Indian Equity Research and Investment Strategy
Reports indicate the move could be seen as a precursor to the possible delisting of the company from the Indian stock exchanges.
The promoters currently hold 70% in Bayer CropScience. For reverse book building required for delisting, the existing promoters’ stake would have to be raised to over 90%. This will require announcing a buyback of shares.
At the current price of Rs 314.15, the scrip trades at a PE multiple of 11.99, based on Q1 June 2007 annualised EPS of Rs 26.20.
The opening sentence in Kotak’s report on India Strategy expresses concern over expensive valuations. Most Large-Cap stocks are trading above aggressive earnings growth expectations for FY2009. The BSE 30 Sensex is trading at the top end of 14,750-18,500 band based on 12-15x FY09 earnings.
Changes in Kotak’s Top 10 Model Folio,
Reliance Energy and Wipro are out. NTPC and Aditya Birla Nuvo are in. The new top 10 folio looks like, ICICI bank, L&T, ITC, Maruti Udyog, BHEL, Bajaj Auto, NTPC, Aditya Birla Nuvo and PNB.
We agree in most parts with Kotak except that of Telecom as Mobile Number Portability and slowdown are not likely to happen very soon, especially with Bharti Airtel and RCom.
Power Grid India which created history for generating the highest demand during its IPO in the history of Indian Capital market had a very electrifying debut on the bourses today. The stock listed at a premium of 70% and is currently traded at Rs 106 or up by 104%.
Power Grid Corporation of India owns and operates most of India’s interstate and inter-regional electric power transmission system. In that capacity, as at June 30, 2007 the company owned and operated 61,875 circuit kilometres of electrical transmission lines and 106 electrical substations. In fiscal 2007, it transmitted approximately 298 billion units of electricity, representing approximately 45% of all the power generated in India.
Congratulations to all the retail investors. The Power sector has been re-rated along with Energy stocks. Book Partial profits and hold this stock for Long Term.
Educomp Solutions Ltd has signed an Memorandum of Understanding (MOU) with Raffles Institution, Singapore. The Scope of Services would include consultancy advice & services of Raffles Institution for schools set up by the company though its related entities. The essence of this MOU is to bring the best of global education in India. Raffles institution is the leading school in Singapore and renowned for its innovative practices and its curriculum. Citigroup has a SELL / Book Profits Recommendation on Educomp.
CS Software Enterprise has bagged orders from Maharashtra State Electricity distribution Company to implement electricity billing in the city of Nasik, Maharashtra. The estimated value of the orders is around Rs 14.20 million.
India Inc had a robust 1Q, Citigroup expects Sensex ex-oil profits to rise by 21% in 2QFY08 (14.5% for Citi India universe ex-oil). Forex gains (a key driver of positive surprises last quarter) will likely be less of a factor this time, as the rupee appreciated by a modest 2% during the Sep-07 quarter.
Telecom (+114%), Media (+109%), Brokerages (91%), Hotels (54%), Capital Goods (47%), and Cement (50%) should lead in profit growth. Key laggards seen as Autos, Pharma, Textiles, Metals, and Sugar. IT Services companies are expected to report (18%) profit growth lagging behind the market average.
Autos: The sector’s performance will likely remain weak overall, with high interest rates continuing to have a negative impact on two-wheelers and fourwheelers alike. Sales for the sector are expected to remain flat on a yoy basis, while profits should decline. Likely best performers: Amtek Auto and Amtek India.
Banks: The sector has potential upside from bond portfolio appreciation and a facilitative trading environment. Expect strong performances from brokerages and possible earning dip for a few public sector banks to due to a high base effect. Likely star performers: Kotak Bank and IL & FS.
Capital Goods: Strong forecast earnings growth of 47% led by expected top-line growth of 35%, and margin expansion. Likely top performers: Thermax, Punj Lloyd, Jindal Saw, L&T and BHEL.
Cement: Higher cement prices should drive margin improvements. Profits likely up by almost 50% on a topline growth of 27%. Likely top performers: ACC and UltraTech.
Consumer: Expect a weak quarter with profit growth seen at only around 10%, Expected top performers: Britannia, and Marico. Likely laggards: TataTea, Colgate and Shoppers’ Stop.
IT Services: Expect strong volume growth should continue in a seasonally strong quarter. EBITDA margins seen down yoy, but likely to improve sequentially for most companies with visa costs and wage hikes being taken care off in 1Q. Likely top performers: Mphasis BFL
and NIIT . Laggard: Sasken Communications.
Oil&Gas: Assuming oil-bond issuance to the tune of Rs240bn for this fiscal, with Rs121bn for the first half, to be booked in this quarter. Rupee appreciation is likely to have a significant
positive impact on gas distributors. Likely top performers: Aban, Gujarat Gas and GAIL.
Pharma: Impact of currency appreciation on exports and margins should lead to a weak quarter with revenue growth in single-digits at 8%, and negative profit growth (-11%). Base effect should have a positive impact on Matrix and a negative impact on Dr. Reddy’s.
Telecom: Expect another strong quarter with profit growth well above 100% yoy. Forex gains in this quarter are likely but to a lesser than the previous quarter. Likely top performers: Idea Cellular and Reliance Communications.
Hexaware Technologies on 04 October 2007 has won a large engagement with a leading German Financial Institution. The order is worth 5 mn Euros.
This is a major development project which entails building a new core application for the client. The scope of the build also involves integration of the new built solution with the back-end system involving three different businesses of the client. A fairly large J2EE programming team and Oracle experts have already been deployed on the project.