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Equity Research

Jindal Saw – Underweight by HSBC

May 6, 20081 min read

Just few minutes ago, HSBC Equity Research has downgraded Jindal Saw Ltd to UNDERWEIGHT. This change in recommendation comes after the back of poor Q4 results from the company. Another Jindal Group company, JSW Steel had to face the same plight earlier this morning.

Jindal Saw (JSAW) had favourable coal prices for a long time, but the inventory of this low-cost (USD100/t) coal is over, the contract for which expired in April 2008. Management guided recently that new supplies should come in only at USD300/t. (more…)

Economy, Markets and Macro Views

Indian Oil – Bongaigaon: Arbitrage Opportunity

May 6, 20081 min read

We will never recommend to Invest in PSU Refinery / Oil Marketing Stocks until the Government supports FREE pricing mechanism, of course control cartelisation like the Steel companies in India are currently resorting to. However, if you are holding Bongaigaon Refinery & Petrochemicals Ltd, which will be merged with Indian Oil Corporation, here is an arbitrage opportunity. (more…)

Equity Research

Reduce BGR Energy – Kotak

May 6, 20081 min read

All though Energy / Power sector looks attractive, Kotak Sec Analyst has recommended a REDUCE on BGR Energy Systems. The company is poised to grow strongly on the back of massive investments expected in the country, especially in the power generation sector. BGR Energy has expanded the scope of its products/services to emerge as a complete Balance-of-Plant (BOP) contractor for power plants. Successful project execution and managing strong growth are key challenges.

Kotak expects revenues and earnings to grow at CAGR of 53% and 62%, respectively, over FY2007-10E, led by growth in power division. Order backlog of Rs36 bn at beginning Mar’08 provides visibility of 1.8 years based on FY2009E revenues. (more…)

Breaking Corporate India Earnings News

JSW Steel – Hit by Rising Cost

May 6, 20081 min read

JSW Steel one of the main companies behind steel cartel in India reported a PAT for 4Q excluding SISCOL, prior period taxes and write-back of misc expenditure works out to Rs3bn (-15% yoy). 4Q PAT would have been higher excl forex translation loss of Rs930m. EBITDA was Rs7.2bn (-7% yoy) and the margin was 23.1%, lower yoy and qoq. SISCOL reported FY08 PBT of Rs660m and 21% EBITDA margin.

During 4Q coke costs jumped 89% yoy to Rs19,000/t and iron ore costs rose 98% to Rs2,300/t. Costs are slated to rise further. JSTL has tied up its coking coal at US$305/t for FY09. Iron ore hikes have not yet been finalized but are likely to be in excess of 65%. JSTL has ~25% of captive iron ore and expects ~60% captive iron ore and ~45% coking coal by 2010.

Margins are likely to be hit somewhat in 1Q FY09 as prices are being maintained at current levels for the next 2-3 months. JSTL also passed on the impact of the import duty cut on raw materials by reducing prices of HRC by Rs500/t.

Breaking Corporate India Earnings News

Elder Pharma – Strong Dose of Results

May 6, 20081 min read

Elder Pharma reported 32% YoY growth in top line in Q4FY08 on the back of strong performance of its leading brands. For full year FY08, total revenue increased by 22% YoY to Rs 5481.4 mn. The growth in revenues was mainly on account of strong performance by its leading brands like Shelcal, Chymoral, Eldervit etc.

Elder’s EBDITA margin remained stable at 20.2% during the fourth quarter ended March 2008. For full year FY08, EBDITA margin grew by 280 basis points to 20.2% as compared to 17.4% for last year.

Elder recorded 36.5% YoY growth at net profit level to Rs 204.2 mn during Q4FY08 compared to corresponding quarter last year. For FY08, net profit witnessed growth of 36.1% YoY to Rs 718 mn.

Equity Research

SBI – Tug of War between Analysts

May 5, 20082 min read

Research Analysts at Citigroup and Morgan Stanley are having a tug of war when it comes to Index Heavyweight State Bank of India. Morgan Stanley Downgraded the bank to Underweight [If you follow their MCSI, then you have to SELL the stock] while, Citigroup lowered the price target but still retained a BUY on the stock.

SBI reported a 21% sequential increase in NPLs. This was driven by higher agricultural NPLs (farmers stopped coming to branches to repay, after the debt waiver scheme announced by government – according to management). The other driver for higher NPLs is SME/ SSI – a sector witnessing some stress. Given that these remain focus areas for growth, we expect an NPL increase as we move forward. Moreover, with NPL coverage of 42%, credit costs could rise significantly. (more…)

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