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Infosys Q4 results update

Praveen Bajaj — Wed, 14 Apr 2010 09:16:05 +0000

Infosys declared its fourth quarter result yesterday. The results came in line with the street expectations. Sales were around 1% above the Bloomberg consensus estimate, whereas the net profit was almost same as per the street estimates. Despite the fact the numbers are in-line with the street expectations; the disappointment is on the rupee guidance front, however the dollar guidance is positive.

Result highlights:

The consolidated net sales for the quarter ended March 10 was up by 5% to Rs. 5,944 cr, this was mainly on account of recovery the Financial Services Sector
Company’s net profit on a consolidated basis contracted by around 1% to a level of Rs. 1,600 cr, this is mainly on account of a higher tax out go. Since the company has provided a branch profit tax of Rs 232 cr for its overseas branches
Company’s operating margin remained fairly stable around 30.10% on account of increased utilizations
Company’s diluted EPS fell by around 1%, to Rs. 28. / share from Rs 28.29/share, a year ago
The company recruited 27639 employees in FY10 and has made 19000 campus offers for FY11
Its USD 200 million plus client was down from 2 in Q3 to 1 in Q4. Top 5 client’s contribution was down from 17.6% to 15.8% in Q4 versus Q3
Dollar Guidance:
- In dollar terms, the company expects 16-18% growth in revenues for the next year i.e. FY11. It expects revenues at USD 5.57-5.67 billion
- EPS growth at 4.3-8.6% for the next financial year
Rupee Guidance:
- In rupee terms, company lowered its guidance for FY11. It expects EPS at Rs 106.82-111.28 per share and revenue growth of 9-11%

I strongly believe that despite the fact the Infosys results and the guidance are muted the Indian IT sector will see out performance in the Indian equity markets as, due to expected rate hike by RBI, funds will start moving from rate sensitive sectors to rate defensive sectors.

Author name:Rahul Sonthalia, Research Head, Kredent

Indian IT Sector: Ready for Growth?

Praveen Bajaj — Tue, 06 Apr 2010 15:38:29 +0000

The economy is recovering,BFSI is showing strongest bounce back,mega deals are struck with dollar strengthening

This sector is estimated to aggregate revenues around USD 73.1bn in FY 2010
The export revenues are estimated at $50bn,while domestic revenues at $23bn by FY2010
Indian IT sector estimated to provide direct employment to 2.3 mn and indirect employment at 8.2 mn by 2010
Software & services revenues accounts for 87% of total software revenues
IT sector’s revenues as proportion of GDP is estimated to touch 6.1% by end of FY2010
But there is hardly any improvement in pricing as clients are still hesitant about the macro scenario and hence keeping their IT budgets flat and insisting on better value from IT vendors
The latest report of NASSCOM’s Strategic Review 2010,showed that industry’s utilization rate increased by 34 basis point YoY to 74.2% in Dec,2009 thereby indicating the effective use of the the existing bench strength by the companies
During this fiscal, the industry was also successful in bringing down the SG&A expenses,increasing offshoring of work from on-site and also arresting the attrition level thus helping in saving on hiring and training cost
Indian IT sector are now recruiting the local talents in their overseas offices to overcome the rising concern for anti-sourcing sentiment which have helped to improve their margin even
IT products have always been export-driven but now more focus will be on the domestic market as the various opportunities are their to explore here even
The UID project based on e-governance is one of the example which will make IT companies ambitious and more focused on domestic revenues to grab for
The front runner companies like TCS,Wipro,Infosys are more appropriate to invest for as of now when IT companies are on improving trend
Bengal promises to be next IT hub
The only problem I see in this is the current strong appreciation of INR which will take a toll on the margins of these companies

Hawkins Cooker: Quarter Two Results

Praveen Bajaj — Tue, 03 Nov 2009 06:17:46 +0000

Company Description:

Hawkins Cooker Limited is engaged in\ the manufacturing, trading and selling of kitchenware. The products manufactured by the Company include pressure cookers, idly stands, cookware and others. It sells kitchenware under the brand names HAWKINS, FUTURA, MISSMARY

RESULT HIGHLIGHTS:

Hawkins declared its 2Q09 results on Saturday.

• The net sales for the quarter ended September 09 increased by 26% to Rs 76.23 cr from 60.74 cr.

• Its net profit increased by a robust 124% to Rs 10.11 cr as compared to Rs 4.51 cr, YoY

• Its EBIT margin increased by a strong 949 bps and this is mainly on account of a fall in its raw material costs as compared to sales from 34% to 25%, YoY

• Since the company is currently operating at only around 60% of its operating capacity, its increase in sales is not because of an increase in additional depreciation expenditure, which is also leading to margin expansions

• Company’s EPS grew by around 125% to Rs 19.1 from Rs. 4.51

At the current market price of Rs 522 the stock is currently trading at a trailing twelve month P/E of around 12, despite its earnings growing at an average of around 60%, over the last four quarters and good dividend payment track record and a dividend yield of over 4%

Hence, we maintain our BUY call on the stock with a year DDM based price target of Rs 625.

Company Description

Hawkins Cooker Limited is engaged in the manufacturing, trading and selling of kitchenware. The products manufactured by the Company include pressure cookers, idly stands, cookware and others. It sells kitchenware under the brand names HAWKINS, FUTURA, MISSMARY

Market Data as on 03.11.2009

LISTING	NSE/ BSE
MARKET CAP (Cr.)	Rs. 276.02
52-WEEK HIGH	Rs. 548
52-WEEK LOW	Rs. 155
BETA	0.55
CURRENT PE (x)	12.45
INDUSTRY PE (x)	n/a

PRICE PERFORMANCE (%)

Time Period	Stock	Nifty 50
1 MONTH	15.22	-7.26
3 MONTH	57.81	3.14
1 YEAR	267.8	63.4

FINANCIALS

RESULT HIGHLIGHTS:

Hawkins declared its 2Q09 results on Saturday.
The net sales for the quarter ended September 09 increased by 26% to Rs 76.23 cr from 60.74 cr.
Its net profit increased by a robust 124% to Rs 10.11 cr as compared to Rs 4.51 cr, YoY
Its EBIT margin increased by a strong 949 bps and this is mainly on account of a fall in its raw material costs as compared to sales from 34% to 25%, YoY
Since the company is currently operating at only around 60% of its operating capacity, its increase in sales is not because of an increase in additional depreciation expenditure, which is also leading to margin expansions
Company’s EPS grew by around 125% to Rs 19.1 from Rs. 4.51

Investment Rationale

Well established brand name
The company has a low capacity utilisation being 31.5% in FY09 and an average utilisation of 25% in the last 5 years. Thus no future capex is required to fuel the growth in demand
With growing brand aspirations among people and rural development to fuel demand the requirements in this industry are bound to grow in the near future
The company has been maintaining a very healthy return on Equity from the last 5 years. Its ROE has grown from 26.2% in 2005 to 81.8% in the year 2009
Cookware industry has always been associated with a stable growth rate which has reflected in the share prices of the company over the years
The company has been growing the dividend payment every year and its dividend yield stands at around 4.8%
At the current market price of Rs 522 the stock is currently trading at a trailing twelve month P/E of around 12, despite its earnings growing at an average of around 60%, over the last four quarters and good dividend payment track record and a dividend yield of over 4%

Hence, we maintain our BUY call on the stock with a year DDM based price target of Rs 625.

Reliance Industries Q2 Results

Praveen Bajaj — Fri, 30 Oct 2009 06:38:16 +0000

Reliance Industries Result Highlights

Price performance

Time Period	Stock	Nifty 50
1 MONTH	-7.49	-5.12
3 MONTH	4.03	5.25
1 YEAR	66.38	76.14

Reliance Industries Market Data as on 29th October 2009

LISTING	NSE/ BSE
MARKET CAP (Cr.)	Rs. 3,34,482
52-WEEK HIGH	Rs. 2490.0
52-WEEK LOW	Rs. 1021.0
BETA	1.25
CURRENT PE (x)	22
INDUSTRY PE (x)	n/a

Financials

Reliance Industries Ltd. declared its second quarter results today. The results came in line with the Bloomberg consensus expectations.

RESULT HIGHLIGHTS:

Reliance’s standalone net profit fell by around 6% YoY, to Rs. 3,852 cr. from Rs. 4,116 cr. This was mainly on account of a lower gross refinery margins (GRMs)
The total turnover rose by around 5% YoY, to Rs. 46,848 cr from Rs. 44,688 cr.
Its petrochemical segment sales are down by around 14% YoY at Rs. 13,340, while the refining segment revenues remained flat
Its turnover from the Oil & Gas segment rose on account of ramp up of the gas production from the KG basin
Company’s GRMs stood at US$ 6.3/barrel for the half year and US$ 6.0/ barrel for the quarter ending 30^th September, 2009 which is one of the key causes of disappointment given the complex nature of its refinery
Its operating margin improved by around 90bps from 15.5% to around 15.4%
Depreciation cost for the company jumped 92.4% to Rs 2,432 crore. This is mainly on account of higher depreciation in Oil & Gas and Refinery & Marketing business
Its other income jumped by around 316% and there was substantial gain on the inventory front too
For the half year ending September 2009 the EBIT margin from its refinery business fell to 4.1% as compared to 8.4% in the previous year mainly on account of over capacity with the addition of SEZ refinery and lower demand at the global level
Even though the half year EPS is only around Rs 46 we believe it to touch around 110 levels for the full year on account of further ramp up of the gas production

Experts on the street believe that the numbers are disappointing as per their estimates and on account of lower margins and higher other income and they expect the stock to test Rs. 1900 levels.

Author: Rahul Sonthalia, Analyst, Kredent Group

Some Strange Statistics and Deja vu….

Hero Honda net profit rises by 95%

Vineet Patawari — Fri, 23 Oct 2009 13:39:41 +0000

Hero Honda net profit surges by 95%

Results highlights – India’s largest manufacturer of motorcycles, Hero Honda Motors second quarter results were ahead of the market’s expectation mainly on account of better margins. The company reported a strong surge of 95% in net profit to Rs 597.14 crore compared to the second quarter of financial year 2008-09. A similar sharp surge came in the first quarter ending June, when net profit rose by 83 per cent to Rs 500.11 crore.

The growth in sales is 26.8% compared to the same quarter in previous financial year. The company reported a strong total income of Rs4,059.4 crore. This was driven by huge volumes as the company sold more than one million units in the quarter.

Growth Factors – The festive season spread over two months during the quarter worked wonders for the company in terms of volume growth, which was also seen across all the segments in the automobile sector.

Decrease in raw material prices, depreciation, and the effective taxation rate at the Haridwar plant (from 28% in first quarter to 22.31% in second quarter).

Stock prices have been building up since August in accordance with strong market fundamentals and good earnings forecast. Prices touched a high of Rs.1724 in 3rd week of September and moved in the range of 1600-1700 ahead of the earnings announcement. Prices opened up on Thursday post announcement on rose up by 2.4% but were dragged down due overall weakness in the market. Prices corrected to close at Rs 1595, about 0.9% down from previous day on October 22, 2009. A better than expected performance failed to keep to prices at increased levels.

Caution – Though the company has achieved a strong volume growth in first half of FY2010, we believe that with the ongoing strikes at one of its major suppliers Rico Auto and few other auto ancillaries in the Gurgaon belt could lead to production constraints in second half of FY2010. Thus we believe that if the demand continues to remain strong, the ongoing agitations in the factories of its major suppliers could affect its production, thereby pushing down its sales volume on a quarterly basis.

Company expects an increase in prices of steel and aluminum between 5 to 10 per cent in the coming quarters as the economy revives. Increasing Interest rate can be threat to all the automobile players in the short term.

We believe given the sound management, consistent performance and expected increase in demand due to reviving economy makes it good long term bait for long term capital appreciation and stability of dividends. But all the above positive points are already factored in the current price. At the current market price of Rs1586, the stock trades at around 16.5x its FY2010E and 14.9x FY2011E Bloomberg consensus earnings of Rs97.6 and Rs108 respectively.

Results highlights – India’s largest manufacturer of motorcycles, Hero Honda Motors second quarter results were ahead of the market’s expectation mainly on account of better margins. The company reported a strong surge of 95% in net profit to Rs 597.14 crore compared to the second quarter of financial year 2008-09. A similar sharp surge came in the first quarter ending June, when net profit rose by 83 per cent to Rs 500.11 crore.

Growth Factors – The festive season spread over two months during the quarter worked wonders for the company in terms of volume growth, which was also seen across all the segments in the automobile sector.

Decrease in raw material prices, depreciation, and the effective taxation rate at the Haridwar plant (from 28% in first quarter to 22.31% in second quarter) led to the higher bottom line compared to the 26.8% increase in top line

Hero Honda vs. Index (source: BSEINDIA.COM)

Stock prices have been building up since August in accordance with strong market fundamentals and good earnings forecast. Prices touched a high of Rs.1724 in 3rd week of September and moved in the range of 1600-1700 ahead of the earnings announcement. Prices opened up on Thursday post announcement and rose up by 2.4% but were dragged down due overall weakness in the market. Prices corrected to close at Rs 1595, about 0.9% down from previous day on October 22, 2009. A better than expected performance failed to keep to prices at increased levels.

Caution – Though the company has achieved a strong volume growth in first half of FY2010, we believe that with the ongoing strikes at one of its major suppliers Rico Auto and few other auto ancillaries in the Gurgaon belt could lead to production constraints in second half of FY2010. Thus we believe that if the demand continues to remain strong, the ongoing agitations in the factories of its major suppliers could affect its production, thereby pushing down its sales volume on a quarterly basis.

Full disclosure: No position at the time of this writing. Please do your own research before making an investment decisions for HEROHONDA.

Authors:

Vineet Patawari , B.Com (H), ACA, PGDM (IIM Indore)