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Today’s View: Positive bias

Expect a positive opening. .Maintain a positive bias.May F&O series starts with a total open interest of Rs46600cr and futures open interest of Rs36200cr-an extremely light position .Inflation figures to be higher than last week due to base effect . Expect figures to be between 7.2% and 7.4%
” In 4QFY08, Maruti’s volumes grew just 1.1% YoY, while realizations were 8.1% higher, enabling net sales growth of 9.2% YoY. EBITDA margin expanded 140bp YoY to 15.7% and adjusted PAT grew 14.6% YoY to Rs5.1b.
Net sales grew 9.2% YoY in 4QFY08, driven by 8.1% increase in realizations. We have adjusted the net sales figure for the Rs545m compensation paid by Maruti to its dealers for the reduction in small car prices following the excise duty cut to 12% in Budget 2008.
EBITDA margin expanded to 15.7%, while EBITDA increased 21.7% YoY to Rs7.9b on account of other operating income nearly doubling to Rs2.1b. We have adjusted other expenditure for the Rs505m provision for foreign currency derivatives.
Maruti has changed its depreciation policy to reduce the useful life of its plant and machinery. As a result, the company has taken a one-time hit of Rs2.1b during 4QFY08. Adjusting for this, Maruti registered 14.6% increase in its adjusted PAT to Rs5.1b - its reported PAT was Rs3b.
The stock trades at 10.6x FY09E EPS of Rs70.2 and 9.1x FY10E EPS of Rs81.9. Recommend Buy for investments.”
“Hero Honda’s 4QFY08 results were significantly better than estimates as EBITDA margin improved 90bp QoQ and 430bp YoY to 14.8% (vs est of 13.6%). PAT grew by 47.1% to Rs2.99b.
In 4QFY08, HH’s volumes increased 3.3% YoY to 884,075 units, while the two-wheelers industry volumes declined 4.3% YoY.
Net sales growth of 5.6% in 4QFY08 was also driven by 2.3% improvement in realisations. HH’s realisations are increasing due to a shift in product mix towards premium models. The 125-250cc motorcycle segment contributed 6.9% of Hero Honda’s two-wheeler sales in 4QFY08 (6.4% in 4QFY07 and 5.2% in 3QFY08).
EBITDA margin at 14.8% was the highest since 4QFY06. EBITDA margin improvement was helped by lower RM/Sales at 70.7% (v/s 70.9% in 3QFY08 and 73.1% in 4QFY07). The company was also able to lower its other expenditure / net sales ratio to 11% (v/s 11.5% in 3QFY08 and 13% in 4QFY07). EBITDA increased 48.9% YoY to Rs4.1b.
We expect HH to report volume growth of 8.1% in FY09 and 7.6% in FY10. While we have raised our EBIDTA margin estimate to 13.4% for FY09,
we would see the impact of higher input prices before revising the margins further (2HFY08 margins of 14.3% is much above our assumption for FY09). Our revised EPS estimate is a growth of 16% in FY09 to Rs56.4 (vs Rs50.5 earlier). The stock trades at 13.8x FY09E EPS. Recommend a buy for investments.”