Year: 2008

S Kumars Nationwide’s 3QFY08 revenues increased 44% YoY, with earnings up a strong 72% YoY, better than our expected 56%. This was largely due to higher sales growth (8%) in luxury textile division benefiting from new capacities and lower than expected depreciation charge as expansions in high value cotton fabric and home textiles have been pushed back to Mar/Apr’08.

EBITDA margins grew 190bps YoY to 22.6% levels, in-line with estimates. However, growth has started to moderate; we see margins peaking at 23% in FY09E since high costs relating to brand promotion expenses and overheads relating to expansions in home
textiles and cotton fabric should limit further gains.

Company is expected to report an EPS of Rs 8.39 and Rs 9.87 for FY08 and FY09.

Larsen & Toubro (L&T) has announced that Larsen & Toubro’s (L&T) Heavy Engineering Division has been awarded an order to manufacture and supply 22 Hydrocracker & Atmospheric Residue Desulphurisation (ARDS) Reactors for Kuwait National Petroleum company’s prestigious clean fuel project 2020.

The total value of the order is KWD 117.89 million, equivalent to US $ 421 million (Rs 1695 crore). This is the largest ever order placed with any single manufacturer in the world for such critical reactors. The order has been won against stiff international competition from Japanese and Italian reactor manufacturers.

These reactors will be manufactured from advanced technology steels containing chromium, molybdenum and vanadium, with thickness up to 300 mm and weights up to 1450 MT. The reactors for the clean fuel project 2020 have to conform to Chevron process design and specifications. L&T’s heavy engineering division is amongst a select group of companies qualified for manufacture of such critical equipment.

Satyam Computer Services net profit rose 28.58% to Rs 433.63 crore on 35.58% rise in total income to Rs 2266.05 crore in Q3 September 2007 over Q3 September 2006. The results are on a consolidated basis as per Indian GAAP.

Satyam Computer for fiscal 2008, under US GAAP, expects revenue between $2,119 million and $ 2,122 million, implying a growth rate of 45% to 45.2% over fiscal 2007. Basic earning per american depository shares (ADS) for fiscal 2008 is expected to be $ 1.27, implying a growth rate of 39.6% over fiscal 2007.

Corresponding revenue growth under Indian GAAP consolidated is expected to be between 29% and 29.2%. EPS for the full year is expected to be Rs 25.5, implying a growth rate of 18.9%.

For Q4 March 2008, under US GAAP, revenue is expected to be between $ 594 million and $ 597 million, implying a growth rate of 5.6% to 6.1%. Basic earning per ADS for the quarter is expected to be $ 0.36.

For Q4 March 2008, under Indian GAAP consolidated, corresponding revenue growth rate is expected to be between 5.3% and 5.8%; EPS for the quarter is expected to be between Rs 7.23.

Seperately, the company said it has entered into a definitive agreement to acquire Bridge Strategy Group, a Chicago based management consulting firm. In making the $35 million, all-cash purchase, Satyam significantly reinforces its strategy consulting and business transformation capabilities.

KPIT Cummins Infosystems:
Company reported revenue of Rs1.51b (exp: Rs1.55b), – up 1.3% QoQ and 29% YoY; in US$ terms, revenue was US$37m – up 4.3% QoQ and 42% YoY. While net profit at Rs141m was also below expectation (Rs144m). This makes full year guidance challenging for the company.

Management expects to meet revenue guidance comfortably (US$145-148m) while for net profits, company hopes to meet lower end of guidance (Rs630m). In worst case of INR appreciating further to Rs38/USD, company expects to make profit of at least Rs.610m. Our estimate for FY08 was already at Rs557m.

KPIT gets just 7% of its revenue from BFSI sector where most of the investor concerns are centered. Also, ATS (auto-electronics and semiconductor) continue to show strong
traction – revenue from this segment has grown over 100% YoY during 9M08.

HT Media:
HTML’s 3QFY08 profit growth of 9.8% yoy was 8% below our estimates, though EBITDA margins fared much better than expected. Declining raw material cost (newsprint) and stabilising employee expenses resulted in 71bps EBITDA margin expansion, despite investments in new ventures like Mint.

Advertising revenues grew 17.6% yoy, driven by 30% growth for Hindi newspaper, though English advertising seems to be slowing. HT Media is still largely dependent on its
flagship English newspaper ‘Hindustan Times’ Delhi edition for its advertising revenues (we estimate about 65%) and any increase in competitive intensity / slowdown in market in Delhi could hamper growth. The stock appears to be fully valued.

Godrej Consumer Products
Net profit for the quarter came at Rs430m, up 8.7% YoY driven by a 14.6% sales growth. On the EBITDA margin, GCP did well to absorb increased raw material costs. The soaps division outperformed the industry yet again this quarter driven by a 5-6% price hike and strong volume growth.

Keyline, GCP’s UK business recovered after a poor performance last quarter, posting a 6.6% sales growth and 20% growth in net profit. Rapidol, GCP’s subsidiary in South Africa showed flat growth, impacted adversely by the rupee appreciation.

ITC Ltd:
ITC’s pricing strategy, loading price hikes in favor of mid-end cigarettes and not leaving any ‘pricing gaps’ across its cigarette portfolio, is paying off. Its cigarette EBIT profits increased 16% in 3QFY08 and 13.7% in 9mFY08 despite declining volumes. Volume trend is also improving, with 3Q volumes declining less than 1%.

3QFY08 net profit growth of 15.8% yoy were in-line with estimates. Positive surprise was 16% growth in cigarette EBIT profits, while growth hotels and agri-business have recovered.

ITC’s foods portfolio (excluding ‘Bingo‘ brand) has broken even in 3Q. EBIT loss margins for new FMCG business continue to decline, despite scaling up of expenses related to the launch of new personal care products under the ‘Fiama di Willis‘ brand in 3Q.