MOSt Market Outlook
Date: Wednesday, April 23, 2014
Global Equity
SGX Nifty
Dow
Nasdaq
FTSE
Nikkei
Hangseng
6815.35
16514.37
4161.46
6681.76
14470.54
22573.06
-2.30
65.12
39.91
56.51
81.77
-157.62
Market Outlook
FLAT
.
Expect market to open on a flat note on account of global cues. US market gained marginally and
Asian markets are trading mixed. Today is the last day of April F&O expiry hence expect intra-day
volatility especially in the second half of the day. HDFC Bank reported inline with expected
quarterly result. We have a buy rating on the stock for investment. We have initiated coverage on
Monsanto India with a Buy rating and target price of Rs2150 (CMP Rs1600). The stock is currently
trading at 15.3x FY15E and 11.9x FY16E EPS. We value the stock at 16x FY16E EPS and arrive at a
target price of INR 2150 on the stock.
Research Updates:
HDFC Bank 4QFY14: In-line; Core PPP/PBT up 30% YoY; NIM 15bp+ QoQ; stress loans low at 50bp;
decadal high RoEs HDFC Bank's (HDFCB) 4QFY14 PAT grew 23% YoY to INR23.3b (in-line). NII was in
line with estimate at INR49.5b (+15% YoY and 7% QoQ) led by 15bp+ QoQ improvement in NIM to
4.4% and in-line loan growth (26% YoY). While FIPB approval and reduction in weights in MSCI
index can impact stocks performance in the near term, we believe valuations are at an attractive
level, with one-year forward P/BV of 3.4x (near its LPA). Comfort on earnings (25%+ CAGR)
remains high and RoE is expected to be at decadal best of 22%+.
Initiate coverage Monsanto India - Monsanto operates through 100 year old brand called Dekalb
and it is India's largest selling hybrid maize seed brand with 25% market share. It currently derives
40% of its revenues from products launched in last 2 years. We expect topline to grow at 25%
CAGR and PAT at 30% CAGR over FY14-16E. We believe the investments done in FY09-FY12 will
start paying off for Monsanto India in terms of new product launches and market share gain. We
also remain excited about the huge potential and scalability opportunity it has to offer over the
long term from GM food and RR Flex. The stock is currently trading at 15.3x FY15E and 11.9x FY16E
EPS. We value the stock at 16x FY16E EPS and arrive at a target price of INR 2150 on the stock. We
initiate coverage with a Buy.
Commodity
B.Crude$
Gold
Silver
Aluminium
Copper
Zinc
$
$
$
$
$
$
109.41
1,284.35
19.46
1,854.75
6,684.50
2,070.00
0.14
0.55
0.04
25.25
22.00
21.00
Others
10 Yr Gsec
Usd-Inr
Vix
$
$
$
8.86
60.77
33.36
0.00
0.18
-1.03
MOSt Velocity (Reiterate Buy) (Medium Term with few months horizon)
Hero MotoCorp
Buy
Company description
Current Market Price
2,267
Hero MotoCorp (HMCL), erstwhile JV between Honda Corporation Japan and the Munjal family, is
Maximum Buy Price
2,269
the leader in domestic motorcycle market with ~44% share, benefiting from a strong dealership
Allocation
7.5%
network and high penetration in the rural areas (~45% of sales) as well. Post split from Honda,
Hero MotoCorp is free to tap global opportunity in 2W.
Key highlights
Strong franchise of Splendor & Passion, and wide distribution reach makes it best placed to tap
strong demand growth, especially in rural markets.
Post split with Honda, Hero MotoCorp is free to explore global markets; it is targeting exports of
1m units over by FY17 (of total 10m units).
The company has announced plans to invest INR25.75b in the coming years for setting up of new
capacities (by 2m units to 9m units), a part distribution centre (Rajasthan) and R&D centre.
Valuation and view
Maintain Buy with target price of INR2,472 (14x FY16E EPS).
Hero MotoCorp
is the leader in domestic motorcycle market
with ~44% share, benefiting from a strong
dealership network
Motilal Oswal Securities Ltd., Motilal Oswal Tower, Level 6, Sayani Road, Prabhadevi, Mumbai 400 025