Market Outlook
October 29, 2015
Market Cues
Domestic Indices
Chg (%)
(Pts)
(Close)
Indian markets are expected to open on a Negative note tracking the SGX Nifty and
BSE Sensex
(0.8)
(109)
27,040
most Asian markets.
Nifty
(0.8)
(62)
8,171
The US markets were volatile post the release of Federal Reserve’s (Fed)
Mid Cap
(0.6)
(61)
11,037
announcement but closed on a positve note. The Fed left the rates unchanged as
Small Cap
(0.0)
(1)
11,453
expected and indicated that it will revisit the decision to hike rates in December.
Bankex
(2.5)
(514)
19,811
After weak performance in the past two sessions, the European markets closed on
the positive note on Wednesday.
Global Indices
Chg (%)
(Pts)
(Close)
Indian markets fell for the third straight day as traders awaited FOMC rate decision.
Dow Jones
1.1
198
17,780
Banking stocks led by Axis Bank and ICICI bank took a beating on the expiry day on
reports of Axis Bank selling its loans to asset reconstruction companies at ~65%
Nasdaq
1.3
66
5,096
discount.
FTSE
1.1
73
6,438
Nikkei
0.7
126
18,903
News & Result Analysis
Hang Seng
(0.8)
(186)
22,957
Result Review: Ambuja Cement, JK Tyre, Kirloskar Oil Engines, Transport
Shanghai Com
(1.8)
(59)
3,375
Corporation of India, Elecon Engineering
Result Preview: GPPL, DRL, Dishman Pharma
Detailed analysis on Pg2
Advances / Declines
Bse
Nse
Advances
1,144
18
Investor’s Ready Reckoner
Declines
1,514
32
Key Domestic & Global Indicators
Unchanged
176
-
Stock Watch: Latest investment recommendations on 150+ stocks
Refer P9 onwards
Volumes (` Cr)
Top Picks
BSE
2,702
CMP
Target
Upside
Company
Sector
Rating
(`)
(`)
(%)
NSE
18,683
Axis Bank
Financials
Buy
483
674
39.6
HCL Tech
IT
Buy
875
1,132
29.3
Net Inflows (` Cr)
Net
Mtd
Ytd
ICICI Bank
Financials
Buy
272
370
36.3
FII
(731)
4,317
(29,561)
Power Grid
Power
Buy
131
170
30.1
MFs
160
(2,780)
56,123
TCS
IT
Buy
2,525
3,165
25.4
More Top Picks on Pg6
Top Gainers
Price (`)
Chg (%)
Key Upcoming Events
Rtnpower
8
9.5
Previous
Consensus
Date
Region
Event Description
Sksmicro
426
6.4
Reading
Expectations
Oct 29
Germany
Unemployment change (000's)
2.0
(4)
Edelweiss
60
5.4
Oct 29
US
GDP Qoq (% change)
3.9
1.6
Ncc
83
5.1
Nov 1
China
PMI Manufacturing
49.8
-
Pmcfin
1
4.5
Nov 2
US
ISM manufacturing PMI
50.2
49.6
Top Losers
Price (`)
Chg (%)
Axisbank
483
(7.4)
Amarajabat
915
(6.3)
Thermax
845
(5.4)
Bharatforg
867
(5.1)
Icicibank
272
(4.3)
As on October 28, 2015
Market Outlook
October 29, 2015
Result Review
Ambuja Cement (CMP: `209 / TP: `233/Upside: 11.5%)
Ambuja Cement 3QCY2015 numbers were in line with our expectation on
operating front; however lower other income led to sharp fall in profitability.
EBIDTA at `310cr declined 21% yoy, mainly due to subdued cement demand and
higher other expenses (led by `40cr provision towards contribution for DMF) but
were in line with our estimate of `318cr. EBIDTA margin at 14.7% declined 317bp
yoy, but were in line with our estimate of 14.7%. Net sales declined by 4.2% yoy to
`2095.2cr due to flat cement demand and weak realization. Realization came in
at `4347 per tonne a decline of 4.2% yoy, but in line with our estimate of `4345
per tonne. Sales volume was flat yoy to 4.82mt but below our estimate of 4.95mt.
Net profit at `153.6cr, were below our estimate of `220.2cr. We maintain our
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)
CY2016E
12,022
22.7
1,699
11.0
15.5
18.9
2.8
10.1
2.3
CY2017E
13,053
23.4
1,911
12.3
16.4
16.8
2.7
8.5
2.0
JK Tyres (CMP: `106 / TP: -/Upside: -)
JK Tyres 2QFY2016 results were in line with our estimates on the operating front;
however forex loss led to lower than estimated profitability. JKT revenues,
expectedly declined 3% yoy to `1,810 cr (our estimate was `1,818 cr) owing to
subdued demand in the truck replacement market, increased imports from China
and price cuts to pass on the lower raw material prices. Operating margins at 17%
improved sharply 460 bp yoy primarily due to softness in the raw material prices.
The margins met our estimates of 16.6%. EBIDTA at `307 cr was in line with our
expectation of `303 cr. However, forex loss of `29 cr lead to the profitability
missing our estimates. Net Profit at `118 cr was below our estimates of `130 cr.
We maintain our Neutral 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
7,446
15.2
445
19.6
25.2
5.4
1.4
4.7
0.7
FY2017E
7,669
14.0
417
18.4
19.5
5.8
1.1
4.4
0.6
Kirloskar Oil Engines Ltd (CMP-`300/ TP: - / Upside: -)
For 2QFY2016, Kirloskar Oil Engines (KOEL) reported a disappointing set of
numbers. The top-line for the quarter declined by 6.0% yoy to `590cr. The poor
top-line can mainly be attributed to low contribution from the large engines
business which had completed the order for NPCIL in 4QFY2015 and overall
sluggishness in the PowerGen Segment. The net raw material cost declined by
286bp yoy to 62.3% of sales while employee expense increased by 79bp yoy to
8.5% of sales, and other expenses increased by 405bp yoy to 21.0% of sales. This
resulted in EBITDA margin contracting by 198bp yoy to 8.2%, lower than our
Market Outlook
October 29, 2015
estimate of 9.8%. Other income increased by 61.1% yoy to `20 and consequently,
the net profit remained flat at `36cr (against our estimate of `37cr).
Since the completion of Large Engines order in FY2015, the top-line is expected to
remain weak for the current year as there are no orders expected in the current
year. Additionally, the sluggishness in the DG set market continues to exist. We
have scaled down our estimates for the current year to reflect the poor demand
scenario. Currently, we have a Neutral rating on the stock and will/may update
out numbers post management interaction.
Y/E
Sales OPM PAT EPS
ROE
P/E
P/BV EV/EBITDA EV/Sales
Mar
(` cr)
(%)
(` cr)
(`)
(%)
(x)
(x)
(x)
(x)
FY2016E
2,471
8.8
132
9.1
9.7
30.8
2.9
14.6
1.3
FY2017E
2,830
10.4
192
13.3
13.3
21.2
2.7
10.5
1.1
Transport Corporation of India (CMP: `291 / TP: -/Upside: -)
For 2QFY2016, Transport Corporation of India Ltd (TCIL)’s earnings has come in
below our estimates. The top-line, at ~`556cr (our estimate was of ~`625cr), is
flat on a yoy basis, with all business segments posting poor performances, barring
Seaways which reported a growth of ~11% yoy to `32cr. For the quarter, the
company reported an operating profit of ~`44cr, up ~7% yoy. Further, the
company’s operating margin expanded by 53bp yoy to 7.9%, primarily on account
of lower operating expenses, which were down 245bp as a percentage of sales.
The net profit grew by ~9% yoy to ~`23cr (which is below our estimates of `25cr)
mainly due to lower sales growth during the quarter. Currently, we have a Neutral
rating on the stock and will update the same post our interaction with the
Management.
Elecon Engineering (CMP: `1,518/ TP: -/ Upside: -)
For 2QFY2016, Elecon Engineering reported standalone numbers that were mostly
below our estimates. The top-line for the quarter declined by 5.5% yoy to `111cr.
Our estimate was on the higher side at `145cr. As per management’s indication,
the momentum in the infrastructure activity is yet to pick up, causing a muted
performance on the top-line front. However, the operating performance improved
significantly during the quarter led by 1,516bp yoy decline in raw material cost to
43.9% of sales. The same was neutralized by 394bp yoy and 236bp yoy increase
in employee and other expenses to 12.4% and 18.9% of sales respectively. This
resulted in EBITDA margin expanding by 859bp yoy to 24.9% (against our
estimated of 22.1%). Led by better operating performance, the standalone net
profit increased by 158.9% yoy to `7cr, which is below our estimate of `10cr.
On consolidated basis, Elecon’s top-line declined by 5.1% yoy to `283cr. The
Material Handling division revenues declined by 2.6% yoy to `101cr while the
segment reported a loss of `6cr against loss of `3cr in the same quarter of the
previous year. The Gears division revenues declined by 7.8% yoy to `190cr and
the segment profits increased by 78.6% yoy to `25cr. The Consolidated net profit
after minority interest and profits from associated stood at `1.4cr against loss of
`3.0cr in the same quarter of the previous year.
Market Outlook
October 29, 2015
The MHE business of the company continues to be under pressure as the company
is not seeing any significant movement in terms of project execution at customer
level. We currently have a Neutral view on the stock and will update our rating
post management discussion.
Result Preview
Gujarat Pipavav Port (CMP: `180/ TP: - / Upside: -)
Gujarat Pipavav Port Ltd. (GPPL) would be shortly announcing its results for the
quarter ended Sep-2015. We expect revenues to grow by 14.4% yoy to `179.8cr,
mainly led by higher Bulk business volumes. We expect revenues from the
Container business to be adversely impacted on account of disruption in railway
lines and owing to loss of a key client to Mundra Port. We expect EBITDA margins
to remain almost flat at 53% for the quarter. In absence of any dividend
announcement by Pipavav Railway Corporation Ltd (PRCL), we expect GPPL to
report a 47.9% PAT margin for the quarter. Reported PAT is expected to decline by
5.2% yoy. Currently we have a Neutral rating on the stock.
Y/E
Sales OPM
PAT
EPS ROE P/E P/BVEV/EBITDAEV/Sales
March
(` cr)
(%)
(` cr)
(`)
(%)
(x)
(x)
(x)
(x)
FY2016E
721
53.1
397
8.2
20.0
21.9
3.5
21.8
10.8
FY2017E
784
53.6
439
9.1
18.3
19.8
2.9
19.2
9.6
DRL (CMP: `4,108 / TP: -/Upside: -)
For 2QFY2016, the company is expected to post moderate growth in sales and net
profit. The company is expected to post an 11.5% growth in sales to end the
period at `4000cr V/s `3588cr in 2QFY2015, mainly driven by domestic markets.
Other markets Like Russia and ROW could be under pressure, on back of
currency. Its key market like US is likely to be stagnant during the period, on back
of few approvals, while domestic formulation market should post good growth.
On operating front, the EBIT margins are expected to come in at 18.7% V/s 17.3%
in 2QFY2015. Thus, the net profit came in at `631cr V/s `574cr in 2QFY2015, a
yoy growth of 9.9%. The stock has seen decent up move, making valuations, fair,
thus 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
18,213
22.6
2,777
163.0
22.5
25.2
5.2
16.8
3.8
FY2017E
21,214
22.7
3,282
192.6
22.0
21.3
4.3
14.2
3.2
Dishman Pharma (CMP: `362 / TP: -/Upside: -)
For 2QFY2016, company is expected to post a moderate set of numbers. The
company is expected to post a 9.3% yoy growth in sales to end the period at
`429cr V/s `392cr in 2QFY2015. On operating front, the GPM, is expected to
come in at 72.3% V/s 69.7% in 2QFY2015. This is expected to lead the OPM to
come in at 22.0% V/s 20.5% in 2QFY2015. The net profit is consequently expected
Market Outlook
October 29, 2015
to come in at came in at `35.6cr V/s `33.4cr in 2QFY2015, a yoy growth of 6.6%.
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
1,716
20.2
132
16.3
9.7
22.2
2.1
9.7
1.9
FY2017E
1,888
20.2
174
21.6
11.7
16.8
1.9
11.7
1.6
Economic and Political News
Proposal to allow jewellers to participate in GMS
FoodMin proposes `47.50 a qtl of first-ever direct subsidy to cane farmers
PSU disinvestment nets 71% of total fund raising in April-September
Corporate News
Sun Pharma recalls anti-allergic drug in the US
Novartis' generic drug arm gets USFDA warning letter for two plants in India
JK Tyre to increase passenger car tyre capacity by 50% at its Mexican facility
FIPB rejects Apollo Hospitals' proposal to raise FDI through rights issue
Market Outlook
October 29, 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
1,14,839
483
674
39.6
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
1,23,103
875
1,132
29.3
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
1,57,679
272
370
36.3
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
2,64,459
1,151
1,306
13.4
be a US$20bn in FY2020.
Government thrust on Renewable sector and strong order book
Inox Wind
8,917
402
505
25.7
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
24,716
490
570
16.4
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
68,377
131
170
30.1
transmission sector.
Growth to pick up from 2HFY2017, attractive given the risk-
TCS
4,97,464
2,525
3,165
25.4
reward.
Tech Mahindra
52,856
549
646
17.6
Acquisitions, to drive growth, normalised valuations attractive.
An improving liability franchise, capital adequacy well above
Yes Bank
30,555
729
906
24.2
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
2,513
249
341
36.9
Visible turnaround in E&P business to drive the earnings.
Garware Wall Ropes
721
330
390
18.3
Higher exports & easing material prices to drive profitability
Comfortable balance sheet to support strong growth; this
MBL Infrastructures
887
214
360
68.3
coupled with attractive valuation to lead to rerating.
New product introductions and increased sourcing by clients to
Minda Industries
812
512
652
27.4
enable outpace industry growth.
Strong brand & quality teaching with innovative technologies &
MT Educare
557
140
169
20.7
higher government educational spending to boost growth.
Earnings boost on back of stable material prices and favourable
Radico Khaitan
1,340
101
112
11.2
pricing environment. Valuation discount to peers provides
additional comfort.
Structural shift in the Lighting industry towards LED lighting will
Surya Roshni
590
135
183
36.0
drive growth.
Tree House
1,188
281
449
59.9
Robust expansion plan for pre-schools to drive growth.
Source: Company, Angel Research
Market Outlook
October 29, 2015
Quarterly Bloomberg Brokers Consensus Estimate
Grasim Industries - October 29, 2015
Particulars (` cr)
2QFY16E
2QFY15
y-o-y (%)
1QFY16
q-o-q (%)
Net sales
8,230
7,866
4.6
8,508
(3.3)
EBITDA
1,293
1,175
10.0
1,417
(8.8)
EBITDA margin (%)
15.7
14.9
16.7
Net profit
433
416
4.1
485
(10.7)
Nestle India Ltd - October 29, 2015
Particulars (` cr)
3QCY15E
3QCY14
y-o-y (%)
2QCY15
q-o-q (%)
Net sales
2,028
2,399
(15.5)
1,934
4.9
EBITDA
393
470
(16.4)
383
2.6
EBITDA margin (%)
19.4
19.6
19.8
Net profit
231
311
(25.7)
(6)
3,687.0
Shriram transport Finance- October 29, 2015
Particulars (` cr)
2QFY16E
2QFY15
y-o-y (%)
1QFY16
q-o-q (%)
PAT
351
302
16.2
321
9.3
Yes Bank - October 29, 2015
Particulars (` cr)
2QFY16E
2QFY15
y-o-y (%)
1QFY16
q-o-q (%)
PAT
566
482
17.4
551
2.7
NTPC ltd - October 29, 2015
Particulars (` cr)
2QFY16E
2QFY15
y-o-y (%)
1QFY16
q-o-q (%)
Net sales
18,166
16,582
9.6
17,019
6.7
EBITDA
4,234
3,242
30.6
3,438
23.2
EBITDA margin (%)
23.3
19.6
20.2
Net profit
2,022
2,072
(2.4)
2,135
(5.3)
Bharat Forge Ltd - October 29, 2015
Particulars (` cr)
2QFY16E
2QFY15
y-o-y (%)
1QFY16
q-o-q (%)
Net sales
1,223
1,109
10.3
1,103
10.9
EBITDA
355
325
9.2
346
2.6
EBITDA margin (%)
29.0
29.3
31.4
Net profit
203
175
16.0
195
4.1
Colgate Palmolive India Ltd - October 29, 2015
Particulars (` cr)
2QFY16E
2QFY15
y-o-y (%)
1QFY16
q-o-q (%)
Net sales
1,064
994
7.0
1,003
6.1
EBITDA
229
187
22.5
222
3.2
EBITDA margin (%)
21.5
18.8
22.1
Net profit
139
130
6.9
114
21.9
Market Outlook
October 29, 2015
Crompton Greaves Ltd - October 29, 2015
Particulars (` cr)
2QFY16E
2QFY15
y-o-y (%)
1QFY16
q-o-q (%)
Net sales
3,393
3,430
(1.1)
3,166
7.2
EBITDA
148
168
(11.9)
79
87.3
EBITDA margin (%)
4.4
4.9
2.5
Net profit
48
70
(31.4)
16
200.0
DR Reddy's Laboratories Ltd- October 29, 2015
Particulars (` cr)
2QFY16E
2QFY15
y-o-y (%)
1QFY16
q-o-q (%)
Net sales
3,161
3,588
(11.9)
3,758
(15.9)
EBITDA
979
842
16.3
926
5.7
EBITDA margin (%)
31.0
23.5
24.6
Net profit
637
574
11.0
626
1.8
Glenmark Pharmaceuticals Ltd - October 29, 2015
Particulars (` cr)
2QFY16E
2QFY15
y-o-y (%)
1QFY16
q-o-q (%)
Net sales
1,835
1,672
9.7
1,626
12.9
EBITDA
387
335
15.5
360
7.5
EBITDA margin (%)
21.1
20.0
22.1
Net profit
214
165
29.7
178
20.2
Market Outlook
October 29, 2015
Research Team Tel: 022 - 39357800
DISCLAIMER
Angel Broking Private Limited (hereinafter referred to as “Angel”) is a registered Member of National Stock Exchange of India Limited,
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managed or co-managed public offering of securities of the company covered by Analyst during the past twelve months. Angel/analyst
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Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and
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