
(x)
(x)
(x)
FY2016E
2,601
21.2
391
20.8
37.2
32.7
10.5
23.2
4.9
FY2017E
3,115
20.2
451
23.9
28.4
31.8
7.9
20.0
4.0
Maruti Suzuki (CMP: `4,388 / TP: `4,960 /Upside: 13%)
Maruti Suzuki India Ltd (MSIL) is slated to announce its 2QFY2016 results today.
MSIL’s top line is expected to grow strongly 14% yoy to `14,007 cr. Volume growth
in 2QFY2016 has been close to double digits and would be the prime driver for
top line. Realisation/vehicle is expected to improve 4% yoy on account of better
product mix and price hikes. On the EBIDTA front, the margins are likely to
improve sharply by 380bp yoy to 16.2% on account of JPY depreciation, lower
discounting and operating leverage. EBIDTA is estimated to grow strongly 49% yoy
to `2,265cr. Given the robust operating performance, the Net Profit is estimated to
grow 45% yoy to `1,248cr. We currently have Accumulate rating on the stock.
Y/E
Sales OPM
PAT
EPS ROE P/E P/BV EV/EBITDA EV/Sales
March
(` cr)
(%)
(` cr)
(`)
(%)
(x)
(x)
(x)
(x)
FY2016E
58,102
16.7
5,498
182.0
19.9
24.1
4.8
12.9
2.1
FY2017E
68,687
16.9
6,812
225.5
21.0
19.5
4.1
10.5
1.7
TVS Motors (CMP: `244 / TP: -/ Upside: -)
TVS Motors (TVSM) would announce its 2QFY2016 results today. TVSM’s topline is
expected to remain flattish yoy at `2,718 cr. Both volumes and realization are
estimated to remove flat. On the EBIDTA front, the margins at 6% are likely to
remain flat. Higher interest expenses would dent profitability. Net Profit is
estimated to decline 4% yoy to Rs 91cr. We currently have Neutral rating on the
stock.
Market Outlook
October 27, 2015
Y/E
Sales OPM
PAT
EPS ROE P/E P/BV EV/EBITDA EV/Sales
March
(` cr)
(%)
(` cr)
(`)
(%)
(x)
(x)
(x)
(x)
FY2016E
11,702
6.8
479
10.1
24.5
24.2
5.9
17.4
1.1
FY2017E
13,713
7.7
689
14.5
28.3
16.8
4.8
14.9
0.9
Economic and Political News
Government to launch Gold Monetisation Scheme ahead of Diwali
Centre to address regulatory, financial issues in infra sector
India's fuel consumption to be higher in 18 months, says Moody's
The Department of Disinvestment wants PSU stake sale target to be more than
halved
Corporate News
REC plans to raise `700cr via tax-free non-convertible bonds
Aban Offshore bags $50mn order from ONGC
Crompton Greaves to sell power systems business in Canada CAD20mn
Sterling Holidays acquires Nature Trails
Market Outlook
October 27, 2015
Top Picks ★★★★★
Large Cap
Market Cap
CMP
Target
Upside
Company
Rationale
(` Cr)
(`)
(`)
(%)
Healthy pace of branch expansion, backed by distribution
Axis Bank
1,23,922
521
674
29.4
network, will be the driving force for the bank’s retail business
and overall earnings.
The stock is trading at attractive valuations and is factoring all
HCL Tech
1,21,317
863
1,132
31.2
the bad news.
Due to its robust franchise and capital adequacy position, the
bank is well positioned to grow by at least a few percentage
ICICI Bank
1,65,635
285
370
29.7
points higher than the average industry growth rate from a
structural point of view.
Back on the growth trend , expect a long term growth of 14% to
Infosys
2,64,470
1,151
1,306
13.4
be a US$20bn in FY2020.
Government thrust on Renewable sector and strong order book
Inox Wind
8,651
390
505
29.5
would drive future growth.
LICHF continues to grow its retail loan book at a healthy pace
with improvement in asset quality. We expect the company to
LIC HFL
24,602
488
570
16.9
post a healthy loan book which is likely to reflect in a strong
earnings growth.
Direct beneficiary of the huge investments lined up in the power
Power Grid
71,071
136
170
25.1
transmission sector.
Growth to pick up from 2HFY2017, attractive given the risk-
TCS
4,99,543
2,535
3,165
24.8
reward.
Tech Mahindra
52,187
542
646
19.1
Acquisitions, to drive growth, normalised valuations attractive.
An improving liability franchise, capital adequacy well above
Yes Bank
31,265
746
906
21.4
Basel III requirements and lowest NPA ratio in the industry, will
help Yes Bank to deliver a stronger growth.
Source: Company, Angel Research
Mid Cap
Market Cap
CMP
Target
Upside
Company
Rationale
(` Cr)
(`)
(`)
(%)
Bajaj Electricals
2,535
251
341
35.7
Visible turnaround in E&P business to drive the earnings
Garware Wall Ropes
747
341
390
14.3
Higher exports & easing material prices to drive profitability
Comfortable balance sheet to support strong growth; this
MBL Infrastructures
893
215
360
67.1
coupled with attractive valuation to lead to rerating.
New product introductions and increased sourcing by clients to
Minda Industries
806
508
652
28.4
enable outpace industry growth
Strong brand & quality teaching with innovative technologies &
MT Educare
546
137
169
23.2
higher government educational spending to boost growth
Earnings boost on back of stable material prices and favourable
Radico Khaitan
1,288
97
112
15.7
pricing environment. Valuation discount to peers provides
additional comfort
Structural shift in the Lighting industry towards LED lighting will
Surya Roshni
615
140
183
30.4
drive growth.
Tree House
1,197
283
449
58.7
Robust expansion plan for pre-schools to drive growth
Source: Company, Angel Research
Market Outlook
October 27, 2015
Quarterly Bloomberg Brokers Consensus Estimate
Maruti Suzuki India Ltd Consol - October 27, 2015
Particulars (` cr)
2QFY16E
2QFY15
y-o-y (%)
1QFY16
q-o-q (%)
Net sales
13,950
11,996
16.3
13,078
6.7
EBITDA
2,237
1,521
47.1
2,189
2.2
EBITDA margin (%)
16.0
12.7
16.7
Net profit
1,259
863
45.9
1,193
5.5
Axis Bank Consol - October 27, 2015
Particulars (` cr)
2QFY16E
2QFY15
y-o-y (%)
1QFY16
q-o-q (%)
PAT
1,944
1,611
20.7
1,978
(1.7)
Vedanta Ltd Consol - October 27, 2015
Particulars (` cr)
2QFY16E
2QFY15
y-o-y (%)
1QFY16
q-o-q (%)
Net sales
16,083
19,448
(17.3)
16,951
(5.1)
EBITDA
3,803
6,327
(39.9)
3,992
(4.7)
EBITDA margin (%)
23.6
32.5
23.6
Net profit
625
1,619
(61.4)
866
(27.8)
Lupin Ltd Consol - October 27, 2015
Particulars (` cr)
2QFY16E
2QFY15
y-o-y (%)
1QFY16
q-o-q (%)
Net sales
3,346
3,117
7.4
3,074
8.8
EBITDA
858
833
3.1
817
5.1
EBITDA margin (%)
25.7
26.7
26.6
Net profit
570
639
(10.9)
525
8.6
Market Outlook
October 27, 2015
Research Team Tel: 022 - 39357800
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