Saturday, February 7, 2009

>India Banks (BNP PARIBAS)

3QFY09 Earnings Wrap

We summarize the key trends from the 3QFY09 earnings for our banks
coverage universe and also infer some takeaways for the few quarters
ahead. All our earnings estimates are currently under revision.

* Loan growth: A sequential slow down in loan growth was evident for
the banks, barring Axis Bank and Bank of India. Y-y credit growth was
still robust at 25%. On an average, we clearly expect more muted loan
growth – in the sub 15-18% range for our coverage universe.

* Deposit growth: Total deposit growth continues to be robust, y-y

growth in the range of 27% (28% for CASA and 27% for term deposits).
But the flight-to-quality of deposits was evident, with SBI recording a
sequential increase of 12% in deposits compared with 8% for HDFC
Bank, 3% for Axis Bank and -3% for ICICI Bank. We expect term deposit
growth to slow down – muted loan growth driving less demand for term
deposits and lower deposit rates in general.

* Net interest margins: 3QFY09 saw a flat to modest expansion in NIMs

across our coverage universe – flat for ICICI and SBI, a 20bps
expansion for BOI and a 39bps contraction for Axis Bank. These trends
were primarily resulting from the magnitude of expansion in the loan
book and the resulting need for high cost term deposits.

To see full report: India Banks

>Sun Pharmaceutical Industries (BNP PARIBAS)

Protonix fading, focus back to core

* 3QFY09 results in line with expectation
Sun Pharma reported 3QFY09 earnings in line with our estimates but
below that of the Street’s. We believe Sun sacrificed its Protonix sales in
favor of margin preservation. The rupee depreciation and an evolving
product mix seems to have helped base business margins. We believe
rest of the world (ROW) markets and the impending Taro acquisition
would be the key to the stock’s continued out performance.

* Diversified revenue base to offset US market slowdown
Sun maintained it’s revenue guidance notwithstanding Caraco’s cautious
outlook on the U.S business.Sun’s base business growth remains on
track with domestic formulations increasing 14% y-y and bulk business
(both export and domestic) continuing to post strong growth. Branded
generics exports to the rest of the world market are likely to be the
incremental growth drivers. The company maintains its FY09 guidance
of 18-20% growth on consolidated basis, notwithstanding the cautious outlook issued by its US subsidiary Caraco.

To see full report: Sun Pharmaceuticals

Suzlon Energy (BNP PARIBAS)

Strong 3QFY09; First sign of orders

* Strong 3QFY09 marred by several one-offs
Suzlon’s consol. sales (wind and Hansen) rose 50.9% y-y (16.3% higher
than our estimate) due to better than expected growth in wind business
(600MW vs actual of 679MW) and Hansen (up 79% y-y versus our 30%
y-y growth). RM costs on a consolidated basis (ex REpower) came in at
57.3% (down sharply by 6.4% q-q) helped by lower commodity prices
and better product mix. Other expenses were high (up 6.8% y-y) partly
due to INR0.83b liquidated damages for one particular customer. Total
exceptional items for the quarter were: a) blade retrofit charges
(INR2.3b); b) MTM losses of INR1.2b; and c) FCCB loss of 0.92b. Pro
forma EPS came in at INR2.75 vs our estimate of INR1.70.

* Early signs of order revival
While order booking has been weak (only 195MW in 3QFY09), the
company’s pipeline (in addition to order backlog of 1916MW) includes
2000 MW orders of which the company is confident of booking around
1000MW of orders in the next six months. This supports our revenue
estimate of around 2866MW in FY10. Key positive in this quarter was
the financial closure of Rattlesnake project of Horizon Wind with the S88 V3 turbines.

To see full report: Suzlon Energy

>Idea Cellular - Maintain Buy (GEOJIT)

Idea Cellular – Maintain Buy with target price of Rs.65

* We remain confident on the prospects of Idea Cellular and maintain the buy recommendation with a target price of Rs. 65 over a one-year term. The company has come out good result for the third quarter of fiscal 09 with strong operating performance. The company has also shown a commendable performance in the growth of subscriber base.

* Profit margins are under pressure due to higher cost of expansion and lower margins on joint ventures (Spice Communications and Indus Towers)

* Projected EPS for FY 09 is Rs. 3.13, which may go up to Rs.4.07 in FY 10. The EPS is expected to be Rs.4.84 in FY11.

* The target price is at a 10 P/E multiple of FY 10 expected earnings and a contribution of Rs.25 from the Indus Towers stake.

To see full report: Idea Cellular (Buy)