Indian Equity Research and Investment Strategy
Here is the list of IPOs that are waiting to raise money from the primary Markets in India [PDF]. Almost all the promoters are waiting for the market to look up so that they can command heavy premium 🙂
More than 50% of the IPOs that raised money in the past 12 months are quoting below their issue price.
Tier-II Software Companies, Hexaware Technologies and KPIT Cummins Infosystems have been downgraded by Citi to a SELL.
Hexaware:
Hexaware reported revenue of US$67m (exp. of US$69m). Lower SG&A spend led to net profit of Rs209m (exp. of Rs211m). Out of the last 5 quarters, headcount has declined in 3; even next quarter hiring outlook is muted – this does not inspire confidence on the outlook for rest of the year. New order booking during Q1 was US$42m (~US$70m in 4Q and US$270m+ in CY07). (more…)
In the Monetary policy review, the RBI has raised CRR by yet another 0.25% TO 8.25%. CRR hike is effective from May-24, 2008. It has left Bank Rate, Reverse Repo Rate and Repo Rate unchanged.
RBI has set a high priority to price stability, well-anchored inflation expectations and orderly conditions in financial markets while sustaining the growth momentum.
Softened GDP growth projection for 2008-09 in the range of 8.0- 8.5 per cent. Inflation to be brought down to around 5.5 per cent in 2008-09 with a preference for bringing it close to 5.0 per cent as soon as possible. [How are you going to do it with every Industry functioning as a Big Lobby ? Looks to me just an empty assurance. ] Going forward, the resolve is to condition policy and perceptions for inflation in the range of 4.0-4.5 per cent so that an inflation rate of around 3.0 per cent becomes a medium-term objective. [Is the RBI Kidding ?]
The limit of bank loans to individuals for housing having lower risk weight of 50 per cent enhanced from Rs. 20 lakh to Rs. 30 lakh.
Hindustan Zinc Ltd (HZL) recorded an impressive 68.3% FY08 EBITDA margins despite zinc LME prices decreasing by 17% (average prices of USD 2700 in FY07 to USD 2400 in FY08) and rupee appreciating by 11% (from INR 44 to INR 39 per USD) in FY08.
In FY08 HZL recorded net sales of INR 78,780 mn as against INR 85,600 mn in FY07, a decrease of 8%. EBITDA margins in FY08 stood at 68.3% as compared with 74.8% in FY07. In Q4FY08 HZL’s net sales stood at INR 22,660 mn as compared with 20,210 mn in Q4FY07. EBITDA margins declined by 450bps as compared with Q4FY0. Adjusted net profits for the quarter increased by 20 bps on account of higher other income and lesser tax incidence as compared with Q4FY07.
FY08 zinc-lead refined metal production increase by 22% and 31% YoY respectively; Q4FY08 zinc-lead metal production increase by 43% and 35% QoQ respectively. The Chanderiya Hydro II smelter was commissioned in a record time of 20 months, 6 months ahead of schedule.
In FY08 HZL through its continued exploration activity increased its net zinc reserve by 22.9 mn TPA and its net contained zinc- lead metal by 3.4 mn TPA (up 14%) at its Sindesar and Rampura mines.
Merill Lynch has downgraded the price target for IndiaBulls Financial Services by 46% on the back of the sharp earnings cut due to lower loan growth.
Indiabulls’ 4QFY08 earnings, up 56% yoy and 16% qoq were in line with expectations due to lower provisions. However, net interest income growth was lower than expected at 39% yoy and flat qoq. This was, in part, driven by IFSL’s desire to ensure ample liquidity for itself. Hence, it borrowed aggressively during the 4Q. The cash equivalent in the balance sheet is now Rs7.2bn (US$1.8bn) which is almost +40% of the total assets. (more…)
Central Bank’s profits declined 15% yoy (6% below estimates) due to a sharp drop in margins, higher loan loss provisions and taxes. Operationally the quarter was weak; cost control the only positive. We believe, given its large corporate loan book; it will be structurally difficult for CBI to co-manage high growth and profitability.
Central Bank’s NIMs dropped over 140bps yoy to 219bps for 4Q08. The drop in margins was significantly more than estimated with aggressive loan growth (+26% qoq) and decline in CASA ratio necessitating a rollover of high cost funds. With its top-line focus and large corporate loan portfolio, we believe margins will remain under pressure.
Costs have remained under check with a 4% decline yoy. After adjusting for pension arrears, CBI’s Tier1 capital has fallen to 5.4% (10.4% overall) as against the required 6% under Basle II (effective Mar09 for CBI);.
Expect CBI to report an EPS of Rs 15.24 for FY2009.