BHEL : Q4FY11 Result Update

Orders On Track, Margin Surprises Positively

BHEL’s FY11 sales/ order intake was inline with management guidance. During FY11, BHEL reported gross sales of Rs 41,000 cr (up 20% YoY) & adj. PAT of Rs 5,700 cr (up 27% YoY)

The management highlighted that gross margins improved by 130bps on the back of increased indigenization, better vendor management, etc. Employee /sales were at ~13%.

Management’s guidance of 10% YoY growth in FY12E orders achievable:This is on the back of: (a) orders worth ~Rs 110 bn that spilled over from Q4FY11, (b) orders for Renovation & Modernization (R&M) of old BHEL projects worth Rs70-110 bn & (c) other pvt & CPSU orders.

Hold with a Target Price of Rs 2,380.

Reliance Industries: Party to Continue!!

Driven by strong domestic demand growth for petro chemical, industry continues to expect stronger margins going forward. Disruption in production from Japan would also support petro chemical margins.

Refining strength to continue: Given a spate of closures of refineries in Japan & MENA, you can expect demand growth to outstrip net capacity additions in next foreseeable future, which would continue to support high GRM’s for complex refiners going forward.

Polyester margins to remain strong: Despite huge acreage expected under cotton cultivation in CY11, companies do not expect more than 30% correction in cotton prices, which would support polyester prices as polyester yarn is already at a 30% discount to cotton yarn prices.

BP deal offers valuation support: Despite concerns over rampup of KG-D6 production, RIL’s deal with BP offers indicative valuations for RIL’s E&P assets. Moreover, BP’s expertise in the deep-water space would aid in RIL’s endeavors to increase KG-D6 production levels and its aggressive exploration plans.

Maintain BUY with Target Price of Rs 1,155, indicating 12% upside from CMP of Rs 1,041.

D B Corp : Growth on Track!!

The management stated that DBCL is all set to launch its first edition in Maharashtra by June’11 while the Bihar launch would be near Diwali (Oct’11). The Bihar launch remains critical for DBCL as most of the national advertisers consider Bihar and JH as a single market and design their media plans accordingly.

Anyways, DBCL has been empanelled with the JH state government enabling it to get a significant share of govt. ads. The market is expected to grow at CAGR of 20% for the next 2-3 years. Ranchi contributes ~70% of the total print ad spends in JH.

At CMP of Rs 252, BUY DBCL with a target price of Rs 292 -  implying a 16% upside.

6th April,2011

The markets opened on a positive note and immediately slipped lower but managed to trade near the previous close till the mid morning session. Profit taking led the markets into the negative where the traded for most of the afternoon session. However the markets showed a smart recovery in the last hour and ended on a flat note. Among the Sectoral indices Consumer Durables & Metals were the major gainers while Oil and Gas FMCG were among the losers. Among the Sensex stocks Reliance Comm (1.88%),Hindalco Inds (1.76%) and BHEL(1.57%)were the major gainers while Tata Power (1.29%), Infosys (0.91% ) and Bajaj Auto(0.90%) were amongst the losers. The Sensex lost 15 points or 0.08% to close at 19,687 while Nifty gained 2 points or 0.03% to close at 5,910.

Total traded turnover stood at Rs 1,20,995 cr. In equities FIIs were net buyers (Rs 723 cr) while DIIs were net sellers (Rs 529 cr).On the derivatives side, FIIs were net sellers in Index Futures (Rs 613 cr) Stock Futures (Rs 575 cr) while they were net buyers in Index Options (Rs 482 cr) and Stock Options (Rs 4 cr).

The US markets ended on flat note as early gains driven by M&A activity were pared on concern over rising crude prices. The Dow Jones lost 6 points or 0.05% to close at 12,394 while NASDAQ gained 2 points or 0.07% to close at 2,791.

The Asian markets are trading mixed. Nikkei is marginally lower by 0.21% while Hang Seng is currently trading higher by 0.06%. The markets ended on a flat note after showing a smart recovery from the days low as buying was seeing in the small & mid cap stocks. FIIs continued to buy in th cash segment. The markets may open on a flat to positive note amidst mixed global cues.

The trend deciding level for the day is 5900, If NIFTY trades above this level then we may witness a further rally up to 5935‐5968‐6000 levels. However, if NIFTY spot trades below 5900 levels then we may see some profit booking to initiate in market, it may correct up to 5865‐5830‐5800.

Stocks to focus for intraday long: JPPOWER, MLL, TATAmotors, Sesagoa.

Stocks to focus for long term:Orient Paper (+55%), Jubliant Life(+53%), Vascon Engineers (+50%), Power Finance (+42%)