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IIP growth drops dramatically to 2.7%; broad based decline in production and base effect in play
n Index of Industrial Production (IIP) for November 2010 stood at 2.7% compared to 11.3% for the same period the previous year, due to a broad based decline in production month-on-month (MoM) and an unfavourable base effect.
n The sizeable mom reduction in IIP growth can be partially explained with seasonality as the festive season ending in Hindu festival of Deepavali took place in the first week of November. This seemingly results in a good portion of consumer demand to occur in the months of September and October. (Note: Deepavali in FY10, was in mid October). And hence, we had strong growth in Oct-10 and a very modest growth in Nov-10.
n IIP growth for October, 2010 has been revised upwards to 11.3% from 10.8%, due to a revision in manufacturing growth.
n Of the various manufacturing industries, 9 out of 17 have shown positive momentum YoY with cotton textiles (6.37%), leather products (12.58%), basic metals (8.58%) and transport equipment (15.55%) registering positive growth.
n The overall cumulative growth in industrial production for FY11 YTD is still strong at 9.5%. We expect the growth for the rest of the year to be at 5% YoY with our FY11 estimate at 7.7-8.0%.
n The seeming moderation in industrial production growth may contain the increase in the policy interest rates to just 25bps in the forthcoming review of monetary policy despite higher than expected inflation.
All figures are in %YoY, unless otherwise mentioned
Mahindra & Mahindra Management Meet Update; Expect volume upgrade, maintain BUY; Target: Rs 880
n Tractor industry can grow by 11%, Auto sector growth of 15% to 18% is a possibility in 2011. Capacity concerns addressed, M&M well placed to capitalize on expected demand
n Ssangyong’s EBIDTA margins in 9MFY11 at 2%. Volumes in CY10 ~82,000 vs 35,000 in CY09. Volumes to improve due to new products and higher focus on domestic market
n Unlike 2010, cost pressure will have to be passed on by industry. Margins to be under pressure due to inflationary pressures though profit per unit may not be affected
n Expect upgrades in FY12 volumes est. as capacity concerns are addressed. Retain buy rating on the stock with a TP of Rs 880
Pfizer Q4CY10 Result Update; Raise estimates; Upgrade to Accumulate; Target: Rs1,193
n Pfizer’s Q4CY10 performance was above expectations with a) Revenue of Rs2.6bn (est. of Rs2.1bn), b) EBIDTA of Rs483mn (est. Rs396mn) and c) APAT of Rs439mn (est. Rs389mn)
n Sales growth was led by a) 21% YoY growth in Pharma business b) 19% growth in Animal Healthcare business and c) 264% growth in Clinical services business
n Higher other operating income and lower employee cost improved operating profitability (EBITDA margin expanded 347 bps)
n Tweak earnings by 3% for CY11E and introduce CY12E estimates. Upgrade to Accumulate with a price target of Rs1,193 (rolled over to Jan’12)
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