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Thursday, November 16, 2006

Sharekhan Eagle Eye (equities) & Derivatives Info Kit


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Emkay - Economy Notes & Telecom Monthly

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Tech Mahindra hits life high after Merill Lynch recommends buy

Tech Mahindra attained a lifetime high of Rs 1,133 after Merill Lynch recommended a 'buy' on the scrip.

It was presently trading up nearly 4%, at Rs 1,116.50, while the influential brokerage set a price target of Rs 1,280 on the scrip. As many as 11.8 lakh shares changed hands in the counter on BSE.

Merrill Lynch has cited an expected strong 27% compounded annual growth rate (CAGR) in earnings over FY 2007 to FY 2009 period, driven by accelerating IT spend by top client BT (British Telecom) and rapid ramp by AT&T. The brokerage also expects accelerated IT offshoring by telecom service providers to benefit Tech Mahindra as it is the largest vendor in this space.

The brokerage has said that the risks to its recommendation are concentration in a single vertical, telecom and client concentration. Tech Mahindra derives a large part of its revenue from a single client, British Telecom. BT contributed to a whopping 64% of revenue in Q2 September 2006.

The stock surged for the second day in a row today. It had risen 8% on Wednesday (15 November), to a lifetime closing high of Rs 1,074.15. The stock had spurted last month following robust Q2 results.

The current price of Rs 1,116.50, discounts its April-September 2006 annualised EPS of Rs 43.30, by a PE multiple of 25.7.

Tech Mahindra’s consolidated net profit surged 66% on a sequential basis to Rs 177 crore for Q2 September 2006, partly due to a write back of prior period tax of Rs 33.90 crore.

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Indiainfoline - Medical equipment...India ranks in global Top 20

But average per capita spending on healthcare remains low at only around US$1, says Research and Markets

The Indian market for medical equipment and supplies ranks among the Top 20 in the world, but average per capita spending on healthcare remains low at only around US$1, says Research and Markets in its latest report. India has a huge population in excess of one billion people. At current growth rates, it will reach around 1.2 billion by 2010, of whom around 58 million will be aged 65 years and over. While the proportion of the elderly population remains comparatively small vis-a-vis the developed nations, the number is equivalent to the entire population of Italy.

As the country develops, India has a growing middle class population with access to high quality healthcare. Leading business and healthcare providers are also striving to make India an international health resort, with an airport to airport concept of health tourism. In 2004, the Maharashtra state government established a Medical Tourism Council to try to attract more foreign medical patients, the main incentive being India's comparatively low costs, quoted at around a fifth of those in the West.

But, India is a country of extremes and developments at the top of the market are unlikely to filter through to the public health system, says Research and Markets. The vast majority of the Indian population is both rural and poor, although urban poverty is also a problem. Modern healthcare technology and western style pharmaceuticals are not even an issue for millions of people.

On a national level, the Indian healthcare system is ill-equipped to cope with the rising number of elderly and the changing disease patterns, with an average of just 0.7 hospital beds and 0.6 physicians per thousand population, according to the report. India faces the continuing challenge of fighting infectious diseases like malaria, tuberculosis and leprosy alongside increases in lifestyle related problems faced by the developed world, such as cancer, cardiovascular disease and diabetes, says Research and Markets.

The best opportunities for foreign manufacturers are in the private sector, particularly for high quality products that represent value for money, although competition is fierce and the high tech end of the market is dominated by multinationals with extensive service networks, says the report. At the other end of the scale, the low to mid tech end of the market will be met mainly by the domestic industry.

Sharekhan Commodities Buzz - Bullion: Greenback holds the key

Gold finally succumbed to selling pressure as the greenback moved up
following better-than-expected Empire Manufacturing numbers. However, the
yellow metal managed to bounce back following good Q3 demand numbers, as the
demand from India and Middle East supported the price

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Blue Bird (India) IPO Analysis

Blue Bird (India) is a leading manufacturer of paper based notebooks and stationery. The company is raising capital to finance its two major expansions: one in south and the other in west India. It is setting up a second notebook manufacturing and printing unit in south India to address the logistic needs in procuring raw material and delivery of products to retailers in the region at an estimated cost of Rs 45.41 crore. The project is likely to commence in the fourth quarter of fiscal 2008.

To reduce a major portion of outsourcing costs, Blue Bird (India) is expanding capacity at its existing plant at Pune. The project, estimated to cost Rs 26.07 crore, is likely to commence in the third quarter of 2008.

Blue Bird (India)’s Pune plant has a capacity of 51,000 tonnes for notebooks and stationery and 12,500 tonnes for printing and publication with capacity utilisation of 74.3% and 50.9% in FY 2006. Post-expansion, the capacity will increase to 76,000 tonnes and 25,000 tonnes, respectively.


The Blue Bird brand is established in west and south India. AC Nielsen ORG-MARG has estimated that Blue Bird enjoys the highest market share of 48% of the total market share controlled by large, organized players in notebooks.

The financial track record is good with continuous growth in sales and profit. The last three-year CAGR up to FY 2006 is 65% in sales and 100% in net profit.


Strong competition from unorganised local players, which controls 80% of the market.

Growth in sales and profit has been slowing down over the years. In the first-half ended September 2006, sales were up only 18% and net profit 20%. Benefits of the projects will accrue only in the later part of FY 2008.


In October 2006, Blue Bird (India) privately placed 1,225,000 equity shares at a price of Rs. 98 per share.

The first-half annualised earning per share based on the post-issue equity capital is Rs 8.6 (FY 2006 EPS: Rs 7.2). At the lower price band of Rs 90, PE stands at 10.4 times, and at the higher band of Rs 105 PE is 12.2. The nearest comparable company Navneet Publications enjoys TTM PE of 13.5.

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Sensex unbeaten for sixth day, settles above 13,500

The BSE Sensex emerged victorious on the sixth consecutive day, living up to its new found trend of ending with modest gains, as buying continued at record levels. From 13,072.51 on 8 November, the Sensex has consistently gained ground, to finish at 13,469.37 on 15 November.

The Sensex finished 36.52 points (0.27%) ahead, at 13,505.89, a lifetime closing high. It surged to an all-time high of 13,588.01, its low being 13,459.28, and thus swinging close to 129 points for the day in highly volatile session of trade.

The S&P CNX Nifty rose 0.55 points (0.01%), at 3,876.85.

The BSE bellwether index had advanced to a record high for the fifth straight session, boosted by a strong influx of foreign funds, which have topped $ 7.8 billion this calendar year (till 14 November). Last year saw foreign investment of $10.7 billion, a record, in 2005. The BSE Sensex has surged over 15% since the start of September, and over 44% so far for the calendar year. It is by far the best performer in the Asia-Pacific.

The market-breadth, positive for the first half of the day, turned negative as selling started in smallcap and midcap stocks. On BSE 1,537 shares declined, while only 1,009 advanced. As many as 62 scrips remained unchanged. The BSE Mid-Cap index was down 10.72 points (0.19%), at 5,583.36, while the BSE Small-Cap index lost 17.44 points (0.27%), to 6,484.18.

The total turnover on BSE exceeded Rs 6,000 crore, at Rs 6,110, boosted by two huge deals of 25.03 lakh shares each in Gujarat Ambuja Cements counter, at an average Rs 138.75 per share. As per market talks, Swiss cement maker Holcim, which presently holds 15.6% of Indian cement maker Gujarat Ambuja Cements, acquired additional 3.6% stake from the promoter group.

Gujarat Ambuja Cement rose 1.65% to Rs 139.50, on a cumulative volume of 51.65 lakh shares. The block deals with a turnover of Rs 694 crore, constituted 3.6% (5 crore shares, 2.5 crore shares each) of its equity capital of Rs 272.02 crore (face value Rs 2 per share).

It was also the top-traded counter on BSE, with a total turnover of Rs 716.88 crore, resulting around 11.75% of the total turnover on BSE. The total turnover on Wednesday was Rs 5,115 crore.

Among the 30-Sensex pack, 18 declined while the rest advanced.

Private sector HDFC Bank was the top gainer, up 6.58% to Rs 1,148.25, on a volume of 4.02 lakh shares. It had surged to a fresh all-time high of Rs 1,150, in the last moments of trading.

Cement major ACC surged 5.83% to Rs 1,079, on 16.35 lakh shares. It had also advanced to a lifetime high of Rs 1,093.80, intraday.

Pharma counters witnessed selling pressure. Ranbaxy (down 1.83% to Rs 396) and Dr Reddy's (down 1.73% to Rs 766) declined.

IT bellwether Infosys lost 1.27% to Rs 2,195. It has recovered from a low of Rs 2,154.

Tata Motors lost 1.51% to Rs 811, amid reports that it has cut Tata 207 LCV price, by Rs 75,000.

Cigarette major ITC finished at Rs 185.25, down 0.30% from its previous close of Rs 185.80.

The BSE Bankex was a top gainer among sectoral indices. It rose 152.15 points (2.16%), at 7,212.38, after surging to a fresh all-time high of 7,353.38, as investors made a beeline for banking stocks.

The rally in banking stocks spilled over to the second consecutive day.

India’s largest private sector bank ICICI Bank ended marginally lower by 0.10% to Rs 880.35, on a volume of 11.56 lakh shares. It had, earlier, surged to an all-time high of Rs 925. ICICI Bank has received Reserve Bank of India's approval for establishing new branches and off-site ATMs.

SBI jumped 3.21% to Rs 1,216, on a volume of 14.28 lakh shares. It had also surged to an all-time high of Rs 1,227.95.

Punjab National Bank (up 0.27% to Rs 548), Federal Bank (up 4.20% to Rs 223.55), Indian Overseas Bank (up 4.36% to Rs 120.80), Oriental Bank of Commerce (up 1.73% to Rs 255), Canara Bank (up 0.89% to Rs 300), and Bank of India (up 2.63% to Rs 191) moved higher.

Select firms developing real estate surged today. Hindustan Motors jumped 8.7% to Rs 37.75. The stock rose on a volume of 33.84 lakh shares on BSE. The company already has permission from the West Bengal government to develop land into a residential township, auto parts cluster and an IT hub in 314 acres, out of the 700 acres it owns at the plant near Kolkata.

Among side-counters, Punjab Chemicals & Crop Protection jumped 5.90% to Rs 172.55 after the company signed an agreement to buy Argentina's Sintesis Quimica, for $ 10 million.

Thermax jumped 6.14% to Rs 355.35, after reporting 38.6% growth in net profit for Q2 September 2006. Thermax jumped 6% to Rs 355, after reporting 38.6% growth in net profit for Q2 September 2006. The company has a robust order-book position with a order backlog of Rs 2,973 crore on a consolidated basis, as on 30 September 2006.

Sterlite Industries rose 0.90% to Rs 542.15, on the back of robust Q2 results, and a board decision to venture into power sector. The company reported a surge in consolidated net profit for the quarter ended September 2006 to Rs 1,207 crore from Rs 259 crore. Net sales surged to Rs 6,718 crore from Rs 2,647 crore. Sterlite also said its board had approved a project to enter the commercial energy business in India. The first phase of this project involves a 2,400 Mw greenfield power plant in Jharsuguda, Orissa, for $1.9 billion.

Textile firm Sangam India jumped 6.28% to Rs 88, after it secured an export order worth Rs 81 crore, which is due to be executed within four months.

Tech Mahindra attained a lifetime high of Rs 1,149.70, after Merill Lynch put a 'buy' on the scrip, with a price target of Rs 1,280. The stock surged 7%, to Rs 1,149.70; as many as 27.08 lakh shares having changed hands on BSE.

Zandu Pharmaceutical Works jumped 10% to Rs 4,644.05, the maximum permissible level, after its board scheduled a meeting on 16 November 2006 (today) to consider an issue of bonus shares. The company is one of those few companies, whose scrips have a face value of Rs 100. The company’s latest book value per share is Rs 1,046.30 and a tiny equity base of Rs 6.05 crore.

Automotive Axles rose 3.20% at Rs 526, after it reported 49.4% surge in net profit for Q4 September 2006, to Rs 13.29 crore (Rs 8.89 crore). Sales rose 35.5% to Rs 155.11 crore.

The Nikkei lost 0.49% on Thursday as Shinsei Bank dropped on its dimmer outlook, while caution ahead of Bank of Japan Governor Toshihiko Fukui's news conference spurred selling in recent gainers such as Tokyo Electron.

After a two-day board meeting, the Bank of Japan kept the overnight call rate target at 0.25%, by a unanimous vote. But traders remain nervous about a possible rate hike in the next few months after a mixed bag of economic indicators in recent weeks.

Shares of Nissin Food Products Co surged after Merrill Lynch raised its rating on the instant noodle maker to 'buy' from 'sell', following its $314 million bid for smaller rival Myojo Foods. The Nikkei 225 index shed 79.60 points, to 16,163.87, extending its loss into the second straight day.

Hang Seng index rose 0.32% (61.07 points), to 19,154.07.

US stocks rose on Wednesday, as a proposed airline merger lifted airline shares and after positive broker comments sparked a surge in Google Inc's shares. But all three major US indices ended sharply off the session's levels as minutes from the Federal Reserve's recent policy-setting meeting sparked worries that the central bank can delay interest-rate cuts as it fights inflation. The Dow Jones industrial average gained 33.70 points, or 0.28%, to end at a record 12,251.71. The Nasdaq Composite Index rose 12.09 points, or 0.50%, to close at 2,442.75. A key US data, the US consumer prices data, is due later in the day.

FIIs were net buyers to the tune of Rs 262 crore in index-based futures on Wednesday. They were net sellers to the tune of Rs 31 crore in individual stock futures, the same day. As per provisional data, FIIs were net sellers to the tune of Rs 84 crore in the cash segment that day.

Profit taking trims early gains

The northbound trend remained intact for the sixth consecutive session, with the market witnessing volatile moves and swinging 129 points in intra-day trades. The Sensex failed to hold on to its early gains and closed off its highs amid profit taking towards the close. Riding on the back of yesterday's buoyant close and optimism in several international markets, the Sensex resumed 32 points higher at 13501 and advanced sharply on sustained buying support to move above 13550 and touch a new intra-day high of 13588. After remaining above 13500 during the first half of the trading session, the Sensex witnessed profit taking and slipped below 13500 to touch the day's low of 13459, 10 points below its last close. However, the index ended the session with steady gains of 37 points at 13506, while the Nifty gained one point to close at 3877.

Among the gainers, ACC surged 6.65% at Rs1,087, HDFC Bank soared 6.26% at Rs1,145, SBI jumped 3.56% at Rs1,220, Satyam rose 2.53% at Rs438, HDFC advanced 1.63% at Rs1,556, Gujarat Ambuja added 1.20% at Rs139 and Wipro gained 1.17% at Rs553. NTPC, ICICI Bank, Grasim, L&T and RIL ended the day in positive territory. However, Ranbaxy dropped 1.51% at Rs397, Infosys fell 1.31% at Rs2,194, ONGC lost 1.19% at Rs870, Maruti shed 1.18% at Rs894, Reliance Communication slipped 1.18% at Rs397, Tata Motors was down 1.17% at Rs814, Hindalco dropped 1.10% at Rs176 and Hero Honda closed weaker by 1.05% at Rs706. TCS, Tata Steel, Bajaj Auto, Dr Reddy's, REL, ITC, BHEL, Bharti Airtel, HLL and Cipla ended the day in negative territory.

The market breadth was negative, with the losers outpacing the gainers in the ratio of 1:0.65. Of the 2,610 stocks traded on the BSE, 1,003 stocks advanced, 1,536 stocks declined and 71 stocks ended unchanged. Baring the Bankex, the PSU index and the CG index the remaining sectoral indices ended with marginal losses. The BSE Bankex gained 2.16% at 7212. The BSE PSU index and the BSE CG index were up with marginal gains.

Banking stocks were in the limelight once again. Most of the Bankex stocks ended with steady gains, with HDFC Bank being the major gainer with gains of 6.26% at Rs1,145. Federal Bank advanced 4.19% at Rs223, Indian Overseas Bank added 3.67% at Rs120, UTI Bank surged 3.61% at Rs484, SBI gained 3.56% at Rs1,220 and Bank of India was up 3.36% at Rs192. Union Bank of India, Oriental Bank of Commerce, Andhra Bank and Punjab National Bank gained 1-2% each. ICICI Bank and Canara Bank also ended the day in positive territory. However Karnataka Bank dropped 1.55% at Rs114 while Kotak Mahindra Bank was down 0.84% at Rs399. Allahabad Bank, Bank of Baroda, Vijaya Bank and Centurion Bank of Punjab ended the day in negative territory.

Over 5.16 crore Gujarat Ambuja Cements shares changed hands on the BSE followed by IDFC (1.10 crore shares), Silverline Technologies (67.25 lakh shares), IFCI (48.44 lakh shares) and Nandan Exim (40.18 lakh shares).

Value-wise Gujarat Ambuja Cements registered a turnover of Rs708.24 crore on the BSE followed by Tech Mahindra (Rs306.14 crore), Mahindra Gesco (Rs299.29 crore), Hindustan Zinc (Rs192.05 crore) and ACC (Rs175.83 crore).

Sharekhan High Noon - Nifty surpasses 3880

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Firm global indices signal positive outlook

Following gains of around 400 points during the last five trading session the market bias may remain positive on strong fund buying into the local market and surging international indices. The market crossed the new all time high of 13506 in yesterday's trades and is likely to take further lead as buying interest continues in large-caps and several other sectoral counters. A strong overnight US markets and sharp rise in several Asian indices in current trades may augur well for the markets. Among the key local indices, the Nifty could test higher levels around 3885-3850 range and has supports at 3840 and 3821. The Sensex has a likely support at 13330 and may face resistance at 13500.

Major US indices registered significant gains on Wednesday, after reports from the Fed's recent policy-setting meeting stating that cutting inflation was the central bank's greatest concern. With the Dow Jones moving up to after reports another record close 12252, up 34 points which the Nasdaq moved up by 12 points to close at 2443. During the trading session, the Dow Jones hit a new intra day high at 12,291.73 while the Nasdaq climbed up to 2,45.56, its highest mark in almost six years.

Barring few, most of the Indian ADRs traded firm on the US bourses. MTNL led the pack with gains of nearly 5% while ICICI Bank and Rediff jumped over 2-3% each. Among the laggards Wipro and Tata Motors were down around 1% each.

Crude oil prices in the US market rose on Wednesday, with the Nymex Light Crude oil for December delivery rising 48 cents to close at $58.76 a barrel. However, in the commodity space, the Comex gold for December series dropped $1.50 to settle at $623.80 a troy ounce.

On Nov 14 2006, FIIs were net buyers of stocks to the tune of Rs1523.80 crore (purchases worth Rs3096.90 crore and sales of Rs1573.10 crore) while domestic mutual funds were net sellers of stocks to the tune of Rs39.50 crore (purchases worth Rs474.31 crore and sales of Rs513.81 crore).

Indian shares seen trading sideways

Indian shares are likely to trade sideways on Thursday as investors pause after a run to record highs, with leads from other Asian markets subdued ahead of key U.S. data.

But the downside for an index that has hit all-time highs on four successive days should be limited by strong foreign fund flows that have topped $7.7 billion this year.

That has helped the key index <.BSESN> gain 15 percent since the start of September and more than 43 percent so far this year, making it the best performer in Asia-Pacific.

"We are seeing investors turn more cautious at these levels, picking specific stocks and more mid-caps," said Ketan Shah at Prabhudas Lilladher brokerage.

"But there is enough liquidity in the market to keep up the momentum, barring big profit sales."

The 30-share BSE index closed 0.33 percent higher at 13,469.37 points on Wednesday, a record close, after it scaled a record high of 13,506.08 in intra-day trade.


* Hindustan Zinc Ltd. , after it lowered zinc prices by 5.4 percent from Thursday. For details, double-click on [ID:nBOM11742].

* Zandu Pharmaceutical Works Ltd. , ahead of its board meeting to consider an issue of bonus shares.

* Power generation and air conditioning equipment maker Thermax Ltd. , after its net profit rose 39 percent for Sept. quarter from a year ago. For details, double-click on [ID:nBMB002177].

* State-run National Aluminium Co. Ltd. , after it finalised a one-year sale of 240,000 tonnes of alumina. For details, double-click on [ID:nBMA000255].

* BSEL Infrastructure Realty Ltd. , after a top official of the company said its net profit to double and revenue rising 50 percent in 2006/07. For details, double-click on [ID:nBOM215244].

FACTORS TO WATCH * Indian bonds seen pausing ahead of auctions [IN/] * Indian rupee may edge higher on yen strength [INR/] * FOREX-Yen jumps on report China buying currency [FRX/] * Oil rises on U.S. stock fall, OPEC cut talk [O/R] * GLOBAL MARKETS-Stocks subdued ahead of data, yen jumps

[MARKETS/AS] * STOCKS NEWS ASIA-Tokyo firms on dividend hopes, Australia slips

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Profit taking may cap upside

The market is likely to remain firm but the upside may be capped by profit taking with the Sensex hitting a string of record highs over the past few days. Continued strong FII inflow may keep sentiment firm. The Asian markets were mostly in the green. As per news which has just hit the market, the Bank of Japan has kept interest rates unchanged at 0.25% as was widely expected by the market.

FII inflow for calendar 2006 has reached $7.8 billion (till 14 November) compared to a record inflow of $10.7 billion in 2005. Revision in earnings estimates by brokerages for companies following strong Q2 results has fuelled surge in FII inflow in the past few weeks. Another factor that has contributed to the surge in FII inflows is the fresh number of FIIs registering with Sebi every day. Since January this year, there has been an addition of over 150 FIIs, and the aggregate now stands at 978. A strong global liquidity, too, has aided the fund flow.

A section of the market attributes the solid surge on the Indian bourses to increasing recognition of India’s long-term growth prospects. From 4,644 on 23 June 2004, it has galloped 190% in less than two and a half years.

FIIs were net buyers to the tune of Rs 262 crore in index-based futures on Wednesday. They were net sellers to the tune of Rs 31 croer in individual stock futures on that day. As per provisional data, FIIs were net sellers to the tune of Rs 84 crore in the cash segment on that day.

Key benchmark indices in Japan, Hong Kong, Singapore and Taiwan were up by between 0.2% to 0.4% on Thursday.

US stocks rose on Wednesday as a proposed airline merger lifted airline shares and after positive broker comments sparked a surge in Google Inc.'s shares. But the three major US stock indexes ended sharply off the session's best levels after minutes from the Federal Reserve's recent policy-setting meeting sparked worries that the central bank could delay interest-rate cuts as it fights to keep a lid on inflation. The Dow Jones industrial average gained 33.70 points, or 0.28 percent, to end at a record 12,251.71. The Standard & Poor's 500 Index added 3.35 points, or 0.24 percent, to finish at 1,396.57. The Nasdaq Composite Index rose 12.09 points, or 0.50 percent, to close at 2,442.75. The key US data viz. US consumer prices data is due later in the day.

US crude was steady at $58.76 after climbing 48 cents on Wednesday, boosted by US data showing sharp fall in fuel inventories and after OPEC signalled it might need to cut crude output again in December.

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FII: + Rs1529 Cr MF's - Rs40Cr

FII Gross purchases Rs 3096.90 Cr Gross Sellers Rs 1573.80 Cr Net Buyer Rs 1523.80 Cr
MF Gross Purchases Rs 474.31 Cr Gross Sellers Rs 513.81 Cr Net Sellers Rs-39.50 Cr.

This FII number includes the Rs 900 cr + TCS deal but even after that the number in excess of Rs 400 cr is certainly enterprising.

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Sharekhan Investor's Eye - Nov 15 2006

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Cluster: Emerging Star
Recommendation: Buy
Price target: Rs340
Current market price: Rs335

Mind-blowing results

Result highlights

  • The consolidated revenues of Thermax grew by 23.0% year on year (yoy) to Rs520.2 crore in Q2FY2007, in line with our expectation. The energy segment grew by a robust 20.9% yoy to Rs433.4 crore whereas the environment segment grew by 17.8% yoy to Rs118.7 crore.
  • The company’s operating profit margin grew by 240 basis points yoy and 350 basis points sequentially to 13.9% in the quarter, way above our expectation. The margin growth was attributed to the strong order booking, lower material cost and a shift in the product mix towards the high-margin energy segment. Consequently, the operating profit grew by 48.5% yoy to Rs72.1 crore, again ahead of our expectation.
  • The energy segment continued its robust performance with a revenue growth of 20.9% yoy to Rs433.4 crore and a 430-basis-point expansion in the profit before interest and tax (PBIT) margin to 15.0%. The environment segment too bounced back with a 17.8% year-on-year growth in the revenues to Rs118.7 crore. The margins bounced back in this quarter after remaining subdued in Q1FY2007. The PBIT margin improved by 330 basis points sequentially.
  • The net profit grew by 76.4% yoy to Rs53.7 crore in Q2FY2007, ahead of our expectation. The robust margin expansion, higher other income and lower effective tax rate are attributable to the jump in the net profit.
  • The order backlog maintained its growth momentum during the quarter, recording a strong growth of 11.5% sequentially and of 142% yoy to Rs2,973 crore. The order backlog is equivalent to 1.8x FY2006 consolidated revenues, imparting a very strong visibility to the revenues.
  • Another development during the quarter was that ME Engineering, UK, its loss making wholly-owned subsidiary was referred to the administrator in the UK as its performance was mediocre and it continued to make losses. Due to this event Thermax has provided for Rs23.1 crore as extraordinary expenses in the stand-alone financials. However, the net impact of the above provisions in the consolidated accounts was Rs2.0 crore only. The positive of this event is that in H2FY2007 the performance of ME Engineering won’t be a drag on the company’s results.
  • The stock is trading at a price/earnings ratio of 17.5x FY2008E consolidated earnings and enterprise value/earnings before interest, depreciation, tax and amortisation of 10.1x FY2008E. We continue to remain bullish on the company. In light of the continued growth traction over the last few quarters and the blow-out H1FY2007 performance, we are looking to upgrade our estimates and price target for the company after attending its conference call. Watch this space.

Cluster: Apple Green
Recommendation: Buy
Price target: Under Review
Current market price: Rs881

Leading private banks can breathe easy
The RBI has started granting branch licenses to banks caught in the IPO scam. ICICI Bank has received permission for 100 new branches and 500 ATMs to add to its current network of 625 odd branches and 2,325 ATMs across the country.



US court rules in Ranbaxy’s favour
A US appeals court has upheld a district court ruling that gave Israel's Teva Pharmaceutical Industries and India's Ranbaxy Laboratories exclusive rights to sell generic forms of Merck & Co. Inc.'s blockbuster anti-cholesterol drug simvastatin (brand name: Zocor).


Improved performance across bank groups

Key points

  • The impressive financial performance is likely to sustain as the banking sector is all poised for improved financial performance in FY2007 on the back of the robust credit demand, improving asset quality and stable costs.
  • There has been a significant improvement in the asset quality across all bank groups as the NPAs at the gross and net levels showed a significant improvement due to lower incremental NPAs and historical write offs and provisioning.
  • The sensitive sectors are under the scanner and the RBI has been repeatedly coming out with cautionary statements regarding the banks’ exposure to the sensitive sectors, especially real estate. The PSBs have more than doubled their exposure to real estate. However, the exposure still remains lower than the other bank groups at 14.2%.
  • The credit growth for the last couple of years has been in excess of 30%. The flow of credit to the different sectors has remained unchanged except for the bank credit to the industrial sector (small, medium and large), which decreased by 200 basis points to 40% in March 2006 compared to 42% in March 2005.
  • The new priority sector lending guidelines are negative for foreign banks. The off-balance sheet exposure of the foreign banks on an aggregate is significantly offline than the entire banking sector data mainly due to their presence in the derivatives market. The RBI wants to realign the operations of foreign banks and make direct lending a larger part of their total assets.


United Phosphorus

United Phosphorus to buy Cerexagri
United Phosphorus Ltd (UPL) is to buy Cerexagri, the France-based crop science business unit with an annual revenue of 250 million euros. Cerexagri specialises in plant protection products, mainly fungicides. The deal size is estimated at around 111 million euros (Rs640.47 crore). Cerexagri has a strong distribution network in the USA and Europe, which accounts for 70% of the company’s revenues. This would be UPL’s fifth acquisition in the calendar year, making it the third largest generic agrochemical company in the world.

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