2007 | Dalal Street

Bears Hug Dalal Street

July 27, 20072 min read

With weak international markets [US Housing Data was the dampener], Dalal Street Bears are in action. Within the first 5 minutes of Trading the BSE Sensex was down 350 points.

HDFC Bank, BHEL, Tata Motors, SBI and Reliance Energy are the top losers in the SENSEX. All the SENSES stocks are hammered and positions unwound. Accordint to Hitesh Chotalia’s analysis all the support levels for the day are broken and the SENSEX is currently at 15,450.

All the Indian Indices are in RED. A Blood Bath on the opening day of August Futures.

Nifty is down 110 Points
Nifty Jr is down 180 Points
Nifty Bank is down 170 Points
Midcap CNX is down 140 Points
IT CNX is down 101 Points

We wonder what will be the fate of IPOs like IVR Prime where extremely wise men invested because they couldn’t read the P/E and other financials of the company 🙂

Update at 12:00 Noon:
BSE SENSEX is down 500 Points. All the sensex stocks are in Red except ITC and Ranbaxy Labs. We recommended a BUY on ITC this morning. Is this is temporary correction ? Well depends on the US Data. If its just a temporary slump, its ok as Dow had also hit an all time high. However if you can see cracks appearing in the US Data, then money will flow out of Stocks. I am sure Wall Street Analysts are burning the midnight oil to analyze their course of action for Firday.

Tags: Invest India, Dalal Street, Stocks, India

Breaking Corporate India Earnings News

Maruti + MRF Results

July 27, 20071 min read

Maruti Udyog’s net profit rose 35.1% to Rs 499.60 crore in Q1 June 2007 over Q1 June 2006. Net sales rose 25.7% to Rs 3930.82 crore in Q1 June 2007 over Q1 June 2006. Both top line and bottom line exceeded market expectations. Recall Analysts were skeptical and negative about the performance of Auto companies.

MRF’s net profit rose 420% to Rs 42.5 crore in Q3 June 2007 over Q3 June 2006. Sales moved up 13.93% to Rs 1,133.43 crore in Q3 June 2007 over Q3 June 2007. MRF has declared interim dividend at the rate of Rs 3 per share.

Breaking Corporate India Earnings News

PNB + Canara Bank – Modest Quarter

July 27, 20072 min read

Punjab National Bank’s [PNB] profits are ahead of our 10% growth expectations, but qualitatively, it remains a modest quarter. Margins continue to face pressures, cost increases are also relatively high and overall profitability has been supported by provisioning write-backs.

Falling margins and high costs pressure overall profitability; excluding trading gains, profit expansion is likely to be lower still. PNB’s well above industry and 400bp+ margins were always likely to erode; however, the erosion appears to be coming in a rate environment that should have bolstered PNB’s margins, given its balance-sheet structure. PNB is expected to report an EPS of Rs 60.08 below Dalal Street Analysts consensus of Rs 64.49. Stock price target is Rs 615.

Canara Bank 1Q08 profits up 26% yoy, 9% higher than our expectations. Qualitatively though, they fall short, with a drop in NIIs the primary and a large disappointment. Margins dipped almost 50bp; well below industry levels, its own historical lows, and in a quarter that saw little growth. The asset book itself provides comfort; limited asset deterioration over quarter, continuing asset recoveries, increase in coverage levels, and loan growth moderation to sub 20% levels.

Canara Bank is expected to report an EPS of Rs 35.86 for FY2008 and the stock price target is Rs 300.

Economy, Markets and Macro Views

Citi Upgrades Kotak Mahindra Bank

July 26, 20071 min read

Citigroup Research has upgraded the price target of Kotak Mahindra Bank to Rs 825 but a bit too late. Kotak has swiftly moved up from Rs 640 to Rs 730 on expectations of better results.

Kotak which is also into Retail Stock Trading business had made all its clients BUY their company Futures ahead of the results. This is a matter of great concern and SEBI should investigate this matter ?

Coming back to Citi’s analysis, 40% yoy profit growth, but 7% below their estimate. KTKM’s loan book is up 56% yoy (4% qoq) and remains diversified across consumer loan segments, with almost no asset stress. Margins remain 5%+ in the face of funding challenges, though broking volumes are only flat.

Target price of Rs825 is based on EVA methodology. KTKM’s relatively high share of securities fees suggests a valuation benchmark of an investment bank. Kotak is expected to report an EPS of Rs 19.92 for FY2008 and Rs 25.46 for FY2009.

Breaking Corporate India Earnings News

Ranbaxy – GSK agree to dismiss US Litigation

July 26, 20071 min read

Ranbaxy Laboratories has reached an agreement with GlaxoSmithKline (GSK) to stipulate a dismissal of their US litigation with regard to Valtrex (Valacyclovir Hydrochloride tablets). The lawsuit in the US was related to GSK’s US Patent No 4,957,924, covering Valacyclovir Hydrochloride and its use in the treatment of herpes virus infections.

Under the agreement, the company will enter the US market in late 2009 whereby as the first generic, the company will enjoy a 180 days exclusivity. In early February 2007, the company received a final approval from the US FDA to market and manufacture Valacyclovir Hydrochloride tablets.

Company will continue to pursue a strategy to effectively leverage and monetize it’s pipeline of FTF opportunities. The company believes that it has a First-to File (FTF) status on approximately 20 Para IV ANDA filings representing a market size of – US $ 26 billion valued at innovator prices.

India IPO Reviews and Updates

Central Bank of India – Subscribe

July 26, 20072 min read

Central Bank of India [CBI] has the third largest network in the country with 3,194 branches (with major presence in central, eastern and western parts of the country). It has an employee base of 36,227 employees serving over 2.5 crore customers. Around 98% of the banks business has been computerised as at the end of March 2007 with 353 branches covering 35% of the banks business covered under core banking solution.

CBI cleans up Balance Sheet:
The bank restructured its capital base in March 2002 by netting off accumulated unabsorbed losses of Rs681.3 crore against its paid-up capital of Rs1,805.5 crore. On March 2007 the balance equity capital of Rs1,124.1 crore was further restructured and converted into Rs800 crore worth of noncumulative perpetual preference shares and Rs324.14 crore of equity capital.

NPAs are on a decline since 2003 and at an all time low of 1.7% to net advances which is still a high compared to Bank of Baroda at 0.9%.

Current IPO Offer:
Issue Size – Rs 680 – Rs 816 crore.
Pricing Rs 85 – Rs 102
Retail offer – Rs 272 crore

Valuations:
Based on the price range of Rs85102, CBI is available at (1.11.2)x its post-issue book value (BV) and (1.51.7)x its post-issue adjusted book value (ABV). The bank has a return on equity of around 13%, a dividend yield of 3% (based on the upper price band).

Recommendation:
Being the 3rd largest banking network in the fastest emerging economy of the world, CBI will attract heavy FII interest pre and post IPO. Investors with appetite for long term capital appreciation are requested to HOLD after allotment [You see what happened to Indian Bank] and Investors who want to SELL on allotment can also do so. We recommend a subscribe to CBI IPO for our readers.

Indian Banks are in much better shape than their Chinese counterparts and Indian banks attract cheaper valuations and are unexpected to cool off. Drastic measures by the RBI may hit their bottomline in short-term. Long Term Investors just hold your investments tight.

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