23 January 2011

Cement- Overall dispatch growth declines 0.7%; South drops 14%: Anand Rathi

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Cement Update
Overall dispatch growth declines 0.7%; South drops 14%
Overall production marginally rose 0.4%, while dispatch growth
declined 0.7% in Dec ’10. Dispatches grew in the range of 3-9% in
most regions, except South, where they declined 14% leading to a
drop in pan-India dispatches.

Buy Visaka Industries - Playing the volume game :: Crisil

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Visaka Industries Ltd (Visaka) is India’s second largest manufacturer (by
capacity) of asbestos cement sheets (ACS). It also manufactures synthetic
yarn. We assign Visaka a fundamental grade of ‘3/5’, indicating that its
fundamentals are ‘good’ relative to other listed securities in India.

Power Utilities  2011 outlook is bullish; PTC top pick :: HSBC research

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Power Utilities
 2011 outlook is bullish; performance to be driven largely by robust
sector earnings growth (25%+)
 Acceleration of new capacity addition (to 18GW in FY12), rise in
capex and high power prices to improve earnings visibility
 Concerns (project execution, coal supply, financial health of
distribution co.s) to persist, but are priced in. PTC is our top pick

Telecoms 2011: Bharti is best positioned: HSBC research

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Telecoms
 We expect a spectrum road-map to emerge from the recent 2G
controversy; this will be positive
 3G launch will be a key driver for future growth
 Re-rating unlikely before (still distant) sector consolidation/shakeout
 Bharti is best positioned in the sector

Retail  2011- Gitanjali is our preferred play:: HSBC research

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Retail
 2011 will be a more challenging year due to tough comps
 Sector valuation is steep; upside over 12 months limited
 Gitanjali is our preferred play

Property 2011- DLF is our top sector pick -HSBC research

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Property
 Residential market to slow across India as high prices and lack of
easy credit curtail housing demand in 2011
 We maintain our positive outlook on commercial property, driven by
increased IT/ITES and financial services hiring
 DLF is our top sector pick, given its strong focus on the commercial
segment and healthy balance sheet

Oil & Gas sector 2011 Top Pick: Cairn India -HSBC research

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Oil & Gas sector
 Full-fledged fuel pricing reform is unlikely in the face of high
inflation, impending elections and broader socio-political factors
 Gas supplies are expected to stay flat in 2011, and Refining and
petrochem margins will remain at mid-cycle levels
 Cairn India is our preferred play in the sector

Metals & Mining - Tata Steel, Hindalco top pick for 2011: HSBC research

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Metals & Mining
 Positive on aluminium/steel/coking coal; negative on copper/iron ore
 INR appreciation, regulatory risks are an overhang on the sector
 Tata Steel is our top pick for 2011, followed by Hindalco

IT Services -Infosys is our top pick, followed by HCLT and TCS : HSBC

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IT Services
 Expect 2010 growth momentum to continue…
 …as sector benefits from secular offshoring and pick-up in
discretionary spending
 Infosys is our top pick, followed by HCLT and TCS

Industrials & Infrastructure- 2011 top pick Larsen & Toubro, -HSBC research

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Industrials & Infrastructure
 Strong government spending on infrastructure and pick up in
corporate capex will serve as catalysts during 2011
 Order book has expanded rapidly over past 18 months, and players
with adequate capital availability will outperform during 2011
 Larsen & Toubro is our top sector pick

FMCG 2011 Top Picks: Dabur - HSBC research

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FMCG
 Cost pressures the dominant theme in CY11 – we see no
significant pressure on sales growth
 Competition unlikely to ease, but that’s factored into expectations
 Dabur is our preferred play in the sector

Financials 2011 Top Picks: Private – YES; PSU – Canara -HSBC research

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Financials
 Robust credit upcycle in FY12 can potentially throw up positive
surprises on growth, margins and asset quality
 Near term we prefer private banks, especially smaller names with
higher growth and execution visibility. A significant stock price
correction could be entry opportunity for buying a sector basket
 Top picks: Private – YES; PSU – Canara

HSBC: India Equities 2011 – Sector views and stock picks

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India Equities
2011 – Sector views and stock picks



 2011 performance to be driven by stock
rather than sector calls
 For many sectors, earnings outlook is
robust but valuations are already high
 Top picks include Yes Bank, L&T,
Infosys, PTC, DLF, Tata Steel…

SBI:: Top line traction & cost pressures on a balance, Hold:: Deutsche Bank

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State Bank of India -Top line traction & cost pressures on a balance, Hold


Fall in stock prices in some risks but downsides exist
We maintain Hold on SBI after reducing TP to INR2750 from INR2880 following
earnings revision and a marginally lower multiple because of challenges from
rising rates. The sharp fall in the stock from the recent peak has factored in some
risks and outturn on NIMs been better than estimates. However, credit quality and
credit cost issues are still prominent, and operating cost-related downsides not yet
out of the way.

Bank of India: Asset quality stabilising, upgrade to Hold -- Deutsche bank

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Bank of India: Asset quality stabilising,
upgrade to Hold -  Deutsche bank


U/g to Hold with new TP at Rs460, fairly valued relative to fundamentals
We upgrade BoI to Hold from Sell after adjusting target price to Rs460 from Rs450
following earnings revision  and abatement of credit costs. We believe that the
bank, which suffered early in the credit cycle, has the worst behind it, and has also
managed to strengthen margins towards a better RoA. However, risks do remain -
margins could correct, occasional accidents on credit quality can't be precluded
and large pension provisions need to be made.

BHEL- In line with expectations: structural risks remain; Goldman Sachs

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EARNINGS REVIEW
Bharat Heavy Electricals (BHEL.BO) 
Neutral  Equity Research
In line with expectations: structural risks remain; maintain Neutral 
What surprised us
BHEL reported 3QFY11 net income, adjusted for the accounting change of
Rs13,432 mn, mostly in-line with our and above Bloomberg consensus
estimates mainly on lower than expected raw material costs. Raw material
costs for the quarter came in at 56% of gross sales, lower than the average
59%-60% range seen over past few quarters.  Order book at the end of the
quarter was at Rs1580bn, registering growth of 18% yoy. The company
made an accounting change this quarter to do a cost – revenue match on
completion of project trial operations.

Morgan Stanley:: Godrej Consumer - 3QF11: Concerns to the Fore

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Godrej Consumer Products Limited  
Quick Comment - 3QF11: Concerns to the Fore 

Stock likely to correct on the back of this result:
GCPL reported consolidated Q3F11 results with
revenue, operating profit and adjusted PAT growth of
89% 72% & 43% respectively, which compares with our
estimates of 93% 74% & 48%, respectively. Key
highlights of the quarter are 1) Tepid organic revenue
growth - international business revenue grew by 5%
YoY and domestic (ex-GHPL) revenue grew by 8%

Credit Suisse: Kotak -- Lending business strong; capital market business below

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Kotak ------------------------------------------------------------------------------------ Maintain NEUTRAL - Lending business strong while capital market business below expectations


● Kotak’s 3Q11 net profit (Rs3.8 bn; 16% YoY) was in line with our
and the street’s estimates. Performance of the lending business
remained strong (47% YoY profit growth) while that of the capital
market businesses was below expectations.
● Loan growth was robust at 37% YoY, driven by retail as well as
corporate. While FY11E loan growth should be over 40%, given
the tight liquidity conditions and rising cost of funds, FY12E
growth is likely to moderate to about 30%. Margins were down 20
bp QoQ (to 5.4%) and management expects margins to reach
about 5% over the next few quarters.
● Kotak’s asset quality is among the best, with gross NPLs falling
further to 2% (72% coverage) and credit costs falling to 0.2%. The
bank indicated that slippages are still on the decline.
● The capital market business’ performance was below
expectations, driven by lower market activity, pricing and
competitive pressures (leading to lower market share) and outlook
doesn’t look attractive, either.
● With the core bank trading at 2.8x FY12E book, and thus despite
strong lending business momentum, we retain a NEUTRAL.

JP Morgan: State Bank of India- Cheap, but high NPLs persist

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State Bank of India
Neutral
SBI.BO, SBIN IN
Cheap, but high NPLs persist


• 3Q11: Headline beat estimates but asset quality concern remains:
SBI reported net profit of Rs28bn up  14% y/y v/s our expectation of
Rs26bn. Stronger than expected margin and lower provisions was the
primary reason for the profit beat. But ~500bps of coverage shortfall and
provisioning for teaser loans could put future profits at risk.

CLSA: buy Yes Bank- 3QFY11 result review & analysis

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Yes Bank -Loan growth moderates
In 3QFY11, Yes Bank’s profit grew by 52% YoY to Rs1.9bn, ahead of our
estimates due to lower provisioning costs. The moderation in loan growth
to 66% YoY (3% QoQ) indicates the focus on profitability over growth as
the sharp rise in cost of wholesale funds is putting pressure on margins.
During the quarter, margins contracted by 20bps QoQ to 2.8%, but
management does not expect them to fall further. Stable asset quality
was positive, but CASA ratio has been flat for 6 quarters. We expect 33%
Cagr in profit over FY10-13CL. Maintain BUY.

Credit Suisse, Global Equity Strategy - 11 surprises for 2011

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● We published our central forecasts for the new year in our twopart
2011 outlook. We project global growth of around 4.5%, are
overweight equities (with a mid-year target of 1,350 on the S&P
500) and underweight bonds, expect peripheral Europe to muddle
through and maintain our benchmark on cyclicals.
● Here we look at the risks to our central scenario. Among the
surprises that could occur in 2011 we look at the following: (1)
GDP growth in the US of 5% in 1H 2011E and a strengthening
dollar; (2) US house prices rise in 2011E; (3) US bond yields rise
to 5% in 2011E; (4) Chinese growth accelerates; (5) The S&P 500
reaches 1,600;(6) There is a default in peripheral Europe; (7) Gold
rises to US$2,000/oz; (8) Autos are the best-performing sector for
the second year in a row; (9) Defensives outperform in spite of a
rise in equities; (10) Banks outperform by more than 10% in
2011E; and (11) Food prices continue to rise sharply.

Info Edge : Inline Quarter :: citibank reserach

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Info Edge (Price Rs. 574 (as on Jan 20 ), TP Rs. 640, ER 11.5%, EDY
0.1%, 3L) : Inline Quarter

Inline 3Q — Revenues at Rs751m were up ~28% yoy (CIRA: Rs777m) while
EBITDA margin was 36.6% (CIRA: 31.9%), an improvement of more than
600bps yoy. Ad expenditure declined ~450bps (as a % of revenues) on a
qoq basis. Profits at Rs219m were up ~40% yoy (CIRA: Rs202m). The
revenue growth trajectory has declined marginally this quarter after
improving over the last four quarters – flattish in 3Q10, ~13% yoy in
4Q10, ~25% yoy in 1Q11 and ~29% in 2Q11.

Credit Suisse: India Property Sector: Dark Clouds: Prefer cash flows over leverage

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● In our new report, Dark Clouds: Prefer cash flows over leverage,
we argue that FY12 could be a challenging year for volumes, if
property prices do not witness 10-30% correction. We initiate
coverage of Oberoi Realty, Prestige Estates, Godrej Properties
and HDIL.
● Volumes in major cities are showing signs of a slowdown owing to
property prices scaling new highs, as evident from developers’
weak 1H FY11 pre-sales. At current affordability levels, we see
hardly any room for further price increases.
● Despite a buoyant property market over the past 18 months,
operating cash flows have remained weak for most developers.
Debt funding is expected to dry up and internal cash flow
generation by cutting prices and focusing on volumes should be
key. We expect developers with no or low gearing, stronger
operating cash flow generation and higher ROEs to outperform.
● Our top picks are Oberoi Realty, Sobha, IBREL, Prestige and
Unitech. We expect DLF and Parsvnath to UNDERPERFORM.

Biocon : Licensing Income Drives Beat :: Citibank research

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Biocon (Price Rs. 387 (as on Jan 20 ), TP Rs. 480, ER 24.0%, EDY 1.1%,
2M) : Licensing Income Drives Beat


Licensing Income Drives Beat — Biocon’s reported 3Q numbers were
higher than our expectations (13% beat on EBIDTA and 9% beat on net
income), almost entirely driven by higher licensing income (net of
higher R&D spend) during the quarter. Other than this, the only
surprise was subdued performance at Axicorp, which was offset by
strong growth in Biopharma and a recovery in research services.

Buy Axis bank:: Business Line report

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Axis Bank: Buy




Investment Focus.






Axis Bank, with its large deposit base and fee income, may be among the private banks best placed to thrive in a rising interest rate scenario. The bank has continued to deliver strong profit growth (35 per cent for the nine months ended December 2010) on a high base.

The stock has corrected by 20 per cent over the last three months on concerns of rising interest rates. At th current price of Rs 1,284, the stock is trading at 2.37 times its estimated FY12 book value of Rs 540 and 13 times its FY12 estimated earnings. The stock trades at a premium to most banks barring HDFC Bank and Kotak Mahindra Bank. However, the premium is justified given that the bank has clocked higher than industry average credit growth consistently over the last four year period (loan book grew at 41 per cent annually over FY07-FY10) and m

Buy Bajaj Auto: High on profitability --Business Line India

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Bajaj Auto: Buy







The company's focus on mid-to-premium bikes, its presence in three-wheelers and a diversified export base are positives.



Bajaj Auto has put up a strong show in the quarter ended December 2010 despite rising input costs and interest rate hikes that would have a bearing on sales.
This performance has been aided by good volumes, greater realisations and superior margins. We reiterate a buy at the current market price of Rs 1311. At this level, the stock trades at PE of 15 times its trailing twelve month earnings and 13 times its estimated earnings for FY12.

Accumulate TVS Motor – 3QFY2011 Result Update - Angel Broking

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TVS Motor – 3QFY2011 Result Update

Angel Broking recommends an Accumulate on TVS Motor with a Target Price of Rs. 71.

TVS Motor (TVSM) reported strong 3QFY2011 results, which came in marginally
ahead of our estimates on the top-line and bottom-line fronts. The performance
was led by sustained volume growth across all product segments and
improvement in average net realisation and partially on a low base. Going
forward, we broadly maintain our volume and earnings estimates for TVSM.
However, future valuation of the stock would be determined by consistent growth
in volumes, improvement in market share and an uptick in margins. Owing to the
recent correction, we recommend an Accumulate on the stock.

Citi:: Yes Bank-: 3Q11 Results: Good Quarter, But Near-Term Headwinds Likely

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Yes Bank (Price Rs. 273 (as on Jan 20 ), TP Rs. 330, ER 20.8%, EDY
0.0%, 1M) : 3Q11 Results: Good Quarter, But Near-Term Headwinds Likely

3Q11 profits up 52%; growth remains strong — Yes Bank’s 3Q11 profits
increased 52% yoy – led by its strong 66% loan growth and supported by
stable asset quality. Fee income growth was healthy at 21% yoy while
treasury income surprised on the upside. Net interest margins,
however, came under some pressure again & we expect continued tight
liquidity & its own modest funding mix to weigh on NIMs further. While
we remain longer-term positive on the stock, we do expect near-term
headwinds due to incrementally tougher macro environment.

Mastek Ltd -BUY Target Price (Rs.) 210; Upside 25% :: Greshma

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Mastek Ltd -BUY


Target Price (Rs.) 210; Upside 25%



Investment Rationale:
Q2 FY11 Result Highlights: During the quarter Q2 FY11 Operating Income for the company stood at Rs. 149.8cr up by 0.6% sequentially and declined by 21.5% Y-o-Y basis, this decline is primarily due to decline in the revenue from Government vertical which was heavily impacted after the BT channel stopped outsourcing incremental work to the company, also there were delay in orders due to elections in UK. Company has incurred the losses of Rs. 27.6cr in Q2 FY11 as compared to profit of Rs. 23.5cr in Q2 FY10, this loss is mainly due to Impairment of goodwill amounting to Rs. 20.7cr and higher depreciation of Rs. 2.4cr. During the quarter company have added 2 new clients and the current order book stood at Rs. 296cr.
Inflow of fresh orders: Management has indicated that they are expecting the traction in order book. Mastek have done the partnership with one of the UK based company which will help the company to initiate projects from UK government. Also there was delay in getting orders from UK due to elections and also lot of orders was on hold, right now the things are stabilize and we believe company will get more orders by Q3 of this fiscal from UK as company has a very strong presence in UK.
Outlook
In Q1 FY11 management has indicated that the company is working on a margin improvement and serving better to the existing clients which will help the company to come back to the healthy growth profitability. Considering the opportunity in insurance vertical in which Mastek has an ample of experience we advise our investors to buy the stock at CMP of Rs. 167.7 for the target price of Rs. 210. At CMP the stock is trading at price earning ratio of 15.3x at its FY11E EPS of Rs. 11 which is 15-20 percent discount to its peers. As on Q2 FY11 company has a cash and cash equivalent of Rs. 152cr, which is approximately Rs. 56 per share which is ~33.3% of the CMP


Trend in Order Book (Rs. in cr) :
Order book has seen declining trend on q-o-q basis, however we are expecting new order inflow from UK government


Revenue by Industry (Rs. in cr):
Sharp decline seen in government vertical this is primarily due to BT channel stopped outsourcing incremental work to the company, we expect this vertical to improve going ahead


 The stock has seen a sharp decline since Dec’09 from the 460 levels and is currently trading around 167.
 There are a series of positive divergence observed and there is a possible pullback rally on cards to 190-195 levels.
 The Prices are currently below the long term100 & 200 Dma.
 The intermediate trend remains bearish and the decline is likely to halt around the 140-145 levels.


Company Profile
Mastek incorporated in 1982, is engaged in providing software solutions and integration services. Mastek a leading IT solutions player with global operations in providing new technology and IP-led enterprise solutions to insurance, government and financial service organizations worldwide
Today, Mastek has grown to become a US $227 million Corporation.
The company has employee strength of 3400 professionals. The company has partnered with various IT giants for delivering quality product and services namely Microsoft, Oracle and IBM are amongst others


Key Investment considerations
Opportunity in Insurance vertical
Revival of UK Economy
Inflow of Orders
Strategic Partnership with UK based company to gain traction in government vertical






Provogue India: Buy says Business Line India

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Provogue India: Buy







Diversification into real-estate development, along with strong brand presence, low debt-equity and better margins through backward integration, augur well.




The company has a firmly established brand presence in the sizeable youth segment

Bhavana Acharya
Premium retailer Provogue's foray into construction and running shopping malls came to fruition as it opened its first mall in October 2010. That the mall houses established retailers such as Star India Bazaar and Croma is another indicator that execution risks, which had shadowed the prospects of this construction business, have abated to an extent.
Provogue has a firmly-established brand recall in apparel for men and women. Low debt-equity and better margins through backward integration are other positives. Provogue is turning its focus on developing two other malls in less-penetrated cities. The construction business, carried out through a joint venture, is supported by investments by private equity players.

Index Outlook: Poised at significant support :: Business Line

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Index Outlook: Poised at significant support


Lokeshwarri S.K.






Sensex (19,007.5)Market participants mired in gloomy thoughts on inflation and the RBI's next policy rate move were pleasantly diverted by strong earnings reported by some front-line companies. This also provided the bulls with the ammunition to defend the 19,000 bastion. The ongoing struggle for supremacy between the bulls and bears is clearly reflected in the manner in which Sensex was unable to move in either direction last week and closed almost flat.
Next week promises to be a thrilling one with monetary policy meeting and derivative expiry scheduled mid-week. Continuing flow of earnings announcements will also give investors plenty to react to.

Enam : IBREL Q3FY11 result review

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IBREL Q3FY11: 

Q3 revenues were significantly higher on a QoQ basis (up 33%) and IN LINE with our expectations. With itshigh volume Panvel project having crossed the threshold last quarter, revenues was expected to show stronggrowth in Q3.Indiabulls Real Estate Ltd (IBREL) reported consolidated revenues of Rs 4.0 bn, operating profit of Rs 1.2bn and net profit (after minority interest) of Rs 766 mn for Q3FY11. Post acquisition of Bharat and Poddar Mills, IBREL now has cash/ liquid investments worth Rs 27 bn (Realty biz: Rs 8 bn & Power biz: Rs 19 bn). However, debt has also gone up for the company to Rs 26 bn(realty biz) from Rs 16 bn last quarter. IBREL sold2.27 mn of residential space totaling Rs 8.7 bn in Q3 and also leased0.25 msf of additional area at its Jupiter Mills property. Total IPIT leased portfolio now stands at 1.41 mn sq. ft. IBREL has 60 msf (49.97 mn resi & 9.55 mn commercial) under development of which 17.19 msf (15.4msf residential and 1.79 msf commercial) is under construction. IBREL has also recd. Board approval for restructuring of the power biz. - de-merger of the power biz by transfer of IBREL’s shares in Indiabulls Power (1.2 bn shares) to IBREL’s shareholders (402 mn) resultingin an issue of 2.95 shares for every 1 in IBREL. At CMP of Rs 123, the stock trades at a discount of 30% to our fair value. We maintain our TP of Rs 175 with a 43% upside.

RBI’s recommendations for MFIs :: CLSA analysis

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RBI’s recommendations for MFIs
We believe that the recommendations of RBI’s committee on regulation
of micro finance institutions (MFI) are in a positive direction as (1) they
suggest that MFIs be regulated by RBI instead of the state governments
and (2) committee is not excessively restrictive on profitability of MFIs,
but stress on sound business fundamentals. RBI has also permitted banks
to restructure loans to MFI till Mar-11 that will provide some relief to
MFIs as banks may become accommodative and extend the repayment
period for the MFIs. These recommendations are neutral for companies
providing small ticket secured loans, including gold loan NBFCs.

CLSA: Buy Info Edge - 3QFY11 results analysis

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Info Edge - 3QFY11 results
Revenues grew 5.5%QQ despite December being a seasonally weaker
quarter and importantly deferred revenues (cash received but revenues
not booked) were up 7.1%QQ underlying the continued improvement in
the job market. A strong margin performance (+660bpsQQ) was driven
by a cut in advertising spend with further buffers from higher pricing.
Meanwhile, Naukri and 99acres continue to strengthen their leadership
position even as Jeevansathi remains in investment phase. With a
strengthening market position, the year ahead holds a lot of promise for
Info Edge and current market forecasts may prove too low. OPF stays.

Reliance’s stalled BWA plans helps Bharti Airtel:: CLSA

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Reliance’s stalled BWA plans
With the government due to unveil the National Broadband plan, Reliance
Industries’ choice of technology for broadband wireless access (BWA) is
still under wraps and no tower/infrastructure-sharing deal has yet been
announced. We believe that, besides the technology dilemma, affordable
handsets remain a critical factor. Further, Reliance needs a unified access
services licence (UASL) to provide voice services alongside data. In the
midst of the 2G spectrum scam, a new UASL will be difficult for the
government to issue. With Reliance’s stalled BWA plan, Bharti Airtel looks
better positioned for the 3G opportunity.

Yes Bank -Growth moderates, margins under pressure:: Credit Suisse

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Yes Bank -------------------------------------------------------------------- Maintain UNDERPERFORM
Growth moderates, margins under pressure


● Yes Bank’s 3Q profit (+52% YoY) was 10% ahead of our and the
street’s estimates, primarily led by a higher other income
● The weakness of its wholesale funded model was visible, as
during the quarter margins dropped 20 bp QoQ (to 2.8%), despite
the bank dramatically slowing asset growth (loan growth was at
3% QoQ) on account of the tight liquidity and a sharp rise in
wholesale funding rates. We expect the upward bias on deposit
rates to continue and margins to stay under pressure even in the
coming quarters
● CASA growth (0% QoQ) disappointed during the quarter and the
share of CASA remained low at 10.2%. While the bank is on track
with its branch addition plans (250 by Jun-11), we believe there
are at least a few more quarters before we start realising
significant improvements in CASA
● While the stock has fallen 21% over past three months, it is still
trading at 2.1x FY12E book, which is not at a big discount to other
private banks such as ICICI (1.9x FY12E BV) and Axis (2.5x
FY12E BV) that already have a well-developed deposit franchise
(40% CASA versus 10% for Yes).

CLSA:: sell JSW Energy - 3QFY11 result

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JSW Energy - 3QFY11 result
JSW Energy 3Q results were marred by high fuel costs (Rs2.7/kWh) and
high interest expenses (includes one time charge of Rs290m). The
company continues to face issues in stabilization of units at both Barmer
and Ratnagiri power projects. With 50% of its coal to be purchased on
spot market in FY12 the company remains vulnerable to the volatility in
thermal coal prices. We are cutting FY11 estimates by 31% to factor in
poor 3Q results and management guidance of further 15% increase in
fuel costs in 4Q. Maintain negative call on the stock.

Buy Infotech Enterprises -Strong growth delivered; improving margins: Credit Suisse

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Infotech Enterprises -------------------------------------------------------- Maintain OUTPERFORM
Strong growth delivered; look forward to improving margins


● Infotech Enterprises reported mixed results for the Dec-10
quarter. While revenue growth exceeded our expectations by 2%,
EBIT was 3% below. Higher other income helped PAT to come in
line with our estimates.
● Management restated its earlier guidance of 8-10% QoQ growth and
5-6% QoQ growth for the Engineering and Network & Content
Engineering (NCE) verticals, respectively, over the next few quarters.
● It also reported success in pricing negotiations with key customers
and guided for a 120 bp improvement in overall pricing from the
current quarter.
● Management indicated that improving margins would be its top
priority going forward, driven by: (1) improving utilisation, (2)
improve productivity of employees and (3) improving offshore mix.
● Given strong revenue growth and improving margins, EPS could
grow 25% in FY12. At 10x FY3/12 earnings, the stock appears
cheap. We thus maintain our OUTPERFORM rating with a target
price of Rs200.

Credit Suisse: Hindalco- Novelis: liberties and restrictions under the new covenants

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Hindalco------------------------------------------------------------------------- Maintain OUTPERFORM
Novelis: liberties and restrictions under the new covenants


● We analyse covenants for new debt at Novelis. These would be
suspended if Novelis gets investment grade by S&P or Moody’s.
Room for further leverage at Novelis: New covenants allow Novelis
to further increase its debt by about US$1.4 bn by FY12 and by
about US$2 bn by FY14 (Fig 1). Out of the two covenants here, net
debt/adjusted EBITDA is more constraining than the interest
coverage covenant.

CLSA: Buy M&M: Strong tractor demand

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M&M: Strong tractor demand
M&M is continuing to see strong tractor demand driven by improving rural
incomes and worsening rural labour shortage. The supply chain issues in
UVs have been resolved and M&M’s production has improved in recent
months. We upgrade FY12-13 EPS by 1-5% factoring in 8-13% higher
tractor volumes but slightly lower margins. We believe that M&M is in a
sweet spot with strong industry growth outlook in UVs and tractors,
multiple exciting new launches and minimal incremental competition. We
maintain BUY on M&M with a target price of Rs910.

Utilities-Merchant prices to move up given impending elections: Credit Suisse

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Merchant prices to move up given impending elections, improving seasonal demand


● Bilateral merchant tariffs fell 16% QoQ during 2Q FY11 and by
another 15% QoQ during 3Q FY11, mainly on: (1) higher
generation from hydro projects led by better-than-expected
monsoon during CY10, (2) weak SEB finances restricting their
ability to pay high merchant tariffs and (3) weaker-than-expected
seasonal demand.
● However, our interactions with power traders suggest merchant
tariffs have started to increase sequentially for contracts with
deliveries in Mar-May 2011. UI rates are also improving.
● The upcoming elections in Tamil Nadu, Pondicherry, West Bengal
and Kerala, likely during April 2011, and improvement in power
demand expected due to agriculture and summer season during
1Q FY12, are key reasons for an uptick in merchant tariffs.
● Traders believe bilateral merchant tariffs are expected to rise to
about Rs4.5/kWh in 4Q FY11 (from Rs4.1/kWh in 3Q FY11) and
further to about Rs5/kWh in 1Q FY12.
● While we continue to highlight structural issues, such as domestic
coal deficits and weak SEB financials, which are likely to impact
the sector in the medium term, we believe stocks such as Adani
Power, JSPL, KSK and Lanco with high merchant power exposure
are likely to benefit from rising merchant tariffs in the near term.

Credit Suisse, India Agribusiness Sector -December 2010 quarter preview

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December 2010 quarter preview: Return to profits for most sugar cos; another relatively weak quarter for Jain


● We expect a return to profits for most sugar companies in the
December quarter results, partly due to higher sugar realisations –
up 8-10% QoQ – and due to this being a seasonally strong
quarter in the absence of ‘naked costs’.
● We expect the updates on cane crushing and Shree Renuka’s
Brazilian subsidiaries to be the key takeaways from the postresults
discussions. Indications are for a slightly disappointing
start to the crushing season with cold weather affecting harvesting
in Uttar Pradesh and recovery rates lower in Maharashtra.
● With unseasonal rainfall affecting implementation in October, we
expect another relatively weak quarter for Jain Irrigation with MIS
revenues estimated to grow at 28% YoY against full-year
expectation of 36% YoY. This could lead to downgrades in fullyear
numbers for Jain.

UBS - India Market Strategy- Positive earnings momentum; Model Portfolio

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UBS Investment Research
India Market Strategy
Positive earnings momentum
􀂄 Positive Sensex/Nifty earnings momentum may support the market
FY12 consensus (IBES) earnings estimates for Nifty and Sensex have improved by
1.8% and 1.9% respectively, in the last three months. However the Nifty and
Sensex have been down by 4.8% & 4.4% in the last three months on concerns
around inflation, higher crude oil prices, concerns on FY12 fiscal deficit, and
slowing down of reforms in the wake of impending state elections.

Commodities- No avoiding a met coal market undersupply :: Macquire

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Commodities Comment
No avoiding a met market undersupply
 As with any situation of recovery, predicting the gradient of getting
Queensland coal operations back to normal levels remains difficult, however
quite simply there is not enough slack in the met coal supply chain to cover
the losses being incurred. With this, the seaborne met coal market is being
undersupplied week after week, with risks of deficits being amplified by
rampant Chinese steel output and strengthening La Nina conditions.

Accumulate Man Industries (India) -Target Rs 87; Asit Mehta

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Introduction
Man Industries India Ltd. (MIIL), the flagship company of MAN Group (UK), was
incorporated in May 1988 as an aluminium extrusions manufacturing company. Today,
it is a leading manufacturer and exporter of large diameter Carbon Steel Line Pipes
for various high pressure transmission applications for Gas, Crude Oil, Petrochemical
Products and Potable Water. It has an annual capacity to produce 1 million tonne
of submerged arc welding pipes through its manufacturing facilities at Anjar and
Pithampur in Gujarat and Madhya Pradesh. It has state-of-the-art manufacturing
facilities for Longitudinal Submerged Arc Welded (LSAW) & Helically Submerged
Arc Welded (HSAW) Line Pipes and also for various types of Anti-Corrosion Coating
Systems. It also owns modern facilities for manufacturing of Aluminum Extrusion
Products. Its operations are spread across globally with offices in U.K. and U.A.E.
besides India.

Zee Entertainment:: Q3FY11 Update:; Centrum

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Zee Entertainment:: Q3FY11 Update

Result below expectation
ZEEL reported Q3FY11 results below our estimates at
Rs8.25bn including Rs 700 million in one time fees for
premature termination of sporting event rights.
Excluding this, revenue growth was mere 6.1% QoQ and
3.2% above our estimates. EBIDTA was most
disappointing at Rs1.54bn excluding one time revenue
and was down 18.2% QoQ and 21% below our estimates
of Rs1.95bn.

HSBC Research:: Reliance Industries: No near-term positive trigger

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Reliance Industries (RIL IN)
N: No near-term positive trigger 
Q3 FY11 results broadly in line with estimates
Lingering concern on future gas production outlook will
likely keep stock range bound
Maintain Neutral rating, TP of INR1084, and earning estimates

Buy Kotak Mahindra Bank- Higher operating expenses affect bottomline: Prabhudas Lilladher

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 Healthy core operating performance, higher opex affects bottom‐line: Kotak
Mahindra Bank (KMB) reported consolidated PAT of Rs3.84bn, up 15.7% YoY
and 5.3% QoQ and standalone PAT of Rs1.88bn, up 31.9% YoY, but down 3. 5%
QoQ. While the consolidated PAT met our expectations, standalone PAT was
lower‐than‐expected. For standalone banking operations, the operating
expenses grew by 18.4% QoQ, with employee and other operating expenses
growing nearly at the same pace. This was mainly on account of certain midyear
salary hikes given for employee retention and higher advertising expenses
towards the 25 years celebration campaign of the bank. Business growth stood
healthy, with consolidated advances growing by 36.7% YoY and 6.9% QoQ, led
by a sharp sequential increase in agri advances (up 12.8% QoQ), CV and
construction equipment loans (up 11.5% QoQ) and mortgages (up 11.5% QoQ).