RESEARCH CALLS: Siemens India

HDFC Securities, initiating coverage on Siemens India, rates it as 'market outperformer'. The company has posted 62 per cent rise in sales to Rs 3640 crore in FY05 and 83 per cent rise in net profit to Rs 310 crore.

New orders received by the company in FY05 were up 37 per cent to Rs 4120 crore and order backlog stood at Rs 3810 crore as on September 30,2005 which was up by 79 per cent, compared to last year.

On the back of strong capex cycle, the report expects the company to post revenue growth of 30 per cent between FY05-07 and EPS to rise by 28 per cent. EBIT margins for the year improved marginally by 30 bps to eight per cent in FY05 and EBIT increased by 114 per cent to Rs 77.3 crore. The stock trades at 29.7x FY06E and 22.1x FY07E.

Hindustan Lever

SSKI, in its event update on an increase in Surf prices, rates Hindustan Lever as an 'underperformer'. Competitive pressure and rising input costs have shrunk the company's margins in soaps and detergents segment by 1000 bps in the last eight quarters. Pressed to stop further margin erosion, it has effected about four per cent price increase on various SKUs under Surf Excel franchise.

The report does not see it as regained pricing power, as the company has kept prices in mass segment unchanged. Also, price increase in Surf Excel has been done simultaneously with P&G, its key competitor in the segment.

The price increase in Surf Excel would hardly have an impact on profitability, as Surf Excel accounts for just 20 per cent of detergents business. The company continues to bear the brunt of input cost increase in mass segment detergent brands, Wheel and Rin.