Month: February 2008

Indraprastha Gas: The company reported a strong set of 3QFY08 numbers, with net income growing 27% yoy to Rs450m, in line with our
estimate, driven by sustained volume growth in both CNG and PNG. This was in line with the run rate over the last few Qs. Underlying business remained strong with increasing
PNG penetration (volumes up 18% yoy) and robust growth in CNG sales.

Noida operations will provide a fillip to volume growth from FY09E, with c.5 stations likely to be operational by Mar-08. Though 3 years marketing exclusivity (from Oct-07) for incumbents is lower than expected, first-mover advantage and rapid network
expansion create sufficient entry barriers for potential new entrants.

GAIL:GAIL’s 3Q reported net income of Rs6.2bn was down 7% yoy and below our estimates. Core operating profits of Rs8.7bn were also significantly below estimates, driven primarily by lower than expected LPG and petrochemical production.

LPG production of 307KT during 3Q was significantly lower than recent trends (average 350KT for the last four quarters), impacted primarily by the 15-day annual shutdown at Gandhar and Vijaipur. Another 15-day shutdown at the Pata petrochem plant impacted petrochem sales, down 16% qoq and 14% yoy. The lower resulting petrochem and LPG EBITDAs drove the poor operating performance for the quarter, significantly below our estimates, despite stable transmission EBITDA.

Jubilant Organosys: Jubilant’s 3QFY08 results were in-line with expectations, with a robust trend in revenues as well as profitability. The high margin PLSPS business (especially CRAMS) was the key growth driver and now contributes c62% of revenues.

Sales growth of 37% yoy (19% organic) & 540 bps expansion in EBIDTA margins led to an 81% increase in recurring PAT. Reported PAT was buoyed by forex translation gains (Rs133m). CRAMS was the key growth driver, up 98% yoy (53% organic), while the legacy industrial & performance products business benefited from lower molasses prices (down 20% YoY).

Research services business to gain traction in coming quarters; ii) Capacity expansion at Hollister-Stier to 120m vials/annum to come through in 1QFY09; iii) Total capex of Rs3bn in FY08 plus Rs2bn in subsidiaries including hospitals and SEZs

Sun Pharmaceuticals: Sun’s strong 3Q (sales up 47%; PAT up 60%) was primarily due to exclusivity sales of oxcarba in the US, reflected in the step jump QoQ in Caraco’s distributed sales. Sun launched generic Protonix as talks between Teva & Wyeth failed. We believe Sun may enjoy extended co-exclusivity (with Teva), as the only other P-IV filer (Kudco) will get approval only after its 30- month stay expires (Dec’08)

Sun indicated that it has an option to buy out the current promoter holding, which would take its stake in Taro to 40%. Sun has a “not to sue” covenant from Wyeth & could get approval in June’08E, albeit as a non AB rated product. Sun could generate sales of cUS$315m during exclusivity; however, we await approval & more clarity on distribution strategy.

Unitech:3QFY08 revenues increased 19% yoy to Rs11,421m. EBITDA margin at 64.3% was flat yoy, but a lower tax rate helped net profit grow 39% yoy to Rs5,258m. EBITDA margin increased to 64% in 3Q from 50% in the previous quarter because of higher proportion of commercial/retail asset sales.

Unitech has received LOI (Letter of Intent) for licenses in 22 circles and has paid ~Rs16.5bn as license fee – we await more details on spectrum allocation. UCP, the AIM fund, has widened its scope of investment to include retail/hotels assets – this could provide potential for Unitech to inject more assets into UCP.

Plans to transfer 40% stake in 3 IT Park/SEZ assets, which are partly owned by UCP, to a business trust to be listed in Singapore. UOT is expected to have an initial portfolio of ~10m sq ft.

Omaxe:3QFY08 revenues increased 18% YoY to Rs6,682m while net profit increased 50% YoY to Rs1,542 on the back of higher other income and 500bps YoY improvement in EBITDA margins to 31.2%.

The company has formed a consortium with GVK and Nagarjuna Construction to bid for infrastructure projects such as airports, roads, bridges, etc. The consortium has currently bid for redevelopment of Udaipur and Amritsar airports and development of Badarpur Highway.

Omaxe is planning to build hotels in Faridabad, Amritsar, Greater Noida and Patiala and is currently in talks with large hospitality chains to form a strategic alliance.

Punj Lloyd: After 1HFY08 PAT growth of 138% YoY, Punj Lloyd’s 3QFY08 Recurring PAT at Rs613mn up 27% YoY was substantially lower than CIR estimates of Rs1.0bn on the back of losses on legacy projects in Semb E&C to the tune of Rs680mn. Reported PAT was higher at Rs917mn on the back of sale of investments of Rs371mn.

In 3QFY08 Semb E&C substantially completed certain low-margin legacy orders in which there were cost overruns due to delays and design changes, which led to a booking of losses of Rs680mn. The Punj + Semb combine ended 3QFY08 with an order backlog of Rs160bn up a tepid 12% YoY. Though the Semb backlog at Rs62bn is up 35% YoY, Punj backlog at Rs98bn, down 13% YoY, is a concern given that the margins are higher on the Punj orders than on the Semb orders.

Nagarjuna Constructions: Nagarjuna posted recurring PAT of Rs396mn, up 5% YoY, and largely in-line with our expectations of Rs389mn for Q308. While margins were in-line with estimates, revenue growth of 11% YoY was well below our estimate of 21% growth. PAT was boosted by lower-than-expected interest costs and taxes and higher than expected other income.

The company mentioned that the land delays were resolved and the projects were back on track, but revised down its revenue guidance by 8% from Rs37.5bn to Rs34.5bn. Management maintained that it will clock top-line growth of at least 30%-35% CAGR for the next 2 years.

Order booking has continued at a steady pace – Nagarjuna has won Rs15bn worth of orders in Q308 and has guided for an order backlog of Rs100bn for FY08E.