Havells India

Havell’s India is likely to sustain its growth momentum on the back of booming user industries such as construction, engineering and power. The commissioning of new plants for electrical consumer durables – fans, CFL, etc, and switchgears in the excise- free zone of Uttaranchal and Himachal Pradesh would help it to expand its market share and improve margins

Boom in user industries Havell’s India is likely to sustain the growth momentum on the back of the boom in the user industries such as construction, engineering and power. Its top line has grown at a CAGR of over 45% during the past 5 years from Rs 171.08 crore in FY01 to Rs 1108.25 crore in FY06. During this period the bottom line grew at a CAGR of over 59% from Rs 6.21 crore to Rs 63.21 crore. Domestic & industrial switch gears, cables and consumer electrical equipment contribute an equal 25% to its revenues while the balance rest 18% and 7% is contributed by wires and the newly acquired Crabtree revenue (cater to premium segment of modular switches and bath fittings) respectively.

The company is currently trading at Rs 315, 18x the FY07E EPS of Rs 17.45. The company has an impressive return on equity of more than 45%, which along with margins expansion may trigger into further re-rating of stock. We expect the company to generate returns to the tune of 20% over 3-6 months with a target price of Rs 380.

Crude plunge

Crude plunges to biggest one-day decline since Aug '05


Crude prices plunged 4.3% at USD 56.26 a barrel, its biggest one-day decline since August 2005 on expectations that OPEC members may not reduce production and a warm US winter will curb demand.
Due to this fall Gold & silver are expected to trade weak.

On A New High

Sectoral Earning growth projections

Robust Growth

The country’s industrial production has kept up its brisk momentum, rising by 11.4% in September 2006 over last year. The Index of Industrial Production (IIP) released on Friday, indicates that the the growth was powered by the double-digit growth of 12% and 11.3% in the manufacturing and electricity sectors respectively. In the first half of this year, IIP has grown by 10.9% over the corresponding period of 2005-06. During the April-September months, manufacturing grew by 12.1%, electricity by 6.6% and mining by 3.1%. Mining has grown only by 3.9% during the period. Icrier director Dr Rajiv Kumar said the interesting feature of the current growth spell was the narrowing of differences in rates between manufacturing and electricity. He said this could make the trend sustainable. Among sectors, the growth rate has been the sharpest for intermediate goods at 14.7% for the month. It has logged 11.3% for Basic goods, but only 2.2% for capital goods. For the period of April-September 2006-07, the figures stood at 10.8%, 15.2% and 8.8% respectively. The Consumer durables and Consumer non-durables have recorded growth rates of 12.6% and 12.5% respectively, with the overall growth in Consumer goods being 12.5%. In terms of industries, the Beverages, Tobacco and Related Products sector as well as Basic Metal and Alloy Industries have shown the highest growth of 19.8%, followed by 19.6% in Wood, Wood Products, furniture and fixtures and 16.7% in Non-Metallic Mineral Products. In 2005, the manufacturing sector recorded only a 8.9% growth rate for September 2005, electricity had a negative growth of 0.8% for September last year. The mining sector however only grew by 3.9% in September 2006, as compared to a negative growth of 1.9% in the same month last year.

Hindalco

Hindalco is expected to reap the benefits of turnaround in copper business along with accelerated profitability from aluminium division on the back of firm prices and volume expansion.

Turnaround in copper business

The copper business witnessed a turnaround this year and has started contributing to profitability. The company’s copper mines division went through a difficult period over the last few years, caused by longer- than-expected development phase resulting in higher costs and large accumulated losses. The company addressed the problem by commissioning the Nifty sulphide mines in Australia, one of the largest mines discoveries in past 10 years with a resource base of 685,000 tonnes and an expected life of 12 years. This helped the company turn around its copper business. The business is expected to contribute about 23-24% to the groups EBIT in FY07E against a negative contribution during the last three years.

Accelerated profitability from aluminium division
The aluminium business is expected to sustain its growth momentum and would do even better on the back of aggressive capacity expansion undertaken by it, which would boost sales volumes. Hindalco is expanding its Hirakut smelter from 65,000 tpa to 143,000 tpa and power capacity from 167.5 MW to 367.5 MW. Simultaneously, it is also setting up an alumina green-field project in Orissa with a refining capacity of 1500,000 tpa, smelter capacity of 325,000 tpa and power plant with a capacity 750 MW. This green-field project is likely to be commissioned over the next three years and has already received SEZ approval. These series of green-field projects would transform the company into a global sized player with a rated capacity of 1.5 million tonnes over the next 6 years.

Electrotherm

Electrotherm is doing excellent in field of Furnaces and also have become involved in battery operated two wheeler and other segments. Sky is the limit in energy saving sector and it is also involved in steel sector. We hope the company expected December EPS TTM will be around 79 and this stock may achieve PE of of 7.5 and telectrotherm price may be around Rs.600/- in January end. Best buy at present cost.