Sterlite Industries
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Friday, August 24, 2007
MakeMyTrip to cross Rs1,000 cr sales in 2007
MakeMyTrip India, which runs a travel booking portal promoted by a host of US venture capital funds, said on 23 August it expects to touch Rs1000-crore sales in the current year.
“In 2006 sales were Rs500 crore. The growth in travel and leisure remains strong and we will maintain the trend of growth,” co-founder and MakeMyTrip India COO Keyur Joshi said. Online booking is estimated at 10% of the total $20 billion travel and tourism market in the country, he added. The company is in the process of creating facilities for travel booking from mobile phones as an alternate channel for air tickets and hotel booking, Joshi said.
MakeMyTrip has opened physical offices in five locations in India, the first among online travel booking companies, and may expand it footprint in retail hypermakets as well, the company chief said. Talks are also on with Indian Railways to start railway ticket booking through the portal, he added.
ESAB India, Banking, Information Technology, Ambuja Cement
Esab India
Cluster: Vulture’s Pick
Recommendation: Buy
Price target: Rs575
Current market price: Rs484
Results ahead of expectations
Result highlights
- ESAB India's revenues grew by 35% to Rs87.3 crore in the Q2CY2007, which is ahead of our expectation.
- The operating profit grew by 36.8% to Rs21.7 crore in Q2CY2007 as against Rs15.8 crore in Q2CY2006. Consequently, the operating profit margin (OPM) also expanded by 30 basis points year on year (yoy) to 24.8%. The raw materials cost-to-sales increased by 130 basis points, while the staff cost-to-sales ratio increased by 290 basis points.
- The commissioning of a new plant at Chennai and capacity additions in its existing plants lead to an increased top line in Q2CY2007. The equipment division registered a whopping 65.5% growth in its revenues and the revenues from the consumables increased by 25.6%.
- The depreciation cost for the quarter increased by 26.7% as the company has commissioned its new plant.
- Elexvia group India B.V. along with Charter plc and ESAB Holding Ltd have made an open offer to the shareholder of ESAB India to acquire 30.78 lac shares (Fully paid up equity share of Rs10 each) at Rs426 per share. These represent 20% of the total fully paid up capital.
- For the first half of CY2007 the net sales grew by 32.1% to Rs168.5 crore and the bottom line grew by 36.4% to Rs26.4 crore, subsequently generating an earnings per share (EPS) of Rs17.2 per share.
SECTOR UPDATE
Banking
Q1FY2008 earnings review
In this sector update we have analysed the banks under our coverage based on certain parameters that we feel are important for the overall banking sector’s performance going forward. We have also taken cognisance of the risks and positive triggers that the banking sector could face in the near to medium term. Based on our analysis we feel the risk/return ratio for banking stocks appears favourable for investors. We say so because we expect the USA to reduce rates in the near future and if that happens, the Reserve Bank of India (RBI) would not be able to sit on the sidelines for too long. A stable to falling interest rate scenario is generally best suited for the banking sector’s performance. Hence, although we remain cautions in the near term, yet we feel the banking sector provides good investment opportunities after the recent correction. Our top picks in the banking sector remain State Bank of India in the public sector, and ICICI Bank and HDFC Bank in the private sector.
Information Technology
Concerns overdone
The tech sector has grossly underperformed the benchmark indices over the past few months. Going by the historic trend, the tech stocks tend to lag behind the overall markets in Q1. However, the underperformance has been much more pronounced this year, due to the added concerns related to the steep appreciation in the rupee, subprime issue and its possible fallout on the overall demand environment, and the slowdown in the earnings growth momentum (compounded annual growth rate [CAGR] over the next three years) on the back of technical issues such as higher tax rate in FY2010.
These issues are largely related to external environment and consequently, not in the control of the domestic tech companies. However, the concerns appear to be overblown and more than priced in the current valuations.
In fact, the premium commanded by the tech stocks over the Sensex valuations (on one year forward basis excluding tech stocks) have reduced from a high of around 120% in the mid of 2004 to a historic low of 20%. This appears to be an overdoing given the fact that one of the key concerns of rupee appreciation is under control now and the performance of the tech sector is not likely to impacted by the rising political risk in the country.
VIEWPOINT
Ambuja Cement
Holcim picks up 3.94% in Ambuja Cements
Continuing with the creeping acquisition of Ambuja Cements' shares, Holcim Mauritius has announced the acquisition of 6 crore equity shares of the company from its promoter and promoter companies (Narotam Sekhsaria, and Radha Madhav Investments and RKBK Fiscal Services). The acquisition has been carried out at a price of Rs154 per share and amounts to 3.94% of the equity capital of Ambuja Cements.
Hindustan Unilever
Till date, the southwest monsoon has been fairly widespread and normal. A favourable monsoon will significantly increase the rural income in the current year. This is particularly positive for HUL for whom the rural markets account for an estimated 50% of incremental growth. This will pave the way for a reasonable sales growth, besides even better profitability.
For the long-term, there is no doubt about its prospects. Increasing urbanisation, improving literacy level, expanding media reach, growing disposable income, changing attitudes and aspirations and a young and growing population all will ensure sustained growth.
Consider these: The per capita consumption of personal wash products in India is 0.5 kg compared to 1.1 kg in Brazil and 2 kg in USA, for fabric wash the figure is 2.6 kg in India compared to 7.2 for Brazil and 13.1 in USA.
The per capita consumption for other products is also currently very low. Toothpaste: 40 ml in India, 358 ml in Brazil and 299 ml in USA, shampoo: 16 ml in India, 444 ml in Brazil and 1,018 in USA, ice cream: 0.98 ltr in India, 1 ltr in Brazil and 22 ltr in the USA.
All these indicate very low level of penetration and tremendous growth prospects. High GDP growth and increase in per capita income is bound to more than proportionately increase demand for the company's products.
Valuation
In FY 2007 (ending December 2007) we expect the company to register sales and net profit of 13696.70 crore and Rs 1905.48 crore respectively. On equity of Rs 220.70 crore and face value Re 1 per share, EPS works out to Rs 8.3. The share price trades at Rs 196. P/E works out to reasonable 23.6.
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