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India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
• Looking to build positions selectively across TATA, STLT, SAIL;
some interest in cement also: We recently met 20+ investors in the US
as part of our investor roadshow. Not surprisingly there was hardly any
discussion on sell ideas as most investors we met do not have any
meaningful exposure as of now. The most interest was in TATA,
SAIL and STLT. A few clients were interested in cement, but most
agreed that it is still too early to enter the sector. Holders of Coal
India were happy post the recent price hike, but not a single investor
expressed any interest in buying at current levels.
• Expectations of a commodity correction makes investors wait for a
better entry point: While most clients look to build positions, many are
expecting a commodity price correction in base metals which in their
view would impact Indian metal names. Investors, in our view, are
puzzled by the recent softening of the spot prices in China (started with
iron ore and has moved to steel) and many expect a potential commodity
price correction to emanate from China’s possible de-stocking extending
across other commodities.
• Key concerns on TATA and STLT: While we are not surprised by the
interest in TATA given raw material prices, the interest in STLT was a
surprise given the spate of regulatory issues STLT has faced over the last
12 months. The key concerns on TATA were essentially on a) Corus and
whether it can remain EBITDA positive over the next few quarters and
when can Corus start contributing meaningfully at the net level and b)
India expansion status as it remains the key to FCF generation at TATA
from next year. We expect Corus to remain EBITDA positive in every
quarter of FY12E, and contribute at the net level in FY13E. On STLT
investors while appreciating the earnings momentum story over the next
few quarters driven by volumes, remain concerned on a) merchant power
tariffs and b) any potential restructuring between various STLT and VED
entities over the next 12-18 months and implications for STLT minority
shareholders. We believe merchant power tariffs are likely to remain
under pressure, but STLT has strong volume growth across silver, zinc,
and power to offset lower merchant power tariffs. On possible restructuring,
while it cannot be fully ruled out, we believe any restructuring
in the near term is unlikely.
• Cement- Too early to step in: Few investors were interested in cement,
though most agree the over-capacity and coal cost issues mean it is too
early to step into the sector.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
• Looking to build positions selectively across TATA, STLT, SAIL;
some interest in cement also: We recently met 20+ investors in the US
as part of our investor roadshow. Not surprisingly there was hardly any
discussion on sell ideas as most investors we met do not have any
meaningful exposure as of now. The most interest was in TATA,
SAIL and STLT. A few clients were interested in cement, but most
agreed that it is still too early to enter the sector. Holders of Coal
India were happy post the recent price hike, but not a single investor
expressed any interest in buying at current levels.
• Expectations of a commodity correction makes investors wait for a
better entry point: While most clients look to build positions, many are
expecting a commodity price correction in base metals which in their
view would impact Indian metal names. Investors, in our view, are
puzzled by the recent softening of the spot prices in China (started with
iron ore and has moved to steel) and many expect a potential commodity
price correction to emanate from China’s possible de-stocking extending
across other commodities.
• Key concerns on TATA and STLT: While we are not surprised by the
interest in TATA given raw material prices, the interest in STLT was a
surprise given the spate of regulatory issues STLT has faced over the last
12 months. The key concerns on TATA were essentially on a) Corus and
whether it can remain EBITDA positive over the next few quarters and
when can Corus start contributing meaningfully at the net level and b)
India expansion status as it remains the key to FCF generation at TATA
from next year. We expect Corus to remain EBITDA positive in every
quarter of FY12E, and contribute at the net level in FY13E. On STLT
investors while appreciating the earnings momentum story over the next
few quarters driven by volumes, remain concerned on a) merchant power
tariffs and b) any potential restructuring between various STLT and VED
entities over the next 12-18 months and implications for STLT minority
shareholders. We believe merchant power tariffs are likely to remain
under pressure, but STLT has strong volume growth across silver, zinc,
and power to offset lower merchant power tariffs. On possible restructuring,
while it cannot be fully ruled out, we believe any restructuring
in the near term is unlikely.
• Cement- Too early to step in: Few investors were interested in cement,
though most agree the over-capacity and coal cost issues mean it is too
early to step into the sector.
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