Category: Equity Research

OnMobile Global reported 3Q FY09 revenues of Rs1157MM, up 19% Q/Q (due to seasonality of revenue recognition) and 44% Y/Y but 5% below our estimate. The EBIT margin of 25% jumped Q/Q but was also lower than expected – this seasonal jump is due to a large proportion of international revenues being booked in 3Q without the associated costs.

YTD (9M FY09) revenue growth was a creditable 51%; however, margins have come off sharply, leading to absolute EBITDA being flat Y/Y. (more…)

Following positive customer response to XCD 135cc motorcycle, Merrill has greater confidence for 4 upcoming launches by Sept. Merrill raises domestic two wheeler sales estimates to 1.36mn units in FY10 (5% growth, earlier 5% decline), and retain 5% growth on higher base in FY11.

In the export category, management maintains positive for exports next year, albeit with slower growth trajectory, Merrill estimate 10% decline in two wheelers (more…)

Based on better-than-expected 9m-FY09 sales, Goldman Sachs [GS] now expect 33% FY09E sales growth. For FY2010E, while acknowledging that DRL faces a challenging task to improve upon its FY09 numbers, we believe that its growth momentum will continue and we expect it to post at least double-digit (10.1%) sales growth (core business growth of 16.9%). Market view of decline in growth in FY10E (owing to base comparison) is overly pessimistic; US to continue to drive revenue growth.

Additionally, we continue to believe that the AOK tender wins have equipped DRL better to face the changing business model in Germany and to be a long-term competitor of significance. (more…)

The excise duty cut affects 24%, 13%, and 61% of 2008 sales for Tata Motors, M&M, and
Ashok Leyland, respectively . Because the cut in excise duty is aimed specifically at boosting demand, as in past instances, we expect all OEMs to pass on the benefit to consumers in terms of lower prices, and thus the lower duty should have no impact on their bottom lines. Our channel checks indicate that all concerned OEMs plan to announce price cuts, in line with the excise duty cut, over the next week. (more…)

Grasim Industries cut VSF prices by 7-8%; The Co’s recent price cut follows a 3-4% price cut in Nov-08. For FY10E, we expect a further 5% drop in VSF prices. Risk to FY10E remains on the downside due to sluggish textile demand & VSF’s expensive pricing vs polyester (PSF) & cotton. In the short-term (for 4Q), however, earnings will be cushioned by drastic drop in sulphur prices (down ~90% from peak. (more…)

Cipla employs a partnership model where it undertakes product development and manufacturing for international partners, without investing in building frontend presence. This will limit profit expansion over the long run. Nine out of the top 15 global players in 2001 have been acquired by now and ongoing consolidation appears inevitable. Cipla faces the risk of its partners getting acquired and the acquirer not being willing to source products. Also, given the fierce competition, its partners have substantial bargaining power.

Cipla’s Margins are Sensitive to HIV (more…)