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  • NTPC: Regulatory changes, rising costs impact profitability

    National Thermal Power Corporation (NTPC), the largest power generating company in India, is principally engaged in engineering, construction and generation of power. Besides, it also undertakes oil & gas exploration, coal mining and provides consultancy services in the area of power plant construction and power generation. It provides power at the cheapest average tariff in the country. Currently the company has a capacity of 32694MW. It is currently trading at a P/BV of 2.6…

  • DR. REDDY’S LABS: Developments during Q2FY11

    Robust performance in India, Russia/CIS & RoW Generics markets has managed to offset lower Generics sales in other markets and overall PSAI sales: Net sales at Rs1870crs showed yoy growth of 1.8%. This performance was a direct result of the lower PSAI sales across allmarkets, which has been offset by robust growth in India, Russia/CIS & RoW markets. PSAI sales declined 14.1% yoy to Rs461.7crs, impacted by price erosions and lower order flow. Ex‐PSAI, net revenues at Rs1367crs grew 7.6% yoy where India, Russia/CIS & RoW markets exhibited continuous (yoy) growth of 25.3%, 17.0% & 25.3% respectively. US generics business depicted strong sequential growth…

  • JM FINANCIAL LIMITED: Buoyant capital markets drive business performance

    JM Financial Ltd’s (JM’s) Q2FY11 revenues were in line with CRISIL Equities’ expectations driven by investment banking and securities funding businesses. However, the securities broking business continued to be impacted due to pressure on broking yields. Losses in the asset management business (AMC) and poor performance of the broking business led to a slight decline in profitability. Our outlook for the company’s second half remains stable on the back of buoyant capital market activities. Consequently, we maintain our earnings estimates for FY11 and FY12. We maintain our fundamental grade of ‘4/5’ for JM…

  • Economy First Cut: Industrial growth drops further to 4.4 per cent in September 2010

    • Industrial output growth dropped to 4.4 per cent in September 2010 as compared to 8.2 per cent a year ago and 6.9 per cent a month ago. • As the index of industrial production (IIP) has been readjusted in view of revamped Wholesale Price Index (WPI) for IIP items, the IIP growth for July and August 2010 now stands 15.0 and 6.9 per cent. • Manufacturing output growth decelerated to 4.5 per cent in September 2010…

  • INDIA STRATEGY: FY11/12 Earnings: What do Analysts think?

    Analysts are turning bullish for the first time in a year. Riding into the quarterly earnings season, we gauge consensus sentiment across sectors, and find that earnings revisions are no longer headed south. We aren’t seeing substantial upgrades just yet, but the trend of downward revisions is moderating. Economic growth is on track with a solid monsoon, robust consumption demand (and perhaps, a booming market), leading analysts to take a second look at earnings. RCML’s Q2 PAT (ex-oil) estimate is 29% for the Sensex, and 21% for our broader 135-stock coverage universe…

  • STERLITE INDUSTRIES: Project issues continue

    The 100 ktpa lead capacity expansion has been delayed by a quarter and is now expected to be completed in Q3FY11. The 400 ktpa brown field copper expansion has been put on hold considering the high court order to shut the existing smelter due to environmental/pollution issues and pending approval from the State Pollution Control Board. The Supreme Court has currently issued a stay on the above order and hearing on the matter is scheduled on October 18. With the Ministry of Environment and Forests withholding clearance for Vedanta Aluminium’s (VAL) bauxite mine and objecting to the alumina expansion, the company has effectively put on hold the entire expansion—alumina expansion at VAL to 5 mt from the current 1 mt, smelter expansions of 1.25 mtpa at Jharsuguda and 325 kt at Korba—at VAL and BALCO…

  • PUNJAB NATIONAL BANK: Out Performer

    In a recent development, Punjab National Bank (PNB) and other seven banks’ exposure to Zoom developers (a Mumbai based project development company) has come into light. The banks’ total exposure to the account is close to Rs26 bn (non-fund based exposure), out of this PNB’s (the lead banker) exposure is close to Rs4.5 bn. In accordance with the media reporting, in Q1FY11, the bank already recognized Rs3.0 bn as NPAs and made provisions. According to our communication with other banks’ managements some of the banks made provisions in Q4FY10 itself. Around 76% of the banks’ exposure is insured with ECGC (Export Credit Guarantee Corporation)…

  • KSK ENERGY VENTURES LIMITED: High Project Visibility coupled with Attractive Valuations (EQUIRUS)

    We expect KSK Energy Ventures Limited (KSKEVL) to commission a total of 4644 MW by FY16 comprising operational capacity of 601 MW, capacity of 313 MW which is expected to be commissioned by FY11 and further capacity under construction of 3730 MW. KSKEVL has pioneered the group captive business model along with a focus on long term off take agreements and fuel security which lead to lower volatility in the tariffs and fuel costs. This provides higher visibility and scalability to its power generation capacity. We see 35% upside in KSKEVL by 30th Sep, 2011 and initiate coverage recommending LONG position and suggest an overweight within the power sector. Our FCFE based DCF TargetPrice (TP) of ` 242 is based on projections till FY17 and 20 years of growth…

  • ING VYSYA BANK: Business and margin scaling up; initiate with Buy

    We initiate coverage on ING Vysya Bank with Buy and price target of `445/share. We expect the Bank’s RoE and RoA to expand to 17.3% and 1% respectively by FY13e on the back of business scaling-up as well as improvement in margins and productivity. ■ Business growth scaling up; margin expansion. We expect ING Vysya Bank to witness improved business growth and higher market share FY11 onwards. Rising CASA share is likely to aid margin expansion to 3.1% in FY13e from 2.7% in FY10…

  • Stocks with 35-50%+ potential

    Midcap monitor is a new product from the Religare Strategy team where we would analyze and provide updates on midcap stocks. In our first edition, we provide 10 midcap picks (market cap of US$500mn-US$2bn) that we believe have 35-50% upside by Dec-11. To build a diversified portfolio, we have chosen stocks across the entire spectrum of Indian growth story – consumption (Ashok Leyland, Educomp, Glenmark Pharmaceuticals), investment (Voltas, Sobha Developers, Shree Cement, KEC Intl), Energy (Petronet LNG), diversified (Sintex), financials (M&M financial Services). We recommend investors to take significant position in these stocks for alpha performance.

  • JSW ENERGY LIMITED

    ■ Capacity to increase ~2x by FY12: JSW Energy (JSWEL) plans to more than double its capacity to 3.1GW by FY12 from 1.4GW currently. It plans to sell ~56% of its expanded capacity in the short-term market, which would increase its earnings sensitivity. If we consider the 270MW Raj West extension, the share of merchant capacity increases further to ~60%. ■ Exposed to the spot market for 46% of total coal requirement: JSWEL has entered into long term coal supply contract with PT Sungai Belati and its South African company

  • CLARIANT CHEMICALS: Capitalising on consumption boom

    Clariant Chemicals (India) (CCIL), a 63.4% subsidiary of Clariant AG, Switzerland, is a leading specialty chemicals companies. India is witnessing one of the best growth rates ever seen in consumption in various sectors including automobiles, paints, personal care, food and beverages or textiles. With demand growing at a fast clip, CCIL is ideally placed to capitalise on this favourable trend as it caters to most of the consumption categories. Most of CCIL’s portfolio consists of specialty of products enjoying strong brand and tremendous customer loyalty due to superior quality and technology…

  • TELECOMMUNICATION SECTOR: The next round gets tougher

    We maintain our medium-term cautious view on the telecom sector and downgrade Bharti Airtel (Bharti) to ‘HOLD’ and Reliance Communications (Rcom) to ’REDUCE’. We maintain ‘HOLD’ on Idea Cellular (Idea) and ‘BUY’ on Tulip Telecom (TTSL). We anticipate tariff wars to re-emerge with the implementation of Mobile Number Portability (MNP) and launch of 3G services. We believe, Bharti’s dominance in revenue market share and margins will be challenged by Idea, Aircel, and Tata Docomo. The entry of MVNOs will further make the market competitive. Over the longer term, we believe, the sector will witness de-leveraging of balance sheets and sustenance of healthy cash flows. But, at current valuations the street is in for a disappointment.

  • INDIA CONSTRUCTION SECTOR: Concerns overdone; risk-reward ratio favourable

    Strong order inflows, improved credit scenario and better execution capabilities are expected to accelerate revenue momentum for India construction sector in the coming quarters. We expect our coverage universe to report 16%/23% YoY growth in revenue for FY11/12 (8% in FY10). With the recent correction, the risk-reward ratio for select construction companies has turned favourable, in our view. Revival in execution and pick-up in industrial/international orders will be the key triggers for construction companies in the near to medium term. Simplex Infrastructure (SINF) and Nagarjuna Construction (NJCC) are our top-picks in the sector with 20%+ potential upside from current levels…

  • MIDCAP STOCKS MONITOR REPORT

    We are suggesting 10 midcap stocks in this Midcap Monitor report which we believe have 35 – 50% upside by Dec.-2011. We have selected the following stocks from the entire gamut of Midcap growth story -

    1) Ashok Leyland
    2) KEC International
    3) Glenmark Pharmaceuticals

  • JAIPRAKASH ASSOCIATES: Well placed to benefit from infrastructure creation

    ■ Jaiprakash Associates, has underperformed the broader market by around 39% in the past one year on account of some overhangs in terms of a potential sale of its treasury stock, a delay in the execution of its Yamuna Expressway project due to farmers’ protests and its plan to enter into the non-related fertiliser business. ■ With regards the farmers’ protests against the Yamuna Expressway project in Uttar Pradesh for a justifiable compensation for land to be surrendered by them, the government has decided to go back to the drawing board to create an expressway authority and decide the funding pattern for the projects…