Hold Fortis Healthcare; Target : Rs 140 ::ICICI Securities

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


M e r g e r   o f   i n t e r n a t i o n a l   f i r m :   E P S   d r a g g e r ? ? ?
Fortis Healthcare has announced the valuation for the acquisition of Fortis
International at US$665 million (i.e. at ~| 3150 crore). Though, as per the
management, this move seems to look fruitful, considering its long-term
operational synergistic benefit, there is still lack of clarity over profitability
of the international firm and potential of synergistic opportunities for the
domestic entity. In our view, the benefits from these synergies will not
come in to the picture soon. On the other hand, since its an all-cash deal
involving cash outflow of around | 3,150 crore, majority of which would
be funded through debt, it would put pressure on the domestic entity’s
profitability leading to EPS dilution over the next couple of years.
ƒ Profitability of international firm remains key monitorables
Profitability of the international firm that is being acquired by the
domestic firm and a key rationale (in terms of synergistic
opportunities) behind transferring the international entity from fully
promoter owned company into domestic entity still remains key
monitorables, going forward. In our view, the benefits from these
synergies will not come into the  picture soon. On the other hand,
since it’s an all-cash deal involving cash outflow of around | 3,150
crore, majority of which would be funded through debt, it would put
pressure on the domestic entity’s profitability and may lead to EPS
dilution over the next couple of years.
ƒ Downgrade to HOLD
This deal has been done at 17.5x FY11 and 12.5x FY12E EV/EBITDA
(assuming EBITDA growth of 40% for FY12E). If EBITDA growth of
40% is achievable then this valuations looks fair. However, lower
profitability of international firms and higher interest burden may act
as an EPS dragger for the combined entity. Considering this, we
lower our FY13E multiple target and revise our one-year price target
downward to | 140 from | 185 with a HOLD rating (i.e. at 13.5x FY13
EV/EBITDA). We will revisit our assumptions once we get full clarity
on the international firm’s profitability and debt-equity mix for
funding this deal.

Buy Taj GVK Hotels; Target : Rs 110 ::ICICI Securities

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


D i s m a l   p e r f o r m a n c e   o n  l o w e r   o c c u p a n c y …
Taj GVK reported its Q2FY12 results, which were in line with our estimate
on the revenue front, which remained flat (down ~1% YoY) at | 59.2
crore (I-direct estimate: | 57.4 crore) while PAT at | 4.3 crore was below
our estimate of | 7.7 crore. The muted topline growth can mainly be
attributed to lower growth in occupancy and average room rate (ARR)
across the Hyderabad region. However, operating profit increased by a
marginal 1% YoY on the back of a  dip in raw material cost and other
expenses by 5% each, which led to a decline in the total operating cost
by 2% YoY. Operating margins during Q2FY12 surged by 68 bps YoY to
33%. Finally, PAT during the quarter saw a significant drop of 42% YoY to
| 4.3 crore, on the back of a rise in tax expenses by 82% YoY as the
company made deferred tax provision of | 7.03 crore in Q2FY12.
ƒ Topline hit by lean season coupled with political disruptions
Taj GVK’s topline was primarily hit by lower occupancy (down by
~550 bps YoY) and muted ARR across the Hyderabad region, which
suffered from the Telangana agitation. However, Chandigarh and
Chennai recorded higher occupancy levels of 67% and 63%,
respectively, for the quarter.
ƒ Cost control measure helps in margin expansion
The operating margin expanded by 68 bps YoY to 33% for the
quarter due to a decline in operating expenditure by 2% YoY to |
39.7 crore. Major cost driver such as employee cost and P&F cost
surged by 1% and 7% YoY, respectively, which was partially offset
by a decline in raw material cost & other expenses by 5% YoY each.
V a l u a t i o n s
At the CMP of | 92, the stock is trading at 8.1x and 6.8x its FY12E and
FY13E EV/EBITDA, respectively. We believe  the  concern on room supply
and political disruption in Hyderabad have been  factored in the price.
The company is expected to  maintain its market share in our forecast
period of FY11-13E due  to its  competitive  room  rates.  Hence, we have
maintained our price target of | 110 (i.e. at 8x FY13E EV/EBITDA) with a
BUY rating

Sell Bombay Rayon Fashions; Target : Rs 238 ::ICICI Securities

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


M a i n t a i n   v i e w :   S e l l   a t  c u r r e n t   m a r k e t   p r i c e …
In April 2011, AAA United BV (AAA United), along with Aktieselskabet and
Ashwell Holding Co Pvt Ltd, had made an open offer to the shareholders
of Bombay Rayon Fashions Ltd (BRFL) to acquire up to 2.84 crore shares
amounting to 20% of the emerging voting capital of the company at a
price of | 300/share. The offer was meant to open on May 30, 2011.
However, the same was deferred. The company has now announced
revised dates for the same (refer Exhibit 1). Further, Sebi has directed that
interest at the rate of 10% per annum be paid on the offer price for the
delay period from the scheduled date of payment to the shareholders of
BRFL. Accordingly, the offer price stands revised from | 300 to | 302.06
per equity share. Based on the offer price, the size of the open offer works
out to | 857.8 crore. The offer is not conditional upon any minimum
acceptance ratio.
Exhibit 1: Offer details
Original Schedule Revised Schedule
Offer opening date 30-May-11 4-Nov-11
Offer closing date 18-Jun-11 23-Nov-11
Source: Company, ICICIdirect.com Research


V i e w
We continue to maintain our view that the existing investors should sell
the shares at the CMP. Considering a higher tax rate (to be paid in case of
tendering shares in the open offer, as in an off-market transaction short
term capital gain from shares is taxed at normal slab rates) and a waiting
period (as the open offer closes on November 23, 2011), we believe an
investor should sell the shares at  the CMP as the returns for a longer
waiting period are not substantially higher.
Note: * - EPS for FY12E and FY13E and the target price has marginally
reduced due to increase in equity due to conversion of warrants.

Buy Ipca Labs ; Target : Rs 358 ::ICICI Securities,

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


D o m e s t i c   s l o w d o w n   m i t i g a t e d   b y   e x p o r t s …
Ipca Laboratories’ Q2FY12 results were above our expectations.
Revenues increased 20.3% YoY to | 623.50 crore, above our expectation
of | 580 crore mainly driven by export formulations, in general, and the
institutional generic business, in particular. The institutional generic
business increased to | 90.8 crore from | 26.5 crore in Q2FY11. On the
flip side, the domestic formulations business witnessed muted growth of
3% to | 229.2 crore on the back of de-growth in the anti-malarial and
antibiotic segments. EBITDA margins rose by 250 bps YoY to 25.3%
despite lower growth in the domestic formulation business on the back of
higher margins from the generic business. Net profit, as expected,
declined by 17% YoY to ~| 78 crore (our expectation: | 71.4 crore) on
the back of forex losses of | 27 crore. We reiterate BUY rating on Ipca.
ƒ New pharma policy (if adopted) to be neutral
The management has indicated that the impact would be neutral if
the new draft pricing policy comes into existence. Around 67% of
the total product basket will come under the new pricing policy.
However, the majority of Ipca’s brands are relatively low priced.
Hence, the company would not suffer any negative impact. Only in
segments such as rheumatoid arthritis and anti-malarial, in which
the company is among the top players, there might be a negative
impact of around 2-3%.
ƒ Upgraded institutional generic sales guidance
The institutional generic business (anti malarial) posted robust
growth of 242% YoY to | 90.8 crore during the quarter taking total
sales in the first half to ~| 140 crore. The company has upgraded its
sales guidance to ~ | 250 crore from | 200 crore earlier.
V a l u a t i o n
Currently, Ipca is trading at | 254  i.e. ~11x FY12E EPS of | 22.4 & ~8x
FY13E of | 29.8. Despite strong growth expected from export formulation
business, we have reduced our target price to | 358 i.e. 12x FY13 E EPS
of | 29.8 from | 366 earlier due to 1) delay in Indore facility approval and
2) bit of uncertainty regarding performance of domestic formulations.

Hold Sesa Goa; Target : Rs 203 ::ICICI Securities,

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


P e r f o rma n c e   imp a  c t e d   b y  mu t e d   s a l e s   v o l ume s . . .
Sesa Goa’s performance in Q2FY12 was below our expectation on the
back of lower-than-expected sales volume, subdued income from
investments and mark to market (MTM) loss on foreign currency
borrowings. In Q2FY12, iron ore sales volumes stood at 1.55 million
tonnes (MT) (as against our expectation of 2.1 MT). The iron ore
realisation during the quarter under review stood at ~US$83.7/tonne (as
against our expectation of US$90/tonne). The topline during the quarter
stood at | 789.7 crore (lower by  14% YoY and 62.6% QoQ). The other
income stood at | 50.4 crore (lower by 50% YoY and 67% QoQ). During
the quarter under review, there was forex MTM loss to the tune of |
234.09 crore on outstanding FCCBs  and foreign currency loan, which
dented the reported PAT significantly. The ensuing reported PAT during
Q2FY12 stood at | 1.28 crore.
ƒ Muted sales volumes
Sesa Goa reported subdued sales volumes in Q2FY12. Sales
volumes stood at 1.55 MT as compared with 1.82 MT (1.37 MT
excluding Orissa) in Q2FY11. At Karnataka, the company sold 0.71
MT of iron ore in Q2FY12 (0.45 MT in Q2FY11) while at Goa the
company sold 0.83 MT of iron ore in Q2FY12 (0.92 MT in Q2FY11).
ƒ Realisations for Q2FY12 lower both QoQ as well as YoY
Sesa Goa reported subdued realisations for Q2FY12, which was
lower both QoQ as well as YoY. The company’s iron ore realisations
stood at | 3834/tonne (lower by 2% YoY and 15% QoQ).
V a l u a t i o n
At the CMP of | 206, the stock is trading at 7.5x and 6.5x its FY12E and
FY13E  EV/EBITDA,  respectively.  We  have  valued  the  stock  on  an  SOTP
basis where we have valued the core business at 4x FY13E EV/EBITDA
and assigned a 30% holding company discount to the investment value in
Cairn India Ltd. Thus, we have arrived at a target price of | 203 and
assigned a HOLD rating to the stock.

TVS Motor Ltd– Results a tad higher than expectations, maintain BUY ::LKP

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

TVS Motor Ltd– Results a tad higher than expectations, maintain BUY  TP-Rs79, BUY

Inline performance

On a consistent volume growth of 15%yoy and 13% qoq to 6.04 lakh units and 6.7 % realization growth on a yoy basis, TVS’s sales were up by 23% yoy and 14% qoq, which was slightly higher than our expectations. Two wheeler sales grew by 15.5%, while 3 W sales grew by 20%. Exports sales grew by 31% yoy on traction in most of the African, South Asian and Latin American markets. Lower raw material costs to sales ratio led by softening of commodity costs (75.46% v/s 76.4% qoq) and lower employee costs to sales (4.81% v/s 5.32% qoq) led to improved margin performance. EBITDA margins came at 7.5% v/s 7.3% qoq and 7.7% yoy. At the bottomline, constant tax rate of 24.2% led net profits to expand 40% yoy to Rs765 mn.  Management has guided tax rate to be at 25% due to tax benefit from the Himachal plant.

Capacity expansion, new launches and 15% volume growth on track

TVS is steadily increasing sales to more than 2 lakh units per month which was reported in September. In October, the company sold 1.85 mn units on maintenance shutdown at its plants for 7-8 days. The company has current capacity of 3mn 2W and 50,000 3W. The company is planning to expand its 3 W capacity from current levels of 6000 p.m. to 8,000 p.m. by April 2012.  TVS also plans to launch a new scooter and a new motorcycle in 4Q FY12/1Q FY13, which will be in the executive segment. Management had guided for 15% volume growth for FY 12E at the end of Q1 FY12 and has maintained its guidance, which we believe is achievable with 2 lakh units selling per month from November. YTD, the volumes of the company have grown by 15.3%. Management has estimated the 2 W industry to grow by 12-15% in FY 12, and the company to grow slightly higher than the industry.

Margins to improve on lower RM costs, increasing 3W sales

TVS’s margins are on an improving trajectory on lower input costs and growing 3W sales. Opening of permits in some of the states like West Bengal, Karnataka and Tamil Nadu will also lead to higher 3W sales. Improving product mix, better cost management and operating leverage will assist the company in improving margins. Withdrawal of DEPB benefit is getting compensated by other schemes and possible price hikes in the export markets without hurting margins. However, renewed competition from Honda in the African markets may lower demand for TVS’s products in Africa, which may impact margins. We expect 7.6%/8% standalone EBITDA margins in FY12/13E.

Outlook and valuation

On the back of better than expected Q2 numbers, expectations of consistent volume performance going forward, new launches, strong rural demand and improving margins, we are slightly increasing our estimates for both FY12/13E. At CMP of Rs66, the stock is trading at 10x times FY13E EPS of Rs6.55. We value the stock at 12x times, which is still at 20% and 15% discount to multiples of 15x and 14x assigned to value Bajaj Auto and Hero Motocorp respectively. We derive a TP of RS79, which is at a 19% upside from current levels.

Fastest growing small companies that could be future giants::ET

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

Every investor dreams to have a future Infosys or Titan Industries in his/her portfolio. But choosing the right gems out of over 5,000 listed companies is no mean task. Here's a list of 10 Fastest Growing Small Companies that could be future giants. 

The phrase "nothing succeeds like success" might be a cliche, but when it comes to demonstrating the success nothing quite succeeds like growth. It is the growth in revenues and profitability that validates the correctness of a business strategy or a robust business model. Better still, if this is achieved consistently over a period of time. Both large corporates and the smaller ones have their own set of growth stories. 

Still the limelight is never the same. Bigger companies are always the ones that are talked of more and corner the bigger share of attention. After all, their growth into biggies has already confirmed their success. 

However, as they say, 'the great thing in the world is not so much where we stand, as in what direction we are moving.' Going by this logic, we feel it is important to celebrate the growth stories even of smaller companies. They may be standing low on the ladder, if size were a criteria, but their consistent growth indicates that they are moving in the right direction. They hold the potential to become India Inc's poster boys in years to come. 

While the ubiquitous disclaimer about future's uncertainties is definitely in order here, we recommend investors cherry pick companies from our list based on their individual research. Such investments could prove immensely fruitful over next the few years. 

THE STREET SHOW 

Last one year has been bad for the stock market and in times like this small and mid-cap companies tend to suffer the most. However, that was not the case with our last year's list of 100 Fastest Growing Small Companies. Between last and this October BSE Small Cap lost 36%, BSE MidCap fell 27% and BSE Sensex slipped over 15%. 

However, three in every four companies from the 2010 list of Fastest Growing Small Companies have outperformed the BSE Midcap Index in this period, while 52 companies have performed better than the BSE Sensex itself. One in every three companies gave a positive return during this period. It is worth noting that this performance is calculated based on monthly average prices and not point-to-point comparison. 

THE STAR CAST OF 2011 

The list of Fastest Growing Small Companies remains, as usual, a representation of varied sectors from auto ancillaries, pharma & FMCG, chemicals to packaging and mining. Only about half the contenders of last year could make it to the list this time. In a few cases this was on account of the company's inability to continue to perform well. However, quite a few had to lose their rankings due to the raised bar. 

The list this year is topped by Ester Industries, maker of polyester film, which made a dashing entry into the list, thanks to the runaway prices of its final product. Zydus Wellness, our last year's topper maintained its momentum to secure the second place. While National Peroxide and Mayur Uniquoters improved their last year's rankings to take third and fourth places, respectively. A brief analysis of our 10 toppers follows the main story for readers' easy reference. 

ACTION & DIRECTION 

One of the key challenges in compiling this list was to weed out unsound and potentially dubious candidates. This is important because one can't worship growth just for the sake of it. 

We tried to achieve this by putting strict parameters for companies vying to enter the list. Only companies qualifying on all these accounts were considered for ranking. As such, making it to the ranking is itself quite an achievement. 

The first thing considered was the debt-equity ratio -the gauge of leverage. Any company with a reading of above 1.5 in last three years was dropped for being too leveraged. Similarly, interest coverage ratio, indicating the ability to service the debt, had to be above 5 for three consecutive years for the companies to make it to the list. 

The next criterion considered was the return on capital employed (RoCE). RoCE is a measure to figure out how efficiently a company utilises its capital invested in the business. Too low a return and the company could end up in a debt-trap. Hence, companies that could get RoCE of above 15% for the past three years were only considered. Additionally, companies unable to generate positive cashflows from operations for at least two of the past three years were removed. 

Finally, the revenue benchmark to qualify as a small company was raised to Rs 1,200 crore or below for the current financial year to accommodate the overall growth and inflation against Rs 1,000 crore or below in the previous year. At the lower end, companies with a market capitalisation below Rs 100 crore were excluded. 

Click next to find out the top 10 fastest growing small companies: 

FY11 saw the demand for polyester film - also known as BOPET film - move up strongly on products such as mobile touch screens, LED televisions and solar panels. 

The prices soared as supply failed to keep pace, enabling companies to make a killing. However, as supplies grew, BOPET prices came down substantially. Ester Industries' June 2011 quarter net profit tumbled 81% y-o-y. 

This means the company is unlikely to maintain its feat next year. However, with its capacities more than doubling last year there will be a substantial volume growth. 

Zydus Wellness, the Rs 350-crore FMCG arm of Zydus Cadila group, has a strong product portfolio with an underlying health plank. The company has invested heavily on building its brands such as Sugar Free, Nutralite and EverYuth. 

Despite a subdued performance in the June quarter, the company's business continues to hold the promise of strong growth. Sugar Free is India's largest-selling low-calorie sweetener with an 86% market share. 

EverYuth range of skin-care products enjoy their leadership position in the scrubs and peel-offs category despite competition from MNCs and other Indian players. However, the company is facing intense competition in the face-wash category. Growing at over 20%, the company is poised to achieve its target of Rs 500 crore revenue by 2013-14. 

Improvement in the prices of chemical hydrogen peroxide helped the industry leader National Peroxide in FY11. The company achieved 49% jump in revenues and 255% in net profits, while its production improved 11.4% to 71,826 tonne. 

The company expanded its hydrogen peroxide capacity by 24%, for which it had to shut down its plant in the April-June quarter for 70 days. 

Even after commissioning the plant, the commercial production could begin only from September 2011 onwards. This is set to affect its numbers in the first half of FY12. However, the second half of FY12 onwards it will enjoy the full benefits of expanded capacity. 

Mayur Uniquoters is India's leading manufacturer of artificial leather and supplies to domestic automakers such as Maruti, Tata Motors, Hero MotoCorp, M&M, etc, and footwear makers such as Bata, Liberty, Action, etc. 

It has continued to grow well over last few years without leveraging its balance sheet and is one of the few companies giving quarterly dividends. The company has started supplying to overseas automakers such as Ford and Chrysler and is trying to enlist with GM, Toyota, BMW and Mercedes Benz. 

The company has maintained its position in the 100 Fastest Growing Small Companies list for second consecutive year and has proven a multibagger in last one year. It appears well placed to continue its steady growth in coming years. 

Sandur Manganese & Iron Ore is India's secondlargest manganese ore miner and also operates a ferro-alloys plant with almost all its 2,000-acre mining land in Karnataka. 

The company benefited from the improved pricing scenario in FY11 although its sales volumes dipped on export ban in Karnataka, high freight costs and 20% export duty imposed on iron ore. 

The company's June 2011 quarter numbers were hit by Supreme Court's blanket ban on mining activity in Karnataka. This factor is likely to weigh on its overall performance of FY12 like other mining companies and could make it difficult to maintain its position in the list next year. 

Lumax Auto Technologies is an auto-component maker supplying transmission and steering components, body and chassis and electrical components. 

Growing production of automobiles by both Indian and foreign players, a buoyant replacement market and rising costs have benefited Lumax. 

It is a debt-free, cashrich company and is planning to add two more plants to the existing six facilities in Maharashtra. Its entry into infrastructure lighting, although small at present, could safeguard it from cyclicality of the auto industry in the future. 

WABCO India, now a 75% subsidiary of WABCO Holdings of the US, is a supplier of auto components to commercial vehicles industry. 

A significant revival in Indian commercial vehicles industry, thanks to investments in development of road and infrastructure, enabled it to post a strong revenue growth. 

As investments in roads grow with more and more private participation, the long-term growth trajectory will remain strong for the commercial vehicle segment. 

However, in the shortterm, cyclicality in the commercial vehicle market and rising raw material costs could be a concern. 

Mumbai-based KPO operator eClerx has benefited from the buoyancy in the demand from the global financial market. 

Despite talks of a global slowdown, eClerx reported a strong sequential growth of over 6% in the five out of the six quarters ended September 2011, validating success of its business model. 

PBDIT margin above 33% shows that the new business did not come at the expense of profitability. This has helped in offsetting the impact of higher taxes due to minimum alternate tax on SEZ income. 

The company offers critical back-end services to the financial sector, which are not affected by the movement of business cycles. This should keep the company going during tough times. 

Hawkins Cookers is seeing a huge demand for its products but was unable to meet it because of labour issues at its plants. 

Last year, the company's net sales grew 17%. The profit declined due to higher raw material prices. 

But now most of the labour issues have been resolved and input prices have come down from their peak. 

Hence the company will be able to run its plants more efficiently and higher growth can be expected. 

Besides, the company is financially sound with high return ratios, strong cash flows and low debt. 

Education services provider Everonn Education has reported strong buoyancy over the past three years backed by sound return and liquidity ratios. 

Its stock has, however, plummeted 44% from the year-ago level following the judicial action against its erstwhile MD in early September. 

The company has appointed new leadership and has ensured the soundness of its business fundamentals. In the past one month, its stock has recovered from the lows of Rs 228 to the current level of Rs 380. 

Its performance under the new leadership in the next few quarters will be crucial to restore the investor confidence.

IDFC :Neutral-- Strong fundamentals, but lacks near-term catalysts: Nomura Research

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


Action: Initiate with a Neutral and a TP of INR140
We like IDFC’s strong fundamentals and robust balance sheet with high
capital adequacy. However, we expect IDFC’s balance sheet expansion to
be sluggish until better policy clarity emerges on its core growth sectors
like power and roads. In our view, current valuations fairly balance the
risks and rewards.
Expect moderation in loan book growth, fee income for FY12F
We estimate IDFC to slow down its loan book growth to 15.4% for FY12F
from 50.4% in FY11 and then inch back to 19.5-20% for FY13F. We also
expect declines in i-banking and broking income for FY12F, while we are
factoring modest growth in AMC fees.
Power sector overhang to stay despite robust asset quality profile
We expect IDFC to be able to maintain spreads of c.2.2% and GNPL
below 30bps until FY13F. However, we estimate credit costs to inch up to
85-90bps by FY13F from 70bps in FY11 on the increasing possibility of
restructuring of loans to upcoming power projects. We believe the current
policy inaction on fuel linkage issue will weigh on the stock in the medium
term.
Valuation: IDFC currently trades at 1.5x our FY13F ABV of INR81.91 and
11.2x FY13F EPS of INR10.82. At our TP of INR140, IDFC will trade at
1.7x our FY13F ABV and 13x FY13F EPS of INR10.82 for an FY13F RoE
of 14.5%.
Catalysts: Accelerated monetary policy easing, policy action on coal
linkage front and traction in fee income.

HDFC :Buy- The juggernaut rolls on: Nomura Research

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


Action: Initiate coverage with a BUY rating and a TP of INR780
We are positive on HDFC, given its stable earnings profile and consistent
performance through the interest rate cycles. HDFC’s lean cost structure,
stable spreads and provision buffer should ensure high core RoE of 30%.
We expect strong loan book growth of 20% over FY12F-13F
We expect HDFC to post strong loan book growth of 19% and 20% for
FY12F and FY13F, respectively, despite high interest rates on account of
the loyalty profile of its customers, diversified scale of operations and
healthy growth in its sanction pipeline.
We expect stable spreads and low credit costs over FY12F-13F
HDFC has demonstrated its ability to maintain spreads above 2.2%
through the past two rate cycles and we expect it to sustain its spreads.
We expect HDFC's robust risk management process and high provision
cushion (at 102% of NPLs) to ensure credit costs stay around 7bps over
FY12F-13F. We also expect HDFC's lean opex structure to help drive
blended RoE and RoA of 21% and 2.75%, respectively, for FY13F.
Valuation: HDFC trades at 2.5x FY13F ABV and 13.4x FY13F EPS
HDFC trades at 2.5x FY13F ABV of INR169.69 and 13.4x FY13F EPS of
INR31.39. We value HDFC’s core mortgage at INR555 and subsidiaries at
INR225 to arrive at our SOTP-based TP of INR780. At our TP, HDFC
would trade at 3.3x our FY13F ABV and 17.7x FY13F EPS.
Catalysts: Easing rate cycle, moderation in residential realty prices

State Bank of India :The worst is behind it -- The proverbial phoenix: Nomura Research

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


Action: Initiate coverage with a Buy and a TP of INR2,400
It can only get better for SBI from now, in our view. We believe higher loan
losses, slowing loan growth and a lack of capital are all priced in. SBI is
the proxy for the Indian banking sector and is the most attractive lever for
playing the impending turn in the rate cycle, in our view. We initiate
coverage with a Buy rating.
Factoring in stress case LLPs of 145bps for FY12F (six-year average
LLP of 66 bps)
We are factoring in incremental slippage of 2.6-2.8%, compared with an
average of 2.1% over the past eight quarters. We are forecasting LLPs of
145bps for FY12F, from 127bps in FY11 (six-year average of 66 bps) to
account for possible slippages from power sector exposure and a general
deterioration in asset quality.
NIM should be stable on strong CASA growth
SBI's consistently strong CASA growth of around 23% over the past nine
quarters and its improving CASA per branch should help maintain an
average NIM of 3.4% over FY12F-13F. We are building a capital infusion
of INR50bn in 4QFY12F from the government and see sustainable loan
growth of 16% for FY12F and 18% for FY13F.
Valuation/catalyst: trades at 1.1x FY13F ABV, ROE of 17.1%
SBI trades at 1.1x FY13F ABV, one standard deviation below its historical
mean of 1.7x one-year forward ABV. At our TP of INR2,400, SBI trades at
1.55x FY13F ABV of INR1,299 and 9.7x FY13F EPS of INR209.67 for an
FY13F ROA of 0.9% and adjusted ROE of 17.1%. Rate cycle turns, capital
infusion and infra-policy action are potential catalysts.

Punjab National Bank :Neutral rating-- Earnings outlook priced in: Nomura Research

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


Action: Initiate with a Neutral rating and a TP of INR1,070
We expect a significant spike in loan loss provisions (LLPs) and a
contraction in NIM for FY13F, which should continue to weigh on the stock
despite the recent price correction. Initiate with Neutral and INR1,070 TP.
Loan loss provisions likely to shoot up to 1.2% by FY13F
We expect a significant increase in LLPs on a higher proportion of
impaired loan book and higher exposure to power and other infrastructure
sectors. We expect an impaired loan ratio of 8.5% and power sector
exposure of 6% to lead to LLPs of 1.2% in FY13F, from 1% in 1Q FY12.
We expect NIM compression & moderating loan growth
We expect NIM to contract in FY12 on account of sluggish CASA
momentum and the impact of high proportion of term deposits garnered
over the past few quarters at peak rates. We expect NIMs to ease to 3.6%
for FY12F, from 3.96% in FY11. We expect loan growth of 19% by FY13F.
Valuation/Catalyst: Risks & rewards evenly balanced
Valuation: Our TP of INR1,070 implies 1.3x FY13F ABV and 7.0x FY13F
EPS for an FY13F ROA of 1% and adjusted ROE of 19.5%. PNB is
currently trading at 1.1x FY13F ABV and 6.1x FY13F EPS.
Catalysts: Accelerated monetary policy easing, policy intervention to
resolve power sector bottlenecks like fuel availability, and SEB (state
electricity board) financial health are the key upside catalysts.

Bank Of Baroda: Buy rating- Defensive public sector bank :: Nomura Research

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


Action: Initiate coverage with a BUY and TP of INR950
We recommend a Buy on BOB for its relatively small impaired book, high
provision cover, good capital base and attractive valuations, despite
factoring in aggressive LLPs.
Factoring in LLPs of 80bps for FY12-13F versus 23bps in 1QFY12
BOB has a relatively cleaner book amongst the large PSU banks, with a
NNPL of 0.44% and a gross provision cover of 82.5% in 1QFY12. Its
restructured loan book is relatively small at 3% with LLP at 23bps as of
1QFY12. We factor in conservative LLPs of 70-80bps for FY12-13F for
possible slippages in its power sector loan book. We expect 1.3% of
BOB’s loan book to be restructured due to bottlenecks troubling the power
sector. We believe our LLPs adequately price in this risk.
Marginal NIM improvement on loan book repricing; well capitalized
for growth
BOB’s robust CASA per branch growth of 18% and increased lending rate
of 125bps versus a deposit cost increase of 50bps should help expand its
margin from 2.87% as of 1QFY12 to 3% by FY12F. With a tier-1 ratio of
9.1%, BOB is well funded for growth for the next two years, in our view.
Valuation/catalysts: Trading at 1x P/ABV FY13E
BOB trades at 1x FY13F ABV of INR705.37 and 5.5x FY13F EPS of
INR130.10. At our TP of INR950, BOB would trade at 1.35x FY13F ABV
and 7.3x FY13F EPS for an ROA of 1.08% and ROE of 19.9%.Catalysts:
Easing rate cycle and accelerated power sector reforms.

Indusind Bank: Buy- The comeback kid – a sequel :: Nomura Research

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


Action: Initiating coverage with BUY and a TP of INR 325
We like IIB’s robust earnings trajectory driven by loan book mix of vehicle
finance and short-term working capital loans, improving deposit franchise,
low loan-loss provisions and track record of management.
Loan book mix ensures high yields & loan growth is CV cycle
agnostic; we expect NIMs of 3.4-3.5% for FY12-13E
We expect IIB to grow its loan book at 26-27% in FY12-13E. Contrary to
market expectations, IndusInd Bank has demonstrated that its loan book
growth (especially the vehicle finance book) is secular and is not linked to
the volatility in the CV cycle. We like the judicious mix of high yield vehicle
finance loans and short-term corporate working capital loans, which
should ensure high yields through interest rate cycles.
Expanding branch network, product suite and liability franchise, fee
income set to surprise
CASA should grow at 32% for FY12-13E driven by a CASA per branch
CAGR of 23% and branch network of 400 (by FY12E). A wider product
suite, which is being rolled out across the expanding network, should
ensure a fee income CAGR of 28% for FY12-13E. Our LLP forecast of
70bps is conservative and we could see upside risk to our numbers.
Valuation: IIB currently trades at 2.5x our FY13E ABV and 14.7x our
FY13E EPS. Our TP implies 3x FY13E ABV and 17.4x FY13E EPS.
Catalysts: Better traction in the CV cycle driven by a turn in the rate cycle
and higher traction in fee income streams.

ICICI Bank- Stronger, leaner franchise for healthy growth- Born again :: Nomura Research

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


Action: Initiate coverage with a Buy rating and a TP of INR1,050
We are positive on ICICI, as we believe the bank's purged loan book, high
capital adequacy and retail lending orientation will ensure reasonable
earnings growth, despite factoring in high LLPs for FY13F.
Factoring in 105bps in LLP to account for possible bad loans from
the power sector
We are building in LLPs of 75bps and 105bps for FY12F and FY13F,
respectively, as ICICI has unseasoned infrastructure exposure of over 5%
and power sector exposure of 2%. Our LLP estimates are conservative for
the current cycle versus a six-year average of 126bps for ICICI.
Stronger balance sheet and leaner opex structure to sustain RoA
We expect a stable NIM of 2.63% for FY13F on the back of loan growth of
17% for FY12F and 20% for FY13F, backed by an average CASA ratio
41.3% for FY12-13F. We expect RoA of 1.28% for FY12F and 1.25% for
FY13F, with a comfortable leverage of 8.4x for FY12-13F.
Valuation: Trades at 1.7x FY13F ABV and 15.6x FY13F EPS
Our target price of INR1,050 is derived from INR870 for the core bank and
INR180 for subsidiaries. At our TP for the core bank, ICICI would trade at
1.7x FY13F ABV and 15.6x FY13F EPS for an ROE of 11%.
Catalysts: Reversal of global portfolio risk aversion, revival in global
corporate activity of Indian companies, resolution of infrastructurerelated
bottlenecks would drive upside risk for ICICI Bank, in our
view.

HDFC Bank :Buy rating- Defensive as always: Nomura Research

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


Action: Initiate with a Buy and a TP of INR570
We recommend buying HDFC Bank for its profit record, low-cost deposit
franchise which is back to its pre-CBOP levels, and strong retail lending
orientation which should help sustain earnings growth in the current
environment.
Robust liability franchise, highly liquid balance sheet, retail loan
orientation and a strong capital position
HDFC Bank’s strong CASA deposit base, which we expect to grow at 20%
for FY12-13F, should help shield core NIMs at 4.1% for FY12-13F. The
retail tilt in the loan book is a positive, in our view, as retail loans are
tracking strongly. A tier-1 capital of 11.4% (at 2Q FY12 excluding profits)
further strengthens the bank's ability to grow profitably.
The best asset-liability mix in the sector
HDFC Bank's focus on short-term corporate working capital loans with
minimum exposure to long-gestation projects backed by its sector-leading
CASA ratio should support high margins and maintain the profit track
record (30% y-y growth for the past 11 years). LLPs have ranged from
80bp-100bps over the past four quarters vs our conservative estimate of
105-120bps until FY13F. We still see 21% PAT growth in FY12F and 22%
in FY13F.
Valuation/catalyst: Trades at 3.3x FY13F ABV, ROE of 18.6%
HDFC Bank currently trades at 3.3x FY13F ABV of INR142.72 and 19.4x
FY13F EPS of INR24.71. At our TP, HDFCB trades at 4.0x FY13F ABV
and 23x FY13F EPS for an ROA of 1.52% and ROE of 18.6%.
Accelerated monetary policy easing is a potential catalyst.

Axis Bank: Best leveraged for a turn in the rate cycle - Buy for high beta :: Nomura Research

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


Action: Initiate with a Buy rating and TP of INR1,400
We recommend a Buy rating on AXSB for its high beta asset book, robust
funding franchise and valuations, for which we have already factored in
stress-case loan losses. In our view, AXSB is best leveraged to a turn in
the rate cycle in India.
Factoring in stress-case LLPs for power sector bad loans
We build in LLPs of 71bps and 104bps for FY12F and FY13F,
respectively, for possible loan losses related to AXSB's power sector
exposure. Our forecasts factor in incremental slippages of 200bps through
FY13F, compared with management guidance of 100bps. While street
estimates have yet to factor in these LLPs, we believe the valuations
already reflect this and we recommend adding to positions at the current
level.
We expect strong loan growth, high CASA per branch to sustain RoE
We expect AXSB to clock loan book growth of 23.5% for FY12F and
22.3% for FY13F, versus system loan book growth of 16-18% for FY12F.
Given current CASA momentum, we expect a CASA CAGR of 22.5%
through FY13F, which should help to maintain NIM in the 3.4-3.5% range.
We expect a 22% CAGR in core fee income through FY13F.
Valuation: AXSB shares are trading at 1.9x FY13F adjusted book
value and 11.6x FY13F EPS. Our TP of INR1,400 implies FY13F P/ABV
of 2.4x and P/E of 14.1x, for an ROA of 1.3% and ROE of 18.4%.
Catalysts: A turn in the rate cycle and investment cycle, plus
accelerated resolution of power sector bottlenecks.


Valuation
Initiate with Buy and TP of INR1,400
We expect Axis Bank to grow its loan book at a CAGR of 23% over FY11-13E. We
expect this to drive revenue and PAT CAGRs of 21% and 12.4%, respectively, over the
same period after factoring in stress-case LLPs of 104bps for FY13F. We expect Axis
Bank to clock RoA and adjusted RoE of 1.3% and 18.4%, respectively, for FY13F. Axis
Bank shares currently trade at 1.9x FY13F adjusted book value (ABV), which is 1
standard deviation below its historical mean of 2.4x one-year forward ABV. Our TP of
INR1,400 implies FY13F P/ABV of 2.4x. We arrive at our TP of INR1,400 using a threestage
residual-income valuation methodology that assumes the following:
• We forecast loan book growth of 23.5% for FY12F and 22.3% for FY13F, versus
management guidance of 23-25% over FY12-13E.
• We forecast fee income growth of 23% for FY12F and 21% for FY13F.
• We estimate NIM of 3.45% for FY12F and 3.5% for FY13F, from 3.78% for 2Q FY12.
• On the bad loan front, we build in an increase in GNPLs to INR34.2bn (1.6% of loan
book) in FY13F, from INR16bn in FY11. We also forecast NNPL of INR8.9bn for
FY13F, up from INR4.1bn in FY11.
• Axis Bank currently has a capital adequacy ratio of 11.4% with tier-1 at 8.5% (9.3%
including 1H FY12 profits). We factor in issuance of 13.78m shares towards the Enam
acquisition.
• Axis Bank’s employee headcount was 25,590 at end-FY11, and we assume an addition
of 5,215 new employees by the end of FY13F. We expect the cost/income ratio to be at
43% in FY13F, from 42.7% in FY11, and we expect the cost/asset ratio to stay flat at
1.95% for FY13F, compared to 1.97% in FY11.
• We forecast pro forma diluted EPS of INR89.8 for FY12F and INR99.6 for FY13F. At
1.9x ABV and 11.6x diluted EPS for FY13F, we believe the stock is attractive. Our
target price of INR1,400 implies 2.4x adjusted book value (adjusted ROE of 18.4% for
FY13F) and 14.1x EPS for FY13F.


Key catalysts: Accelerated monetary policy easing, policy intervention to resolve power
sector bottlenecks, such as fuel availability and SEB (State Electricity Board) financial
health, are key upside catalysts.
Key risks: RBI persisting with a tight money policy, policy inaction with respect to power
sector bottlenecks and continued global macro uncertainty are potential downside risks.
Residual income valuation
We build the following assumptions into our three-stage residual-income model:
• We expect Axis Bank to grow its interest-earning assets at a CAGR of 21.9% over
FY11-14E, compared to an industry average of 17% on our forecasts. We expect this to
be followed by a CAGR of 12.9% over FY13-20E and a terminal growth rate of 4%
beyond that.
• We have modeled for an average ROE of 18.8% over FY12-20E and an 18.3% terminal
value ROE. Our discount rates range from 14.85% (current cost of equity) for FY11-
14E, 12.25% for FY14-20E and a 10% terminal rate.
• Our book value estimates factor in 3.5% dilution towards the Enam acquisition

India banks: Loan-loss fears priced in, rate cycle turn isn’t; set sail :: Nomura Research

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


Action: Initiate coverage of Indian banks; headwinds to tailwinds
We initiate coverage of the Indian banking sector with a Bullish view as we
believe current headwinds in the form of tight monetary conditions, higher
government borrowing and credit losses from utility loans are priced into
current valuations. We believe many banks are well positioned to leverage
the impending turn in India's rate cycle. We believe current valuations
factor in the worst, but do not price in the benefits of a rate cycle turn.
Attractive even after factoring in stress case LLPs for utility loans
We calculate the likelihood of the restructuring of 60 power projects that
have achieved financial closure by analyzing their fuel linkages and
demand agreements. Our proprietary analysis indicates that the proportion
of loan book of our covered banks, which are at risk of being restructured,
ranges from 1.3%-3.5%. We expect their LLPs to peak out at 120bps in
this cycle and we have factored these provisions into our forecasts. Our
analysis of the provisioning cycle in India for the last 15 years indicates
these are stress-case provisions comparable to relevant episodes in the
past. If these loan losses come to bear, we estimate an average ROA loss
of 21bps across the sector, which we believe is priced in at current levels.
We back-test this ROA loss by a factor analysis of ROA to fundamental
drivers like net interest income, fee income, cost efficiency and LLP.
Savings rate deregulation: seems more dynamic than headline CASA
The deregulation of interest rates on savings accounts is likely to change
many of the competitive dynamics in the sector, but in our view, it is too
early to distinguish winners from losers on this count. We enumerate a
number of dynamics that are at play here. We will continue to side with
banks that have a wide product suite, excellent service levels and a
demonstrated ability to respond to structural changes in the industry.
Crowding out concerns appear overplayed
We are budgeting in base-case loan growth of 16.5% for the banking
sector for FY12F. To achieve this, credit growth for the rest of the year will
have to be 18% annualised (or flat incremental addition compared to
2H11). The current incremental LDR of 50% leaves significant scope for
loan growth to improve through the rest of the year and we see no risks to
our loan growth estimates.
SBI (Buy; TP: INR2,400) and Axis Bank (Buy; TP: INR1,400) are our top
picks. We also initiate on HDFC Bank (Buy; TP: INR570), ICICI Bank (Buy;
TP: INR1,050), Indusind Bank (Buy; TP: INR325), Bank of Baroda (Buy;
TP: INR950), Punjab National Bank (Neutral; TP: INR1,070), HDFC Ltd
(Buy; TP: INR780), and IDFC (Neutral; TP: INR140).

Are equity systematic investment plans worth it? ::IIFL

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

Now, the question arises as to how can one safeguard their money from market volatility? The answer lies in Systematic Investment Plans in Equity.

Now-a-days, with the effect of rising inflation, the importance of money is increasing day by day. Money has become the first priority in everyone’s life as it is needed in various stages of life at any time. In this expensive world, it is unwise to keep money idle.  So, the need is to make money from the money we have which can be achieved by making the right investments. Though the equity market gives good returns, it is highly volatile due to its constant rise and fall. Now, the question arises as to how can one safeguard their money from market volatility? The answer lies in Systematic Investment Plans in Equity.

What are SIPs?

The Systematic Investment Plan (SIP) is a simple plan to increase wealth over a long period of time in a disciplined manner.  It allows us to invest in the stock market by way of mutual funds so that you can beat the ups and downs in the market by averaging your cost and diversifying across sectors. Equity SIPs of different amounts and time periods are offered by many brokers like ICICI Direct, HDFC securities, Reliance Securities , Kotak Securities , Geojit BNP Paribas Financial Services , Motilal Oswal Financial Services and IIFL.

Who can deal in the Equity market?

Anyone can enter the equity market and build their own portfolio through DIY-SIP in equities, a product offered by HDFC securities. DIY SIP stands for Do It Yourself Systematic Investment Plan. Another option is the Reliance Securities of the Anil Ambani group introduced RSP (Research Stock Purchase). DIY-SIP allows the customers to enter in the market with small investments. It provides a systematic way to gain direct exposure in the equity markets. ICICI started the new concept of equity SIPs on the lines of mutual funds. It invests a fixed amount every month or invests in a fixed number of stocks daily where one can invest in any blue chip funds or Exchange Traded Fund (ETF).

About Blue Chip Funds

Blue chip value funds provide updates on monthly holdings on or around the 15th of each month .There are several ways to invest in Blue Chip Funds. Shares can directly be acquired by the investors through a broker, a direct stock purchase plan or a dividend investment plan. The best way is to invest in the ‘Diamonds’. Diamonds are the investment instrument traded on the American Stock Exchange. As Diamonds have the dual advantage of low expense ratio as well as tax efficiency, they are preferable over blue chips mutual fund.  Diamonds are most efficient as they are traded on an exchange.

Investing Do’s and Don’ts

When one is investing in the market, they should first analyze the market.

While investing, one should keep some amount aside as a reserve.

People should invest in small sums and must diversify their investments. One should never keep all eggs in a single basket.  

Investing in small amount is also helpful as then, in case of a loss, the amount can be recovered easily.  

Equity SIP is a method by which customers have the option to invest their funds at a particular fixed frequency of time. It allows systematic investment in a disciplined way.

SIPs generate returns over a long period of time; they do not give results immediately. One has to be patient while investing in SIPs and be prepared to give it some time to fructify.

When the market is high you should buy less number of shares, and when the market is low you should buy more number of shares. Get the benefits compounded over a period of time.

Money should always be in routed form. This means that if you are investing some amount than you should also get some returns on it, in other words, you should assess your Return on Investment or ROI. There should be a money life cycle.

With Equity Systematic Investment Plan, it is a customer’s choice to invest at specified frequencies which may be daily, weekly or monthly. You need to vary only the amount of the investment every time you buy the stocks, depending on the stock price in the market. One should invest more when the market is down and should sell it when the market is up so that lesser investment can earn you more returns. Investment can be done in various means like in gold, shares, debt instruments or a combination. The amount to be invested can be transferred through a cheque or online from your account.

Why should one choose Equity Systematic Investment Plans?

It allows you to buy shares, gold etc. at low rate and well spaced out intervals and sell them when the rates are high. There is a lock-in period of SIP’s of 3 years after which one can choose to stay invested in the SIP or cash out. One mistake committed by many investors is that they buy shares at high rates and sell them when the market is going down. Equity SIP enables one to  avoid this mistake.

Equity SIPs also help one by avoiding the risk of buying shares at high rates. Many a time, it may be possible that for certain period of time, the market is moving down. At this time you should not get panicked and cash out of your investments. You must continue your investment through Equity SIPs and give them some time to bear fruit.  Equity Systematic Investment Plans are meant for long term investors. Moreover, the choice of the stock should be made based on the fundamentals of the company.

Equity SIPs are extremely beneficial for those who do not know when to enter and exit the market. With the help of Rupee cost averaging, one tends to invest a fixed sum and not in a fixed number of shares. This practice works more often than not for investors. Also, through Equity SIPs, there is no need to pay extra charges for buying shares. However, one must understand that everything does have a flip side and in this case, the disadvantage is that equity SIPs being market linked instruments, the risk involved is also substantial.

When anyone invests in Equity SIPs, no additional cost is applicable other than the charges of the regular brokerage and the cost for maintaining an account to hold shares in electronic format.

Equity SIP works almost like Mutual Funds (MFs). Broking charges vary depending on the investors; they must understand the market and then invest. Today, some  Asset Management Companies (AMCs) or mutual fund houses also provide the ease and convenience of transacting games. They have set up their online transactions platforms, where one can invest in SIPs through IPIN (Internet Personal Identification Number). For a person investing in the market, the necessary condition is that they should be patient. One must understand that they have to stand their ground during market swings. Sometimes, the market may see a major correction. During such situations, an investor should try and buy shares so that the loss in previous investments gets adjusted. When the market rises again, one can sell the shares and book profits. If a person invests in a wrong instrument, he should exit it as soon as possible. With the amount earned, he can buy another product after conducting his research.

Equity SIPs helps one to gradually increase their wealth by investing small amount of money regularly, over a long period of time.