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India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
India Equity Strategy: FY12 Union Budget expectations [Abhay Laijawala]
Fiscal consolidation: We expect the Finance Minister to raise excise duties by
200bps to 12%, and also raise service tax rate by 200bps to 12%; One-off windfall
gains (akin to 3G/BWA auctions) is likely in form of announcement on transparent
coal block auctions. Unfortunately, we do not envisage any material tax incentive
for corporate sector except likely lowering of corporate tax surcharge by 250bps
to 5%. Incentivizing Agriculture: We expect additional relief/funding for irrigation
projects, incentivizing investments in food supply chain/cold chain. Incentives
aimed at encouraging investments focused on raising farm productivity are also
likely.
Construction Materials: Cement companies could attempt pass-through of
cost push [Chockalingam Narayanan]
Our interactions with cement traders and retailers suggest that cement companies
could attempt another round of price increase of c2-5%, following cost inflation
pressures and not an encouraging demand growth outlook. Barring Eastern India,
where cement companies have comparatively higher stocks, the probability of
price increases coming through and sustaining in other regions look higher. 1) We
continue to prefer diversified players like Grasim (Buy, Target price INR 2,730) as it
(a) benefits from the supercycle in VSF (contributes to c45% of consolidated
profits). Please note that VSF prices have moved upto INR 140/kg from the
Q3FY11 average of INR 123/kg, (b) is available at an attractive valuation of 10x P/E
FY12E consolidated earnings vis a vis the position in the cycle.
Cairn India: Factoring higher Brent oil price estimates [Harshad Katkar]
In the Commodities Weekly dated 18 February 2011, Deutsche Bank energy team
has revised Brent oil forecast upwards by 4-8% to US$101-105/bbl for CY11-15.
The long-term oil price assumption has also been increased by 5% to US$105/bbl.
The key reasons for a bullish outlook on oil prices are expectations of stronger
global oil demand driven by Chinese demand growth, drawdown of OECD oil
inventories and reduction in OPEC spare capacity.
Nestle India Limited: Bucks the trend on gross margins, Maintain Buy
Nestle reported strong 4QCY10 result with 24% sales growth (vs 17% DBe)
driven by both pricing as well as volume growth. Domestic sales growth stood at
26.6% displaying strong consumer demand. The key highlight of the result
however was the expansion in gross margins (63 bps YoY, 143 bps QoQ) despite
relatively high raw material prices (especially milk). This is quite significant at a
time when most of the Indian consumer companies are facing gross margin
declines eg HUL -201 bps YoY, Dabur -385 bps YoY, Marico -672 bps YoY and
displays Nestle's pricing power.
Pantaloon Retail India Ltd: Still in an an investment mode. Maintain Hold
[Harrish Zaveri]
Pantaloon reported weak 2QFY11 results with core retail EBITDA growth of 12%
and PAT growth of 5.5% despite a sales growth of 31%. Gross margins declined
by 216 bps and EBITDA margins declined by 146 bps YoY due to higher material
costs and poor performance of electronics retailing business. In the first half of
FY11, Pantaloon has incrementally invested INR 6bn in Working capital and INR
4.5bn on capex for core retail business; and INR 800mn on Future ventures limited
(other non core businesses) while the incremental sales for the core retail
business has been only INR 6.6bn (2QFY11 vs 2QFY10).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
India Equity Strategy: FY12 Union Budget expectations [Abhay Laijawala]
Fiscal consolidation: We expect the Finance Minister to raise excise duties by
200bps to 12%, and also raise service tax rate by 200bps to 12%; One-off windfall
gains (akin to 3G/BWA auctions) is likely in form of announcement on transparent
coal block auctions. Unfortunately, we do not envisage any material tax incentive
for corporate sector except likely lowering of corporate tax surcharge by 250bps
to 5%. Incentivizing Agriculture: We expect additional relief/funding for irrigation
projects, incentivizing investments in food supply chain/cold chain. Incentives
aimed at encouraging investments focused on raising farm productivity are also
likely.
Construction Materials: Cement companies could attempt pass-through of
cost push [Chockalingam Narayanan]
Our interactions with cement traders and retailers suggest that cement companies
could attempt another round of price increase of c2-5%, following cost inflation
pressures and not an encouraging demand growth outlook. Barring Eastern India,
where cement companies have comparatively higher stocks, the probability of
price increases coming through and sustaining in other regions look higher. 1) We
continue to prefer diversified players like Grasim (Buy, Target price INR 2,730) as it
(a) benefits from the supercycle in VSF (contributes to c45% of consolidated
profits). Please note that VSF prices have moved upto INR 140/kg from the
Q3FY11 average of INR 123/kg, (b) is available at an attractive valuation of 10x P/E
FY12E consolidated earnings vis a vis the position in the cycle.
Cairn India: Factoring higher Brent oil price estimates [Harshad Katkar]
In the Commodities Weekly dated 18 February 2011, Deutsche Bank energy team
has revised Brent oil forecast upwards by 4-8% to US$101-105/bbl for CY11-15.
The long-term oil price assumption has also been increased by 5% to US$105/bbl.
The key reasons for a bullish outlook on oil prices are expectations of stronger
global oil demand driven by Chinese demand growth, drawdown of OECD oil
inventories and reduction in OPEC spare capacity.
Nestle India Limited: Bucks the trend on gross margins, Maintain Buy
Nestle reported strong 4QCY10 result with 24% sales growth (vs 17% DBe)
driven by both pricing as well as volume growth. Domestic sales growth stood at
26.6% displaying strong consumer demand. The key highlight of the result
however was the expansion in gross margins (63 bps YoY, 143 bps QoQ) despite
relatively high raw material prices (especially milk). This is quite significant at a
time when most of the Indian consumer companies are facing gross margin
declines eg HUL -201 bps YoY, Dabur -385 bps YoY, Marico -672 bps YoY and
displays Nestle's pricing power.
Pantaloon Retail India Ltd: Still in an an investment mode. Maintain Hold
[Harrish Zaveri]
Pantaloon reported weak 2QFY11 results with core retail EBITDA growth of 12%
and PAT growth of 5.5% despite a sales growth of 31%. Gross margins declined
by 216 bps and EBITDA margins declined by 146 bps YoY due to higher material
costs and poor performance of electronics retailing business. In the first half of
FY11, Pantaloon has incrementally invested INR 6bn in Working capital and INR
4.5bn on capex for core retail business; and INR 800mn on Future ventures limited
(other non core businesses) while the incremental sales for the core retail
business has been only INR 6.6bn (2QFY11 vs 2QFY10).
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