Indian Equity Research and Investment Strategy
Inflation for the week ended Apr 26 comes at 7.61 % vs. market 7.57% for the week before. Inflation for the same period last year was 6.06%.
Late last week the price of Tea shot up by whopping 16% over the previous week. This week its rising again. Experts expect the Inflation to touch 7.68% for the week ending May 3rd 2008.
YTD Inflation for FY09 is at 7.41%. Morgan Stanley in its report has expressed concerns about India’s Macro scenario but however hasn’t downgraded India to a SELL yet 🙂
World’s leading banker, Citigroup has some harsh words for India in its report. Citi said,
It has become expensive to live in India but probably even more expensive to do business in India. A look at the rising costs of setting up business over the last 3 years – asset, capital and services based – suggests “business inflation” could be as high as 10-35% p.a., well ahead of 7-8% headline inflation. This could be meaningful, given India’s growth is primarily investment led.
The report further adds that Business inflation is raising break-evens and capital intensity, lowering returns.
Citi estimates, ballpark by nature, suggest that in cases, break-even periods are up 20-80% over the last 3 years, capital intensity is up 10-60% and distribution requires 2x sales to generate the same returns. A part of this pressure is global, and this does not apply to all but raises questions on the direction of returns.
Citi raises 4 questions 1. Growth rates – where will they settle? 2. Government/RBI policy stance, in the face of inflation and election [frequent elections, a dampener] . 3. Earnings momentum – slowing, but faltering? 4. Retail investor – will he come back and when ?
Bartronics India (BIL) reported an outstanding 495% yoy growth in its 4QFY2008 Top-line. This was a result of impressive growth in its Automatic Identification and Data Capture (AIDC) Solutions business, specifically in the RFID Solutions business, as also contribution from the Smart Cards segment. BIL had acquired a US company towards early 2008, which contributed Rs 33cr to Topline.
During 4QFY2008, BIL reported a 116bp yoy contraction in EBITDA Margins owing to higher operating costs viz., Raw Material, Staff Costs and Other Expenses. These expenses rose, as a % of Sales, by 675bp yoy, 19bp yoy and 179bp yoy respectively, in 4QFY2008. BIL’s total outstanding order book position at the end of FY2008 stood at a significant Rs345cr and constituted 128% of total FY2008 Revenues.
Kansai Nerolac Paints’ Q4FY08 results were subdued due to lower demand for industrial paints [Automobiles]. Top-line grew 8.1% y-o-y to Rs 308.4 crore from Rs 285.2 crore. Bottom-line grew by a meagre 2.8% to Rs 24 crore from Rs 23.3 crore. Increase in realizations (2% in decorative segment) boosted EBITDA margin to 13.1% from 12.7% in Q4FY07. During the quarter, the company’s decorative business posted positive results as the housing segment continued to do well. (more…)
Techno Electric company has posted its Q4FY08 performance, which saw an improvement in all its divisions. The stock is in for a re-rating on the back of continued strong order inflow, huge order backlog and timely execution capability.
Techno Electric order backlog stood at Rs. 8,500 mn as on FY08. The total backlog is 2x of FY08 revenues. The company has bid for more than Rs. 2,500 mn till date. (more…)
Todays Writing Products Limited’s (TWPL’s) Q4FY08 results were in line with our expectations. The company is currently consolidating its business, both in the writing products segment and in its subsidiaries namely, Todays Stationery Mart Limited.
During Q4FY08, TWPL registered a 14% QoQ increase in its topline, driven by strong export growth and stable domestic demand.