Posts
All Comments
Welspun Gujarat Stahl Rohren (WGS IN)
Good Performance during the quarter
The results of Welspun Gujarat (Welspun), for Q2FY09
have been better than our estimates at the top line and lower
at the bottom line due to the MTM forex loss.
· Top line growth of 60.9% YoY
· EBIDTA marred by the forex re-alignment
· Reported PAT lower, but the Adjusted PAT shows good growth
· Robust Order Backlog of Rs 90bn
Read full report here Welspun Gujarat
Immune to slowdown, unlike auto-component peers
We initiate coverage of Exide, the leader of the Indian automotive and
industrial storage batteries markets, with a BUY rating. Exide’s earnings
should be immune to an auto slowdown as it depends on replacement
demand from the existing vehicle base and not on sales to originalequipment
manufacturers (OEMs). Our thesis is supported by a similar
demand pattern observed in auto tyre sales. Exide’s auto replacement
volumes (with 70% market share in branded batteries) should expand
15-20% in FY08-10 due to a higher vehicle base following the auto boom
in FY03-07 (our checks confirm average battery life of three years).
Lead recycling to boost market share, help margins
We expect branded batteries’ share in the auto replacement market to
improve from the current 50% to 58-60% by FY10 due to Exide’s
strategy of procuring exhausted batteries, thereby cutting supply of
recyclable lead to unbranded players. Exide’s recent acquisition of two
smelters for recycling lead from exhausted batteries will meet 25% of its
requirements. Use of cheaper recycled lead, combined with the recent
44% drop in lead prices, presents strong margin-expansion potential.
Don’t ignore the industrial batteries segment
Sales of high-margin industrial batteries (40% of revenue; 45% market
share) should post 18-20% growth in FY08-10 driven by the telecom and
export segments. Exide’s telecom segment should expand at least at a
conservative 40% CAGR in FY08-10, with telecom base stations
expected to expand at a 50% CAGR and battery replacement adding to
demand. We also expect exports to expand to about 8% of sales by
FY10 from 5% as the recent expansion eases capacity constraints.
Initiate with BUY; TP of INR82 implies 19.2% upside
We estimate EPS growth at a 27% CAGR in FY08-10 on 15% volume
growth and 150bp margin expansion in FY09. Our TP of INR86 is a sum
of INR71/share for the standalone business, based on 14x FY10E EPS,
and INR15/share for the 50% stake in ING Vysya Life Insurance. We
believe Exide deserves a premium to auto-component peers given that
its medium-term profitability appears immune to the current slowdown
Read full report here Exide Industries(BNP Paribas)
Cairn India’s Q3CY08 recurring net income was at Rs3.1bn (I-Sec: Rs1.6bn, Street:
Rs1.4bn) on the back of higher-than-expected other income from investments
(Rs1.2bn) and forex fluctuation gain of Rs873mn. The company’s production
declined 9% YoY to 17.1mboepd due to 22% YoY fall in Ravva crude production
(owing to natural decline in the field), though partially offset by 54% YoY rise in
Cambay crude production. The stock has corrected 44.6% and underperformed
the Sensex 16.2% in the past one month on the back of worries over global
recession, impact on crude demand and huge correction in commodity prices.
This is an excellent opportunity for long-term investors to buy the stock at cheap
valuations. The stock offers an attractive 42% upside to our bear-case valuation of
Rs163/share and 127% upside to our fair value of Rs261/share. Maintain BUY.
Net sales increased 20.6% YoY to Rs3.2bn on the back of 49.5% YoY rise in
average price realisation to US$87.3/boe. This was despite 9% YoY dip in net
production to 17.1mboepd in Q3CY08, primarily due to 22.5% YoY dip in Ravva oil
production.
EBITDA increased 33.1% YoY to Rs2.5bn due to higher sales and decline in staff
expenses that were partially offset by higher other administrative expenses. Staff
expenses fell 32.9% YoY to Rs160mn and operating expenses rose 268.8% YoY to
Rs172mn. EBITDA margin also improved 727bps YoY to 77.4%.
Recurring net incomes rose 150.9% YoY to Rs3.1bn due to higher EBITDA and
sharp 499.2% YoY rise in other income to Rs2.1bn on the back of higher income
from investments and forex fluctuation gain. DD&A rose 26.9% YoY to Rs650mn.
present, Cairn offers 42% upside to our bear-case valuations. Under bearcase
valuation of Rs163/share, we have assumed long-term crude price at US$60/bl,
cess liability for Rajasthan crude at Rs2,575/te, Rajasthan’s crude discount to Brent
at 15% and three months delay in commencement of production from Rajasthan to
January ’10.
Cheap valuations. Cairn is currently trading at long-term implied crude price of
US$35.4/bl. The stock offers an attractive 42% upside to our bear-case valuation of
Rs163/share and 127% upside to our fair value of Rs261/share. This is an attractive
entry point for long-term investors.
Read full report here Cairn(ICICI Securities)
Global indices witnessed the steepest ever weekly fall of 16-20%, reflecting the
ongoing turbulence in financial markets. This has significantly shaken investor
confidence and depleted risk appetite. Consequently, valuations have taken a
severe beating. While predicting the bottom is not feasible, we believe that such
an event offers many excellent businesses on ‘sale’. Assuming a challenging
business scenario over the next year as well as conservative historic valuations
benchmarks, we have mined few potential winners based on our bottoms-up
analysis. We have focused on risks first (given the current environment) and then
estimated the potential conservative RoI in the next 3-4 quarters. Such deepvalue
stocks could generate 30-55% RoI in the coming year.
Globally, equities undergoing unprecedented meltdown. After a four-year bull
run, the sub-prime related financial crisis has taken toll on global equities, with the
Dow Industrial Average, MSCI World, MSCI Asia (ex-Japan) and Sensex
plummeting 28%, 34%, 45% and 43% respectively YTD. With rapid erosion in
equities’ risk premium, we have factored in conservative historical valuation
benchmarks to account for economic headwinds that India is likely to face.
Deep value BUYs with lower attendant risks. Based on highly conservative
historic valuations benchmarks and potential risks, we have screened all companies
in the I-Sec universe and handpicked deep-value stocks. We expect these stocks to
deliver potential RoI of 30-55% over the next 3-4 quarters.
Read more here Deep_Value_Stocks
Bharat Heavy Electricals Ltd. (BHEL.IN/BHEL.BO) recorded a robust revenue growth in Q2 FY09 and continued to exhibit a strong order book position, though it faltered on the margins front. Total sales grew 30.6% Y-o-Y to Rs.57.98 bn with the Power segment contributing Rs.44.08 bn (up 33.4%Y-o-Y), while the Industry segment contributed Rs.15 bn (up 20.4% Y-o-Y). However the EBIDTA margin for the quarter declined 420 basis points Y-o-Y to 13.3%, due to an increase of 500 bps Y-o-Y in material costs, as a percentage of sales, to 59.54%. Total provision for wage revisions stood at Rs.19.07 bn for the period January 1, 2007 to March 31, 2009 and the overall amount provided up to
March 31, 2008, was Rs.5940 mn. Out of the balance Rs.13.13 bn to be provided in 2008-09, Rs.5.47 bn was provided in the first two quarters, while remaining Rs 7.66 bn will be provided in H2 FY09. The proforma PAT improved by 18.1% Y-o-Y to Rs.6.16 bn in Q2 FY09, as against an EBIDTA growth of 2.2% Y-o-Y, driven by an increase of 31.6% Y-o-Y in Other income to Rs.3.07 bn. Read full here BHEL_FG
