Crisil, : 2QFY2012 Result Update: Angel Broking,

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


For 3QCY2011, CRISIL’s net sales grew by 38.3% yoy to `220cr. The company
reported a 281bp yoy expansion in OPM to 38.1%. Net profit declined by 20.2%
yoy to `60cr. We continue to remain Neutral on the stock.
Top line posts strong growth, PAT declines: For 3QCY2011, CRISIL’s top line
reported 38.3% yoy growth to `220cr, led by strong growth in its research
segment, which witnessed 48.0% growth because of addition of Pipal’s revenue
for the full quarter and strong revenue growth in Irevna and CRISIL Research.
The rating segment also picked up during the quarter, registering modest 14.8%
yoy growth. The advisory segment also witnessed an increase in its revenue,
registering 44.3% yoy growth. The company’s EBITDA margin increased by
281bp yoy, largely due to lower employee cost, which declined to 40.5% of sales
from 42.8% of sales. Net profit came in at `60cr, down 20.2% yoy. However,
adjusting for other income, net profit increased by 74.5%. Other income declined
by 88.1% to `5.3cr compared to `44cr in 3QCY2011.
Outlook and valuation: We expect CRISIL to post a 25% CAGR in revenue over
CY2010-12 and continue to maintain its leadership position. CRISIL has
announced another round of buy back of shares. The company will be purchasing
shares directly from the market with a maximum price of `1,000/share and up to
an aggregate amount of `80cr. With current market capitalization of `5,959cr,
the company will only be able to buy back 1.3% (assuming CMP of `839/share)
of the total equity, which will not have any significant impact on our estimates.
Currently, the stock is available at 24.2x CY2012E earnings, which is at the
higher end of its historical range of 16.4-29.9x one-year forward EPS.
We continue to maintain our Neutral recommendation on the stock.

WNS : In-line 2Q and outlook confirm improved growth prospects; Goldman Sachs,

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


WNS (Holdings) Ltd. (WNS)
Neutral Equity Research
In-line 2Q and outlook confirm improved growth prospects; Neutral
What's changed
WNS reported September-quarter operating results that were largely in
line with expectations. Management updated its FY12 revenue guidance
slightly to $388-$404 mn (+5%-9% yoy) vs. $387-$407 mn previously.
Guidance for adjusted net income was also relatively unchanged at $44-
$47 mn ($43-$47 mn prior). Organic revenue growth for the quarter
finished at +5.3% yoy, above our 3.3% estimate, while the adjusted
operating margin of 15.4% was a touch lower than our forecast (-30 bp) on
a comparable basis. We raise our FY12/FY13/FY14 adjusted EPS (excluding
amortization and stock comp) modestly to $1.00/$1.12/$1.21
($0.99/$1.10/$1.21 prior) reflecting reported results and updated currency
assumptions. Our 12-month price target of $11 remains unchanged.
Implications
We maintain our Neutral rating, as we believe WNS’s growth profile will
continue to trail its offshore BPO peers in the near to medium term. That
said, 2Q results confirm that its organic revenue has turned the corner
given two consecutive quarters of positive growth, and its business has
stabilized given improving margins, operating metrics, and free cash flow.
In addition, we view the company’s recently filed shelf-registration as a
positive step toward increasing its free float, as we believe that low trading
liquidity and associated risks have been one of the investing deterrents for
existing and new shareholders since WNS’s IPO.
Valuation
Our 12-month price target of $11 is based on a weighted average model
incorporating our sector relative Investment Framework, CY12E P/E, CY12E
EV/EBITDA, and an M&A value; it implies a CY12 P/E of 10.1X our adjusted
EPS of $1.09 (+4% yoy).
Key risks
Downside: (1) Lower revenue growth and margins. Upside: (1) Higher
revenue growth and margins. (2) M&A.
INVESTMENT LIST MEMBERSHIP
Neutral
Coverage View: Neutral

Coal India- How bad can it get? Macquarie Research,

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


Coal India
How bad can it get?
Event
 Diverting e-auction coal to power: As per press reports, the Coal Ministry
has announced that they will divert the October e-auction coal quota (about
4mt) to power companies in light of shortages. This coal will be supplied to
them at FSA prices as against the e-auction prices which were at an 80%
premium.
 This will impact Coal India's profits for October, though the company expects
to increase the e-auction quota after October and end at 10%+ for the whole
year. However, this is more negative for companies which source coal from eauction
currently and they could be hit by lack of supply in the near term.
Impact
 Production ramp up remains a concern: The Ministry of Coal, Ministry of
Power and Coal India called an emergency meeting yesterday to address the
concerns over a shortage of coal production. The company's production was
flat for FY11 after growing between 5-7% for the past 7 years due to delays in
environmental clearances and unavailability of rail rakes for despatches. This
situation was exacerbated by the Telangna stir, which stopped coal transport
in Andhra Pradesh and has resulted in a crunch for power producers.
 Agreement is biased towards power: The current agreement releases only
4mt, which is the October quota to power producers at FSA prices. However,
our concern is that if the company is unable to increase production and
despatches, this might set a precedent and impact Coal India's profitability in
the long run. A total shift of e-auction volume to FSA linked prices would have
an impact of 22% on Coal India's FY12E profits by our estimates.
 E-auction dependent companies also impacted: Various cement
producers, sponge iron producers and aluminium producers which depend on
eauction coal will also be impacted. Most impacted will be cement companies
which source 35-40% from eauction; aluminium producers like Hindalco (35%
for domestic), Nalco (40%) and Sterlite Energy (55%) could also see some
impact.
Earnings and target price revision
 No change.
Price catalyst
 12-month price target: Rs388.00 based on a DCF methodology.
 Catalyst: Strike by workers on Oct 18-19
Action and recommendation
 Maintain Neutral, could see more downside: Coal India has corrected
sharply in the past few days. We believe there could be more negative news:
(a) production targets miss (b) strike by workers on October 18-19 and (c)
impending wage negotiations which would put the stock under pressure. We
maintain our target price and rating and would wait for a better entry point.

Credit Suisse Global Wealth Report 2011

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


● The Credit Suisse Research Institute released its second annual
Global Wealth Report, the most comprehensive study of world
wealth, from the very bottom of the “wealth pyramid” to ultra high
net worth individuals.
● Key findings: Global wealth has doubled since 2000 thanks to
strong economic growth and rising populations in the emerging
world and stands at a record US$231 tn. In the next five years, the
analysis points to global wealth rising by 50% to US$345 tn.
● Emerging markets have remained the main wealth growth engine.
China is projected in 2016 to become the second largest source of
household wealth in the world with wealth rising by US$18 tn to
US$39 tn. The progress of wealth creation in the emerging world
is leapfrogging the path taken by the Western world. It took the
US more than 20 years to replicate this five-year forecast for
China.
● The report finds that emerging markets have considerable scope
to increase personal wealth given their much lower ratio of net
financial assets to income and debt-income ratio than the mature
economies.

NHB guidelines: Calling for a structural change ::Goldman Sachs

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


NHB guidelines: Calling for a structural change
Uniform rate for borrowers, no pre-payment charge, RBI to follow
NHB has issued two circular to housing finance companies (HFC): 1) NHB
has advised that HFCs should ensure uniformity in rates, on a floating rate
basis, charged to their old and new customers with the same risk profile; 2)
HFCs cannot charge prepayment penalty on pre-closure of floating rate
housing loans or a fixed rate loan, which is pre-closed by the borrowers
out of their own source of income (i.e., it is not taken over by a competitor).
NHB does not want discrimination in rates
1) Financers charge lower rate on new loans, while increasing rates on old loans
in a rising rate environment. Similarly, in a falling rate environment they offer
loans at lower rates to new customers but do not reduce rates simultaneously
for existing customers. In the last one year, lenders have increased PLR by 225-
250bp, while new loans were offered at rates 50-100bp lower vs. the old
customers; 2) Based on information available for the banks/HFCs under our
coverage, typical pre-payment penalties are up to 2% for loans transferred to
other companies that could be impacted by the circular. Given we view this as
quite low, we believe this will have a limited impact.
Uniform rates implementation difficult, will need to be incremental
The uniform loan rates will likely have a significant impact as new loans to
opening loan balances are c.50% for HFCs, based on our estimates. It is not
clear how HFCs would be required to implement this as the interest rate
differential could be high leading to complications, e.g., rates could range
between 10.5% (for new customers) to 12% (for existing customers). As
raising rates to 12.5% could be difficult, rates would have to be aligned to
the lower rate of 10.5%. This could impact margin for HFCs, and expose
them to higher interest rate volatility on ALM mismatch. We believe that
implementation will thus have to be on an incremental basis.
Changes negative, maintain Sell on HDFC, Neutral on LICHF
In addition to the changes above, we expect competition in the mortgage
space from banks to increase as loan growth in the infrastructure sector
has slowed. Of the two HFCs we cover, LICHF is currently selling mainly
fixed rate products with maturity of 3-5 years and 50% of its book is at fixed
rates and will have a relatively low impact for now. In the case of HDFC, we
believe that 15% of its new loans are on a fixed rate basis.

Zee Entertainment Enterprises: Strong 2QFY12 also raises questions on long-term strategy::Kotak Sec,

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


Zee Entertainment Enterprises (Z)
Media
Strong 2QFY12 also raises questions on long-term strategy. Zee reported strong
2QFY12 EBITDA of Rs2.08 bn (+10% yoy), ahead of estimates, led by (1) reduced sports
losses and (2) robust entertainment business margins. However, the strong performance
also raises questions on long-term strategy; weak ratings (~Rs150 GRPs) in flagship Zee
TV channel should not be underestimated. Zee has multiple drivers (1) favorable Indian
market advertising growth, (2) DTH growth, (3) digitization ordinance, (4) Media Pro
(Zee-Star distribution JV), (5) robust cash position and (6) diversification (25 channels).
Nonetheless, Zee has been quite conservative with its content and expansion strategy.
Retain BUY; upcoming content revamp in Zee TV takes center stage now.

Buy eClerx: Steady and boring ::CLSA

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


Steady and boring
The Sep-11 quarter saw eClerx once again live up to street expectations
delivering revenue growth well above larger peers in the Indian IT
services space. While the management’s focus in mining their non top-5
accounts is a step in the right direction, the consequent increase in costs
brought about a contraction in operating margins despite strong currency
tailwinds. Although macro uncertainties have caused demand volatility in
the sector, eClerx’s small scale and niche presence in core processes
should allow it to deliver steady revenue/earnings growth. Retain BUY.
Topline momentum continues to be robust
eClerx delivered another strong quarter with 9% QQ growth in $-revenues (to
24.3m), well ahead of most peers in the Indian IT-BPO space. We are building
in a 33.5%YY growth in $-revenues for FY12 with eClerx expanding seating
capacity to support such growth. While remaining cognizant of the global
uncertainty, eClerx believes that its focus on core client processes should limit
any impact on volume trajectory. Discontinuation of proprietary trading desks
at eClerx’s clients is concerning but the management remains confident of
getting business from the spun-off units. eClerx’s pricing remains inline with
tier-1 IT peers and they are yet to see any pricing pressure.
Operating margins contract despite currency tailwinds
For sustaining and de-risking its revenue growth eClerx has increased focus
on its “Emerging client” accounts, i.e., clients not in the top-5. eClerx
strengthened its sales force to this end and resultant cost increase impacted
margins for the quarter (down 60bpsQQ), despite benefits from a weaker
currency. Company’s operating margins target remains in mid-30s albeit a
benign currency could result in a spike in 2HFY12. DSOs increased by 9 to 76
days and that marred what was otherwise a good operating performance.
While eClerx indicated that this is a one-off and should be addressed over
next couple of quarters, we would keenly watch this metric. A Rs102m forex
gain helped register a 26% QQ growth in net income to Rs442m.
Steady financials and niche position drives BUY recommendation
eClerx faces risks common to companies of its scale. Clients’ concentration
remains high with top-5 clients contributing 86% of revenues, and minor
delays in payment schedules can impact operational prowess as it happened
this quarter. Additionally, the sector as a whole faces concerns of a volatile
demand environment and reduced visibility of revenues. But this needs to be
viewed in light of the steady financial performance they have delivered.
eClerx’s robust operating margins, 40%+ ROE and high dividend pay-out
justifies its valuation premium to sector peers. Our target price of Rs860
values the company at 13x FY13 earnings. eClerx is our only positive
recommendation in the India IT-BPO space. Reiterate BUY.

Reliance Industries --: Overall in line, refining weaker::Credit Suisse,

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


RIL reported 2Q FY12 EPS of Rs17.4, in line with our estimate,
although GRM of US$10.1/bbl declined 20 cents QoQ. EBITDA
fell 1%, largely due to accounting of the BP deal in end August.
● RIL’s GRM premium to Reuters Singapore complex margins has
now fallen to US$1/bbl. RIL is, however, on track to meet our FY12
GRM estimates. The company’s petrochemical EBITDA increased
10% QoQ, although overall margins were weaker. We think this
may be a reversal of the 1Q disappointment. Asian margins
continue to be volatile though; RIL petchem exports are up sharply.
● RIL suggests volume growth at D6 will be from monetisation of
newer fields. The company is also re-evaluating all exploration
plans with BP, and may miss near-term drilling commitments. This
could potentially form another bone of contention between RIL
and the government, noise on which could hurt.
● We update our model for the impact of the BP transaction, update
CBM/NEC field metrics and near-term KG D6 oil and gas volume
estimates. Our FY12E/13E/14E EPS fall 2/2/6%. We reduce our
target price from Rs1,057 to Rs1,022. Maintain OUTPERFORM.

Economy: September inflation: Crawl down the hill from here? Kotak Sec,

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


Economy
Inflation
September inflation: Crawl down the hill from here? We believe that with the
September outturn of 9.72% (in line with consensus expectation of 9.75% and lower
than our expectation of 9.86%), inflation is likely to have peaked out in August-
September. The climb down for inflation is likely to be at a slow pace given the
depreciated currency and the still elevated levels of global commodity prices; headline WPI
inflation is unlikely to come down to RBI’s comfort levels in the near term. However, given
that some of the lead indicators such as PMI and excise collections are now pointing to a
deeper drop in production, the peaking of inflation could provide RBI with the
opportunity to press the pause button on October 25, but with a continued hawkish bias.

Utilities 2Q FY12 preview: Overall weak results expected with potential negative surprises::Credit Suisse,

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


● We expect Adani Power and JPVL’s recurring PAT to grow 69%
YoY and 196% YoY respectively led by commissioning of new
capacities (2x YoY for Adani Power and 2.4x YoY for JPVL).
However, despite capacity doubling for Reliance Power as well, its
PAT is expected to decline 32% YoY due to lower other income.
● KSK’s profitability is expected to decline 88% YoY due to higher
fuel costs at Wardha Warora project. Lanco is expected to report
loss of Rs391 mn at recurring PAT level due to losses at Griffin,
higher construction revenue elimination and higher interest costs.
● NHPC’s recurring PAT is expected to remain flat YoY. We expect
NTPC’s recurring PAT to decline 2% YoY, however, lower-thanexpected
plant availability (PAF) could trigger a negative surprise.
Tata Power’s recurring PAT is expected to increase 25% YoY.
● Sharp INR depreciation (9.6% QoQ) in 2Q12 is expected to result
in MTM forex loss of Rs2.6 bn for Lanco (leading to reported loss
of Rs3bn) and Rs5.3bn for Tata Power (leading to reported loss of
Rs282 mn). But, Tata Power is evaluating a change in accounting
policy which may mean that it wouldn’t report forex loss in 2Q12.
Adani Power
We expect revenues and recurring PAT to grow 126% YoY and 69%
YoY respectively led by doubling of capacity to 1.98 GW. However,
growth could have been even higher but for: (1) planned maintenance
shutdowns taken at units 3 & 4 (330MW each) of Mundra-I & II project
resulting in lower PLF of 76%, and (2) UP SEB procuring only 0.48GW
out of 0.6GW contracted for one year (w.e.f Jul-11). Further, if Adani
Power does not pay MAT tax imposed on SEZ projects (issue under
litigation), our recurring PAT estimate could see upside of Rs545 mn.
Jaiprakash Power (JPVL)
Recurring PAT is expected to grow 196% YoY due to merger of 1GW
Karcham Wangtoo project in standalone business (w.e.f. 1Q12) and
increase in total capacity to 1.7GW post the commissioning of 0.5GW
of Karcham Wangtoo in Sep-11. Almost all the power from the project
was sold through power exchanges in 2Q12 and we expect its
realization at Rs3.0/kWh in line with merchant tariffs for the period.
KSK
Despite 70% YoY revenue growth led by commissioning of entire
0.54GW Wardha Warora project and sale of 0.3GW from the project
to Reliance Infra at an attractive tariff of Rs5.4/kWh, we expect KSK’s
recurring PAT to decline 88% YoY led by higher fuel costs (Wardha
Warora still buying e-auction coal pending supplies from Coal India),
lower PLF (56%) at Wardha Warora and no material project
development fees expected to be earned during 2Q12.
Lanco
We expect Lanco to report loss of Rs391 mn at a recurring PAT level
led by: (1) EBIT loss of Rs750 mn at Griffin, (2) increase in elimination
of construction revenues (higher share of subsidiary projects being
executed), (3) higher fuel costs at Amarkantak-I & II and, (4) sharp
rise in interest costs. Further, 9.6% QoQ depreciation of INR vs USD
during 2Q12 is expected to result in MTM forex loss of Rs2.6 bn on
unhedged foreign exposure resulting in a reported loss of Rs2.97 bn.
NHPC and NTPC
We expect NHPC’s sales to grow 7% YoY led by 9% YoY rise in tariff
realisation. Recurring PAT is expected to remain flat YoY. For NTPC,
despite 2.6GW capacity addition over the past year, we expect muted
sales growth of 5% YoY due to 3% YoY decline in generation (lower
PLF due to recent coal supply issues). Lower availability (PAF) could
result in negative surprise to our recurring PAT estimate of Rs18.2 bn.
Reliance Power
We expect a strong 179% YoY sales growth led by doubling of
capacity at Rosa-I project to 0.6GW. However, we expect recurring
PAT to fall 32% YoY led by 60% YoY fall in other income as cash
surplus is depleting on it being deployed towards projects under
construction. Rosa-I is expected to earn an RoE of 9.8% in 2Q12 (vs
10.8% in 1Q12) as it operated at 76% PLF in 2Q12 (vs 91% in 1Q12).
Tata Power
Recurring PAT is expected to grow 25% YoY led by a rise in earnings
from Mumbai’s licence area operations, and higher profitability in
Indonesian coal business. Due to the sharp INR depreciation in 2Q12,
Tata Power could report MTM forex loss of Rs5.3 bn resulting in
reported loss of Rs282 mn. However, the company is evaluating a
change in its accounting policy which would imply it would report forex
profit/loss in P&L yearly rather than quarterly.

India Construction - Weak sector outlook owing to macro headwinds:: Credit Suisse,

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


● With successive interest rate hikes over the last 18 months and
slow pace of policy reforms resulting in a slowdown in industrial
and infrastructural capex, we believe existing macro environment
remains extremely challenging for the construction sector.
● Working capital cycle has deteriorated for most construction
players over the last several quarters. Further balance sheet
weakening is visible as, in absence of operating cash flow
generation and lack of equity/PE funding, most players have been
forced to resort to debt funding to meet their equity investment
commitments for Infra BOT projects. Resultantly, high interest
costs are expected to continue to impact sector profitability ahead.
● We cut our FY12 and FY13 EPS estimates by 14-58% and 18-
60%, respectively, for our coverage as we build in muted sales
growth on deteriorating order inflows, lower margins, high working
capital cycle and rising interest costs. We cut our TP by 8-60%
across the sector and with a weak near-medium term outlook, we
downgrade IVRCL, NCC and Gammon India to NEUTRAL.

Idea Cellular - Topline risks cast shadow on tariff upside �� BofA Merrill Lynch,

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


Idea Cellular Ltd.
Topline risks cast shadow on
tariff upside
�� Topline worries but +ve margin outlook; Maintain Neutral
Idea reported disappointing 2Q results as topline grew only 2% QoQ & EBITDA
contracted 2% QoQ. Post results, our EBITDA for FY12E stands trimmed by ~2%
on tad slower subscriber growth & FY13E stays mostly unchanged; EPS cuts are
sharp due to higher interest & depreciation. We maintain our Neutral rating on the
stock due to positive margin outlook for next 2 quarters & likely postponement of
policy risks, counter-balanced by downside risks to topline. PO stays at Rs100/sh
Weak traffic dragged 2Q; topline remains the major worry
In 2Q FY12, Idea’s traffic contracted 2% QoQ for the first time in recent years.
Idea’s top mgt. attributed this to deeper seasonality owing to rising proportion of
rural subscribers & said recent (Oct ’11) traffic trend was encouraging. We have
left topline estimates unchanged for now but worry that risks are on the downside
Roaming pacts impact 2Q margins; we see room for upside
In 2Q FY12, Idea’s EBITDA margin fell ~110bps QoQ despite a reported 4% QoQ
improvement in revenue per minute (rpm). We estimate that the 2Q margin drop
was accentuated by 3G roaming pacts, assuming reciprocal sharing. Adjusting for
roaming & data uptake, we estimate voice rpm improved ~1% QoQ in 2Q. Over
next 2 qtrs impact of on-net tariff hikes should further lift voice rpm & margins
Mgt highlights: roaming abolition - complex; slow 3G uptake
On its post results call, Idea’s top management said that recent policy vision of
“One India, free roaming” will be complex to implement. On 3G, Idea reported
~2.5mn subs but said that only 30% had seriously used the services. To facilitate
3G adoption, Idea is working to launch own-branded android-based smartphones.

Hold Indraprastha Gas; Target :Rs 408 ::ICICI Securities,

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


S t e a d y   p e r f o r m a n c e …
Indraprastha Gas (IGL) declared its Q2FY12 results with revenues of |
597.2 crore, EBITDA of | 157.9 crore and PAT of | 77.2 crore. The
profitability was lower than our estimates mainly on account of higher
than estimated raw material costs.  The depreciation of the rupee and
inability of the company to pass on  higher costs to customers led to
lower-than-expected profits. However, we believe this will be a one-off
phenomenon as IGL has now increased CNG prices to | 32 per kg,
domestic PNG prices to | 22 per scm and commercial prices to | 37.5 per
scm. In Q2FY12, the increased sales volumes in the CNG segment and
natural gas sales volume to industrial and commercial customers
contributed to the 23.4% YoY increase in volumes to 307.7 mmscm (3.3
mmscmd). In Q2FY12, blended sales prices were increased by 7.3% YoY
to | 21.5 per scm, mainly to pass on increased raw material costs. We
expect IGL’s volumes to increase  to 1219 mmscm and 1411 mmscm in
FY12E and FY13E, respectively. We recommend a HOLD rating on the
stock with a price target of | 408.
ƒ YoY increase of 23.4% in gas sales volume
IGL reported a 23.4% increase in gas sales volume from 249.4
mmscm in Q2FY11 to 307.7 mmscm in Q2FY12. The CNG and PNG
gas sales volume increased by 14% and 62.3% YoY to 239.5
mmscm and 68.2 mmscm, respectively in Q2FY12. We expect total
sales volume to increase to 1219 mmscm and 1411 mmscm in
FY12E and FY13E, respectively. We expect 14.9% and 37.5% CAGR
in CNG & PNG sales volume, respectively, over the next two years.
ƒ Realisations improve on account of both CNG and PNG price hikes
Realisations improved YoY on the back of the price increases taken
in both the CNG and PNG segment. CNG and PNG realisations stood
at | 22.6 per scm (| 29.6 per kg) and | 20.4 per scm, respectively, for
Q2FY12. The impact of the price hike in CNG segment to | 32 per kg
would be visible from the current quarter.
V a l u a t i o n
We expect IGL to report steady growth on account of higher capex,
increasing pipeline network and higher conversion to CNG vehicles. We
have valued the stock based on DCF methodology with a price target of |
408 (WACC – 11.7%, terminal growth – 3%).

HDFC: Performance in line; slowdown and competition pose risks ::Kotak Sec,

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


HDFC (HDFC)
Banks/Financial Institutions
Performance in line; slowdown and competition pose risks. HDFC reported 20%
earnings growth (in line with estimates). Its loan growth declined to 19% yoy (from
22% in 1QFY12) on the back of 18% growth in approvals; NIMs (as per our
calculations) improved qoq. We believe that increase in competition and slowdown in
the housing sector pose contingent risks at the current juncture. At 4X PBR FY2013E,
we believe that the risk-return trade-off may not be in favor of investors. We tweak
estimates, retain REDUCE with price target of Rs725.

HDFC: Performance in line; slowdown and competition pose risks ::Kotak Sec,

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


HDFC (HDFC)
Banks/Financial Institutions
Performance in line; slowdown and competition pose risks. HDFC reported 20%
earnings growth (in line with estimates). Its loan growth declined to 19% yoy (from
22% in 1QFY12) on the back of 18% growth in approvals; NIMs (as per our
calculations) improved qoq. We believe that increase in competition and slowdown in
the housing sector pose contingent risks at the current juncture. At 4X PBR FY2013E,
we believe that the risk-return trade-off may not be in favor of investors. We tweak
estimates, retain REDUCE with price target of Rs725.

Hold Gateway Distriparks; Target : Rs 155 ::ICICI Securities,

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


G o o d   p e r f o r m a n c e …
Gateway Distriparks’ (GDL) numbers for Q2FY12 were better than our
estimates, on the back of a sharp increase in realisations in the CFS
business YoY and better than expected improvement in EBITDA margins
(31.3% in Q2FY12, 628 bps YoY). In Q2FY12, the total income from
operations of the GDL group increased by 41.2% YoY and 6.0% QoQ to |
195.3 crore while the net profit increased by 63.4% YoY to | 33.5 crore. In
Q2FY12, the CFS business reported profit at the net level to the tune of |
27.6 crore registering growth of 18.5% YoY. The rail segment showed an
improved performance with PAT of | 5.1 crore in Q2FY12.
Highlights for the quarter
ƒ The higher EBITDA margin is attributable to higher realisations in the
CFS segment, which increased on the back of rationalisation of
tariffs YoY and profitability in the rail/ICD segment
ƒ The total CFS segment throughput was 86,890 TEUs, which was
4.1% higher YoY and 4.4% lower QoQ. Realisations stood at |
9452/TEU
ƒ The rail segment throughput was 43057 TEUs, which was 36.4%
higher YoY and 10% higher QoQ. Realisations stood at | 22291/TEU
V a l u a t i o n
In Q2FY12, GDL reported a healthy performance on the back of higher
realisations in the CFS segment and better then expected EBITDA
margins. Going forward, within the rail segment, the company is further
planning to increase its share in the more profitable Exim segment, which
augurs well for the future. The company remains confident about better
profitability in the rail/ICD segment, going forward. GDL is trading at 11.2x
FY13E EPS. We have a HOLD recommendation on the stock with a price
target of | 155, 12.0x FY13E EPS of | 12.9.

Invest in Gold - through Gold ETF / Gold Fund

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

Greetings from Integrated for a very happy Deepavali.

 

Celebrate Dhanteras (24/10/2011) & Deepavali (26/10/2011) by investing in Gold - through Gold ETF/Gold Fund.

 

Salient features of Gold ETF :

-----------------------------

Investment in Gold without taking physical delivery of Gold - totally avoids risk of theft. Each unit of Gold ETF is approximately equal to 1 gram of Gold. Purchases can be made thru' our NSE terminals, just like purchasing a Share. Units will get credited in your Demat account, again like Shares.

FYI, "IDBI Mutual Fund" has come out with their "Gold ETF NFO" which is open already and closes on 02/11/2011.

 

Select list of existing Gold ETFs.                                                                           

        

Goldman Sachs Gold ETF	HDFC Gold ETF
Kotak Gold ETF	Reliance Gold ETF
Religare Gold ETF	SBI Gold ETS

Salient Features of Gold Funds :

--------------------------------   

Gold Funds are basically Fund of Funds where amount mobilised will be invested in existing Gold ETF. Investors without a Demat/trading account also can invest. Best route to invest in Gold systematically (SIP).

Select list of existing Gold Funds.

  

ICICI Pru Regular Gold Savings Fund	Kotak Gold Fund
Reliance Gold Savings Fund	SBI Gold Fund

 

Safest....Purest.....Cheapest..... Easiest..... Gold ETFs/Gold Funds - Golden opportunity to invest in Gold.

22 Oct: Economy News ::Kotak Sec,

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


Economy News
4 Food inflation for the week rose to 10.6% as compared to9.32% in the
previous year same week (BS).
4 The government will launch its first infrastructure debt fund (IDF), with a
likely corpus of $3 billion, within this fiscal, but will restrict participation to
domestic investors (ET).
4 The much-awaited pact on trade in services and investment between
India and the Association of Southeast Asian Nations (Asean) has made
"some progress towards conclusion" during the last round of
negotiations that took place here last week, even as New Delhi's hope of
getting more market access for its professionals seems futile (ET).
4 There is no plan to revise the annual production target of Coal India Ltd
(CIL) downward even as most of the coal mines of the navratna public
sector coal company have reported negative growth in the first six
months of the current fiscal, pushing thermal power stations across the
country into deep crisis (BS).
4 Mumbai's realty sector has received a much needed boost as the
Maharashtra government has announced a crucial decision to allot 33 per
cent floor space index (FSI) in suburbs for premium. This is expected to
substantially bring down the TDR (transfer of development right) prices,
increase housing stock and reduce their prices (BS).
Corporate News
4 Infosys plans to add 600 employees to its Singapore operations to take
advantage of the shift in investments from the US and Europe to Asia
(ET).
4 SEBI is investigating whether an associate company of DLF duped an
investor by using a maze of intermediary companies while purchasing
land. The Delhi High Court had directed the Securities and Exchange
Board of India (Sebi) to investigate the issue (BS).
4 Biocon's net profit dipped 3.9% to Rs 857 mn for the second quarter of
this fiscal. However, on a like-to-like basis without the contribution of
Axicorp,the firm posted a 5% increase in profit (Bl).
4 The promoter group of automaker Mahindra & Mahindra Ltd has
raised its stake to over 25 per cent (ET).
4 Tata Motors is looking to raise $750 million via overseas borrowing to
meet working capital requirements and reduce debt. The external
commercial borrowing (ECB), with a spread of six years, would be priced
about 350 basis points above the London Interbank Offered Rate (BS)
4 Exide Industries registered a net profit of Rs512 mn for the 2QFY12
compared to Rs 2.1 bn in the year-ago due to lower OEM off take of
automotive battery and lower replacement sales volume (ET).
4 Reliance Media Works, has partnered Hyderabad-based Annapurna
Studios. Under the strategic alliance, Annapurna's studio will also operate
and expand the studio's digital post-production facilities that cater to the
needs of the motion picture and television commercials industry (BS).
4 Nestle said that weakening consumer sentiment in developed markets
would make it harder to improve margins as it raised its sales growth
outlook for 2011 after reducing forecasts for the first nine months (BS).


News Round-up
􀁠 Food inflation shot up to a 25 week high, moving again into double-digit territory &
increasing the likelihood the RBI will raise interest rates yet again at next week's
monetary policy review. Food inflation for the week to Oct. 8 rose to 10.6% from a
year ago compared with 9.32% in the previous week. (ECNT)
􀁠 Shares of housing finance cos. fell in a weak market on concern the regulatory move
to ban these firms from penalising pre-payment of loans would affect their profits.
(ECNT)
􀁠 The Directorate General of Hydrocarbon's move to arm-twist Reliance Ind. (RIL IN)
into spending about USD 612.24mn to drill four new wells at the KG-D6 block faces
scrutiny by the national auditor as the wells turned out to be dry & the govt. will have
to foot the bill. (ECNT)
􀁠 SEBI set to probe alleged disclosure & investor protection rule violation by DLF (DLFU
IN). (ECNT)
􀁠 Hindustan Zinc (HZ IN) has discovered zinc & lead reserves in Ajmer district of
Rajasthan. The co. has found proven reserves of 10-12 million tonne zinc & expects it
can go further after exploration. (TTOI)
􀁠 SBI (SBIN IN) hikes home loan tenure to 30 years. Rising rates prompt extension by 10
more years; others may follow suit. (BSTD)
Source: ECNT= Economic Times, BSTD = Business Standard, FNLE = Financial Express, THBL = Business Line.

TCS: High expectations mar a decent quarter, downgrade to REDUCE on valuations::Kotak Sec,

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


TCS (TCS)
Technology
High expectations mar a decent quarter, downgrade to REDUCE on valuations.
TCS reported a sub-par quarter with revenue growth of 4.7% qoq to US$2.53 bn,
1.3% lower than our estimate. Volume growth was strong though pricing decline
impacted revenue growth. Quarterly volatility in performance is understandable but
does play a role in setting and resetting of expectations. We expect a reset down in
case of TCS. We are comfortable with our growth forecasts but uncomfortable on
valuations, rich at 19X FY2013E earnings. REDUCE from ADD; TP cut marginally (0.5%
to Rs1,150).

UBS :: Power Utilities - Pick up in merchant tariffs

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


UBS Investment Research
India Power Utilities
P ick up in merchant tariffs
􀂄 Event: spot tariffs are at Rs6/unit for October
As per data from the Indian Energy Exchange, spot/merchant tariffs have risen to
Rs6.0/unit for October from Rs3.1/unit in September. Data for the first half of
October show that average spot tariffs have almost doubled compared to average
prices in H1 FY12. The primary reasons for this are lower output from thermal
plants due to coal shortages and the pick up in demand from the agriculture sector.
􀂄 Impact: we believe such high tariffs are not sustainable
We think the increase in prices in the short-term market is driven by temporary
factors and is not sustainable. Due to high State Electricity Board (SEB) losses and
less willingness by SEBs to buy power at very high prices, spot tariffs have fallen
about 60% since FY09. We think the trend is unlikely to reverse so soon (see India
Power Utilities: Not all doom and gloom, published 25 August 2011).
􀂄 Action: Jindal Steel & Power key beneficiary of high spot tariffs
Jindal Steel & Power’s (JSPL) subsidiary, Jindal Power, operates a very profitable
1,000MW captive-coal-based power plant that benefits from high merchant power
prices. Of the companies in our coverage universe, JSPL is most exposed to the
change in merchant tariffs. However, we are negative on JSPL due to execution
risk in capacity additions, as we have already seen significant delays. Please refer
to our initiation of coverage report Jindal Steel & Power: Risks outweigh strong
fundamentals, published 7 October 2011.
􀂄 Our top picks: Power Grid and Lanco
We prefer Power Grid Corporation of India (Power Grid) and Lanco Infratech
(Lanco). We also have Buy ratings on National Thermal Power Corporation of
India (NTPC), Tata Power and Reliance Infrastructure. We upgraded our rating on
Reliance Power from Sell to Buy in August 2011.

Reliance Industries: Take some money off the table ::Kotak Sec,

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


Reliance Industries (RIL)
Energy
Take some money off the table. RIL reported 2QFY12 net income at `57 bn (+0.7%
qoq and +15.8% yoy) versus our estimate of `56 bn. RIL’s EBITDA declined 0.8% qoq
to `98.4 bn in 2QFY12 reflecting (1) lower oil and gas production from KG D-6 block,
(2) lower share in KG D-6 block qoq due to completion of transfer of 30% share in KG
D-6 to BP in August 2011 and (3) lower refining margins; this was partly mitigated by
strong performance of the chemical segment. We revise our rating on RIL stock to ADD
from BUY noting the 14% rise over the past two months which leaves a moderate
upside of 15% to our SOTP-based target price of `1,000.


0.7% qoq increase in net income, 0.8% qoq decrease in EBITDA
RIL reported 2QFY12 net income at `57 bn versus `56.6 bn in 1QFY12; our estimate was `56 bn.
RIL’s 2QFY12 EBITDA declined 0.8% qoq (+4.8% yoy) to `98.4 bn led by (1) lower KG D-6
production, (2) weaker performance of the refining segment and (3) lower share of production
from KG D-6 block given completion of the BP-RIL deal in August 2011. Operational results were
helped by (1) weaker rupee and (2) stronger performance of the chemical segment.
Chemical segment surprises again; refining segment largely in line
2QFY12 chemical segment EBIT increased 9.3% qoq despite the weakness in global chemical
margins, presumably on account of (1) weaker rupee qoq and (2) likely higher sales volumes. RIL‘s
refining segment EBIT declined by 3.9% qoq to `30.8 bn led by lower refining margins at
US$10.1/bbl (-US$0.2/bbl qoq). Crude throughput was 17.1 mn tons (+0.1 mn tons qoq). E&P
segment EBIT increased 3.9% qoq despite lower production from KG-D6 block, led by lower
DD&A charge due to a reduction in gross block by the amount received from BP. KG D-6 gas
production declined to 45.3 mcm/d (-6.8% qoq) and MA-1 oil production declined to 16,087 b/d
(-9.6% qoq).
Reasonable valuations versus lack of positive triggers
We see the investment thesis on RIL stuck between (1) inexpensive valuations and (2) lack of
positive triggers. Valuations are reasonable at 12.3X FY2012E EPS and 12.2X FY2013E EPS. Our
reverse valuation exercise suggests that the market is ascribing low value to RIL’s E&P segment.
We expect improvement in sentiment for the stock from (1) any potential announcement on the
likely roadmap for revival of production from RIL’s KG D-6 block and (2) guidance from the
management on potential use of cash.
Revised rating to ADD versus BUY; revised earnings for FY2012-14E
We have revised our rating on RIL stock to ADD from BUY previously given its strong performance
over the past two months; the stock has risen 14% since August 16, 2011. We have revised our
FY2012E and FY2013E EPS to `70 and `71 from `69 and `71 previously, to reflect (1) 2QFY12
results, (2) higher chemical margins and (3) other minor changes. Key downside risks to our
earnings estimates stem from weaker-than-expected chemical and refining margins.


Valuation—12-month target price at `1,000
Exhibit 12 presents our SOTP-based fair valuation based on FY2013E estimates. We discuss
the valuation for each segment in detail below.
􀁠 Refining segment. We value RIL’s refining segment at `331/share based on 6X FY2013E
EBITDA. We estimate the refining segment EBITDA of `165 bn in FY2013E based on midcycle
refining margins of US$10.4/bbl.
􀁠 Petrochemical segment. We value RIL’s petrochemical segment at `231/share based on
6X FY2013E EBITDA. We estimate petrochemical segment EBITDA of `115 bn in FY2013E
based on modestly lower petchem margins versus FY2012E levels.
􀁠 Upstream segment. We value RIL’s upstream segment at `192/share based on DCF for
the key blocks. We note that KG D-6 block contributes `99/share based on 8.2 tcf of
recoverable reserves (RIL’s share) and other developing blocks (NEC-25, KG D-3, KG D-9
and MN D-4) contribute `50/share based on 14.6 tcf of recoverable reserves (RIL’s share).
We see downside risks to our valuation of developing blocks given the delays in the
exploration activities.
􀁠 Investments, loans and advances and other businesses. We value retail and SEZ
businesses at `23/share based on 0.8X book value. Other investments, loans and
advances and capital WIP contribute `143/share at 1X book value.

Accumulate GATEWAY DISTRIPARKS; target: RS.160:: Kotak Sec,

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


GATEWAY DISTRIPARKS LTD
PRICE: RS.145 RECOMMENDATION: ACCUMULATE
TARGET PRICE: RS.160 FY13E P/E: 11.1
GDL reported its consolidated net profit at Rs 335 mn (+63% YoY, but +1%
QoQ). It was a tad above our expectations of Rs 332 million. Revenues have
grown by ~35% YoY to Rs 1,841 mn. CFS revenues have increased to Rs 794
mn (+14% QoQ and +50% YoY). This is due to volumes increasing 4% YoY
in the CFS business. Revenue per TEU has significantly improved to Rs 9,138
from Rs 6,323 per TEU (YoY). As a result the margins from CFS business have
improved to 50% in the quarter from 46% YoY. This is 3rd consecutive
quarter that the rail business has reported positive PAT. The fill factor has
improved in the rail business from 78% in Q2FY11 to 87% in the current
quarter which has improved the margins of the business from 12% in
Q2FY11 to 17% in the current quarter. Cold chain business continues to be a
small part of the consolidated entity.
Financial highlights are:
n Consolidated revenues grew by 35% YoY and 1% QoQ in Q2FY12 to
Rs.1,841mn.
n Consolidated operating margins has improved by ~800 bps to 35.1% YoY led by
margins improving in the CFS business to 50% from 46% YoY. Margins have
also improved in the rail business to 17% in the current quarter from 12% in
Q2FY11.
n The effective tax rate has increased for the company to 30% in the current quarter
from average of 15% over FY07 to FY11.This was due to the CFS business
attracting full tax from FY12 (benefit under section 80IA until FY11).
n Net profit after minority interest has increased by ~ 63% YoY to Rs 1841 mn in
Q2FY12.
n The company has announced an interim dividend of Rs 3 per share for the financial
year FY12

Buy Tata Consultancy Services (TCS) Target : |Rs 1150 ::ICICI Securities,

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


L o f t y   e x p e c t a t i o n s   p i e r c e   e a r n i n g s …
TCS reported its Q2FY12 numbers, which were ahead of our but
marginally below consensus estimates. Sequential rupee revenue growth
of 7.7% was aided by international revenues (grew 9% QoQ) while India
revenues created a drag (declined 4.3%). QoQ growth by market was
broad based with the US, UK and Continental Europe growing 8.8%,
10.3% and 9.3%, respectively. Price  realisations continue to be a
headwind and impacted Q2 and Q1FY12 revenues by 95 and 50 bps,
respectively. Noticeably, TCS expects seasonal demand pressures in Q3
and Q4 while Infosys expects evenly spread out demand. This disconnect
in the demand outlook for the back half of FY12 makes us cautious and
leads us to maintain our estimates till CY12 IT budget clarity emerges.
ƒ Earning summary
Q2FY12 US$ revenues grew 4.7% QoQ (4.4% estimate) to $2.53
billion while those in rupees grew 7.7% QoQ (6.8% estimate) to |
11,633 crore. Rupee revenue growth was aided by volume growth
(up 6.25%) and currency (up 2.5%) while rate realisations (-0.95%)
and offshore effort shift (-5 bps) created drag. At 27.1%, EBIT
margins were  in  line with our 27.1% estimate while  reported PAT of
| 2,439 crore was marginally above our | 2,408 crore estimate.
ƒ Vertical growth trends
Banking, financial services & insurance (43.5% of revenues) grew
8.6% QoQ vs. 5.8% in Q1 while retail (12.1%) grew 12.2% QoQ vs.
11.3% in Q1. Manufacturing, hi-tech & life sciences continue to
witness robust demand with 10.3%, 9.5%, & 9.1% growth,
respectively. Energy & utilities contribution increased 0.5 percentage
points (pp) QoQ & grew 20% QoQ. Telecom came in the weakest
with 1 pp decline in contribution & 1.7% QoQ decline in revenues.
V a l u a t i o n
We expect US$ revenues to grow by 21%/14% in FY12E/FY13E and
rupee revenue/EPS to grow by 20%/18% and 13%/10%, respectively.
This translates to revenue/earnings CAGR of 19%/18% over FY10-FY13E.
Finally, we have valued TCS at | 1150, i.e. at 20x our FY13E EPS estimate
of | 57.4 and maintain our BUY rating.

Reliance Industries: 2QFY12 results; revise EPS, target, rec ::CLSA

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


2QFY12 results; revise EPS, target, rec
Reliance’s 2QFY12 net profit rose 0.7%QoQ to Rs57bn – 1% below expectation.
Ebitda came 7% ahead as weak refining was offset by better petchem. E&P Ebit
was also higher due to lower DD&A and higher liquids output. Forex losses and
lower other income pulled reported EPS estimates. We have cut FY12/13 EPS by
4/2% primarily to model a $0.2-0.3/bbl cut to GRMs. We also reset our 12m
forward target to Rs950/sh. After recent stock price rally, this implies only a 10%
upside; we revise our reco to O-PF noting also that the stock is again trading at a
premium to global peers with implied E&P value similar to the base BP-deal value.
2QFY12 net up 0.7% QoQ. Reliance’s 2QFY12 net rose 16%YoY/1%QoQ to Rs57bn
(Rs17.4/sh) – 1.3% below estimates. Lower refining was offset by better petchem
while E&P Ebit was also higher than expected on lower depreciation and higher liquids
output. Overall, core Ebit (Rs71.5bn, +9%QoQ) was 9% ahead. However, a large forex
loss (Rs4.4bn) and lower than expected other income pulled reported profit below our
estimates. Reliance also adjusted Rs45bn in translation losses on its forex debt on its
balance sheet driving up reported debt and fixed assets by this amount.
GRMs fall QoQ. Refining Ebit declined 4% QoQ – 10% below expectation led by a
US$0.2/bbl QoQ decline in GRMs (US$10.1/bbl) – US$0.4/bbl below estimates. As in
the last few quarters, Reliance’s realised margins continue to lag the strength in Singcomplex
margins (+US$0.5/bbl QoQ); for the quarter management attributed this to
primarily to softer light-heavy spreads, lower gasoil spread and use of higher cost LNG.
Strong petchem. Petchem Ebit rose 9%QoQ (16% above estimate), though, on
higher margins in polymers and chemicals offset by lower chain margins in polyesters.
A rebound in domestic demand (+21%QoQ in both polymers and polyesters) would
have helped while implied opex was also sharply lower (down 16%QoQ).
Mixed outcomes in E&P. Reliance adjusted the BP-deal from end Aug-11 leading to a
Rs32.2bn cut to E&P gross block; lower DD&A drove E&P Ebit up 4%QoQ even as KGD6
gas volumes declined 4mmscmd QoQ. Our interaction during the analyst meet
indicates that drilling and completions of additional wells may take 2-3 years implying
that a quick rebound in output is unlikely. Monetisation of other discoveries in KG-D6,
NEC-25 etc are also continent on government approvals and are unlikely before 2015.
Reliance also underscored that it has frozen exploration activity pending the outcome
of comprehensive review with BP. Progress in shale-gas is encouraging though, with
the Pioneer JV now producing at 6mmscmd of gas and ~25kbpd of condensate.
We lower EPS by 2-4%. We make several changes to our model, including an
US$0.2-0.3/bbl cut to GRMs, leading to a 4/2% cut to FY12/13 EPS. Lower earnings
and an alignment of NEC-25 resources to recent media comments (1.2tcf) leads to a
5% cut to our Mar-12 fair value to Rs915/sh; we set our 12-month target at Rs950/sh.
Revising rec to O-PF. After the recent rally, this implies just a 10% upside; we are
revising our reco to O-PF. We also highlight that the stock now implies an E&P value
similar to the base-value of the BP transaction (US$7.2bn for 30%) and is again
started trading at a 1-39% premium to peers on earnings based valuation multiples.

ITC •TOP Muhurat 2011 PICK ::ICICI Securities,

Please Share::  India Equity Research Reports, IPO and Stock News

Visit http://indiaer.blogspot.com/ for complete details �� ��

ITC
• With a leading position in its various businesses, we expect ITC
to sustain its gross revenue growth at 12.6% (CAGR from FY11-
14E), driven by healthy growth in FMCG (18.6%), agri business
(16.3%) and paperboards (13.7%) with a moderate growth in
cigarette (10.1%) and hotel (8.8%) revenues
• ITC is the market leader in the Indian cigarettes industry and
enjoys ~75% volume share (FY11). Its cigarette revenues
(gross) have grown by ~1.5x, from | 12833.7 crore in FY07 to |
19827.6 crore in FY11, largely driven by price growth of 11.3%
with volume growth remaining flat. Being a dominant player,
passing on the impact of higher taxes through price increases
has not been tough for ITC. Therefore, we expect revenues from
cigarettes to continue growing at a CAGR of 10.1% (FY11-14E)
driven by 5.3% price growth and a lower volume growth of
4.5%
• Comparing with global peers like British American tobacco
(BAT), Philip Morris and Japan Tobacco, ITC should trade at a
premium given the opportunity size of the Indian market and
expected higher earning growth. Simultaneously, a substantial
reduction in FMCG losses and visibility of break-even would
result in the FMCG segment commanding a higher valuation
than the historic average. We remain positive on the stock from
a 9 to 12 months perspective

find detail report and other stock pick detail at

Muhurat 2011: Selective stock picking in turbulent times…::ICICI Securities,

HPCL • •TOP Muhurat 2011 PICK ::ICICI Securities,

Please Share::  India Equity Research Reports, IPO and Stock News

Visit http://indiaer.blogspot.com/ for complete details �� ��

HPCL
• Hindustan Petroleum Corporation (HPCL), a Fortune 500
company, is engaged in refining and marketing of petroleum
products in India. It operates two refineries with 16.3 mmtpa
capacity in FY11 and has ~18% share in marketing of petroleum
products. HPCL, in a joint venture with Mittal Energy, is setting
up a 9 mmtpa refinery at Bhatinda, which would be operational
in FY12E
• We believe capacity expansion, increase in retail sales volume
and higher refining margins would create value for investors,
going forward. Also, government policy and reforms in the
pricing of sensitive petroleum products could reduce net underrecoveries of the company. We have assumed Brent crude oil
prices of US$100 per barrel and  net under-recoveries of 8.8%
for OMCs in FY13E
• HPCL is trading at 7.5x FY12E and 6.3x FY13E EPS of | 46.1 and
| 55.2. HPCL’s book value of  | 439 in FY13E also offers good
risk reward ratio to long-term investors. Sustained higher crude
oil prices and adverse government policy remain risks to our
recommendation

find detail report and other stock pick detail at

Muhurat 2011: Selective stock picking in turbulent times…::ICICI Securities,

HDFC Bank •TOP Muhurat 2011 PICK ::ICICI Securities,

Please Share::  India Equity Research Reports, IPO and Stock News

Visit http://indiaer.blogspot.com/ for complete details �� ��

HDFC Bank
• We expect healthy business growth of 20% CAGR over FY11-13E
with a well diversified loan book (~50:50 between retail and
wholesale) and strong liability franchise (CASA ratio of ~48%)
• Margins will be protected at over 4% (one of the best across
industry). Healthy asset quality will lead to lower credit costs
• The bank commands a premium multiple of 3.8x FY13E ABV
because of consistent track record of 30% YoY growth in PAT,
higher margins and healthy asset quality. We expect PAT
growth of 30% CAGR over FY11-13E and RoA of ~1.9% and
RoE of 21% by FY13E

find detail report and other stock pick detail at

Muhurat 2011: Selective stock picking in turbulent times…::ICICI Securities,

HDFC Bank •TOP Muhurat 2011 PICK ::ICICI Securities,

Please Share::  India Equity Research Reports, IPO and Stock News

Visit http://indiaer.blogspot.com/ for complete details �� ��

HDFC Bank
• We expect healthy business growth of 20% CAGR over FY11-13E
with a well diversified loan book (~50:50 between retail and
wholesale) and strong liability franchise (CASA ratio of ~48%)
• Margins will be protected at over 4% (one of the best across
industry). Healthy asset quality will lead to lower credit costs
• The bank commands a premium multiple of 3.8x FY13E ABV
because of consistent track record of 30% YoY growth in PAT,
higher margins and healthy asset quality. We expect PAT
growth of 30% CAGR over FY11-13E and RoA of ~1.9% and
RoE of 21% by FY13E

find detail report and other stock pick detail at

Muhurat 2011: Selective stock picking in turbulent times…::ICICI Securities,

Biocon • •TOP Muhurat 2011 PICK ::ICICI Securities,

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

Biocon
• The out-licensing deal with Pfizer to launch four human insulin
products in emerging and advanced markets post patent expiry
augurs well for Biocon. It has started supplying Fidaxomicin (antiinfective) API to US based Optimer’s patented product Dificid for
which the company is a sole supplier. The recent launch of
reusable pen in the domestic market is a promising move for the
company. Divestment in Axicorp is expected to boost EBITDA
margins
• The R&D services business is witnessing a consistent
improvement both in terms of revenues and profitability over the
last three quarters. The key trigger will be the unlocking of R&D
business through IPO.
• We expect sales and profits (after adjusting Axicorp numbers in
FY11) to grow by 22% and 20%, respectively, between FY11 and
FY13E. Biocon is currently trading at ~18x FY12E EPS of | 19.3
and ~15x FY13E EPS of | 24




find detail report and other stock pick detail at

Muhurat 2011: Selective stock picking in turbulent times…::ICICI Securities,

Bharti Airtel •TOP Muhurat 2011 PICK ::ICICI Securities,

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


Bharti Airtel
• The industry scenario has improved over the past few quarters
with the ongoing CBI enquiry into the 2G scam. The recent price
hike by incumbents signifies reducing competitive intensity and
returning pricing power. Airtel is expected to post an
improvement in ARPMs in the coming quarters on the back of the
recent price hike and traction in 3G services. With the withdrawal
of unsustainable customer acquisition offers from the market and
reducing dual SIM phenomena, margins in the domestic market
are expected to improve, going ahead
• Africa operations have shown  continual improvement in key
metrics. EBITDA margins have expanded by 276 bps in the past
three quarters. With outsourcing agreement in place, the benefit
in terms of further margin expansion is expected to kick in from
FY13 onwards
• DoT expects NTP 2011 to come into effect by December 31, 2011.
Most of the negatives related to one-time spectrum fees seem to
be already priced in. Spectrum trading, pooling and sharing
would help larger players like Bharti Airtel. At the CMP of | 385,
the stock is trading at 16.1x FY13EPS against its long-term
average of 19.3x. Also, with most of the capex already incurred,
return ratios would also improve, going ahead

find detail report and other stock pick detail at

Muhurat 2011: Selective stock picking in turbulent times…::ICICI Securities,

Muhurat 2011: Selective stock picking in turbulent times…::ICICI Securities,

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

Diwali Muharat Picks (click company name report for details)

Bharti Airtel 

Biocon

HDFC Bank

HPCL

ITC

CLICK links to below for MORE reports on: 

Diwali Muharat, 

 ICICI Securities

The global economy is once again passing through turbulent weather in
terms of the growth trajectory. Soft economic data points coming out of
western economies (weak PMI readings breaching the critical level of 50
globally, discouraging consumer confidence retesting the 2008 lows and
stressed housing sector)  coupled with the perplexing sovereign debt
crisis in the peripheral Euro zone has once again raised the odds of a
double dip recession in the troubled western economies. Hence, the
downgrade of US debt (July 2011) by the rating agencies was merely a
catalyst for the ruthless sell off that risky asset prices have witnessed post
the downgrade, further adding to the odds of a double dip. The impact
MSCI Developed Markets were down by 15% from July-September 2011
coupled with huge volatility.
Coming to emerging markets, especially India, the main concern leading
to the sell-off was the realignment of growth expectations as the EM
central bankers have been tightening to avoid a hard landing. India
remains no exception as the RBI has been ahead of the curve and raised
rates by 350 bps on 12 counts to tame spiralling price levels. Also, stalled
policy reforms from New Delhi have added fuel to the fire as we are
entering a moderation period wherein we expect growth rates to cool off
from 8.5% levels to 7-7.5% over the next couple of quarters. This, we
believe, is clearly reflected in the asset prices (stock markets) over the
previous months.
In the beginning of the year, in our strategy report we had put our
Bull/Base/Bear Case targets for the Sensex at 25451/23165/16924,
respectively, for December 2011. Though our bear case target has
materialised given global and  local macro headwinds, we are
downgrading our Bull/Base/Bear Case targets further for March 2012 to
20190/18844/16310 levels, respectively.  We estimate a base case
valuation of 18844 for the Sensex (14x FY13 EPS of | 1346). In case of
negative surprises wherein valuation multiples contract and future
earnings are ignored, we expect the Sensex to trade at 16310 (14x FY12
EPS of | 1165).

The main revision in our BSE Sensex  target stems from the fact that we
have revised down our earnings for FY12E and FY13E by 6% and 5%,
respectively, and lowered our target multiple for the base case from 17x
to 14x .
We expect more of a time based correction and expect the markets to
oscillate in a broad trading range till the time reasonable clarity emerges
from the various local and global macro headwinds. In case of a negative
outlier event, the markets may fall further in the wake of panic selling.
However, we do not expect the markets to sustain at such levels. In such
an environment, timing the markets would become extremely difficult.
We believe any sharp cuts should be  bought into from a three to five
years perspective. Buying is recommended in large caps and selective
quality midcaps.

On the flip side, the BSE Sensex can face further downside given there
appears some Black Swan in the global backdrop (bank failure in the Euro
area, default contagion in the peripheral Euro zone and policy failure,
probable oil shock or some unforeseen domestic political issues) that can
lead to debasement of  P/E multiples as in 1992  (Harshad Mehta Scam),
1999-2000 (Ketan Parekh scam) and  the most recent 2008 US crisis
wherein the multiples contracted to as low as 10-11x.