09 November 2010

Power Grid - a good bet; FPO Note; Subscribe: Edelweiss

Bookmark and Share
Visit http://indiaer.blogspot.com/ for complete details �� ��


Power Grid Corporation of India (PWGR IN, INR 85-90, Subscribe)

n  ~INR 76 bn FPO: 50% offer for sale and 50% fresh issue
Power Grid Corporation of India (PGCIL) plans to issue 4.2 bn fresh shares, with the government selling another 4.2 bn shares from its stake, in the INR 85–90 / share (at 1.8x post issue FY12 book value) price range. The resultant INR 76 bn issue will dilute government’s stake in the company from 86.4% to 69.4%. 

Thermax - Danstoker acquisition; an eye on the future; event update; Buy: Edelweiss

Bookmark and Share
Visit http://indiaer.blogspot.com/ for complete details �� ��


Thermax - Danstoker acquisition; an eye on the future; event update; Buy


Thermax (TMX IN, INR 879, Buy)

Event: Thermax announces acquisition of Danstoker (Denmark) for EUR 29.5 mn

Attractive buyout from a strategic long-term perspective
Danstocker specializes in the manufacture of boilers using oil and gas, biomass and waste heat recovery products. The deal valuation stands at 0.7x sales and around 8x EBIDTA on YE Sept, 2010 basis, which we believe is fairly attractive, given Danstoker’s huge potential in terms of its overall product portfolio and strong client reference base across Europe, Middle-East and South East Asia. Thermax now not only  has access to a wide range of products through Danstoker, which will enable it to leverage and reap benefits of both European Union’s aim of 20% energy generation from renewable by 2020, but also to the latter’s global client base for its Indian products. Europe has a total market size of EUR 370 mn annually in the heating segment, of which a large chunk comes from Denmark, Germany and Sweden, where Danstoker has 50%, 20% & 20% market share, respectively.

PE infusion in GVK's energy assets finally: JPMorgan

Bookmark and Share
Visit http://indiaer.blogspot.com/ for complete details �� ��


GVK Power & Infrastructure Overweight
GVKP.BO, GVKP IN
PE infusion in GVK's energy assets finally





• Finally the announcement on PE infusion in GVK’s energy assets.
GVK has signed an agreement with 3i India Infrastructure Fund to lead
an investment of Rs12B for a 21.1% stake in wholly owned subsidiary
GVK Energy. The deal implies an equity value of Rs56.9B or
Rs36/share (CMP of Rs45.6).


SBI -Headline Miss, But Core on Track: Morgan Stanley

Bookmark and Share
Visit http://indiaer.blogspot.com/ for complete details �� ��


State Bank of India
Headline Miss, But Core on
Track


F2Q11 earnings at Rs25 bn. This compares with our
estimate of Rs28.6 bn. Given the strength in the stock
over last 3-4 months, this miss may lead to some
weakness in the stock. However, we would buy the dips.
We maintain our price target at Rs3,700. The key points
in the results were:


Aban Offshore -Strong Results with Record EBITDA Margins: Morgan Stanley

Bookmark and Share
Visit http://indiaer.blogspot.com/ for complete details �� ��


Aban Offshore Ltd
Strong Results with Record
EBITDA Margins


Quick Comment Impact on our views: Aban offshore
reported consolidated F2Q11 results with EBITDA and
PAT 15-20% above our estimates on the back of lower
operating costs. With Aban deploying 90% of its jackup
fleet, margins for the company improved to a record
67.2% in F2Q11 as against our expectation of 63%. We
expect margins to average 65% in F2011 as the
company deploys Aban Abraham by the end of F2011.
The company has written off its investment in Petrojack
– without this, PAT would have been 13% higher.


IDFC F2Q11: Strong Loan Growth : Morgan Stanley

Bookmark and Share
Visit http://indiaer.blogspot.com/ for complete details �� ��




IDFC

F2Q11: Strong Loan Growth


Quick Comment – IDFC reported F2Q11 earnings of
Rs3.4bn vs. our expectation of Rs3.7bn. However, the
miss was in capital gains (which are volatile). Underlying
earnings (excluding capital gains) were about 20%
ahead of our expectations. The big swing was driven by
a spike in loan-related fees.


Gray Market Premium Prices for India IPO: 9th Nov, 2010

Bookmark and Share
Visit http://indiaer.blogspot.com/ for complete details �� ��




Company Name
Offer Price
Premium
(Rs.)
(Rs.)
Gravita India
120 to 125
52 to 54
Power Grid FPO
85 to 90 (rumor)
6 to 8

GVK Power and Infrastructure- PE money in power vertical: Positive:: UBS

Bookmark and Share
Visit http://indiaer.blogspot.com/ for complete details �� ��


UBS Investment Research
GVK Power and Infrastructure
PE money in power vertical: Positive

􀂄 Rs12bn to be invested for ~21% stake; additional ~12% upside to our PT
GVK has signed an agreement with 3i India Infrastructure Fund to lead an
investment of Rs12bn for a 21.1% stake in its Energy vertical. 3i would invest
Rs8bn. This values GVK Energy at ~Rs57bn post money. The capital raising is as
per expectations (please refer our note GVK: Equity raising in airports/power
verticals dated 11 October 2010), but there is a valuation surprise. This transaction
implies a valuation of ~Rs45bn or Rs28/share for GVK’s 78.9% stake in its Energy
vertical. We currently value its Energy business at ~Rs33bn or Rs21/share.


ENIL: Growth on track 2QFY11 result snapshot: Alchemy

Bookmark and Share
Visit http://indiaer.blogspot.com/ for complete details �� ��


Growth on track
2QFY11 result snapshot
Entertainment Network India’s (ENIL’s) 2QFY11 results were a little above our expectations.
Consolidated revenue for the quarter grew 11.7% YoY to `1,100mn. A sharp volume-led
growth in advertisement revenue for the radio business, coupled with strong cost-control
measures improved the company’s operating profitability. Consolidated operating profits for
the quarter stood at `148mn, with an operating profit margin of 13.4%. Accordingly, net
profit for the quarter stood at `9mn as against a net loss of `138mn in 2QFY10.


Graphite India -Impressive run rate to continue… ICICI Sec

Bookmark and Share
Visit http://indiaer.blogspot.com/ for complete details �� ��


Impressive run rate to continue…
Graphite India Ltd (GIL) reported good set of numbers for Q2FY11.
Topline registered stellar growth (up 16% YoY and 25% QoQ) led by
increase in graphite electrode volumes (up 48% YoY and 34% QoQ).
This was backed by improved capacity utilisation levels at 78% and
stable electrode realisations. EBITDA margins also saw decent gains (up
~42% QoQ) but remained muted YoY (down ~23%). Increase in raw
material cost (up ~25% QoQ and 37% YoY), fuel cost (up 26% QoQ and
45% YoY) and one-time charge for the Bangalore plant restructuring led
to decline in margins. PAT grew ~ 43% QoQ primarily due to reduced
interest outgo on account of repayment of loans and conversion of
FCCBs. We expect good run to continue based on improved volumes
from EAF segment and stable electrode pricing regime. Also, we do not
expect any significant jump in needle coke prices based on yearly
contractual rates. We have revised our target price to Rs 107/share and
assigned BUY rating to the stock.


Oil Refining & Marketing-Crude levels to pressure subsidies again: JPMorgan

Bookmark and Share
Visit http://indiaer.blogspot.com/ for complete details �� ��


• Crude rise brings subsidies back into focus: Crude has rallied ~8%
since September due to a confluence of supportive economic indicators,
the Fed's QE2 announcement and the approaching winter. While the
overall subsidy level was ~Rs110bn for the September quarter, with
crude remaining persistently high, subsidies for 2HFY11 could be
significantly higher than anticipated.


India Consumer -(Not a) Happy Halloween: More Tricks; Fewer Treats: Citi

Bookmark and Share
Visit http://indiaer.blogspot.com/ for complete details �� ��


India Consumer
(Not a) Happy Halloween: More Tricks; Fewer Treats


 2QFY11: a tad lower than forecasts — Jul-Sep Q results for the consumer sector
were ~2-3% below estimates. Key disappointments were: a) Asian Paints
(impacted by prolonged monsoons, festive timing mismatch) and b) United Spirits
(volumes lower than forecasts + higher ad spends). Of the 8 staples companies
under coverage, 4 missed numbers, 2 bettered estimates & 2 were in line.


IDFC - Operationally a good quarter :: UBS

Bookmark and Share
Visit http://indiaer.blogspot.com/ for complete details �� ��


UBS Investment Research

Infrastructure Development Finance
Operationally a good quarter

􀂄 Headline numbers lighter than estimate but quality of numbers is good
IDFC reported PAT (consolidated) of Rs 3.4 bn (UBSe of Rs 3.5 bn) up 16% YoY.
Standalone numbers came below estimate at Rs 3.06 bn (UBSe of Rs 3.4 bn) on
account of low capital gains booked during the quarter. Income came in line with
estimates, though the mix of revenues was different than expected with low NIItreasury
offset by strong fee based income. Loan growth was stronger than
expected at 19% QoQ while spreads came down to 2.4% as expected. IB and AMC
revenues were strong in line with capital market trends.


Great Eastern Energy Co.- Interim Results and Site Visit -Buy: Arden Partners

Bookmark and Share
Visit http://indiaer.blogspot.com/ for complete details �� ��



GEEC has today released its interim results for FY 2011, and an
update on its operations at its Raniganj Block, including details
of drilling and fraccing rates and expected production ramp up.

􀂋 Production up sharply from July; growth rate set to increase. GEEC
has reported current production of 4.54mmcf/d, a 22% increase on the
3.72mmcf/d it was producing in July. Although this is below what we were
forecasting, due principally to longer than anticipated well dewatering
times, it is still an impressive growth rate, and the pace of production ramp
up is expected to increase with the addition of new equipment.


SBI- Strong 2Q core earnings; Buy on positive risk-return : BofA ML

Bookmark and Share
Visit http://indiaer.blogspot.com/ for complete details �� ��



State Bank of India
Strong 2Q core earnings; Buy
on positive risk-return

􀂄 Raise PO to 3800, Buy on positive risk-return
We raise our PO to Rs3800 (US$165 on GDR). While the stock is likely to see
some correction post higher slippages (NPLs) in 2Q, we recommend buy on
declines, as we believe the stock trading at +2.1-2.2x FY12 (banking biz.) can
trade up to +2.3-2.4x FY12 adj. book as 1) we reckon NPLs have peaked,
although at elevated levels; 2) still see visibility of earnings growth of +26/45% for
FY11/12 driven by topline and fees and; 3) RoEs for banking business (SBI and
associates) rising to +22% (SBI RoEs at +20%) by FY12. Adding Rs283 (10%
Holdco disc.) for non-bank subs (maintain) we get our new PO of Rs3800.


BGR Energy Systems – 2QFY2011 Result Update- Angel Broking

Bookmark and Share
Visit http://indiaer.blogspot.com/ for complete details �� ��


BGR Energy Systems – 2QFY2011 Result Update
Angel Broking maintains a Neutral  on BGR Energy Systems

BGR Energy Systems’ (BGR) 2QFY2011 results were along expected lines.
The company’s revenue increased by robust 143% yoy to `1,136cr and PAT
spiked by 154% yoy to `78cr, compared to our expectation of `1,054cr and
`76cr, respectively. During the quarter, the company finalised its JV with Hitachi
for the manufacture of supercritical boilers and turbines, enabling BGR to
participate in the NTPC rebid for the 11x660MW boiler package. We maintain
Neutral on the stock.

Power Grid- Upgrade to Buy (1L) – Citi

Bookmark and Share
Visit http://indiaer.blogspot.com/ for complete details �� ��



Power Grid Corporation of India (PGRD.BO)
Upgrade to Buy (1L) – On Stock Underperformance
 Upgrade to Buy (1L) — From Hold (2L) to factor in: 1) 32% underperformance v/s
BSE Sensex over last six months, 2) its scarcity value, as it is the only listed play
on the regulated transmission business in India vis-a-vis plenty of generation
options, 3) PGCIL trades at P/BV of 2.1x FY12E, a 22% discount to the hist av of
2.7x 1 year forward, 4)EPS CAGR of 17% over FY10-13E with av RoEs of 14.8%.


7.4% IIP growth + 8.5% inflation = RBI pause :: BofA ML

Bookmark and Share
Visit http://indiaer.blogspot.com/ for complete details �� ��


7.4% IIP growth + 8.5%
inflation = RBI pause
September IIP growth, October WPI inflation forecasts
IIP WPI
Previous: 5.6% 8.6%
BofAMLe: 7.4% 8.5%

Bottom line: Industrial, inflation cycles peaking off
􀂄 Incoming data should support our case for a RBI pause until March 11. We
expect September industrial growth to come in at 7.4% on Friday, although
data volatility is an obvious risk these days. In the net, we expect industrial
growth to slow to 8.2% in FY11 from 10.9% in April-August 10 .
October inflation should clock 8.5% on November 15, in line with September's
8.6% en route to 7% levels in December .


Coal India: India proxy, with a miner's cash flow and a utility's stability: JPMorgan

Bookmark and Share
Visit http://indiaer.blogspot.com/ for complete details �� ��


• Miner, utility, India proxy- Initiate with N, March-12 PT of Rs345, further
re-rating contingent on execution: In our view, while CIL is a structural play
on India's rising coal deficit and is an India proxy, we believe most of this has
been priced in to listing day gains (up 40% on Nov 4th). From here we believe
further re-rating is contingent on execution of volume growth and washed coal
plans. Our PT is based on 7.5x FY13E EV/EBITDA with our estimates being 8-
12% ahead of consensus.


FII & DII trading activity on NSE and BSE as on 09-Nov-2010

Bookmark and Share
Visit http://indiaer.blogspot.com/ for complete details �� ��


FII trading activity on NSE and BSE on Capital Market Segment
The following is combined FII trading data across NSE and BSE collated on the basis of trades executed by FIIs on 09-Nov-2010.
FII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
CategoryDateBuy ValueSell ValueNet Value
FII09-Nov-20103652.843178.31474.53
Domestic Institutional Investors trading activity on NSE and BSE on Capital Market Segment
The following is combined Domestic Institutional Investors trading data across NSE and BSE collated on the basis of trades executed by Banks, DFIs, Insurance, MFs and New Pension System on 09-Nov-2010.
DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
CategoryDateBuy ValueSell ValueNet Value
DII09-Nov-20101260.861789.53-528.67

FII DERIVATIVES STATISTICS FOR 09-Nov-2010

Bookmark and Share
Visit http://indiaer.blogspot.com/ for complete details �� ��



FII DERIVATIVES STATISTICS FOR 09-Nov-2010 
 BUYSELLOPEN INTEREST AT THE END OF THE DAY 
 No. of contractsAmt in CroresNo. of contractsAmt in CroresNo. of contractsAmt in Crores 
INDEX FUTURES26206826.60542871712.1753985017147.20-885.58
INDEX OPTIONS1514814721.911467974564.77177581355951.87157.14
STOCK FUTURES493741434.80389081174.47148090843727.92260.34
STOCK OPTIONS18713645.2719246657.5032777989.78-12.23
      Total-480.33

GSK Consumer, Jain Irrigation, SBI, M and M Financial: reports by IIFL

Bookmark and Share
Visit http://indiaer.blogspot.com/ for complete details �� ��


Mahindra and Mahindra Financial Services (Growth drivers in place, BUY): Mahindra and Mahindra Finance (MMFS) is a leading rural-vehicle financier with a wide reach, strong parentage and well-established asset origination/collection skills. We believe buoyancy in the rural economy and structural under-penetration of finances would drive demand for credit higher. MMFS would sustain CAGR of 42%, 37% and 27% in disbursements, assets and earnings, respectively over FY10-13ii. Strong lending franchise, favourable growth outlook and robust profitability would drive valuation higher, in our view. We initiate coverage with BUY and target price of Rs900.

Market Ownership Trends Sep ’10: Anand Rathi

Bookmark and Share
Visit http://indiaer.blogspot.com/ for complete details �� ��



Market Ownership Trends
Sep ’10: Sectoral positioning largely sustained
 FIIs maintain stronghold. Institutional ownership stood at
27.2% (FIIs: 18.0%; Insurance: 5.3%; Mutual Funds-MFs: 3.8%)
in Sep ’10 as against 25.9% in Jun ’10 and 25.7% in Sep ’09. FII
ownership has increased 145bps while DIIs have seen a marginal
increase of 10bps since Sep ’09.


Powergrid 37% upside at FPO pricing;by Motilal Oswal

Bookmark and Share
Visit http://indiaer.blogspot.com/ for complete details �� ��


Meaningful acceleration in capitalization to drive core earnings


Expect PGCIL’s regulated asset base to increase from Rs113b as at March 2010
to Rs173b by FY12 (up 50%+); driving 15% EPS CAGR till FY12

Bunching up of private sector generation capacity addition driving accelerated
execution: Given the expectations of accelerated pace of generation capacity
additions with 120GW of projects under construction, we expect step-up in investments
towards transmission. CERC has recently approved setting up of nine high speed
transmission corridors (HSTCs). PGCIL is setting up these corridors, aimed at
evacuating electricity from 38 private sector players putting up an aggregate generation
capacity of ~42GW. Since most of this ~42GW capacity is likely to be commissioned
over the next 3-4 years, and transmission infrastructure needs to come up in tandem,
it would necessitate accelerated execution by PGCIL. Business visibility for PGCIL
has improved meaningfully.


Eicher Motor -Margins to remain under pressure in short term:: Emkay

Bookmark and Share
Visit http://indiaer.blogspot.com/ for complete details �� ��


Eicher Motor Ltd.
Margins to remain under pressure in short term


NOT RATED

CMP: Rs1,423                                        Target Price: NR

n     EBIDTA margin disappoints at 7.2% (est. of 9.2%) due to lower topline (Rs 11.0bn vs est. Rs11.6bn) & higher staff cost. Lower other income impacts APAT ( Rs 387mn vs est. 675mn)
n     Price increased by 2% to 4%in CVs to pass on the emission cost and some of the other cost pressures. Margins under pressure in the short term due to focus on HCVs
n     Valued the stock on SOTP basis with TP of Rs 1,326 (current business – Rs 1,173, NPV of engine business – Rs 153).
n     Was a preferred play in the CV space since last two quarters. Find valuations unattractive, post the strong outperformance

JINDAL SAW Lower SAW pipe sales dent numbers: Edelweiss

Bookmark and Share
Visit http://indiaer.blogspot.com/ for complete details �� ��



􀂃 Results disappoint; Major dip in pipes sales volume at 135,000 MT
Jindal Saw (JSL) reported net revenues of INR 8 bn, 41.6% lower Y-o-Y and
29.4% lower Q-o-Q due to lower pipe sales. Total pipe sales in Q2FY11, at
135,000 MT, dipped 28.9% Y-o-Y and 39.1% Q-o-Q on lower SAW pipe volumes
at 43,000 MT (down 64% Q-o-Q). Delay in dispatch of orders due to heavy rains
in North India also contributed to the lower sales volume. This has resulted in an
inventory pile up of INR 2.5 bn. DI pipe sales were also lower than estimate at
63,000 MT (70,000 MT). Blended realisations improved 10.3% Q-o-Q to USD
1,325/MT due to lower HSAW sales. Conversion expenses in Q2FY11 jumped
30.9% Q-o-Q to USD 294/MT. Overall, the company reported an EBITDA of INR
1.85 bn, down 26.9% Y-o-Y and 26.6% Q-o-Q. JSL’s Q2FY11 net profit dipped
30.2% Y-o-Y and 32.4% Q-o-Q to INR 1.02 bn (our estimate INR 1.59 bn).


JUBILANT FOODWORKS Above average growth; expensive valuations: Edelweiss

Bookmark and Share
Visit http://indiaer.blogspot.com/ for complete details �� ��


􀂄 Strong economy, new product launches drive 43.8% SSS growth
Strong economy, along with the introduction of two products (Mexican Wrap and
Pasta Italiano) during the quarter, helped Jubilant Foodworks (JFL) record its
highest ever same store sales (SSS) growth of 43.8%. The company reported
38.8% volume growth, along with 5% price growth. Sales increased to INR 1.63
bn, up 67.1% Y-o-Y and 20.5% Q-o-Q. JFL opened 18 new stores this quarter,
taking the total to 33 stores during H1FY11 and ended the quarter with 339 stores
(including two sub-franchises). We are increasing our SSS estimates to 30% and
20% for FY11 and FY12 due to the 40% SSS growth delivered by the company in
H1FY11. The company has maintained its 70 new stores opening target for FY11.