M&M, L&T, Dishman Pharma, VSNL,

SSKI on Mahindra & Mahindra

M&M's standalone Q4FY07 revenues and profits were above our expectations; though margins were lower by ~50bps vis-à-vis our expectations. Net sales grew by 20%yoy to Rs27.47bn on the back of 17.7% volume growth at 75,155 units. The company's EBIDTA margins were lower at 11.4%, lower 50bps yoy and 60bps qoq due to lower margins in the automotive segment. The company's Q4FY07 operating profit grew by 15.2%yoy to Rs3.13bn and net profit before extraordinary items was higher by 47%yoy at Rs2.28bn. M&M's FY07 consolidated revenues grew by 43%yoy to Rs176.2bn led by strong performance of the standalone entity and the company's key subsidiaries. Consolidated EBIDTA margin for the company increased to 15.3% in FY07 against 14.1% in FY06 and consolidated PAT before extraordinary items grew by 54% to Rs16.0bn in FY07.

We expect M&M's core business to remain under pressure due to moderation in growth rates, both in the UV and Tractors segment, pressure on margins and a sharp surge in depreciation and interest charges due to the company's enhanced capex and borrowing plans. The company's consolidated performance for FY07 has exceeded our expectations and its subsidiaries are likely to continue their growth momentum. We have introduced Punjab Tractors into our consolidated estimates, resultant of which, we have recognized amortization of our estimate of goodwill arising due to the acquisition and also adjusted for minority interest in PTL. This, along with higher depreciation and interest charges has led to a marginal earnings downgraded of 1% for FY08 and 2.2% for FY09 - the positive impact of increased revenues has been negated by higher depreciation and interest charges and good will amortization. We have an SOTP based price target of Rs845/share for M&M with the core business valued at Rs402/share, which implies that ~52% of the SOTP value is derived from the company's subsidiaries. Segments other than Automotive and Farm Equipment contribute to ~40% of consolidated revenues and ~51% of M&M's consolidated profits. Thus, we believe M&M is currently more a play on its value accretive subsidiaries than on the core business. Maintain Outperformer.

SSKI on L&T

L&T's 4QFY07 earnings were sharply ahead of our estimates at Rs7bn driven by sharply higher than estimated revenue growth and operating margins of the E&C segment. The overall operating margins improved by 50bps to 13% during the quarter led by 300bps margin improvement in E&C segment as few large projects crossed the profit booking threshold limit. Moreover, order booking during the quarter increased by 19% yoy to Rs61.2bn thereby resulting in strong order backlog growth of 48% yoy to Rs353bn. However, the lower than estimated performance of its subsidiaries led to consolidated earnings being in line with our estimates at Rs18.1bn for FY07. We have upgraded our standalone FY08 and FY09 estimates by 19.3% and 26% respectively (higher operating margins and higher revenue growth), while consolidated earnings are upgraded by 7.5% and 12.1% for FY08 and FY09 respectively (led by sharp upgrade in standalone earnings estimates). L&T is currently trading at 17.4x FY09E earnings on consolidated earnings. Considering its strong order book of Rs353bn and ensuing visibility of revenues and hence earnings growth of 27% CAGR over the next two years, we believe the valuations are attractive. Also, L&T continues to be amongst the largest and most preferred "infrastructure plays" in the country, thereby L&T will continue to trade at a significant premium to the market multiples. As a result, we maintain our Outperformer rating on the stock.

SSKI on Dishman Pharma

Dishman's Q4FY07 results have been impacted by one-offs and regroupings related to consolidation of Carbogen-Amcis and material write-off. Net profits at Rs329m are significantly ahead of estimates due to higher other operating income, lower tax and depreciation provisions even though the operating profits are considerably lower at Rs215m. Operating profits have been impacted have by rupee appreciation (Dishman exports ~75% of sales) and Rs900m of one-off provisions. Overall the broad story remains firmly on track. Carbogen-Amcis is doing better than expected; Solvay is on track while there is very strong momentum in non-Solvay CRAMS business executed out of India. We expect this non-Solvay business to drive growth for Dishman with increasing traction from multiple big pharma clients. Dishman has started to leverage synergies with Carbogen-Amcis with 3 of existing Amcis clients seeking to transfer manufacturing to Indian facilities. We remain positive on Dishman's business model and believe it is one of the best companies on play the CRAMS opportunity in India. Maintain earning estimates and reiterate Outperformer with price target of Rs.312 (20xFY08E and 15.6xFY09E). Commercialization of any of the 3 Phase III products in Carbogen-Amcis will be upsides to estimates. Dishman remains one of our top picks in the space.

JP Morgan on Mahindra & Mahindra


· M&M's 4Q adjusted earnings at Rs.2.4B (up 36% yoy) were in line with our expectations. While EBITDA was lower than expected (the margin was 60bp below our estimate), higher other income and lower rate of taxation offset the impact.
· While unit sales grew 19%, and EBITDA increased just 14%. EBITDA margin at 11.3% (down 60bp yoy) declined due to a 200bp yoy increase in other expenditure. Though RM/sales ratio was lower by 120bp yoy, it could only partially offset the effect of higher other expenditure.
· Higher other income (due to increased dividends from subsidiaries) and lower tax rate (down 540bp yoy) mitigated the drop in operating performance.
· In FY08, M&M expects unit sales grow to moderate to c.8-10% for both UV's and tractors (due to higher interest rates and base effect).
· M&M firmed up plans for its newly announced plants for commercial vehicles at Pune and passenger cars at Chennai. Both plants are expected to commence production in FY10.
· The company is working on two new platforms in UVs: The Ingenio, a Multi Purpose Vehicle (MPV), which is expected to launched over the next 12 months, and a new UV, which will be launched from the Chennai facility.
· For commercial vehicles, M&M will launch a mass market vehicle (both in the goods and passenger segment) besides launching its range of heavy CVs in collaboration with its foreign partner, Navistar.
· M&M has planned a capex of Rs20B p.a. for the above initiatives over the next three years. To fund these activities, M&M will use its internal accruals as well as raise debt; however it would restrict its leverage (Debt: Equity ratio would not exceed 1x).
· Over FY08, M&M plans to list its subsidiary, Mahindra Holidays. It is also in the process of merging the recently acquired forging companies in its group company, Mahindra Forging.


JP Morgan on Videsh Sanchar Nigam Limited,

· Mixed operational performance. VSNL's 4QFY07 (unconsolidated) revenues were up 1.7% Q/Q (+13.0% Y/Y) but EBITDA was down 5.6% Q/Q (+3.0%) because of higher SG&A costs. On full year (FY07) basis, EBITDA increased by only 6.3% Y/Y to Rs9.3 bn but we expect growth to be higher in FY08 based on continued strong volume growth (total LD minutes were up 53% Y/Y, IPLC bandwidth +103% Y/Y in FY07) and cost optimization (impact of recent headcount reduction).
· Consolidated results highlight the challenges. FY07 consolidated EBITDA of Rs10.54 bn reflects start up losses in South Africa and the challenges in revenue generation from loss making Tyco network (TGN). We estimate EBITDA loss from TGN was US$35 mn in FY07 compared with our estimated US$50-55 mn in FY06. EBITDA growth in Teleglobe is a consolation but has been mainly driven by cost reductions.
· Valuations and stock view. We maintain neutral rating on VSNL stock with Jun-08 SOP price target of Rs500 (Rs475 previously). Our SOP includes Rs235 from the India business, which we have valued using DCF (implied FY08E EV/EBITDA is 6.0x). Stock is likely to remain in a trading range and we would consider buying around Rs400/share level.
· Risks to our view. Downside risks are competition, adverse regulatory changes (regulation of access to cable landing stations) and delay in cash breakeven of TGN. Upside may come from unlocking of surplus land value. Furthermore, listing of RCOM's cable assets (FLAG) could also boost investor outlook on the value of TGN submarine cable system.

Religare on Riddhi Siddhi Gluco Oils

Strategic location of Gokak and Pondicherry plants provides substantial operational benefits; upcoming Uttaranchal unit also offers a strategic cost-advantage and opens up access to north and eastern markets Tie-up with French starch giant, Roquette Freres, generates strong value addition for its product portfolio Net sales CAGR of 38.9% expected over FY06-FY09 to Rs 6.2bn We initiate coverage with Buy with an end-FY08 target price of Rs 365, 47% potential upside from the current levels

Merrill Lynch on Larsen and Tourbo

Margins Surprise in FY07; Raising Earnings & PO to Rs2150
We hike our earnings estimates by 15% for FY08 and 10% for FY09 & PO to Rs2150 (1925) led by better-than-expected FY07 parent EBITDA margins (+300bps) and subsidiary performance. Further L&T had 48%YoY growth in order backlog, rebound in parent sales (+35%YoY in 4Q FY07), 300bps EBITDA margin expansion in E&C to 11% and consolidated rec. PAT growth of 72%YoY. Buy