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Weekly Wrap
Investment Ideas
November 07, 2014
Torrent Pharmaceuticals
BUY
CMP `942
Elder deal to bolster presence in newer therapy
areas
Torrent completed its `20bn buyout of Elder Pharma’s
domestic branded formulations business at end of Q1; as per
management the acquired business would be EPS accretive
in third year and brings in to the fold brands like Shelcal,
Chymoral and Carnisure which are top ranking with >50%
market share in their respective therapeutic segments.
Torrent ranks 4th in Cardiovascular and Neuro-Psychiatry in
domestic market and the acquisition brings scale to Torrent’s
Gynecology and Pain divisions and adds women healthcare
to the therapy basket. The acquired brands had Q1 sales of
`770mn (as per AIOCD) and focus would be on five key brands
(including above 3) from the acquired portfolio which have
the potential to double in next 4-5 years. Overall we expect
domestic business to register robust revenue cagr over next
3 years supported by mid teens annual growth in domestic
business ex-Elder’s acquired brands.
International business to see robust traction
Torrent had close to 10% market share in Cymbalta (anti
depressant) in US and since Cymbalta moved out of
exclusivity in June 2014, it has endured pricing pressure being
a 10-player market. However, we expect healthy growth in
ex-Cymbalta US business with 8-10 product launches likely in
current fiscal. In Brazil, we factor in growth at par with that
of target market led by market share gains due to prior year
price reductions; forecast 17% revenue cagr for international
business with growth driven by US and steady contributions
from Europe and ROW businesses.
Attractive valuations, 17% EPS cagr underpin our
BUY reco
Sector: Pharmaceuticals
Sensex:
52 Week h/l (`):
10
TORNTPHARM
15,604
FV (`):
Promoters
71.5
71.5
71.5
180
Insti
19.6
19.7
19.4
150
8.9
8.8
9.1
120
Others
0
FY11
FY12
FY13
FY14
Source: Company, India Infoline Research
FY15E
FY16E
Torrent
240
Sensex
210
90
Oct-13
Apr-14
Oct-14
business and healthy international traction provide visibility
on near term earnings. Given the ~17-18% revenue and
EPS cagr over FY14-16 and still healthy return ratios despite
Elder deal, we believe the valuation discount is unjustified
and stock deserves rerating; recommend BUY. Slower than
expected growth in US/Europe and within Elder portfolio
constitute key risks to our recommendation.
Financial summary
Y/e 31 Mar (` m)
Revenues
yoy growth (%)
OPM (%)
FY13
FY14
FY15E
FY16E
32,111
41,847
50,519
58,123
19.1
30.3
20.7
15.1
6,970
10,357
12,781
14,996
21.7
24.8
25.3
25.8
4,328
6,639
7,460
9,105
yoy growth (%)
52.4
53.4
12.4
22.1
EPS (`)
51.1
39.2
44.1
53.8
P/E (x)
18.4
24.0
21.4
17.5
P/BV (x)
2.8
4.2
3.3
2.6
EV/EBITDA (x)
5.8
8.1
6.4
5.2
0.5
0.6
1.0
0.8
ROE (%)
36.5
45.0
34.4
33.0
ROCE (%)
31.0
32.4
24.1
24.9
Source: Company, India Infoline Research
5
5
Share price chart
Sep14
Debt/Equity (x)
15
NSE code:
Jun14
Reported PAT
20
940 / 404
Mar14
Margins to expand over FY14-16
25
500420
Share holding pattern
(%)
Operating profit
%
BSE code:
Market cap (`cr):
Torrent Pharma trades at ~17.5x FY16 earnings at a discount
to other mid cap pharma peers. Mid teens growth in domestic
30
Sector View: Positive
27,869
India Infoline Weekly Wrap
Market Outlook
After notching three weeks of gains, the market took a pause this
week even as it hit fresh highs on Wednesday. The result season has
been mixed bag with more number of hits than misses. The trading
activity was thin (compared to previous week) due to a truncated
week. Broader markets was focused on quarterly earnings where
stocks which delivered above estimate results saw the maximum
traction. A lot of action was also seen in counters which moved in and
out the MSCI India indices.
Realty was back in flavor after months of disappointment. However,
the index did come of its high and was among the best performing
indices for the week. IT stocks TCS and HCL Tech saw some pressure
at higher levels.
Technical View
Nifty after breaching 8200 barrier is now facing stiff resistance at
8400 level for previous three trading session. Current formation
of Nifty and Banknifty suggest a consolidation phase most likely in
the next 1-2 weeks. Though IT stocks have recovered the strength
in the move is missing. PSU Banks are exhibiting strength as we
see buying emerging at lower levels despite results being slightly
disappointing.
F&O View
The coming week will see the market focus on earnings. Investors
will pay close attention to the currency movement and FII inflows. If
global markets are supportive, Nifty will attempt to breach 8480-8500
next week. High beta companies along with mid-cap stocks will be in
limelight.
Markets saw flat closing on truncated week, but decisively able to
hold levels of 8300. The Nifty index futures saw mild unwinding of
longs positions from FII front at higher levels. Aggressive options
writing across the strikes from 8200 to 8500 zone, indicate range
bound moves ahead. Maximum OI build on 8400 calls and 8200
puts indicates the trading range. Banking and Oil & Gas had seen
strong long buildup likely to remain firm in coming week.
FIIs/MFs activity
Advance/Decline
2,200
(Rs cr)
2,100
Net FIIs inflow
2,000
1,800
(No of stocks)
Advance
Decline
1,800
Net MFs Inflows
1,600
1,500
1,400
1,200
1,200
1,000
900
800
600
600
400
300
200
0
0
30-Oct
31-Oct
3-Nov
29-Oct
5-Nov
Global performance
31-Oct
7.2
2.1
Sensex
1.9
Nasdaq
1.6
Shanghai
1.5
IT
(%)
4.3
Power
4.0
BSE-200
3.5
Banks
3.4
3.4
Oil & Gas
3.1
Health Care
Auto
3.1
(2.0)
2
0.0
2.5
FMCG
(%)
2.0
4.0
6.0
8.0
5.4
5.2
4.8
Realty
Small Cap
(0.6)
5-Nov
Capital Goods
Metals
2.1
Nifty
Hangseng
3-Nov
Sectoral performance
Nikkei
Dow Jones
30-Oct
1.0
0.0
2.0
4.0
6.0
India Infoline Weekly Wrap
Technical Check
Nifty 50 & CNX 500 top 10 Losers
Nifty 50 & CNX 500 top 10 gainers
NSE Nifty
NSE Nifty
CNX 500
Company
CMP
(`)
Dr Reddy'S
%
Chg Company
CMP
(`)
%
Chg
Company
CNX 500
CMP
(`)
3,397
9.8 Bombay Burmah
304
24.1
Nmdc Ltd
Axis Bank
469
9.0 Ramco Industries
86
19.0
United Spirits
Dlf Ltd
135
8.3 Gvk Power & Infra
12
16.9
Gail India
BPCL
759
8.1 Himachal Fut
21
16.8
Hero Moto
Sun Pharma
894
7.9 Opto Circuits
22
16.7
Coal India Ltd
%
Chg Company
158
2,585
485
2,888
CMP
(`)
%
Chg
(6.3) Carborundum U
180
(7.4)
(5.5) Jubilant Life
136
(7.0)
(5.0) Berger Paints
370
(6.8)
(4.8) Nmdc Ltd
158
(6.3)
34
(5.7)
(5.0)
345
(4.3) Peninsula Land
391
(4.1) Gail India Ltd
485
1,239
(3.8) Hero Motocorp
2,888
(4.8)
70
(4.5)
Tech Mahindra
2,652
6.9 Gabriel India Ltd
96
16.6
Bharti Airtel
Infosys
4,167
5.6 Ksk Energy
76
16.5
M&M
5.6 Max India
404
16.3
Hindalco
5.5 Sks Microfinance
363
16.3
Cairn India Ltd
275
(2.5) Coal India
345
(4.3)
65
15.2
BHEL
249
(2.4) Bharti Infratel
279
(4.2)
Bank Of Baroda
Lupin
962
1,419
HUL
762
4.9 RCF
Technically strong
Company
Tata Global Bev
Petronet Lng
Acc Ltd
Essar Oil Ltd
CMP
(`)
Total
Traded Qty
(lacs)
10 days
Average
Traded Qty
(lacs)
161
158
1.6
Company
CMP
(`)
10 days
Moving
Average (`)
18.5
Divi'S Lab
1,752
1,801
Gujarat Nre Coke
60
59
1.8
68.9
201
197
2.0
406.8
1,509
1,479
2.0
31.0
M&M
123
121
2.2
54.5
Jain Irrigation
Bulk deals
Total
Traded Qty
(lacs)
10 days
Average
Traded Qty
(lacs)
(2.7)
218.0
71.4
8
8
(2.5)
246
252
(2.5)
9.3
1,239
1,270
(2.5)
46.1
84
86
(2.4)
47.7
Sesa Sterlite
Book closure and record date
Qty
(lacs)
Price
(`)
Company
Date
Purpose
GODREJCP
11 Nov 2014
2nd Interim Dividend - `.1.00
S
9.3
340.1
HEXAWARE
12 Nov 2014
Interim Dividend - `.2.35
Astral Poly Technik
B
17.6
340.0
Citigroup
OnMobile
B
6.2
50.2
Goldman Sachs
SKS Microfinance
B
9.2
325.1
Date
Institution
Scrip name
31-Oct
CITIgroup Global
Mkt
Astral Poly Technik
31-Oct
IDFC MF
5-Nov
3-Nov
B/S
Nifty Future VWAP
8400
(2.7) Man Industries
Technically weak
10 days
Moving
Average (`)
Nalc
156
Nifty Futs Close
Nifty Vwap
8300
ATULAUTO
13 Nov 2014
Interim Dividend - `.2.50
MRF
13 Nov 2014
2nd Interim Dividend - `.3.00
NMDC
13 Nov 2014
Interim Dividend - `.3.00
Bank Nifty Future VWAP
17600
17500
Bank Nifty Futs Close
Bank Nifty Vwap
17400
17300
17200
8200
17100
17000
16900
8100
16800
16700
8000
28-Oct 29-Oct 30-Oct 31-Oct 3-Nov 5-Nov
16600
28-Oct 29-Oct 30-Oct 31-Oct 3-Nov
5-Nov
3
India Infoline Weekly Wrap
Commodity Corner
Base metals
Precious metals
LME base metals remain adversely influenced by the concerns
over the health of the real estate sector in China. A private survey
revealed that home prices in China dropped for a sixth consecutive
month in October. In addition, supply side concerns have eased
in copper markets after workers at Freeport-McMoRan have
cancelled a planned one-month strike due to start next week after
reaching an agreement with the company's management. On
fundamental front, ILZSG reported that the production of e-bikes
in China has slowed after a rapid expansion over the past 10 to
12 years. E-bikes market has saturated, which in the process is
dampening the demand growth for lead batteries. However, lead
demand from automobiles and mobile phones remain stable.
Global market is expected to be in a 40,000 ton deficit this year
and in a 25,000-ton shortfall in 2015.
Precious metals bore the brunt of aggressive selling, as US dollar
surged against the yen and rose to multi year high against a basket
of currencies. The fierce strength into the greenback is attributed
to the BOJ decision to substantially expand its stimulus program.
The apex bank stated that it would accelerate purchases of
Japanese government bonds and also triple its purchases of ETF’s
and REITs. The Bank will increase its holdings at an annual pace of
80 trillion yen, equivalent to gigantic US$723.4bn. In addition, the
Japanese government pension fund will increase its allocation into
the purchases of domestic and foreign stocks. Meanwhile, Euro
has weakened further as there was no surprise from the ECB policy
meeting. Markets were expecting a Japanese kind of stimulus
move from ECB chief Mario Draghi. Nevertheless, the central bank
mentioned that it intends to expand its balance sheet but failed to
provide any details on when and how the process will be executed.
On outlook, the metals fraternity can derive some optimism
from the positive flow of US macroeconomic numbers.
However, deteriorating health of the Chinese real estate
sector continues to cast dark shadows over the demand
prospects for the non-ferrous metals. Chinese manufacturing
activity is neither portraying any signs of optimism, with the
official manufacturing PMI declining to a five-month low in
October.
The greenback is maintaining its buoyancy against various
currencies and the flow of US macroeconomic numbers is
indisputably on the positive side. The market focus will be
accentuated on the October payroll numbers released by
the US government, wherein the expectations are calling for
addition of 235,000 jobs and the unemployment rate dipping
below 6%. On outlook, the combination of strengthening
greenback and buoyant equity markets will keep the gold
bugs very much on the defensive.
Note: This market commentary is written at 12:00 PM IST
Weekly inventory update
LME prices
Base Metals (US$/ton)
High
Low
LTP*
Chg(%)
Tons
Abs Chg.
Chg (%)
(1.7)
Copper
6,795
6,544
6,660
(0.5)
Copper (LME)
159,775
(2,825)
Nickel
16,175
14,900
15,500
(1.8)
Nickel (LME)
387,222
3,780
1.0
2,331
2,202
2,227
(3.5)
Zinc (LME)
695,850
(5,125)
(0.7)
Zinc
Aluminium
2,079
2,018
2,076
1.8
Lead
2,040
1,956
2,010
-
Aluminium (LME)
4,427,975
(7,550)
(0.2)
220,550
(5,975)
(2.6)
10,245
1,010
10.9
Lead (LME)
Tin (LME)
Precious Metals (US$/ounce)
Gold
Silver
* Last Traded Price
High
Low
LTP*
Chg(%)
89,570
(6,254)
(6.5)
1,203
1,138
1,141
(2.7)
Shanghai Zinc
111,761
(28,370)
(20.2)
16.5
15.1
15.3
(5.1)
Shanghai Aluminium
226,133
(13,627)
(5.7)
LME Copper
10500
Shanghai Copper
COMEX Gold
US$/ ton
2050
Copper (LME)
US$/ ounce
Gold
1900
9500
1750
8500
1600
1450
7500
1300
6500
4
Nov-14
Aug-14
Feb-14
May-14
Nov-13
Aug-13
Feb-13
May-13
Nov-12
Aug-12
Feb-12
May-12
Nov-11
Aug-11
Feb-11
May-11
Nov-10
1000
Aug-10
Nov-14
Aug-14
Feb-14
May-14
Nov-13
Aug-13
Feb-13
May-13
Nov-12
Aug-12
Feb-12
May-12
Nov-11
Aug-11
Feb-11
May-11
Nov-10
5500
Aug-10
1150
6
0
5
110
100
30
(%)
Six core Ind.
(INR/EURO)
(INR/USD)
(INR/GBP)
(INR/JPY)
IIP and Six core Industries
IIP
130
12
8
0
70
(8)
60
Currency Movements
90
80
60
50
70
Nymex Crude
Nov-14
Aug-14
May-14
Feb-14
Nov-13
10yr Gsec yield
3mth CP rate
Aug-13
May-13
Feb-13
Nov-12
4
Aug-12
9
Feb-12
6
May-12
10
Nov-11
8
(%)
Aug-11
10
Feb-11
12
13
May-11
14
Nov-10
MFG Products
Aug-10
Sep-14
Jun-14
Mar-14
Dec-13
Monthly Inflation
Sep-13
Jun-13
Mar-13
Dec-12
Sep-12
Jun-12
(%)
Mar-12
Dec-11
Sep-11
Jun-11
14
Mar-11
May-11
Jul-11
Sep-11
Nov-11
Jan-12
Mar-12
May-12
Jul-12
Sep-12
Nov-12
Jan-13
Mar-13
May-13
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
2
Mar-11
Inflation
Mar-11
May-11
Jul-11
Sep-11
Nov-11
Jan-12
Mar-12
May-12
Jul-12
Sep-12
Nov-12
Jan-13
Mar-13
May-13
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
(4)
Mar-11
May-11
Jul-11
Sep-11
Nov-11
Jan-12
Mar-12
May-12
Jul-12
Sep-12
Nov-12
Jan-13
Mar-13
May-13
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
May-14
Jul-14
Sep-14
16
Jul-11
Sep-11
Nov-11
Jan-12
Mar-12
May-12
Jul-12
Sep-12
Nov-12
Jan-13
Mar-13
May-13
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
India Infoline Weekly Wrap
Chartbook
Interest Rate
5yr AAA bond yield
12
11
8
7
Crude (Brent/ Nymex)
120
Brent Crude
110
4
100
90
80
Dollar Index
95
90
Dollar Index
70
85
80
40
75
Source: Bloomberg
5
6
Source: Bloomberg
29x
24x
30,000
18x
20,000
13x
10,000
7x
0
22.0
PE (x)
Cur. Yr
Nasdaq
24.0
5-Nov
3-Nov
1-Nov
30-Oct
28-Oct
26-Oct
24-Oct
22-Oct
20-Oct
18-Oct
(Rs)
Mexico Bolsa
60,000
16-Oct
VIX
Sensex
Sensex PE Band
14-Oct
35
12-Oct
1,400
10-Oct
Volatility Index
S&P 500
40,000
Nov-14
250
Dow Jones
50,000
Aug-14
May-14
Feb-14
Nov-13
Aug-13
40
Taiwan
1,370
May-13
300
Straits
10
Feb-13
Oct-14
Jul-14
Apr-14
Jan-14
Oct-13
Jul-13
Apr-13
Jan-13
Oct-12
Jul-12
Apr-12
Jan-12
Oct-11
Jul-11
Apr-11
Jan-11
Oct-10
50
FTSE
1,375
Nov-12
60
DAX
15
Aug-12
US
China
Hang Seng
1,380
Feb-12
PMI
Shanghai
20
May-12
Germany
Jun-14
1,385
Nov-11
Euro Zone
Dec-12
25
Aug-11
India
Jun-11
Nov-09
1,390
May-11
40
May-08
Oct-06
Apr-05
30
Feb-11
(%)
Oct-03
Apr-02
Oct-00
Apr-99
45
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Jun-14
Jul-14
Aug-14
Sep-14
Oct-14
65
Nov-10
India Infoline Weekly Wrap
Chartbook...
US Initial Jobless Claims
550
500
Initial Jobless Claims ('000)
55
450
400
350
Sensex Earning Estimates
FY15
1,395
PE Comparision
1-Yr Fwd
20.0
18.0
16.0
14.0
12.0
10.0
8.0
6.0
India Infoline Weekly Wrap
News Recap
The Finance Ministry has asked Reserve Bank of India Governor
Raghuram Rajan to provide greater flexibility to banks funding
stalled infrastructure projects, after concerns were raised by senior
bankers that some lending requirements were too 'stringent'. (BS)
Oil marketing companies (OMCs) have slashed petrol prices by `
2.41 a litre and rates of diesel by ` 2.25 a litre, including taxes, with
effect from Friday night. State oil marketing companies have cut jet
fuel prices by over 7% from the October rate. (BS)
Output of core industries grew at an eight-month low of 1.9% in
September, down from 5.8% in August, indicating overall industrial
production will be subdued. (BS)
Telecom regulator TRAI is likely to review this week interconnect charges, which one telecom operator pays to another
for completing calls and SMSes. In the previous review, TRAI has
reduced interconnect charges, leading to reduction in tariffs. (ET)
In the six months between March 21 and September 19 this year
—gross credit of the banking system grew by a tepid 1.76%. (BL)
Tata Steel labour representatives, slated to meet chairman Cyrus
Mistry later this month, are seeking a commitment from the
company to consider possible alternatives put forth by its own
experts to the sale of the steelmaker's long products business in
Europe. (ET)
For October, the PMI fell to 50 from 51.6 in September. The overall
composite PMI, which combines manufacturing and services
sectors, was down to 51 in October, from 51.8 a month ago, (BS)
Amid strong protests from existing airlines, the ministry of civil
aviation is considering diluting the restriction on domestic carriers
from commencing international operations, instead of outright
abolition of the norm, termed the 5/20 rule. (BS)
Infosys has launched a major recruitment drive in the US, where it
plans to hire about 2,100 people - both experienced and freshers,
over the next 12 months. (BS)
Reliance Industries said it planned to sell its share in the Eagle Ford
Shale Midstream business in the US, which it has with a partner,
Pioneer Natural Resources. (BS)
Ranbaxy Laboratories said the US health regulator has revoked its
tentative approvals for its generic anti-viral drug and stomach and
oesophagus problems treatment tablets. (BL)
Suzlon has developed a new hybrid wind turbine generator that
is nearly one-and-a-half times taller than the conventional wind
turbine. (BL)
Maruti Suzuki India Limited launched Alto K10 with automated gear
shift technology tagged at ` 3.80 lakh (ex-showroom price in Delhi).
(BS)
Biocon and US-based CytoSorbents Corporation announced that
they have expanded the scope of their strategic partnership for
CytoSorbents’ CytoSorb, a critical care drug. (BS)
Dabur has launched its premium offering of its Chyawanprash
called Dabur Ratnaprash. (BL)
GAIL India said it has signed an initial agreement with State Oil
Company of Republic of Azerbaijan for jointly pursuing LNG
opportunities. (ET)
Aditya Birla Minerals, owned by the Aditya Birla Group, is in talks
with a potential buyer to sell its Mt Gordon copper mine in Australia.
9ET)
Wockhardt's steps to have the United States lift bans on products
from two of its plants are unlikely to approved until next year. (ET)
Threatening to intensify their agitation over low wages and other
grievances, the Hindustan Lever Employees Federation asked the
company to resolve the issues at the earliest or face more industrial
unrest. (BL)
Event Calendar
Period: 10th Nov – 14st Nov
US
• Sep Wholesale Inventories MoM (12 Nov)
•
Oct Monthly Budget Statement (13 Nov)
•
Oct Import Price Index MoM (14 Nov)
China
• Oct Retail Sales YTD YoY (13 Nov)
•
Oct Industrial Production YoY (13 Nov)
India
• Oct CPI YoY (12 Nov)
IIFL, IIFL Centre, Kamala City, Senapati Bapat Marg, Lower Parel (W), Mumbai 400 013
The information in this newsletter is generally provided from the press reports, electronic media, research, websites and other media. The information also includes information from interviews
conducted, analysis, views expressed by our research team. Investors should not rely solely on the information contained in this publication and must make their own investment decisions based on their
specific investment objectives and financial position and using such independent advisors as they believe necessary. The materials and information provided by this newsletter are not, and should not be
construed as an advice to buy or sell any of the securities named in this newsletter. India Infoline may or may not hold positions in any of the securities named in this newsletter as a part of its business.
Past performance is not necessarily an indication of future performance. India Infoline does not assure for accuracy or correctness of information or reports in the newsletter.
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