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INVESTOR’S GUIDE

Volatile session ahead

Though the stock prices are gradually moving up absence of momentum and decisiveness at the higher level is causing uneasiness to the participants especially traders. We expect this uncertainty to end in the coming week. Overall the market is in a positive mode and will continue as long as the Nifty index sustains above 8,200. Meanwhile, uphold stock specific approach and avoid overleveraging in the carry over positions. A list of events is lined up in the coming week will affect the movement in indices. To begin with, participants will be eyeing winter session of the parliament, which starts on Monday. The Reserve Bank of India is also scheduled to release the current account deficit (CAD) numbers on the day. Futures and options (F&O) settlement of the November month is due on November 27. It will keep the volatility on the higher side throughout the week. And lastly, data on GDP (gross domestic product) is set to be announced by the government on November 28. During the previous week the benchmarks were seen gaining nearly a percent amid consolidation for third successive week. Absence of any major cue from the domestic and global front capped the movement in the key index for the entire week; however, stock specific move kept the participant busy.

Jayant Manglik, president-retail distribution, Religare Securities

 

Revival in demand to boost industry

Continuing on its growth trajectory the cement sector reported 7 per cent higher volumes and eight per cent increase in realisations during July- September period. We believe strong demand will result in higher sales volumes for companies and profitability will improve due to better price realizations in the remaining months of 2014-15. We stay positive on the sector with top picks. Between markets south India remained a drag on overall growth during the six months gone by. Other regions reported steady growth due to pick-up in demand and production ramp-up in newly-commissioned cement plants across regions. IIP data indicates an encouraging 9.8 per cent rise in cement production. Cement prices are expected to harden with the onset of the busy season. Our interaction with dealers suggests that cement prices softened a bit in October during the festive season owing to weak demand and labour shortage. While part of the fall was recovered in October itself, dealers expect prices to pick up smartly as the busy season sets in over the next four-five months. Forecast a demand CAGR of 9-10 per cent over FY14-FY17 supporting strong pricing/profitability. Religare Securities

 

Strong Performance continues

Sun Pharma’s second quarter revenue was better than our estimates due to strong performance in domestic formulations and the US business (particularly the Taro subsidiary). The EBITDA margin was robust 45.7 per cent per cent and also higher than our estimates. Domestic formulations and Taro are the key drivers to growth in near future. Considering the higher margins, the rosy prospects in the US market and the lower effective tax rate ahead, we have raised our 2014-15 and 2015-15 profits estimates and believe that premium valuations for the stock would be sustained in the months ahead. On the other hand the risks for this company are currency fluctuations and regulatory hurdles. Anand Rathi

 

Better performance, high margins

NCC’s second quarter revenue grew robustly after execution of the Krishnapatnam power project which brought Rs 6 billion to the income surpassing our estimate. The EBITDA margin was higher at 8.1 per cent on better fixed-cost absorption. The management is aiming at 10-15 per cent revenue growth in 2014-15. On the basis of the new orders bagged (at a high margin) the management expects to post an EBITDA margin of nine per cent in 2015-16.  The company is experiencing less competitive intensity in bidding for building projects. Its proceeds from the rights issue is utilised to repay debt. Through debt reduction the company aims to save Rs 700 million on interest cost annually and Rs 300 million on commission charges next year. The risks for the company are increase in interest rates and slowdown in orders.  Anand Rathi

 

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