CP | Dalal Street

Investment Strategy for 2010 – Morgan

November 26, 20092 min read

After Merrill unveiled its investment outlook for 2010, Morgan Stanley has pushed the button forward on what it looks in the Indian markets for 2010. Here is an excerpt from the same,

1. Value in PSU Banks – The Central Bank is likely to start raising rates in January 2010. Rising rates favor Indian banks as they run a maturity mismatch on their balance sheets (liabilities have a longer maturity). Thus NIMs will rise; coupled with acceleration in loan growth (which trails IIP growth), this will help earnings. PSU Banks trade at better (more…)

Equity Research

Pipavav Shipyard – SELL by Citi

November 26, 20091 min read

Citi has initiated coverage on Pipavav Shipyard (PSL) at Sell / High Risk (3H) rating. The risk / reward remains unfavorable at current levels.

PSL is constructing a shipbuilding, shiprepair, and offshore fabrication complex at Pipavav which will have the capability to build and repair vessels of up to 400,000 DWT and provide offshore construction facilities. (more…)

Breaking Corporate India Earnings News

BHEL’s Order from JP Power – Analysis

November 25, 20091 min read

BHEL won its single largest order ever, which also happens be its 1st super-critical order from Pvt. IPP, worth Rs56bn for 3x660MW from JP Power for its Bara TPS in UP.

BHEL won its largest order, which also happens be its 1st super-critical (SC) order from Pvt. IPP worth Rs56bn for 3x660MW from JP Power. Apart from 4.5% add to backlog and improving visibility, key implications are a) BHEL gets closer to its indigenisation thresh-hold with order of 7 SC sets of 8-10 SC sets required, b) BHEL could also win an additional Rs35bn order in FY11E for phase II of this project being a supplier to the first phase and c) realization healthy @ Rs28mn / MW vs sub-critical @ Rs20mn / MW.

BHEL’s total order Backlog is +21% at Rs1.26tn, 1H Inflow weak to correct in 2H.

Economy, Markets and Macro Views

Indian Telecom Industry Overview for Investors

November 25, 2009July 18, 20202 min read

The Indian Telecom industry is now dominated by Wireless vertical and going forward, even the Data / Broadband market will go the unwired way. Here is an overlook at the industry at macro level with forthcoming developments – Spectrum and Fees, 3G Auction and finally Consolidation.

Industry is still growing (23% in FY11 and 15% in FY12), spectrum constraints and tariff pressures are likely to limit the upside. More importantly, prices should decline further (25% in FY11e) due to increased competitive intensity, which will weigh on margins and earnings. (more…)

Equity Research

Nestle – Robust Outlook backed by Maggi

November 24, 2009April 18, 20201 min read

Nestle India’s outlook remains robust on the back of its star performing brand – Maggi which is now contributing between 25% to 35% of total sales. Nestle is favorably placed to benefit from the structurally strong demand conditions in semi-urban and rural areas.

New Product Pipeline:
Nestle’s topline growth of 18-20% to be sustained led by high single digit vol growth. Focus on low unit price pack & enhanced distribution continues to expand its customer base. Its exports, institutional accounts and out-of-home segments should revive with pick up in eco. (more…)

Breaking Corporate India Earnings News

No impact of Sugarcane Agitation by farmers

November 24, 20091 min read

We expect the next 2 years to be shortage years, sugarcane farmers are anyways expected to be paid a price much higher than the support prices. So FRP [fair and remunerative price] would not have any impact on our near term earnings.

We build in a sugarcane price of Rs2,100/tonne (FRP=Rs1,300/t; SAP=Rs1,650/t) for the U.P. players, initial media reports suggest that the companies have started the season with a price of Rs1,800/quintal. In any case, given the supply tightness we believe that the mills would be able to pass on higher costs top consumers.

Near Term Weakness on Stocks
We expect continued negative news flow related to farmers agitation against FRP. This is likely to have a negative impact on stocks of the U.P. players Bajaj Hindustan and Balrampur Chinni. Seasonally, sugar prices soften due to higher supplies as sugarcane crushing picks up. This may also lead to weakness in sugar stocks. Domestic sugar prices are trading at close to import parity and 8-10% higher than our SY10-11 estimates, which poses significant upside risks to forecasts.

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