Wednesday, February 11, 2009

>Daily Market Preview (MARWADI FINANCIAL)

* The much awaited bailout package fell flat on the Wall Street as it fell below
expectation. While huge built-up was experienced during the past two to
three weeks in anticipation of the comprehensive economic plan, investors
unwounded their positions as it was relatively inadequate.

* We expect Indian market to trade weak in the morning session. However
built-up for interim budget can support the market. We advice investors to
remain cautious on all risky assets including equities during uncertain and
tough economic conditions .

To see full report: Market Preview 11-02-2009


To see report: F&O Report 11-02-2009

>Hindalco Industries (CITI)

Sell: Better Copper TC/RCs Can't Offset Aluminium Oversupply

* Maintain Sell — We are cutting our target price to Rs34 on a 34-57% earnings
cut for FY10-11E, following a reduction in our global LME price forecasts. We
roll forward to March10 (from Dec09) and raise our target P/E multiple to 7x
(vs 6x) as we assume near trough price forecasts and incorporate a better
outlook for copper TC/RC margins. At our target price, Hindalco would trade at
an EV/EBITDA of 5.6x given its high leverage vs. international majors at 5x.

* Aluminium surplus — We have cut our average aluminium price by 44% to
US$1,300/t for FY10E and by 50% to US$1,380/t in FY11E. Current prices are
well below average costs with little scope for further cost cuts, which effectively
means that the downside to prices is limited. However we expect continuing
oversupply and little likelihood of prices recovering before 2010.

* Copper TC/RCs improving — Copper TC/RCs have been rising rapidly due to
easing concentrate supply demand balance as smelter production cuts are
being implemented more rapidly than concentrate production cuts. We expect
TC/RC margins to be ~USc19-20/lb in FY10-11E, however, part of the benefit
should be lost due to expected weakness in prices of copper and by-products.

To see full report: Hindalco

>Grasim Industries (CITI)

Sell: 3Q FY09 Margin Pressures to Continue

* 3Q FY09 PAT falls 40% yoy — PAT came in at Rs3.3bn, slightly better than
our estimate of Rs3.1bn. EBITDA fell 38% yoy to Rs5.4bn and margins fell to
20% vs. 33% last year and 22% in the previous quarter. EBITDA margins for all
divisions fell yoy, a substantial decline in case of VSF margins.

* Cement (63% of Sales, 70% of EBITDA) — The cement division margin fell to
24% in 3QFY09 from 31% in 3QFY08, impacted by higher costs. Grey cement
volumes grew 8% yoy to 4.05m tonnes and realizations rose 6% yoy to Rs3,399/t
(-1.4% qoq). We expect continued pressure on margins, with new domestic
supply, to result in price weakness. Grasim's 4.4mtpa Shambhupura plant
should be operational by 4QFY09 and the 4.5mtpa Kotputli plant by 1QFY10.

* VSF and Chemicals (25% of Sales, 17% of EBITDA) — VSF's margins fell
sharply to 11%, from 42% in 3QFY08, on lower realizations and volumes,
higher sulphur and pulp prices, and rupee depreciation. Volumes fell 22% yoy
in 3QFY09, on global demand weakness, and realizations fell 11% yoy to
Rs96,611/t. VSF prices have been cut by ~7% and margins are expected to
remain under pressure in the medium term.

To see full report: Grasim