Caution on Indian Banks – Morgan Stanley

According to Morgan Stanley, India has the worst macro among Asian countries right now – implying significant probability of tightening. This move is clearly bad for banks – the question is how bad. In Morgan’s view, it’s very bad – don’t be surprised if banks correct by another 25-30% from current levels, even after they have declined 30-50% YTD. (more…)

Indian Party Spolied for Sure, But Not Over

In a somewhat bold report written by Citigroup Economists, they are of the view that the Indian Party Sp’OIL’ed for Sure, But It’s Not Over [Reason OIL].

The 40% rise in oil prices since Jan 2008 is key to the direction change seen across all macro variables in India. The pressure could ease a bit from FY10 as new hydrocarbon discoveries come onstream. (more…)

Emco + Crompton Greaves to Transform your Portfolio

Emco TransformerInvestors can consider Holding or Adding Emco and Crompton Greaves to transform their portfolio.

Emco:
Emco has posted a healthy net sales growth of 36% YoY to Rs 3.4bn for Q4FY08 and 44% to Rs 9.4bn for the full fiscal. Project division revenues have picked up pace during H2FY08, contributing 30% of net sales for the fiscal. The management expects an even higher revenue share from this division in FY09, at 45%. Emco’s order book stands at Rs 11bn, which is 1.2x FY08 sales. The healthy order backlog and bright outlook for the project division indicate good revenue flows over the next two years. (more…)

United Spirits – Mallya running out of spirit

United Breweries / SpiritsAfter the pathetic loss of Royal Challengers in IPL, it seems like Vijay Mallya is running out of spirits. [J/K] What is really haunting Mallya is higher price of molasses. Industry sources indicate continuing molasses price run up led by lower sugar production and growing demand for ethanol. Merill estimates molasses to be in sharp deficit versus surplus over the last two years and FY09 price to rise ~36% vs 25% earlier.

United Spirits [US] margins will reverse their impressive expansion of past three years and decline by 80bps in FY09. Synergy benefits from SWC integration have likely maxed out and UNSP does not have pricing power in 2/3rd of its Govt. controlled markets to counter rising molasses prices. (more…)

Jyoti Structures + KEC International – Transmission Tower Business Outlook

The Outlook for Tower and related business remains positive in medium to long term even though the sector saw their margins come down YoY due to cost inflation leading to higher raw material cost. KEC International and Jyoti Structures are two favorites in this sector.

KEC International:
The merger of RPG Transmission and NITEL will lead to higher efficiency and will enhance operational and financial capability of KEC. The recent quarterly performance of KEC clearly demonstrates this fact. (more…)

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