Summary
of Contents
SHAREKHAN SPECIAL
Q4FY2007 IT earnings
preview
The street expectations have toned down
considerably in terms of both Q4 performance and the annual guidance
for FY2008, and the recent underperformance of the tech stocks
indicates that the same has already been factored in the valuations.
This essentially means that the negatives have been priced in,
leaving limited scope for downside. But positive surprises,
especially in terms of higher than expected annual guidance by
Infosys, are not ruled out. However, the continued strengthening of
the rupee and seasonal weakness in Q1 (due to wage hikes and
additional visa related cost) would continue to influence sentiments
on tech counters in the short run. We believe that any further
weakness would be an opportunity to accumulate the front-line tech
stocks and prefer Infosys and TCS.
STOCK UPDATE
Mahindra &
Mahindra Cluster: Apple
Green Recommendation: Buy Price target: Rs1,050 Current
market price: Rs711
Logan unveiled
Key points
-
Mahindra Renault has made the much-awaited
launch of its passenger car Logan. Three variants of the car have
been launched—two in the petrol segment and one in the diesel
segment.
-
The vehicle has been priced aggressively as its
petrol version is priced between 4.28 lakh and 5.69 lakh, and its
diesel version is priced between Rs5.47 lakh and Rs6.44
lakh.
-
Currently, the vehicle is being manufactured at
the company's Nasik plant. With the setting up of a new greenfield
plant near Chennai by mid-2009, the capacity would be scaled up by
300,000 units. Also, the localisation content would improve from
50% currently to about 80-90%.
-
We expect the car to do well in the Indian
markets, mainly on account of its pricing. We expect the launch of
Logan to have a negative impact on models like Maruti's Esteem,
Tata Motors' Indigo, and Hyundai's Getz. The launch of the
passenger cars also further diversifies M&M's business model.
-
At the current market price of Rs711, the stock
discounts its FY2008E consolidated earnings by 10.4x. We maintain
our Buy recommendation on the stock with a price target of
Rs1,050.
SECTOR UPDATE
Cement
Government cuts CVD on cement imports
Key point
-
The government on Tuesday scrapped the 16%
countervailing duty (CVD) as well as the 4% additional duty on
cement imports into the country, which is a sequel to the import
duty cut in January (refer to our note dated January 23,
2007).
-
With this move, the import parity price, which
acts as a pricing benchmark for the domestic prices, will come
down from Rs245-255 per bag to Rs210-215 per bag.
-
The government has also expressed a possibility
of a roll-back of the excise duty hike affected in the budget. If
that happens, then the retail prices will come down to Rs210-215
per bag in line with the import prices.
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