Category: Equity Research

Reliance Infrastructure’s EPC division has a strong order backlog of cINR196bn and we expect robust order inflow from R-Power and other nonpower sources. We also expect lower commodity prices to drive a 90bp EBITDA margin improvement (earlier 40bp) in FY10. The profit contribution from distribution and transmission should grow on the back of additional capex in Mumbai and increasing its stake in the Delhi distribution business to 49% from 26%.

Reliance Power Holding Value – R-Infra’s 45% stake in R-Power is valued at INR695 per share, or 65% of the company’s market cap. (more…)

Adani Enterprises Limited (AEL) is the primary vehicle for the Adani Group’s businesses, with execution being its key strength. It is India’s largest coal trader and owns the country’s highest-selling edible oil brand. The group also built India’s largest private sector multi-product port [MSEZ – Mundra Port].

AEL expects to undertake contract mining for 1.7bn tonnes of coal over a 30-year period. Out of 70mtpa, it has signed contracts for 10mtpa, letters of intent (LOI) for 35mtpa and in-principle approvals for 25mtpa. (more…)

Cadila Healthcare has created multiple platforms to ensure stable growth over the medium term. It is one of the largest companies in domestic formulations (3.6% market share) with expanding presence across a number of international markets.

Revenues: CDH is targeting revenues of US$1 bn in FY2011E versus revenues of US$620 mn reported in FY2009. To achieve its sales target, CDH needs to grow revenues at a CAGR of 18% in Rupee terms over FY2009-11E. Expect domestic segment (c.60% of revenues) to grow steadily, export formulations will grow at an (more…)

Kotak has downgraded Indian Overseas Bank (IOB) to REDUCE from ACCUMULATE earlier after its stock price has moved closer to target price. Although stock is currently quoting at 1.0x its FY11E adjusted book value its disappointing core performance and sharp deterioration in asset quality in last few quarters are likely be depress its valuation.

The bank’s net interest income (NII) was flat at Rs.7.85 bn in Q2FY10 on back of increase in balance sheet liquidity. Its net profit declined 51.0% to Rs.1.76 bn in (more…)

Baja Auto is estimated to record 25% growth in FY10/FY11 (industry 20%/15%), as a market transition to user-related economy and premium segments is expected to favor Bajaj’s Discover and Pulsar brands, respectively. We expect the company to sustain recent share gains in bikes, increasing to ~25%, up from the January trough of 15%, and 21% in H1.

Going forward, there will be moderation in margins to ~20% by FY12, below peak levels of 22% achieved in Q2. This is due to (1) operating leverage, (2) better sales mix in favour of pricier economy, (more…)

Ranbaxy Labs [Daiichi Sankyo] got a double upgrade from Morgan Stanley from UNDERWEIGHT to OVERWEIGHT citing strong cash flow over the next 3 years and also recovery in the US.

Expect the business to recover in the next 3 years via operating leverage with base business growth and cost containment (closure of unprofitable sites/operations; (more…)