Category: Equity Research

Kotak has identified stocks that show steep increases in earnings over the next two years and / or stocks that are trading at very low multiples. 15 stocks with the potential to yield 50-100% returns over the next 18 months and examine the drivers required for these returns. In most cases, these are a sharp rebound in earnings (select commodity stocks), a potential re-rating of multiples led by better than expected operating and financial performance (largely banking stocks) and potential positive catalysts (RIL). (more…)

Corporate FreePress of India broke the news that, Ranbaxy’s Paonta Sahib plant has received GMP certifications from MHRA, UK and TGA, Australia. Certifications have been issued following a joint audit conducted in October 2008. The MHRA certification is valid for three years, and covers product filings across the EU, while the TGA certification is valid for two years.

Europe remains a key market for Ranbaxy, accounting for 20% of total sales in CY08 US$328m), while Australia accounted for c.1%-2% of overall revenues. These now appear secure, at least from a regulatory standpoint. (more…)

The winning bidder for Satyam takes a 31% stake, via newly issued shares, and then makes a public offer for 20% of the enhanced capital at same price. Post close of the public offer, if an investor has <51% stake, it has option to subscribe to additional new shares, such that they will not have more than a 51% stake. Press reports suggest that Larsen & Toubro (L&T) is a serious contender in the fray.

L&T has Rs45.5bn of resources to bid for Satyam. In the event of a winning bid it may have to spend between Rs15bn (Rs30/share of Satyam) to Rs45bn (Rs90/share of Satyam). (more…)

Nomura of Japan has initiated coverage of the Indian banks sector with a NEUTRAL view. Key drivers of bank earnings – loan growth, interest rates (bond yields) and asset quality – have turned negative in 4QFY09 and are likely to deteriorate further in FY10E. Nomura expects earnings growth of Indian banks to drop 6% in FY10 after a robust CAGR of 21% over FY05-08. While banks are faced with these challenges, there is some comfort in state-owned banks’ valuations, which are trading at below book values, and fast-growing private banks, which are trading at 1-2x FY10E P/BV.

Nomura initiates a BUY on (more…)

The recent sharp 33% qoq drop in zinc metal prices has led to a sharp cut-back in zinc mining output and led to a spate of mine closures. Cumulative reported mine closures have been to the order of 1.6 mn tons so far, which represent about 15% of global output. Zinc prices are expected to remain subdued in the near term owing to current surpluses and high inventories, we believe swift supply side response would help restore market equilibrium. (more…)

Sesa Goa is India’s largest iron ore producer exporter with an expected annual output of 16 mn tons in FY2009 and would go up to 25 mn tons by FY2012 following recent expansion initiatives. According to Sesa, with its average cost of production of US$24/ton, it is in the first quartile of the global cost curve and the cost of production at its Goa operations at less than US$15/ton are the lowest in the world.

Sesa Goa has operations in Goa, Karnataka, and Orissa. Logistics costs greatly impact performance across geographies. (more…)