HDFC continued to post consistent growth in FY08. Its net profit surged 55% in FY08, while its asset size increased 29%. Indiabulls Securities reiterates its 'buy' rating on the stock due to the following factors: Loans grew at 29% over the year. The compound annual growth rate (CAGR) for mortgage lending for the past five years is 27%. During the slowdown in FY08, the company maintained its growth rate by substituting corporate loans with individual loans. Indiabulls is upbeat about HDFC's future as the company is focused on maintaining its key strength, i.e. maintaining its momentum in lending, despite changes in the demand dynamics and following sound risk management policies. In the fourth quarter (Q4) of '08, HDFC's spreads increased by 14 basis points (bps) to 2.32%. Its net interest margin (based on quarterly averages) rose by 29 bps yearon-year (y-o-y) to 1.26%. Going forward, high margins, coupled with growth in advances, will help HDFC to sustain its growth momentum. The company has consistently reduced its non-performing loans (NPLs) by adhering to sound risk management policies such as adopting a low loan-to-value ratio (average of 65%, maximum of 85%) and lending primarily to end users of property. At the end of FY08, gross NPLs (three months) fell 8 bps y-o-y to 0.84% and the credit cost fell 8 bps to 0.84%.
Also Read: gem worth investing - HDFC BANK



GODAWARI Power & Ispat has received an 'in principle' approval from the forest department for mining iron ore from 107 hectares at Ari Dongri in Chhattisgarh, which was pending for 18 months. This is a major milestone achievement in obtaining the final mining approval. Now, the company will be able to complete all legal formalities to get the final mining licence within three months. Ari Dongri has high grade lumpy ore that is suitable for sponge iron production. Iron ore production is expected to be ramped up to 400-600 kilo tones per annum (ktpa) in FY10. The company is currently buying iron ore from private miners at ~Rs 4,000/tonne. Once the iron ore mine is operational, the cost of mined iron ore will be ~Rs 1,000/tonne, which will generate savings of more than Rs 100 crore in FY10 due to substitution of purchases. During FY09, sponge iron production is expected to increase 17% and margins are likely to improve due to substantial increase in sponge iron and steel prices, while the cost increases will be moderate. Margins have already expanded, as is evident from the recently announced Q4 FY08 results. The current prices of sponge iron and steel are substantially higher than the average prices during Q4. Hence, margins are likely to be even better in subsequent quarters. The stock trades at a price-to-earnings (P/E) multiple of 4.1x FY09E and 2.5x FY10E. If the savings of Rs 100 crore on account of captive mining of iron ore are factored in, the stock trades at a P/E of 1.7x FY10.



EMKAY Share & Stock Brokers maintains a 'buy' recommendation on Aban Offshore with a revised price target of Rs 5,330. The price target is based on 10x Aban's FY10 earnings per share (EPS) of Rs 533. In order to protect the US from the spiralling oil prices, President George W Bush called for an end to the long-standing federal ban on offshore drilling and open the Arctic National Wildlife Refuge for oil exploration. Even though Mr Bush called for repealing of the ban on offshore drilling, an acute shortage of deep water offshore rigs promises to impede any rapid turnaround in oil exploration and supply. Over the past few years, a near 100% utilisation for offshore and a fairly long gestation period for newly built rigs has created a critical bottleneck, constraining the ability of exploration & production (E&P) companies globally to exploit known reserves or find new ones. As a result, the day rates for deepwater rigs in the Gulf of Mexico are now hovering around $600,000 a day. The day rates for such rigs will continue to remain firm with an upward bias. As 35% of the company's revenue is expected to be derived from the deepwater segment in FY09, Aban is likely to be a beneficiary of this uptrend in day rates for deepwater assets. Also, Aban has one deepwater semi-submersible rig, Bulford Dolphin, currently under refurbishment to get contracted. The offshore oilfield services industry's fundamentals remain compelling and Aban is the best play to drive the strong demand for offshore rigs and continued uptrend in day rates. Aban is currently trading at 8.4x its FY09 earnings and 5.9x its FY10 earnings.


BHARAT Petroleum Corporation (BPCL) reported a recurring profit after tax (PAT) of Rs 58.4 crore in Q4 FY08, which was below the expected profit of Rs 120 crore. The difference was primarily on account of higher net interest burden due to the pending issuance of Rs 4,000-crore oil bonds by the government. BPCL's sales volumes grew 11% y-o-y to 7 million metric tonnes (mmt) in Q4 FY08, as a result of 8.5% y-o-y growth in domestic sales and 77% y-o-y growth in exports. The refinery throughput declined 5.1% y-o-y and 4.2% q-o-q to 5 mmt. This, coupled with the increase in petrol and diesel prices in February '08, resulted in 35% y-o-y and 13% q-o-q growth in net sales. BPCL reported gross refining margins (GRMs) of $6.65/bbl in Q4 FY08 (vs $5.83/bbl in Q4 FY07 and $5.28/bbl in Q3 FY08), in line with the sharp increase in GRMs globally. Petrol and diesel retail margins remained significantly negative during Q4 FY08 as the rise in global crude prices could not be passed through. In addition, BPCL received oil bonds worth Rs 3,970 crore (vs Rs 900 crore in Q4 FY07 and Rs 2,080 crore in Q3 FY08) from the government as compensation for under-recoveries. The initial ad-hoc announcement by the government for subsidy-sharing in FY09E suggests that oil marketing companies such as BPCL will be significantly disadvantaged. The government's primary intent is to keep BPCL's earnings largely between Rs 1,000 crore and Rs 1,500 crore. Since early '08, BPCL had started outperforming, given its defensive, deep value (0.6x PBV, 6.1x FY10E PER) nature.



ENAM Securities maintains sector outperformer rating on Indraprastha Gas. IGL reported net sales of Rs 187 crore, up 14% y-o-y, and PAT of Rs 48.2 crore, up 20% y-o-y. For the full year, a jump in CNG and PNG volumes helped IGL post an impressive 27% increase in PAT (Rs 174 crore for FY08, against Rs 138 crore for FY07). Strong growth in the conversion of private vehicles to CNG and rapid expansion of PNG network led to a rise in volumes. Full-year sales for CNG and PNG were 386.2 million kg (vs 344 million kg in FY07) and 42.9 mmscm (vs 36.6 mmscm in FY07), respectively. High crude prices, fresh supply coming in from Reliance Industries' Krishna Godavari D6 gas in H2 FY09, and favourable economics that gas offers over oil, can lead to acceleration in CNG/PNG demand. The Delhi government plans to enhance transport infrastructure in view of the Commonwealth Games in '10. IGL will benefit from high volume growth with the introduction of radio taxis and high capacity buses on CNG. IGL currently supplies ~1.6 mmscmd of gas and has allocation for 2.2 mmscmd. It has applied for an additional 0.4 mmscmd for supply to other areas in the NCR. In Enam's view, the market is largely ignoring IGL's business franchise and its ability to manage costs, and seems to be more concerned about the impact of regulations. But at current valuations (9.1x FY09E EPS), the concerns seem to be overdone, and the stock offers a great investment opportunity.
Also Read- Research Report: The Right Choice - INDRAPRASTHA GAS (IGL)
Source: Equity Bulls