Monday, November 15, 2010

>NTPC: Regulatory changes, rising costs impact profitability

National Thermal Power Corporation (NTPC), the largest power generating company in India, is principally engaged in engineering, construction and generation of power. Besides, it also undertakes oil & gas exploration, coal mining and provides consultancy services in the area of power plant construction and power generation. It provides power at the cheapest average tariff in the country. Currently the company has a capacity of 32694MW. It is currently trading at a P/BV of 2.6.

To read the full report: NTPC

>DR. REDDY'S LABS: Developments during Q2FY11

Robust performance in India, Russia/CIS & RoW Generics markets has managed to offset lower Generics sales in other markets and overall PSAI sales: Net sales at Rs1870crs showed yoy growth of 1.8%. This performance was a direct result of the lower PSAI sales across all markets, which has been offset by robust growth in India, Russia/CIS & RoW markets. PSAI sales declined 14.1% yoy to Rs461.7crs, impacted by price erosions and lower order flow. Ex‐PSAI, net revenues at Rs1367crs grew 7.6% yoy where India, Russia/CIS & RoW markets exhibited continuous (yoy) growth of 25.3%, 17.0% & 25.3% respectively. US generics business depicted strong sequential growth of 13%, led by market share gains in base business and new products like generic Lotrel and Tacrolimus launched in Q1FY11. Betapharm sales have stabilized and grew 23% Q‐o‐Q; they, however, declined 27% Y‐o‐Y from one‐time seasonal vaccine sales in Q2FY10.

To read the full report: DRL

>JM FINANCIAL LIMITED: Buoyant capital markets drive business performance

JM Financial Ltd’s (JM’s) Q2FY11 revenues were in line with CRISIL Equities’
expectations driven by investment banking and securities funding businesses.
However, the securities broking business continued to be impacted due to
pressure on broking yields. Losses in the asset management business (AMC)
and poor performance of the broking business led to a slight decline in
profitability. Our outlook for the company’s second half remains stable on the
back of buoyant capital market activities. Consequently, we maintain our
earnings estimates for FY11 and FY12. We maintain our fundamental grade of
‘4/5’ for JM.

Q2FY11 result analysis
• JM’s revenues increased 33.3% y-o-y to Rs 2.3 bn supported by strong performance
in investment banking and securities funding businesses. However, PAT dipped by
2.3% y-o-y to Rs 564 mn mainly due to losses of Rs 33.5 mn in AMC and poor
performance in the broking business.
• The investment banking and securities businesses reported revenue growth of 27.3%
y-o-y to Rs 1.3 bn in Q2FY11. The investment banking division completed five deals
worth Rs 30.6 bn in Q2FY11. However, the performance of the broking business was
impacted by low brokerage yields and higher cost related to the institutional desk. As
a result, segmental profit increased at a low rate of 3.7% y-o-y to Rs 94 mn in
• Revenues from the securities funding business increased 70% y-o-y to Rs 721 mn in
Q2FY11. However segmental earnings declined 7.3% y-o-y to Rs 198 mn due to a
higher mix of borrowed funds and increased funding cost.
• AMC performance was impacted by regulatory changes and redemption pressure.
Average AUM declined 26% y-o-y to Rs 65.3 bn in 2QFY11. The segment reported
losses of Rs 33.5 mn. We believe the loss is largely due to one-time valuation losses
arising from the shift to the mark to market valuation regime for the bond portfolio,
which the company may have absorbed rather than passing on to the investors, inline
with most of the players in the mutual fund industry.
• The alternative investment segment had AUM of Rs 17.2 bn and reported profit of Rs
110 mn in Q2FY11, 26.3% lower than that in Q2FY10.

Valuations: Upside from current levels
We continue to value JM using the sum-of-the-parts method and maintain the
fair value at Rs 45 per share. The stock price has rallied by 15% since our
previous update report dated August 19, 2010. Hence, we are revising our
valuation grade to 4/5.

To read the full report: JM FINANCIAL LIMITED

>Economy First Cut: Industrial growth drops further to 4.4 per cent in September 2010

• Industrial output growth dropped to 4.4 per cent in September 2010 as compared to 8.2 per cent a year ago and 6.9 per cent a month ago.

• As the index of industrial production (IIP) has been readjusted in view of revamped Wholesale Price Index (WPI) for IIP items, the IIP growth for July and August 2010 now stands 15.0 and 6.9 per cent.

• Manufacturing output growth decelerated to 4.5 per cent in September 2010.

• Among the three major segments of IIP, only manufacturing index posted a positive growth (1.4 per cent) on m-o-m basis.

• Weak m-o-m performance of both mining and electricity in September 2010 led to their growth slowing down to 5.2 and 1.7 per cent respectively

• Capital goods output, continues to be volatile and the same shrank by 4.2 per cent in September 2010. As per the recompiled series, this is the first month in which capital goods have witnessed contraction this fiscal.

• Consumer durable goods, hitherto a consistently good performer also posted a lower growth of 10.9 per cent in September 2010 as against 27.1 per cent in the previous month.

To read the full report: ECONOMY FIRST CUT