Monday, December 1, 2008

>JP Associates(Citi)

 Impressive big picture, as in the next 10 years JPA could be — 1) One of the
top three Indian cement companies; 2) Power portfolio of 7,515MW (3) Inhouse
EPC with a backlog of ~ Rs420bn; 4) One of the largest real estate
developers in India; and 5) Have 1,212km of expressways with tolling rights.
 However, getting there will be extremely tough — The success of JPA’s asset
heavy business is pinned on easy access to capital. On the capital side we
believe Yamuna Expressway needs an incremental ~ Rs36.6bn of funding,
mobilizing ~ Rs450bn for the Ganga Expressway. This is going to be a
Herculean task and financially closing all power projects will be extremely
difficult. Further the poor demand outlook for real estate and cement makes
the situation that much tougher for the company.
 Cutting target price to Rs87 (from 300 earlier) to factor in — 1) 21-22%
earnings cut; 2) Cut in construction EV/EBITDA 7x (12x); 3) Cut in cement
EV/ton to US$75 (US$120); 4) Cut in power assets value to Rs35bn (Rs69bn);
5) Cut in Jaypee Greens value to Rs5.4bn (Rs11.7bn); 6) Cut in Jaypee Hotels
value to Rs1.5bn (Rs4.9bn) and 7) Cut in Jaypee Infratech value.
 But we still maintain a Buy because — 1) Underlying parent businesses will
still generate Rs8-10bn average annual CFO; 2) Stock looks attractive as the
parent (cement, EPC and Jaypee Greens) business trades at adjusted P/E
multiples of 4.9x FY09E, which we believe is extremely cheap; and 3) Most of
the value in our new target price of Rs87 comes from cement, power and
construction, and not real estate.

To read full report JP Associate(Citi)


 Management view: Short-term uncertain but medium-term positive — Deal
pipeline remains strong and while ramp-ups are happening, there are certain
ramp-downs as well. Management is positive over the medium term – believes
that this environment throws up opportunities for Wipro. Our view –
Uncertainty/delay in decision making will impact near-term outlook.
 Focus on "just in time" hiring — Wipro has made ~8,000 campus offers till
Sep-end (compared to ~14,000 last year till Dec-end). Wipro is focusing on
optimizing the employee supply chain, improving productivity and growing
revenues without a proportionate increase in headcount. Our view – Lower
hiring partially reflects lower visibility and partly easing supply scenario.
 Initiatives to drive higher growth — 1) Customer centricity; 2) Integrated multiservice
offering; 3) Consulting to proactively help clients cut costs; 4) Taking
existing services to new areas; and 5) “Hunting” for new customers and
focusing on emerging markets. Our view – Wipro’s strength across multiple
service lines and emerging markets should help drive better growth rates.

To read full report Wipro(Citi)

>Sail(JP Morgan)

Sharply lower earnings likely over the next two to three quarters, but
building in gradual recovery from H2FY10E: We expect sharp earnings
erosion over the next two to three quarters, driven by lower volumes and
higher coking coal costs. We expect H2FY09E earnings decline of 79% y/y.
However, we expect earnings to improve from June-09 as lower coking coal
kicks in. We cut our EPS estimates sharply over FY09E-11E (13-43%).
• Domestic demand recovery critical: Given the dependence on imported
coking coal, we believe most of India's steel companies are less competitive
in the export market compared to CIS/Chinese steel exports, and therefore
we believe demand recovery in the domestic market is critical to earnings
recovery in H2FY10E. However, we project extremely weak steel demand
over the next few months, and we cut our India steel demand growth
estimates to 4.5% for FY10E.

To read full report Sail(JP Morgan)