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Equity Research

Real Estate Industry Reports

June 8, 20072 min read

In the wake of Mega DLF Real Estate IPO, we at Dalal Street Business felt that it is of utmost importance to educate the Indian investor on how Real Estate has matured as a Industry but still with lot of issues.

Due to DLF-IPO Scam in 2006, the promoters of DLF get a Zero on Transparency issues.

How DLF Cheated Small Investors – Part -1

The DLF IPO Scam on Small Investors – Part 2

Over period of time various Research Houses have recommended various Stocks because of Land Bank saga. JeeZ!!! Also, don’t forget the hype which Udayan and Mitali create on CNBC TV 18 on Land Bank Stories, which is utter non-sense. This is no FUC*ING Bollywood. We are here to create some serious wealth and build the Indian economy.

Days are not far from the impending correction in Global Equities as suggested by some J P Morgan Analyst in early Jan-07 [I forget his name, but he is a Desi] Here are some of the Research Reports by very good institutions. We don’t care for third rate brokerage houses like Anand Rathi, Karvy, Religare, Anagram etc.

[All the following reports are PDF, Right click on the link, choose “Save As” and download them]

Also read on how to value Indian real estate stocks. Keep your fingers crossed until our research team comes out with its recommendation on DLF IPO.

Breaking Corporate India Earnings News

MSP Steel & Power, Surana Industries Results

June 8, 20071 min read

MSP Steel & Power reported net profit of Rs 9.98 crore in the quarter ended March 2007 as against net loss of Rs 0.78 crore during the previous quarter ended March 2006. Sales rose 119.84% to Rs 69.38 crore in the quarter ended March 2007 as against Rs 31.56 crore during the previous quarter ended March 2006. For the full year, net profit rose 1735.45% to Rs 20.19 crore in the year ended March 2007 as against Rs 1.10 crore during the previous year ended March 2006. Sales rose 149.61% to Rs 210.52 crore in the year ended March 2007 as against Rs 84.34 crore during the previous year ended March 2006.

Net profit of Surana Industries declined 17.86% to Rs 9.38 crore in the quarter ended March 2007 as against Rs 11.42 crore during the previous quarter ended March 2006. Sales rose 10.88% to Rs 277.39 crore in the quarter ended March 2007 as against Rs 250.17 crore during the previous quarter ended March 2006. For the full year, net profit rose 31.19% to Rs 30.75 crore in the year ended March 2007 as against Rs 23.44 crore during the previous year ended March 2006. Sales rose 23.88% to Rs 774.88 crore in the year ended March 2007 as against Rs 625.52 crore during the previous year ended March 2006.

Economy, Markets and Macro Views

Citi Upgrades Punj Lloyd to BUY

June 8, 20072 min read

You are reading this first here…
Citirgroup Analyst, Venkatesh Bala, in a report released just few seconds ago has upgraded Punj Lloyd Ltd to a BUY with a price target of Rs 305. Our Dalal Street Research Analyst had recommended Punj Lloyd in December-06 with a price target of Rs 300 [Post-split] So you notice the difference between our quality research and research coming from world’s top brokerage house ? We were the first one to do it 🙂

Citi in its report has also upgraded the stock from Risky- SELL to Low Risk – BUY. Punj is now pre-qualified for larger/more complex projects. Indications of this scale-up are already visible (average order is up from US$30mn to US$100mn in FY07 and likely to go up to US$200mn).

At the end of FY07 Punj Lloyd had the third largest order backlog of Rs159bn in Engineering & Construction sectors after BHEL (Rs550bn) and L&T (Rs369bn).

Earnings revisions of 20% in FY08E and 21% in FY09E. A rolling forward of our target P/E multiple to 23x FY09E, from 23x FY08E earlier. This is well supported by an earnings CAGR of 38% over FY07-10E with RoEs expanding from 17% in FY08E to 25% in FY10E.

Despite L&T being a more diversified and established player with a market cap which is ~ 10x that of Punj Lloyd, Citi uses a similar multiple for both companies given Punj Lloyd’s superior earnings CAGR of 38% over FY07-10E coming off a smaller base vis-a-vis 31% for L&T.

India IPO Reviews and Updates

Nelcast Review and Recommendation

June 8, 20072 min read

Nelcast is dependent on the auto industry ramping up of exports and increasing machining are required to maintain growth as domestic users face a slowdown.

Right now, Neelcast exports about 9% of its sales Globally, export of castings to developed nations is on the rise on account of rising costs, lack of skilled foundry people and environmental restrictions in these markets. The company plans to increase its focus on exports and become the preferred full service supplier to original equipment manufacturers (OEMs) across the globe. The export target is 30% of sales by 2010.

Strengths:
The composition of machined castings is about 10% of production. This is to be increased to about 20%-25% over the next two years so as to improve margin.

Weakness:
More than 70% of revenue is derived from the HCV and tractor segments. Both these user industries are set to slow down significantly in FY 2008 when the company’s substantial capacity expansion is under implementation.

Ancillaries to domestic auto and auto components sectors often have to maintain their prices despite rising raw material cost due to a limited number of clients. Margin is down from 11.9% in FY 2004 to 8.9% in FY 2006, though it jumped to 13.4% in FY 2007.

Valuation:
At a price band of Rs 195 – 219, Nelcast’s P/E works out to 17.2 – 19.3 times FY 20007 earning on post-diluted equity. Industry peer Ennore Foundries is trading at a P/E of 19.0.

Investors with some risk appetite may apply at Cut-Off.

Breaking Corporate India Earnings News

India Technicals

June 8, 20071 min read

With SENSEX and Nifty in Red, here are the technical support and resistance levels.

Nifty — The index opened on a flat note and exhibited intra-day volatility in 4230 and 4162 band.It ended the day down 18 points.

Support — The index has support around 4141 (low of 25 May 2007) and 4127 (approx.) the level of 4127 is 62% retracement level of the rise from low of 3981(11 May 07) to the recent high at 4363. Intra day Nifty declined towards the 4141 level and witnessed an intra-day bounce.

Resistance — The index faces resistance around 4225 (20dma) and 4257 (10dma), cross above 4225 could see an intra-day bounce towards 4257.

Conclusion — Intra-day pullback will face resistance around 4257.

Equity Research

Citi Maintains a BUY on Indraprastha Gas

June 7, 20071 min read

Citigroup in a research report released just a while ago has maintained a BUY on Indraprastha Gas with a price target of Rs 156. Indraprashta Gas is expected to record a 21% annual growth between 2006-09.

Citi projects growth in PNG penetration, with renewed focus as compliance-led skew toward CNG should moderate; (2) regulatory upside potential, with the Delhi government mandate for conversion of new LCVs to CNG; (3) geographical growth in the National Capital Region; and (4) discretionary demand growth.

Indraprastha Gas is expected to report an EPS of Rs 9.18 and Rs 11.06 for FY07 and FY08 respectively. On DCF model Citi recommends a BUY with a price target of Rs 156. Target price for IGL is also based on a Price/Cash Earnings of 11.1x FY07E.

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