Technicals- Sterlite Industries, Subex, PSL, Foseco India, Balrampur Chini,Fresenius Kabi Oncology:: Business Line

PSL Order book adds musclePSL Order book adds muscle ::Edelweiss,

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PSL’s Q3FY12 standalone revenue at INR5.2bn (down 31.2% YoY, up 2.3%
QoQ) was in line with estimate. EBITDA and PAT dipped to INR0.8bn
(down 6.2% QoQ and 7.0% YoY) and INR0.1bn (down 36.5% QoQ and
67.4% YoY), respectively. The company’s standalone order book stands at
INR29bn with majority orders worth ~INR16bn announced in the last two
months. We have increased our FY13E EPS 6.3% to INR16.2/share to
incorporate higher EBITDA margin (against our earlier expectation).
Maintain ‘BUY’ with a target price of INR140/share (March 2013).
Revenue and EBITDA in line with estimates; pipe sales at 48.6KT
Q3FY12 standalone pipe sales at 48.6KT (down 35.4% YoY and 8.5% QoQ) were
marginally below estimated 50KT. However, revenue increased 2.3% QoQ due to
higher pipe realizations at USD1,117/mt (Q2FY12 realisation USD1,056/mt). Coating
segment recorded EBITDA margin of 12‐13% while pipes EBITDA was ~USD197/mt
(down 9.4% QoQ). Depreciation, interest and tax rate at INR278mn, INR408mn and
30%, respectively, were flat QoQ and in line with estimates. PAT at INR67mn was
lower than expected due to carried down effect of marginally lower EBITDA.
Order book at INR29bn; lower EBITDA margin on new orders
Recent announcement of orders propelled the order book back to a decent INR29bn
(provides visibility over next 3‐4 quarters). However, the EBITDA margin for new
orders seems to be lower at USD130‐150/mt than PSL’s 9mFY12 average of
~USD200/tn. Rising steel price regime leads to negative impact on EBITDA margin.
Management guided for 50‐60KT pipe sales for US facility in FY12; 100KT sales in FY13.
Outlook and valuations: Uptick in order book; maintain ‘BUY’
With no major capex plans for the next 12 months, PSL is likely to repay some portion
of its debt during FY13 (as per management), thereby reducing interest expenses. We
are rolling over our target price to March 2013 and peg the same at INR140/share. At
CMP of INR69/share, the stock trades at 5.6x/4.3x our FY12E/13E EPS. Our price target
estimate is based on average of P/E (7.5x) and EV/EBITDA (5.4x) valuations. We
maintain ‘BUY’ recommendation on the stock

Sizzling Stocks :Blue Dart Express , PSL ::Business Line,

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Sizzling Stocks :Blue Dart Express (Rs 1,383)

Blue Dart Express skyrocketed 34 per cent accompanied by extraordinary volumes last week on speculation of delisting. It took twin supports, from its key long-term support level and up trend-line around Rs 1,000 in late March 2011 and started to move higher. The stock broke through its significant resistance level of Rs 1,200 and marked a new all-time high of Rs 1,478 on April 8.

We notice the formation of shooting star candlestick pattern, which is a bearish reversal pattern. Moreover, the stock's daily relative strength index is featuring in the over bought zone signalling that a near-term correction is due. The stock can decline to its immediate support level of Rs 1,200 in the ensuing days. Next support is at Rs 1,000. Medium-term target for the stock is Rs 1,500.

PSL (Rs 91.9)

The stock zoomed 21 per cent during the previous week with heavy volumes. However, the stock encountered twin resistances at Rs 95, a medium-term key resistance level and intermediate-term down trend-line and is currently testing resistance. The stock has been on an intermediate-term downtrend since its January 2010 peak of Rs 188. Only a decisive move above Rs 140 will mitigate this downtrend. Inability to surpass the resistance of Rs 95 will pull the stock down to Rs 83 and then to Rs 75 in the near-term.

On the other hand, emphatic breakthrough of Rs 95 can take the stock higher to Rs 105 or Rs 110 in the short-term. Strong move above Rs 110 will give a medium-term target of Rs 120

PSL - higher revenues from coatings; Buy :: Edelweiss,

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�� Coating revenue jumps; consolidated pipe sales lower at ~80 KT
PSL’s Q3FY11 net consolidated revenue jumped 11.6% Q-o-Q to INR 7.7 bn, in
line with our estimate. Revenue from pipes dipped 38.7% Q-o-Q to ~INR 3.9 bn
due to lower sales volume of ~80 KT (-45% Q-o-Q), which dipped due to lower
order book. However, dip in sales volume was negated by higher coating
revenue of INR ~3.9 bn (+277% Q-o-Q). PSL’s consolidated order book as on
December 31, 2010, stands at INR ~18 bn (~370 KT) which includes the
recently won water pipeline order of USD 80 mn (90 KT) from Saudi Arabia for
its Sharjah facility. The US plant was lying idle for most of the quarter due to
lack of orders; the plant has started as management is accepting lower volume
orders for this facility as it waits for larger orders.

PSL Ltd- Excess leverage may play spoilsport…ICICI Sec

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Excess leverage may play spoilsport…
PSL reported its Q2FY11 numbers that were in line with our estimates.
Revenues grew ~ 25% YoY despite sluggish growth QoQ (down ~14%)
against our estimates of | 780 crore due to lower shipments from the
0.3 MTPA plant in the US. EBITDA margins also improved (up ~100 bps
YoY and 130 bps QoQ) led by lower raw material cost (down ~11%
QoQ) and reduced employee expenses (down ~ 43% QoQ). PAT
remained under pressure due to excess leverage on the books (debt at
~ | 2295 crore), which led to a sharp spike in interest cost by ~100%
YoY. So far, the Q2FY11 results reported by pipe manufacturers have
not been encouraging. Also, based on order book visibility concerns, we
have revised down our target price to | 110/share with an ADD rating.

PSL- Results disappoint: Edelweiss

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PSL
Results disappoint


􀂄 Consolidated revenues dip; standalone pipe sales higher at 132,488 MT
PSL’s Q2FY11 net consolidated revenues dipped 15% Q-o-Q, to INR 7.4 bn, as
coating income receded from INR 2.1 bn in Q1FY11 to INR 1 bn during the
quarter. Revenues from pipes were marginally lower Q-o-Q, at INR 6.3 bn, with
consolidated pipe sales at 145 KT (+28.1% Q-o-Q). Although standalone pipe
sales were 37% higher Q-o-Q, at 132.5 KT, dip in sales from the US plant
impacted the blended EBITDA margins and overall profitability. The US plant was
lying idle for most of Q2FY11 due to lack of orders, but the management has
guided that, going forward, the plant has few orders in the pipeline.

Edelweiss: PSL - banking on Indian pipeline capex; Buy

We recently met the management of PSL Ltd. (PSL) to get an update on the company. Following are the key takeaways of our interaction:

Order book to gain traction with brighter visibility for new order accretion

PSL’s order book currently stands at ~INR 15 bn (~400 KT) with volumes of 200KT for PSL India, ~30-40 KT for PSL Sharjah and ~60-70 KT for PSL USA. Although new order accretion in HSAW pipes has been moderate in FY11 due to slowdown in the oil & gas capex, it has gathered pace for water-based projects, especially from the Middle East; PSL has bids outstanding of ~INR 40-50 bn for water projects (domestic and overseas).

In India, PSL has bagged a 30 KT order for the recently bid Dabhol-Bangalore pipeline of the total orders of 180 KT, due to its pipe mill located in Chennai. Also, it expects orders from domestic water projects (Jaipur) and RGTIL’s upcoming pipelines in East India (Mehsana-Bhatinda, Mallavaram–Bhilwara, Kochi-Mangalore-Bangalore, Jagadishpur-Haldia). Moreover, the company has some bids outstanding in the US.

Leveraging on strategic advantages and X-80 technology for new orders

PSL is currently focused on relocating capacities from its existing facility at Kandla to its mills in Chennai and Jaipur, at a capex of INR 100 mn per mill. Also, the company recently received the X-80 certification for its Vizag mill. Lower freight rates due to strategic location of mills, together with cost savings on X-80 pipes (post technical qualification of its mills) are likely to give PSL a competitive edge in bidding for new orders from GAIL.

The management has guided to EBITDA margins of USD 70-90/MT for PSL USA, USD 60-80/MT for PSL India and USD 80-100/MT for PSL Sharjah. Margins in India would remain at sub USD 100/MT in the near term due to intense competition from other domestic players.

Outlook and valuations: Sector to gather momentum; maintain ‘BUY’

The pipe industry has been facing lower order accretion for some time. This has impacted the net order book of all pipe companies, including PSL. Going forward, we expect orders to pick up as pipeline capex in India fructifies and the oil & gas sector gathers momentum globally. After the recent annual report update, we have revised our earnings estimates (See Table 1) and have also introduced fair value for PSL, valuing it at INR 160/share. At CMP of INR 115, the stock is trading at an attractive P/E of 6x FY12E EPS and EV/EBITDA of 6.2x FY12E. We maintain our ‘BUY/Sector Outperformer’ recommendation on the stock.