Daily Result Updates

Reliance Communications: In-line 1QFY08 results, low increase in costs a positive surprise; fine-tuned estimates

Tata Steel: 1Q 2008 results'Volumes, dilution disappoint; maintain U

Tata Motors: 1Q net profit at Rs4.7 bn grows 22% yoy; margins under pressure

Cairn India: 2QCY07 results hit by forex loss; strong otherwise in line with high crude prices

i-flex solutions: Another weak quarter'de-listing expectations supporting expensive valuations. Maintain Underperform rating

Bharat Electronics: Disappointing results with low execution and margins decline

Aditya Birla Nuvo: Standalone results below expectations, but does it really matter?

HPCL: Another wasted quarter but probably a good time to buy when nobody is looking

Jet Airways: Results miss expectations, near-term outlook remains challenging

Oriental Bank of Commerce: Lower provisioning support profit growth, retain IL

India Cements: 1QFY08- Targeting 15 mn tpa capacity by FY2010; retain IL with target price of Rs200/share

HT Media: Slightly weaker-than-expected 1QFY08 results; reduced estimates moderately

India Infoline: Operating in line, raising estimates but downgrade to Underperform

Godrej Consumer Products: 1QFY08: Price hikes aid revenues growth and retain margins

Dredging Corporation of India: Better-than-expected numbers led by in-chartered dredgers

SREI Infrastructure Finance: Growth on track, profit in-line, retain IL

Change in recommendations

Reliance Energy: Sasan in the bag'4,000 MW capacity addition on fast track

Updates

Infosys Technologies: Key takeaways from Infosys analyst meet; Reiterate outperform rating

Banks/Financial Institutions:

RBI quarterly credit policy a net negative for the banking sector
1QFY08 operational performance disappoints

Daily Result Updates - August 1 2007

Anagram Daily Call - Aug 1 2007

Anagram Daily Call - Aug 1 2007

Investment profile of higher income groups

India Unveiled

Trading Calls

Sell GMR Infra with stop loss of Rs 872 for target of Rs 685. This recommendation is with a one week perspective.
Sell Reliance Capital with stop loss of Rs 1210 for target of Rs 1075. This recommendation is with a one week perspective.
Buy Jagran Prakashan with stop loss of Rs 494 for short-term target of Rs 587.
Buy Federal Bank with stop loss of Rs 337 for short-term target of Rs 375.

Market Close: Recovery post CRR hike !

All eyes were on RBI's meet as it was supposed to decide on liquidity tightening. That kept the indices ranged and negative biased till the decision of CRR hike was announced by the RBI. Global markets bounced back today and India followed the same trend. But as soon as RBI announced CRR hike market indices took a dip. However, buying at lower levels across major sectoral indices in the final trading hours helped to offset the negatives on CRR hike. However we believe that the impact will be seen gradually. The major gainers for the day were on the Banking, Consumer Goods, Metals and Reality counters. Small and mid caps were also able to attract buyers. Europe was in green.

Banks have already reported a slowdown in the credit off take because of higher lending rates?CRR will further bring it down. We believe that the impact of the CRR hike would also continue to impact the corporate Indian on account of higher rates. We expect the fuel prices in the country to be hiked in the next few weeks because of higher crude prices. That would further add to the inflation. Let see how CRR hike helps to control inflation. We will bring more updates here for you..Keep watching this space.

Sensex was by 307 points at 15567.89. It was helped up by gains in HDFC (2006.5,+5 percent), L & T (2568,+5 percent), BHEL (1720,+5 percent), ACC (1057.7,+3 percent) and Ranbaxy (388.75,+3 percent). Restricting the gains were Maruti (831.05,-2 percent), Hero Honda (674.95,-2 percent), Tata Motors (699.9,-1 percent), HLL (206.8,-1 percent) and Infosys (1973.25,-1 percent).

Larsen & Toubro was one of the major gainers for the day. Company?s net profit for the June ended quarter was at Rs.377 cr vs Rs.157 cr, up by 140%. Net sales for the quarter were at Rs.4505 cr vs Rs.3469 cr, up by 30%. Company bagged orders to the tune of Rs.3,445 cr in the month of July itself. We believe that the company is well placed in the industry. Order book is large and it will continue to bag more orders. Valuations are high and growth as well !

Ceat delivered good set of numbers for the quarter June. The top line witnessed a growth of 8% YoY. The EBIDTA for the quarter was up by 248% to Rs.64 cr?thanks to lower rubber prices. The bottom line stood at Rs.30 cr against Rs.0.23 cr in the same quarter previous year. The proximity to the OEM?s (Original Equipment Manufacturers) which had witnessed a slow down in the last quarter which impacted the top line growth for the quarter. The revenues from the OEM?s were down by 10% while that from the replacement market were higher by 12%. We believe that other players are better placed in the industry compared to Ceat. Do read our note on the company to be published shortly for that.

Everest Kanto Cylinders (EKC) the largest manufacturer of CNG cylinders in the country ended 4% higher for the day. 60% of EKC's production goes to retrofitters and 25% to OEM. Demand and supply gap has made company enjoy huge profits and things will continue to be the same for next few years. CNG is more economical as compared to petrol...so high crude may force more people to go for CNG. Govt. ruling is also helping. But we are not a buyer ! Do read our note to know more.

Technically Speaking: Indices rallied after RBI?s CRR hike news. Sensex made high of 15569 and low of 15225. Advances were much ahead of Declines in the ratio 1.7:1.Sensex churned a turnover of Rs 5255Cr. VJ stood to the stand that markets will test 15500 after the fall during midday. Markets bounced back as per the reading of VJ and closed above 15500.

Monetary Policy, Tata Motors, United Phosphorous, Omax Autos

Monetary policy review

CRR hike a surprise, but market takes it in its stride
In the first quarter review of the annual monetary policy, the Reserve Bank of India (RBI) has kept the policy rates unchanged as per expectations but hiked the cash reserve ratio (CRR) by another 50 basis points to 7%, which has come as a surprise. Higher money supply and reserve money growth coupled with risks from higher commodity and oil prices to price stability and inflation are likely to have forced the RBI to take the rather pre-emptive step. In addition to price stability the RBI has added maintenance of financial stability in the policy stance.

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STOCK UPDATE

Madras Cement
Cluster: Cannonball
Recommendation: Buy
Price target: Rs3,700
Current market price: Rs3,328

Price target revised to Rs3,700

Result highlights

• In Q1FY2008, Madras Cements' top line grew by 37.7% year on year (yoy) to Rs469 crore on the back of a 5.8% growth in volumes and a 30% rise in realisations. The rise in realisation was because of a Rs10-15 increase in the price per bag of cement in May and June in the south.
• The operating expenditure rose sharply by 40% yoy to Rs286.6 crore on account of higher freight cost and higher employee expenditure. The costs per tonne grew by 32% yoy to Rs1,976 because of a 26% increase in the variable costs.
• The operating profit margin on a year-on-year (y-o-y) basis was lower by 100 basis points at 39.5% whereas on a sequential basis, it was higher by 830 basis points on account of a higher realisation growth. The higher realisations also helped the earnings before interest, tax, depreciation and amortisation (EBITDA) per tonne to grow by 26% yoy to Rs1,260.
• During the quarter, the interest cost doubled to Rs8 crore, thanks to higher borrowings, whereas the depreciation provision grew by 37.4% yoy to Rs23.9 crore.
• Consequently, the profit after tax (PAT) grew by 27.5% yoy to Rs100.5 crore, which was in line with our expectations.
• The company is incurring a capital expenditure (capex) of Rs1,474 crore to expand its capacity by 4 million metric tonne (MMT) in the next one year. The 2MMT expansion at Jayantipuram (including a 1MMT grinding unit at Kolkata) will be commissioned by the third quarter of FY2008, whereas the remaining 2MMT capacity at Ariyalur including an additional 56 megawatt (MW) wind power plant will be commissioned by the second quarter of FY2009.
• Taking cognisance of the higher volume growth and the improved pricing scenario after the price freeze, we are upgrading our FY2008 earnings per share (EPS) estimate by 18% to Rs368 per share and FY2009 EPS estimate by 23% to Rs443.
• The higher capacities will drive the volume growth of the company going forward whereas the improved pricing scenario will improve its profits. The captive power plants (CPPs) will help lower the power & fuel cost. The company will be able to save income tax in FY2009 to the extent of the accelerated depreciation available on wind power plants, which will positively increase the cash flows of the company. At the current market price (CMP) of Rs3,328,the stock is trading at a valuation of 7.5x its FY2009 earnings which almost captures the near-term opportunity. Thus we maintain our Buy recommendation with a revised price target of Rs3,700.

Subros
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs340
Current market price: Rs238

Strong performance

Result highlights

• Subros' Q1FY2008 results are above our expectations, thanks to a strong improvement in its profitability. The net sales of the company grew by 11.4% to Rs157.7 crore in the quarter led by a volume growth of 17%. The strong performance of one of its key customers, Maruti Suzuki India, particularly contributed to Subros' impressive performance.
• The operating profit margin (OPM) improved by a good 150 basis points to 12.2% during the quarter due to rising efficiencies and savings in logistic cost as a result of better operations from its newly commissioned Gurgaon plant. Consequently, the operating profit for the quarter grew by 26.1% to Rs19.2 crore.
• Both interest and depreciation charges were higher due to the capital expenditure (capex) incurred by the company for the new plant and efforts to raise its capacity further. Consequently, the company reported a 10.1% growth in its net profit to Rs6.6 crore.
• We maintain our positive outlook on Subros. We also understand that the company has recently bagged a huge order from Suzuki for the export vehicle that shall be manufactured from the Japanese company's Manesar plant. Also, the company shall be supplying to Mahindra and Mahindra for the latter's yet to be launched Ingenio range.
• At the current levels, the stock is available at attractive valuations of 5.3x FY2009E earnings and an enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) of 2.5x. We maintain our Buy recommendation on the stock with a price target of Rs340.

Omax Autos
Cluster: Apple Green
Recommendation: Book Out
Current market price: Rs71.5

Book out

Result highlights

• Omax Auto's Q1FY2008 results were better than our expectations due to a higher than estimated top line and stable margins during the quarter.
• The net sales of the company grew by a good 7.5% to Rs172.3 crore in the quarter, led by an 8.3% growth in the domestic sales to Rs165 crore. The exports for the quarter were disappointing at Rs7.3 crore against Rs8 crore in the same quarter last year.
• The operating profit margin (OPM) for the quarter declined by 80 basis points year on year (yoy) and was flat sequentially at 9%. Consequently, the operating profit declined by a marginal 0.7% to Rs15.6 crore.
• A higher capital expenditure (capex) led to an increase in both the interest and the depreciation cost. This led to a 29.3% decline in the profit to Rs4 crore.
• Omax Auto has rendered a mixed performance in the past few quarters. Though its margins have improved a bit, the company has fallen short of meeting its export targets. The entry into the business of components for commercial vehicles would de-risk its business model a little. However, we expect the company to face the heat in the domestic market due to a slowdown in the two-wheeler industry. Moreover, the cut-throat competition in the ancillary industry might restrict the margin growth for Omax Auto. We thus expect FY2008 to be weak for Omax Auto, both in terms of top line and bottom line growth.
• We expect the company to report a 27.6% decline in its earnings in FY2008 but recover in FY2009, with better two-wheeler volumes as well as the commencement of supplies to Tata Motors. We expect its earnings per share to reach Rs11.3 in FY2009. At the current market price, the stock is trading at 6.3x its FY2009E earnings and is available at an enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) of 4x. Considering the slowdown in domestic market in FY2008, slower offtake in its exports and restricted margins, we are closing our recommendation on the stock. We recommend investors to book out.

Tata Motors
Cluster: Apple Green
Recommendation: Buy
Price target: Rs792
Current market price: Rs699

Q1FY2008 results: First-cut analysis

Result highlights

• Tata Motors Q1FY2008 results were below our expectations due to lower than expected margins during the quarter. However, the bottom line was buttressed by a higher foreign exchange (forex) gain on account of the appreciation in the rupee during the quarter.
• The net sales for the quarter grew by 5.3% to Rs6,056.8 crore on the back of a 1.3% volume growth and a 3.9% realisation growth during the quarter.
• However, high raw material cost and lower volumes, particularly in the commercial vehicle segment, adversely affected the margin (excluding the forex gain/loss). The margin declined to 9% from 11.9% in the same quarter of the last year. Hence, the operating profit dropped by 19.9% to Rs546.3 crore.
• A little higher interest and depreciation charges led to a drop of 39.4% in the adjusted net profit to Rs259 crore. After accounting for the forex gain of Rs205.9 crore during the quarter, the net profit grew by 22.4% to Rs466.76 crore.
• On consolidated basis, the company's sales grew by 13.3% to Rs7,631.3 crore while the net profit excluding the forex gain declined by 27.7% to Rs308.2 crore. The profit after extraordinaries and forex adjustments increased by 35.7% to Rs516.1 crore.
• At the current levels, the stock trades at 10.6x its FY2009E consolidated earnings and is available at an enterprise value/earnings before interest, depreciation, tax and amortisation of 5.3x. We maintain our Buy recommendation on the stock with a price target of Rs792.

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VIEWPOINT

United Phosphorus

Focus on Latin American markets for growth
We attended the conference call of United Phosphorus Ltd (UPL) to discuss Q1FY2008 results. We present the key takeaways from the call.

Investor's Eye - July 31 2007

EXCLUSIVE - Equibrain Report - August 1 2007

EXCLUSIVE - Equibrain Report - August 1 2007

SBI Ltd

SBI Ltd

Crompton Greaves, Indian Overseas Bank, Blue Star, Greaves Cotton, HCC, Suzlon Energy

Crompton Greaves, Indian Overseas Bank, Blue Star, Greaves Cotton, HCC, Suzlon Energy

Purvankara Projects

Purvankara Projects

Reliance Comm Q1 net jumps, beats forecast

Reliance Communications, India's second-largest mobile firm, said on Tuesday its June quarter net profit more than doubled, beating forecasts, as it added more users in the world's fastest-growing mobile market.

Reliance Communications, which had more than 32 million mobile users at end-June, said net profit for the June quarter rose to Rs 12.21 billion, from 5.13 billion reported a year earlier.

Revenue rose 32 per cent to Rs 43.04 billion from 32.50 billion reported a year earlier. The firm gets more than 65 per cent of its revenue from wireless subscribers.

A Reuters poll of ten brokerages had forecast a rise in net profit to Rs 11.11 billion on revenue of 42.56 billion.

Larger rival Bharti Airtel last week reported that its quarterly net profit had doubled to Rs 15.12 billion.

Shares in Reliance Communications, India's fifth-most valuable firm, gained 23.1 per cent during April and June, outperformimg a 12.1 per cent rise in the benchmark index.

RBI raises reserve requirements, holds rates

The Reserve Bank of India took steps on Tuesday to drain surplus cash from the banking system stemming from strong capital inflows, knocking bonds and stocks lower, but it left its key interest rates steady, as expected.
The Reserve Bank of India (RBI), still sounding a fairly hawkish note after five rate increases since June last year, raised the proportion of cash banks have to keep with it on deposit to mop up funds that could fuel inflation.
“Monetary expansion has to be curbed,” said Saumitra Chaudhuri, economic adviser at credit rating agency ICRA.
The central bank raised banks’ cash reserve ratio (CRR) to 7% from 6.50% with effect from August 4, the fourth increase announced since early December, taking it to its highest level since November 2001.
It also scrapped a Rs30-billion ($740 million) limit on its daily money market operations to drain cash from the system, enabling banks to park more funds with it.
The yield on the 10-year government bond spiked up 12 basis points to 7.87% soon after the decision on worries these measures would leave less cash to buy bonds.
The stock market shed its 1 percent gain in a few minutes after the decision, with banks and auto stocks hit particularly hard on concern that loan growth would fall, but the market rebounded strongly in afternoon trade.
The partially convertible rupee inched towards last week’s nine-year high of 40.20 per dollar after the decision.
The RBI left its key lending rate, the repo rate, unchanged at 7.75% and its reverse repo rate, at which it absorbs excess cash from banks, steady at 6%. The bank rate, used to price long-term loans, remained at 6%.
Other Steps
India’s move came a day after China, inundated with cash from its current account surplus, raised the level of deposits banks must hold in reserve for the ninth time in 13 months.
India’s banking system has been awash with cash in recent months due to robust capital inflows into Asia’s third-largest economy, particularly into the record-breaking stock market.
“Recent financial market developments in India and potential uncertainties in global markets warrant a higher priority in the policy hierarchy for managing appropriate liquidity conditions,” the RBI said in a statement.
It scrapped one of its two daily money market operations from Aug. 6, and said it could use variable or fixed rates in repo and reverse repo auctions and conduct longer-term operations.
The central bank has been intervening to cap the rupee’s gains, buying dollars in a policy that has generated excess cash in the money market.
As a result, overnight call money rates have hovered near zero for weeks, complicating monetary policy.
HSBC economist Robert Prior-Wandesforde said intervening to suppress the rupee while fighting inflation with firm interest rates was unsustainable, and he saw another reserve requirement increase later in the year along with more rupee gains.
“If inflows continue the way they have been, we will be witnessing a similar situation a couple of months later,” he said.
The central bank said although headline inflation, which has eased below its 5% comfort ceiling, had slowed, upward pressures persisted, with risks from high and volatile crude prices, demand-supply gaps and firm food prices.
It warned banks and financial institutions to be prepared for higher volatility than before in financial markets worldwide.
But it said domestic economic activity continued strong and the base appeared to be broadening, and it retained its 8.5% growth forecast for 2007-08.

CRR hike fails to dampen market spirit

Positive global cues, enthusing quarterly numbers and a strong bullish sentiment helped the market scale up in the early hours of trades. Buying was witnessed in select banking and FMCG stocks, while auto, information technology and pharma stocks remained out of favour. The market turned choppy after the announcement from Reserve Bank of India to hike the cash reserve ratio (CRR) by 50 basis points to 7%. The Sensex slipped immediately into the red and touched the day's low of 15,225. But it was quick to recover on the back of gains in capital goods, metal and FMCG stocks. All around buying saw the Sensex touch the day's high of 15,569. The Sensex finally closed the session at 15,551, up 290 points. The broad based Nifty ended the session at 4,529, up 89 points.

The breadth of the market was positive. Of the 2,717 stocks traded on the BSE 1,706 stocks advanced, 937 stocks declined and 74 stocks ended unchanged. Among the sectoral indices the BSE CG index flared up by 4.90% and the BSE Realty index gained 2.40%. While the other sectoral indices were up around 1% each, the BSE IT index and the BSE Auto index ended with moderate gains.

The recovery in the market was led by L&T, which shot up by 7.29% at Rs2,624. Among the major gainers HDFC advanced by 5.72% at Rs2,018, BHEL moved up by 5.48% at Rs1,734, Ranbaxy added 3.64% at Rs390, SBI scaled up by 3.60% at Rs1,636 and Reliance Communication jumped 3.57% at Rs560. Select index stocks witnessed selling pressure. M&M was the major loser and dropped 2.86% at Rs731. HUL fell by 1.32% at Rs206, Tata Motors declined by 1.16% at Rs699, Infosys and Dr Reddy's Lab closed with the moderate losses at Rs1,973 and Rs635 respectively.

Capital Goods stocks witnessed sharp buying support. Greaves Cotton jumped 8.75% at Rs364. Crompton Greaves vaulted by 7.23% at Rs293, ABB advanced 6.96% at Rs1,147, Kirloskar Brothers flared up by 6.83% at Rs445 and Punj Lloyds gained 5.20% at Rs283. Alstom Projects, Lakshmi Machine Works, Bharat Electrical were up 3-4% each.

Over 1.31 crore RNRL shares changed hands on the BSE followed by IFCI (83.97 lakh shares), Bella Steels (65.12 lakh shares), IKF Technologies (60.90 lakh shares) and Harig Cranks (59.36 lakh shares).

SBI was the most actively traded counter on the BSE and registered a turnover of Rs277 crore followed by L&T (Rs168 crore), Reliance Industries (Rs138 crore), Reliance Energy (Rs125 crore) and Housing Development & Infrastructure (Rs120 crore).

Bias may remain cautious

The market is likely to witness cautious trend as major Asian gauges like the Hang Seng index, the Kospi index and the Jakarta index have gained marginally but the Nikkei index is trading in the red in current trades and US Market ended with a positive note. Although the domestic indices gained marginally on Monday as intense selling backed by strong volatility saw the index swing over 300 points during intra-day trades. Today, RBI will announce its first quarter review of the annual credit policy, which is likely to weigh on the market sentiment. Among the local indices, the Nifty could test 4400 on the down side while on the upside it could find support at 4550. The Sensex is likely to get support at 15000 and may face resistance at 15450.

Key announcements like Alok Industries, Aurobindo Pharma, Bhajaj Hindustan, Cadila, Godrej Consumer, Hindalco, Indian Hotels, Jindal Saw, Shipping Corporation of India and Tata Motors are expected to announce their figures.

US indices closed on Monday with a positive note, helped by cooling credit markets fears and a bit of deal making on Wall Street. The Dow Jones gained 92 points at 13358, the Nasdaq was up 21 points at 2583.

Crude oil prices slipped marginally, with the Nymex light crude oil for September delivery fell by 19 cents to close at $76.83 a barrel. In the commodity space, the Comex gold for December delivery gained $4.30 to settle at $676.60 an ounce

Market to swing based on outcome of RBI's monetary policy review

The market will take direction from the outcome of RBI's monetary policy review today, 31 July 2007. The BSE 30-share Sensex rose 26.34 points to 15,260.91, on Monday, 30 July 2007, amid mixed trend in pivotals.

The Reserve Bank of India (RBI) is likely to leave its key benchmark rates untouched in its first quarterly review of the annual policy statement today, 31 July 2007. According to experts from money market, the central bank is likely to shift its focus to the problem of excess liquidity in the money market system, evident from the softening of interest rates in overnight call money market.

The RBI had pushed its benchmark repo rate to a four-year peak of 7.75% in its drive to tame inflation, raising the repo, its key short-term lending rate, 5 times between June 2006 and March 2007. India's inflation accelerated to 4.41% for the week ended 14 July from 4.27% the previous week.

Asian markets gained in volatile trade today, 31 July 2007. Hong Kong's Hang Seng (up 1.01% at 22,970.70), Taiwan Weighted (up 2.10% at 9,263.10), Singapore's Straits Times (up 0.84% at 3,555.80) and South Korea's Seoul Composite (up 0.78% at 1,921.65), edged higher.

Japanese stocks were mixed as losses in electronic parts maker Kyocera Corp. were matched by gains in Mitsubishi Electric and Sharp Corp. Nikkei slipped 0.22% at 17,251.10.

Wall Street found a foothold yesterday, 30 July 2007 as investors, still anxious that a credit crunch could crimp US growth, took advantage of low prices after last week's steep losses. The Dow Jones advanced 92.84 points, or 0.70%, to 13,358.31. Broader stock indicators also posted gains. The Standard & Poor's 500 index added 14.96 points, or 1.03%, to 1,473.91, and the Nasdaq Composite index advanced 21.04 points, or 0.82%, to 2,583.28.

As per provisional data, foreign institutional investors (FIIs) sold shares worth a net Rs 1117.25 crore, while domestic institutional investors (DIIs) were net buyers of shares worth Rs 854.32 crore on Monday, 30 July 2007.

Oil prices were little changed on Tuesday, 31 July 2007 with US crude still within sight of its record high as traders feared further declines in hefty US crude stocks. US crude eased 16 cents to $76.67 a barrel. London's Brent crude slipped 14 cents to $75.60 a barrel.