Axis Bank + IDFC Results Preview – Citi

Axis Bank’s net profits increased 60%yoy, 17% ahead of expectations. Operationally, the results were strong too with pre-provisioning profits up an impressive 85%yoy. The bank continued strong growth, momentum in fees, strong asset quality and high profitability; though profits were boosted by new capital and bond gains.

AXBK’s loan growth remained strong, ahead of expectations at 53%yoy, despite a lacklustre 22% industry growth and a relatively modest 27% increase in retail loans. Continued fee momentum also surprised on the upside with a 59%yoy growth.

Axis Bank’s overall asset quality remained comfortable as NPL ratio declined to 1.1% of loans from 1.5% in 2Q07. Axis Bank is expected to report an EPS of Rs 30.02, 36.96 and 47.95 for FY08, 09 and 10 respectively. Citi maintains a hold though the stock is already trading above its target price of Rs 675.

IDFC:
IDFC’s 2Q08 net profits rose 25%yoy in-line with expectations. Key positives were improvement in NIMs, strong loan growth and fee momentum. Asset management returns and fund raising plans are also ahead of expectations and could provide valuation upsides.

IDFC’s NIMs increased to 320bps (+40bps qoq) driven by a favorable interest rate environment and helped by additional capital raising during the quarter.

Unrealized gains have increased to Rs3.24bn and provide earnings comfort. Management indicates that IRRs on its first PE fund are over 45%; expects contributions to performance fees from 3Q08 and plans a new fund launch in early FY09E – ahead of expectations and could drive valuation upsides.

IDFC is expected to report a fully diluted EPS of Rs 5.32, 6.36 and 7.88 for FY08, 09, 10 respectively. Citi maintains a BUY/medium Risk recommendation on the stock with a price target of Rs 140 [which the stock has already crossed].

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HDIL receives nod for airport slum rehabilitation

Housing Development & Infrastructure (HDIL) has received a letter of intent dated 15 October 2007, for the airport slum rehabilitation project, for removal of slums from encroached airport land, which has been awarded by Mumbai International Airport to the company. The company has also executed an agreement dated 15 October 2007 for rehabilitation and development of slums around the Chhatrapati Shivaji International Airport and development of part of the cleared land.

Our Coverage on HDIL:
HDIL has tied up with Lehman Brothers.
Religare – Stock Recommendation on HDIL

JSW Steel + Gujarat NRE Coke – Macquarie Research

JSW Steel: Global commodities team has revised steel price forecasts upward by 6% and 2% for FY3/09 and FY3/10, respectively, while also increasing iron ore forecasts by 20% each year, and for coking coal by 8% and 5% for FY3/09 and FY3/10, respectively. JSW has recently been allocated 69% in a coking coal mine with mineable reserves of 250mt while it explores for more reserves in Mozambique. It expects to reach 50% self sufficiency in the next 3–4years.

Revising EPS estimates for FY3/08–FY3/10 by 7.5%, 29.2% and 0.3% to Rs100.6, Rs120.3 and Rs160.2 respectively. Increasing the target price to Rs1,203, based on a PER of 10x FY3/09E EPS.

Gujarat NRE Coke:
Global commodities team has upgraded coking coal price forecasts for FY09-11 by 13%, 10% and 6% to US$135/t, US$110/t and US$95/t, respectively.GNC is looking to double its coking coal production to 1mt in FY09, with the completion of purchase of Elouera mine by December 2007. GNC is merging its two mining subsidiaries listed in Australia. This, we believe, will lead to reduction of discount, as the merged entity will be a multi-mine, multi-location company with lower risks.

Revising EPS estimates for FY3/09–FY3/10 by 7.5% and 12.2% to Rs8.1 and Rs8.8 respectively. 12-month price target: Rs140.00 based on a DCF methodology.

BSE Sensex Hits 19,000 – Alltime High

It took just 4 Trading sessions for the Mumbai Stock Exchange SENSEX 30 to hit a new high of 19,092.

Easing of political worries and improved Index of Industrial Production (IIP) figures for August 2007 boosted the bourses today. India’s industrial output in August 2007 rose 10.7% from a year earlier, higher than upwardly revised annual growth of 7.5% in July 2007 due to mining, manufacturing and electricity production, data released by the government showed on Friday, 12 October 2007.

Emerging markets-dedicated equity funds posted strong inflow for yet another week. For the third consecutive week, emerging markets equity funds recorded inflow in excess of $5 billion at $5.1 billion, in the week ended 10 October 2007. Funds dedicated to emerging Asia had the most inflows in the seven-day period, or $2.13 billion.

Axis Bank Posts Strong Q2 Numbers

Axis Bank IndiaAxis Bank’s net profit rose 60.5% to Rs 227.82 crore on 64.1% rise in sales to Rs 2059.37 crore in Q2 September 2007 over Q2 September 2006.

At the current price of Rs 790.90, the scrip trades at a PE multiple of 30.94, based on Q2 September 2007 annualised EPS of Rs 25.56.

The board of the company also proposed to establish a mutual fund, the bank said in a statement to us. Axis Bank is the third largest private bank in India.

L G Balakrishnan Demerger + Jai Corp SEZ

L G Balakrishnan & Bros reportedly plans to spin off its forging division into a separate company so that the division can focus more in its core business and can seek independent joint ventures in future. Reports suggest that the company would list the forging unit on the bourses and the company has already set up a panel to fix the share swap ratio for demerger.

At the current price of Rs 26, the scrip trades at a PE multiple of 11.50, based on Q1 June 2007 annualised EPS of Rs 2.26. Face Value of Rs 1.

Jai Corp is a major promoter in developing the 5,250-acre Navi Mumbai Special Economic Zone, apart from Mukesh Ambani led Reliance Industries (RIL). Jai Corp is focusing on developing one of the largest special economic zones in India. Jai Corp is led by Mukesh Ambani’s friend, Anand Jain who has been with Mukesh Ambani for over 20 years now in Reliance Group.

JAI CORP Ltd has informed BSE that the promoters on October 15, 2007 have sold 2,19,00,000 (two crores & nineteen lakhs) equity shares of the Company through the floor of the exchange.

Jai Corp has invested in two multi product special economic zones near Mumbai – Navi Mumbai SEZ (NMSEZ) and Mumbai SEZ (MSEZ). Both the SEZs are being conceived and developed as a futuristic business hub and gateway for trade, commerce, industry, service and tourism. The NMSEZ will be set up as a joint venture with the City and Industrial Development Corporation (CIDCO) of Maharashtra holding 26%, and RIL holding the rest with Jai Corp.

As per recent reports, Jai Corp is planning to raise a venture capital corpus of Rs 40000 crore through its wholly owned subsidiary, Urban Infrastructure Venture Capital. Reports suggest that Jai Corp has already committed a capital of Rs 22,000 crore in 12 cities in India. The major investments would be in multiuse projects and townships (22% each), residential (15%) commercial (14%), industrial township (12%) and hospitality (6%).