* Time to bottom fish? Not yet — *Despite CG’s 27% plunge over the past 3 days, we would not be tempted to enter the stock yet: 1) the macro looks weak; 2) the new leadership faces the tough task of meeting high expectations (though moderated now); 3) management has not given any guidance on the headwinds facing the business (despite recent analyst/investor interactions) and its guidance about future prospects is confusing; and 4) valuations are not cheap enough. While we believe the macro may turn, and factor in some recovery, we prefer waiting for new management to deliver on its revised expectations. Initiate at Sell.
*Strong global T&D player, but faces macro headwinds — *Part of the US$4bn Avantha Group, CG is into Power Systems (65% of consolidated sales), Consumer Products (20%) and Industrial Systems (15%). India’s T&D market remains weak, with few orders, high competition and falling realizations. The global T&D market faces the same issues, made worse by economic weakness in Europe and the strife in the Middle East. Industrial capex and consumer product demand in India appear to be slowing due to inflation and high interest rates. *Lower earnings and returns trajectory — *We expect CG’s earnings CAGR to slow to 6% in FY11-14E, from 32% in FY08-11, given the weak demand and operating environment. We expect ROE to fall to 22% by FY14E from 31% in FY11. *Safe Harbor Statement:* *Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.* ** *Nothing in this article is, or should be construed as, investment advice.** * ** * * ** ** -- For Anything related with Stock market be Online at http://www.niftyviews.com/ Get free updates on your mobile phone. Sms "Join TSR " and send to 09223492234 FOR TRIAL STOCK/NIFTY/OPTION CALLS You received this message because you are subscribed to Google Group "STOCKRESEARCHER" group. To post to this group, send an email to [email protected] To unsubscribe email [email protected] for more info visit http://groups.google.com/group/STOCKRESEARCHER?hl=en-GB . This is Not a Spam Mail. Disclaimer :- "The opinions expressed by the members on this board are based on their individual experience and perceptions and to share information with other members with the best of intentions to help fellow members in investment decisions as equity investment is a risky venture."
