Jindal Steel & Power - Results Inline
Friday, July 31, 2009
JSPL reported consolidated net income for 1QFY2010 at Rs9.9bn, up 123% yoy, in-line with expectations. The steel business delivered an EBITDA of Rs5.6bn. A third consecutive quarter of strong merchant power tariffs (> Rs 6/kwh), gives yet more evidence of the structurally under-supplied nature of Indian power markets. Steel business is on track to deliver volume growth of 30% in FY10E.
JSPL's new 1,350MW capacity power plant is on track for phased commissioning from Dec 09 onwards and will start contributing to earnings from FY11E onwards. Power division EBITDA stood at Rs10.4bn, up 3% QoQ and 15% ahead of expectation.
Goldman has a Buy rating on the stock and our SOTP based 12-month TP of Rs 3,530. The stock is currently trading at 3.1x FY11E P/B, and offers FY11E RoE of 37% with FY09-12E EPS CAGR of 20%.
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Published by Webmaster @ 8:57 AM IST.
Results So Far - Looking Good
Thursday, July 30, 2009
We are into the third week of the current reporting season, things still look positive and ahead of expectations, with 1QFY10 profits at 18/29 Sensex companies (excluding -oil) up 12.6% yoy (4% expected). At a still broader level, 178/500 companies have reported 17% yoy growth. There are more positive than negative surprises.
1QFY10 sales growth for 18/29 Sensex companies is 0.8% yoy (+3% expectation) While there is likely a commodity price component to modest demand, we believe this is a worrying trend. Businesses have clearly taken advantage of raw material costs (50% of expenses), but also appear to have cut other operating costs, collectively driving up margins 211bps yoy (Sensex). We believe rising margin is good, but rising demand/sales would probably be better.
The sector leaders have been Banks (65%+, although there are qualitative issues), IT Services (+22%, outlook remains strained), and Telecom. Materials, Consumer and Capital Goods have been in-line.
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Published by Webmaster @ 5:34 PM IST.
RBI Policy Analysis - All Rates Unchanged
Tuesday, July 28, 2009
The Reserve Bank of India (RBI) kept all rates unchanged in line with consensus and our expectation. The repo rate stands at 4.75% and the reverse repo rate at 3.25%, while the CRR of banks is at 5%.
The RBI raised its inflation target from 4% to 5% for end-March 2010 in line with market expectations.
In the policy statement, the RBI listed its future challenges as four-fold. First, manage the balance between the short-term compulsions of providing ample liquidity and the potential build-up of inflationary pressures on the way forward. Second, to manage the government's borrowing program.
In our view, the rate decision and policy statement signals a move away from a sole focus on boosting demand to giving more weight to inflation. Inflationary pressures have been acknowledged explicitly and the WPI target revised upwards.
The policy confirms that there will be no more rate cuts and therefore takes away a small overhang on the INR. The Dollar was trading at 48.21 against INR.
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Published by Webmaster @ 3:51 PM IST.
Buy the Dips - Target 17,000 Morgan Stanley
Wednesday, July 22, 2009
FII ownership is coming off a 5½ year low and is well off the peak. Mutual
cash balances have reduced over the past three months, but FIIs still have substantial cash in their portfolios. In the meanwhile, the rising equity supply could cause a problem for the market if it gets bunched up, as we saw recently. Sensex is trading at 17.7x and 15x F2010 and F2011 earnings, respectively.
The prospective bottoming out of the growth cycle, reasonable policy momentum, the coming recovery in earnings growth, strong corporate balance sheets, stable politics, and fair valuations, Indian equities are in a sweet spot.
If the global economies improve, there is scope for more aggression with our portfolio. In the meanwhile, consumer and infrastructure sectors will lead the growth recovery and, hence, market performance.
The probability-weighted outcome for the BSE Sensex is 17,000 for June 2010. This is 15% upside from current levels with overweight positions in Discretionary and Industrial sectors.
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Published by Webmaster @ 9:54 AM IST.
Investment Strategy - Beat the Sensex for Big Money
Friday, July 17, 2009
Over the past few days I spent quite a bit of time understanding the dynamics of the market. All the Research Houses from Goldman Sachs to Kotak failed in seeing the SENSEX at 14,000+.I should admit that I am investor willing to take calculated risk, want to beat the benchmark and taste Big Money, which otherwise is possible only by leveraging and trading in Derivatives and Options. This is my personal investment strategy I have opted for the next 30 months and wanted to share it with you all. Any changes in the strategy will be updated.
Before getting to the details of the strategy, I'd like to tell that I am choosing HDFC Top 200 for the purpose of investment. Why - Justified here ?
Invest Lumpsum + Average with SIP - Strategy
Now it is well known fact that we can't time the market, especially amidst Global Economic crisis [According to me it'll end, only when 20% of the 10 million plus displaced employees are back at their work place]. So what I have started doing is, invest in Lumpsum to such an extent, that I can average it within the time frame i.e deadline for withdrawal [30 months] / Dec-2011.
Assume, you have 50,000 to invest. Start investing in multiples of 15,000 whenever the markets are around 14,000. And over the next 30 months, keep adding Rs 1,000 in SIP. So at the end of 30 months you would have invested - 50,000 + 30,000 - Rs 80,000.
Historical returns of Top 200 in Past 30 Months:
30 Months ago, BSE Sensex was around 14,000 level [Top 200 NAV was 110] and it went up to 21,000 and then fell down to 8,500 levels and is hovering again at 14,000 levels discounting March-2011 earnings already :-).
Avg Top 200 NAV for 2007 [12 Mths] - 124.25
Avg Top 200 NAV for 2008 [12 Mths] - 128.58
Avg Top 200 NAV for 2009 [06 Mths] - 107.57 [NAV as on 1st of every month]
So you would have accumulated - 454 lumpsum units + 97 Units in 2007 by SIP + 93 Units in 2008 SIP + 65 Units in 2009 SIP. Total 710 Units
Investment of 80,000 is now worth Rs 100,820 [710 * 142 NAV of Top 200] Not Big Returns, I agree but Risk Free I have made Good Money.
Big Returns - 2009 to 2011:
In the last 30 months markets saw volatility of the decade or probably in the History of Sensex. Going forward, earnings which have hit the nadir will stabilize and will only look up. [Yes, I have studied more than 50 reports and taking my decision. Be Positive]
In Dec-2011, Analysts on the street will be discounting earnings of March-2013. Sensex EPS currently around 850 will be 870 for FY10 and should touch at least Rs 1350 for March-2013 thus taking the SENSEX to 24,000. Top 200 NAV should rise in-line [I expect it to Double]
Worst Case:
Sensex may not touch the specified targets but since we have been averaging with SIP, we won't lose anything but have to postpone the deadline for withdrawal.
The Dont's
Don't go and leverage your property / assets and bring the money into the route suggested above.
Your Questions, Comments and Critics are most welcome.
Labels: Investment-Strategy, Sensex-24000
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Published by Webmaster @ 11:22 AM IST.
Sintex Industries - Disappointing Quarter
Wednesday, July 15, 2009
Sintex Industries reported 1QFY10 results below estimates - PAT of Rs606 mn (up 7.3% yoy) was lower than street expectations of Rs742 mn. Revenues at Rs6.6 bn (down 9.1% yoy) were lower than our estimated Rs7.3 bn mainly due to lower pre-fab sales. EBITDA margin at 13.2% (estimated 17%) was below estimate due to the lower contribution from the pre-fab segment and lower-than-expected textile margin.
The monolithic order book at end-1QFY10 has grown to Rs16 bn from Rs14 bn at end-FY2009, implying new order additions of about Rs3.2 bn during the quarter. Fresh orders of around Rs1.9 bn for rural housing are in the pipeline which may further increase FY2011E revenue visibility for the monolithic segment.
The plastic segment reported EBIT margin at 11.3% versus our estimated 15%. We believe the decline in margins was mainly on account of lower pre-fab revenues.
Sintex is expected to report an EPS of Rs 25.2 and Rs 28 for Fy10 and FY11 respectively. Existing investors can HOLD while fresh exposure can be taken around Rs 150 for a 12 months target of Rs 260.
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Published by Webmaster @ 10:29 AM IST.
No Recovery in Metals Yet - Analysts
Wednesday, July 08, 2009
Consensus estimates for Q1 results by Analysts on the street expect Metals to lead sharp earnings drop in SENSEX companies.
EPS for Sensex companies is set to decline for the 3rd consecutive quarter with forecast net profit expected to drop by 18.3%. Sales and EBITDA also decline for consecutive quarters. 10 of the 30 companies in the Sensex are expected to show drop in profits.
But the good news is that this steep fall in net profit and sales is led by metals stocks (TISCO, Hindalco & Sterlite). Ex-metals estimated PAT growth is at +4.4% with EBIDTA growing 7.9%. Second good news is that earnings downgrades are behind us and we are starting to see some upgrades.
Cement and autos will should strong performance in the results season and may see a rally Analysts recommend profit booking in cement stocks in the rally. Telecom will continue to show strong growth. Infosys could cut earnings guidance which may disappoint the market.
Update:
Banks (34%+) and Cement (23%) lead the pack with strong profit expectations while the long tail comprises Real estate (-87%), Metals (-39%) and Auto’s (-8.7%). More sectors will see earnings fall (10) than rise (6), reflecting broad-based pressures rather than concentrated ones.
12 months ago, Sensex companies were generating sales growth of 35%yoy - this has slipped consistently but will now likely touch a pace of 2.8% and flat to negative qoq. Revised FY10 expectations, +1.7% growth, would also suggest a nadir with back ended growth in the current year.
We don't recommend selling anything now, unless valuations look too far stretched. Wait for a separate post covering the front line blue chips and their performance expectations.
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Published by Webmaster @ 9:51 AM IST.
Budget Impact - First View
Monday, July 06, 2009
The FM raised MAT from 10% to 15%. Impact of MATImpact of MAT tax rate increase to 15% impact on EPS owing to MAT (First Cut)
- Reliance: 7%
- Cairn India: 6%
- Bharti 3.4-0.4%
- RCom 5.5-1.6%
- Idea 5.7-3.7%
- Sun Pharma (local entity's tax rate goes up and this will result in increase in consol tax rate by 50-100bps resulting in 0.8-1.5% downgrade to EPS).
- Cipla would get impacted as they would enter MAT scenario in FY10 and FY11 (c.1.5-2% EPS downgrade).
- Mphasis BFL
- Power Grid is currently under MAT however the tax expense is a pass through for the company.
- Tata Motors is on MAT too.
- Sterlite (because of Sterlite Energy)
- JSPL (because of Jindal Power)
Negative for Banks and Real Estate:
Banks -ve due to bond yields likely to move out. Disappointment for HDFC and banks due to tax exemption limit on mortgage interest not being raised.
Real Estate -ve due to increase in MAT rate and tax exemption limit on mortgage interest not being raised.
Additionally STPI scheme has been extended for one more year. While on expected lines, only a small negative for IT-SEZ developers. The new IT Units will anyway go to IT-SEZs.
Fringe Benefit Tax (FBT) has been abolished: FBT on ESOPs was already passed through to employees. This is positive for Tech Mahindra's and Hexaware's top-management which has large number of outstanding ESOPs. Otherwise, little impact on earnings
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Published by Webmaster @ 1:09 PM IST.
Highlights of Railway Budget - Live
Friday, July 03, 2009
Railway Minister Mamta Banerjee said while presenting the Railway Budget 2009-10 that she would concentrate on improving the quality of services being provided by the Indian Railways and has left the fares unchanged [both Passenger & Commercial]. To improve the infrastructure of Indian Railways, the minister said that 50 stations had been identified to be developed on lines of world class stations will best available technology. Mamta Banerjee also said that 350 more stations were identified for upgradation in order to improve the services of Railways.The minister also said that railways will also ensure one doctor in each train and ambulances will also be arranged to stand by on routes of important trains.
Railways will buy 18,000 new wagons, a development that will help companies like BEML and Titagarh Texmaco, etc. Also planning to setup a new factory to manufacture 5,000 coaches.
Railways to form expert panel for rail optic fibre network - RailTel.
Indian Railways will start 12 new non-stop trains with immidiate effect. These incude routes like Howrah-Delhi, Delhi-Chennai, Delhi-Allahabad and kolkota-Amritsar etc.
Gross budgetery support (GBS) for the Indian Railways by Rs 5,000 crore and will deploy internal resources at Rs 15,675 Crore in the current fiscal.
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Published by Webmaster @ 1:05 PM IST.
