Orchid Chemicals & Pharmaceuticals (Orchid) is an integrated pharmaceutical company with core competencies in the cephalosporin injectable space and that too in regulated markets of US. Having an established strong base in US cephalosporin segment, the company is now spreading its wings to other regulated markets like Europe and Canada. Further the company is progressing well in the non-penicilin, noncephalosporin (NPNC) and drug discovery front.
Tazo+Pip to power earnings ahead
Orchid has recently commenced the comercial launch of Tazobactum & Pipperacillin (Tazo+Pip) injection (the generic version of Wyeth’s Zosynin) in Europe during Q4FY09, with an addressable market of $250mn for Orchid. This product has limited competition with just two generic competitors like Sandoz and APP pharmaceutical. Given by the fact and Orchid’s well planed marketing pact with one of the leading marketers like – Hospira, We estimate Tazo+Pip
injection in Europe bring incremental revenue about $35-40mn during FY10. Further, it foresees the launch of Tazo+Pip injection in US by Q2FY10 with another $250mn opportunity. These two launches would boost the revenues as well as margin going forward.
Strong pipeline opportunities to drive growth
Alongside, Orchid is expected to launch approximately 12 to 13 products with market size worth $2.6 billion in U.S. and Europe together in 1-2 quarters time. On a longer term perspective, Orchid has the pipeline of Carbopenems (like - Imipenem + Cilastatin, meropenem), which are over $1billion opportunity and Ranbaxy is the only known competitor in the space, that would trigger the earnings late FY10 onwards. Also, Orchid holds 5 First-to-file opportunities for
Desloratidine-ODT and ER, Ibandronate, Memantine and Gemifloxacin, would maintain the growth momentum for the company beyond 2010. however, we have not factored Carbopenem and FTF opportunities in model yet and they remain surprising earning triggers.
FCCB Buy back and revised AS-11 to improve earning predictability
Orchid has recently bought back FCCBs worth $40mn (at a discount of above 40%). This would enhance the clarity on profitability front by reducing the possibility forex loss led by currency fluctuation. On the top of that, the forex translation losses, as per the new AS-11, would not impact the earnings rather would be reported directly in balance sheet. Thus, Going forward we do not factor forex translation differences a cause of concern, which has been the major
performance dampener in 9mFY09.
Steady improvement in financials
During 9mFY09, Orchid reported 15% revenue growth coupled with 24.8% OPM. But only the additional fiancial burden and the forex loss of Rs 1715mn (against a profit of Rs 790mn in corresponding period) have resulted in a net loss of Rs 765mn. But the likely reversal of translation losses in the shortly expected Q4FY09 result would boost the FY09E earnings.
Going ahead, with the immediate earning impact of Tazo+Pip launch and subsequent triggering of pipeline opportunities, we estimate revenue would grow at a CAGR of over 20% during FY09-11 and margins to remain firm backed by its cost reducing efforts and new launches. With the capex phase almost over, Orchid management has now committed to reduce its debt/Equity levels from current 2.7x to about 1x.
After factoring the AS-11, our back of the calculation shows that Orchid would report a profit of Rs 507mn resulting a EPS of Rs 5.6 during FY09. But as we expect the adjusted forex loss will be capitalized (resulting a higher depreciation), the EPS for FY10 and FY11 stands at Rs 14.3 and Rs 22.3, respectively.
Valuation
Orchid is currently trading at an attractive valuation of 5x it FY11 EPS its FY11 EV/ EBITDA. Further looking at the robust earning opportunities in the pipeline and debt reduction comitment, we recommend a BUY rating on Orchid with a target price of Rs 176 (8x FY11E).
To see full report: ORCHID CHEMICALS
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пятница, 19 июня 2009 г.
среда, 17 июня 2009 г.
>NATIONAL ALUMINIUM COMPANY (RELIANCE MONEY)
Catastrophic performance
National Aluminium Co. Ltd. (Nalco) has delivered its worst ever performance in last 16 quarters - courtesy low LME Aluminium prices which are currently trading at slightly above cost of production ($1500 per tonne). Nalco posted Net sales revenue of Rs. 10.9 bn (down by 23% (YoY)), an EBIDTA of Rs. 0.58 bn (YoY decline of 90%) and a PAT of Rs 0.83 bn (drop by 80%). The other income of Rs 1.45 bn has saved the day for the company. The EBIDTA margins have been cut
by 3498 bps (YoY) to 5.4%.
Aluminium prices to be under pressure:
LME Aluminium prices had been trading in the band of $1400 - 1500 per tonne before sharp jump by about $200 per tonne on the news of supply shocks from Russia and the LME Aluminium inventory has risen to a whooping 4.27 mn tonne which is approx. 10% of the last year's total global Aluminium consumption. Plummeting prices are the result of collapse of demand for Primary Aluminium. Demand has been crushed by a major drop in the end market demand globally and greatly exacerbated by inventory destocking through out the supply chain. Currently, the Aluminium metal stock at LME is at the level of about 6.5 weeks' consumption. It is expected to grow to level of about 8.4 weeks' consumption by the end of CY09. The increasing inventory at LME is expected to keep pressure on the prices. Secondly, the supply demand mismatch in the Aluminium market
is expected to be extant till FY11E. We estimate around 6 mmT of stock inventory at LME by CY11E though the growth in inventory may have flattened by then.
EBIDTA margins are expected to be squeezed
Cap on Aluminium prices coupled with rise in the input cost due to a) expected rise in CPC and CTP cost and b) increase in cost of Bauxite ( Due to labour problem post Naxal attacks in Bauxite mines), the EBIDTA margins of the company are expected to drop sharply. We envisage an approx. 1100 bps of cut in EBIDTA margins of Nalco in FY10E over FY09. Though we expect a dismal performance of the company in FY10E, it is expected to improve in FY11E due to partial addition of the capacities from 3rd phase of expansion. We have assumed an average LME Aluminium price of $1825/tonne and $1950/tonne for FY10E and FY11E respectively and exchange rate of Rs 47/$ and Rs 46/$ respectively.
Valuation:
At CMP, the stock is quoting at an EV/EBIDTA of 10.2x for FY11E earnings. Due to the huge LME inventory, we expect the LME Aluminium prices to be range bound. We perceive the stock to be currently quoting at stretched valuations and recommend a Sell with a price target of Rs 287 at which it will quote at an EV/EBIDTA of 8x for FY11E earnings. The target price also quotes at the P/E of 13.8x FY11E earnings which is roughly near the mean of the P/E band. We would like
to issue a rider that being a PSU, the company is likely to feature in the disinvestment list as GoI controls 87% of the stock. Any news on disinvestment will take the stock to further highs though it may not be backed by fundamentals.
To see full report: NALCO
вторник, 16 июня 2009 г.
>CUMMINS INDIA LIMITED (RELIANCE MONEY)
Exports likely to dip
Cummins India Ltd (CIL) reported better than expectation results for Q4FY09 on a standalone basis. Results for Q4FY09 are not comparable as CSS and CASL are amalgamated with CIL in Q4FY09 results. On a comparable basis CIL reported decline in net profit by 12% as per guidance given by the management. We recommend a Reduce.
■ Standalone net sales grows by 54% y-o-y in Q4FY09
CIL’s standalone revenue reported growth of 54% y-o-y for Q4FY09, which is better than our expectations. The results for Q4FY09 are not comparable with Q4FY08 mainly because of amalgamation of CSS and CASL in CIL. It reported revenue of Rs.10.71bn for Q4FY09 fuelled by growth in engines segment which grew by 31% y-o-y and others segment grew by a whopping 1630% y-o-y. Domestic sales jumped 54% y-o-y to ~Rs.7,437mn and exports went up strongly
by 54% y-o-y to Rs.3,276mn. But the management has indicated that there could be a severe drop in exports revenue in FY10E. However on the positive side, domestic markets have started picking up during last two months. We expect with the focus on infrastructure projects by new government, there will be increase in domestic demand for CIL’s products in near future.
■ Smart jump in standalone EBITDA margins by 258bps y-o-y
Because of favorable product mix and decline in raw material cost by 431bps yo-y, CIL’s EBITDA jumped by 81% y-o-y to Rs.1,821mn and EBITDA margins went up by 258bps y-o-y to 17% for Q4FY09. For FY09, its standalone EBITDA went up by 208bps y-o-y to 17.6%. On a consolidated basis CIL’s EBITDA margins came down marginally by 24bps y-o-y to 17% mainly due to rise in other expenditure during FY09. Net profit on a consolidated basis for CIL went up by 43% y-o-y to Rs.4,629mn and its segmental results suggest it earned healthy ROCE of 47% on its engines business.
To see full report: CUMMINS
вторник, 9 июня 2009 г.
>TATA MOTORS (RELIANCE MONEY)
No signs of revival
TAMO’s Q4FY09 (implied results) performance is better than our expectations mainly due to adoption of new guideline for AS-11. TAMO’s margins remained under pressure for FY09, but net profit was better than our expectations. The company has already tied up for funds for JLR, but its leverage remains a concern in the short to medium term. We expect interest cost to go up in the near future. We continue to remain negative on CV industry as there are no signs of revival yet and assign SELL rating to the stock.
■ FY09 top line declines by 11% y-o-y
TAMO’s FY09 net sales reported a decline of 11% y-o-y to Rs.256.6bn on account of lower volumes. Sales volume for year were down by 16% y-o-y due to fall across all the three segments viz. passenger car, CV and exports. PC, CV and export sales of the company reported a fall of 5% y-o-y, 15% y-o-y and 39% y-oy respectively. However the company has improved its market share in the CV industry from 62.2% to 63.8%. Net sales realizations of the company during FY09 reported an improvement of 6% y-o-y to Rs.488,516 per vehicle. TAMO’s implied results for Q4FY09 suggests its top line went down by 21% y-o-y to Rs.68.9bn mainly due to drop in sales volume by 23% y-o-y.
■ AS-11 supports net profit
For FY09 TAMO’s EBITDA declined by 41% y-o-y to Rs.17bn and EBITDA margins came down by 334bps y-o-y to 6.6%. Higher raw material prices, lower volumes and higher employee cost impacted margins for the year. TAMO during the year has divested few of its investments (TACO, Tata Tele, Tata Steel etc) which supported its other income for the year. Other income for FY09 went up by 92% y-o-y to Rs.9.25bn. Net profit for the year came down by 51% y-o-y to Rs.10bn. TAMO has also taken advantage of change in AS-11 guidelines and due to which its PBT went up by Rs.5.19bn for the year. TAMO’s implied results for Q4FY09 suggests its EBITDA margins declined by 125bps y-o-y to 7.8% better than Q3FY09 margins of 1.6%. Net profit for Q4FY09 went up by 236% y-o-y to Rs.7219mn mainly due to change in AS-11 benefit.
To see full report: TATA MOTORS
суббота, 30 мая 2009 г.
>GUJARAT NRE COKE LIMITED (RELIANCE MONEY)
Price Target Achieved:
Gujarat NRE coke has appreciated by about 54% since our last recommendation dated Apr. 15, 2009 (quarterly pre-view) wherein we had recommended a Buy with a price target of Rs 41 looking at the expected mismatch in the domestic coke market. Gujarat NRE being the largest private sector player in the Low Ash Metallurgical Coke (LAMC) would be the direct beneficiary of all the positive developments in the coke and Steel industry.
Well poised to weather the storm ………
Equipped with upcoming green field capacity, Gujarat NRE coke is braving the slowdown in the Steel Industry- the principal consumer of coke. Gujarat NRE coke is adding up 0.25 mmT of capacity which is ready in times of falling Global Steel production and prices but relatively stable production and prices in India. Gujarat NRE Coke is the largest independent coke manufacturer that owns coking coal mines in Australia. With backward integration, Gujarat NRE is assured of the raw material it requires for making of Low Ash Metallurgical Coke (LAM Coke), thus controlling its costs.
Enhanced backward integration to favour the company:
Currently, Gujarat NRE Ltd. is sourcing about 30% of its raw material from its own Australian mines and rest from the spot market. With enhanced production from the Australian mines, the Guj. NRE Ltd. expects to meet its 100% requirement by FY2011. This will help the Indian operations to be secured on raw material front in scenario of volatile coking coal market though at the annual bench mark contract rates.
Gujarat NRE to benefit from demand- supply mismatch:
A wide gap of approx. 26 mmT of coke is existent in the Indian coke market, which will be benefiting Gujarat NRE coke. Coke being an essential input for Steel making through blast furnace route, the suspension of production cuts will keep the demand intact in the Indian market. With increased capacity of 0.25 mmT coming in June.’09, Gujarat NRE will enjoy the economies of scale vis-à-vis its competitors. It has also embarked on the expansion of its capacity by another 1 mmT expected to be commissioned by FY2011.
Valuation
At CMP of Rs 42, the stock quotes at an EV/EBIDTA of 2.5x for FY2011E earnings. The coke prices are expected to be stable with upward bias. LAM Coke being a critical input the Steel making process through blast furnace route and the supply being restricted due to limited availability of coking coal, the down side for the coke prices is limited. Secondly, the fortunes of coke- making industry are hinged upon that of Steel making industry- the latter lifting 90% of the production. With stability seen resuming in Steel making industry, the coke prices are expected to be robust, though it may not reach the highs scaled in CY2008. At CMP of around $395 per tonne we are of the belief that the coke is rightly priced. Hence, we advise our clients to book profits in the
stock and re-enter at lower levels although we have positive outlook on the sector and the company as a whole.
To see full report: GUJARAT NRE COKE
Gujarat NRE coke has appreciated by about 54% since our last recommendation dated Apr. 15, 2009 (quarterly pre-view) wherein we had recommended a Buy with a price target of Rs 41 looking at the expected mismatch in the domestic coke market. Gujarat NRE being the largest private sector player in the Low Ash Metallurgical Coke (LAMC) would be the direct beneficiary of all the positive developments in the coke and Steel industry.
Well poised to weather the storm ………
Equipped with upcoming green field capacity, Gujarat NRE coke is braving the slowdown in the Steel Industry- the principal consumer of coke. Gujarat NRE coke is adding up 0.25 mmT of capacity which is ready in times of falling Global Steel production and prices but relatively stable production and prices in India. Gujarat NRE Coke is the largest independent coke manufacturer that owns coking coal mines in Australia. With backward integration, Gujarat NRE is assured of the raw material it requires for making of Low Ash Metallurgical Coke (LAM Coke), thus controlling its costs.
Enhanced backward integration to favour the company:
Currently, Gujarat NRE Ltd. is sourcing about 30% of its raw material from its own Australian mines and rest from the spot market. With enhanced production from the Australian mines, the Guj. NRE Ltd. expects to meet its 100% requirement by FY2011. This will help the Indian operations to be secured on raw material front in scenario of volatile coking coal market though at the annual bench mark contract rates.
Gujarat NRE to benefit from demand- supply mismatch:
A wide gap of approx. 26 mmT of coke is existent in the Indian coke market, which will be benefiting Gujarat NRE coke. Coke being an essential input for Steel making through blast furnace route, the suspension of production cuts will keep the demand intact in the Indian market. With increased capacity of 0.25 mmT coming in June.’09, Gujarat NRE will enjoy the economies of scale vis-à-vis its competitors. It has also embarked on the expansion of its capacity by another 1 mmT expected to be commissioned by FY2011.
Valuation
At CMP of Rs 42, the stock quotes at an EV/EBIDTA of 2.5x for FY2011E earnings. The coke prices are expected to be stable with upward bias. LAM Coke being a critical input the Steel making process through blast furnace route and the supply being restricted due to limited availability of coking coal, the down side for the coke prices is limited. Secondly, the fortunes of coke- making industry are hinged upon that of Steel making industry- the latter lifting 90% of the production. With stability seen resuming in Steel making industry, the coke prices are expected to be robust, though it may not reach the highs scaled in CY2008. At CMP of around $395 per tonne we are of the belief that the coke is rightly priced. Hence, we advise our clients to book profits in the
stock and re-enter at lower levels although we have positive outlook on the sector and the company as a whole.
To see full report: GUJARAT NRE COKE
среда, 27 мая 2009 г.
>JSW STEEL (RELIANCE MONEY)
Price target achieved
JSW Steel has appreciated by more than 18%, since our last recommendation dated May 11, 2009. We had given a buy call with a price target of Rs 485 on the spectacular guidance given by the management for FY2010E and FY2011E. The management had guided for 70% rise in the production for FY2010E owing to the successful operations expected from the green field facility recently commissioned.
Indian Steel industry is exhibiting resilience:
Indian Steel industry is not showing the panicky conditions exhibited by the global steel majors. The steel prices throughout the country are stable and above the international prices which in turns are exhibiting some strength. The Indian domestic Steel prices have been steadfast. The Steel demand is expected to remain robust despite the recessionary noises through out the globe. According to World Steel Association India's apparent steel demand is forecasted to reach 53.5 mmT in CY09, a 1.7% rise over that of CY08 and is expected to reach 58 mmT in 2010, an increase of 8% YoY.
Steel prices are expected to be stable and rising:
The demand for Indian Steel Industry is expected to steady. Although, the capacity expansion projects of domestic steel majors are on track, the green field plans made by foreign Steel behemoths like POSCO and Arcellor Mittal have been deferred. The mismatch between expected demand and supply is expected to keep the prices steady and rising.
Valuation:
At CMP of Rs 511, the stock quotes at an EV/EBIDTA of 1.7x FY2011E earnings. Currently, we feel that the pricing of the stock is stretched. We advise the clients to book profits at this price and re-enter at lower levels although we are positive on the future prospects of the company.
To see full report: JSW STEEL
JSW Steel has appreciated by more than 18%, since our last recommendation dated May 11, 2009. We had given a buy call with a price target of Rs 485 on the spectacular guidance given by the management for FY2010E and FY2011E. The management had guided for 70% rise in the production for FY2010E owing to the successful operations expected from the green field facility recently commissioned.
Indian Steel industry is exhibiting resilience:
Indian Steel industry is not showing the panicky conditions exhibited by the global steel majors. The steel prices throughout the country are stable and above the international prices which in turns are exhibiting some strength. The Indian domestic Steel prices have been steadfast. The Steel demand is expected to remain robust despite the recessionary noises through out the globe. According to World Steel Association India's apparent steel demand is forecasted to reach 53.5 mmT in CY09, a 1.7% rise over that of CY08 and is expected to reach 58 mmT in 2010, an increase of 8% YoY.
Steel prices are expected to be stable and rising:
The demand for Indian Steel Industry is expected to steady. Although, the capacity expansion projects of domestic steel majors are on track, the green field plans made by foreign Steel behemoths like POSCO and Arcellor Mittal have been deferred. The mismatch between expected demand and supply is expected to keep the prices steady and rising.
Valuation:
At CMP of Rs 511, the stock quotes at an EV/EBIDTA of 1.7x FY2011E earnings. Currently, we feel that the pricing of the stock is stretched. We advise the clients to book profits at this price and re-enter at lower levels although we are positive on the future prospects of the company.
To see full report: JSW STEEL
воскресенье, 17 мая 2009 г.
>HINDUSTAN ZINC LTD. (RELIANCE MONEY)
On Expected Lines…
Q409 results of Hindustan Zinc Ltd. (HZL) were as per our expectations. HZL reported net revenue of Rs. 12.9 bn (down by 43%), an EBIDTA of Rs.6.05 bn (cut by 61%) and PAT of Rs. 5.5 bn (a decline of 57%). The EBIDTA margins witnessed a correction of 2235 bps. Average realizations for Q409 for Zinc and Lead were $1174/tonne and $1160/tonne respectively.
Margins compression was less severe than forecasted: Q409 had experienced a highly volatile Zinc trading at LME. The Zinc prices dropped from $1300/tonne to a low of $1110/tonne before rising back to $1300/tonne level. Though HZL finds itself in the first quartile of the cost curve, the volatility of the Zinc and Lead prices on LME were expected to affect the margins. We had foreseen a margins squeeze of 3200 bps taking the EBIDTA margins to 37% in our quarterly preview. However, the company bettered our expectations by posting an EBIDTA margin
of 47%.
Valuation:
The stock has appreciated sharply in the span of last 2 months concomitant with the market rally. At CMP the stock quotes at P/E of 6.4x and EV/EBIDTA of 1.9x for FY2011E earnings. The company is virtually debt-free and cash rich with cash of Rs. 232 per share. Considering positive prospects for the LME Zinc prices in future we upgrade the stock to a Hold with a price target of Rs. 590. At the target price the stock would quote at an EV/EBIDTA of 2.5x for FY2011E earnings.
Zinc in slight Surplus
Consumption of Zinc is directly related to the Steel Industry prospects. Currently, LME is having a stock inventory of 0.34 mmT for Zinc and 0.063 mmT for Lead. The Zinc inventory is less than 3% of the global annual consumption and it is expected to remain flat with negative bias which may prop up the Zinc prices currently at $1475/ tonne. As per ILZGS, the global Zinc surplus for CY2009 is expected to be 0.26 mmT which is less than the current stock inventory at LME. We assume an average $1550/ tonne for Zinc and $1500/tonne for Lead for FY10E and $1650/tonne for Zinc and $1550/tonne for Lead for FY2011E respectively.
To see full report: HINDUSTAN ZINC
Q409 results of Hindustan Zinc Ltd. (HZL) were as per our expectations. HZL reported net revenue of Rs. 12.9 bn (down by 43%), an EBIDTA of Rs.6.05 bn (cut by 61%) and PAT of Rs. 5.5 bn (a decline of 57%). The EBIDTA margins witnessed a correction of 2235 bps. Average realizations for Q409 for Zinc and Lead were $1174/tonne and $1160/tonne respectively.
Margins compression was less severe than forecasted: Q409 had experienced a highly volatile Zinc trading at LME. The Zinc prices dropped from $1300/tonne to a low of $1110/tonne before rising back to $1300/tonne level. Though HZL finds itself in the first quartile of the cost curve, the volatility of the Zinc and Lead prices on LME were expected to affect the margins. We had foreseen a margins squeeze of 3200 bps taking the EBIDTA margins to 37% in our quarterly preview. However, the company bettered our expectations by posting an EBIDTA margin
of 47%.
Valuation:
The stock has appreciated sharply in the span of last 2 months concomitant with the market rally. At CMP the stock quotes at P/E of 6.4x and EV/EBIDTA of 1.9x for FY2011E earnings. The company is virtually debt-free and cash rich with cash of Rs. 232 per share. Considering positive prospects for the LME Zinc prices in future we upgrade the stock to a Hold with a price target of Rs. 590. At the target price the stock would quote at an EV/EBIDTA of 2.5x for FY2011E earnings.
Zinc in slight Surplus
Consumption of Zinc is directly related to the Steel Industry prospects. Currently, LME is having a stock inventory of 0.34 mmT for Zinc and 0.063 mmT for Lead. The Zinc inventory is less than 3% of the global annual consumption and it is expected to remain flat with negative bias which may prop up the Zinc prices currently at $1475/ tonne. As per ILZGS, the global Zinc surplus for CY2009 is expected to be 0.26 mmT which is less than the current stock inventory at LME. We assume an average $1550/ tonne for Zinc and $1500/tonne for Lead for FY10E and $1650/tonne for Zinc and $1550/tonne for Lead for FY2011E respectively.
To see full report: HINDUSTAN ZINC
вторник, 21 апреля 2009 г.
>Money Advisor (RELIANCE MONEY)
SYNOPSIS
Mutual Fund Update
The report reviews the performance of all open ended equity schemes and debt schemes covered by Reliance Money. The performance has been reviewed as on March 2009.
Performance Overview
The markets witnessed a sharp correction in the beginning of the month of March, 09, however by the end of the month investors started investing money since the valuations were looking attractive and the markets have recovered by almost 10%. Mutual funds who were holding tightly to cash positions have now slowly started deploying the money however many fund houses are still cautious with their investment approach. The overall performance of the schemes has gone up in the last month. Among large cap funds, Templeton India Growth Fund and Principal Large Cap Fund emerged as toppers on a monthly basis with 10.73% and 8.03% absolute returns as against the category average of 5.5%. While on a yearly basis, IDFC Imperial Equity Fund and DSP BlackRock Top 100 Equity Fund have topped the charts outperformed their benchmark indices as well as exceeded category average.
The Midcap and Smallcap category have continued to under perform as a whole as compared to other equity categories. However with the recovery in the markets the funds within this category performed well on a one month basis. Within this segment SBI Magnum Midcap Fund and Franklin India Prima Plus were gainers and reported 7.9% and 6% absolute returns respectively. While on an annualized basis, Franklin prima plus and Reliance Growth were among the leaders while Fortis Future Leaders Fund and SBI Magnum Sector Umbrella - Emerging Business Fund were among the laggards.
Being the tax saving month, ELSS witnessed a net inflow of Rs.547 crore in the month of March 2009 which was higher as compared to industry expectation given the market conditions. However the inflows were subdues as compared to the figures of previous fiscal. Among ELSS funds, ICICI Prudential Tax Plan and Reliance Equity Linked Saving Fund - Series I were among the toppers.
Gold ETF is another category which has come in the limelight with the recent upsurge in gold prices. Gold ETFs have outperformed every other asset class rising 22.8% for the year ending March 30, gold funds that invest in gold mining
companies and mutual funds (MFs), which have an exposure in such companies, too, have joined the Bull Run.
To see full report: MONEY ADVISOR
Mutual Fund Update
The report reviews the performance of all open ended equity schemes and debt schemes covered by Reliance Money. The performance has been reviewed as on March 2009.
Performance Overview
The markets witnessed a sharp correction in the beginning of the month of March, 09, however by the end of the month investors started investing money since the valuations were looking attractive and the markets have recovered by almost 10%. Mutual funds who were holding tightly to cash positions have now slowly started deploying the money however many fund houses are still cautious with their investment approach. The overall performance of the schemes has gone up in the last month. Among large cap funds, Templeton India Growth Fund and Principal Large Cap Fund emerged as toppers on a monthly basis with 10.73% and 8.03% absolute returns as against the category average of 5.5%. While on a yearly basis, IDFC Imperial Equity Fund and DSP BlackRock Top 100 Equity Fund have topped the charts outperformed their benchmark indices as well as exceeded category average.
The Midcap and Smallcap category have continued to under perform as a whole as compared to other equity categories. However with the recovery in the markets the funds within this category performed well on a one month basis. Within this segment SBI Magnum Midcap Fund and Franklin India Prima Plus were gainers and reported 7.9% and 6% absolute returns respectively. While on an annualized basis, Franklin prima plus and Reliance Growth were among the leaders while Fortis Future Leaders Fund and SBI Magnum Sector Umbrella - Emerging Business Fund were among the laggards.
Being the tax saving month, ELSS witnessed a net inflow of Rs.547 crore in the month of March 2009 which was higher as compared to industry expectation given the market conditions. However the inflows were subdues as compared to the figures of previous fiscal. Among ELSS funds, ICICI Prudential Tax Plan and Reliance Equity Linked Saving Fund - Series I were among the toppers.
Gold ETF is another category which has come in the limelight with the recent upsurge in gold prices. Gold ETFs have outperformed every other asset class rising 22.8% for the year ending March 30, gold funds that invest in gold mining
companies and mutual funds (MFs), which have an exposure in such companies, too, have joined the Bull Run.
To see full report: MONEY ADVISOR
среда, 15 апреля 2009 г.
>Automobile Sector (RELIANCE MONEY)
Two Wheeler Sales Volume Update - March 2009
FY09 ends with hope of improvement….
FY09 ended on a positive note for two wheeler companies as sales volumes of companies showed improved performance in the last few months as compared to earlier period of the year. HH & TVS have reported a jump in volumes to the extent of 10% and 4% respectively. While, BAL has restricted fall to 13% due to strong volumes generated by the recently launched XCD. It is noteworthy that despite the fall in volumes on a yearly basis, BAL has reported flattish growth on m-o-m basis during the month ofMarch 2009 and is improving sales every month, though not on y-o-y basis. The benefit of excise duty cut along with new launches in the form of variants has led the growth for companies in the two wheeler space
The excise duty cut benefit extended beyond 31st March 2009 is also a positive indication for the two wheeler industry and we believe that it will help the companies in reporting good volumes along with attractive new launches, Which without any doubt have been the key for the volumes growth for the companies during FY09. In the near future we expect the volumes of companies to improve on the back of 1) softening interest rates and 2) Improvement in exports (post H1FY10). However, we remain hopeful that volumes will continue to pick up as the companies have planned new launches strategically which is likely to continue the existing growth of companies in future.
Exports which account for a sizeable portion of the volumes for TVS and BAL have been declining on a monthly basis which is due to the increasing competition in the global arena and also due to the slowdown in global economy. Exports of BAL fell by 8.2% y-o-y while TVS grew robustly by 25% on a y-o-y basis, but its volumes on m-om basis reported a fall of 1.5%. It is interesting to note that on a y-o-y basis the two wheeler industry has reported growth of 2.5%. We upgrade our outlook on the sector to Neutral from negative on the back of improvement in overall scenario.
Industry Highlights
* Honda will exit the geared scooter market in India and phase out its 150 ccmodel Eterno as the company plans to focus on the gearless segment.
* TVS Motors will launch a unisex scooter model in the current financial year , inpace with the popularity of the segment in the present urban and semi-urban twowheeler markets.
* Yamaha Motor has launched its new bike 'FZ-S' priced at Rs 67,000 (ex-showroomDelhi).
* Honda Motorcycle & Scooter India (HMSI) has decided to launch a 100ccmotorcycle in the next fiscal.
* Honda will exit the geared scooter market in India and phase out its 150 ccmodel Eterno as the company plans to focus on the gearless segment.
* TVS Motors will launch a unisex scooter model in the current financial year , inpace with the popularity of the segment in the present urban and semi-urban twowheeler markets.
* Yamaha Motor has launched its new bike 'FZ-S' priced at Rs 67,000 (ex-showroomDelhi).
* Honda Motorcycle & Scooter India (HMSI) has decided to launch a 100ccmotorcycle in the next fiscal.
To see full report: AUTOMOBILE SECTOR
суббота, 11 апреля 2009 г.
>Kirloskar Oil Engines Ltd (RELIANCE MONEY)
Demerger of engines and auto component business from the Company
Kirloskar Oil Engines Ltd (KOEL) has announced the demerger of Engine and Auto Component business of the Company into Kirloskar Engines India Ltd (KEIL). After the demerger KOEL would continue to hold investments in its books while KEIL would represent core engines and auto component business. KOEL after Q3FY09 results informed that it’s Board of Directors had constituted a Committee of Independent Directors to examine merits of reorganizing the various businesses and investments of the company, including by way of restructuring and /or demerger of the Company. The effective date of demerger has been decided as 1st April 2009.
Existing shareholders to get 3 shares of KEIL for 4 shares in KOEL
KOEL has fixed demerger ratio at 3:4 which means existing shareholders of KOEL to get 3 shares of KEIL for every 4 shares held in KOEL. The company has not disclosed the method of valuation for demerger. But we believe it to be mainly based on book value and potential value of unlisted investments. We believe the valuation has given due consideration to potential of unlisted companies (Toyota Kirloskar, Toyota Kirloskar Auto Parts, T G Kirloskar Automotive etc) which is reflected in demerger ratio.
KEIL ‘s equity capital after the demerger would be ~146mn equity shares of Rs.2 each (~Rs.291mn). KOEL as on 31st March 2008 held book value investments of ~Rs.4.76bn which includes strategic investments and investments in mutual funds. The current market value of these investments is ~Rs.1.9bn and including the book value investments of non-quoted investments and mutual fund investments, the investment on the books are at Rs.4.93bn.
KOEL’s valuation has not been reflecting the value of investments it holds in the balance sheet and because of which we believe the company has taken the decision to demerge core business into separate company, KEIL.
To see full report: KIRLOSKAR
Kirloskar Oil Engines Ltd (KOEL) has announced the demerger of Engine and Auto Component business of the Company into Kirloskar Engines India Ltd (KEIL). After the demerger KOEL would continue to hold investments in its books while KEIL would represent core engines and auto component business. KOEL after Q3FY09 results informed that it’s Board of Directors had constituted a Committee of Independent Directors to examine merits of reorganizing the various businesses and investments of the company, including by way of restructuring and /or demerger of the Company. The effective date of demerger has been decided as 1st April 2009.
Existing shareholders to get 3 shares of KEIL for 4 shares in KOEL
KOEL has fixed demerger ratio at 3:4 which means existing shareholders of KOEL to get 3 shares of KEIL for every 4 shares held in KOEL. The company has not disclosed the method of valuation for demerger. But we believe it to be mainly based on book value and potential value of unlisted investments. We believe the valuation has given due consideration to potential of unlisted companies (Toyota Kirloskar, Toyota Kirloskar Auto Parts, T G Kirloskar Automotive etc) which is reflected in demerger ratio.
KEIL ‘s equity capital after the demerger would be ~146mn equity shares of Rs.2 each (~Rs.291mn). KOEL as on 31st March 2008 held book value investments of ~Rs.4.76bn which includes strategic investments and investments in mutual funds. The current market value of these investments is ~Rs.1.9bn and including the book value investments of non-quoted investments and mutual fund investments, the investment on the books are at Rs.4.93bn.
KOEL’s valuation has not been reflecting the value of investments it holds in the balance sheet and because of which we believe the company has taken the decision to demerge core business into separate company, KEIL.
To see full report: KIRLOSKAR
четверг, 9 апреля 2009 г.
>ONGC (RELIANCE MONEY)
Price target achieved
During the past 2 weeks the markets are in an uptrend and in the process, prices of extremely beaten down stocks seem to be catching up with their fundamentals. ONGC, since our Buy recommendation on 30th January 2009 after Q3 FY09 results has given a return of 24%. At current levels, we advise our clients to book profits and enter at lower levels.
Our investment argument in ONGC was basically linked to the cheap valuations and attractive dividend yield. At our recommended price of Rs 640, the stock was earlier trading at extremely cheap valuations of 6.2x FY10 EPS estimates, and dividend yield at that point in time was at attractive 5%. In our view, the valuations at that point of time didn't capture various positives like low oil prices leading to lower subsidy burden, depreciating rupee which contributes substantially to bottom-line and extreme pessimism of market which was extrapolating poor net realizations at $34 per barrel in Q3 FY09 in future also. We expect net realization of ONGC to remain at $45-$50 per barrel mark irrespective of oil price movements.
However, at the current market price of Rs 794, the stock is trading at FY10 P/E multiple of 7.5x, which we believe captures most of the positives. Though over the long term in view of the company's ability to generate significant free cash flows and debt free status we continue to like the stock, but believe that at higher levels, market will again start focusing on lack of pricing power above $50 per barrel of oil prices and uncertainty regarding subsidy burden. Keeping in view the uncertain market conditions, we advise our clients to book profits and re-enter at lower levels.
Valuations
The stock is currently trading at FY09 and FY10 P/E multiple of 7.9x and 7.5x respectively. ONGC continues to generate significant amount of free cash flows to support its future investment needs, and the company has a strong balance-sheet with almost a zerodebt position and healthy cash flows. However, in view of lack of support of valuations and uncertain market conditions we advise our clients to book profits and re-enter below Rs 765 levels.
To see full report: ONGC
During the past 2 weeks the markets are in an uptrend and in the process, prices of extremely beaten down stocks seem to be catching up with their fundamentals. ONGC, since our Buy recommendation on 30th January 2009 after Q3 FY09 results has given a return of 24%. At current levels, we advise our clients to book profits and enter at lower levels.
Our investment argument in ONGC was basically linked to the cheap valuations and attractive dividend yield. At our recommended price of Rs 640, the stock was earlier trading at extremely cheap valuations of 6.2x FY10 EPS estimates, and dividend yield at that point in time was at attractive 5%. In our view, the valuations at that point of time didn't capture various positives like low oil prices leading to lower subsidy burden, depreciating rupee which contributes substantially to bottom-line and extreme pessimism of market which was extrapolating poor net realizations at $34 per barrel in Q3 FY09 in future also. We expect net realization of ONGC to remain at $45-$50 per barrel mark irrespective of oil price movements.
However, at the current market price of Rs 794, the stock is trading at FY10 P/E multiple of 7.5x, which we believe captures most of the positives. Though over the long term in view of the company's ability to generate significant free cash flows and debt free status we continue to like the stock, but believe that at higher levels, market will again start focusing on lack of pricing power above $50 per barrel of oil prices and uncertainty regarding subsidy burden. Keeping in view the uncertain market conditions, we advise our clients to book profits and re-enter at lower levels.
Valuations
The stock is currently trading at FY09 and FY10 P/E multiple of 7.9x and 7.5x respectively. ONGC continues to generate significant amount of free cash flows to support its future investment needs, and the company has a strong balance-sheet with almost a zerodebt position and healthy cash flows. However, in view of lack of support of valuations and uncertain market conditions we advise our clients to book profits and re-enter below Rs 765 levels.
To see full report: ONGC
воскресенье, 29 марта 2009 г.
>KEC International Ltd. (RELIANCE MONEY)
Encouraging domestic order inflow during Q4FY09
During the 4th quarter of FY09, KEC International Ltd (KEC) has seen addition of seven significant orders largely from domestic markets. The management earlier in post Q3FY09 results conference call had indicated the company intended to increase focus in domestic market. In Q4FY09 KEC received domestic orders to the tune of ~Rs.12.5bn as against Rs.11bn in Q3FY09 (out of which Rs.8.8bn were export order). We remain impressed with the order inflow and remain confident about earnings for FY09E and FY10E. But the major risk we foresee is possibility of lower order inflow during Loksabha election period.
Easing of input material cost and interest rates
The key input raw materials like steel, copper, aluminum etc have corrected significantly from the highs during 1st Quarter of FY09. Steel Billets prices have fallen by 24.5% from the high of Rs.40025/Tonne during April’08 to Rs.30200/ Tonne in Feb’09. Similarly RBI has cut repo and reverse repo rates for three times during last 6 months which has resulted in reduction in interest rates by most of the banks. We expect the company will able to improve its profitability with these positive developments.
Order inflow uncertainty foreseen during 1st Half of FY10E
As 15th general elections are near the corner, the first half of FY10E is expected to be muted in terms of new order inflow both from state and central utilities due to funding arrangement and other regulatory issues.
Well equipped to compete in current scenario
Domestic market is likely to witness high competition and due to which the margins are likely to come under pressure, which is expected to intensify further as bigger players like BHEL are also expected to enter the market. We believe KEC is better equipped with its planned tower capacity of 200,000 MT and established execution skills for this competitive scenario.
Business Outlook and Valuation
KEC currently has a healthy estimated outstanding order book position of ~Rs.54.5 bn. We continue to remain cautious in terms of new order inflow from international market as well as domestic market during the 1st half of FY10E. At current market price of Rs.144, the stock is currently trading at P/E of 4.2x and EV/EBITDA of 3.9x of its FY10E earnings. We maintain our HOLD recommendation on the stock with target price of Rs.147.
To see full report: KEC INTERNATIONAL
During the 4th quarter of FY09, KEC International Ltd (KEC) has seen addition of seven significant orders largely from domestic markets. The management earlier in post Q3FY09 results conference call had indicated the company intended to increase focus in domestic market. In Q4FY09 KEC received domestic orders to the tune of ~Rs.12.5bn as against Rs.11bn in Q3FY09 (out of which Rs.8.8bn were export order). We remain impressed with the order inflow and remain confident about earnings for FY09E and FY10E. But the major risk we foresee is possibility of lower order inflow during Loksabha election period.
Easing of input material cost and interest rates
The key input raw materials like steel, copper, aluminum etc have corrected significantly from the highs during 1st Quarter of FY09. Steel Billets prices have fallen by 24.5% from the high of Rs.40025/Tonne during April’08 to Rs.30200/ Tonne in Feb’09. Similarly RBI has cut repo and reverse repo rates for three times during last 6 months which has resulted in reduction in interest rates by most of the banks. We expect the company will able to improve its profitability with these positive developments.
Order inflow uncertainty foreseen during 1st Half of FY10E
As 15th general elections are near the corner, the first half of FY10E is expected to be muted in terms of new order inflow both from state and central utilities due to funding arrangement and other regulatory issues.
Well equipped to compete in current scenario
Domestic market is likely to witness high competition and due to which the margins are likely to come under pressure, which is expected to intensify further as bigger players like BHEL are also expected to enter the market. We believe KEC is better equipped with its planned tower capacity of 200,000 MT and established execution skills for this competitive scenario.
Business Outlook and Valuation
KEC currently has a healthy estimated outstanding order book position of ~Rs.54.5 bn. We continue to remain cautious in terms of new order inflow from international market as well as domestic market during the 1st half of FY10E. At current market price of Rs.144, the stock is currently trading at P/E of 4.2x and EV/EBITDA of 3.9x of its FY10E earnings. We maintain our HOLD recommendation on the stock with target price of Rs.147.
To see full report: KEC INTERNATIONAL
пятница, 27 марта 2009 г.
>Tata Motors' Nano Update (RELIANCE MONEY)
Launch of Tata Motors' Nano
Tata Motors has formally launched Nano across India. It had showcased the first Nano in January 2008, during Auto Expo 2008. The base version is priced at Rs.1,12,735 (ex-mumbai) and higher version is priced at Rs.170,335 (ex- Pantnagar). The company has decided booking amount of Rs.95,000 for Nano and has also promised to give price protection for first 100,000 cars. We estimate FY10E would see revenue addition of ~Rs.6bn (~2.2% of FY10E revenue) and insignificant incremental EPS for FY10E.
Nano – Big Wonder is here
Tata Motors has launched much awaited Nano across the country. Earlier the company has promised to launch the car in Mid-2008, but after facing many hurdles it first showcased it in Auto Expo in January 2008, finally Tata Motors has launched the car. It’s a 623cc, 33 HP, the engine meets BS3 and is capable to being scaled up to Euro 4. It is approximately 8% smaller compared to Maruti 800, but 21% larger in terms of passenger space. Nano is expected to give mileage of 23kmpl. The car has satisfied front crash test and satisfies European recycle norms.
Expect strong response for Nano bookings
Tata Motors has already said that Nano bookings will be open from 9th April 2009 and would remain open till 25th April 2009. Looking at the initial response at Auto Expo 2008 and response from various categories, we expect strong response for Nano bookings. The company would start distributing Nano from 9th July 2009. Tata Motors has also revealed that the car will be up for grabs under the financing mode which starts at an attractive booking amount of Rs.3,000/- per vehicle. While, for others who do not wish to opt the financing mode will have to make a heavy down payment of Rs.0.95L-Rs.1.4L (~75% of total amount). We believe that the other mode, wherein down payment is very heavy will not be that attractive for the customers, while for the financing mode the rate of Interest is likely to be a key factor towards the booking, which is still not disclosed.
To see full report: NANO
четверг, 26 марта 2009 г.
>BIOCON (RELIANCE MONEY)
Biocon starts commercial operations under BMS pact
Biocon has commenced a fully dedicated research and development facility for Bristol- Myers Squibb (BMS), one of the leading global innovator in Biocon Park, Bangalore. This which was in line with Biocon’s collaborative research pact with BMS during March 2007. In fact, Syngene – the CRO arm of Biocon, entered into an R&D partnership with Bristol Myers Squibb (BMS) for providing services for discovery and NCE development.
The initiation of the research and development activity will expand the span of the drug discovery and development process. Syngene would facilitate contract research services right from the initial stage of lead optimization to early stages of clinical studies to Phase I and Phase II trials.
The 200,000 square-foot facility at Biocon Park is dedicated to helping advance Bristol-Myers Squibb’s work in discovery and early drug development, and is currently occupied by 270 researchers. The facility will house 360 researchers by the end of the year and could accommodate as many as 450 employees in the future.
This initiative is to add incremental revenues of about Rs 800mn in FY10
With the commissioning of the new research facility and anticipated ramp up in researchers count to about 360 (since most of the revenues for Biocon are on Full Time Equivalent (FTE) basis), we estimate Biocon’s BMS pact would add incremental revenue of Rs 800mn during FY10E. We expect the peak revenue potential from the pact will be materialised during FY11E with 450 FTEs and revenue worth Rs 1200mn. Initially the core research activity would earn revenue for Biocon but subsequently the additional support activities and possible supply opportunities (like supply of sample batches during the advance development of molecule) would further boost the earning potential of the BMS pact FY11 onwards.
Hold with a target price of Rs 139
Certainly going ahead, the commercial commencement of long awaited BMS research contract would emerge as a money spinner for Biocon, it also projects the research capabilities of the company in Global pharma industry. Apart from this, Biocon has few more medium-term revenue triggers that would maintain growth momentum. In fact, the commencement of Tacrolimus and mycophenolate mofetil (patent expires in May 2009) API supply to US during Q1FY10 and launching of Glargine (a basal insulin having market potential of Rs 400mn and only cometitor Sanofi-Aventis) in domestic market Q1FY10 onwards would power the earnings growth of the company. Biocon has already got the Drug Controller General of India (DGCI) approval for Glargine.
To see full report: BIOCON
Biocon has commenced a fully dedicated research and development facility for Bristol- Myers Squibb (BMS), one of the leading global innovator in Biocon Park, Bangalore. This which was in line with Biocon’s collaborative research pact with BMS during March 2007. In fact, Syngene – the CRO arm of Biocon, entered into an R&D partnership with Bristol Myers Squibb (BMS) for providing services for discovery and NCE development.
The initiation of the research and development activity will expand the span of the drug discovery and development process. Syngene would facilitate contract research services right from the initial stage of lead optimization to early stages of clinical studies to Phase I and Phase II trials.
The 200,000 square-foot facility at Biocon Park is dedicated to helping advance Bristol-Myers Squibb’s work in discovery and early drug development, and is currently occupied by 270 researchers. The facility will house 360 researchers by the end of the year and could accommodate as many as 450 employees in the future.
This initiative is to add incremental revenues of about Rs 800mn in FY10
With the commissioning of the new research facility and anticipated ramp up in researchers count to about 360 (since most of the revenues for Biocon are on Full Time Equivalent (FTE) basis), we estimate Biocon’s BMS pact would add incremental revenue of Rs 800mn during FY10E. We expect the peak revenue potential from the pact will be materialised during FY11E with 450 FTEs and revenue worth Rs 1200mn. Initially the core research activity would earn revenue for Biocon but subsequently the additional support activities and possible supply opportunities (like supply of sample batches during the advance development of molecule) would further boost the earning potential of the BMS pact FY11 onwards.
Hold with a target price of Rs 139
Certainly going ahead, the commercial commencement of long awaited BMS research contract would emerge as a money spinner for Biocon, it also projects the research capabilities of the company in Global pharma industry. Apart from this, Biocon has few more medium-term revenue triggers that would maintain growth momentum. In fact, the commencement of Tacrolimus and mycophenolate mofetil (patent expires in May 2009) API supply to US during Q1FY10 and launching of Glargine (a basal insulin having market potential of Rs 400mn and only cometitor Sanofi-Aventis) in domestic market Q1FY10 onwards would power the earnings growth of the company. Biocon has already got the Drug Controller General of India (DGCI) approval for Glargine.
To see full report: BIOCON
вторник, 24 марта 2009 г.
>Ranbaxy Laboratories Ltd. (RELIANCE MONEY)
UK & Australia Regulators approve Paonta sahib facility
Ranbaxy’s Paonta Sahib plant (that has been under U.S. Food and Drug Administration (USFDA) Import Alert since September 2008) receives approval from United Kingdom (UK- MHRA) and Australian (TGA) regulatory authorites for GMP Compliance. Moreover, the UK - MHRA approval will also apply to all product filings for the entire European Union region. The European approval comes as a consolation for Ranbaxy’s Paonta Sahib facility, as USFDA has recently halted reviewing its all drug applications having link with Paonta Sahib facility on the ground of falsified data and test results. Likewise, the Australian (TGA) approval is mild positive for Ranbaxy. In fact earlier this month, TGA had raised a safety & efficacy concern over Ranbaxy’s Paonta Sahib facility, subsequent to USFDA’s halt of reviewing Ranbaxy’s all drug applications
Implication
Though the favourable decision from Europe and Australian regulator has provided some comfort to Ranbaxy, the undergoing USFDA issue with the Paonta Sahib plant and Dewas facility continues to be cause of concern (the impact of which has already been factored in our estimates). And we believe this UK & Australia approval as just a sentiment booster and would not bring any incremental financial benefit. Thus, we maintain our estimates for Ranbaxy, as per which the EPS for CY09E and CY10E stands at Rs 11.8 and Rs 20.6, respectively. With the multiplying impact of USFDA safety issues and outstanding foreign debt exposure (over $500mn) at a time of steadily weakening Rupee/Dolla scenario, the stock faced heavy sell-off leading to sharp correction in prices from over Rs 250 levels to CMP Rs161. But with the FII holding minimising to about 4%, we don’t anticipate any major down side from current level. On the other hand, the strong bout of revenues from the FTF (First-to-File) opportunities of generic Valacyclovir and Tamsulocin during late 2009 and early 2010, provides good earning visibility for Ranbaxy in medium term.
Recommend BUY with retained TP of Rs 189
At the CMP, Ranbaxy is attractively valued at 8x its CY09E earnings (after factoring the NPV value worth Rs 70 for its FTF pipeline). Hence, with about 25% price correction in in Ranbaxy, we upgrade our rating from Hold to Buy with the earlier fixed target price of Rs 189.
To see full report: RANBAXY
Ranbaxy’s Paonta Sahib plant (that has been under U.S. Food and Drug Administration (USFDA) Import Alert since September 2008) receives approval from United Kingdom (UK- MHRA) and Australian (TGA) regulatory authorites for GMP Compliance. Moreover, the UK - MHRA approval will also apply to all product filings for the entire European Union region. The European approval comes as a consolation for Ranbaxy’s Paonta Sahib facility, as USFDA has recently halted reviewing its all drug applications having link with Paonta Sahib facility on the ground of falsified data and test results. Likewise, the Australian (TGA) approval is mild positive for Ranbaxy. In fact earlier this month, TGA had raised a safety & efficacy concern over Ranbaxy’s Paonta Sahib facility, subsequent to USFDA’s halt of reviewing Ranbaxy’s all drug applications
Implication
Though the favourable decision from Europe and Australian regulator has provided some comfort to Ranbaxy, the undergoing USFDA issue with the Paonta Sahib plant and Dewas facility continues to be cause of concern (the impact of which has already been factored in our estimates). And we believe this UK & Australia approval as just a sentiment booster and would not bring any incremental financial benefit. Thus, we maintain our estimates for Ranbaxy, as per which the EPS for CY09E and CY10E stands at Rs 11.8 and Rs 20.6, respectively. With the multiplying impact of USFDA safety issues and outstanding foreign debt exposure (over $500mn) at a time of steadily weakening Rupee/Dolla scenario, the stock faced heavy sell-off leading to sharp correction in prices from over Rs 250 levels to CMP Rs161. But with the FII holding minimising to about 4%, we don’t anticipate any major down side from current level. On the other hand, the strong bout of revenues from the FTF (First-to-File) opportunities of generic Valacyclovir and Tamsulocin during late 2009 and early 2010, provides good earning visibility for Ranbaxy in medium term.
Recommend BUY with retained TP of Rs 189
At the CMP, Ranbaxy is attractively valued at 8x its CY09E earnings (after factoring the NPV value worth Rs 70 for its FTF pipeline). Hence, with about 25% price correction in in Ranbaxy, we upgrade our rating from Hold to Buy with the earlier fixed target price of Rs 189.
To see full report: RANBAXY
среда, 18 марта 2009 г.
>Auto Sector 4 wheeler (RELIANCE MONEY)
Surprise spike in sales volume
Passenger vehicle sales numbers for the month of February 2009 came out to be better than expectations. Sales of companies have shown impressive growth during the month of February 2009 as the excise benefit along with improvement in financing situation by PSU banks have led to improvement in volumes. The CV segment continues to face weak demand but has been reporting sequential growth from the last two months on the back of accelerated depreciation policy and excise cut announced.We believe that the LCV segment which has recently been offered the excise cut will benefit the most and is likely to show some improvement in volumes on the back of excise benefit. The M&HCV segment is also under the excise bracket but we don’t expect that this segment witness improvement in volumes mainly due to slowdown in the overall economy. It is noteworthy that despite the price hike taken by few players in the last two weeks of February the sales volumes have increased which is a positive signal and we believe this is largely due to the improvement in financing situation. Interest rates are likely to fall down further as RBI has cut repo and reverse repo rates by 50 bps. We expect passenger car industry would continue to report improvement on m-o-m basis due to excise duty benefit and rural market demands, but CV demand is likely to witness pressures as overall economy is still showing weakness.
To see full report: AUTO SECTOR
пятница, 13 марта 2009 г.
>Microsoft Corporation (RELIANCE MONEY)
CORPORATE OVERVIEW: Microsoft is the world's largest software product company, primarily due to its dominant position in operating systems, which runs on over 90 percent of all PCs currently in use and business productivity applications, where its Office productivity suite has over 400 million users. The combination of these two strongholds provides MSFT with a strong barrier to entry for competitors, in our opinion. With MSFT generating over $1 billion every month in free cash flow, it had $23.7 billion in cash and investments as of June 2008, despite having paid out more than $116 billion for dividends and share buybacks from FY 04 to FY 08 (Jun.).
Highlights
● We see total revenues rising by 0.1 percent in FY 09 (Jun.), compared to the 18 percent growth achieved in FY 08. Our forecast of flat revenues reflects our view of a severe economic recession. We expect client revenue to decrease 8.3 percent, based on our forecast of 1 percent growth in worldwide PC unit shipments in 2009 negated by increased pricing pressure due to lower selling prices in emerging markets.
● While we estimate 2 percent decline of overall corporate IT spending in 2009, we project that
server and tools revenue will raise 9 percent and Microsoft Business division 4 percent because of gain in market share in these businesses. We estimate Entertainment and Devices division (EDD) revenue will fall 3.5 percent on weak consumer spending and lower Xbox prices.
● We estimate an EPS of $1.72 for FY 09, compared to $1.87 in FY 08, reflecting lower operating
margins amid a difficult sales environment.
To see full report: MICROSOFT CORPORATION
Highlights
● We see total revenues rising by 0.1 percent in FY 09 (Jun.), compared to the 18 percent growth achieved in FY 08. Our forecast of flat revenues reflects our view of a severe economic recession. We expect client revenue to decrease 8.3 percent, based on our forecast of 1 percent growth in worldwide PC unit shipments in 2009 negated by increased pricing pressure due to lower selling prices in emerging markets.
● While we estimate 2 percent decline of overall corporate IT spending in 2009, we project that
server and tools revenue will raise 9 percent and Microsoft Business division 4 percent because of gain in market share in these businesses. We estimate Entertainment and Devices division (EDD) revenue will fall 3.5 percent on weak consumer spending and lower Xbox prices.
● We estimate an EPS of $1.72 for FY 09, compared to $1.87 in FY 08, reflecting lower operating
margins amid a difficult sales environment.
To see full report: MICROSOFT CORPORATION
вторник, 10 марта 2009 г.
>Auto Sector 2 wheeler (RELIANCE MONEY)
Bajaj Auto has reached an agreement with KTM regarding to hike Bajaj Auto's stake in the latter and the deal would be completed over the next two months.
Harley-Davidsonis now looking at expanding its operations worldwide and also wants to bring its bikes to India.
Honda Motorcycle & Scooter India Ltd. has launched the Honda CBR1000RR Fireblade and CB1000R sports bikes in the Indian market. These bikes will be imported into India as CBUs and given the stiff import duties levied on such machines, prices are stratospheric - Rs.1.25mn for the Fireblade and Rs.0.95mn for the CB1000R.
Yamaha India is now looking at expanding its dealer network and may even use its India facility as an exports hub for shipping bike and engines for its global operations. Yamaha plans to invest up to Rs.2.4bn in its Indian operations by 2011 and will develop at least two or more brand-new bikes which would be engineered specifically for this market. The company is also looking at increasing the number of its dealerships in India to around 600, by end-2010.
To see full report: AUTO SECTOR
Harley-Davidsonis now looking at expanding its operations worldwide and also wants to bring its bikes to India.
Honda Motorcycle & Scooter India Ltd. has launched the Honda CBR1000RR Fireblade and CB1000R sports bikes in the Indian market. These bikes will be imported into India as CBUs and given the stiff import duties levied on such machines, prices are stratospheric - Rs.1.25mn for the Fireblade and Rs.0.95mn for the CB1000R.
Yamaha India is now looking at expanding its dealer network and may even use its India facility as an exports hub for shipping bike and engines for its global operations. Yamaha plans to invest up to Rs.2.4bn in its Indian operations by 2011 and will develop at least two or more brand-new bikes which would be engineered specifically for this market. The company is also looking at increasing the number of its dealerships in India to around 600, by end-2010.
To see full report: AUTO SECTOR
суббота, 7 марта 2009 г.
>TCS (RELIANCE MONEY)
TATA COSULTANCY SERVICES
Company Update
Action - SELL
The worst is still not behind us…
* Project cancellations intensified, Q4FY09 is likely to be dismal …
There have been project cancellations in the last two months across the board, more severely in BFS, Manufacturing and Telecom with some amount of resilience witnessed in Retail, Pharma and Utility verticals. Nevertheless, management indicated at newer deal flow albeit at a slower pace. On the other hand, as clients are trimming their overall IT budgets, there could pressure on volume growth in the coming quarters, however some respite can be expected by Q2FY10E, with bottoming out of project cancellation and revival in organic volume growth.
* Pricing cuts worries intensify; margins to come under pressure..
TCS’s management indicated that pricing pressure from clients increased in the recent months and renegotiation requests are coming in to the extent of ~5%-15% cut in the contracts. However, management expects to negate the pricing pressure to the extent of single digit pricing cut by exercising the internal levers like higher offshoring, cut in variable pays (~8%of salary), increase in working hours (~45 hrs per week from ~40hrs earlier) coupled with bringing down the bench strength (already substantially reduced outside of India bench strength).
To see full report: TCS
Company Update
Action - SELL
The worst is still not behind us…
* Project cancellations intensified, Q4FY09 is likely to be dismal …
There have been project cancellations in the last two months across the board, more severely in BFS, Manufacturing and Telecom with some amount of resilience witnessed in Retail, Pharma and Utility verticals. Nevertheless, management indicated at newer deal flow albeit at a slower pace. On the other hand, as clients are trimming their overall IT budgets, there could pressure on volume growth in the coming quarters, however some respite can be expected by Q2FY10E, with bottoming out of project cancellation and revival in organic volume growth.
* Pricing cuts worries intensify; margins to come under pressure..
TCS’s management indicated that pricing pressure from clients increased in the recent months and renegotiation requests are coming in to the extent of ~5%-15% cut in the contracts. However, management expects to negate the pricing pressure to the extent of single digit pricing cut by exercising the internal levers like higher offshoring, cut in variable pays (~8%of salary), increase in working hours (~45 hrs per week from ~40hrs earlier) coupled with bringing down the bench strength (already substantially reduced outside of India bench strength).
To see full report: TCS
воскресенье, 18 января 2009 г.
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