Bajaj Auto - XCD 135cc motorcycle gets Positive Response
Friday, February 27, 2009
Following positive customer response to XCD 135cc motorcycle, Merrill has greater confidence for 4 upcoming launches by Sept. Merrill raises domestic two wheeler sales estimates to 1.36mn units in FY10 (5% growth, earlier 5% decline), and retain 5% growth on higher base in FY11.
In the export category, management maintains positive for exports next year, albeit with slower growth trajectory, Merrill estimate 10% decline in two wheelers and 5% in three wheelers. Recent trends are worrying, with sharp contraction in sales to Latin America (~30% of exports), and there could be downside risk to our forecasts.
Merrill rasied the Target Price of Bajaj Auto by 11% to Rs 585, as we expect valuation multiples to expand on improved earnings visibility. This follows upward revision to domestic bike sales and EPS forecasts by 3/4% over FY10/FY11. Post-revision, Merrill estimate 7.5% EPS CAGR over our forecast period. Maintain Neutral rating on modest growth prospects.
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Published by Webmaster @ 4:46 PM IST.
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Dr Reddys Labs Growth Underestimated - Goldman Sachs
Thursday, February 26, 2009
Based on better-than-expected 9m-FY09 sales, Goldman Sachs [GS] now expect 33% FY09E sales growth. For FY2010E, while acknowledging that DRL faces a challenging task to improve upon its FY09 numbers, we believe that its growth momentum will continue and we expect it to post at least double-digit (10.1%) sales growth (core business growth of 16.9%). Market view of decline in growth in FY10E (owing to base comparison) is overly pessimistic; US to continue to drive revenue growth.
Additionally, we continue to believe that the AOK tender wins have equipped DRL better to face the changing business model in Germany and to be a long-term competitor of significance.
Reason For Under performance w.r.t SENSEX:
These have been primarily two-fold: (1) Concerns on reported growth numbers for FY10E owing to a base comparison effect with FY09, coupled with concerns in the Russian and German markets (2) Concerns on reported EBIT margin and net earnings decline on any potential write-offs on Betapharm products.
Dr Reddy's is the least expensive stock in Pharma group (apart from the exception of Glenmark) and trades at a significant discount of 33% on one-year forward PE of 8.5X and 38% on one-year forward EV/EBITDA 4.9X to its peers.
Low 3-year PEG of 0.4 indicates the higher earnings potential of the company (compared to the peer average of 1.0) and maintain DR Reddy's Lans on Conviction Buy list. GS has set a Target Price of Rs 805 implies a FY10E P/E of 17.3X, which implies a 20% premium over sector.
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Published by Webmaster @ 11:16 AM IST.
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Impact of Duty Cut on Indian Auto Sector
Tuesday, February 24, 2009
The excise duty cut affects 24%, 13%, and 61% of 2008 sales for Tata Motors, M&M, and
Ashok Leyland, respectively . Because the cut in excise duty is aimed specifically at boosting demand, as in past instances, we expect all OEMs to pass on the benefit to consumers in terms of lower prices, and thus the lower duty should have no impact on their bottom lines. Our channel checks indicate that all concerned OEMs plan to announce price cuts, in line with the excise duty cut, over the next week.
The cut is primarily to align the rate of excise duty for goods carriers with that for passenger carriers – and to spur demand in the segment. Given slowing industrial activity, low freight movement, and the tight financing environment for commercial operators, we do not expect this move to push up demand, and we remain cautious on the Commercial Vehicles sector.
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Published by Webmaster @ 11:49 AM IST.
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