Public Relations
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Early signs of a recovery
from $110,000 about 5-6 months ago. But, analysts sound caution as they believe that supply of idle as well as new capacities will keep the day rates in check even if the recovery is strong. Reliance Industries (RIL), which generates a large part of its revenues from exports of petroleum products, also saw its gross refining margins (GRMs) take a hit—these dropped to almost $6 per barrel in September 2009 quarter from $13.4 per barrel last year. However, these are expected to improve gradually on the back of the economic recovery. Analysts believe RIL’s GRMs will improve to $7.1 in 2009-10 and to $9.1 in 2010-11. Capital goods & engineering Most engineering companies took a hit as capex across industries slowed down consequent to the credit crisis. New projects were also postponed, which to some extent was also due to the customers’ desire to take advantage of falling commodity prices-customers also started renegotiating (even cancelling) contracts awarded earlier. The hit was more prominent for companies catering to the Middle East markets where capex plans were also impacted due to lower crude oil prices. Punj Lloyd generates about 61 per cent of its revenues from the oil and gas sector and of this about 80 per cent comes from markets like the Gulf region, Europe and Africa by primarily offering services in process engineering, pipelines and tankages. Its orders dropped last year and hence, the business suffered. Thus, a revival in the global hydrocarbon capex is crucial and could change its prospects significantly. A revival will also benefit L&T, which generates about 20-25 per cent of its revenues from markets like Middle East. Notably, L&T continues to gain from improving domestic demand- its management recently upped its order book growth guidance to 30 per cent for 2009-10. HIGH ON OVERSEAS EXPOSURE in Rs crore Net sales PBIDT (%) Net profit D-E (x) RoCE (%) (Rs) P/E (x) Amtek Auto * 4,657 20.6 465 0.9 15.2 176 19.3 Bajaj Auto 8,449 12.6 535 0.8 32.9 1,470 18.7 Bharat Forge 4,711 10.7 41 0.9 7.5 266 79.6 Tata Motors 70,429 2.5 -2,465 1.8 581 27.0 United Phosp. 4,802 19.8 438 0.7 17.5 149 61.5 Tata Chemicals 12,154 15.0 760 1.2 14.6 277 13.1 Alstom Projects 2,290 10.6 138 57.2 522 24.4 Crompton Greaves 8,819 11.7 563 0.5 40.7 385 30.2 Cummins India 3,559 17.5 463 46.0 386 18.4 Larsen & Toubro 40,371 14.6 3,708 0.8 18.9 1,600 32.2 Praj Inds. 954 15.9 118 36.3 89 11.7 Punj Lloyd 11,876 6.2 -225 0.7 10.8 216 27.0 Siemens * 9,680 9.7 594 38.9 530 18.4 Suzlon Energy 26,082 12.1 429 1.1 12.4 66 Thermax 3,272 14.0 289 49.8 551 24.7 HCL Tech. * 7,563 19.8 1,054 0.0 28.7 312 20.1 Infosys Tech. 21,693 35.5 5,988 43.3 2,234 21.1 TCS 27,813 24.2 5,311 0.0 42.6 623 24.7 Tech Mahindra 4,465 27.9 1,015 70.3 1,029 15.9 Wipro 25,700 21.1 3,874 0.4 26.8 603 22.1 Bhushan Steel 4,975 19.5 425 3.5 9.4 1,261 10.7 Hindalco Inds. 65,415 5.3 349 1.7 1.1 130 13.5 Jindal Saw * 5,150 13.8 326 0.4 15.8 774 9.1 JSW Steel 15,940 19.1 243 1.7 10.3 813 17.3 Sesa Goa 5,265 51.8 1,995 70.9 318 16.9 Sterlite Inds. 21,136 30.4 4,961 0.2 20.7 800 99.2 Tata Steel 147,365 12.4 4,849 1.8 16.4 509 12.2 Welsp.Guj.Stahl 5,576 12.9 214 1.5 15.6 277 13.8 Jain Irrigation 3,050 14.4 133 0.9 15.8 834 41.0 Sintex Inds. 3,065 18.9 327 1.2 13.2 224 11.9 Divi"s Lab. 1,181 42.4 417 0.1 40.6 567 22.7 Dr Reddy"s Labs 6,862 20.2 -917 0.5 15.1 1,103 27.2 Glenmark Pharma. 2,086 24.4 193 0.2 13.4 232 39.9 Jubilant Organ. 3,516 21.7 270 2.3 14.7 227 15.4 Ranbaxy Labs. * 7,332 -5.9 -935 0.9 415 38.3 Sun Pharma. 4,280 47.5 1,878 0.0 31.6 1,404 28.9 Essar Oil 38,106 3.2 -455 2.9 137 24.4 Reliance Inds. 151,336 16.3 14,950 0.6 12.3 2,025 22.3 Aban Offshore 3,050 71.1 429 11.6 9.7 1,290 18.1 Great Offshore 1,081 50.3 275 1.9 18.5 516 9.6 Prices as on November 9, 2009 D-E is Long-term Debt-Equity ratio; RoCE is Return on capital employed The list is arrived at by considering the export earnings or the overseas exposure (through subsidiaries) of a company in relation to its consolidated revenues * For Amtek Auto and HCL Tech, latest audited year is June 2008, while it is Dec 2008 for Ranbaxy and Jindal Saw and it is Sept 2008 for Siemens Source: CapitaLine Plus In the industrial and power equipment space, many domestic companies had made overseas acquisitions to gain global presence. Crompton Greaves, a case in point, has seen its order book for overseas markets grew by mere 3 per cent in June 2009 quarter. The company believes that growth this year would range 5 per cent, but next year it could jump to 15-20 per cent as a result of the revival in capex. Suzlon is another stock to watch given the revival in demand. Analysts believe that many of its global customers postponed their capex. Its international order book thus dropped by almost half y-o-y to 1,435 mw in June 2009 quarter. The company has also lowered its order guidance for 2009-10 to 1,900-2,100 mw as against the 2,400-2,600 mw earlier. However, a lot would depend on its ability to lower debt on its books. Others The fundamentals of textile sector are turning around for the better. The economic revival has helped foreign retailers, particularly in the US markets, in increasing footfalls and post relatively better sales, which has lead to a pickup in India’s textile products. Between April and September, India’s man-made textile exports grew by 26.3 per cent y-o-y in rupee terms. Companies like Gokaldas Exports (a large garment exporter) and Welspun India (earns 80 per cent of its revenue from exports) could be among key beneficiaries of this revival. In gems and jewellery, companies like Gitanjali Gems and Rajesh Exports could gain as exports of gems and jewellery which plunged by 26.9 per cent in April 2009 are seen recovering—these shrunk at a lower rate of 7.8 per cent in October 2009. For pharmaceuticals players, the economic revival will benefit them in the form of higher R&D spending by companies in the developed world which is positive for CRAMS players like Jubilant Organosys, Piramal Healthcare, Divi’s Laboratories and Dishman. Also, the easing of credit in East Europe and Russian markets should benefit companies like Dr Reddy’s and Ranbaxy.Pages: 1 [2]