Indian Equity Research and Investment Strategy
Morgan in a report released just minutes ago has upgraded Marico Ltd to OVERWEIGHT with target price revised upwards.
Copra prices (Marico’s key input cost) have declined 10% in recent days. Similarly, Safflower oil prices, a key input for its edible oil business, have fallen 25% over the past couple of weeks. We believe this sharp fall in key input costs improves the probability for margin expansion in Marico’s hair care business and higher volume growth in its edible oil business. (more…)
Strong farming income, especially in northern India, and the ongoing wedding season boosted “two-wheeler” (motorcycles, scooters) sales. Hero Honda was the key beneficiary – sales volumes in February were up 24% y-o-y. We expect sales to be aided by elections, which will be held during April-May. However, the outlook remains bleak on exports; Bajaj Auto saw its exports decline 20% y-o-y.
Car makers also benefited from implementation of the Sixth Pay Commission recommendations in October 2008. Maruti Suzuki was the key gainer; the central government employees’ contribution doubled to 15% of its sales in January 2009. (more…)
We decided to run a Status Check of the Home Loan Market in India and found that the Growth Rate market has been continuously declining in the past 6 quarters. YoY Growth peaked in Q2 FY07 to a whopping 80% and fell for the next 2 quarters to touch 25% in Q1 FY08 and saw a momentary rise to 32% in Q2 FY08 and since then began its downward journey and is now recording a growth of mere 10% YoY. The following Chart shows the Home Loan Outstanding Vs Growth in Home Loan Disbursal.
Home Loan Lending Data for the Past 2 Months:
Top 5 Banks are as follows – No of Loan Accounts + Amount in Rs mn
SBI & Associates 6,970 2,605.7
Oriental Bank of Commerce 993 375.9
Syndicate Bank 1,528 336.8
Union Bank of India 1,228 301.5
Bank of Baroda 710 255.7
India Real Estate has mentioned from various research reports that the Realty market in India is headed for a deeper and longer correction. Historically, it is proved that Equity is a better investment over Real Estate as proved by Kotak Research.
Post Merger of Reliance Petroleum with Reliance Industries Ltd, here is what various brokerage house expect and recommend to investors.
ABN Amro:
RPET assets are likely to be taken over at their current book value. Expect minimal cost savings arising from the merger given that key cost elements like crude sourcing will have been optimised. Proforma post-merger EPS for FY10/11F drops by 1-3% due to the rise in RPET’s project costs rather than because of the merger itself.
Finally, ABN Amro recommends a (more…)
India’s Current Account Deficit
Based on data for the first half of 2008/09, India’s current account looks to be heading for a fiscal year deficit of more than 3% of GDP. This would match
the highest ever shortfall since the data began in 1950/51.
During India’s Balance of Payments crisis, the peak full year deficit was 3% of GDP in 1990/91. The recent deterioration reflects the previous period of above-trend growth as well as the earlier oil price surge. The good news is that the external deficit is now significantly better covered by foreign (more…)
FreePress broke the news this morning about 1:16 swap ratio for RPL merger into RIL. RIL will extinguish the treasury stock from the merger and issue additional 69 mn (4.4% of current RIL share base) for minorities in RPL.
Analysis of the Deal:
It gives RIL access to about US$1.5 bn-US$1.8 bn of RPL’s annual cash flows (on full ramp up) for its various planned projects. (more…)