Shares of Sun pharma and its research arm SPARC fell in the morning trade on Monday after the USFDA revoked an approval issued in March to SPARC for an epilepsy drug. (Reuters)

Shares of Sun pharma and its research arm Sun Pharma Advanced Research Company (SPARC) fell in the morning trade on Monday after the US Food and Drug Administration (USFDA) revoked an approval issued in March to SPARC for an epilepsy drug.

At 11.34 am, the SPARC shares were trading 2.32 per cent down at Rs 376.95 apiece. The scrip opened at Rs 379 and had touched a high and low of Rs 379 and Rs 368.50, respectively, in trade so far.

Sun Pharma shares were down 2.42 per cent at Rs 869 apiece. Sensex was down 54.50 points, or 0.21 per cent, at 25,809.

SPARC has received Complete Response letter (CRL) form USFDA for its New Drug Application (NDA) for Elepsia XR (Levetiracetam extended-release tablets 1000 mg and 1500 mg). SPARC had earlier received a final approval from USFDA in March 2015 for this product and was evaluating several marketing partners for commercialisation.

However SPARC has now received a CRL from the USFDA rescinding its earlier approval, citing that the compliance status of the manufacturing facility was not acceptable on the date of approval.

In a BSE filing SPARC said, “Elepsia XR TM is to be manufactured at Sun Pharmaceutical Industries (SPIL)’s Halol facility. SPIL is working with USFDA in resolving the cGMP deviations at the facility and has taken several corrective measures.”

Nomura has downgraded FMCG major Emami citing high valuations.

Japanese brokerage firm Nomura has downgraded FMCG major Emami citing high valuations.

According to Eikon data, the company has traded at 42 times of 1 year forward earnings as compared to 32.4 times of rivals.

The brokerage company prefers Dabur India, Godrej Consumer and Hindustan Unilever which offer higher growth at cheaper multiples.

The Eikon data said that the company’s stock has 13 ‘buy’, 8 ‘hold’ and 5 ‘sell’ ratings.

At 9.59 am, Emami shares were trading 0.33 per cent up at Rs 1099.55. Sensex was down 91.35 points at 25,772 during the same time.

The stocks of Emami from January 2015 till date has been up 39.3 per cent, whereas the NSE Nifty has declined 5 per cent during the same period.

With Reuters inputs

Emami stocks will be in focus after Japanese brokerage house Nomura downgraded company’s stocks citing high valuations. (Express Photo)

The BSE Sensex and NSE Nifty opened flat on Monday tracking mixed Asian cues. At 9.21 am, Sensex was up 43.38 points at 25,906.88. Similarly, Nifty was up 11.05 points at 7,879.55 during the same time

Shares that are likely to be in focus today

Emami: Stocks of the the company will be in focus after Japanese brokerage house Nomura downgraded Emami citing high valuations.

Nalco: Aluminium giant NALCO is all set to invest over Rs 65,000 crore to launch ambitious projects in the country and abroad, besides undertaking expansion and diversification into power and mining sectors in a big way.

Maruti Suzuki: Temporary workers at Maruti’s Manesar plant are demanding wage hikes similar to those given to permanent employees. The Manesar plant, which saw protests from temporary workers on Saturday, was closed on Sunday.

Amtek Auto: Lenders of Amtek Auto have agreed to give additional funds to the troubled auto component-maker but have asked the promoters to bring in some equity first.

Steel Authority of India Ltd (SAIL): The steel company is investing over Rs 2,600 crore for installing a three million tonnes per annum facility for hot rolled (HR) coils at its Rourkela plant to make auto-grade and special steel products. The Maharatna firm has awarded the contract for setting up this hot strip mill to a consortium led by Mitsubishi and Larsen & Toubro, a source said.

Sun Pharma: Sun Pharma Advanced Research Company Ltd (SPARC) said the U.S. Food and Drug Administration has denied its application for approval to launch a new anti-epilepsy drug, citing manufacturing quality issues at its production site.

Gammon India: The company  has secured the Engineering, Procurement & Construction (EPC) project worth Rs 1,709.99 crore from National Highways Authority of India (NHAI).

Essar Ports: Shareholders have approved its proposal to raise up to $1 billion through securities from domestic and international markets to fund expansion plans.

The BSE Sensex and NSE Nifty are likely to open in red on Monday tracking SGX Nifty and mixed Asian cues.

The BSE Sensex and NSE Nifty are likely to open in red on Monday tracking SGX Nifty and mixed Asian cues.

At 8.29 am (IST), SGX Nifty was down 0.49 per cent, or 38.50 points, at 7,885.50.

Asian stocks sagged on Monday after Wall Street’s uninspiring Friday performance and ahead of key economic indicators, while the dollar consolidated its gains against the yen and euro. Nikkei and Shanghai were down 1.14 per cent and 0.53 per cent at 17,677.12 and 3,076.03, respectively.

On Friday, the S&P 500 erased an early Federal Reserve-driven rally and closed slightly lower amid a selloff in biotech shares, and the Nasdaq lost 1 per cent. The Dow , however, managed to rise 0.7 per cent.

The European markets ended the Friday’s session on a positive note led by comments from Janet Yellen, which provided the clarity investors had been seeking on the direction of US monetary policy.

Back home, the Indian markets ended modestly higher on Thursday ahead of a long weekend and the upcoming monetary policy meeting on September 29. Mixed global cues, rupee weakness and portfolio churning on the eve of the expiry of September derivative contracts limited potential gains. Sensex and Nifty jumped 0.16 per cent and 0.29 per cent at 25,863.50 and 7868.50, respectively, on Thursday. Domestic equity markets were closed on Friday on account of Eid.

Markets Today
According to Angel Broking, the trend deciding level for the day is 25,828/7,856 levels. If Nifty trades above this level during the first half-an-hour of trade on Monday then the market may witness a further rally up to 25,985 – 26,107 / 7,907 – 7,946 levels. However, if Nifty trades below 25,828/7,856 levels for the first half-an-hour of trade then it may correct towards 25,706 – 25,549 / 7,817 – 7,765 levels.

Weak economic revival, global trade impacting port traffic: Our analysis of traffic at major ports, Adani Ports and Gujarat Pipavav (GPP), that cumulatively account for around 70% of India’s port volumes, suggests a slowdown in port traffic growth in 1H CY15, as weaker-than-expected domestic revival has impacted nonoil-non-gold imports while weak global growth continues to impact exports growth. The sector witnessed a tepid 3.9% y-o-y growth in 1H CY15.

Expect container traffic growth to be subdued near-term

After registering a robust 11% y-o-y (year on year) growth during 9MFY15, container traffic has slowed down to just 3% y-o-y in 1H CY15 owing to the weak EXIM trade. Our economics team has recently cut its growth estimates for non-oil-non-gold imports as well as for exports (ex-services). Besides, we believe that with containerisation already >50%, the scope for its rapid expansion going forward is limited. Consequently, we cut our estimates for container traffic growth for the sector from 9.5% CAGR (compound annual growth rate) in FY15-19 to 7.1% now.

Coal imports growth robust; but see risks going forward

Despite India’s muted power demand growth at 0.5% in 1HCY15 vs robust 8.5% domestic coal production growth, growth in coal traffic has remained strong at 20% driven by a robust 24% y-o-y growth in thermal coal. However, our bottom-up power and coal demand-supply analysis suggests that coal imports growth would turn flat in FY17 before starting to decline from FY18, as we expect Coal India to ramp-up its production at 11% CAGR in FY15-19. Thus, we cut our estimates for coal traffic growth for the sector from a 3.3% CAGR in FY15-19 to 1% now.

Expect only 4.5% CAGR in port traffic in FY15-19

Port traffic growth has a strong correlation with GDP. However, despite an improving economy, based on our bottom-up cargo-wise analysis, we expect port traffic to register a CAGR of only 4.5% in FY15-19 vs 4.7% recorded in FY10-15. We attribute our estimates to: (i) muted refinery capacity adds, which could hurt crude/POL (petroleum oil and lubricants) traffic (37% share in FY14), (ii) ramp up in domestic coal supply, impacting coal import traffic (24% share), and (iii) weak growth for containers (17%).

Market share gains by private sector ports would continue

Weak port traffic growth for the sector would also impact private sector operators. Consequently, we have cut our port traffic growth estimate for Adani Ports to 14% CAGR in FY15-19 (vs 18% earlier) and for Gujarat Pipavav to 9%
CAGR in FY15-19 (12%). However, these ports would continue to gain market share from the inefficient & congested major ports operated by the government and given their strategic location on India’s  west coast.

Upgrade GPP to Neutral; prefer Adani Ports

We continue to prefer Adani Ports as we expect market share gains to 19% by FY19e (vs 14% now), strong EPS (earnings per share) CAGR of 18% and >21% RoE (return on equity) in FY15E-17e (estimates). Additionally, we upgrade Gujarat Pipavav to Neutral (from U/P) post 29% correction in the share price since April 2015.

Price objective basis & risk

Adani Ports & SEZ Ltd

We value ADSEZ using SoTP (sum-of-the-parts) methodology to arrive at a PO (purchase order) of R394/share. We value each of its port assets based on the (FCFE) free cash to equity-based DCF (discounted cash flow) using cost of equity ranging from 12.8% to 15.5% and assuming it gets an extension in its concession agreements wherever applicable . We value its stake in Adani Logistics at 3x FY17e book value and its stake in other businesses at 3x the invested equity as of March 2017. Downside risks for ADSEZ are:

(i) Potential diversion of ADSEZ’s cash flows towards cash gap for Adani’s group companies (mainly Adani Power),

(ii) continuation of loans to related parties, (iii) $800m of contingent liability towards Abbot Point and (iv) issues in extending Mundra port’s concession agreement once it expires in 2031.

GPP (XJGUF, B-2-7, R171.85)

We value GPP’s core business based on a free cash flow-to-equity-based DCF valuation. We use an 11.9% cost of equity to value GPP, which is lower than our estimates for ADSEZ (cost of equity of 12.8% to 15.5% for ADSEZ), led by GPP’s superior balance sheet and strong parentage. We value its 38.8% stake in PRCL at 17x FY17 earnings, adjusted for the dividends received by GPP for its 18% earnings CAGR expected in FY15-17. Based on this, we arrive at a SoTP-based valuation of R187. Upside risks for GPP are (i) Faster-than-expected ramp-up of new capacities, (ii) Potential of higher-than-20% dividend payouts assumed in our estimates now. Downside risk for GPP is its potentialinability to grow container traffic until it expands its capacity in Mar 2016.