>Bosch (ANGEL BROKING)

BOSCH

4QCY2008 Result Update
BUY; Target - 3600

Performance Highlights.....

* Better-than-expected Performance: For 4QCY2008, Bosch India reported 13.5% yoy growth in Net Sales to Rs974cr, which was marginally below our expectation of Rs994cr. This came on back of 17% yoy decline in Auto segment while Other businesses posted robust 33.1% growth. The company’s Bottom-line, which recorded 24.3% yoy decline to Rs94.2cr (Rs124.4cr) however, exceeded our expectation. Bottom-line was mainly supported by the 72.8% yoy increase in Interest Income to Rs35.3cr. While the Auto Segment clocked sluggish growth (in some segments), the company’s Non-Auto businesses continued to clock strong growth.

* EBITDA Margin declines 270bp: During 4QCY2008, Bosch witnessed a substantial 270bp yoy fall in EBITDA Margins owing to higher Raw Material costs, which moved up 202bp yoy and accounted for over 50.9% of Sales (48.9% in 4QCY2007). Bosch imports some of its key components from Europe. Hence, unfavourable exchange rate fluctuation impacted Margins. Further, the company’s product mix has also undergone changes consequent to which, its overall input mix has seen a gradual change, which was one of the reasons for higher Raw Material cost, as indicated by management. Other expenditure for the quarter however, declined by 231bp yoy, which cushioned the fall in Margins to an extent. Other expenditure declined mainly on the back of continuous efforts of the company to cut Operating costs on account of the industrial slowdown. Overall, Bosch reported a 27.2%yoy decline in Operating Profits (excluding Other Income) to Rs175.4cr (Rs240.9cr) primarily owing to low operating leverage during the quarter.

* Bottom-line down 24.3%: Bosch reported 24.3% decline in Net Profit to Rs94.2cr (Rs124.4cr) for 4QCY2008. The company reported 9.3% increase in Depreciation to Rs105.3cr (Rs96.4cr) in 4QCY2008 due to its ongoing capex in CY2008. Almost 70% of capex was booked in 2HCY2008. However, 113.1% yoy jump in Other Income negated the impact on Bottom-line to an extent. An increase of 72.8% yoy in Interest Income to Rs35.3cr also lent a boost to Bottom-line.

To see full report: Bosch

>Ashok Leyland (ICICI Securities)

ASHOK LEYLAND

Recovery path still hazy

* Spate of new product launches include: i) cost effective & fuel efficient 40.19 and 25.16 vehicles iii) Neptune engine (being co-developed with Avia) to be introduced in April ’10 (Euro IV-compliant; can be scaled-up to meet Euro V norms). Neptune would be at least 20% more fuel-efficient vis-à-vis existing engine iv) modular platform for cabs (mid ’10) v) Unitruck (mid ’10), similar to Tata Motors’ world truck.

* Cost reduction initiatives. ALL is aggressively focusing on cost reduction on all fronts: i) Has realised 25-30% reduction in raw material in Q4FY09, with FY10 likely to witness full benefit of commodities softening; ii) Salary cut via reduction of 2,000 casual workers, working days from six days per week to three and executive salaries, thereby leading to 20% lower salary bill in FY09; iii) Reducing admin costs. However, discounts are substantially high and could, thereby, impact profitability in the short term. Post inventory correction, ALL would discontinue the discounts.

* Cash conservation – Reduction in capex and WC. ALL has scaled-back its capex plans to Rs28.5bn from Rs42bn over FY09-12E. Capex is expected to be Rs8.5bn in FY09 (versus Rs10bn earlier) and Rs20bn over the next three years (versus Rs32bn earlier). ALL plans reducing Rs6bn from WC in Q4FY09 to payoff short-term debt and reduce interest costs.

To see full report: Ashok Leyland

>Ambuja Cements (MERRILL LYNCH)

AMBUJA CEMENTS LIMITED
Company Update - UNDERPERFORM

Company visit highlights.....

* Co offers sober demand assessment
Ambuja voiced doubts about sustainability of recent demand recovery beyond the upcoming elections. The Co said recent govt. measures have helped accelerate existing (real-estate & infrastructure) projects but no new projects appear to be on the anvil. Ambuja feels recent demand recovery is led by a combination of preelection spend, higher govt. spend ahead of fiscal-yr closure & beneficial impact of the stimulus package. The Co expects industry growth in CY09E to be ~6-8%.

* Pressure on local prices by end-09; exports already weak
Barring any seasonal dip during monsoon months, Ambuja expects domestic cement prices to be stable until 4Q CY09. The Co feels there is high visibility on new capacity additions of ~30mn tpa across the industry through CY09. However, meaningful supplies from these are likely only by 4Q. On the export front, Ambuja said export cement prices are already down to ~US$45-50/t vs ~US$60/t last yr.

* Lagged benefit of falling coal prices for Ambuja
Ambuja has used relatively high cost coal inventory through the Jan-Mar ’09 quarter. The benefit of falling coal prices for the Co may be visible only from 2Q CY09, unlike other majors that may witness lower energy prices in Jan-Mar qtr.

* Other tidbits: Cochin jetty; expansions; stake creep-up
Ambuja’s captive jetty at Cochin (~0.5mn tpa handling capacity) is almost ready. The Co’s CY09 capex budget is frozen at ~Rs14-15bn; the Co expects to commission its Bhatapara expansion by mid-CY09 while the Himachal expansion may scrape thru with end-CY09 commissioning. In our assessment, Holcim is unlikely to seek significant stake increases in Ambuja in the current environ. We maintain underperf rating on unexciting CY09 outlook & relatively high valuation.

To see full report: Ambuja Cements

>Weekly F&O Indicators (ANAGRAM)

To see report: F&O Indicators 060309