CIPLA Q1FY08 Result Update (Reduce)
Monday, July 23, 2007
The market kept on surging as the day progressed, except for the odd hiccup in initial trade, which was due to weak global cues. Strong buying interest propelled the key indices to all time highs, with Sensex closing above the 15,700 mark and the Nifty above the 4,600 level.
Shares from the auto, real estate, capital goods sectors were at the forefront of today's rally. However, shares from the pharma pack saw some profit booking. Asian and European markets were trading on a mixed note.
The BSE 30-share Sensex surged 166.65 points or 1.07% to 15,732.20, an all time closing high. It opened lower at 15,560.57 and slipped to 15,477.91 in early trade, tracking weak global equities. But it started advancing from here to hit an all time high of 15,773.37 in late trade, as buying intensified breaching its previous all-time high of 15,683.03 hit on Friday, 20 July 2007.
The Sensex extended gained for the fourth straight session today, rising 442.38 points from a recent low of 15,289.82 on 17 July 2007.
The S&P CNX Nifty gained 53.30 points or 1.17% at 4,619.35, an all time closing high. It also struck an all time high of 4,628.45. The Nifty July 2007 futures settled at 4614, a slight discount of 5.35 points as compared to spot closing.
The market is expected to stay choppy in the near term ahead of the expiry of the July 2007 derivatives contracts on 26 July 2007. The total open interest in NSE’s F&O segment today increased to an all-time record of Rs 97,713.71 crore from Rs 90,641.76 crore on the previous day.
The BSE Mid-Cap Index ended at 6,849.12, up 13 points or 0.2% while the BSE Small-Cap Index ended at 8,234.45 up 46 points or 0.6%.
The market breadth was just about positive on BSE with 1,303 shares advancing as compared to 1278 shares declined, and 77 remained unchanged.
The total turnover on BSE amounted to Rs 4,825.29 crore as against Rs 5,791.29 crore on Friday, 20 July 2007. The NSE F&O turnover was at Rs 51,007.17 crore as ompared to Rs 48073.22 crore on Friday, 20 July 2007.
Among the Sensex pack, 21 advanced while the rest declined.
Shares from the capital goods pack surged, with the BSE Capital Goods index hitting an all-time high of 13,731.77. The BSE Capital Goods Index settled 4.03% higher at 13,596.20, and was the top gainer among sectoral indices on BSE.
State-run engineering major Bharat Heavy Electricals (Bhel) galloped to an all-time high of Rs 1,798 after it secured a Rs 1,829-crore order for manufacturing and setting up three 500-MW thermal power units in Haryana. The project is a joint venture between National Thermal Power Corporation, Harayana State Electricity Board and Indraprastha Power Generation Company. The stock settled 7.54% higher at Rs 1,772.30. It was the top gainer from the Sensex pack.
Engineering & construction major L&T galloped 7.42% to Rs 2,659, after striking an all-time high of Rs 2,675.
Areva T&D (up 7.20% to Rs 1646.55), Bharat Earth Movers (up 2.18% to Rs 1227.30), Alstom Projects (up 1.76% to Rs 843.15), and Punj Lloyd (up 2.50% to Rs 278.90) were the other gainers from the capital goods sector.
Hindustan Unilever (HUL) jumped 4.53% to Rs 203.10 after its parent announced after market hours on 20 July 2007 it is considering a plan to buy its own shares on 29 July 2007. HUL will also declare financial accounts for the second quarter and half year ended 30 June 2007 on that day.
State-run oil exploration major ONGC gained 2.49% to Rs 909 after the company said that it may have to shoulder lesser burden of fuel subsidies with the government agreeing to consider exchange rate losses while calculating the subsidy burden the upstream oil companies have to bear. Every one rupee appreciation against the dollar results in revenue loss of about Rs 900 crore to ONGC.
Domestic pharma major Cipla was the top loser from the Sensex pack. It shed 4.90% to Rs 191. The company posted a 30% drop in net profit to Rs 120 crore in Q1 June 2007 over Q1 June 2006. Net sales rose 5% to Rs 902 crore in Q1 June 2007 over Q1 June 2006 on the growth in active pharmaceutical ingredient (API) exports business. The results were announced on 21 July 2007.
Other pharma shares - Ranbaxy Laboratories (down 0.58% to Rs 350.50), and Dr Reddy’s Laboratories (down 0.15% to Rs 667.20), also edged lower. The BSE Healthcare Index was down 0.83% at 3,798.44, and was the top loser among the sectoral indices on BSE.
Infosys Technologies shed 1.83% to Rs 1,950.40 after both the companies, Infosys and Capgemini, denied rumors of Infosys mulling the acquisition of aquiring Capgemini.
ICICI Bank dipped 1.53% to Rs 970.05 despite posting a 25% rise in net profit in Q1 June 2007 to Rs 775.08 crore over Q1 June 2006, riding on increased fee-based income and retail lending. Total operating income rose 46.9% to Rs 9,281.42 crore in Q1 June 2007 over Q1 June 006. Fee income increased 35% to Rs 1,428 crore in Q1 June 2007 over Q1 June 2006.
ICICI Bank’s net interest margin (NIM) stood at 2.3% compared with 2.5% in Q1 June 2006. Net non-performing assets increased 112% to Rs 2,742 crore in Q1 June 2007 over Q1 June 2006 as high interest rates hit the bank’s retail borrowers. Net interest rose 16% to Rs 1,714 crore in Q1 June 2007 over Q1 June 2006. The results were announced on 21 July 2007.
Index heavyweight Reliance Industries (RIL) advanced 1.43% to Rs 1,914, on reports it may seek foreign partner for its deep water exploration blocks off the country's east coast. Reports indicate that global oil firms, including Chevron, have shown interest in partnering RIL for its Cauvery oil & gas assets.
Auto stocks gained on fresh buying on a view that interest rates have peaked for the time being. Auto major Bajaj Auto advanced 4.21% to Rs 2,425, while Tata Motors (up 0.65% to Rs 772) and Maruti Udyog (up 0.85% to Rs 835) also gained. The BSE Auto Index closed at 5,186.46 up 1.2%.
Debutante Suryachakra Power Corporation settled at Rs 22.82, a premium of 14.1% over the IPO price of Rs 20. The Suryachakra IPO had closed on 29 June 2007 with 2.18 times subscription. 6.10 crore shares were traded in Suryachakra Power Corporation counter on BSE today. The scrip topped volumes on BSE.
Shares from real estate pack advanced, with the BSE Real Estate index hitting an all time high of 8,398.36, on renewed buying momentum after KV Kamath, Managing Director and CEO of ICICI Bank, said on Tuesday, 17 July 2007, that interest rates seem to have peaked and should come down soon. The Reserve Bank of India (RBI’s) quarterly monetary policy review is due on 31 July 2007. BSE Real Estate settled 2.40% higher at 8,379.28.
DLF (up 4.07% to Rs 673.05), Unitech (up 2.22% to Rs 576.75), Mahindra Gesco Developers (up 6.40% to Rs 631.25) and Sobha Developers (up 1.63% to Rs 940.60) advanced from the real estate sector.
GMR Infrastructure spurted 8.94% to Rs 960. On 10 July 2007, GMR Infrastructure in consortium with Malaysia Airport Holdings and Turkey's Limak won the rights to build Istanbul's second airport with an 1.9 billion-euro bid. The consortium will build a new international terminal at the Sabiha Gokcen airport on Istanbul's Asian side and run the airport for 20 years. The winning bid does not include 18% value added tax.
Century Textiles & Industries jumped 7.52% to Rs 760.50 after its net profit surged 54.5% to Rs 107.91 crore in Q1 June 2007 over Q1 June 2006. Net sales rose 16% to Rs 836.84 crore over Q1 June 2006. The company declared the results during trading hours today, 23 July 2007.
ABB gained 6.04% to Rs 1136.10, the scrip gained on fresh positions build-up ahead of the company announcing its Q2 June 2007 results on 26 July 2007.
Fulford India rose 2.23% to Rs 537 after Reliance Capital Trustee Company on account of Reliance Pharma Fund acquired 63,100 shares of the company at Rs 525 per share on 20 July 2007 from Wipro chairman Azim Premji.
UTI Bank dipped 3.76% to Rs 624.80 after it priced its GDR issue at a discount to the ruling market price. It announced before market hours today, 23 July 2007 that it has successfully priced its offering of 14.13 million GDRs, aggregating $ 218.07 million. Each GDR, representing one underlying share, was priced at $15.43 and will be listed on the London Stock Exchange. This represents a discount of 1.7% to the closing price of the Bank's GDR on 20 July 2007.
In addition, the bank has determined the issue price of the equity shares to be offered in the proposed qualified institutional placement (QIP) to be Rs 620 per share. The size of the QIP will be Rs 1,752 crore.
Jindal Drilling & Industries jumped 4.77% to Rs 803 after scheduling a board meet on 30 July 2007 to consider stock-split. The board will also consider the unaudited financial results for Q1 June 2007 on that day.
SRF slipped 1.97% to Rs 156.90 after its net profit declined to Rs 56.02 crore in Q1 June 2007 over Q1 June 2006. Net sales slipped to Rs 404.65 crore from Rs 457.20 crore.
JK Lakshmi Cement gained 4% to Rs 157 after its net profit jumped 76% to Rs Rs 68.46 crore in Q1 June 2007 over Q1 June 2006. Net sales rose 41.2% to Rs 266.42 crore in Q1 June 2007 over Q1 June 2006.
Union Bank of India’s gained 4.67% to Rs 155.65 after its net profit rose 34.9% to Rs 225.10 crore in Q1 June 2007 over Q1 June 2006. Total income was up 25% to Rs 2,289.48 crore in Q1 June 2007 over Q1 June 2006.
Electrosteel Castings surged 6.93% to Rs 455.65 after its board approved splitting each share of face value Rs 10 into 10 shares of Re 1 each.
IVRCL Infrastructures & Projects rose 2.83% to Rs 415.90 on bagging orders of an aggregate value of Rs 641.39 crore for irrigation works by the government of Andhra Pradesh. The order is to be executed by IVRCL through a joint venture.
Asian indices were also trading mixed today, 23 July 2007, after a sharp fall on Wall Street on Friday, 20 July 2007. Japan's Nikkei tumbled 1.07% to 17,963.44.
Hang Seng gained 0.32% to 23,365.56, after initial weakness
China's Shanghai Composite jumped 3.81% to 4,213.36, even as the central bank raised borrowing costs, effective Saturday, 21 July 2007, in the latest of a series of moves aimed at capping inflation and preventing the world's fourth-largest economy from overheating.
European indices were trading on a mixed note.
Shares on Wall Street declined sharply on Friday, 20 July 2007, retreating from record levels following disappointing results from long-time favorites Caterpillar Inc. and Google Inc. The Dow fell 149.33 points, or 1.07%, to 13,851.08. Broader stock indicators also lost ground. The S&P 500 index fell 18.98 points, or 1.22%, to 1,534.10, and ended the week 1.19% lower. The Nasdaq Composite index fell 32.44 points, or 1.19%, to 2,687.60
Emerging markets-dedicated funds saw their second best inflows ever in the week ending 18 July 2007, after setting their all-time high just the previous week. Inflows to emerging markets equity funds exceeded outflows by $3.3 billion in the week ended 18 July 2007. More than half of this net inflow - a record high of $1.8 billion went to funds dedicated to Asia ex-Japan.
Meanwhile, due to pressure from Left- backed trade unions, the Employees Provident Fund (EPF) board today, 23 July 2007 agreed to continue paying 8.5% interest rate to its nearly four crore subscribers for fiscal 2006-07 as well. The EPF has a corpus of Rs 94,000 crore including pension fund.
The northbound trend of the Sensex continued for the fourth consecutive session with the index registering smart gains on buying in heavyweight and sectoral stocks. The Sensex began the trading session marginally lower and shed 88 points to touch the day's low at 15,478, but recovered on buying in heavyweights and rallied sharply to touch another all-time high of 15,773 towards close. The Sensex came close to testing 15,800 towards the day’s close, but ended the session with a gain of 167 points at 15,732. The Nifty gained 53 points to close at 4,619.
The breadth of the market was marginally positive. Of the 2,703 stocks traded on the BSE, 1,324 stocks advanced, 1,304 stocks declined and 75 stocks ended unchanged. On the sectoral indices front, the BSE CG index surged 4.97% to 13,720 followed by the BSE Realty index (up 2.62% to 8,398) and the BSE FMCG (up 2.12% to 1,868). However, the BSE Bankex index, the BSE HC index and the BSE IT index inched lower.
Among the gainers, BHEL advanced 7.54% to Rs1,772, L&T surged 7.42% to Rs2,659, HUL added 4.58% to Rs203, Bajaj Auto advanced 4.21% to Rs2425, Reliance Energy gained 3.97% to Rs716, ACC jumped 3.47% to Rs1,146 and Satyam Computers was up 2.85% to Rs491. However, Cipla dropped 4.75% to Rs191, Infosys lost 2.01% to Rs1,947 and ICICI Bank declined 1.53% to Rs970, while ITC, Ranbaxy, Ambuja Cement, M&M and Dr Reddy's Lab closed with marginal losses.
Several capital goods stocks attracted strong buying support. Areva soared 7.20% to Rs,1647, BHEL advanced 7.12% to Rs1,765, ABB surged 6.04% to Rs1,136 and L&T gained 5.62% to Rs2,614. Crompton Greaves, Bharat Electronics, Punj Lloyds, BEML, Suzlon Energy and Alstom Projects gained over 1-3% each.
Over 6.10 crore Surya Chakra Power Corporation shares changed hands on the BSE followed by IFCI (1.39 crore shares), Reliance Natural Resources (98.81 lakh shares), Spice Telecommunication (84.10 lakh shares) and Tata Teleservices (78.56 lakh shares).
Valuewise, GMR Infrastructure registered a turnover of Rs225 crore on the BSE followed by DLF (Rs174 crore), Surya Chakra Power Corporation (Rs139 crore), L&T (Rs98 crore) and United Sprits (Rs98 crore).
The market is likely to remain under pressure after a sharp fall in the US market and weakness among major Asian indices in the ongoing trades. However, FIIs remaining net buyers in equities for last couple of sessions may help the sentiment to turn positive. Among the domestic indices, the Nifty could test higher levels of 4600 and may dip to 4500 - 4440 levels on the downside. The Sensex has a likely support at 15300 and may face resistance at 15750.
US indices fell sharply on Friday, with the Dow Jones lost nearly 150 points on the back of weak earning news and continued housing fears. The Dow tumbled 150 points to close at 13851, the Nasdaq also ended weak with a loss of 32 points at 2688.
Indian ADRs also had a weak outing on Friday. MTNL was the major loser amongst the ADRs and declined 5.02% followed by VSNL which tumbled 3.73%, while Tata Motors, Patni Computer, Rediff, Infosys, Wipro and HDFC Bank shed around 1-2% each. However, Satyam gained 3.36% and Dr Reddy's Lab closed with the marginal gains.
Crude oil prices moved down, while the Nymex light crude oil for August series went down by 35 cents at $75.57 a barrel. In the commodity segment, the Comex gold shot up by $6.60 to settle at $684.70 an ounce.
The market may decline following weak global markets. The BSE 30-share Sensex gained 15.42 points to 15,565.55, an all time closing high, on Friday, 20 July 2007. It also struck an all time high of 15,683.03 in initial trade on that day.
The market is expected to stay choppy in the near term ahead of expiry of July 2007 derivatives contracts on Thursday, 26 July 2007. The total open interest in NSE’s F&O segment increased to an all time record of Rs 94,041.37 crore on Friday, 20 July 2007, from Rs 89,173.11 crore on previous day.
Asian indices edged lower today, 23 July 2007, after a sharp fall on Wall Street on Friday, 20 July 2007. Japan's Nikkei tumbled 1.28% at 17,924.62.
Hong Kong's Hang Seng (down 0.24% at 23,236.39) and Singapore's Straits Times (down 0.44% at 3,635.34), edged lower. However, Taiwan's Taiwan Weighted gained 0.49% at 9,633.19 while South Korea's Seoul Composite rose 0.23% at 1,988.03.
Shares on Wall Street declined sharply on Friday, 20 July 2007, retreating from record levels following disappointing results from long time favorites Caterpillar Inc. and Google Inc. The Dow fell 149.33 points, or 1.07%, to 13,851.08. Broader stock indicators also lost ground. The S&P 500 index fell 18.98 points, or 1.22%, to 1,534.10, and ended the week 1.19% lower. The Nasdaq Composite index fell 32.44 points, or 1.19%, to 2,687.60
As per provisional data, foreign institutional investors (FIIs) bought shares worth a net Rs 1155.93 crore, while domestic institutional investors (DIIs) were net sellers of shares worth Rs 344.48 crore on Friday, 20 July 2007.
Allsec Tech, Apollo Hospitals, Atlas Copco, Centurion Bank of Punjab, Century Textiles, Dabur India, Dewan Housing, Dr. Reddy's, Emco, Greenply, Jindal Stainless, Kewal Kiran Clothing, M&M Financial Services, Nitco Tiles, Omaxe Auto, Rolta, Siemens, Sun Pharma, Union Bank and Venus Remedies.
FIIs were net buyers of Rs11.56bn (provisional) in the cash segment on Friday. On the other hand, local institutions were net sellers at Rs3.44bn. From the F&O segment, FIIs withdrew Rs8.84bn.
On Thursday, FIIs poured in Rs8.83bn in the cash segment. Mutual Funds were net buyers of Rs1.12bn.
Major bulk Deals:
Kotak has bought Balasore Alloys; Bear Stearns has picked up Bhagyanagar Industries; ABN Amro Bank has purchased Classic Diamonds; Credit Suisse has bought Donear Industries; Reliance Capital has picked up Fulford India while Azim Premji has sold the stock; UBS Securities has purchased Geometric Software; First Carlyle Ventures has purchased Great Offshore while Motilal Oswal and UTI MF have sold the stock; Citigroup has purchased JK Lakshmi Cement; ICICI Securities has picked up Oil Country; Merrill Lynch has bought Sujana Metal while Citigroup has sold the stock.
McDowell Holdings Limited: Management of FMR Corp and its direct and indirect subsidiaries and Fidelity International Ltd. and its direct and indirect subsidiaries has sold in open market 549257 equity shares of the company on 12th July,
Goldstone Technologies Ltd: Standard Chartered Premier Equity Fund has purchased from open market 433500 equity shares of the company on 13th July, 2007.
Geometric Software Solutions Co. Limited: Manu Parpia, Founder & Vice Chairman has sold in open market 481595 equity shares of the company on 20th July, 2007.
GVK power and Bala Steel.
BF Utilities, Accentia Technology, GTL Infrastructure, Godavari Fertilizer, Zuari Industries, Marksons Pharma, Ganesh Forgings and
Delivery Delight (Rising Price & Rising Delivery):
Dr. Reddy's, Amtek Auto, BEL, Suzlon, Radico Khaitan, Punj Lloyd, CEAT, Pantaloon, HCC and Rolta.
Indiabulls Financial, ACC, Cambridge Solutions, India Cements, Aptech, Dr. Reddy's, Orchid, KEC Intl, Lupin, Canara Bank and FT.
Major News & Announcements:
Inflation was 4.27% in week ended July 7 vs expectations of 4.32%
Hindustan Unilever board to mull buy back of shares on July 29
ICICI Bank Q1 net profit at Rs7.75bn (up 25%), revenues at Rs92.81bn (up 53.4%)
Hanung Toys plans to raise $50mn
Swaraj Mazda Board to consider Right Issue on 27th July
Punj Lloyd signs up for new plant in UAE
Hindustan Zinc raises zinc prices by 2.2%, lead prices by 2.6%
Voltas Q1 net profit at Rs521.6mn (up 139.8%), sales at Rs8.25bn (up 42.2%)
Gujarat Ambuja Cement Q2 profit at Rs8.78bn (up 168%), net sales at Rs14.64bn (11.4%)
Ultratech Cement Q1 net profit at Rs2.59bn (up 23.3%) and net sales at Rs13.65 (up 15.6%)
Govt not considering relief package for IT sector on rupee issue, says Kamal Nath
Exide Industries to buy 26% stake in Australian firm
Jindal Drilling to consider stock split on 30th July.
Better bend than break.
The rising bulls may decide to bend a little due to some weakness in world markets and higher oil prices. The main indices have gained significantly over the past 3-4 months. A case for some profit booking has always been there but liquidity ensured that funds continued to move in and out of stocks keeping the momentum intact. Some indicators from the F&O segment, like the record high open interest, the higher put-call ratio and the widening of the discount for near-month futures also point to some weakness. Any correction will only set the tone for further appreciation in the medium term.
Fundamentally, nothing has changed as far the long-term India Shining story is concerned. If anything, the softening of inflation and possible peaking out of domestic interest rates is healthy for the Indian economy. But, valuations are not cheap vis-a-vis historic average as well as other emerging markets. The rally also lacks breadth as not all stocks are going up. Be careful at this juncture. Get rid of any weak scrips. Stay invested in strong counters. For the day, HUL (formerly HLL) could be in action as the company is considering a buyback later this month.
B Holdings and Air Deccan could be in action amid reports that Vijay Mallya is likely to offload a 20% stake in each of his airline companies. Asian Hotels could prop up as a financial daily reports that the company could announce a bonus. PVR is expected to do well due to its strong results.
SCI and Dredging Corp are likely to advance as the government has approved their capex plans. UTI Bank will be in the limelight as the private sector bank has raised $1bn through GDR and QIP issues.
ICICI Bank is another stock to watch out for after the private banking major announced its results over the weekend. Dr. Reddy's could gain ahead of its results today. IVRCL is likely to be in the thick of action as IVR Prime IPO opens today.
US stocks fell last week as lingering worries about the fallout from the subprime mortgages coupled with disappointing earnings from a few Wall Street heavyweights and higher oil prices dented investors' confidence.
The last trading day was particularly harsh on the bulls, as the ongoing weakness in the credit market spilled over into the equity market. The Dow Jones lost almost 150 points on Friday, a day after closing above the 14,000 mark for the first time ever.
The S&P 500 index fell for the first week since the period ended June 22, losing 1.2% to 1534.1. The Dow declined 0.4% to 13,851.08. Both reached record highs before pulling back. The Nasdaq shed 0.7% during the week to shut shop at 2,687.60.
European shares dropped on Friday. The pan-European Dow Jones Stoxx 600 index slipped 1.1% to 392.59. The UK's. FTSE 100 slipped 0.8% to 6,585.20, the German DAX 30 traded 1.5% lower at 7,874.85 and the French CAC-40 lost 1.8% to 5,957.16.
Latin American markets too ended sharply lower. Brazil's Bovespa fell 682 points, or 1.1%, to 57,442.74, a day after the benchmark equity index set another record high a day ago, at 58,125.57. Meanwhile, Mexico's IPC stock index ended down 228 points, or 0.7%, at 31,922.62.
Asian markets are trading mixed this morning. The Nikkei in Tokyo has slumped 219 points to 17,938 while the Hang Seng in Hong Kong is down 27 points to 23,264. The Kospi in Seoul is down 2 points to 1980 and the Straits Times in Singapore has lost 10 points to 3641.
Asian stocks fell, with a key regional index dropping from a record. Honda Motor Co. paced a decline among exporters as disappointing earnings from Caterpillar Inc. dented confidence in the U.S. economy.
In China, the CSI 300 Index gained 2.4% after the central bank raised interest rates for the third time this year to help limit industrial expansion and cool inflation. Surging investment raises the risk of manufacturing overcapacity, which may dent earnings.
Taiwan's Taiex index also advanced, while benchmarks in all other regional markets open for trading declined.
HOW MARKET FARED
Choppiness may increase
Historic week ended with strong gains after starting off on sluggish note. However, on Friday, markets barely managed to survive the late onslaught by the bears and closed with modest gains. Also, bulls continued its winning streak and recorded its sixth winning week in a row. Finally, BSE 30-share Sensex added 15 points to close at 15565 on Friday. NSE-50 Nifty closed flat at 4566 touching an in intra-day high of 4600 and a low of 4553. Profit booking spoiled the party late in afternoon trades as ACC, Bajaj Auto, Satyam Computer and SBI were among the major losers. Satyam Computer was down by 1.4% to Rs479 after the company’s quarterly results missed the estimates.
Heavyweights like Reliance Industries, Bharti Airtel and Tata Steel were the frontrunners aiding the key indices to close with gains for sixth straight week. However stocks like PTC and Zee News were the star performers of the week. BSE Capital Good, Metal and Realty index were the top gainers among the sectoral indices.
Ultratech Cement advanced by 2% to Rs990 after the company declared its Q1 result with net profit at Rs2.59bn (up 23.3%) and net sales at Rs13.65 (up 15.6%). The scrip touched intra-day high of Rs1004 and a low of Rs967 and recorded volumes of over 3,00,000 shares on NSE.
Satyam Computer was among the major loser after the company reported Q1 profit at Rs3.78bn (up 6.7%), net sales at Rs18.3bn (up 26.8%), lower than estimations and revised its Rupee guidance downwards. The scrip touched intra-day high of Rs487 and a low of Rs471 and recorded volumes of over 48,00,000 shares on NSE.
Gujarat Ambuja slipped by 1.6% to Rs136. The company announced its plans that it would raise cement capacity by 6mn tones. The scrip touched intra-day high of Rs140 and a low of Rs135 and recorded volumes of over 46,00,000 shares on NSE.
Orchid Chemical declined by 2.4% to Rs238. The company announced that it secured US FDA nod for Cefdinir ANDAs. The scrip touched intra-day high of Rs248 and a low of Rs236 and recorded volumes of over 3,00,000 shares on NSE.
Moser Baer fell 1.5% to Rs317. Reports stated that big private equity players are eyeing a 10% stake in its Photo Voltaic arm. The scrip touched intra-day high of Rs335 and a low of Rs315 and recorded volumes of over 10,00,000 shares on NSE.
ABG Shipyard gained by 1.4% to Rs451 as the company is reportedly the frontrunner for buying Goa-based Western India Shipyard. The scrip touched intra-day high of Rs464 and a low of Rs449 and recorded volumes of over 1,00,000 shares on NSE.
Aurobindo Pharma was down 0.5% to Rs713. The company announced that it has received approval from USFDA for Amlodipine Besylate Tablets. The scrip touched intra-day high of Rs723 and a low of Rs712 and recorded volumes of over 74,000 shares on NSE.
Capital Good stocks were trading firm in choppy market led by gains heavyweight L&T as the scrip surged nearly by 4% to Rs2478, Gammon India gained 2.3% to Rs485. However, BHEL edged lower by 0.3% to Rs1649 and Punj Lloyd marginally slipped 0.2% to Rs272.
IT stocks also ended on the receiving end as rupee further impacts the IT Companies. Mastek slipped 5% to Rs306, Polaris was down by 3.3% to Rs131, Satyam Computer declined by 1.4% to Rs4794 and Mphasis BFL dropped 2.8% to Rs270.
However, Telecommunication stocks recorded smart gains. Bharti Airtel surged by over 4% to Rs923, R Com was up by 1% to Rs584, VSNL gained by 0.5% to Rs489. However Idea was down by 1.7%t o Rs129.
Cement stocks also ended on the receiving end on back of selling pressure. ACC fell by over 3% to Rs1108 and Gujarat Ambuja slipped 1.6% to Rs136.
Market Grape Wine :
In House :
Nifty at a support of 4538 & 4509 levels with resistance at 4570 and 4676 levels .
Buy : Intraday : JpAsso above 841 target 854 s/l of 829
Sell : Intraday : Praj : below 227.5 target 218 s/l of 231
Buy : in F&O Gesco above 606 target 624 s/l of 598
Sell : in F&O Stroptical : below 229 target 220 s/l of 233
Out House :
Markets at a support of 15335 & 15414 levels with resistance at 15656 & 15764 levels .
Markets to be very choppy and volatile keep strict stop loss for your trades .
Buy : Kotakbank & SBIN at dips
Buy : RIL at dips
Buy : SkOil & IolBroad at dips
Buy : Praj at dips
Buy : Sail & Tisco at dips
Buy : Aban & SKumar
Buy : DLF , Unitech , UBulls at dips
Buy : Asian & Muru
Dark Horse : RIL , Kotak ,IBulls , IndiaInfo ,Sail , DLF , IOlBraod & Skumar
Bullet for the Day : RIL & Aban with strict stop loss
Investors with a one/two-year horizon can retain their holdings of the Kirloskar Pneumatic Company (KPCL) stock. As a leading player in the industrial refrigerants segment, the company is well placed to benefit from the on-going capex boom across its user industries.
A healthy order book, coupled with a strong business outlook, also lends sufficient visibility to its future earnings. At the current market price, the stock trades at about 17 times its expected FY-08 per share earnings.
While the stock has appreciated considerably in the recent past, there is room for growth over the longterm. Investors can use broad market corrections to build up exposure in the stock.Investment rationale
Kirloskar Pneumatic operates in two business segments — compression systems and transmission products. Apart from manufacturing compressors, the compression systems division also undertakes design and packaging of refrigeration systems.
Additionally, the division packages gas compression systems for CNG (compressed natural gas) stations, refineries and petrochemical industries.
Given the government’s targeted GDP growth of 9 per cent-plus and the fact that the economy is running on almost full capacity utilisation, investments towards capacity expansion across industries appear inevitable.
Catering to a wider base of user industries such as steel, power generation, infrastructure, oil and gas, KPCL is likely to benefit directly from this upsurge in capex cycle. Its business is also likely to get a fillip from its foray into the West Asia market; it recently completed an order from German Gulf.
While contributions from this division could scale up further, KPCL’s ability to garner a significant share of the growing market will be crucial. However, the division’s good earnings and the order book of about Rs 200 crore lend confidence. For the year ended FY-07, the compression systems division recorded a 64 per cent growth in earnings on the back of a 17 per cent increase in revenues.
The transmission products division undertakes the manufacture of rail traction gears, wind turbine gearboxes, marine gearboxes for naval and commercial ships and also manufactures gearboxes for other industrial applications.
The increasing need for alternate sources of energy and the growing demand for windmills from corporate India, given the tax concessions, are likely to lead to a buoyant market for windmill gearboxes.
To tap this growing market, KPCL has investments on the anvil. While the capex plans are yet to be finalised, investments in this segment could widen the market for KPCL.
Given the dearth of high-quality windmill gearbox manufacturers, any developments in this regard could trigger a re-rating of the stock. This apart, the division is likely to benefit from the increase in demand for railway rolling stock. For the year ended FY07, the division’s revenue grew by about 19 per cent, while the earnings recorded a growth of about 78 per cent. Financials
For the year ended March 2007, the company recorded a 17 per cent growth in revenues while the earnings tripled to about Rs 44 crore.
This could be attributed to improving operational efficiencies and better realisations. On the operational front, margins grew by about 6 percentage points, leading to an operating profit of about Rs 35 crore.
On a segmental basis, the compression systems contributed to about 86 per cent of the overall revenues, while the transmission products made up for the rest.
Central Bank of India (CBI) is among the last of the nationalised outfits to make a public offer of capital as part of the overall restructuring in PSBs. This restructuring plan has been in operation for close to a decade now and most nationalised banks have already made public offers of capital.
CBI wrote off around Rs 680 crore of accumulated losses against capital in March 2002 and, more recently, in March, restructured its capital base of Rs 1,124 crore to include a perpetual preference share component of Rs 800 crore.
The per share earnings on the reduced equity base of Rs 324 crore based on FY-2007 earnings work out to Rs 13.11. At the lower end of the price band (Rs 85), the offer price discounts the FY-07 EPS by about 6.5 times and at the higher end of the band (Rs 102), by 7.8 times. Valuations vis-À-vis peers
The issue price may not appear aggressive, given the overall market valuations. But it is certainly so in relation to the valuations enjoyed by other PSBs that have a much better performance profile. The trend in the bank’s income and profit performance has not been consistent.
While total income has grown at a CAGR of 7 per cent over the past three years, net profits have shown an uneven trend, declining from Rs 620 crore to Rs 504 crore over the same period. The performance record of CBI and the state of its financials do not give the confidence that the stock can be a good buy-and-hold investment. Similar revamp plan
In recent times, Indian Bank was another public sector bank which followed a similar capital revamp plan as that being put through by Central Bank now. But Indian Bank’s financials were in far better shape at the end of all the business and capital revamp efforts over of the past five years and its business prospects, therefore, appeared good enough to consider an investment exposure.
Central Bank of India appears to be placed in a competitively weak position vis-À-vis its public sector peers on many parameters.
The low level of information technology penetration (which has a bearing on the quality of the database/MIS for driving business — only around 35 per cent of the bank’s business is covered under CBS), the locational profile of the branches (more than 50 per cent in the eastern/central regions which traditionally have not been attractive from the business point of view), the compositional make-up of the assets dominated by lower yielding corporate/commercial loans (75 per cent of total loans is corporate/commercial, retail is 10 per cent whereas in other PSBs, the proportion is skewed more in favour of higher yielding retail loans) the still relatively higher level of NPAs on the books (net 2.6 per cent as of March 2007 against sub-1 per cent for the peers) are all factors that can inhibit good medium-term financial performance. No significant upside
From a stock market perspective, relatively stronger PSBs such as Canara Bank, Corporation Bank, Bank of India, Union Bank of India, Indian Overseas Bank and Indian Bank — a set that can be broadly compared with Central Bank of India in terms of size — are even now (at the high overall market levels), trading in a P/E band of 7 to 11.
There appears to be a certain drag with respect to the valuations of the core group of public sector banks listed above in relation to the multiples enjoyed by their private sector counterparts. In such a situation, it is difficult to see a significant upside for any exposure in the CBI stock.
Offer details: Central Bank of India is entering the market with a public issue of eight crore shares in the price band of Rs 85-102 per share.
Investors with a one/two-year perspective can subscribe to the initial public offer from Zylog Systems, considering its business prospects and reasonable asking price. Zylog is a Tier-2 software services and solutions provider to a predominantly US clientele. The company provides services such as application development and maintenance, enterprise infrastructure management and quality assurance and testing. It also has product platforms for seamless integration of various software applications for telecom, manufacturing and banking clientele.
Additionally, Zylog derives significant revenues from partnering with system integrators/solution providers, independent software vendors (ISV) and value-added resellers (VAR).Business Outlook
The company, which began operations in 1996, is different from the typical IT outfit, in that it generates 81.5 per cent of its revenues from services rendered onsite. While BFSI (Banking Financial Services and Insurance) and telecom are its key operational verticals (together contributing 56 per cent of revenues), Zylog generates significant revenues from retail, manufacturing and healthcare verticals.
Zylog’s revenues have grown at a compounded annual growth rate of about 58 per cent the past four years, driven by certain key operational metrics and strategic moves.
Zylog’s business is driven by the software solutions that it offers and a ‘collaborative sales model’. The latter means that it acts as a channel partner for some big international players such as Sun, Microsoft, and HP.
Besides helping the company tap the business of these players, this model aids it to acquire clients independently through aggressive marketing.
Zylog derives its revenues from servicing specific business units of large corporations rather than by providing enterprise-wide solution(s) that larger players offer.
Apart from making the business less volume driven, this strategy enables greater focus, allowing Zylog to provide tailored IT, consulting services and product platforms to its clients. The association with the bigger players has also, over the years, given it greater scope for value-addition to the international players’ portfolio as well as its own.
Second, the company derives 46 per cent of its revenues from fixed price billing, which is milestone-based. This indicates that the company may have robust means of estimating timelines and expertise required towards completion of projects. This could help in smoother revenue realisations.
Third, the top 10 clients contribute 25.6 per cent of its revenues, indicating that client concentration risks are not high. MCI, its top client, a telecom company in the US, contributes about 4 per cent of its revenues. A healthy trend in client additions (the company has 16 million dollar clients) and a repeat business percentage of 88.9, are positive indicators. Expansion Plans
Zylog plans to raise about Rs 126 crore at the upper end of the IPO price band from this IPO. Apart from this, it has raised Rs 43.8 crore through preferential allotment and Rs13.15 crore from a bank term loan. The company plans to spend about Rs 66.7 crore (Rs.7.6 crore has already been spent) to set up two offshore development centres (ODC) in Chennai, to increase its offshore presence. This could help the company improve its margin profile (by lowering costs) and acquire a more desirable offshore-onsite mix.
A sum of Rs 81.8 crore has been earmarked for working-capital requirements and an unspecified amount towards possible acquisitions. This is expected to be an overseas acquisition, which could help tap new locations (other than the US) to cross-sell expertise and, possibly, offshore part of the work.Risks
The company now derives 98 per cent of its revenues from the US. This, together with the fact that the company has not entered into any forward contract towards hedging its dollar exposure, renders the company vulnerable to rupee appreciation risks. Zylog’s acquisition plans need to be watched for overall strategic fit to its offshore/onsite operations and the possible margin pressures that such an acquisition could add.
As a relatively small player, the company also faces considerable competition from Tier-1 companies and established Tier-2 players, which may have deeper pockets. This could exert pricing pressures. Other execution and financial risks such as attrition and wage inflation are applicable to Zylog as well.Valuation
At the upper end of the price band, the offer values the company at about 11 times the current earnings, on the post-offer equity base. This is at a discount to other Tier-2 IT services companies such as i-Gate, Hexaware and Mastek. The EBITDA (earnings before interest depreciation and amortisation) margin at 17.1 per cent compares reasonably well with that of i-Gate and Mastek. Offer Details
Zylog is offering 36 lakh shares, representing a 21.89 per cent stake, in the price band of Rs 330-350. The offer is open from July 20-25. Motilal Oswal Investment Advisors is the book running lead manager to the issue
Investors can subscribe to the initial public offer of Asian Granito India, a maker of vitrified tiles. Invest with a two-year perspective to gain from earnings growth arising out of increased capacities.
Strong financials, a track record of quickly ramping up capacities, and presence in the fast growing vitrified tile business are the positives. The offer price of Rs 85-102 also appears attractive with a price earnings multiple of 5-6 times the company’s earnings for 2008-09, when all its planned capacities are likely to be fully operational.
The company’s market cap (at the offer price) is about Rs 200 crore; the small market cap may subject the stock to high volatility.Business
Asian Granito manufactures a range of vitrified tiles at different price levels. Vitrified tile offers an ideal substitute for high-cost marble and granite. It is also superior to ceramic tiles in that it is less porous and therefore absorbs less water. The company has a fully-owned subsidiary — Asian Tiles —which makes ceramic tiles, relatively low-end.
Asian Granito plans to raise Rs 60-70 crore through this IPO that will expand its share capital by 40 per cent. The proceeds are to be used to increase its vitrified tile capacity by 2,000 sq.m per day to 16,000 sq. m. per day, to be operational by October 2007.
The company also plans to set up a new capacity for wall tile manufacturing using imported Italian machinery. This unit is expected to go on stream by January 2008.Positives
Asian Granito enjoys 10.5 per cent of the organised vitrified tile capacity, according to the Indian Council of Ceramic Tiles and Sanitaryware. This share appears healthy, given that the vitrified tile market is fast growing and new players are entering the market, apart from Chinese imports.
The company’s range of products and its ability to offer tiles of various sizes are likely to provide it with a competitive edge in a market where the pricing pressure is likely to continue. The planned entry into the wall tiles segment also appears well-timed as there are not too many established players in this space.
This may provide the company an early mover advantage and derive superior realisation for a few years.
The company’s operating profit margins at about 24 per cent, though superior to a number of other tile companies, is less than leading players such as Murudeshwar Ceramics.
Superior realisation by the latter, as a result of better brand recognition and market share, appears to be the reason.
A smaller player such as Asian Granito may continue to face pressure on the realisation front; higher volumes in vitrified tiles post-expansion and possible superior realisation from wall tiles may provide some support to operating profit margins.
The company has enjoyed superior return on equity at over 30 per cent over the past three years. While the current equity expansion may dent this return in the short term, ramp-up in capacities is likely to get the returns back on track.
On the cost angle, the company’s facility is close to raw materials; it has moved to LNG (instead of LPG) over the past one year, thus reducing its power and fuel costs. Cost efficiency would also be key to buttressing margins.
Asian Granito appears to enjoy a pan-India presence as can be seen from the well-diversified geographical distribution of its revenues.
Increased competition from unorganised players and slump in real-estate leading to poor capacity utilisation are major risks for this tile maker.
Investors can avoid the initial public offer of IVR Prime Urban Developers for now, given the steep asking price and the company’s limited track record as a developer.
Though the company’ proposed projects may translate into higher earnings over a period, most of them are at a nascent stage, making for low earnings visibility.
The price band of the IPO is Rs 510-600. The company’s earnings per share for 2006-07 stood at Rs 4.1 (on the pre-IPO equity base). Also, certain transactions suggest a conflict of interest with the parent. However, the backing of the parent company — IVRCL Infrastructures & Projects — may help IVR Prime prove its execution capabilities over the next few years. Investors can wait for a significant ramp-up in earnings over the next few years for a better clarity on the investment decision.
We believe there are other real-estate companies with a proven track record and better earnings visibility, available at better valuations.
IVR Prime is an 80 per cent subsidiary of IVRCL Infrastructures, an integrated construction company. Post-IPO, the parent’s holding will reduce to about 62 per cent. IVR Prime has developed about two million sq ft, in a single project (predominantly residentials) at Gachibowli (games) village in Hyderabad. The company plans to raise Rs 720-850 crore through this offer.
The proceeds would be used to complete projects, repay loans and make payments for development rights — the last two to be made to the parent company. About Rs 362 crore, or over 40 per cent of the offer proceeds, would, therefore, go to the parent company.Land bank profile
Unlike some recent IPOs, the profile of IVR Prime’s land bank does not provide much comfort. The company has 2,478 acres, of which only 14 per cent is owned by the company or its subsidiaries; on a good 58 per cent the company has sole development rights. Of this, two-fifth of the acreage is rights from third-parties (other than parent company or subsidiaries).
Further, about 21 per cent of the land is still in the “agreement to acquire” stage. Only 5.5 per cent of the land is being developed jointly.
Although only a part of the land is directly owned by the company, it would be more confidence-inspiring if substantial payments had been made for the rest of the land. However, about 70 per cent of the payment on land is still outstanding, with a bulk of it pertaining to instalments to be paid for the Noida parcel.
The above land mix and the payment schedule show that most of the planned development is at a preliminary stage and face execution risks in terms of delays/stalling. The offer document states that the company expects the projects to be completed by 2012.Concentration
IVR Prime’s urban land reserves are skewed in favour of Chennai that accounts for about 70 per cent of the total developable area, consisting predominantly of residential projects.
While the Chennai market is witnessing a boom on the back of increased demand from IT companies, the prices, especially in the suburbs where the company holds land (Sriperumbudur and Minjur), have already witnessed a significant run-up. There is, therefore, a risk of a correction in property prices.
Further, the company has reported that, on average, it has realised about Rs 3,300 per sq ft from the sale of flats in 2006-07.
This has largely come from the sale of its apartments in Gachibowli, which have the locational advantage of being near the IT corridor in Cyberabad. Further, the company is a new entrant (with hardly any joint ventures) in locations such as Bangalore, Pune or Noida, and may have to promote its brand mainly through competitive pricing. IVR Prime now plans to develop about 75 million sq ft of area, consisting primarily of residential projects and a few commercial and retail projects. This is 37.5 times the two million sq ft project, executed so far over a four/five-year period.
Added to this, the company has not executed projects in any other locality save Hyderabad.
The lack of strong track record as a developer and entry into regions where the company does not have much brand recognition increases the risk profile.Strong parent but…
IVR Prime has a strong parent in IVRCL Infrastructures. A sound infrastructure player, the latter, is also likely to be the contractor for projects developed by IVR Prime Urban. This provides comfort to the project execution skills. However, while the resource pool of the parent is strong, it needs to be noted that IVRCL Infrastructures is itself sitting on a robust order-book that may absorb resources in terms of assets and skill-sets.
IVR Prime Urban has managed to contain its debt level as a result of support it received from its parent (unsecured loans of Rs 203 crore). Given that IVRCL Infrastructure is itself in a working capital-intensive industry, its subsidiary may not be able to receive continuous fund support for the massive scale of development that is being planned. This may necessitate borrowing and increase the debt levels.Revenue scenario
IVR Prime’s revenue for 2006-07 was Rs 148 crore, with net profits at Rs 21 crore. While operating profit margins surged to 25 per cent compared to a mere 10 per cent, as a result of higher realisations, we do not expect significant margin expansion, given that much of the residential projects are aimed at the middle-income group, where the scope for improving margins comes only through lower land costs. However, this segment may help increase volumes, and, thus, maintain margins.
The parent company, which was allotted plots in Noida, has given the development rights to IVR Prime. Two of the four lease plots are, however under revenue-sharing agreements with the parent company.
This apart, some of the above Noida lands are subject to yearly lease rentals (that are enhanced by 50 per cent each year) that will be paid to the parent. These indicate that not all the revenue arising in Noida will accrue to the company.
The IPO is open from July 23 to 26. Enam Financial and Kotak Mahindra Capital are the book-running lead managers. At the offer price band, the company’s market cap would be Rs 3,300-3,850 crore.