New Location for Research & Analysis
Sunday, January 31, 2010
You asked for it, you have it. We received e-mails from Readers asking for more from the research. In order to satiate the needs of our readers, we had to migrate to a new content publishing platform. Location of Equity Research is here.
In the days to come, we will unveil a new research page with lot of Analytics focused entirely on Research, never before done in the history of Dalal Street.
You can continue to Browse the Old Site here or in the Archive Section.
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Published by Webmaster @ 12:37 PM IST.
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Sell the Rally in Tata Communications + MTNL - Goldman
Thursday, January 07, 2010
Tata Communications has risen to an extent that it no more deserves the valuation it is trading at, while MTNL appears inexpensive but no visibility on potential re-rating and hence Goldman sachs has initiated coverage on the stock with a SELL Call. Aditionally, their weaker competitive positioning in the Indian telco space and Tata's not coming with a blue print to merge Telecom operations is a cause of concern. Both the companies are ill-prepared to tackle the overbidding risks related to the upcoming 3G/BWA license auction.Tata Communications:
Strong revenue/EBITDA growth; but largely factored in by consensus: We expect TCOM's revenues / EBITDA to grow at 8%/24% CAGR from FY2009-FY2012E, given faster uptake of data/internet services and an increasing mix of data products.
Goldman sees downside risk to consensus net profit estimates for FY2010-FY2011 from higher net interest expense (due to increase in debt needed to fund capex and service roll-out) and higher D&A (from a potential BWA license win).
IN SOTP valuation the core business is merely valued at Rs 103 while investments and holdings add 192 / share taking the Valuation to Rs 295 which is also Goldman's Target Price with a SELL rating.
MTNL:
MTNL's wireline and wireless revenues to decrease at a CAGR of 11% and 8%, respectively, from FY2009-FY2012E, given continued F2M substitution, weaker competitive positioning and the impact of intense price competition in the wireless market.
MTNL's FY10E net cash per share (around Rs80/share) to decline in the coming 6 months given the upfront 3G/BWA license payments (estimated upfront fee payment of Rs20/share).
MTNL is already in Red when it comes to EPS and 12-month target price by using a 10-year DCF-based methodology yields to Rs 70 and hence the SELL rating.
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Published by Webmaster @ 10:32 AM IST.
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TVS Motors- Ready to Ride the Auto Boom
Monday, January 04, 2010
South India based TVS Motor has started to invoice the 110cc commuter bike Jive. Given the positive expert reviews, and expectations of national ramp up in less than 3 months, we raise motorcycle growth assumptions to 25% in FY11 (earlier 15%). This would imply above industry average growth rate (estimated ~15%), likely given the company’s absence so far in the mid-priced commuter category i.e. ~55% of bike market.Export sales (~11% of aggregate two wheeler sales) declined 28% YTD to ~93,000 units, due to recessionary conditions in key destinations, which led to de-stocking.
TVS Motor continues to perform strongly in major operating segments - mopeds (YTD up 30%), scooters (up 15%), and three wheelers. While the mopeds business continues to remain a cash cow with limited competition.
Financials:
The company is expected to report an EPS of Rs 1.13 and Rs 7.30 for FY10 and FY11 respectively. With revised profit forecasts driven by increased volume expectations in domestic motorcycles, and two wheeler exports, BOFA-Merrill has revised the target price to Rs 89.
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Published by Webmaster @ 11:43 AM IST.
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Kewal Kiran Clothing - Killer Investment Idea
Sunday, January 03, 2010
Kewal Kiran Clothing Limited (KKCL) today is amongst the few large branded apparel manufacturers in India. KKCL brands brands range from the high fashion premium segment such as 'Killer' for denim wear and 'Easies' for casual wear to the middle and economy segments through brands such as 'Lawman' and 'Integriti'.The company has constantly introduced new fits, finishes and fabrics. The company's own R & D team working closely with designers is constantly innovating, creating an exciting array of product lines in a variety of fabrics, washes and cuts, using the latest in technology and processes. Fashion with Quality is the cornerstone of each collection introduced by the company. KKCL has recently entered the women's and accessories segment.
KKCL has Strong distribution network and marketing set up and will ride the Growth in organized retail and shift in demographics. Capacity expansion to drive growth in FY11.
Financial and Investment Case:
KKCL follows prudent financial management practices. This is reflected in its high cash balance, preference for a franchisee business model, conservative ad spend (10-12% of sales), write off of part of investment in White Knitwear and low debt to equity. In the recent slowdown, KKCL was impacted to a lesser degree. In FY09, KKCL reported net sales of Rs. 144.6 cr, down 9.4% y-o-y. Operating margins fell by about 500 bps y-o-y to 13.9%.
In Q2FY10 and H1FY10, KKCL produced 8,60,000 pieces and 14,22,000 pieces
respectively, representing a volume growth of 7% y-o-y. However, topline grew by 18.7% in Q2FY10 to Rs. 57.3 cr and 19.6% in H1FY10 to Rs. 90.4 cr due to an increase in price realizations.
Expect KKCL to report topline growth of 22.4% and 18.4% in FY10 and FY11 respectively. This translates into a topline of Rs. 177 cr and Rs. 209.5 cr in FY10 and FY11 respectively. KKCL is expected to report an EPS of Rs. 25.1 and Rs. 28.4 for FY10 and FY11.
HDFC Sec in its recommendation on Kewal Kiran Clothing says,
The stock can be bought at the current market price and added on declines to the Rs. 217-234 price band for a price target of Rs. 299 in 6 months.Related Reading:
You can read a complete interview of Kewl Chand Jain, MD of Kewal Kiran Clothing.
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Published by Webmaster @ 12:14 PM IST.
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