Month: May 2008

Federal’s 4Q08 profits (+4% yoy) were 30% below estimates on higher-than-expected bond portfolio charges and some rise in loan loss provisions. Core operations grew by 37%, strong on the back of a sharp increase in margins. We believe its new capital allows management to seek higher growth opportunities, both organic and inorganic, and will be a key valuation driver.

Federal’s margins increased to 376bps (+60bps qoq) and were a key beneficiary of its new capital. While we expect NIMs to moderate from current levels, management seemed confident of maintaining them at 340-350bps despite aggressive 25% loan growth target.

Retail loans (and provisions) showed higher stress for a second successive quarter. While asset quality is fairly comfortable (0.2% net NPLs), we believe its rising predilection for retail and SME warrants greater caution in the current environment.

We expect a Negative Growth in EPS and it is expected to report Rs 27.49 for Fy09 lower than Rs 28.66 reported in Fy08.

Tata Teleservices Maharashtra continued to underperform. 4QFY08 revenues of Rs4.56 bn (+3.6% Q/Q; 19.8% Y/Y) were in line but EBITDA of Rs1.15 bn (+5.8%, +30.6%) was 2.5% below our estimate. Net loss of Rs206 mn came in lower (versus JPMe: Rs308 mn) due to higher other income. For the full year (FY08), TTML’s revs were up 21% Y/Y and EBITDA was up 40%.

Revenue momentum was decent despite slowdown in sub-additions to 0.35 MM vs. 0.54 MM in 3Q. ARPU decline (6.5% Q/Q) was lower versus recent trend; we estimate 4Q wireless ARPU
was ~Rs240 (RCOM: Rs320). Margin expansion was only 50 bps as interconnect/network costs were a tad higher. However, SAC (handset subsidy) is on a declining trend (Rs600 in FY08 vs. Rs900 in FY07). Notably, FY08 was TTML’s first ever year of a positive EBIT.

For FY09, the company is expected to be in Red losing Rs 0.28 / share.

Lakshmi Machine Works – LMW reported Q4FY08 results below our expectations. While Net sales grew by 7.4% yoy to Rs6251mn (11% growth in the textile machinery business and a 21% decline in the machine tools & foundry division), Operating profits remained flat at Rs1206mn. (margins declined by 150bps yoy to 19.3% mainly due to the rise in raw material prices ).

APAT (ex one off items) declined by 12.6% yoy to Rs601mn (attributable to the sharp increase in depreciation owing to higher capex). LMW ended FY08 with revenue growth of 18% (as compared to the growth guidance of 30%) and a PAT growth of 15.5%. Although LMW started the year with a strong order backlog of Rs53.3bn, the lower than expected (as well as guided) growth reflects, higher than anticipated slowdown in the textile sector.

The company faces a double whammy in the form of (1) Declining demand (thus impacting revenue growth) and (2) Rising raw material prices (hitting margins, though management indicated an intention for upward revision in prices post Q1FY09)

Mumbai Realty major, HDIL declared bonus in the ration of 2:7. results for Fy2008-08 were inline with our expectations.

HDIL reported revenues of Rs9.8 bn (v/s our expectation of Rs9.7 bn) and PAT of Rs7.1 bn (v/s our expectation of Rs6.7 bn) for 4QFY08. HDIL booked revenues largely from the sale of commercial property in Andheri (Kaledonia) in 4QFY08 for a consideration of Rs9 bn. Also HDIL booked Rs0.5 bn from land development in Vasai-virar region. PAT was 6% higher than our estimates due to our higher construction cost assumptions for the commercial property.

HDIL has various projects under construction in different parts of Mumbai. Prices of HDIL’s projects in following places at Mumbai Motilal Nehru Nagar, Santacruz (W), Andheri, Ghatkopar, Jogeshwari , Malad, Virar, Vasai, Worli, Bandra etc.