17 April 2011

Equities flat WoW while oil and gas diverge in opposite directions :: Macquarie Research,

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Equities flat WoW while oil and gas
diverge in opposite directions
Energy Market Indices WoW Changes
⇒ S&P/TSX Energy Index: +0.3%
⇒ S&P 500 E&P Index: -0.3%
⇒ Oil Service Sector Index: -1.4%
⇒ UK FTSE Oil & Gas Producers Index: +0.5%
⇒ Asia Pacific Oil & Gas Producers Index: +1.6%

Earnings season simplified:: Business Line

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Want to know how the companies you invested in have performed this quarter? Well, with the results season having just begun, we decode for you some of the market terms that are oft-used during earnings announcements.

TOP LINE AND BOTTOM-LINE

The two main data points that you will need to monitor when results announcements are made are sales and profits. Sales, the figure which appears as the topmost entry in a financial statement is referred to as the top line. Net profits, which come in among the last few items is referred to as bottom line. Generally, the results of companies can be looked up in their web sites, in printed annual reports or in the announcements section of the stock exchange web sites all round the year. You will also find companies reporting their financial results in the form of advertisements in newspapers.

Q-O-Q AND Y-O-Y

Topline and bottom line by themselves aren't enough to evaluate a company's performance. You would need to base the performance over the sales and profit numbers of previous quarters; say, the same quarter of last year or the quarter before. Comparing the performance over earlier quarters helps put the company's scorecard in perspective. For instance, now that the fourth quarter results announcements will be made, you will find comparisons being made with the third quarter (QoQ) as well as the fourth quarter of last year (YoY).

STANDALONE AND CONSOLIDATED

More often than not, companies, especially those that have overseas operations, have many subsidiaries (businesses in which the parent company has a controlling stake). So when results announcements are made, you will need to take note of their performance on a consolidated basis and standalone basis. While consolidated results take into account the performance of subsidiaries too, standalone results capture only the performance of the company involved . So which results should you consider? Well, if your company gets substantial revenues and earnings from its subsidiary businesses, keeping a tab on consolidated performance will help. In such cases, even analysts view the results by splitting the performance of the entity on standalone and consolidated terms.

CONSENSUS ESTIMATES

Before the start of the earnings season, brokerage firms and in-house research teams of business newspapers and channels put out estimates on the companies' earnings. These estimates are generally based on numbers already announced by companies, for example - earnings guidance in the case of IT companies, despatch figures in the case of cement companies and sales numbers of auto manufacturers. Over and above that, analysts give out their earnings expectations too. Pooling the estimate earnings figures across research houses for individual companies, you get the ‘consensus estimate'. Depending on the range of earnings predication, you also have optimistic and pessimistic forecasts. When the actual results come, analysts peg it to the consensus and term it ‘better-than-expected', ‘along expected lines' or ‘below expectations' accordingly.

EARNINGS GUIDANCE

When a company's management gives a forecast on its earnings, it is called ‘earnings guidance.' After all, who would know the company's growth potential better than the insiders! IT majors such as Infosys and Wipro give their earnings guidance, forecasting the earnings/revenue growth for the following year or the subsequent quarter considering both the macro environment and the internal developments. Select companies from other sectors too give out yearly revenue and profit guidance

Pivotals April 18th Week: Reliance Industries ; SBI, Infosys, Tata Steel:: Business Line

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Pivotals: Reliance Industries (Rs 1,018.4)


The stock finished the week on a negative note declining marginally by Rs 5.8.
Traders can initiate short position while maintaining the stop loss at Rs 1030 levels. The initial target is Rs 990 and then Rs 970.
Conversely, a surge above Rs 1055 will be a threat to the short-term bearish outlook. In that case, a rally to Rs 1076 and then to 1090 could be possible.
Medium-term trend is a sideways consolidation in the broad range between Rs 880 and Rs 1160. Only a strong weekly close below Rs 956 can drag it lower to Rs 920 or Rs 880.
State Bank of India (Rs 2,803.3)
SBI advanced Rs 24 in the previous week and is now testing its 200-day moving average.
Short-term traders can consider initiating fresh short position with stop-loss at Rs 2850 levels. Downward targets are Rs 2750 and Rs 2700.
Key supports below Rs 2700 are at Rs 2,650 and Rs 2,565 However, move above Rs 2850 will change the view and take the stock higher to Rs 2900 and then to Rs 300 levels.
The stock continues to be in a medium-term downtrend from its last November peak of Rs 3515. An emphatic move above Rs 3000 will alleviate the bearish stance, post which a medium-term rally to Rs 3150 is possible.
Tata Steel (Rs 630.3)
The stock was choppy and ended the week in the same levels, forming a doji candlestick in weekly chart. This indicates a neutral stance. The stock is currently facing a significant resistance at Rs 640. Fresh short position can be initiated, only if the stock fails to move above this resistance, with stop at Rs 640. Targets are Rs 615 and Rs 600.
However, we reiterate that a jump above Rs 645 can push Tata Steel to Rs 660. Break through of resistance at Rs 660 will put an end to the medium-term downtrend and will make way for a rally to Rs 680 or Rs 700 in the ensuing weeks.
Infosys Technologies (Rs 2,988.8)
Infosys nosedived 9.6 per cent with extra-ordinary volumes on Friday, following its disappointing fourth quarter results. It finished the week with loss of 7.4 per cent.
With this plunge, it has conclusively penetrated its significant intermediate-term support at Rs 3050 and its 200-day moving average at Rs 3041. At present, the stock is poised above an important support band between Rs 2950 and Rs 2966.
Reversal from this support band will signal a near-term pull back rally to Rs 3050. Short-term traders should avoid trading in the stock. Key resistances for the upcoming week are at Rs 3100 and Rs 3200.
The stock failed to move above the key resistance level of Rs 3300 and resumed its medium-term downtrend that has been in place since the January-11 peak.
A fall below Rs 2900 will strengthen the downtrend and pull the stock down to Rs 2800 or 2750 in the medium-term

JP Morgan - India Automobile Sales Tracker Mar'11: Unit sales growth moderates, discounts rise for PVs

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'Milestones' - India Automobile
Sales Tracker
Mar'11: Unit sales growth moderates, discounts rise
for PVs


• Sales trends: Two wheeler sales grew +19% yoy vs. +27% YTD,
passenger car sales grew +24% yoy vs. 24% YTD and commercial
vehicle sales were up +18% vs. +31% YTD. Sector growth rates
appear to be moderating, off a demanding base. Interestingly,
discounting trends picked up for the passenger car segment over the
month.
• Key data points on market share: Over FY11, the market leaders
ceded share to competition: Maruti (-40bp) in the passenger car
segment, Tata Motors (-190bp) in the commercial vehicle segment,
and Hero Honda (-350bp) in the motorbike segment. However, Maruti
and Hero Honda have gained incremental market share mom. While
Maruti offered attractive year end schemes, Hero Honda has been able
to ramp up production over the quarter.
• Global luxury OEMs report healthy growth: Luxury brands BMW,
Audi and Mercedes-Benz saw worldwide sales increase by 15%, 14%
& 8%, respectively, y/y in March 2011. Sales growth continues to be
driven by Chinese and US markets.
• Sector growth outlook by SIAM: This year, SIAM expects growth
rate to moderate to 12-15% for the overall industry. They expect the
growth rate in the PV segment to moderate to 16-18%, two-wheeler
segment to moderate to 12-14% and commercial vehicle segment to
14-16%.
• The auto sector (+7% mom) performed broadly in line with the broader
Sensex (+7% mom) during the month. While sector growth rates
appear to be moderating, rising input cost pressures and higher
competitive intensity will likely weigh on profitability.


ACCUMULATE Bajaj Auto: TARGET : RS.1464 ; Kotak Sec

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BAJAJ AUTO LIMITED
 RECOMMENDATION: ACCUMULATE
TARGET PRICE: RS.1464 FY12E P/E: 14.3X
q BAL remains confident of carrying the growth momentum in FY12. After
growing at 38% in FY11, the company expects 20% volume growth in
FY12.
q We expect 3-4 new launches planned by the company in FY12 will help
them sustain the growth momentum. Discover model motorcycles will
play a significant role in our view towards contributing additional volumes
in FY12.

Gas Utilities- Falling D6 prod improves LNG outlook :: RBS

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Gas Utilities
Falling D6 prod improves LNG outlook
We maintain that falling dom gas prod will force govt to prioritise gas supply to
fertiliser/power sectors, forcing the rest (which have greater affordability) to buy
LNG. This would involve changing contract terms, but there is precedent of govt
doing that . PLNG (TP Rs150) remains key beneficiary of higher LNG demand.
! Gas consumers have been allocated 63.715mmscmd by the empowered group of ministers
(EGOM) from the KG-D6 block operated by Reliance Industries (RIL). We estimate that actual
contracts signed in relation to these firm allocations is around 55.5mmscmd (see table below).
Some customers with firm allocation are not in a position to take the gas and hence contract
volumes are lower than allocations. However, total actual contract volumes (60.8mmscmd)
are higher than 55.5mmscmd as they also include fallback volumes (which would not be
supplied in current lower gas supply environment). Current gas supply from KG-D6 is around
50mmscmd and RIL has consequently cut supply pro-rata to all its customers (implying
around 10% cut to every customer).

JP Morgan: Realty check -India's Urbanization - Initial read through from census data

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Realty check
India's Urbanization - Initial read through from census
data


Results of census 2011 are being gradually released. Preliminary trends
indicate that urbanization trend is intact and population growth rate in cities
is happening at a rate higher than average population growth. Within cities,
growth seems to be higher (as expected) in upcoming suburbs around cities.
This then is supportive of long-term hypothesis of rising real estate demand
around major economic centers. However, on the flip side, as cities look to be
hitting their long-term population targets faster than expected, the census then
seems to have sparked off a sharp debate amongst various activists/ planners
on government spend (or lack of it) in ensuring adequate infrastructure in
fast growing metros.
• In terms of key cities:
o Gurgaon registered the highest decadal population growth at 74%
(1.5MM), followed by Noida (GB Nagar) at 51%. These two areas
instead of being suburbs to Delhi are now transitioning to becoming full
fledged cities in themselves. Interestingly Delhi’s population growth rate
moderated (21% vs. 47% last decade), implying that new opportunities
are more in upcoming geographies around the main city.
o In Mumbai, a similar pattern was repeated. While the main city just
registered a population growth of 4%, MMR region registered a far
higher growth. Thane (+43% growth, 1.8MM ppl) is now one of the
largest districts in India. New satellite townships i.e Navi Mumbai
(+48%). Vasai Virar (+ 221%), Kalyan Dombivili (+50%), New Panvel
(+113%) were some of the fastest growing suburbs around the
metropolis.
o Bangalore’s decadal population growth increased to 47% (vs. 35%) to
9.6MM people or close to what Mumbai had in 2001. Interestingly, the
city has already achieved its population target, which was expected by
2030 (10.1MM) (as per Mckinsey).
o In other key cities, growth was more modest—Hyderabad (4MM, 4.5%),
Chennai (4.7MM, 7.5%). Kolkata was one of the only metros to register
a population decline (4.5M, -1.7%). Although suburban data for these
metros are not out yet, it may be possible that population growth rate
there again will likely be higher.
• Urbanization is widely understood as the main driver of RE demand. As per
a study by McKinsey, by 2030 almost 590MM people will be living in cities
(2x current population), which will account for 70% of new employment
generation. Mumbai and NCR will be the largest cities in Delhi with
population of 33MM/26MM respectively.



Utilities: Merchant tariffs to remain firm ::Deutsche bank,

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Utilities: Merchant tariffs to remain firm [Manish Saxena]
We are surprised to see all the India power generation data in April. While the generation volumes have dropped by 2.5% MoM as expected (as the first leg of busy season ended on March 31), interestingly the spot prices have now risen to INR 4-5/kWh (from INR c2.5/kWh a few weeks back). As per the CERC forward rates, it looks like spot tariffs would rise to INR 4.91/kWh in May and fall to INR 3.79/kWh in June with onset of monsoons. Overall, we continue to find constraints in energy availability, which we note is seasonal due to (a) low domestic coal production,(b) absence of buyers from India in the sea-borne thermal coal markets,(c) railway wagon shortage and (d) reduced availability of natural gas. Accordingly, we estimate that spot markets are likely to remain tight around INR 3.75-4.25/kWh and continue to prefer long-energy players i.e. Coal India, Adani Power (coal resources in Indonesia owned by the parent) v/s non integrated ones such as NTPC.
India Equity Strategy: Rural prosperity set to continue [Abhay Laijawala]
According to the Government of India’s recently released third advance estimates, India’s food grain production is likely to touch a new record in FY11, rising by an estimated 8% to 236mn tonnes. Production of wheat, pulses, oilseeds and cotton is expected to touch a record high in FY11. Increasing production of foodgrains remains critical to India where rising rural prosperity (particularly at the bottom of the pyramid) has resulted in surging demand for foodgrains.
Asia FX Strategy Notes: MAS does not disappoint the market [Mirza Baig]
The key change announced by the MAS today was a re-centering of the policy band "below the prevailing level of the SGD NEER". There were no changes to the slope or band width. This raises a slight confusion about the extent of the revaluation. If the announcement was of re-centering "to the prevailing level" of the SGD NEER, then it would be safe to assume a 3% revaluation. However, the "below the prevailing level" remark leaves some room for ambiguity. Given the fairly hawkish tone of the policy statement (and the historical experience of previous re-centerings), we believe the mid-point of the policy band has been shifted up by 2%. The chart below shows how the SGD NEER now looks in the context of the new policy band.
US Daily Economic Notes: Memo to Fed: Do not ignore commodities [Joseph LaVorgna]
Mr. Bernanke and other members of the FOMC (namely, Dudley and Yellen) have made it clear that as long as inflation expectations remain stable, the Fed can be slow in removing ultra-accommodative monetary policy. After all, we note the Fed is still falling short on its dual mandate of maximum sustainable growth and low/stable inflation: Unemployment is high at 8.8% and core inflation is below the Fed's implicit 2% target. These members have also said that the run-up in commodity prices is likely to be temporary. We believe a couple of points are worth making. One, inflation expectations are set according to trends in the headline CPI, not the core. This is why consumer price expectations are rising appreciably. For example, the University of Michigan's median 5-year expected inflation rate jumped 0.3% in March to 3.2%, the highest reading since May-June 2008. We get preliminary data this morning for April, and we think we could see another such jump, thereby taking inflation expectations up to 3.5%.

Telecom Industry -- - 4Q11 (March 2011) Preview:: Emkay

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Telecom Industry
n Revenue growth momentum to continue in Q4FY11. We expect our Telecom universe to register QoQ revenue growth
in the range of 3-5% in Q4FY11E, led by stabilization of price war coupled with strong subscriber net adds.
n Due to launch of MNP during Q4FY11E, we expect APRU and ARPM decline to be in a range of 3% and 1% for Bharti
and Idea, respectively. While the decline is expected to be higher for Rcom.
n Nevertheless, the traffic on network is expected to grow in the range of 4% and 7% QoQ for Bharti and Idea,
respectively. It is expected to be at 1.2% for Rcom as the company is reducing free minutes on the network.
n Led by continued healthy subscriber addition, we expect mobility revenue for Bharti, Idea and Rcom to grow by 3.5%,
5.5% and 1.7%, respectively.
n Despite of revenue growth, EBITDA margin of our coverage universe is expected to remain flat at 31.8% QoQ
(considering Bharti EBITDA for Q3FY11 excluding one time re-branding cost) due to higher marketing expenses
pertaining to aggressive campaigns for MNP and 3G launch.
n MNP was launched on pan India basis on 20th January, 2011. Latest data released by TRAI shows just 38lacs
subscribers (i.e. ~0.5% of total subscriber base) opted for the service.
n All the players have launched 3G services, Idea was the last one to roll out at the end of March, 2011. As per the
recent data, the pricing offered for 3G services indicates absence of intense price war in the industry. As per the
media reports, Bharti has added 2 million subscribers on its 3G network till now.
n Relaxation on the stringent norms in new telecom policy (expected any time in April, 2011)) could be a positive trigger
for the industry.
n We rate BUY on Tulip Telecom, HOLD on Bharti, reduce on RCOM and SELL on Idea Cellular. Bharti Airtel remains
our top pick in the sector.

Print Media - - 4Q11 (March 2011) Preview:: Emkay

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Print Media Sector Emkay
n Ad revenue growth is expected to remain strong, post festive season as well.
n We expect our coverage universe to report ad revenue of Rs 7.6bn, growing 18.7% YoY.
n Regional companies (DB Corp, Jagran Prakshan, Hindustan) are expected to post growth of 20.0% YoY to Rs 5.1 bn
while, their national counterpart (HT Media) would grow at 16.0% YoY to Rs 2.6 bn.
n Print media players are increasing the circulation to have an edge over competition. Jagran has increased circulation
across the markets, while Hindustan is aggressively expanding its presence in U.P. On the back of this, we expect
our coverage universe circulation revenue to grow by 3.9% YoY to Rs 1.5bn, led by 6% growth expected from Jagran.
n Coverage universe EBITDA margin is expected at 22% v/s 25.7% Q4FY10, declining due to higher operating cost.
However, PAT is expected to grow 19.3% YoY, driven by lower interest cost coupled with higher other income.
n The newsprint prices have remained stable from last couple of quarters. Price stood at $670/tonne in Q4FY11 v/s
$665/tonne in Q3FY11.
n We maintain our bullish stance on the regional print media space; nevertheless, with the increasing ad spend by
corporates, national players are also expected to post healthy returns.
n With the expansion by print players into Tier II and Tier III cities, we expect the growth in ad market to maintain its
momentum going forward. Stabilization in newsprint prices would also drive the EBITDA going forward
n We maintain our BUY rating on Jagran and HT Media and HOLD rating on DB Corp. Jagran remains our top pick in the
sector

Power - - 4Q11 (March 2011) Preview:: Emkay

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Power
n Expect our utilities universe to report 14.5% yoy revenue growth led by commissioning of capacities. EBITDA to grow
by 26% yoy led by operating leverage. However, PAT to decline by 5.0% yoy led by PAT decline in NTPC (change in
grossing up) and JPVL (higher interest due to securitization). PAT ex-NTPC & JPVL to increase by 15.5% yoy.
n 15,795MW added during FY11. Expect further jump in capacity additions starting FY12E with addition of 22,706MW.
n Even after factoring in best case demand estimates (9.6% growth) including latent demand, supply is likely to outpace
demand by end FY13E.
n Merchant prices (day ahead on exchange) were expected to rebound significantly in Q3/Q411 (stood at Rs2.3/unit &
Rs3.6/unit) but that hasn’t been the case till now. Its just 2.5 months window before the monsoon impact again kicks
in and result in lower merchant prices. Expect lower prices in exchanges to escalate to bilateral trades and see
significant downside risk to consensus (also ours) merchant tariff of Rs4/unit and Rs3.5/unit in FY12E and long term
respectively. Our estimate for sustainable merchant rates stands at Rs2.7/unit.
n Unsustainable SEB losses (Rs740bn – FY10) to trigger panic situation starting FY12E and SEBs to resort to price
caps, power cuts/demand management, payment delays etc.
n IPP valuations still factors in a (1) long term merchant rate of Rs3.5/unit, (2) coal supply at linkage rates, (3) high PLFs
of 85%+ and (4) significant latent demand. We reiterate negative view on private power utilities and prefer regulated
utilities. Our top picks are power grid (not covered) and NTPC (lower risks, reasonable valuations and improving
execution).

Pharmaceutical - - 4Q11 (March 2011) Preview:: Emkay

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Pharmaceutical
n We expect our Pharma universe to report a growth of 6% YoY (-2% QoQ) in revenues. Sun Pharma, Cadila and
Aurobindo are expected to grow by 37%, 35% and 16% respectively, while Ranbaxy and Jubilant Life expected to degrow
by 24% and 12%. Ex-Ranbaxy and Jubilant, revenue of Pharma universe is set to grow by 15% YoY. Pharma
Universe (ex-CRAMS) is likely to grow by 8% YoY, while CRAMS space (excluding Aurobindo) is likely to de-grow by
8% YoY.
n Continued momentum in the domestic market coupled with limited competition product opportunities in the US will
continue to drive growth in the generic space. In the CRAMS space, we expect gradual recovery, with Divi’s to be the
prime beneficiary from the pick-up in outsourcing trend.
n Increasing cost pressures due to expansion of the field force, regulatory filings/ litigation cost, pricing pressures in
US and continual investments in capacities will put the margins under pressure in Q4FY11. EBIDTA is likely to degrow
by 20% (OPM at 20% in Q4FY11E) driven by 78% and 33% YoY EBITDA decline in Ranbaxy and Jubilant Life.
Ranbaxy will be impacted because of Valtrex exclusivity in Q4FY10 which had higher margin profile. Ex-Ranbaxy and
Jubilant, EBITDA will witness 6% YoY increase (OPM at 22%). OPM for CRAMS companies (excluding Aurobindo) is
likely to contract by 565bps because of lower capacity utilization and higher base in Q4FY10.
n APAT of Pharma universe is likely to de-grow by 26% YoY (3% QoQ) driven by 83% de-growth in Ranbaxy, 66% degrowth
in Dishman and 56% de-growth in Jubilant Life. Ex-Ranbaxy, Dishman and Jubilant, APAT for Q4FY11E will
likely be flat.
n Cadila, Divi’s and Aurobindo are our top picks in the pharma space.

Paper - 4Q11 (March 2011) Preview:: Emkay

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Paper
n We expect aggregate revenues to increase by 8% which is driven by 2% volume growth and 4% increase in
realisations. During the quarter, TNPL commissioned its paper plant resulting into 33% increase in capacity however
volume growth is muted due to inventory clearance in Q4FY10
n Paper realisations remain firm at average 44,684 / mt in Q4FY11 (+4% yoy) however various players have taken price
increase of Rs 750- 1000 / mt (2%-3%) during the quarter which should drive average realisations for subsequent
quarters
n Though the industry has witnessed cost pressure on account of higher input prices like pulp, chemicals and
transportation cost. However driven by higher realisations, we expect average EBITDA / mt to increase to Rs 11300 /
mt (Rs 9780 / mt previous year) also driven by higher pulp margins. EBITDA margins to improve by 180 bps to 23.1%
n Rayon Grade Pulp (RGP) prices have increased further to Rs 60,000 / mt (+41% yoy / 16% qoq) and expected to drive
BILT’s profit margins
n In a recent deal, world’s largest paper company has entered into Indian PWP segment through acquisition of AP
paper. Valuations paid by the company at FY2011E EV/EBITDA of 16x are at significant premium to domestic paper
companies trading at average EV / EBITDA of 6x.
n Significant premium paid by global giant to enter into fast growing Indian market (growth of 8-12% as against global
average of 2-3%) has propelled the stock prices in the sectors by 15-20% post this deal. However valuations continue
to remain attractive at current level for our universe at FY2012E EV / EBITDA of 4.7x, P/E of 6.3x and P/BV of 0.9x. We
maintain our BUY recommendation on the sector

Oil & Gas - 4Q11 (March 2011) Preview:: Emkay

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Oil & Gas
n Crude Oil price during the Q4FY11 averaged ~US$101 per bbl as compared to ~US$84 per bbl in Q3FY11.
n However, spreads in light and middle distillates remains strong during the quarter, implying higher demand for petro
products. We expect OMC’s GRM in the range of US$5.5-6.6 per bbl higher than Q3FY11.
n During the quarter finance minister has given Rs.210bn as cash compensation to OMC’s for losses incurred on
selling petroleum products at below market prices. Till 9m FY11 OMC’s have received Rs.366bn compensation from
the Government and upstream companies.
n The upstream companies subsidy share expected to remain at 33% of the total under recovery, even though the
absolute level is expected to rise significantly.
n For Q4FY11, we estimate total under recovery at Rs.330bn. At current crude oil price under recovery on Diesel is at
Rs.16 per ltr, Rs.28 per ltr for SKO and Rs.325 per cyl for LPG. However, we have not considered the under recovery
on petrol, due to deregulation of the petrol prices.
n Pressure on the US dollar has been diverting interest of investors towards commodities including crude oil. If US
dollar continues to remain under pressure, the commodities are likely to stay firm including crude oil, hurting the
OMC’s performance.
n We expect OMC’s to report revenue growth of 11.9% in Q4FY11E compared to Q4FY10 led by higher crude oil prices
and hence higher realisation for companies. Higher spreads in the light and middle distillate improves GRM and
profitability of the OMC’s.


Natural Gas Emkay
n We expect natural gas transmission volume (GAIL and GSPL) is expected to remain flat at 0.1% to 158mmscmd in
Q4FY11 compared to Q4FY10 but distribution companies (IGL and Gujarat Gas) would report healthy growth of 18%
YoY to 6.4mmscmd in Q4 FY11.
n Petronet LNG is expected to registered healthy volume growth of 29.7%, YoY to 119.1tbtu in Q4FY11.
n Natural Gas universe likely to report revenue and profit growth of 36.8% and 14.7% YoY, respectively, primarily driven
by higher volume growth and higher realisation from GAIL, Petronet LNG and IGL.
n Natural gas universe likely to report EBIDTA growth of 20% YoY. However, higher subsidy burden on GAIL and cost
pressure on IGL drag down the margin from 20.2% to 17.8% YoY.
n The upstream companies’ subsidy share expected to remain at 33% of the total under recovery, even though the
absolute level is expected to rise significantly, due to higher crude oil prices.
n Subsidy burden is the key concern for GAIL’s profitability. Based on the expected under recovery for Q4FY11, we
expect subsidy burden for GAIL is at ~Rs.10bn. This would adversely hamper the sequential growth for the company.
n CGD companies like Gujarat Gas and Indraprastha Gas are expected to report lower margins on YoY and sequential
basis, due to the higher spot LNG prices.
n Overall, strong quarter for CGD and transmission companies.



Metals and Mining - 4Q11 (March 2011) Preview:: Emkay

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Metals and Mining
n Higher realizations and better volumes during Q4FY11 would reflect through increased revenues across the sector.
We expect our Metals and Mining universe to post a revenue growth of 15% YoY and 7% QoQ basis. In terms of
revenue growth on YoY basis, we expect Sterlite Industries (+21%) to be the outperformer followed by Sesa Goa
(+18%) and JSW Steel (17%). Tata Steel and GPIL also are likely to post a YoY revenue growth of ~12%. On QoQ
basis, Sesa Goa (+27%) and GPIL (+17%) are expected to remain top performers
n Despite jump in revenue on YoY basis, the EBITDA for our coverage universe is likely to fall 6% mainly due to margin
pressure in case of Tata Steel (-17%) and JSW Steel (-3%). On QoQ basis despite rise in input costs, significantly
higher realizations enabled the EBITDA of our coverage universe to grow by 20%. Accordingly better EBITDA
performance would be seen in Sesa Goa (+34%), JSW Steel (+26%), GPIL (+20%) and Sterlite (+17%)
n Following the trend in EBITDA, the PAT of our coverage universe is likely to post a drop of 18% YoY primarily due to
Tata Steel (-48%) and JSW Steel (-9%). On QoQ basis, backed by good operational performance, we expect a PAT
growth of 39% for our universe. Major QoQ improvement in PAT is likely for JSW Steel (+61%) and Tata Steel (+53%).
Others viz. Sesa Goa (+33%), Sterlite (+28%) and GPIL (+28%) too are likely to show better performance on QoQ basis
n During the Q4FY11, domestic steel companies raised prices by Rs 5000- 6000/ tonne on the back of good demand and
rise in iron ore and coking coal prices. Non- ferrous metals also saw sharp jump in LME prices due to recovery hope
in developed markets and investment demand
n Among major corporate actions Tata Steel raised Rs 3466 cr through FPO and Rs 1500 cr through perpetual bond,
VAL tied up Rs 16000 cr for its aluminium project and Sesa Goa bought assets of Bellary Steel for Rs 220 cr. We
expect M&As/ JVs/ consolidations to continue in this space

IT Services - 4Q11 (March 2011) Preview:: Emkay

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IT Services
n Some softness after the strong Sep’10 and Dec’10 show
We expect a 3.8-4.7% QoQ US$ revenue growth for our Tier I IT coverage universe with TCS and HCL Tech leading peers on revenue
growth. Amongst the Tier II companies we expect ~2.6-6.7% sequential US$ revenue growth with Infinite Solutions leading the mid tier
pack. We expect primarily a volume led revenue growth for the sector with marginal cross currency and price gains. While we expect
margins to remain flat sequentially for Infosys, margins could dip by ~30 bps QoQ for TCS on account of normalization of bad debt
provisioning. We expect Wipro to report ~40 bps improvement in margins sequentially driven by higher utilization benefits.
n Infosys could guide for ~18-20% sequential revenue growth, EPS outlook of Rs 134-138
We expect Infosys to guide for 18-20% revenue growth which would essentially entail a 3.5-4.2% CQGR through FY12. Similarly , in terms
of earnings outlook, we expect Infosys to guide for FY12 earnings of Rs 135-138(+13-15% YoY growth) building in ~150 bps decline in
margins conservatively and US$/INR exchange rate of Rs 45.
n Key areas of investor focus
We expect investors to focus on (1) Infosys’s annual revenue guidance apart from Wipro’s June’11 quarter guidance (given that
Infosys’s quarterly revenue guidance has continued to be conservative for past several quarters), (2) wage increments for FY12 (most
companies announce salary hikes in April), (3) hiring outlook (most notably campus recruitments), (4) outlook on margin levers ( supply
side pressures have only got stiffer) and (5) outlook on discretionary spending (especially after strong results from global majors Oracle
and Accenture) and pick up in IT spending in the telecom vertical
n Earnings upgrade need to wait for a while
A more modest March’11 quarter would keep consensus earnings upgrades in check in our view for now (street largely building in a 26-
27% YoY revenue growth for Tier I players) with supply side pressures only getting stiffer. We believe that demand continues to be
strong, a view reinforced by good results by global tech majors recently. We maintain ACCUMULATE on Infosys (TP Rs 3,400) and TCS
(TP Rs 1,275) amongst Tier 1 companies

Engineering, Capital Goods & Infrastructure (ECI) - 4Q11 (March 2011) Preview:: Emkay

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Engineering, Capital Goods & Infrastructure (ECI)
Our ECI universe is expected to report strong performance in Q4FY11E with net profit growth at 54.8% yoy – this is
largely attributed to (1) BHEL (Provisional results declared – APAT up 47% yoy to Rs28.1 bn) and (2) Punj Lloyd
(reported Rs6.2 bn loss in Q4FY10). Hence, below analysis is excluding BHEL & Punj Lloyd
n After strong 9MFY11 (+23.7%), expect revenue growth of 19.8% yoy to Rs249.8 bn – led by outstanding order backlog.
Strong revenue growth à amongst large caps by Cummins (+44%) and Thermax (+24%) and amongst small caps by
LMW (+43%), TRF (+43%), McNally Bharat (+38%), Indo Tech (+75%) and Bharat Bijlee (+32%)
n Subdued EBITDA growth at 12.3% yoy to Rs33.2 bn and 90 bps yoy decline in EBITDA margins to 13.3% (on high
base in Q4FY10). Drop in EBITDA margins will be led by L&T (-140 bps yoy), Cummins (-70 bps) and Thermax (-10
bps). Blue Star to report margin expansion of 50 bps.
n Led by subdued operational performance, APAT growth expected to be lower at 9.5% yoy to Rs21.1 bn – largely
attributed to lower other income and high interest costs. Amongst large caps expect Cummins India to deliver strong
growth at 35% yoy. While LMW (+39%), Greaves Cotton (+29%) and EMCO (+61%) to have robust performance in midcaps.
L&T, Voltas, Blue Star, TRF, McNally Bharat and Elecon to report growth ranging between 0-8%.
n Asking rate for order inflows in Q4FY11E stood at Rs466.3 bn (41% of FY11E target order flows or growth of 52% yoy)
– we believe ECI universe would find it difficult to meet expectation owing to fragile business environment and hence
there will be spill-over of order finalization in H1FY12E.
We would closely scrutinize (1) trend in investment spends (2) growth outlook for FY12E (3) pressure on operating
margins and (4) order finalization.

Consumers /FMCG - 4Q11 (March 2011) Preview:: Emkay

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Consumers
n Emkay CONSUMER universe is expected to witness robust growth momentum - record 21.9% YoY growth in revenue
to Rs 107 bn. Godrej Consumer is likely to witness highest growth of 118.8% on account of consolidation of acquired
businesses – excluding which our CONSUMER universe is expected to grow at 15.9%. Selective price increases
coupled with healthy volume growth momentum will drive robust revenue growth this quarter. In Emkay universe,
GCPL would record highest revenue growth at 118.8% YoY followed by Jubilant FoodWorks, Marico and Titan at
58.2%, 41.0% and 27.1% YoY respectively.
n EMKAY universe would register improvement in growth momentum – forecast 21.9% YoY growth in revenues to Rs
107 bn driven by continuation of healthy up-tick in volumes coupled with selective price increases and consolidation
of acquired businesses for GCPL. While the Middle East crisis will impact the international operations of APL and
Marico, strong domestic performance will offset this negative impact. Our volume growth assumptions for HUL at 8%,
APL at 14% (domestic business) and same store sales growth for Jubilant FoodWorks at 25%.
n While higher raw material costs continue to keep margins under pressure, we expect selective price hikes with
efficient operating performance would drive EBITDA growth at 26.4% YoY to Rs 15.4 bn and APAT at 30% YoY growth
to Rs 10.3 bn. We have factored 50 bps expansion in EBIDTA margins for EMKAY universe – Jubilant FoodWorks
would report highest expansion at 260 bps, followed by APL at 170 bps and HUL at 50 bps.
n While pricing interventions have been initiated in selective categories like hair oils, detergents and paints, consumer
sector continues to face risks from (1) rising raw material costs (2) intensifying competition and (3) unfavorable base
effects. We continue to remain selective in playing the sector with a preference for absolute market leaders with
higher pricing power.

Construction - 4Q11 (March 2011) Preview:: Emkay

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Construction
n Infrastructure companies under EMKAY coverage are expected to post a growth of 37.8% sequentially in revenues & 21.3% yoy (ex ITNL)
led by improved execution. Post the extended monsoons season execution is expected to bounce back in Q4FY11E driving healthy
topline growth. Construction revenues are expected to grow 40.7% qoq and 8.7% yoy (ex ITNL).
n The topline growth is also boosted by cement revenues growth of 42.6% for JPA with its cement volumes growing 28% yoy (4.62 mt) &
11% yoy improvement in cement realization
n We expect sequential growth of 12.8% in EBITDA with aggregate margins of 21.2% which is likely to decline 470 bps sequentially as
major traction is visible from the low margins construction segment. Ex ITNL’s performance, EBITDA is expected to grow at 16.7% yoy.
Core construction EBIT is expected to grow by 15.5% qoq and 2.8% yoy (ex ITNL).
n Net profit is expected to witness a growth of 20.3% qoq. Performance(Ex ITNL) is expected to report 11.2% yoy growth in PAT.
n NHAI awarding is set to gain traction in Q1FY12E which is expect to further bolster the order backlog for the existing construction
companies and will provide further opportunities as a developer.

Cement - 4Q11 (March 2011) Preview:: Emkay

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Cement
n Though on a yoy basis our cement coverage universe is expected to see a 5.9% earnings decline in Q4FY11,
sequentially the performance is expected to improve sharply led by successive price hikes taken in Jan-March 2011.
All India cement dispatches for the first 2 months of Q4FY11 have grown at 4.9% yoy showing some signs of recovery
from the flattish growth witnessed in Q3FY11. Cement prices continued their uptrend and averaged at Rs258/bag for
the quarter up 9.3% yoy and 8.6% qoq led by pricing discipline exercised by cement producers across regions.
n We expect cement companies under our coverage to report topline growth of 9.4% yoy. Pure cement sales are
expected to grow 9%yoy led by 1.8% growth in volumes and 7.2% yoy improvement in realizations. Volumes for south
based players however are expected to decline by 14.3% yoy due to production cuts exercised to maintain prices and
the slow pick up in demand in southern region.
n With hyper inflation in energy prices (international coal prices averaging USD120) total cost per tonne is expected to
increase by 12.3% yoy. Pure cement EBDITA is expected to register a decline of 5.5% yoy with EBIDTA/t at Rs887 (-
7.1% yoy). Consequently aggregate EBIDTA is expected to decline by 5.2% yoy with margins shrinking 350 bps to
22.7%. Further rising interest costs (+30.7% yoy) are expected to drag down net profit by 5.9% yoy.
n We expect cement prices to remain buoyant at least for the next few quarters, driven by seasonality in demand and
the pricing discipline across regions. However amidst supply issues and related pricing pressures that the sector is
witnessing, the pivotal concern now is the revival of demand which could drive any sort of upgrades for the sector.
n Maintain our NEUTRAL stance on the sector. Maintain negative stance on, Ultratech, Ambuja Cement and India
cements, remain positive on ACC & Grasim.

Banking and Financial Services - 4Q11 (March 2011) Preview:: Emkay

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Banking and Financial Services
n Earnings momentum expected to slow down for PSU banks during Q4FY11 as we expect growth in the overall as well
core earnings of the banks to grow by 5.9% qoq and 5.6% qoq compared to 12.1% qoq and 12.3% qoq in Q3FY11
n The advance growth picked up pace during the quarter to 23.2%, with deposit growth also improving to 16.7% as on
March 11, 2011, resulting in 230bps expansion in CD ratio
n Q4FY11 witnessed liquidity crunch for large part of the quarter and consequently the costs have risen. However,
driven by banks’ agility to pass on the costs and 230bps expansion in CDR to restrict the compression in NIMs to just
5-15bps qoq. The NIMs still to expand on yoy basis due to low base effect
n We expect the PSU banks to report 32.6%yoy (1.1% qoq) and Private banks to report 20%yoy (3.1% qoq) growth in NII
led by strong growth in advance.
n The bond yields have hardened by 7bps and 24bps towards the long and the short end respectively. As a result,
treasury gains likely to be muted during the quarter.
n Employee expenses could rise substantially as PSU banks need to provide for the second pension liability related to
retired employees in FY11 itself . However, banks have requested the RBI for an extension and are awaiting a final
decision on the same.
n Key factors to watch out – (1) RBI decision on pension liabilities for retired employees, (2) NPAs as the banks move
to system recognized NPAs (3) restructuring in MFI books (4) signs of pick up in recoveries and upgradations
n Our top picks for the quarterly results – Axis Bank, Allahabad Bank, Bank of Baroda, Union bank of India, LICHF,
MAGFIL, Mahindra Finance and CRISIL

Automobiles - 4Q11 (March 2011) Preview:: Emkay

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Automobiles
n We expect our automobile universe to report 20% YoY/7% QoQ growth in sales to Rs 663bn due to strong volume
growth driven by end of fiscal year sales.
n EBIDTA at Rs 92 bn is also expected to grow by 29% YoY/ 12% QoQ. Excl. TML subs, EBITDA growth to moderate to
6% YoY/14% QoQ to Rs 55 bn.
n Consequently, EBIDTA margins would expand by 100 bpsYoY/60bps QoQ to 13.9%. Excluding TML subs, margins to
register decline of 150bps YoY due to higher RM costs. However, QoQ margins to expand by 40 bps driven by
operating leverage on higher volumes.
n APAT at Rs 59bn should report a strong growth of 41% YoY/17% QoQ. Ex TML subs, APAT will grow marginally by 6%
YoY/17% QoQ to Rs 35bn input notably Steel, Rubber and Aluminum which have increased 17%, 16% and 7% over
last quarter.
n Only TML (due to JLR) is expected to report YoY margin expansion. QoQ margins expansion will be witnessed in ALL
(390 bps), HH (150 bps), TVS (45 bps), EML (28 bps) and MSIL (22 bps). BAL and M&M are likely to face margin
contraction QoQ/YoY
n We maintain our BUY on BAL, M&M and TML. Post 3QFY11 results, we had upgraded ALL, MSIL and TVS to
ACCUMULATE. We maintain our REDUCE rating on Hero Honda

Agri Input and Chemicals - 4Q11 (March 2011) Preview:: Emkay

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Agri Input and Chemicals Emkay
n We expect our universe to report strong Q4FY11 results driven by higher profitability in fertiliser segment and
improved margins in chemical segment
n Aggregate revenues to increase by 21% while aggregate EBITDA growth is expected at 49% on account of 360 bps
expansion in aggregate EBITDA margins to 19.4%. We expect APAT growth of 34% for the universe
n Complex fertiliser sales volumes in Q4FY11 for the industry indicates marginal decline of 3% yoy (being Mar’11 data
provisional) while urea volumes increased by 15% yoy. Aggregate fertiliser revenues for our universe increased by
23% on account of volume growth and price increase while EBIT margins improved by 520 bps to 11.5%
n Chemical segment benefited from rising chemical prices as emkay chemical index increased by 8% yoy / 5% qoq.
Resulting aggregate chemical revenues registered a growth of 13%. On back of improving spread EBIT margins in
chemicals improved by 410 bps to 23.9%
n Agrochemicals sales are likely to remain strong in the quarter on account of some spill over sales from Q3FY11. We
also expect growth to pick up in European and North American markets on back of improved weather conditions
n We expect GNFC to post strong results driven by higher fertiliser sales (since company had production disruption in
previous year) and strong chemical prices. GSFC should report another strong quarter since caprolactam prices
remain at accelerated level during the quarter. Chambal Fertiliser is expected to benefit from higher urea prices on
the production above cut off during the quarter
n Our outlook on the sector remain strong and we expect that complex fertiliser sales volumes to pick up in Q1FY12.
Chemicals prices are likely to remain buoyant driven by firm demand


Shipping Monthly Report – April 2011 :: ICICI Securities,

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Shipping Monthly Report – April 2011
• The Baltic Dry Index (BDI) rose by 22% to 1530 in March 2011 led
by a 35% rise in the Capesize index to 1768. The major reason for
the rise in dry bulk freight rates was resumption of iron ore
imports by China
• The Dirty Tanker Index rose by 1% to 932 while the Clean Tanker
Index rose by 16% to 841 in March 2011. The decline in crude oil
imports by Japan following the closure of refineries post the
earthquake led to a drop in crude oil shipments on the key tanker
route TD3 i.e. Saudi Arabia (Ras Tanura) to Japan (Chiba).
However, the rise in import of refined crude products by Japan led
to a rise in demand for product carriers and resultant strength in
product carrier freight rates
• LPG freight rates across all categories reported a rise in March
2011
• Utilisation levels for drill ships, semi-subs and jack-up rigs was
reported at 73%, 81% and 72% in March 2011 as against 71%,
79% and 73% in February 2011, respectively. Utilisation levels
showed signs of improvement but did not translate into a rise in
charter rates

Indusind Bank - Breaking into the big league; target Rs 330:: ESIB

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Indusind Bank
Breaking into the big league
Indusind Bank’s remarkable turnaround has been richly rewarded
with the stock outperforming the benchmark BSE Bankex by a
whopping 68% since our initiation and 28% YoY. We expect
improved synergies between the bank’s sizeable retail assets and
deposits base to support a higher growth momentum than peers and
to lead to continued outperformance. We remain buyers.
Indusind has an established retail customer base...
Indusind’s retail loan book had grown ~ 50% from FY09 levels riding on the back
of a booming auto sales cycle. The bank’s retail loan book remains dominated by
auto and commercial vehicle (‘CV’) loans (41% of loans). This segment is the
strongest lending segment for the bank due to its three decade old operations in
auto and CV finance (in initial years as part of Ashok Leyland Finance). Having
survived multiple credit cycles in this niche lending segment, we think Indusind
now has the necessary experience to further scale up its retail lending franchise
by expanding its product range vs. its current strong CV finance focus.
...which will help build its liability franchise
In a recent earnings call, the bank’s CEO Ramesh Sobti indicated the bank’s
intention of improving retail funding support to the bank’s niche commercial
vehicle finance business. This strategy is in line with our analysis of successful
private banks in other emerging market countries like Poland, Brazil and Spain.
In these markets, the successful mid market banks built successful liability
franchises by increasing their retail lending operations as well.
Breaking into the big league
While the bank had added nearly 80 branches since Mar’08 (the bank received
the RBI’s signoff on branch expansion only in June’09) and had a 258 branch
strong network its traction on savings deposits has been muted. Low cost
current and savings deposits comprised 26.8% of its deposit base in 9MFY11 with
current deposits’ contribution having expanded by nearly 600bps in this period
to 18.4% (of deposits) vs. a mere 300bps expansion incase of savings deposits
to 8.4% (of deposits) in the same period. However, we expect the bank’s savings
deposits base to gain faster traction on the back of (a) growing branch
network, and (b) its strategy of increasing its target retail deposit base
through its lending business. Overall, our analysis of successful private sector
banks in India and across other geographies also shows that IIB’s is a proven
strategy which has been successfully executed by other banks. We now expect
current and savings deposits to rise to 30% and 32% of deposits in FY12 & FY13
respectively.
Risks to our ‘Buy’ call
(a) Slowdown in Indusind’s low cost ‘CASA’ deposits’ growth momentum due to
rising competitive pressure; (b) Aggressive branch expansion plans and higher
than expected retail delinquencies depressing RoEs.
Valuation: Franchise merits premium
At Rs 274, Indusind trades at 2.4x FY13E BV, in-line with the private sector
bank’s average (ex IIB). We believe the bank’s superior retail franchise and
growing branch network is likely to sustain a faster growth momentum than its
mature private sector peers and hence a premium valuation is justified. We
upgrade our FY12 and FY13 earnings by 10-14% to factor in superior NIMs amidst
stable credit costs. Revised valuation of Rs 330 indicates a 20% upside and an
implied FY13E P/BV of 2.8x.


Company snapshot
Promoted by the Hinduja Group in 1994, Indusind bank is a midsized private
sector bank with 258 branches. It has a significant presence in the vehicle
financing business (2nd biggest vehicle financier in India) with a loan book in this
segment of Rs 90bn (36% of loans). In 2008, after a prolonged period of poor
earnings performance and lacklustre growth, the bank brought on board
experienced ABN Amro country head Romesh Sobti (current MD & CEO) and four
of his former colleagues from the foreign bank.
The bank’s Rs 250bn loan book is currently dominated by corporate loans (68%
of loans) although the bank has a large retail loan book dominated by auto/ CV
loans (42% of loans).

Yes Bank --Switch from ‘Sell’ to ‘Buy’ :: ESIB

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Yes Bank
Switch from ‘Sell’ to ‘Buy’
Yes Bank (‘YES’) has underperformed the benchmark BSE Bankex by
11% since our Dec’09 ‘Sell’ initiation despite consensus beating
earnings and growth. The stock now trades at 2.4x FY12E BV, a sharp
15% discount to its private sector peers. However, we turn buyers of
the stock on the back of its now sensible discount to stronger low
cost private sector deposit franchises and its renewed commitment
on building a retail deposit led franchise.

Indian Private Sector Banks -- The all new tortoise and rabbit race ::ESIB

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Indian Private Sector Banks
The all new tortoise and rabbit race
India’s smallest private sector banks- Indusind (IIB) and Yes Bank
(YES)- face the unenviable task of scaling up franchises in a far more
competitive lending and funding environment than faced by private
sector peer goliaths –ICICI, HDFC and Axis- in the 90s. While the
imminent entry of a new generation of private sector banks is likely
to increase competitive pressure, we turn Buyers of YES though still
prefer its slow grown peer Indusind due to a more scalable franchise
that derives its niche from the bank’s retail portfolio.

Capital Goods:: Industrial capex: No cycle without reforms:: Credit Suisse

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Industrial capex revival continues to elude: Our bottom-up analysis of
capex plans of 30 companies/70 projects, which account for over US$18 bn
of annual capex in India, suggests a continued capex slowdown in FY12.
Order pipelines for cement (oversupply issues, weak demand), metals
(strong plans but slow approvals) and oil & gas (flattish spend in E&P with
steep competition, YoY decline in refining, gas supply impacting pipeline
capex) do not appear strong enough to create a new cycle, in our view

Balance sheet healthy, approvals key: While the ability to spend is not the
key concern, as balance sheets (leverage) are in much better shape than in
the previous downturn (based on aggregation of around 100 companies),
our project tracker suggests that around 70% of the projects in this cycle are
greenfield expansions (versus around 30% in the previous cycle), which
slows order activity, as it becomes more dependant on various approvals
and land acquisition challenges

End-markets weak, reforms critical: Our end-market analysis suggests
that power/infra cycle should remain weak in FY12 (some acceleration in
ports/roads spend but airport/metro/railway spend muted). Without reforms
(increasing penetration of private vendors in defence/rail orders, retail FDI,
streamlining approval process, vendor qualifications), these end-markets
could remain weak

Order inflows could disappoint, underweight capital goods: Given a
weak cycle, we see a risk to our inflow estimates (around 25% for FY12E)
for the sectors, and with margins peaking, room for a rerating is less. We are
therefore now cautious on infra/industrial cycle (companies with high
exposure include L&T (Restricted), reiterate UNDERPERFORM on Punj
Lloyd ABB, Siemens). We remain cautious on the power cycle (NEUTRAL
BHEL/BGR Energy). Havells, Crompton Greaves, KEC and Cummins are
our key OUTPERFORM ideas on account of exposure to global growth.

Reliance Communications :: target price of INR122 :: HSBC Research,

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Reliance Communications
(RCOM)
 Corporate actions have been the catalyst but RCOM is likely to
find it difficult to unlock value in tower assets
 No gains from MNP and uncertainty over CDMA given progress
on TD-LTE raise concerns for the stock
 Retain Neutral (V) rating and target price of INR122

Idea Cellular: lower our TP to INR72 (from INR75) :: HSBC Research

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Idea Cellular (IDEA)
 Even though Idea Cellular benefits from improvement in revenue
per minute, TRAI recommendations raise concern for the stock
 Improvement in regulatory environment and higher possibility of
sector consolidation provide downside support for the stock
 Retain Neutral (V) rating and lower our TP to INR72 (from INR75)

Bharti Airtel:: Upgrade Bharti to Overweight; raise TP to INR425:: HSBC Research

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Bharti Airtel (BHARTI)
 We expect Bharti to be benefit most from weakening of competition
 Revenue per minute set to improve; best placed to benefit from
3G as well. Remain cautious on Africa; expect usage to improve
 Upgrade Bharti to Overweight; raise TP to INR425 (from INR370)
on rolling forward DCF

Indian Telecoms: Why it’s time to buy Bharti again:: HSBC

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 It’s time to focus on Bharti’s revenue
growth, not negative sector newsflow
 It offers the best potential return of all
India large caps; competition, regulatory
risk-reward profile also improving
 Upgrade Bharti to OW and raise TP to
INR425 from INR370

STRONG CAPITAL INFLOWS, BUT…:: Business Line

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Despite higher capital inflows witnessed for close to two years now, India's foreign exchange reserves are still short of their all-time high of May 2008. Data released by the RBI on Friday peg the foreign exchange reserves at $308.2 billion, as of April 8, 2010, $8 billion short of the 2008 high.
Change in foreign exchange reserves is determined by a change in balance of payments position (an accounting record of all transactions between a country and the rest of the world) and by fluctuations in the value of a country's currency vis-à-vis other currencies. Much of the growth in India's forex reserves during the recent period has been due to higher capital flows than due to appreciation in the value of the rupee.

STRONG CAPITAL INFLOWS, BUT…

RBI data suggest that the $20 billion capital outflows from forex reserves seen in 2008-09 has come back ($24 billion inflows) to the country over the subsequent 21 months ending December 2010. The latest March quarter numbers are yet to be disclosed. While capital flows have been strong, post FY-09, why have forex reserves not bounced back to 2008 levels? A weaker rupee than in 2008 is the key reason.
Widening current account deficit during recent times has been chipping away the effect of strong capital inflows. This has also curtailed the rupee appreciation. It may be recalled that before forex reserves peaked in 2008, an ideal environment of higher capital flows and low current account deficit meant smoother appreciation of the rupee vis-à-vis other currencies. During the credit crisis, the rupee witnessed a sharp drop in valuation against major currencies; this alone accounted for two-thirds of the fall in reserves in FY-09.
The fall was so significant that despite rising from the lows, the rupee spot rate has not yet gone back to the 2008 levels against five out of the six currencies with which the trade weighted exchange rate (NEER) of India is calculated. The British pound is the only exception.

ALL IN THE TRADE?

If oil remains on boil, the rupee may see further pressure, thanks to a higher import bill. Also, the end of ‘quantitative easing-2' may see capital flow out of countries such as India back to the US, thanks to real interest rates improving there.
As of February 2011, India's forex reserves are sufficient to fund 9.5 months of import bill as against the peak of 16.9 months in March 2004 and 16.5 months in February 2009. The shrinking ratio is a result of import growth outpacing the expansion of reserves.
Another concern is quantum of volatile money coming in. The ratio of short-term money and portfolio flows to total forex reserves has shot up from 48 per cent in March 2009 to 69.3 per cent in December 2010.
Higher current account deficit due to rising import bill and lower proportion of long-term money flows could put the brakes on forex reserves taking higher strides too soon

Sensex likely to reach 22k-mark by March 2012: SMC Global (in ET)

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The stock market bellwether Sensex is likely to reach the 22,000-mark by March next year as foreign funds will remain bullish on the prospects of India growth story, says financial solution provider SMC Global Securities.

It said that despite negative factors such as sinking industrial production, rising inflation and commodities prices, Sensex is likely to peak at 22,000 by March 2012 and its bottom levels are unlikely to slip below 18,000-mark since foreign fund will remain bullish on the prospects of Indian economy.

Infosys Technologies- Disappointment writ all over :: EMkay

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Infosys Technologies
Disappointment writ all over


ACCUMULATE

CMP: Rs 2,989                                        Target Price: Rs 3,250

n     ‘Disappointment writ all over’ as a 1.1% QoQ rev increase in a strong demand environment  with volumes declining by ~1% seq(V/s +1-2% QoQ assumed in the guidance)
n     FY12 rev guidance of 18-20% in line with expectations, however are dismayed by earnings outlook of Rs 126-128(+5.5-7.3% YoY) driven by lower margin assumptions
n     Cut FY12/13E EPS by ~7.6/9.2% to Rs 138/165 driven by lower rev ( +23%/17.5% YoY V/s 25%/20% earlier) and lower EBITDA mgns (31.4%/30.9% V/s 32.8/32.4% earlier)
n     Retain ACCUMULATE with a revised TP of Rs 3,250(V/s Rs 3,400 earlier), implying ~20xFY13E EPS, however would not rule out further near term weakness despite a 10% fall today.

Tata Group to invest Rs 1.2 lakh cr in 5 years; aims $150 bn revenue:: Economic Times,

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Diversified business house Tata Group will invest up to Rs 1.2 lakh crore across sectors in the domestic market in the next five years as it looks to more than double its revenues to $150 billion (about Rs 6.64 lakh crore) by then.

The Tata Group, which has over 90 operating companies, will put in half of the planned investment in power sector, while the other significant portions will be in steel and automobile sectors.

JSW Steel: Buy:: Business Line

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Strong volume growth from better utilisation of recently added capacity, greater efficiencies at the acquired Ispat Industries' facilities and scope for margin expansion make JSW Steel an attractive buy in the steel space. The company has been first off the block in implementing its expansion programme among the larger steel companies, allowing it to capitalise on strong demand especially for flat products.
The stock trades at Rs 958 or around 15.6 times estimated consolidated FY11 earnings. On an Enterprise Value/Tonne basis the stock is among the least expensive in the steel space. On a EV/tonne basis, the company is valued at Rs 30,500/tonne on its current capacity, which is at a discount of 30 per cent to replacement cost. Compared to peers, this value represents a discount of between 16 and 36 per cent to peers such as SAIL and Bhushan steel. This excludes the 41 per cent stake held by the company in Ispat Industries.
An improving product mix with the addition of rolling capacity coupled with a near doubling of steel production capacity will enable the company to enjoy better realisations on a higher proportion of steel over the next two-three years. With the acquisition of Ispat Industries, the company controls 14.2 million tonnes of crude steel production capacity, the largest in India. Given that the company's steel output (including Ispat) in 2010-11 was at just 6.5 million tonnes, there is scope for substantial increase in volumes given the strong demand outlook.
The company's consolidated nine-month sales figures for the period ended December 2010 grew by 24 per cent on the back of higher steel prices, which were up by 15-20 per cent during the period. However, raw material cost pressures, particularly coking coal, have moderated net profit growth to 5 per cent.
The hikes in steel prices (around 15 per cent) usually lag those of the raw materials such as iron ore and metallurgical coal. Therefore, this margin squeeze phenomenon is likely to remain the case over the next 15 months. However, for JSW Steel this may be offset by sharp volume growth from its brownfield capacity additions and operational improvements at Ispat Industries.
The company's iron ore requirement is largely serviced by NMDC, however this bill is subject to a lot less volatility given the longer term of contracts at rates significantly lower than international prices. The company enjoys no such advantage on coking coal, which is largely imported. However, the company has initiated moves to boost margins. The acquisition of iron ore mines at Chile and coking coal mines in the US, which will be imported for use in its Indian operations (initially accounting for around 10 per cent and ultimately reaching 20-25 per cent of requirement), will make the operations more integrated and less susceptible to swings in input costs.
The ongoing financial year is a crucial one for the company in terms of attaining domestic operational stability at its added brownfield capacity and at Ispat. The company's debt:equity ratio stood at 0.85 at the end of December 2010, with EBIT covering interest 3.3 times over