All You Need To Know Going Into Trade On Jan. 16

Earnings Reaction To Watch

Sterlite Tech (Q3, QoQ)

• Revenue fell 11.5 percent to Rs 1,202.7 crore.
• Net profit fell 68.3 percent to Rs 50 crore.
• Ebitda fell 16.3 percent to Rs 241.4 crore.
• Margin was at 20.1 percent versus 21.2 percent.

Den Networks (Q3, YoY)

• Revenue rose 3.1 percent to Rs 318.1 crore.
• Net profit was at Rs 19.4 crore versus net loss of Rs 32.4 crore.
• Ebitda rose 21.2 percent to Rs 58.4 crore.
• Margin was at 18.4 percent versus 15.6 percent.

Plastiblends (Q3, YoY)

• Revenue fell 4.4 percent to Rs 144.7 crore.
• Net profit rose 2 times to Rs 11.4 crore.
• Ebitda rose 66.1 percent to Rs 21.1 crore.
• Margin was at 14.6 percent versus 8.4 percent.

Reliance Industrial Infrastructure (Q3, YoY)

• Revenues fell 5.7 percent to Rs 20 crore.
• Net profit rose 13.6 percent to Rs 2.5 crore.
• Ebitda fell 48.1 percent to Rs 1.4 crore.
• Margin was at 7 percent versus 12.7 percent.

Tinplate Company of India (Q3, YoY)

• Revenues fell 15.3 percent to Rs 533.6 crore.
• Net profit rose 27.9 percent to Rs 55 crore.
• Ebitda rose 4.6 percent to Rs 40.9 crore.
• Margin was at 7.7 percent versus 6.2 percent.

Earnings To Watch

• Tata Metaliks
• Karnataka Bank
• South Indian Bank
• Rallis India
• Hathway Cable & Datacom
• Cyient
• Asahi Industries
• Aditya Birla Money
• 5Paisa Capital.

Banks Sell Stake In Equifax Credit Information Services

• Kotak Mahindra Bank’s arm Kotak Mahindra Prime sold its entire stake of 5.56 percent for Rs 50.6 crore.
• Bank of India sold its entire stake of 3.5 percent stake for Rs 31.9 crore.
• State Bank of India sold its entire stake of 7.41 percent stake for Rs 67.43 crore.
• Union Bank sold its entire stake of 4.17 percent stake for Rs 37.93 crore.

All the transactions are subject to regulatory approvals and are expected to be completed by the fourth quarter of fiscal year 2020.

Brokerage Radar

CLSA on City Gas Distribution Companies

• Raw material costs to fall while competing fuels may see prices rise.
• Slew of reform-linked tailwinds likely.
• Big uncertainty related to infrastructure exclusivity may be resolved positively.
• IGL: Maintained ‘Buy’; hiked price target to Rs 540 from Rs 510
• MGL: Maintained ‘Buy’; hiked price target to Rs 1425 from Rs 1380
• Gujarat Gas: Maintained ‘Buy’; hiked price target to Rs 315 from Rs 270

CLSA on Bharti Airtel

• Maintained ‘Buy’; cut price target to Rs 565 from Rs 570.
• Awaited verdict on AGR petition; funding of AGR payment risks assuaged.
• See accelerating growth led by tariff hikes and 4G data adoption.
• India mobile revenue and consolidated Ebitda to grow at a CAGR of 16%/23% over FY20-22.

CLSA on Sun Pharma

• Maintained ‘Buy’ with a price target of Rs 570.
• Revenue from specialty products expected to jump 40 percent by the third quarter to $125 million.
• See improved profitability in India and further scale-up in emerging markets.
• In 2020 all eyes will be on the ramp-up of specialty products Ilumya and Cequa in the U.S.

Nomura on Dr Reddy’s

• Maintained ‘Buy’; hiked price target to Rs 3,437 from Rs 3,200.
• Business restructuring and cost controls lay a strong foundation for sustainable growth.
• Company has moved away from an excessive focus on a few assets and investing in specialty front-end.
• Expect Ebitda margin and RoCE of 24.5 percent and 18 percent in FY22 – below mgmt. guidance.

IIFL on Hindalco

• Maintained ‘Buy’ with a price target of Rs 251
• Aleris acquisition is unlikely to close by Jan. 21, 2020.
• New bond offering extends overall debt maturity profile.
• Mgmt.’s Q3 estimates indicate continued strong performance for Novelis.

Daiwa Capital on Coal India

• Maintained ‘Buy’ with a price target of Rs 290.
• Coming quarters: volume pickup, better operational performance.
• The government could look to extract higher dividends from SOEs.
• Big dividend in the offing; attractive risk-reward.

On L&T Infotech

Axis Capital

• Downgraded to ‘Add’ from ‘Buy’; hiked price target to Rs 2,140 from Rs 1,890.
• Deal wins steady, outlook positive, top client issues behind and improving outlook for key verticals.
• Expect $ revenue CAGR of 13 percent over FY19-22 with modest margin recovery in 2020-21.
• Stock has surged about 30 pecent in past three months, capping the upside.

Emkay

• Maintained ‘Hold’; hiked price target to Rs 1,820 from Rs 1,520.
• Third-quarter results were rock solid from a revenue standpoint.
• Commentary confident suggesting growth visibility within top clients.
• L&T Infotech I is the only company which has surprised on revenue growth front among peers.

On Sterlite Tech

Axis Capital

• Maintained ‘Buy’; cut price target to Rs 165 from Rs 175.
• Revenue trajectory on decline; order book improves.
• Products may remain under pressure; order book still strong.
• Moderation in revenue trajectory a near-term concern.

Edelweiss

• Maintained ‘Buy’; cut price target to Rs 167 from Rs 189.
• Order book improves; margins to sustain; capacity utilisation likely to pick up.
• Factoring in delay in demand recovery and the weak December quarter.
• Cut revenue and earnings estimate by 10.7%/2.6% and 13.4%/16.1% for FY20/21

Morgan Stanley’s Outlook For 2020

• Adds Bharti Airtel, Bharat Electronics, NTPC and UltaTech Cement to focus list.
• Removes Ashok Leyland, Bajaj Auto, Jubilant FoodWorks and United Spirits from focus list.
• The corporate tax cut sets the stage to improve corporate saving and could trigger a turn in the investment cycle in 2020.
• That said, growth needs to improve for companies to have the confidence to spend. Watch order books.
• Earnings revisions breadth has turned up but remains tentative. The consensus now expects considerable outperformance by India’s corporate earnings versus emerging markets.
• Preferred approach is to buy domestic cyclical mid-cap value stocks.

Trading Tweaks

• Security & Intelligence Services record date for share split at 2:1.
• Vikas Proppant & Granite to move into ASM Framework.
• Madhav Marbles and Granites, Man Infraconstruction, Jaiprakash Power Ventures, Sadhana Nitrochem to move into short term ASM Framework.
• GSS Infotech, Shankara Building Product, Jiya Eco-Products, RattanIndia Power to move out of short term ASM Framework.

Who’s Meeting Whom

• Great Eastern Shipping to meet Edelweiss AMC, Valentis Advisers and Philip Capital from Jan. 16-20
• Mahindra & Mahindra to meet Bajaj Allianz Life Insurance on Jan. 16

Insider Trading

• Steel Strips Wheels promoter Sunena Garg acquired 7,000 shares from Jan. 13-14.

Money Market Update

• The rupee closed at 70.82/$ versus 70.88/$ on Tuesday.

F&O Cues

Index Futures

• Nifty January futures closed at 12,378, premium of 34.7 points.
• Nifty January futures open interest down 3.5 percent, sheds 4.8 lakh shares in open interest.
• Nifty Bank January futures closed at 31,943.8, premium of 118.9 points versus 97.4 points.
• Nifty Bank January futures open interest down 1 percent, sheds 61,000 shares in open interest.

Options

• Nifty PCR at 1.56 versus 1.67 (across all series).

Nifty Weekly Expiry: Jan. 16

• Max open interest on call side at 12,400 (20.4 lakh shares).
• Max open interest on put side at 12,300 (26.1 lakh shares).
• Open interest addition seen at 12,450C (+3.6 lakh shares), 12,400C (+3.3 lakh shares), 12,250P (+2.8 lakh shares).
• Open interest shedding seen in 12,300P (-5.5 lakh shares).

Nifty Monthly Expiry: Jan. 30

• Max open interest on call side at 12,500 (27.7 lakh shares).
• Max open interest on put side at 12,000 (42 lakh shares).