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NIFTY - Weekly



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SAIL



Steel Authority of India Limited (SAIL) is the leading steel making company in India. It is a fully integrated iron and steel maker, producing both basic and special steels for domestic construction, engineering, power, railway, automotive and defence industries and for sale in export markets. It is also having captive mines.

In 1QFY2009, SAIL posted a significant yoy jump in topline of 37% to Rs11,029cr (Rs8,040cr). Topline growth came mainly on account of volume growth of around 6.7% and increase in yoy realisations of around 29%. Sales volumes stood at 2.7mn tonnes (2.53mn tonnes). Average net realisation increased by 29% to Rs40,850/tonne (Rs31,776/ tonne).

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SAIL reported an almost 450bp decline in OPMs to 25.1% (29.6%) in 1QFY2009 owing to wage revision and increase in raw material costs like coal, ferro alloys, freight, etc. Net Raw material cost per tonne increased by 42.5% to Rs12,000/tonne from Rs8,480/tone in 1QFY2008.

Bottomline grew at a slower rate of 20% yoy to Rs1,835cr (Rs1,525cr) due to the fall in Margins. Other Income grew 28% yoy to Rs392cr, due to higher Interest Income on account of higher investments during the quarter, which also aided Bottomline growth.

Government is thinking of doing away with the export duty on steel and imposing anti dumping duty to restrict cheap imports from china. These policy measures might prove good for the company.

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SAIL – Weekly

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Ranbaxy• Ranbaxy Laboratories Limited, India’s largest pharmaceutical company, is an integrated, research

based, international pharmaceutical company. The Company is ranked amongst the top ten global generic companies and has a presence in 23 of the top 25 pharma markets of the world.

Investment Rationale

•Steady Revenue: Ranbaxy holds 19 FTFs which is expected to bring ~US$27 bn of revenues. Ranbaxy has settled on Nexium, Lipitor, Flomax, Valtrex , with a total sales of around US$20 billion.Ranbaxy received tentative approval for Valganciclovir (USD 239mn) and have filed two ANDAs and received four approvals; ninety-three ANDAs are pending for approval.

•Solid Result: On the basis of company’s Q3 consensus estimates we expect a steady result, with net sales increasing 19% YoY. How ever, the company’s margin is expected to squeeze because of rise in input cost.

•Strong Guidance: Ranbaxy maintains a topline growth guidance of 18-19% and holding EBITDA margin guidance of 17.5-18%. The company’s FY09 EBIDTA margin is seen at 17%. The company plans to mitigate pricing erosion in the company’s generics business by volume growth.

•Negative News Factored: The impact of the import ban on Ranbaxy drugs by US FDA and the uncertainty on Daiichi deal has been factored in the current price of Ranbaxy. Ranbaxy is trading at 43x FY09 earnings and the script has shaded ~50% in last three months and we believe that it’s strong fundamentals will help the script go up.

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• Entry To Niche Sector: The new management of Ranbaxy, Daiichi Sankyo, is expected to concentrate on entering specialty and niche therapeutic area by expanding partnership (increased stake to 47%) with Zenotech Laboratories to work on Oncology and Bio-generics

•Growing Exports: Exports contribute ~70% of Ranbaxy’s sales with USA contributing 30% of the total exports. Ranbaxy’s exports are expected to grow at 15% YoY. Indian pharmaceutical off shoring industry is expected to grow to US$2.5bn by 2012.

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• Robust Sector Growth: The Indian Pharma Industry is estimated to be worth US $ 8.5 billion, growing at about 9% annually.

Recent News:• Ranbaxy Laboratories has submitted an Investigational

New Drug (IND) application to the Drug Controller General of India (DCGI) for permission to initiate Phase-I human clinical trials. Ranbaxy could receive over US$100million for the product developed by Ranbaxy

•Ranbaxy-Daiichi deal on track: Daiichi Sankyo's purchase of Ranbaxy Laboratories for Rs198bn is on track. The deal is expected to get completed by March 2009. The deal is awaiting SEBI’s approval.

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Ranbaxy - Weekly

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BHEL is the largest engineering and manufacturing enterprise in India in the energy related/infrastructure sector. BHEL manufactures over 180 products under 30 major product groups and caters to core sectors of the Indian Economy viz., Power Generation, Transmission, Industry, Transportation, Telecommunication, Renewable Energy, etc.

BHEL has announced its first quarter results. The company’s standalone net profit was up at Rs 3,844.1 mn versus Rs 2,889.1 mn, (YoY). Its standalone net sales were up at Rs 4,3292.4 mn versus Rs 3,2339.2 mn, (YoY). 0

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Government has planned addition of 78,000 MW of generation capacity in India over the Eleventh Plan , of the above capacity addition, 65% plus is estimated to be from thermal-based power plants. This is a positive for BHEL. BHEL has also demonstrated its skills in hydro power projects. Further, to cater to the country’s ambitious future power capacity addition programme, BHEL is also planning to increase its capacity to 15,000 MW by December 2009 from the existing 10,000 MW.

Bagged new orders worth more than Rs 100,000 mn, including key order of 500 MW at Korba West. Also bagged order for 2 units of 500 MW each at Marwa thermal power project worth Rs 33000 mn. Order book as of March 2008 stood at Rs 950,000 mn. Order backlog represents a book-to-bill ratio of 4x FY08 revenue.

BHEL

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BHEL - Weekly

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DISCLAIMER

This report has been prepared by the research department of ULJK Securities Pvt Ltd. and is for information purposes only. This report is not construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. It is for the general information of clients of ULJK Securities Pvt Ltd. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. This report is not for public distribution and has been furnished to you solely for your information and should not be reproduced or redistributed to any other person in any form. The report is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon. ULJK Securities or any of its affiliates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. ULJK Securities or any of its affiliates or employees do not provide, at any time, any express or implied warranty of any kind, regarding any matter pertaining to this report, including without limitation the implied warranties of merchantability, fitness for a particular purpose, and non-infringement. The recipients of this report should rely on their own investigations. ULJK securities and/or its affiliates and/or employees may have interests/ positions, financial or otherwise in the securities mentioned in this report. Opinions expressed are our current opinions as of the date appearing on this material only. While we endeavor to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice. The analyst for this report certifies that all of the views expressed in this report accurately reflect his or her personal views about the subject company or companies and its or their securities, and no part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this report. 11

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