04 November 2012

Adani Port & SEZ Cargo growth drives top‐line, consol margins disappoints :: ::Prabhudas Lilladher


􀂄 Cargo growth drives top‐line: Standalone port revenues grew by 25% YoY and
31% QoQ to Rs7.7bn, led by 16% QoQ volume growth at Mundra to Rs20.43mt.
SEZ revenues for the quarter stood at (Rs11m) on account of a reversal as
against SEZ revenues of Rs2.04bn in Q1FY13. On a consolidated basis, volumes
increased by 17% QoQ led by increase in volumes at Dahej as well as due to trial
operations beginning at Hazira. On a consolidated basis, volumes increased by
19% YoY and 2% QoQ to Rs10.4bn.
􀂄 Consolidated margins disappoint: Margins on a standalone basis stood strong at
72.2% despite no income from SEZ sales. However, at a consolidated level,
margins disappointed on account of higher-than-expected costs at the
subsidiary level. Margins on a consolidated basis stood at 63.8% largely led by
newer ports operating at lower utilizations leading to lower fixed cost
absorption.
􀂄 Volume break‐up: Volumes at Mundra port was led by coal cargo which
increased from 4.5mt in Q1 to 7mt in Q2FY13. Tata’s coal imports increased to
1mt from 0.3mt in Q1FY13, while Adani’s imports increased from 2.75mt to
3.3mt for the same period. Other cargo categories at Mundra remained status
quo. On a consolidated basis, volumes at Dahej increased from 1.26mt in
Q1FY13 to 1.7mt in Q2FY13 and Hazira contributed marginally as the company
commenced trial runs there ahead of schedule.
􀂄 Valuations: Our SOTP for the company stands at Rs165, of which 76% is
contributed by the Mundra asset, 8% contributed by Abbot Point and the
remaining by the SEZ as well as the other Indian ports. We maintain ‘BUY’ on the
stock.

Talwalkars Better Value Fitness :: ::Centrum


From gym to fitness
We recently met with the management to ascertain recent
developments in the company. The management continued to
remain unaffected by the economic slowdown and is on track to
achieve its FY15E target of opening 250+ gyms. Its focus on going
asset light is bearing fruits while migration from gym to fitness will
significantly increase same store sales growth and help the company
become FCF positive by FY14. The company is also looking at an
opportunity to start its own recreation club and possible tie-up with
a global leader. We maintain our BUY rating on the stock.

Everest Industries Ltd. (EIL)- BUY - TARGET Rs. 284:: Sushil


Strong Demand Visibility for Building Products – ‘Driven by Low Penetration of Pucca Housing’
EIL is primarily present in the manufacturing of AC (Asbestos Cement) roofing sheets and non-asbestos boards and panels which contributes ~75% to the company’s revenues. ~48% of rural India lives in kuccha houses (thatched roofing) providing an opportunity to every player to have a pie of the market which is estimated at ~Rs.250 Bn. EIL has reported an impressive volume CAGR of 10.3% over FY07-12 aided by timely expansion of building product capacity, strong rural demand driven by increasing rural income and increased thrust of Government on rural development through various schemes like Indira Awas Yojana, Bharat Nirman Yojana, NREGA etc. We expect EIL to post a volume CAGR of 5% over FY12-14E to be driven by 100,000 MTPA capacity additions in FY14E, better capacity utilization by way of technological upgradation and rising inclination towards pucca housing. Also, given the increasing thrust on rural housing and rise in income levels of rural people, the company has been able to efficiently pass on the increasing costs in the past (FY07-12 Pricing CAGR of 7.3%). We expect the prices to increase at a CAGR of 7.9% over FY12-14E resulting in Building Products revenue CAGR of 13.2% over the same period.
Pre-Engineered Buildings (PEB) – ‘Gaining Acceptance’
Given cost overruns in traditional concrete building structures due to delays in the construction, PEB is gaining acceptance on account of its speed of construction and quick turnaround time. The other features of PEB are similar to that of concrete structures in terms of strength, earthquake resistance and safety. However it reduces dependence on labor as predominantly the steel structures and panels are manufactured in-house and only the assembly work is carried onsite which significantly reduces the turnaround time. In the current situation where TIME is the king, many infrastructure projects like airports, cargo hubs, schools, metro rails, Indian railways, warehouses, Pharma companies, Automobile Companies etc. are increasingly using PEB. However, given current low acceptance of this structure and weak macroeconomic environment, we are factoring in a low growth of 11.2% over FY12-14E (FY09-12 CAGR– 34%).
Strong Financials, Healthy Return Ratios, Robust Cash flow Generation & Consistent Dividend History
EIL recently took an ECB of $12 mn to be repaid over next 5 years for setting up a Greenfield facility at Balasore in Orissa resulting in its D/E inching up to 0.4 from 0.3 as on March’2012. However given strong operating cash flows over the next 2 years (Rs.777 mn and Rs.972 mn in FY13E & FY14E resp.) and low capex (~Rs.540 mn. for AC Sheet Plant at Balasore and Metal Roofing Plant at Ranchi), we expect the company to become net debt free by FY14E. Also, the company has healthy return ratios with RoE & RoCE pegged at 23.0% and 18.7% respectively (likely to expand). It follows a consistent dividend paying policy (since last 10 years) with ~20% payout in FY12 offering a dividend yield of 3.2%.
OUTLOOK & VALUATION EIL is one of the leading players in the building products segment with a volume market share of 13.2% (Source: ACPMA) and having a strong pan-India presence with 38 sales depots & 6,000 retail outlets. Given the government’s thrust on rural development and the significance of rural India in overall GDP growth, we believe that the Roofing Industry would continue to grow at a decent pace. Also, given the increasing acceptance of urban products & PEB in the Industry, we believe EIL is well positioned to reap the benefits of its de-risking strategy. Based on H1FY13 performance, we have upward revised our earnings estimate by 9.1% & 15% to Rs.43.0 & Rs.47.4 respectively. At the CMP of Rs.219, the stock is trading at 5.1x and 4.6x its FY13E & FY14E EPS. We change our rating from ACCUMULATE to BUY with a revised price target of Rs.284.

Everest Industries Ltd. (EIL)- BUY - TARGET Rs. 284:: Sushil


Strong Demand Visibility for Building Products – ‘Driven by Low Penetration of Pucca Housing’
EIL is primarily present in the manufacturing of AC (Asbestos Cement) roofing sheets and non-asbestos boards and panels which contributes ~75% to the company’s revenues. ~48% of rural India lives in kuccha houses (thatched roofing) providing an opportunity to every player to have a pie of the market which is estimated at ~Rs.250 Bn. EIL has reported an impressive volume CAGR of 10.3% over FY07-12 aided by timely expansion of building product capacity, strong rural demand driven by increasing rural income and increased thrust of Government on rural development through various schemes like Indira Awas Yojana, Bharat Nirman Yojana, NREGA etc. We expect EIL to post a volume CAGR of 5% over FY12-14E to be driven by 100,000 MTPA capacity additions in FY14E, better capacity utilization by way of technological upgradation and rising inclination towards pucca housing. Also, given the increasing thrust on rural housing and rise in income levels of rural people, the company has been able to efficiently pass on the increasing costs in the past (FY07-12 Pricing CAGR of 7.3%). We expect the prices to increase at a CAGR of 7.9% over FY12-14E resulting in Building Products revenue CAGR of 13.2% over the same period.
Pre-Engineered Buildings (PEB) – ‘Gaining Acceptance’
Given cost overruns in traditional concrete building structures due to delays in the construction, PEB is gaining acceptance on account of its speed of construction and quick turnaround time. The other features of PEB are similar to that of concrete structures in terms of strength, earthquake resistance and safety. However it reduces dependence on labor as predominantly the steel structures and panels are manufactured in-house and only the assembly work is carried onsite which significantly reduces the turnaround time. In the current situation where TIME is the king, many infrastructure projects like airports, cargo hubs, schools, metro rails, Indian railways, warehouses, Pharma companies, Automobile Companies etc. are increasingly using PEB. However, given current low acceptance of this structure and weak macroeconomic environment, we are factoring in a low growth of 11.2% over FY12-14E (FY09-12 CAGR– 34%).
Strong Financials, Healthy Return Ratios, Robust Cash flow Generation & Consistent Dividend History
EIL recently took an ECB of $12 mn to be repaid over next 5 years for setting up a Greenfield facility at Balasore in Orissa resulting in its D/E inching up to 0.4 from 0.3 as on March’2012. However given strong operating cash flows over the next 2 years (Rs.777 mn and Rs.972 mn in FY13E & FY14E resp.) and low capex (~Rs.540 mn. for AC Sheet Plant at Balasore and Metal Roofing Plant at Ranchi), we expect the company to become net debt free by FY14E. Also, the company has healthy return ratios with RoE & RoCE pegged at 23.0% and 18.7% respectively (likely to expand). It follows a consistent dividend paying policy (since last 10 years) with ~20% payout in FY12 offering a dividend yield of 3.2%.
OUTLOOK & VALUATION EIL is one of the leading players in the building products segment with a volume market share of 13.2% (Source: ACPMA) and having a strong pan-India presence with 38 sales depots & 6,000 retail outlets. Given the government’s thrust on rural development and the significance of rural India in overall GDP growth, we believe that the Roofing Industry would continue to grow at a decent pace. Also, given the increasing acceptance of urban products & PEB in the Industry, we believe EIL is well positioned to reap the benefits of its de-risking strategy. Based on H1FY13 performance, we have upward revised our earnings estimate by 9.1% & 15% to Rs.43.0 & Rs.47.4 respectively. At the CMP of Rs.219, the stock is trading at 5.1x and 4.6x its FY13E & FY14E EPS. We change our rating from ACCUMULATE to BUY with a revised price target of Rs.284.

Sesa Goa :: Operating environment worsening::Nomura research



Zinc profits not enough to stem
VAL drag; acquisition of Cairn
costlier on INR depreciation


Action: Downgrading to Neutral due to too many near-term issues
We downgrade Sesa Goa to Neutral as we believe that the company has
lost value on account of: 1) the iron ore mining bans in Karnataka and
Goa; 2) worsening aluminium business due to the shortage of bauxite
mines; and 3) forex losses due to the transfer of Cairn India acquisition
debt from Vedanta Resources. While zinc operations are going strong and
the power business is steadily improving, it won’t be enough to outweigh
the above negatives, in our view. We also lower our target price to INR179
from INR220 to account for the worsening operating environment.
Catalyst: No near-term triggers
We don’t believe that there are near-term triggers for the stock price.
However, few events which could create value are: 1) the merger of HZ
post the stake sale by the government; and 2) allotment of a bauxite mine.
Valuations: Sum-of-parts valuation at INR179/share
We value the stock at INR179/share using sum-of-parts valuation. Our
valuation accounts for the restructuring of operations and for the merged
entity SESA Sterlite.
 On our valuation, the stock would be trading at ~5.4x FY14F P/E. We
think a lower multiple is justified given: 1) the overseas zinc business
(which we value at 4.5x P/E) has a low mine life; and 2) a holding
company discount is applicable to its stakes in HZ and Cairn India.


Sterlite Industries :: ::Nomura research


Downgrade to NEUTRAL
Stock to follow SESA GOA

Hindustan Zinc :: ::Nomura research


Earnings momentum intact
Volumes to pick up from 2H,
strong silver ramp-up and cost
optimisation to drive earnings

BUY Muthoot Finance:: nirmal bang,


Snapshot
A small player in the NBFC segment, Muthoot Capital is a part of the Pappachan Muthoot Group. The company is growing at a scorching pace in the financing of the two-wheelers and three-wheeler segment.
Investment Rationale Changing the business model at the right time: The company has changed the business model at the right time and shifted from the regulatory-impacted gold loan business to relatively stable and safer automobile finance business.
Strong growth expected going forward: The AUM of the company stood at approximately Rs.300 crore. We expect the company to reach a target of Rs.450-500 crore by the end of FY’13E.
Strong promoter holding: The promoter holding in the company stood at 77 per cent. In order to comply with the regulatory requirements, the holding has been reduced to marginally below 75 per cent.
Consistent dividend pay-out ratio: The company has got a consistent dividend pay-out ratio of around 25 per cent. We expect this trend to continue further and going by the earnings for H1FY’13, the company should pay a dividend of Rs.4 for FY’13E translating into a dividend-yield of ~4.5 per cent.

LIC Housing Finance :: PAT below our estimate on lower margins ::Nomura research


LICHF reported a PAT of INR2.43bn versus our estimate of
INR2.72bn (street est. of INR2.6bn), largely driven by lower net
interest income.

TVS Motor :: Results above our estimates on higher margins ::Nomura research


Above or below expectations?
2QFY13 PAT came in at INR452mn which was 8% above consensus
expectations and 26% above our expectations. ASPs were 3% above
our estimates. Margins came in at 6%, while we were expecting 5.4%.

4 Nov: Pivotals: Reliance Industries, SBI, Tata Steel, Infosys :: Business Line


Nov 4: Union Bank, Marico, :: Business Line

 

Heidelberg Cement India Ltd. ::Target – INR 64 :: SPA

HCIL came out with steady set of numbers which were almost in-line with our estimates on the back of improved operational performance.
While the topline was in-line with our estimates at INR 2563 mn (+23.1% YoY), bottomline was marginally below our expectations at INR 75
mn against our expectations of INR 81 mn. Realisation during the last quarter improved by 19.5% YoY outpacing the 7.8% increase in
operating cost/tn, which resulted in sharp improvement in EBIDTA margin. We recommend a BUY on the stock with a target of INR 64.
Volume & Price driven growth
HCIL reported a healthy revenue growth of 23.1% YoY to INR 2563
mn, led by volume growth of 3.1% to 0.65 mt coupled with 19.5%
improvement in cement realisations to INR 3931/tn. HCIL like all other
cement players managed to witness sharp improvement in
realisations largely due to delayed monsoons, resulting in shorter
period of seasonal decline in prices. Demand is expected to improve
going forward with the commencement of construction activities post
monsoon season, which will result in recovery in cement prices.
Sharp improvement in margins
HCIL has reported sharp improvement in EBIDTA margins to 8.3% on
the back of firm cement prices. Freight cost increased by 6.4% to INR
500/tn due to the recent 5-7% increase and levy of service tax on rail
freight. Power & Fuel cost increased by 10.3% to INR 1141/tn largely
due to ~18% surge in power tariffs to INR 6.5/unit (expected to
remain elevated for next 2-3 quarters). However with realisations
outpacing total costs, EBIDTA/tn improved to INR 317 in Q3CY12.
New capacities on track
HCIL’s new additional clinker & grinding capacities of 1.9 mtpa & 2.9
mtpa respectively are all set to commence operations from Dec 2012
onwards, which will increase its total cement and clinker capacity to
6.0 mtpa and 3.1 mtpa. This expansion is well timed as it will enable
the company to increase its market share and enjoy the economies of
scale. The company plans to sell the additional output in the markets
of UP, MP, Bihar, Delhi and NCR.
Conveyor belt to reduce transportation cost
HCIL has commissioned its new conveyor belt in Oct 2012 for
transportation of limestone from mine to its plant (~20 km), the
benefits of which will be largely seen from CY13. This coupled with
change in rail road mix from 63:37 to 50:50 would result in savings of
~INR 75-100/ton.
Demand in Central region to improve
HCIL derives ~65% of its volumes from the central region. We expect
demand in central region to grow at CAGR of more than 10% (All India
demand CAGR 8%) aided by higher growth in MP due to state
elections next year. Additionally UP is also likely to witness
improvement in demand as the newly elected government is showing
increased interest in infrastructure spending. The company is
targeting to increase its market share in MP & UP to 12% & 9%
respectively (currently ~7-8%) post the expansion.
Outlook & Valuation
Well timed capacity addition and presence in high growth central
region of UP & MP places HCIL on a superlative growth path. Doubling
of cement capacity, increased usage of pet coke from 20% to 35%
along with conveyer belt & change in rail road mix will lead to
economies of scale. With majority of capex plans almost over, return
ratios are expected to improve. Currently the stock is trading at P/BV
of 1.3x & EV/ EBIDTA of 7.6x its CY13E earnings and EV/tonne of INR
2282 its CY13E capacity. We recommend a BUY on the stock with a
revised target of INR 64 based on FY13E EV/tonne of INR 2750.

QUERY CORNER - L and T Finance, Sintex, Nakoda, Bank of India, Glodyne, Orchid Chem:: Business Line

 

Angel Broking - Derivatives Report - 02.11.2012

Angel Broking - Derivatives Report - 02.11.2012

Angel Broking - Derivatives Report - 02.11.2012

Angel Broking - Derivatives Report - 02.11.2012

Angel Broking - Market Summary - 02.11.2012

Angel Broking - Technical Report - 02.11.2012

Angel Broking -Market Outlook - 02.11.2012

TRACKING TECHNICALS - MTT BUY CALL ON THERMAX:: Anand Rathi


FII & DII trading activity on NSE and BSE 02-11-2012

CategoryBuySellNet
ValueValueValue
FII2381.921999.73
382.19
DII877.971176.53
-298.56

 


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FII DERIVATIVES STATISTICS FOR 02-Nov-2012


FII DERIVATIVES STATISTICS FOR 02-Nov-2012 
 BUYSELLOPEN INTEREST AT THE END OF THE DAY 
 No. of contractsAmt in CroresNo. of contractsAmt in CroresNo. of contractsAmt in Crores 
INDEX FUTURES615431616.7333350914.3040903910230.03702.43
INDEX OPTIONS2873398148.232726097720.63168501348012.59427.60
STOCK FUTURES432161178.2934093925.21105456228580.46253.08
STOCK OPTIONS380411064.41381551059.93620101747.444.48
      Total1387.59
 

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Adani Enterprises (Rs 225.6): BUY :: Business Line


Index Outlook: Action-packed week ahead :: Business Line


Kotak: Wipro Demerger explained

Wipro demerger: How does that help investors?

Wipro, the third largest software services company in the country, started off as Western India Products (WIPRO) in 1945 after establishing an oil crushing unit at Amalner, near Jalgaon in Maharashtra. In 1980, the company started its technology business. Over the years, IT services became a dominant part of the business. For 2011-12, the IT business contributed 86 per cent of Rs 32, 053 crore revenue and 94 per cent of Rs 6,413 crore operating profit of Wipro Limited.
 
Here are some pointers that could help you comprehend the development:

  • The demerger: Wipro is hiving off non-IT business (consumer, lighting and medical diagnostic) offering an exit to investors interested only in the IT services business. According to the scheme, existing shareholders of Wipro have multiple options. The first one is a simple allotment of shares of the company Wipro Enterprises which would host the consumer, lighting and other non-IT businesses. So for every 5 shares of Wipro, you get an allotment of 1 share of the new company.
  • How can investors exit: Those not interested in holding shares of Wipro Enterprises can choose to take preference shares that offer a fixed rate of interest at 7 per cent. Preference shares are more of a debt than equity. Preference shareholders get preference for dividend over ordinary shareholders. However, they do not have a voting right. At the end of the tenure (12 months in this case), preference shares can be redeemed at a pre-determined value. So Wipro investors can get 1 preference share for every 5 Wipro share held.
  • Shareholder friendly: The third option for investors is to receive Wipro shares from the promoter in exchange for the non-IT business or Wipro Enterprises shares held. The best part of the exchange is that the company is not issuing any new shares. Shares held by the promoter Group would be allotted to investors in exchange. This protects the earnings per share of the company as it does not expand the equity capital. Wipro shares rose 4.2 per cent while the BSE Sensex traded flat on Thursday. This shows that investors are pleased with the move.
  • Promoter holding needs to fall: This means the promoter group led by Azim Premji will own more of the consumer business and less of IT services. Currently, Azim Premji and the promoter group control 78 per cent of the company. According to new rules drafted by Securities and Exchange Board of India, publicly traded companies have to have a minimum of 25 per cent public –shareholding by June 2012. According to Credit Suisse, a global bank, Wipro promoters have to sell shares worth Rs 3,700 crore. The demerger helps Wipro promoters achieve the objective.
  • Clear focus: The IT services business is highly competitive and needs a clear focus. Wipro has invested significantly over the past 18 months to win new customers for the IT services business. This is reflected in the sharp rise in high-revenue customers. Wipro has 8 clients who give over $100m revenue as of June 2012 quarter against 3 in March 2012 quarter.
Wipro Demerger Announcement: Wipro’s statement to stock exchanges on Thursday lists out details of the demerger scheme. Read more
To understand the concept of a demerger, you may want to go through this elaborated piece.
Read more
$240bn
Foreign institutional investors (FII’s) currently own $ 240bn worth of Indian equities, according to Morgan Stanley, a global bank. This is nearly a quarter of $ 1.1 trillion market value of all shares listed on the Bombay Stock Exchange. The non-promoter holding or free-float is half of this number. This means FIIs control nearly half of the value of shares traded on BSE.
 

Nov 4: Mutual Fund Talk :: Business Line


I wish to accumulate Rs 75 lakh in 10 years. I can invest Rs 18,000 a month. I have been investing for the past eight months in various funds via SIPs, as follows: Rs 4,000 each in HDFC Equity, SBI FMCG, Reliance Pharma, Franklin India Bluechip and Rs 2,000 in Sundaram Select Midcap.
I am bullish on the FMCG and Pharma sectors. Will I achieve my goal with my present investments?
Sunder

Construct short strangle on resistance-prone Tata Motors :: Business Line


Eye on the Market: Wipro’s round-robin with investors :: Business Line


Companies, it seems, can change their minds as quickly as investors.
Consider tech major Wipro. After sinking over Rs 2,300 crore of capital into its consumer and lighting business to build it up to a Rs 3,300 crore size, it has now decided that its IT and consumer businesses would be better off if they were separate.

What makes gold glitter :: Business Line