Dalal Street

Tata Power Company reported Q1 FY09 profits of INR 1.9 bn which is flat y-o-y. However, adjusting for the incentive gains, tax provisions and forex gains, the earnings would be lower by ~ INR 120 mn. This fall can be attributed to lower other income which fell from INR 685 mn to 483 mn y-o-y. The revenues increased 34% y-o-y to INR 20.5 bn on account of higher fuel costs which are passed through to tariff. Fuel cost increased 45% to 12,894 for the quarter on y-o-y basis.

Tata Power’s subsidiary have done exceptionally well in Q1. NDPL PAT is up 20% YoY to Rs339mn. Powerlinks PAT has increased 12% YoY to Rs90mn. Power trading subsidiary has increased its revenue by 160% to Rs4.13bn and PAT by 96% to Rs14.1mn.

All capacity expansion projects are running on time. Specifically Mundra UMPP – Construction is on in full swing and work on boiler and turbine for Unit 1 and 2 has started; Maithon – Ordering of equipment is complete and civil work has started; 250MW Mumbai – CoD will be achieved by October 2008 and Haldia expansion is being commissioned now. Tata Power is expected to report an EPS of Rs 28.8 for FY09.

ABB Ltd:
ABB’s 2QCY08 PAT at Rs1.3bn up 21% YoY was expectations of Rs1.5bn primarily on account of slow sales growth of 15% YoY, led by execution of long cycle orders. Margins have held up well in an inflationary commodity price environment.

Order inflow growth was disappointing at 11% YoY, a clear sign of the difficult macro environment led by double-digit inflation, rising energy costs, volatile commodity prices and high interest rates.

Brokerages have cut earnings estimate for ABB by 8-10% and the company is now expected to report an EPS of Rs 28.77 for year ending Dec-2008.

Hindustan Unilever Q2 revenue growth accelerated to 21% Y/Y, driven by 21% growth in soaps and detergents and 19% in personal care. Recurring PAT rose c20% Y/Y, buoyed by sharp increase in other operational income (includes F/X gains and cost recoveries on R&D / offshore activities for Unilever). Revenue growth was primarily mix / price driven (overall FMCG volumes grew 8.3%).

Reported EBITDA margin declined 10bps to 15.1%; sans other operational income, margins declined 130bps Y/Y. Price hikes / mix improvements have mitigated cost pressures. Gross margins declined 43bps Y/Y, but encouragingly, increased 95bs Q/Q. A recurring trend across all FMCG results this quarter. Expenses rose c30%Y/Y and 15% increase in media rates.

Management brushed off concerns on the weak monsoons – indicated there is no slowdown as yet in rural demand. We believe, though, that there could be a lag impact. HUL is expected to report an EPS of Rs 11.7.

Marico has recorded 28.1% y-o-y revenue growth. Despite a price hike of around 10%, it was able to record 15% volume growth. Both the major brands, Parachute and Saffola, have reported healthy volume growth of 8% and 26%, respectively. Perfumed hair oils have also showed strong volume growth of 26%.

To offset raw material price inflation, the company has raised prices of most of its products. It is further planning to increase prices in 2QFY09. Rising revenues of perfumed hair oils are also expected to help maintain margins. Though it is confident of maintaining profit per unit, it expects margins to be under pressure.

Kaya Life revenues +62% yoy on a small base. At present, there are 69 outlets – management targets roll-out of 95 by end-FY10. Rising real estate rentals (an average 10-12% increase YoY) and high manpower costs are key concerns. Marico is expected to report an EPS of Rs 3 for FY09.

NIIT reported revenue of Rs2.6b up 15% YoY was marginally below expectation of Rs2.7b while EBITDA Rs187m up 29% YoY was significantly below expectation of Rs289m. While Retail training was in line, corporate business was much below expectations despite INR weakness.

IT training business is late cyclical and would get impacted with a lag, in our view. No fees hike during this academic season indicates waning pricing power. Hiring in IT services sector has slowed and we do not expect a quick recovery – this is likely to impact retail training business with a lag. Corporate business revenue were flat while margin declined by 350bps to 0.2%. NIIT is expected to report an EPS of Rs 31.7 for FY09.

Educomp Solutions reported revenue of Rs694m (up 152% yoy) and net profit of Rs168m (up 181% yoy). It also reported headline consolidated numbers – revenue of Rs860m and net profit of Rs166m for 1Q. Smart-class revenue was Rs472m, while ICT revenue was Rs81m.

Company currently has 8 operational schools with 7,000 student enrolled. It plans to add 16 more schools during this financial year. Company acquired 51% stake in Learning.com for US$24.5m in May’08. Two JVs with Raffles Education for the Indian and Chinese markets – both companies plan to invest US$100-150m over next 2-3 years into these JVs.

Educomp has maintained its FY09 guidance for revenue of Rs5.4-5.5b and net profits of Rs1.35-1.4b for stand-alone entity.

Zee Entertainment Enterprises had an excellent 1QFY09 with 33%YoY growth Rec. PAT (19% ahead of MLe) led by 37%YoY growth in ad revenues & robust international / DTH pay-tv revenues. Robust Ad growth despite IPL Cricket and competition (NDTV, 9X) was commendable. Despite the provision of Rs290mn of one-time bonuses and Rs398mn loss on Zee Next, rec. PAT grew 33%YoY.

Z TV sustained its relative shares in 1Q09 with ~21% channel share amongst GECs despite competition (9X & NDTV). This led ad revs at 37%YoY. INR depreciation helped global pay revs grow +18%YoY and doubling of DTH revs led India pay revs.

Catalysts are, full impact of 15-20% ad rate hike in 1QFY09 on Zee TV to monetize ratings and lack of clear #3 channel in GEC market and uptick in pay-tv revs from DTH & International markets.

The company is expected to report a full year EPS of Rs 11.56 on an income of Rs 501.3 crore.