Paper division acts as a drag...
Orient Paper has reported a YoY revenue growth of 23.1% to Rs 467 crore. The EBITDA margin has improved by 150 bps due to improvement in margin in the electrical consumer durables division. The adjusted net profit has grown by 24.6% YoY to Rs 66.7 crore.
■ Highlight of the quarter
Net sales grew 23.1% YoY to Rs 467 crore in Q4FY09 from Rs 379.3 crore in Q4FY08. This was due to increase in revenues from the cement, paper and electrical consumer durables divisions. The EBITDA margin improved by 150 bps YoY to 25.2% due to improvement in margins in the electrical consumer durables division. Other income grew 331% YoY to Rs14.6 crore due to income from carbon credit of Rs 8 crore. The reported net profit has increased by 14.1% YoY to Rs 54.9 crore. During the quarter, the company has written off dues from the Kenyan JV and made a provision for water tax for the earlier year. Thus, adjusted net profit has grown by 24.6% to Rs 66.7 crore. On a QoQ basis, net sales grew 35%. The EBIDTA margin has improved by 40 bps to 25.2%. The reported and adjusted net profit has grown by 7.2% and 30.1%, respectively.
■ Valuations
At the CMP of Rs 57 per share, the stock is trading at 4.5x and 4.6x its FY10E and FY11E earnings, respectively. We are assigning a PERFORMER rating to the stock with a price target of Rs 66 per share.
■ Segmental results
Cement
The cement division has reported revenue growth of 20.9% YoY to Rs 233.5 crore. Cement dispatches grew 13.8% YoY to 7.5 lakh tonnes while realisation improved by 6.2% YoY to Rs 3132 per tonne. The EBIT margin has remained almost flat at 39.9%. Due to growth in revenue, the EBIT has reported growth of 20% YoY to Rs 93.1 crore.
Paper
The paper division has reported revenue growth of 51.4% YoY to Rs 91 crore. However, due to the disturbed pulp mill operations division, Paper division has reported a loss of Rs 0.2 crore in Q4FY09 as compared to profit of Rs 1.4 crore in Q4FY08.
Electrical consumer durables
The electrical consumer durables division has reported revenue growth of 13.7% to Rs 142.5 crore due to incremental revenue from the CFL business. The EBIT margin has improved by 600 bps on account of a decline in metal prices. Thus, EBIT has surged by 76.4% YoY to Rs 23.9 crore.
To see full report: ORIENT PAPER & INDUSTRIES
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суббота, 20 июня 2009 г.
четверг, 18 июня 2009 г.
>CEMENT SECTOR (ICICI DIRECT)
- All-India cement dispatches up 10.7% YoY in May 2009
- Northern region dispatches up 26.3%, South up by 4.1%
Robust growth
In May 2009, all-India cement dispatches reported a growth of 10.7% YoY on the back of strong growth in the northern and central regions. On an MoM basis, cement dispatches were down 1.2% mainly on account of a drop in capacity utilisation. On a YTD basis, (April-May’09) cement dispatches have grown by 11.9%. Among major players, Shree Cement, Jaiprakash Associates and Grasim reported impressive growth of 32.2%, 25.7% and 22.1% YoY, respectively, due to capacity additions and strong demand in the northern and central region. Ambuja (8.3%) and UltraTech’s (16.4%) growth have also been higher than the industry average on account of
lower base due to the ban on cement export last year.
Outlook
Infrastructure spending undertaken by the government prior to the election and demand from rural and semi urban housing mainly drove the strong YoY growth in cement dispatches. The lower base of last year also contributed to the YoY growth as export was banned in the first two months of FY08. The slowdown in the real estate sector has increased the uncertainty of cement demand in the near future. The uncertainty has further increased on account of growth driven by rural spending,
which is heavily dependent on monsoons. On the cost front, the recent surge in fuel prices will increase the cost pressure for cement companies from Q3FY10 (depending upon inventories and long-term contracts). With new capacities coming on stream, the industry would be unable to pass on the cost increase. Thus, we expect the margin to come under pressure.
Region wise performance
Among major regions, the northern region has reported the highest growth of 26.3% YoY led by incremental demand from major projects, namely Commonwealth Games, sewerage line project in
Punjab, national irrigation project in Haryana, Delhi Metro, flyover and Delhi airport. The central region’s dispatches have reported growth of 11.0% YoY due to spending by the UP government on
low-cost housing. The western region has reported 8.3% growth on account of lower base due to ban on cement export last year (last year western region had reported growth of -6.2%). The eastern region has reported growth of 7.7% while southern region has reported moderate growth of 4.1% YoY on account of slowdown in construction activities due to assembly elections in Andhra Pradesh.
To see full report: CEMENT SECTOR
вторник, 16 июня 2009 г.
>SONATA SOFTWARE (ICICI DIRECT)
Sonata Software is a mid-tier company, which has seen a PAT CAGR of 48% over the past five years. The company is strategically expanding in new geographies (Middle East). We believe the current valuations make it a compelling buy…
Company background
Sonata Software is a Bangalore headquartered company having offices across the globe in the US, Europe, Middle East and Asia Pacific.
The company’s portfolio of services includes IT consulting, product engineering services, travel solutions, application development, application management, managed testing, business intelligence, infrastructure management and packaged applications. It serves segments like manufacturing, travel transport & logistics, independent software vendors (ISV), BFSI, telecom and construction.
Investment arguments
■ Entering new geographies
Through the years, the company has expanded its geographical presence both organically and inorganically. For the European region, it formed a joint venture with TUI, Europe’s largest tourism group. Sonata has a majority stake in TUI InfoTec, which provides a portfolio of services comprising IT operations and IT services. TUI InfoTec's basket of IT operations includes infrastructure management, helpdesk and hosting services, while it offers IT services such as application development, application management, business intelligence and managed testing.
The company is currently trying to offshore a lot of work, which is currently being done in Germany, to its development centres in India. TUI InfoTec employs around 440 IT professionals in Germany. The company has recently opened up a 100% subsidiary in Dubai to cater to the growing demand of the Middle East market.
■ Well diversified in terms of geography
The company has a good mix of business coming from the international and domestic market in the ratio of 60:40. We believe this augurs well for the company, as in comparison to some of the other peers in the sector it is not totally dependent on international clients for its growth.
■ Looking at acquisitions for growth
The company has cash of Rs 8 per share, which makes the valuations even more attractive. Sonata is looking at acquisitions to further fuel its growth and is looking at companies with $50 million revenue with mature business models. It is also looking at companies specialising in niche markets.
Risks & concerns
With the reduction in IT spend globally clients are asking for price cuts, which could affect margins, going ahead. The company also has a large dependence on the travel segment the IT spend of which is largely discretionary and within such global uncertainty would take time to revive.
To see full report: SONATA SOFTWARE
Company background
Sonata Software is a Bangalore headquartered company having offices across the globe in the US, Europe, Middle East and Asia Pacific.
The company’s portfolio of services includes IT consulting, product engineering services, travel solutions, application development, application management, managed testing, business intelligence, infrastructure management and packaged applications. It serves segments like manufacturing, travel transport & logistics, independent software vendors (ISV), BFSI, telecom and construction.
Investment arguments
■ Entering new geographies
Through the years, the company has expanded its geographical presence both organically and inorganically. For the European region, it formed a joint venture with TUI, Europe’s largest tourism group. Sonata has a majority stake in TUI InfoTec, which provides a portfolio of services comprising IT operations and IT services. TUI InfoTec's basket of IT operations includes infrastructure management, helpdesk and hosting services, while it offers IT services such as application development, application management, business intelligence and managed testing.
The company is currently trying to offshore a lot of work, which is currently being done in Germany, to its development centres in India. TUI InfoTec employs around 440 IT professionals in Germany. The company has recently opened up a 100% subsidiary in Dubai to cater to the growing demand of the Middle East market.
■ Well diversified in terms of geography
The company has a good mix of business coming from the international and domestic market in the ratio of 60:40. We believe this augurs well for the company, as in comparison to some of the other peers in the sector it is not totally dependent on international clients for its growth.
■ Looking at acquisitions for growth
The company has cash of Rs 8 per share, which makes the valuations even more attractive. Sonata is looking at acquisitions to further fuel its growth and is looking at companies with $50 million revenue with mature business models. It is also looking at companies specialising in niche markets.
Risks & concerns
With the reduction in IT spend globally clients are asking for price cuts, which could affect margins, going ahead. The company also has a large dependence on the travel segment the IT spend of which is largely discretionary and within such global uncertainty would take time to revive.
To see full report: SONATA SOFTWARE
понедельник, 15 июня 2009 г.
>TECH MAHINDRA (ICICI DIRECT)
Positive disclosure but already priced in…
Tech Mahindra disclosed Satyam’s financial details, which came in above market expectations. The company has stated that these financials details were not audited and the audited numbers could materially be different.
Numbers positively surprise
Satyam, according to the disclosures made by Tech Mahindra, had standalone revenues of Rs 2294 crore for Q3FY09. For January and February the sales were Rs 681 crore and Rs 676 crore, respectively. If one were to aggregate, the annual run rate comes to Rs 8762 crore, which is around $1.75 billion. However, the company has lost significant business and key personnel in March. Thus, we believe the annual run rate could be lower than $1.75 billion. (At the press meet Vineet Nayar had stated that the run rate could settle around $1.3 billion).
The biggest surprise came in on the margin performance front. A 17.5% operating margin was way above expectation of a low single digit margin expectation. We believe that in the near term the company could do well to maintain this level (as there is pressure on revenues in the near term). However, in the long run, cost rationalisation and revenue stability could push up margins (employee rationalisation and further reduction in SG&A costs).
Customer — a lose-win situation
As of March 26, Satyam partially or totally lost around 66 customers and won deals from around 215 existing customers. In total, the company lost business worth $183 million (including $91 million expected over the next 12 months) and won deals worth $380 million.
Litigations – difficult to ascertain financial impact
The company is facing litigations with respect to the acquisitions made by the company in the past as well as US class action law suits, unpaid litigation and unacknowledged claim of Rs 1230 crore. It is too early to ascertain the impact of the same on the financials of the company. However, it could materially impact the performance if the settlements go against Satyam.
To see full report: TECH MAHINDRA
Tech Mahindra disclosed Satyam’s financial details, which came in above market expectations. The company has stated that these financials details were not audited and the audited numbers could materially be different.
Numbers positively surprise
Satyam, according to the disclosures made by Tech Mahindra, had standalone revenues of Rs 2294 crore for Q3FY09. For January and February the sales were Rs 681 crore and Rs 676 crore, respectively. If one were to aggregate, the annual run rate comes to Rs 8762 crore, which is around $1.75 billion. However, the company has lost significant business and key personnel in March. Thus, we believe the annual run rate could be lower than $1.75 billion. (At the press meet Vineet Nayar had stated that the run rate could settle around $1.3 billion).
The biggest surprise came in on the margin performance front. A 17.5% operating margin was way above expectation of a low single digit margin expectation. We believe that in the near term the company could do well to maintain this level (as there is pressure on revenues in the near term). However, in the long run, cost rationalisation and revenue stability could push up margins (employee rationalisation and further reduction in SG&A costs).
Customer — a lose-win situation
As of March 26, Satyam partially or totally lost around 66 customers and won deals from around 215 existing customers. In total, the company lost business worth $183 million (including $91 million expected over the next 12 months) and won deals worth $380 million.
Litigations – difficult to ascertain financial impact
The company is facing litigations with respect to the acquisitions made by the company in the past as well as US class action law suits, unpaid litigation and unacknowledged claim of Rs 1230 crore. It is too early to ascertain the impact of the same on the financials of the company. However, it could materially impact the performance if the settlements go against Satyam.
To see full report: TECH MAHINDRA
>INDIAN TELECOM SECTOR (ICICI DIRECT)
Mounting subscribers; waning earnings quality
The Indian telecom industry has grown more than 12 times in five years, from just 33 million subscribers in 2004 to 386 million in 2009. Even at its current size, it proved to be fairly immune to the current economic slowdown with 11% of total base being added in the last quarter of FY09. Today, the industry is at a crucial point with over 50% of net adds coming from rural India. With one of the lowest ARPUs globally, volume growth would be the revenue driver for the industry. We are bullish on the growth momentum. However, at current levels valuations look stretched. We advise cherry picking in the telecom space with preference for companies with higher operational efficiency, low leverage and strong balance sheet. We are initiating coverage on Bharti Airtel with HOLD rating and on RCom and Idea Cellular with UNDERPERFORMER rating.■ Fast-track subscriber growth
Mobile subscribers have grown at a CAGR of 63% from 33 million in 2004 to 386 million in 2009. With newer licenses being granted and a host of new policy initiatives like MNP and MVNO, this figure is set to grow further. We expect rural penetration to fuel the future growth with subscriber base reaching 654 million by 2012, at a CAGR of 19.2%. However, the quality of new additions remains a concern and falling ARPU, MoU & ARPM could dent the margins, going forward.
■ Passive infrastructure – value unlocking
By 2012, we expect the tower base to increase nearly 1.5 times from existing ~2.86 lakh towers with 90% population being covered as compared to ~60% in FY09. Penetrating further into rural areas while maintaining financial viability would require aggressive passive infrastructure sharing. Moreover, we expect new telecom operators to use the infrastructure of existing tower companies. Incumbent operators would benefit by renting out tower services to competitors.
■ Declining margin
With increasing competition, renting of passive infrastructure, 2G network expansion and rollout of 3G, we expect margins across players to decline in the mobile segment. However, with robust
growth coupled with increasing margins in the non-telecom business, integrated players like Bharti and RCom will be able to arrest the decline in overall margins to a certain extent.
Outlook and recommendation
Indian telecom companies are currently trading at 20x FY10E earnings. Although lower than their historical multiples, the valuations looks stretched given that the benchmark index is trading at 17x and telcos in other emerging markets are trading in the range of 12-14x FY10 earnings. We do not believe this premium is justified. While we believe subscriber led volume growth will continue to be
robust in the foreseeable future, it may not translate into a commensurable EPS growth for all companies. We advise cherry picking among telcos with preference for companies with good quality of earnings, higher operational efficiency, low leverage and strong balance sheet. We initiate coverage on Bharti Airtel with HOLD rating and on RCom and Idea Cellular with UNDERPERFORMER rating.
To see full report: TELECOM SECTOR
пятница, 12 июня 2009 г.
>DENA BANK (ICICI DIRECT)
Valuation still compelling after recent rally…
Dena Bank is one of leading PSU banks having a dominant position in the CASA rich western region of the country. With majority of branches in Maharashtra and Gujarat, we believe it has a strong low-cost liability franchise, which provides a good hedge for NIMs. We estimate the core
business of the bank will grow at a CAGR of 20% over FY09-FY11E. The risk reward lies in the compelling valuation at which it is currently trading. Even on a stress case scenario the bank is available at 0.9x FY11E stressed ABV. Hence, we are initiating coverage on the stock with a
PERFORMER rating and a target price of Rs 65 over 12-15 months.
■ CASA @ 36%: Still one of the best
At the current CASA levels of 36%, Dena Bank is one of the best and most competitive banks in the PSU banking space. A majority of its branches are located in the western region especially in Gujarat and Maharashtra with a tally of 480 and 242 branches, respectively which are CASA rich by nature out of a total of 1184 branches in FY09.
■ Value buy
In our stress case scenario, we assume the whole GNPA will turn bad. Assuming the GNPA to be at 2.6% for FY10E and 2.2% for FY11E at Rs 890 crore and Rs 953 crore respectively, the adjusted net worth of the bank stands at Rs 2521 crore for FY11E, resulting in ABV of Rs 65 per
share after considering a dilution in FY10E. We believe the stock can command 1.0x ABV (stress case) of Rs 65 and value the stock at Rs 65 per share.
■ Valuation
Dena Bank is currently trading at 3.4% of market capitalisation to balance sheet size, which is still below the average of the past three years. We expect the balance sheet to grow at 17% CAGR over FY09 - FY11E and credit-deposit ratio to stabilise around 70%, NIM around 2.8% and CASA around 39%. We expect the bank to bring 100% of its branches under CBS by FY10, which will enable it to generate more fee income and better its operating efficiency. Thus, we value the bank at Rs 65 (0.8x FY11E ABV of Rs 82). Therefore, we have arrived at a target price of Rs 65 by giving equal weightage to both the above scenarios. Hence, we rate the stock as PERFORMER.
To see full report: DENA BANK
Dena Bank is one of leading PSU banks having a dominant position in the CASA rich western region of the country. With majority of branches in Maharashtra and Gujarat, we believe it has a strong low-cost liability franchise, which provides a good hedge for NIMs. We estimate the core
business of the bank will grow at a CAGR of 20% over FY09-FY11E. The risk reward lies in the compelling valuation at which it is currently trading. Even on a stress case scenario the bank is available at 0.9x FY11E stressed ABV. Hence, we are initiating coverage on the stock with a
PERFORMER rating and a target price of Rs 65 over 12-15 months.
■ CASA @ 36%: Still one of the best
At the current CASA levels of 36%, Dena Bank is one of the best and most competitive banks in the PSU banking space. A majority of its branches are located in the western region especially in Gujarat and Maharashtra with a tally of 480 and 242 branches, respectively which are CASA rich by nature out of a total of 1184 branches in FY09.
■ Value buy
In our stress case scenario, we assume the whole GNPA will turn bad. Assuming the GNPA to be at 2.6% for FY10E and 2.2% for FY11E at Rs 890 crore and Rs 953 crore respectively, the adjusted net worth of the bank stands at Rs 2521 crore for FY11E, resulting in ABV of Rs 65 per
share after considering a dilution in FY10E. We believe the stock can command 1.0x ABV (stress case) of Rs 65 and value the stock at Rs 65 per share.
■ Valuation
Dena Bank is currently trading at 3.4% of market capitalisation to balance sheet size, which is still below the average of the past three years. We expect the balance sheet to grow at 17% CAGR over FY09 - FY11E and credit-deposit ratio to stabilise around 70%, NIM around 2.8% and CASA around 39%. We expect the bank to bring 100% of its branches under CBS by FY10, which will enable it to generate more fee income and better its operating efficiency. Thus, we value the bank at Rs 65 (0.8x FY11E ABV of Rs 82). Therefore, we have arrived at a target price of Rs 65 by giving equal weightage to both the above scenarios. Hence, we rate the stock as PERFORMER.
To see full report: DENA BANK
четверг, 11 июня 2009 г.
>UNION BANK OF INDIA (ICICI DIRECT)
Growing via the quality route …
UBI’s ability and focus to grow via the quality route (moderate credit growth coupled with focus on branch expansion to build strong liability franchise), opex under check relative to expansion as a result of adequate rollout of technology infrastructure & business process and, above all, the policy to maintain high loan loss coverage ratio makes UBI command a premium in terms of valuation multiple relative to its peers. We expect the bank to post a business CAGR of 19% over FY09- FY11E. We are initiating coverage on the stock with a target objective of Rs 249 over 12-15 months and rate the stock as PERFORMER.
■ Focus on Liability franchise + moderation in credit growth
Containing the cost of funds via expanding its low cost liability franchise is the key focus of Union Bank of India (UBI). The bank has plans to add 500 branches in FY10, which will bring traction in low cost CASA deposits. On the lending front, UBI will continue to focus its lending more
towards quality corporates, medium enterprises and the agri sector.
■ High provisioning to provide cushion to asset quality
As of Q4FY09, the NNPA for UBI stood at 0.35% (NNPA is one of the best for UBI in the PSU space). We can attribute such a low NNPA to the fact that UBI has been maintaining the highest loan loss coverage ratio of more than 83% during FY09. The bank has been using the strong
profitability to provide for NPAs, which has enabled the bank to contain its NPAs.
■ Superior operating efficiency always a prerogative
Focus on control of opex relative to expansion plans has been the key catalyst for UBI’s growth. Also, 100% of its braches are based on CBS and posses the necessary infrastructure so as to carry on business smoothly.
■ Valuation
At CMP of Rs 218, the stock is trading at 1.1x and 1x its FY10E and FY11E ABV, respectively. We believe that with a better business profile, ability to maintain healthy asset quality and garner higher than industry average RoEs will enable the bank to fetch premium valuation multiples. We value the stock at 1.3x its FY10E ABV to arrive at a fair value of Rs 249.
To see full report: UBI
UBI’s ability and focus to grow via the quality route (moderate credit growth coupled with focus on branch expansion to build strong liability franchise), opex under check relative to expansion as a result of adequate rollout of technology infrastructure & business process and, above all, the policy to maintain high loan loss coverage ratio makes UBI command a premium in terms of valuation multiple relative to its peers. We expect the bank to post a business CAGR of 19% over FY09- FY11E. We are initiating coverage on the stock with a target objective of Rs 249 over 12-15 months and rate the stock as PERFORMER.
■ Focus on Liability franchise + moderation in credit growth
Containing the cost of funds via expanding its low cost liability franchise is the key focus of Union Bank of India (UBI). The bank has plans to add 500 branches in FY10, which will bring traction in low cost CASA deposits. On the lending front, UBI will continue to focus its lending more
towards quality corporates, medium enterprises and the agri sector.
■ High provisioning to provide cushion to asset quality
As of Q4FY09, the NNPA for UBI stood at 0.35% (NNPA is one of the best for UBI in the PSU space). We can attribute such a low NNPA to the fact that UBI has been maintaining the highest loan loss coverage ratio of more than 83% during FY09. The bank has been using the strong
profitability to provide for NPAs, which has enabled the bank to contain its NPAs.
■ Superior operating efficiency always a prerogative
Focus on control of opex relative to expansion plans has been the key catalyst for UBI’s growth. Also, 100% of its braches are based on CBS and posses the necessary infrastructure so as to carry on business smoothly.
■ Valuation
At CMP of Rs 218, the stock is trading at 1.1x and 1x its FY10E and FY11E ABV, respectively. We believe that with a better business profile, ability to maintain healthy asset quality and garner higher than industry average RoEs will enable the bank to fetch premium valuation multiples. We value the stock at 1.3x its FY10E ABV to arrive at a fair value of Rs 249.
To see full report: UBI
>BHARATI SHIPYARD (ICICI DIRECT)
Bharati Shipyard’s open offer to Great Offshore
Bharati Shipyard Ltd (BSL) has announced an open offer to acquire 20% equity stake of Great Offshore (GOSL) at a price of Rs 344 per share aggregating to Rs 255 crore. Previously BSL had acquired 55.33 lakh shares at Rs 315 per share (14.89% stake) amounting to Rs 174 crore. Great
Offshore had earlier pledged 14.87% stake with BSL for a loan of Rs 200 crore. BSL is likely to fund the acquisition of GOSL’s share through internal accruals. This open offer is positive for BSL, as it will have a presence in the high margin offshore shipping services segment. Moreover, it is getting a stake in a company that has strong revenue visibility at an attractive price, which is at a discount to the current market price. We feel that BSL will be able to get lesser than the targeted 20% stake in the open offer due to the current market price of GOSL being higher than the open offer price. However, it will be able to increase its stake in GOSL and have effective control of decisions taken by the Board.
Valuations
At the CMP of Rs 174, BSL is trading at 3.3x FY10E earnings of Rs 52.79 and 2.7x FY11E earnings of Rs 64.44. BSL’s strong order book of Rs 5093.71 crore and relative less exposure to the dry bulk segment provides revenue and earnings visibility. We believe BSL’s diversification into the offshore segment through the open offer to Great Offshore will enable it to have a presence in the high-margin offshore segment. We have valued BSL on multiple valuation parameters using global benchmarks, with a target price of Rs 201, providing an upside of 16%.
To see full report: BHARATI SHIPYARD
Bharati Shipyard Ltd (BSL) has announced an open offer to acquire 20% equity stake of Great Offshore (GOSL) at a price of Rs 344 per share aggregating to Rs 255 crore. Previously BSL had acquired 55.33 lakh shares at Rs 315 per share (14.89% stake) amounting to Rs 174 crore. Great
Offshore had earlier pledged 14.87% stake with BSL for a loan of Rs 200 crore. BSL is likely to fund the acquisition of GOSL’s share through internal accruals. This open offer is positive for BSL, as it will have a presence in the high margin offshore shipping services segment. Moreover, it is getting a stake in a company that has strong revenue visibility at an attractive price, which is at a discount to the current market price. We feel that BSL will be able to get lesser than the targeted 20% stake in the open offer due to the current market price of GOSL being higher than the open offer price. However, it will be able to increase its stake in GOSL and have effective control of decisions taken by the Board.
Valuations
At the CMP of Rs 174, BSL is trading at 3.3x FY10E earnings of Rs 52.79 and 2.7x FY11E earnings of Rs 64.44. BSL’s strong order book of Rs 5093.71 crore and relative less exposure to the dry bulk segment provides revenue and earnings visibility. We believe BSL’s diversification into the offshore segment through the open offer to Great Offshore will enable it to have a presence in the high-margin offshore segment. We have valued BSL on multiple valuation parameters using global benchmarks, with a target price of Rs 201, providing an upside of 16%.
To see full report: BHARATI SHIPYARD
вторник, 9 июня 2009 г.
>PVR LIMITED (ICICI DIRECT)
Near term pain, long-term looks good...
PVR reported its Q4FY09 standalone results, which were below our expectations. The topline at Rs 58.0 crore was up 6.8% YoY while it declined by 21.5% QoQ. The EBITDA margin at 10.5% declined 248 bps and 526 bps YoY and QoQ, respectively, on the back of higher rental cost and
film distributors share. The company reported a net loss of Rs 1.11 crore vs. Rs 2.8 crore of PAT during Q4FY08.
Highlight of the quarter
PVR opened a 24-lane bowling alley centre at Ambience Mall, Gurgaon under its newly formed JV PVR Blu-O. During its 18 days of operation, the subsidiary grossed an income of Rs 0.7 crore and PAT of Rs - 0.4 crore.
Valuations
The whole of Q110E has been written off. This would result in negative growth in topline for FY10E. However, we expect the bottomline to grow on account of operational improvement in the subsidiaries and absence of one time launch cost incurred in them in FY09. At the CMP of Rs 129.3, PVR is trading at 27.0x its FY10E EPS of Rs 4.8 and 10.6x its FY11E EPS of Rs 12.2. On an EV/EBITDA basis, it is trading at 7.1x and 4.7x its FY10E and FY11E EBITDA, respectively. We value the company at 7x FY10E EBITDA to arrive at a target price of Rs 127.3, implying a 1.5% downside. We are upgrading the stock from UNDERPERFORMER to HOLD.
Result Analysis
Lack of good quality content
The entire multiplex industry witnessed lower occupancy levels due to lack of good quality content and the examination season. Generally, Q4 remains subdued due to the examination season. However, during Q4FY09 the exhibition business took a further hit due to the inferior quality content that was released. Big-ticket movies like Delhi 6, Chandni Chowk to China and Billu underperformed at the box office. Top five films in Q409 had a net collection of Rs 94.0 crore at the box office as compared to Rs 145.6 crore in Q408.
Consolidated result analysis
On a consolidated basis, the company reported topline of Rs 355.39 crore and EBITDA of Rs 50 crore. The EBITDA margin stood at 14.2% as against 16.8% on a standalone basis. During the year, PVR formed three new subsidiaries PVR Pictures, Sunrise Infotainment Ltd and CR Retail. The company entered into a 51:49 JV with Thailand-based Major Cineplex group Plc for PVR Blu-O. These collectively contributed ~Rs 117.66 crore to the topline. However, on the EBITDA front, the consolidated contribution from these subsidiaries was negative.
To see full report: PVR LIMITED
PVR reported its Q4FY09 standalone results, which were below our expectations. The topline at Rs 58.0 crore was up 6.8% YoY while it declined by 21.5% QoQ. The EBITDA margin at 10.5% declined 248 bps and 526 bps YoY and QoQ, respectively, on the back of higher rental cost and
film distributors share. The company reported a net loss of Rs 1.11 crore vs. Rs 2.8 crore of PAT during Q4FY08.
Highlight of the quarter
PVR opened a 24-lane bowling alley centre at Ambience Mall, Gurgaon under its newly formed JV PVR Blu-O. During its 18 days of operation, the subsidiary grossed an income of Rs 0.7 crore and PAT of Rs - 0.4 crore.
Valuations
The whole of Q110E has been written off. This would result in negative growth in topline for FY10E. However, we expect the bottomline to grow on account of operational improvement in the subsidiaries and absence of one time launch cost incurred in them in FY09. At the CMP of Rs 129.3, PVR is trading at 27.0x its FY10E EPS of Rs 4.8 and 10.6x its FY11E EPS of Rs 12.2. On an EV/EBITDA basis, it is trading at 7.1x and 4.7x its FY10E and FY11E EBITDA, respectively. We value the company at 7x FY10E EBITDA to arrive at a target price of Rs 127.3, implying a 1.5% downside. We are upgrading the stock from UNDERPERFORMER to HOLD.
Result Analysis
Lack of good quality content
The entire multiplex industry witnessed lower occupancy levels due to lack of good quality content and the examination season. Generally, Q4 remains subdued due to the examination season. However, during Q4FY09 the exhibition business took a further hit due to the inferior quality content that was released. Big-ticket movies like Delhi 6, Chandni Chowk to China and Billu underperformed at the box office. Top five films in Q409 had a net collection of Rs 94.0 crore at the box office as compared to Rs 145.6 crore in Q408.
Consolidated result analysis
On a consolidated basis, the company reported topline of Rs 355.39 crore and EBITDA of Rs 50 crore. The EBITDA margin stood at 14.2% as against 16.8% on a standalone basis. During the year, PVR formed three new subsidiaries PVR Pictures, Sunrise Infotainment Ltd and CR Retail. The company entered into a 51:49 JV with Thailand-based Major Cineplex group Plc for PVR Blu-O. These collectively contributed ~Rs 117.66 crore to the topline. However, on the EBITDA front, the consolidated contribution from these subsidiaries was negative.
To see full report: PVR LIMITED
воскресенье, 7 июня 2009 г.
>SAIL (ICICI DIRECT)
Sailing through…
Steel Authority of India Ltd (SAIL) surprised us with its Q4FY09 numbers, which were ahead of our and consensus estimates. Though there was YoY de-growth, the company was able to report better-than-expected results. This was despite a fall in realisation on improved product mix, lower employee costs and significant rise in saleable steel volume over the previous quarter supported by an improvement in domestic demand. SAIL reported net profit of at Rs 1486.68 crore and Rs 6174.81 for Q4 and full FY09 (against our expectations of Rs 856.4 crore and Rs 5544.5 crore), respectively. The Q4 net profit figure was down 37% YoY. However, it rose 76% QoQ.
Highlight of the quarter
The topline for Q4FY09 was Rs 12057.8 crore, down 10% YoY but up 35% QoQ. The EBITDA margin grew by 480 bps QoQ but fell by 1010 bps YoY to 17.5%, as higher raw material cost mainly on account of coking coal continued to weigh coupled with lower realisation during H2FY09. For the full year FY09 the EBITDA margin, however, stood at 20.4% due to stronger performance during H1FY09. Special steel production rose 11% YoY to 3.7 million tonnes (MT).
Valuation
At the CMP of Rs 173, the stock is discounting its FY10E earning of Rs 13.3 by 13.1x and FY10E EV/ EBITDA by 5.7x. Based on the good growth prospect of the company in future coupled with higher operational efficiency we assign the stock a multiple of 6.5x on its FY10E EV/EBITDA. This translates to a price of Rs 180/ share, an upside of 4%. We continue to maintain our HOLD rating on the stock.
Strong volume growth offsets fall in realisation
The average realisation per tonne fell again for the second consecutive quarter in Q4FY09 following the global trend. Indian steel prices, however, did not see a significant fall compared global markets. This is because India is better positioned compared to most of its global peers in terms of expected economic recovery. Thus, steel makers that have their major focus on the domestic markets are set to reap the benefit. SAIL, being a PSU, has already shown that. The company, though it saw some drop in realisation, could sell significantly higher quantity (3.6
MT) in Q4FY09 compared to the previous quarter (a QoQ growth of 33%). On a YoY basis, however, saleable steel production declined by 4% to 12.5 MT. Total sales also fell by 8% YoY to 11.32 MT for the full FY09. However, considering the tough situation in FY09 especially from mid-August to December 2008, even this performance seems quite good.
To see full report: SAIL
Steel Authority of India Ltd (SAIL) surprised us with its Q4FY09 numbers, which were ahead of our and consensus estimates. Though there was YoY de-growth, the company was able to report better-than-expected results. This was despite a fall in realisation on improved product mix, lower employee costs and significant rise in saleable steel volume over the previous quarter supported by an improvement in domestic demand. SAIL reported net profit of at Rs 1486.68 crore and Rs 6174.81 for Q4 and full FY09 (against our expectations of Rs 856.4 crore and Rs 5544.5 crore), respectively. The Q4 net profit figure was down 37% YoY. However, it rose 76% QoQ.
Highlight of the quarter
The topline for Q4FY09 was Rs 12057.8 crore, down 10% YoY but up 35% QoQ. The EBITDA margin grew by 480 bps QoQ but fell by 1010 bps YoY to 17.5%, as higher raw material cost mainly on account of coking coal continued to weigh coupled with lower realisation during H2FY09. For the full year FY09 the EBITDA margin, however, stood at 20.4% due to stronger performance during H1FY09. Special steel production rose 11% YoY to 3.7 million tonnes (MT).
Valuation
At the CMP of Rs 173, the stock is discounting its FY10E earning of Rs 13.3 by 13.1x and FY10E EV/ EBITDA by 5.7x. Based on the good growth prospect of the company in future coupled with higher operational efficiency we assign the stock a multiple of 6.5x on its FY10E EV/EBITDA. This translates to a price of Rs 180/ share, an upside of 4%. We continue to maintain our HOLD rating on the stock.
Strong volume growth offsets fall in realisation
The average realisation per tonne fell again for the second consecutive quarter in Q4FY09 following the global trend. Indian steel prices, however, did not see a significant fall compared global markets. This is because India is better positioned compared to most of its global peers in terms of expected economic recovery. Thus, steel makers that have their major focus on the domestic markets are set to reap the benefit. SAIL, being a PSU, has already shown that. The company, though it saw some drop in realisation, could sell significantly higher quantity (3.6
MT) in Q4FY09 compared to the previous quarter (a QoQ growth of 33%). On a YoY basis, however, saleable steel production declined by 4% to 12.5 MT. Total sales also fell by 8% YoY to 11.32 MT for the full FY09. However, considering the tough situation in FY09 especially from mid-August to December 2008, even this performance seems quite good.
To see full report: SAIL
суббота, 6 июня 2009 г.
>IPCA LABS (ICICI DIRECT)
Forex loss spoils the show…
Ipca Lab ’s results for Q4FY09 were in line with our expectations. The topline grew ~25% YoY to Rs 317 crore. Net profit de-grew 65% YoY to Rs 7.9 crore. Ipca’s EBITDA margin in Q4FY09 expanded by over 243 bps YoY on account of higher revenue from promotional markets and efficient cost control. Lower realisation from the sterling pound had a negative impact on operating profitability. For FY09, the topline grew 22% YoY to Rs 1284 crore. The EBIDTA margin expanded 259 bps but net profit margin declined by 551 bps on account of Rs 76 crore of forex loss. Overall, we are confident about Ipca’s growth momentum and rate the stock as PERFORMER.
Highlight of the quarter
On account of robust growth in the high margin promotional business, the overall EBITDA margin expanded 243 bps. A forex loss of Rs 76 crore, largely translational in nature, dented the bottomline by 65% YoY in Q4FY09. Input cost as a percentage of sales declined by 243 bps but increase in employee cost by 140 bps restricted further expansion in the operating margin.
Valuations
Given the strong traction in the branded business, Ipca is looking to log higher growth in the promotional market. In the domestic market, the company already has a good portfolio of offerings. For FY09, exports witnessed a robust growth of 27% YoY led by 49% YoY growth in the branded business. We expect Ipca’s revenue and profits to grow at a CAGR of 15% and 14.6%, respectively, through FY11E. Due to the recent rally in mid-caps, the stock has run up significantly. Thus, we are revising our rating on the stock to PERFORMER with a target price of Rs 627, 8x FY10E EPS of Rs 78.4.
Result analysis
Topline growth in line with expectations
Ipca’s topline grew at 25% YoY in Q4FY09 to Rs 317 crore buoyed by a robust 31% growth in the exports revenue backed by 38% growth in the export formulation business. During Q4FY09, the domestic business grew strongly by 26% YoY to Rs 124 crore, backed by higher than 14% growth in the fixed dosage business. For the full year, exports grew 27% YoY. Fixed dosage
exports grew 28% YoY to Rs 437 crore on account of entry into the US market in September 2008 and robust growth in promotional markets. API exports logged a robust growth of 25% to Rs 243 crore in FY09.
The generic business grew 17% YoY to Rs 269 crore in FY09 vis-à-vis Rs 229 crore in FY08. The institutional business is showing good growth momentum. However, growth in the UK market has been disappointing as the region is witnessing lot of price fluctuation in the Amoxy based products. The domestic formulation business also grew at a good rate of 15% registering revenues in excess of Rs 600 crore. The company has filed 11 abbreviated new drug applications (ANDAs) in the US and has received approval for nine. Ipca currently has only five formulations selling in the US garnering market share in excess of 15%.
Operating margin instills confidence
The EBITDA margin of 16.8% in Q4FY09 was way above our expectation of 14%. For the full year, the margin improved by a solid 259 bps on account of higher revenue generation from the promotional export markets of CIS countries, LATAM (Latin America) and African markets, etc. The higher margin branded business, which has been growing at a CAGR of 35% for the last four
years registered a 49% YoY increase in sales. Although sales grew over 20% YoY, lower realisation due to the Sterling pound had a negative impact on operating profitability. The company also suffered losses on rupee-dollar hedging. However, a decline in raw material and other expenses as a percentage of sales supported the margin expansion.
To see full report: IPCA LABS
Ipca Lab ’s results for Q4FY09 were in line with our expectations. The topline grew ~25% YoY to Rs 317 crore. Net profit de-grew 65% YoY to Rs 7.9 crore. Ipca’s EBITDA margin in Q4FY09 expanded by over 243 bps YoY on account of higher revenue from promotional markets and efficient cost control. Lower realisation from the sterling pound had a negative impact on operating profitability. For FY09, the topline grew 22% YoY to Rs 1284 crore. The EBIDTA margin expanded 259 bps but net profit margin declined by 551 bps on account of Rs 76 crore of forex loss. Overall, we are confident about Ipca’s growth momentum and rate the stock as PERFORMER.
Highlight of the quarter
On account of robust growth in the high margin promotional business, the overall EBITDA margin expanded 243 bps. A forex loss of Rs 76 crore, largely translational in nature, dented the bottomline by 65% YoY in Q4FY09. Input cost as a percentage of sales declined by 243 bps but increase in employee cost by 140 bps restricted further expansion in the operating margin.
Valuations
Given the strong traction in the branded business, Ipca is looking to log higher growth in the promotional market. In the domestic market, the company already has a good portfolio of offerings. For FY09, exports witnessed a robust growth of 27% YoY led by 49% YoY growth in the branded business. We expect Ipca’s revenue and profits to grow at a CAGR of 15% and 14.6%, respectively, through FY11E. Due to the recent rally in mid-caps, the stock has run up significantly. Thus, we are revising our rating on the stock to PERFORMER with a target price of Rs 627, 8x FY10E EPS of Rs 78.4.
Result analysis
Topline growth in line with expectations
Ipca’s topline grew at 25% YoY in Q4FY09 to Rs 317 crore buoyed by a robust 31% growth in the exports revenue backed by 38% growth in the export formulation business. During Q4FY09, the domestic business grew strongly by 26% YoY to Rs 124 crore, backed by higher than 14% growth in the fixed dosage business. For the full year, exports grew 27% YoY. Fixed dosage
exports grew 28% YoY to Rs 437 crore on account of entry into the US market in September 2008 and robust growth in promotional markets. API exports logged a robust growth of 25% to Rs 243 crore in FY09.
The generic business grew 17% YoY to Rs 269 crore in FY09 vis-à-vis Rs 229 crore in FY08. The institutional business is showing good growth momentum. However, growth in the UK market has been disappointing as the region is witnessing lot of price fluctuation in the Amoxy based products. The domestic formulation business also grew at a good rate of 15% registering revenues in excess of Rs 600 crore. The company has filed 11 abbreviated new drug applications (ANDAs) in the US and has received approval for nine. Ipca currently has only five formulations selling in the US garnering market share in excess of 15%.
Operating margin instills confidence
The EBITDA margin of 16.8% in Q4FY09 was way above our expectation of 14%. For the full year, the margin improved by a solid 259 bps on account of higher revenue generation from the promotional export markets of CIS countries, LATAM (Latin America) and African markets, etc. The higher margin branded business, which has been growing at a CAGR of 35% for the last four
years registered a 49% YoY increase in sales. Although sales grew over 20% YoY, lower realisation due to the Sterling pound had a negative impact on operating profitability. The company also suffered losses on rupee-dollar hedging. However, a decline in raw material and other expenses as a percentage of sales supported the margin expansion.
To see full report: IPCA LABS
>KAMAT HOTELS (ICICI DIRECT)
Revised AS-11 guidelines lead PAT growth…
Kamat Hotels came out with its Q4FY09 numbers that were marginally below our expectations. The net sales declined by 35.1% YoY and 2.5% QoQ, respectively. The margin continued to remain under pressure despite a reduction in operating costs. It declined 1690 bps YoY and 560 bps QoQ,
respectively. During the quarter, the company adopted revised AS-11 guidelines and reversed notional forex loss of Rs 14.48 crore. As a result, it reported net profit of Rs 9.7 crore against loss of Rs 1.5 crore in Q3FY09.
Highlight of the quarter
During Q4FY09, the company reported net sales of Rs 28.8 crore as against our expected net sales of Rs 31.0 crore. Net sales dropped 35% YoY. QoQ also, the company was unable to maintain growth due to heavy cut down in travel budgets by Indian companies, as its major clientele comprise Indian companies. Operating profit for the quarter was Rs 7.6 crore. It declined by
60.6% YoY and 10.3% QoQ. During the quarter, the company adopted revised AS-11 guidelines and reversed notional forex loss of Rs 14.48 crore. It also received luxury tax refund of Rs 1.7 crore for FY04-05. As a result, it reported net profit of Rs 9.7 crore against loss of Rs 1.5 crore in Q3FY09.
Valuations
Over a short-term perspective, we may continue to see sluggish performance as majority of the company’s clients are corporate clients which are currently cutting costs steeply. However, on the other hand, with leading macroeconomic data showing some signs of recovery, hotel players having majority ‘corporate clientele’ like Kamat Hotels would tend to benefit faster compared to those having a higher presence in the leisure segment over a longer term. Hence, we are revising our FY10E EPS estimates marginally upward to Rs 9.9 and introducing our FY11E EPS estimates at Rs 13.1. We value the stock at 6x its FY11E EPS estimates to arrive at a target price of Rs
78. We are changing our rating from UNDERPERFORMER to PERFORMER.
Result analysis
Sales continue to decline on cut down in corporate travel budgets
During the current quarter, Kamat Hotels again reported a sharp decline in its sales. Its net sales declined by 35.1% YoY to Rs 28.8 crore. One of the main reasons for such a sharp decline in sales was a heavy cut down in corporate travel budgets by Indian companies on account of the global slowdown. Since Kamat Hotels’ major clientele (i.e. ~80% of its clientele) comprise Indian companies, it has seen a sharp decline in sales on a yearly basis compared to other hotel companies like Viceroy Hotels.
Adoption of revised AS-11 guidelines results in robust PAT growth
During the quarter, the company adopted revised AS-11 guidelines. Accordingly, a notional forex loss of Rs 14.48 crore on its FCCB of US$18 million got reversed. As a result of this, the company reported net profit of Rs 9.7 crore and Rs 5.7 crore for Q4FY09 and FY09, respectively. A receipt of Rs 1.71 crore towards luxury tax refund for FY05 also aided the growth in net
profit.
Focusing on core business
In order to improve its performance and ease liquidity issues, the company sold its 60% stake in Concept Hospitality (non-core asset) for ~Rs 6 crore. The company is now focusing more on its core business expansions. Currently, it has three major projects underway, which include
commissioning of new hotel property at Nagpur, Bhubaneshwar and expansion of its Mumbai property ‘The Orchid’. These entail total capex of ~Rs 140 crore. A majority of these projects are expected to be complete by 2010 according to the guidance given by the management.
Valuations
Over a short-term perspective, we may continue to see a sluggish performance as majority of company’s clients are corporate clients that are currently cutting costs steeply. However, on the other hand, with leading macroeconomic data showing some signs of recovery, hotel players having a majority ‘corporate clientele’ like Kamat Hotels would tend to benefit faster compared to those having a higher presence in the leisure segment. Though the stock price has rallied sharply in the last one month, it still offers some further upside as liquidity concerns have eased. With the overall macro scenarios improving, we are also expecting an improvement in hotel occupancies and, thereby, rise in room rates by the end of FY10E. Hence, we have revised our FY10E EPS estimates upwards to Rs 9.9. We are introducing our FY11E EPS estimates at Rs 13.1. We value the stock at 6x its FY11E EPS estimates to arrive at a target price of Rs 78. We are changing our rating from UNDERPERFORMER to PERFORMER.
To see full report: KAMAT HOTELS
Kamat Hotels came out with its Q4FY09 numbers that were marginally below our expectations. The net sales declined by 35.1% YoY and 2.5% QoQ, respectively. The margin continued to remain under pressure despite a reduction in operating costs. It declined 1690 bps YoY and 560 bps QoQ,
respectively. During the quarter, the company adopted revised AS-11 guidelines and reversed notional forex loss of Rs 14.48 crore. As a result, it reported net profit of Rs 9.7 crore against loss of Rs 1.5 crore in Q3FY09.
Highlight of the quarter
During Q4FY09, the company reported net sales of Rs 28.8 crore as against our expected net sales of Rs 31.0 crore. Net sales dropped 35% YoY. QoQ also, the company was unable to maintain growth due to heavy cut down in travel budgets by Indian companies, as its major clientele comprise Indian companies. Operating profit for the quarter was Rs 7.6 crore. It declined by
60.6% YoY and 10.3% QoQ. During the quarter, the company adopted revised AS-11 guidelines and reversed notional forex loss of Rs 14.48 crore. It also received luxury tax refund of Rs 1.7 crore for FY04-05. As a result, it reported net profit of Rs 9.7 crore against loss of Rs 1.5 crore in Q3FY09.
Valuations
Over a short-term perspective, we may continue to see sluggish performance as majority of the company’s clients are corporate clients which are currently cutting costs steeply. However, on the other hand, with leading macroeconomic data showing some signs of recovery, hotel players having majority ‘corporate clientele’ like Kamat Hotels would tend to benefit faster compared to those having a higher presence in the leisure segment over a longer term. Hence, we are revising our FY10E EPS estimates marginally upward to Rs 9.9 and introducing our FY11E EPS estimates at Rs 13.1. We value the stock at 6x its FY11E EPS estimates to arrive at a target price of Rs
78. We are changing our rating from UNDERPERFORMER to PERFORMER.
Result analysis
Sales continue to decline on cut down in corporate travel budgets
During the current quarter, Kamat Hotels again reported a sharp decline in its sales. Its net sales declined by 35.1% YoY to Rs 28.8 crore. One of the main reasons for such a sharp decline in sales was a heavy cut down in corporate travel budgets by Indian companies on account of the global slowdown. Since Kamat Hotels’ major clientele (i.e. ~80% of its clientele) comprise Indian companies, it has seen a sharp decline in sales on a yearly basis compared to other hotel companies like Viceroy Hotels.
Adoption of revised AS-11 guidelines results in robust PAT growth
During the quarter, the company adopted revised AS-11 guidelines. Accordingly, a notional forex loss of Rs 14.48 crore on its FCCB of US$18 million got reversed. As a result of this, the company reported net profit of Rs 9.7 crore and Rs 5.7 crore for Q4FY09 and FY09, respectively. A receipt of Rs 1.71 crore towards luxury tax refund for FY05 also aided the growth in net
profit.
Focusing on core business
In order to improve its performance and ease liquidity issues, the company sold its 60% stake in Concept Hospitality (non-core asset) for ~Rs 6 crore. The company is now focusing more on its core business expansions. Currently, it has three major projects underway, which include
commissioning of new hotel property at Nagpur, Bhubaneshwar and expansion of its Mumbai property ‘The Orchid’. These entail total capex of ~Rs 140 crore. A majority of these projects are expected to be complete by 2010 according to the guidance given by the management.
Valuations
Over a short-term perspective, we may continue to see a sluggish performance as majority of company’s clients are corporate clients that are currently cutting costs steeply. However, on the other hand, with leading macroeconomic data showing some signs of recovery, hotel players having a majority ‘corporate clientele’ like Kamat Hotels would tend to benefit faster compared to those having a higher presence in the leisure segment. Though the stock price has rallied sharply in the last one month, it still offers some further upside as liquidity concerns have eased. With the overall macro scenarios improving, we are also expecting an improvement in hotel occupancies and, thereby, rise in room rates by the end of FY10E. Hence, we have revised our FY10E EPS estimates upwards to Rs 9.9. We are introducing our FY11E EPS estimates at Rs 13.1. We value the stock at 6x its FY11E EPS estimates to arrive at a target price of Rs 78. We are changing our rating from UNDERPERFORMER to PERFORMER.
To see full report: KAMAT HOTELS
четверг, 4 июня 2009 г.
>DALMIA CEMENT (ICICI DIRECT)
■ Volume to cushion bottomline...
Dalmia Cement reported a sequential improvement in Q4FY09 as net profit increased by 87% QoQ because of an increase in the operating margin by 1170 bps. This was primarily backed by a growth of 29% QoQ in cement sales driven by 30% volume growth. Also, the recent surge in the equity markets has reduced the losses in the investment books.
■ Highlight of the quarter
Net sales grew 16.9% YoY to Rs 485.0 crore in Q4FY09 from Rs 415.0 crore in Q4FY08. The EBITDA margin has declined by 620 bps YoY due to a 29.3% increase in the total expenditure. Thus, the EBITDA remained flat YoY despite a growth in topline. The net profit has declined by 36.8% YoY to Rs 44.3 crore because of a decline in the operating margin and reported loss in other income of Rs 24 crore. However, on a QoQ basis, the net profit grew 86.7% on account of an increase in the operating margin by 1170 bps and positive other income in Q3FY08.
■ Valuations
At the CMP of Rs 137 per share, the stock is trading at 6.9x and 6.6x its FY10E and FY11E earnings, respectively. On an EV/tonne basis, it is trading at an EV/tonne of $73 and $61 its FY10E and FY11E cement capacities, respectively. We are upgrading our rating on the stock to HOLD with a price target of Rs 125 per share.
■ Higher volumes, realisation back topline growth
Dalmia Cement reported net sales of Rs 485.0 crore in Q4FY09 (up 16.9% YoY) on account of 17% and 13% YoY growth in cement and sugar sales, respectively. A 6.8% increase in sales volumes and 9.7% increase in net realisation drove cement sales. Also, the sugar sales volume and realisation increased by 10.5% and 37.7%, respectively. On a QoQ basis, net sales grew 20.0% on the back of a 29.7% increase in the cement volume and 13.3% growth in sugar realisation.
■ EBITDA soars QoQ on margin improvement
The EBITDA remained flat YoY but increased 79.2% QoQ. An improvement in operating margin by 1170 bps drove the sequential growth in EBITDA. Total expenditure has also been flat while it increased by 29.3% YoY to Rs 313.0 crore on account of higher power & fuel and freight cost.
The power & fuel cost has increased by 28.7% YoY and 20.3% QoQ to Rs 120.5 crore on account of high cost coal inventory while the freight cost has increased by 46.7% YoY and 46.2% QoQ to Rs 41.7 crore. The employee cost has increased by 70.6% YoY to Rs 18.6 crore. However, the employee cost has declined sequentially by 30%. The raw material cost declined 43.8% YoY to Rs 130.6 crore but remained flat QoQ.
To see full report: DALMIA CEMENT
Dalmia Cement reported a sequential improvement in Q4FY09 as net profit increased by 87% QoQ because of an increase in the operating margin by 1170 bps. This was primarily backed by a growth of 29% QoQ in cement sales driven by 30% volume growth. Also, the recent surge in the equity markets has reduced the losses in the investment books.
■ Highlight of the quarter
Net sales grew 16.9% YoY to Rs 485.0 crore in Q4FY09 from Rs 415.0 crore in Q4FY08. The EBITDA margin has declined by 620 bps YoY due to a 29.3% increase in the total expenditure. Thus, the EBITDA remained flat YoY despite a growth in topline. The net profit has declined by 36.8% YoY to Rs 44.3 crore because of a decline in the operating margin and reported loss in other income of Rs 24 crore. However, on a QoQ basis, the net profit grew 86.7% on account of an increase in the operating margin by 1170 bps and positive other income in Q3FY08.
■ Valuations
At the CMP of Rs 137 per share, the stock is trading at 6.9x and 6.6x its FY10E and FY11E earnings, respectively. On an EV/tonne basis, it is trading at an EV/tonne of $73 and $61 its FY10E and FY11E cement capacities, respectively. We are upgrading our rating on the stock to HOLD with a price target of Rs 125 per share.
■ Higher volumes, realisation back topline growth
Dalmia Cement reported net sales of Rs 485.0 crore in Q4FY09 (up 16.9% YoY) on account of 17% and 13% YoY growth in cement and sugar sales, respectively. A 6.8% increase in sales volumes and 9.7% increase in net realisation drove cement sales. Also, the sugar sales volume and realisation increased by 10.5% and 37.7%, respectively. On a QoQ basis, net sales grew 20.0% on the back of a 29.7% increase in the cement volume and 13.3% growth in sugar realisation.
■ EBITDA soars QoQ on margin improvement
The EBITDA remained flat YoY but increased 79.2% QoQ. An improvement in operating margin by 1170 bps drove the sequential growth in EBITDA. Total expenditure has also been flat while it increased by 29.3% YoY to Rs 313.0 crore on account of higher power & fuel and freight cost.
The power & fuel cost has increased by 28.7% YoY and 20.3% QoQ to Rs 120.5 crore on account of high cost coal inventory while the freight cost has increased by 46.7% YoY and 46.2% QoQ to Rs 41.7 crore. The employee cost has increased by 70.6% YoY to Rs 18.6 crore. However, the employee cost has declined sequentially by 30%. The raw material cost declined 43.8% YoY to Rs 130.6 crore but remained flat QoQ.
To see full report: DALMIA CEMENT
суббота, 30 мая 2009 г.
>POWER SECTOR (ICICI DIRECT)
Regulators move in the right direction…
The Central Electricity Regulatory Commission (CERC) came out with the draft “Tariff Norms for Renewable Energy Projects” in May 2009. The tariff policy will regulate renewable energy projects, which are central sector generating stations or generating stations with composite scheme for sale of electricity to more than one state. The different renewable energy projects for which tariff is determined in the manner suggested under these tariff norms includes wind, small hydropower plants, biomass, bagasse, solar PV and municipal solid waste. The steps taken by the regulator were pointing in the right direction with regard to being clear on the tariffs for renewable energy projects. Several parties to the policy will submit their comments and suggestion on the policy. Developers, to whom the tariff norms are applicable, will find comfort in the fact that the preferential tariff is to be determined for a period of 13 years. The tariff will be determined on a competitive basis after the debt service obligations are covered.
Suzlon Energy, PTC India and Tata Power would be the immediate beneficiaries of the tariff norms. We believe the move is in the right direction. This will lead to increased investment in the renewable energy space.
Policy norms proposed under the New Tariff Norms
We have tried to focus on the impact of the norms on the wind energy sector in the event update.
■ Tariff design
Under the earlier norms, SERCs were prescribing a varying approach for tariff design. In the recommendation given by the CERC, under the new tariff norms, they have suggested a levelised tariff mechanism. Such a tariff mechanism will be applicable over the preferential tariff period of 13 years. Since the levellised tariff takes into account the extra cash flow requirement by the project for servicing the debt in the initial phases of the project it will help the developers to manage cash flows properly. At the same time it will not lead to a significant burden on utility.
■ Debt equity ratio
The debt equity ratio has to be considered as 70:30. If the equity actually deployed is more than 30% of the capital cost, equity in excess of 30% shall be considered as normative loan. If the deployed equity is less than 30% then actual equity will be considered for determination of tariff.
■ Capital cost
The capital cost for wind energy projects shall be Rs 5.15 crores per MW for FY09-10. It will be linked to an indexation formula for computing the capital cost for projects coming after FY10.
■ Tariff structure
The tariff on renewable energy consists of the following fixed components. It includes
1. Return on equity
2. Interest on loan capital
3. Depreciation
4. Interest on working capital
5. Operation and maintenance expense
• Return on equity: It is proposed that the preferential return at the rate of 16% will be allowed in case of renewable energy projects. The developer shall be entitled to avail the 80IA benefit under the Income Tax Act, which will result in the MAT rate being applicable for the initial 10 years. This will translate into a pretax return on equity of ~17% for the initial 10 years. Beyond 10 years, the normal corporate tax rate of 33.66%will be applicable. This will translate into a pre-tax rate of return on equity of ~23%.
• Interest on loan capital: A normative loan tenure of 12 years has been specified for claiming interest rate on a normative basis in tariff determination. The benchmark interest rate is prescribed as 100 basis points above the SBI PLR prevalent as on April 1 of the relevant period.
• Depreciation: After considering the normative repayment tenure of loan over the initial 12 years, the commission has prescribed the rate of depreciation. The estimated useful life of the asset is distributed into two parts. The first part will be 12 year over which the loan capital can be serviced by the developer by way of depreciation. Hence, it has been proposed as 6% for the initial 12 years.
• Interest on working capital: Interest on working capital will be calculated at the average SBI short-term PLR prevalent for the period (April 2008 – March 2009). For the calculation of working capital the commission has prescribed the following line items.
• Operation and maintenance expense
The regulator has prescribed the operation and maintenance expense for FY2009-10 at Rs 6.5 lakh per MW for the first year. CERC has also prescribed an escalation factor of 5.72% per annum from FY11 onwards.
To see full report: POWER SECTOR
The Central Electricity Regulatory Commission (CERC) came out with the draft “Tariff Norms for Renewable Energy Projects” in May 2009. The tariff policy will regulate renewable energy projects, which are central sector generating stations or generating stations with composite scheme for sale of electricity to more than one state. The different renewable energy projects for which tariff is determined in the manner suggested under these tariff norms includes wind, small hydropower plants, biomass, bagasse, solar PV and municipal solid waste. The steps taken by the regulator were pointing in the right direction with regard to being clear on the tariffs for renewable energy projects. Several parties to the policy will submit their comments and suggestion on the policy. Developers, to whom the tariff norms are applicable, will find comfort in the fact that the preferential tariff is to be determined for a period of 13 years. The tariff will be determined on a competitive basis after the debt service obligations are covered.
Suzlon Energy, PTC India and Tata Power would be the immediate beneficiaries of the tariff norms. We believe the move is in the right direction. This will lead to increased investment in the renewable energy space.
Policy norms proposed under the New Tariff Norms
We have tried to focus on the impact of the norms on the wind energy sector in the event update.
■ Tariff design
Under the earlier norms, SERCs were prescribing a varying approach for tariff design. In the recommendation given by the CERC, under the new tariff norms, they have suggested a levelised tariff mechanism. Such a tariff mechanism will be applicable over the preferential tariff period of 13 years. Since the levellised tariff takes into account the extra cash flow requirement by the project for servicing the debt in the initial phases of the project it will help the developers to manage cash flows properly. At the same time it will not lead to a significant burden on utility.
■ Debt equity ratio
The debt equity ratio has to be considered as 70:30. If the equity actually deployed is more than 30% of the capital cost, equity in excess of 30% shall be considered as normative loan. If the deployed equity is less than 30% then actual equity will be considered for determination of tariff.
■ Capital cost
The capital cost for wind energy projects shall be Rs 5.15 crores per MW for FY09-10. It will be linked to an indexation formula for computing the capital cost for projects coming after FY10.
■ Tariff structure
The tariff on renewable energy consists of the following fixed components. It includes
1. Return on equity
2. Interest on loan capital
3. Depreciation
4. Interest on working capital
5. Operation and maintenance expense
• Return on equity: It is proposed that the preferential return at the rate of 16% will be allowed in case of renewable energy projects. The developer shall be entitled to avail the 80IA benefit under the Income Tax Act, which will result in the MAT rate being applicable for the initial 10 years. This will translate into a pretax return on equity of ~17% for the initial 10 years. Beyond 10 years, the normal corporate tax rate of 33.66%will be applicable. This will translate into a pre-tax rate of return on equity of ~23%.
• Interest on loan capital: A normative loan tenure of 12 years has been specified for claiming interest rate on a normative basis in tariff determination. The benchmark interest rate is prescribed as 100 basis points above the SBI PLR prevalent as on April 1 of the relevant period.
• Depreciation: After considering the normative repayment tenure of loan over the initial 12 years, the commission has prescribed the rate of depreciation. The estimated useful life of the asset is distributed into two parts. The first part will be 12 year over which the loan capital can be serviced by the developer by way of depreciation. Hence, it has been proposed as 6% for the initial 12 years.
• Interest on working capital: Interest on working capital will be calculated at the average SBI short-term PLR prevalent for the period (April 2008 – March 2009). For the calculation of working capital the commission has prescribed the following line items.
- Operation and maintenance expense of one month
- Receivable equivalent to 1.5 months of energy charges
- Maintenance spare @ 15% of operation and maintenance
• Operation and maintenance expense
The regulator has prescribed the operation and maintenance expense for FY2009-10 at Rs 6.5 lakh per MW for the first year. CERC has also prescribed an escalation factor of 5.72% per annum from FY11 onwards.
To see full report: POWER SECTOR
четверг, 28 мая 2009 г.
>DIVIDEND YIELD STOCKS (ICICI DIRECT)
High-dividend-yield stocks offer a safe haven to investors where safety is of greater priority compared to high returns. So, even if the market remains volatile, going ahead, an investor can still get a decent return on investment, thanks to good dividend yielding stocks. The dividends are paid no matter what direction the stocks move and can provide a higher yield on investment in a weak market.
To see full report: DIVIDEND YIELD STOCKS
To see full report: DIVIDEND YIELD STOCKS
суббота, 23 мая 2009 г.
>MARKET STRATEGY (ICICI DIRECT)
Opportunity lying outside the index
Who says Black swan events always have a negative impact? They can also work well on the positive side, as is the case of the outcome of the Indian general elections. Who could have predicted the clean sweep by the UPA in the elections? However, the UPA is indeed about to form a government at the Centre with the Indian National Congress being the major political party in the coalition with 206 seats.
Much to the consensus relief, the new government formed will not need the support of the Left and the alliances of local regional parties, which would have otherwise impacted the decision making process of the government had they been party to the coalition. This will indeed send huge positive signals to the economy and the capital markets.
In our recent strategy report, we had mentioned that if the election results are favourable then the markets may reach 14500 levels on the upside in the short run. It did that within two trading sessions after May 16 2009. However, on the first day when markets opened, within a few seconds, for the first time ever, the market hit the 15% upper circuit followed by an additional 5% rise. This gave no chance to the investors to buy into the markets. As large caps have rallied substantially, mid caps soon followed suit. Since the substantial appreciation in large caps has created a huge valuation divergence between large caps and mid caps, the ongoing run in the mid caps is simply a case of catching up.
We believe that within the midcap universe only quality midcaps will witness sustainable buying interest. Within this segment, PSU banks, private regional banks, power companies and high leveraged plays will be preferred. In addition, we are of the view that one should view any deep correction in the markets as an opportunity to accumulate quality stocks at reasonable valuations.
However, one thing is for sure. This black swan result has indeed increased the visibility of the India growth story in front of the international investor community. Now, on the back of expectations of better policy reforms, increased focus on fiscal deficit and high probability of PSU divestments and prudent & speedy executions related to the important bills like that of FDI in insurance will result in increased FII participation in India.
Key expectations from the new government:
We believe the above factors will help in bringing fresh capital into the country in terms of FDI, FII flows and ECB flow
Key Beneficiaries
To see full report: MARKET STRATEGY
Who says Black swan events always have a negative impact? They can also work well on the positive side, as is the case of the outcome of the Indian general elections. Who could have predicted the clean sweep by the UPA in the elections? However, the UPA is indeed about to form a government at the Centre with the Indian National Congress being the major political party in the coalition with 206 seats.
Much to the consensus relief, the new government formed will not need the support of the Left and the alliances of local regional parties, which would have otherwise impacted the decision making process of the government had they been party to the coalition. This will indeed send huge positive signals to the economy and the capital markets.
So, the big question that remains is where does the market head from here?
In our recent strategy report, we had mentioned that if the election results are favourable then the markets may reach 14500 levels on the upside in the short run. It did that within two trading sessions after May 16 2009. However, on the first day when markets opened, within a few seconds, for the first time ever, the market hit the 15% upper circuit followed by an additional 5% rise. This gave no chance to the investors to buy into the markets. As large caps have rallied substantially, mid caps soon followed suit. Since the substantial appreciation in large caps has created a huge valuation divergence between large caps and mid caps, the ongoing run in the mid caps is simply a case of catching up.
We believe that within the midcap universe only quality midcaps will witness sustainable buying interest. Within this segment, PSU banks, private regional banks, power companies and high leveraged plays will be preferred. In addition, we are of the view that one should view any deep correction in the markets as an opportunity to accumulate quality stocks at reasonable valuations.
However, one thing is for sure. This black swan result has indeed increased the visibility of the India growth story in front of the international investor community. Now, on the back of expectations of better policy reforms, increased focus on fiscal deficit and high probability of PSU divestments and prudent & speedy executions related to the important bills like that of FDI in insurance will result in increased FII participation in India.
Key expectations from the new government:
- Improvement in fiscal management/public finances via disinvestments
- Increased focus on infrastructure spending especially power and road/highways.
- Thrust on agriculture and rural development
- Financial sector reforms like increasing FDI in retail and insurance sector
- Increased focus on education and healthcare
- Providing ample liquidity to corporates and individuals at affordable rates
We believe the above factors will help in bringing fresh capital into the country in terms of FDI, FII flows and ECB flow
Key Beneficiaries
- Insurance plays like SBI, Kotak Mahindra Bank and Reliance Capital
- Infrastructure plays like Bhel. L&T, NTPC etc.
- PSU banking stocks with trigger of government stake dilution for example: OBC, Dena Bank, etc.
- PSU space will be in limelight on expectations of divestments and new IPOs
To see full report: MARKET STRATEGY
>FUNDAMENTAL PICK OF THE WEEK (ICICI DIRECT)
Indraprastha Medical
Established in 1995, Indraprastha Medical Corporation has established itself well over the past 10 years. The company’s commitment to continuous improvement and focus on clinical outcomes has resulted in a significant improvement in resource utilisation. Increased focus on pathways, faster turnaround of operation theatres, decreasing length of stay and the use of minimally invasive surgeries has significantly contributed to growth in revenues while lowering cost to the patient. With a shortage of hospital beds coupled with growing medical tourism and rising demand for private healthcare services, Indraprastha Medical is well placed to leverage the growth opportunities due to its low debt-equity ratio and strong cash position.
Company Background
Indraprastha Medical is an associate company of Apollo Hospitals, in which the latter holds nearly 18.25% stake. It is a healthcare company, which operates through Indraprastha Apollo Hospital. Indraprastha Apollo, a 695-bed specialty hospital, was commissioned in December 1995 in collaboration with the New Delhi administration. The company offers various healthcares services. It provides diagnostic, medical and surgical facilities through its chain of hospitals. Its services include surgical services, dental, cardiothoracic, neuro, vascular, joint, plastic, cosmetic and general surgeries. It is India's first corporate hospital. It primarily operates in India and is headquartered in New Delhi.
Future plans
To capitalise on the long-term growth opportunity in the healthcare space, the company is expanding itself gradually. The company has recently announced plans to augment its facilities by an additional 175 beds. The project is expected to be complete within a year. It further plans to set up more than 10 satellite clinics in and around Delhi to facilitate easy availability of Apollo-type medical services to a larger cross-section of society. These clinics are slated to take the shape of mini-hospitals with all basic back-up emergency services aimed at providing posttreatment facilities to Apollo Hospitals patients. The hospital is also investing in upgrading technology. The demand for quality healthcare infrastructure and services in India far exceeds the supply. Thus, any addition to capacity would have incremental positive impact on its bottomline.
Sector outlook
In India, the demand for quality healthcare infrastructure and services far exceeds the supply. Rising literacy rates and growing healthcare awareness will further drive the demand for quality healthcare in India. This is further supplemented by the rapid increase in middle and rich segments of the population. According to Technopak Advisors report ‘India Healthcare Trends 2008’, India needs investments of $82 billion in order to fill up the long standing gap in demand and supply. The government can meet only 15% of this demand. Moreover, the public sector healthcare delivery infrastructure and facilities are in a poor state. Thus, the overall outlook for private players in this sector is expected to remain positive. Indraprastha Medical is well placed to leverage the growth opportunities due to its low debt-equity ratio and strong cash position.
To see full report: INDRAPRASTHA MEDICAL
четверг, 21 мая 2009 г.
>DAILY CALLS (ICICI DIRECT)
Sensex: We said, "After two bear candles, holding 13800-34 will be required for positive expectations for Sensex. Breaking it could be bearish." Initially holding 13834, Index attempted positive moves, but weakened later to end 2.3% lower. Cap. Goods Index lost 5.4%. Small-Cap Index finished 2.5% higher with evened A/D.
The action formed the third consecutive bear candle. Having lost over 1200 points within 3 days, Index will test 38.2% and 50% correction levels to latest part of the rally at 13695 and 13314, respectively. Today will make it clear if it finds buyers at 38.2%. Support, however, confirms if it can move above previous day's high.
To see full report: CALLS 220509
The action formed the third consecutive bear candle. Having lost over 1200 points within 3 days, Index will test 38.2% and 50% correction levels to latest part of the rally at 13695 and 13314, respectively. Today will make it clear if it finds buyers at 38.2%. Support, however, confirms if it can move above previous day's high.
To see full report: CALLS 220509
>DAILY MARKET & TECHNICAL OUTLOOK (ICICI DIRECT)
Key points
■ Market Outlook — Open flat
■ Positives — New government to take oath today
■ Negative —MFs selling
■ The Indian market is likely to open flat today. It ended sharply lower on Thursday, as traders booked profits in frontline stocks and bought undervalued small-cap stocks. Weak cues from the overseas market also kept the large-cap indices under check. Today the markets are expected to open flat with a mixed trading session. More clarity would emerge over the weekend, as investors are likely to take cues from new cabinet formation
■ The Sensex has supports at 13480, 13200 and resistances at 13840, 14040. The Nifty has supports at 4190, 4150 and resistances at 4290, 4340
■ India's wholesale price index rose 0.61% in the 12 months to May 9 compared to an annual rise of 0.48% in the previous week and 8.57% in the corresponding week a year ago
■ Asian shares pared back early losses in the morning session on Friday, to trade mixed, with fiscal and economic concerns dragging sentiments down. Stocks tied to a recovery in growth, including technology and automotive shares, weighed on markets
■ US stocks fell on Wednesday, led by financials in a late-stage sell-off, after the Federal Reserve gave a more pessimistic view on the economy, tempering hopes for a quick recovery. The Dow Jones industrial average fell 52.57 points, or 0.62%, at 8,422.28. The Standard & Poor's 500 Index lost 4.64 points, or 0.51%, at 903.49. The Nasdaq Composite Index was off 6.70 points, or 0.39%, at 1,727.84
■ Stocks in news: Tata Power, Patel Engineering, Dr Reddy’s Lab.
To see full report: OPENING BELL 220509
■ Market Outlook — Open flat
■ Positives — New government to take oath today
■ Negative —MFs selling
Market outlook
■ The Indian market is likely to open flat today. It ended sharply lower on Thursday, as traders booked profits in frontline stocks and bought undervalued small-cap stocks. Weak cues from the overseas market also kept the large-cap indices under check. Today the markets are expected to open flat with a mixed trading session. More clarity would emerge over the weekend, as investors are likely to take cues from new cabinet formation
■ The Sensex has supports at 13480, 13200 and resistances at 13840, 14040. The Nifty has supports at 4190, 4150 and resistances at 4290, 4340
■ India's wholesale price index rose 0.61% in the 12 months to May 9 compared to an annual rise of 0.48% in the previous week and 8.57% in the corresponding week a year ago
■ Asian shares pared back early losses in the morning session on Friday, to trade mixed, with fiscal and economic concerns dragging sentiments down. Stocks tied to a recovery in growth, including technology and automotive shares, weighed on markets
■ US stocks fell on Wednesday, led by financials in a late-stage sell-off, after the Federal Reserve gave a more pessimistic view on the economy, tempering hopes for a quick recovery. The Dow Jones industrial average fell 52.57 points, or 0.62%, at 8,422.28. The Standard & Poor's 500 Index lost 4.64 points, or 0.51%, at 903.49. The Nasdaq Composite Index was off 6.70 points, or 0.39%, at 1,727.84
■ Stocks in news: Tata Power, Patel Engineering, Dr Reddy’s Lab.
To see full report: OPENING BELL 220509
среда, 20 мая 2009 г.
>SHIPPING SECTOR (ICICI DIRECT)
• The Baltic Dry index was down 15.3% MoM, mainly on account of an increase in China’s iron ore inventory
• More than 50% (MoM) drop in day rates in the tanker segment across all vessels categories
• Increase in supply of VLCCs tonnage is putting extreme pressure on VLCC spot market
• The prolonged ore negotiations pulled the market down as rates declined despite an increase in chartering volumes
• The crude tankers fleet is expected to grow by 19.4 million DWT this year. This is more than double the 3.1% growth seen in 2008
• Hundreds of vessels have been laid up worldwide as container lines try to boost rates depressed by US and European consumer paring spending on Asia-made goods
Tankers
April was the weakest month YTD for the tanker segment as day rates across all vessel categories declined by more than 50% (MoM). This was mainly on account of a fall in tonnage demand. Despite rising slippage rates and order book cancellations, large quantities of tonnage addition over the next two years are pressurising the freight rates downwards. The tankers market is expected to remain soft due to the subdued economic environment and oversupply of tonnage.
Dry bulk
The Baltic Dry Index declined by 15% MoM. This fall was mainly on account of a rise in iron ore inventory levels in China. The Chinese iron ore inventory increased from 67.44 million tonnes (MT) in March to 69.14 MT in April. We expect the market to remain rangebound as BHP, Rio Tinto and Vale are expected to delay negotiations for as long as possible in the hope that steel demand would pick up. On the other hand, cancellation and delays in deliveries coupled with rise in China’s steel production would have a positive impact on the day rates in the dry bulk segment.
LPG
Day rates in the LPG segment across all vessel categories saw a meagre decline of 1-2% in April. Though we expect low day rates for the next few months on account of weak market conditions and increasing tonnage supply the rates will stabilise in the long-term on account of increase in scrapping activities.
To see full report: CEMENT SECTOR
• More than 50% (MoM) drop in day rates in the tanker segment across all vessels categories
• Increase in supply of VLCCs tonnage is putting extreme pressure on VLCC spot market
• The prolonged ore negotiations pulled the market down as rates declined despite an increase in chartering volumes
• The crude tankers fleet is expected to grow by 19.4 million DWT this year. This is more than double the 3.1% growth seen in 2008
• Hundreds of vessels have been laid up worldwide as container lines try to boost rates depressed by US and European consumer paring spending on Asia-made goods
OUTLOOK
Tankers
April was the weakest month YTD for the tanker segment as day rates across all vessel categories declined by more than 50% (MoM). This was mainly on account of a fall in tonnage demand. Despite rising slippage rates and order book cancellations, large quantities of tonnage addition over the next two years are pressurising the freight rates downwards. The tankers market is expected to remain soft due to the subdued economic environment and oversupply of tonnage.
Dry bulk
The Baltic Dry Index declined by 15% MoM. This fall was mainly on account of a rise in iron ore inventory levels in China. The Chinese iron ore inventory increased from 67.44 million tonnes (MT) in March to 69.14 MT in April. We expect the market to remain rangebound as BHP, Rio Tinto and Vale are expected to delay negotiations for as long as possible in the hope that steel demand would pick up. On the other hand, cancellation and delays in deliveries coupled with rise in China’s steel production would have a positive impact on the day rates in the dry bulk segment.
LPG
Day rates in the LPG segment across all vessel categories saw a meagre decline of 1-2% in April. Though we expect low day rates for the next few months on account of weak market conditions and increasing tonnage supply the rates will stabilise in the long-term on account of increase in scrapping activities.
To see full report: CEMENT SECTOR
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