Indian Equity Research and Investment Strategy
L&T has been in the news for wrong reasons – Hostile bid for Satyam Computers which has eroded its stock price as Satyam’s Scam unfolded.
Investors who have destroyed wealth in the past 12 months in L&T have been asking about the performance of the stock in the month of March. Credit Suisse analyzed the historical performance of the stock in the past 16 years (more…)
OnMobile Global reported 3Q FY09 revenues of Rs1157MM, up 19% Q/Q (due to seasonality of revenue recognition) and 44% Y/Y but 5% below our estimate. The EBIT margin of 25% jumped Q/Q but was also lower than expected – this seasonal jump is due to a large proportion of international revenues being booked in 3Q without the associated costs.
YTD (9M FY09) revenue growth was a creditable 51%; however, margins have come off sharply, leading to absolute EBITDA being flat Y/Y. (more…)
Growth was below ours and consensus estimates (6.1%), with the surprise element being the 2.2% contraction in agriculture (partly due to a high base effect). While industry growth slowed to 2.4%, growth in services remained buoyant – up 9.9% largely due to a reflection of the pay commission outgo (community services, up 17.3%). With 9MFY09 GDP growth at 6.9%, growth in 4QFY09 would need to come in at 7.6% in order for the government to achieve its 7.1% advance estimate put out earlier this month. This appears optimistic given the weakening global environment and continued contraction in trade.
The deceleration in investment continued, with fixed capital formation slowing to 5.3% in 3Q vs. 12.6%yoy during 1HFY09. However, headline consumption growth remained buoyant at 7.8% (vs. 7.3% in 1HFY09) with the deceleration in the private sector +5.4% being offset by the pay revision which is accounted under public consumption – up 24.6% yoy.
Citi revised India’s FY 2010 GDP expectations to 5.5% with contraction in exports, a further deceleration in investment, and a moderation in consumption.
Following positive customer response to XCD 135cc motorcycle, Merrill has greater confidence for 4 upcoming launches by Sept. Merrill raises domestic two wheeler sales estimates to 1.36mn units in FY10 (5% growth, earlier 5% decline), and retain 5% growth on higher base in FY11.
In the export category, management maintains positive for exports next year, albeit with slower growth trajectory, Merrill estimate 10% decline in two wheelers (more…)
Riding on tax cuts and softening commodity prices, Inflation is continuing its downward journey. The wholesale price index (WPI) for all commodities fell by 0.1% to 227.8 on weekly basis for the week ended February 14.
Growth in WPI on annual basis stood at 3.36% in the said week compared with 3.92% in the previous week. Faster than expected decline in inflation and high base effect of last year is likely to drag India into negative inflation territory by April. Another fuel prices cut, which the government is understood to be considering, will further hasten the downward journey of inflation.
However, with Reserve Bank of India expected to cut its policy and reserve rates in near term, relatively stronger rural demand, and expectations of improvement in consumer demand by mid-20009 may still be able to save India from facing any serious deflation threats.
Based on better-than-expected 9m-FY09 sales, Goldman Sachs [GS] now expect 33% FY09E sales growth. For FY2010E, while acknowledging that DRL faces a challenging task to improve upon its FY09 numbers, we believe that its growth momentum will continue and we expect it to post at least double-digit (10.1%) sales growth (core business growth of 16.9%). Market view of decline in growth in FY10E (owing to base comparison) is overly pessimistic; US to continue to drive revenue growth.
Additionally, we continue to believe that the AOK tender wins have equipped DRL better to face the changing business model in Germany and to be a long-term competitor of significance. (more…)