MARKET OUTLOOK- 7TH APRIL 2015

Dear Customer,

 

Markets always tend to be interesting with something or the other happening all the time. Our Morning Mantra is released before the opening bell and it includes the market commentary along with Corporate & Global news for the day.

 

• U.S. stocks rose on Monday as expectations the Federal Reserve could hold off longer on raising interest rates offset concerns over Friday's surprisingly weak jobs report.

Dow Jones	17880.9	+117.6	+0.66%
Dow Futures	17805.0	+129.0	+0.73%
Nikkie	19620.4	+222.4	+1.15%
SGX Nifty	8727.0	+34.0	+0.39%

 

• Asian stocks rose, following a rally in U.S. equities, after comments by a Federal Reserve official fueled optimism that policy makers in the world’s largest economy will hold interest rates lower for longer
• Market is expected to open on positive note and will be driven by RBI policy action.
• We expect RBI to expect to keep rates unchanged
• GMR consortium bags Rs 5,080-cr rail freight corridor project from DFCC. It will be designing and constructing a 417-km stretch of the project's eastern arm
• Cairn India sues govt over Rs 20,494-cr tax demand. Argues tax proceedings initiated after more than six years
• Ashok Leyland promoters release pledged shares from HSBC reducing it from 16.66% to 4.93%.
• Videocon D2H withdraws Rs 700-cr IPO application. This is because the satellite television arm of Videocon group got listed on the Nasdaq last month
• Rural Electrification Corporation OFS on 8th April
• Oil Ministry has allowed national oil companies ONGC and Oil India Ltd to sell any new natural gas supplies from their small and isolated fields through an open tender.
• KEC International has bagged orders worth Rs 1,565 crore for power transmission and distribution and cables
• Kotak Mahindra Bank exits investment in MCX. Bank held Rs 459 crore worth stake in MCX
• Tata Motors and the group’s PE fund, Tata Capital are looking to sell 90% stake in Pune-based auto designer Tata Technologies. The valuation is being pegged at $1bn (Rs 6,200 crore)
• Hindustan Construction Company board approves QIP issue, sets floor price at Rs 30.98/share
• Economy Update – Institution Desk: High disinvestment proceeds helped the Central government to garner more revenue in February 2015. Further, total spending contracted for the second consecutive month, helping India’s fiscal deficit to halve compared to February 2014. Within total expenditure, while revenue spending declined, capital spending stood at its highest level in any February for the past 18 years. This is a good sign. As discussed in our previous note on the subject, the government was required to spend (capital outlay) about Rs500bn in February-March 2015 in order to meet its capital spending target for FY15RE (revised estimate). With capital outlay of Rs164bn in February, the government might have spent ~Rs300bn last month, which is not an unrealistic amount. To our mind, this provides credence to the government’s plan to increase capital expenditure by 25% in FY16. This is important because a look at the past decade reveals that the government has almost always chosen not to violate its budgeted fiscal deficit target at the cost of capital spending. However, recent actual numbers make FY16 budget estimates (BE) looks more realistic.
• Blue Dart Express – Road Show Update – Institution  Desk: We organised a road-show for Blue Dart Express (BDEL) recently. Mr. Yogesh Dhingra, COO and CFO (chief operating officer and chief financial officer) of the company was present. Of the total express logistics business, air express/ground express account for ~80%/20% of revenue, respectively. BDEL has 52%/20% market share in air express/ground express segments, respectively. As BDEL is a late entrant in ground express market (foray in 2007), its market share is low.

 

• Result Announced

BHEL - Insti

The FY15 provisional results of Bharat Heavy Electricals (BHEL) were below our expectations owing to weak profitability and lower order inflow. While gross turnover stood at Rs308bn, 10.3% above our estimate but down 23.6% YoY, PAT fell 62% YoY to Rs13.1bn, 9.2% below our estimate. Order inflow for FY15 stood at Rs308bn, below our estimate of Rs350bn, despite a low base. (FY14 order inflow stood at Rs280bn, while FY09-FY11 average was at Rs595bn - see Exhibit 3). The key concern that remains is lack of order finalisation in the BTG/EPC domain along with a higher share of slow-moving projects in the order book at 23%. With fewer projects on offer, the competition remains intense and pricing irrational, leading to sustained pressure on margins, return ratios and working capital of BHEL. We have retained our negative outlook on BHEL with a target price of Rs202 (16xFY17E EPS, a 30% discount to the past nine years’ median P/E of 23x) and a Sell rating on it.

Kitex Garments

Kitex Garment Result is good. Sales came at 147cr for Q4FY15vs qoq 114cr and yoy 121cr EBITDA came at 66cr vs qoq 42cr and yoy 42cr PAT came at 41.6cr vs qoq 23.13cr and yoy 21,08cr EPS came at Rs.8.76 vs qoq 4.87 yoy 4.44 Kitex Guarment management said they are targeting revenue Growth of 20-25% in FY16 and can maintained or improve from yearly margin of FY15. FY16 EPS works out to Rs.28 and Share is trading at 23.5x PE

 

• Result to be announced

Companies	Mar’14	Dec’14	Mar’15 Exp
GM Breweries	6.04	6.05	NA

 

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