RESEARCH REPORTS
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Easun Reyrolle- Initiating Coverage
Easun Reyrolle is an acknowledged leader in the field of electrical power management. The company offers a “ONE TOUCH ACCESS” to power system solutions. It has 25% market share in the relay panel (a power system protection device) market in the country. It has diversified its offering to protection products, protection systems, energy meters, automation, communication & control products, turnkey projects business, and switchgears. ERL expects to sustain the growth of 50% CAGR for next 4 years. Easun is one of the leading players in power management – power system protection, control and automation, would benefit from the investments in the power sector…
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INDIAN TOLL ROAD SECTOR: The Roads to Revenue
■ The Indian Toll Roads sector is an excellent proxy to play on India’s vibrant growth story
■ NHDP is entering an important inflection point and NHAI alone would be coming up with orders worth Rs 1.9 trillion over the next four years
■ ITNL and IRB are our top picks in the Toll Road sector: We believe ITNL will leverage its parent’s strong background, superior execution skills, and established track record of executing BOT projects… -
STATE BANK OF INDIA: Result Update 1QFY2011
For 1QFY2011, State Bank of India’s (SBI) standalone net profit grew 25.1% yoy and 56.1% qoq, which exceeded our estimates on account of better-thanestimated NII and lower operating expenses. Robust operating performance with reasonable asset quality was the key highlight of the result. We maintain an Accumulate rating on the stock. Robust operating performance: The bank’s net advances increased 20.4% yoy and 3.4% qoq to Rs6,53,220cr, while total deposits grew 6.8% yoy and 1.4% qoq to Rs8,15,297cr during 1QFY2011…
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LINC PEN & PLASTICS LIMITED: Good growth prospects
Linc Pen (Linc) has over the years built an aggressive supply chain which comprises the manufacture of writing instruments at very competitive costs. The Kolkata-based manufacturer of writing instruments and stationery also supplies goods to various global retail chains. ■ Stock trigger: Linc, we believe is a play on the India’s consumption and outsourcing stories. We believe that news of any major orders from any global retail chain will act as a trigger for the stock. On the other hand retail network expansion, in the short-term, may be a lowdown forprofitability…
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DOLPHIN OFFSHORE LIMITED: Starts FY11 in the red
Dolphin Offshore Ltd (Dolphin) reported a net loss of Rs 123.1 mn in Q1FY11 as against a net profit of Rs 120.1 mn in Q1FY10, which was well below CRISIL’s estimates. During the quarter, the company undertook significant additional work resulting in extra time and cost for two EPC contracts. However, the company has not booked the revenue against this as it is yet to receive change orders for such work. The company’s order book has increased by just around 4 per cent in Q1FY11 over the previous quarter due to the slow tendering process of its major client – ONGC. This slow pace of order book addition has led us to lower our yearly projections for FY11…
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FINANCIAL TECHNOLOGIES: 1QFY11 Results Update
Financial Technologies’ (FT) standalone revenue (Rs0.74b v/s our estimate of Rs0.82b) and EBITDA margin (39.1% v/s our estimate of 48.7%) for 1QFY11 were below expectations, though PAT (at Rs0.45b) was in-line on lower than anticipated taxation on higher export revenues. Standalone business corresponds to FT’s technology business. ■ FT’s standalone revenue for the quarter was Rs0.74b (up 25.8% YoY, down 11.9% QoQ), EBITDA margin was 39.1% (down 620bp QoQ) and PAT was Rs0.45b (up 120% YoY and 3% QoQ) on lower effective tax rate…
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TEXMACO
Long awaited consolidation in Texmaco has finally come to an end after prices continued their upward march to finally surpass the resistance of ‘ascending triangle’ with improved volumes. As the stock has hit a ‘double top’ formation in Feb 2010, prices have retraced back almost 38.2% of its earlier up move beginning from March 2009 and has shown quiet a bit of resilience to hold above the levels of Rs132. Prices on the Medium chart resemble ‘inverted head and shoulder’ formation and breakout may accentuate buying momentum as volumes have started to react positively to price increase…
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Hinduja Global Solutions Ltd: Positive outlook about IT-BPO
Nasscom expects export revenues from IT-BPO industry to grow at a CAGR of 13-15% and the domestic business to grow at CAGR of 15-17%. It is expected that Indian IT-BPO to generate the revenue of $ 73.1bn in FY2010, with the IT software and service industry for $ 63.7bn of revenues. Also US president Obama’s $871 bn healthcare reform bill could also indirectly benefit the Indian IT-BPO providers which are focused in Insurance and claims processing domains. HGSL being the larger player in this Industry is likely to be beneficial with this robust growth in the sector…
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ICICI BANK: Return to growth; Buy
■ Management meeting re-affirms our positive stance; Buy We hosted Ms. Chanda Kochhar, MD & CEO of ICICI Bk, in Hong Kong over the last two days. The bank has successfully delivered on the 4Cs strategy and is now seeking to leverage capital for growth. We believe the “return to growth” from 2HFY10 and a sustained focus on costs and profitability could see ROA expanding from <1.1%>..
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GSPL: 1QFY2011 Result Update
GSPL reported marginally lower-than-expected set of numbers for 1QFY2011 due to lower-than-expected transmission tariffs and volumes during the quarter. Bottom-line increased 30.6% yoy to Rs105.1cr (Rs80.5cr), which was below our expectation of Rs110cr. However, given the company’s strong growth potential and attractive valuations, we recommend an Accumulate rating on the stock. Transmission volume surges, realisation dips: In 1QFY2011, GSPL recorded a 19.4% yoy jump in revenues to Rs252cr (Rs211cr), lower than our estimate of Rs266cr…
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MERCATOR LINES: Valuation compelling…
MLL reported considerable improvement in operating performance in Q1FY11 with dry bulk division performing reasonably well. The company has also ramped up its coal business (mining as well as trading) which would increasingly contribute to the topline for the company. Freight rates are expected to be volatile over the next one year which could lead to fluctuations in the operating performance of the company going ahead. But MLL is well placed to ride the volatility of shipping business on account of inherent advantages such as diversified revenue stream, presence across segments, long term charter contracts, comfortable debt equity ratio and strong management capability…
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OPTO CIRCUITS LIMITED : Sensing strong growth ahead
Medical Equipment Industry to grow in double digits : According to Global consulting firm Capgemini, The global medical equipment industry, valued at USD 280 billion in 2009, is forecast to grow by more than 8% annually for the next seven years to exceed USD 490 billion in 2016. Some of the subsegments like orthopedic and cardiology are growing at a CAGR of 15-20%. Medical devices and supplies market in India is expected touch USD 1.7 billion in 2010, growing at the rate of 23% annually in the coming years from the current Rs. 5750 crores…
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HINDALCO INDUSTRIES: Beyond US$1bn EBITDA
Earnings showing increasing trend: Net sales of US$2.5bn were up 29% YoY and 5% QoQ as both shipments and realisation were up. Operating EBITDA of US$282m is up from US$42m reported last year and 38% above US$205m last quarter. PAT of US$50m compared to a loss of US$1m in the last quarter. The company was operating at capacity during the quarter, reporting peak shipments. In addition, results reflected the sustainability of cost cuts, which did not increase in line with volumes…
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INDIA FINANCIALS: Stick to Quality: u/g HDFC and BOI to OW, d/g IDFC and SBI to UW
• We remain positive on India financials against a macro backdrop of rising rates and accelerating growth. All-round quality is likely to do better than lopsided deposit or loan franchises, with credit growth and falling NPL provisions being key earnings drivers. We reshuffle our ratings and our top picks are HDFC Bank/HDFC, Kotak and IndusInd. • Rising rates are not a worry, yet, because they are unlikely to affect growth. Rates are definitely rising, though, across all segments. Continuing tightness in short term liquidity should put upward pressure on deposit costs…
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Tata Steel Ltd: Q1FY11 Consolidated earnings preview
Earnings expectations for both standalone and consolidated: TATA reports consolidated earnings on 12th August. For standalone business, we expect EBITDA of Rs25bn (+48% y/y, -14% q/q) v/s Bloomberg Consensus (BBRG) estimates of Rs24.7bn. Our standalone PAT estimates are Rs13bn (+66% y/y, – 35% q/q) v/s BBRG of Rs13.3bn. For the consolidated results, we expect EBITDA of Rs46.6bn (-2% q/q) and PAT at Rs20.6bn (-25% q/q) v/s BBRG EBITDA of Rs43.5bn and PAT at Rs18.04bn…
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ZYLOG SYSTEMS LIMITED: Q1FY11 results beat expectations
Zylog Systems Ltd’s (Zylog’s) Q1FY11 results beat CRISIL Equities’ expectations. While consolidated revenues were marginally higher than our forecast, the 103% y-o-y growth in consolidated PAT was a surprise. Q1FY11 consolidated PAT accounts for 27% of our existing full-year forecast. We will revise our estimates following our discussion with the company management on key issues such as revenue growth drivers in Q1FY11, expected salary hike, the likely employee mix and progress on the integration of Brainhunter. Our back-of-the-envelope analysis suggests that we may have to raise our FY11 PAT forecast by 10-15%…
