Post on 30-Sep-2020
Religare Research 18 July 2008
Religare Research is also available on Bloomberg FTIS <GO> and Thomson First Call 1
In focus
News track US Congress Committee to probe into FDA's findings on Ranbaxy.(ET)
US based Abbott labs files suit against Dr Reddys for infringing the patent of Depakote ER an anti seizure drug.(BS)
MindTree has raised about Rs 1,000 mn loans from HSBC and Citibank on a long-term basis to meet its operational expenses and capital expenditure.(BS)
McNally Bharat Engineering has received an order worth Rs 2.5bn from Vedanta Alumina for design, detailed engineering, manufacture and supply of equipment, erection and commissioning of three units green mode plant at Jharsuguda in Orissa. (BS)
Unitech has received Rs 7.4bn from Lehman Brothers Real Estate Partners for a 50% stake in the reality firm’s project in Mumbai. (FE)
Gujarat State Petroleum plans to invest US$ 1bn (about Rs 41bn) to make its eastern offshore Krishna Godavari basin gas field operational by 2011. (ET)
M&M has unveiled a CNG variant of Bolero cargo pick up. It is expected that the CNG variants will be extended to its other products such as Scorpio. (BL)
Indoco Remedies plans to launch 40 drugs in the domestic market within a year, mostly in the areas of antibiotics.(BS)
Gujarat State Petroleum Corporation is planning to spend Rs 40bn over the next three to four years to produce oil and gas, as the company made a significant discovery of gas in KG-22 block with the potential reserve of over 20tcf. (BL)
Power Grid has embarked upon a plan to setup 3 transmission line in Myanmar and would send a delegation to Myanmar. (FE)
Source: BL: Business Line, BS: Business Standard, ET: Economic Times, FE: Financial Express
Volume shockers
Company (No of shares)
17-Jul 2-mth avg
Chg(x)
EID Parry India 1,323,683 47,978 27.6
United Breweries 700,103 26,178 26.7
Timken India 115,197 8,100 14.2
Delivery toppers
Company Del (%)
Tot vol Cons
days up
Aban Offshore 10.5 191,484 1
ABB India 29.8 199,029 2
Alstom Projects 25.7 191,007 1
Equity indices % Chg
17-Jul 1-day 1-mth 3-mth India Sensex 13,112 4.3 (15.0) (20.4) Nifty 3,947 3.4 (13.9) (20.4) Global / Regional markets Dow Jones 11,447 1.8 (4.8) (10.9) Nasdaq 2,312 1.2 (4.8) (3.8) FTSE 5,286 2.6 (8.2) (12.7) Nikkei 12,938 0.4 (10.5) (4.0) Hang Seng 21,858 0.6 (6.3) (9.7)
Value traded (Rs bn) BSE NSE
Cash 48.7 116.6
Derivatives 0.4 463.0
Total 49.1 579.6
Net inflows Recent trends (days)
(Rs bn) 16-Jul -7d -15d -30d
FII (7.7) (24.4) (45.5) (115.6)
MF (2.2) 0.4 9.4 33.9
% Chg Forex / Crude
17-Jul 1-day 1-mth 3-mth
Rs/US$ 43.0 0.0 0.1 (7.2)
Euro/US$ 1.6 (0.2) 1.9 0.1
Crude ($/bbl) 129.9 0.4 (5.0) 11.3
Mkt movers (Rs) Close Pr. Cl. % Chg
Top gainers
Polaris Software 78.8 68.1 15.6
Unichem Lab 177.0 155.1 14.1
IVRCL Infra 295.1 259.5 13.7
Top losers
Biocon 352.0 376.8 (6.6)
Prajay Engineers 56.8 60.6 (6.4)
Sterlite Industries 608.8 646.8 (5.9)
Morning Buzz
18 July 2008
Tata Consultancy Services – Results Update Results in line, estimates revised CMP: Rs 728 Target: Rs 961 BUY
Nectar Lifesciences – Company Note At an inflexion point CMP: Rs 275 Target: Rs 503 BUY
Jubilant Organosys – Results Update Sales in line but PAT slips on forex losses CMP: Rs 304 Target: Rs 452 BUY
Religare Research 18 July 2008
Morning Buzz 2
Tata Consultancy Services
CMP: Rs 728 Target: Rs 961 BUY
Results in line, estimates revisited on new depreciation policy In line with our expectations, TCS has posted revenue growth of 6% QoQ for Q1FY09 led by a 1.3% increase in volumes. The EBITDA margin declined 113bps due to salary hikes, reduced pricing and a higher onsite effort. This was offset to some extent by rupee depreciation and lower SG&A expenses. The margin decline was restricted to 26bps at EBIT levels due to a change in accounting policy for depreciation. Net profit for the quarter dipped 1% QoQ as against our expectations of a 5.5% decline. Lower depreciation and a tax reversal of Rs 350mn boosted profitability. Excluding these items, PAT would have been 1.5% lower than our estimates.
We are revising our revenue and earnings estimate for TCS to incorporate a change in our exchange rate assumptions as well as the company’s new aggressive depreciation policy (computer equipment now depreciated over four years vis-à-vis industry norm of 2–3 years). We now expect EPS to be at Rs 61.7 for FY09 and at Rs 69.4 for FY10, a revision of 2.3% and 3.6% respectively from earlier estimates.
The stock is currently trading at 11.8x and 10.5x its expected earnings for FY09 and FY10 respectively. The discount to Infosys in terms of P/E valuation has widened considerably in the last three months and is currently ~30%. We have valued TCS at 15x one-year forward earnings, which is a 17% discount to our target multiple of 18x for Infosys. Considering the current attractive valuations, we upgrade the stock from Hold to Buy with a revised one-year target price of Rs 961.
Quarterly results
(Rs mn) Q1FY09 Q4FY08 Chg (%) Q1FY08 Chg (%)Revenues 64,107 60,469 6.0 51,572 24.3Employee costs 29,351 25,964 13.0 22,852 28.4Other CoR 7,076 6,543 8.1 5,370 31.8Gross profit 27,680 27,962 (1.0) 23,350 18.5SG&A Expenses 12,366 12,836 (3.7) 10,543 17.3EBITDA 15,314 15,126 1.2 12,807 19.6Depreciation 1,167 1,625 (28.2) 1,265 (7.7)EBIT 14,147 13,501 4.8 11,542 22.6Other income 332 1,179 - 1,972 -PBT 14,479 14,680 (1.4) 13,514 7.1Income taxes 1,947 1,988 (2.1) 1,523 27.8PAT 12,532 12,692 (1.3) 11,991 4.5Earning of affiliates 1 (1) - 3 -Minority interests 97 133 - 140 -Reported net income 12,436 12,558 (1.0) 11,854 4.9Adjustments (254) 125 - 138 -Adjusted net income 12,182 12,683 (4.0) 11,992 1.6EPS (Rs) 12.7 12.8 (1.0) 12.1 4.9Source: Company, Religare Research
Anurag Purohit Hitesh Punjabi (91-22) 6612 4795 (91-22) 6612 4769
anurag.purohit@religare.in hitesh.punjabi@religare.in
BSE code: 532540 NSE code: TCS
Company data
Particulars
Market cap (Rs bn / US$ bn) 712.5/16.6
Outstanding equity shares (mn) 979
52-week high/low (Rs) 1,210/716
2-month average daily volume 1,707,881 Financial snapshot
Particulars FY08 FY09E FY10E
Sales (Rs mn) 228,614 277,312 301,944
Growth (%) 22.7 21.3 8.9
Adj net inc (Rs mn) 50,598 60,379 67,907
Growth (%) 23.1 19.3 12.5
FDEPS (Rs) 51.7 61.7 69.4
Growth (%) 23.1 19.3 12.5
P/E (x) 14.1 11.8 10.5
ROE (%) 47.4 41.6 35.7 Risk-return profile
Shareholding pattern
(%) Dec-07 Sep-07
Promoters 76.4 77.6
FIIs 11.2 10.8
Banks & FIs 6.3 5.3
Public 6.1 6.3 Stock performance
Returns (%) CMP 1-mth 3-mth 6-mth
TCS 728 (21.0) (27.3) (21.1)
Sensex 12,576 (19.9) (23.7) (36.2)
BSE IT 3,567 (19.7) (14.1) (7.4) Company website www.tcs.com
Results Update
Religare Research 18 July 2008
Morning Buzz 3
Result highlights Actual vs estimated performance
(Rs mn) Actual Estimated % VarianceNet sales 64,107 62,440 2.7EBITDA 15,314 15,125 1.2Net profit 12,436 11,868 4.8FDEPS (Rs) 12.7 11.9 4.8Source: Company, Religare Research
Revenue growth muted due to volume and pricing concerns Continuing with the sluggish trend in Q4FY08, volumes increased by just 1.3% QoQ as TCS encountered challenges in three major customer accounts during the quarter. Blended pricing also witnessed a decline of 90bps due to the difficult demand environment. Thus, the revenue growth in dollar terms remained muted at 0.5% QoQ. However, rupee depreciation during the quarter led to a 6% QoQ growth in revenues in rupee terms.
Components of revenue growth QoQ
1.3
(90bps)(50bps)
510bps
6.0
0
2
4
6
8
VolumeGrowth
Pricing Effort Forex RevenueGrowth
(%)
Source: Company, Religare Research
EBITDA margin declines 113bps Salary hikes, a decline in pricing, and lower utilisation rates shaved 113bps off the EBITDA margin as against our expectations of an 88bps fall. Utilisation, including trainees, declined to 74.6% during the quarter from 75.8% in Q4FY08. This coupled with salary increments and lower pricing had a negative impact of 507bps on the EBITDA margin. However, on the positive side, a 3.7% QoQ decline in SG&A expenses along with rupee depreciation restricted the negative impact to 113bps.
Change in accounting policy restricts fall in EBIT margin A favourable change in the depreciation accounting policy restricted margin erosion at the EBIT level to 26bps. TCS has increased the depreciable life of computer equipment from two years to four years. This resulted in a 28.2% decrease in depreciation QoQ. Depreciation as a percentage of revenue reduced to 1.8% in Q1FY09 from 2.7% in Q4FY08.
New depreciation policy a departure from conservative industry norms Indian IT players have traditionally been highly conservative regarding asset depreciation. Most companies opt for a faster rate of depreciation as compared to the useful life of the asset. For computer equipment, industry peers have a depreciation policy of two to three years, implying that TCS’ revised policy of considering a four-year lifespan is rather aggressive.
Lower depreciation and tax reversal result in above-estimated net profit Net profit for the quarter dipped 1% QoQ as against our expectation of a 5.5% fall. However, adjusting for the lower depreciation and a tax reversal of Rs 350mn, net profit would have been at ~Rs 11.7bn, which is 1.5% below our estimate.
Challenges in three major client accounts muted volume growth to 1.3% QoQ
Salary hikes, reduced pricing and lower utilisation pull down the EBITDA margin
Depreciation policy
Company Useful Life (years)
Infosys 2–5
Satyam 2
Wipro 2–3
Patni 3
MindTree 2–3
Cognizant 3
HCL Technologies 3–4
TCS - Earlier 2
TCS - Now 4
Source: Religare Research
Religare Research 18 July 2008
Morning Buzz 4
Q1FY09 performance – other key highlights
Parameters Comments
Onsite-Offshore-GDC mix Offshore revenue contribution has decreased by 120bps QoQ to 40.9%, while that of GDC (global delivery centres) has declined 50bps to 4.2%. The onsite revenue share has increased by 170bps during the quarter.
Salary hikes April-June is a quarter marked by salary hikes; the rise in salaries due to promotions had a negative impact of 196bps on the EBITDA margin.
Employee addition A total of 8,982 employees were added at the gross level, of which 4,495 were trainees and 2,905 were lateral recruits. The management has maintained its guidance of recruiting 30,000–35,000 employees at the gross level in FY09. TCS currently has a total of 116,308 employees with 4,417 employees in GDC.
Attrition rate 4,087 employees left the company during the quarter, representing a 12.8% attrition rate on LTM basis.
Clients & deals The company had seen three clients cutting their IT spend in Q4FY08, which affected revenues in Q1FY09. TCS has added 35 new clients across geographies and sectors during the quarter, taking the total customer count to 885. The company has a healthy order book pipeline of 25 deals, many of which are US$ 50mn–100mn projects.
Utilisation levels Utilisation (including trainees) decreased 120bps QoQ to 74.6%. Net utilisation (excluding trainees) decreased at a lower rate of 80bps QoQ to 78.3%.
Client growth Growth was witnessed across all clients in rupee terms. However, clients other than the top 10 group recorded a faster pace of growth at 3.8% sequentially in rupee terms. The top 5 clients too increased at 1.8% QoQ, contributing 18.9% of revenue.
Services metrics The share of ADM in overall revenues increased to 46.9% during the quarter as against 46.2% in Q4FY08, as services like enterprise solutions, business process outsourcing and assurance solutions continued to ramp up.
Vertical metrics Subdued by the US subprime crisis, the contribution of the BFSI vertical dipped 130bps during the quarter to 42.5%.
Geographical mix Revenue contribution from the US has remained stable at 55.2%, while that from India and the Asia Pacific has witnessed a fall during the quarter as clients delayed IT spending decisions.
Source: Company, Religare Research
Revising FY09 and FY10 estimates We are raising our revenue and earnings estimates for TCS to incorporate fresh exchange rate assumptions as well as the company’s amended depreciation policy. Our revenue estimates for FY09 and FY10 have been increased by 1.3% and 1.2% respectively, while EPS estimates for these two years stand revised upwards by 2.3% and 3.6% respectively.
TCS – revised estimates
FY09E FY10E (Rs mn)
Earlier Revised Chg (%) Earlier Revised Chg (%)Revenue 273,631 277,312 1.3 298,364 301,944 1.2EBITDA 71,919 73,999 2.9 80,860 81,264 0.5Net profit 59,000 60,379 2.3 65,538 67,907 3.6EPS (Rs) 60.7 61.7 2.3 67.0 69.4 3.6Source: Religare Research
Estimates raised on revised forex assumptions and new depreciation policy
Religare Research 18 July 2008
Morning Buzz 5
P/E discount to Infosys widening TCS is currently trading at 11.8x and 10.5x its expected earnings for FY09 and FY10 respectively. The discount to Infosys in terms of P/E valuation has widened considerably in the last three months to ~30% at present. In our opinion, a discount of 15–20% is appropriate considering TCS’ growth rate and profitability vis-à-vis Infosys. We have valued the company at 15x one-year forward earnings, which is a 17% discount to our target multiple of 18x for Infosys.
P/E comparison
5
15
25
35
45
Apr-
05
Jul-0
5
Oct
-05
Jan-
06
Apr-
06
Jul-0
6
Oct
-06
Jan-
07
Apr-
07
Jul-0
7
Oct
-07
Jan-
08
Apr-
08
Jul-0
8
TCS Infosys
(30)(25)(20)(15)(10)(5)0
Apr-
05
Jul-0
5
Oct
-05
Jan-
06
Apr-
06
Jul-0
6
Oct
-06
Jan-
07
Apr-
07
Jul-0
7
Oct
-07
Jan-
08
Apr-
08
Jul-0
8
P/E Discount(%)
Source: Religare Research
Decreasing target price to Rs 961; upgrading to Buy Consequent to the change in our estimates and revision of target multiple to 15x from 16.5x earlier, we are decreasing our target price for the stock to Rs 961 from Rs 1,011. Current valuations of the stock are relatively inexpensive in our opinion and have a limited downside. We thus upgrade the stock from Hold to Buy.
Recommendation history
Date Event Reco price Tgt price Reco 17-Apr-07 Results Update 1,280 1,530 Buy 9-Jul-07 Sector Update 1,159 1,448 Buy 17-Jul-07 Results Update 1,128 1,415 Buy 5-Oct-07 Quarterly Preview 1,078 1,354 Buy 16-Oct-07 Results Update 1,074 1,193 Buy 7-Jan-08 Quarterly Preview 1,005 1,177 Hold 17-Jan-08 Results Update 945 1,095 Hold 28-Mar-08 Sector Update 879 851 Hold 22-Apr-08 Results Update 993 851 Sell 30-Apr-08 Sector Update 882 987 Hold 7-Jul-08 Quarterly Preview 855 1,011 Hold 17-Apr-08 Results Update 728 961 Buy Source: Religare Research
Stock performance
600700800900
1,0001,1001,2001,3001,400
Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08
Source: Religare Research
P/E discount to Infosys has widened to 30%; we believe a 15–20% discount is appropriate
Valuations attractive with limited downside, upgrade to Buy
● Buy ● Hold ● Sell
Religare Research 18 July 2008
Morning Buzz 6
Consolidated financialsProfit and Loss statement
FYE March, Rs mn FY07 FY08 FY09E FY10E
Revenues 186,332 228,614 277,312 301,944Growth (%) 40.6 22.7 21.3 8.9EBITDA 50,628 59,397 73,999 81,264Growth (%) 36.8 17.3 24.6 9.8Depr & amort 4,184 5,746 5,624 7,482EBIT 46,445 53,651 68,376 73,782Growth (%) 35.8 15.5 27.4 7.9Interest 237 452 534 574Other income 2,181 4,902 2,492 5,877EBT 48,389 58,101 70,334 79,085Income taxes 6,700 7,494 9,605 11,178Effective tax rate (%) 13.8 12.9 13.7 14.1Extra-ordinary items - - - -Min int / inc from assoc 461 432 413 520Reported net income 41,315 50,191 60,348 67,427Adjustments 206 (407) (31) (480)Adjusted net income 41,110 50,598 60,379 67,907Growth (%) 39.8 23.1 19.3 12.5Shares outstanding (mn) 978.6 978.6 978.6 978.6Religare EPS (Rs) 42.0 51.7 61.7 69.4Growth (%) 39.8 23.1 19.3 12.5DPS (Rs) 11.5 14.0 16.0 18.0
Cash flow statement
FYE March, Rs mn FY07 FY08 FY09E FY10E
Net income + Depreciation 45,651 55,937 65,972 74,909Non-cash adjustments 8 (2,526) 4,771 4,204Changes in working capital (11,603) (12,119) (11,832) (6,618)Cashflow from operations 34,056 41,292 58,911 72,494Capital expenditure (11,560) (10,941) (11,250) (11,750)Change in investments (4,526) (13,792) (17,500) (12,500)Other investing cashflow (2,496) (2,666) - -Cashflow from investing (18,581) (27,399) (28,750) (24,250)Issue of equity 211 - (0) (0)Issue/repay debt 3,949 631 841 600Dividends paid (10,922) (14,832) (15,115) (19,817)Other financing cashflow - - - -Change in cash & cash eq 8,713 (309) 15,887 29,028Closing cash & cash eq 12,291 10,352 26,239 55,267
Economic Value Added (EVA) analysis
FYE March FY07 FY08 FY09E FY10E
WACC (%) 14.8 14.5 15.5 15.5ROIC (%) 61.3 52.6 55.5 54.6Invested capital (Rs mn) 76,894 100,704 112,150 120,108EVA (Rs mn) 35,716 38,352 44,782 46,856EVA spread (%) 46.4 38.1 39.9 39.0
Balance sheet
FYE March, Rs mn FY07 FY08 FY09E FY10E
Cash and cash eq 12,291 10,352 26,239 55,267Accounts receivable 43,090 53,899 57,152 59,791Inventories 416 424 509 586Others current assets 19,055 27,102 33,253 38,242Investments 12,711 26,503 44,003 56,503Gross fixed assets 25,669 33,205 45,955 60,205Net fixed assets 15,774 21,159 28,956 36,463CWIP 7,139 9,055 7,555 5,055Intangible assets 13,978 14,738 13,967 13,196Deferred tax assets, net 161 3,552 4,262 4,901Other assets 5,772 9,035 10,842 12,468Total assets 130,386 175,818 226,739 282,472Accounts payable 6,701 9,712 10,085 11,189Other current liabilities 21,997 28,575 34,290 39,434Provisions 2,817 3,500 4,200 4,830Debt funds 6,468 7,098 7,939 8,539Other liabilities 2,742 3,112 3,672 4,318Equity capital 979 979 979 979Reserves & surplus 88,682 122,841 165,574 213,184Shareholder's funds 89,661 123,820 166,553 214,162Total liabilities 130,386 175,818 226,739 282,472BVPS (Rs) 92.6 127.5 171.2 219.8
Financial ratios
FYE March FY07 FY08 FY09E FY10E
Profitability & Return ratios
EBITDA margin (%) 27.2 26.0 26.7 26.9EBIt margin (%) 24.9 23.5 24.7 24.4Net profit margin (%) 22.1 22.1 21.8 22.5ROE (%) 55.5 47.4 41.6 35.7ROCE (%) 52.6 44.9 39.9 34.5Working capital & Liquidity ratios Receivables (days) 87 94 93 92Inventory (days) 2 1 1 1Payables (days) 22 24 24 24Current ratio (x) 2.6 2.4 2.6 3.0Quick ratio (x) 1.9 1.7 1.9 2.3Turnover & Leverage ratios Gross asset turnover (x) 8.0 7.8 7.0 5.7Total asset turnover (x) 1.7 1.5 1.4 1.2Interest coverage ratio (x) 196.2 118.8 128.0 128.5Adjusted debt/equity (x) 0.1 0.1 0.0 0.0Valuation ratios EV/Sales (x) 3.7 3.0 2.5 2.3EV/EBITDA (x) 13.7 11.7 9.4 8.5P/E (x) 17.3 14.1 11.8 10.5P/BV (x) 7.9 5.7 4.3 3.3
Religare Research 18 July 2008
Morning Buzz 7
Nectar Lifesciences
CMP: Rs 275 Target: Rs 503 BUY
Alok Dalal Varun Rao (91-22) 6612 4750 (91-22) 6612 4712
alok.dalal@religare.in varun.rao@religare.in
BSE code: 532649 NSE code: NECLIFE
Company data
Particulars
Market cap (Rs bn / US$ mn) 4.2/96.7
Outstanding equity shares (mn) 15.2
52-week high/low (Rs) 329/165
3-month average daily volume 25,746
Financial snapshot
Particulars FY08 FY09E FY10E
Sales (Rs mn) 7,359.4 9,560.9 12,196.2
Growth (%) 69.8 29.9 27.6
Adj net inc (Rs mn) 745.5 1,159.6 1,687.4
Growth (%) 59.5 55.6 45.5
FDEPS (Rs) 35.8 55.8 81.1
Growth (%) 59.5 55.6 45.5
P/E (x) 7.7 4.9 3.4
ROE (%) 29.3 36.4 44.2
Risk-return profile
Shareholding pattern
(%) Jun-08 Mar-08
Promoters 64.5 64.5
FIIs 3.6 3.2
Banks & FIs 6.5 6.5
Public 25.8 254
Stock performance
Returns (%) CMP 1-mth 3-mth 6-mth
Nectar 275 4.3 17.1 (3.2)
Sensex 12,676 (17.7) (22.0) (36.2)
BSE HC 3,909 (13.6) (3.8) (5.2)
Company website www.neclife.com
At an inflexion point Transitioning from cephalosporin API manufacturer to integrated formulations player
Investment rationale
Amongst the fastest growing Indian pharma companies with a revenue and PAT CAGR of 40% and 52% respectively over FY04–FY08, achieved purely through organic means. Strong presence in the third and fourth generation cephalosporin space and in phytochemicals. Venture into gelatine capsule manufacture and CRAMS to de-risk the business model.
Presence across the entire value chain from intermediates, APIs and formulations to capsule manufacturing, thus emerging as a strong integrated player with an advantage over other API and contract manufacturing companies.
Rising API prices in China likely to shift demand to India; Nectar to be a prime beneficiary of this trend. Exports value-added APIs to over 50 countries at present, with a planned entry into regulated markets by 2010. Thus, net profit margin set to improve from 10.1% to ~14% over the next two years. Looking to acquire an anti-infective company in the US or Europe, thereby reducing the entry time to these geographies.
World’s largest producer of menthol flakes and crystals, having built a global market share of 25% in the US$ 250mn organised sector over just 30 months due to high product quality. Key approvals from Kosher and Halal for mint-derivatives allow for sales across the globe, while assured raw material supplies along with backward integration initiatives separate it from competitors. Pharma-centric approach leads to superior quality and a DMF filing for menthol crystals with the USFDA has strengthened price realisation.
Key concerns
Excessive dependence on key geographies for phytochemicals.
Delay in regulatory approvals for the regulated markets.
Valuation
Nectar is trading at 4.9x FY09E FDEPS of Rs 55.8 and 3.4x FY10E FDEPS of Rs 81.1. Based on its strong growth prospects, leadership in key verticals and transitioning up the high margin value chain, we value the company at 6x FY10E earnings and recommend a Buy with a target price Rs 503.
Refer to our report dated 17-Jul-2008 for further details.
Company Note
Religare Research 18 July 2008
Morning Buzz 8
Consolidated financialsProfit and Loss statement
(Rs mn) FY07 FY08 FY09E FY10E
Revenues 4,332.9 7,359.4 9,560.9 12,196.2
Growth (%) 66.9 69.8 29.9 27.6
EBITDA 802.9 1,245.5 1,759.2 2,402.7
Growth (%) 32.5 55.1 41.2 36.6
Depreciation 115.8 194.7 242.8 288.7
EBIT 687.1 1,050.8 1,516.4 2,114.0
Growth (%) 31.5 52.9 44.3 39.4
Interest 207.6 273.7 323.6 361.1
Other income 51.7 48.5 95.6 122.0
EBT 531.2 825.6 1,288.5 1,874.9
Income taxes 63.9 80.1 128.8 187.5
Effective tax rate (%) 12.0 9.7 10.0 10.0
Adjusted net income 467.3 745.5 1,159.6 1,687.4
Growth (%) 23.0 59.5 55.6 45.5
Reported net income 467.3 745.5 1,159.6 1,687.4
Growth (%) 23.0 59.5 55.6 45.5
Shares outstanding (mn) 14.9 15.2 15.2 15.2
Basic EPS (Rs) (adj) 31.4 49.0 76.2 110.9
FDEPS (Rs) (adj) 22.5 35.8 55.8 81.1
DPS (Rs) 2.0 4.0 5.0 7.0
Source: Company, Religare Research
Cash flow statement
(Rs mn) FY07 FY08E FY09E FY10E
Net income 467.3 745.5 1,159.6 1,687.4
Depreciation 115.8 194.7 242.8 288.7
Other adjustments, net 71.6 56.4 77.3 112.5
Changes in working capital (1,256.1) (1,403.4) (1,241.6) (1,014.2)
Cash flow from operations (601.4) (406.8) 238.1 1,074.3
Capital expenditure (1,744.3) (908.0) (868.5) (997.6)
Change in investments 82.3 - - -
Other investing inc/(exp) (1.4) - - -
Cash flow from investing (1,663.4) (908.0) (868.5) (997.6)
Free cash flow (2,264.8) (1,314.8) (630.4) 76.7
Issue of equity - 3.3 - -
Issue/repay debt 2,579.8 2,000.0 500.0 1,000.0
Dividends paid (33.5) (70.0) (87.5) (122.5)
Other financing cash flow (183.7) - (472.6) (907.1)
Cash flow from financing 2,362.6 1,933.3 (60.1) (29.6)
Change in cash & cash eq 97.8 618.5 (690.5) 47.1
Opening cash & cash eq 262.0 359.8 978.4 287.8
Closing cash & cash eq 359.8 978.3 287.8 334.9
Source: Company, Religare Research
Balance sheet
(Rs mn) FY07 FY08E FY09E FY10E
Cash and cash eq 359.8 978.4 287.8 334.9
Accounts receivable 1,150.5 1,840.8 1,988.1 2,683.9
Inventories 1,963.8 2,945.7 3,093.0 4,020.9
Others current assets 1,220.4 1,839.9 2,294.6 2,683.2
Current assets 4,694.5 7,604.7 7,663.5 9,722.9
Long-term investments 17.4 17.4 17.4 17.4
Net fixed assets 1,789.1 3,405.0 4,214.5 5,015.3
CWIP 1,270.1 367.5 183.8 91.9
Deferred tax assets, net (221.8) (269.8) (347.2) (459.6)
Total assets 7,549.3 11,124.8 11,732.0 14,387.8
Accounts payable 856.3 1,712.6 1,198.8 2,157.9
Others 262.8 303.2 324.7 363.7
Current liabilities 1,119.1 2,015.8 1,523.5 2,521.6
Debt funds 4,221.5 6,221.5 6,721.5 7,721.5
Other liabilities - - - -
Equity capital 148.9 152.2 152.2 152.2
Reserves 2,059.8 2,735.3 3,334.8 3,992.5
Shareholder's funds 2,208.7 2,887.5 3,487.0 4,144.7
Total liabilities 7,549.3 11,124.8 11,732.0 14,387.8
BVPS (Rs) 148.3 189.7 229.1 272.3
Source: Company, Religare Research
Financial ratios
FY07 FY08E FY09E FY10E
EBITDA margin (%) 18.5 16.9 18.4 19.7
EBIT margin (%) 15.9 14.3 15.9 17.3
Net profit margin (%) 10.8 10.1 12.1 13.8
FDEPS growth (%) (19.0) 59.5 55.6 45.5
Receivables (days) 85.8 74.2 73.1 69.9
Inventory (days) 164.9 146.5 141.3 132.6
Payables (days) 84.6 76.7 68.1 62.6
Current ratio (x) 4.2 3.8 5.0 3.9
Quick ratio (x) 2.4 2.3 3.0 2.3
Interest coverage ratio (x) 3.3 3.7 4.6 5.7
Debt / equity (x) 1.9 2.2 1.9 1.9
ROE (%) 22.4 29.3 36.4 44.2
ROA (%) 7.8 8.0 10.1 12.9
ROCE (%) 13.7 13.5 15.7 19.2
EV/Sales (x) 2.2 1.3 1.0 0.8
EV/EBITDA (x) 11.7 7.6 5.4 3.9
P/E (x) 12.2 7.7 4.9 3.4
P/BV (x) 1.9 1.4 1.2 1.0
Source: Company, Religare Research
Religare Research 18 July 2008
Morning Buzz 9
Jubilant Organosys
CMP: Rs 304 Target: Rs 452 BUY
Sales in line but PAT slips on forex losses Jubilant Organosys’ Q1FY09 revenue was marginally above estimates on the sales front driven by higher-than-expected growth in the Industrial and Performance Products (IPP) segment. IPP sales came in at Rs 3bn, a 28% growth YoY driven by higher price realisations. The quarter also witnessed strong growth in CRAMS and inflows from Draxis Health which was acquired in May 2008 for US$ 255mn.
Jubilant’s EBITDA margin improved by 240bps to 20.1% (150bps higher than estimated) led by the strong operational performance. However, exchange losses of Rs 1bn on restatement of foreign currency borrowings resulted in a 90% decline in PAT to Rs 128mn as against our estimate of Rs 651mn.
The company has witnessed a 29% revenue CAGR over FY05-FY08 driven by a mix of organic and inorganic growth. FY09 will be a year of consolidation driven by expanded capacities, a wider product basket and increasing penetration of regulated markets. The management’s guidance of over 50% revenue growth for FY09 with improved EBITDA in a high input cost scenario is encouraging.
Factoring in the Draxis acquisition and an upward revision of our forex assumptions, our revised FDEPS for FY09 and FY10 stands at Rs 19.1 and Rs 31.8 respectively. We value Jubilant at 14x FY10E earnings, which has been the lowest point of its historical trading band. We maintain Buy with a target price of Rs 452 from a 12-month perspective, which offers a return of 49%.
Actual vs estimated performance
(Rs mn) Actual Estimated % VarianceNet sales 8,266 7,933 4.1EBITDA 1,658 1,476 12.3Adj net income 128 651 (80.3)FDEPS (Rs) 0.7 3.6 (80.3)Source: Company, Religare Research
Quarterly results
(Rs mn) Q1FY09 Q1FY08 % Chg FY08 FY07 % ChgNet sales 8,266 5,400 53.1 24,889 18,097 37.5Expenditure 6,608 4,448 48.6 (20,263) (15,528) 30.5Operating profit 1,658 952 74.1 4,626 2,569.0 80.1Other income (1,002) 996 (200.6) 1,430 1,234 15.9Interest (138) (84) 64.2 (337) (195) 72.8Depreciation (337) (194) 73.7 (1,039) (623) 66.8PBT 182 1,670 (89.1) 4,680 2,985 56.8Tax (61) (273) (77.6) (573) (712) (19.5)APAT 128 1,429 (91.2) 4,005 2,280 75.7OPM (%) 20.1 17.6 250 bps 18.6 14.2 440bpsFDEPS (Rs) 0.7 8.0 (91.2) 22.1 12.6 75.7Source: Company, Religare Research
Alok Dalal Varun Rao (91-22) 6612 4750 (91-22) 6612 4712
alok.dalal@religare.in varun.rao@religare.in
BSE code: 530019 NSE code: JUBILANT
Company data
Particulars
Market cap (Rs bn / US$ bn) 44.8/1.0
Outstanding equity shares (mn) 147.0
52-week high/low (Rs) 400/251
3-month average daily volume 76,993 Financial snapshot
Particulars FY08 FY09E FY10E
Sales (Rs mn) 24,889 38,379 47,598
Growth (%) 37.5 54.2 24.0
Adj net inc (Rs mn) 4,108 3,471 5,788
Growth (%) 80.8 (15.5) 66.7
FDEPS (Rs) 22.6 19.1 31.8
Growth (%) 74.1 (15.5) 66.7
P/E (x) 13.5 15.9 9.6
ROE (%) 37.4 23.9 30.6 Risk-return profile
Shareholding pattern
(%) Jun-08 Mar-08
Promoters 50.4 50.9
FIIs 10.2 10.0
Banks & FIs 21.8 21.4
Public 17.6 17.7 Stock performance
Returns (%) CMP 1-mth 3-mth 6-mth
Jubilant 304 (16.0) (14.6) (9.5)
Sensex 12,576 (19.9) (23.7) (36.2)
BSE HC 3,971 (12.7) (2.8) (3.7) Company website www.jubl.com
Results Update
Religare Research 18 July 2008
Morning Buzz 10
Result highlights Strong base business growth, higher realisations lead to jump in IPP sales Jubilant’s Q1FY09 sales were marginally above estimates driven by higher-than-expected growth in the Industrial and Performance Products (IPP) segment. The company registered a 28% YoY increase in IPP sales to Rs 3bn driven by higher price realisations. The quarter also witnessed strong growth in the base business of CRAMS along with a month’s revenue contribution from Draxis Health which was acquired in May 2008 for US$ 255mn. Hollister Stier recorded sales of Rs 730mn while Draxis recorded sales of Rs 440mn for the quarter. Excluding the contribution from acquisitions, sales have increased at 37%.
Revenue break-up
(Rs mn) Q1 FY09 Q1 FY08 % growthProp products and exclusive synthesis 2,700 1,807 49.4API 611 424 44.1CMO 822 199 313.1Specialty Pharma 352 89 295.5CRAMS 4,485 2,519 78.0Drug Discovery 512 349 46.7Dosage Forms 218 162 34.6Healthcare 12 2 500.0PLSPS 5,227 3,032 72.4IPP 3,039 2,367 28.4Net sales 8,266 5,399 53.1Source: Company
EBITDA margin expands 240bps on all-round growth
A strong operational performance, particularly in the IPP segment, saw the EBITDA margin expanding 240bps to 20.1% in Q1FY09. The gross margin improved 230bps to 32.2%. The revenue share of high-margin regulated markets increased to 37% from 32% in the same year-ago quarter. Increasing traction in CRAMS, contribution from acquisitions (Hollister Stier and Draxis) along with better realisations in IPP despite higher crude prices were key drivers for margin expansion during the quarter.
EBITDA margin trend
(%)
18.1 16.6 14.8
7.7
17.6 18.320.2
18.120.1
5
10
15
20
25
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1FY07 FY08 FY09
Source: Company, Religare Research
Restatement of foreign currency borrowings results in Rs 1bn forex losses As against a gain of Rs 879mn in Q1FY08, Jubilant reported a forex loss of Rs 1bn for the quarter, which resulted from restatement of foreign currency borrowings including FCCBs. Jubilant has outstanding FCCBs worth ~US$ 255mn as on June 30, 2008. As a result, PAT declined by 91% Yoy to Rs 128mn as against our estimate of Rs 651mn.
Above-expected IPP sales with a growth of 28% YoY
Contribution of regulated markets up 37% from 32% in Q1FY08
FCCBs worth US$ 255mn outstanding as on June 30
Religare Research 18 July 2008
Morning Buzz 11
Forex position and impact on PAT
(1,500)(1,000)
(500)0
5001,000
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1(200)(100)0100200300
Forex gain /(loss - L)Impact on PAT (% change YoY - R)
(Rs mn) (%)
FY07 FY08 FY09
Source: Company, Religare Research
Recent developments Jubilant Biosys announces drug discovery partnership with Amgen Jubilant Biosys, a 67% subsidiary of Jubilant, recently entered into a drug discovery partnership with Amgen, USA. Under this agreement, Jubilant will develop early pre-clinical candidates for small molecules from Amgen’s early discovery efforts for an initial term of three years. Amgen will be responsible for the subsequent pre-clinical and clinical development and commercialisation. The financial terms include a combination of research funding and success-based milestone payments to Jubilant. The peak revenue potential assuming success could be in the range of US$ 80mn–90mn.
Valuation Expect 38% revenue CAGR over FY08-FY10 The company has witnessed a 29% revenue CAGR over FY05-FY08 driven by a mix of organic and inorganic growth. We expect FY09 to be a year of consolidation driven by expanded capacities, a wider product basket and increasing penetration of regulated markets. The management’s guidance of over 50% revenue growth for FY09 with improved EBITDA and net margins is very encouraging.
Key growth drivers
Business Growth drivers Revenue CAGR over FY08-FY10 (%) Proprietary products and exclusive synthesis (CRAMS I & II)
Strong order book of US$ 92mn in CY08; a five-year multi-million contract with Syngenta
32.8
API 19 products under development; 11 products in the ready-to-launch stage
31.9
CMO Enhanced capacity at Hollister and sterile business of Draxis (recently signed new contracts with customers)
50.6
Specialty Pharma Radiopharma segment a key opportunity; launch of Sestamibi expected in Q3FY09, a US$ 600mn opportunity with limited competition
NA
Drug Discovery Drug development with Eli Lilly, Amgen and Forest Labs, business to turn profitable in Q3 FY09
40.5
Dosage Forms 9 ANDAs approved and 7 more awaiting approval. Expect a stepping up of product fillings in 2009
35.4
Healthcare 200-bed hospital slated to open in December 2008; to scale up to 1,000 beds
142.5
IPP Improving productivity and operational efficiencies. Expect higher realisations and stable margins
19.1
Source: Religare Research
Partnership with Amgen to develop early pre-clinical candidates
Religare Research 18 July 2008
Morning Buzz 12
Estimates revised to factor in Draxis acquisition and revised forex assumptions We are raising our sales estimates by 16% each for FY09 and FY10 to factor in the Draxis acquisition and a revised rupee-dollar exchange rate assumption of Rs 42.8 for FY09 and Rs 42.0 for FY09. However, we have revised our PAT estimate for FY09 downwards by 15.0% to reflect the negative other income on account of forex losses. Our FDEPS for FY09 and FY10 now stands at Rs 19.1 and Rs 31.8 respectively.
Revised estimates
FY09E FY10E (Rs mn)
Earlier Revised % Chg Earlier Revised % ChgNet sales 32,958 38,379 16.4 41,177 47,598 15.6Adj net income 4,085 3,471 (15.0) 5,446 5,788 6.3FDEPS (Rs) 22.3 19.1 (15.0) 29.8 31.8 6.3Source: Religare Research, Key assumptions for Re/$: 43.0 for FY09 and Rs 42.0 for FY10
Maintain Buy with a target price of Rs 452 We maintain our one-year target price of Rs 452 for Jubilant based on 14x FY10E earnings – the lowest point of its historical trading band. An alternate sum-of-the-parts (SOTP) valuation approach gives us a target price of Rs 464.
SOTP valuation based on FY10 estimates
Segment PAT (Rs mn) Multiple (x) Valuation (Rs mn)PLSPS 5,099.7 14.0* 71,396.0IPP 1,632.0 8.0 13,056.3Total 84,452.3FD share capital (mn) 182.0Target price 464.0Source: Religare Research, * valued at a 10% discount to generic and CRAM companies
P/E valuation band
0
100
200
300
400
500
600
Apr-03 Apr-04 Apr-05 Apr-06 Apr-07 Apr-08
1-yr fwd P / E
14x
18x
22x
26x
30x(Rs)
0100200300400500600700800
Apr-03 Apr-04 Apr-05 Apr-06 Apr-07 Apr-08
10x
14x
18x
22x
26x
2-yr fwd P / E(Rs)
Source: Religare Research
Recommendation history
Date Event Reco price Tgt price Reco19-Jul-07 Results Update 313 365 Buy 19-Sep-07 Company Update 290 388 Buy 18-Oct-07 Results Update 295 405 Buy 6-Feb-08 Results Update 351 405 Buy 7-Apr-08 Company Update 340 405 Buy 24-Apr-08 Results Update 360 452 Buy 16-Jul-08 Results Update 304 452 Buy Source: Religare Research
Stock performance
240260280300320340360380400
Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08
Source: Religare Research
Sales estimates for FY09 and FY10 raised by ~16%
Valued at 14x FY10E EPS - the lowest point of its historical trading band
● Buy
Religare Research 18 July 2008
Morning Buzz 13
Consolidated financialsProfit and Loss statement
FYE March, Rs mn FY07 FY08 FY09E FY10E
Revenues 18,097 24,889 38,379 47,598Growth (%) 20.7 37.5 54.2 24.0EBITDA 2,600 4,627 7,873 10,273Growth (%) 15.4 78.0 70.2 30.5Depr & amort 623 1,039 1,777 2,077EBIT 1,977 3,588 6,096 6,096Growth (%) 14.3 81.5 69.9 -Interest 220 337 789 961Other income 1,196 1,301 (868) (113)EBT 2,953 4,552 4,438 7,122Income taxes 713 573 967 1,334Effective tax rate (%) 24.1 12.6 21.8 18.7Extra-ordinary items - - - -Min int / inc from assoc (39) (16) 10 20Reported net income 2,280 3,995 3,461 5,768Adjustments 8 (113) (10) (20)Adjusted net income 2,272 4,108 3,471 5,788Growth (%) 84.7 80.8 (15.5) 66.7Shares outstanding (mn) 143.4 146.2 147.5 147.5Religare EPS (Rs) 13.0 22.6 19.1 31.8Growth (%) 60.3 74.1 (15.5) 66.7DPS (Rs) 1.3 1.5 1.5 1.8
Cash flow statement
FYE March, Rs mn FY07 FY08E FY09E FY10E
Net income + Depreciation 2,902 5,034 5,239 7,845Non-cash adjustments 8,803 1,869 781 1,964Changes in working capital (887) (5,597) (8,733) (3,949)Cashflow from operations 10,818 1,306 (2,713) 5,861Capital expenditure (3,666) (5,454) (6,789) (4,545)Change in investments (37) (1,500) - -Other investing cashflow - - - -Cashflow from investing (3,703) (6,954) (6,789) (4,545)Issue of equity - (3,377) (0) -Issue/repay debt 946 4,603 10,037 1,135Dividends paid (203) (144) (187) (175)Other financing cash flow 27 16 - -Change in cash & cash eq 7,886 (4,551) 348 2,276Closing cash & cash eq 8,750 5,238 4,460 6,371
Economic Value Added (EVA) Analysis
FYE March FY07 FY08E FY09E FY10E
WACC (%) 2.8 3.0 9.8 8.6ROIC (%) 8.6 12.4 12.4 13.7Invested capital (Rs mn) 19,341 31,206 45,774 51,256EVA (Rs mn) 1,121 2,925 1,191 2,637EVA spread (%) 5.8 9.4 2.6 5.1
Balance sheet FYE March, Rs mn FY07 FY08E FY09E FY10E
Cash and cash eq 8,750 5,238 4,460 6,371Accounts receivable 2,948 5,451 9,364 11,566Inventories 3,532 5,249 8,282 9,742Others current assets 2,425 3,725 5,925 6,700Investments 39 1,539 1,539 1,539Gross fixed assets 13,472 18,105 24,983 30,073Net fixed assets 9,284 12,637 17,738 20,750CWIP 2,357 3,178 3,089 2,545Intangible assets 2,994 4,305 5,547 5,201Deferred tax assets, net (1,360) (1,683) (2,200) (2,910)Other assets 41 69 78 87Total assets 31,008 39,709 53,824 61,591Accounts payable 2,546 2,884 3,106 3,374Other current liabilities 372 381 483 590Provisions 2,330 2,207 2,751 3,535Debt funds 16,526 21,128 31,165 32,300Other liabilities 174 190 180 160Equity capital 143 146 147 147Reserves & surplus 8,917 12,773 15,992 21,486Shareholder's funds 9,060 12,919 16,138 21,632Total liabilities 31,008 39,709 53,824 61,591BVPS (Rs) 64.2 89.4 111.5 149.2
Financial ratios
FYE March FY07 FY08E FY09E FY10E
Profitability & Return ratios EBITDA margin (%) 14.4 18.6 20.5 21.6EBIT margin (%) 10.9 14.4 15.9 17.2Net profit margin (%) 12.6 16.5 9.0 12.2ROE (%) 26.2 37.4 23.9 30.6ROCE (%) 12.0 14.9 10.3 13.2Working capital & Liquidity ratios
Receivables (days) 55 62 70 80Inventory (days) 129 139 143 156Payables (days) 93 86 63 56Current ratio (x) 6.1 6.0 7.8 8.7Quick ratio (x) 1.1 1.7 2.6 2.9Turnover & Leverage ratios
Gross asset turnover (x) 1.5 1.6 1.8 1.7Total asset turnover (x) 0.7 0.7 0.8 0.8Interest coverage ratio (x) 9.0 10.6 7.7 8.5Adjusted debt/equity (x) 1.8 1.6 1.9 1.5Valuation ratios
EV/Sales (x) 4.0 2.9 1.9 1.5EV/EBITDA (x) 27.5 15.5 9.1 7.0P/E (x) 23.4 13.5 15.9 9.6P/BV (x) 4.7 3.4 2.7 2.0
Religare Research 18 July 2008
Morning Buzz 14
Recommendation tracker Date Company Report type Stock price (Rs) Target (Rs) Reco 30-May-08 India Glycols Results Update 313 433 BUY 30-May-08 Sintex Industries Results Update 381 587 BUY 30-May-08 UTV Software Communications Results Update 786 1,068 BUY 2-Jun-08 Federal Bank Results Update 219 300 BUY 2-Jun-08 IVRCL Results Update 415 522 BUY 3-Jun-08 Sun Pharma Results Update 1,403 1,664 BUY 3-Jun-08 Mahindra and Mahindra Results Update 593 783 BUY 4-Jun-08 Oil & Gas Sector Update NA NA NA 5-Jun-08 Cadila Healthcare Visit Note 290 381 BUY 5-Jun-08 Punj Lloyd Results Update 278 411 BUY 6-Jun-08 Emco Results Update 159 240 BUY 10-Jun-08 Divi’s Laboratories Results Update 1,414 1,833 BUY 10-Jun-08 Deepak Fertilisers & Petrochemicals Results Update 100 183 BUY 11-Jun-08 PVR Results Update 174 391 BUY 13-Jun-08 Garware Wall Ropes Results Update 94 210 BUY 16-Jun-08 KPIT Cummins Infosystems Results Update 73 65 SELL 17-Jun-08 Steel Sector Update NA NA NA 18-Jun-08 Gujarat Industries Power Company Results Update 91 123 BUY 19-Jun-08 Karuturi Global Initiating Coverage 25 35 BUY 20-Jun-08 Adhunik Metaliks Company Update 145 209 BUY 20-Jun-08 Banking Sector Update NA NA NA 23-Jun-08 Sintex Industries Company Update 384 587 BUY 24-Jun-08 KSK Energy Ventures IPO Note 240-255 NA AVOID 25-Jun-08 Divi’s Laboratories Visit Note 1,358 1,833 BUY 25-Jun-08 ACC Initiating Coverage 595 632 SELL 26-Jun-08 Parsvnath Developers Results Update 142 245 BUY 26-Jun-08 Rohit Ferro Tech Results Update 135 253 BUY 27-Jun-08 Fame India Results Update 48 75 BUY 30-Jun-08 ONGC Results Update 830 1,077 BUY 1-Jul-08 Tulip Telecom Results Update 1,020 1,558 BUY 3-Jul-08 TVS Motor Results Update 25 26 SELL 4-Jul-08 Glenmark Pharmaceuticals Company Update 600 728 BUY 7-Jul-08 Pyramid Saimira Results Update 176 480 BUY 7-Jul-08 Riddhi Siddhi Gluco Biols Results Update 190 301 BUY 8-Jul-08 Unity Infrastructure Projects Results Update 360 887 BUY 9-Jul-08 Sarda Energy & Minerals Results Update 260 404 BUY 10-Jul-08 Greenply Industries Company Update 164 252 BUY 14-Jul-08 Bajaj Auto Results Update 501 510 HOLD 14-Jul-08 Infosys Technologies Results Update 1,676 1,945 BUY 15-Jul-08 Sintex Industries Results Update 294 503 BUY 15-Jul-08 South Indian Bank Results Update 103 173 BUY 16-Jul-08 Axis Bank Results Update 597 805 BUY 17-Jul-08 Nectar Lifesciences Company Note 275 503 BUY 17-Jul-08 Jubilant Organosys Results Update 304 452 BUY 17-Jul-08 Tata Consultancy Services Results Update 728 961 BUY
Religare Research 18 July 2008
Morning Buzz 15
Market trends BSE sectoral indices
% Chg
Sector 17-Jul 1-day 1-mth 3-mth Constituent performance
Automobiles 3,536 4.2 (15.4) (21.6)
Banks 5,728 6.1 (21.6) (31.0)
Capital Goods 10,762 5.9 (11.2) (19.6)
Comm. & Tech. 2,865 2.9 (15.1) (13.6)
Consumer Durables 3,441 1.5 (14.4) (18.5)
FMCG 1,942 2.3 (15.9) (18.0)
Healthcare 3,976 0.1 (12.2) (2.7)
IT 3,675 3.0 (15.2) (11.5)
Metal 11,697 (2.0) (23.3) (20.2)
Oil & Gas 8,852 3.1 (12.1) (22.4)
Power 2,303 4.2 (13.9) (29.0)
Mid-caps 5,155 1.3 (18.9) (24.6)
Small-caps 6,387 1.0 (17.9) (25.1)
Number of companies: down 5% down 2-5% down 0-2% up 0-2% up 2-5% up 5%
Emerging markets
% Chg Country 17-Jul
1-day 1-mth 3-mth 6-mth
Brazil 60,109 (3.1) (10.4) (7.4) 4.5
Shanghai 2,707 0.8 (8.0) (12.5) (47.7)
Hong Kong 21,858 0.6 (6.3) (9.7) (13.3)
India 13,112 4.3 (15.0) (20.4) (31.0)
South Korea 1,529 0.2 (13.8) (13.7) (11.9)
Taiwan 6,960 (0.2) (15.3) (23.3) (15.0)
FII statistics
(US$ mn) 1-day WTD MTD YTDIndia (52.2) (273.5) (630.8) (7,125.6)
South Korea (136.1) (1,078.1) (3,433.4) (25,001.9)
Taiwan (38.7) (647.3) (3,229.0) (6,824.9)
Thailand (3,700.0) (243.7) (837.6) (2,496.1)
Religare Research 18 July 2008
Morning Buzz 16
Events calendar
Quarterly results
July 18 19 20
Allahabad Bank, GTL Infra
Cipla, Shree Cements, BEML
Wipro, Nissan Copper, Apollo Tyres
Sasken Comm, Satyam Computer
Shree Cements
Mangalam Cement
Jaypee Hotels
Indian Bank
Reliance Industrial InfraStructure
G S Auto International
Nucleus Software Exports
GEE - Dividend & Bonus Issue
21 22 23
HDIL, Tech Mahindra, Petronet LNG
Aban Offshore, Bank of India
Triveni Engg, Canara Bank
Maruti Suzuki, Jindal Drilling
Peninsula Land
Reliance Petroleum
EMCO, Asian Paints
Bank of Rajasthan
Siemens, Lupin
IDBI Bank, NIIT Technologies
Sterlite Technologies
Kalyani Forge, Patni Computer
Zee Entertainment, Mastek
Mahindra & Mahindra Financial
Shree Renuka Sugars
Religare Research 18 July 2008
Morning Buzz 17
Trade data Institutional bulk deals
Scrip Client Buy/Sell Quantity Avg Price (Rs)Basf India Diversified (Mauritius) B 142,000 291.2Basf Deutsche Securities Mauritius S 172,975 286.1Prime Securities Citigroup Global Markets Mauritius S 250,000 35.9Webel-Sl Energy Systems Morgan Stanley Mauritius Company S 73,150 215.0Source: BSE
Disclosures under insider trading regulations
Shares transacted Post-transaction holdingScrip Acquirer/Seller Buy / Sell
Qty % Qty %
Arvind Chemicals Ruchika Tradelink & Pac'S B 35,500 0.4 3,321,715 33.6Bilpower Ashok Bansal B 1,000 - 15,512 0.1Clutch Auto Deutsche Securities Mauritius S 30,000 - 548,000 3.4Deccan Aviation CaptG R Gopinath B 800,000 0.6 12,381,627 9.1Ess Dee Aluminium Ajay Doshi B 1,759 - 10,415 0.0Gitanjali Gems Mehul C Choksi B 200,000 0.2 33,137,844 39.0Gokul Refoils And Solvent Pacific Corporate Services B 38,000 0.1 2,674,572 10.1I-Flex Solutions Suresh Lotlikar S 450 - 3,125 -Indo-City Infotech Anil Jain - Huf B 96,329 0.9 209,429 2.0Max India Liquid Investment & Trading Company B 50,917 0.0 21,447,010 9.7Motor & General Finance (MGF) Lt Ram Prakash & Co B 15,000 0.1 224,000 1.2Orchid Chemicals & Pharmaceuticals I Seetharam Naidu S 2,000 - 333,280 0.5Orchid Chemicals & Pharmaceuticals I Seetharam Naidu S 1,000 - 332,280 0.5Polaris Software Lab Arun Jain B 175,000 - -- -Polaris Software Lab Arun Jain B 200,000 - -- -Ritesh Properties & Industries Sanjeev Arora B 1,100 - 1,984,423 17.1Shloka Infotech Birla Leasing & Infrastructure B 196,553 - 293,253 7.7Shloka Infotech Birla Bombay S 196,553 - -- -Uttam Galva Steels Sanjug Trading Co B 400,000 0.4 6,880,028 6.0Source: BSE
Religare Research 18 July 2008
Morning Buzz 18
RELIGARE RESEARCH
Fundamental Research
Amitabh Chakraborty, CFA, FRM President - Equity amitabh.chakraborty@religare.in (91-22) 6612 4602
Piyush Parag Automobiles, Shipping piyush.parag@religare.in (91-22) 6612 4730
Abhishek Banerjee Automobiles, Shipping abhishek.banerjee@religare.in (91-22) 6612 4764
Abhishek Agarwal Banking, Sugar abhishek.a@religare.in (91-22) 6612 4753
Dinesh Shukla Banking, Sugar dinesh.shukla@religare.in (91-22) 6612 4739
Vinod Nair Capital Goods, Engineering, Power nair.vinod@religare.in (91-22) 6612 4731
Ronald Siyoni Capital Goods, Engineering ronald.siyoni@religare.in (91-22) 6612 4615
Sumit Arora Cement arora.sumit@religare.in (91-22) 6612 4659
Suman Memani Construction, Realty, Mid-caps suman.memani@religare.in (91-22) 6612 4736
Anurag Purohit IT, Telecom, Power anurag.purohit@religare.in (91-22) 6612 4795
Hitesh Punjabi IT, Telecom hitesh.punjabi@religare.in (91-22) 6612 4769
Ram Patnaik Media, FMCG ram.patnaik@religare.in (91-22) 6612 4752
Nihal Wagle Media, FMCG nihal.wagle@religare.in (91-22) 6612 4696
Rahul Singhvi Metals rahul.singhvi@religare.in (91-22) 6612 4644
Sudeep Anand Oil & Gas, Chemicals sudeep.anand@religare.in (91-22) 6612 4670
Alok Dalal Pharmaceuticals alok.dalal@religare.in (91-22) 6612 4750
Varun Rao Pharmaceuticals varun.rao@religare.in (91-22) 6612 4712
Rahul Gajare Power rahul.gajare@religare.in (91-22) 6612 4749
Technical Research
Birendrakumar Singh birendrakumar.singh@religare.in (91-22) 6612 4657
Derivatives Research
Somendra Agarwal somendra.agarwal@religare.in (91-22) 6612 4639
Production
Anisha deSa anisha.desa@religare.in (91-22) 6612 4729
Rajesh Mhatre rajesh.mhatre@religare.in (91-22) 6612 4728
R Murali r.murali@religare.in (91-22) 6612 4674
Administration
Shraddha Hosalkar shraddha.hosalkar@religare.in (91-22) 6612 4680
Religare Research 18 July 2008
Morning Buzz 19
Recommendation parameters
Large-caps* > 10% < - 5%
B SELL
Mid-caps** > 25% < 10% Absolute
Returns
*Market cap over US$ 1bn**Market cap less than US$ 1bn
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