Buy rating on Axis Bank is maintained with a target price of Rs.1353 over one year. The stock is currently traded in the range of Rs.850.
It seems that the correction in the stock is highly unwarranted it continues to be the top pick. During the past one month, the stock price is down 11.9% as against the decline of 8.4% in the Bankex and a drop of 5.9% in the Sensex.
Stress points exist on the quality of the assets but nothing alarming. Currently, non performing loans (NPL) are sector specific risk rather than bank specific risk.
For the bank, higher exposure in power and SME segments appear to be the major weakness. In the power sector, bank’s exposure is 5% of total loans as against the industry average of 7%. Delay in loan servicing in some projects may be possible but large scale defaults by power projects are unlikely.
Bank’s exposure in the SME (small, medium enterprises) segment is higher than that of peer private banks but this is unlikely to spiral under control as the bank has adopted very cautious approach about SME loans.
Investors are advised to concentrate on positives rather than just negatives as it is basically a sector wide problem.
On the positive side, the bank’s CASA deposits have consistently been strong and growing. CASA growth has been supported by the increase in branch network. It has increased branch network by 40% during the last two years.
Axis has one of the most diversified fee based income stream among private sector banks
and it is expected to grow at 20% plus.
Bank’s net interest margin (NIM) may moderate to 3.4 – 3.5% in 2HFY12 from 3.78% in 1H. However, the drop is only seasonal and not a cause for concern.
At the current level, the valuation seems very attractive and hence, the ‘buy’ is reiterated with a target price of Rs.1353 over one year.
Thursday, December 22, 2011
Tuesday, December 13, 2011
Indian Stock Market Remain Sluggish
As expected, the Indian markets remained sluggish last week as it declined 4 percent led by the crisis in the euro-zone and signs of slowdown in the domestic economy. The Sensex and Nifty closed at 16,213 and 4,867 declining 633 and 183 points respectively.
The week started off flat due to profit bookings at higher levels. Political pressures that forced the government to roll back its proposal to allow 51% FDI in multi-brand retail too weighed on investors’ sentiments. The markets later slipped into the red on reports that the industrial output had declined by 7% in October 2011. Also, the warning by French leader that the risk of euro-zone explosion is very real and S&P putting a number of large European banks and European Union on watch for a downgrade of its AAA credit rating weighed on the market outlook.
The domestic market continued its downtrend after the government conceded that the Indian economy had hit a rough patch. The Finance Minister announced that the GDP expansion in 2011-12 could be lower at around 7.5% as the sharply deteriorating global economic environment had a dampening effect on India. The markets slipped further after the European Union leaders failed to agree on the much awaited treaty that would toughen fiscal rules and impose automatic sanctions on countries violating budget limits.
The week started off flat due to profit bookings at higher levels. Political pressures that forced the government to roll back its proposal to allow 51% FDI in multi-brand retail too weighed on investors’ sentiments. The markets later slipped into the red on reports that the industrial output had declined by 7% in October 2011. Also, the warning by French leader that the risk of euro-zone explosion is very real and S&P putting a number of large European banks and European Union on watch for a downgrade of its AAA credit rating weighed on the market outlook.
The domestic market continued its downtrend after the government conceded that the Indian economy had hit a rough patch. The Finance Minister announced that the GDP expansion in 2011-12 could be lower at around 7.5% as the sharply deteriorating global economic environment had a dampening effect on India. The markets slipped further after the European Union leaders failed to agree on the much awaited treaty that would toughen fiscal rules and impose automatic sanctions on countries violating budget limits.
Monday, December 12, 2011
Market Slip Because of Bad IIP Data
Bad IIP data took their toll on the markets with both benchmark indices breaching their psychologically important levels of 16,000 and 4800, respectively. Barring IT, all sectoral indices closed negative with metal being the worst among them. Other sectors with substantial losses were oil & gas, banking, realty, auto and capital goods. The Sensex closed at 15870, down 343 points from its previous close, and the Nifty shut shop at 4765, down 102 points. The CNX Midcap index closed with 2.1% loss while the BSE Smallcap index was down 1.5% in today's trade. The market breadth was negative with advances at 263 against declines of 1037 on the NSE. The top Nifty gainers were Wipro, TCS, HCL Tech and Infosys while the biggest losers included Tata Power, Hindalco, SAIL and JP Associates.
Now on 15th Advance Tax and on 16th RBI policy two most important factor comes if it is positive market jump very fast if not market slip down likely nifty 4200 to 4300 and Sensex touch likely 14000 to 12000.
Now on 15th Advance Tax and on 16th RBI policy two most important factor comes if it is positive market jump very fast if not market slip down likely nifty 4200 to 4300 and Sensex touch likely 14000 to 12000.
Saturday, December 10, 2011
Equity Market Update
Global Market Update :
o Equity Markets lost the upward momentum from last month as fears of EU sovereign debt crisis reemerged. Concerns on EU debt contagion accelerated as cost of borrowing for large nations like Italy, Spain and France rising which affected investor confidence. However, the markets rebounded from the month lows at the end of month on the back of news that central banks eased dollar funding and resilient US economic data.
o The worst preforming markets in November were Hong Kong and India which corrected by 9.5%. The BSE Sensex hit a 23 month low, YTD down 21% and is one of the most performing equity markets.
o The US Markets (Dow Jones) was the best performing market with 0.76% returns in November and the one of the only developed market which has delivered positive returns YTD in 2011.US
US Economy Update :
Resilient US macro data and policy cooperation held the market
• Better-than-expected macroeconomic data of the US
- US consumer confidence jumped from a previous 40.9 to 56.
- US ISM manufacturing index rose to 52.7in November from 50.8 in October.
• The Federal Reserve cut the cost of emergency dollar funding for European banks as part of a globally coordinated central bank response to the continent’s sovereign debt crisis. The new interest rate has been reduced to the dollar overnight index swap rate plus 50 basis points.
• Payroll gains in the U.S. improved last month, while an increase in the number of Americans leaving the workforce helped push the jobless rate down to 8.6 percent, the lowest level since March 2009.
Euro Region: Key developments :
• UK PMI Manufacturing decreases for the second successive month to 47.6 points in November, following 47.8 points registered the in October.
• S&P reduces its credit ratings on 15 big banking companies, mostly in the Europe and the US as the result of an overhaul of its ratings criteria.
• UK budget office cuts the country’s economic growth forecast for 2011 to 0.9% from the 1.7% it had predicted in March, and trims the 2012 forecast to 0.7% from 2.5.
• Greek Prime Minister George Papandreou gave in to pressure from France, Germany and from within his own country and scrapped a referendum on a bailout package for the country proposed by the European Union (EU).
• Private sector activity in Euro zone declined for the third straight month in November, coming in at 47.2 thus remaining below the 50.0 (the level that distinguishes expansion from contraction).
• The sale of German govt. bond or bunds failed on Wednesday (23rd November) with the German govt. being able to sell only €3.644 bn of the €6 bn in 10 years bunds on auction for an average yield of 1.98%
• The UK economy rebounded with the GDP growing at 0.5% in the third quarter both over the second quarter as well as on an annual basis. The growth was driven by stock building and government spending.
• European Central Bank cut in the euro zone’s benchmark interest rate from 1.5% to 1.25%, while warning of a mild recession.
• Fitch Ratings says France's AAA rating would be at risk if the euro-zone debt crisis intensifies; also downgrades Portugal's rating to junk status to BB+ from BBB-.
o Equity Markets lost the upward momentum from last month as fears of EU sovereign debt crisis reemerged. Concerns on EU debt contagion accelerated as cost of borrowing for large nations like Italy, Spain and France rising which affected investor confidence. However, the markets rebounded from the month lows at the end of month on the back of news that central banks eased dollar funding and resilient US economic data.
o The worst preforming markets in November were Hong Kong and India which corrected by 9.5%. The BSE Sensex hit a 23 month low, YTD down 21% and is one of the most performing equity markets.
o The US Markets (Dow Jones) was the best performing market with 0.76% returns in November and the one of the only developed market which has delivered positive returns YTD in 2011.US
US Economy Update :
Resilient US macro data and policy cooperation held the market
• Better-than-expected macroeconomic data of the US
- US consumer confidence jumped from a previous 40.9 to 56.
- US ISM manufacturing index rose to 52.7in November from 50.8 in October.
• The Federal Reserve cut the cost of emergency dollar funding for European banks as part of a globally coordinated central bank response to the continent’s sovereign debt crisis. The new interest rate has been reduced to the dollar overnight index swap rate plus 50 basis points.
• Payroll gains in the U.S. improved last month, while an increase in the number of Americans leaving the workforce helped push the jobless rate down to 8.6 percent, the lowest level since March 2009.
Euro Region: Key developments :
• UK PMI Manufacturing decreases for the second successive month to 47.6 points in November, following 47.8 points registered the in October.
• S&P reduces its credit ratings on 15 big banking companies, mostly in the Europe and the US as the result of an overhaul of its ratings criteria.
• UK budget office cuts the country’s economic growth forecast for 2011 to 0.9% from the 1.7% it had predicted in March, and trims the 2012 forecast to 0.7% from 2.5.
• Greek Prime Minister George Papandreou gave in to pressure from France, Germany and from within his own country and scrapped a referendum on a bailout package for the country proposed by the European Union (EU).
• Private sector activity in Euro zone declined for the third straight month in November, coming in at 47.2 thus remaining below the 50.0 (the level that distinguishes expansion from contraction).
• The sale of German govt. bond or bunds failed on Wednesday (23rd November) with the German govt. being able to sell only €3.644 bn of the €6 bn in 10 years bunds on auction for an average yield of 1.98%
• The UK economy rebounded with the GDP growing at 0.5% in the third quarter both over the second quarter as well as on an annual basis. The growth was driven by stock building and government spending.
• European Central Bank cut in the euro zone’s benchmark interest rate from 1.5% to 1.25%, while warning of a mild recession.
• Fitch Ratings says France's AAA rating would be at risk if the euro-zone debt crisis intensifies; also downgrades Portugal's rating to junk status to BB+ from BBB-.
BUY : Bharat Electronics Limited (BEL)
BUY : Bharat Electronics Limited (BEL): Target Rs. 1725/-, CMP Rs. 1500/-
BEL, set up to meet specialised electronic needs of Indian defence services, has over the years, grown into multi-product, multi-technology, multi-unit company serving needs of customers in diverse fields in India and abroad.
Company derives 80% of sales from defence and this ratio is expected to prevail in future as well as both (defence & retail) businesses will grow in line. Being a defence PSU, BEL is likely to be the key beneficiary of substantial increase in defence expenditure. Infact, First time buys (relevant to BEL) - Rs. 234,000 crore, Offset opportunities - Rs. 40,000 crore and upgrades of Mirage & Jaguar fighter planes - Rs. 30,000 crore will open up > Rs. 300,000 crore worth business opportunities over next 10 years for the company and it is confident of capturing > 50% of such opportunities.
Defence offset, requiring 30% of order to be sub-contracted domestically, to be another booster. BEL’s PSU status makes it a preferred offset partner for many contracts. Accordingly, company is looking at such opportunities in aerospace sector, especially big contract like Medium Multi Role Combat Aircraft. As a result, export order book is expected to swell to US $ 300-500 million (US $ 42.3 million of total export order book of US$ 66.4 million in FY 2011) in next 5 years.
All the factors mentioned above aptly get reflected in strong order book of Rs. 28,000 crore as on Sep. 30, 2011 (Rs. 23,000 crore at beginning of FY 2012), providing visibility of sales growth of 15% (+) for next 5 years. BEL expects further order inflow of ~ Rs. 5,000 crore in FY 2012.
Sensing huge business opportunities on high end defence side (eg. Battlefield surveillance, tactical communication, Akash Weapon, etc), company has significantly stepped up R&D spend (grown @ CAGR of 25.7%) in past 4 years (FY 2007-2011) and accounts for ~ 7% of FY 2011 sales. Strengthening of R&D will improve BEL’s ability to remain competitive even as the government opens up defence sector to private players.
BEL also plans to venture into green field areas like energy sector (Solar, Nuclear), Infrastructure.
Valuation :
In view of robust order book, steady demand from existing products, enhanced high value product offerings and growth opportunities in civil & export segment, BEL is expected to grow @ CAGR of 15% for next 4-5 years .
Its cash rich company. As on Sep. 30, 2011, company had cash balance of Rs. 5,875 crore, i.e. > Rs. 734 per share, which is ~ 50% of its current market price.
At CMP, share is trading at 11.26 times FY 2012 expected EPS of Rs. 133.16 and 10.21 times FY 2013 expected EPS of Rs. 146.98. Considering excellent future prospects, it is an “Excellent Buy from 2-3 years perspective”.
BEL, set up to meet specialised electronic needs of Indian defence services, has over the years, grown into multi-product, multi-technology, multi-unit company serving needs of customers in diverse fields in India and abroad.
Company derives 80% of sales from defence and this ratio is expected to prevail in future as well as both (defence & retail) businesses will grow in line. Being a defence PSU, BEL is likely to be the key beneficiary of substantial increase in defence expenditure. Infact, First time buys (relevant to BEL) - Rs. 234,000 crore, Offset opportunities - Rs. 40,000 crore and upgrades of Mirage & Jaguar fighter planes - Rs. 30,000 crore will open up > Rs. 300,000 crore worth business opportunities over next 10 years for the company and it is confident of capturing > 50% of such opportunities.
Defence offset, requiring 30% of order to be sub-contracted domestically, to be another booster. BEL’s PSU status makes it a preferred offset partner for many contracts. Accordingly, company is looking at such opportunities in aerospace sector, especially big contract like Medium Multi Role Combat Aircraft. As a result, export order book is expected to swell to US $ 300-500 million (US $ 42.3 million of total export order book of US$ 66.4 million in FY 2011) in next 5 years.
All the factors mentioned above aptly get reflected in strong order book of Rs. 28,000 crore as on Sep. 30, 2011 (Rs. 23,000 crore at beginning of FY 2012), providing visibility of sales growth of 15% (+) for next 5 years. BEL expects further order inflow of ~ Rs. 5,000 crore in FY 2012.
Sensing huge business opportunities on high end defence side (eg. Battlefield surveillance, tactical communication, Akash Weapon, etc), company has significantly stepped up R&D spend (grown @ CAGR of 25.7%) in past 4 years (FY 2007-2011) and accounts for ~ 7% of FY 2011 sales. Strengthening of R&D will improve BEL’s ability to remain competitive even as the government opens up defence sector to private players.
BEL also plans to venture into green field areas like energy sector (Solar, Nuclear), Infrastructure.
Valuation :
In view of robust order book, steady demand from existing products, enhanced high value product offerings and growth opportunities in civil & export segment, BEL is expected to grow @ CAGR of 15% for next 4-5 years .
Its cash rich company. As on Sep. 30, 2011, company had cash balance of Rs. 5,875 crore, i.e. > Rs. 734 per share, which is ~ 50% of its current market price.
At CMP, share is trading at 11.26 times FY 2012 expected EPS of Rs. 133.16 and 10.21 times FY 2013 expected EPS of Rs. 146.98. Considering excellent future prospects, it is an “Excellent Buy from 2-3 years perspective”.
Tuesday, December 6, 2011
Weekly Market Review
Global: Financial markets got a boost from efforts to boost dollar liquidity, signs of stronger policy responses and monetary easing in key emerging markets. Equity markets rallied sharply from recent lows and yields eased at the short tend. Commodity prices moved up and the US dollar gave up some of the recent gains.
India – Equity: Domestic indices, especially the large cap ones, rallied sharply on the back of positive global sentiment. GDP data pointed towards a slowdown led by weakness in manufacturing, while services sector maintained strength. At these levels, strong policy actions (read reforms) can act as a positive trigger and also help in addressing infrastructure bottlenecks.
India – Debt: Yields fell across the curve on increased hopes of an easier monetary policy, even as liquidity remained tight. The rupee benefited from the dollar's weakness and the auction of new FII investment limits witnessed strong demand. Fiscal deficit numbers came in higher than last year levels for the same period.
India – Equity: Domestic indices, especially the large cap ones, rallied sharply on the back of positive global sentiment. GDP data pointed towards a slowdown led by weakness in manufacturing, while services sector maintained strength. At these levels, strong policy actions (read reforms) can act as a positive trigger and also help in addressing infrastructure bottlenecks.
India – Debt: Yields fell across the curve on increased hopes of an easier monetary policy, even as liquidity remained tight. The rupee benefited from the dollar's weakness and the auction of new FII investment limits witnessed strong demand. Fiscal deficit numbers came in higher than last year levels for the same period.
Hold on Mphasis
Weak numbers for 4QFY11 (August – September). Revenue growth at 1.6%qoq was lower
than market expectation of 2.4% qoq due to poor volume sales and lower realized USD/INR rate.
EBIT margin at 14.7% missed street estimates by 200 bps.
However, EPS has beaten market expectations because of forex gains.
Growth continues to suffer from sluggish HP channel sales, which declined 4.4% qoq. This segment provides 62% of total sales.
Headcount also declined despite the addition of about 2000 Wyde employees. Lower headcount is an indication of worsening demand.
At the current price, the stock does not seem expensive. Moreover, it has net cash of USD 344 million, which may provide support to the stock price.
Hence, ‘hold’ rating is maintained despite weak quarterly performance.
than market expectation of 2.4% qoq due to poor volume sales and lower realized USD/INR rate.
EBIT margin at 14.7% missed street estimates by 200 bps.
However, EPS has beaten market expectations because of forex gains.
Growth continues to suffer from sluggish HP channel sales, which declined 4.4% qoq. This segment provides 62% of total sales.
Headcount also declined despite the addition of about 2000 Wyde employees. Lower headcount is an indication of worsening demand.
At the current price, the stock does not seem expensive. Moreover, it has net cash of USD 344 million, which may provide support to the stock price.
Hence, ‘hold’ rating is maintained despite weak quarterly performance.
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