July, 2007 | Dalal Street

GMR Infrastructure ban on derivatives contracts

July 18, 20071 min read

The derivative contracts in the underlying of GMR Infrastructure have crossed 95% of the market-wide position limit and are currently in the ban period on NSE.

The current market price of Rs 868 discounts its FY 2007 EPS of Rs 0.09 by a PE multiple of 9644. [Highly Overvalued Stock – SELL and Book Profits]

GMR Infrastructure reported net profit of Rs 12.37 crore on sales of Rs 22.01 crore in Q4 March 2007.

Net profit declined 91.89% to Rs 2.88 crore in the year ended March 2007 (FY 2007) as against Rs 35.55 crore in the year ended March 2006 (FY 2006). Sales slipped 41.9% to Rs 33.39 crore in FY 2007 (Rs 57.44 crore).

The company will unveil Q1 June 2007 results on 27 July 2007. Is GMR the new ENRON of India ?

Equity Research

Power Finance an Undeperformer – Kotak Securities

July 17, 20071 min read

Power Finance Corporation’s [PFC] first quarter results look terrific at a glance but when you look at the finer details you will see that other income contributed to a large portion of the bottom line.

Kotak Securities has an Underperformer rating on the stock with a price target of Rs 125. CMP of PFC is Rs 195.

PFC has reported stable spread of 1.9% in 1Q08 and 4Q07. PFC’s ALM position seems comfortable in the near term. riable rate loans (with three-year reset) from FY2005 will be re-priced about 2-3% higher in FY2008; About 61% of PFC’s assets are floating as compared to 16% of its liabilities. This will help the company in a rising interest rate scenario.

PFC’s tax rate in 1Q07 was higher at 41% on account of prior period income tax demand. Consequently, reported PAT was subdued in that period. The 1Q08 effective tax rate was 32% in line with long-term trends.

PFC is expected to report an EPS of Rs 11.2 for FY2008 and Rs 12.8 for FY2009. Dalal Street Analyst advises Investors to Book Profits at CMP of Rs 198 as the stock looks expensive.

Equity Research

Citi Upgrades Corporation Bank Target Price

July 17, 20071 min read

Citigroup just a while ago upgraded Corporation Bank to a BUY and also revised its target price upwards to Rs 455 from Rs 379. The reason for the upgrade is the solid performance in Q1-08; profits are up 23% – well ahead of 3% growth expectations. Balance-sheet driven NII expansion, fee growth and reduced bond portfolio charges (sharp base effect) drive profits up 23%.

Management foresees about 20% growth, which should alleviate recent funding pressures and support its above-industry capital cushion. Corp Bank is expected to report a fully diluted EPS of Rs 45.53 and Rs 55.44 for FY2008 and FY2009 respectively.

EVA-based target price of Rs455 is premised on a risk free rate of 8%, industry average margins of 230bps and higher than industry long-term capital ratio of 6.5% vs 6% average. Citi is also benchmarking target price on a 1.3x FY09E P/BV multiple (FY08E earlier), which is in-line with industry average target multiple.

Breaking Corporate India Earnings News

Lupin receives US FDA approval

July 17, 20071 min read

Lupin has received approval from the US FDA for Abbreviated New Drug Application (ANDA) for Amlodipine Besylate tablets, 2.5 mg (base), 5 mg (base) and 10 mg (base). Commercial shipments of Amlodipine Besylate tablets will commence shortly.

The company’s Amlodipine Besylate tablets are AB-rated generic equivalent of Pfizer’s Norvasc tablets, a long-acting calcium channel blocker indicated for the treatment of hypertension. The brand product had annual sales of approximately $ 2.7 billion for the twelve months ended December 2006, based on IMS Health sales data.

Economy, Markets and Macro Views

Pyramid Saimira Theatres – New Business Initiatives

July 17, 20072 min read

Pyramid Saimira Theaters Ltd [PSTL] which hopes to be the largest Theater Chain operator in the world has set some ambitious plans with new business tactics to make the best use of its resources. PSTL operates 402 screens in 340 cities in India.
PSTL hopes to have 700,000 seats by the end of this year thus beating World’s Number One Theater chain, Regal which has 600,000 seats.

PSTL’s new Business Initiatives are as follows,

Let teachers take private tuitions in their premises because until afternoon their are no shows scheduled. They expect students to BUY Coffee and Snacks which will aid their bottomline.
Sell subscriptions instead of tickets. Instead of buying ticket per film, consumers can BUY monthly subscriptions – Rs 100 or so. They will be given a bio-metirc identity card which can be used in any PSTL theater. Ofcourse for peak hour shows you have to make a reservation calling their call center. PSTL will profile consumer habits and then will sell that database to Advertising and Marketing agencies.
PSTL is in talks with a Match Making agency to setup retail outlets in its theaters.
It is also exploring other retail initiatives on its premises.
PSTL’s immediate goal is to eliminate the middlemen – distributors and establish their presence in both film production and exhibition.

Way to go PSTL. Now their are copycats in the Ambani camp who are all set to copy this idea and tune it to suit their business.

Breaking Corporate India Earnings News

L&T consortium bags orders from Tata Steel

July 16, 20071 min read

Larsen & Toubro led consortium has bagged orders worth Rs 1070 crore for supply & installation of sinter plant and other packages from Tata Steel.

The company in consortium with Outotec GmbH, Germany bagged EPC (Engineering – Procurement – Construction) Contract for 5.75 MTPA Sinter Plant valued at Rs 836 crore. L&T ‘s share of this order is Rs 623.30 crore. This would be the single largest Sinter Plant to be built in India. This is scheduled for completion in 30 months.

L&T has also been awarded the contract for civil & structural steel works of steel melt shop valued at Rs 233.59 crore. This is scheduled for completion in 28 months.

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