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Contents
Tractors India - Management Meeting update
(CMP Rs730/Share, MCap Rs7.3 bn, PER 10X FY11E - Attractive Valuations)
We met Mr. Aloke Banerjee, President & CFO, TIL Ltd. Key takeaways of the meeting are:
TIL Ltd a slow N steady company from Kolkata is now eyeing a multifold growth over next 5 years. The accelerated growth would encompass all 3 divisions i.e. Material Handling Equipment (MHE), Construction & Mining Equipment (CME) and Power Supply System (PSS). The CME and PSS businesses involve trading, leasing and service of Caterpillar Equipment - now stands transferred to wholly-owned subsidiary "Tractors India Private Ltd" w.e.f April 2010. This certainly sets the stage for accelerated growth in Caterpillar business in next 5 years. Internally, TIL is eyeing a 5-fold jump in revenues from Rs10.6 bn in FY10 to Rs60.0 bn in FY16E. The target mix for manufactured to traded products would be 50:50 over next 5 years versus 20:80 currently. Upfront, TIL target is very aggressive with doubling of revenue CAGR from 20% in FY05-FY10 period to 41% in FY10-FY16E period. Lot depends on policy initiatives and execution in Mining industry and TIL capability to successfully invigorate the MHE business. Considering its track record, we believe 25% CAGR in revenues is achievable for next 5 years. TIL is eyeing Ebidta margins of 11-13% (blended at company level) and stable working capital cycle. But, to accomplish this, TIL is eyeing large capex in near term, which could possibly impact the return ratios in near term.
Auto –December 2010 volume update
Bajaj Auto Ltd (BAL)
n Total sales increased by 9.8% YoY to 276,803 units
n Motorcycle sales grows by 10.5% YoY to243,675 units. Numbers are below expectation.
n Three wheelers sales were up by 4.9%YoY at 33,128 units
n Exports sales grew by 5% units to 95,388 units. Exports numbers are below expectations
Hero Honda (HH)
n Total sales increased by 33.3% YoY to 501,111 units. Numbers are above expectation
TVS Motors Ltd. (TVS)
n Total sales increased by 68.7% YoY to 172,759 units
n Motorcycle sales increased by 23.9% YoY 61,404 units
n Scooters/ Mopeds sales increased by 108.9% YoY to 107,855 units
n Three wheelers sales grew by 188.8% YoY to 3,500 units
n Export sales increased by 10.3% YoY to 19,002 units.
Export grows by 5.2% mom; trade deficit eases marginally to $8.9bn
n The trade deficit for the month of November eased marginally to $8.9bn driven by an improvement in export growth.
n Export growth improved to 5.2% mom while import growth stood at 0.4% mom, resulting in easing of the trade deficit by $8.9bn.
n The month of November saw the rupee depreciate by ~1.4% mom boosting exports, while oil prices went up ~ 3.4% mom, muting oil-import growth.
n The trade deficit YTD has widened to $81.7 bn. from $72.8 bn last month and $68.4 bn for the month of November last year.
Emkaynomics; Dec 17, 2010; Fortnightly round up of key banking and economic indicators
n The growth in non food credit has moved up to 23.5% for the week ended Dec 17, 2010 however growth in deposit mobilisation remained low at 14.8%
n The CD ratio has expanded to 75.8% for the week ended Dec. 17, 2010 with TTM CD ratio moving past 100%. The incr. CD ratio stood at a high of 128%
n Money supply growth has moderated further to 15.8% and the money multiplier marginally dropped to 4.86x
n Call money rates eased to 5.65% on January 03, 2011 from 6.45% last fortnight, indicating an ease in liquidity pressures
n The shortage of liquidity in the system was to the tune of Rs418bn. The net repo balances stood at ~ Rs1.48tn for the week ended Dec 24, 2010.
n The spread between the long and short end OIS has eased and stand at 30bps as opposed to 39 bps last fortnight
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