>Auto Sector Two Wheeler (WAY2WEALTH)

INDEX

■ Industry Composition
■ Sales Analysis for FY06-FY09
■ Index Performance/Stock

Performance v/s Sensex
■ Conclusion: Two-wheeler

Industry: A Cyclical Reversal?
■ Company Update
■ Hero Honda Motors (HHML)
■ Bajaj Auto (BAL)
■ TVS Motors (TVS)

To see full report: AUTO SECTOR

>SEAMEC LIMITED (ANAGRAM)

BACKGROUND
Established in 1996 as Peerless Shpping and Oilfields, South East Asia Marine Engineering & Construction Limited caters to the offshore oilfield industry and provides Diving Support Vessel (DSV) based diving services. Mauritius based Coflexip Stena offshore oilfield industry and provides Diving Support Vessel (DSV) based diving services. Mauritius based Coflexip Stena offshore had acquired 58.24% stake in the erstwhile. Peerless Shipping in 1999, which in-turn was acquired by Technship S. A. of France in April 2000. Pursuant to this Technship made an open offer to the shareholders of SEAMEC in December 2002 taking its shareholding from 58.24% to 78.25%.

BUSINESS
Being a leading provider of DSV based diving services, SEAMEC has unrivalled experience in the ongaoing subsea inspection, repair maintenance and light construction required for the support of offshore oil production.

Currently the company owns three multi functional diving support vessels is capable of working throughout the year in severe sea and weather conditions. Multi-support vessels are normally used for supporting oil fuel services, diving, remote vehicle operations, fire fighting, rescue and helicopter services. Most of the time dedicated dive support vessels are used for diving and sometimes for ROV service (Remote Operated Vehicles), which are under water remotely controlled vehicles.

The company has also acquired a cale lay vessel in june 2006 named Seamec Princess. After modification, the vessel was put on charter from 1st March 2008.

To see full report: SEAMEC

>India Steel Sector (UBS)

Infrastructure spend and the Indian steel industry

■ Infrastructure spend to be an important driver for steel consumption
UBS estimates infrastructure spending as per the eleventh five-year plan will be US$275bn, compared to the plan’s target of US$500bn. Infrastructure accounts for around 59% of the total domestic steel consumption and we expect steel consumption for infrastructure in 2007-2012 to potentially increase to around 48mt compared to an estimated 33mt used between 2002-2007, during the tenth fiveyear plan period.

■ Top companies and their positions
Tata Steel has the highest proportion of longs in its basket with around 45% of sales; SAIL comes in second with 22% of volumes being flat. Tata also has a 1- 1.25mt sales volume of auto-grade flat steel, which improves its product profile and eventually EBITDA/tn in the domestic business, in our view. JSW has around 8% proportion of sales volumes in long products, and intends to ramp up its HSM over 2009-11.

■ Valuation: recently upgraded Tata Steel to Buy, and JSW to Neutral
We prefer Tata Steel and SAIL and rate them a Buy. We rate JSW Steel Neutral. We used the DCF methodology to arrive at our price targets for Tata Steel (Rs275), SAIL (Rs125), and JSW (Rs225).

To see full report: INDIA STEEL SECTOR

>Reliance Industries (ANAND RATHI)

Niko data points sustain E&P promise; Reiterate Buy

■ D6 capex to rise to US$10bn. Niko now expects capex on the current D6 project to be a higher-than-budgeted US$10bn over the life of the project. It expects gas production to start by 1 Apr ’09. We do not expect the higher capex to materially affect the valuation due to the cost recovery mechanism.

■ Production to ramp up to 120m cmd. Niko re-affirmed plans to raise D6’s peak production to 120m cmd by developing nine satellite discoveries at an additional capex of US$6bn. The development plan for these discoveries awaits approval.

■ D4 a wild card; exploration drilling in D6 re-started. Niko stated that the D4 field (RIL owns 85%), could be much larger than D6, based on initial studies. Niko also confirmed that after a 16-month lull, exploration drilling has re-commenced at D4.

■ Earnings. We restate estimates, incorporating the proposed merger, recent rupee depreciation, and higher margins.

■ Valuation. We raise the fair value of RIL to Rs1,625 (Rs1,300 earlier), incorporating RPL’s valuation minus the holding company discount, higher margins, and adjusting for the recent rupee depreciation. We value refining and petrochemicals businesses at EV/EBITDA of 5.5x FY10 estimates, new refinery at DCF and its E&P businesses using DCF/multiple-based approach.


To see full report: RELIANCE INDUSTRIES