For updates visit
Kotak Securities: Sensex band seen at 14250-16750 over next 12 months; May not have seen end of subprime crisis
Friday, September 14, 2007
Sanjeev Prasad, Head Research of Kotak Securities says that there is not much upside seen from the current level for the markets and it can be seen in a band of 14250-16750 over the next 12 months. He believes that the US subprime problems are not over yet. In India he says that the political instability is likely to keep the markets under pressure. It may also impact the telecom, oil and gas policies.
Speaking on the sectors, Prasad says that we may not have seen the end of problems in real estate. They have a positive view on the infrastructure space, but says that the FMCG space may not report good numbers. The Indian IT sector is also likely to continue underperforming.
On media, Prasad says that they are not excited by it and the CAS rollout has been ineffective. Zee EPS is seen at Rs 11.50 for FY 09 and the stock looks expensive at these levels. On cement, he mentioned that the cement capacity utilisation will decline in FY09-10 and prices may come off. They are looking at 32 mt of new cement capacities in FY09 & FY10 each.
Ambuja Cement Inline; target Rs 130: Kotak
Friday, August 24, 2007
Holcim has made an open offer for acquiring 20% shares of Ambuja Cement (ACEM) at Rs 154 per share. This follows the acquisition of additional 3.9% stake from the Sekhsaria family at the same price, which necessitated an open offer. The offer price is at a 20% premium over the average price of the last two weeks and implies an EV/ton of USD 285. Upon successful completion of the open offer Holcim's stake in ACEM will likely increase to 56%. We have In Line rating with target price of Rs 130 per share on the stock. Our target price of Rs 130 per share and open offer price of Rs 154 per share implies a weighted average price of Rs 137.6 per share based on an acceptance ratio of 32% (floating stock is 63% prior to open offer). The open offer therefore presents an opportunity to exit at a price higher than our fair value estimate. We believe that cement prices could come under pressure in FY2009 with large new capacity addition and retain our cautious view on the sector. Holcim is keen on increasing stake in ACEM and its willingness to pay a higher price in the event of a poor response to the open offer would be a key risk.
Open offer price of Rs 154 per share implies a buying opportunity in the stock below Rs 137.6 per share for tendering in the open offer
The non-promoter (Holcim/Sekhsaria) holding prior to the open offer is 63%, which implies an acceptance probability of 32% assuming all the shares are tendered in the open offer (20% divided by 63%). Our fair value target price of Rs 130 per share and open offer price of Rs 154 per share gives a weighted average price of Rs 137.6 per share based on 32% acceptance ratio. The stock therefore offers a trading buy opportunity below Rs 137.6 per share for tendering in the open offer.
Open offer will take Holcim’s stake to 56%
Holcim through its subsidiary Holderind Investments Ltd, has made an open offer to acquire 20% shares of ACEM at Rs 154 per share, which if successful will take Holcim’s stake in ACEM to 56%. Holcim has acquired 3.9% stake in ACEM from the founding family (Sekhsarias) of ACEM for Rs 154 per share in addition to its extant 32.35% stake. Post this acquisition, Holcim’s acquisition of ACEM shares exceeds the maximum 5% allowed in a financial year under the creeping acquisition rules. Holcim as a result is obliged to make an open offer (under SEBI Guidelines of Substantial Acquisition of Shares and Takeovers) for acquiring additional 20% of ACEM’s equity.
Acquisition to consolidate Holcim’s presence in emerging markets
Holcim’s acquisition of additional stake at EV/ton of USD 285/ton on CY2007E production and 9.2X EV/EBITDA indicates the premium (replacement cost id USD 85-100/ton) global players are willing to pay to participate in the growth in emerging markets. Asia-pacific contributed 23% to net sales of Holcim in 1HCY2007, making it the second largest market for the company after Europe. In Asia, India represents the highest growth market for Holcim both in value and volume terms.
Buy ICICI Bank, target price Rs 1075:Kotak
Tuesday, August 21, 2007
The Foreign Investment Promotion Board has cleared the plan by ICICI Bank to divest up to 24% equity stake in ICICI Financial Services in favour of global private equity companies. We believe the fundamentals of the company are intact and the approval from the FIPB is one step forward in the direction of value unlocking of its subsidiaries in the holding company. The recent correction provides good buying opportunities. Hence, we recommend BUY with a target price of Rs 1075.
ICICI Bank received approval from FIPB for its proposal to divest up to 24% of its equity stake in ICICI Financial Services in favor of global private equity companies. In June 2007 itself, FIPB rejected the proposal on the ground that section 2(g) (i) of IRDA regulations do not allow a subsidiary company to be a promoter of the insurance business.
Apart from the approval from FIPB and IRDA, the bank has to await the clearance from the Finance Minister as well as the central bank. Before the recent approval from FIPB, the bank had received the go-ahead from IRDA, subject to the condition that the foreign investment in ICICI Financial Services does not breach 26% FDI cap for the Insurance sector.
ICICI Bank plans to sell 5.9% stake in ICICI Financial Services to foreign investors to help fund the organic growth of its insurance and AMC businesses. The bank has already received a commitment of USD 650 million for its 5.9% stake in ICICI Financial Services, valuing the holding company at USD 11 billion. The commitment of these investors is valid for six months. According to some pink papers, Goldman Sachs will be the largest foreign investor in the holding company whereas other investors would include Nomura, Swiss Re, Sequoia Capital and Soros.
The bank is also planning to list the wholly-owned subsidiary in the coming future. ICICI Financial Services includes the insurance businesses: life and non-life both, and asset management business. It is expected that over 70% of the value of the holding company would come on account of its life insurance business. The other 30% of the pie is expected to come from its non-life business and its asset management business.
Valuation and recommendation
We are maintaining our earnings forecast and expect that net profit for FY08E and FY09E will be Rs 38.85 billion and Rs.50.73 billion, respectively resulting into an EPS of Rs 38.74 and Rs.45.86, respectively. The adjusted book value for FY08E and FY09E is forecast at Rs.403.2 and Rs.435.5, respectively. On the basis of SOTP, we are maintaining its fair value at Rs.1075, where the value of its standalone business comes to Rs 740 (P/E:16x FY09 EPS, P/ABV: 1.7x FY09E ABV) and the value of subsidiaries included here is Rs 335 (15% discount to the fair value of its subsidiaries at Rs.394). Its overseas banking subsidiary is valued at 2x FY09 BV, which has a decent RoE of around 22%.
KOTAK - INDIA DAILY, Murudeshwar Ceramics, PSL Ltd, ICICI Bank, HT Media, Weekly Technical Update
Tuesday, June 26, 2007
Karvy - Inox Liesure, Daily Morning Brief, India Daily, IPCA LABORATORIES, SHARON BIOMEDICINE
Thursday, June 21, 2007
Download
Karvy - Inox Liesure, Daily Morning Brief, India Daily, IPCA LABORATORIES, SHARON BIOMEDICINE
Emkay - Jindal Stainless, Lakshmi Machine Works, SREI Infrastructure Finance, mutual funds report june07, Indian Cement Sector
Kotak - Panacea Bio, Petronet LNG, Media & Cement, KR Choksy - Tech Mahindra
Friday, June 15, 2007
Kotak - Tata Tea, Torrent Pharmaceuticals, Dish TV
Tuesday, June 5, 2007
• Expect 36% growth in FY2008 net profit; on the back of 18% revenue growth
• Maintain IL, with revised price target of Rs260. Recommend buying on dips.
We recently met the Torrent management. Outlook continues to be robust, with strong revenue growth and margin expansion. For FY2008, we have modeled revenue growth of 18%, 130bps margin expansion (10.8% EBITDA) and 36% growth in net profit. We estimate an EPS of Rs15 and Rs17.4 for FY2008 and FY2009 (versus Rs13.2 and Rs16.1 earlier). Amongst key markets, India, Brazil and CIS are doing very well, a trend, which is likely to continue. Company expects sharp margin expansion in the Brazil market, which will equal investments/loss in Mexico (for product filings). Investment/losses in the US market will continue this year too (for product filings), as revenues are expected to begin from next year. Germany continues to be a dark spot (Rs230 mn loss in FY2007). We have rolled over our DCF to March 2009 and our revised price target is Rs260 (Rs200 earlier), or 15x FY2009 earnings. Key risks include inability to improve profitability of international operations, mainly Germany.
For domestic formulations, we have modeled 20% growth for FY2008. For FY2007, domestic formulations business grew by 25% to Rs5.6 bn (43% of total sales). This growth rate was largely due to buoyant performance of the Diabetology, Neuro-Psychiatry and Pain management portfolios, impact of field force expansion done in previous years, improved doctor coverage and new introductions made during the year. We expect the trend to continue.
We have modeled 19% growth in international sales for FY2008. For FY2007, international sales grew by 43% to Rs6.15 bn (48% of total sales). This includes Rs2.8 bn from Heumann (Germany), Rs1.7 bn from Brazil and Rs590 mn from Russia/CIS. The company has done a good job in Brazil, creating a large business in 5 years. We expect the growth momentum to continue. Under the same country head, and a similar branded strategy, the company is expanding into Mexico.
During the previous year, the Company received an approval status from the US FDA for its API and formulation manufacturing facilities. This should help start the US business; however we have little expectation in the short to medium term.
We have modeled EBITDA margin of 10.8% for FY2008, up from 9.5% in FY2007. Margin expansion will likely be driven by scale benefits. Excise duty dropped to 2.2% in FY2007 (6.9% in FY2006). The year had the benefit of a new tax-free plant at Baddi. This resulted in lower excise and income tax. R&D cost is likely to remain at 6% of sales.
Tata Tea : Domestic branded tea sale grew by 12% in FY2007, retain water as a focus area Targert-992
• 9% volumes growth and 12% value growth for branded tea in domestic portfolio
• Growth in Tetley remains a concern-forex gains help
• Exit Energy Brands, enter Mount Everest Mineral Water
Tata Tea reported 14.7% growth in revenues at Rs2.51 bn (we expected 12.2% growth) and 34% increase in EBITDA to Rs150 mn (we estimated Rs243 mn) during 4QFY07.
While domestic branded tea sales continue to do well (9% volumes growth and 12% value growth for branded tea in domestic portfolio), higher wage expenses (wage increases and new accounting standards) resulted in lower EBITDA. Tetley continues to post marketshare gains in key markets. However, stagnant black tea market in UK remains a concern. Tata Tea has agreed for conditional sale of its stake in Energy Brands Inc (EBI) to Coca Cola. Tata group had earlier acquired 30% stake in EBI (25% held by Tata Tea and 5% by Tata Sons) for US$677 mn, in a bid to add a high growth beverage portfolio in the world's largest beverage market. With the sale of 30% stake to Coca Cola for US$1.2 bn, Tata Tea will need to redraw its plans for improving its growth profile. Tata Tea has reiterated its thrust on three verticals—Tea, Coffee and Water, and has announced the acquisition of a controlling stake in Mount Everest Mineral Water Limited (MEMW). We believe that given the robust macro environment in rural as well as urban India, domestic tea business will continue to do well. However, we have concerns on the Tetley business and need to watch out for Tata Tea's strategy to drive growth. We retain In Line rating on the company. Our revised target price of Rs992/share includes Rs91/share from
investments in group companies (valued at 50% discount to market price).
Our target price implies a P/E of 21.5X and 16.9X on FY2008E and FY2009E respectively.
Avoid expensive war for water. Tata Tea has agreed for a conditional sale of its stake in EBI for a consideration of US$1.2 bn (for 30% stake—of which 5% is held by Tata Sons) to Coca Cola Company as against an acquisition price of US$677 mn, resulting in a gain of 77% in less than a year. The sale results in a pre-tax saving of US$436 mn (or Rs296/ share) for Tata Tea. Enhanced and flavored water market is the fastest growing beverage segment in US. Coca Cola lagged its archrival Pepsico in this segment and worried with the slow growth in carbonated drinks market had approached the shareholders of EBI for a possible takeover. We note that the Tata group was a minority shareholder in EBI with 30% stake and gaining control over EBI would have required it to enter into a possible expensive war with Coca Cola. The sale is likely to be completed by November 2007.
Retain focus on water business—as the third vertical. Tata Tea has reiterated that water would remain a critical growth avenue for the company along with tea and coffee. Tata Tea has announced the acquisition of a controlling stake in Mount Everest Mineral Water Limited (MEMW), owners of Himalayan brand of bottled water. Tata Tea is purchasing 10.7% of equity from the promoters and subscribing to a preferential issue of 15% of equity at Rs140/share. A successful open offer for additional 20% stake will increase Tata Tea's stake to about 44%. Factoring in the cash with the company, the acquisition price puts the EV of MEMW at Rs3.97 bn. MEMW achieved sales of Rs229 mn and EBITDA of Rs23.1 mn during the 12 months ending December 31, 2006, implying a 12-month trailing EV/EBITDA of 171X and EV/Sales of 17.3X.
While the acquisitions appears expensive on valuations, Tata Tea claims that the aquifer (of mineral water) is currently being tapped for only 1% of its potential and expect string growth going forward. The bottled water market in India is estimated at Rs11 bn growingat a healthy rate of 25%. Tata Tea will also likely use MEMW's alliance with US-based Marsh Supermarkets Inc. for distributing Tetley products in US. Marsh Supermarkets has 67 supermarkets, 31 LoBill Foods Stores, 6 O'Malia's Food Markets, 148 Village pantry convenience stores and a chain of pharmacies.
Financials
March y/e 2007E 2008E 2009E
Sales (Rs bn) 3 9 4 1 4 2
Net Profit (Rs bn) 3 .1 2 .9 3 .5
EPS (Rs) 5 2.0 4 6.2 5 7.3
EPS gth 0.1 (11.1) 24.2
P/E (x) 1 8.3 2 0.6 1 6.6
EV/EBITDA (x) 1 2.9 1 1.8 1 1.4
Div yield (%) 1 .3 1 .3 1 .3
-----------------------------------------------------------------------------------
• Limited room for error in execution at current stock price levels; pricing strategy of new entrants next trigger
• Any correction in fancy valuations of Indian media stocks will hurt Dish TV stock also
We have downgraded Dish TV to IL from OP noting the fact that the stock is trading above our 12-month DCF-based target price of Rs125 and the stock's strong outperformance over the past few weeks. We continue to like Dish TV as a good play on India's emerging distribution opportunity. Indeed, we are most favorably disposed to the distribution portion of the media chain versus broadcasting and content given distribution's ownership of the last-mile, its more loyal audience and hence more predictable cash flows. We would wait for more visibility on the pace of adoption of DTH service in India, Dish's execution versus others and pricing strategy of new entrants. However, we model rapid uptake of DTH service in India given problems with the cable industry. Thus, Dish's current valuations leave limited scope for execution and macro-environment-related disappointments. We retain our earnings estimates.
Not much margin for error at current stock price levels. We believe Dish TV’s strong outperformance of the Indian market over the past few weeks leaves limited scope for disappointments related to slower-than-expected uptake of DTH service in India or Dish’s execution in its quest for new subscribers and market share. Exhibit 1 gives our forecasts for the Indian DTH market and Dish’s market share for the next few years. We model Dish to add 1.1 mn subscribers each in FY2008E and FY2009E. Also, we would watch for the pricing strategy of new entrants and note large risks to Dish’s cash flows if new entrants (Sun Direct, Reliance Bluemagic and Bharti Airtel) offer more competitive packages—lower monthly fees, higher subsidies on consumer premise equipment [CPE] and more number of months of free service. We note that Dish’s valuation is highly leveraged to pricing (ARPU and subsidy on CPE) assumptions. We model a competitive pricing environment but not a disastrously competitive one. We assume new entrants will offer similar packages compared to the current ones in terms of pricing, subsidies on CPE and number of months of free service.
Dish TV could also be vulnerable to any correction in the valuations of the Indian media sector. We expect valuations of the Indian media sector to correct at some point in the future; we cannot say when in the current liquidity-driven market. However, any correction would impact Dish TV stock also since it does not have the support of earnings and/or dividends currently. Indeed, we believe the stock’s outperformance may be due to the general strong re-rating of the sector and not due to any great foresight in stock picking by us and others. In our view, valuations of most Indian media stocks are incredibly high and reflect a lot of expected positive developments in the future; thus scope of earnings disappointments and concurrent multiple de-rating (where earnings exist) is high.
We find the valuations impossible to justify despite our reasonably positive view of the fundamentals of the sector.
--------------------------------------------------------------------------------------------
Kotak - India Daily, Derivative Trakker, Daily Morning Brief
Wednesday, May 23, 2007
Catagories Daily Call, Daily morning brief, Derivatives, Kotak, Research Reports
kotak - Daily Morning Brief, F & O, India Daily Special
Tuesday, May 22, 2007
Catagories Daily morning brief, Derivatives, FNO, Kotak, Research Reports
Kotak - Voltamp BUY, NICHOLAS PIRAMAL
Thursday, May 10, 2007
Download Here
Kotak-VoltampBUYNICHOLASPIRAMAL
Kotak RELIANCE PETRO
Download Here
Kotak - RELIANCE PETRO
KOTAK Voltamp Transformer
Download Here
KOTAK - Voltamp Transformer
Kotak - GAIL India, Jyothi Structures, ABB, Energy, Economy
Kotak - GAIL India, Jyothi Structures, ABB, Energy, Economy
Download Here
Kotak INDIA DAILY (Tech Mahindra, J&K Bank, Ashok Leyland, India equity strategy), Weekly Technical Update
Tuesday, May 8, 2007
Kotak INDIA DAILY (Tech Mahindra, J&K Bank, Ashok Leyland, India equity strategy), Weekly Technical Update
Download Here
Kotak - Daily Morning Brief (ASHOK LEYLAND, GLENMARK, J & K Bank), Market Morning, India Daily Summary
Kotak - Daily Morning Brief (ASHOK LEYLAND, GLENMARK, J & K Bank), Market Morning, India Daily Summary
Download Here
KotaK - Daily Morning, Market Morning
Friday, May 4, 2007
KotaK - Daily Morning Brief, Market Morning
Download Here
Kotak (Reliance Petro, HDFC, Sterlitre Ind, Aditya Birla Nuvo, Sintex Ind, M & M, Sesa Goa, Wockhart, Banking
Kotak (Reliance Petro, HDFC, Sterlitre Ind, Aditya Birla Nuvo, Sintex Ind, M & M, Sesa Goa, Wockhart, Banking
Download Here
KOTAK - Daily Morning Brief, Market Morning, Daily
Friday, April 27, 2007
Download Here
KOTAKDailyMorningBrief
KOTAKMarketMorning
Kotak_Daily
