2007 | Dalal Street

Lupin wins product patent challenge

September 13, 20071 min read

Lupin Labs has announced that the court of appeals for the federal circuit on 11 September 2007 reversed a district court decision on Ramipril in its favor, finding the Aventis patent on Ramipril invalid. Aventis owns the 722 patent in question and king pharmaceuticals markets Altace.

Ramipril is one of the ACE inhibitors, which are useful for treating high blood pressure and Altace revenues were over US $ 900 million in the US (IMS MAT Jun 2007).

Dr Reddys Laboratories has announced that the U.S. Food and Drug Administration (USFDA) has granted final approval for the company’s Abbreviated New Drug Application (ANDA) for Ranitidine (Zantac) 150mg tablet (over-the-counter). The company is the only generic manufacturer to receive FDA approval for this product following the expiry of innovator’s patents. This is the first approval for the company’s U.S. OTC business unit following an announcement in mid-May, to launch a store brand OTC division in the U.S.

Equity Research

Buy Numeric Power Systems

September 12, 20071 min read

In FY07, Numeric Power Systems Ltd [NPSL] added 45 sales and service centers, thereby taking the total tally to 201 by March 2007. The company has a highly efficient service team, all of whom are personally trained by NPSL. They provide 24×7 technical support to all important customers/projects. The company has over 600 factory-trained engineers for this important function of customer care.

NPSL has developed partnerships with three major professional IT, sales and distribution companies. The sales through the entire network channel have grown 60% over last year. The revenues of Numeric to grow at 17.6% CAGR for the next two years. More importantly, the net profit is expected to grow at 33.2% CAGR for the next two years, that is, from FY07 to FY09E.

NPSL is expected it to report an EPS of Rs.58.1 in FY08E, moving up to Rs.71.6 in FY09E. The current market price of Rs 440 discounts FY09E earnings at 6.1, which is very attractive due to the clear growth prospects of the company, going forward. We remain positive and maintain BUY on Numeric Power Systems with target price of Rs.615, which provides an upside potential of 40%.

Economy, Markets and Macro Views

Bajaj Auto Riding Strong on XCD-125CC

September 12, 20071 min read

Bajaj Auto launched 125-cc ‘XCD’ at a price of Rs 41,000.The product is aimed at upgrading entry-level segment customers to 125-cc bikes from existing 100-cc bikes. Bajaj plans to manufacture 20,000 units of the new product, ramping it upto 50,000 units by November 2007. Bajaj Auto has a margin of Rs 3,000 / bike. Hero Honda’s Super Splendor is the only bike in this segment and is priced at Rs 44,000.

The launch of ‘XCD 125’ to stem the decline in Bajaj’s motorcycle volumes and
improve market share for Bajaj. We had reported that Bajaj recorded a 22% yoy decline in domestic motorcycle sales on a year-to-date basis.The success of the bike is critical to Bajaj as it shifts its focus towards high-end bikes.

Kotak retains outperform rating on the company with a price target of Rs 2,750.

Economy, Markets and Macro Views

Reliance Gas + IPCL Merger

September 12, 20071 min read

The government appears set to approve Reliance Industries‘ pricing formula for the gas it plans to produce from July next year from KG basin with minor changes. The empowered Group of Ministers (eGoM), which had its third meeting today morning, was near unanimous on the need to honour the government’s commitment to allow marketing and price freedom to investors in oil and gas, reports suggest. The eGoM has left the final decision on RIL’s gas pricing to External Affairs Minister Pranab Mukherjee.

Meanwhile, RIL board of directors fixed 12 October 2007 as the record date for the purpose of determining the shareholders of Indian Petrochemicals Corporation (IPCL) who will be entitled to receive equity shares RIL in terms of the scheme of amalgamation. RIL will issue its 1 equity share of Rs 10 each for every 5 equity shares of the IPCL held on record date.

Reliance Industries stock hit a life time high crossing Rs 2,000 and is currently traded at Rs 2,015.

Equity Research

Buy HDIL – Religare

September 12, 20071 min read

Religare has initiated coverage on Mumbai based Realty firm HDIL with a BUY recommendation and a target price of Rs 694.

HDIL has presence in Residential, Commercial, Retail and Slum Rehabilitation. It is a very well established brand especially in Residential and Commercial. HDIL has a land bank of 116 million sft. HDIL’s average cost of land acquisition is Rs 113.9 / sft [excludes post-ipo purchase of Land] while that of DLF is over Rs 300 / sft.

At the CMP of Rs 535 HDIL trades at P/E of 13.3 on FY08E EPS of Rs 40.2 and 7.3 on FY09E EPS of Rs 72.7. Using the NAV valuation approach, Religare analyst arrives at a stock price of Rs 694 / share. HIL currently quotes at 0.8x one year forward NAV which is relatively cheaper than DLF [1.3x] and Unitech [1.1x]. There is a potential upside of 30% in the stock.

Religare has also recommended a BUY on Parsvnath Developers Ltd. Parsvnath quotes at mere 0.6x one year forward NAV.

Breaking Corporate India Earnings News

Peninsula Land Deal With Alok

September 12, 20071 min read

Real estate firm Peninsula Land struck a deal to sell 5,75,000 square feet of land at its Dawn Mills premises to Alok Infrastructure, a unit of Alok Industries for Rs 1050 crore. ENAM has a BUY on Peninsula Land with a price target of Rs 719.

Peninsula Land (PLL), formerly known as Morarjee Realties, is known for its concept-based architecture in the commercial, retail and residential sectors. Some of the company’s real-estate projects are Crossroads, CR2, Peninsula Corporate Park, Peninsula Technopark, Peninsula Business Park, Ashok Towers and Ashok Gardens.

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