HDFC Mutual Fund SIP – Update Q2-2007

Here is our Quarterly update on HDFC Mutual Fund for our SIP and Value investors. The markets have been buoyant and so have been your investments in the mutual funds. Our favorite fund manager, Prashant Jain was on Wizards of Dalal Street. If you have missed to watch his show, you can watch it online here.

SIP Update as on June-30-2007.

Please continue to invest fixed sum in these funds every month. You can use this SIP calculator to find about your investment goals.

Suggestions and Comments maybe sent to – “feedback @ DalalStreet.Biz”

Divis Labs + Aditya Birla Nuvo

Divi’s Laboratories’ net profit rose 151.5% to Rs 67.28 crore in Q1 June 2007 over Q1 June 2006. Sales moved up 41.8% to Rs 228.07 crore in Q1 June 2007 over Q1 June 2006.

Hyderabad-based Divi’s Labs makes generic bulk drugs and offers customs chemical synthesis or drug development services to innovator drug firms.

Aditya Birla Nuvo’s net profit slid 53% to Rs 26.46 crore in Q1 June 2007 over Q1 June 2006. Sales declined 5.4% to Rs 740.96 in Q1 June 2007 over Q1 June 2006.

Aditya Birla Nuvo’s principal activities are manufacturing viscose filament yarn, carbon black, branded apparels, textiles and insulators.

RBI Hikes CRR Again by 0.5%

The Reserve Bank of India has done it again. They have hiked the CRR rate by 0.5% taking it to 7%. Most company CFOs were not expecting the same and this has come as a surprise. Reacting to this hike, the 30 share Sensitive Index of Bombay Stock Exchange fell by 150 points from the day’s high.

RBI has left other rates unchanged. India’s central bank withdraws cap of Rs 3,000 crore (Rs 30 billion) on daily reverse repo (overnight borrowing) transaction from August 6.

Indraprastha Gas – Conflicting Reports

Citigroup Research reiterates a BUY on Indraprastha Gas Ltd while Merrill Lynch has retained a SELL on the stock. So what do you do when their are such conflicting recommendations ? I was watching Wizzards of Dalal Street – Prashant Jain and believe in his theory.

  • You have to model the company financials yourself.
  • Then see what are the influencing factors that will affect the company in the next few quarters
  • Once you have all the required data – Ask yourself what happens if this is the scenario or if that is the scenario and you have the answer in front of you. Mr. Jain took some bold decisions like exitting IT stocks before the Dot Com BUST in 2000 because his model told him something was not right and recommended a SELL

Here is what Citigroup has to say on Indraprastha Gas:
Steady CNG conversions driven by the rapid pace of private car conversions (c.3,000 per month), increasing PNG penetration, and geographical growth in newer areas (Greater Noida, Ghaziabad) would result in a 14% volume CAGR over FY07-10E. IGL’s 1QFY08 net income of Rs384m was ahead of expectations and up an impressive 39% yoy. Adjusting FY08E and FY09E earnings by +3% and -1% respectively after factoring in FY07. Any increase in prices of the gas will be passed on to consumers.

Target price of Rs160 for IGL is based on DCF. DCF is used because it captures the value of the projects over their lifetime. IGL’s near-term cash flow is affected by its aggressive expansion. Target P/CEPS of 8.2x FY09E is still at a small discount to current multiples of other gas utilities.

Merill Lynch Report:
The biggest risk to IGL is competition from likely new entrants like Reliance Industries (RIL). It as imminent. Competition from an aggressive player like RIL is a serious threat to IGL’s volumes as well as super-normal margins. If gas cost rises gradually as expected it will worsen IGL’s outlook. Merrill therefore maintains a Sell on IGL despite its encouraging 1Q result.

DalalStreet Research Analyst Views:
Merrill Report about selling this stock is purely based on RIL entering this segment. Reliance also entered the Telecom business under Mukesh Ambani but Bharti is till the PAN India leader. It is difficult to BUY Merrill’s argument on “if RIL” enters this business. We endorse Citi’s views.

Newsflash – SBI Estimate and Target Price Revised Upwards

Citigroup Research has upped the target price of State Bank of India in a report released just a while ago to Rs 1,825. Citi has also upgraded the EPS earnings estimate to Rs 102.64 and Rs 121.18 for FY2008 and FY2009 respectively.

SBI is India‚Äôs largest bank with around 20% market share in deposits and loans, 9,038 branches and more than 90m customers. Target price for SBI is Rs1,825 based on our EVA model, which captures the long-term value of the business and is a standard valuation measure for Citigroup’s India Banking universe.

Citi has revised target price from Rs1,235 previously, as they now incorporate new earnings, lowered the risk-free rate to 8% (8.5% previously) in line with the market level, increased the valuation of its subsidiaries to Rs525 (Rs231 previously) as we
have moved valuation benchmarks to FY09E and we have factored in the Insurance and asset management business.

Federal Bank – Earnings Estimate and Target Price Upgraded:
Citi has also upgraded the earnings estimate and price target of Federal Bank as well. Federal’s 1Q08 profits were up 67%yoy; pre provision profits were up 66%, ahead of estimates. Increased coverage levels (88%) with low net NPLs (>0.4%) provide comfort.

Federal Bank is expected to report a fully diluted EPS of Rs 40.58 and Rs 49.53 for FY2008 and FY2009. Raising estimates 11-17% for FY08-09E, target price to Rs 438 and target P/BV multiple to 1.7x FY09E (from 1.5x Sep 07) to reflect premium over average PSU banks.

i-flex Q1 Net Profit Down 46%

i-flex Q1 net profit fell sharply to mere Rs 41.5 cr versus Rs 77 crore on QoQ basis (US GAAP). i-flex net sales also declined to Rs 532 crore versus Rs 579.4 crore, on QoQ basis. (US GAAP)

Other Quarterly News Flash Available to DalalStreet.Biz are as follows,
Rakesh Jhunjunwala held Praj Industries Q1 PAT Rs.28cr (+238%yoy)
Vijay Mallya Controlled United Spirits Q1 PAT Rs.88cr (+151%yoy)
BharatBijlee Q1 PAT Rs.12.6cr (+194%yoy)
Despite weakening Auto Sales, AmarRaja Q1 PAT Rs.18cr (+90%yoy)

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