Economist Report : MAY 2015- INDEX OF INDUSTRIAL PRODUCTION ANALYSIS

MAY 2015- INDEX OF INDUSTRIAL PRODUCTION ANALYSIS

The quick estimates of the Index of Industrial Production (IIP) for the month of May were released on 10^th July 2015 by the Central Statistics Office (CSO). The base for IIP is the fiscal year 2004-05. The IIP as an index measures the growth in the activity levels of various sectors of the economy.

The index as compiled by the CSO reflects growth in the form of ‘Use-Based’ goods produced within the country as well as on the basis of the National Industrial Classification (NIC-2004).

The ‘Use-Based’ classification has been shown in Table 1 along with the weights assigned to each of the categories. The industries included in the NIC-2004 based compilation has been included in Appendix 1.

Table 1 IIP (Use Based)

CATEGORY	WEIGHT
BASIC GOODS	456.82
CAPITAL GOODS	88.25
INTERMEDIATE GOODS	156.86
CONSUMER GOODS
·         DURABLES	84.60
·         NON-DURABLES	213.47
IIP INDEX	1000.00

3rd Quarter Analysis Report: Symphony Ltd. (SELL; Estimated Price: Rs. 1853)

3^rd Quarter Analysis Report: Symphony Ltd. (SELL; Estimated Price: Rs. 1853)

In March 2015 quarter, volume growth has been about 13% with 213,000 coolers sold which is lower than the sales in March 2014 on account of unseasonal rains and hailstorms. In the next quarter as well, it is projected that sales will be hampered as sales are closely knit with the weather. Looking at the segment revenue, home appliances have not shown much of an increase and have gone up to Rs. 138.90 crores from Rs. 113.64 crores whereas corporate funds have grown tremendously to Rs. 7.39 crores from Rs. 1.91 crores. Gross revenue including treasury income stood at Rs. 146 crores in March 2015 quarter versus Rs. 116 crores in March 2014, registering a growth of about 27%.  Bulk of the business of Symphony, in fact more than 90%, is from residential air coolers and rest is centralized air cooling. Symphony has taken initiatives to grow the centralized air cooling segment but it is still relatively small. The company has succeeded to sign in the rate contracts with HDFC Bank and ICICI Bank for their rural and semi-rural low cost branches. Even all Decathlon stores will have symphony air coolers to cool their showrooms.

Looking at the international business, during the quarter the operations have been restarted. The company has tapped a new market in Vietnam, Cambodia. But in some of the Middle East countries like Egypt and Syria because of political unrest the exports have been partially affected during the quarter and the first nine months supplies to IMPCO have steadied. However, in order to tap the export market Symphony is planning an acquisition but things are in the primitive stage right now so no disclosure has been made.

PAT stood at 36.5 crores versus 27 crores that is an increase of 35% while PAT percentage to gross revenue jumped from 23.4% to 25%. Looking at EBITDA numbers, EBITDA stood at 51 crores versus 36 crores in March quarter showing growth of 43% in absolute number while EBITDA percentage to sales stood at 37% versus 32% last time.

Overall, the growth of Symphony has suffered. However, the reasons for this sufferance are of less significance as weather conditions can never be controlled. Our estimated price of Symphony is around Rs. 1853 per share whereas the current market price is Rs. 1894.90 per share.

Economist Report : STATE OF THE ECONOMY

INTRODUCTION

Our economy is expected to attain a growth rate of 7.5% in FY2015-16 and would consequently surpass China as per a Global Economic Prospects (GEP) report that was recently released by the World Bank. A number of macro-economic variables, such as inflation as measured by the CPI and WPI indices, have also played out favourably in this regard. This in turn provided sufficient headroom to the RBI to have a more accommodative stance with regards to the monetary policy.

The central bank lowered the policy rate by 25bps twice this year and followed it with another cut of 25bps on 7^th May, 2015, making it amply clear that there was uncertainty regarding monsoon and the expected increase in rates by the US Federal Reserve down the line (though we do have forex reserves to the tune of $350Bn) among other factors. Following the announcement the SENSEX tanked by more than 600 points.

Though the stock markets nosedived, it is important to understand that monetary policy can perhaps only act as a catalyst in the process of growth and not substitute for deeper and broader changes that would be required in different sectors of the economy. It is vital that a number of issues are tackled so as to actually sustain India’s higher growth rate as compared to its peers in the coming years.

(It would be pertinent to note that a decrease in the policy rate would not always automatically lead to lower lending rates by banks and consequently an increased appetite for consumption of capital or consumer goods by the people.)

Recently changes were introduced in the method of GDP calculation as well as the revision of base year from 2004-05 to 2011-12. The CPI index was also modified.

Analysis Report : NTPC Quarterly result (BUY , Estimated Price : Rs. 160 per share)

Here is an interpretation made on the basis of these results and the company’s performance in a nut shell. 

In the 4^th quarter, company did perform well, with all the coal block scams and blockage from government. As the government is planning to provide 24X7 electricity, the power sector will require huge investment to withstand the growth. Moreover, the sector is turning towards environment friendly production which is yet to be implemented in various units. Due to the pressure of Coal Blocks and turning to green portfolio, NTPC witnessed a decline in Net sales but the use of better technology has increased their percentage of profit. And also with the news of disinvestment in this sector, the share price has witnessed a decline but as the auction of cola blocks is in the pipe line and the investments in Telangana, the NTPC shows long term growth phenomenon.

Other aspects like Power and Fuel cost has also declined indicating use of more efficient ways and process which will surely increase in future as NTPC is keen for green portfolio. The Power and Fuel cost in quarter 4, 2014-15 is almost 65% where as in the same quarter last year it was around 69%. With the growth rate promised by the government, the per capita power consumption which was 917.18 Kwh will definitely increase and thus providing new avenues to this sector. As NTPC has almost 25% of the production share in India, it is likely to increase with the developments. The EBIT of this quarter has shown a rise of 1.01% at 16.94% of the Net Sales as compared to the same of 15.93% in 2013.