RESEARCH REPORTS
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IDBI BANK (SKP SECURITIES)
■ As on 31st March 2010. Tier 1 capital of IDBI Bank was 6.2%, which is lower than the RBIs suggested level of 8%. ■ To increase the Tier 1 capital to 8% GOI is expected to infuse capital of Rs.31000 Mn. by way of preferential placement of equity. ■ This will provide headroom to IDBI bank to raise funds to support its business growth…
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OMAXE LIMITED
■ Low inventory for the company: Most of the projects for Omaxe in Noida, Greater Noida, Faridabad and Lucknow have all been sold out the extent of 70-75%. Major portion of the projects are at the completion stage or ready to move in stage which provides them with an edge over their competitors whose projects are still under construction. ■ Timely execution of the projects: The company has good execution capabilities, as most of its projects were executed in a period of 3 – 3.5 years…
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KPIT CUMMINS (TATA SECURITIES)
KPIT’s consolidated revenues grew by 4.6% in 1QFY11 to Rs2,061mn. In US$ terms, the growth was 5 .6%. The growth in 1QFY11 was driven by a 3% volume growth and around 2.5% increase in realisations. The increase in realisation was on account of higher share of revenues from SAP and auto businesses, which have a higher average realisation. In 1QFY11, the SAP business grew by 9.6% sequentially, with auto and engineering business growing by 4.8%. The company also commented there were some early starts to the projects resulting in higher-than-expected revenue growth in 1QFY11…
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The rise of the aspirational Indian
In our 1st July note we highlighted that ‘aspirationals’ stocks have outperformed ‘essentials’ on both fundamental and stock price performance over the past decade. Today we highlight that in a high inflation environment in particular, ‘aspirationals’ deliver higher top and bottom line growth than ‘essentials’. Aspirationals outperform essentials in all ‘GDP growth – inflation’ combinations barring ‘low GDP growth, low inflation’ An 11 year time-series analysis of the ‘aspirational’ vs ‘essential’ product companies’ financials yields the following results…
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LARSEN & TOUBRO: The leader takes it all
■ L&T and MHI has started the production at its facility in it newly set facility at Hazira. The JV’s (50% each) will have installed capacity to produce 4,000 MW of Boilers and Turbines annually. ■ Apart from these two factories, the company is also setting up dedicated factories for axial fans, air-preheaters, electrostatic precipitators, high pressure piping and a forge plant. We believe these units will increase the indigenization of the manufacturing of the overall BTG units for L&T and would result in higher margins.
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STERLITE INDUSTRIES: Best zinc play
■ Bullish on Sterlite’s exposure to zinc: Sterlite has augmented its zinc capacity though organic and inorganic routes. Dariba smelter added 210ktpa, Anglo’s assets would add c.400ktpa taking the total zinc-lead capacity to 1,462ktpa; in all c.11% of the world’s total zinc-lead capacity. We are bullish due to two emerging themes for the zinc market – China’s robust concentrate imports, coupled with struggling global mine supply…
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THERMAX LIMITED (TATA SECURITIES)
Strong bounce back in order inflows; current valuations stretched: Armed with a robust order book, Thermax started FY11 with a sharp bounce back in growth during 1QFY11. Revenues grew by 45%, while PAT grew by 42% during the quarter. More pertinently, the standalone order backlog increased to Rs63bn (96% growth YoY), with an across-the-board improvement in order inflows.
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UNITED SPIRITS: Less Bulk, More Brands (CITI)
Mgmt noted that W&M will focus on emerging markets and branded scotch, moving away from its current bulk business. We believe this is a long-term positive. The new business model is in keeping with W&M’s status as a leading global scotch manufacturer. Execution will remain a key imponderable In the near term; earnings will be affected – mgmt has guided to EBITDA of £33m (-40%) in FY11 on a revenue base of £110m (3.5-4m cases). Mgmt expects EBITDA growth of ~15% CAGR over the next 2 years. W&M’s scotchinventory of 103m litres is valued at £430m as of June 2010…
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NHPC LIMITED: Established track record in implementing hydroelectric projects (ICRA)
Incorporated in 1975, NHPC Limited, formerly known as National Hydroelectric Power Corporation Ltd, is the largest hydro power company in India. It has developed and constructed 14 power stations and its current total installed capacity is 5,295 MW with a major presence in the Northern and Eastern parts of the country. Its 51 per cent subsidiary, NHDC, has 1,520 MW under operation and is also considering development of a 1,320 MW thermal power project in Madhya Pradesh. The company has 4.6 GW capacity under construction, while 6.7 GW is under different stages of planning and awaiting clearances…
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ZENSAR TECHNOLOGIES LIMITED: Q1FY11 RESULT UPDATE (SUSHIL FINANCE)
ZENSAR TECHNOLOGIES LIMITED: Q1FY11 RESULT UPDATE (SUSHIL FINANCE)
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The Artificial Economic Recovery
Economic recovery in the U.S. and elsewhere has slowed rapidly and private and some public forecasts are being downgraded accordingly. The Federal Reserve is sounding much more cautious, although they are not yet prepared to talk of further monetary easing. The most optimistic observers are now having to face reality. The massive stimulus packages did the job of stopping a self-feeding downward spiral but they have given us an artificial recovery…
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BHEL: Gross sales seen at Rs400-410bn in FY11E (CITI)
■ Gross sales seen at Rs400-410bn in FY11E — This mgmt estimate compares to official “base target” of Rs380bn and official “excellent target” of Rs395bn. To what extent sales actually exceed Rs400bn is a function of execution and client preparedness. Our gross sales estimate of Rs422bn now appears to have downside risk. ■ Trying to maintain RM % of sales at FY10 levels — Raw materials (RM) % of sales was ~60% in FY10 and can be maintained at the same levels in FY11E, though internal stretch targets are to reduce it to 58%. We assume 76bps increase…
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GEI INDUSTRIAL SYSTEMS (HDFC BANK)
GEI Industrial systems (GIS) was founded in 1970 with its manufacturing facility located in Bhopal (Madhya Pradesh). The company was incorporated as General Engineering Industries. Later on in 1993 the company was converted in to a joint stock company. In 1997-98 Hammon industries, France bought a 30% stake in the company (29.95 lakh shares) and hence the name of the company was changed to GEI Hammon Industries. Hammon sold 25 Lakh shares in August 2008, post disagreements between the two parties. It continues to hold on 4.95 Lakh shares in GIS. Initially the company was formed as an ancillary unit of BHEL…
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DISH TV: Highlights of Q1FY11 results
■ Dish TV’s performance for the quarter is marginally below estimates with revenues of Rs3.04bn (flat QoQ), EBITDA of Rs322m (estimates of Rs370m) and net loss of Rs632m (estimates of Rs575m) in Q1FY11 ■ During the quarter, Dish TV has added 0.6m gross subscribers (7.5m subscribers) and 0.4m net subscribers (6.2m subscribers). Churn has improved on QoQ basis at 0.7% per month…
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GLOBUS SPIRIT LIMITED
Globus Spirits is a leading North Indian player engaged in manufacturing, marketing, and sale of country Liquor, IMFL and industrial alcohol comprising rectified spirit and ENA apart from taking contract bottling to cater to renowned Indian players. GSL has two modern distilleries, one at Behror, Rajasthan and the other at Samalkha, Haryana. Both are spread out in an area of around 17 acres each and have a combined capacity of 28.8 million bulk liters of alcohol on an annual basis. Both of them are state-of-the-art plants capable of distilling alcohol from grain or molasses…
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SHADOW BANKING: Federal Reserve Bank of New York
The rapid growth of the market-based financial system since the mid-1980s changed the nature of financial intermediation in the United States profoundly. Within the market-based financial system, “shadow banks” are particularly important institutions. Shadow banks are financial intermediaries that conduct maturity, credit, and liquidity transformation without access to central bank liquidity or public sector credit guarantees. Examples of shadow banks include finance companies, asset-backed commercial paper (ABCP) conduits, limited-purpose finance companies, structured investment vehicles…
