Sensex

Tuesday, June 24, 2008

DG - Results - Jet Airways, United Breweries, PSL; Change in Recommendation - Hindalco; Updates - Economy, Cement

What's Inside

Results

Jet Airways: Higher-than-expected losses due to increased fuel costs; no respite in sight, cut rating to SELL from REDUCE

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Higher-than-expected losses due to increased fuel costs and low international seat factors

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Outlook remains bleak with continued strength in fuel prices, domestic overcapacity and start-up nature of international operations

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Jet Lite's FY2008 performance improves over a low base; turnaround to test management's execution skills

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Cut target price to Rs450; and rating to SELL from REDUCE earlier

United Breweries: Margin expansion in a difficult year but rich valuations do not offer upsides

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4QFY08 profits higher than expected due to fixed cost savings, but input cost pressures remain

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JV operations as per expectations, awaiting more clarity post Heineken acquisition of S&N stake

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Reduce target price to Rs 160 (Rs 169 earlier) and maintain REDUCE rating

PSL: 4QFY08 results below estimates; revise estimates for recent order flow; maintain BUY

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4QFY08 results - revenues and PAT below estimates due to lower EBITDA margin

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Revise FY2009E and FY2010E earnings estimates upwards by 19% and 26% for higher volumes and better realizations

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Revise volume assumptions for recent order flows and pricing assumptions in line with current market trends

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Maintain target price at Rs500 and BUY rating; increase WACC assumption to 13%

Change in Recommendation

Hindalco: Rights issue to fund Novelis acquisition; balance funding may prove costly - cut target price to Rs150; lower rating to REDUCE

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Hindalco will raise Rs50 bn through a rights issue to fund the Novelis bridge loan of US$3 bn - balance to be funded through treasury and debt

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We reduce our target multiple to factor in lower global valuations for non-ferrous companies - we now value both aluminum and copper business at 6X FY2010E EBITDA

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Reduce target price to Rs150/share (Rs215/share earlier) factoring lower multiple, dilution on account of rights issue

Updates

Economy: Growth to trim on RBI's strong signal; but inflation is destined to stay high

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RBI hikes CRR by 50 bps to 8.75, repo rate by 50 bps to 8.5%; we expect CRR at 9.25% and repo rate at 8.75% during the year

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CRR hike to mop up nearly Rs200 bn of primary liquidity; repo rate hike to increase cost of borrowed funds

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Tightening to slow aggregate demand; revise our real GDP growth projection to 7.9% from 8.2% for FY2009E

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Inflation likely to stay in double digits till 3QFY09; but preemptive tightening to help contain second round impact of fuel-price-led inflation

Cement: Crude oil linked inflation woes to impact profitability of cement companies

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Average realizations for FY2009 reduced by Rs5-7/bag

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Higher freight costs on account of revised fuel prices

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Steep correction in valuation multiples, ahead of margin correction

 

 

 

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Regards

BigGains !!
MARKETPLACE

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