Heritage Foods Ltd
17/12/2014 Others
Heritage Foods stock price has more than doubled in the past one year, ie by ~104% to Rs373 and by ~86% since we initiated our coverage on the company on March 31, 2014 at Rs200. Of the two business segments it operates in, the dairy segment (77% of total revenue) has been the key growth driver while the retail business has been a drag on the companys profitability (unlikely to turn profitable before FY2016). Further, in south India (accounting for 92.5% of FY2014 revenues), where the government has introduced a minimum support price (MSP) for milk procurement, the competitive advantage of procurement for private players like Heritage Foods has reduced, which in turn has left little scope for margin improvement for the liquid milk division (~71% of dairy). Also, even after considering the best case scenario where milk volume is expected to grow at a CAGR of 3.7% over FY2014-17E coupled with retail business turning profitable by FY2017E, the current valuations of 11.6x PE on FY2017E earnings is on the higher side. As a result, we do not expect any notable upside in the stock and hence recommend a Neutral rating on the stock and drop our coverage on the same from December 17, 2014.
   Stock Holding Disclosure list as on December 15, 2014
16/12/2014 Disclosure
The list includes the stock position of Angel Broking and its Affiliates and/or its Analysts as on December 15, 2014. The stock holding position is pertaining to companies under the coverage of Analysts employed by Angel Broking and its Affiliates.
   Infosys Ltd
05/12/2014 Company Updates
In June 2013, Mr. Narayana Murthy had outlined guidelines for the company to return to industry leading growth. The company has reinforced the same and is confident of its strategy of achieving the objective of industry leading growth (around 15-18%) in the medium to long term with 25-28% EBIT margins. That would imply attaining the results by FY2017. However, a detailed plan for the same in terms of investments required to bring about this transition, is expected to be outlined only in April 2015. One of the key levers of the same will be employee productivity which stands at 75.2% as of 2QFY2015, leaving scope of improvement. Apart from organic growth, in terms of acquisition, the key focus of the company is on small innovative companies rather than acquiring scale in yesterdays technologies. Segments in which the company will be looking to acquire include-Artificial Intelligence, Automation, Internet of Things, Collaboration and Design.
   Automobile Sector
05/12/2014 Sector Updates
The auto industry continued to build on the growth trend witnessed over the last two quarters. The passenger segment viz (passenger vehicles (PV) and two-wheelers (2W) retained their double digit growth momentum, reporting 12% and 9% yoy growth respectively during November 2014. Also, the Commercial vehicle (CV) volumes recovered, reporting the first month of positive growth in the fiscal which is the key highlight of the monnth. Continued double digit growth in the medium and heavy commercial vehicle (MHCV) segment due to improvement in fleet utilization and moderation in decline in the light commercial vehicle (LCV) segment led to the improvement in CV sales.
   Bi-monthly Monetary Policy Statement FY2015
02/12/2014 Others
RBI has kept the policy repo, reverse repo, MSF and CRR rates unchanged at 8.0%, 7.0%, 9.0% and 4.0% respectively in line with our and market expectations. The RBI has revised its forecast downwards for CPI inflation to 6.0% by March 2015 and expects it to be around the same level over the next 12-month period. RBI has mentioned that going forward, in case the current downward momentum in inflation continues, interest rates could be reduced by early part of CY2015 and once stance changes, it will continue to remain accommodative over sustained period of time. GDP growth estimate for FY2015 is retained at 5.5%, with further improvement expected in FY2016. We expect decline in inflation will sustain in future. In our view, RBI will start reducing rates from March-April 2015 and we expect broader interest rates to be lower by 100bps over next 12 months.
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