Dish TV India- Festival shopping - what's the best deal? :Macquarie Research,

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Dish TV India
Festival shopping - what's the best
deal?
Event
􀂃 We visited a couple of retail outlets across Mumbai to get an idea of the
‘festive offerings’ from the different DTH operators. Since operators are
maintaining rational competition, the consumer in us was disappointed by the
lack of tempting offers. Amongst the six DTH operators, Dish and Airtel were
the most aggressive. We continue to like Dish and believe the festive season
will help the company meet its gross addition target of 3–3.5m subs in FY12.
Impact
􀂃 Dish and Airtel lower their STB price by Rs250 for the festive season.
The standard set top box price at Dish TV and Airtel Digital TV is Rs1,290 (vs.
~Rs1,550 earlier). This is the most aggressive offer we have seen across the
six DTH operators. (Detailed offers are tabulated on page 2).
􀂃 Free subscription offers limited to a maximum of two months. The DTH
operators have expanded their free content subscription to a maximum of two
months – the standard free content package is only for one month. This is a
significant difference from the peak competitive intensity seen during 2009-10
when operators were undercutting their ARPU by extending the free
subscription period.
􀂃 Season push in HD offerings evident in our checks. Of our estimated 14m
colour HD TV sets to be sold in FY12E, we expect 6m to be flat panel TVs.
During our shopping trip, we found sales representatives to be aggressive in
offering HD DTH connections bundled with high end TV sets.
􀂃 Festive season – a key contributor to annual sales. Festive quarter sales
historically make up ~30% of the DTH operators’ full year gross additions and
are crucial in setting the tone for their full year subs acquisition. We see some
downside risk to our current 0.8m subs addition forecast for 2Q but would wait
until after the festive quarter before re-assessing our full year target of 3.5m
subs addition.
􀂃 Dish TV 2Q expectations. We expect Dish TV to report 2Q revenue of
Rs4.9bn, with margins of 28% and net loss of Rs30m. Our subs addition
forecast of 0.80m has some downside risks that are already well known to the
market, and we expect a modest 1% QoQ improvement in ARPU to Rs151.
Earnings and target price revision
􀂃 No change.
Price catalyst
􀂃 12-month price target: Rs95.00 based on a DCF methodology.
􀂃 Catalyst: Festive season turnout.
Action and recommendation
􀂃 Reiterate OP.

Macquarie Agri-view - Post Oct WASDE report::Macquarie Research,

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Macquarie Agri-view
Post Oct WASDE report
Feature article
 We highlight in this report our reaction to today’s USDA WASDE report.
Given the trend of recent USDA reports, the big shock was there were no real
shocks. The USDA changed very little in the balance sheets, leaving corn
yields unchanged and lowering harvest area in line with expectations. The
market will remain hung over though on the revelation of Chinese buying
which lead to a significant swing higher in prices yesterday. In sum from a
fundamental perspective the report was neutral for corn, bearish for wheat
and bullish for soybeans.
Latest news
 Corn: The USDA left US corn yields unchanged at 148.1bpa and dropped
harvested area by 500K acres roughly in line with our expectations of 400K
acres. This WASDE report has been clearly over shadowed by the revelation
of Chinese corn buying. From a demand perspective the USDA shifted import
demand lower to 1,600m bu; this does seem unrealistic now given the
announcement of additional exports to China yesterday. Another highlight
from the report is the significant shift higher in Ukraine corn production to
21mt, on the basis of this increase in production the USDA have revised their
export estimate higher to 12mt. The only other changes of interest have been
for the China balance sheet. The USDA increased their production
significantly for the 09/10, 10/11 and 11/12 season, but counteracted these
alterations with increases in consumption. Interestingly the USDA maintained
their estimate of Chinese corn imports at 2mt, our current projection remains
at 5mt.
 Wheat: The outlook for wheat in the near term from this report is certainly
bearish as both US and global stocks have seen revisions higher. This has in
part been implied by lower feed demand, but a significant proportion has
come from playing with historical stock piles of grains, with beginning stocks
increasing by 2.26mt. The shift in feeding demand has mainly come from the
USDA lowering US wheat feeding to 160m/bu from 240m/bu. We had
expected the USDA to be more conservative than this; we maintain our view
that realised wheat feeding will actually be far higher. From a global
perspective we also maintain our view that wheat feeding will be significantly
higher than the USDA’s current forecast as wheat feed remains at a
significant discount to other feed grains into all the major import destinations.
 Soybean: For soybeans the shift lower in both yields and harvest area is
fundamentally bullish, but we maintain the view that the large stockpiles of
soybeans in South America limit the relevance of this change. The USDA
dropped the national yield nominally to 41.5bpa and also reduced planted
area by 100K acres. This change in conjunction with the shift lower in stocks
seen in the NASS report on Sep 30th has inspired the USDA to lower their
export projection for the US by 40m/bu. We believe this further shift lower in
US seaborne supplies of soybeans is easily accommodated into the global
balance sheet as the large stock piles in South American along with the
projection of another bumper harvest will allow them to respond to this
change.

INDIA POLICY – To hike or not to hike? :CLSA

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The RBI’s midyear policy is scheduled for 25
October, and it is poised to hike rates for the
thirteenth time. RBI has so far raised policy rates
effectively by 500bp since early 2010. However, at
9.7% YoY in September, WPI inflation remains
stubbornly high, although one relative positive is that
it is not worsening. Overall, the policy outcome is
less certain this time, and the possibility of RBI
holding fire cannot be totally ruled out. The
deterioration in the global backdrop, the palpable
deceleration in India’s growth momentum and its
implications for FY13 growth, expectations of
inflation rolling over from December onwards, and
the slowdown in incremental loan growth could stay
RBI’s hand.

UltraTech Cement :2QFY12 results :CLSA

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2QFY12 results
A low base helped UltraTech’s net earnings which rose 140% YoY to Rs2.8bn
which was still lower than our estimates. While realisations came in-line, lower
than expected volumes and higher costs led to earnings disappointment. Despite
this, we raise our FY12 EPS estimates by ~7% thanks to recent price hikes which
have been well ahead of cost inflation, driven by producer discipline. We remain
concerned on sector fundamentals due to surplus capacity scenario and note that
prices (and margins) would continue to be highly volatile in coming quarters. U-PF.
2Q results lower than our estimates due to lower volumes, higher costs
UltraTech’s 2Q Ebitda rose 43% YoY to Rs5.8bn which was 20% lower than our
estimates. While cement realisations (Rs180/bag; -8% QoQ) were broadly in-line,
overall volumes (9.4mt; +2% YoY) were below estimates; unit costs rose 12% QoQ,
much ahead of our estimates leading to earnings disappointment. Ebitda/t at Rs615
was down 48% QoQ (+40% YoY). Lower interest and higher other income nonetheless
helped net earnings which rose 140% YoY to Rs2.8bn.
Channel checks indicate that current realisations should be >5% higher
Our recent channel checks indicate that cement prices across regions have moved up
by 2-10% in the last few weeks driven by seasonality as well as producer discipline.
Dealers expect prices to trend up in the coming weeks, particularly in north and central
region. We estimate UltraTech’s current realisations to be already higher by 5% from
2Q levels and revise up 2HFY12 realisations to Rs197/bag (+10% from 2Q).
… driving earnings upgrade by 2-7%
Higher realisations have driven a 7% upgrade to our earning estimates for FY12CL as
we expect Ebitda/t in 2H to average at Rs850/t (40% higher than 2Q levels). We
however marginally raise estimates for FY13-14CL by 2-3% as we expect cement
prices to remain volatile in the medium-term with a negative bias due to continued
excess capacity surpluses.
Weak industry utilisation, volatility in cement pricing remain our key concerns
Despite better than expected cement pricing, we are negative on our sector outlook as
well as on UltraTech for two reasons: a) sharp cost pressures have necessitated these
hikes which is evident from the fact that despite our assumption of all time high
realisation, UltraTech’s Ebitda/t is 12-15% lower than historical peak; b) hikes are
driven by producer discipline and are not underpinned by industry fundamentals –
cement prices (and margins) would remain highly volatile therefore.
Maintain U-PF; revised target: Rs1,000/sh (-11% downside)
We retain our U-PF rating on the stock as we find valuations (9x EV/Ebitda; US$130/t)
expensive in the context of industry fundamentals; revised target price Rs1,000/sh.

Construction-- 2QFY12 results preview: High interest costs and working capital cycle to impact profitability::Credit Suisse,

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● We expect construction sector companies under our coverage to
report weak 2QFY12 results. Aggregate sector profitability (ex-
JPA) is expected to decline 56% YoY due to sharp increase in
interest costs because of increased leverage and rising interest
rates. We expect EBITDA margin to be in the range of 8.1-10.1%.
● Order inflows are expected to be muted for most players with
overall expected order book growth of 6% YoY. Movement in
working capital cycle, which has deteriorated for most players
over the last few quarters, and order inflow guidance for rest of
FY12 would be key factors to watch.
● IVRCL is expected to report recurring PAT of just Rs16 mn due to
50% YoY increase in interest costs. Profitability for Simplex, NCC
and Gammon India is expected to be down 43/ 56/ 33% YoY.
● We expect 26% YoY growth in JPA’s cement revenues to be
offset by 24% YoY decline in construction revenues, leading to
muted overall sales growth of 2% YoY. EBITDA margin is
expected to remain flat at 22.9% and recurring PAT is expected to
decline 27% YoY to Rs828 mn.

India IT: Back to business?::CLSA

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Back to business?
Tier-1 Indian Techs’ modest revenue report in the seasonally strongest
Sep quarter confirmed that business trends have been less than sanguine,
even as stocks have recovered 10-23% from their recent lows. With Dec
a seasonally weak quarter, revenue growth hopes have now been pushed
out to 2012 where macro challenges could de-rail the high expectations.
Our revised currency forecasts (Rs49 for 2HFY12, Rs48 for FY13) demand
a 2-6% EPS upgrade for the Tier-1 stocks, but we view these earnings
revisions, as late realignments versus the rally seen in tech stocks over
the last month. We continue to advise caution on Indian IT stocks.
Currency tailwinds have run their course
q CLSA’s view on a weaker Rupee has driven a change in currency assumptions
across all models. Versus Rs45/$ earlier, we now build-in Rs49/$ for 2HFY12 and
Rs48/$ for FY13.
q FY12 EPS upgrade: 2-6%; somewhat pulled down by forex hedge losses at TCS.
q FY13 EPS upgrade: 3-6%; as FY13 more fully benefits from currency.
q Meanwhile, stocks have rallied by 10% (HCL) to 23% (Infosys) over the last month.
In our view, the on-going currency resets across the street are lagging the stock
moves and are not an incremental trigger.
Back to business. Is demand really good?
q Sep-11 quarter revenue performance of Tier-1 vendors has provided little comfort
on the demand trajectory. Just a 5%QQ growth in constant currency terms in the
seasonally strongest quarter is hardly a sign of strong demand environment.
q Note that just 3 months back, Sep-11 revenue growth estimates were ~6-8%QQ
for Tier-1 techs and the companies have missed even moderated expectations.
q While vendors have been talking about strong deal pipelines, client commitments
on new deals need to translate into signings, and then into actual ramp-ups. There
continues to be some friction in both areas, given the macro environment.
q Increased competitive intensity in the sector, higher commoditisation of offerings
and greater pricing transparency in IT contracts is also keeping pricing subdued.
q Most vendors have been non-committal on 2012 outlook just yet. In this context,
expectations of solid revenue growth in FY13 are seemingly running ahead of reality
and we see downside risks to street revenue estimates.
Is the “base effect” finally catching up for Tier-1s?
q Tier-1 techs have successfully evaded repeated predictions of the “base-effect”, or
the expectation that their growth would slow down as they became bigger. Also,
Tier-1s have almost always grown revenues much faster than Tier-2 IT vendors.
q Sep-11 quarterly results reported thus far have however shown a unique
divergence in the growth prospects of Tier-1 and Tier-2 IT Services companies.
q Smaller vendors like Mindtree and Hexaware have reported stronger topline growth
even as Tier-1 peers’ performance has been modest. While performance in a couple
of quarters cannot be extrapolated, we would keep a close watch on trends here.
Stocks seem fully valued; take some money off the table
q Business environment will need to improve beyond current levels for street growth
projections to be met, in our view.
q We expect a pause in the stocks as they head for another re-test of demand in the
Dec-Jan timeframe. We expect no quick answers as deal decision making is still
patchy and deal wins need to seen in context of suddenly elevated consensus
assumptions, especially after Infosys’ 2HFY12 outlook.
q While a weaker currency can somewhat buffer the EPS risks ahead, valuation
multiples remain slaves of $-revenue growth and recognition of lower revenue
growth trajectory will impair valuations prospects as well.
q We currently have no positive recommendation in the Indian IT Services space.

The 'Grand Deal' in Europe: Rewards and risks:: Credit Suisse,

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● A possible ‘Grand Deal’ on the problems facing the Euro-area has
to sort out three issues: The ring-fencing of the rest of Europe, the
recapitalisation of banks and the solvency of Greece.
● In a perfect world, it would also address the most critical issue
(growth). The first three look likely to be resolved over the next
weeks, but we struggle to see the Euro-area returning to growth
quickly (even if there are announcements related to EIB
infrastructure spending).
● Bottom line we think a re-leveraged EFSF of €1.5–2 tn is required,
and that would be enough if growth returns (and thus the leverage
calculations get no worse) and fiscal commitments are maintained.
We examine what can go right, the problems and the uncertainties.
Figure 1: Possible uses of the EFSF guarantee (€ bn)
Total guarantees 779
IR, GR and PT contribution 53
Guarantees excluding IR, GR and PT 726
Funds committed to IR and PT programmes (€48.5 bn)* 86
Guarantees after IR & PT programmes 640
Bank recapitalisations (€100 bn)* 177
Guarantees after bank recapitalisations 463
Guarantees required to cover the €1.4 tn funding requirements of ES, IT,
GR, PT, IR by end-2013 (assuming a leverage factor of 4.5x)
308
Remaining funds 155
* Funds that will have to be paid out in cash will have to be raised in the markets and will
be subject to cash buffers and overguarantees. We assume the ratio between guarantees
and usable funds is 1.77x; Source: Thomson Reuters, Credit Suisse research
What is going right?
● European politicians seem to be realising the gravity of the situation.
● The Allianz plan of turning the EFSF into a sovereign bond insurer
looks promising. This plan gets around: (1) most of the legal
difficulties to do with Lisbon Treaty 123 forbidding the ECB to
monetise debt; (2) the German constitutional court’s objection to
inter-sovereign transfers and (3) the immediate threat of a
downgrade to France due to higher contingent liabilities. The plan
is likely to give the EFSF effective firepower of around €1.5 tn–2 tn
(given 25% guarantees of Spain/Italy and 40% for the rest). This
would make the arithmetic work, just.
● Direct sovereign money is likely to be used rather than the EFSF
to recapitalise banks in core Europe (but that still leaves around
€80 bn for peripheral European bank recapitalisations that needs
to come from the EFSF or private sources).
● The ECB still seems to be hinting that even after the unveiling of
the new plan, it could buy peripheral European debt.
● Any move towards federalisation means that the Euro-area can be
viewed more like a single entity—and the aggregate Euro-area
government debt to GDP ratio is below that in the US, while the
fiscal deficit is better and the current account is in balance.
What are the key uncertainties about the likely new
package?
● Can the banks be recapitalised by borrowing from governments
using the guarantees backed from the ‘re-leveraged EFSF’? This
looks likely, and would be good news.
● Can governments use funds borrowed from the ‘re-leveraged
EFSF’ to buy back debt at market prices (around €300 bn of
buying would reduce government debt to GDP to sustainable
levels in Portugal, Ireland and Greece)? In passing, our
economics team believe that post PSI and debt buyback (in
accordance with the 21 July agreement), Greece can avoid a
default for some time, provided it sticks to the fiscal targets and
privatisation targets, which in our opinion, is unlikely.
● If the banks are not nationalised, they could end up tightening
lending conditions (as they reduce RWA to push up capital ratios)
and try to reduce their loan-to-deposit ratio from an aggregate of
135%, which would put downward pressure on growth.
● Implementation of fiscal targets must be part of the plan—but it is
very unclear what the safeguard or enforcement mechanisms will
be or whether these mechanisms ultimately involve a treaty
change, which in turn would require a mix of parliamentary
approval, constitutional reforms (Germany) or referenda (Ireland).
● The old debt would trade on a discount to the new debt (as it
appears that the Allianz proposal will guarantee only new debt).
The stock of outstanding debt in peripheral Europe is €3.4 tn
(versus €1.4 bn of financing requirements up to the end of 2013).
The critical issue for the debt service ratio is the bond yield on
new debt (not old debt), but if the old debt were to fall in value,
banks would have to mark to market, in our view.
What are the problems?
● Growth has to be the most critical variable to fiscal sustainability.
There seems to be little in what we know of the plans to stimulate
growth, apart from maybe front loading of EIB spending. Further,
the outlook on the growth front is bleak: European PMIs are
already consistent with zero GDP growth at best, 2012 fiscal
tightening in Europe is estimated by the IMF to be 1.2% of GDP
and banks are tightening lending conditions again. Last, we
estimate a c.5-15% decline in wages is required in the periphery
to get real effective exchange rates back to fair value or to
generate a current account surplus. Yet wages have yet to fall in
Italy and Spain—these two economies account for 28% of Euroarea
GDP.
● BTP spreads are moving up again (Berlusconi surviving his 51st
vote of no confidence) and OAT spreads are at a new high.
● Banks’ aggregate CDS spread are staying at extreme levels and
Italian bank borrowings from the ECB have risen to €105 bn from
€30 bn in May.
● The EUR rally (up around 5% since the beginning of October; we
continue to believe a weak EUR is critical to stimulate European
growth; each 10% off the EUR TWI boost growth by 0.7 pp, on
IMF projections).
● Oil price at US$100/bbl for North Sea Brent (we estimate each 10%
rise in oil prices takes 0.2 pp off continental European GDP growth).

Utilities Sector- Recent spike in merchant power tariffs unlikely to sustain::Credit Suisse,

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● Merchant power prices have recently spiked to more than
Rs5/kWh over the past two weeks and to more than Rs7/kWh
over the past four days, led by pent up demand for merchant
power from states facing lower generation due to the recent
extraordinary coal shortage.
● Coal production has been impacted from SCCL mines due to
ongoing Telangana protests and from Coal India’s mines due to
strike by workers demanding higher bonus payments. The eastern
region is facing coal supply issues due to excessive rains. As a
result, substantial power cuts have been witnessed across states.
● We believe merchant tariffs are unlikely to sustain at Rs7–8/kWh
levels beyond 2–3 weeks as the government is taking immediate
steps to restore coal supply. Further, the ability of states such as
AP and Tamil Nadu to continue purchasing such expensive power
is limited given their already weak financial health.
● However, we believe merchant prices could remain high at
Rs5/kWh levels till Apr-May 2012 due to continued buying from
UP, which has significantly increased power purchase recently
ahead of its Apr 2012 elections. Further, Delhi and Mumbai too
could continue to purchase power at high rates.

Mindtree: Excellent quarter::Kotak Sec,

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Mindtree (MTCL)
Technology
Excellent quarter. 2QFY12 performance was impressive on several parameters: broadbased
revenue growth of 9.5% qoq, EBITDA margin expansion of 180 bps qoq despite
limited benefit from Rupee depreciation and net income of Rs543 mn (our expectation
of Rs382 mn). Performance is all the more creditable as it comes on the back of a
strong 1QFY12. We attribute the turnaround at MindTree to focus on basics and
completion of ramp-down from drag accounts in R&D. Growth in our view will be
backed by margin expansion. Upgrade our 2013E EPS estimates by 22% and TP to
Rs460 (Rs375 earlier). ADD.

BUY MindTree; Target Price `462: Angel Broking,

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MindTree reported a strong performance for 2QFY2012, with numbers ahead of
street as well as our expectations on all fronts. The company reported volume
growth of 6.1% qoq along with a 3.5% qoq increase in price realization.
MindTree has been one of the good performers on the revenue growth front in
the Indian IT mid-cap space, growing by a CQGR of 5.6% over the last six
quarters. We expect MindTree to continue its growth momentum at a 17.9%
CAGR in USD revenue over FY2011-13E. We recommend Buy on the stock.
Quarterly highlights: For 2QFY2012, MindTree reported USD revenue of
US$101.3mn, up 9.5% qoq. In INR terms, revenue came in at `456.7cr, up
10.6% qoq. The company’s EBITDA margin increased by 174bp qoq to 12.9%;
factors affecting EBITDA margin were 1) 440bp qoq positive gain on account of
operational efficiency, 2) 40bp gain due to INR depreciation and 3) 320bp
negative impact due to wage hikes given to 24% of the employee base. PAT came
in at `54cr, aided by higher other income.
Outlook and valuation: MindTree has its IT services business (~64% of revenue)
coming in from growth verticals such as BFSI, manufacturing and travel and
transportation (T&T). Management is confident that its IT services business would
continue its growth momentum and has planned to hire 4,000 people (~2,000
freshers) overall. We expect the company to record a 17.9% and 18.4% CAGR in
USD and INR revenue, respectively, over FY2011–13E. MindTree has adequate
amount of margin levers such as 1) improving utilization level on the back of
volumes expected, 2) employee pyramid rationalization, 3) business growth even
with a marginal increase in SGA on an absolute basis and 4) effort shift towards
offshore to improve margin profile from 11.8% in FY2011 to 13.7% in FY2012E
and 14.4% in FY2013E. We expect the company to record a 30.8% and 34.8%
CAGR in EBITDA and PAT over FY2011-13E, respectively. We value the stock at
10x FY2013 EPS i.e., with a target price of `462, and recommend Buy.

Tata Consultancy Services (TCS) Performance highlights: Angel Broking,

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For 2QFY2012, TCS reported modest set of numbers, lower than street’s
expectations on the revenue front; however, the company outperformed on the
operating front. The major highlight of the result was the 6.25% qoq volume
growth and addition of two new clients in the US$100mn plus revenue bracket.
Management has highlighted robust growth outlook for FY2012, with the deal
pipeline being strong. TCS continues to remain our preferred pick along with HCL
Tech in the IT pack. We recommend Accumulate on the stock.
Quarterly highlights: For 2QFY2012, TCS posted revenue of US$2,525mn, up
4.7% qoq, majorly led by volume growth. In INR terms, revenue stood at
`11,633cr, up 7.7% qoq. EBITDA and EBIT margin increased by 100bp and 94bp
qoq to 29.1% and 27.1%, respectively, aided by INR depreciation against USD,
which absorbed the negative impact due to promotions given during the quarter.
PAT came in at `2,439cr, up merely 2.5% qoq, as the company incurred forex
loss of `91cr during 2QFY2012, resulting in lower other income.
Outlook and valuation: Management maintained its hiring guidance at 60,000
gross employee additions in FY2012, with lateral fresher ratio of 38:62.
The company bagged 10 large deals in 2QFY2012. In addition, the company is
currently chasing 10 large deals. Even with aggressive hiring plans, management
targets to maintain utilization levels excluding trainees at 82-84% in FY2012.
Thus, over FY2011-13E, we expect TCS’s revenue to post a 21% CAGR (USD
terms), surpassing even the US$10bn revenue mark in FY2012 itself, after
achieving the US$8bn milestone in FY2011. On account of tailwinds such as
1) strong growth even on the back of 29% growth in FY2011, 2) headroom to
scale up utilization levels and 3) SGA expense optimization as a strong lever, we
expect TCS to absorb the impact of wage hikes gradually. We expect the EBIT
margin’s downside to be limited to 135bp yoy and settle at 26.7% by FY2013.
We value TCS at 20x (10% premium to Infosys) FY2013E EPS of `61.0 with a
target price of `1,220 and recommend Accumulate on the stock.

Hold Hero MotoCorp ; Target :Rs 1919 ::ICICI Securities,

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A   “ h e r o ”   i n   p r o f i t ,   f o r  v a l u a t i o n s   o t h e r w i s e …
Hero MotoCorp Ltd (HMCL) reported Q2FY12 numbers, which were
above our estimates with net sales at | 5784.3 crore (I-direct estimate: |
5586.7 crore), a 28.2% YoY and 2.6% QoQ jump. The growth was volume
led (~20.1% YoY, 1.0% QoQ increase)  at 1.54 million units with festive
demand leading the momentum. Realisations on a per unit basis jumped
1.8% QoQ at | 40,131 as ~1% price hike was incurred at the end of
Q1FY12. EBITDA margins reported were higher at 15.9% (up ~140 bps
QoQ) as the twin impact of lower RM/unit (1.4% QoQ) and favourable
realisations helped cumulatively. PAT came in stronger than estimates at
| 603.6 crore (up ~20% YoY) due to a strong operational performance.
Highlights of the quarter
HMCL has witnessed another robust quarter with volume growth at 20%
YoY (1.54 million units), 22% YTD (3.1 million units) and continues to
maintain motorcycle market share of ~56% in the domestic market. The
management remains confident of clocking sales of ~6.4 million units for
FY12 and HMCL is on course to touch 7.0 million unit capacity by March
2012. It had undertaken a price hike at the end of Q1FY12 of ~| 500-700
whose complete impact has become visible in Q2. HMCL has decided to
set up a fourth plant of ~0.75 million capacity, work for which could be
started by Q4FY12E. The royalty outgo has been higher at | 205 crore due
to the forex impact of | 27 crore due to ~10% rupee depreciation. One of
the concerns towards re-branding costs has been ~| 60crore, which has
been passed through and ~| 40 crore is expected to be spent in Q3 also.
V a l u a t i o n
We have been cautious on cost pressures emanating from re-branding
and R&D related expenses (quantum of which still remains a black box).
However, strong “Bharat” led rural demand is making other concerns fade
away a little. At the CMP of | 2067, it is trading at 15.6x FY13E EPS. We
are jittery and respectful of the “growth premium” being assigned by the
market in an uncertain global macro to HMCL. We have valued it at 14.5x
FY13E EPS to arrive at a target price of | 1919 with a HOLD rating

Oberoi Realty: Continues to remain resilient in an adverse environment::Kotak Sec,

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Oberoi Realty (OBER)
Property
Continues to remain resilient in an adverse environment. Oberoi reported 31%
yoy and 38% qoq growth in revenues aided by higher-than-expected recognition while
sales remained reasonably steady at 0.2 mn sq. ft (-10% qoq) with Esquire contributing
68% to area sold. We cut FY2012E/FY2013E revenues and earnings by 15.6%/1.2%
and 14%/2% led by slower commercial sales and sales skew to Esquire and retain our
BUY recommendation with a revised target price of Rs310/share at par with our March
2013E NAV

Buy Dish TV; Target :Rs 86 ::ICICI Securities,

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T o p l i n e   i n   l i n e ;   f o r e x los s e s   hit   p r ofi t s …
Dish TV reported its Q2FY12 results, which were in line with our
expectations on the topline and EBITDA front. The topline stood at |
482.3 crore against our expectation of | 487.1 crore, growing 47.9% YoY
owing to higher number of subscribers and better ARPU. However, the
subscriber addition has been at 0.6 million subscribers this quarter,
disappointingly lower than expected. The subscriber base and ARPU
grew by 41.3% and 9.4% YoY, respectively. EBITDA for the quarter stood
at | 121.8 crore against our estimate of | 121.0 crore. EBITDA margin for
the quarter was 25.3%, 999 bps and 87 bps more than that of Q2FY11 and
Q1FY12, respectively, owing to the fixed nature of input costs. However,
on the PAT front, the company reported less than expected numbers on
account of forex losses of | 30.4 crore on foreign debt. The company
reported a loss of | 48.6 crore against | 45.2 crore in Q2FY11.
Highlights of the quarter
The subscriber addition for the quarter has slowed down to 0.6 million
from 0.7 million in Q1FY12 owing to the set top box price hike taken in
July and due to the macro environment causing consumers to cut down
on their discretionary spending.  The ARPU increased from | 150 in
Q1FY12 to | 152 in Q2FY12. The subscriber acquisition cost increased
from | 2058 to | 2232 in Q2FY12 owing to | 15 crore of commission given
on 1.2 million set top boxes that were shipped but not completely
activated on account of building dealer inventory for the festive season in
October.
V a l u a t i o n
Aided by the festive season and mandatory digitisation, we expect
subscriber addition to pick up in the subsequent quarters. We expect Dish
TV to add 2.7 million and 3.1 million subscribers with an ARPU of | 154
and | 167 in FY12 and FY13, respectively. Assuming revenue CAGR of
19.4% over FY11E–FY20E and terminal growth of 4.5%, thereon, we have
arrived at a target price of | 86/share. The stock is currently trading at |
78. We are maintaining our BUY rating on the stock.

ACCUMULATE South Indian Bank; Target Price `24 :Angel Broking,

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For 2QFY2012, South Indian Bank (SIB) reported healthy net profit growth of
24.4% yoy (15.1% qoq) to `95cr, better than our (`83cr) and street estimates
(`88cr). NIM expansion coupled with lower slippages was the key highlight of the
results. We maintain our Accumulate recommendation on the stock.
Healthy NIM expansion with improving asset quality: During 2QFY2012, the
bank’s business growth moderated in-line with overall industry trends; however,
it remained comfortably ahead of the industry. Advances grew by 3.9% qoq
vis-à-vis marginal 0.2% growth for the industry (up to September 23, 2011).
Deposits showed traction, rising by 4.5% qoq as compared to 0.8% growth for the
industry. CASA deposits grew by relatively lower 3.5% qoq, leading to a marginal
20bp qoq compression in CASA ratio to 21.3% (down from 23.9% in
2QFY2011). With the pass-through of higher interest rates and a larger share of
higher-yielding gold loans, the bank was able to improve its yield on advances
further by 36bp qoq and 150bp yoy to 12.1% (for 1HFY2012). With wholesale
funding costs remaining largely stable, the bank’s cost of deposits went up only
marginally (6bp qoq), leading to a healthy ~50bp qoq expansion in calculated
NIM for 2QFY2012. Asset quality was also largely stable during 2QFY2012, with
absolute gross and net NPAs declining by 2.5% and 8.2% qoq, respectively, and
provision coverage ratio excluding technical write-offs improving to 74.7%.
Slippages surprised positively, coming in at just 0.5% (annualized) vis-à-vis 0.8%
in 1QFY2012 in spite of deterioration in the economic growth outlook.
Outlook and valuation: SIB plans to raise ~`1,000cr in FY2012, which will
enable it to maintain its strong growth, especially in its gold loan business.
Currently, the stock is trading at moderate valuations of 1.1x FY13E ABV. In light
of capital raising and strong expansion plans, we value the bank at 1.2x FY2013E
ABV and maintain our Accumulate view on the stock with a target price of `24.

BUY DB Corp; Target Price `274 ::Angel Broking,

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DB Corp. (DBCL) reported modest performance on the revenue front and weak
performance on the earnings front. The company’s top-line growth was driven by
a mix of ad revenue growth and circulation revenue growth. On account of new
launches in Maharashtra and Jharkhand, earnings for the quarter declined.
We maintain our Buy recommendation on the stock.
Key highlights for the quarter: For 2QFY2012, the company’s top line grew by
17.6% yoy (flat qoq) at `354cr. Consolidated ad revenue for the quarter grew by
15.9% yoy to `274cr. The company’s circulation revenue grew by impressive 13%
yoy and 5.8% qoq on account of new edition launches in Maharashtra and
Jharkhand. DBCL reported a weak set of numbers on the earnings front primarily
on account pre-operative expenses of `9.9cr and operating losses on the three
editions launched in the above-mentioned states. The company reported a 37.1%
yoy and 34.1% qoq decline in its recurring earnings. Recurring PAT for the quarter
stood at `40cr. Operating margin during 2QFY2012 fell steeply by 981bp yoy
and 657bp qoq on account of new edition losses as well as forex losses.
Outlook and valuation: We have revised our earnings estimate downwards
considering the higher-than-anticipated increase in newsprint price due to
increased circulation, forex fluctuations impact and higher number of loss-making
editions. At the CMP, DBCL is trading at 14.9x FY2013E consolidated EPS of
`15.5. We maintain our Buy view on the stock with a revised target price of `278,
based on 18x FY2013E earnings, which is in-line with its historical trading
average since its listing. Downside risks to our estimates include 1) any further rise
in newsprint prices, 2) competition becoming fierce and 3) higher-than-expected
losses/increase in the breakeven period of the new launches.

Infosys Technologies- No bad news is good news! :Macquarie Research,

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Infosys Technologies
No bad news is good news!
Event
 Infosys stock up 7% post in-line 2Q. The company lowered its USD
revenue guidance by 100bps and significantly raised its INR EPS guidance
due to revised FX assumptions. We recognise that our FY13 USD revenue
growth estimate of 12% is conservative. Even so, we think it’s better to wait
and watch for initial trends on CY12 budgets before raising estimates.
Detailed financial and operational metrics for 2Q are provided in Figure 3.
Impact
 Conference Call Takeaways. The key points from the results discussion call
were: 1) No change in underlying volume volume/pricing assumptions to
arrive at the guidance; 2) No budget cuts/client ramp downs seen so far; 3)
Deal pipeline strong with 12 large deals and 27 transformation deals
underway; 4) New client additions (45) hit six-quarter high; 5) FY12 margin dip
to be in a range of 50-100bps; 6) Comfort utilization band planned at 78%-
81%, though actual could differ due to business realities.
 Is Infosys cutting pricing to win volume? Management categorically
denied media talk of “aggressive pricing” in new RFPs (Request for
Proposals) to gain volume share. The company maintains that it continues to
win business without compromising on its margin discipline.
 Growth evenly spread out across quarters in FY12. Historically, the 1H of
the fiscal year has seen the strongest volume momentum. Infosys believes
that this year it would be different and 2H growth would be similar to 1H.
Consistent spend through the year gives the clients more control over budget
spend in the current macro environment. (See Fig 1)
 Decision making delays remain a source of concern. Though Infosys is
yet to see any client budget cuts, management mentioned that they are
seeing delays in decision making on long term projects. End customers are
assessing the changing macro before committing to fresh spend.
 FY12 and 3Q guidance details. The company’s USD revenue growth
guidance for FY12 is now 17%-19% (vs 18%-20% earlier). The revised US$-
INR assumption of Rs49 is the prime reason for its raised FY12 EPS
guidance to Rs143-145 (vs Rs128-130 earlier). The company guided to 3-5%
US$ revenue growth in 3Q.
Earnings and target price revision
 Updating for 2QFY12 results. No change in TP.
Price catalyst
 12-month price target: Rs2,860.00 based on a DCF methodology.
 Catalyst: CY12 Client budget finalization and large deal wins
Action and recommendation
 OP maintained. With the sharp movement in Infosys’ stock price we
recommend HCL as a way to play the steady demand trend visible in results
today. TCS should maintain its volume growth momentum and is our top large
cap pick in the sector in India.

23 Oct: News headlines: Corporate 􀂉 CLSA

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News headlines: Corporate
􀂉 Tata Motors is looking to raise US$750m through an overseas
borrowing to meet working capital needs and to cut existing debt.
(BS)
􀂉 Power Grid Corp. and Aditya Birla group are reportedly looking
to independently acquire stakes in Portuguese power utilities.
(Mint)
􀂉 Punjab National Bank has completed formalities to acquire 30%
stake in Metlife. (BS)
News headlines: Economic and political
􀂉 Mobile phone subscriber base grew by 0.86% mom in August with
the addition of 7.3m new connections. (BS)


􀂉 The government expects to resolve the telecom industry’s
immediate issues related to policy, regulator and infrastructure in
next six months. (BS)
􀂉 Communication and IT minister Kapil Sibal has said that the
National Telecom Policy, 2011 will be sent for cabinet approval this
year. (BS)
􀂉 India’s food inflation rose to 10.6% for the week ending October 8
on the back of costlier vegetables, fruits, milk and protein-based
items. (ET)
􀂉 The Agriculture ministry has proposed a hike of Rs115 per quintal
in the minimum support price for wheat to Rs1,285 per quintal.
(Mint)
News headlines: Corporate
􀂉 State Bank of India has said that it requires to raise Rs400bn of
core capital in the next five years of which Rs78bn need to be
raised in this fiscal to shore up its Tier-I ratio to 8%. (ET)
􀂉 The promoter group of M&M has raised its stake to over 25%.
(BS)
􀂉 Cairn India reported 2QFY12 net profit of Rs7.6bn, -51% YoY.
(BS)
􀂉 IDBI Bank reported 2QFY12 net profit of Rs5.2bn, +20% YoY.
(BS)
􀂉 The government has ruled out the disinvestment of Air India and
has said that it is trying to bring the company to ‘no-profit, no-loss’
status. (BS)
􀂉 Bajaj Auto reported 2QFY12 net profit of Rs7.3bn, +6% YoY. (BS)
􀂉 Ultratech Cement reported 2QFY12 net profit of Rs2.8bn, +140%
YoY. (BS)
􀂉 Hexaware Technologies reported 2QFY12 net profit of Rs650m,
+54% YoY. (BS)
􀂉 Exide Industries reported 2QFY12 net profit of Rs511m, -76%
YoY. (BS)
􀂉 Bharti Enterprises and Japan's Softbank Corp have formed an
equal joint venture to focus on mobile Internet. (BS)
􀂉 Yes Bank reported 2QFY12 net profit of Rs2.3bn, +33% YoY. (BS)
􀂉 Biocon reported 2QFY12 net profit of Rs857m, -4% YoY. (BS)
􀂉 Infosys is planning to add 600 employees to its Singapore
operations to take advantage of the shift in investments from the
United States and Europe to Asia. (BS)
􀂉 State Bank of Travancore reported 2QFY12 of Rs1.2bn, -28%
YoY. (BS)
􀂉 State Bank of India has decided to allow stretching the loan
repayment tenure to maximum of 30 years. (BS)

Buy Praj Industries; Target :Rs 96 ::ICICI Securities,

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S t e l l a r   p e r f o r m a n c e …
Praj Industries put up a stellar performance in Q2FY12 with net sales
increasing by 111.6% YoY from | 108.2 crore in Q2FY11 to | 228.9 crore
in Q2FY12. Though raw material costs were higher during the quarter,
64% of net sales compared to 58.8% in Q2FY11, a considerable
rationalisation in employee cost, from 17.3% in Q2FY11 to 10.7% in
Q2FY12, helped the company to improve its margins. Margins for the
quarter stood at 8.4% against 7.9% in Q2FY11. Consequent to the higher
sales and margins, Praj’s earnings jumped by 130.7% during the quarter
to | 20.5 crore from | 8.9 crore in the corresponding quarter last year.
ƒ Highlights of the quarter
Praj received orders worth | 270 crore (~52% international orders, ~48%
domestic orders) during Q2FY12 with the total order book at the end of
the quarter at | 900 crore ((~55% international, ~45% domestic).
The company inaugurated its two new facilities at Kandla and Jejuri (near
Pune) during the quarter. The Kandla plant manufactures high thickness
pressure vessels and static equipment while the Jejuri plant produces a
range of bio-tech products used in  the production of ethanol, beer and
sugar. The company has also formed a wholly owned subsidiary, Praj
South Africa PTY Ltd. and Praj Tanzania in Africa to execute its operations
in Africa.
V a l u a t i o n
At the CMP, the stock is trading at 21.8x and 15x its FY12E and FY13E
EPS of | 3.5 and | 5.1, respectively. With the increasing order inflows
especially from international operations and improvement in orders from
the non-ethanol business, we expect the revenues of the company to
grow at a higher rate. Further, margins are also expected to sustain at
current levels led by the higher international orders composition. We
have valued the stock at 14x its FY13E EPS of | 5.1 and added the cash
value of | 25/share to arrive at the target price of | 96.

Buy South Indian Bank; Target : Rs 26 ::ICICI Securities,

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S t e l l a r   p r o f i t   g r o w t h   b ac k  e d   b y   s t r o n  g   N I I  …
South Indian Bank’s (SIB) Q2FY12 results reflect strong business growth
of 31% YoY (advances growth primarily driven by gold loan portfolio) and
NIM bouncing back sequentially to 3% leading to 26% QoQ growth in NII.
Even though other income remained flat QoQ at | 53 crore due to dismal
fee income and opex and provisions were higher QoQ, SIB recorded its
highest ever profit of | 95 crore (our estimate: | 83 crore). Asset quality
continues to be stable with GNPA ratio at 0.99% and NNPA ratio at
0.25%. The bank aims to reach a business size of | 1 lakh crore by FY14E
growing at 25% in FY12E and FY1Y13E and ~27% in FY14E. We expect
22% CAGR in business to boost PAT by 21% over FY11-13E.
ƒ Deposit growth healthy, gold loan key driver for loan growth...
Deposits grew 32% YoY to | 33,038 crore with CASA ratio at 21.3%.
SIB expects to maintain its CASA ratio at 21.5-22% and total low
cost deposits including CASA at 30% in FY12E. The bank is focusing
on higher flows in its NRI deposits given the depreciation in the
rupee. Advances grew 29.9% YoY (3.9% QoQ) to | 23,017 crore
with rapid expansion of its gold portfolio (up ~83% YoY to | 6100
crore). SIB’s gold loans have tenure of 12 months and high yields of
~12.5%, which enables frequent repricing boosting NIM. Moreover,
the bank has sanctions worth |  3000 crore that is yet to be
disbursed. We expect deposits and advances to grow at a CAGR of
22% and 23% over FY11-12E, respectively.
ƒ NIM improves 17 bps QoQ to 3%, NII rises 26% QoQ…
Margins moved back to 3% after two quarters as YoA rose 119 bps
QoQ to 12.94% while CoD was up only 15 bps QoQ to 7.75%.
Consequently, NII grew 31% YoY (26% QoQ) to | 258 crore against
our estimate of | 217 crore. Even though the bank has raised its YoA
while keeping deposit rates unchanged, we expect NIM to moderate
to 2.8-2.9% by the end of FY12E on account of sustained higher
costs.
V a l u a t i o n
SIB’s performance has been steady with strong business growth, healthy
margins and controlled asset quality. We expect SIB to deliver RoA of 1%,
RoE of 14% (post factoring dilution of | 945 crore). The bank plans to
raise capital when market conditions are conducive. Thus, we have
maintained our target price of | 26 (1.2x FY13E ABV).

UBS : Zee Entertainment- Maintain long-term positive view

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UBS Investment Research
Zee Entertainment Enterprises Ltd
Maintain long-term positive view
[ EXTRACT]
􀂄 Zee TV’s ratings remain under pressure
Zee’s flagship channel (Zee TV) has shown a decline in its viewership (GRP) and ranking
over the past eight weeks (from No. 3 to No. 4). This could negatively impact its
advertising revenue in the near term. While Zee TV has recently started a new reality
show (Star Ya Rockstar), we believe it needs to invest in additional programming to
regain its No. 3 position. We expect the GRP gap between Sony (currently No. 3) and Zee
TV to narrow once the former’s show Kaun Banega Crorepati (KBC) ends.
􀂄 We lower our FY12/13 ad revenue forecasts
Based on our discussion with media participants, advertising revenue seems to have
picked up for Zee in October, ahead of Diwali. However, we believe advertising could
come under pressure after November given Zee TV’s No. 4 ranking. We conservatively
lower our FY12 advertising revenue growth forecast from 5% to 0% and for FY13 from
15% to 12%.
􀂄 Weak Q2 results could provide an attractive buying opportunity
We expect Q2 results to be weak, which could provide an attractive buying
opportunity. We maintain a positive view as Zee should benefit from mandatory
digitisation. We think the distribution JV with Star could be positive for Zee and should
contribute to subscription revenue growth starting in FY13. Zee has a healthy balance
sheet with Rs14bn in cash (at end-Q1) and we estimate a strong FY12 FCF yield of 4%.
We believe there is limited share price downside as Zee will buy back Rs7bn in shares
at under Rs126/share (12m shares bought so far).
􀂄 Valuation: maintain Buy, lower price target from Rs160.00 to Rs145.00
We derive our price target from a DCF-based methodology and explicitly forecast longterm
valuation drivers using UBS’s VCAM tool, assuming a 12.3% WACC.

􀁑 Zee Entertainment Enterprises Ltd
Zee Entertainment Enterprises (Zee) is a cable and satellite channel operator
with Hindi language and regional language programming. The relaunch of Star
as a Hindi language network in July 2000 raised competitive pressure in the
domestic broadcasting business. Zee is building up pay revenue as a second
driver of its earnings growth, as advertising revenue is faltering because of weak
advertising spend by companies and Zee's low audience share. Zee was the first
to launch a direct-to-home service in India.
􀁑 Statement of Risk
We believe Zee faces multiple risks in its content and broadcasting business in
terms of the success or failure of its programming. It also faces intense
competition from other networks, which could impact its viewership ratings and
advertising revenue.

GOLD ETF: The smart way to invest in Gold

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!!! WE LOVE GOLD…ALMOST EVERY INDIAN HOME HAS A LITTLE OF IT !!!
For centuries Gold has remained an auspicious gift & is something that gets passed down generations.
Indian Consumers have always had a fascination with gold and are the largest buyers of gold, accounting for 9.5 percent of the world’s total gold holdings.  More impressive is the fact that current demand from India alone consumes 25% of the world’s annual gold output. It is a symbol of power and wealth & also reflects security & prosperity.
Gold has a stabilizing effect during period of High Inflation and currency fluctuations. Portfolios with Gold are regarded as safe and are more immune to market fluctuations
THE SMART WAY TO INVEST IN GOLD – GOLD EXCHANGE TRADED FUNDS (ETFS)
One can invest in Gold through various forms i.e. buying gold coins, gold bars & jewellery… But the smartest way to invest in Gold is through Gold Exchange Traded Funds
WHY INVEST IN GOLD ETFS - EASY TO BUY, EASY TO SELL

• Attractive Pricing with no premium, making or delivery charges
• Easy to Buy & Sell & can be traded electronically on the exchange as any other security
• Gold ETF are more liquid and can be easily sold whenever required
• Greater safety as held in Demat form with no risk of theft & quality
• Customize buys according to your available needs and requirements
• No Securities Transaction Tax (STT) or Wealth Tax
• Save on locker charges as your gold investment is stored in Demat form.

CHOOSE YOUR GOLD ETFS
Investing in Gold ETF’s is similar to investing in securities. Each Gold ETF unit is equal to 1 gram of gold which provide you with an opportunity to invest as per your investment requirement. 
Gold ETF’s listed on the Exchange are as under -     

• Benchmark Exchange Traded Fund (Gold BeES)
• UTI Gold Exchange Traded Fund
• Kotak Gold ETF
• Reliance Gold Exchange Traded Fund
• Quantum Gold Fund (an ETF)
• SBI Gold Exchange Traded Scheme
• Religare Gold Exchange Traded Funds
• HDFC Gold Exchange Traded Funds
• ICICI Prudential Gold Exchange Traded Funds
• AXIS Gold ETF
• Birla Sun Life Gold ETF

UBS:: Hathway Cable - Digitisation gets cabinet approval

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UBS Investment Research
Hathway Cable & Datacom
Digitisation gets cabinet approval
[ EXTRACT]
􀂄 Government has passed an ordinance to mandate digitisation
Based on our meetings with various media industry participants, we believe the
government was working on an ordinance to approve mandatory cable digitisation in
India. This received cabinet approval today. As per the timelines finalised by the
Ministry of Information Broadcasting (MIB), the whole of India is likely to switch to
digital signals by December 2014 in four phases.
􀂄 We assume mandatory digitisation in our estimates from FY13 onwards
We forecast revenue will grow 12% and EBITDA 34% in FY13, led by Phase I of the
digitisation process. Hathway Cable & Datacom (Hathway) reaches 8.7m subscriber
homes, but it only gets paid for 1.8m. We assume: 1) 82% of the 8.7m homes will form
part of the Phase I and II implementation; 2) around 60% of the undeclared homes
would remain with Hathway after digitisation, with approximately 40% churning to
DTH; and 3) placement revenue will decline 70% to Rs1.35bn by FY16.
􀂄 Hathway benefits from cable digitisation
We believe the recent government approval is a key catalyst for Hathway’s share price.
We think Hathway remains a long-term growth story and benefits from cable
digitisation in India. We estimate a worst-case value of Rs100/share based on
conservative assumptions, while our best-case estimate is Rs200/share. However,
execution remains key for a share price re-rating, in our view.
􀂄 Valuation: maintain Buy; Rs130.00 price target
We value Hathway at 9x FY13E EV/EBITDA. While we maintain our Buy rating on
the company, we prefer Dish TV due to its better execution and earnings visibility.


􀁑 Hathway Cable & Datacom
Hathway Cable & Datacom (Hathway) began operations in 1998. It is one of
India's leading cable multi-system operators with a pan-India presence. It
distributes cable TV on digital and analogue platforms, and provides broadband
services. Its cable services reaches 8.2m homes. It has a backend network of 71
analogue and 19 digital head-ends, and 15,000km of hybrid fibre-coaxial
network. The Rajan Raheja group holds a 50.6% stake in the company.
􀁑 Statement of Risk
We believe the key risk for Hathway is poor execution. Other risks include
intense competition from DTH as well as regulatory risks. Placement costs could
decline to zero if there is complete digitisation.

Idea Cellular Ltd. F2Q12 Results in Line; Fine- tuning Estimates ::Morgan Stanley Research,

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Idea Cellular Ltd.
F2Q12 Results in Line; Fine-
tuning Estimates
What's Changed
 F2012E / 2013E EPS   -14.7% / +0.7%
We reiterate our Overweight rating on Idea after the
company reported F2Q12 results in line with our
estimates. We have lowered our F2012 EPS by 15%
to factor in FX losses, but retain our PT of Rs119.
Key Positives
¾ APRM increased by 4.1% QoQ from 41.0p to 42.7p,
largely due to higher VAS contribution, roaming
revenue and revision in promotional tariffs.
¾ VAS revenue increased from 12% in F1Q12 to
13.2% in F2Q12. The 3G data revenue is included
in VAS revenue, which has mainly contributed to
this increase.  
¾ Roaming revenue increased during the quarter.  
¾ Idea added close to 5k BTS in this quarter, including
2.8k 3G BTS, implying rapid 3G network expansion
Key Negatives
¾ Overall traffic on the network declined by 2% QoQ
to 106.2bn minutes. MOU per sub fell from 391 to
364, i.e., 6.9% QoQ.
¾ EBITDA losses from new circles widened by 27%
QoQ to Rs1.77bn.  
We continue to highlight Idea Cellular as our top
pick in Indian Telcos, as we believe that the stock offers
the highest leverage to the wireless business in India.
Idea has increased its revenue market share by 4ppt
and has the highest active subscriber base ratio.

Maruti Suzuki - another agreement with striking workers, Neutral ::Goldman Sachs,

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Maruti Suzuki India (MRTI.BO) Rs1,092.30
   Equity Research
Maruti Suzuki - another agreement with striking workers, Neutral
News
On Friday Maruti Suzuki management announced a fresh tripartite
agreement between the Company management; Haryana Government and
the striking workers at Manesar. The company also said that normal
operations will resume at the Manesar plant on October 22.
Analysis
We make the following observations: (1) The announcement makes no
mention of the worker’s demands of forming a new Union but does
mention the setting up of a Labor Welfare Committee and Grievance
Redressal Committee comprising members of Maruti Suzuki management
and workers. (2) Management has agreed to take back 64 suspended
employees, while 30 can be suspended for disciplinary reasons under the
revised agreement.
Implications
As highlighted in our September 16, 2011 note, Labor concerns with
weaker demand and competition; stay Neutral, we believe recent labor
issues mark a new low in industrial relations at the company. Given the
volatile employee situation at Maruti Suzuki’s Manesar operations over last
few months, we believe that the risk of further labor disruptions cannot be
completely ruled out in the near term. We would look for more stable
production at the Manesar facility and at the vendor Suzuki Power Train
India facility over the next few months, before turning more positive on the
company’s production outlook in FY12E. Our earnings estimates, rating
and target price are unchanged. Key risks – higher/lower than expected
competitive pressure on pricing, inflation-rate cycle and commodity costs.
INVESTMENT LIST MEMBERSHIP
Neutral
 
 
Coverage View:  Neutral

UBS :: TV18 Broadcast:: Strong execution—Colors back to No. 2

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UBS Investment Research
TV18 Broadcast
Strong execution—Colors back to No. 2
[ EXTRACT]
􀂄 Competition remains high; its Colors channel is back to #2
Competition among the Hindi GECs remains high. However, Sony dropped to No. 3 on
the week ended 8 October (it was No. 2 for the prior seven weeks). Colors regained its
No. 2 position with its new show Big Boss 5 (started airing on 2 October), in line with
our expectations. Apart from Big Boss 5, Colors has shifted three of its prime-time
shows to afternoon time slots and moved a weekend show to a weekday prime-time slot.
􀂄 Hindi movie channel launch deferred
TV18 has deferred its Hindi movie channel launch to FY13, and announced the launch
of a comedy channel and another for young audiences in the next three months. It
launched a history channel on 9 October in six languages with Bollywood celebrity
Salman Khan as a brand ambassador. We maintain our earnings estimates as we expect
TV18’s margins to decline from the new launches and a weak advertising outlook for
FY12. We estimate a 4% advertising revenue increase in FY12 for TV18’s existing
entertainment channels (including Colors).
􀂄 TV18 benefits from subscription growth
Subscription revenue contributes 12% to TV18's revenue, which is below industry
average (20%). We expect this to increase to 20% by FY15 as most TV18 channels are
among the top three in their respective genres. We estimate subscription revenue will
post a 39% FY11-15 CAGR driven by: 1) a rapidly-expanding digital subscriber base
led by voluntary digitisation (the recently-approved mandatory digitisation should
benefit it further); and 2) distribution partnership with Sun TV.
􀂄 Valuation: maintain Buy; Rs60.00 price target
We value TV18 at 12x FY13E EBITDA, a 20% discount to its historical trading
average.


Takeaways from our meeting with Raghav Bahl
The following are takeaways from our meeting.
􀁑 TV18 is facing weakness in its advertising outlook at the Hindi GEC level
(Colors), while its news channels remain relatively strong. Management
forecasts its entertainment channels’ advertising revenue growth at less than
10% in FY12 (its previous guidance was 15%).
􀁑 Subscription revenue growth is on track and management expects it to grow
to 14% of revenue in FY12 (Rs1.9-2bn). Management also estimates
subscription revenue will increase from 12% of revenue in FY11 to around
30% over the next five years.
􀁑 Net debt should not increase beyond Rs8bn (Rs6.7bn in Q1 FY12) as
Viacom18 (its joint venture with Viacom) would need more debt for its
channel launches. The launch of its Hindi movie channel has been deferred.
􀁑 Its existing TV channels could report an EBITDA margin expansion in FY12.
However, losses from potential channel launches should impact its margins.
􀁑 In the next five years, TV18 plans to evaluate its channel launches in the
following genres: Hindi movie channel (expected launch in FY13), a few HD
channels, and its regional channels (including business and general news
channels).


􀁑 TV18 Broadcast
IBN18 was incorporated in June 2005 as Global Broadcast News and started
commercial operations in December 2005. IBN18 operates news channels CNN
IBN and IBN7. It is a subsidiary of Network18 Group, a media conglomerate in
India. IBN18 has a 50:50 JV with Viacom named Viacom18, which operates
Colors, MTV, VH1 and Nickelodeon. IBN18 also operates regional (Marathi)
news channel, IBN Lokmat, under a 50:50 JV with Lokmat Group (IBN
Lokmat). IBN18 acquired the business news channels (CNBC TV18 and CNBC
Awaaz) from TV18 in a group restructuring in July 2010.
􀁑 Statement of Risk
We believe the key risks for TV18 are: 1) intense competition in most of its
broadcasting genres, especially the Hindi general entertainment channels
(GECs); 2) heavy reliance on advertising revenue; and 3) regulatory risk, as the
news segment of the Indian broadcasting industry is exposed to significant
regulation on up-linking and ownership.

All Eyes on the Euro Zone :: Angel Broking,

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All Eyes on the Euro Zone
Sensex (16786) / Nifty (5050)
Markets opened with a neutral bias on Monday's session and
traded in a range throughout the week. As stated in our earlier
report, markets faced strong resistance near the multiple
resistance zone of 17260 - 17200 / 5198 - 5177. Hence,
every attempt of scaling this level failed during the week and a
selling pressure dragged indices lower to register a weekly close
around the daily "20 EMA". This average is currently placed at
16714 / 5038 level. As expected, 16510 / 5034 acted as a
decent support level for the week. On the sector front, the
correction was mainly led by IT, Realty and Oil & Gas counters.
The Sensex ended with a nominal loss of 1.74%, whereas the
Nifty lost 1.60%, vis-à-vis the previous week.
Pattern Formation
􀂄 We are observing a positive crossover in Weekly
"RSI - Smoothened" momentum oscillator.
􀂄 On the Weekly chart, there is a "Horizontal Line" resistance
at 17256 / 5198 level.
􀂄 The "20 EMA" on the Weekly chart is now placed at
17215 / 5172 level.
􀂄 On the Daily chart, the "20 EMA" is placed at
16714 / 5025 level.
(Note: All technical evidences mentioned last week are almost unchanged;
therefore, we continue to mention them along with a single addition of
Daily "20 EMA")

News headlines:: RBS, Oct 23, 2011

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News headlines
Oil & Gas
􀀟 Cairn India sees Rajasthan output jumping 40% by end-fiscal (Economic Times)
􀀟 ONGC nets windfall of over Rs10bn courtesy Oil Ministry (Economic Times)
􀀟 BPCL buys 20,000 tonnes of gasoline from Vitol (Economic Times)
􀀟 CAG to probe Reliance Industries' drilling of D6 dry wells
Banks
􀀟 Punjab National Bank completes formalities to acquire 30% stake in Metlife (Economic Times)
􀀟 SBI needs Rs79bn to keep Tier-I capital at 8% (Economic Times)
􀀟 SBI hikes home loan tenure to 30 years (Business Standard)
Commodity
􀀟 Iron ore prices rise; Karnataka steel industry explores options (Economic Times)
􀀟 Tata Steel to invest £4.5m more in its UK plant (Business Line)
IT and Telecom
􀀟 Infosys to add 600 jobs in Singapore (Business Standard)
􀀟 National Telecom Policy: DoT to seek Cabinet nod soon (Economic Times)
􀀟 Telecom Ministry aims Rs6.5tn investment by 2017 (Economic Times)
􀀟 Over 18m opt for mobile number portability (Economic Times)
􀀟 Bharti Enterprises, SoftBank tie up to push mobile internet (Economic Times)
􀀟 BSNL ends deals with telcos (Times of India)
Power, engineering and infrastructure
􀀟 Siemens sees growth in low-cost products (Business Standard)
Automobiles
􀀟 Mahindra's new SUV clocks 200 bookings in South Africa (Economic Times)
􀀟 Maruti Manesar plant strike enters 14th day; talks continue (Economic Times)
􀀟 Maruti may strike a deal with disgruntled workers (Economic Times)
􀀟 Tata Motors to raise $750m via ECBs (Business Standard)

Query Corner - IDFC, Pipavav, Adani, Moser Baer, Orient Paper, Surya Gujarat NRE, HCC :: Business Line,

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I have Infrastructure Development Finance Company (IDFC) shares bought at Rs 150 and Hindustan Construction at an average price of Rs 29. Please advise the medium- and long- term targets for these stocks.

Nirnimesh Bhansali

IDFC (Rs 121.1): IDFC formed a double-top at Rs 218 in November 2010 and is in a sharp slide lower since then. This slide is finding support in the key medium-term support zone between Rs 100 and Rs 112. Investors can hold the stock as long as it trades above Rs 100. Rebound from this zone will maintain the structural uptrend that began in the first quarter of 2009.

Investors with higher risk-taking ability can consider buying the stock at current levels with stop at Rs 100. It can move up to Rs 148 or Rs 176 in the ensuing months. The stock will continue to face strong hurdle in the band between Rs 220 and Rs 236 and investors can book partial profits when the stock nears this range. However, target on a breach of this band is Rs 274.

Conversely, decline below Rs 100 can pull the stock all the way down to Rs 70.

Hindustan Construction Company (Rs 26.4): This stock faces long-term resistance around Rs 85 and it reversed just under this level in January 2010. The stock went on to breach its medium-term support at Rs 40 in April and it is currently trading well below this level. Both short- and medium-term trends in the stock are currently down. The stock could slip lower towards its January 2009 low of Rs 14 in the days ahead.

Investors who continue to hold the stock can do so as long as it trades above this long-term support at Rs 14. Key short-term resistance is at Rs 40. Medium-term resistances will be at Rs 47 and Rs 61.

Please let me know the short-, medium- and long-term targets for Gujarat NRE Coke.

Bhaskar Parab

Gujarat NRE Coke: (Rs 24.2): In our review of this stock in February, we had written that key support for the stock was at Rs 46 and investors with long-term perspective can hold the stock as long as it trades above this level. We had also written that target on a decline below Rs 46 was Rs 16.8.

The stock crashed below Rs 46 in August this year, and has fallen precipitously since then to the recent trough at Rs 20.6. Next reliable support for the stock is the March 2009 trough at Rs 16.8. Investors holding the stock can continue to do so as long as it holds above this level. Short-term stop loss can be Rs 20.

Short-term resistances are at Rs 30, and then at Rs 36. Investors with short-term perspective can divest their holdings if the stock struggles to get past these levels. Medium-term resistance would be at Rs 49 and then Rs 58. Long-term trend will turn positive only if the stock manages to move past Rs 87.

Kindly inform the long-term prospects of Surya Pharmaceutical and Orient Paper and Industries.

Anil

Surya Pharmaceutical (Rs 15.7): Long-term trend in Surya Pharmaceutical is up since the trough recorded in March 2009. Though the stock is in a medium-term downtrend since last November's peak of Rs 35, it is halting at the key medium-term support band between Rs 15 and Rs 16.5. Investors can hold the stock as long as it trades above this band. The stop-loss can be placed slightly lower at Rs 14.

Recovery from this level can take the stock higher to Rs 23 or Rs 28 over the ensuing months. Long-term target on a break above Rs 35 is Rs 45. Investors should, however, be aware that a crash below Rs 15 can result in the stock declining very sharply to Rs 10 or Rs 8.

Orient Paper and Industries (Rs 59.6): This stock is in a secular uptrend since the trough at Rs 16.9 formed in December 2008. One leg of this up-move was completed at the April 2010 peak of Rs 66, and the stock is moving sideways between Rs 45 and Rs 67 since then. The stock faces long-term resistance in the zone between Rs 60 and Rs 65, and it has made multiple efforts to get past this zone since April 2010. Targets on a break above this zone are Rs 85 and Rs 112.

Medium-term supports for the stock are at Rs 42 and Rs 36. Investors can hold the stock as long as it trades above the second support.

Please let me know the long-term outlook of Moser Baer bought at Rs 23.

Parrivel

Moser Baer India (Rs 27.8): Moser Baer is in a very strong structural downtrend. It had long-term support in the range between Rs 40 and Rs 45, where it formed troughs in 2002 and in 2009. This support zone was penetrated in August, and the stock is currently trading 35 per cent below this band. Immediate support for the stock is at Rs 17, and investors can use that as a stop-loss. However, decline below this level will pull the stock to Rs 5.

Investors should resist the temptation to buy this stock or to add to their current holding since it has not reversed emphatically yet. Risk-averse investors can consider purchasing this stock only on a close above Rs 40. Subsequent resistances are at Rs 100 and Rs 143.

I want to buy Adani Power with 4-5 year perspective. What does your chart suggest?

Chandan Bhurat

Adani Power (Rs 83.7): There is not much that can be gauged from Adani Power's charts regarding the prospects for the next 4-5 years since the stock has only two-year history. The structural trend in the stock is down since it is currently trading close to its life-time low.

The stock can be bought at current level with stop-loss at Rs 70. But this advise is only for investors with a higher degree of risk taking ability. Risk averse investors can wait for the stock to close strongly above Rs 108 before venturing to accumulate it. Subsequent targets would be Rs 110 and Rs 118.

Medium-term view will turn positive only on a close above Rs 118, paving the way for a shy at its previous peak of Rs 144. Investors should, however, keep off this stock if it declines below Rs 70 since it is hard to know where the next halt can be.

Please give your long-term views on Pipavav Defence and Offshore Engineering Company.

Kavita

Pipavav Defence (Rs 85.1): Pipavav Defence was listed only two years ago and hence does not have sufficient history to help us understand its long-term prospects. It has been moving in the band between Rs 62 and Rs 92 since December 2010. Investors can hold the stock with stop at Rs 60. They can also use declines to the area close to Rs 60 to accumulate the stock with stop at Rs 55.

The stock will face resistance in the zone between Rs 90 and Rs 95 in the months ahead. Once this barrier is crossed, the stock can head towards its previous peak of Rs 120.

Index Outlook - Looking forward to Diwali fireworks :Business Line,

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Sensex (16,785.6)

The Sensex took one hesitant step backward from the 17,000 threshold last week. Selling pressure was absent but so was buying fervour. Perhaps the joy that spills out during the Indian festival of lights will provide the impetus to send stock prices rocketing skywards. Muhurat days have been game-changers in the past, perhaps it will be so this year too.

That may be a tough task given that Europe continues to be in doldrums. The RBI's next move on the policy rate front is also not likely to be benign to the stock market, since the headline inflation reported last week was far from comforting.

Volumes were very dull in the cash segment though derivative action perked up in the later part of the week. Open interest continues to be low reflecting investor apathy. Volume is likely to be tepid in the holiday-splattered week ahead that also has a derivative expiry and an RBI policy meeting thrown in.

The ‘comprehensive response' to Europe's debt crisis will be revealed on Wednesday and if that turns out to be disappointing, another churn is possible in the global markets in the later part of the week. Investors are better off taking the next week off from markets to spend time with their family.

Oscillators in the daily chart are declining slightly but they continue in the bullish zone implying that the short-term trend continues to be positive. The weekly rate-of-change oscillator is very promising since it is poised just below the zero line on the verge of crossing over into bullish territory. If it manages to move into the positive zone, it will mean that the medium-term trend is reversing higher.

The action is similar in index movement also. The Sensex is poised at key medium-term trend deciding level at 17,200. Break above this level will mean that the intense short-term turbulence is behind and that there is a likelihood of the index making some headway. Targets on a strong move above this level stay at 17,448 and 17,845.

The Sensex traded sideways between 16,670 and 17,188 last week. The support zone to watch out for in the upcoming sessions is between 16,500 and 16,650. Presence of both the 21 and 50-day moving averages in this region make it a strong pad from which a rebound is possible. If this zone remains un-violated, the Sensex can move on to 17,561 or 18,113 in the days ahead.

Short-term trend will be under threat only if the index goes on to close below 16,300. Possibility of a decline to the previous trough at 15,745 becomes a possibility then.

The medium-term trend continues to be under a cloud and the index has a long way to go, at least to move past 18,200, before investors can rest easy. However the positive factor that gives comfort is that the index is moving up from critical long-term support around 16,000. Though the odds are stacked against the Sensex at this point, a long-term trough is possible in this region. Many of the global benchmarks reversing from similar long-term support levels also fortify this hope.

The Nifty (5,049.9) disappointed last week by failing to get past the key hurdle at 5,170. The short-term trend will turn positive only if the index gets past this level, with the next targets at 5,230 or 5,350.

Traders can, however, draw heart from the fact that there was no sharp downward reversal last week and the index is instead consolidating in the zone between 5,000 and 5,160. Traders can hold their long positions as long as the index trades above 5,000. Sideways move between 5,000 and 5,170 will mean that the index can move higher to 5,231 or 5,278 in the days ahead. Rally beyond 5,350 is needed to make the medium-term view positive.

Decline below 5,000 will take the index lower to 4,947 or 4,897. Short-term view will turn negative only on close below 4,897. A move to 4,800 will then be on the cards.

Global Cues

Global equity markets held on to the hope that a resolution to Europe's troubles was imminent that made stock prices close in the green last week. That investors were feeling more optimistic was reflected in the CBOE volatility index remaining at lower levels between 30 and 36. But as we have been reiterating, this index needs to close firmly below 28 to imply that the short-term trend has turned positive.

The Dow fluctuated below the 11,650 mark for most part of the week before breaking upward to close at 11,808. Now that it has got past the challenge at 11,750, next hurdle is at 12,000. Emphatic close above this level will make the short-term view positive for the index and clear the way for rally towards the May peak of 12,840.

As mentioned before, the 10,400 support is a critical long-term support for the Dow and if it manages to hold above it, it will signify that the long-term trend continues to be up and the index can break out higher after prolonged movement (maybe lasting a year or more) in the region between 10,000 and 13,000. The S&P 500 has also taken support at the corresponding support at 1,100.

The weakness in US dollar index is also a factor helping equity prices. The dollar index declined further last week to near the support at 76. If this level is penetrated, that will spell the end of the current bout of turbulence in equity markets. Our Indian rupee can also breathe a little easy then.