Fw: Investor's Eye: Pulse - IIP growth jumps to 6.8% in January 2012; Viewpoint - TD Power Systems (A niche play but macro concerns cloud near term outlook)

 

Investor's Eye [March 12, 2012]  Summary of Contents PULSE TRACK IIP growth jumps to 6.8% in January 2012 In January 2012, the Index of Industrial Production (IIP) grew by 6.8%, which was significantly higher than the market's expectations. The higher than expected performance was led by a strong growth in the manufacturing sector (up 8.5% year on year [YoY]) and a sharp jump in the non-durable consumer goods sector. On a year-till-date (YTD) basis, the IIP growth stands at 3.9% as against 7.8% in YTD FY2011. The December number has been revised upwards to 2.5% (against 1.8% provisional) mainly contributed by the manufacturing and electricity segments.   Outlook The IIP numbers have been quite volatile but the recent jump (from 2.5% in December 2011 to 6.8% in January 2012) shows some uptrend in the industrial activity. We continue to track the three-month moving average (3-MMA) as well as the YTD growth as these give a better picture. The 3-MMA grew to 5.1% whereas the YTD growth stood at 3.9%. Since the RBI has already reduced the cash reserve ratio (CRR) by 75 basis points to 4.75% to ease the liquidity, the probability of repo rate cuts has reduced in the March 15th mid-quarter policy review. VIEWPOINT TD Power Systems        A niche play but macro concerns cloud near term outlook Company background  TD Power Systems is India's leading manufacturer of AC generators in the range of 1MW to 52MW for steam turbines, gas turbines, hydro turbines, wind turbines and for diesel and gas engines. The company operates basically in three segments - 1. Manufacture of AC generators up to 52MW (formed 39% of FY2011's sales). 2. Projects business- Turbine Generator projects up to 52MW (19% of sales). 3. EPC business -Boiler Turbine Generator projects of 52-150MW (42% of sales) executed by a subsidiary - DF Power Systems. We interacted with the company's management recently to understand the business and future outlook.  View The company has a strong niche in the captive power space. But the slowdown in captive power investment amid rising interest rates and tough business environment has led to a slowdown in the company's order booking. Hence, the growth for the next few quarters is expected to be muted, however an uptick in the capex cycle post elections and budget could give a positive thrust to the company's order book. Its increasing focus on the overseas market could also result in a breakthrough with respect to procuring a few big orders. At the current level, the stock is trading at 13.2x our FY2013E rough earnings. Click here to read report: Investor's Eye   Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the companies mentioned in the article. Regards, The Sharekhan Research Team myaccount@sharekhan.com Manage your newsletter subscriptions