2007 | Dalal Street

Yet another acquisition from Wipro

September 28, 20071 min read

Wipro has entered an to acquire Oki Techno Centre (Singapore). The target company is based out of Singapore and is focused on wireless design in the areas of RF and baseband.

The development center set up by Wipro will enable OKI to utilize design resource efficiently and enhance product development capabilities. This will enable OKI to expand its semiconductor business and increase its competitive edge in designing semiconductor products in the global market.

Earlier last month Wipro acquired Infocrossing in the US.

Equity Research

Merill Lynch Neutral on ITC

September 28, 20071 min read

ITC’s cigarette performance in Sept Quarter will not live up to market’s expectations. ITC’s volumes in Sept Quarter are expected to be down 3-4% y-o-y and volumes are lower than June Quarter as the later had the hit of higher prices for only 2 months. Secondly, it bears the full brunt of Uttar Pradesh tax of 32%. UP accounts for 6% of ITC’s volumes and has not implemented VAT of 12.5%.

ITC’s recent shampoo launch marks its entry in the household and personal care (HPC) category. The brand, Fiamma Di Wills has been launched in six SKUs and is priced in between HUL’s Sunsilk and Clinic All Clear. We believe next in the pipeline are shampoo sachets and soaps. These events imply that ITC’s FMCG losses (5% of EBIT) are unlikely to decline in the near future.

ITC is expected to report a fully diluted EPS of Rs 8.27 for FY08 and Rs 9.36 for FY09.

DalalStreet.Biz Recommendation:
We recommend our reader / investors to switch out of ITC into other growth stock.

Breaking Corporate India Earnings News

Restructuring buzz electrifies Reliance Energy

September 27, 20071 min read

Despite Citibank’s SELL Recommendation on Reliance Energy, the stock is moving up. What’s cooking ? Our Analyst has done an exclusive research and here are the findings.

Reportedly, Reliance Energy (REL) wants to be known as an infrastructure player rather than a pure power utility with forays into projects such as roads, metro rail and real estate.

Currently, REL has two key divisions, power and engineering, procurement and construction (EPC). The power division, which includes generation, transmission and distribution businesses, contributes about 64% of overall revenues while balance comes from the EPC division.

As per recent reports, REL’s fast-growing EPC division may be spun off into a separate company.

Economy, Markets and Macro Views

NSE Nifty + BSE Sensex scale new high

September 27, 20071 min read

Nifty opened 2.20 points higher and surged to strike an all time high of 5015.55, at the onset of the trading session boosted by strong demand for index pivotals. The market surged today as weak US economic data reinforced expectations for another interest rate cut from the Federal Reserve, following a steep half-point reduction to 4.75% last week.

Nifty took a little under ten months to advance 1000 points from 4,000 to 5,000. It had first hit the 4,000 mark on 1 December 2006.

BSE Sensex has crossed the 17,000 mark a new life time high and many fund managers are of the view that the Indian indices will continue to rise until the end of 2007. FIIs have poured in $3 Billion in the Indian equities until the 25th of this month.

Breaking Corporate India Earnings News

Lupin acquires pharmaceutical business of Rubamin

September 27, 20071 min read

Lupin has acquired Rubamin Laboratories (RLL), a part of the Rubamin group. The pharmaceutical business of Rubamin group was operated through its subsidiary RLL, largely engaged in the manufacture of advanced intermediates for APIs under contract research and manufacturing (CRAMS) model.

RLL has over a decade of experience in manufacturing advanced intermediates for APIs. RLL today has capabilities to participate in the value chain from drug development to commercial production of advanced intermediates for APIs. RLL has built a strong customer base and with company’s strengths will be in a better position to support the global pharmaceutical industry.

Equity Research

Kotak Bullish on Pfizer India

September 27, 20072 min read

Kotak Equity research has reiterated a BUY on Pfizer India with a price target of Rs 965.

Pfizer has announced its quarterly results for Q3CY07, which is disappointing at the revenue level. Net sales fell 1.6% to Rs.1.76 bn from Rs.1.78 bn. Reported net profit was up 9.8% to Rs.308 mn as compared to Rs.281 mn. The pharma and consumer healthcare business fell 3.5% to Rs.1.58 bn. The animal healthcare business rose 18% to Rs.179 mn and income from clinical development services declined 38.1% to Rs.43 mn.

The company is targeting 14% compounded revenue growth (for continuing business) and a 500 bps expansion in EBITDA margin by CY10. New launches through the parent’s portfolio as well as launch of patented products from CY08 onwards will be key revenue drivers. EBITDA margins are likely to improve from the existing 25% to about 30% by CY10 led by higher revenue growth, outsourcing of manufacturing and cost reductions in the distribution/supply chain areas.

Pfizer currently has 3.1 bn cash. It will receive 2.27 bn cash from sale of its Chandigarh property. Further 3.5 bn is expected from sale of its consumer health care business. In all it is likely to have Rs 10 bn in cash which translates to Rs 335 / share. At the current market price of Rs.720, the stock is trading at 14.5x CY07 and 12.1x CY08 earnings estimate. Kotak maintains BUY with a target price Rs.965.

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