Tata Steel Results Cracking - Merrill Bearish - Morgan Bullish
Friday, November 27, 2009
Tata Steel announced its results for Q2 FY2010.Both Corus and Tata Steel consolidated reported EBITDA and PAT were in red for the Sep qtr as losses at Teesside (TCP), and restructuring charges of Rs9.1B (some related to contract cancellations) hit earnings.Corus reported EBITDA loss of $375MM (including TCP loss of $170MM) vs the 1Q loss of $387MM. Realizations fell q/q across segments in Europe. Tata reported consolidated PAT loss of Rs28B, 35% higher than 1Q loss of Rs20.2B. Tata Steel plans to reduce debt by $2B in the medium term through a combination of existing cash ($2.3B), non-core asset sales.
Management highlighted that Corus was EBITDA positive in October, and to our query on the recent decline in steel prices possibly impacting profitability, management remained positive on the 2H earnings outlook.
Tata Steel EPS Estimates & Rating:
Morgan Stanley is a Big Bull in Tata Steel as it expects it to report an EPS of Rs 29 and 95 for FY10 and FY11 with a price target of Rs 645.
Merrill is UNDERWEIGHT on Tata Steel with EPS expectations of Rs 16 and Rs 49 for fy10 and fy11 with a price objective of Rs 405.
JP Morgan is NEUTRAL on Tata Steel with a price objective of Rs 475 and EPS estimates of Rs 4 for FY10 and Rs 69 for FY11.
Deutsche Bank expects EPS of Rs 14 and Rs 68 for FY10 and FY11 respectively.
Consensus EPS estimates for Tata Steel is Rs 24 and Rs 65 for FY10 and FY11 respectively.
Read the full article
Published by Webmaster @ 10:38 AM IST.
Investment Strategy for 2010 - Morgan
Thursday, November 26, 2009
After Merrill unveiled its investment outlook for 2010, Morgan Stanley has pushed the button forward on what it looks in the Indian markets for 2010. Here is an excerpt from the same,1. Value in PSU Banks - The Central Bank is likely to start raising rates in January 2010. Rising rates favor Indian banks as they run a maturity mismatch on their balance sheets (liabilities have a longer maturity). Thus NIMs will rise; coupled with acceleration in loan growth (which trails IIP growth), this will help earnings. PSU Banks trade at better valuations helped by a declining fiscal deficit.
2. Avoid Technology - Tightening by the Central Bank will put upward pressure on the rupee with negative consequences for technology stocks. Tech stocks have done particularly well over the past six months and also suffer on a relative basis in an accelerating domestic growth environment.
3. Energize your Portfolio - Energy, especially Reliance Industries, has delivered its worst relative performance ever on a trailing-six-months basis. The sector correlates positively with crude oil, short-term yields (read: local inflation) and industrial production. Thus it provides a hedge against a spike up in crude oil prices.
4. Industrials - Acceleration in industrial growth will help close the output gap faster than what is possibly in the price right now. This will help a new private capex cycle to start in 2010 and further boost performance of industrials [L&T]
5. Shift Bias From Rural[Inclusive Growth] to Urban Plays - No doubt rural growth remains very strong, helped by rising food prices and government spending. Yet at the margin, urban growth will close the gap vs. rural growth as industrial activity picks up. In contrast, media and niche mid-cap staples may still perform well.
6. Time for MidCaps - The broader market is likely to generate faster earnings growth of around 25% in 2010 [Balrampur, Lupin, Pantaloon, IVRCL]
Most of the market returns in 2009 have come from a PE re-rating, and as the key driver of returns shifts to earnings in 2010, so will the key driver of stock prices from macro to idiosyncratic stock related factors.
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Published by Webmaster @ 11:59 AM IST.
Indian Telecom Industry Overview for Investors
Wednesday, November 25, 2009
The Indian Telecom industry is now dominated by Wireless vertical and going forward, even the Data / Broadband market will go the unwired way. Here is an overlook at the industry at macro level with forthcoming developments - Spectrum and Fees, 3G Auction and finally Consolidation.Industry is still growing (23% in FY11 and 15% in FY12), spectrum constraints and tariff pressures are likely to limit the upside. More importantly, prices should decline further (25% in FY11e) due to increased competitive intensity, which will weigh on margins and earnings.
A shakeout/ consolidation is inevitable. However, we do not anticipate this for another 12-18 months, as a) regulatory change (required to make consolidation attractive for buyers) is at least a year away, and b) despite the grim outlook, more new, deep pocketed players are expected to enter the market, and liquidity is not a constraint for most existing operators.
Most Vulnerable Players:
The vulnerable companies are regional operators HFCL Infotel, S-Tel, Datacom, Loop Telecom, Uninor and Etisalat DB. Though they have managed to get startup spectrum, they have a monstrous task to put their balance sheet in black.
Across the street, analysts are UNDERWEIGHT on the Indian Telecom Stocks as their are still lots of issues that needs to be sorted out. Review of individual stocks will be posted, until then look at different sector or stocks for fresh investment. Existing investors can HOLD. We believe, there will be a good chance to BUY Telecom within the next 6 months with a Horizon of atleast 24 months from then.
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Published by Webmaster @ 10:05 AM IST.
United Spirits - Cheering the Economic Boom
Monday, November 23, 2009
One of the main beneficiaries of India Inclusive Growth Story is United Spirits as executives like to be cheerful and celebrating. It has retained margin above 17% save for a tough quarter in Q3 FY09 when OPM sank to 11.3%. Expect USL to sustain 15-17% OPM in its domestic business even as molasses price is likely to remain over Rs3,800/MT in sugar-rich UP. A persistent focus on premiumisation and main line brands has not impacted USL volume growth which stood at a respectable 13.7% yoy in H1 FY10. The company is well placed to outpace industry growth (estimated at 10-11% pa) in IMFL volumes and is likely to witness a 15% volume CAGR.
USL has raised Rs16bn through a QIP in Oct 09 and would repay about US$285mn worth of acquisition debt resident in the downstream subsidiaries of the co. This could improve interest coverage to 2.1x in FY11 while net D/E could trend below 2x for the
first time since White & Mackay buyout.
United Spirits is likely to report an EPs of Rs 25 and Rs 40 for FY10 and FY11 respectively. HOLD it will be a market performer. ADD on Decline less than 1000.
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Published by Webmaster @ 10:54 AM IST.
Surprise of 2010: A market consolidation - Merrill
Friday, November 20, 2009
The year 2009 has turned out to be a big surprise. It is on track to be the best year for marketssince 1991.
[ 1991 and 2009 are Manomohan Magic Years ]The year 2010 is expected to be a year of consolidation rather than the "boom-bust" years in the past. The last time we ended a year with a single digit move (either positive or negative) in the market was in 2002 and 2004 was the last year with a move of under 25% in the markets.
The Good for Equities:
Global liquidity is likely to stay easy for an extended period of time. The Indian economy is recovering and we expect GDP to grow at 7.8% in FY11 vs. 6.2% in FY10. Earnings growth is likely to recover to over 20% in FY11 compared to 5% in FY10.
The Bad / Ugly for Indian Market:
Inflation can hit 5% by December 2009E and get close to 8% by March 2010E. Rising inflation has historically been negative for markets. Since 1990, there have been 7 occasions when inflation turned upwards. In 5 of these 7 occasions, markets have given a negative return in subsequent periods.
The RBI has already been sending signals on a possible exit policy. A rise in inflation will likely lead to a CRR/repo hike in January. And finally, stimulus withdrawal by the Government.
IPO / Paper Supply will Absorb Liquidity - supply of paper could be around $7-8bn including the PSU disinvestments.
Finally, Valuations are getting expensive though they are not yet in bubble territory. Markets are trading at 17x 1-year forward earnings ahead of 15x long term average.
Sensex Targets:
If the easy liquidity conditions globally lead to an asset bubble, we could get equity markets hitting the old highs. However, the markets will sustain at these levels in 2010.
Going by History, on the 2 occasions that market had fallen more than 50%, it took 294 and 571 days to hit the old peak. This means we should hit the peak between May 2010 and June 2011. Interestingly, on both these occasions, the markets gave a 30-40% negative return in the next 6 months.
Read the full article
Published by Webmaster @ 10:53 AM IST.
MidCap Stocks for Long Term - Part II
Thursday, November 19, 2009
Edelweiss Research has initiated coverage on few growth oriented MidCaps. You must read Part-1 of the coverage here. Here is the second set of Stocks recommendation in the MidCap space.Infotech Enterprises:
Infotech Enterprises (IEL) has developed a unique positioning in the engineering services space.One of the key positives during the recent results is the scale up of revenues from the top 10 clients. Continuous expansion in services portfolioAs the overall environment is improving, revival of growth will be the key to upward valuation rerating. The company is close to two large deal wins that could add significant revenues in FY11 and boost growth rates. The stock is currently trading at a P/E of 10.2x and 9.0x FY10E and FY11E, earnings [Rs 25 and Rs 29 EPS], respectively.
Koutons Retail:
India's organised retail industry is set to post ~19% CAGR over the next four years to INR 2,024 bn by FY13E. Clothing and fashion accessories account for 38% of total organised retail spending. Presence across value chain; garment manufacturer to specialty retailer. PAT margins to expand; earnings CAGR of 24.6% over FY09-11E likely. Edelweiss has a BUY recommendation on the stock and value it at 12.5x FY11E [EPS of 40] EPS (50% discount to Pantaloon's FY11 P/E multiple) to arrive at a target price of INR 500.
Mahindra Holidays & Resorts:Leisure travel and vacation ownership set to boom in India. Mahindra Holidays & Resorts India (MHRIL) offers a differentiated product to leisure travellers with its unique Vacation Ownership (VO) model. As MHRIL charges membership fees upfront, it helps the company build resorts without borrowing capital. MHRIL is trading at 25.9x our FY10E consolidated EPS of INR 13.9 and 19.0x our FY11E consolidated EPS of INR 18.9.
Lakshmi Energy & Foods:
Lakshmi Energy & Foods (LEAF), the largest rice processor in India with processing capacity of 1.2 mtpa, still forms less than 1% of the country's highly fragmented 135 mn tonne paddy processing industry. Rice volumes to rebound, premium rice to increase share. Estimates suggest paddy processing to normalise for the current year driven by stronger FCI offtake. At CMP of INR 124, LEAF is trading at a P/E of 8.4x FY09 EPS of INR 14.8 and P/E of 4.6x FY10E EPS of INR 27.2
Shiv Vani Oil & Gas:
Ideal play on the evolving opportunities in Indian onshore OFS space. SVOG has a robust order book of INR 37.2 bn (4.3x FY09 revenues) as on September 2009, ensuring revenue visibility for ~2-3 years. The company has well timed its asset expansion from 21 rigs and 4 seismic crews in CY06 to 40 rigs and 10 seismic crews by FY10E. The stock is trading attractively at P/E of 6.1x and 4.6x its FY10 and FY11 earnings estimates, and at EV/EBITDA of 6.4x and 4.9x our FY10 and FY11 estimates, respectively. This is at a significant discount to international peer valuations.
Read the full article
Published by Webmaster @ 1:05 PM IST.
MidCap Stock Picks -1
Edelweiss has some favorite picks in the MidCap space where it expects an improvement in top line to drive strong EBITDA growth as revenue growth outpaces costs. Stocks with high degree of operating leverage. Edelweiss' conviction is that these stocks have a high probability of surprising on the upside over the next 1-3 years.This is Part 1 of the Coverage and here are the stocks and brief excerpts / justification them being picked up.
AUROBINDO PHARMA:
Strategic alliance with Pfizer (PFE) for 80 products and 218 SKUs across multiple markets adds strategic depth and long-term value. Regulated sales are likely to post 38% CAGR in FY09-11E, to INR 13 bn, as ARBP is poised to benefit from current scale of filings. Expect an EPS of Rs 90 and 118 for FY10 & FY11. Maintain BUY recommendation on the stock and rate it Sector Outperformer on relative return basis.
BGR Energy:
Power capacity addition to drive orders growth. BGR's FY09 order intake jumped 3.5x on two large EPC jobs worth INR 80 bn (Kalisindh and Mettur). Even as the macro environment looks uncertain, the management has bid for INR 50 bn worth projects on BOP basis. Besides engineering and technology skill sets, EPC and BoP contracts tend to be project management intensive. Expect an EPS of Rs 22 and 33 for FY10 & FY11. Maintain BUY with Sector Outperformer rating.
Everonn Systems / Education:
Everonn is the third largest player in ICT in the schools business, following Educomp and NIIT. Currently, the company has implemented ICT projects in 4,442 schools, which contribute 33% to overall revenues. Estimate a consolidated topline CAGR of 47% and net profit CAGR of 68%, over FY10-11E. Expect an EPS of Rs 27 and 41 for FY10 & FY11.
IRB Infrastructure:
IRB Infrastructure (IRB) is a pioneer in the BOT road segment in India with presence in the space since 1995. The company's strategy revolves around sound planning and then following it up with aggressive decision making. Its EPC arm has industry leading margins and return ratios and ~ INR 99 bn order book, which will help EPC revenues grow four-fold between FY09 and FY11E. Expect an EPS of Rs 10.5 and 13 for FY10 & FY11.
IVRCL Infrastructure:
IVRCL Infrastructure's (IVRCL) business strategy is marked by its dominance in the water segment, which contributes the bulk of its order book. IVRCL has four BOT projects a water desalination plant and three road projects. Sum-of-the-parts-based target price for the stock is INR 482, with EPC projects contributing INR 376 to valuations. At CMP of INR 400, for fully diluted EPS estimate of INR 18.4 and INR 23.5, IVRCL is trading at a P/E of 21.8x and 17.0x for FY10E and FY11E, respectively
Stay Tuned for 10 more MiCap stores from Edelweiss. Do you agree with their recommendations ? What say ?
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Published by Webmaster @ 11:25 AM IST.
FII Investment in Indian Equity - Analytics Data
Wednesday, November 18, 2009
Over the past few weeks, we have been working on compiling data on FII interest in BSE 500 stocks as they are still the major reckoning force in our market.After going through various sources, Annual Reports, Company Filings with BSE, etc we were able to mine the data on FII Holding in Indian Equities at the end of Sept-2009 and few other quarters as well.
FIIs Investment in Indian BSE 500 is INR 7549 Bn or USD 168 Bn [Value of their Holding]. The following chart shows how they have invested in various sectors. Industrials and Capital Goods is the most sought after sector by FIIs while it was surprising to know their investment in Indian Banking and Financial is relatively low. Data suggests that FIIs hold 14.15% of BSE 500 while DII hold ~11% of the pie.
Late last night, I've posted on the Forum about FII's Investment in the following sectors -- Industrial / Capital Goods
- Telecom / Communications
- Metals and Basic Raw Materials for manufacturing
- Energy - Oil & Gas
- Banking and Financial Sector
- Power and Utility Sector
- Non Cyclical Consumer
- Cyclical Consumer
- Technology Sector
Read the full article
Published by Komal M @ 10:52 AM IST.
India Earnings + Growth Revised Upwards, but Underweight - HSBC
Tuesday, November 17, 2009
HSBC Equity Research which was one of the most conservative in Indian Earnings Growth Estimates has changed its stance and has upgraded the numbers, and it has gone ahead of the DalalStreet Consensus estimates :-)Economic data and Growth figures likely to surprise on the upside and lead to upgrades in EPS forecasts. Market expects policy tightening in view of a pick-up in growth and inflationary pressure and this will be not be a disaster for equities; however, evidence suggests the first move in a tightening cycle causes markets to pause.
New Estimates by HSBC:
Top-down Sensex EPS forecasts at INR920 for FY09-10 and INR1120 for FY10-11 are c6% higher than consensus.
HSBC is overweight on the following sectors - private sector banks, industrials,
consumer staples and IT, and our key underweight sectors are materials and healthcare.
Valuation and Trading range for SENSEX:
The market traded at an average multiple of 13.6x from mid-2003 to mid-2007, and traded above a multiple of 17x only 5% of the time. The typical trading range, covering more than 75% of the cycle was 11-17x 12-months forward PE.
The current multiple of 17.0x is 1.25x standard deviation above its longterm
average. The index has typically traded one standard deviation above its long-term average, closer to the peak of the market cycle.
In the last 10 years, PE expansion has accounted for only 18% of index returns, and the bulk of it has been due to EPS growth, which accounts for 58% of returns, with the remaining 24% being accounted for by a combined effect of PE expansion and EPS growth.
Finally they raise SENSEX target to 18,000 for end-2010 and gains in Indian equities may lag other markets hence remain underweight on India in Asia portfolio.
Read the full article
Published by Webmaster @ 10:41 AM IST.
UltraTech + Samruddhi Cement Merger - Swap Ratio - Analysis
Monday, November 16, 2009
UltraTech Cement and Samruddhi Cement, a wholly owned subsidiary of Grasim Industries, approved Samruddhi's merger with UltraTech. Samruddhi shareholders will receive 4 shares of UltraTech at a face value of Rs 10 each for every 7 shares of face value Rs 5 each The deal will make UltraTech, the largest cement company in India and the 10th largest in the world.Proposed merger earnings - The given share ratio is modestly earnings accretive for Ultratech. We do not see significant incremental synergies in the near term given that the cement businesses (Grasim and Ultratech) are already
operationally integrated, i.e. common branding (Brand Ultratech), and functionally
integrated.
EBITDA for Ultratech will decline 13% y-o-y in FY11. HSBC's valuation for Ultratech is based on a 2011 multiple of 6x (earlier 7x) on the consolidated cement business which is the lower end of its historical trading range of 6-8x. Our new target price of INR811.
While Analysts at Goldman Sachs take a contrarian view and argue that Holcim group (ACC/Ambuja) were the preferred companies by FIIs due to their pure play cement business. However, FIIs will now have a choice - Ultratech and hence valuations should narrow [Valuation of Ultratech should rise with a target price of Rs 894]
Kotak expects the combined entity to report an EPS of Rs 84 and Rs 96 for FY11 and FY12 respectively with a target price of Rs 925.
Update:
Morgan Analysts say the proposed swap ratio is EPS neutral for merged UTT in F11, on their estimate and broadly in line with current replacement cost for cement plant in India.
Religare shares the same opinion as Goldman Sachs - The stock is currently trading at a P/E of 9.4x and an EV/EBITDA of 5.9x on FY11E. The merger will narrow the valuation discount between UltraTech and other cement majors such as ACC and Ambuja Cement.
Read the full article
Published by Webmaster @ 10:11 AM IST.
Fund Managers Views on Equity Valuations + Directions for Market
Wednesday, November 11, 2009
Yesterday we covered Global Fund Managers views on the Indian Macro. Today we will cover directly on the equity markets, which is probably more interesting to you. Major drivers for Indian equity markets in FY10 would be liquidity flows and change in earnings.A majority of the fund managers [65%] feel that the markets are fairly valued at the current levels. 20% rated Indian markets as Overvalued however, there are some other 15% who said that they are undervalued. BSE Midcap and BSE 100 were likely to give highest returns in FY10.
EPS Growth for INDEX:
Half of them expect it to be in the range of 5-10% while 31% expect it to be between 10-15% [Some divergent views coming here and hence this volatility of 2,000 to 3,000 points in near future] Of the Remaining, 8% less than 5% growth in EPS while the other 11% expect it to be greater than 15% [Morgan Stanley is in this quadrant. Read Full EPS Expectations Analysis here]
BSE Sensex Levels / Trading Range:
37% of the fund managers feel that the same would be in a range of 14000 - 16000. The weighted average for the fair value of the Sensex is around 16000. Around 27% expect it to be between 16,000 to 18,000 and another whopping 27% peg it between 18,000 to 20,000.
Nifty topline Growth:
The weighted average expected top line growth for companies in the Nifty for FY10was around6.59%in previous quarter which has been marginally increased7.88%.
For this quarter fund managers feel that Petrochemicals, OIL and Telecom Sector would be the laggards in terms of EPS growth. Overweight on Auto/Auto Ancillaries, Media and Pharmaceuticals. Neutral ones appears to be on Banking & Financials, Cement and FMCG.
Fund Flows:
The FII/FDI Inflows for FY10 would be higher than last year (FY09). MF fund flows for FY10 continues to be Positive.
Real Estate as an Investment Returns:
Majority of the fund managers feel that the same would be in a range of0-10%. Weighted Average expected return from Real Estate as an asset class in FY10 from the current level was around 6.82%in the previous quarter and has been increased to8.00% in this quarter
Indian Equities continue to be the most sought after Asset Class followed by Fixed Income securities and Gold ETFs.
Risks:
Reduction in global risk appetite and slowdown in Indian GDP growth. Rising interest rates domestically and globally can weigh on the markets.
Read the full article
Published by Webmaster @ 11:03 AM IST.
Fund Managers Views + Opinion - Macro
Tuesday, November 10, 2009
In the past 18 months, we have already told you that Analysts & Fund Managers views have always followed markets but not lead them. However, with signs of stability if not growth, fund managers views become important. In the light of these developments, we have refined few dozen reports and here is what these wealth managers are of the opinion of Indian Macro Environment.
We will cover the opinion of all the Billion Dollar Fund Managers View on Equity Markets in the next post.
India Macro View by Global Fund Managers:
GDP - Majority feel that the same would be in a range of 6 –6.5%.The weighted average expected GDP growth rate of Indian economy in FY10 was at 6.16.
INR Vs USD - A range of 46 –48. The weighted average expectation on the Dollar Rupee Rate is at 45.86 in the current quarter.
Manufacturing - growth rate for the same would be greater than 5.5%
Services Sector - growth rate for the same would be in a range of8-9%.
Agriculture - growth rate for the same would be in a range of-2 to -1%.
Inflation - a marginal increase in inflationary expectations to 3.57%.
CRR & Repo - CRR rate to be between 4.5-5.5%at the end of FY10. Repo rate to be greater than 5.0%at the end of FY10.
Credit Rating - The fund managers expect that theupgrades of credit ratings in FY10 would be higheras compared to the previous years even in this quarter and the number of fund managers who agree on this point has increased compared to the previous quarter.
Long Term Bond Funds / GILTs - Expect Yield of 6.5%. We will cover their views on Equity Markets tomorrow. Questions and Comments are welcome.
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Published by Webmaster @ 10:50 AM IST.
GVK Power + Bangalore Airport Deal - Analysis
Friday, November 06, 2009
GVKPIL announced that its board approved acquisition of a 12% stake in Bangalore International Airport Ltd for consideration of ~Rs4.846bn from Flughafen Zuerich AG. GVK intends to fund the acquisition via debt. The company has also recently raised ~$150mn through the QIP route.Bangalore airport is the 4th largest airport in India in terms of passenger traffic handled - it handled 9.2mn passengers in 2008. The airport is spread over 4,000 acres of land; with 215 acres of land earmarked for commercial development. GVK is interested in piece of this land and may offer L&T to BUY OUT form the venture.
While we do not have details of the financial performance of the company, GVK did mention that it expects the company to post a profit of Rs300-400mn in FY10E
Zurich Airport has exited at 8X its cost of investment in less than there years. In our view, substantial upside of the project development has been captured by Zurich airport rather than GVK.
GVKPIL is expected to report an EPS of Rs 0.90 to Rs 1.0 for FY10 and between 1.10 to 1.50 for FY11. Stock at Rs 50 appears to be fully pricing in the recent development.
Read the full article
Published by Webmaster @ 11:00 AM IST.
Mundra Port & SEZ - Large Deals Ahead
Thursday, November 05, 2009
MPSEZ 2QFY10 recurring PAT grew +22%YoY despite slow growth in port income +5%YoY on rebound in high margin SEZ income +41% & 30% lower tax on SEZ benefit on port income. Adani Power has scaled-up its Mundra Project by 70% to 7.9GW, which will drive long-term assured volume for MPSEZ's new coal terminal.
Mundra Port was one of the few Asian ports to report 2QFY10 cargo volume growth of +9%YoY to 10.1mmT led by liquid cargo +55% and crude cargo +43%, Coal cargo +19% despite Minerals & other cargo -57% and Fertilizer cargo -35%. Rec. PAT at Rs1.7bn was +22%YoY led by 11% growth in Revenue, 193bps YoY improvement in EBITDA margin and 30% lower tax incidence on notification of port as an SEZ.
A scaleable and deep draft port on the western coast, a low-cost 18k acres of contiguous land bank - India's largest port-linked SEZ - and un-leveraged balance sheet (net D/E 0.4x),
EPS & SOTP Valuation of Mundra Port SEZ:
MPSEZ is expected to report an EPS of Rs 9.46 and 14.61 for fy10 and fy11 respectively, according to Citi.
ENAM - 17.9 and 26.7 for FY10 and FY11 respectively - Quite BULLISH, isn't it ?
Edelweiss- 15.3 and 20 for fy10 and fy11 respectively.
UBS - 12.65 and 16.85 for fy10 and fy11
BOFA_Merrill - expects it to report an EPS of Rs 13.46 and 18.21 for fy10 and fy11 respectively. Further SOTP is pegged as follows,
Port Business - 514 per share on DCF basis at CoE of 12.4% for 50 years concession period
SEZ - 111
Dahej Port - 39
Others - 6 Totally - Rs 670 / share
Analysts vary a lot in their expectations. Anyway, HOLD if you are already doing so.
Read the full article
Published by Webmaster @ 6:55 PM IST.
SBI - Bank in Everybody's Portfolio - Q2 Review
Wednesday, November 04, 2009
State Bank of India, the largest bank and banker to every Indian reported a 2Q FY10 net profit of INR24.9bn, up 10% y-o-y and 7% q-o-q. Even though NII growth was muted on a y-o-y basis on a q-o-q basis it was encouraging. The net interest margin recovered by 25bp q-o-q to 2.6%, led by the retiring of high-cost bulk deposits.Key positives: margins, fees and costs have moved in the right direction - together. Margins were up 25bps qoq (from a low 230bps), but management's guidance of a 10bp per quarter expansion will likely disappoint possibly higher market expectations.
Near term earnings will be subdued due to coverage increase bank will still generate mid teen ROE). By F2012, NIMs should have right-sized and coverage increased to 70%. This would be the first year of 20% ROE, with negligible contribution from trading gains.
Asset Quality:As at end-September 2009 the gross non-performing asset ratio (NPA %) was 3% versus 2.8% a quarter ago. Even though annualized credit costs dipped for the quarter, we believe that asset quality risks might not have peaked for SBI as yet.
EPS Estimates of SBI:
Morgan Stanley - 174 and 234 for fy10 and fy11 respectively
Citi - 164 and 208 for fy10 and fy11 respectively
BOFA-Merrill - 164 and 201 for fy10 and fy11
HSBC - 182 and 235 for fy10 and fy11
BUY SBI or BOB or BOI or PNB or Canara, in a way of speaking a PSU Bank which are quoting at far lower P/Es. Ofcourse on correction :-)
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Published by Webmaster @ 12:28 PM IST.
Hindustan Unilever - Too Much expectations by Investors
Tuesday, November 03, 2009
Hindustan Unilever Ltd - HUL reported recurring PAT at R5bn (+9.7%Y/Y) Despite strong margin expansion (+166bps Y/Y), overall EBITDA rose c17%, as revenue growth was a disappointing 5% - with overall FMCG volume growth of ~1% - despite the lower base.
Market share in both hair and skin remains fairly stable; oral market share [personal wash, skin care and toothpaste] continues to deteriorate. This segment remains the bulwark of profitability. We expect ad spends (as % of sales) to continue to accelerate, as mgmt refocuses on these categories.
When Fund Managers have no choice, they chase ITC & HUL setting in expectations of higher performance. But in the past 8 years HUL has been a laggard with respect to performance that it delivered in the 90s. On the back of Retailers looking towards pushing their own private labels, FMCG companies will be under some pressure.
Citi expects HUL to report EPS of 10.9 and 12.9 for fy10 and fy11.
Goldman expects HUL to report EPS of 10.2 and 11.6 for fy10 and fy11.
CLSA expects HUL to report EPS of 10.5 and 12.3 for fy10 and fy11.
Long term existing investors can HOLD from the Dividend point of you. We find ITC better than HUL.
Read the full article
Published by Webmaster @ 1:06 PM IST.
Benchmark ETF - Advantage Volatile Markets
Monday, November 02, 2009
Going forward we expect Volatility in the Movement. There can be sharp downward spikes on intra-day basis and a recovery at the end. As a small investor, how can you take advantage of this spike since you can't avail this benefit with Mutual Funds which transact on the NAVs on closing basis. You can take Delivery of these units which will be held in your DEMAT A/C. For example, on 31/10/08, Nifty Bees made a Spike downwards and hit a low of 230 and lets since then has more than doubled beating every other mutual fund.Benchmark Funds ETFs can be of great help. NAV of these ETFs keep moving with the market. The ones available and recommended for investment are - Nifty Bees, Junior Bees, Bank Bees and Gold Bees.
Depending on how you want to allocate your portfolio and then market condition, we recommend to take advantage of MARKET-FALL by using these instruments for investments.
We had a chance to touch base with Rajan Mehta, Executive Director @ Benchmark and here is an excerpt from few of the issues we raised before recommending these funds to you.
Why does NiftyBees always trade at Premium to the NIFTY Index on NSE ?
When you compare Nifty BeES with Nifty Index It might be appearing that it trades at premium. This happens because the Nifty Index you see is price index and does not capture dividends while Nifty BeES receives dividends so NAV of Nifty BeES tends to become higher. To avoid this continuous build up, we declare dividend to bring the NAV back to Nifty levels. Recently we have declared such dividend of Rs. 4.5 per unit and Ex date was 8th July. After ex date now Nifty BeES NAV is very near to 1/10th of Nifty. Also we tell investor that premium discount should be calculated from real time NAV of Nifty BeES (Available on our website) and not Nifty level. You can confirm this by checking data on our website by comparing Daily close and daily NAV.Since this is an ETF, why don't you reduce the creation unit to smaller lots, say 1,000 instead of 10,000 or 16,000 ? Are their any proposals from Benchmark to the concerned regulators to make this extremely attractive for small investors ?
Creation unit is entirely internal matter and there is no regulatory guidelines. Higher creation unit does not mean that it is not attractive to retail investors as they can trade in as little as one unit on the stock exchange. Cretion unit need to have optimal size because 1. there are minimum custodian cost per creation and 2. the basket which is being exchange should have smaller rounding off error.If you are a HNI, then you can BUY them directly from Benchmark but the capital required for the same is much higher - few Million rupees.
Additional advantage of investing in Nifty BEES is you can trade the same, just like Traders trade Nifty Index.
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Published by Webmaster @ 12:20 PM IST.
Earnings Season - So Far - Revisit The Optimism ?
Sunday, November 01, 2009
Around 139 companies from the BSE 500 have reported earnings and the overall score is - Net Sales increase by 3.3% and Net Profits by 25.3% with NPM expanding to 12.4%.
Autos and cement have performed strongly in sales while Telecom, metals and media are the laggards. When it comes to profit, Banks and Autos lead the chart followed by Pharma. Construction and Infra have seen a decline in profits.
On the back of tepid earnings growth, reforms moving slower than expectations and central bank's signals on a possible exit policy and at the same time equity supply is burgeoning has weighed on the markets as expected even before the results season began.
Investors must cash-in on this volatility and BUY and HOLD as the era of (% plus GDP growth is still ahead of us i.e pricing the boom is atleast 12 months away. [You should see an upward spike in discounting the SENSEX.
Sensex Earnings Estimates:
As seen in the chart above, Morgan is extremely bullish about FY11 with base case expectations of 1247 while consensus is still at 1108. WE feel that consensus will rise going forward but may not see revision upto 1247 but likely until 1170.Morgan's target for Dec-10 is 19,400 which is quite reasonable in our view. BUY on every dip and stick to GROWTH sectors / fundamentals.
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Published by Webmaster @ 9:56 AM IST.
