The risk of IT demand growth falling to 2001-02 levels is increasing. Gartner models worst case scenario of demand decline in 2009. The BFSI segment accounts for 23.5% of global IT services demand. The current credit crunch is squeezing this segment. We expect this to impact demand adversely. Around 55% of Indian IT companies’ revenues come from the US. IT service providers would have to work harder in conveying cost reduction and/or deliver at predictable costs. Competition on price is likely to turn severe in IT management services. (more…)
Year: 2008
Shree Renuka Sugars – Results
Shree Renuka Sugars reported lower-than-expected Q4FY08 result with EBITDA margin of 9%, due to lower-than-average market price of sugar. Sugar segment sales grew 41.4% YoY with sugar volumes rising from 317,674 tonnes to 535,644 tonnes and average sugar prices falling from Rs15,940 per tonne to Rs12,962 per tonne.
The company took maximum advantage of the enormous opportunity in exports, due to which trading sales grew by a whopping 455% YoY. The expansion in distillery as well as power capacities coupled with increase in average realization (12.2% in ethanol per liter and 62.5% in power per unit) helped the company post healthy growth in its co-generation and ethanol businesses.
On an annual basis, sales rose 149.1% YoY. However, due to subdued performance in the last quarter, FY08 EBITDA margin fell 240bp YoY to 12.0% but net profit rose 36.9% YoY to Rs927bn. Although average sugar price in Q4FY08 hovered at Rs16,500 per tonne, the company had to sell it at about Rs15,000 per tonne. This resulted in the company registering a 799bp YoY fall in EBITDA margin during the quarter.
At Rs57, the stock trades at 6.8x earnings FY09E earnings expectations. In a related development, HDFC Sec has downgraded Bajaj Hindustan.
HDFC downgrades Bajaj Hindustan
HDFC Sec has downgraded Bajaj Hindustan to “Market performer” with a negative bias from BUY rating as the company is likely to be adversely impacted by higher debt and sugar cane costs. UP government has declared cane price (SAP) of Rs 1,400 per tonne for 2008-2009 (Oct-Sep) crushing season against Rs 1,100 per tonne paid by the companies for the last season. Sugar Mill owners have challenged the order in the High Court. Meanwhile, Bajaj Hindustan has agreed to pay Rs 1,400 per tonne for 08-09 crushing season to the farmers and not delay their operations till the court issues directives on this matter. (more…)
Dark Clouds over Emerging Markets – Shankar Sharma
Shankar Sharma of First Global echoed his views that he had done in Samvat Trading – Short India, take the profits on table wherever they appear and stay Liquid.
Here is an excerpt from the report,
GDP Growth to Slowdown, China could well be in the 6-7% range, and India, in the 4-5% range, in the coming year. The reasons for this will be different. India, with its lack of internal resources, and over-reliance on foreign capital for its growth. China, for its dependence on the US for export growth. (more…)
Neyveli Lignite – Results Getting Dark
For the quarter ended 2QFY09 Neyveli Lignite reported an 8.19% fall in Net Sales to Rs 668.17 crore. This was mainly because of reduced power generation. Power generation declined from 4.37BU in Q2FY08 to 3.74BU in Q2FY09.
The Operating Profit Margin declined by 353 basis points to 32.03% due to 18.42% increase in employee cost from Rs. 188.92 crore in 1QFY08 to Rs. 223.72 crore in 2QFY09. Employee cost for the current quarter includes Rs. 61.17 crore (Rs. 37 crore for the corresponding previous quarter) towards provisional liability for pay revision. The subsequent Operating Profit for the quarter under review stood at Rs 213.99 crore which was 18% lower when compared with corresponding period last year.
Net profit went down 18.46% YoY to Rs. 188.39 crore from Rs. 231.04 crore in 2QFY08.
DLF No Bottom Yet – SELL
In a report released by Reliance Equities, the company has recommended a SELL on the stock of India’s largest Realtor DLF which has stalled work on its Gurgaon’s Mall of India [Largest Mall]
The main trigers for the recommendation are – Volumes will disappoint in the immediate period. Rising receivables during the better part of the cycle (again to result in lower volumes). Commercial property sale to slow post DLF Assets (DAL) transaction. (more…)