Pharma stocks out of favour today

Thu, 17 May 01:30 pm

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Although trading well above the dotted line, the Indian stock markets shed a portion of their gains during the previous two hours of trade. Stocks from the FMCG, realty and metal sectors are leading the pack of gainers, while those from the capital goods, healthcare and Information Technology spaces seem to be out of favour at the moment.

The BSE-Sensex is trading up by about 80 points (0.5%), while the NSE-Nifty is higher by about 30 points or 0.6%. Stocks from the mid and small cap spaces are also trading higher with the BSE Mid Cap and BSE Small Cap indices up by about 0.3% and 0.4% respectively. The Rupee is trading at Rs 54.41 to the US dollar.

Stocks of auto companies are trading mixed with Tata Motors and Hero Motocorp trading firm while Mahindra & Mahindra, Bajaj Auto and Ashok Leyland are trading weak. Ashok Leyland (ALL) announced its results for the quarter and year ended March 2012 recently. During the quarter, the company reported a revenue growth of 12% YoY. Growth during the quarter was led by both, pricing action as well as higher volumes sales. The company's operating profits however, declined as operating expenses increased at a faster pace as compared to the increase in revenues. Operating expenses increased by 15% YoY during 4QFY12. The company's operating margins stood at 10.9% as compared to 13.2% during the corresponding quarter last year. The decline in margins was mainly on the back of higher input costs as well as higher other expenses (both as a percentage of sales). ALL's net profits declined by 13% YoY on the back of a poor operating performance coupled with higher depreciation and finance charges.

For the full year FY12, ALL's revenues grew by 15% YoY, while profits declined by 10% YoY. The company's operating profits increased by 3.5% YoY while operating margins stood at 9.8% as compared to 10.9% during FY11. Similar to the performance in the fourth quarter of FY12, the company's profits were lower on the back of higher depreciation and interest costs.

FMCG stocks are trading mixed with Godrej Consumer Products and Marico Ltd trading firm while, Pidilite Industries and Procter and Gamble Hygiene and Health Care (P&G Hygiene) are trading in the red. Essel Propack Limited, the world's largest manufacturer of laminated tubes, is planning to increase prices for its products. The hikes would be in the range of 3% to 4%. The company is doing this in the light of increasing raw material costs for its products. The company has already hiked prices twice in the last financial year FY12. While Essel Propack is looking at maintaining margins by hiking prices, it also plans to control input costs through change in formulations and other packaging innovations. The management of the company expects a 12% growth in its topline during the current financial year FY13. The stock of the company is trading in the green.