Exports to US continue shrinking

Reflecting the deepening of troubles of Indian exporters, India’s exports to the US dropped to lowest level in more than a year in February. The recession-hit US imported goods worth a total $1.58 billion in February, the lowest in 14-months.

Consumer spending has fallen sharply in the US due to the ongoing economic crisis, resulting in erosion of demand for most of the imported goods. Nearly all countries which export to the US like China, Taiwan and other South Asian countries, have witnessed sharp decline in exports to US.

India’s average monthly exports bill had been over $2 billion a month before the start of financial crisis in September last year. Since then, however, it has been showing consistent decline and reached its lowest point of $1.58 billion in February this year.

Book Profits in DLF + Unitech – Kotak

Real estate stocks have rallied rapidly over the past three weeks as new launch activity has picked up at 25-30% discount to prevalent prices. Good responses to some of these projects especially in Mumbai and Delhi have further contributed to this positive sentiment. However, despite the better launch activity in March, Kotak continues to observe large consensus downgrades in March.

Expect 4QFY09E to be extremely weak, with sales dropping 70% yoy and 16% qoq, driving 81% yoy and 39% qoq de-growth in profits.

Sharp reduction in commercial revenues, and new sales have to be significantly higher to maintain same contribution as selling prices are sharply lower. Improvement in financial performance thereafter will depend on sustained recovery in volumes. (more…)

United Phosphorus Concerns Overdone – Citi

Besides good results, management speak from global peers indicate that farm economics and demand are sound across markets, with the exception of some LatAm countries. The outlook for the next fiscal is strong in most cases and concurs with our positive view on UPL’s business.

UPL has a steady B/S, with net D/E of 0.6x, low refinancing risk (most debt redeemable in 2011) and rising cash flows. As asset valuations come off, we believe UPL is one of the few players positioned to be an active participant in any industry consolidation. (more…)

Feb industrial production: Momentum shows uptick

The negative IP growth was in line with the consensus forecast of a 1.3% yoy decline and our expectation of a 1.5% yoy decline. The monthly momentum rose by 0.6% mom in February, higher than the 0.2% mom rise in January. For the April-January months, IP grew 2.8% yoy versus 8.9% yoy in the same period previously.

The Capital Goods Index rose by 10.4% yoy in February versus a 8.9% yoy rise in the first 10 months of the year. The monthly momentum in capital goods rose 1.2% mom s.a. (seasonally adjusted) in February, versus a 0.5% mom decline in the previous month. The Infrastructure Index for February rose 2.2% yoy in February compared to 1.5% yoy in January. Production of
consumer goods shrunk 3% yoy, lower than the 5.9% yoy average growth in the first 10 months of the fiscal year. However, on a monthly basis, growth in the Consumer Goods Index rose 0.7% mom from a 0.3% mom fall in January.

India Sugar cycle getting sweeter – Merrill

The sugar price in India could jump 20% in next six months and remain strong for next three years, in our opinion. Key drivers for such a strong up-cycle are – very low production in current season and forth coming season compared to consumption and lack of scope for further reduction in dealer stock level. Increased cost of production as well as cost of imports. (more…)

Reliance Communications – Justifications for the strong outperformance?

Some investors have wondered about RCOM’s strong outperformance recently. RCOM is currently trading at a 10-15% premium to Bharti on FY10E EV/EBITDA. In the past, this premium has reached 25% also but only when the Towerco IPO looked imminent (Jan-08) and when the market was at its peak in terms of bullish sentiment. Such premium may not be repeated again in our view.

Most of the reasons for the sharp up-move have been macro & technical rather than company specific – increased risk appetite for high leverage B/S, esp. in the underweight index names which had been beaten down. Besides, a new rule on allowing non-compliance to AS-11 comes as a relief for companies with high forex debt (which are incurring huge translation losses). However, this does not benefit RCOM’s P&L as it anyway was not reporting as per AS-11 in FY09. In any case, relaxation in accounting rules does not mean there is no impact.