9am with Emkay 13 April, 2011

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9am with Emkay

13 April, 2011

Contents

n        Research Views

Key takeaways from interview of MS Unnikrishnan, Managing Director, Thermax on CNBC

On the Industry

n    There continue to be delay in order finalizations, but expect pick-up from Q1FY12E and Q2FY12E… initial signs already visible from Q4FY11 end.

n    Engineering industry to witness sequential decline in order books.

n    Order finalizations happening in steel and cement industries… pick-up seen in food, food processing and hospitality

n    Outlook on International markets… Recovery seen in Middle-East and South-East Asian sectors (especially hydrocarbons). No improvement in Europe and America

Additionally… Mr. Unnikrishnan stated that Thermax’ Q4FY11E order inflow was better than Q3FY11 (Rs12.5 bn)… this implies that Thermax exceeds our Q4FY11E target of Rs10.3 bn… key to maintaining our FY12E earnings.

At CMP of Rs680, Thermax is trading at 21.0FY11E and 17.5XFY12E consolidated earnings of Rs32.4 and Rs39.0 per share respectively. We continue to have a positive bias on Thermax.

Link to the interview à http://www.moneycontrol.com/news/business/fresh-orders-expectedq4-as-compared-to-q3-thermax_534841.html

n        Research Update Included

GNFC Company Update; Expect strong Q4FY11 performance; Buy; Target: Rs 157

n    We expect GNFC to post strong Q4FY11 results (APAT of Rs 902 mn against loss of Rs 383 mn) leading to FY11 PAT revision by 14% and AEPS of Rs 14.1 (previous Rs 12.4)

n    Prices of company’s key chemicals like Nitric acid, Formic acid, Methanol etc have increased by 15-20% resulting into higher margins despite increase in input cost

n    Insurance claim of Rs 1.4 bn is likely to boost the profitability for Q4FY11 / FY11. Resulting FY11 reported PAT to be higher by 45% than our estimated APAT of Rs 2.2 bn

n    Stock trades at compelling valuations of 4.8 x FY12E EPS, 3.3x EV/EBITDA and 30% discount to its FY11 BV of Rs 144. We reiterate our BUY recommendation on the stock

Dishman Pharma Management Meet Update; Demand Recovery Underway; Accumulate; Target: Rs 125

n    Dishman’s Indian CRAMS business to see some respite as supplies to European customer set to begin from Q1FY12 leading to higher operating leverage

n    Carbogen Amcis (CA) continues to bleed, commissioning of HIPO facility to get delayed

n    Chinese facility will take at least two years to start contributing meaningfully to the top-line

n    Commencement of European orders will lead to higher asset utilization in Indian CRAMS operations. Raise target price to Rs125 and revise the rating one-notch to Accumulate

Emkaynomics; March 25, 2011; Fortnightly round up of key banking and economic indicators

n    The growth in non food credit moderated to 21.4% yoy during the fortnight ended March 25, 2011, while the growth in the deposit mobilization remained moderate at 15.8%.

n    The CD ratio improved marginally to 75.7% for the week ended March 25, 2011 with TTM CD ratio remaining high at 97.2%.

n    The money supply grew at 16.4% in line with reserve money growth of 17.2% The money multiplier was at 5.01x

n    Call money rates have dropped below the reverse repo rate at 5.45%. We believe that this is more seasonal phenomenon as the corporates would have started repaying working capital loans. Once, the government bond auctions start we could see them moving up

n    The shortage of liquidity in the system increased to Rs1.1tn for April 1, 2011. However, as the government spending picked up and the corporate have started repayments, the LAF balances have turned positive now

n    The spread between the long and short end OIS has gone up to 65bps as opposed to 32bps last fortnight

n        Technical Comments

Nifty

With the fourth consecutive bearish close, Nifty started the week on a losing note and stayed below 5800-mark on close. As mentioned we were expecting a 38.2% pullback of the entire rally from 5348 to 5944, which comes at 5716. Also 5718 is the support of 200-DSMA. Hence this makes the range of 5716-5718 a key pivotal area going forward, as if this range is violated on closing basis, then it will be a worrisome signal for the bulls. Unless that takes place, we still stick to our bullish view of 6250 in the short term.