Equity Research Report Ways2Capital 18 Dec 2017

Nifty futures and bank nifty future market closed at 10276/ 25214.according to technical analysis

Nifty futures and bank nifty future market closed at 10276/ 25214.according to technical analysis if nifty futures and bank nifty future moves up-word in upcoming treading sessions then 10430/ 25800 will be next resistance level, if it break this level then nifty futures and bank nifty future can touch 10530 / 26200 level . it will be hard resistance. meanwhile in reveres there is support on 10150/ 24800 for nifty futures and bank nifty future after breaking this support with volume there is big support for nifty futures and bank nifty future on 10000/24500


Exit polls on Thursday unanimously predicted that BJP would return to power in Gujarat and also indicated a landslide victory in Himachal Pradesh. Chanakya-News 24 predicted highest seats for BJP (135 +/-11) for Gujarat Elections out of 182 assembly seats. Whereas others have predicted between 99-135 seats for BJP in Gujarat. If these polls are proved right, it would be a huge sentimental boost for BJP and it may help BJP to garner votes in 2019 general elections. The exit pool outcome if proved right will be a setback for Congress. The exit poll says that development has overshadowed the concerns of two big reforms GST and demonetization.

IDBI BANK DECLARES RUCHI SOYA A WILFUL DEFAULTER - IDBI Bank, one of the lenders to Ruchi Soya Industries Limited has declared the company a wilful defaulter. Ruchi Soya Industries Limited is one of India’s leading edible oils company with product portfolio spanning across edible cooking oils, soya foods, bakery products, Vanaspati ghee, healthy foods and soaps.The company, while having popular brands in edible oil and soya chunks, suffered heavily in 2015 due to an unprecedented crash in global castor seed prices. The crash, coupled with sagging revenues in its core oil business, led to dwindling profits and the company was in the red in FY16. As on March 31, 2017 Ruchi had debt of more than Rs55bn on its consolidated books and a D/E ratio of close to 6x. Apart from IDBI Bank, Standard Chartered Bank and DBS Bank too have filed insolvency cases against the company.

NCC TO RAISE RS550CR THROUGH QIP - The board of NCC has approved raising of upto Rs550cr in equity via the Qualified Institutional Placement route. The company had last raised funds through the QIP route in FY2010 when the company had raised Rs367cr. The stated purpose of the QIP in FY2010 was to reduce short term borrowings as well as invest in infrastructure projects in roads and power sector.Though the company has not stated the purpose of the QIP, we feel that it is possible that the company would be looking to deleverage its balance sheet. As of FY17,

The short term borrowings of the company stood at Rs2,016cr on a consolidated basis. NCC is one of the top three infrastructure construction companies in India in terms of revenue. Company's current order book is majorly contributed by building, transportation, O&G and water and railway. It also has presence in Middle East.With strong order inflows, company’s order book stands at Rs22,009cr which translates into healthy revenue visibility. Moreover, company has been declared L1 in orders worth Rs2,500-3,000cr in Q2FY18. Also, it expects to win some EPC contracts in the road division and building contracts in Amravati.

CANARA BANK TO RAISE FUNDS UP TO RS1800CR - canara bank has received an approval to raise capital funds through Additional Tier I instruments in rupee terms domestically for an amount not exceeding Rs1800cr in single or multiple tranches to maintain healthy CRAR during the current year. The Board of the company vide its order dated December 12, 2017 has permitted for the same.The fundraising would act positively for the bank as it would aid it in improve its capital adequacy ratio, which in turn would partly fund its future loan growth besides help it to provide for its bad loans.We expect a fall in slippages by 140 bps to 2% over FY17-19E attributable to improving the domestic economic outlook, its follow up on recovery and the recent RBI ordinance on NPA.We expect the improving credit deposit ratio by 397 bps over FY17-19E to 73% and improving CASA to contribute to NIM improvement. We expect its overall NIM to improve by 42 bps over FY16-FY19E to 2.6%. We expect its RoE to improve by 276 bps over FY17-19E to 6%.Canara Bank’s improving asset quality, better NIM prospects and rising noninterest income bodes well for its profitability over FY17-19E.
PNB TO RAISE UP TO RS5,000CR THROUGH QIP - Punjab National Bank has initiated the process of raising up to Rs5,000cr through Qualified Institutional Placement. The committee of directors for capital mop-up at a meeting approved opening of the QIP.The bank has approved the floor price of Rs176.35 per share of face value Rs2. This fundraising would act positively for the bank as it would aid it in improve its capital adequacy ratio, which in turn would partly fund its future loan growth besides help it to provide for its bad loans.

LUPIN GETS USFDA NOD FOR GENERIC OF SAFYRAL TABLETS - It has received final approval for its Tydemy and Levomefolate Calcium Tablets, 3 mg/0.03 mg/0.451 mg and Levomefolate from the USFDA to market a generic version of Safyral Tablets of Bayer HealthCare Pharmaceuticals Inc. Tydemy is indicated for use by women to prevent pregnancy and to raise folate levels in women who choose to use an oral contraceptive for contraception. Drospirenone, Ethinyl Estradiol, and Levomefolate Calcium Tablets, 3mg/0.03 mg/0.451 mg and Levomefolate Calcium Tablets, 0.451 mg tablets had annual sales of approximately $22.9 million in the US. Lupin, a manufacturer of branded plus generic formulations, biotechnology products and APIs, earns 47% from its US business. Chronic and semi-chronic therapy contributes 88% to revenue, of which chronic contributes 65% of total revenue in the domestic market.

ITC OPENS RS1,500CR INTEGRATED FOOD PARK IN PUNJAB, MILK-BASED BEVERAGES TO BE LAUNCHEDITC - Rolled out its largest integrated food manufacturing and logistics facility at Kapurthala, Punjab on December 14, 2017. This unit would have the wheat mandis as well to procure the grain from farmers, in addition to FMCG units. The facility is spread across 8 lakh sq.ft with initial investment of Rs1,500cr and would be producing atta, noodles, wafers, biscuits, fruit juices and other fruit-based beverages. In addition to FMCG products, ITC would launch a range of ready-to-drink milk-based beverages and frozen desserts from this new plant to accelerate its dairy business. The first dairy-based product is expected to be launched in the second or third quarter of next fiscal year. ITC’s expansion plan in dairy business is a part of its long-term goal of reaching Rs100,000cr revenue from the non-cigarette business by 2030. The company had earlier announced an investment of Rs25,000cr in 65 projects and expects one or two facilities to be operational every year. ITC enjoys leadership position in all the segments it caters to, and is continuously trying to gain market share in its FMCG segment through new product launches and newer segments. Cigarettes, where it has 80% market share has been marred by the aggressive tax incidence under GST. Additionally, the uncertainty of timelines for tax rate revision under GST makes the company more prone to volume volatility. Further, though, the FMCG segment is set to gain from the supply chain benefits post GST implementation and shift in demand to the organised players, we remain cautious on its profitability.

BHEL BAGS RS7,300CR EPC CONTRACT FOR 1,320 MW SUPERCRITICAL POWER PROJECT IN TAMIL NADU - Against stiff International Competition Bidding, Bharat Heavy Electricals Limited has won an order for setting up a 1,320 MW Supercritical Thermal Power Project in Tamil Nadu. The order valued at over Rs7,300cr, for setting up the 2x660 MW Udangudi TPP has been placed on BHEL by Tamil Nadu Generation and Distribution Corporation Ltd. Significantly, this is the fourth order for supercritical sets finalized in the last three years by TANGEDCO, and all the four orders have been won by BHEL. The previous three orders viz 2x660 MW Ennore SEZ, 1x800 MW North Chennai Supercritical TPP Stage-III and 2x800 MW Uppur TPP were also secured by BHEL on ICB basis, reinforcing its position as the frontrunner in the power generation equipment industry in India. The key equipments for the project will be manufactured at BHEL’s Trichy, Haridwar, Bhopal, Ranipet, Hyderabad, Jhansi, Thirumayam and Bengaluru plants while the company's Power Sector - Southern Region shall be responsible for civil works, erection and commissioning of the equipment. The implementation of the new projects will help foster growth in Tamil Nadu and provide easy access to electricity to the people of the state. At present, BHEL has a significant share of 83% in the state’s coal-based generating capacity and has been a major partner in the power development programme of Tamil Nadu. BHEL is India’s largest power plant equipment manufacturer with 20,000 MW pa manufacturing capacity. It is the market leader in generation equipment space with 55% market share of the total installed power capacity.

EVEREADY INDUSTRIES GETS ORDERS WORTH RS23.85CR - It has received orders for supply of celling fans and smart LED Street lighting Luminaries worth Rs23.85cr.  Eveready Industries India is a manufacturer of dry cell batteries, flashlights, lighting and packet tea. It derived 55% revenue from dry cell batteries, 14% from flashlights, 22% from Lighting & Electricals and 9% from others in FY17. The company has recently forayed into home appliances business and is a known brand in east and north Indian markets. This is expected to keep volumes buoyant by 10-12% and likely to garner 65% market share by FY19E. It has shifted its business from declining CFL market to growing LED market and has launched new LED products. This shift is expected to add Rs.25cr to its revenue by FY18E.

RENAISSANCE JEWELLERY HITS 20% UPPER CIRCUIT ON STRONG Q2 NUMBERS - Renaissance jewellery reported more than doubled net profit at Rs16.9cr in September quarter. It had profit of Rs7.4cr in the same quarter year ago. The company’s revenue grew 34% at Rs384cr against Rs286cr in the corresponding quarter of previous fiscal. EBITDA margin improved to 6.94% from 5.6% in previous year quarter. Renaissance Jewellery Ltd. is engaged majorly in design, manufacturing & sale of jewellery products in overseas and India. It has 3 subsidiaries in UK, US & UAE. Its Indian subsidiary, Housefull International is into retail furniture business. It sells its products through specialty jewellery chain & online portals. It designs low cost products for Amazon, Hallmark, JCPenney and Walmart abroad. Company witnessed a gradual transition from gold to silver.

HDFC GROUP STOCK UP POST FUND RAISING PROPOSAL -The stocks of HDFC group were up following a fund raising proposal. HDFC Bank is up by 2.28% at Rs1,880, while HDFC Ltd stock is up by 1.3% at Rs1,730. HDFC bank’s board will meet on Wednesday, December 20, 2017 to consider a proposal for raising of funds. It is considering raising funds through a qualified institutional placement, which may also include a preferential issue to its parent HDFC Ltd. The fund raising will act as a positive for the bank as it would improve capital adequacy ratio to fund  future loan growth. HDFC Bank had last raised Rs9,800cr in February 2015 through a mix of ADRs and a QIP. HDFC bank stock is trading at 3.4x FY20E P/BV. We have positive outlook the stock. Mortgage lender HDFC Ltd., which holds 25.7% in HDFC bank, will also consider raising capital on December 19, which would be used to subscribe to HDFC Bank’s preferential allotment. This will improve its stake in HDFC Bank which will act positive for the mortgage lender.

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