September, 2007 | Dalal Street

MRPL signs supply agreement with Shell

September 5, 20071 min read

Mangalore Refinery & Petrochemicals (MRPL) and a subsidiary of ONGC, has signed a 4-year product supply agreement, extendable by another two years, with Shell India Marketing. The products include all grades of MS and HSD. The company started offering products to Shell in 2004 and since then, their off-take has been steadily rising, which reiterate the confidence reposed by Shell on the company’s products, in terms of quality and service. Shell India is presently uplifting almost all of their fuel requirements from the company since 2004 under a product supply pact valid till October 2007.

The new agreement which will become operational from October 2007 covers not only fuel supply but also infrastructure sharing & hospitality and collaboration on health, security, safety and environmental management procedures & practices.

Economy, Markets and Macro Views

UBS Upgrades ITC to Buy from Neutral

September 5, 20071 min read

UBS Securities has upgraded the stock of ITC to Buy from Neutral with a price target of Rs 200.

ITC’s cigarette volumes is expected to be down by 4.4% in FY08, previous forecast a 6.5% fall. With strength in consumer spending, cigarette volumes held up well in Q1, despite imposition of a 12.5% VAT rate and a 33.5% trade tax in UP. Expect volumes to stabilise in Q2 and to recover in Q3. ITC’s multiple price points in its cigarette portfolio has allowed the business to move the consumer across segments rather than lose volumes. Filter cigarettes have held volumes better than the non-filter variety. This has improved the revenue mix.

ITC’s FMCG business is driving strong growth in the non-tobacco segments. Losses have stabilised and look set to decline. The hotel and paperboard businesses are recording strong growth and are expanding capacity.

Raised FY08 EPS forecast to Rs8.4 (+9%), and FY09E EPS to Rs9.9 (+13%). The increase reflects a rebound in cigarette volumes. New price target is benchmarked at 20x FY09E earnings, the mid-point of ITC’s valuation band.

Equity Research

Buy IDFC – Deutsche Bank

September 5, 20072 min read

Deutsche Bank has initiated coverage on IDFC, India’s only listed infrastructure financing company with a Price Target of Rs 150.

IDFC’s fee incomes will grow aggressively at an estimated CAGR of 66% during FY07-FY10E, and from 17% of total income in FY07 to 33% in FY10E. Fees are expected to rise from 17% of total income in FY07 to 33% in FY10E. Ramp-up of the principal investment business provides added equity upside potential.

Since it is not realistically possible to improve the RoE of the lending business to beyond 18-19% because of the expected spread compression, IDFC has been deliberately allocating more capital and management time to the other forms of serving the same infrastructure finance objective. These are principal investments, private equity, project equity and investment banking. Globally, infrastructure lending has progressed in this direction.

IDFC currently has $670mn FUM under private equity. One fund of $220mn is already fully deployed. Of the next proposed fund of $450mn, 35% is already committed, and should be 65-70% committed by June 2008. IDFC holds investments through PE in Bharti Airtel, NTPC, Indraprastha Gas, ONGC, etc

Sum of Parts Valuation of IDFC:
Value from Infrastructure Financing Rs120
Value form SSKI Rs 7.2
Value from NSE and ARCIL stake RS 7.0
Value from IDFC Private Equity Rs 8.3
Value from IDFC Project Equity Rs 5.1
Value from gains on listed investments Rs 3.0

Here is Citigroup’s Research Report on IDFC.

Breaking Corporate India Earnings News

Shreyas Shipping acquires 51% in Haytrans

September 5, 20071 min read

Shreyas Shipping & Logistics has acquired a stake of 51% in Haytrans (India) making Haytrans a subsidiary of the company.

Haytrans’ thriving presence in international freight forwarding, worldwide network of 17 offices, established global reach, industry competence and strategically developed worldwide air freight and ocean freight network would effectively compliment Shreyas’ logistics business resulting in synergy in operations and increase in the geographical spread.

Read an Exclusive Research report on Logistics Stocks in India.

Equity Research

Allcargo + CONCOR + Gateway Logistics Update

September 5, 20072 min read

Kotak Sec Research is bullish on the prospects of Indian Lgistics Sector and Stocks. Here are some noteworthy points from the Logistics Conference Centrum – 2007.

Indian ports handled 6 mn TEUs in FY07. Container traffic may touch 30 mn TEUs by 2016.Currently, 68% of the cargo that can be containerized is being containerized. With growing awareness of the benefits of containerization this will go up to the international standards of 75% to 80%.

Rail transportation is cheaper than road.For handling 20 mn TEUs, we need 190 trains per day as against 40 trains currently. Dedicated expressway connectivity to the port needed. We need 4-5 hub ports with 16 mtrs draft.

Kotak believes that the growth in the Indian economy and increasing penetration of containerization would lead to faster growth in the handling of containers in the country. Currently, we handle about 6 mn TEUs. If we are to handle 30 mn TEUs, it calls for huge growth in opportunities for logistics service providers. Thus, positive on the logistics stocks.

Allcargo Global Logistics will report EPS of Rs.56.5 and Rs.70.8 in CY07E and CY08E, respectively. At Rs.889, the stock trades at 12.6x CY08E earnings. Kotak maintains BUY on Allcargo with a price target of Rs.1346, which provides 52% upside potential.

Gateway Distriparks Ltd [GDL] will report EPS of Rs.8.2 and Rs.10.7 in FY08E and FY09E, respectively. At Rs.132, the stock trades at 12.3x FY09E earnings. Kotak maintains BUY on GDL with a price target of Rs.180, which provides 37% upside
potential.

Container Corporation of India [Concor] will report EPS of Rs.126.7 and Rs.149.3 in FY08E and FY09E, respectively. At Rs.2214, the stock trades at 14.8x FY09E earnings. Kotak maintains BUY on Concor with a price target of Rs.3000, which provides 36% upside potential.

Breaking Corporate India Earnings News

Larsen & Toubro + Gayatri Projects Bag Orders

September 5, 20071 min read

Larsen & Toubro’s ECC division in consortium with Paul Wurth, Italy bagged a Rs 1205 crore order from Bhushan Steel for turnkey construction of 2.5 million TPA blast furnace for their plant in Meramandali, Angul, Orissa. The company’s share in this project is pegged at Rs 760.5 crore. The order has been bagged under stiff international competition including engineering majors like Siemens VAI and others.

Paul Wurth’s, scope covers basis engineering, supply of proprietary and special equipment as well as technical supervisory services while the company’s scope covers detail engineering, supply of indigenous mechanical, electrical and instrumentation works including complete site services involving civil structural and erection works. The turnkey project is to be completed in 28 months commencing from December 2007.

Gayatri Projects has secured new order valued Rs 311.89 crore. The entire work has to be executed with in a period of 3 years. The work is improvement to Naranpur – Pandapada – Harichandanpur – Bramhanipal-Duburi Road in the District of Keonjhar and Jajpur, Orissa.

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