Month: July 2008

Sintex Industries (Sintex) has reported disappointing Q1FY09 numbers due to lower volumes in the BT Shelter business and below-expected textiles revenues. The results on QoQ basis are really bad.

Net sales increased 108% YoY [9.2bn Q4FY08] to Rs 7.1bn, this was spurred by the acquisitions of Bright AutoPlast, Nief Plastics and Wausaukee rather than growth in core operations. Sintex’s net profit grew at 68% YoY to Rs 567mn.

Higher employee costs and other expenditure shaved 590bps off the EBITDA margin to 11%. Order book totalled Rs 15bn at the end of the quarter with an execution period of two years.

EPS for Q1FY09 is Rs 3.8 compared to Rs 6.4 in Q4FY08.

With the closure of Indymac bank in California, Morgan Stanley has downgraded the Indian IT sector to be cautious. The outlook for outsourcing and tech spending in the US is likely to remain challenging in the coming quarters. Any more events like further bank closures, mergers, or seizures could further aggravate the situation for offshore
outsourcing vendors.

A rising interest rate environment coupled with prospects of an imminent recession is likely to lead to lower P/E multiples, in our view.

Furthermore, specific factors like the imposition of tax rates post F2010 for STPs, the inability of smaller vendors to migrate to SEZs, and rising offshore wage costs due to increasing competition would imply significantly lower profitability.

Axis Bank’s results were ahead of expectations. Axis Bank reported a bottom line of Rs330.1 crore for Q1FY2009. The same grew by a whopping 88.6% on a year-on-year (y-o-y) basis.The net interest income (NII) for the quarter came in at Rs810.5 crore, up 81.4% year on year (yoy). The non-interest income too recorded a strong growth of 82.5% yoy and reached Rs624.8 crore. This was on the back of a robust growth in the fee income (up 80%) and the forex income. treasury income (excluding customer forex earnings) registered a decline of 17.7%.

Axis’ pre-provisioning profits are up 118% YoY on a mix of accelerating 80%+ fee income growth (broad-based), some cost control, and 90% NII growth (boost by capital, margins fall). Market expectations of Axis’ asset risks have been modest. This quarter does not provide the answers. Overall, asset quality is better than expected and remains on the ‘keenly watch’, rather than worry, list.

Analysts expect Axis to report a full year EPS of Rs 37.75 to Rs 38.50.

Apparel major Arvind Ltd has come up with a four-point plan in order to reduce its mounting debt burden. The total debt of the company stood at Rs 1172 crore as on March 31 2007.

As per the plan, along with concentrating on more profitable fabrics and apparel business, the company will also focus on retail business and popular brands. The company also plans to unlock value in non strategic assets and use cash flows to de-leverage the balance sheet.

The company expects to get the shareholders’ approval for the plan at the upcoming annual general meeting to be held on July 31. Arvind ventured in to production of denim in 1987 and became the world’s largest producer by 1998. However, as a change in strategy, the company is now looking to reduce its capacity of denim production and concentrate more on retail segment. The company has been undergoing restructuring since 2003.

Era Infra Engineering has failed to make a mark on the BSE despite the company bagged a contract worth Rs 95.5 crore from Bharat Heavy Electricals (BHEL). The company will be responsible for the civil, structural & architectural work for main power block along with its auxiliaries and BOP for 1×500 MW thermal power station, extension unit # 6, Gujarat State Electricity Corporation at Ukai in Gujarat.

The scrip is currently trading at Rs 555 per share, down 7.6 points or 1.35% on the BSE.

The stock opened at Rs 545 per share as compared to its previous close of Rs 562.60 per share on Friday.