2008 | Dalal Street

Equity Research

Reliance Infrastructure – Rosa Phase I- Construction

December 22, 20082 min read

Rosa Phase I is the first of the 13 power plants being developed by Reliance Power. It will be a 600 MW (2×300 MW) plant, which, as per the agreement is likely to be commissioned by March 2010. The estimated cost of the plant is Rs27 bn and it is being funded in a debt:equity mix of 80:20. Until now, the company has spent approximately Rs12 bn on its construction. The power produced from the project will be sold to the Uttar Pradesh Electricity Regulatory Commission (UPERC) on a cost plus basis.

Shanghai Electric Corporation (SEC) is the EPC contractor for the plant and is supplying the BTG equipment while the BOP works are subcontracted to various players in India. (more…)

Breaking Corporate India Earnings News

Morgan Stanley Upgrades to Equal Weight

December 22, 20081 min read

Morgan Stanley recommendations are following the Indian market but not lading it ;-). Morgan has upgraded India to Equal weight from Underweight.

India’s quant model ranking has improved from #19 to #13 making it the biggest gainer in rank on the month. India has had a major jump in its relative EPS growth (#6 to #2) indicating a less severe deterioration on these metrics over the last month than other EM markets. On the trailing P/E (#17 to #11) and P/CE metrics (#13 to #10) India has also improved significantly.

However, India remains locked at the bottom of the asset class on the dividend yield metric. The market’s technical ranking has also improved (#14 to #9).

You can recall, Morgan Stanley has got many forecasts about India wrong. Former Morgan Analyst Andy Xie had told India will slip into Bear Phase in 2006 but it made an all time high in Jan-08.

Economy, Markets and Macro Views

Book Profits in the Rally

December 21, 20081 min read

The Indian market has exhibited some strength over the past few weeks. The market is now in its eighth week of rise from its October intra-day lows.

The BSE Sensex is up 31% since its October lows and this is the fourth time since the bear market started in January that we’ve seen a rally of 20%+ and the longest one thus far. The broad market has started to outperform the narrow market with a 5% outperformance over the past week. (more…)

Equity Research

Jain Irrigation Systems – Review

December 18, 20082 min read

Polymer costs for JISL have declined by around 25% over the past three months which includes cut in excise duty, this implies a margin expansion of ~700 bps. JISL has wound down its capex plans for F09 and now plans to invest around Rs2.0 bn (Rs3.0 bn earlier). Certain corporate capital expenditure has been deferred, and the company plans to outsource non-critical MIS component manufacturing.

JISL intends to reduce its working capital requirement by around 30%. This reduction will be driven by a combination of lower polymer cost, low raw material inventory, and de-bottlenecking. (more…)

Breaking Corporate India Earnings News

Inflation Tanks to 6.84%

December 18, 20081 min read

For the week ending 6 Dec ’08, headline (wholesale price index, WPI) inflation fell to 6.84%, beating our and street estimates by large margins.

For the first time, Primary prices fell, backed by easing in food articles (food grains, fruits, vegetables and condiment and spices). Non-food articles also witnessed a fall. We expect the current trend to continue, further easing primary price inflation.

Except food products, all the major components witnessed a fall. Basic metals, alloy, chemicals and transport equipment fell. The week under review saw cuts in the administered fuel (petrol and diesel) as well as non-administered fuel.

Going forward, Inflation is softening ahead of our expectations. The cut in cenvat, a stronger rupee and the pass-through of falling international commodity prices now indicate that India might slide into a technical deflation much sooner than our earlier forecast.

Equity Research

Kansai Nerolac Paints – Review

December 17, 20082 min read

Kansai Nerolac Paints Ltd – KNPL is the 2nd largest paints company in India with a market share of approximately 21%. It is the largest in the industrial paint segment with a 45% market share and has a substantial market share of 14% in the decorative segment. Sales contribution from both the segments for KNPL is almost equal.

For Q2 FY09, Net Sales grew 12% to Rs.390cr – another quarter of weak performance given the impact of high raw material costs and subdued demand from the crucial (more…)

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