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FITT Research: India Power Sector Finance: A step-up transformer [Dipankar
Choudhury]
Deutsche Bank Company Research's Investment Policy Committee has deemed
this work F.I.T.T for investors seeking differentiated ideas. The specialized power
lenders Power Finance Corp (PFC) and Rural Electrification Corp (REC) are
benefiting from the increasingly harder-to-finance, capital-constrained power
sector, armed with low operating costs and benign regulatory disposition. We
initiate coverage on PFC and REC with Buy recommendations and higher-thanconsensus earnings estimates.
India steel update: Steel pricing momentum across world geographies
[Abhay Laijawala]
We have seen strong momentum in steel pricing globally since Dec'10, with the
strongest trends seen in the US, where prices have risen by ~17% MoM. While
prices in Europe have not moved up as sharply, we understand that companies are
planning price hikes, particularly for steel plates. CIS HRC export prices are also
set to rise to about USD670/tonne from USD640/tonne currently, which could give
Indian steel producers another opportunity to raise domestic prices (currently at
INR32,500/tonne) in line with the corresponding landed price.
Construction Materials: Weak demand, costs may force another round of
production discipline [Chockalingam Narayanan]
Indian cement industry again found it difficult to push through higher volume
growth with the cement majors reporting a despatch growth (not necessarily
consumption) of only c5% YoY (c23% MoM). Jaiprakash Associates is an
exception with c29% despatches jump due to new capacity ramp up; but its
utilisation at c72% is in line with most cement players.
Maruti Suzuki Limited: December 2010 volumes - strong numbers continue
[Srinivas Rao]
Maruti's December 2010 volumes at 99,225 units (+17% YoY) continue to be
robust. We note that volumes for December are lower than the average run-rate
(c110K/month) achieved by Maruti over the past few months due to a planned five
day maintenance shutdown. We expect production to revert to the debottlenecked capacity of 110K from January onwards.
Sun Pharma: Significant events at Caraco in last 1m [Abhay Shanbhag]
(1) On 6 Dec, Sun proposed to take US listed Caraco (Sun’s subsidiary for ~ a
decade) private by acquiring all its free float of~26% at a cash price of USD
4.75/share. (2) On 23 Dec, Caraco announced receipt of some purported class
action lawsuits with respect to this proposal, alleging breaches of fiduciary duties,
and asking the court to enjoin this proposal. (3) On 27 Dec, Caraco announced that
its Distribution and Sale agreement with Sun, while extended for another year will
be terminated in Jan’12. Sun exercised its rights of ending, citing margin
constraints due to competitive pricing pressures in US. (4) On 3 Jan, Caraco
announced that it does not expect to re-commence operations at its only
manufacturing unit (at Detroit, US) by Mar’11e - its earlier guidance. It is now
unable to predict when manufacturing may resume
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