The market stayed in the green zone for most of the early afternoon trade as index heavyweight RIL turned positive and European markets opened in the positive. However, the key benchmark indices once again turned negative in late trade as rally in crude oil prices stoked inflation worries and finally ended in red.
The Sensex and Nifty closed with losses of 0.2% each, while the mid-cap and smallcap indices closed with losses of 0.3% each. Among the front liners, Jindal Steel, M&M, Sterlite Inds, HDFC and Tata Steel gained 1–2%, while Hindalco Inds, Hero Honda, Maruti Suzuki, Cipla and Wipro lost 2–3%. Among mid caps, Kansai Nerolac, HOEC, Sun Pharma, Akzo India and Monsato India gained 7–9%, while Gujarat Gas, MVL, KGN Inds, SBBJ and Shree Ashtavinayak lost 4–6%.
Markets Today
The trend deciding level for the day is 17,947/5,374 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 18,103–18,367/5,404–5,443 levels. However, if NIFTY trades below 17,947/5,374 levels for the first half-an-hour of trade then it may correct up to 17,684–17,528/5,334–5,305 levels.
Mylan sues USFDA to block Ranbaxy’s sale of Lipitor
Mylan has sued the USFDA to block Ranbaxy’s exclusive rights to sell generic version of Pfizer‘s cholesterol pill Lipitor (US sales of US $7.27bn for the 12 months period ending September 30, 2010 – IMS Health).
Ranbaxy had reached an agreement with Pfizer in 2008 to sell copies of Lipitor beginning November 2011 and is entitled to a 180-day marketing exclusivity as a reward for being the first to challenge the Lipitor patent. According to Mylan, the other generic-drug makers should be allowed to enter the market as soon as the patent expires. In its complaint, Mylan stated that Ranbaxy is not eligible for the marketing exclusivity because of ‘false and unreliable data’ from its manufacturing site in Paonta Sahib, India, where Lipitor copies would be produced and, thereby, wants the court to force the FDA to say publicly that Ranbaxy’s application ‘is tainted by Ranbaxy’s misconduct’ and that, therefore, the application must be denied and the 180-day reward be announced void.
Currently, Lipitor contributes around Rs.67/share to our target price of Rs.588. Even in the worst-case scenario, assuming there is no contribution from Lipitor, it would be Rs.521/share. Thus, given the correction in the stock price and the valuation of around 2.5x and 2.0x EV/sales (excl. FTF) for CY2011E and CY2012E, respectively, we believe the stock currently discounts most of the negatives. Hence, we maintain Buy on the stock with a target price of Rs.588.
Sadbhav Engineering bags orders worth Rs.869cr
Sadbhav Engineering (SEL) has bagged two irrigation orders worth Rs.869cr from The Executive Engineer, Narmada Development Division, Mandleshwar, Madhya Pradesh. The projects are worth Rs.349cr and Rs.519cr and are in a JV with GKC Projects, with SEL’s share at 60% and 40%, respectively. This is a positive development for the company and its order backlog now stands at ~Rs.8,150cr (4.6x FY2011E revenue).
At current levels, the stock is trading at valuations of 11.9x FY2012E earnings and 2.0x FY2012E P/BV on a standalone basis, which we believe is attractive considering its huge BOT portfolio, well-funded balance sheet and robust order backlog. Our target P/E multiple for its construction business (expected to post earnings CAGR of 51.6% over FY2010–12E) is 12x and we have valued its BOT arm on DCF basis. We maintain a Buy rating on the stock with an SOTP-based target price of Rs.173/share.
MPL bags road project worth Rs.1,500cr
Madhucon Projects Ltd. (MPL) has bagged an annuity project worth Rs.1,500cr from National Highway Authority of India for four-laning of Ranchi-Rargaon-Jamshedpur section of NH-33, Jharkhand. The project is awarded under the National Highway Development Programme-III on DBFOT basis, with semi-annual annuity of Rs.133.2cr. The concession period is 15 years, including a construction period of 30 months. This is the same order in which MPL was disqualified and later the Delhi High Court had intervened. With this order, MPL’s outstanding order book stands at ~Rs.5,600cr (3.3x FY2011E revenue), thus enhancing revenue visibility. This is positive for MPL, as the company will be able to book EPC revenue in the coming quarters (FY2013 onwards), thus boosting its overall revenue.
The key triggers to watch out for MPL should be the pick-up in execution in the development business and building of an attractive asset portfolio before it plans to raise money via an IPO, which would fructify somewhere in FY2012 only and will be based on the market conditions prevailing then. Hence, we believe until then the stock would be a sector performer and real value would be created only on unlocking at the subsidiary level. We maintain our Buy view on the stock with an SOTP target price of Rs.171. Our SOTP target price is arrived by assigning P/E of 10x on FY2012E earnings (Rs.89.9/share), valuing the BOT projects on NPV basis (Rs.52.0/share) and other investments in Madhucon Infra and the real estate venture on BV basis (Rs.25.2/share and Rs.3.9/share, respectively).
Economic and Political News
- Imports of sensitive items in April–December up 8%
- Media and entertainment industry to touch US $28bn by 2015: FICCI-KPMG
- Gap between FDI and FIIs seen at US $14bn in FY2011
- Rs.700cr fine imposed on telcos for violation of laws
Corporate News
- Essar prepays Rs.4,230cr raised through NCDs
- Hind Copper to invest Rs.3,677cr to quadruple capacity
- Monnet Ispat acquires coal mine in Indonesia for Rs.108crRead More... For the latest updates PRESS CTR + D or visit Stock Market news Today
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