14 May 2013
FII DERIVATIVES STATISTICS FOR 14-May-2013
| FII DERIVATIVES STATISTICS FOR 14-May-2013 | |||||||
| BUY | SELL | OPEN INTEREST AT THE END OF THE DAY | |||||
| No. of contracts | Amt in Crores | No. of contracts | Amt in Crores | No. of contracts | Amt in Crores | ||
| INDEX FUTURES | 63406 | 1916.31 | 52488 | 1592.14 | 509298 | 15345.40 | 324.17 |
| INDEX OPTIONS | 541191 | 16260.25 | 531703 | 15987.11 | 1900095 | 57063.68 | 273.14 |
| STOCK FUTURES | 49184 | 1392.13 | 56192 | 1570.25 | 966295 | 27285.67 | -178.12 |
| STOCK OPTIONS | 43360 | 1192.08 | 42761 | 1187.87 | 118307 | 3379.87 | 4.21 |
| Total | 423.40 | ||||||
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FII & DII trading activity on NSE, BSE and MCX-SX 14-05-2013
| Category | Buy | Sell | Net | |
| Value | Value | Value | ||
| FII | 2276.29 | 1855.3 | 420.99 | |
| DII | 552.49 | 965.15 | -412.66 | |
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Asia & Reserve Accumulation "Crowding Out" and the Cost of Sterilization :: JPMorgan
Asia’s FX reserves have increased +54% since the end of 2008, boosted by a
rebound in trade & accelerating capital inflows. Today, Asia sits on $6.7 trillion
of FX reserves, over 61% of the world’s total. “Sterilized” intervention has both
managed currency appreciation & limited domestic inflation; but this ignores the
very real cost of FX reserve accumulation. Policies that delay or resist currency
appreciation ultimately lead to the misallocation of capital & over-dependence
on exports (China). Moreover, sterilized intervention “crowds out” private credit,
by redirecting domestic liquidity away from loans, and towards sterilization
instruments (China, Phils). This results in both lower profitability for banks, as
well as higher interest rates & less access to credit for private sector borrowers.
Ultimately, there’s no free lunch to FX reserve accumulation. Continued QE in
the West – with more aggressive action by the BOJ in particular – is forcing Asia
to make tough choices between further “crowding out” & allowing faster growth
in money supply (“unsterilized” intervention). We focus on how these issues are
forcing policy changes in the Philippines, Thailand, and China in particular.
FX reserves are generally viewed positively, reflecting the strength of the export
sector & the ability to attract inflows; unfortunately, these reserves come at a
price, and sterilized intervention results in a number of distortions.
The central bank can lose money when the yield on foreign reserve assets is
below the cost of issuing sterilization instruments. This "negative spread"
increasingly became an issue post-08 as US/EU rates collapsed, and led to
falling capital ratios at central banks across the region. In the case of the
Philippines, it recently required a capital injection from the government.
The issue is not unfamiliar to Asia. In the early ‘90s, rising domestic rates &
falling US rates forced Malaysia to scale back sterilization. When a central bank
buys FX, it sells domestic currency; if it doesn’t sterilize, the monetary base
expands. So it was in Malaysia: after sterilization was put on hold, base money
surged from +11% Y/Y to +41%; a year later, loan growth followed, rising from
+12% to +30%. Credit growth accelerated right into the Asia Crisis.
Sterilization also “crowds out” the private sector by forcing banks to divert
domestic liquidity away from loans/bonds and into sterilization instruments.
High RRRs in China (big 4, 20%) & the Philippines (18%) is the key reason
why loans are just 50% of bank assets in both countries. This weighs on bank
NIMs (RRRs = low yields in CH, no yield in PH) & pushes up borrowing costs.
Continued QE in the West, and more aggressive actions by the BOJ more
recently, are putting further pressure on sterilization policies. Given the negative
spreads on, and current size of, sterilization measures, we see countries pursuing
a number of alternative measures.
In the Philippines, the BSP has cut SDA rates twice & cut off foreigners from
using SDAs. This should boost onshore liquidity, supporting stronger loan
growth going forward. Likewise, Thailand has pursued unsterlized intervention;
but here we worry more about adding fuel to an already-robust credit cycle.
China is also pushing to recycle liquidity abroad, hence the headlines on RMB
swap agreements recently signed with a number of countries. This should help
reduce the need to stockpile reserves going forward, but China still faces a long
adjustment if it wants to de-emphasize exports in favor of consumption
Higher sourcing cost leads to muted performance- GujGas:: Centrum
Higher sourcing cost leads to muted performance
High LNG prices coupled with lower domestic gas supplies led to GujGas’ muted Q1 performance with operating margin at 9.4% and operating profit at Rs722mn against our expectations of 13.2% and Rs1,022mn respectively. The company hiked its industrial retail prices from April 1, 2013 which, along with softening LNG prices, is expected to benefit performance going ahead. Reorganisation with GSPC as parent is expected to take some time and its benefits will be felt subsequently. GujGas enjoyed higher valuations due to its MNC parentage and high dividend payout which we believe may not sustain going ahead. Volume growth too remains a near term concern. Hence, we have lowered our P/E multiple for the stock from 14x earlier to 12x and maintain ‘Buy’ with a reduced target price of Rs283 (earlier Rs341).
Price hike in February benefits realisations: GujGas’s average distribution realisations jumped by 3.1% QoQ at Rs28.9/scm on account of price hikes effected on February 1, 2013 in industrial retail segment. Distribution volumes though remained flattish sequentially at 2.9mmscmd impacted by lower domestic gas availability and higher LNG prices.
Higher LNG prices and lower domestic gas availability impact EBITDA/scm: Lower domestic gas availability (from PMT) and higher LNG prices led to 9.1% QoQ and 24.6% YoY increase in blended gas cost which stood at Rs24.4/scm thus lowering EBITDA/ scm to Rs2.5/scm from Rs3.9/scm in Q4.
Alembic Pharma - Nirmal bang, report
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Alembic Pharma Ltd.
Q4FY13 Result Update – 06 May 2013
4
Recommendation HOLD
Operational efficiency led to better performance
Domestic business grew by 14% yoy where as exports continue to play spoilsport and grew by meager 5% yoy during the quarter on back of capacity constraints
Overall sales grew by 11% yoy to Rs 376.4 cr. Because of seasonality factor sequential numbers are not comparable
The positive surprise came from margins side as EBITDA margins improved to 17.4% as compared to 12.1% in Q4FY12, supported by better product mix and higher economies of scale.
Strong operational performance and Lower interest expense (as Debt has reduced from Rs 353 cr as on Mar’12 to Rs 185 cr) led to 115% YoY growth in net profit, much higher than our expectation of Rs 28.4cr
APL has strong product pipeline of 34ANDAs pending approvals, which shows the research capacities of the company and also provides for the revenue visibility. The company expects 8-10 product launches every year in US markets. Cumulative ANDAs stand at 57 and DMF 60
APL managed to substantially reduce the debt on its books from Rs 305cr at the end of FY12 to Rs 185 cr at the end of FY13 as the cross holdings on Alembic Ltd has been removed. Current Debt : Equity ratio is 0.3x which reflects the sound financial policies followed by the company. It also provides scope for expansion by fund raising if the need arise. Management believes that it can be further reduced to below Rs 100 cr by FY14.
The company didn’t provide any quantative number the its recent big win – Desvenlafaxine Base – a 505 (b) (2) launch, however expects to garner reasonable revenues in the next 18-21 months window it has.
The management has given healthy outlook of overall 20% growth escorted by 30-35% in international generics (as new formulation facility has partially go operated easing the capacity constraints), 15% in domestic formulations and 10% in API. Management has also maintained 100-125 bps improvement in EBITDA margins going forward.
Valuation & Recommendation
Considering the improving margins with steady growth, We recommend investors to BUY the stock on declines with price target of Rs 138 (10x of FY15E EPS), an upside of 13.4% from current levels
Mangalam Cement:: Target: INR 209: SPA
Mangalam Cement reported below than expected set of numbers in Q4FY13 largely on the back of sharp decline in
volumes. This was due to subdued demand for cement coupled with closure of clinker unit for couple of months resulting
in decline in clinker sales volume from 79304 tn in Q4FY12 to 10957 tn in Q4FY13. Upcoming clinker and cement capacity of
0.50 mt & 1.25 mt by Oct 13 & Dec 13 respectively will drive the next leg of growth. We introduce FY15 estimates and retain
our BUY rating on the stock with a revised target of INR 209 (Previous TP 193).
More investors now from smaller cities ::Business Line
Allow investors below a certain threshold, say Rs 50,000, to invest if they have a bank account. RAVI VARANASI, CHIEF - BUSINESS DEVELOPMENT, NSE
Investments from Tier 2 and 3 cities are trickling into the markets. Newer investors are more keen on long-term investing than trading, says Ravi Varanasi, Chief - Business Development, National Stock Exchange. Excerpts from an interview:
Retail participation in Indian stocks seems to be declining. What is NSE’s experience?
We are seeing a rise in new investor registrations. Every time a new client registers with any broker, the exchange has to be intimated. We capture this in terms of new PAN numbers. We have seen 10.5 lakh new investors in the last financial year. The additions may have come down but there are new investors coming in, for sure.
One reason for number of investors coming down in bigger companies could be that institutional investments via mutual funds are rising. We see a significant interest in systematic investment plans and brokerages are promoting these plans quite actively. I think a good way to encourage retail participation in the markets would be to allow investors below a certain threshold, say, Rs 50,000, to just begin investing if they have a bank account. With a small threshold, the scope for misuse is really limited. Many Internet brokerages are now, in fact, making an appeal for a simple online way to open a brokerage account.
What has been the response to the RGESS?
It has had reasonable response but investor additions have not been very big so far, partly because the scheme kicked off towards the end of the fiscal year. We have reached out to a large number of investors. The NSE actually set up stalls in 15 suburban railway stations in Mumbai, Baroda Staff College, the Sealdah station and other centres, to explain it to investors. The stalls attracted large crowds. But the scheme is also seen as being a little complicated.
Any change in the profile of investors compared with five years ago?
We see a larger number of investors coming in from Tier 2 and Tier 3 cities. Plus, we see that a large number of them are not traders but are actually interested in long-term investing.
Illiquid stocks have been moved to a new call auction window. Has this helped curb price manipulation in such stocks?
The call auction mechanism helps in better price discovery by concentrating demand and supply for a stock, within a specific time window. Focussed attention on these stocks at preset times may increase liquidity. One suggestion from the market participants is to have the call auction just one or two times in a day, during a not very active period for the markets. Feedback from market players has gone to the regulator.
Do brokers conduct real-time surveillance of their trades to check manipulation?
Most brokerages pre-screen their large trades before they are fed in. Dealers have specific instructions to ensure that trades that exceed certain filters are to be reported. This is supplemented by end-of-day reports on any exceptional or unusual trades. What brokerages find difficult to check is if the two parties to a trade are colluding and are acting across different exchanges. Effectively though, brokerages are conducting surveillance, exchanges are doing it too and so is SEBI. This three-stage process tends to ensure a fairly high level of security for the market ecosystem.
Though Qualified Foreign Investors are now allowed to invest in domestic markets, there haven’t been very large inflows. What are brokers’ concerns on this?
The main issue seems to be tax-related. The intermediaries — Qualified Depository Participants — have been tasked with many obligations which they are uncomfortable with. For instance, there is a concern that they would be treated as assessees-in-default for tax obligations of the investor. Notices on tax can result in high legal costs too, which they perceive as a risk. Therefore there is some amount of reluctance from QDPs to market the product actively. Now that the K M Chandrashekhar committee is looking into the entire gamut of foreign investments, these issues may be studied in combination with the Shome committee proposals. I think once the tax and access issues are addressed, the route will be popular.
The QFI route offers significant possibilities for India.
L & T:: TP: INR1,734 Buy: Overseas juggernaut: 1.5-2% market share in ME ::Most
Overseas juggernaut: 1.5-2% market share in ME
Circumspect about nature of project wins, near-term margins at risk
Since our thematic report on Larsen and Toubro (LT), 'Gearing up the overseas
juggernaut' in November 2012, the overseas business is now expected to contribute
39% of consolidated earnings in FY14E (v/s 32% earlier).
Initial success has been encouraging, with LT being part of the pre-qualified bidding
consortiums in metro, railway, road and hydrocarbon projects. Possible order intake
of INR200b in FY14E from the overseas markets will entail a market share of ~1.5-2%
in Middle East ordering (based on recent aggregate ordering trends).
We remain circumspect about profitability in overseas orders due to likely poor fixed
cost absorption and learning curve, associated with new geographies/ segments.
Maintain Buy and believe triggers still exist to accumulate the stock on declines.
Alembic Pharmaceuticals : Q4FY13 Result Update: Sushil
Alembic Pharmaceuticals Limited (APL) has reported strong set of numbers on a quarterly as well as on a
yearly basis exceeding our margin & bottom line estimates. APL recorded a revenue growth of 10.5% &
4% in Q4FY13 & FY13 respectively. However, with a positive surprise on the margins front, APL managed
to record a strong PAT growth of 115% & 27% in Q4FY13 & FY13 respectively. The following are the key
highlights of the results:
Key Highlights of Q4FY13
Revenues grew by 10.5% YoY from Rs. 3426 mn in Q4FY12 to Rs. 3781 mn in Q4FY13. The company
registered a growth 14.2% in its domestic business whereas Export business registered a meager
growth of 5.8%.
Domestic formulation business registered a growth of 12.5% from Rs. 1845 mn in Q4FY12 to Rs. 2075
mn in Q4FY13 whereas domestic APIs witnessed a YoY growth of 30.2%. APL’s specialty segment
(chronic segment) registered a healthy growth of 31% which was partially offset by a slow growth of
only 3% YoY in anti-infective, cold & cough segment (acute segment). The share of APL’s Speciality
segment to its total domestic formulations went up from 45% in Q4FY12 to 51% in Q4FY13.
Export formulations business registered a growth of 32.9% to Rs. 905 mn on the back of a 54.2%
growth witnessed in its international generics business. During the quarter, APL initiated supply of
Desvenlafaxine to Ranbaxy for sale in US market coupled with partial commencement of the
expanded formulation facility at Panelav. The company however witnessed a de-growth of 27.5% &
21.3% in its international branded business & export API business respectively.
Operating profit reported a growth of 59.5% from Rs. 411 mn in Q4FY12 to Rs. 656 mn in Q4FY13 on
the back of decline in material cost & other expenses (Forex loss of Rs. 18 mn in Q4FY12 vs Forex gain
of Rs. 32 mn in Q4FY13). The positive surprise came from margins side as EBITDA margins improved
to 17.3% as compared to 12.0% in Q4FY12 supported by better product mix.
A higher than expected expansion in EBIDTA margins coupled with a reduction in interest expenditure
on the back of debt reduction, aided the 115% YoY growth in net profit.
Key Highlights of FY13
Revenues grew by 3.7% to Rs. 15203 mn in FY13. The company registered a growth of 14.1% in its
domestic business whereas Export business registered a de-growth of 10.6%.
Domestic formulation business registered a growth of 13.2% from Rs. 7826 mn in FY12 to Rs. 8863 mn
in FY13 on the back of a healthy growth of ~27% in its specialty segment. Its domestic API business
registered a growth of 20.8% to record revenue of Rs. 1138 mn for FY13.
Export formulations business registered a de-growth of 10.6% to Rs. 5166 mn on the back of 2.5% degrowth
in its international generics business (phasing out of low margin products + capacity constraint
faced at Panelav during the year), 22.2% de-growth in its international branded business & 15.2% degrowth
its export API business (rationalizing it for high margin business + focus on captive use).
Operating profit reported a growth of 14.8% from Rs. 2194 mn in FY12 to Rs. 2520 mn in FY13 with
margins at 16.6% v/s 15.0% in FY12 bearing the fruits of the strategic decision taken by the company
to shift to high margin international generic business and increased contribution from specialty
segments in the domestic space.
Net Profit grew by 27% from Rs. 1301 mn to Rs. 1652 mn in FY13 mainly on the back of a substantial
dip in its interest expense (D:E now at 0.3 v/s 0.9 in FY12).
OUTLOOK & VALUATION
On the domestic formulations front, the company is already recording strong growth backed by
increasing contribution from its chronic portfolio. On the international generics front, with the transition
phase to high margin business over in Q4FY13 + Desvenlafaxine ramp up expected going forward, the
management is confident of recording 30‐35% CAGR over FY13-15E. With greater focus on chronic
segments & expected ramp-up from the regulated markets post commissioning of its expanded facility
coupled with expanding return ratios, robust cash flows (CFO - FY14E: Rs.2078 mn, FY15E: Rs.2457 mn),
reducing debt profile and expanding margins going forward, we believe APL is still trading significantly
cheaper vis-Ã -vis its peers and further re-rating is due on the counter (from 6x at the initiation time to
10x now). We have thereby rolled forward our TP to Rs.153 based on 12x FY15E EPS of Rs.12.8,
recommending a BUY on the stock & reiterate our view of it continuing to be a strong re-rating
candidate.
Infosys: Disappointing messaging + Bad quarter = worst fears coming true; however, stock action may be overdone :: JPMorgan
Disappointing messaging + Bad quarter = worst fears coming true. This is
how we would describe 4QFY13 print and its aftermath. Infosys’s bad 4QFY13
print delayed our hopes that it is managing to put its struggles behind it amidst
an improving demand environment. What we find particularly surprising is
management’s messaging to the markets stoking added worry among investors.
Disappointing messaging by management worries investors, not just
4QFY13 financial performance. We think Infosys would have been better off
not giving FY13 guidance than give one which lends itself to the worst possible
interpretations. By giving revenue guidance so wide (6-10% USD revenue
growth for FY14) so as to render it meaningless and by refusing to spell out a
floor for FY14 margins and, particularly, by stating that it cannot predict
margins in the near term for its business, management has played to the street’s
worst fears. In our view, the better course of action would have been to spell out
a margin band, so that the street gets some assurance that the company is able
and willing to quantify the variables impacting its margins. Better messaging
would have not caused such stock price disruption, in our view.
We continue to believe that the demand environment is improving & is in
better shape than 6 months ago. We think issues are still largely Infosysspecific.
This may be evident when peers (Infosys/Cognizant/HCLT) report.
But there is still hope for Infosys which is why we are still OW on the stock.
If discretionary spending comes back (as we expect), we think Infosys should
be able to capitalize on this revival (nearly a third of its revenues come from
discretionary-oriented offerings). This offsets the likely deterioration in margins
that stems from aggressively priced contracts in outsourcing ramping up. Also,
we are now seeing the price action of contracts discounted, volume growth
should follow later (or pricing likely precedes volume pick-up for re-negotiated
contracts/engagements). Utilization is still a buffer. Pipeline is good. We think
Infosys could be overly conservative in its lower-end of the revenue guidance
band (if Infosys manages the same CQGR revenue growth in FY14 as in FY13,
it should end up closer to the upper-end of its revenue band guidance). Maybe, a
case of once-bitten, twice-shy on guidance. We forecast USD FY14 revenue
growth at near the upper-end of guidance band though FY14E Rs EPS is flattish.
Investment view. Still stay OW. After the disappointing print, the stock
corrected 20%+ while our FY14/15 estimates go down 7-8%. Stock trades at
~14xFY14. We think confidence will return with volume growth in the course
of the year. Timing the Infosys recovery has become tricky but we take a 9-12
month view. We see 15%+ stock potential upside over this time-frame.
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