Indonesia & India: A reversal of fortunes?- Much ado about inflation:: Credit Suisse

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��



Indonesia & India: A reversal of fortunes?-------------------------------------------------------------
Much ado about inflation

● The following is a summary of our new Asian Economics report.
In it we consider the macroeconomic reasons behind the 15%
outperformance of Indonesia’s equity market relative to India this
year and, more importantly, whether it will continue.
● In our view, the news flow will remain far more helpful for
Indonesia than India over the next 3-4 months at least. In
particular, we expect Indonesian inflation to drop to 4.5% by
August (from more than 6% currently), while Indian WPI inflation
remains above 8% during the first half of the fiscal year.
● As such, Bank Indonesia is likely to remain on hold until
September/October, with the RBI hiking another 75 bp during the
same period. The lagged impact of earlier rate rises in India is
also likely to take an increasingly visible toll on economic growth
in the country to the surprise of many.
● By the end of 3Q, however, the situation should change
somewhat as Indonesian inflation starts to move higher again,
while the market senses the end of the rate rising cycle in India.

JPMorgan:: Importance of organization structure & accountability mapping in Indian IT grows with size; mastering trade-offs the name of the game

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Importance of organization
structure & accountability mapping in Indian IT grows
with size; mastering trade-offs the name of the game


• Notable aspects of organization structure are increasingly common to
larger Indian IT companies. These include (a) verticalization at the front-end
(or the sales and marketing specialized along industry lines) (b) clear
segregation between hunters (business from new clients), farmers (mining
existing client accounts) and practice sales specialists (e.g. BPO sales
specialists) and (c) explicit P&L ownership resting in account managers only
(hunters, practice sales specialists largely measured on generated order
book/revenues booked). Service-line/geography heads have become relatively
more subservient in the evolving org structure (TCS the only exception on this).
• However, other aspects will be different necessitating more discernment.
This includes issues of whether (a) delivery should be completely verticalized
as Infosys 3.0 envisages (which is how it has been at Cognizant for long). TCS
takes a somewhat different view believing that some offerings are fairly
horizontal in nature, (b) all strategic accounts should be sufficiently multi-tiered
with dedicated business architects and technical architects (we believe so), (c)
there is sufficient fungibility and cross-leveraging of resources (especially at the
junior levels) and (d) dedicated organization resources and carve-outs are
needed for strategic initiatives (such as offerings for the SMB as TCS has done).
• Complete verticalization of delivery (as at Cognizant) improves customer
responsiveness but also entails some duplication of shareable overheads/cost
elements across business units, which is absorbed in Cognizant’s cost & margin
structure. Complete verticalization of both S&M and delivery (Cognizant and
Infosys) contrasts with the judicious horizontalization of service-lines (TCS).
• Breadth of responsibility that senior managers handle in roles versus depth
in managing dedicated P&Ls exceeding USD 1bn. Breadth is inappropriate in
larger companies. Managing a vertical (P&L) is quite different in its dynamics
from managing a horizontal or service-line (important KRAs for service heads
relate to cost & productivity management, solution and Centre of Excellence
development as opposed to P&L). We like split in leadership of verticals and
horizontals (seen in Infosys 3.0) which was not there in the prior Infosys
structure. That said, Infosys 3.0 is now more vertically concentrated.
• What else do we discuss in this report? We dwell on the key emerging aspects
in the theme of organization structure and weigh the pros and cons of each.
There is no single best organization structure but a good organization structure is
one that addresses trade-offs to the best extent – (a) centralization (shared
services, central pool of technical resources, sharing of best practices, common
engineering platforms) versus de-centralization (autonomy & responsiveness in
decision-making) (b) exclusivity of delivery resources for verticals versus their
fungibility across verticals, (c) creation of country-specific structures (Germany,
France etc.) for greater geography focus vs. added costs of such customization .
• Investment conclusion. Infosys and Wipro today are veering towards the
organization structure of Cognizant (complete verticalization of both sales and
delivery without the joint P&L that Cognizant has so well instituted and
executed). TCS distinctively prefers to retain a valuable horizontal component to
its offerings. TCS (OW) and Wipro (OW) remain our key picks in the sector.

Spring shower, summer sizzle .:Macquarie Research

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Spring shower, summer sizzle
Traded commodity prices have sold off particularly sharply in May 2011, with
some of the non-traded commodities, such as coking coal, also down over the
same period. For the remainder of 2011 and into 2012 we have selected copper
and zinc as the two most oversold base metals with the best prospects for
improving fundamentals, and iron ore as the bulk commodity with the best
prospects to surprise to the upside (i.e. we are neutral on the price outlook from
recent record high price levels but this is substantially above consensus). We
continue to recommend exposure to platinum and palladium in the precious
metals space. In soft commodities, our preference is strongly towards corn and
wheat, given weather risks for the 2011/12 crops and underlying tightness.
Chinese tightening appears overplayed, and is almost done
Most commodity end use indicators grew by 10%+ in 1Q11, with the strongest
growth coming from floor space under construction – up 26% YoY – and
consumer appliance output – up over 30% YoY. Other indicators that point to
healthy growth in commodity end use demand in China so far in 2011 include
strong power generation growth and the fact that steel inventories have been
falling even in the face of higher than expected levels of crude steel production.
Our China Economist Paul Cavey believes that the current tightness in credit
availability and weakness in key leading indicators is enough to ensure that
significant further tightening of policy is not needed, particularly as headline
activity indicators and more importantly inflation start to roll over in 3Q11. Cavey
expects policy will remain focused on squeezing lending in the remainder of 2Q,
with slower growth promoting looser policy into 2H. Overall the recently released
Chinese industrial output, inflation and new loans data for April showed that
growth was a little softer, and price inflation at least wasn’t accelerating, and that
new loans were 5% lower YoY.
End to QE2 and European debt issues not expected to
significantly disrupt commodity consumption
We would note that while a generally declining US dollar has been supportive of
rising commodity prices in recent years, it is not a necessary condition for
commodity price strength (indeed there are numerous periods historically where
the US dollar has appreciated and commodities have gone up). However, the
dramatic drop in exchange trade commodities in the past few weeks highlights
the vulnerability of prices to changes in sentiment towards the macroeconomic
situation in the US/Europe.
The unpredictable nature of weather and tighter supply
chains means that the risks around our price forecasts are
skewed to the upside
While we aim to have evenly balanced risks in our modelling of commodity
demand and supply, the apparently increasingly unpredictable nature of weather
conditions and tighter supply chains (the latter in the face of lower credit
availability from banks and high commodity and input prices) mean that risks are
actually likely to be skewed to the upside for our supply-demand balances and
thus price forecasts over the medium to long term. While such weather risks are
clear for the softs, copper, coking coal and iron ore seem the most vulnerable
hard commodities in this regard.

China is buying copper now \.:Macquarie Research

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


China is buying copper now
 Following on from our Commodities Comment – Copper: China market
starting to turn, dated 11 May, we highlight in this week’s China Commodity
Call a number of new factors that make us even more confident that the
Chinese copper market is tightening. As a result of this information we are
taking our short-term trading sell call off of copper and highlight that our
current 2H11 and 1H12 price forecasts are more than 25% above current spot
prices. The prospect of sharp declines in copper stocks in global warehouses
in 2H11 and a pick-up of Chinese copper imports from mid-2011 are set to be
the catalyst for the next move higher.
 LME copper prices have fallen by ~10% since early-March 2011, when
Macquarie put on its short-term trading sell call on copper. However, we are
now starting to feel more comfortable about the copper price moving up, with
a gradual pick- up of Chinese copper fabricators’ utilization rates, solid order
books over the year to date and the end of consumer destocking.
 Our discussion with copper cable, rod and tube producers suggests that their
utilization rate has moved up significantly since early-April this year to ~90%+
in May, from ~60–70% only back in 1Q11. Order books year to date for
copper wire and cable producers have been growing at ~20–30% YoY for
larger producers and ~15–20% for the smaller players. Major copper tube
producers are also ramping up to full capacity rate at the moment in the face
of substantial growth in China’s home appliance industry.
 Tight liquidity supply from the central government forced copper fabricators to
destock their working capital from the beginning of the year. However, they
were forced to come back to the spot market coming to the end of their
destocking cycle from early-April. As a result, reported (SHFE) and
unreported copper stocks (bonded warehouse material) in China came off
heavily over the past six weeks, with SHFE reporting copper stocks down by
40%, or 72kt, from the peak back in end-March this year to 105kt (as of last
Friday). Bonded warehouse copper inventories have fallen by ~100–150kt to
500kt at the time of writing this report. Lower Chinese imports also contributed
to the decline in stocks over the period.
 Scrap is being de-stocked in China, and discounts are coming in sharply. The
price discount of scrap copper to refined metal narrowed significantly this year
from the peak of Rmb4,500/t ($692/t exclude VAT) back to end-2010 level of
Rmb750/t ($115/t excluding VAT). This reflects strong scrap demand vs
supply and is bullish for the refined copper market, as it suggests the
incentive to use more scrap/scrap availability is waning.
 The major driver of the very recent $300–400/t pick-up in prices from their
intraday lows of ~$8,500/t appears to be the long-waited buying from China to
support the physical copper market.

Axis Bank:: A few positive points ::RBS

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Axis Bank
A few positive points
As per FY11 annual report data, the bank's asset/liability maturity profile appears
to have improved yoy. This will likely ease the pressure on NIMs in a rising
interest rate cycle. Also, the lower quantum of restructured loans is positive. Post
the stock price correction, the risk reward appears favourable. Buy.

Larsen & Toubro (LART.BO) Strong FY12E Guidance – But It Could Be Quite a Stretch ::Citi

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Larsen & Toubro (LART.BO)
 Strong FY12E Guidance – But It Could Be Quite a Stretch
 
 4Q11 PAT - 7% below expectations — L&T’s 4Q11 Recurring PAT at Rs15.1bn, up
12% YoY, was 7% below CIRA  on lower sales growth, higher depreciation and higher
tax rate. FY11 Recurring PAT at Rs36.8bn, up 18% YoY, was 3% below CIRA.
 Inflows in line - But miss guidance by 8% — Gross inflows in FY11 at Rs798bn, up
15% YoY, were in line with CIRA @ Rs791bn (FY11 guidance of Rs870bn). Net inflows
at Rs739bn, up 10% YoY, resulted in FY11 end backlog at Rs1302bn growing 30% YoY.

UBS :: Ashok Leyland 4Q-strong end to FY11 ::target rs 65

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


UBS Investment Research
Ashok Leyland
4Q-strong end to FY11
 
„ Event: 4QFY11 results: Sales ahead at Rs 38.3bn (+30%YoY)
Sales were ahead of our expectation at Rs.38.3bn (UBS-e:Rs 36.6bn) due to strong
volume growth of 61% qoq and 7% qoq increase in realizations (due to price
increase of ~2% in Jan’11 and improved mix). Revenue in defence business was up
50% YoY in Q4FY11.  
„ Impact: In-line margins; no change to our estimates
EBITDA margin increased 40bps yoy to 13.3% mainly due to lower RM costs
(RM to sales down 110bps yoy) and other expense (other expense to sales down
110bps yoy), but was negatively impacted by increase in staff costs (staff costs to
sales up 170bps yoy). Dep. was higher at Rs.772m vs. Rs.588m in Q4FY10 due to
full year impact of Pantnagar plant vs 1month in Q4FY10.
„ Action: Reiterate Neutral; muted growth outlook
Mgmt. has guided: 1) industry vol. growth of 7-8% and 2) domestic and export vol.
growth of 10-15% and 20% resp. for the co in FY12. Mgmt. expects operating
margin of 10-10.5% for FY12; margins may have negative impact from increase in
proportion of U-Trucks (~25% of domestic truck volumes in FY12E). Management
expect to ramp up production from Pantnagar plant to 36,000 units in FY12. Mgmt.
guided capex of Rs.10-12bn in FY12 for which Co. will raise debt of ~Rs.6bn.
„ Valuation: Maintain Neutral, PT Rs 65
We derive our price target from a DCF-based methodology and explicitly forecast
long-term valuation drivers using UBS’s VCAM tool. We assume a 12.5% WACC.
We add Rs3.0 on account of Leyland’s stake in IndusInd Bank.

Buy Petronet LNG Ltd.:: Can Money

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Fundamental Reasons:-
Petronet LNG Ltd, a joint venture company between BPCL, IOC,GAIL and ONGC, was incorporated in
April 1998 for importing LNG and setting up of LNG terminals with facilities like jetty, storage,
regasification etc. to supply natural gas for generation of power to both private / public sector power plants.
The equity structure consists of equity contribution of 12.5% each by BPCL, IOC, GAIL and ONGC, 10%
from Gaz de France & the balance from third parties. PLL has set up LNG receipt and regasification
terminal facilities of 5 MMTPA capacities at Dahej in Gujarat and started commercial supplies of regasified
LNG from the said terminal.
Petronet LNG has signed sale purchase agreement with M/s. Ras Laffan / MOBIL to supply LNG to Dahej
and Cochin terminals. PLL has decided to expand its capacity of Dahej to 10 MMTPA. The company
completed implementation of ERP solution covering all aspects of its business. The company also obtained
ISO:9001 and OSHAS certification during 2004-05.
At present, Petronet LNG powers its own operations in Dahej with a captive power plant of about 25 MW
capacities. The company plans to construct a power plant that will consume about 10% of its own gas
capacities of 10 million tonne per annum at Dahej will be set up in 28-30 months on receiving the board
approval which is expected to get in a couple of months. About 50 hectare of land has already been
acquired for the project. Gas-based power projects require investments of about Rs 3.5 crore per MW,
which company will fund by a combination of internal accruals and debt.
In Q4; FY11, Petronet LNG has reported a better than expected growth in the topline & bottom-line on Y/Y
basis. While total sales registered a whopping rise of 67.09%, net profit surged by 112.54% during the said
period. Net revenue were recorded at Rs 3985.97 Crore against Rs 2385.46 Crore as on Q4;FY2010, net
profit came at Rs 206.78 Crore against Rs 97.29 Crore as of Q4;FY2010. The profitability was higher than
analysts’ estimates mainly on account of lower other expenditure. During the said period the EBDITA also
rose by 73.76% and was recorded at SR 351 Crore. EPS has witnessed a healthy growth of 111.54% and
came at Rs 2.75 against Rs 1.30 as of Q4; FY10.
India's natural gas demand is expected to nearly double to 320 million metric standard cubic metre per day
(mmscmd) by 2015, according to a report released by global consultancy firm, McKinsey at the VI Asia
Gas Partnership Summit. According to the report, the current demand of 166 mmscmd—made up of nearly
132 mmscmd supplies from domestic fields and the rest from imported liquefied natural gas (LNG)—is
likely to rise to at least a minimum of 230 mmscmd and a maximum of 320 mmscmd by 2015. As petronet
LNG is the main gas supplier to commercial & other purposes in India. With reference to boom in the gas
based activities/ applications, company is bound to prosper. However on account of highly volatile gas
prices in international markets and excessive dependence on import may eat into the company’s margin.