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India Equity Research Reports, IPO and Stock News
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Markets rally in the Budget week
The Indian stock market staged a spectacular run during the week, which
began with the presentation of the Union Budget. The market viewed the
Budget announcements positively and both the benchmark indices, Nifty
and Sensex, rose 4.4% each, despite the continuation of global concerns.
Crude oil continued to trade at high prices, despite proposals for peace
talks doing the rounds. BSE mid-cap and small-cap indices underperformed
the large-cap counterparts during the week, gaining 3.8% and 2.7%,
respectively. All the major sectoral indices were in green during the week.
The BSE auto index outperformed the other indices, gaining 8.1%, followed
by the BSE FMCG index, which was up by 6.8%.
BSE auto index rallies on positive Budget cues
The BSE auto index (up 8.1%) outperformed the Sensex (up 4.4%) during
the week. Auto stocks rallied on account of the status-quo in central excise
duty in the Union Budget 2011-12 and buoyant monthly volumes reported
by auto majors in February 2011. Ashok Leyland, M&M, Maruti, Bharat
Forge and Apollo Tyres were the major gainers, rising by 14.7%, 13.6%,
12.2%, 10.1% and 9.8%, respectively. We remain positive on the long-term
prospects of the Indian auto sector and continue to prefer companies in the
four-wheeler space over companies in the two-wheeler space, considering
reasonable valuations and volume growth visibility.
Inside This Weekly
Union Budget 2011-12 Review: In the Union Budget 2011-12, it was restraint
that was required on the expenditure side. And, by not having any major
populist measures, the Finance Minister has managed to bring down the
targeted fiscal deficit to 4.6% - the key positive from the Budget. Even though
on some counts, such as subsidy estimates, the targets are likely to be
overshot, but because of the absence of any major populist measures and
substantial restraint on most items of expenditure, any overshooting of the
fiscal deficit is likely to be contained to 20-40bp of GDP. In other words, the
deficit is unlikely to exceed the FY2011 levels of 5.1%.
Automobile Sector Update - February 2011: Automakers extended their
robust performance into February 2011 as well, with domestic demand
remaining buoyant on the back of positive consumer sentiment. Pre-budget
buying to avoid the likely increase of excise duty in the Union Budget
2011-12 was also partially responsible for the strong performance during
the month. Among the majors, Mahindra & Mahindra, Hero Honda and
TVS Motor reported better-than-expected volumes for February.
Sesa Goa - Event Update: The Union Budget 2011-12 has proposed raising
the export duty on iron ore to ad valorem 20% on lumps and fines. In line
with this, we have raised our export duty expenses for Sesa Goa to `1,903cr
for FY2012 v/s our previous forecast of `485cr for FY2012. Our EBITDA
estimate for FY2012 also stands pruned by 26.1% to `4,008cr. We continue
to value Sesa Goa at 3.5x FY2012 EV/EBITDA, but at a lower target price
of `298 (`356). We maintain our Accumulate rating on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Markets rally in the Budget week
The Indian stock market staged a spectacular run during the week, which
began with the presentation of the Union Budget. The market viewed the
Budget announcements positively and both the benchmark indices, Nifty
and Sensex, rose 4.4% each, despite the continuation of global concerns.
Crude oil continued to trade at high prices, despite proposals for peace
talks doing the rounds. BSE mid-cap and small-cap indices underperformed
the large-cap counterparts during the week, gaining 3.8% and 2.7%,
respectively. All the major sectoral indices were in green during the week.
The BSE auto index outperformed the other indices, gaining 8.1%, followed
by the BSE FMCG index, which was up by 6.8%.
BSE auto index rallies on positive Budget cues
The BSE auto index (up 8.1%) outperformed the Sensex (up 4.4%) during
the week. Auto stocks rallied on account of the status-quo in central excise
duty in the Union Budget 2011-12 and buoyant monthly volumes reported
by auto majors in February 2011. Ashok Leyland, M&M, Maruti, Bharat
Forge and Apollo Tyres were the major gainers, rising by 14.7%, 13.6%,
12.2%, 10.1% and 9.8%, respectively. We remain positive on the long-term
prospects of the Indian auto sector and continue to prefer companies in the
four-wheeler space over companies in the two-wheeler space, considering
reasonable valuations and volume growth visibility.
Inside This Weekly
Union Budget 2011-12 Review: In the Union Budget 2011-12, it was restraint
that was required on the expenditure side. And, by not having any major
populist measures, the Finance Minister has managed to bring down the
targeted fiscal deficit to 4.6% - the key positive from the Budget. Even though
on some counts, such as subsidy estimates, the targets are likely to be
overshot, but because of the absence of any major populist measures and
substantial restraint on most items of expenditure, any overshooting of the
fiscal deficit is likely to be contained to 20-40bp of GDP. In other words, the
deficit is unlikely to exceed the FY2011 levels of 5.1%.
Automobile Sector Update - February 2011: Automakers extended their
robust performance into February 2011 as well, with domestic demand
remaining buoyant on the back of positive consumer sentiment. Pre-budget
buying to avoid the likely increase of excise duty in the Union Budget
2011-12 was also partially responsible for the strong performance during
the month. Among the majors, Mahindra & Mahindra, Hero Honda and
TVS Motor reported better-than-expected volumes for February.
Sesa Goa - Event Update: The Union Budget 2011-12 has proposed raising
the export duty on iron ore to ad valorem 20% on lumps and fines. In line
with this, we have raised our export duty expenses for Sesa Goa to `1,903cr
for FY2012 v/s our previous forecast of `485cr for FY2012. Our EBITDA
estimate for FY2012 also stands pruned by 26.1% to `4,008cr. We continue
to value Sesa Goa at 3.5x FY2012 EV/EBITDA, but at a lower target price
of `298 (`356). We maintain our Accumulate rating on the stock.
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