Indian Equity Research and Investment Strategy
We are in a situation where earnings risk and valuation risk seem to be prevailing simultaneously. Large cap stocks in most sectors appear fully valued and the market is trading close to top of its trading range. Simultaneously, Sensex EPS estimates have declined 2-3% during the recent quarterly result season.
The narrow market (i.e., BSE Sensex) is lagging the broad market on profit growth. Slightly more than half of the reported companies (more…)
The Indian Equity market has reacted nonchalantly to a tepid earnings season, especially with the larger companies tending to disappoint on earnings. While inflation is a concern, the market seems to hold the view that the pressures will recede, and hence that India’s premium multiples will continue.
Morgan Stanley has crunched some historical data and come up with the theory of – Value at Risk. (VAR) – represents the weekly (more…)
Dr. Reddy’s Laboratories’ (DRRD) Q1FY11 results were below estimates, with operating profit of INR 2.6 bn vs. our estimate of INR 3.1 bn. While operating margins were flat Q-o-Q (ex-restructuring costs in Q4FY10) and fixed costs of INR 6.3 bn broadly in line with estimates, a lower-than-expected sales of INR 16.8 bn led to operating margins of 15.6% (below our estimate of 17.2%). Adjusted net profit of INR 2.3 bn (excluding INR 225 mn forex loss primarily from rouble depreciation) was 8% lower than our estimate of INR 2.5 bn. This (more…)
India’s larges Cigarette manufacturer ITC saw a dip in volumes during the last quarter. This does not necessarily mean increasing health consciousness amongst Indians but their affluent lifestyle making them to hop on to Foreign Brands.
ITC’s recent pricing, coupled with mix improvements led to ~12% and ~16% YoY growth (90bps margin expansion) in cigarette revenues and profits respectively. PAT growth of ~22% YoY to Rs10.7bn was marginally ahead of our/consensus estimates of Rs10.6/10.4bn respectively. Moderate EBITDA margin expansion of ~110bps YoY to 33.4% was primarily on (more…)
REC reported strong disbursement in Q1FY11, of INR 46.4 bn (28% Y-o-Y), led by generation projects; disbursements in T&D were, however, relatively lower. Sanctions were robust at INR 228.8 bn – a growth of 51% Y-o-Y led by sanctions under the T&D segments and spillover from the earlier quarter.
REC reported earnings of Rs5.9bn (up 25% yoy; in line). But, excluding few oneoffs of last year (income tax-refund from earlier years (more…)
United Spirits Revenue growth of ~18% YoY
to Rs14.7bn reflects various changes in accounting bases (re-grouping of sales/A&SP expenses ex tie up units). Like to like, revenues rose ~11% YoY, comprising 6% YoY volumes and the rest due to mix/price increases. Mgmt noted that volume growth during the Q was adversely impacted by de-stocking in the state of Andhra Pradesh due to a fresh (more…)