We maintain our overweight stance (upgraded on Feb 27, 2012) on improving sector profitability, stabilized debt and better volumes - as (1) we expect positive trends to sustain on robust demand in most cities; (2) see continued strength in underlying demand in Mumbai; and (3) pick up in approvals process. Further, exposure of the banking sector to retail home loans has reached an 8-year low, which lessens potential concerns of a credit-led bubble in real estate, while providing headroom for future growth. DLF has surprised positively in the quarter with improved operations and renewed focus on execution and asset monetization. Consequently, we have upgraded DLF to ‘BUY/SP’. Along with DLF, Jaypee Infratech (JPIN) is our top pick in the sector.
14 June 2012
Real Estate - On higher ground; sector update :Edelweiss, PDF Link
We maintain our overweight stance (upgraded on Feb 27, 2012) on improving sector profitability, stabilized debt and better volumes - as (1) we expect positive trends to sustain on robust demand in most cities; (2) see continued strength in underlying demand in Mumbai; and (3) pick up in approvals process. Further, exposure of the banking sector to retail home loans has reached an 8-year low, which lessens potential concerns of a credit-led bubble in real estate, while providing headroom for future growth. DLF has surprised positively in the quarter with improved operations and renewed focus on execution and asset monetization. Consequently, we have upgraded DLF to ‘BUY/SP’. Along with DLF, Jaypee Infratech (JPIN) is our top pick in the sector.
Larsen and Toubro - Call to order: Policy, demand hold key; company update; Buy: Edelweiss PDF link
Larsen and Toubro (LT IN, INR 1,316, Buy)
We analysed key verticals like Power, Metals, Hydrocarbons and Infrastructure to gauge the depth and diversity of L&T’s order intake. Our bottoms up analysis deduce that the order intake in FY13E-FY14E would grow at a CAGR of 11%-12%, led by a recovery across segments. We foresee strong growth in Hydrocarbons, Power T&D & Railways over FY13E-14E, given strong project pipeline & L&Ts clear focus. While policy traction will remain critical on various issues including coal & land availability etc, overall demand sentiment will also play a major role to determine the extent of industrial capex recovery. We maintain Buy with a TP of INR 1528.
Infrastructure Order Inflow Pulse ‐ May: Prabhudas Lilladher,
Engineering & Construction
Synopsis
Ordering activity was mainly seen in the Water and Building segments. The total
order inflow announced by various E&C players on BSE amounted to Rs53.1bn, down
by 26.8% on MoM basis. L&T announced the higher chunk of projects worth
Rs33.5bn followed by IVRCL at Rs6.5bn.
JPMorgan, DLF - Making the right moves; debt reduction and asset sales remain key rating triggers
DLF Limited Neutral
DLF.BO, DLFU IN
Making the right moves; debt reduction and asset
sales remain key rating triggers
We think DLF is taking the right strategic steps in terms of: 1) getting debt
under control via asset sales; 2) consolidating land bank back into performing
geographies; 3) resolving execution by completely outsourcing to reputed
Indian contractors; 4) focusing on improving infrastructure in Gurgaon; and 5)
continued investment into select high-value rental assets. Results of this will
likely show themselves over a 12-month horizon. In the interim, we see two
main catalysts: 1) asset sales of three big-ticket deals; and 2) launch of a highend
golf course project in Gurgaon in 2H. Given the macro we would like to
wait for gearing to come down before turning more positive. Maintain
Neutral.
Dr Reddy's- Merck Serono biologic partnership The deal contours present right balance between risks and rewards : Nomura research,
Action: Dr Reddy's partnership with Merck Serono is strategically
positive
We believe the deal catapults Dr Reddy's as a global player in biosimilars.
We believe the partnership provides Dr Reddy's with: a) Merck Serono's
development, manufacturing and commercial expertise across markets; b)
financial support that can expedite some of Dr Reddy’s development
programmes; c) the option of an efficient integrated worldwide product
development; d) lower risks as investments in R&D, manufacturing and
sales force are lowered and e) reasonable upsides as it gets to keep a
share of profits in the most lucrative US market and certain branded
markets like India and Russia. We think the deal may not have resulted in
any immediate value discovery as there are no upfront and milestone
payments disclosed. But the partnership, we believe, is the right strategic
move and the deal has struck a right balance between risks and rewards.
Catalyst: Biosimilar remains an interesting opportunity
The deal appears well timed, as some clarity on regulatory pathways has
begun to emerge in its developed markets of the US and Europe. With
biologic drugs of USD100bn+ in sales going off-patent by 2020, we
estimate the biosimilar opportunity in developed markets to record ~50%
CAGR to reach USD20bn by 2020F. Also, we expect a 3-fold growth in
patient volumes in emerging markets by 2020F as affordability increases
on lower prices of biosimilars. Dr Reddy's biosimilar revenue of USD25mn
(FY12) is <5% of the overall biosimilar market currently, on our reading.
Valuation: Maintain Buy
The deal does not impact our estimates but reduces risk. At 16x FY13F
P/E, the valuations appear reasonable. Our TP implies 19% upside.
Shifting pattern in equity derivatives ::Business Line
The BSE is gradually increasing its presence in the equity derivative segment.
Indian stock markets moved from the badla regime to futures and options in 2000 with the launch of Nifty futures.
Indian traders initially preferred trading in futures due to its similarity with the badla trades.
Options were also viewed as more exotic and complex instruments. Index futures and stock futures jointly comprised more than 85 per cent of the derivative turnover till 2007-08.
That was probably the period when retail participation in derivatives was greater. The 2008 crash led to a shift in trading pattern.
Infrastructure - a growth propeller; enabling thrust needed: Motilal OsSwal
Infrastructure - a growth propeller; enabling thrust needed
Opportunity canvas huge; LNT is the "Top Pick"
The Prime Minister's Office (PMO) called for a review of the FY13 targets for key infrastructure segments - Roads, Power/
Coal, Railways, Aviation, and Ports.
In the past, actual performance has fallen short of targets due to multiple hindrances, many of which are policy-related. In
this context, attention from the highest authority, the PMO, is positive.
However, creation of an effective enabling framework, facilitating clearances and funding, is necessity.
Opportunity canvas huge; LNT is the "Top Pick"
The Prime Minister's Office (PMO) called for a review of the FY13 targets for key infrastructure segments - Roads, Power/
Coal, Railways, Aviation, and Ports.
In the past, actual performance has fallen short of targets due to multiple hindrances, many of which are policy-related. In
this context, attention from the highest authority, the PMO, is positive.
However, creation of an effective enabling framework, facilitating clearances and funding, is necessity.
Edelweiss Technical Reflection (ETR) 14 June
It was a futile day in the markets yesterday with Nifty oscillating in 50 points range as the bulls and bears fought it out to gain an upper hand.With a flat opening and rather listless morning session, the index managed to register a minor higher high of 5145 before falling prey to selling pressure. A ‘doji’ candlestick pattern has formed on the daily chart supported by high volumes indicating a high level of indecision. The factors in play for the bulls are that Nifty has managed to trade above its 50 and 200 DMAs that and could provide the platform to launch higher, where for the bears, the Nifty is facing strong resistance at 5145 / 5150 level with hourly momentum rolling bearish providing an opportunity to pull the index down to 5000 levels. Breadth slipped marginally in favor of declines.Coming back to momentum, the daily MACD has managed to move into positive territory which is an a positive signs where immediate near-term oscillators are overheated and showing negative divergence warning of a risk of profit taking. We suggest taking a cautious stance as the upside on the index is limited to 5150 / 5180 and one can see a retracement down to 5000 levels in the near-term. It is recommended to take profits on trading longs at higher levels and possibly initiate shorts risking 5200.
Trend among the sectoral indices was mixed with gains coming from Cap Goods (+1.58%), FMCG (+1.06%) and Healthcare (+0.45%) indices; whereas losses were registered in Realty (-1.47%), Auto (-1.47%) and Power (-0.81%) indexes. Even the broader market indices ended with mixed performance. The Mid-cap index lost 0.21% and the Small-cap index gained 0.13%.
Bullish Setups: CNXBANK, REC, HUVR, DRRD, SIEM
Bearish Setups: INFO, HDFC, MM
Regards,
Edelweiss Research
Stocks in News : 14 June: Edelweiss
Stocks in News
RCOM gets nod to list its cable unit on S’pore bourse (ET)
McLeod challenges retrospective tax law (ET)
Coal India puts overseas asset acquisition initiative on hold (ET)
UK fund TCI serves ultimatum on CIL to sell coal at mkt rates (ET)
Coal India cuts supplies to Lanco unit (DNA)
Reliance Cap gets approval for AMC stake sale (BS)
HC on RNRL – R Power merger probe (BS)
June 12-Tax Talk ::Business Line
We are gifting the sale proceeds of our flat at Hyderabad which is in my wife's name to our son to help him buy a flat in Chandigarh. He is 38 and holds a good job.
Will this attract any kind of tax and also can the amount be split as gift to spouse and son?
— Sivaraman
Is size the only criterion for reliability? ::Business Line
With hundreds of mutual fund schemes to choose from, how do you select the right one for you? For years, financial advisers have debated the pros and cons of investing in a fund that manages more assets vis-à-vis smaller schemes. It is true that large funds normally get recognition among investors, but that does not always mean that schemes with a smaller corpus are not good for you.
A fund having a large corpus indicates investor confidence. A scheme's corpus may possibly grow due to factors such as the fund's investment process and its steady performance. Larger corpus funds have lower costs as expenses are spread over a larger base. As a fund grows, fixed costs become a smaller proportion of the expenses, which improves its effectiveness.
At the same time, a huge corpus may not be simple to manage and a fund manager may run out of investment opportunities to deploy the cash. In this regard, schemes with a small corpus can be more responsive and flexible and can make the best of the changing market scenario by changing the composition of securities held.
Pidilite Industries: In fair value zone after recent outperformance: Nomura research,
Longer-term story intact but
near-term headwinds on rawmaterial
and elastomer persist
Action/Valuation: Cut to Neutral; don’t see upside from current levels
We downgrade Pidilite to Neutral, as we believe the stock is now in a fair
value zone after its recent outperformance although concerns over raw
material prices and the elastomer project still persist. We continue to
derive our target price based on a P/E multiple of 17.5x on FY14F adj EPS
of INR9.66 (we have scaled back our FY14F estimate by ~3%).
Increasing VAM price and depreciating INR suggest margin pressure
We expect VAM prices to remain high, backed by strong demand for
ethylene (a key raw material for VAM) and high crude oil prices (Nomura
forecasts per barrel to average USD110 in FY13F and USD105 in FY14F
vs ~USD98 in FY12. Since VAM is imported, depreciation of the rupee vs
the US dollar would further add to raw material headwinds for Pidilite.
Slowing demand in domestic market & export to limit price increase
We expect moderating growth in consumer & bazaar (C&B) on slowing
new construction and industrial products, reflected in weak IIP numbers, to
constrain Pidilite’s ability to pass on rising raw material costs. For FY13F,
we build in margin declines in the C&B and industrial-product divisions.
Overseas subsidiaries performance remains a concern
Overseas subsidiaries (especially Brazil and the Middle East) continue to
be a drag on group performance.
Catalyst: Outcome on the progress of the elastomer project, which is
currently on hold, should remove an overhang on the stock’s
multiple
Anant Raj Industries : TP: INR80 Buy :Motilal Oswal
Anant Raj's 4QFY12 results were impacted due to reversal of INR1.15b revenue from Kapasera project which
was discontinued in 4QFY12, due to unfavorable verdict Delhi Municipal Authority notification with regard to
certain permissions.
Revenue was up 3% YoY to INR654m, EBITDA down 59% YoY to INR187m, and PAT down 63% YoY to INR112m.
However, adjusting for the reversal, revenue booking has been healthy at INR1.8b, 2x QoQ. Rental income
from commercial / hotel projects stood at INR264m v/s INR232m in 3Q. Incremental rental came from higher
contribution from Kirti Nagar mall and Hotel Tricolor which commenced operations in Jan-12.
Ongoing projects witnessed strong QoQ growth in sales at 0.7msf (INR3.6b) as against 0.4msf (INR0.9b), led by
good response in Golf Course Road project. FY12 sales value was up 30% YoY to INR7b.
Net debt stood at INR10.5b (marginally up QoQ); net DER was 0.27x. The management targets ~INR4-5b debt
reduction over next 12-18 months, banking on a strong cash flow from Golf Course Road project.
ARCP has a quality land bank and wide presence across asset classes enabling multiple revenue streams and
relatively healthy liquidity. With ~13msf (~INR8.4b) of land acquisition during FY11 at an attractive cost, the
company is strongly placed to unlock significant value through its monetization.
Despite strong sales over FY11-12, the lower collections (~INR1.1b out of INR8b) raises concern over quality of
sales. However, initial response to Golf Course Road project is a positive. With no major launch plan over
FY13-14, we expect success of Golf Course project would be the deciding factor for its operating performance.
Major challenges: (1) Subdued leasing momentum in its commercial projects such as Manesar IT park, and (2)
Slower execution pace till date.
The stock trades at 9.5x FY13E EPS of INR4.8, 0.3x FY13E BV and at ~ 58% discount to our NAV of INR110.
Maintain Buy.
Set mutual fund triggers to avoid market mishaps :Business Line
Trigger options can be chosen either when you start your investment or at a later date. The occurrence of an event, determined by you, will set the trigger to shift your money.
For those of you who saw portfolio returns soar in 2007 only to crash in 2008, it meant losing a chance to convert paper profits to cash. But did you know that mutual funds offer you a viable solution to avoid these kinds of misadventures?
Popularly called the trigger option, mutual funds allow you to set a pre-determined level at which your money will be automatically redeemed or switched from your equity fund to cash or debt fund options.
Sales Traders Commentary : 14 June: Edelweiss
On Wednesday, the Indian equity market closed marginally positive in an extremely volatile session. Both Sensex and Nifty gained marginally by 0.10% each. Buying was seen in capital goods, FMCG, healthcare and IT stocks while realty, auto, consumer durables and metal stocks faced selling pressure.
While the Sensex closed at 16880, up 18 points, the Nifty gained 06 points to end the day at 5121.
Major gainers were were Hindustan Unilever (3.03%), Oil & Natural Gas Corporation (2.83%), Larsen & Toubro (2.60%), Sun Pharmaceutical Industries (2.37%), Jindal Steel & Power (1.67%), and I C I C I Bank (1.23%).
Major losers were Maruti Suzuki India (3.38%), NTPC (2.51%), Sterlite Industries (India) (2.31%), Tata Motors (2.10%), Mahindra & Mahindra (1.86%), and Tata Power Company (1.77%).
The Capital Goods index jumped 1.58%. Major gainers were Alstom Projects India (2.21%), Alstom T&D India (1.22%), Bharat Heavy Electricals (0.59%), A B B (0.21%) and Bharat Electronics (0.15%).
The FMCG index gained 1.06%. Major gainers were Dabur India (3.35%), Hindustan Unilever (3.03%), I T C (0.64%), Colgate-Palmolive (India) (0.35%) and Jubilant FoodWorks (0.15%).
The Auto index slipped 1.47%. Major losers were Mahindra & Mahindra (1.86%), Hero Motocorp (1.72%), Bharat Forge (1.31%), Bajaj Auto (0.73%) and Exide Industries (0.34%).
The Realty index was down 1.47%. Major losers were Oberoi Realty (4.15%), Godrej Properties (2.97%), Indiabulls Real Estate (1.2%), D L F (1.14%) and Housing Development and Infrastructure (0.66%).
Major losers in the mid–cap space were A I A Engineering (1.73%), Amara Raja Batteries (1.22%), CORE Education and Technologies (0.57%), Alok Industries (0.54%) and A B G Shipyard (0.11%).
Major gainers among small caps were A2Z Maintenance & Engineering Services (3.26%), Reliance MediaWorks (2.09%), Trident (0.63%), A B G Infralogistics (0.45%) and Genesys International Corporation (0.39%).
Globally, Asian indices ended on a higher note while European indices were trading lower.
14 June: Business News Tablet (click on link to read article) : IFCI Financial Services Limited
Business News Tablet (click on link to read article)
Economic Times
|
Business Standard
| |
Business Line
|
Mint
| |
Financial Express
|
Financial Chronicle
| |
(Click on link to view article)
Thanks and Regards
IFIN: IFCI Financial Services Limited
Raymond-The Impregnable Brand -Prabhudas Lilladher,
Raymond-The Impregnable Brand
• Leveraging brand, strongly expanding retail presence
• Upwards trajectory post restructuring
• Moving towards and asset-light model
SGX Nifty 5,106.50 -22.00(Singapore exchange) Indian Markets to open DOWN today
SGX Nifty 5,106.50 -22.00(Singapore exchange)
8:00 AM India time
June 14
Indian Markets to open DOWN today
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