| Analysts' Picks - Gujarat Ambuja Cement, Federal Bank and Dena Bank -
February 24th, 2006
Gujarat Ambuja Cement
Khandwala Research, in its company update, recommends a 'hold' on Gujarat Ambuja Cement, one of the leading domestic cement manufacturers. With present capacity of 13.30 million tonne a year, it is also the largest exporter of cement from India.
The local cement sector is expected to grow at 8-10 per cent in the coming years. The industry has grown at 10.5 per cent for the April 2005 to January 2006 period.
The major drivers of the cement demand have been the housing and the infrastructure sectors. The other areas seeing demand include the retail sector and the increased capex. Gujarat Ambuja is a major player in the northern and western India.
While the northern markets include Punjab, Haryana, Rajasthan, Delhi, Himachal Pradesh, Jammu & Kashmir, Uttar Pradesh and Uttaranchal, the western markets include Gujarat and Maharashtra. The company exports to the Middle-East countries. Its exports account for 14 per cent of the sales volume.
Federal Bank
IL&FS Investsmart, in its results update on Federal Bank, recommends a 'buy'. The report states that the company posted a y-o-y increase of 16 per cent in its net interest income in Q3 FY06 on the back of 26 per cent rise in advances.
Operating expenses have shown a decline leading to an impressive 34 per cent rise in operating profit. The bank is seen on track to register sharply higher profits in FY06, against a low base in FY05. Its ROE is expected to bounce back to 30 per cent in FY06.
The bank witnessed strong asset growth. Interest earned on advances increased 23.9 per cent on the back of 26 per cent rise in advances, while interest on investments also jumped 31.6 per cent. Other income grew 9.4 per cent, though the same, on a q-o-q basis, declined 14.5 per cent.
Dena Bank
Karvy Stock Broking, in its results review, recommends a 'buy' on Dena Bank. The bank posted strong Q3 FY06 results with net profits zooming 85 per cent to Rs 83.3 crore, though it was less than the expected Rs 100 crore.
The bank reported higher standard asset provisions of Rs 29.5 crore, which had not been factored. The bank is on its turnaround path and the report expects its performance to remain strong in Q4 FY06 and FY07 as well.
Its income was boosted by certain non-recurring items such as interest on income tax refund of Rs 30 crore (negligible in Q3 FY05). Treasury profits were Rs 56.1 crore and income from written-off accounts was Rs 47.9 crore.
Treasury profits and income from written-off accounts depend on market conditions and recovery efforts of the bank. That the bank focused on recovery of bad debt reflected in its Q3 FY06 numbers.
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