Archive for July, 2008

Nifty growth now less than 10%

3 comments Written on July 31st, 2008 by
Categories: Results
Results today:
  • RCOM showed 23% EPS growth.
  • DLF's consolidated shows a growth of 10.86%.
  • Nalco's EPS grew 17.6%.
  • TataSteel was up 1.27% on EPS (considering last EPS adjusted down by the factor given in this circular)
For some reason the NSE site shows the Nifty EPS down to 238. This is calculated using Nifty P/E (given as 18.21 today) and Nifty Close (4333). Let me go with this, and I'll revi

237 is ridiculous. It's there from 220 same time last year, and with just one company (HCLTECH) to go - and that comprises 0.52% of the index. Even at 241 (as reported yesterday) we aren't growing much.

This is less than 10% EPS growth for the Nifty.

In Feb, the Nifty EPS grew 13%. In May, it was 11%. It's the end of July today, and with nearly all results out, we are less than 10%.

Too much momentum, and too much inertia. We can't stay at a P/E of 18 with these growth rates. Time to move over to bonds. Oh, sorry, nobody trades there anymore. Hmm.

Posted in Results

Suzlon Earnings Fall 92% but reported as an actual gain

10 comments Written on July 31st, 2008 by
Categories: Results, Suzlon
Economic Times reports:
Suzlon Energy Ltd, the world's No 4 wind turbine maker, said on Thursday its consolidated quarterly net profit rose almost doubled, boosted by rising orders, despite a foreign exchange loss.

Suzlon said consolidated net profit in the April-June quarter rose to 393.8 billion rupees ($9 million), compared to 200 million rupees reported a year ago. The company said its June quarter net profit was hurt by a 1.5 billion rupee forex loss

(Note: 393.8 billion rupees is not equal to $9 million.)

Now look at the NSE pages for Suzlon results, for Q1 2008-09 versus Q1 2007-08.

The EPS for this year is Rs. 0.01 versus Rs. 0.13 for last year. (0.65 is displayed, but you have to adjust that for a 1:5 split)

That is a DROP of 92%, not the "doubling" of net profit as announced by this article. In fact, Suzlon itself has announced to the exchange:

Suzlon Energy Limited has informed the Exchange regarding the consolidated Results for the quarter ended on 30-JUN-2008 as follows: Net Sales of Rs. 276046 lacs for quarter ending on 30-JUN-2008 against Rs. 194463 lacs for the quarter ending on 30-JUN-2007. Net Profit / (Loss) of Rs. 135 lacs for the quarter ending on 30-JUN-2008 against Rs. 1889 lacs for the quarter ending on 30-JUN-2007.
Given that, the article is plain wrong - and it seems to me that in the hurry to get the article out, the author failed to independently verify the results.

You might say that before "minority interest" the results show a 39 cr. profit, which is double, no?

I say how can you disregard minority interest? The funda: Take a company (call it "HugeCo") that own 51% stake in another company (call it "SmallCo") , and someone else ("Chotu") owns 49%. HugeCo has its own standalone business, but in consolidated results must include SmallCo's results too.

Now SmallCo makes Rs. 500 in sales, and Rs. 100 in net profit. In "Consolidated" results, HugeCo will add Rs. 500 to its own sales and the FULL Rs. 100 to its profit. It will also add SmallCos other details (Expenses, EBIDTA, etc.) to it's p&L statements.

But obviously the entire Rs. 100 is not HugeCos, no? Rs. 49 is actually Chotu's part of the deal - so Rs. 49 is subtracted from HugeCos consolidated net profit as "Minority Interest".

So Suzlon has only made Rs. 1.35 crores, an EPS of 1 paise.

Against 13 paise last year. EPS has thus dropped 92%. (Even Moneycontrol gets it wrong. Bloomberg is the only correct answer, it seems.)

Posted in Results, Suzlon

Nifty EPS at 241, but losing steam: Slowdown.

5 comments Written on July 30th, 2008 by
Categories: Commentary, Results
More results today: (All notes are EPS growth)
  • Unitech up 15.7%. I expected more. Is this real estate slowing down?
  • Tatamotors down 33%.
  • Tata Comm (VSNL) down 5%. Uhem.
  • Powergrid down 34%. Whoa.
  • ITC down 5.2%.
  • M&M up 1%. Wow.
  • PNB up 20%. A pleasant surprise.
And Suzlon, which is supposed to have declared today, has vanished. No results. How bad can the news be?

Well, the Nifty EPS is now officially 241. With nearly 89% worth of results declared and Suzlon looking dangerously unprofitable, where will the growth come from? Note that even if we scale it to 245 we are BARELY scraping through a 12% year on year growth.

And this is before inflation hits these companies (it has at least a one quarter lag), and before the new interest rates hit them. Now next month, Dr. Reddy will give way to Mr. Reliance Power on the Nifty - which means they will replace a profitable company with one that will make negligible money for the next few years. So no EPS from RPL and no EPS from RPower also. Soon we're going to be happy to see the Nifty not change EPS at all.

Slowdown anyone?

Posted in Commentary, Results

Interest Rates Up, Markets Down, Crude Down

2 comments Written on July 29th, 2008 by
Categories: Results
So RBI's hiked interest rates up to 9%. This almost surely means a hike in auto, home loan and personal loans - and probably, an increase in default rates. RBI has made it pretty clear that they don't want credit to grow over 17% this year. This is bad for banks; and also bad for anyone who wants big credit. Retail will get hit the worst - property prices are going to drop further due to lack of loans now, and so will other assets that require borrowing (stock market financing, personal loans, auto). The RBI is determined to break the back of inflation - too late and perhaps the worst way possible - by increasing rates to the point when inflation has no choice but to come back to the sub 6% levels.

A good development is that crude is down over 2.7% as I speak, to $121 per barrel. Heck, what else would happen, after reports that people in the US are driving far lesser, and overall Chinese and Indian slowdowns post Olympics and our interest rate hikes respectively.

Crude must now influence inflation positively, but not in the short term. Politics may ensure easing of fuel prices sometime in December or Jan (the parties are likely to want the best memory for their voters when elections are due in May 09). And inflation is much harder to control when it runs away as it has - and will require further and harder rate increases. So brace yourself for more - but not much more.

Markets have taken it on the chin - down 3% or so. Obviously the biggest to go were banks, auto and real estate.

Our systems took us short four banks - practically a second after the RBI policy announcement. We don't ask why - I found out after the trades went through that the rate hike was 50 bps and people were surprised. (Why? Wasn't it expected? I would not be surprised if they decided to hike another 50 bps tomorrow, because 11% is bloody ridiculous)

Very interesting day - we won some, we lost some; and now we're up 6% over two months. It's been incredibly educating - learning how to deal with drawdowns, how you can model risk and how models are phenomenally stupid to rely on, how it can emotionally drain you unless you become a monkey and don't care. It's difficult not to care about money. It's crazy to see a system that works very well on paper be completely unexecutable in reality - we've discarded so many fabulous systems that way! But the results seem good. One system has made an unleveraged return of 21% since June 9, trading purely intra-day. Another "failed" i.e. couldn't handle the volatility and lost us a fair bit. A third one is struggling but staying above water. In a few days we will have one more system online; and hopefully, we'll have a good track record to demonstrate at some point.

Ok, that was me rambling. Predictions for tomorrow: "Hahahaha". (I will laugh tomorrow. At least that much I can predict, guaranteed.)

Posted in Results

More results – Nifty EPS moving up but not enough

2 comments Written on July 29th, 2008 by
Categories: Commentary, Results
More results today:
  • Hero Honda up 43.64%. Very unexpected, excellent results.
  • Cairn up some 500%+ from 0.21 to 1.4.
  • Gail up 31% on EPS. Great stuff.
  • NTPC down 27% on EPS.
Nifty EPS is up to 239+, with results of companies weighing 80% of the Nifty already known. Left are a few big folks (DLF, RCOM, PowerGrid, Unitech, Nalco, Wipro, ITC, TataSteel, Suzlon) and a few smaller ones (TataMotors, TataComm, PNB, M&M, HCLTech).

Will be interesting to see where we end up on Aug 2 when all results are out. P/E is 17+ even now. (To match P/E, Nifty EPS needs to end up at 258, but that is unlikely. Maybe 12% growth now?)

Posted in Commentary, Results

ONGC bumps up Nifty EPS

1 Comment » Written on July 28th, 2008 by
Categories: Commentary, Results
Results today (Nifty stocks only):
  • ONGC shows an EPS growth of 50%. Bumps up nifty EPS as it has a huge weightage in the Nifty.
  • LT gives major bhaav and shows EPS growth of 41.46%.
  • Sunpharma shows an EPS growth of 120% (!)
  • BPCL goes from EPS of +6.6 to -28.45. I have no idea how bad that is but BPCL is only 0.44% of the Nifty.
  • HDFCBank's EPS is up a whopping 8%. I was thinking it will be a drop in EPS so this is actually quite good.
  • Hindalco does 13%.
  • Tata Comm (VSNL) shifts results out to 30th. Bad news there?
Nifty EPS has now moved to Rs. 238. It was 220 as of Aug 1, 07 - which means for a 10% growth (please, at least 10%!) we need to go to Rs. 242. The remaining stocks account for 28.65% of the Nifty - and as of now, not considering them, the Nifty has grown 11.62% on EPS. P/E is still 18.

Posted in Commentary, Results

InfoEdge Q1 09 results out

2 comments Written on July 27th, 2008 by
Categories: InfoEdge, Results
Info Edge's Q1 09 results are not very encouraging. They have grown EPS from 4.27 to 4.75, a y-o-y growth of 11.25%. Further a very large amount of money - 88% - comes from recruitment alone.

Their other sites include the matrimonial portal JeevanSaathi.com, real estate portal 99acres.com, other sites like brijj.com and shiskha. All these are losing money, though top lines seem to be growing. In fact they are losing MORE money than they did last year, inspite of growing top lines.

They've bought some FMPs which are going to mature in April 09, so their near 265 cr. of mutual funds is most likely going to yield profits then (not recorded now). So this year, the EPS may not have a huge other income component.

They made an EPS of 20 odd last year. If we annualise this quarter's growth (11.25%) and add a bit here and there, we come to an EPS of Rs. 23. At the current price of Rs. 860 that's a forward P/E of 35.

Posted in InfoEdge, Results

Results: Bad for Nifty EPS, Mixed bag though

2 comments Written on July 26th, 2008 by
Categories: Commentary, Results
Some results are out, and all Nifty stocks would have announced their Q1 results by Aug 1. Here's a primer: Bad Stuff:
  • ICICI Bank down 24% on EPS. (Yeah they raised capital but so what)
  • SBI down 26% on EPS. (Also raised capital, again, so what)
  • Dr. Reddys down 50%, and Ranbaxy down 43% - bad, bad, bad.
  • Cement unhappy: ACC and Ambuja down 22 and 34%, Grasim up 0.3%. Not good.
  • Tata power down 18%.
  • Maruti down 6.7%. Indicative of auto results?
Good stuff:
  • Bharti up 52%
  • BHEL up 33%
  • Infy, Wipro, and Satyam: 20, 34 and 44% respectively.
  • ZEE Media: up 100%
  • ABB up 21%.
As of now, the EPS is still 229 (of the Nifty). Bad results expected from Hero Honda, BPCL, PNB, Tata Steel, Tata Motors, M&M. Good from DLF, Unitech, RCOM, Sterlite.

Without surprises, the Nifty EPS should probably grow about 10% over last year. The current P/E is 18. At some point this stuff needs to converge. It can take years so don't jump to buy or sell. But not looking good at all. Will revisit after August 1.

Posted in Commentary, Results

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