16 June 2013
Operating performance beats estimates ; Maintain Neutral Mahindra and Mahindra :Centrum
Operating performance beats estimates ; Maintain Neutral
Mahindra and Mahindra’s (M&M) overall results for 4QFY13 were better than our expectations with standalone EBITDA margin at 12.1% compared to our estimate of 11.1%. Combined EBITDA margins for M&M + MVML stood at 14.4% largely driven by strong performance of the FES segment despite the challenging environment. Though the tractor segment has seen demand revival for April’13 and May’13, the Auto sector has started to experience pressure with flat YTDFY14 volume growth. We continue to maintain our Neutral view on the stock with revised target price of Rs.1,023 driven by upward revision in earnings and roll forward of valuations to FY15E from earlier Sept 2014.
Key Highlights:
M&M standalone: 1.) Standalone operating income for the quarter stood at Rs.104bn registering a YoY growth of 12% (drop of 2.7% QoQ) compared to our estimate of Rs.96bn. Net Automotive realizations for the quarter stood at Rs.522,157 registering a growth of 3% YoY and 2.5% QoQ. Surprisingly, Net realizations for FES (Farm Equipments Sector) stood at Rs.574,656 registering YoY growth of 8.4% and QoQ growth of 9.4%. Driven by better than expected revenue growth, EBITDA margins for standalone operations stood at 12.1% vs. our estimate of 11.1%. EBIT margins for the Automotive segment stood at 9.8% (110bps YoY and up 131bps QoQ) and for the tractor segment 16% (up 25bps YoY and 48bps QoQ). 3.) Driven by better than expected revenue growth and operating performance, Adjusted PAT for the quarter stood at Rs.7.99bn vs. our estimate of Rs.6.6bn.
M&M + MVML: M&M + MVML combined operating income for the quarter was Rs.99.8bn (up 9.5% YoY but down 2.5% QoQ). Net Automotive realizations for the quarter stood at Rs.491,125 registering a growth of 3.1% YoY and 3.2%QoQ. Surprisingly, Net realizations for FES stood at Rs.574,656 registering a growth of 8.4% YoY and 9.4% QoQ. 2.) EBITDA margins for M&M+MVML operations stood at 14.4%. EBIT margins for the Automotive segment stood at 12.4% (171bps YoY and up 126bps QoQ) and of the tractor segment 16% (up 25bps YoY and 48bps QoQ).
Mahindra and Mahindra’s (M&M) overall results for 4QFY13 were better than our expectations with standalone EBITDA margin at 12.1% compared to our estimate of 11.1%. Combined EBITDA margins for M&M + MVML stood at 14.4% largely driven by strong performance of the FES segment despite the challenging environment. Though the tractor segment has seen demand revival for April’13 and May’13, the Auto sector has started to experience pressure with flat YTDFY14 volume growth. We continue to maintain our Neutral view on the stock with revised target price of Rs.1,023 driven by upward revision in earnings and roll forward of valuations to FY15E from earlier Sept 2014.
Key Highlights:
M&M standalone: 1.) Standalone operating income for the quarter stood at Rs.104bn registering a YoY growth of 12% (drop of 2.7% QoQ) compared to our estimate of Rs.96bn. Net Automotive realizations for the quarter stood at Rs.522,157 registering a growth of 3% YoY and 2.5% QoQ. Surprisingly, Net realizations for FES (Farm Equipments Sector) stood at Rs.574,656 registering YoY growth of 8.4% and QoQ growth of 9.4%. Driven by better than expected revenue growth, EBITDA margins for standalone operations stood at 12.1% vs. our estimate of 11.1%. EBIT margins for the Automotive segment stood at 9.8% (110bps YoY and up 131bps QoQ) and for the tractor segment 16% (up 25bps YoY and 48bps QoQ). 3.) Driven by better than expected revenue growth and operating performance, Adjusted PAT for the quarter stood at Rs.7.99bn vs. our estimate of Rs.6.6bn.
M&M + MVML: M&M + MVML combined operating income for the quarter was Rs.99.8bn (up 9.5% YoY but down 2.5% QoQ). Net Automotive realizations for the quarter stood at Rs.491,125 registering a growth of 3.1% YoY and 3.2%QoQ. Surprisingly, Net realizations for FES stood at Rs.574,656 registering a growth of 8.4% YoY and 9.4% QoQ. 2.) EBITDA margins for M&M+MVML operations stood at 14.4%. EBIT margins for the Automotive segment stood at 12.4% (171bps YoY and up 126bps QoQ) and of the tractor segment 16% (up 25bps YoY and 48bps QoQ).
Bond rally signals improving fundamentals: upgrade BOB, PNB to OW :: JPMorgan
We upgrade BOB and PNB to OW on the back of a sharp rally in bond
markets. We see the benefits extending beyond mere treasury gains – we
think the imminent deposit and base rate cuts will be incrementally
positive for loan growth and asset quality. The bond rally also creates
conducive conditions for a quick margin-accretive switch from excess
SLR to loans. Elevated delinquencies remain a risk, but recoveries should
improve given the more aggressive intent shown in recent weeks. We
retain our ratings on SBI (OW) and BOI (UW) with raised price targets.
Interest rates headed down. We think the bond market rally (yields
markets. We see the benefits extending beyond mere treasury gains – we
think the imminent deposit and base rate cuts will be incrementally
positive for loan growth and asset quality. The bond rally also creates
conducive conditions for a quick margin-accretive switch from excess
SLR to loans. Elevated delinquencies remain a risk, but recoveries should
improve given the more aggressive intent shown in recent weeks. We
retain our ratings on SBI (OW) and BOI (UW) with raised price targets.
Interest rates headed down. We think the bond market rally (yields
India’s Gold Obsession - Not Easy to Wish Away:: JPMorgan
April trade data reported yesterday was a rude shock to both the Equity
and Currency markets. Given the substantial correction in Gold and Oil
prices over the recent past, markets were expecting a meaningful respite
on the Current Account Deficit. But this was not to be. The culprit –
apart from slowing exports, was a 138% oya surge in gold imports. The
fall in gold prices led to a sharp increase in demand. Anecdotal evidence
suggests that this trend continued over May as well.
The behavioral pattern seen over April-May is not an anomaly. Data
over the last decade suggests that a substantial correction in Gold Prices
has typically led to an increase in demand. Our regression analysis
suggests a meaningful inverse relationship between price and demand.
Consequently we believe investors should temper their optimism on the
impact of the correction in Gold prices both on the CAD and on
financial savings. J.P. Morgan Economists believe that the CAD will
narrow only to about 4.6% of GDP in FY14E from an expected 5.1% of
GDP in FY13E (vs. consensus estimates of 4% for FY14E).
Over the last two years, Gold has been attracting significantly larger
proportion of household savings. Higher inflation and weak growth has
likely influenced this trend. Going forward, revival in economic growth
and improved investor confidence are keys to reversing this trend.
and Currency markets. Given the substantial correction in Gold and Oil
prices over the recent past, markets were expecting a meaningful respite
on the Current Account Deficit. But this was not to be. The culprit –
apart from slowing exports, was a 138% oya surge in gold imports. The
fall in gold prices led to a sharp increase in demand. Anecdotal evidence
suggests that this trend continued over May as well.
The behavioral pattern seen over April-May is not an anomaly. Data
over the last decade suggests that a substantial correction in Gold Prices
has typically led to an increase in demand. Our regression analysis
suggests a meaningful inverse relationship between price and demand.
Consequently we believe investors should temper their optimism on the
impact of the correction in Gold prices both on the CAD and on
financial savings. J.P. Morgan Economists believe that the CAD will
narrow only to about 4.6% of GDP in FY14E from an expected 5.1% of
GDP in FY13E (vs. consensus estimates of 4% for FY14E).
Over the last two years, Gold has been attracting significantly larger
proportion of household savings. Higher inflation and weak growth has
likely influenced this trend. Going forward, revival in economic growth
and improved investor confidence are keys to reversing this trend.
Macro Stability Indicators Continue to Improve Gradually: Morgan Stanley Research,
Key Macro Indicators – What Are They Saying?
Positive
• Industrial production growth accelerated to 2.5% in March, led by improvement in capital goods
• Private projects under implementation picked up a bit in QE March; public sector projects remained steady
• WPI inflation decelerated to a 41-month low of below 5% in April
• CPI inflation decelerated for second consecutive month to 9.4% in April
• Rural agriculture sector wages continue to show signs of moderation, though they are still high. Rural farm wage growth decelerated to 16.9% YoY for the three months ended Mar-13 from the peak rate of 22% during the three months ended October 2011
• 12-month trailing fiscal deficit has shown improving trend since Sep-12
Negative
• Export growth decelerated to 1.7%YoY in April; on a seasonally adjusted sequential basis, exports fell by 2.8% in April
• Trade deficit widened in April to US$17.8bn vs. US$10.3 bn in Mar, led by higher gold imports (up 138%YoY)
•
Auto sales continued to decline in April
•
Seaport traffic growth declined in April
• Corporate revenue growth decelerated further in QE Mar-13
• Credit ratio (rating upgrade to downgrade ratio by Crisil) remains low at 0.6x in 2H F2013
Positive
• Industrial production growth accelerated to 2.5% in March, led by improvement in capital goods
• Private projects under implementation picked up a bit in QE March; public sector projects remained steady
• WPI inflation decelerated to a 41-month low of below 5% in April
• CPI inflation decelerated for second consecutive month to 9.4% in April
• Rural agriculture sector wages continue to show signs of moderation, though they are still high. Rural farm wage growth decelerated to 16.9% YoY for the three months ended Mar-13 from the peak rate of 22% during the three months ended October 2011
• 12-month trailing fiscal deficit has shown improving trend since Sep-12
Negative
• Export growth decelerated to 1.7%YoY in April; on a seasonally adjusted sequential basis, exports fell by 2.8% in April
• Trade deficit widened in April to US$17.8bn vs. US$10.3 bn in Mar, led by higher gold imports (up 138%YoY)
•
Auto sales continued to decline in April
•
Seaport traffic growth declined in April
• Corporate revenue growth decelerated further in QE Mar-13
• Credit ratio (rating upgrade to downgrade ratio by Crisil) remains low at 0.6x in 2H F2013
ITC - Rounds off a strong FY13; remains a core LT holding ::JPMorgan
ITC rounded off FY13 with another good quarterly performance, with revenue
and earnings for Q4FY13 coming in ahead of our estimates. Net sales, EBITDA,
and PAT witnessed growth of 19%, 20% and 19%, respectively. Cigarette, other
FMCG and agri business in particular posted healthy EBIT growth. We believe
ITC should remain a core long-term holding, given steady cigarette EBIT growth
(supported by strong pricing power), improving profitability of other FMCG
business, high FCF generation, and potential for a higher dividend payout.
Aggressive price hikes this fiscal year will overshadow volume weakness and
support mid- to high teens earnings growth in our view. The stock has run up 17%
YTD (trading close to the higher end of its historical valuation band, relative
returns of 13% vs. the Sensex) and we would seek better entry points.
and earnings for Q4FY13 coming in ahead of our estimates. Net sales, EBITDA,
and PAT witnessed growth of 19%, 20% and 19%, respectively. Cigarette, other
FMCG and agri business in particular posted healthy EBIT growth. We believe
ITC should remain a core long-term holding, given steady cigarette EBIT growth
(supported by strong pricing power), improving profitability of other FMCG
business, high FCF generation, and potential for a higher dividend payout.
Aggressive price hikes this fiscal year will overshadow volume weakness and
support mid- to high teens earnings growth in our view. The stock has run up 17%
YTD (trading close to the higher end of its historical valuation band, relative
returns of 13% vs. the Sensex) and we would seek better entry points.
Investment Alerts: A lifeline from Fitch :: Business Line
Amidst gloomy news about dropping industrial production and the sharp fall in the rupee, there was a silver lining. Rating agency Fitch sees hope for India and upgraded the country’s outlook from ‘negative’ to ‘stable’. The optimism stems from the Government’s efforts to curtail fiscal deficit and remove supply constraints.
An improved outlook means lower risk of investing in Government debt which could see more foreign capital flows. Viewed against the background of the recent hike in the limit for FII investments in Government bonds by $5 billion, this upgrade could help attract foreign capital and support the sagging rupee.
Love you, love you not, O foreign investor! :: Business Line
Delayed FDI approvals, flip-flops about Mauritius and run-ins with the taxman may leave foreign investors confused.
Not to let the left hand know what the right hand is doing may be a good policy in espionage. But why is the Indian Government following this principle? Consider the garbled signals that it is sending out to foreign investors. On Friday, galvanised into action by the sliding rupee, the Finance Minister was going all out to woo foreign investors, promising to review or even wholly do away with existing Foreign Direct Investment (FDI) limits in various sectors. The very next day, you find the Foreign Investment Promotion Board (FIPB) putting the Jet-Etihad deal, one of the very few large FDI deals that has actually fructified this year, on hold, without citing concrete reasons. The reported reasons for this range from the FIPB requiring more details about ownership and effective control of Etihad, to doubts about whether Jet Airways’ promoter Naresh Goyal’s stake will count as FDI (as he is an NRI). While it is quite right for the FIPB to demand transparency on the entities infusing money into India, why should calculation of FDI limits be subject to any confusion, after so many years of liberalisation?
Supreme Infrastructure India Ltd-Q4FY13 Result Update Maintain : BUY --KC research
:: Supreme Infrastructure India Ltd (SIIL) has reported a revenue of `6533.8 mn in
Q4FY13, with a modest revenue growth of 28.7% on Y-o-Y basis and by 18.7% on
sequential basis. For FY13 SIIL’s revenue of `19869.5 mn with growth of 31.9%. During
the year SIIL’s consolidated revenue grew by robust 35.1% to `23328.8 Mn.
Q4FY13, with a modest revenue growth of 28.7% on Y-o-Y basis and by 18.7% on
sequential basis. For FY13 SIIL’s revenue of `19869.5 mn with growth of 31.9%. During
the year SIIL’s consolidated revenue grew by robust 35.1% to `23328.8 Mn.
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