PULSE TRACK
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Q3FY2007 GDP up by 8.6%
STOCK UPDATE
Bharat Electronics
Cluster: Apple Green
Recommendation: Buy
Price target: Rs1,715
Current market price: Rs1,550
Budget positive for BEL
The budgetary allocation for the defence sector has been pegged at Rs96,000 crore for 2007-08, which amounts to a growth of 7.9% over the earmarked figure of Rs89,000 crore in the last year’s budget. The same is 11.6% higher than the Rs86,000 crore shown in the revised estimate for 2006-07. The growth in the total defence allocation is in line with the trend seen in the past couple of years.
The huge jump in the capital outlay for equipment is likely to benefit a company like Bharat Electronics Ltd (BEL), which has emerged as one of the key suppliers of electronic and other high tech equipment to the defence forces. This coupled with the order backlog of around Rs7,300 crore (as on December 2006) and a strong traction in civilian business provides a reasonably strong revenue growth visibility for the company. Moreover, the recent alliances with leading defence contractors would also add to the overall growth in revenues over the coming years.
VIEWPOINT
GlaxoSmithKline Pharmaceuticals
Powered by rich product pipeline of parent
GlaxoSmithKline Pharmaceuticals (Glaxo), for the full year CY2006, reported a marginal revenue growth of 4.6% to Rs1,552.92 crore. The growth was lower because the company had divested its low-margin animal healthcare business during Q3CY2006. The operating profit margin (OPM) expanded by 180 basis points to 30.6%, resulting in an 8.6% rise in the net profit to Rs545.5 crore. The full year numbers are not strictly comparable with those of the previous year, as the company had divested its animal healthcare business during Q3CY2006.
SECTOR UPDATE
Automobiles
Two-wheelers in low gear
- Bajaj Auto’s February sales were disappointing, the same declined by 1.2% year on year (yoy).
- Hero Honda Motors’ performance continued to be steady. It recorded a growth of 11.9% yoy in February 2007, with sales of 280,515 vehicles.
- After a dismal performance in the last two months, growth in TVS Motors’ sales was in line with the industry growth. The company sold 120,110 vehicles, recording a growth of 10.3%.
- Maruti Udyog reported a growth of 53.3% for February 2007. The growth rate appears high due to a low base in February 2006 in anticipation of an excise duty cut in the last budget.
- Mahindra and Mahindra’s February sales were good, however the growth rate seems to have slowed down in comparison with the earlier months.