Archive for the ‘Between The Lines’ Category
Infosys Technologies Ltd - KRC Stock Recommendation
Infosys Technologies Ltd
Result Update: Q4 FY08
Key Data
CMP Rs 1750.75
Date April 29th 2008
Sector Software
Face Value Rs.5
BSE Code 500209
52 Week H/L Rs 2415/ 1517
Market Cap Rs 95235 Cr
Investment Rationale
Infosys is the leading Software Company in India and is held in high esteem by clients and competitors alike. The company witnessed growth of 6.3% q-o-q and 20.4% y-o-y in top line to Rs 4542 crore. The net profit declined by 5.1% q-o-q and 2.1% y-o-y to Rs 1168 crore, while the EBIDTA margins declined by 80 bps at 32.5% in Q3 FY08. The company is witnessing strong sequential growth in Maintenance, Package Implementation, Testing and BPO services. While in terms of verticals it is witnessing strong growth in BFSI, Retail and Services sectors. Though the company’s growth slowed down in Q3 FY08 vis-à-vis its robust growth in Q2 and Q3 of FY08 quarters, it has exceeded guidance. The company’s books reflect healthy financial performance with cash and cash equivalents of Rs 6950 crore as on date. Also it has superior compelling value proposition to offer to its clients and higher EBIDTA margins compared to its peers. Thus the company still has strong potential for growth in future and based on the strong expected earnings in the next year, we recommend a buy on the stock with a long term view.
Key Developments
Billing rates remain stable
Despite current trends which have lead some operators to decline pricing or maintain current levels, Infosys has been able to record a marginal increase of 0.24%y-o-y in billing rates during Q4FY08 and 5.6% y-o-y. Offshore billing rates have increased 0.53% y-o-y while volumes on the top 10 clients grew 12% y-o-y. This trend was supported by the company’s policy to be selective in accepting contracts, maintaining revenue productivity and deep client relationships. Given the flat trend in Q4FY08, and the current US economic environment the company has guided towards stable pricing trends in FY09.
Employee additions to decline while utilization rates improve
Infosys plans to hire about 25,000 candidates in FY09, which are about 8,000 less than FY08 levels as the company expects the first two quarters of this year to go slow. Of the 25,000-strong recruitment planned, 18,000 campus offers have been made. Typically, 70- 75% of these offers are converted into recruitment. In Q4FY08, the company added 2,586 employees and recorded a decline in attrition to 3.8% compared to 4.0% in Q4FY07. This contributed to a decline in utilization Q4FY08, and is expected to improve in Q1FY09 to 76.5%
Financials
Net sales up 6.3% q-o-q
Infosys delivered revenue growth of 6.3% q-o-q to Rs 4,542 crore, supported by enterprise services and package implementation services expansion. EBITDA margin remained flat at 32.5% q-o-q. Net profit declined 5.1% q-o-q to Rs 1,168 crore (excluding tax reversal of Rs 200 mn). Net income was impacted by forex losses of Rs 450 mn (versus Rs 140 mn in Q3FY08). As a result, EPS for Q4FY08 declined 5.2% q-o-q to Rs 20.43 from Rs 21.55.
Valuations
At the CMP of Rs 1750.75, Infosys is quoting at a PER of 21.85. On EV/Sales and on EV/ EBIDTA basis it is quoting at 5.46x and 17.38x respectively based on consolidated twelve months earnings ending as on Mar’08.
Click Here for In-depth Infosys Technologies Ltd research report by KR Choksey, company profile along with stock recommendations, Infosys Technologies Ltd target price and for making informed investment decisions.
Kisan Ratilal Choksey Shares and Securities Pvt. Ltd.
1102, Stock Exchange Tower, Dalal Street, Mumbai 400 001
Phone: 91-22-56338050 / 66965555. Fax: 5633 8060
Members: BSE & NSE
www.krchoksey.com
Email: customercare@krchoksey.com / eservices@krchoksey.com
YES BANK - KRC Stock Recommendation
YES BANK
INITIATING COVERAGE
Key Data
CMP Rs 169
Date April 25th 2008
Sector Banking
Face Value Rs.10
BSE Code 532648
52 Week H/L Rs 278/ 120
Market Cap Rs 5012 Cr
Investment Rationale
YES BANK is a private Indian bank promoted by Rana Kapoor and Ashok Kapur with financial support from Rabobank Nederland, and global institutional private equity investors. YES BANK has 67 operational branches across 57 locations nationally, YES BANK has received additional licenses to open 57 new branches and 125 offsite ATMs taking the total licensed network to 117 branches and 200 Offsite ATM’s. YES BANK is steadily building corporate and institutional banking, financial markets, investment banking, corporate finance, business (SME) and transactional banking, retail banking and wealth management business lines across the country.
Net profit of the bank has shown extraordinary growth of 108percent qoq in Q3FY08 driven by controlled operating expenses and expansion in the NIM. Advances of the bank has grown by 50percent qoq and deposits by 61percent (qoq) and CASA deposits by 138.2percent (yoy) for the same period. The bank has ROA of 1.61percent ahead than other private sector banks. For the first time in the history of Yes Bank, it reported Gross NPA of 0.11percent and Net NPAs of 0.09percent.
JINDAL SAW LTD - KRC Stock Recommendation
JINDAL SAW LTD
UPDATE: Q3FY08
Key Data
CMP Rs 652
Date April 24th 2008
Sector Metals – Steel
Face Value Rs.10
BSE Code 500378
52 Week H/L Rs 1224/ 517
Market Cap Rs 3334 Cr
Investment Rationale
The Q308 results were beyond market expectations. Net Sales was up by 35percent and profit after tax was up by 83percent. EBIDTA was up by 46percent. The key driver for the robust performance was because of higher sales volume and better cost management. Company booked a profit of Rs463.78crore by selling its stake of a US subsidiary company. The Company is also venturing into new businesses and diversifying its portfolio.
KEY DEVELOPMENTS
Sales and Net Profit grew by 35percent and 83percent respectively
The company posted a growth of 35percent in Net Sales to Rs.1611Crore during the quarter from Rs1192crore in Q3FY07. Net Profit grew by a whooping 83 percent to Rs110Crore during the quarter from Rs.60Crore in Q3FY07.Net profit was high because of higher sales volume and better cost management
Strong Order Book
Jindal Saw recently bagged an order of more than 200mnUSD from Cairn India for supply of line pipes, tracer tube, insulation and bends for Barmer Salaya Pipe Line (BSPL) project of Cairn. With this order, the total order book of JSL exceeds US$ 1 billion). These orders are scheduled to be executed by January, 2009.
FINANCIAL PERFORMANCE
The company declared robust results in Q3FY08 as its net profit increased by 83 percent to Rs110crore from Rs60crore in corresponding Q3FY07, Also the net sales of the company increased by 35percent to Rs.1611Crore from Rs1192crore in Q3FY07.
VALUATIONS
At the CMP of Rs.652 Jindal Saw is quoting at P/E of 9.13x TTM December 07 earnings and 1.78x its book value. The company is expected to grow on account of capacity expansion, higher pipes demand and better operating efficiency.
Click Here for In-depth JINDAL SAW LTD research report by KR Choksey, company profile along with stock recommendations, JINDAL SAW LTD target price and for making informed investment decisions.
Kisan Ratilal Choksey Shares and Securities Pvt. Ltd.
1102, Stock Exchange Tower, Dalal Street, Mumbai 400 001
Phone: 91-22-56338050 / 66965555. Fax: 5633 8060
Members: BSE & NSE
www.krchoksey.com
Email: customercare@krchoksey.com / eservices@krchoksey.com
Sona Koyo Steering System Ltd. (SKSSL)
Sona Koyo Steering System Ltd. (SKSSL)
KR Choksey Stock Recommendation
Q4FY08 Result Update
Key Data
CMP Rs 44.75
Date April 23rd 2008
Sector Auto ancillary
Face Value Rs.2
BSE Code 520057
52 Week H/L Rs 74/ 36
Market Cap Rs 431 Cr
Investment Rationale
Sona Koyo Steering System Ltd. (SKSSL) is the largest manufacturer of steering gears in India with market share of over 50 percent. The company at present has three manufacturing facilities at Chennai, Nashik and Gurgaon with combined capacity of over 1.5 million units. The company intends to double the capacity through greenfield plants at Singur, Uttaranchal and Bawal in Haryana over next 3-4 years. The company derived nearly 53 percent of revenue from Maruti Suzuki India Ltd and top 6 clients contribute nearly 90 percent of top line. The company has reported 17.8 percent growth in net sales to Rs683.60 crore in FY08 whereas the net sales for Q4FY08 registered a growth of 10 percent to Rs194.30 crore. The full year EPS of the company declined by 12.7%. This was partly on the back of rising input cost and partly due to equity dilution. However the company is expected to pass on the rise in input cost to its customers and also obtain better pricing from its vendors in the coming time.
The company has formed a (49:51) JV with JTEKT of Japan to serve the steering system requirement for small cars up 1500 CC segments. The proposed JV would be focused to the clients like Tata Motors, Toyota and Nissan etc. The company would be investing Rs160 crore for greenfield facility at Bawal in Haryana, the proposed JV is expected to contribute approx Rs320 crore in the topline from FY11 onwards.
Koutons Retail (India) Ltd - KRC Stock Recommendation
Koutons Retail (India) Ltd
Initializing Coverage
Key Data
|
CMP |
Rs 766.05 |
|
Date |
April 22nd 2008 |
|
Sector |
Retail |
|
Face Value |
Rs.10 |
|
BSE Code |
532901 |
|
52 Week H/L |
Rs 1098/ 515 |
|
Market Cap |
Rs 1417 Cr |
Investment Rationale
The Company was incorporated on November 25, 1994 as Charlie Creations Private Limited. The company name was changed to Koutons Retail India Private Limited with effect from February 7, 2006. The company has an integrated apparel manufacturing and retail company in India engaged in the business of designing, manufacturing and retailing apparel under the ‘Koutons’ and ‘Charlie Outlaw’ brands through a network of 999 exclusive brand outlets (as of August 20, 2007) across India.
Sun TV Network Ltd - KRC Stock Recommendation
Sun TV Network Ltd
Initiating Coverage
Key Data
CMP Rs 296.60
Date April 21st 2008
Sector Media & Entertainment
Face Value Rs.5
BSE Code 532733
52 Week H/L Rs 1779/ 260
Market Cap Rs 11783 Cr
Investment Rationale
Sun TV follows a unique business model with regards to sourcing content as compared to its competitors. Most of the content is sourced in house and for its outsourced content, it brings down the cost by selling advertisement time slots to its content providers instead of buying the content outright. This helps the company follow a low cost content sourcing model and helps it maintain high operating margins. Sun TV sources close to 75% of its content requirement in house – 40-45% is movie based, 8-10% is news and the rest is game shows, talk shows and variety shows. Movie and movie related content generates high viewer ship in South India. The Sun Network has acquired around 80% of the movies which are released in southern India. It has a library of 8,000 movie titles and holds perpetual rights for close to 95% of its movies. Sun TV Network has presence across genres like general entertainment, movies, music, and news, except in Kerala, where it offers only general entertainment and movies. We believe that a bouquet of offerings spanning the above genres adds to viewer stickiness. The company has added a new channel, Chutti TV, positioned as the first Tamil kids channel. Chutti TV has been a big hit – its TRP ratings (4.75%) are higher than some of the Tamil GECs.
Bharat Shipyard Ltd - KRC Stock Recommendation
Bharat Shipyard Ltd
Q3FY08 Result Update
Key Data
CMP Rs 510
Date April 17th 2008
Sector Ship building/ Breaking
Face Value Rs.10
BSE Code 532609
52 Week H/L Rs 865/ 349
Market Cap Rs 1406 Cr
Investment Rationale
The current order book of Bharati Shipyard (BSL) is Rs 4,639 crore to be executable by FY2010. The order book to sales ratio stands at 10.9x FY07 revenues and 9.4x TTM revenues giving a clear visibility of revenues in the years to come. 67% of the order book of BSL comprises of exports and the balance 33% is domestic. More than 70% of the orders are for offshore support vessels, multipurpose vessels, platform supply vessels etc. BSL’s Mangalore yard will have a capacity to build vessels up to 60,000 DWT (Dead Weight Tonnage). The yard will focus more on specialized ships like tankers, bulk carriers, container ships, chemical carriers, product carriers etc. The machinery from the acquired Swan Hunter Shipyard would be transferred to Mangalore. The Mangalore yard is expected to commence shipbuilding operations by Dec 2008. With the initial focus on building rigs and dry bulk carriers, BSL can achieve faster capacity utilization and enhance the profitability in the upward shipbuilding boom. The company’s operating margins range from 19 to 21% (excluding subsidy) on a yearly basis. Going forward, we expect BSL to sustain the margins. This is due to the company’s policy of covering raw material purchases on a back to back basis (so as to hedge against any volatility in the prices of raw materials like steel).
Grasim Industries Ltd. - KRC Stock Recommendation
Grasim Industries Ltd.
Q3FY08 Result Update
Key Data
CMP Rs 2568.55
Date April 16th 2008
Sector Diversified
Face Value Rs.10
BSE Code 500300
52 Week H/L Rs 4074/ 2232
Market Cap Rs 23551.03 Cr
Investment Rationale
Grasim Industries Ltd. a dominant player in VSF (Viscose Staple Fibre) & cement businesses in the domestic market has posted a strong growth of 15.38 percent (Y-o-Y) in net sales to Rs 2629.93 crore during Q3 FY08. During the quarter, Cement division’s operating profit rose by 9.19percent while its VSF division reported higher revenues with better margins. The company has chalked out an extensive capex plan encompassing capacity expansion as well as modernization of its VSF and cement division. Barring cement and Textiles, the remaining 3 segments viz. VSF, Chemicals and Sponge Iron have reported a very good performance. Rising international prices of VSF helped Grasim to counter high fuel and freight costs at is cement division. Its combined Net Sales were up by 15.38 percent although its cement division posted an increase of just 11.2 percent. Its EBITDA during the same period grew by 28.85 percent. Due to the increasing power and fuel cost and continuous government pressure on the cement prices, our short term outlook on the company is a bit slackened. But looking forward, the prices are expected to calm down mainly because of huge capacity expansion plans.
Key Developments:
Cement capacity expansion
The share of blended cement increased from 61percent to 66percent. 13 RMC plants were commissioned during the year. Higher realization during the quarter was set off by the steep hike in fuel cost and increased freight cost, which impacted margins. The company’s aggregate cement capacity (including that of its subsidiaries) will stand augmented by 17 million tonnes at 47 million tonnes upon completion of all expansions. Besides, both the company and its subsidiary are setting up ready mix concrete plants at various locations in the country. The additional capacity of around 90 million tonnes, as announced by the industry, over the 3-year period FY08 to FY10, could result in a surplus scenario, affecting realisation from end-FY09. Rising energy prices would lead to increased costs. However, the addition of captive power plants at various locations will help contain this impact.
Financial Performance:
Net sales up by 15.38 percent on the back of robust performance of VSF and
Sponge Iron segment
For Q3FY07 the company has posted net sales of Rs 2629.93 crore thus registering a growth of 15.38 percent. This was primarily due to the increased sales revenue in the VSF segment by 23.28 percent and 25.18 percent increase in the Sponge Iron segment. The EBITDA for the quarter was higher by 28.85 percent to reach Rs. 921.36 crore. The company posted a 19 percent increase in their consolidated revenues to Rs 4358 crore from 3668 crore. Its Chemical segment also posted an increase in the revenue by 51.82 percent to reach 116.72 crore. The Textiles segment of the Company saw a negative growth rate mainly due to appreciation of rupee.
Valuations:
At current market price of Rs 2568.55, Grasim is quoting at a PER of 15.59x. On EV/Sales and on EV/ EBIDT basis it is quoting at 2.62x and 8.39x of its Dec’07 TTM earnings respectively.
Click Here for In-depth Grasim Industries Ltd. research report by KR Choksey, company profile along with stock recommendations, Grasim Industries Ltd. target price and for making informed investment decisions.
Kisan Ratilal Choksey Shares and Securities Pvt. Ltd.
1102, Stock Exchange Tower, Dalal Street, Mumbai 400 001
Phone: 91-22-56338050 / 66965555. Fax: 5633 8060
Members: BSE & NSE
www.krchoksey.com
Email: customercare@krchoksey.com / eservices@krchoksey.com
Indian Oil Corporation - KRC Stock Recommendation
Indian Oil Corporation
Q3FY08 Update
Key Data
CMP Rs 460.15
Date April 15th 2008
Sector Refineries
Face Value Rs.10
BSE Code 530965
52 Week H/L Rs 809.9/ 355
Market Cap Rs 54867 Cr
Investment Rationale
Indian Oil Corporation Ltd (IOC) reported a 16.7 per cent growth in net profit for the third quarter of the FY 08. As a result, IOC clocked a net profit of Rs2019 crore as compared to a profit of Rs 1,792 crore during the corresponding quarter in the previous year. The company has outlined a capex plan of Rs. 51030 crore for the period upto March 2012. Also, the company is planning transportation of crude through pipeline from the upcoming SPM at Paradip in Orissa to solve the age-old crude availability constraints in Assam, and expand capacities of Guwahati refinery and Bongai gaon Refinery and Petrochemical Ltd. IOC has signed gas agreements with Petronet LNG for supply of 1.5 MMTPA of gas plus additional 0.75 MMTPA regassified LNG by 2009-10. IOC has also sold 1.50 million tons re-gassified LNG, including captive consumption at Gujarat and Mathura refineries and spot LNG sold to fertilizer and power sectors. The major projects in line are Naphtha Cracker which is under implementation at Panipat with an estimated cost of Rs.14439 crore and expected to be commissioned by 2009 and Integrated refinery and petrochemicals complex at Paradip with an estimated cost of Rs.25646 crore and expected to be commissioned by 2011-12.
Varun Shipping Ltd. - KRC Stock Recommendation
Varun Shipping Ltd.
Q3FY08 Result Update
Key Data
CMP Rs 73.7
Date April 11th 2008
Sector Shipping
Face Value Rs.10
BSE Code 500465
52 Week H/L Rs 110.5/ 52.5
Market Cap Rs 1105.5 Cr
Investment Rationale
Capacity addition to drive growth
Company plans to spend capex of $ 400 mn in 2008 mainly for expansion and modernization of its fleet. VSCL has acquired its 12th LPG carrier last year and its 5th Anchor Handling and Towing Supply Vessel (AHTS). It will be the most powerful AHTS vessel under Indian flag.
Presence in Offshore business to boost margins.
VSCL offers 2 AHTS for charter to oil and gas companies operating offshore last year. Both AHTS are deployed on long term charters with ONGC. Contribution from offshore business has been significant and this has been witnessed in the results this quarter. The 5th AHTS will be used for deep sea oil exploration activity going in areas like North Sea, KG basin and Atlantic Ocean off the coasts of Nigeria, Brazil and Mexico.
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