Sunday, February 15, 2009


Engineering Success………..

HDO has made rapid strides in its core EPC business, engineering a ~5.4x

growth in less then four years with significant contribution from mineral
beneficiation and environmental infrastructure business. However we believe
that the best is yet to come for HDO as the company is well positioned and
has expertise to get into the bigger league with higher ticket contracts.
We expect HDO to grow 49% & 35% CAGR in revenues and profits respectively
through FY08~FY10E, driven primarily by water infrastructure business,
manufacturing proprietary Industrial products, ore sepearation business and its
planned focus on engineering support centre.

Investment Logic

# Healthy Order book comfortable enough to tide over the near term
concerns: The current order backlog of Rs.7bn is 2.3xFY08 billings. Based on
the pipeline bids, enquiries, and the Capex cycle we expect order accretion to
gain momentum in next few quarters and grow at 17% CAGR for the next two

# Getting into the big league with Diversified Portfolio – Market
positioning, expertise and executional capabilities has made HDO a preferred
Vendor across many groups / Industry. Traction is expected in award of big
ticket contracts in the next few quarters.

# Increased manufacturing to stem margins: We expect that higher
demand for its proprietary Industrial products is likely to prop the blended
margin going forward with ~14% revenue contribution by FY10.

To see full report: HDO

Interim Budget Preview (IDFC SSKI)

Interim Budget FY10 Preview

With all eyes on the interim budget to be announced next week, we expect the government to remain committed to its agenda to pull through a sagging economy. However, the government will have to walk a tight rope between its conflicting agendas of priming growth while keeping an eye on the ballooning deficit. The FY09 revenue projections are looking aggressive in a changed economic environment. We see net tax revenues falling short of budgeted estimates by ~5%. With lower growth likely to continue through fiscal 2010, impacting personal incomes and corporate earnings, we expect direct tax collections to decline by ~4%yoy for the fiscal year. Indirect tax collections are already under pressure on the back of a series of duty cuts (for excise collections) and lower prices of commodities and goods (for customs duty collections).

To see full report: Budget Preview

>Weekly F&O Indicators (ANAGRAM)

To see Report: F&O Indicators 13-02-2009

>Indian It services (IDFC SSKI)

Not out of woods

The Indian IT services sector faces strong headwinds as recesssion has
concurrently hit most of its target markets. We expect tepid revenue growth over
the next two years with volumes returning only in H2FY10. However, pricing
(constant currency) could come off by 5-7% over FY10-11 and lead to flat-todeclining
earnings. In view of this, we rule out stocks giving material absolute
returns till business concerns start waning. However, stock valuations are close to
historic lows and we see limited downside. We thus recommend market weight on
IT services and prefer Tier 1 companies with a strong track record which assumes
more importance post the Satyam debacle. We rate Infosys, TCS and Wipro as
Outperformers with a year’s view though the recent outperformance (as also
guidance overhang for Infosys) would keep stock under pressure in near term and
may also prevent their participation in bear market rally, if any. We have a Neutral
stance on HCL Tech and rate Patni and Tech Mahindra as Underperformers.

To see full report: IT SERVICES