RESEARCH REPORTS
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Housing Development Finance Corporation Ltd.
HDFC Ltd.’s (HDFC.IN)/ (HDFC.BO) reported numbers for Q1 FY11 came in marginally lower than our expectations. HDFC reported an EPS of Rs.23.5 for the quarter, as against our estimate of Rs.24.1, mainly due to a decline of 15% Y-o-Y and 13% sequentially in the Non Interest Income to Rs.1.85 bn. The net interest income grew 34.2% Y-o-Y, but fell 21% sequentially to Rs.8.97 bn in Q1 FY11. Interest expenses increased 10.3% sequentially, which was in line with our expectation (in our various sector reports published since January 2010, we had highlighted that the low interest rate regime would be history and with the RBI continuing to exit from its accommodative monetary policy, there could be an increase in the cost of funds for banks/ NBFCs)…
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EDUCOMP SOLUTIONS LIMITED: 1QFY11 results weaker than expected; SmartClass, K-12 schools traction continues to be strong – ALERT
1QFY11 results came in lower than expected: Revenues of Rs.2,279m came in 6% below our estimates, driven by lower ICT and preschools business revenues missing our estimates. EBIT margins of 20.4% were below our estimate of 24% mainly driven by lower margins in the SLS (SmartClass and ICT) businesses. However, sharp reduction in tax rates led to net profit (Rs. 366m) coming in just 5% below our estimates.
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POWER GRID CORPORATION OF INDIA: Low-risk exposure to India’s s power sector
Power Grid Corporation of India (Power Grid) is the government-appointed central power transmission utility. We estimate India will add 100,000MW of generation capacity in FY11-17, a three-fold increase, and that transmission and distribution capex will reach 80% of generation capex by FY15 (compared with the historical average of 40-45%). We think Power Grid will be a key beneficiary of this growth; it already has more than a 50% market share and we expect this to increase…
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IPCA LABORATORIES: 1QFY2011 Result Update | Pharmaceutical
Ipca Labs (Ipca) 1QFY2011 performance was below expectations impacted by subdued performance by the anti-malarial segment, and higher employee and promotional expenses. However, going forward, management expects recovery in the anti-malarial formulation segment and gradual increase in the productivity of the newly recruited sales force (1,000 MRs). We maintain Neutral on the stock owing to fair valuations. Results disappoints on the operating front: Ipca reported net sales of Rs414.5cr (Rs357.8cr), which was in line with our estimates. On the domestic front, formulation sales grew 16.1% to Rs168.2cr (Rs144.9cr) driven by the CVS and NSAID segments…
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JBF INDUSTRIES: Margins to improve in Financial Year 2011
JBF Industries (JBF) reported strong YoY revenue growth on the back of significantly higher sales realisation in the Polyester chips and POY segment. Revenues for Q1FY11 were higher by 26% at Rs 849.2 crore. In spite of raw material cost to sales ratio increasing by 50 bps YoY to 79.5%, JBF has been able to maintain its EBITDA margin owing to improvement in realisations. However, Q1FY11 net profit has declined by 38.6% YoY to Rs 31.6 crore mainly on account of absence of extraordinary profit on buyback of FCCBs to the tune of Rs 17.5 crore…
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Prakash Steelage Ltd.: IPO NOTE
Prakash Steelage Limited (‘PSL’) a flagship company of Prakash Group is engaged in the manufacturing of seamless & welded stainless steel Pipes, Tubes and U-tubes. PSL carries production through its two stateof- the-art production units situated at Silvasa and Umbergaon (Gujarat) with total installed capacity of 15,600 MTPA. ■ PSL is an ISO 9001: 2008 & PED certified company. Company is also a government recognized ‘Star Export House’ exporting to several multinationals in over 40 countries across the globe…
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WENDT LIMITED (Industry – Abrasives)
Bangalore-based Wendt (India) Ltd (Wendt) is a leading manufacturer of superabrasives in India. It also manufactures grinding machines and precision components. We assign Wendt a fundametal grade of ‘4/5’, indicating that its fundamentals are ‘superior’ compared to other listed securities in India. We assign a valuation grade of ‘2/5’, indicating that the current market price has ‘downside’ to our fair value per share…
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Transformer & Rectifier India Ltd: RESULT UPDATE 1QFY11
Transformer & Rectifiers India Limited’s (TRIL) Q1FY11 results were tad lower than our expectation in terms of revenue and earnings. TRIL registered a muted performance on revenue front as it registered a top line of ` 85.56 Crores as compared to ` 85.94 Crores in the same quarter last year. Sales in volumes terms declined by 2% to 1591 MVA as compared to 1616 MVA in the same quarter last year, while the realizations slightly improved by 1% to ` 5.24 lakh per MVA from 5.18 lakh per MVA in the same quarter last year. Realizations improved in the quarter on account of some good private industrial order execution where the realizations were as high as ` 8-9 lakhs per MVA…
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Indian Hume Pipe Ltd (IHP): only company/manufacturer in the organised sector in India that manufacture quality Air Rifles / Air Pistols.
IHP is in the business of cemented pipes and pipes that can cater almost water management needs. IHP is only company/manufacturer in the organised sector in India that manufacture quality Air Rifles / Air Pistols. Company is now entering in to real estate development this will unlock the value for shareholders. At CMP of ` 777 we initiate our covering on IHP and recommend buying with a target price of ` 975. ■ Water Management remain as necessity forever ~ Water is a prime natural resource and a basic human need for survival and existence…
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Indian Power Industry – Current Scenario and Opportunities Ahead
India has the fifth largest generation capacity in the world with an installed capacity of 152 GW as on 30 September 2009, which is about 4 percent of global power generation. The top four countries, viz., US, Japan, China and Russia together consume about 49 percent of the total power generated globally. The average per capita consumption of electricity in India is estimated to be 704 kWh during 2008-09. However, this is fairly low when compared to that of some of the developed and emerging nations such US (~15,000 kWh) and China (~1,800 kWh). The world average stands at 2,300 kWh2. The Indian government has set ambitious goals in the 11th plan for power sector owing to which the power sector is poised for significant expansion. In order to provide availability of over 1000 units of per capita electricity by year 2012, it has been estimated that need-based capacity addition of more than 100,000 MW would be required. This has resulted in massive addition plans being proposed in the sub-sectors of Generation Transmission and Distribution…
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ICSA LIMITED: Ready to takeoff
We recently had a conference call with the management of ICSA (India) Ltd. to have an understanding of i) the corporate strategy for their new SMART meters manufacturing facility, ii) new product development, and iii) recent developments within the T&D industry, specifically RAPDRP. ICSA is bullish on the demand potential of the SMART meters facility with peak revenue potential of Rs.1000–1500mn in the next 3-4 years. ICSA is also bullish on Power Quality Management Systems (PQMS), designed to monitor interruptions, durations, voltages etc., at each distribution transformer level. Near-term triggers to the stock include possible order inflow from high margin…
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GLOBAL FORECAST: Cooling Trend In Global Growth
Scotia Economics now expects that global growth will advance by 4.4% this year and 3.8% in 2011 (based upon a purchasing power parity weighting of 34 countries), with emerging countries still outpacing the performance of the advanced nations by a considerable margin. This continues a recent pattern of trimming our economic and financial market forecasts to reflect a number of key developments that are restraining activity around the world. First, we have pared back domestically generated growth in the United States from already soft levels, with the increased economic and financial market…
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INDIA STRATEGY: Chart Focus – Evaluating Tail Risk
The Debate: Is the market ignoring the macro pressures on inflation and the micro pressures on profit growth, especially given the premium valuations for equities? Hence, is the market set up for a big sell-off?; Market View: The market has reacted nonchalantly to a tepid earnings season, especially with the larger companies tending to disappoint on earnings. While inflation is a concern, the market seems to hold the view that the pressures will recede, and hence that India’s premium multiples will continue…
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ACTION CONSTRUCTION EQUIPMENT: Poised for growth
Action Construction Equipment (ACE) reported sales of Rs1.3bn, a 60% YoY (in line with our expectation Rs1.3bn). Revenue increase was on the back of both, a lower base in Q1FY10 and increased volumes. The company saw significant increase in volume across all product ranges. ACE maintained that it could have done higher volumes for the quarter if it was not for loss of productivity on account of Oracle implementation. We expect the strong volume growth to continue, given the robust demand from infrastructure and alleged activities. There was an increase in EBITDA margins by 170bps YoY to 8.4%, primarily due to lower other costs…
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JK CEMENT: Taxing times; Quaterly Update
Higher tax rate squashes bottom line: The operating performance of JK Cement (JKC) was in line with our expectations, but the lower net profit (due to a higher effective tax rate) was 15.2% below our estimates. JKC reported a 21.8% YoY growth in revenues thanks largely to a strong expansion in volume due to the addition of new capacities. The EBIDTA margin has declined by 1,280 bps YoY to 17.2%. The PAT for the quarter weakened 58% YoY (32.8% QoQ) to INR295mn…
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BAJAJ ELECTRICALS: Result Update First quarter FY 2011
Bajaj Electricals (BEL) posted a healthy 35.2% growth in net sales for 1QFY2011, mainly on the back of strong growth in the lighting and consumer durables divisions, which grew 52.5% and 43.9%, respectively. Net sales at Rs483.9cr (Rs358.0cr) were slightly above our expectations. However, OPM declined to 8.4% (10.0%) on higher raw material costs. Interest costs fell to Rs5.7cr (Rs8.6cr) in 1QFY2011. Overall, PAT increased 37.3% to Rs22.5cr (Rs16.4cr). The carry forward order book in the E&P division currently stands at Rs810cr. We remain Neutral on the stock…
