Category: Equity Research

IVRCL’s Q2 FY09 Recurring PAT at Rs354mn was 36% ahead of our estimates primarily led by 34% better than expected sales; alleviating our concerns on the possibility of execution delays even as the operating environment is difficult. After including the impact of a) Rs160mn dividend received from its 62.3% listed real estate subsidiary, IVR Prime b) forex loss of Rs30mn on its outstanding FCCB and c) full tax rate at 34%, reported PAT at Rs571mn was up 57% YoY.

Current orderbook is Rs140bn. The company expects another Rs15-20bn of orders shortly as they have emerged as the lowest bidders on the same. ~65%-70% of orderbook is from the water segment. Water projects from the AP government form ~30%-40% of the water projects orderbacklog. (more…)

Bharat Forge’s consolidated net profit, adjusted for forex losses and extraordinary items grew just 1.3% YoY and declined 15.7% QoQ at Rs 729mn, which was below expectations. Consolidated sales grew 28.8% at Rs 13.5bn, but EBITDA grew just 9.2% YoY and declined 5.2% QoQ at Rs 1.94bn. Margins declined 20bps YoY and 120bps QoQ at 14.4%. Disappointment came from both, domestic and subsidiary performances.

Expect company to revert to decelerating EBITDA and declining profits over the next year on slowing sales, contracting margins and higher fixed costs. Our estimates factor on-time commissioning of non-auto facilities, which is expected to partially offset slowdown in auto sales. (more…)

In a somewhat bold move, Kotak Securitis Analysts have come forward and downgraded Reliance Industries Ltd to “REDUCE” from “ADD” due to earnings risk with cyclical downturn in chemical and refining turning out to be worse than expected. Adding to Ambani’s woes is the sharp contraction in refining and chemical margins in recent weeks.

The report said that implosion in demand, reduced operating rates and ample supply as indicator of weaker-than expected commodity cycle. (more…)

Nestle reported net sales, operating profit, and adjusted PAT growth of 22%, 8.5%, and 11.4%, respectively, which compares with our expectations of 20%, 18%, and 19% growth, respectively. Domestic FMCG growth was robust at 23% during the quarter. Nestle reported a 250bp decline in GPM due to a steep increase in prices of key commodities like milk solids, green coffee, vegetable fats, wheat flour, and sugar.

The calibrated price hikes taken by Nestle could only partially offset the cost pressures being faced by the entire FMCG industry. (more…)

Sun Pharma reported Sales and PAT were up 76% and 135% respectively. While exclusivities were the primary driver of growth and margin expansion, we highlight that core biz appears to have done well too. We estimate exclusivity sales of cUS$68m in 2Q – assuming PBT margins of 85% on these sales, we estimate that recurring sales and PAT grew 32% and 31% respectively. Sun maintained its FY09 guidance.

Sun indicated that post the sharp erosion in market values of global generic companies, there appear several assets that could give a better return vis-a-vis Taro. (more…)

SBI reported 11% growth in its net profits to Rs23.8bn in 2Q2008.Operating revenue was up 27% and is marginally ahead of our expectations by 5%. Lower operating cost growth (up 9%) boosted PPOP growth to 55% yoy. The bank has provided Rs6.93bn as estimated liability with respect to wage revision, but details regarding the accounting for the same are not available. Provisioning for NPA has been higher than our expectations by 14%. We expect this trend to continue as provision coverage for the bank is low compared to the industry. (more…)