CP | Dalal Street

2009 – A Year of Recovery – Quick Performance Recap

December 25, 20092 min read

After the Global Meltdown in 2008, the worst year for equities, 2009 was a year of recovery instilling hope amongst equity investors. Here is how the Indian Market reacted to National and Global News during the year.

FIIs have already purchased more stock in 2009 than ever before in a single calendar year as overall institutional flows are just short of the 2007 high. Until yesterday, FIIs were the major Buyers in the Indian Cash Market with net purchases of over Rs 16,283 cr while their hedge in the Derivatives is a Negative 4,383 cr. Domestic Equity funds have bought mere Rs 614 cr while Domestic Insurance sector is another big bull in the making has bought stocks worth Rs 6500 cr. (more…)

Equity Research

Nagarjuna Construction + IVRCL Infra – The MidCap Saga on Street

December 25, 2009April 18, 20203 min read

The mid-cap construction space has underperformed the broader indices recently and is trading around 10x FY11E (adjusted for subs valuations) due to short-term irritants, despite we believe substantial growth opportunities beginning in FY11. Issues like the Dubai credit crisis and a separate statehood issue in Telangana have created a dampener on stock prices.

We expect order inflow in the infra space to strongly rebound in FY11 as governments get their acts together on sectors like roads, ports and continued push in power.
(more…)

Breaking Corporate India Earnings News

US FDA Targets Ranbaxy / Daiichi Sankyo’s American Facilities

December 24, 20091 min read

Woes for Ranbaxy continued as the FDA has issued a warning letter to Ranbaxy’s liquid manufacturing plant at Gloversville (NY), citing cGMP violations (inspected in Jul/Aug 2009). It is one of the three plants in Ohm Labs; the others did not have any material deviations. Ranbaxy has engaged a consulting firm to address the issues.

Ranbaxy has indicated the plant accounts for under 10% of US (c.2%-3% of total) sales. Sales would continue and while approvals are likely to be on hold, there are not too many major filings pending approval from this plant. We see a worst case impact at c.2%-3% and c.5% of core sales and EPS respectively, and believe the FTF pipeline appears secure.

While this development, by itself, does not appear to have a material impact on financials or the key drivers, it is likely to affect recently rising confidence levels w.r.t. the stock among investors, given its past issues with the FDA [Whether targeted because American Pharma giant failed to outbid Japanese major, Daiichi Sankyo]

However, Daiichi Sankyo is committed to its plans and long term investors need not worry.

Breaking Corporate India Earnings News

RIL KG gas find – Implications

December 23, 20091 min read

Reliance Industries (RIL) yesterday announced its third consecutive gas discovery (in as many wells) in its deepwater block D-3 in the KG Basin (KG-DWN-2003/1), where it holds a 90% stake (UK-based Hardy Oil owns the remaining 10%).

Analysts await the regulator’s [already under Oil Minister, who is under Reliance] decision on commerciality of the discovery, we believe this discovery reiterates the exploration upside potential of RIL from eastern India offshore. RIL owns 10 blocks in the prolific KG Basin and another 8 blocks in the adjoining prospective Mahanadi basin. No EPS / Estimates have changed on the back of this news yet.

As we move into 201, more news flow from RIL’s other exploration blocks, as two more rigs add to RIL’s current count of three in India (one each in D-6, D-3 and Cauvery Basin).

Equity Research

Broadcast Media Recovery – Goldman Prefers Zee

December 23, 20092 min read

Major Indian broadcasters such as Zee Entertainment and Sun TV Network have indicated plans to hike rates on flagship channels by 5%-15%, pointing to improving utilizations and signs of a broader recovery in advertising spend. Apart from this, the thesis of structural positives for the broadcasters from increased digitization is intact and strengthening as digital subscriber growth has continued to be robust.

Investors must prefer established broadcasters as the best way to gain exposure to increasing penetration of digital distribution platforms (like DTH, digital cable)

In line with earlier view of 10%-12% sequential growth in advertising (more…)

Economy, Markets and Macro Views

Expect 14% Returns in 2010 – CLSA

December 23, 20092 min read

In continuing our coverage on Views and Strategies for 2010, we present Hong Kong based Institutional Investor, CLSA’s Views. It expects 14% return for the market in 2010, as pick-up in the investment cycle and global recovery drive the next leg of earnings upgrades. Q1 of Calendar Year 2010 is likely to be choppy, on revival of macro concerns like inflation, monetary and fiscal tightening and the large pipeline of pending equity issuances; autos, property and power look most vulnerable. (more…)

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