CP | Dalal Street

Industrial Weakness – 5 Years of Stalled Projects by Congress Politicians

April 4, 20142 min read

The Indian Industry went into a prolonged phase of Policy & Project Paralysis as the Congress Government got itself into defensive mood to defend itself against the massive Scams [2G Spectrum Scam, Common Wealth Games, Coal Scam, etc] with absolutely ZERO attentiosn towards Governance and Progressive Reforms. Industrial CAPEX Data released by CMIE March 2014 shows that investment for the quarter was lackluster, with average four quarterly new starts at Rs967bn (-10% qoq / -14% yoy). This capex slowdown is in line with the weakness seen over the past 12 quarters and as we expected given the upcoming national elections. We expect activity to be slow in the quarter ending June 2014 as well and improve only gradually. Government capex fell sequentially (-11%) after increasing over the last two quarters. Private capex showed no signs of revival. The decline was driven off continuing weak activity, particularly in the transport and mining segments.

Stalled projects as a percentage of total outstanding remained at elevated levels of ~5%. Given our expectations of a (more…)

Equity Research

Motherson Sumi – Review – Long Term BUY on Correction

April 2, 2014April 3, 20142 min read

Motherson Sumi Systems Ltd is a a joint venture of Sumitomo Wiring Systems of Japan and Motherson group of India, is a leading manufacturer of electrical and plastic parts for automobiles globally. It is a market leader for wiring harness in India with over65% share. In Europe it is one of the top three manufacturers for external rear view mirrors, car bumpers and dashboard etc. Currently India contributes 17% of revenue and bulk of its profit.

Motherson is expected to register a 20% CAGR in sales through FY20. Key drivers we see are: an increase in the value of plastic and electrical parts per car (more…)

Economy, Markets and Macro Views

Bajaj Finance Vs IDFC Vs LIC Housing Finance – New Banking License

April 2, 20143 min read

The RBI is likely to issue new bank licence soon. The key question before investors is whether or not to buy the new bank licensees over the existing and well established franchises such as HDFC Bank & Axis Bank. Our fundamental & quantitative analysis shows that significant value could accrue to investors from new bank licensees with a well-executed strategy.

Empirical evidence shows that new bank licensees have potential to deliver high returns during (more…)

Equity Research

Which Industrial / Cement/ Auto / Financial Stocks to Own to Play Economic Recovery ?

April 1, 2014April 2, 20142 min read

With cyclical stocks in India having rallied in anticipation of an election induced acceleration in economic momentum and sentiment in the wake of Opinion Polls projecting most progressive Global Politician Narendra Modi Ji as the Prime Minister of India, we look at blue sky valuations for domestic cylicals. We use EV/Sales as our benchmark for manufacturing companies and P/BV for financials, inherently assuming that the profitability cycle mirrors the revenue cycle.

Industrial / Auto / Cement Stocks – Only 4 companies are trading (more…)

Economy, Markets and Macro Views

L G Balakrishnan & Bros – Review and Recommendation

March 31, 2014April 18, 20202 min read

L G Balakrishnan & Bros (LGBL), the flagship company of ELGI Group, is a leading supplier of transmission chains to the automobile industry under the brand, Rolon. Transmission chains are also known as automotive chains. LGBL has a around 70% market share in the OEM chain segment and around 50% market share in the replacement segment. The technology is the entry barrier in this business as chains are precision components. As vehicles become sleeker and powerful, the chain quality has to improve.

The transmission segment mainly caters to OEMs and replacement (more…)

Equity Research

FIIs Bullish on Indian Banks / Financial Sector

March 31, 2014March 31, 20143 min read

The optimism and hope of a stable Government coupled with macro-economic parameters has led to Foreign Institutional Investors shoring up Indian Equities. The strengthening of Indian rupee and confidence in the new RBI governor’s policies and outlook, receding macro concerns like CAD, lower inflation and fiscal deficit numbers. More importantly, they seem to be looking at the overall GEMS market and India looks far better than any of the other members in the BRICS – China has its own issues, especially the banking system, where no one seems to believe the numbers and most investors perceive stress is very high, Russia and Brazil are not favoured, and more importantly.

If there is any further rally after a favourable election verdict, a (more…)

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