Tata Power Vs Reliance Power
Friday, October 31, 2008
Tata Power reported net revenue of Rs19.6bn (up 45% YoY), primarily on the back of increasing fuel costs which are a complete pass through in the regulated business model. EBITDA was up 1% YoY at Rs2.7bn; however, EBITDA margins were under pressure this quarter declining by 584 bps YoY primarily due to an increase in cost of fuel (up 76% YoY). Other income (excluding Rs1.7mn on profit on sale of investment in F2Q09 vs Rs851mn in F2Q08 and forex gain of Rs767mn in F2Q09 vs Rs90 mn in F2Q08) was Rs1.1 bn (up 141% YoY). This was largely attributed by dividend income received from subsidiaries.
Reported earnings, however showed a modest 2% YoY decline at Rs2.5bn. The
company's consolidated forex debt is US$980mn, which includes US$900mn in the coal SPVs and US$80mn in the corporate book. On acquisitions, Tata Power stressed that it will look at it only when it feels that the valuations look reasonable and denied speculation of any specific potential acquisitions.
Tata Power is expected to report EPS between Rs 27 to Rs 29 for FY09
Reliance Power:
The company intends to secure financial closure for ~9GW of generation capacity by Mar-09. Management is negotiating for annual interest-rate reset clauses while tying up debt funding; typical cost of funds is currently 12.5%-13%. As international coal prices drop, RPWR is receiving unsolicited proposals for long-term coal supply for its proposed coastal coal-fired projects. On gas supplies, mgmt. is optimistic of a near-term resolution of the dispute between Reliance Industries and Reliance Natural Resources on their gas supply agreement.
RPower has Cash on books (aggregating ~Rs45/share, 42% of market cap) does not have any exposure to equity markets.
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Published by Komal M @ 8:32 AM IST.
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NTPC - Can Growth Last ?
Tuesday, October 28, 2008
NTPC reported F2Q09 revenue of Rs94.5 bn (up 27% YoY) and earnings of Rs21 bn (up 10% YoY). Adjusted earnings in F2Q09 were Rs18.3 bn (up 12% YoY). The company commercialized 500 MW of Kahalgaon II during the quarter.
2QFY09 recurring PAT at Rs17.4bn (down 6% YoY) was in line with CIR estimates. Reported PAT was higher at Rs21.1bn (up 13% YoY) led by exceptional items. Earnings are under pressure due to Significant delays in incremental capacity additions and Marginal negative impact (2-3%) of new CERC draft regulations from FY10E onwards.
The Indian regulatory system of cost pass throughs works well and provides a defensive characteristic to NTPC's financials, quite unlike any other Asian generator. Capex is well funded with low gearing (0.52x), a high cash balance of Rs170bn, strong credit rating and high annual CFO cash Rs135bn over FY09E-12E.
In our view, it is key for the company to ensure timely completion of its projects, as any delays would be negative for the stock. Further, any adverse change in CERC regulations (which are due for revision in March 2009) could affect profitability.
NTPC is expected to Report an EPS of Rs 10.15 for FY09.
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Published by Komal M @ 7:43 AM IST.
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ITC - Defensive in turbulent times
Monday, October 27, 2008
ITC grew sales by 15% and PAT by 4%. Cigarette volume was down c2.5% in line with expectations, but margin expansion was only 68bp despite a 13% realisation increase due to higher raw material costs. FMCG losses at INR1,166m were 219% higher than last year but almost equal to last quarter, going forward the same should decline.
Agri business surprised positively as EBIT margins rose 7% Y/Y, driven by exports of tobacco leaf and soya. Hotel business EBIT was +4%, impacted by lower occupancy levels. FY09 EBIT guidance was maintained at c15%, implying 2H will be seasonally weaker. Paper EBIT was -3% Y/Y as mill commissioning resulted in heightened depreciation levels.
The macro outlook continues to appear tough in the near term. In such a scenario, we expect consumer stocks to continue to shine, led by resilient earnings, stable cash flows and a strong balance sheet.
DSP Merill Lynch expects ITC to report an EPS of Rs 9.3 for FY09.
HSBC estimates FY09 EPS to be Rs 9.11 and SOTP Valuation is at Rs 175.
Citi expects ITC to report an EPS of Rs 9.19 for FY09
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Published by Komal M @ 7:32 AM IST.
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NIIT Technologies + Mphasis - Review
Wednesday, October 22, 2008
NIIT Technologies reported a steady 2QFY09 with 5% Q/Q revenue growth, 4% volume growth and 80 bps Q/Q EBITDA margin decline due to salary hikes. EPS grew 5% Q/Q. Growth was driven by good performance of Room Solutions where revenues increased 17% Q/Q and EBITDA margins bounced 300 bps Q/Q. Performance was good across service lines and industry verticals with 5 new customer additions and US$ 75 of new order wins.NIIT expects weakness in Travel and transportation vertical. This was reflected in net headcount decline in the quarter and management expects to ramp-up utilization to meet demand given tough demand environment.
NIIT Technologies is expected to report an EPS of Rs 22.10 for FY09 and a flat growth for FY10. JP Morgan has reduced the target price to Rs 100 from Rs 160 with a NEUTRAL view on the stock.
Mphasis reported a strong 2QFY09 with 13% Q/Q revenue growth, EPS growth of 79% Q/Q and EBIT margin expansion of 460bp Q/Q. Strong performance was driven by impressive 5.5% volume growth in IT Services, pricing improvement Q/Q and sustained momentum in BPO & ITO. EDS remained at ~40% of revenues, indicating growth in both EDS and non-EDS clients.
Despite the strong quarter, management was cautious in its guidance. Further, business outlook from EDS remains uncertain near term, due to both economic weakness and the HP-EDS merger.
Mphasis is expected to post an EPS of Rs 20.9 for FY09. JP Morgan is NEUTRAL on the stock with a target price of Rs 200.
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Published by Komal M @ 1:10 PM IST.
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Geometric Software + Rolta India - Recommendation
Tuesday, October 21, 2008
Geometric Software Revenues grew by 8.7% sequentially to Rs1,526m. EBITDA grew a strong 52.1% (v/s a 17.7% decline in Q1) to Rs197m. EBITDA margins at 12.9% expanded handsomely by 369bps. A prior period adjustment shaved off Rs 14.1m from profits.
India and APAC (combined ~10% rev) witnessed strong growth which momentum is expected to continue going forward. Number of customers added was a modest 15 even as new deals won this quarter dwindled to a mere US$6.7m.
We now estimate an FY09 EPS of Rs.6.7 (Rs.7.0 earlier). Stripped of the extraordinaries' incurred in Q1FY09, the core EPS for Geometric would stand at Rs.4.9 in FY09E. Sell Geometrcie Software on every rise and switch to front line IT counter.
Rolta's Q1FY09 revenues were in line with estimates. Revenue grew by 7.8% QoQ to Rs 3,461mn, whereas EBITDA grew by 5.6% QoQ to Rs 1,185mn. EBITDA margins dipped slightly by 70bps to 34.2%, primarily due to wage hikes (offshore 15%, onsite 2%) effected during the quarter.
Rolta has had to provide for mark-to market provision of Rs613mn on its outstanding FCCBs of $150mn. This is the second straight quarter of mark-to-market provision (Rs302mn provided in Q4FY08). The FCCBs were raised when the rupee was trading at close to Rs41
Management did not increase FY09 guidance for a recent small acquisition a conservative step, in our view, given the current economic environment. However, management did state increased confidence in reaching the top end of guidance.
Rolta is expected to post a full year revenue growth of 44% at Rs 1,543 crore with a PAT of Rs 285 crore and an EPS of Rs 19.29 for FY09 and Rs 24 for FY10. Existing investors can stay invested while fresh accumulation can be done at Rs 150 levels.
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Published by Komal M @ 3:19 PM IST.
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HDFC - Core Business Strong + Subsidiary Under Pressure
Monday, October 20, 2008
HDFC's 2QFY09 net income, adjusted for extraordinary gains from sale of stake to Intellenet, grew by 32% yoy. The recurring earnings were driven by a 29% topline growth supported by steady margins and loan growth of +30%. Reported profits, however, declined by 17% yoy as last year HDFC had a one-time gain from sale of its stake in Intellenet.Non-interest income was strong with yoy growth of 57% yoy. Also, core fee income (lending biz.) increased by +90% yoy. HDFC has been building up retail deposits during the period. While term loans have grown at 5% yoy, retail deposits have grown by 28% yoy. Resources (deposits+ borrowings) have grown 22% yoy and 6% qoq.
HDFC's housing loan growth could still be +22%; disbursements at +20%. HDFC is expected to report an EPS of Rs 83 for FY09. The sum of the Parts Valuation of HDFC is as follows,
Cores Business - 1,900
Life Insurance - 186
AMC - 67
HDFC Bank - 394
Less Investment in Subs - (109)
HDFC Price Target is Rs 2,438.
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Published by Komal M @ 12:53 PM IST.
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HDFC Bank Result Review
Friday, October 17, 2008
HDFC Bank has reported a profit after tax (PAT) of Rs528 crore for Q2FY2009, indicating a growth of 43.3% year on year (yoy). The Q2FY2009 financials include the effect of the merger of Centurion Bank of Punjab (CBoP) with HDFC Bank and hence are not strictly comparable with the performance in the year-ago period.
The net interest income (NII) for the quarter stood at Rs1,866.5 crore, up 60.5% yoy buoyed by the CBoP acquisition-led balance sheet expansion and healthy margins. The reported core net interest margin (NIM) stood at a healthy 4.2% compared with 4% a year ago. The capital raised by HDFC Bank and CBoP during FY2008 has contributed to the same.
The non-interest income growth was robust at 33.3% and stood at Rs643.1 crore. The growth in the non-interest income primarily stemmed from an impressive 49.9% year-on-year (y-o-y) growth in the fee income. Incidentally, the bank suffered a treasury loss of Rs15.6 crore during Q2FY2009 compared with a gain of Rs46.2 crore.
The asset quality of the merged entity indicated a marginal sequential
deterioration. In absolute terms, the gross non-performing assets grew by 11.5%
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Published by Webmaster @ 1:22 AM IST.
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Realty + Core Sector Pull Down Sensex
Monday, October 06, 2008
In the last two trading sessions, the benchmark BSE Sensex has plunged by more than 1,200 points on massive unloading by beleaguered foreign institutional investors, as the financial crisis spread to Europe. Indian Real Estate saga built on paper foundation has collapsed and all the realty stocks hit a new low today. Taking the plunge were most core sector stocks as well - Reliance Infrastructure, Tata Steel, Tata Power, Reliance Industries, BHEL, ACC and Larsen & Toubro.Indian Realty Stocks which hit a new low on Sept-18th made fresh lows again today.
NSE Nifty has just survived at the tip of 200 Week Moving average of 3,600. Our Analyst has an in depth coverage on how the bears are likely to hug the market over the next 24 months. BNP Paribas in a report released just a while ago has put an under-perform rating on India with SENSEX target of 9,746.
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Published by Webmaster @ 4:14 PM IST.
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Welspun Gujarat Stahl Rohren - BUY
Friday, October 03, 2008
HDFC Sec has initiated coverage on Welspun Gujarat Stahl Rohren - WGSRL with a Long Term BUY rating. The fundamentals of the company remain unchanged post Q1FY09 results with minor cut in plate production for FY09E and FY10E which will be partly compensated by volumes in the higher grade (API) category. WGSRL is a mere converter of of various forms of steel and not a steel producer. The pipe segment globally is of national interest in terms of its use in infrastructure development.
The company will not be impacted to the extent of its current order book position [Rs 72 bn] as its profits were locked in at the time of getting the orders. Further, the current decline in steel prices will present big opportunities going forward as projects which were put on the back burner on rising costs will become more viable in future and we expect the company to get more of these orders.
Its expansion plans in India and the US are on schedule. The company is setting up a new facility in the US of 0.3 mn tons and in India of 0.475 mn tons between FY09E and FY10E incurring a Capex of US$ 200 mn. This will enhance its capacity to 1.75 mn tons by FY10E from 1 mn tons in FY08.
Considering the current scenario of financial crisis and macro, WGSRL's earnings have been marginally revised downwards and the company is expected to report a PAT of Rs 593 crore and Rs 926 crore for FY09 and FY10 respectively. EPS is expected to be Rs 31.5 and Rs 49.5 for FY09 and FY10. HDFC Sec has a BUY rating on the stock with a target price of Rs 592 [revised downwards from Rs 774].
Long term Investors can consider exposure to the stock.
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Published by Webmaster @ 12:20 PM IST.
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Chambal Fertilisers + GSFC - A Fertile Quarter
Wednesday, October 01, 2008
The fertiliser sector is expected to post strong Q2FY09 earnings owing to good volumes in urea & DAP backed by an encouraging policy and robust growth in the trading business. The Urea Investment Policy was announced in the quarter, providing import parity price (IPP)-linked pricing for all incremental urea capacities.
Subsidy payment:
Under provisioning of subsidy in the budget and ballooning fiscal deficit owing to rising crude prices creates risk of delay in payment of subsidy bill or payment in the form of fertiliser bonds. In an unprecedented move during the quarter, the Department of Fertilizers borrowed from PSU banks to discharge the fertilizer subsidy bill on schedule.
Chambal Fertilizers:
There have been significant accounting changes made by the company in Q1FY09, from booking profit/loss arising from foreign exchange fluctuation on borrowings towards acquisition of fixed assets to adjusting such fluctuation in the carrying value of assets, the company's profit & loss account is insulated from rupee depreciation going forward. The company is expected to post a 30% adjusted PAT growth for H1FY09.
GSFC:
Revenues are likely to register 79% YoY growth due to rising prices of phosphoric acid and, hence, DAP prices. EBITDA is likely to grow at 26% YoY over Q2FY09 due to margin expansion. The company is expected to post a 18% adjusted PAT growth for H1FY09.
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Published by Sunil K @ 11:04 AM IST.
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