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India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
India Financials 2011: Time to catch the falling knife, it's not that sharp
[Dipankar Choudhury]
We do not concur with the prevailing pessimism on Indian financials on
apprehensions of a negative impact of rising rates; from a one-year perspective,
we believe this is a buying and not a reducing opportunity. Although the next few
months could be challenging, we do not see much valuation downside from here.
Our earnings estimate increases after the October-December 2010 results are a
reinforcement of fundamental strength and catalyst for a potential reversal in
sentiment, if the liquidity climate were to turn favorable even at the margin.
India Equity Strategy: Oil on the boil: implications for India [Abhay Laijawala]
India’s equity risk premium tends to rise sharply during periods of elevated oil
prices. In 2008 the BSE Sensex multiple contracted by about 400bps over a period
of six months after oil pierced the psychological threshold of USD100. India’s
valuation has already compressed by 200bps+ since the start of 2011. MSCI
India’s valuation premium to MSCI Asia has also compressed to 220bps (the
lowest in past eighteen months) from 384bps in December 2010. Consequently
we believe that the market may have largely priced in oil at 100. However, given
the high sensitivity of oil to India – in an environment of already elevated inflation -
should the tensions in the middle east escalate further - driving oil prices higher -
we would not rule out a further compression in India’s valuation multiples and a
narrowing of its premium to MSCI Asia. We believe that the market is likely to stay
nervous until the headwind on inflation and policy inertia has abated.
Indian Power Sector: facing major disruption [Manish Saxena]
India's spot power rate rose to historic high of INR 14-15/Kwh unit - 6x regulated
tariff, just at the beginning of the busy season. What worries us is that Indian
power system has become constrained at a thermal utilisation level of c74% (a
good 500 bps lower than previous peak level of 79%), suggesting that power
plants are constrained by fuel and grid availability. We estimate that this surge
would primarily benefit Adani Power and to an extent Lanco Infratech, Shree
Cement etc.
Cipla: Poor 3Q in terms of revenue & margin; cut estimates & TP [Abhay
Shanbhag]
Revenue of INR 15.2bn (12% yoy, DBe – INR 16.2bn) constrained by competition
in domestic market (11% growth to INR 7.3bn against expected INR 7.7bn) as well
as by strong INR in formulation exports (12% to INR 6.4bn, INR6.8bn) and API
exports (-45% to INR 0.5bn, INR 0.5bn). Spike in semi-fixed costs with
commissioning of a large SEZ at Indore in 2Q was aggravated by INR and spike in
input costs (that are being passed through phased price increases) resulting in
530bp yoy and 240bp qoq fall in EBITDA margins.
Oil India Limited: 3Q results in line with estimate; net oil realisation up QoQ
[Harshad Katkar]
Oil India (OIL) reported net profit at INR9.1bn (+27% YoY and -1% QoQ) and
EBITDA at INR13.1bn (+19% YoY, -6% QoQ), in line with estimates. As expected,
net crude realization at US$67.1/bbl (+14% YoY, +6% QoQ) was sequentially
higher because of higher crude oil prices. This validates our view that post petrol
price deregulation, Oil India has a marginal positive impact from rising oil prices.
OIL's subsidy contribution increased in the quarter to INR5.6bn (+20% YoY, +40%
QoQ). Oil production at 0.93mn te (+1.9% yoy, -0.5% qoq) and gas production at
0.62bcm (-1.6% yoy, +5.7% qoq) was also in line with estimates.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
India Financials 2011: Time to catch the falling knife, it's not that sharp
[Dipankar Choudhury]
We do not concur with the prevailing pessimism on Indian financials on
apprehensions of a negative impact of rising rates; from a one-year perspective,
we believe this is a buying and not a reducing opportunity. Although the next few
months could be challenging, we do not see much valuation downside from here.
Our earnings estimate increases after the October-December 2010 results are a
reinforcement of fundamental strength and catalyst for a potential reversal in
sentiment, if the liquidity climate were to turn favorable even at the margin.
India Equity Strategy: Oil on the boil: implications for India [Abhay Laijawala]
India’s equity risk premium tends to rise sharply during periods of elevated oil
prices. In 2008 the BSE Sensex multiple contracted by about 400bps over a period
of six months after oil pierced the psychological threshold of USD100. India’s
valuation has already compressed by 200bps+ since the start of 2011. MSCI
India’s valuation premium to MSCI Asia has also compressed to 220bps (the
lowest in past eighteen months) from 384bps in December 2010. Consequently
we believe that the market may have largely priced in oil at 100. However, given
the high sensitivity of oil to India – in an environment of already elevated inflation -
should the tensions in the middle east escalate further - driving oil prices higher -
we would not rule out a further compression in India’s valuation multiples and a
narrowing of its premium to MSCI Asia. We believe that the market is likely to stay
nervous until the headwind on inflation and policy inertia has abated.
Indian Power Sector: facing major disruption [Manish Saxena]
India's spot power rate rose to historic high of INR 14-15/Kwh unit - 6x regulated
tariff, just at the beginning of the busy season. What worries us is that Indian
power system has become constrained at a thermal utilisation level of c74% (a
good 500 bps lower than previous peak level of 79%), suggesting that power
plants are constrained by fuel and grid availability. We estimate that this surge
would primarily benefit Adani Power and to an extent Lanco Infratech, Shree
Cement etc.
Cipla: Poor 3Q in terms of revenue & margin; cut estimates & TP [Abhay
Shanbhag]
Revenue of INR 15.2bn (12% yoy, DBe – INR 16.2bn) constrained by competition
in domestic market (11% growth to INR 7.3bn against expected INR 7.7bn) as well
as by strong INR in formulation exports (12% to INR 6.4bn, INR6.8bn) and API
exports (-45% to INR 0.5bn, INR 0.5bn). Spike in semi-fixed costs with
commissioning of a large SEZ at Indore in 2Q was aggravated by INR and spike in
input costs (that are being passed through phased price increases) resulting in
530bp yoy and 240bp qoq fall in EBITDA margins.
Oil India Limited: 3Q results in line with estimate; net oil realisation up QoQ
[Harshad Katkar]
Oil India (OIL) reported net profit at INR9.1bn (+27% YoY and -1% QoQ) and
EBITDA at INR13.1bn (+19% YoY, -6% QoQ), in line with estimates. As expected,
net crude realization at US$67.1/bbl (+14% YoY, +6% QoQ) was sequentially
higher because of higher crude oil prices. This validates our view that post petrol
price deregulation, Oil India has a marginal positive impact from rising oil prices.
OIL's subsidy contribution increased in the quarter to INR5.6bn (+20% YoY, +40%
QoQ). Oil production at 0.93mn te (+1.9% yoy, -0.5% qoq) and gas production at
0.62bcm (-1.6% yoy, +5.7% qoq) was also in line with estimates.
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