Category: Equity Research

This transaction is biased toward the strategic; scale – branch (45%+) and assets (19%+), a clear number two positioning in the market (50% larger than Axis), widening its geographic segment /customer spread (deep penetration in West and South India, more consumer credit and SME), and an enhanced platform to support its relatively increased growth momentum. Acquisition provides growth (8-12 months), branches (45% – but lower quality) and deeper market positioning – but is not transformational.

Swap ratio not yet announced, but on market pricing – appears expensive. Expect 6-7% earnings dilution. HDFC Bank paying high price, significant premium to its own high valuations, expensive on branch matrix too. (more…)

HSBC in a report has retained OUTPERFORM rating on Kalpataru Power, while IndiaInfoline recommends a HOLD on Crompton Greaves.

Kalpataru Power:
Kalpataru Power management has a solid history of execution and growth in engineering, procurement and construction (EPC) transmission towers. It has built its strong position in civil construction through JMC Projects and in pipeline laying business. Kalpataru holds a 52% stake in JMC Projects, which has an order backlog of INR21bn. We introduce our consolidated forecasts. (more…)

SBI caps has initiated coverage on Shri Lakshmi Cotsyn Ltd [SLCL] with a BUY rating.

SLCL is a multiproduct company involved in the manufacturing of denim, terry towel, bottom weight, home furnishing, nylon and wearable apparels. SLCL is aggressively building capacity in the textile industry with a committed capex of Rs 457 crore in two phases in the last two years. SLCL has planned a CAPEX of Rs 310 crore in the current year. (more…)

Edelweiss had a site visit to Bharat Forge and Amtek Auto. Here is the key takeaway after talks with the management of both the companies.

Amtek Auto:
Amtek’s Sanaswadi plant was commissioned in Q1FY08 with a machining capacity of 1 mn units, primarily for crankshafts. It also has a capacity for machining 50,000 units p.a. of front axle beams. A second shed is being made for the Amtek VCST JV that is 70% complete. Delivery of machining capacity for this JV is expected by March 2008; the JV’s trial production is likely to start by June end. (more…)

Siemens India’s Annual Report clearly highlights shift of revenue mix to project execution higher proportion of bought out items, also explain lower margins. Projects are being executed with high proportion of bought out components reflecting in lower margins that Siemens has reported in the y/e September 2007 (particularly in the power segment where execution of Qatar orders contributed to strong revenue growth).

Siemens’ annual report highlights that it maintains significant net sell position through forward contracts in US Dollar and Qatari Riyal to hedge its likely exports revenues in these two currencies. (more…)

DSP Merill Lynch a while ago concluded Investors conference in Mumbai. Key takeaway from the conference is as below.

Asian Paints: Volume growth of 15% plus appears sustainable. Mix upgrade is supporting margin expansion in decoratives. Increasing focus on industrials to de-risk portfolio. Forecast FY08 EPS to grow 38.5% to Rs41.3. Valuations appear reasonable at P/E of 23xFY09E and 19xFY10E for a business with strong brand name, structural growth drivers and high ROE.

Axis Bank:Non-banking initiatives underway with PE (infrastructure) fund, AMC with offshore advisory focus and also wealth management focus for Indian diaspora besides expanding international presence. (more…)