India’s Economic Growth story can be grouped into three phases. (1) Prolonged below-trend growth period – 1998 to 2003. (2) Acceleration to Overheating Zone – 2004 to 2007; (3) Reverting to sustainable growth rate. We believe the underlying sustainable growth rate currently is 7.5-8% – the level at which the risk of overheating is low. (more…)
Author: CP
Brokerages Underweight on ITC
Though the revenue growth was good in this quarter, operating margins for the company were hit due to higher investments in the newer businesses. Going forward the growth in the cigarette business of the company will be severely impacted due to the recent changes in the excise duty structure in the Union budget. However, there might be some near-term strength due to migration of consumers from unfiltered to the filtered segment which would result in the company reporting strong numbers in the next few quarters. (more…)
Reliance Communications + MTN GROUP to enter into exclusive negotiations
India’s leading telecom company Reliance Communications and MTN Group, a leading emerging market telecom operator, have agreed to enter into exclusive negotiations for a period of up to 45 days with respect to a potential combination of their businesses.
The negotiations are currently taking place and a further announcement will be made when appropriate. It is to be noted that there is no certainty either on completion, or the timing of the said proposal. In the meantime, shareholders are advised to exercise caution in their dealings in the companies securities dealings until a further announcement is made.
Federal Bank – Hit by Higher Bond Charges
Federal’s 4Q08 profits (+4% yoy) were 30% below estimates on higher-than-expected bond portfolio charges and some rise in loan loss provisions. Core operations grew by 37%, strong on the back of a sharp increase in margins. We believe its new capital allows management to seek higher growth opportunities, both organic and inorganic, and will be a key valuation driver.
Federal’s margins increased to 376bps (+60bps qoq) and were a key beneficiary of its new capital. While we expect NIMs to moderate from current levels, management seemed confident of maintaining them at 340-350bps despite aggressive 25% loan growth target.
Retail loans (and provisions) showed higher stress for a second successive quarter. While asset quality is fairly comfortable (0.2% net NPLs), we believe its rising predilection for retail and SME warrants greater caution in the current environment.
We expect a Negative Growth in EPS and it is expected to report Rs 27.49 for Fy09 lower than Rs 28.66 reported in Fy08.
Reduce Thermax Ltd
Thermax’s Q4FY08 results were in line with expectations. At the consolidated level, revenues grew ~19% Y-o-Y to ~INR 10 bn, driven by better performance of the company’s subsidiaries. Standalone revenues grew ~13% Y-o-Y to ~INR 9 bn.
During the quarter, the energy business segment grew ~12% Y-o-Y, whereas the environment business grew ~7% Y-o-Y. The energy segment contributed ~77% to revenues with the balance being contributed by the environment segment. Consolidated EBITDA margins were up ~100bps Y-o-Y to 13.4% driven by higher margins in the energy business segment. (more…)
Tata Teleservices Maharashtra – Poor Show
Tata Teleservices Maharashtra continued to underperform. 4QFY08 revenues of Rs4.56 bn (+3.6% Q/Q; 19.8% Y/Y) were in line but EBITDA of Rs1.15 bn (+5.8%, +30.6%) was 2.5% below our estimate. Net loss of Rs206 mn came in lower (versus JPMe: Rs308 mn) due to higher other income. For the full year (FY08), TTML’s revs were up 21% Y/Y and EBITDA was up 40%.
Revenue momentum was decent despite slowdown in sub-additions to 0.35 MM vs. 0.54 MM in 3Q. ARPU decline (6.5% Q/Q) was lower versus recent trend; we estimate 4Q wireless ARPU
was ~Rs240 (RCOM: Rs320). Margin expansion was only 50 bps as interconnect/network costs were a tad higher. However, SAC (handset subsidy) is on a declining trend (Rs600 in FY08 vs. Rs900 in FY07). Notably, FY08 was TTML’s first ever year of a positive EBIT.
For FY09, the company is expected to be in Red losing Rs 0.28 / share.