The Morning Meeting Notes as on 4th March, 2010.
Contents
n Research Views
Auto – February 2010 volume update
Jaguar Land Rover (JLR)
n Total sales increased by 11.0% YoY and 7.9% MoM to 2,793 units.
n Jaguar sales declined by 4.2% YoY but increased 20.6% MoM to 794 units.
n Land Rover sales increased by 17.9% YoY and 3.8% MoM to 2,032 units.
n Research Update included
South Indian Bank - Initiating Coverage ; Giving what is due ; BUY ; Target: Rs 180
We believe that South Indian Bank's valuations at 1.0x FY11E ABV are not reflecting the transformation in quality of its earnings. Over FY06-09, SIB has consolidated its position by channelising its resources in core banking business. Focusing on core banking has helped SIB weed out volatitlity from its earnings (1.0% core RoAs) and made them more consistent, though its valuations have not taken note of this transformation.
With consolidation phase being over, SIB has set ambitious growth plans for itself. We expect SIB to add 50 branches per annum over FY10-13E with clear focus on the northern region. With branch expansion in non-south regions, we expect SIB to almost double its loans over FY09-12E to Rs240bn, a CAGR of 25.4%. We expect the earnings to grow at a CAGR of 30% over FY09-12E, driven by NIMs of 3.0% and low credit costs. We believe that SIB's robust and quality RoEs of 20% over FY09-12E warrant a re-rating of its valuations. We initiate coverage with a BUY rating and a target price of Rs180.
n Technical Comments
Hurdles ahead:
With Nifty managing to hold on to its positive gains throughout the day and finally closing near the highest point of the day, bulls still hold the supremacy. However, the conservative target of inverse H & S has seen completion and taking into account the overbought position of momentum oscillator MACD, the bearish sentiments have still not vanished. So until 78.6 % retracement packed at 5175 is cleared, the overall view still remains bearish. On downside 5045 is the key support below which the slide can deepen upto 4996 in the coming session.
BSE Oil & Gas:
Buying was witnessed in the BSE Oil & Gas index and it outperformed the broader markets and finally closed at 9825 with a gain of 2.28%. Going forward now this index has resistance at 9953 levels; if it starts trading above this level then we will witness further upside in this index. However downside this index has support at 9470 levels.
BSE Power:
BSE Power index broke the resistance of 3035 and finally closed above that at 3073 with a gain of 1.93%. On the daily chart this index forms higher top and higher bottom, as well as trading above the 21DEMA.Thus now in the coming days we may see further upside in this index and it will test 3130.However downside level of 2940 will play as a support for this index.
Regards,
Emkay Research
Emkay Global Financial Services Ltd.
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Worli, Mumbai - 400 013.
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E-mail: emkayresearch@emkayglobal.com
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