Stock Market News for May 3 , 2014 …

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Corporate News

Weak start to auto sales for FY15; Motown reports tepid sales in the month of Apr14 – Negative in short term for Maruti and M&M, Positive for Hero Motocorp Listed 4W players

Maruti Suzuki India Ltd sales fell 12% to 79,119 units in Apr14 compared to a year ago.
Its volumes were dragged down by the mini segment which includes Maruti 800, A-Star, Alto and WagonR. Sales of these models shrank by a fourth compared to the year-ago period. Sales of DZire, Maruti’s compact sedan, also dropped 17% to 16,008 units.

Mahindra and Mahindra Ltd, saw its passenger vehicle sales decline 13% to 18,148 units. The company sold a total of 34,107 units, including commercial vehicles, during the month— down 15% from April 2013.
Tata Motors will post its domestic sales figure today.

Private 4W players

Sales at the local arm of Toyota Motor Corp. were hit by labour unrest at its plant near Bangalore. The company sold 7,562 units, down 16% over a year ago. Volumes at General Motors India Pvt. Ltd, too, contracted 35% to 5,302 units over a year ago.

New models held out hopes for Hyundai Motor India Ltd, Honda Cars India Ltd and Ford India Pvt. Ltd. While the new City and Amaze propped up Honda sales 30% to 11,040 units, it was the Xcent (a compact sedan) and the Grand (a premium hatch) which helped the India arm of the Korean car maker with sales increasing 8% to 35,248 units. For Ford, which sold 6,651 units, up 66%, the EcoSport continued to drive volumes.

2W players
Two-wheeler firms posted robust sales during the month, led by market leader Hero MotoCorp Ltd which despatched 571,054 units, up 14% from a year ago. Sales at Honda Motorcycle and Scooter India Pvt. Ltd also rose 21% to 313,942 units over a year ago. Albeit from a lower base, domestic sales at Yamaha Motor India Sales Pvt. Ltd increased 42% to 51,158 units. Mahindra Two Wheelers, too, saw a steady increase to 14,896 units against 5,367 units last year.

Conclusion

Despite of excise duty cut offered by the govt, sales of 4W continues to remain tepid. Industry is hopeful of revival in sentiments post the outcome of general election on 16th May. In short term, Maruti and M&M will come under selling pressure. In medium to long, India’s automobile growth story is intact and we recommend investors to accumulate the stocks on dips.

For 2W, Hero Motocorp has posted healthy growth and we may positive reaction in today’s trade. However, on account of expected impact of the El Nino on the upcoming monsoons, we expect some slowdown in the 2W volumes, going ahead. We are cautiously optimistic on 2W segment and our top pick continues to be Hero Motocorp, TVS Motors and Eicher Motors.

For 4QFY14, Shoppers Stop posted degrowth in PAT, led by high finance and depreciation cost. Operating parameters are inline with expectations. Turnaround likely during FY14-FY16E period – Positive in medium to long term for Shoppers Stop

For 4QFY14, Net sales grew by 17% YoY to Rs 7905.4 mn. SSSG was healthy 8.4%, led by 6.5% growth in volume and 1.9% was price/mix led growth. Shoppers stop added 2 stores 4Q14, taking total store count to 67 stores. Gross margin expanded by 10bps to 33.4%. EBITDA declined by 0.9% YoY to Rs 379.5 mn and EBITDA margin compressed by 90 bps to 4.8%. The pressure on margins is mainly due aggressive expansion during FY14 leading to front loading of expenses on employee, lease rental and start-up cost. Interest cost was up 37.3% YoY to Rs 107.8 mn and Depreciation expense was up by 42.5% YoY to Rs 178.1 mn. Overall, Adj PAT degrew by 46.6% YoY to Rs 81.1 mn.

Going forward, during FY14-FY16E, we expect SSSG for Shoppers stop to be in the range of 7-8%. Moreover, we expect Hypercity to breakeven on EBITDA levels. We recommend investors to BUY the stock with medium to long term perspectives. For further details, please refer to out result Update.

National News

Infrastructure output growth slows to 2.5% in March

Annual infrastructure sector output growth slowed to 2.5% in March, dragged down mainly by a contraction in production of crude oil, natural gas and fertilizers. The sector grew an annual 4.5% in February. In the fiscal year that ended in March, the output grew an annual 2.6% compared with a 6.5% growth a year ago. The infrastructure sector, which comprises coal, crude oil, oil refining, natural gas, steel, cement, electricity and fertilizers, accounts for 37.9% of India’s industrial output.

Government readies plan to counter impact of weak monsoon rains

The agriculture ministry is making unprecedented preparations to counter impact of weak monsoon rains, which will be the top priority for the new government. Concerned that retail prices of pulses and rice have already risen 10% to 27% in past four months due to unseasonal rain and hailstorms, the agriculture ministry is working hard to make sure that food production is not badly hit by the weather as monsoon rainfall is likely to be weak this year.

World News

Fed Trims Bond-Buying Plan by another $10 billion

The Federal Reserve voted to trim its bond-buying program by a further $10 billion, brushing off data showing the U.S. economy slowed to a crawl in the first three months of the year. Federal Open Market Committee members voted unanimously to reduce the amount of cash it will inject into the economy for the fourth straight meeting, to $45 billion a month from $55 billion. Policy makers think the economy will pick up for the rest of the year following the weather-related first quarter lull.

U.K. Manufacturing Growth gains momentum

U.K. factory expansion improved strongly in April, at the fastest pace in five months, led by robust growth in output and new orders, suggesting that the economic recovery may continue to be led by the manufacturing sector. The seasonally adjusted Markit/Chartered Institute of Purchasing & Supply PMI climbed to 57.3 in April from 55.8 in March, which was revised from 55.3.

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