Friday, February 27, 2009

>Daily Market Preview (MARWADI FINANCIAL)


* The Indian Federal Government seems to be at full action (through interim policies) to revive the economy. The sops and incent ives announced in the past few days for the industry as well consumer will definitely have positive impact in times to come. It would be crucial to watch quarterly GDP numbers during the day.

* We expect market to hold on its gain on the back of smooth rollover and short covering witness on the settlement day. However 2800-2820 will be crucial resistance for the market. We are positive on Auto, Cap-goods and FMCG sectors.

To see full report: Market Preview 27-02-2009


To see report: F&O 27-02-2009

>Telecom Sector (INDIA INFOLINE)


January 2009 saw the highest monthly subcriber additions ever anywhere in the world. Reliance Communications powered wireless growth of over 15 mn subscribers with a 180% mom surge in user additions. This came on the back of its pan-India GSM foray from Jan'09. Idea-Spice combine added 2 mn subscribers, a jump of 34% mom, the best since Sep'08. Bharti maintained its 2.7 mn add rate, similar to levels seen in the past several months. However, smaller operators like Airtel continued to decline inpace of user additions on a monthly basis.

Although RCOM has doubled its share of subcriber additions, its ARPUs need to be watched for any adverse impact of such a spurt in subcriber growth. Retain bharti as the preferred BUY in the sector.

Rcom powers wireless growth; adds 5 mn subcribers in a month
From Jan'09, Rcom launched its GSM services in 14 circles, making it the first pan-India dual network operator. The company garnered nearly 5mn subcribers in a span of 30 days driven by aggresivepricing strategy. For instance, it offered free minutes and GSM SIM available at one-time charge of Rs 25 in the city of Mumbai. Rcom subcriber additions jumped 180% mom on its earlier run rate of about 1.75 mn/month. It represents the highest ever monthly wireless additions by an operator anywhere in the world except China.

ARPUs need to be watched for Rcom
Rcom almost doubled its share of user additions mom in Jan'09 and accordingly Bharti and Vodafone Essar together lost nearly 12ppts in their share of subscriber additions. Indeed every operator, barring Spice, reported a drop in its share of wireless growth. Incremental growth is likely to accrue from rural areas of most players. Hence, we believe, Q4 FY09 ARPUs for Rcom could indicateif a volume-based growth is coming at the expense of much lower revenue/user. Further, the impact of any significant migration from Rcom CDMA to its GSM platform remains to be seen.

To see full report: Telecom Sector

>Welspun Gujarat (INDIA INFOLINE)

CMP Rs 65 Target 69

Order flows have dried; undermining visibility beyond FY10E
The sharp global slow down led by the exacerbation of financial crisis has caused sharp correction in commodity prices over the last six months. Global crude oil market which experts feared was on the verge of supply deficit some time back is in a state of huge surplus now. Waning cash flows has led to deferment in capital expenditure of crude oil producing companies. We do not expect fresh order inflows before the end of FY10, when crude prices are expected to bounce back. Surplus crude oil capacity will lead to lower E&P and transportation spending in the near term. Export orders form a majority of Welspun Gujarat Stahl Rohren (WGL) order book. We expect situation with respect to slowdown in fresh export orders witnessed during Q3 FY09 to worsen further for the company.

Surplus capacity to further depress EBITDA per ton
The five leading domestic pipe manufacturers have increased their capacity by 34.8% yoy in FY08 and are expected to add further 8.7% in FY09. The reduction in export orders would lead to a surplus capacity for domestic manufacturers. As a result, these companies would try to outbid each other in the domestic tenders to be opened by GAIL> We expect EBITDA per ton for the sector to shrink 40-50% in FY10. WGL's EBITDA per ton is expected to fall from Rs 11000 in Q3 FY09 to Rs 5,500 per ton in FY10E.

To see full report: WELSPUN