Nov 18, 2013, 05.40 PM IST
Prabhudas Lilladher believes that M&HCV goods segment would de-grow by 15- 20 percent in FY14E; expects working capital requirements to remain stretched over the next few quarters for fertilisers sector and remains positive on PTC India and Tata Power trading on the back of growth in volumes and regular receivables cycle.
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Prabhudas Lilladher view on Automobile, Fertilisers, Power
Prabhudas Lilladher believes that M&HCV goods segment would de-grow by 15- 20 percent in FY14E; expects working capital requirements to remain stretched over the next few quarters for fertilisers sector and remains positive on PTC India and Tata Power trading on the back of growth in volumes and regular receivables cycle.
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Prabhudas Lilladher view on Automobile, Fertilisers, Power
Prabhudas Lilladher believes that M&HCV goods segment would de-grow by 15- 20 percent in FY14E; expects working capital requirements to remain stretched over the next few quarters for fertilisers sector and remains positive on PTC India and Tata Power trading on the back of growth in volumes and regular receivables cycle.
Automobiles
After 3-4 percent recovery in truck rentals during September 2013, truck rentals during October 2013 (October 3 - November 2, 2013) remained stable and almost flat because the small increase in festival season dispatches were virtually neutralized by weak arrival of regular vegetables - onion, potato, tomato - due to extended rainy season/slow withdrawal of monsoon in Eastern States, Orissa/Andhra Pradesh Coastal areas, parts of Madhya Pradesh, Chhattisgarh and Maharashtra leading to subdued trucking activity on trunk routes. Despite record discounts on sales and subvention to auto financers, M&HCV goods segment declined by 31.9 percent YoY in Oct'13, with a YTD de-growth at 28.8 percent YoY, mainly on account of low cargo offering across segments and negative sentiments on the ground level. LCV goods segment de-grew at 14.7 percent in Oct'13, with de-growth in YTD FY14 at 10.7 percent YoY. We maintain our negative view on the Trucking industry (M&HCV segment) for the next 6-8 months. We believe M&HCV goods segment would de-grow by 15- 20 percent in FY14E. In our view, LCV goods segment is likely to grow at a slower pace of 5-8 percent in FY14E.
Fertilisers
Preliminary data from the Ministry of Fertilisers indicates that sales volumes of overall complex fertilisers (incl. manufactured & traded) declined 21.8 percent YoY for the industry during Oct'13, primarily due to decline in trading volumes. Imported complex fertilisers witnessed a decline of 50.0 percent YoY during Oct'13, while manufactured volumes increased by 7.9 percent YoY. On the other hand, urea was down by 13.8 percent YoY during Oct'13. On a YTD basis, aggregate complex fertiliser sales is down 15.6 percent YoY due to 36 percent decline in traded volumes. Urea, however, is up by 7.1 percent on a YTD basis. Over the last couple of quarters as expected, manufactured indigenous volumes have improved, while imports continue to decline as importers have till now refrained from importing. However, due to continuous decline in global fertiliser prices during the last few months trading has again emerged as an attractive proposition. Our recent interaction with companies'/industry participants corroborates the fact that traders have started becoming aggressive in the marketplace. Likelihood of reduction in farmgate prices has become imminent during the current rabi season and we expect reduction to the tune of Rs1,500‐ 2,000/mt on DAP. Subsidy overhang remains a major issue in the sector and we expect working capital requirements to remain stretched over the next few quarters.
Power
H1FY14 has been a quiet period in terms of overall trading volumes growth. Early and heavy monsoons, massive hydro generation, low demand due to no election period and restrictions on SEBs to buy costly power and competition have played the spoil-sport. However, receivable position of all the players improved drastically YoY on the back of payments (past dues as well as current billing) from SEBs. Following is a recap of the power trading scenario in India in H1FY14 and its impact on earnings.
As 50 percent of the volumes are transacted in H1 of the financial year, the trend till now indicates atleast a 6-8 percent YoY growth for FY14E versus our earlier estimates of 10-15 percent. Prices should start crawling back on account of election demand and onset of agriculture demand. Overall, we expect the energy trading business to continue to grow at a CAGR of 10 percent in the next two years on the back of 60GWs capacity addition, of which, at least 15-20 percent has been kept open. We remain Positive on PTC India and Tata Power trading on the back of growth in volumes and regular receivables cycle.
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