Category: Equity Research

Motilal Oswal has picked the following 3 midcaps for investment and here is the review of all the thre.

Nagarjuna Constructions:
During 2QFY10, NCC reported revenues of Rs10.7b & net profit of Rs439m (up 3.8%YoY). EBITDA margin during 1HFY10 stood at 10.3% vs FY09 margins of 9.0%, and the management is confident of maintaining margins at 10-10.5% in FY10.NCC has witnessed a meaningful traction, with order intake of Rs46b in 1HFY10, vs initial guidance of FY10 order intake of Rs65b. (more…)

Shri Renuka Sugars is acquiring a Brazilian sugar and ethanol company in the state of Parana, in the centre-south region of Brazil. We view the potential acquisition as strategically compelling, as it increases operating flexibility and offers geographic diversification.

Acquisition Valuation and Financing:
The acquisition is reasonably priced, as Renuka trades at USD90/tonne; and Cosan SA acquired Nova America at USD80/tonne in January 2009, and sugar prices have rallied (more…)

The iron ore spot price for benchmark-grade 63.5% Fe CFR China has risen 20% since its Sept. low and 8% over the past week. As per SBB, the current iron ore price is US$100.5/t, 11% below its peak level in Aug. 2009.

While Sesa would benefit from a higher spot price, given that it exports 85% of its
output to China, we believe that this price may not be sustainable over the medium term.

The widening price spread between domestic iron ore and imports (China domestic concentrate prices up only 5% over the past 2 months) should encourage mills (more…)

Shoppers Stop Limited (SSL) on a consolidated asis reported a growth of 9.1% yoy in its revenues during 2QFY2010 to Rs382.2cr (Rs350.1cr). SSL clocked the growth on the back of SSS growth of 2.3% for Shoppers Stop departmental stores and 1.8% growth for all formats on yoy basis,thus ending the declining trend posted for the last three quarters. SSL’s Bottom-line improved significantly thereby posting a profit of Rs8.7cr in 2QFY2010 against a loss of Rs18.3cr in 2QFY2009.

The performance is significantly impressive on qoq basis as in 1QFY2010 the company had posted a 6.3% decline in departmental stores sales and a 7.5% decline in all (more…)

ICICI Bank‘s profits for Q2FY10 grew 3% YoY and 18% QoQ driven by 18% fall in operating expenses. Net revenues (adjusting for trading gains) declined 15% YoY due to 5% decline in NII as loan book shrunk 13% YoY in Q2. Fee income continued to decline YoY (26% in Q2). Demand deposits grew 9% YoY and 14% QoQ.

ROA set to increase to 1.3% by FY11e, led by improving margins. Core RoE of the bank could rise to ~17% by FY12 v/s 11% (more…)

Green Energy Infrastructure Company, Suzlon’s 2Q FY10 continued to disappoint, with shipments much lower than expected. At the Suzlon Wind level (parent level), 2Q FY10 wind shipments totalled 283MW, for a 1H FY10 figure of 406MW (17% of our FY10F estimate), and gross margin narrowed from 31% last quarter to 27%.

Suzlon had a disastrous 2QFY10 with Rec. Loss of Rs3.4bn vs Rec. PAT of Rs2.6bn in 2QFY09 and 3x BofAMLe. This was led by uneconomical operations resulting from (more…)