04 April 2011

UBS: Titan Industries - Quality at a price 􀂄 target Rs4,100

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UBS Investment Research
Titan Industries
Quality at a price
􀂄 Premium to sector justified
We believe Titan should trade at a premium to other retailers given 1) limited price
competition in Titan’s product categories 2) Titan provides the best exposure to
growth in disposable income 3) Titan is the market leader across all its categories
and has 4) strong growth potential across all businesses. Titan is trading at 32x
FY12E earnings vs. sector at 29x. Titan’s implied valuation at our price target of
Rs.4,100 is 37x FY12E earnings.
􀂄 Q-series findings
Based on our Q-Series “Are staples a good inflation hedge?” Titan emerges as one
of the survivors in an inflationary cycle because of Strong brand recognition in
India’s watch segment coupled with a very strong distribution network. Its
jewellery segment which dominates the branded jewellery market we believe will
remain immune to the inflationary cycle in terms of volumes as Indian culture of
buying jewellery on many occasions irrespective of prices will drive volumes. We
expect Titan to grow volumes at 10% in FY12E
􀂄 Near term positive catalysts
Titan has outperformed Sensex by 90% and 8% in last 12/one month. We believe
the upside from current levels is limited. The near term catalysts for stock price
movement include 1) Q4FY11 results, 2) new product launches and 3) gold price
fluctuation.
􀂄 Valuation: Buy rating with price target of Rs. 4,100
We derive our price target from a DCF-based methodology and explicitly forecast
long-term valuation drivers using UBS’s VCAM tool, assuming WACC of
~12%....

UBS: Pantaloon Retail - Valuation hard to ignore: Target Rs 350

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UBS Investment Research
Pantaloon Retail (India) Ltd.
Valuation hard to ignore
􀂄 Compelling valuations
PRIL’s complicated holding structure, high working capital requirements and
highly levered balance sheet is reason for concern but current valuations are hard
to ignore. Pantaloon is trading at 18x FY12E earnings, and ~40% discount to sector
valuation at 30x FY12E PE– despite being the dominant retailer
􀂄 Positive catalysts will warrant re-rating
Inventory days improvement, monetization in few of its investments (we have
assumed that investments worth Rs5bn will be monetized in FY11) and a demerger
of Future Capital and Future Generali would be key going forward, in our view.
􀂄 Strong growth prospects
With India among the most attractive retail destinations, PRIL being the largest
retailer is in a sweet spot.. We expect PRIL’s core retail business to grow
24%/23.6% YoY in FY11/12 with profit growth of 42%/41%. We believe PRIL
will continue store expansion at a lower pace, and shift focus to cash generation
and optimal capital deployment.
􀂄 Valuation: trading at 42% discount to sector valuation
Valuation remains attractive for PRIL at 18x FY12E earnings vs. sector’s 30x. At
our price target, the implied valuation of PRIL is PE of 24x FY12E; 17% discount
to the sector. We value PRIL through DCF, where we explicitly forecast long-term
valuation drivers using UBS’s VCAM tool. We assume a WACC of 12% and a
terminal year growth rate of 5%..


Key investment positives which we believe are not priced in the current
valuation
International JV could provide a case for re-rating: We
think a pure hypermarket/convenience store business, which has considerable
scale, would be an appropriate joint venture vehicle for a large international
retailer setting up back-end operations in India. The international retailer could
capitalise on PRIL’s network and also establish its own cash and carry business.
An agreement with a foreign retailer for back-end operations would enable PRIL
to benefit from its partner’s expertise in supply chain management, sourcing
strategies and inventory management. A JV may also give PRIL an edge in price
negotiations with the suppliers, depending on the scale of a partner’s operations
and its own wholesale business.
A JV with an international retailer would also bring global best practice,
information technology and knowledge for PRIL that could be used to revamp
its exiting assets. We believe this could improve its working capital turns and
returns and potentially result in a re-rating of the stock.
From the perspective of a foreign retailer, we think a JV would also be a good
proposition, as it would have access to the largest front-end operation in India
and the ability to establish a clear needs-based relationship with the Indian
retailer.
Window of opportunity once FDI opens up: Once FDI opens
up; PRIL's value retail arm will emerge as an attractive buyout of Indian retail.
The reason we believe PRIL s value retail is attractive to a foreign retail player:
1. Location advantage: Big Bazaar and its offshoots are present in all the most
attractive shopping hubs in the country.
2. Established logistics, own brands and brand equity. Being the longest in the
business, Big Bazaar has established a robust backend and importantly human
capital that is so important to the running of a retail chain.
3. Willingness to divest and partner- PRIL's management is open to divest and
grow using acquired funds, unlike other private retailers that still haven't shown
willingness to do so.
Releasing funds for future growth: Divesting FCH and insurance
business would raise funds for expansion. We estimate the sale of a 49% stake
in the insurance business and the sale of FCH stake (at the current market price)
would raise Rs5-6bn. Though the company has delayed in delivering on this
causing the stock to de-rate, we believe, will prove to be a major catalyst going
forward, in our view.
Our price target does not include value of FCH and insurance business.


Valuation
Valuation remains attractive for PRIL at 18x FY12E earnings vs. sector’s 30x.
We believe the discount to sector due to concerns relating to complicated
holding structure and highly levered balance sheet is warranted however not to
such at extent. At our price target, the implied valuation of PRIL is PE of 24x
FY12E which still is at a 17% discount to the sector.


UBS: India Retail - Performance indicators in retail sector

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UBS Investment Research
India Retail Sector
Performance indicators in retail sector
􀂄 Focus on key performance metrics
We study the historical financial data of eight retail companies (Jubilant Foodwork,
Provogue, Pantaloon, Shopper’s Stop, Trend, Vishal retail, Titan Industries and
Bata India.) in India. The companies include both rated and non-rated companies.
Financial data that we focus on includes sales growth, Inventory turns, free cash
flow, leverage and profit margins.

Global Perspectives -2011 Growth Thesis to Be Tested in 2Q:: Morgan Stanley Research,

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Global Perspectives
2011 Growth Thesis to Be Tested in 2Q
We expect 2Q11 to be an inflection point for developed market economies and for bond markets alike. Simply, it’s the quarter where the rising growth thesis for 2011 will be tested, and we would go so far as to say it’s the most critical quarter of the year. 2Q11 also represents the start of the removal of stimulus and accommodative polices. The market is currently priced to look past the setbacks in 1Q and make up lost ground in the following quarters – but data in 2Q will reveal how likely that is.
Duration: We question whether carry and roll-down earned from bonds in present steep yield curves can compensate for higher rates during hiking cycles.
Inflation: Global inflationary pressures remain strong. Carry favors buying JGBi breakevens and entering BTPei 5-30y breakeven flatteners. We think 30y TIPS are cheap and advocate a 5-30y BEI steepener. Finally, we like owning 2y1y TIPS BEIs.
Treasuries: We model 10y yields incorporating Fed funds expectations, realized inflation, and longer-term inflation expectations. Based on this model, we find that 10s are slightly cheap. Further, we estimate that the 10s30s curve remains ~15bp too steep.
Vol: We retain our bearish bias on the front end of the Europe and UK curves and still believe that the US front end can move higher. We recommend positioning with 1x2 payor spreads globally.
Euro sovereigns: We highlight the good and the bad news from recent EU meetings and Irish bank stress tests.
MBS: We find that a yield curve flattening has historically caused 30y mortgages to outperform 15y’s and low coupons to outperform high coupons.
Japan: We provide our second ‘post-quake’ update, and assess growth prospects from here.
AXJ: we recommend initiating curve steepeners following the fallout from the Japanese earthquake

INDIA DAILY April 4, 2011 ; Kotak Sec,

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Economy News
4 External commercial borrowings (ECB) raised by Indian companies hit
record highs and have increased by $18.5 bn in the first three quarters of
FY11 as companies sought to benefit from lower borrowing costs (BL).
4 Realty firms are turning towards private equity investors for money to
repay mounting debt portfolios. With commercial banks turning cautious
about lending to the real estate sector, industry players strapped for cash
are seeking equity capital to ease liquidity crunch (ET).
Corporate News
4 Promius Pharma, a wholly-owned subsidiary of Dr Reddy's Laboratories
(DRL), has entered a collaborative agreement with US-based Valeant
Pharmaceuticals International, to market Cloderm cream in the US
market (BS).
4 ONGC Videsh Ltd (OVL), the overseas exploration arm of Oil and Natural
Gas Corporation (ONGC), has invoked force majeure clause for its
Libyan block following a war-like situation in the African nation (BS).
4 Zuari Industries Ltd is looking to set up a phosphoric acid plant abroad
as well as scouting for rock phosphate mines in North Africa and
Australia (BS).
4 Dunlop India  has issued a layoff notice to about 900 workers of its
Sahagunj tyre factory, two hours from here in the adjoining district of
Hooghly (BS).
4 CBI has filed its first charge-sheet in the 2G spectrum allocation case
before a Special Court in New Delhi. Names include Managing Director of
Unitech Ltd and three senior officials of Reliance-ADAG group (BL).
4 MindTree Consulting Ltd has decided not to go ahead with its plan to
set up a 20 acres software development centre in Bhuvaneshwar (BS).
4 GMR Industries is in talks with major aircraft engine manufacturers to
set up engine MRO (maintenance, repair and overhaul) facilities (ET).
4 The Supreme Court has directed Glaxo India to pay Rs.712.1 mn to the
state in a 20-year-old dispute over pricing of the drugs scheduled under
the Drug Price Control Order (DPCO) (ET).
4 United Spirits Ltd has acquired 41.54 per cent stake in Karnataka-based
Sovereign Distilleries for Rs.35 mn to increase distillation capacity of the
company, as part of its backward integration plan (BS).
4 Temasek Holdings is in talks with PE major TPG Capital to buy a part of
its stake in  Shriram Transport Finance Company (STFC), India’s
largest commercial vehicle financing company (BS).


News Round-up
` Credit facility Fitch has downgraded Indian economy's growth projections to 8.3%
for 2011-12 on account of high inflationary pressures that has forced the RBI to hike
key rates. (ECNT)
` The Reserve Bank of India has asked non-banking finance companies (NBFC's) to
desist from contributing capital to any partnership firm or be a partner in partnership
firm. (THBL)
` Domestic passenger car sales rise 25.1% in March. (BSTD-Sat)    
` The Delhi High Court has stayed the merger between Idea Cellular (IDEA IN) and
Spice Telecom on a compliant filed by the Department of Telecom that the deal
between the two operators was in violation of the licence conditions. (THBL SAT)
` Temasek looks to buy TPG's stake in Shriram Transport (SHTF IN). TPG Capital's partexit may deliver it eight-fold returns in five years; deal size seen at USD 556 mn.
(BSTD)
` Lazard India Pvt Ltd on behalf of IP Holding Asia Singapore Pte Ltd, along with
International Paper Company, together persons acting in consort (PAC) has come up
with an open offer to acquire additional 21.5 per cent stake in Andhra Pradesh Paper
Mills Ltd (APPM IN). (THBL SAT)
` Anticipating a sharp rise in valuations after Andhra Pradesh Paper's purchase by USbased International Paper, Ballarpur Industries (BILT IN) has put on hold its plan to
launch a USD 330 mn initial public offer (IPO) of its UK subsidiary. (BSTD-Sat)
` Ballarpur Ind. (BILT IN) shelves LSE issue, sees better valuation in India. (ECNT-Sat)
` SAIL (SAIL IN) production may touch 12.6 million tonnes in the current financial year.
(BSTD)
` JSW Steel (JSTL IN) has revived its plans to list on the London Stock Exchange. (BSTD)
` GMR Group is in talks with major aircraft engine manufactures to set up engine MRO
(maintenance, repair and overhaul) facilities. (BSTD)
` Zuari Industries Ltd (ZUAR IN) is looking to set up a phosphoric acid plant abroad as
well as scouting for rock phosphate mines in North Africa and Australia. (BSTD)
Source: ECNT= Economic Times, BSTD = Business Standard, FNLE = Financial Express, THBL = Business Line.

Hindustan Unilever- No respite :12-month target Rs 235: Macquarie Research

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Hindustan Unilever
No respite
Event
 The pricing-led competition has returned to haunt Hindustan Unilever. P&G
India (not listed), has taken price cuts of 15-33% in its hair care brands
Pantene and Heads & Shoulders. Hindustan Unilever is the market leader in
shampoo category with 45% market share and gets ~8% of sales and 12% of
profits from this category. We reiterate our Underperform rating and target
price of Rs235 (implying 17% downside).

Goldman Sachs: Construction: Takeaways from NHAI conf call

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India: Construction: Infrastructure
Equity Research
Takeaways from NHAI conf call – step-up in road awards likely
NHAI confident of a strong pick-up in road project awards
We hosted a call with Mr. Nihar Ranjan Dash, CGM – Finance, NHAI today.
Key takeaways from the call:
1) Targeting 11,000 Km of road project awards for FY12E: NHAI
proposes to award projects worth 11,000 Km in FY12E and c.30,000 Km
over the next 3-4 years. Of this, RFQs have already been received for about
700 Km and these are likely to be awarded in April 2011 itself. The DPR for
another 3,000 Km is also ready – so easier to be awarded in 4-6 months.
This uptick in awards would mean NHAI would have c.17,000 Km under
implementation by FY12E, leading to an uptick in execution subsequently.
2) Land Acquisition – although still a structural issue is now moving at
a faster pace: NHAI acquired 9900 acres of land in FY10 and 8300 acres in
FY11. This land now places NHAI in possession of > 80% of the land for
about 6500kms of projects (across phase 2, 3 and 5). The creation of 180
Land Acquisition units and high level committees at local levels and the
signing of SSAs with several states have helped to expedite this process.
3) The RFAQ (Annual RFQs) process and the proposed e-tendering
process would also quicken the project award process: The introduction of
RFAQ towards end Apr’11 is expected to shorten the project award process
from the current 6 months to about 3 months. This would also be helped by
the launch of electronic tendering and procurement process in the next 3
months, improving transparency in the award mechanism in the process
(addressing one of the key concerns for the space).
4) Private sector would contribute to 50% of the proposed Rs470bn
investment in roads in FY12E: Market borrowings of Rs 120bn, cess of Rs
85bn would be NHAI’s key funding sources. Private sector’s participation is
expected to go to 50% from last three years average of 38% share.
5) NHAI’s assumes traffic growth at 5% while planning for target
traffic in new projects – which looks achievable to us.
Implications
An uptick in road award activity starting April 2011 looks likely and would be
positive for sector valuations even though competition may continue to be
high. We prefer companies with a strong execution track record and existing
strong order book that would enable them to bid conservatively; 1)
IRB( IRBI.BO, Buy) and ITNL(ILFT.BO, Buy) - top picks. Risks: 1)Aggressive
bidding, volatile interest rates, lower spending by government.

Goldman Sachs:: 4Q2010 balance of payments— headlines to look better, but watch the fine print

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Preview of 4Q2010 balance of payments—
headlines to look better, but watch the fine print
The Reserve Bank of India will release balance of payments (BOP) data for 4Q2010 on March 31.
We expect the current account deficit to be lower at 2.2% of GDP (US$10.3 billion), compared to
a historic high of 4.1% of GDP (US$15.8 billion) in 3Q2010. Consensus expectations by
Bloomberg are at 2% of GDP (US$9.2 billion).
The BOP data for October-December 2010 will be keenly watched due to the record high previous
print. The potentially much lower print compared to our previous expectations (see India’s current
account problem, Asia Economics Flash, November 16, 2010) may provide some reassurance that
the external sector may not be as vulnerable as previously thought. Although we think this is a
positive development, we would caution against interpreting from this quarter’s print that the
current account deficit has been permanently reduced to a lower level or that external sector
vulnerabilities are no longer relevant.
We expect the positive development in the current account balance for 4Q2010 to be mainly due
to a significant improvement in merchandise trade. Goods exports have been surprisingly robust,
growing at 73% qoq; s.a. annualized as compared to decline of 9% qoq; s.a. annualized in the
3Q2010, based on monthly trade data. Meanwhile, import growth also increased but at a lower
rate at 17% qoq annualized in 4Q2010.
Although the product-wise breakdown of exports is available only with a lag, our micro-level
assessment of the fast growing gems and jewellery and textiles sectors seem to suggest that export
growth in recent months have primarily been driven by an increase in prices rather than volumes.
Hence, we still question the sustainability of the current surge in exports. There is also a key
question as to why the higher oil prices have not yet been reflected in import data, which should
have shown a much higher growth. There may be future revisions or the import data may capture
this with a lag. In either event, this could worsen the current account deficit.
We would look out for three other important pieces of information from the data release. First,
non-software services trade, which has gone into negative since 4Q2008. If this trend continues,
then the current account deficits may continue to be impacted negatively in 2011. Second, the
magnitude of inward remittances. In 3Q2010, these were at US$9 billion. In the October-
December quarter, remittances would have likely peaked, as tensions in the Middle East may lead
to lower remittances, at least in 1H2011. Third, the composition of capital inflows—especially
FDI, but also external commercial borrowings. This will tell us whether the funding profile of the
current account deficit is improving in favor of longer-term flows, or is it still being dominated by
short-term flows. Note that our concern with the current account deficit was not only with the
levels, but how is it being financed. Unless the financing changes in a material way, the risks to
the BOP may remain.

CLSA:: Steel prices peaking; Tata Steel & JSPL remain top picks

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Steel prices peaking
Global steel prices have risen by ~25% since Dec-10 as buyers started
stocking up ahead of cost push. However, prices seem to have peaked in
Mar-11 - earlier than expected – and look set to decline over 2QCY11 as
buyers enter de-stocking mode and costs recede. The decline in prices
might not be much though, given that iron ore prices have stabilized at
fairly high levels. Unlike previous up-cycles, steel stocks have actually
come off in the current up-cycle and hence might not decline much when
prices weaken in 2Q. Overall, steel prices continue to move in ‘minicycles’
and we don’t expect a sustained improvement in convertor
margins unless global utilization levels improve, which needs a broader
economic revival. In this context, company specific triggers continue to
underpin our investment thesis. Tata Steel & JSPL remain top picks.

JP Morgan: 2015-Iron ore over supply- :Long term implications for Indian steel and iron ore

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India Steel and Mining
2015-Iron ore over supply- :Long term implications for
Indian steel and iron ore


• Potential iron ore over supply by 2015E: In a detailed report ‘Fortescue
Mining Group- Is there a danger of oversupplying the iron ore market?’ dated
March 25th, 2011, JPM Australia Resources analyst Mark Busuttil highlights
the risk of iron ore oversupply as the Big 3 + Fortescue (FMG) have very
large capacity addition plans. According to Mark, the cumulative planned
capacity addition by these companies (high grade, low operating costs of
$30/MT) over 2015-2020E (please see excerpts from the report in the attached
note) is 696MT by 2015 (2011E prod of 782MT) and another 475MT over
2015-2020. This is a medium to long term scenario. Our global view is that of
limited production growth from the major producers over the next 3-4 years and
delays to growth from mid-cap miners is likely to see pricing remain high for at
least the near-term.
• Implications for Indian steel and iron ore: Such large potential capacity
addition could push down iron ore prices globally and impact the cost curve of
the Indian steel industry. However, two most important (and difficult) variables,
are a) Chinese steel capacity and demand growth and b) Supply discipline in the
miners. Mapping the capacity build out, the planned capacity addition picks up
from CY14E. While some flattening of the steel cost curve for Indian steel
makers is likely and the captive iron ore advantages of TATA should
diminish from current levels (~$240/MT of steel), and non integrated cos
like JSW should benefit, we do not see a complete negation of TATA’s iron
ore advantage. Even at JPM 2014E iron ore price forecast of $98/MT
(CFR), which are 45% lower than current prices, TATA and other
integrated steel mills should still have an advantage of $110/MT.
Additionally continued elevated iron ore prices over the next 3-4 years, could
likely keep TATA’s India margins above its peers.
• What happens to the large iron ore export industry in India: India's iron ore
export industry is based on exports to China. While Goa has the lowest opex/MT
at <$35/MT, opex/MT to port from other regions like Karnataka (>$65/MT) and
Orissa is much higher because of inland transportation costs. However, Goa
grade of iron ore is significantly lower, and hence discount to high grade would
likely increase over time. It remains to be seen as to how the Indian iron ore
exporters over the next 3 years look to diversify from their core iron ore export
business (possibly through forward integration into steel making).
• This could change the investment priorities of steel companies: Indian steel
mills have historically looked to build steel plants in Eastern India, closer to
mines and have seen significant delays. As global low cost iron ore supplies
increase, we see more Indian steel mills coming up in non traditional areas like
Western and Southern India as land availability is easier and proximity to ports
could ease the iron ore dis-advantage. In the event the above global capacity
build were to pan out, we see lower probability of TATA going ahead with its
proposed investment in the Canada iron ore project.

Silver : New 31 Year High At $38.50/oz - Backwardation Ends ; COT Data Is Bullish

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From GoldCore
The positive momentum of gold and silver continue with both higher in European trade as oil prices have risen due to geopolitical tensions in oil rich nations and the euro has fallen on Eurozone debt concerns.

Focus will be on interest rates this week with the ECB likely to increase interest rates and renewed speculation as to whether the Federal Reserve will attempt to increase interest rates or embark on QE3. Contrary to some misinformed analysis, rising interest rates will be bullish for gold and silver as they were in the 1970’s.

Silver for immediate delivery has gained another 1.7% to $38.50 an ounce, the highest level since February 1980, the year silver reached a record of $50.35/oz. An ounce of gold bought as little as 37.32 ounces of silver in London today, the lowest level since September 1983.

Silver has come out of backwardation and returned to contango with longer dated future prices again higher than nearer month contracts and spot for delivery (see table below). This suggests that default on the COMEX, as warned of by some analysts, is not imminent and the tightness seen in the physical silver market may have abated somewhat.

However, the Dec12 contract trading at only cents over spot for delivery (less than 10 cents) suggests that tightness remains. Given the degree of tightness in the physical silver market, silver may return to backwardation  sooner rather than later.

While silver is overbought in the very short term, silver’s outlook remains bullish.

Momentum remains very strong with a series of higher weekly, monthly, quarterly and annual price gains. Silver remains the preserve of a handful of contrarian and hard money advocates and is only beginning to enter the consciousness of the mainstream. Allocations remain tiny compared to allocations to conventional investments.

Finally, speculative fever is not only missing from the mainstream public (most of whom would not even know the price of an ounce of silver) but it also remains subdued on the COMEX on Wall Street. Little or no irrational exuberance or “piling in” being seen in the trading pits. The latest COT report shows speculative long positions, or bets prices will rise, outnumbered short positions by 37,139 contracts (see news and chart below). This is a level of net longs by hedge fund managers and other large speculators that was seen as long ago as 2002.

Silver Large Speculators, Futures

Thus, despite silver’s sharp gains in recent months, speculative fever remains very tame. This suggests that much of silver’s gains in recent weeks may have been short covering by Wall Street banks being investigated by the CFTC for holding massive concentrated short positions.

There is also evidence that some hedge fund managers are choosing to bypass the COMEX and buy actual physical silver bullion in allocated accounts.

NEWS

(Bloomberg) -- Silver Climbs to $38.23 An Ounce, Highest Since February 1980 
Silver for immediate delivery rose 1.1 percent to $38.23 an ounce by 7:52 a.m. in London, the highest price since Feb. 13, 1980.

(Bloomberg) -- Gold May Advance on Geopolitical Risks, Outlook for Inflation 

Gold, trading little changed, may advance as investors buy the precious metal to shield their wealth from geopolitical risks and rising inflation.

Immediate-delivery bullion traded at $1,430.95 an ounce at 1:57 p.m. in Singapore compared with last week’s close of $1,428.80. Gold for June delivery in New York rose 0.2 percent to $1,431.80 an ounce.

“Geopolitical risks linked to the Middle East and Japan, as well as the European debt crisis, have yet to show an improvement,” said Hwang Il Doo, a Seoul-based senior trader at KEB Futures Co. “These, coupled with the inflation outlook, will continue to power gold.”

Libyan leader Muammar Qaddafi’s acting foreign minister, Abdul Ati al-Obeidi, met with Greece’s prime minister yesterday to seek a political solution to the nation’s crisis, Greek Foreign Minister Dimitris Droutsas said. The U.S., Britain and France have been enforcing a United Nations-backed no-fly zone over the country as rebels battle Qaddafi’s forces for control.

In Japan, Tokyo Electric Power Co.’s attempt to clog a cracked pit with sawdust, newspaper and plastic failed to stop radioactive water leaking into the sea from a crippled power plant, which was damaged in the March 11 quake and tsunami.

Marc Faber, publisher of the Gloom, Boom & Doom report, said last week investors should have 10 to 20 percent of their portfolio in gold as an inflation hedge. The unemployment rate in the U.S. unexpectedly fell to a two-year low of 8.8 percent in March, adding to evidence that a recovery in the world’s largest economy is gaining traction.

Survey Outlook

Eleven of 25 traders, investors and analysts surveyed by Bloomberg, or 44 percent, said that bullion will rise this week. Nine predicted lower prices and five were neutral. Spot gold reached an all-time high of $1,447.82 an ounce on March 24.

Hedge-fund managers and other large speculators increased their net-long position in New York gold futures in the week ended March 29, according to U.S. Commodity Futures Trading Commission data.

Speculative long positions, or bets prices will rise, outnumbered short positions by 193,121 contracts on the Comex division of the New York Mercantile Exchange, the commission said in its Commitments of Traders report. Net-long positions rose by 18,284 contracts, or 10 percent, from a week earlier.

“We believe prices will remain supported as long as real interest rates stay low and trepidation over global growth prevails,” Hussein Allidina, head of commodity research with Morgan Stanley Research, wrote in a note to clients.

Cash silver rose 0.6 percent to $38.025 an ounce, approaching the highest level since 1980. The metal last touched $38.165 an ounce on March 24.

Palladium for immediate delivery increased 0.3 percent to $775.75 an ounce, while platinum was little changed at $1,763.13 an ounce.

(PTI) -- India's gold demand to rise over 1,200 tonnes by 2020: WGC 

Gold demand in India will continue to grow  and is likely to reach 1,200 tonnes or approximately Rs 2.5  trillion by 2020, at current price levels, according to a  research by World Gold Council (WGC).

"The rise of India as an economic power will continue to  have gold at its heart. India already occupies a unique position  in the world gold market and, as private wealth in India surges  over the next ten years, so will Indian demand for gold", WGC  Managing Director for India and the Middle East Ajay Mitra said  in a statement here.

Indian gold demand has grown 25 per cent despite 400 per  cent price rise of the rupee in the last decade, making the  country a key driver of global gold demand, the research said.  Gold purchases in India accounted for 32 percent of the global  total in 2010.

Further, the council expects an increase by over 30 per  cent in real terms.

"India's continued rapid growth which will have significant  impact on income and savings, will increase gold purchasing by  almost 3 percent per annum over the next decade," the council  said in a statement.

It added, "In gold terms, India is a market with  significant scale. In 2010, total annual consumer demand reached  963.1 tonnes. As seen in the last decade, Indian demand for gold  will be driven by savings and real income levels, not by price".

According to Mitra, in parallel to growth, socio and  demographic challenges will need to be addressed given its  immense diversity.

"This also applies to the gold market. Nevertheless, gold purchasing will continue, underpinned by India's long-standing and deep cultural affinity for gold; a love affair which  transcends generations and makes India unlike any other gold  market," he said.

At more than 18,000 tonnes, Indian households hold the  largest stock of gold in the world.

'India: Heart of Gold' is the second in a series of WGC  research with focus on India.

The first paper, 'India Heart of Gold: Revival' was released in November 2010, and focused on the historical demand of the past 10 years and the revival in 2010.

Together they form a compendium, with the latest research  including forecasts from the Centre for Monitoring the Indian  Economy (CMIE), as well as contributions from leading academics  and industry experts, Dr. D. Pattanaik and Dr. R. Kannan, which have been specially commissioned for the World Gold Council.

(Bloomberg) -- Silver Traders Increase Bets on Price Rise, CFTC Data Shows 
Hedge-fund managers and other large speculators increased their net-long position in New York silver futures in the week ended March 29, according to U.S. Commodity Futures Trading Commission data.

Speculative long positions, or bets prices will rise, outnumbered short positions by 37,139 contracts on the Comex division of the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report. Net-long positions rose by 364 contracts, or 1 percent, from a week earlier.

Silver futures rose this week, gaining 1.8 percent to $37.73 a troy ounce at today's close.

Miners, producers, jewelers and other commercial users were net-short 55,295 contracts, an increase of 113 contracts from the previous week.

Each Friday the CFTC publishes aggregate numbers for long and short positions for speculators such as hedge funds and institutional investors, as well as commercial companies that buy or sell futures to protect against price moves. Analysts and investors follow changes in speculators' positions because such transactions can reflect an expectation of a change in prices.

Buy Unity Infraprojects, Target (% Up / Down) 86 (24%):: Unicon

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Company Description
Unity Infra projects Ltd., (UIPL) is a leading infrastructure company. Started as
an EPC contractor, UIPL is now a full fledged infrastructure company with
specialization in civil construction (transportation) and infrastructure segments
(irrigation & water supply).  UIPL has also forayed into new areas like real
estate development, road projects on BOT basis & telecom.
Investment Rationale
Ø Diversified and sound order-book of INR 35.7 bn (2.4x its FY10 revenue)
provides revenue visibility over FY13e. About 76% of its order-book is state
sponsored projects entails low risk to deferment or cancellation of projects.
Ø Increasing ticket size of the contract (increased from ~INR 650Mn in FY05 to
~INR 5.7bn in FY10) enables to mitigate the margin risk involved in small
and scattered projects.
Ø Proven track record of completing complex projects in time and higher Networth enables to bid for larger projects.  UIPL's net worth has increased
post QIP (Dec'10 by INR 730Mn) which entails it to bid for bigger projects.
Concerns
Ø Further increase in commodity prices and high cost of debt could be a
material threat to our earning estimates.
Ø Another major threat to our earning estimates would be lower than our
expectation of order intake over FY13e. Within our earning estimate, we
have factored in order-book growth of +15% and +10% for FY12 and FY13
respectively, which in our views seems to be achievable.
Outlook & Valuation
UIPL is trading at attractive valuation. Since FY07, UIPL has been trading at 5x
its one year forward earning whereas it is currently available at FY13e PE of
4.4x.
Given the a) stock trading at low of its one year forward earning since FY07, b)
revenue visibility over 2.5 years, C) revenue and EPs growing at CAGR of 17%
and 33% respectively over FY13e, Buy for target price of INR 86, +25%.


Company Description
Unity Infra projects Ltd., (UIPL) is a Mumbai based leading infrastructure
company with proven execution track record of over 30 years. Started as an
EPC contractor, UIPL is now a full fledged infrastructure company with
specialization in civil construction (transportation) and infrastructure segments
(irrigation & water supply).  UIPL has to its credit of building various stadiums,
airports, railway stations and irrigation projects in the country.  UIPL has also
forayed into new areas like real estate development, road projects on BOT basis
& telecom.
Civil Constructions segment undertakes to construct residential and commercial
buildings, mass housing projects, township, industrial structures, airports,
infotech parks, hotels and hospitals, education complex, stadium, railway
stations etc. While transportation division undertakes construction of roads,
bridges, flyovers, subways and tunnels, the Irrigation & Water supply verticals
undertakes project relating to dams, tunnels, lift irrigation, water supply and
sewerage and micro tunnelling.


Investment Rationale
Diversified and sound order-book of INR 35.7 bn provides revenue visibility
over FY13
UIPL has proven execution capability with growing asset base. Its diversified
and sound order-book of ~INR 35.73bn (2.4x its FY10 revenue) provides revenue
visibility over next 2.4 years. More than 75% of its orders are from state
sponsored projects and remaining 25% comes from private sector. So there is
low concern as to the cancellation or deferment of projects.
UIPL is not regional player but has well diversified order-book span across
states in India. About 73.7% of its current order-book is to be executed in the
state of Maharashtra rest 26.3% is in the state of AP, Delhi, UP, Haryana, Karnataka
etc.
Increasing Ticket size of the contract
With proven execution record, the average ticket size of the order for UIPL has
increased from ~INR 650Mn in FY05 to ~INR 5,725Mn. The big ticket size orders
enable to deploy the resources effectively resulting in better operating profit
margin. With gaining expertise in micro tunnelling and projects involving higher
engineering skills, it now competes with its peers who are established in
constructions. UIPL's net worth has also increased post QIP (Dec'10 by INR
730Mn) which enables it to bid for bigger projects
Proven track record of completing complex project in time
UIPL has to its credit of completing complex projects in time. Like a) expansion
o f   t e r m i n a l   1 B   a t   M u m b a i   A i r p o r t   w i t h o u t   d i s r u p t i n g   o p e r a t i o n s ,   b )
strengthening of Tansa dam execution without emptying Dam and c) rabale
railway station built on operational railway line. This makes it the most eligible
contender to bid for complex projects, going forward.
Attractive Valuation
UIPL is currently trading at 4.1x our FY13e earning estimate. Historically, it has
been trading at average one year forward earning of 5x since FY07. With revenue
and profit expected to grow at CAGR of 16.7x and 33x over FY11-13, stock is
trading at EV/Sales ratio of 0.4x and EV/EBITDA of 2.7x (FY13e).


Risks & Concerns
Rising commodity prices and higher cost to serve debt
UIPL like its peers is also exposed to the risk of rise in raw material prices. Although,
over more than 70% of its orders are from the state sponsored projects and are
covered with price escalation clause, severe uptick in commodity prices may impact
its operating profit margin. Besides, higher interest rate regime also leads to low
incremental growth in orders. The current cost of debt of UIPL is ~12%.
UIPL aims to launch its Bangalore project now and its Kolkata project in Q2FY2012.
Goa property development will take another three-four months, once more clarity
comes due to political issues. Further, there is no progress as far as the Nagpur
project is concerned.
We have not factored in the value of its investment in real-estate venture which
works out to ~INR 13/shares, (0.5x P/BV). This adds as margin of safety to our
valuation. UIPL has so far invested INR 1.96bn in its real estate port folio of property
situated at Nagpur, Pune and Goa. So, there is upside risk to our price target for
any successful and timely land development.


Financ ial s
For FY12 and FY13, we expect UIPL to register sales and profit CAGR of 16.7% and
33% respectively with RoCE of 19%(FY13e). We also expect its Debt to come down
to 0.5x its equity from current level of 1.2x.




Buy Jaypee Infratech - unique mix of annuity and development assets; Edelweiss

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Jaypee Infratech (JPIN IN, INR 61, Buy)

n  Large low-cost land bank, backed by a strong brand equity 
Jaypee Infratech (JPIN) is constructing the Yamuna Expressway (YE) project, a six-lane 165 km road connecting Noida to Agra, which we expect to become operational by Q1FY13. As compensation for constructing YE, JPIN has rights to collect toll for 36 years on YE and holds development rights on 6,175 acres of land (saleable area of 530 msf, of which, ~311 msf is located in the NCR), across five contiguous land parcels along YE, acquired at a low cost of INR 32-40/sf. The large low-cost land bank has enabled JPIN to compete effectively with its peers in Noida and is supported by the Jaypee Group’s established presence.

n  Flexible product/pricing strategy maximises cash flows
Unlike most developers who follow an inflexible pricing policy at the cost of volumes, JPIN has adopted a flexible pricing model that maximises volumes and cash flows. With unit sizes varying from 535-2,300 sf and ticket sizes in the range of INR 1.8-7.8 mn, the company has been able to achieve cumulative sales volumes of ~31.1 msf worth INR 92.3 bn as of December 2010 from the Noida land parcel , of which, the company has received ~INR 41.3 bn.  

n  Strong cash collections in FY11-13E; debt peaking in FY11
We expect JPIN to sell ~36 msf over FY11-13E for an aggregate transaction value of ~INR 111 bn. As a result, we expect JPIN to realise INR 49.9 bn of net cash flows (post-taxes) from real estate business over the same period. With YE nearing completion, JPIN is towards the end of its capex program and we expect JPIN’s debt to reduce with net D/E of 0.5x by FY13E against 2.0x in FY10.

n  Outlook and valuations: Cash flows key; initiate coverage with ‘BUY’
Our FY12E GAV of INR 82/share consists of INR 75/share for real estate business and FCFE of INR 7/share for YE and Noida-Greater Noida expressway. Adjusted for FY12E net debt in real estate, we arrive at a NAV of INR 80/share. Though dependence on Noida for cash flows and delay in completion of YE are key risks over FY12, we believe commissioning of YE and generation of real estate sales volumes from Greater Noida/Agra land parcels in FY12 will act as key triggers. At CMP of INR 61/share, the stock trades at 24% discount to our NAV of INR 80/share. We initiate coverage on the stock with ‘BUY/SP’ rating.


FII & DII trading activity on NSE and BSE as on 04-Apr-2011

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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 04-Apr-2011.
FII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
CategoryDateBuy ValueSell ValueNet Value
FII04-Apr-201125631958.49604.51
 
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 04-Apr-2011.
DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
CategoryDateBuy ValueSell ValueNet Value
DII04-Apr-2011744.631133.96-389.33
 
 


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FII DERIVATIVES STATISTICS FOR 04-Apr-2011

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FII DERIVATIVES STATISTICS FOR 04-Apr-2011 
 BUYSELLOPEN INTEREST AT THE END OF THE DAY 
 No. of contractsAmt in CroresNo. of contractsAmt in CroresNo. of contractsAmt in Crores 
INDEX FUTURES935032761.55463961368.6855678116544.121392.87
INDEX OPTIONS1909725488.831758335013.64142627341911.06475.18
STOCK FUTURES395361055.02588281565.71114430030178.24-510.69
STOCK OPTIONS6565184.786763191.1913811383.41-6.41
      Total1350.95
 


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