Midcap Pick: Sintex Industries a good Buy
Thursday, May 29, 2008
Sintex is a market leader in the Indian plastics processing industry with an innovative product portfolio. The company has, over the years, leveraged its established market dominance in water tanks (~70% share) to tap other higher-margin segments.Sintex is set to deliver a 45% sales CAGR in FY2008-FY2010E (53% FY2005-FY2008) through a strategy of innovation (it is the only company in India involved in monolithic construction) and acquisitions (four in the past year, which contributed US$249 mn to sales)
Monolithic construction (low-cost mass housing) - a relatively new segment for Sintex (9% of FY2008 sales) - has a current order book of US$375 mn (to be executed over FY2009 - FY2010). Sintex has successfully completed five acquisitions in the past two years (21% of FY2008 sales), achieving product and client diversification and acquiring superior technology and facilities near client locations.
Goldman Sachs recommends Sintex on a 12-month DCF-based target price of Rs664 implies 59% potential upside.
SSKI Coverage on Sintex Industries Ltd.
Labels: Sintex-Industries
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Published by Webmaster @ 12:08 PM IST.
India Logistics - Part -II
Wednesday, May 28, 2008
In continuing the Goldman Sachs coverage on India Logistics & Transportation, the following stocks have been assigned Neutral rating unlike the BUY rating on Gateway Distriparks and Gati Ltd.Transport Corporation of India Ltd: TCIL
TCIL is an integrated logistics company and the largest organized player in the road freight business, with a 15% share of the organized market - it moves close to 1.5% of India's surface traffic annually.
The company plans to invest Rs3,400 mn (~US$85 mn) in capex (~30% of current sales) between FY2009E-FY2010E. A majority of this would be directed toward the quick turnaround express and SCS businesses (1.5 mn sq ft of warehouse space added in FY2008). Gati offers a better business mix and has higher absolute margins (we estimate that the low-margin legacy transport segment will still account for 48% of TCIL's revenues in FY2010E (55% in FY2008).
Goldman has a Neutral rating and a DCF-based 12-month target price of Rs 119, implying 25% upside from current levels.
Allcargo Global Logistics:
Allcargo is a leading player in the MTO segment, with a strong international network. It provides consolidation services for lessthan- container (LCL) load cargo and is also in the project cargo handling business, involving packaging and transportation of cargo from factory to project site.
Heavy operating expenses in the MTO segment and high employee costs (including severance) associated with recent acquisitions have led to significant margin erosion over the past several quarters (EBIT margins moved down from 19% in 2005 to 7.7% in 2007).
The company's growth will be restricted (sales CAGR of 14% in 2007-2009E), given its higher exposure to lower-growth areas outside India (41% of 2006 revenues from Europe). Thus, the Neutral rating. 12-month DCF based target price of Rs 904, implying 27% potential upside from current levels.
Container Corp. of India Ltd:
Concor is the largest established player in the Indian multimodal logistics business, with a significant infrastructure advantage over its peers – the company handles 33% share of India's EXIM container traffic (we estimate the segment accounted for 80% of
FY2008E sales).
The company would be unable to sustain the growth it delivered in FY2006-FY2007 (25%) because of a lack of spare capacity and slower overall EXIM demand growth. Goldman forecast Concors sales to grow at a 12% CAGR in FY2008E-FY2010E. Concor has stated its intent to diversify into the air cargo and cold-chain logistics space by leveraging its core infrastructure. If successful, this could provide a boost to sales.
Goldman has set a DCF-based 12-month price target of Rs 928, implying 5% upside from current levels.
Labels: Allcargo-Global-Logistics, Container-Corporation-CONCOR, TCIL
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Published by Webmaster @ 2:30 PM IST.
India: Transportation & Logistics - Initiating Coverage - Goldman Sachs
Just minutes ago, Goldman Sachs has released a report initiating coverage on India Transportation and Logistics Sector with a BUY rating and long-term growth prospects. Goldman has five stocks representing 63% of the Indian logistics sector's total market capitalization.Gateway Distriparks Ltd: GDL
GDL is the largest private port-based logistics services provider in India (accounted for about 5% of container [CFS] traffic in FY2008), and plans to double its capacity over the next three years (expect segment growth of 18% in FY2008-FY2010E).
GDL is a direct beneficiary of the ongoing infrastructure spend in India (US$168 bn in FY2007-FY2012E) and the strong GDP and trade growth expected - GS forecasts GDP growth of 8% annually in FY2008-FY2020E in India, and EXIM trade, which typically leads economic growth, had a CAGR of 29% in FY2004-FY2008.
Goldman has a Buy rating and DCF-based 12-month price target of Rs 175, implying 55% upside from current levels. EPS FY09(E) Rs 6.93 and FY10(E) Rs 9.14.
Gati Ltd.:
Gati is a dominant player in the surface cargo business in India with a strong distribution network and delivery capability to reach 594 of India's 602 districts. Goldman believes that market has not fully valued the margin strength of its core express business and the potential growth from its freighter and logistics segments.
Gati is currently undergoing a shift in its business mix away from its legacy surface express business (>50% of 2007 sales). Expect higher-margin freighter and logistics businesses to grow at a CAGR of 57% and 23% over FY2008 - FY2010 (which would constitute 24% of FY2010E sales compared with 17% of FY2008 sales).
Goldman has a Buy rating and DCF based 12-month target price of Rs 149, implying 44% potential upside from current levels. EPS FY09(E) Rs 5.99 and FY10(E) Rs 6.91.
Labels: Gateway-Distriparks-Ltd, Gati-Ltd
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Published by Webmaster @ 1:56 PM IST.
Are FIIs Fleeing India ?
Your eyes must be Red and BP shooting high the moment you read, FIIs are fleeing India. Chill, to save their siblings in the US [American Subsidiaries], they booked huge profits and thus their holding in BSE-500 has dropped from 20% to 17.8% at the end of March-08. Promoter share of the BSE500 picked up ~2.9%, rising to 58.2% in the quarter - the highest level in 32 quarters, suggesting continued promoter confidence even in a weakening market.FIIs have been the top sellers in the correction, bucking the trend of rising foreign ownership leading to market performance. From a sector perspective, domestic institutions were strong sellers of Financials in the quarter, moving from an overweight to an underweight. Consider Citigroup one of the largest FIIs in India, is overweight on Financials, Telecoms, IT Services and Pharma. We are neutral on Energy, Consumer and Industrials, and negative on Materials and Utilities.
FII Portfolio in India March-2008:
FIIs are overweight on Financials, Industrials and Energy stocks. They subscribed to SBIs Rights issue.
Domestic Mutual Fund Portfolio in India March-2008:Domestic Fund Managers held a contrary view against FIIs and increased their exposure to Industrials / Manufacturing. Domestic Funds hold half of FIIs in Telecom while they both hold equivalent in Energy. Again in FMCG, FIIs and Domestic Funds take divergent views.
Retailers Sold, FIIs Bought:Since 2001, the retail investor has been selling and FIIs have been BUYING in India. They have ramped up their holdings in BSE-500 companies from 12% to 19.86% by Dec-07, and then started booking profits to save their family in the US and hence saw holdings decline to 17.84%
Retailers holding has declined from 16% in Mar-2001 to 9% by March-2008.
Analyst View: Continue to BUY like an SIP investor in Mutual Fund. However, if you want to beat the benchmark like we do, you have to reshuffle and churn your portfolio very often which we don't like either, but are helpless like any other fund manager to make money in this market.
Labels: FIIs-Holding-India
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Published by Webmaster @ 10:41 AM IST.
True Indian Inflation maybe as high as 15% - sans Oil+Gas subsidies
Tuesday, May 27, 2008
Have you seen anywhere in the world where Inflation numbers stand revised because of data collection issues ? Welcome to India, anything is just possible here. The Indian Inflation could be as high as 15%, yes you are reading that right. Combined Oil and Gas subsidies contribute to as much as 6.9% to the Inflation.Adding to its woes is lack of proper financial planning by the government which has landed itself in Fiscal Deficit closer to 10 per cent and Current Account Deficit closer to 3.5 per cent.
The RBI should just stop messing with CRR eye wash and start raising interest rates.For the first time in 4 years, Real Interest Rates on Bank Deposits are negative, that is interest paid is lower than annual inflation rate. However, this does not mean that you jump into stock market or start speculating, No the RAINY DAYS are here to stay. All this means, India is headed into moderated growth in FY09 and it is to be seen if SENSEX will meet its earnings target of RS 1,000 or will miss it ?
Related Reading:
How Higher Crude Oil prices is ruining India's growth story ?
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Published by Webmaster @ 10:18 AM IST.
Growth Cycle - At CrossRoads
Monday, May 26, 2008
India's Economic Growth story can be grouped into three phases. (1) Prolonged below-trend growth period - 1998 to 2003. (2) Acceleration to Overheating Zone - 2004 to 2007; (3) Reverting to sustainable growth rate. We believe the underlying sustainable growth rate currently is 7.5-8% - the level at which the risk of overheating is low.Just as during 2005-2007 strong positive global factors supported India's growth above its then sustainable growth trend, negative global factors are now threatening to pull its growth below potential. Rise in prices of Global Commodities and continued aversion of global financial markets will act against India's interests.
For an emerging economy like India with a rising working population and large unemployed work force, limitations to potential growth are determined by the pace of reform to the economic environment, which allows resources to operate productively. Although the Government claims that economy will grow upwards of 9%, we feel it is just an eyewash as rising Inflation and Cartelisation across Iron & Steel, Cement, Real Estate will hurt the growth story badly in the short to medium term.
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Published by Webmaster @ 2:37 PM IST.
Brokerages Underweight on ITC
Though the revenue growth was good in this quarter, operating margins for the company were hit due to higher investments in the newer businesses. Going forward the growth in the cigarette business of the company will be severely impacted due to the recent changes in the excise duty structure in the Union budget. However, there might be some near-term strength due to migration of consumers from unfiltered to the filtered segment which would result in the company reporting strong numbers in the next few quarters.Foods portfolio in the non tobacco FMCG segment has grown 40% during the quarter. Growth in other non tobacco FMCG businesses has slowed down. Non tobacco FMCG excluding snack foods and HPC has broken even in Q4F08. Snack foods expected to break even during the next 4 quarters. Agri business profitability has been driven by Soya and leaf tobacco exports. Although revenue growth is likely to be flat margins could improve in F09. New paper mill was commissioned in Q1F09. This backward integration is likely to witness margin expansion in F09.
Consensus EPS Estimate for Fy09 is Rs 9.45 Morgan Stanley, Lehman Brothers, HSBC Equity Research are all underweight on the stock.
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Published by Webmaster @ 12:04 PM IST.
Bharti Shipyard - Tidal Times Ahead
Friday, May 23, 2008
Bharti Shipyard is expected to sail through Tidal Times mainly due to jump in steel price and jump in working capital due to delivery delays and need to keep higher raw material inventory.Bharati has order backlog of 5.6x FY08 sales and has its yards full till mid FY11. Significant quantum of repeat orders, robust financial of key customers and an order book skewed in favor of offshore vessel and bulk carriers indicates very low risk of cancellation, in our view.
Merill Lynch has cut DCF-based target price on Bharti Shipyard to Rs625. Merill expects Bharti to report an EPS of Rs 39.23 and Rs 52.84 for FY09 and Fy10 respectively. You can also read Citigroup's coverage on ABG Shipyard and Bharti Shipyard.
Labels: Bharti-
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Published by Webmaster @ 12:35 PM IST.
Buy Riddhi Siddhi Gluco - Kotak
Wednesday, May 21, 2008
Riddhi Siddhi [RSGB's] 500 TPD maize-crushing plant at Uttarakhand has successfully completed trial runs and has commenced commercial production. The Uttarakhand plant is state-of-the-art and has been built with inputs from Roquette Ferres, which is one of the global leaders in maize starch and its value added derivatives. It was built at a cost of Rs.1.2 bn.The plant would be able to provide timely and effective service to its large number of corporate and institutional clients who have set up facilities in Uttarakhand and Himachal Pradesh.The total capacity of the company has increased by 50% form 330,000 TPA to 500,000 TPA or from 1000 TPD to 1500 TPD. The financial performance of the company is poised for aggressive growth in the coming years in line with such an aggressive capacity addition.The capacity utilization of the Gokak, Karnataka plant has gone up from 40% in May 2007 to 80% in March 2008. The management is very confident of ramping it above 90% capacity utilization levels by June 2008.
Over the last nine months, the stock had underperformed the markets due to fire at its Gokak plant and couple of month's delay of its Uttarakhand plant. Now with the Gokak plant back to normal and aggressive capacity expansion to 0.5 mn TPA becoming operational, the financial performance of the company is expected to improve significantly from now on.
Kotak Sec expects RSGB to report EPS of Rs.22.8 for FY08E moving upto Rs.48.2 for FY09E. It recommends a BUY with a target price of Rs 390.
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Published by Webmaster @ 11:19 AM IST.
Satyam Corporate Governance at Stake
Monday, May 19, 2008
India's leading IT company Satyam Computer services is facing charges of Fraud by UPaid in a Patent Dispute involving hundreds of millions of dollars.Here is the sequence of events that has happened in the last 12 years with Upaid.Upaid awards contract to Satyam for software development. 20 Satyam employees designated as "inventors" - Involved in the core architecture and design of the external platform contributing to Upaid's inventions. Upaid files a provisional patent application. Satyam to relinquishes all claims to the ownership of such intellectual property rights.All individual inventors had to give their individual enduring duties of disclosure and candour to the USPTO, by way of a formal declaration under oath for patent to be formally granted.
947 Patent granted to Upaid - Combined declaration with signature of 20 inventor employees by Satyam in Nov 1999 was filed.
In June 2005, Upaid files patent infringement proceedings against Qualcomm and Verizon. Two Satyam employees deny signing the employee assignments or combined declaration. Upaid alleges that is has the evidence of the forged signatures of two Satyam's employees. UPaid drags Satyam to Court of Law in Texas, USA but Satyam appeals in the high Court of London, which was dismissed last week and London court grants permission for the Texas court to proceed on the said matter.
Implication on Satyam Computers:
Out of court settlement - Questions araise on corporate governance at Satyam [Their could be more forgeries that Satyam may have done with other clients]
Negative outcome - Apart from Corporate Governance, Satyam's balancesheet may bleed as Upaid is talking about $ 1 Billion in the lawsuit.
Positive Outcome - No impact on balance sheet + Reputation preserved.
After going through various reports we believe that UPaid may have the required ground. However it is too early to say anything. Historically [since 1999], Satyam always traded at a discount to Infosys because of Poor Management practices and lack of transparency [Recall the Rs 600 crore IndiaWorld deal with Sify, then Satyam's subsidiary company ?]
Reduce Satyam Computers from your folio.
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Published by Webmaster @ 8:18 PM IST.
HSBC on Dabur India
Friday, May 16, 2008
In a report released just minutes ago, HSBC has reiterated its OVERWEIGHT rating on Dabur India. Dabur is one of the least expensive consumer stocks in India and trades at an 18% discount to peers on PEG basis. Foods has been integrated into the Consumer Care Division and will have access to a wider distribution network. Consumer Health Division has seen revival in H2FY08 and we see this continuing in FY09e on better brand support and new packaging. A large portion of the consumer care division portfolio has been relaunched and is likely to post good sales growth and the company plans price hikes.
FY09e sales will be higher at 16.7% compared to 15.2% in FY08. Volume growth to remain at FY08 levels but price increase is due to uncontrolled Inflation.Dabur currently trades at a PEG of 1.17 compared to the sector average of 1.43. The stock is currently trading at 22.1x FY09e. HSBC Analyst apples a multiple of 22x to March 2010 consolidated EPS estimate of INR 5.35. This gives a price target of INR118 per share.
DalalStreet.Biz: We will not recommend any fresh BUYING, but existing investors can stay invested.
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Published by Webmaster @ 11:29 AM IST.
Buy Bilpower + Lakshmi Energy Foods - SBI Caps
Tuesday, May 13, 2008
SBI Caps Securities has initiated coverage on Bilpower Ltd and Lakshmi Energy and Foods Ltd with a BUY rating.Bilpower Ltd:
Consolidation of businesses should lead to enhanced synergies, as Bilpower becomes an integral player across the value chain. Bilpower incurred a CAPEX of Rs 390 mn in FY08. This has led to increase in capacity of electrical laminations to 16,500 tpa and added new stamping line with capacity of 15,000 MT. For FY09, the company has lined up Rs 50 crore CAPEX in adding Transformer manufacturing capacity.
Bilpower is a leading player in electrical lamination. Thus foray into motor stamping and transformer manufacturing business is a logical extension for a comprehensive portfolio. At the CMP of Rs 208, the stock trades at a P/E of 7.2x and 5.0x on FY09E and F10E respectively. Investors can ADD this stock to their portfolio with a 12-month price target of Rs 318, a 50% appreciation from current levels.
Lakshmi Energy and Foods Ltd:
Lakshmi Energy and Foods Ltd. (LEAF) is the largest integrated non-basmati paddy processor in the world with combined installed capacity of 225 MT per hours. It is expected to produce nearly 220 mn units of power in a year with PLF of 72%. The company would be using nearly 15% of the power generated for captive purpose and remaining 85% would be sold to Punjab Electricity Board at Rs3.59 per unit. The use of husk as bio-fuel for power generation would yield 1.4 Lakh CAR (Carbon Credit) under Kyoto protocol which translate into a revenue of Rs10-12 crore per year form FY10 onwards.
It has embarked a capex of Rs800-1000 crore over next 4 years to double its existing paddy processing capacity to 350 MT per hours (2 MMTPA) and also substantially raise its other by-product processing capacities like rice bran, solvent extraction; edible oil refining and de-oiled cattle feed etc
At CMP of Rs210, Lakshmi Energy & Foods Ltd is trading at a PER of 9.7x of TTM March 2008 earnings whereas on EV/Sales and EV/EBITDA it quoting at 1.5x and 7.1x respectively. The company is expected to report FY09E EPS of Rs 24.1. At P/W of 12x, one can expect a the stock to rise to Rs 290.
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Published by Webmaster @ 4:05 PM IST.
Buy Nalco, Hindalco, Sterlite - Citi
Monday, May 12, 2008
Just a while ago Citigroup Analysts have turned BUYERS into Aluminium stocks in India [Upgrading NALCO and Hindalco from SELL to BUY]. Citi's global Analyst, expects an emerging power crunch and shortage of high quality bauxite to cause a shift in the competitive landscape for aluminium, driving aluminium & alumina prices up. New aluminium prices are US$3,600/t (+22%) in FY09 and US$4,500/t in FY10 (+71%).The upward trend in electricity prices and security of supply is a key challenge in countries with major aluminium smelting capacity such as China, South Africa, Brazil, and the USA.
Hindalco:
Hindalco is a low-cost integrated aluminum producer (~500,000 tpa) with 1.5m tpa of alumina capacity, and has the advantage of captive power and bauxite. It has a strong domestic market share in primary aluminium; and a dominant 60-65% market share
in sheet products.
Hindalco has ambitious expansion plans to triple both its alumina capacity (to 4.8m) tpa and its aluminium capacity to ~1.5m tpa, to be completed in stages during 2010 to 2013. These will have matching power and bauxite and some captive coal.
Citi is upgrading HINDALCO to Buy and raising its target price to Rs240 following our improved aluminium outlook for the next three years. Target price is based on 12-month forward consolidated P/E of 9x.
Nalco:
Nalco believes that it is among the three lowest cost alumina producers globally due to its good quality bauxite, low transport cost (the conveyor belt uses gravity to transport ore to refinery at foothills) and advanced technology.
The company expects to complete its ongoing expansion by Dec 2008 (capex Rs46bn), resulting in a 33% hike in both alumina (to 2.1m tpa) and aluminium capacities (to 460,000 tpa).
Based on the new forecasts (but with 7-11% discounts), more favourable Rs/$ exchange rates and slightly higher volume assumptions, Citi upgrades EPS by 83% in FY09E and 268% in FY10E. Citi has set a new target price of Rs 546, 12-month forward P/E of 10x, the mid-point of Nalco's one-year trading range of 9x-11x.
Sterlite:
Citi has raised earnings estimates by 6% in FY09E and 28% in FY10E given new aluminum forecasts and exchange rates. They continue to value Sterlite at 10x P/E but roll forward to June 2009 (12-m forward), arriving at a value of Rs984. To this, add the value of the power business (Rs69/share) for a target price of Rs1,053.
Labels: Global-aluminium-price-to-shoot-up
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Published by Webmaster @ 2:20 PM IST.
Effects of Higher Crude Oil Prices on India
India is the 10th largest oil importing nation in the world (oil imports are close to 70% of its crude oil requirements). If the average price of crude oil for FY09 is $105 / bbl, then, it will result in the FY09 trade deficit coming in at US$115bn. According to Citi,US$1/bbl increase in oil prices results in the trade deficit widening by US$700mn. Therefore, assuming a US$15/bbl increase in the Indian basket to US$120/bbl, the import bill would rise by an additional US$10.5bn, taking the CAD to US$47.3bn or 3.6% of GDP.To be in-line with international trends, auto fuels need to rise 18% for petrol and 43% for diesel.However given political compulsions, this is unlikely to take place. As far as the fisc is concerned, to compensate the oil marketing companies for the under-recoveries, the government is likely to issue oil bonds to the tune of Rs630bn in FY09.
How much LPG, Kerosene, Diesel and Petrol Contribute to Inflation ? See Chart below.
Overall, if the above fuel prices are changed to be in-line with international prices, they will contribute 4.70% to Inflation and the Government can never do this but burn deep hole in its own pocket. Additionally, the Indian Rupee is expected to become weaker on account of higher deficits.
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Published by Webmaster @ 12:12 PM IST.
Buy Suzlon Energy - Nomura
Sunday, May 11, 2008
The markets seem to be in correction mode and it is really difficult to recommend a stock. However, Nomura Securities has initiated coverage on Green and Clean Energy giant - Suzlon energy with a STRONG BUY.Growth in the global wind industry continues to accelerate, driven by climate concerns, energy security, increased electricity demand from developing countries and improvement in yields. The cumulative installed wind power capacity is forecast to grow from 94GW in 2007 to 288GW in 2012F, a CAGR of 25%. Energy Law is targeting 20% of energy from renewables by 2020F and in the US the Renewable Portfolio Standard (RPS) means that 21 nations have mandates to generate 10% to 20% of their energy needs via renewables.
Suzlon is targeting this demand with an aggressive expansion programme. Long-term sales target by geography is as follows: 20% from the US, 20% China, 20% Europe, 20% from India (stable at 50% market share) and 20% from the rest of the world.
Nomura believe Suzlon is well positioned to gain market share. As at January 2008, it had an orderbook of 3,358MW worth US$4,335mn. Of these orders, 441MW were for domestic orders in India and 2,916MW for international orders.
Nomura expects Suzlon to be Free Cash Flow Pisitive in FY10 after a high capex in FY08 and 09. EPS is expected to be Rs 12.6 and Rs 18.4 for FY09 and FY10. Noumra has set a target price of Rs 370 on Suzlon.
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Published by Webmaster @ 12:04 AM IST.
Citi Downgrades Sensex Target 18500
Friday, May 09, 2008
American Financial Crisis, Historically High Oil Prices and the worst factor for Indian economy is Business Inflation - The rising cost of doing busines, together have all triggered the downgrading of Indian Equity Markets by Citigroup. In a report released just minutes ago, Citi which had BSE Sensex Target of 23,950 to 25,000 has reduced it to mere 18,500 by March 2009.Citi had set an ambitious target of 23,950 to 25,000 in Jan 2008. Our Analyst had then said, In our honest opinion, we feel it is highly absurd valuation for mere 19% growth in FY09. Incidentally, today's BusinessLine Quotes Citi's research Team as the best in India - and our team should be a step above Citi, right ? Or maybe lets blame it on Citi's ex-CEO Ratnesh who is now with Ananad Rathi ;-)
According to Citi, India's growth has pulled back quite sharply; 2008 (March end) GDP growth at 8.7% is lower than the previous year, and Citi Economist forecasts 2009 GDP growth at 7.7% while market consensus ranges from 7-7.5%.
The macro has clearly been challenging - inflation has reared its head up high, markets' expectations of rate cuts have been abandoned (and with the RBI pulling out liquidity through the CRR, banks are biased toward raising rates). In addition, global uncertainties remain high while the capital markets - a contributor to market momentum and mood – have come to a grinding halt.
India's earnings momentum has been slowing; expectedly, since 2QFY08, and we expect that trend to continue. This is consensus, and follows four years of strong and rising earnings momentum; a combination of operating leverage, low interest rates, accelerating growth environment and strong asset prices.
The sharp market fall over 2008, has had one defined victim, the "retail investor". This investor - hard to categorize, in numbers, segment or scale, has clearly been hurt and a large segment of these retail investors have exited the markets, for now.
Citi has now set a target of 18,500 for March 2009 based on ROE/ PBV incorporating embedded asset values.The market trades at 16.4x FY09 P/E, in-line with its 18-year average.
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Published by Webmaster @ 12:31 PM IST.
BSE Sensex - 1990 to 2008
This is the Best BSE Sensex historical graph I have ever seen and hence sharing it with you all. The Graph image can be enlarged to see Mean, Mean SD, Mean+ 2SD and Roll P/E.
As the economy improved and the breadth of the markets increased, the SENSEX Rolling P/E has made lower peaks. 1992-93 peak was a result of Harshad Mehta Scam and 1999-2000 is Ketan Parekh + Sandeep Sabharwal IT Stocks Scandal [Inline with Global Dot Com Boom]Graph Source: Citigroup + Bloomberg.
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Published by Webmaster @ 12:17 PM IST.
Kansai Nerolac Paints Outperformer - ICICI
Thursday, May 08, 2008
Kansai Nerolac Paints' Q4FY08 results were subdued due to lower demand for industrial paints [Automobiles]. Top-line grew 8.1% y-o-y to Rs 308.4 crore from Rs 285.2 crore. Bottom-line grew by a meagre 2.8% to Rs 24 crore from Rs 23.3 crore. Increase in realizations (2% in decorative segment) boosted EBITDA margin to 13.1% from 12.7% in Q4FY07. During the quarter, the company's decorative business posted positive results as the housing segment continued to do well.Raw material costs increased by 9% y-o-y to Rs 200.7 crore from Rs 184.2 crore. Depreciation provisioning increased 14.2% due to expanded capacities. Other income was down by 56.7% to Rs 4 crore. Going forward, housing demand is expected to be on an upswing and this would support demand for decorative paints. The outlook for industrial should improve on the expected pick-up in automobile sales.
At the current price of Rs 684, the stock discounts its FY09E EPS of Rs 52.5 by 13.0x. Historically, the stock has traded in a range of over 16x-18x. ICICI Maintains an OUTPERFORMER rating with a price target of Rs 945.
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Published by Webmaster @ 5:27 PM IST.
Will Oil Price Spoil the Indian Party ?
Wednesday, May 07, 2008
The Oil has scaled to a record high and Indian Oil Marketing companies [HPCL, BPCL, Indian Oil Corp] are losing $12 million everyday for selling subsidized Petrol / Diesel / LPG. With stream of elections across India and no political party willing to risk their fortunes by raising oil prices, the Government's subsidy bill is simply out of control now. All the noises about 30% plus growth in Tax collection will now be utilized for Oil Bonds and Government subsidies.The current account deficit as percentage of GDP has worsened since 2003 and is close to 1991 level[Historically the Worst for India]. See Graph Below.
Adding to India's woes is weak global environment. India's balance sheet fundamentals suggest some weakness given its widening current account deficit, limited fiscal space coupled with rising inflation. This is sending conflicting signals to Foreign Investors and some have opted for wait and watch approach while other are planning a limited exit to de-risk their folio.
However, their are factors that put the odds in favor of India's resilience rather than its vulnerability include the underlying growth story, favorable external debt ratios, high reserves and policy response.
Research houses have again revised the GDP estimates downwards for FY09 to 7.5%, which was more like 10% at the beginning of the year. On a side note, the USD has hit a 6 month high in Intraday trade today and is quoting at Rs 41.15.
We are recommending our Investors not to commit any big ticket investments at current levels. India being an Oil dependent economy and lack of will by successive government's to strike deals with Middle East or Russia is a dampener.
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Published by Webmaster @ 1:20 PM IST.
Indian Oil - Bongaigaon: Arbitrage Opportunity
Tuesday, May 06, 2008
We will never recommend to Invest in PSU Refinery / Oil Marketing Stocks until the Government supports FREE pricing mechanism, of course control cartelisation like the Steel companies in India are currently resorting to. However, if you are holding Bongaigaon Refinery & Petrochemicals Ltd, which will be merged with Indian Oil Corporation, here is an arbitrage opportunity.BRPL Share Price(Rs/share) 64
Merger Ratio 37:04
Implied Share Price for IOCL( Rs/share) 592
Current IOC's share Price( Rs/share) 481
Implied Premium/ (Discount) (%) 23
IOCL's proposed merger with BRPL has received approval from their respective
shareholders and secured and unsecured creditors. The companies have sought approval from Ministry of Company Affairs (equivalent to the High Court approval) for the scheme of amalgamation. The entire process is likely to take another 3 months.
Investors who are in profit and are willing to exit must do so and seek solace in other energy companies such as Reliance Petroleum upon correction.
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Published by Webmaster @ 12:20 PM IST.
Morgan Stanley Overweight on Amtek Auto
Monday, May 05, 2008
Morgan Stanley in a report continues to be OVERWEIGHT on Amtek Auto.F3Q08 numbers in line with estimates. Consolidated revenues came in at Rs13.2bn, 1.6% above our Rs13.0bn estimate while EBITDA came in at Rs2.3bn, 12.2% below our Rs2.6bn estimate. This excludes one-time Rs297.1m profit on sale of shares booked by Amtek Siccardi (one of the subsidiaries) in F3Q08. Adjusted EBITDA margin came in at 17.2%, 270 bps below 19.9% estimate and 280 bps below last year's 20%, primarily driven by higher raw material costs.
Consolidated reported PAT came in at Rs1.2bn exactly in line with our estimates and 14% above last year's Rs1.0bn. Standalone revenues and margins came in at Rs3.3bn and 26.2%, below Rs3.4bn and 28.2% estimates, respectively.
Morgan Stanley expects Amtek Auto to report an EPS of Rs 30.18 for FY08 ending in June and Rs 35.26 for FY09. Continues to be overweight with a target price of Rs 500.
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