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Contents
Natural Gas Sector; The stage is set, let the flow begin
The natural gas transmission sector is gearing up for a long and sustained growth trajectory as impediments/roadblocks hampering its growth in the past are cleared. Increased natural gas supply from the KG D6 basin, higher supply of RLNG at reasonable rates, infrastructure in place to ensure seamless supply, emerging clarity on transmission tariff and strong demand from user industries (power, fertilizer, CGD etc) create a conducive environment for transmission and distribution players to clock steady growth.
We initiate coverage on the Natural Gas sector- specifically transmission and distribution companies with a long term bullish view. With most of the concerns on the sector being addressed, we expect a sharp improvement in the fundamentals of companies under our coverage. We expect our natural gas universe to register revenue, EBIDTA and PAT CAGR of 17.4%, 13.3% and 11.1% over FY10-FY12E respectively. We initiate coverage on GSPL, GGCL and Petronet LNG with a BUY rating and GAIL and IGL with an ACCUMULATE rating. While we prefer the business model of GAIL and IGL, the sharp run up in its prices offer limited scope for upsides from current levels.
Tata Consultancy Services Company Update; Demand momentum continues; Accumulate; Target: Rs1,250
n Co remains confidence of sustaining a 20%+ revenue CAGR over the next 3 years supported by demand momentum
n Expect an encore of strong performance in Dec’10 quarter. Estimate a 7% QoQ US$ rev growth and build in nearly flat margins despite headwinds from currency and strong hiring
n Upping FY12/13E EPS by ~7.5/11% to Rs 51.1/60.2 as we build in a 24%/19% revenue growth (V/s 22%/17% earlier) and reset in currency assumptions to Rs 45/$ ( V/s Rs 44/$)
n Valuations at ~23x/19x FY12/13E EPS appear stiff, however we back further stock price upsides backed by earnings upgrades. Retain ACCUM, with a revised TP of Rs 1,250
n Dealer Comments
The markets started the day’s session on a positive note with almost 75 odd point’s upward gap tracking firm cues from the global markets particularly the firm Asian counterparts. Post good and firm opening markets continued to trade in a very narrow range in the positive terrain for almost most part of the day. Once again markets were trading in a very lacklustre mood in the absence of any major flows and hardly any business opportunities on the derivatives front. The markets lost its momentum in the last one and half hour of trade led by flattish closing on the Asian fronts and the unenthusing start by the European markets. Sintex stocks continued to lose for third day in a row on the back of heavy off loading by a long only fund Capital World, which is said to have sold almost 90 lac shares in last 3 days. Among the auto pack Maruti lost almost 2% on the back of news that the December sales will be lower due to one of its plant maintenance being undertaken. In the absence of major flows from the FII stable the markets will continue to be driven by the news of the day, sometimes positive and sometimes negative but the only console is that the underlying long term sentiment and the outlook growth story shall continue to remain positive. Finally the markets snapped its three day winning streak to close the day on a negative note towards the end with Sensex losing 45 points or 0.22% lower to settle at 20015 levels while Nifty lost just 16 points or 0.27% lower to settle at 5984 levels. The overall traded volumes were higher compared to the earlier day by almost 12% and were at Rs 1262 bn. While delivery based volumes were quite lower compared to the earlier day at 38.1% of the total traded turnover. Among the Fund activities FII’s were net buyers to the tune of Rs 0.29 bn 21st December 2010. While on 22nd December 2010 FII’s were net sellers to the tune of Rs 0.67 bn in the cash segment while in the F&O segment FII’s were net buyers to the tune of Rs 9.47 bn while Domestic Funds were net buyers to the tune of Rs 0.99 bn.
n Technical Comments
Dark-cloud cover at the resistance of 50-DSMA
After a range-bound session for the major part of the day, Nifty sold-off during the closing bell, to end the session on a negative note. Moreover, today’s price action has formed a top reversal pattern known as Dark-cloud cover, where the second body of the Dark-cloud cover failed to go pass the resistance level of 50-DSMA, which proves that bulls were unable to take control of the market. Apart from this Nifty is trading within a broad range of 300 odd points, since 26th Nov, 2010 and this range is taking the shape of a triangle. So unless the previous swing high of 6070 is surpassed the odds are in the favour of the bears. Also, the breadth of the market deteriorated as the day progressed to finally conclude with 1.1:1 advance to decline ratio. The momentum cycles on hourly degree too confirmed the sell call with their negative crossover. So we have revised down our short term bias for the target of 5800 with reversal at 6070.
BSE Bankex:
With today’s negative close BSE Bankex seems to have resumed its downtrend after finding resistance at the 20-daily simple moving average. For final confirmation one can wait for a break of 12754 to initiate fresh shorts.
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