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Aditya Birla Nuvo - Result highlights The consolidated revenues of Aditya Birla Nuvo (ABN) increased by 28.6% year on year (yoy) to Rs3,594.1 crore in Q2FY2009. The operating profit margin (OPM) declined by 499 basis points to 4.9% in Q2FY2009 primarily due to the losses in the insurance, garment and business process outsourcing (BPO) businesses. Furthermore, margin pressure in the major business segments further deteriorated the overall operating profit margin (OPM). Consequently, the operating profit declined by 36.6% to Rs174.4 crore despite a strong revenue growth during the quarter. For the quarter the company has reported a net loss after minority interest of Rs104.6 crore compared with a profit after minority interest of Rs47.8 crore in Q2FY2008. An increase in the interest (up 54.8%), depreciation (up 29.0%) and tax (up 38.5%) expenses resulted in the loss. The interest expenses increased due to a higher short-term debt during the quarter. The company’s tax expenses were higher

Andhra Bank - Result highlights Andhra Bank has reported a profit after tax (PAT) of Rs161.5 crore in Q2FY2009 indicating an increase of 6.8% year on year (yoy). The same was well above our estimate of Rs131.0 crore. The net interest income (NII) for Q2FY2009 registered a robust growth of 33.6% yoy and stood at Rs433.5 crore on account of a healthy 19.5% year-on-year(y-o-y) growth in the advances coupled with a strong 48-basis-point y-o-y increase in the reported net interest margin (NIM). The NIM for the quarter came in at 3.42%, up by 48 basis points yoy from 2.94% during the year-ago period. The expansion in the margin primarily stemmed from a 98-basis-point y-o-y increase in the yields on the advances on account of 125-basis-point prime lending rate (PLR) hike undertaken by the bank during the quarter. The non-interest income during the quarter fell by 14.4% yoy to Rs135.4 crore on the back of a treasury loss of Rs8.7 crore as compared with a Rs39.0 crore gain during the year-ago

Piramal Healthcare signed a definitive merger agreement to acquire Minrad for US$40mn, to enter into US market for Sevoflurane. In addition to acquisition cost, PHL will also provide US$12mn fund as working capital to Minrad. The acquisition to be funded largely through debt thereby leverage to increase to 1x of equity by FY09; The management expect acquisition to be earning accretive (additional EPS Rs.1/share in FY10) with the revenue of US$65mn from Minrad in FY10E. Acquisition is to be completed by March 2009. We leave our financial estimates unchanged until conclusion of the deal. Minrad has been facing extreme financial difficulties due problem in material sourcing, high raw material costs, high R&D costs, high debt and interest expenses and simultaneously very low capacity utilization. Minrad has reported revenue of US$23mn and net loss of US$25.6mn in 9-month CY08 including US$4.7mn for front end discounting charges. As at the end of September 2008, it has reported net fixe

Robust order book and order inflow expected IVRCL has a robust order book of Rs.140bn which provides a revenue visibility for next 2.5 years. Order book of Rs.140 bn provides diversification across water and irrigation projects (68%), buildings (20%), power (7%) and transportation (5%). IVRCL is carrying out the building projects primarily for the large developers and state government where risk of delayed payments is minimal. Order inflow in the current fiscal till date has also been to the tune of Rs 67bn and company is L1 in another Rs 20bn worth of orders across segments. Decline in commodity prices to augur well for the company. Commodity prices have come off quite sharply in past few months which are expected to augur well for the company as well as for the entire sector. Out of the total order book, 92-93% is hedged with variable pricing clauses while the remaining are fixed price contracts. Star rated contracts constitute 70% of the variable pricing contracts while remaining co

Economy: Inflation eases but slowdown intensifies India’s trade deficit stood at USD10.5 billion in October 2008 compared with USD10.6 billion in the previous month. Though the trade deficit is up by 61.2% year on year (yoy), the same remains largely flat on a month-on-month (m-o-m) basis. With this, the year-till-date (YTD) trade deficit has now widened to USD75.8 billion from USD45.5 billion in the comparable period of the previous fiscal. Equity markets: Volumes continue to decline During November 2008, the benchmark indices corrected by 7.0%, followed by an increase of 8% during the month-to-date (MTD) period (December 01–15), negating the decline in the previous month. However, the volatility in the equity markets has taken its toll on the volumes, which continued to decline in the MTD period. In the month till date, the volumes in the futures and options (F&O) continued to decline while that in the cash market remained largely stable compared with the previous month. For Dec

The index of industrial production (IIP) for October 2008 declined 0.4%, as compared to 12.2% growth in October 2007 on back of 1.2% decline in manufacturing sector and lower growth in mining sector.Mining and electricity grew at 2.8% and 4.4%, respectively during October, 2008 whereas manufacturing sector witnessed decline of 1.2% during the same period. Intermediate goods (weight: 26.51%) and consumer goods (weight: 28.67%) declined by 3.7% and 2.3%, respectively. A decline for three consecutive months in Intermediate goods is a cause of concern. The cumulative growth for April-October 2008-09 stands at 4.1% over the corresponding period of the previous year. At the same time, IIP growth for September 2008 has been revised upwards to 5.4% from 4.8% earlier. The leading indicators like automobile sales, exports and excise tax collections etc have been suggesting that October & November IIP number would be weak. We believe that the broad moderation in IIP would continue for the res

The International markets are doing well. Revenue from international markets growing strongly on the back of strong performance in Brazil, Europe (excluding German) and Russian operations. Brazilian operations to continue strong sales growth led by new product launches. Mexico likely to start contributing from Q1FY10. Manufacturing of products constituting a significant part of Heumann (Germany) sales have been successfully transferred to India and is expected to reap benefits of lower costs from Q3FY09. Heumann reached at break-even during Q2FY09. Revenue and earning estimates: Expect 15.1% and 25.3% revenue and earning CAGR over FY08-10E. Expect EPS of Rs.22.2 for FY09E and Rs.25 for FY10E. At the current market price of Rs.122, the stock is trading at 5.5x FY09 and 4.9x FY10 earning estimates. Accumulate with target price Rs.222. At target price, the stock will be valued at 10x FY09E and 8.9 FY10E price-to-earning multiple and 2.8x FY09E EV/EBIDTA multiple.

Profitability hinges on cane price Dhampur Sugar Mills reported a 12.3% increase in its sales to Rs667.9 crore in FY2008primarily due to the revenues generated from the sale of power from the cogeneration division. The cogeneration division had a surplus power generation capacity of 80MW that led to the sale of power to the grid and fetched Rs128.7 crore of gross revenues (as against nothing in FY2007). The operating profit for the year stood at Rs113.8 crore against an operating loss of Rs20.9 crore in FY2007 because of a 42% profit from the cogeneration division (no profit in FY2007) and a 12% year-on-year (y-o-y) lower sugar-cane cost of Rs110 per quintal. Thus, the adjusted net profit stood at Rs21.6 crore against a loss of Rs68.8 crore in FY2007 despite higher interest and depreciation charges due to the expansions carried out in the sugar, cogeneration and chemical divisions. The company had foreign exchange loss of Rs18 crore on its external commercial borrowing (ECB) of $15 mil

Subdued outlook but value emerges Due to a slowdown in construction and real estate sectors backed by a slowdown in economy and substantial addition of fresh cement capacities over the next four to six quarters, we expect cement volume growth to slow down considerably from the earlier expectations of around 8-8.5% compounded annual growth rate over FY2008-10. As a result of a slower growth rate the utilisation rate of cement companies is expected to decline and the average realisation is anticipated to soften going forward. This will outweigh any let-down in cost pressures due to recent correction in the prices of coal, oil and other basic raw materials. Thus, the pressure on the margins of cement companies is likely to extenuate further in the coming quarters. Though the cement companies will have tough six to eight quarters before the situation begins to improve, the negatives are largely factored in the valuations with most companies trading at 30-70% below their replacement cost. M

November saw significant action being taken by several countries to defreeze the credit markets and protect their banking systems. Large fiscal stimulus was announced by the EU and China. India also took measured steps first to enhance liquidity in the system and then to soften borrowing costs. Fundamentally, India remains on a relatively better footing (albeit with slower growth) with no significant impact on the banking system, in our opinion. The potential slowdown in the Indian economy has impacted equity markets which, in our opinion, are now discounting the same. Valuations at about 10x-11x current year earnings, are not demanding, though they are higher than most Asian peers, according to consensus estimates. Falling commodity prices provide comfort on the inflation and interest rates front. We believe that, fiscal / monetary measures and higher risk appetite (stabilization in FII flows) will be the triggers for an up-move in the markets. We maintain that, in the short term, mar

Patel Engineering CMP 118 Slowdown witnessed in order inflows, especially in hydro power segment Order inflow in the hydro power segment has witnessed a slowdown in past 3-4 quarters and overall order inflow in this segment for the company is also lower than our expectations. Patel Engineering received order inflow to the tune of Rs 7bn in the last quarter from the Andhra Pradesh State Government for the modernization of the Krishna Delta System in the irrigation segment and is the lowest bidder in another Rs 15bn worth of orders. The current order book of company is expected to drive the revenue growth between FY09-FY10, however an increased pace of order inflows is required to maintain the growth momentum going forward. ACCUMULATE Patel Engineering with a price target of Rs.227 Zee Entertainment CMP 108 Rating losses, competition, deteriorating macro to weigh on advertising revenues in FY10E; recent FWICE strike doesn't help After the recent entry of three new GECs (9X, NDTV Imag