Fw: Company Report - JSW Steel Ltd - SELL

 

JSW Steel Ltd: Challenges persist - SELL CMP Rs733, Target Rs641, Downside 12.5%   JSW's performance over the last two years has been challenging due to the regulatory measures undertaken by the Government to curb illegal mining. Expectations of a faster reversal in iron ore output increased after the Supreme Court (SC) cleared the category 'A' and 'B' iron ore mines to resume operations in Karnataka, subject to necessary conditions. However, most of the mining lease agreements have expired in the past 18 months. As per the SC order, mining can resume only after they renew leases and secure statutory approvals; these mines may take anywhere between 6-12 months to resume production. We believe the impact of resumption of these mines would only be felt in FY15. However, this would not be able to boost production as it would replace the iron ore dumps to be used in FY14 and iron ore bought from other states. We expect the utilization levels at Vijaynagar to remain low at 81.5% in FY14 and 86.5% in FY15. Profitability of the consolidated entity would decline in FY14 as raw material costs would decline only marginally and lower profitability operations of Ispat would be merged. Iron ore costs remain flat due to the tight iron ore situation in Karnataka and the decline in global coking coal has been offset by the weaker rupee. We expect blended EBIDTA/ton to decline from Rs7,110 in FY13 to Rs5,998/ton in FY14 on account of the merger of the high cost operations of Ispat. Higher interest costs would further impact the company's earnings. We expect pre-exceptional profit to increase 16% yoy in FY14 to Rs15.4bn and 25% yoy in FY15 to Rs19.3bn. In FY14, net debt is expected to increase by 41.4% yoy to Rs296bn with the merger of Ispat and a capex of Rs50bn. Net debt/equity too would jump from 1.2x in FY13 to 1.71x in FY14. In addition to the stretched balance sheet, we are also concerned about the foreign debt exposure (40% of total debt exposure) and ~US$1.6bn of revenue acceptances. JSW is set to be an underperformer in the near term due to the above challenges. We believe the recent rally in the stock should be used to exit the counter and downgrade the stock from Market Performer to Sell with a revised price target of Rs641.

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Warm Regards, Amar Ambani

Fw: Company Reports - Exide Industries and Persistent Systems

 

Exide Industries: Fully charged - BUY CMP Rs127, Target Rs155, Upside 22.0% Exide Industries (Exide) has underperformed Amara Raja Batteries over the past three months by 17%. This has been on the back of slowdown in OEM sales where Exide has a larger market share. Weak industrial activity, slow pickup in replacement demand and depreciating rupee have added to the woes. We believe that markets have over reacted to some of these concerns. Battery replacement demand for passenger cars will see a strong growth in the near future as the strong growth in car sales during FY09-12 (CAGR of 18.2%) and replacement cycle of 30-36 months will start entering the markets. The two-wheeler replacement market has already seen a lot of traction in Q1 FY14 with a 22% growth. We believe this momentum would be sustained as proportion of switch-start 2-wheelers in the domestic sales has increased considerably. With regards to OEM sales, while FY14 will continues to be muted FY15 could see modest revival if the consumer sentiment improves and interest rates are cut by 50-100bps over the next 12 months. Nevertheless, weak OEM sales are margin accretive as OEM sales command substantially lower margins when compared to replacement and industrial segments. The concern over rupee and lead prices has been abated with recent appreciation in rupee and the price hikes implemented over the past few months. We expect the company to maintain its gross margins in the medium term. Given the strong performance in FY13, where margins achieved some stability, return ratios improved and investment in expansion was made, we expect the financial performance to improve from here on. Sale of stake in insurance business could be an additional trigger. With earnings FY13-15E CAGR of 22.6%, we find the valuations of 13.5x FY15E P/E attractive. Retain BUY with a revised 9-month target price of Rs155.

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Persistent Systems: Deserves Rerating! - BUY CMP Rs590, Target Rs680, Upside 15.3% Platforms and IP to boost revenues; PE services sees stable growth The core product engineering (PE) services and platforms segment of Persistent Systems has shown steady improvement in revenue traction over past couple of quarters driven by higher spending of Independent Software vendors (ISVs) and enterprises. Our recent conversation with the management suggests this traction should continue especially considering robust growth from Platform solutions. The IP business (Intellectual Property) too should show strong growth owing to the pushed out HP Client automation (HPCA) product revenues and traditional back-ended growth in rest of the IP portfolio. Operating margin to improve seq. on higher IP and cost leverage Integration related expenses, strong hiring, sales function re-organisation, wage hikes and delay in the revenue accretion from the HPCA product (despite costs being booked) resulted in correction in margin over past 3-4 quarters. We believe, the improving traction in Products and platform business, robust growth expectation in IP revenues should result in strong cost leverage implying a steady improvement in margin. Overall, the key headwinds of wage inflation, fresher hiring and sustained S&M should be offset to a large extent by the improving business momentum in H2 FY14 resulting in margin improving 300bps over next three quarters. Valuation is cheap at 8.7x FY15E; Maintain BUY Persistent has continued to leverage on its niche expertise in the offshore product development space and its marquee clientele. This is seen in the sustained traction for its sell-with business, PE services as well as strong growth in IP portfolio. Improving spending momentum in its key US market, rejigged sales organization and broadened services/client portfolio due to acquisitions should continue to support revenue traction. On the back of this stronger momentum, we increase our estimates and expect dollar revenue/INR earnings to witness 15.8%/19.6% CAGR over FY13-15E (versus 13.6%/16.3% earlier). Maintain BUY

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Warm Regards, Amar Ambani

Fw: Currency Eagle Eye: USD-INR has the potential to crack further

 

 

Currency Eagle Eye [Septemebr 23, 2013] Sharekhan www.sharekhan.com

Summary of Contents   PUNTER'S CALL USD-INR: Potential to crack further Since the breakout from an ending diagonal in May, the USD-INR rallied smartly. On the way up it crossed multiple resistances.   GBP-INR: Bears keep upper hand The GBP-INR had taken support near a long-term rising trendline.   EUR-INR: Trend remains down In case of the EUR-INR, the short-term correction had found support near the medium-term rising trendline.   JPY-INR: Channel broken The JPY-INR had fallen significantly. It achieved the equality target on the downside.   Click here to read report: Currency Eagle Eye

Regards, The Sharekhan Research Team

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Fw: NFO from ICICI Prudential Mutual Fund

 

*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.   (BLUE) investors understand that their principal will be at low risk (YELLOW) investors understand that their principal will be at medium risk (BROWN) investors understand that their principal will be at high risk

Presenting ICICI Prudential Multiple Yield Fund Series 5 - 1100 Days - Plan A (A close ended Income Fund) The Fund aims to limit downside by investing in high rated debt instruments and at the same time endeavors to generate long term growth by investing in equity. This is achieved through the structure of the Fund's portfolio which will be predominantly invested in debt instruments (aim to limit downside risk), with a limited equity exposure aiming to provide capital appreciation. The returns are sought to be tax efficient.

Suitable for: The Fund can serve as a good transition product for risk averse investors, who primarily save in traditional fixed income investments. Investors who have shunned equities because of their market linked nature can consider investing in this Fund as it has mix of debt and equity instruments. Investors looking forward to enhancing returns, from their portfolio, with a view to beat inflation in the long term, can consider this Fund. In terms of tax efficiency, traditional fixed income investors (in higher tax brackets) can consider investing in this fund.

Other NFO details: Benchmark: Crisil MIP Blended Index Minimum application amount: Rs. 5000/- and in multiples of Rs.10 thereafter Entry Load: Not Applicable; Exit Load: Since the Plan will be listed on the stock exchange, load will not be applicable. Investors shall note that the brokerage on sales of the units of the schemes on the stock exchanges shall be borne by the investors. Liquidity: Listed on BSE Ltd. No redemption/repurchase prior to maturity with the fund house

Investment Approach: For Debt Portion: Investments in securities with high investment grade rating and maturing in line with the duration of the Scheme i.e. 3 yrs (1100 days) and primarily with the objective of holding till maturity. It is endeavoured to build a portfolio which is high on accrual from an asset mix of high investment grade corporate securities and bonds.

For Equity Portion: Focus on bottom up stock picking with no sector or market capitalization bias. The objective is to create a basket of stocks with a 3-year perspective. The focus is on maximizing returns.

MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.

Fw: Attractive 12.68% p.a. On Monthly Interest* - Invest in IIFL Secured Bonds

 



Key Features 3 years & 5 years maturity bonds Consistently Low NPAs Net NPA: 0.17% as on March 31, 2013 Tradable bonds to be listed on NSE & BSE Allotment on first-come-first-served basis No Tax Deducted at Source (TDS) if held in demat account

For detailed terms and conditions please refer to the Prospectus India Infoline Finance Limited ("IIFL") is subject to market conditions and other considerations, proposing a public issue of Secured Redeemable Non-Convertible Debentures and has filed the Prospectus with the Registrar of Companies - Maharashtra, Mumbai, The National Stock Exchange of India Limited and The Bombay Stock Exchange Limited. The Prospectus is available on our website at www.iiflfinance.com, on the websites of the stock exchanges at www.nseindia.com and www.bseindia.com and the respective websites of the LMs at www.axisbank.com, www.idbicapital.com, www.trustgroup.co.in, and www.iiflcap.com and co-Lead Managers to the Issue at www.rrfinance.com/rrfcl.com, www.karvy.com, www.smccapitals.com. Investors proposing to participate in the Issue should invest only on the basis of information contained in the Prospectus. Registered Office: IIFL,12A-10, 13th floor, Parinee Crescenzo, C-38 and C-39, G Block, Behind MCA, Bandra Kurla Complex, Bandra East, Mumbai – 400051. Tel: +91 22 67881000 Fax: +91 22 67881010 Corporate Office: IIFL Center, Kamala City, Senapati Bapat Marg, Lower Parel, Mumbai – 400 013. Tel.: +91 22 4249 9000 Fax: +91 22 2495 4313 Website: www.iiflfinance.com.