The Morning Meeting Notes as on 5th May, 2010. Contents >nResearch Views >Auto – April 2010 volume update >Ashok Leyland (ALL) >nTotal sales increased 271.4% YoY but declined 35.4% MoM to 6500 units >nMHCV domestic sales increased 274.0% YoY but declined 35.5% MoM to 5950 units >nMHCV exports increased 269.6% YoY but declined 34.0% to 499 units >nTotal LCV sales increased 66.7% YoY but declined 42.7% MoM >Jaguar & Land Rover US Sales >nJaguar sales declined 30.1% YoY and 8.9% MoM to 896 units >nLand Rover sales increased 34.6% YoY and 0.8% MoM to 2749 units >nJLR combined increased 9.7% YoY but declined 1.7% MoM to 3645 units >nJLR underperforms the industry on YoY basis, however sequential performance >was better than industry . >nResearch Update Included >IndiaCement Q4FY2010 Result update; Numbers continue to disappoint- Maintain >SELL; Target: Rs 112 >ICL’s pre exceptional net profit at Rs421 mn (-61.3% yoy) is below our >estimate on account of lower than estimated cement realisation & higher other >expenditure. Net revenues for the quarter increased by 8.5% yoy to Rs9.64bn. >Cement revenues grew by 6.2% yoy to Rs9.2 bn driven by volume (2.95mt) growth >of 26.9%, where as realisations declined by 16.3% yoy to Rs3121/ton (our >estimate - Rs3271/ton). On account of declining realisations and higher >expenditure, EBIDTA for the quarter declined by 37% yoy to Rs1.42bn, as EBITDA >margins declined by a massive 1070 bps to a meager 14.7%. EBIDTA/tonne has >declined by 58% y-o-y to just Rs398/tonne. >To factor in lower realisations and higher other expenditure we are >downgrading our earnings by 9.8% for FY11E (EPS of Rs8.75). We are also >introducing our FY12E earnings for ICL at Rs10.6. With these earnings, ICL now >ranks the last in our cement coverage universe as far as return ratios are >concerned. Its RoCE and RoE for FY2011 are now below 10%, significantly below >cost of capital, clearly suggesting destruction of shareholder value. At >current levels, the stock is trading at 14.4x FY11E earnings and EV/ton of >USD95 for its FY11E capacity, which we believe are quite expensive for a >company with return ratios lower than the cost of capital. We maintain our >SELL rating on the stock with a revised target of Rs112 (Earlier Rs100). The >change in our target value is attributed to 1) Ascribing value of ICL’s IPL >franchisee Chennai Super Kings (Rs30/share) 2) Equity dilution of 8.7% on >account of ICL’s recent QIP of Rs2.95 bn. We have valued ICL at average of 8X its FY2011 earnings and USD 80 for its FY2011 capacity. >Note: ICL’s reported staff cost of Rs801.8 mn for the quarter includes Rs160 >mn of charges on account of provision of un-availed leave as per AS-15. We >have treated this as extraordinary and accounted for it below the line. >nTechnical Comments >Finally, bears out of the hibernation >The benchmark Nifty finally saw a downside breakout from the triangular >consolidation and did manage to close below the support 50-daily exponential >moving average (50-DEMA), which again boosted back the confidence among the >bears. Moreover, the break of 5160 has confirmed the Dow Theory’s sell signal >with lower top lower bottom formation in place. In addition, the daily ADX has >began to strengthen, after reversing from the oversold line, signaling the end >of a trading range and a development of new trend in the downward direction. >Hence the general picture is clearly a sell on rise story. >BSE Metal >BSE Metal continued its southbound journey and tested the mentioned target of >16950 and finally closed at 16640 with a loss of -3.93%. Going forward this >index is still looking weak and now it will test 16513 which is 61.80% >retracement level of the recent rally from 15138 to 18736. >BSE Realty >BSE Realty fell sharply and finally closed at 3357 with a loss of -2.76%. This >index had already retraced 61.80% of the recent rally from 3170 to 3649, thus >going forward this index is still not showing any strength, and we maintain >our downside target of 3170. >BSE Cap Good >Selling was witnessed in BSE Cap Good and it broke the support of 13750 and >finally closed at 13625 with a loss of 1.69%. On the daily chart this index >had formed Lower Top and Lower Bottom, thus in the coming days we will witness >further downside in this index and it will test 13517 and below 13284 levels. >nResults Today >Brigade Enterpr. DCM Shriram Con. Lupin NIIT Tech. Prism Cement United >Breweries >Click here to read report: 9AM with Emkay >Emkay Retail Advisory | Emkay Global Financial Services Ltd.| >www.emkayglobal.comParagonCenter, H -13-16, 1st Floor, Opp. Century Mills, >Pandurang Budhkar Marg, Worli, Mumbai - 400 013 | Fax: +9122-66610307 > >
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