Category: Equity Research

Over the weekend, Ranbaxy announced the voluntary recall of Nitrofurantoin capsules (Sales of US$4.1 mn and TRx of 0.56 mn units in 2008) from the US market. Ranbaxy believes the recalled drug (an antibiotic for the treatment of urinary tract infections) is “unlikely to produce any serious adverse health effects” implying a Class III FDA classification.

Ranbaxy’s recall of Nitrofurantoin capsules is the second product recall, following the Gabapentin recall in November 2007. In this instance, Ranbaxy (more…)

DLF reported FY2009 net income of Rs46.3 bn, which was down 41% yoy, and 7% below street estimates. EBITDA margin for FY2009 was down to 60% from 69% in FY08. reflecting a fall in DLF Assets Limited (DAL) margins. Profit-before-tax margin for DAL stood at 57% for FY09 compared with 72% in FY08. In 4QFY2009, DLF took a one time charge of Rs3 bn on account of price resets and various customer schemes.

DLF’s EPS for FY-09 was Rs 27.17 42% lower than Rs 46.90 reported in FY-08. (more…)

HDFC Bank reported 4QFY09 earnings and here is an update on the same:
NII increased c12.8% yoy, lower than our forecast due to slower loan growth and lower margins. NIMs declined 10bp sequentially to 4.2% in 4Q09 (4.4% in 4Q08), largely due to a decline in yield on loans but supported by a higher low cost deposits (CASA) ratio. Core fee income (+46% yoy) and treasury gains (cRs2.4bn) drove other income past our estimates.

Asset Quality:
Provision for NPLs was about 0.6% of loans in 4Q09 (1.7% in FY09). Asset quality in absolute terms was largely stable on a qoq basis. The provision coverage ratio was maintained at about 68% as of March 2009. (more…)

Real estate stocks have rallied rapidly over the past three weeks as new launch activity has picked up at 25-30% discount to prevalent prices. Good responses to some of these projects especially in Mumbai and Delhi have further contributed to this positive sentiment. However, despite the better launch activity in March, Kotak continues to observe large consensus downgrades in March.

Expect 4QFY09E to be extremely weak, with sales dropping 70% yoy and 16% qoq, driving 81% yoy and 39% qoq de-growth in profits.

Sharp reduction in commercial revenues, and new sales have to be significantly higher to maintain same contribution as selling prices are sharply lower. Improvement in financial performance thereafter will depend on sustained recovery in volumes. (more…)

Besides good results, management speak from global peers indicate that farm economics and demand are sound across markets, with the exception of some LatAm countries. The outlook for the next fiscal is strong in most cases and concurs with our positive view on UPL’s business.

UPL has a steady B/S, with net D/E of 0.6x, low refinancing risk (most debt redeemable in 2011) and rising cash flows. As asset valuations come off, we believe UPL is one of the few players positioned to be an active participant in any industry consolidation. (more…)

The aluminum and zinc prices may not be far off from their bottoms, but a pick up may be some time away. Medium-term earnings trajectories for stocks like Hindalco (UW), Nalco (EW), Sesa (EW), and Sterlite (EW) do not look that encouraging even though valuations look interesting, and balance sheets at Sterlite, Sesa, and Nalco are strong. Sterlite remains top pick in the space due to its multi dimensional growth story and strong balance sheet even though concerns about its restructuring plan and near-term earnings slump may cap the stock near term. On Hindalco, our concerns hover around Novelis profitability and its balance sheet. (more…)