|
Summary
of Contents
SHAREKHAN SPECIAL
Auto earnings
preview
Q1FY2007 has been a strong
quarter for the automobile sector. Bajaj Auto's motorcycle sales
grew by 34.5%, Maruti's car sales grew by 19% and Tata Motors'
commercial vehicle sales grew by 64% (on a low base of Q1FY2006 due
to the implementation of the new emission norms).
The volume growth in the quarter should lead to
margin expansion, thereby mitigating the impact of the rising costs
to some extent. Most of the vehicle companies are planning to raise
the prices by 2-3% from Q2FY2007 onwards to offset the impact of the
cost increases.
We expect Ashok Leyland, Bajaj Auto and Maruti
Udyog to be among the leaders in the sector for this
quarter.
Banking earnings
preview
-
We expect most of the public sector banks
(PSBs) to report a decline in their earnings for Q1FY2007 despite
a strong loan growth, due to the contraction of the net interest
margins and the losses on the bond portfolios.
-
We expect the private sector banks to fare
better than their peers in the public sector and report better
results on account of a strong growth in the non-interest income
and lower provisioning.
-
We expect the PSB majors like State Bank of
India and Punjab National Bank to report a decline of 16% year on
year (yoy) and 18% yoy in their respective earnings.
-
HDFC Bank, ICICI Bank and UTI Bank are likely
report a growth of 29.6% yoy, 12% yoy and 22% yoy respectively in
their earnings for Q1FY2007.
STOCK UPDATE
Aban Loyd Chiles
Offshore
Cluster: Emerging
Star
Recommendation: Buy
Price target:
Rs1,760
Current market price: Rs911
Mulling an equity issue
In our
earlier updates on Aban Loyd Chiles Offshore (Aban), we had informed
you of the company's high debt/equity ratio of 7.7:1. We had also
told you how we expected the company to go for an equity infusion in
order to improve its balance sheet and further grow via the
inorganic route. Well, that's exactly what seems to be happening
now. According to a news report, Aban Singapore, a 100% subsidiary
of Aban, is looking to raise around USD400 million by placing shares
to private equity investors.
3i
Infotech
Cluster: Emerging
Star
Recommendation: Buy
Price target: Rs244
Current
market price: Rs146
Fundamentals are intact
According
to the media reports, ICICI Bank is looking at reducing its stake in
3i Infotech from 54% (including direct and indirect holding) to
below 30%. This is in line with the regulations that a bank cannot
hold more than a 30% stake in a non-financial company. In the recent
past, ICICI Bank has reduced its stake in 3i Infotech by 5% to 49%,
by offloading around a 2% stake to Life Insurance Corporation (LIC)
and another 3% to group companies.
SECTOR
UPDATE
Textiles
Government
makes it 'TUF'
-
The ministry of textiles has directed the
lending institutions to stop the sanctioning of loans under the
Technology Upgradation Fund Scheme (TUFs) with effect from July 6,
2006. However, the disbursement of the loans, which have already
been sanctioned, will not be affected.
-
The companies under our coverage in the
textiles space are Welspun India, Alok Industries and Aarvee
Denims. These companies have already received the required
sanctions from the lending institutions for the funds to be raised
under the TUFs. The capital expenditure (capex) plans for these
companies as factored in our FY2007 and FY2008 estimates are fully
financed.
-
Thus as the capex plans of these companies are
fully funded, we do not see the stopping of the loan sanctions
under the TUFs having any negative impact on the finance cost of
these companies. |
