Bajaj Auto :FY13 annual report: Key takeaways: Credit Suisse

 Bajaj’s FCF declined from Rs29 bn in FY12 to Rs17 bn in FY13. A
large part of the decline can be attributed to higher capex (Rs3.5
bn out of which Rs2.1 bn was spent on aircraft), a delay in VAT
refunds (Rs3 bn) and higher receivable days (Rs3 bn).
 Losses at Bajaj’s Indonesian subsidiary widened from Rs120 mn to
Rs240 mn. It expects a pick-up in 2H FY14 once its products will be
sold through Kawasaki network. KTM benefitted from the smaller
made-in-India products and saw healthy >30% volume growth.
 FY13 also witnessed increases in both advertising (20 bp) and
R&D (40 bp) spends from Bajaj. Advertising spends in India
increased 40% in FY13 and we expect them to increase further
with new launches and rising competitive intensity.
 A region-wise break-up of Bajaj’s exports confirms what we have
been saying about strong growth in Africa, steady growth in Latin
America and a decline in Asia. While Bajaj started FY13 with an
optimistic outlook reflected in its capacity expansion at Waluj and
amount of hedges (US$1.4 bn), Bajaj’s lower hedges for FY14
(US$0.9 bn) reflect the uncertainty prevalent in export markets.

Financial Planning advice :: Business Line

  

India Coal : Deficit Is Rising – but Not Alarmingly :: Morgan Stanley Research

India Coal
Asia Insight: Deficit Is Rising
– but Not Alarmingly
India’s coal imports will grow in F13-F17, but the
pace is likely to be slower than generally thought in
India and below F11-F13. That should be aided by
higher volumes from CIL and should boost prices in
India. CIL, NTPC and Adani Ports would benefit.
Most challenged: Adani Power, and Nalco.
India’s coal crunch – growing but at a falling pace:
Our mining, utilities, cement and infrastructure research
teams collaborate to put into proper perspective the key
debates around India’s coal market, as seen below.
Key Debate 1 – How will coal imports trend in India?
We project a 13.2% CAGR in thermal coal imports in
F13-F17, to 160mt. Our F17 forecast is 11% lower than
consensus in India. Demand growth in F13-F16 should
be lower than market expectations. We expect output to
be buoyed – by recent government initiatives and by
captive mining – to a CAGR of 20% in F13-F17 versus
1.1% in F10-F13.
Key Debate 2 – Will infrastructure emerge as a
constraint? We conclude that logistics present the
biggest challenge for improvement in coal supplies.
Railways may just be able to handle the coal quantities
that we are forecasting, but would have to do this by
shifting some capacity away from other cargoes.
Key Debate 3 – How will coal prices evolve from
here? India’s contract coal prices should post a CAGR
of 5.8% in F13-F17 vs. the market’s view of 3-4%. We
expect the price rise will be greater (CAGR of 7.9%) for
non-power sector consumers. Also, we do not see much
progress on privatization, coal price regulation, new
captive blocks, or a break-up of CIL until F17.
Prospects of improving coal output strengthen our OW
calls on CIL and NTPC; rising imports could help Adani
Ports. Rising domestic coal prices too would help CIL.
Increasing coal prices and coal shortage would likely
continue to trouble Adani Power and Nalco.

Monsanto Company F3Q Beats Largely Below The Line; Intacta F14 Acreage Target: 3MM Acres :: Morgan Stanley Research

Impact on our views: We would not expect any
material stock response from today’s results or outlook.
Monsanto’s underlying F3Q EPS of $1.66 results came
in ahead of both MS ($1.59) and consensus ($1.60)
forecasts that were recently tempered by the company’s
preannouncement. The outperformance came largely
below the gross profit line due to a lower tax rate ($0.07)
and lower interest expense ($0.01), partially offset by
higher than forecast SG&A ($0.01) and R&D ($0.06).
From a gross profit perspective, seeds overall came in
$0.02 below our forecast, more than offset by Ag
Productivity $0.05 above our forecast. FY13 and FY14
guidance was not surprisingly left unchanged from the
update a few weeks back. However, the high end of
cash flow from operations guidance was reduced by
$200 million, but FCF guidance was left unchanged – we
assume this is a function of working capital changes
(i.e., inventory increasing due to seed returns due to
lower planted acreage) and assume this number could
still move up or down depending on the final tally of
sales / returns determined in F4Q13.
Monsanto targets about 3 million acres for Intacta in
F14. This is in line with our expectations. We would
imagine both extrapolating this initial acreage number
into the out years and Intacta pricing to be a focal point
of today’s conference call.
US biotech acreage targets exceeded. Monsanto
expects to be at or above the high end of its acreage
forecast for Reduced Refuge Corn (36-38 million acres)
and Roundup Ready 2 Soybeans (39-41 million acres).
This is notable given the likely decline in expected
planted acreage in the US.
Corn and soy margins weak as anticipated. Gross
profit margin in corn was 55% versus 61% in the year
ago period; soy margins were 60% versus 66% in the
year ago period. Soy margins faced the headwind of.

Sun Pharma – BUY -- Defining the Earnings Arc -IIFL

Multiple swing factors, big enough to make material swings in
FY14 and FY15 growth and profitability, make Sun Pharma
earnings projection difficult. Despite that, we believe that the
recent stock price correction and the earnings upside from
weakened INR make Sun’s valuation attractive. In the median
case, we expect 21% core earnings growth in FY14 and 14% in
FY15. If all factors play out favourably, FY14 earnings growth
could be as high as 44%; on the downside, earnings could
remain flat for the year. We raise our FY14, FY15 core earnings
estimates by ~8% to factor in the weaker INR; raise our target
price to Rs1,114. Maintain BUY.

Using your adviser as a financial therapist :: Business Line

In our endeavour to help you create a least-effort portfolio, we had discussed in this column last week that you should not spend much time in assessing your risk appetite.

Several readers responded to the article, stating that all our suggestions so far, if implemented, would make investment advisers irrelevant! That is not our intention. We wish to reiterate that investment advisers can add value to your portfolio.

In this article, we discuss why the value-added services of your adviser comes more from financial therapy, and not from helping you buy some investment products from the market.

Beyond investments

There are two rules to creating a least-effort portfolio. One, you should invest for a purpose, not just to earn returns. And two, your investment process should require you to spend minimal time in translating your savings into investments.

Our objective is simple. You should achieve your goals without spending your leisure time evaluating investments or monitoring your portfolio; for leisure time should be set aside for family and fun activities. It is in keeping with this spirit that you should carefully evaluate the services that you can ask of your adviser.

It is typical for individuals to seek the opinion of their adviser to recommend best-performing mutual funds, stocks or commodities for investments. In a least-effort portfolio framework, your task is clearly laid-out. A significant proportion of your portfolio will be in index funds, an investment that you can make without the help of your adviser. And if you do want to invest in active funds, remember this: No active fund can consistently outperform the market. And advisers cannot consistently pick active funds that can outperform the market.

Therefore, it is moot if you should use your advisers for only such recommendations. You should instead concentrate on fine-tuning your investment process so that you are always on the path to achieving your investment objectives. It is in this context that your adviser’s role as a financial therapist becomes important.

Financial therapy

Research in psychology has found that our past experiences, especially negative ones, can unconsciously affect our decisions. If you have, for instance, witnessed your parents lose their wealth because of a market crash, you will be averse to investing in equity, even if you have the ability to take high risk. This can cause problems if you are self-managing your investments; your aversion would prompt you to invest less in equity, even if doing so will hurt your investment objectives. An adviser, as a financial therapist, can help you recognise your unconscious feelings and moderate your aversion to equity.

Sometimes, your biased decisions can also affect your investment performance. Consider these two examples. One, you may have suffered a setback in your business or profession, causing emotional and financial stress. And if the market crashes during this period, you may be tempted to sell your retirement investments at a loss. It is not good to take a financial decision when you are stressed, as your logical-thinking ability can fail. Your adviser can help you moderate your cognitive error and talk you out of such a decision.

Two, you may be spending more than you should on non-discretionary expenses or, perhaps, you may be stretching your household budget by taking a large mortgage on your home. Your adviser can apply behavioural psychology to nudge you into spending less and saving more.

Conclusion

Your cognitive and emotional biases stand between you and your portfolio’s good investment performance. And your portfolio’s performance is a critical variable in achieving your life goals. So, it is important that you identify and moderate your cognitive and emotional biases. Your adviser can help you in this regard; he/she can act as your financial therapist and continually nudge you on your path to financial freedom.

Make corporate NPS work for you :: Business Line

Phoenix Mills :Rising footfalls and occupancy at malls; maintain Buy (on CL) : Goldman Sachs

What's changed
We believe that launch/revamp of entertainment options at the Phoenix malls
in Mumbai, Bangalore and Chennai are driving an increase in footfalls and
occupancy. Some key events this quarter at Phoenix Mills include: (1)
Increased entertainment options at Kurla, Mumbai. We saw higher
occupancy and footfalls on our recent visit to the Phoenix mall at Kurla as
various entertainment and leisure retailers ramped up operations, including
the 12-screen PVR Cinemas and Amoeba; (2) IMAX at High Street
Phoenix (HSP). PVR has opened its first IMAX theatre in Mumbai at HSP,
Lower Parel. We expect this to further drive consumption at the mall; (3)
Stake purchases at SPVs. Phoenix Mills has announced stake purchases
at various market cities from IL&FS and Edelweiss Real Estate; and (4)
Luxury mall in Chennai. The company is constructing a luxury mall
measuring 0.2 mn sqft at Chennai in addition to the existing mall.
Implications
We believe that higher occupancy will drive higher rental revenues and
higher footfalls will boost consumption at various malls, leading to higher
revenue share for Phoenix Mills in FY14E. We believe that the luxury mall
in Chennai will drive up rentals over the medium term, as was the case
with the start of Palladium at HSP, Mumbai.
Valuation
We adjust our model for Phoenix Mills to reflect stake purchases in various
SPVs and introduce the luxury mall in Chennai. We raise our FY14E NAV
per share to Rs400 from Rs389 and our 12-month NAV-based target price
to Rs360 from Rs350. Our standalone Phoenix EPS estimates remain
unchanged. Maintain CL-Buy. Key catalysts: 1) continued increase in
consumption at various market cities in FY14; and 2) higher retail FDI
leading to demand for more quality retail space.
Key risks
Sustained GDP slowdown and continued high interest rates.
INVESTMENT LIST MEMBERSHIP
Asia Pacific Buy List
Asia Pacific Conviction Buy List