Market Outlook
October 28, 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)
27,253
Nifty and most Global markets.
Nifty
(0.3)
(28)
8,233
The US markets moved lower and ended in the negative territory yesterday as the
Mid Cap
0.2
17
11,098
traders booked profits ahead of FOMC rate decision and Federal Reserve
Small Cap
0.2
17
11,454
commentary. Disappointing Durable Goods orders, which declined by 1.2% in
September and decline in US Consumer Confidence to 97.6 also added to the
Bankex
(0.1)
(24)
20,325
negative sentiment.
The European markets also ended in the red yesterday as disappointing quarterly
Global Indices
Chg (%)
(Pts)
(Close)
earnings from companies like BASF and Novartis and poor U.K. GDP growth
Dow Jones
(0.2)
(42)
17,581
(declined by 0.5% vs. expected growth of 0.6%) dampened investor sentiment.
Nasdaq
(0.1)
(5)
5,030
Indian markets were down throughout the day as mixed corporate earnings
FTSE
(0.8)
(52)
6,365
continued to disappoint traders.
Nikkei
(0.9)
(172)
18,775
Hang Seng
0.1
26
23,143
News & Result Analysis
Shanghai Com
0.1
5
3,434
Result Review: Axis Bank, Lupin, Alembic Pharma, Ceat
Detailed analysis on Pg2
Advances / Declines
Bse
Nse
Investor’s Ready Reckoner
Advances
1,220
657
Key Domestic & Global Indicators
Declines
1,482
825
Stock Watch: Latest investment recommendations on 150+ stocks
Unchanged
154
92
Refer P6 onwards
Top Picks
Volumes (` Cr)
CMP
Target
Upside
Company
Sector
Rating
BSE
2,809
(`)
(`)
(%)
Axis Bank
Financials
Buy
521
674
29.3
NSE
16,899
HCL Tech
IT
Buy
868
1,132
30.5
ICICI Bank
Financials
Buy
284
370
30.4
Net Inflows (` Cr)
Net
Mtd
Ytd
Power Grid
Power
Buy
134
170
27.2
FII
10
5,049
(28,830)
TCS
IT
Buy
2,530
3,165
25.1
MFs
(165)
(2,940)
55,963
More Top Picks on Pg4
Key Upcoming Events
Top Gainers
Price (`)
Chg (%)
Previous
Consensus
Date
Region
Event Description
Bfutilitie
589
19.5
Reading
Expectations
Oct 28
US
FOMC rate decision
0.25
0.25
Tvsmotor
276
13.2
Oct 29
Germany
Unemployment change (000's)
2.0
(4)
Finolexind
320
5.9
Oct 29
US
GDP Qoq (% change)
3.9
1.6
Niittech
579
5.0
Nov 1
China
PMI Manufacturing
49.8
-
Cox&Kings
252
4.7
Top Losers
Price (`)
Chg (%)
Lupin
1,946
(5.3)
Shreecem
12,220
(4.2)
Ongc
248
(3.1)
Hdfc
1,275
(2.9)
Gsfc
73
(2.8)
As on October 27, 2015
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Market Outlook
October 28, 2015
Result Review
Axis Bank (CMP: `521 / TP: `673 / Upside: 29.2%)
Axis Bank reported a positive set of numbers for 2QFY2016 with steady asset
quality and 18.9% yoy growth in profit to `1,915.6cr which was well in-line with
the expectations. On the balance sheet front, Advances for the quarter grew by
23% yoy, which is strong, considering the slower credit growth in the economy.
Retail Advances grew 27% yoy and accounted for 40% of the Net Advances of the
Bank. On the operating front, the Net Interest Income for the bank grew at a
moderate pace by 15.2% yoy which was slightly below expectations likely due to
higher than expected impact of base rate cut. Provisions for the bank declined 37%
qoq whereas on a yoy basis, it declined by 2.5% which was much below our
expectations.
On the asset quality front, the bank reported a steady set of numbers, as its
reported Gross as well as Net NPA ratio was constant at 1.38% and 0.48% which
is similar to the previous quarter. Slippages too came in at `583cr which were
much below than the previous quarter at `1,186cr suggesting better asset quality.
However, we would wait for more clarity regarding any sale to ARC’s for the
quarter.
Hence, given the bank’s healthy advances growth, better than expected asset
quality combined with consistent growth in earnings, we are of the view that the
stock is attractively valued at 2.1x FY2017E P/ABV. We recommend a BUY rating
on the stock.
Y/E
Op. Inc
NIM
PAT
EPS ABV ROA ROE
P/E P/ABV
March
(` cr)
(%)
(` cr)
(`)
(`)
(%)
(%)
(x)
(x)
FY2016E
40,401
3.6
8,784
37.1
214.2
1.8
18.7
14.1
2.4
FY2017E
47,741
3.6 10,746
45.3
249.4
1.8
20.0
11.5
2.1
Lupin (CMP: `1,944 / TP: -/Upside: -)
For 2QFY2016, the company posted bad set of numbers, with OPM’s coming in
lower than expected, consequently net profit. The company posted a 2.0% growth
in sales to end the period at `3178cr V/s `3272cr estimated, mainly driven by
European markets. Its key market US (`11,550cr), posted a dip of 9.2%, on slow
pace of approvals. The company launched 4 products in US during the period.
The company expects the US sales to get normalized by 4QFY2016. Other key
markets: India, Europe, Japan, South Africa and ROW, which posted a growth of
9.4%, 32.2%, -6.5%, -5.6% and 52.9% yoy respectively.
On operating front, the Gross margins came in at 64.5% V/s 65.7% expected.
However, a lower growth and 19.4% and 36.2% rise in the Staff cost and R&D
expenditure lead the OPM come in at 16.6% V/s 24.6% expected and 24.9% in
2QFY2015. Thus, the net profit came in at `408.5cr V/s `578.6cr expected and
`630.0cr, a yoy dip of 35.2%. 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
38.6
8.0
26.0
6.5
FY2017E
15,110
27.9
2,891
64.3
23.4
30.3
6.4
19.7
5.5
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Market Outlook
October 28, 2015
Alembic Pharma (CMP: `664 / TP: -/Upside: -)
For 2QFY2016, company posted numbers well ahead of expectations. The
company posted an 84.5% growth in sales to end the period at `1008cr V/s `750c
expected. This was primarily driven by gAbilify launch in the US. Overall
formulations were 84% of sales in 2QFY2016, with International generic (45% of
sales) and Indian branded (34% of sales). The international generic (`559.3cr)
posted sales growth of 342% yoy. The Indian formulation branded sales (`2846cr)
posted sales growth of 3.3% yoy. The API business posted a yoy growth of 43%
yoy. On operating front, the OPM came in at 37.2% V/s 27.8% expected V/s
19.5% in 2QFY2015. R&D expenditure during the quarter was 9.4% of sales V/s
13.0% of sales in 2QFY2015. The net profit consequently came in at `289cr V/s
`177.3cr expected and V/s `77.3cr in 2QFY2015, a yoy growth of 273.9%. 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
32.0
10.3
22.6
4.8
FY2017E
3,115
20.2
451
23.9
28.4
27.8
7.7
19.5
3.8
Ceat (CMP: `1,178 / TP: -/Upside: -)
Ceat Ltd 2QFY2016 results were in line with our estimates. Revenues, on the
expected lines dipped marginally 2% yoy to `1,409 cr. Pricing cuts to pass on the
soft raw material prices along with subdued domestic demand and increased
Chinese imports continue to put pressure on the top line. Operating margins
improved sharply 220bp yoy to 14.4% primarily on account of soft raw material
prices and were in line with our estimates of 14.1%. Given the improvement in the
operating metrics, the Net profit grew strongly 30% yoy to `107.4 cr meeting our
estimates of `102 cr. We currently have Neutral view on the stock but would
review estimates post the management interaction.
Y/E
Sales OPM
PAT
EPS ROE P/E P/BV EV/EBITDA EV/Sales
March
(` cr)
(%)
(` cr)
(`)
(%)
(x)
(x)
(x)
(x)
FY2016E
6,041
14.3
410
101.5
20.0
11.6
2.3
6.5
0.9
FY2017E
6,597
14.1
472
116.6
19.1
10.1
1.9
5.7
0.8
Economic and Political News
Government sets up panel to simplify Income Tax laws
India Inc's external borrowings down 32% at $2.6bn in Sept
Government to award 100 highway projects on PPP next year
Corporate News
Hero aims to sell 600,000 two-wheelers in October
Cairn-Vedanta merger deal not to be reworked
Bharat Forge rejigs European operations
www.angelbroking.com
Market Outlook
October 28, 2015
Top Picks
Large Cap
M
arket Cap
CM
P
T
arget
Upsid
e
Company
Rationale
(` Cr)
(`)
(`)
(%)
Healthy pace of branch expansion, backed by distribution
Axis Bank
1,23,958
521
674
29.3
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
1,22,049
868
1,132
30.5
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
1,64,764
284
370
30.4
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
2,63,793
1,148
1,306
13.7
be a US$20bn in FY2020.
Government thrust on Renewable sector and strong order book
Inox Wind
8,932
403
505
25.5
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
24,741
490
570
16.3
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
69,894
134
170
27.2
transmission sector.
Growth to pick up from 2HFY2017, attractive given the risk-
TCS
4,98,479
2,530
3,165
25.1
reward.
Tech Mahindra
51,740
538
646
20.2
Acquisitions, to drive growth, normalised valuations attractive.
An improving liability franchise, capital adequacy well above
Yes Bank
31,471
751
906
20.6
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
M
arket Cap
CM
P
T
arget
Upsid
e
Company
Rationale
(` Cr)
(`)
(`)
(%)
Bajaj Electricals
2,502
248
341
37.5
Visible turnaround in E&P business to drive the earnings
Garware Wall Ropes
739
338
390
15.5
Higher exports & easing material prices to drive profitability
Comfortable balance sheet to support strong growth; this
MBL Infrastructures
875
211
360
70.5
coupled with attractive valuation to lead to rerating.
New product introductions and increased sourcing by clients to
Minda Industries
818
516
652
26.4
enable outpace industry growth
Strong brand & quality teaching with innovative technologies &
MT Educare
548
138
169
22.7
higher government educational spending to boost growth
Earnings boost on back of stable material prices and favourable
Radico Khaitan
1,296
97
112
15.0
pricing environment. Valuation discount to peers provides
additional comfort
Structural shift in the Lighting industry towards LED lighting will
Surya Roshni
616
141
183
30.2
drive growth.
Tree House
1,193
282
449
59.2
Robust expansion plan for pre-schools to drive growth
Source: Company, Angel Research
www.angelbroking.com
Market Outlook
October 28, 2015
Quarterly Bloomberg Brokers Consensus Estimate
Dabur India- October 28, 2015
Particulars (` cr)
2QFY16E
2QFY15
y-o-y (%)
1QFY16
q-o-q (%)
Net sales
2,127
1,924
10.6
2,064
3.1
EBITDA
410
351
16.8
322
27.3
EBITDA margin (%)
19.3
18.2
15.6
Net profit
332
288
15.3
261
27.2
Exide industries- October 28, 2015
Particulars (` cr)
2QFY16E
2QFY15
y-o-y (%)
1QFY16
q-o-q (%)
Net sales
1,771
1,761
0.6
1,795
(1.3)
EBITDA
245
208
17.8
266
(7.9)
EBITDA margin (%)
13.8
11.8
14.8
Net profit
142
126
12.7
155
(8.4)
www.angelbroking.com
Market Outlook
October 28, 2015
Research Team Tel: 022 - 39357800
E-mail: [email protected]
Website: www.angelbroking.com
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