Energy stocks lead the recovery

Wed, 2 Feb 09:30 am

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Asian markets have opened today on a positive note. Japan (up 1.9%) and Hong Kong (up 1.4%) are leading the gainers' pack currently. These gains are following cues from the US markets, which closed up by 1.3% yesterday. As for the Indian markets, these have also opened amidst gains today. The buying is currently being led by stocks from the energy and realty sectors.

The BSE-Sensex is trading higher by around 200 points (1.1%), while the NSE-Nifty is up about 40 points (0.7%). Mid and small cap stocks are also trading with gains, with the BSE Midcap and BSE Small cap indices up by 1% each. The rupee is trading at 45.51 to the US dollar.

Bharti Airtel announced its 3QFY11 results a short while ago. The company has recorded a 4% QoQ growth in consolidated net sales (including Zain Africa's business) during the quarter. The results are not comparable on a YoY basis i.e., as compared to 3QFY10, as the company did not have Zain numbers to show then. Anyways, coming back to 3QFY11 performance, both the Indian and African mobile services business have grown sales by 4% QoQ. However, led by high operating costs, the company has lost out on the margin front. Its consolidated operating margins during 3QFY11 stand at 31.6%, as against 33.7% last quarter (2QFY11). The pressure on margins has largely come on the back of continued investments in Africa. This is seen from the fact that Bharti's India business maintained its PBIT margins at 24% (same as in 2QFY11), the same for the Africa business dropped from 4.4% to 1%. Anyways, on the back of weaker overall margins, Bharti's net profits are down 22% QoQ during 3QFY11. The company's current subscriber base stands at a mammoth 208 m spread across 19 countries. The company has faced pressure on both its average revenue per user (ARPU) and minutes of usage (MoU), with these declining by 2% QoQ and 1% QoQ respectively during 3QFY11. The stock has opened the day in the red. Other telecom stocks like Tata Comm and Reliance Comm are trading with gains currently.

Power stocks have opened today on a positive note. NTPC and PTC India are leading the gainers' pack. NTPC, India's largest power generating company, yesterday announced a weak set of numbers for the quarter ended December 2010 (3QFY11). While sales grew by 19% YoY, net profits were almost at the levels seen in the corresponding quarter of previous year (3QFY10). Its operating margins declined to 30.8%, from 33.2% earlier. One reason for the weak overall performance was the marginal growth in power generation (up 0.8% YoY) and volume sales (up 0.8%) during the quarter. These were impacted by the planned maintenance that the company conducted at some of its power stations, which led to lower availability of these plants. Also, on account of scarce supply of coal and gas, NTPC's plants operated at lower capacity utilisation as compared to 3QFY10. While the utilisation (measured by PLF or plant load factor) for its coal plants dropped from 90.5% to 87.2%, PLF for the gas plants declined from 73.6% to 66.3%. In order to meet some of its future fuel requirements, the company is looking to produce 45 m tonnes of coal from its own mines by 2017. While the plans look grand, as they have always been for NTPC, it's the execution that will count.