Suzlon Energy: Small volume miss, large bottomline miss ::JP Morgan

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


Sept-q shows Suzlon’s cash flow vulnerability to small volume slip-ups.
The company reported a loss, as against our expectation of a sustained
turnaround. Notwithstanding recent stock underperformance, we think
concerns on shortfall in operating cashflow to meet debt obligations,
would constrain stock performance going forward
 Sep-q sales volumes below estimate, resulting in a loss. Suzlon reported a
Sep-q consolidated loss of Rs829M (adj for forex losses, Hansen stake sale
vs. our profit estimate of Rs931M). The wind business reported an adj. loss
of Rs1.7B, as against our turnaround expectation. Volume slip-up caused
the miss - 420MW vs our estimate of 495MW, 1Q 437MW. Barring 25MW
sold in China, there were no international sales or fresh orders. Gross profit
margins at Rs24.3/MW were up 18% yoy due to higher realizations.
 Suzlon’s shift to domestic market visible. YTD, Suzlon reported 670MW
of inflows down 33% yoy. 95% of the new orders and 82% of YTD sales
have been in India. YTD Suzlon has achieved 38% of our sales estimate for
FY12, with India largely on track with 44% of FY12E of 1.6GW achieved.
But international sales estimate of 650MW remains at risk.
 REPower had a relatively better quarter. REpower reported PAT of
Rs1.03B vs. 1QFY12 PAT of Rs0.8B and 2QFY11 loss of ~Rs310M.
Similar to last quarter, REPower benefited from FX gain on translation of
COGS in 2Q as well. With a $4.1B OB, REPower has good revenue
visibility with inflows picking up in Europe and Developed Markets.
 FY12 guidance maintained: Suzlon has maintained its consol FY12
guidance of Rs240-260B sales (JPMe of Rs227bn, 2H asking rate Rs133B
+115% yoy) and EBIT margin of 7-8% (JPMe 6.6%, 2H asking rate Rs9.9B
i.e. 7.4% mgn). Notwithstanding the slippage in 2Q, we think Suzlon is
banking on making up lost volumes in 2H.
 Leverage and its costs increase. Consol Net D/E increased to 1.7x as of
Sep-11 compared to 1.4x at the end of FY11 as acquisition loans (possibly
for acquisition of balance stake in REPower) and FCCBs (given the recent
$175M issue) increase. In the Sep-q interest costs were up 34% yoy and
20% qoq, and 1H expenses are now tracking ahead of our estimate for
FY12.

India IT Services Tactical gainers from the weaker INR are ironically not the stronger companies - what are the criteria to identify them? ::JP Morgan

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


Companies that are tactically gaining the most from the weak INR are
interestingly those that lose the most from the INR strengthening. Which are
these? Typically, they are stocks that satisfying these two criteria:
 Modest operating margins – A small positive delta can produce more
significant % changes in EBIT for a lower-margin company than a more
profitable peer (having comparable exposure to USD billing as % of total
billing). Rule of thumb, a company with 15% EBIT margins should gain
twice as much as a company with 30% margins purely from the INR
weakness because of similar absolute EBIT increment from INR
depreciation over a lower EBIT base (15%). For example, a 1%
depreciation of the USD against the INR affects TCS’ margins by 40 bps
and HCLT’s margins by 30 bps, because of the latter’s much lower
operating margins (HCLT’s margins at 14% is almost half of TCS’),
HCLT’s EBIT gains over 1.7x in % terms (as TCS’ EBIT).
 Skewness of cost structure towards offshore or INR-denominated cost
structure – Larger companies such as TCS/Infosys/CTSH/Wipro have
more costs onsite than offshore. USD denominated costs are a natural
hedge against the USD-INR fluctuation leaving the INR-based costs (or
costs in India), naturally unhedged. Companies that have a much larger
proportion of offshore or INR denominated costs in their cost structure
because of their business model are more vulnerable to the INR
appreciation because of lack of natural hedge in their cost structure.
Conversely, these companies gain more when the INR depreciates (as it is
depreciating now) – all other things remaining the same.
 Tactically, those in Indian IT Services who are gaining because of this are
certain mid-caps such as MindTree (NR), KPIT Cummins (NR), eClerx
(NR) and Persistent Systems (OW) who have very offshore-centric
business models with offshore revenues. Offshore revenues for these
companies well exceed 50% of their revenues and offshore effort exceeds
80% of the total effort. Of course, almost all India-based BPOs fall in this
category given that the BPO is a very offshore-centric business model.
BPOs such as EXL, WNS and Genpact have had significant stock
appreciation in the past two-three months handsomely beating the Indian
IT index (returns measured in USD) since June 2011 (2QCY11).
 The conclusion is that if one wishes to tactically play the weak INR
trade in Indian IT and assess which companies gain more from the
weak INR (assuming they have a decent business outlook), seek out
those companies that satisfy the above two criteria – all other things
being equal. Investors should note that this is a tactical trade that will
reverse as soon as the INR reverses its course of depreciation against the
USD. Also, we must examine companies’ hedging position so to see to
what extent gains from the weak INR flow through to PAT from EBIT.

Technology: 2QFY12 earnings review—on balance, positive : Kotak Sec

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


Technology
India
2QFY12 earnings review – on balance, positive. Sep 2011 was a robust, albeit not
spectacular, quarter for the Indian IT services players. Positives – (1) 3-8% qoq c/c
organic rev growth for Tier-Is; some mid-caps did better, (2) margins, aided partially by
currency, held up well across names, barring Wipro, (3) string hiring trends, and (4)
buoyant management commentary on demand pipeline and pricing. Negatives – (1)
tepid Dec quarter rev growth guidance from Cognizant, and (2) poor FCF generation,
especially for Wipro and HCLT. We remain constructive. Infosys/TCS top picks.

Domestic Health Check-Quarterly Update ::ICICI Securities

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


A n t i - i n f e c t i v e s ,   G I   r e s t r i c t   o v e r a l l   g r o w t h …
For the quarter ended September 2011, Indian domestic formulations
grew at 13.2%, their slowest growth since September 2010 according to
latest AIOCD data. This was on account of a dismal show by some acute
therapies. The growth rate has come down from 17.6% in Q2FY10 and
14.9% in Q1FY12.
Anti-infectives, the biggest therapeutic group (~18% share), was the
main dragger. It grew by just 6.8% during the quarter. Other major
laggards were respiratory, gastrointestinal (GI) and anti-inflammatory
which grew by 8.3%, 9.7% and 11.4%, respectively. The reasons cited
by industry players for slower growth in anti-infective were severe
pricing pressure on account of stiff competition from new domestic
players and existing MNCs, maximum attrition among medical
representatives (MRs) due to heavy poaching, extended monsoons and
lower offtake. Similar reasons were sited for tepid growth in other
laggards. Only two acute categories vitamins\minerals and dermatology
clocked above average growth rate. On the upside, chronic segments
such as cardiovascular (CVS), anti-diabetic and neuro/CNS did well and
grew by 19.4%, 24.9% and 14.8%, respectively.
Among players, Pfizer, Sun Pharma and Lupin registered strong growth
of 24.1%, 20.5% and 19%, respectively. Both Sun and Lupin did well in
acute as well as chronic therapies. Pfizer was a standout gainer in an
otherwise muted anti-infectives segment. On the downside, Unichem
(negative growth), Indoco Remedies and Dr Reddy’s reported paltry
growth on account of pressure in acute therapies. Torrent, Ipca, Zydus
Cadila and GSK also reported muted numbers.

BuyNCC Ltd; Target : Rs 64 :: ICICI Securities

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


E x e c u t i o n   m i s s e s   i m p a c t   r e s u l t s …
NCC reported disappointing Q2FY12 results led by slower execution,
lower margins and higher interest costs. The company reported a topline
of | 1090 crore in Q2FY12 vs. our estimate of | 1273 crore on account of
weak execution. The reported PAT at | 11.4 crore was lower than our
estimate of | 29.3 crore due to execution miss, lower OPM and higher
interest cost (up ~89% YoY to | 71 crore) during the quarter. The
management has also lowered its FY12 standalone revenue guidance to |
5600 (implying YoY growth of ~20.7% in H2FY12) from | 5900 earlier. We
believe this is still an uphill task considering the H1FY12 performance and
challenging macroeconomic environment. We maintain our BUY rating
with a price target of | 64 per share purely on account of valuation.
ƒ Disappointing performance…
NCC reported a topline of | 1090 crore in Q1FY12 vs. our estimate of |
1273 crore on account of weak execution. The EBITDA margin at 9.5%
in Q1FY12 was lower than our estimates of 10%. The reported PAT at |
11.4 crore was lower than our estimate of | 29.3 crore due to execution
miss, lower OPM and higher interest cost (up ~89% YoY to | 71 crore).
ƒ Guidance for FY12 lowered, still an uphill task…
The management has lowered its standalone revenue guidance to |
5600 crore vs. | 5900 crore guided earlier. We believe that the new
revenue guidance (implying YoY growth of ~20.7% in H2FY12) is an
uphill task given the H1FY12 performance and challenging
macroeconomic environment. Therefore, we have now built in lower
growth of ~10% YoY in H2FY12.
ƒ Order book guidance remains strong…
NCC secured orders worth | 1,736 crore in Q2FY12 to close the order
book at | 16,570 crore at the end of the quarter. The management has
guided for order inflow of | 9,000  crore (ex – Nelcast power project
worth ~| 5,000 crore expected in FY12 only) as it aims to bag road
projects worth ~| 2500 crore from NHAI in FY12.
V a l u a t i o n
At the CMP, the stock is trading at 2.8x FY13E adjusted P/E and 0.5x FY13
P/BV. We maintain our  BUY recommendation on the stock with a price
target of | 64 per share purely on account of valuation.

QUERY CORNER - ONGC still in structural uptrend :: Business Line

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

What is your view on Corporation Bank? Is it a good stock for long-term investment?

Swaminathan

Corporation Bank (Rs 418.9): The structural trend in Corporation Bank continues to be up despite the steep correction witnessed since last November.

Key long-term trend deciding level is at Rs 400. Presence of the 200-day simple moving average at that level adds to its significance. Strong decline below Rs 400 will put the long-term outlook in jeopardy and the stock can go on to decline to Rs 275 or even lower. Therefore, fresh purchases are not recommended on a close below this level.

Conversely a reversal from this level will take the stock higher to Rs 560 or Rs 660 in the upcoming months.

The stock needs to move beyond the second resistance to signal that it is on its way to a new high again. Investors with short- to medium-term perspective can divest their holding at either of these levels. Investors can wait for a weekly close above Rs 460 before buying the stock.

Please discuss the medium- and long-term outlook of Marico and Dabur India.

Anil

Marico (Rs 147.3): Marico belongs to the privileged bunch of stocks that have been unscathed by the ongoing correction. It is currently trading close to its record high of Rs 172. Key medium-term support for the stock is at Rs 135 and if it manages to hold above this level, sideways movement between Rs 135 and Rs 170 can follow for few months.

Breach of the support around Rs 135 will take the stock to the next support zone between Rs 125 and Rs 110 and then to Rs 95. Long-term investors can buy the stock on declines with a stop at Rs 95.

The area around Rs 170 is acting as a strong resistance currently. However, breach of this level will take the stock up to Rs 200.

Dabur India (Rs 98.5): Dabur is yet another stock that had been cocking a snook at the ongoing correction this year, going on to a record high at Rs 122 this June.

But, it is in a mild corrective phase since then, that has pulled the stock close to its psychological support at Rs 100. Key medium-term support is, however, lower at Rs 87 and investors can utilise declines to buy the stock as long as it trades above this level.

Sideways move between Rs 87 and Rs 125 will in fact be construed as a positive long-term base-building move by the stock. However, decline below Rs 87 will mean that the stock will slide lower to Rs 76 or Rs 65 in the months ahead.

Long-term target on a break-above Rs 125 is Rs 136 and Rs 170.

Could I consider buying SAIL and ONGC at current levels from one to two years perspective?

Chayan Sarkar

SAIL (Rs 105.3): SAIL has been badly battered in the market fall since this April. The stock is down around 40 per cent since the April high of Rs 177. It is currently trying to stabilise itself around Rs 100 but this is a tenuous support. The stock has already breached the key long-term trend decider at Rs 133 and is currently trading well below this level. The attempts by the stock to move higher since August have also not been successful.

Investors with long-term perspective can wait for a move above Rs 160 before buying this stock. Investors with greater risk-taking ability can buy at current levels. The stock can also be accumulated if it declines to the next long-term supports at Rs 70 or Rs 59.

Resistances for the medium-term would be at Rs 160 and Rs 200. Long-term resistance is in the zone between Rs 260 and Rs 280.

ONGC (Rs 265.8): The structural trend in ONGC is still up, and the stock is attempting to stabilise after retracing half the gains made since January 2009. Immediate support for the stock is at Rs 260. If this level is breached, the stock could halt around Rs 225.

Investors with long-term horizon can, therefore, buy the stock on declines with stop at Rs 220. Halt above this level can make the stock move higher to Rs 314 or even Rs 370.

The long-term picture will, however, deteriorate if the stock declines below Rs 220. That will imply that it can move lower to Rs 200 or even Rs 153 in the medium-term.

Please give the short- and long-term outlook of Rolta.

Krishnamurthy K.S.

Rolta India (Rs 76): In our review of Rolta in May, we had written that the stock could be accumulated in the zone between Rs 110 and Rs 150 with stop at Rs 100. The support at Rs 100 was firmly penetrated in the last week of September, and the stock recorded the trough of Rs 69 last month.

Needless to add, the long-term trend in the stock is down. It could head lower towards the long-term support at Rs 40 or Rs 42 in the months ahead. Rs 40 can act as the stop-loss for long-term investors.

Key medium-term resistances are at Rs 124, Rs 157 and Rs 210. The long-term view will turn positive only if the stock records strong weekly close above Rs 260.

Please let me know the long-term prospects of Kansai Nerolac and Clariant Chemicals.

Deepak L. Pai

Kansai Nerolac Paints (Rs 861.1): Kansai Nerolac is in a strong secular uptrend since its bear market low at Rs 178. Though the stock is in a corrective phase since last October, this correction is a sideways-moving shallow one rather than a deep one. This correction is halting at Rs 720 that occurs at 38.2 per cent retracement of the rally from March 2009 lows.

Investors can continue to hold the stock with stop at Rs 700. Sideways move in the band between Rs 700 and Rs 1,050 will mean that the stock can break higher to Rs 1,260 or Rs 1,595 over the next two years. The zone between Rs 1,000 and Rs 1,050 will, however, continue to act as a strong medium-term resistance.Fresh purchases are not recommended if the stock declines below Rs 720. Subsequent targets are Rs 620 and Rs 514.

Clariant Chemicals (Rs 655.1): Clariant Chemicals is also in a long-term uptrend despite the correction since last October. This decline is halting at the key long-term support around Rs 600 and long-term investors can continue to hold the stock with a stop-loss slightly below, at Rs 580.

If the stock manages to bide its time in the range between Rs 600 and Rs 850 for a few more months, chances of a break-out of the upper ceiling to Rs 1,030 are bright.

If the stock breaches the buttress at Rs 600, investors should brace themselves for further declines to Rs 500 or Rs 420.

Please let me know the technical prospects of IDBI Bank.

Vivek Agarwal, Shantha. D. Pai, Kavitha Jegadesh.

IDBI Bank (Rs 107): This stock has strong long-term support around Rs 100. It declined slightly below this level to record the low of Rs 95 in October. Investors can hold the stock with stop-loss a little below, at Rs 85. Breach of this support will spell disaster as the stock can then move down to Rs 58 or even lower.

Rebound from current levels will take the stock up to Rs 137 or Rs 162 over the medium-term. Investors with short- to medium-term outlook can book some profits if the stock reverses from either of these levels.

Buy Global Offshore; Target : Rs 101 ::ICICI Securities

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


I m p r o v e d   o p e r a t i o n a l   p e r f o r m a n c e …
Global Offshore (GOL) reported an improved QoQ performance for
Q2FY12 both on the revenue as well  as the net profit front. GOL’s
revenues increased by 14.7% to  | 52.9 crore (I-direct estimate:  | 59.6
crore) while it reported a net profit of | 5.7 crore (I-direct estimate: | 6.9
crore) as against a loss of | 2.1 crore in Q1FY12. Revenues were lower
than our estimates as GOL sold its AHTS vessel MV Garware I while MV
Kailash was employed for just 21 days and MV Garware V remained idle
during the quarter. GOL reported a substantial improvement in EBITDA
margin (QoQ 1015 bps and YoY 556 bps) to 43.5%.
ƒ EBITDA margin to stabilise
During H1FY12, GOL’s EBITDA margin (38.8%) had been lower on
account of significant expense incurred on mobilisation and modification
of two of its assets i.e. MV Kailash and MV  Beaucephalus for making
them suitable for new contracts. We expect the EBITDA margin to
improve in H2FY12 as these two  assets are now working on new
contracts, which will run till FY15.
ƒ High proportion of long-term contracts provide comfort
GOL operates a fleet of 11 vessels, which consist of six AHTS vessels,
four OSVs and one construction barge. The company sold its AHTS
vessel Garware I during the quarter. The company has strong revenue
visibility as majority of its fleet is deployed on long-term charter contract
with contracted revenue being  92% and 66% of FY12E and FY13E
revenues, respectively.
V a l u a t i o n
At the CMP of | 82, the stock is trading at 11.4x FY13E EPS of | 7.0 and
0.6x FY13E book value of | 127. We have valued the stock at 0.8x FY13E
book value to arrive at a price target of | 101 and recommend a  BUY
rating. Existing investors should also continue to hold the stock.

Hold Gujarat Gas; Target : Rs 410 ::ICICI Securities

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


P A T   d e c l i n e s   Q o Q   o n  h i g h e r   g a s   c o s t s …
Gujarat Gas’ revenues for Q3CY11 increased 28.8% YoY to | 653.3 crore,
above our estimates, mainly on account of higher-than-expected gas
sales volumes (326 mmscm) for the quarter. EBITDA margins increased
20 bps YoY to 18% on account of an increase in gross margins from | 4.0
per scm in Q2CY10 to | 5.0 per scm in Q3CY11. However, the gross
margins per scm decreased by | 1.1 per scm QoQ on account of higher
gas costs. The net profit for Q3CY11 increased 43.1% YoY to | 80.9 crore,
lower than our estimates on lower than expected margins per scm. We
have revised our volume estimates to 3.5 mmscmd (1260.5 mmscm) and
3.9 mmscmd (1388.2 mmscm) in CY11E and CY12E, respectively,
factoring in volume growth at higher LNG prices. Gross margins would
continue to remain strong as the company has been able to pass on
higher LNG costs to customers. We estimate CAGR of 28% and 24%
increase in revenues and net profits, respectively, over CY10-12E. We
recommend a HOLD rating on the stock with a price target of | 410.
ƒ Highlights of the quarter
Gujarat Gas reported a 3.5% YoY increase in gas sales volume from
315 mmscm in Q3CY10 to 326 mmscm in Q3CY11. The volume for
Gujarat Gas was ensured by the higher YoY procurement of shortterm LNG for the current quarter. Realisations increased by 24.9%
YoY from | 16.1 per scm in Q3CY10 to | 20 per scm in Q3CY11 to
pass on higher LNG cost to customers. EBITDA margins stood at |
3.6 per scm in Q3CY11.
V a l u a t i o n
The firm contracts for LNG would increase its gas sales volume from 3.3
mmscmd (1212 mmscm) in CY10 to 3.5 mmscmd (1260.5 mmscm) and
3.9 mmscmd (1388.2 mmscm) in CY11E and CY12E, respectively. Gujarat
Gas is trading at price/BV of 4.5x CY12E and has an RoNW of 32.3%
CY12E. We have valued the stock based on the DCF methodology (WACC
– 12%, terminal growth - 3%) to arrive at a target price of | 410.

UBS: Indiabulls Real Estate- Steady 2Q

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


UBS Investment Research
Indiabulls Real Estate
S teady 2Q
􀂄 Event: 2Q better than UBSe & consensus; operationally steady
2Q Revenues grew 11% YoY to Rs 3.3bn driven by higher value recognition of
Panvel. EBITDA grew strongly to Rs 1bn with margins at 31% (vs. 12% in Q1).
Q2 Net Income of Rs394mn declined 23% YoY but was impacted by one-time
interest expense of Rs 350mn. Pre-sales healthy at 1.2msf (vs. 0.78msf Q1);
leasing steady at 0.18msf (vs. 0.17msf in Q1); 1.96msf of 3.3msf leased. IBREL
acquired 34acres of Navi Mumbai land (Rs 1bn). Net debt flat at Rs 11.1bn.
􀂄 Impact: Lowering PT & earnings to factor in lower pre-sales visibility
We lower our FY12E/13E est. by 30%/19% & PT by 31% to Rs 125 factoring in
lower pre-sales visibility, likely margin pressures & higher interest costs. That said,
we maintain a 20% earnings CAGR through FY14E on better execution
momentum & execution picks up on mid-income projects.
􀂄 Action: Maintain Buy; Valuations outweigh risks
Though we see near-term Mumbai market weakness as an overhang, we believe
stock is trading below leased IPIT portfolio value (Rs85/sh). Further, with launch
momentum picking up (Navi Mumbai, Worli & Gurgaon) and restructuring clarity
on power subsidiary likely in Q3/Q4, we see progress on both as sentiment
positive.
􀂄 Valuation: Trading at distressed levels
We lower our PT by 31% to Rs 125 on a higher 45% discount (40% earlier) to
revised NAV of Rs 225 (vs. Rs 315 earlier). With stock trading at 1) 70% disc to
NAV 2) 0.3x P/B FY12E, we believe valuations outweigh risks at current levels.

Buy Mangalam Cement ; Target :Rs 139 ::ICICI Securities

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


H i g h e r   c o s t s   e r o d e   m a r g i n …
Mangalam Cement reported net sales of | 124 crore and EBITDA of | 7.4
crore, which were above our respective estimates of | 109 crore and | 5.2
crore on account of higher-than-expected cement realisation, which came
at | 3370/tonne (our estimate: | 3048/tonne). EBITDA/tonne came at |
202/tonne against our expectation of | 146/tonne. Net profit of | 0.7 crore
was below our estimate of | 1 crore on account of lower-than-expected
other income. Cement volumes remained muted during the quarter
because of a slowdown in construction activities due to the monsoon
season. With cement capacity expansion of 1.25 MT in Aligarh (UP), total
capacity would reach 3.25 MT by end of FY13E. We expect cement sales
volume of 1.61 MTPA in FY12E (flat YoY) and 1.75 MTPA in FY13E (up
~9% YoY).
ƒ Net realisation up ~12% YoY (down ~4% QoQ), volumes muted
Cement sales volumes declined ~4% YoY (increased ~2% QoQ) to
0.37 MT due to sluggish demand during the quarter. The realisation
increased ~12% YoY to | 3370/tonne but declined ~4% QoQ due to
a correction in cement prices across its markets.
ƒ EBITDA declines ~67% QoQ to | 202/tonne on lower realisation
The EBITDA/tonne increased ~161% YoY mainly on account of
higher realisation, which negated the impact of an increase in input
costs. However, it declined ~67% on a QoQ basis due to a decline
in realisation coupled with increase in costs.

V a l u a t i o n
At the CMP of | 103, the stock is trading at 10.4x and 6.2x its FY12E and
FY13E earnings, respectively. The stock is trading at an EV/EBITDA of 5.3x
and 6x FY12E and FY13E EBITDA, respectively. On an EV/tonne basis, the
stock is trading at $41 and $39 its FY12E and FY13E capacities of 2 MT
and 3.25 MT, respectively. We have  valued the stock at $45/tonne its
FY13E capacity of 3.25 MT, which is ~65% discount to the current
replacement cost of $130/tonne. We have maintained our BUY rating on
the stock with a target price of | 139/share.

Higher returns from post office savings schemes ::Business Line

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

The government has announced the freeing up the interest rates on post office deposits and small savings schemes on the lines suggested by the National Committee on Comprehensive Review of Small Savings. The committee had proposed pegging the rates of interest on post office deposits and small savings schemes to government securities with similar maturities, with a spread of 25 basis points in most instruments. What does this mean for interest rates on these schemes? Not much. The post office time deposits may see small increases in interest rates. But long term schemes such as the Senior Citizen's Savings Scheme and the Monthly Income Scheme will not earn much higher returns than now. The rate on another long-term scheme, the Public Provident Fund has however been raised to 8.6 per cent from the current 8 per cent. The investment limit has also been enhanced by Rs 30000 to Rs 1 lakh.

Pension tweaks

After many twists and turns, the insurance regulator has come out with final guidelines for pension products to be sold by insurance companies. It has said that life insurers can offer pension products both as market-linked and non market-linked plans. The original idea of such plans offering a guaranteed return of 4.5 per cent has been done away with. Instead, the regulator says that pension plans should specify the guaranteed maturity benefit at the outset. In short, investors should know the lump sum amount that they will receive on retirement.

No pre-payment penalty

Finally, there's some action on the waiver of pre-payment penalty. With the RBI questioning the incidence of this penalty, banks have now started to waive these charges. Among the early birds are Bank of India, Indian Bank and United Bank of India. SBI, which earlier waived the pre-payment penalty for new customers, has now extended the benefit to existing customers. However, for its fixed rate loans, there is still a pre-payment charge.

Demand your bank statement

Is your bank not providing you a passbook for your savings bank account or where there is statement facility, refusing to provide monthly statements? Then you may demand it under RBI's circular dated October 2006 as the central bank has once again reiterated that banks adhere to the earlier instructions in spirit.

Repayment of fixed deposits now with lesser hassle

Frustrated that your bank is demanding signatures of both depositors for allowing repayment of your fixed/term deposit? If you've opened a deposit account with ‘Either or Survivor' or ‘Former or Survivor' instructions, receiving repayment on your fixed deposits just got easier. In a directive, the Reserve Bank of India has said that if fixed or term deposit accounts are opened under ‘Either or Survivor', the signatures of both depositors need not be obtained for repaying deposits on maturity. In case your instruction is ‘Former or Survivor', the ‘Former' can withdraw the matured deposit even when both the depositors are alive. However, under both mandates, both signatures are required if the deposit is to be paid before maturity.

Cheques to have 3-month validity

With effect from April 1, 2012, you will have to cash your cheques, drafts, pay orders and banker's cheques within three months from the date of the instrument. Currently, you have a six-month period to cash these instruments. The RBI has stated that the six-month period is being misused by some to circulate the instruments like cash until it nears its tenure. Hence, it has decided to reduce the validity of cheques and other instruments.

Double Dhamaka

State Bank of Hyderabad has introduced a deposit scheme which would help investors double the money in 87 months, providing a yield of about 13.84 per cent. The product would be available to all resident and non-resident individuals. The minimum deposit required is Rs 10,000 and multiples of Rs 1,000 thereafter. There will be no premature penalty if the deposit is withdrawn after 60 months. In addition, customers can avail a loan against the deposit as well.

Godrej Consumer Products: Good all-round performance :Kotak Sec,

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


Godrej Consumer Products (GCPL)
Consumer products
Good all-round performance. GCPL reported strong sales growth – soaps 32%
(+19% volumes) household insecticides (HI) 29% (+25% volumes), hair color 15%
(+7% volumes) and Megasari, Indonesia 20% (in local currency). EBITDA and PAT
growth were 25% and 22%, respectively. We reckon that GCPL is likely gaining market
shares in HI and losing in hair color. It had net debt of Rs20 bn as of September 30,
2011. Our concerns on aggressive forex policy of GCPL remains. The key reason for our
optimism on the GCPL stock is our strong positive view on its prospects in HI business
(India HI and Megasari HI account for ~45% of sales and profits). ADD.

Raymond Ltd 2Q: Growth momentum continues ::Macquarie Research,

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


Raymond Ltd
2Q: Growth momentum continues
Event
 We hosted post 2Q FY12 Raymond (RW IN) conference call. The company
has reported consolidated net sales growth of 25% YoY to Rs9.8bn on
account of robust growth in Textile (up 26%), branded apparel (up 29%),
denim (up 31%) and auto components (up 32%) businesses. Consolidated
EBITDA increased 31% to Rs1.85bn on the back of 77bp margin expansion.
Impact
 Domestic textile business margin contracted 338bp. Domestic textile
sales grew 26% YoY to Rs5.0bn on the back of 4% volume and 17%
realization growth. Textile EBIT grew by 8% YoY to Rs1.0bn due to 338bp
decline in margins. Margin contraction was primarily due to higher raw
material cost (wool), which offset the cost savings due to Thane plant closure.
 Strong performance in other segments. Raymond’s branded apparel sales
grew 29% YoY and EBITDA margin expanded 750bp YoY to 18.6% on the
back of strong growth across all brands and savings from closure of nonprofitable
brands and retail stores. EBITDA for branded apparel business
increased 112% to Rs0.4bn. Other businesses also grew strongly:
 Domestic denim sales grew 31% YoY to Rs1.9bn, driven by 33%
realisation growth and marginal decline in volumes. Margins declined
254bp due to higher input costs.
 Auto components and files and tools sales grew by 32% and 37% YoY,
respectively. Growth was driven by strong volume growth.
 Management expects margin improvement, going forward. According to
the management, softening in key raw material costs such as cotton,
polyester and viscose is likely to improve its margin, going forward. Company
was also optimistic of slight moderation in wool prices and thinks all these will
help improve margin in coming quarters.
 Volume growth should pick-up during festive season. In the 2Q, the
volume growth for the textile business came down to 4% (from 24% in 1Q).
Management is hopeful the demand will pick-up again in the current quarter
due to ongoing festivals and wedding season ahead.
 Thane land monetisation can turn it cash positive. Post VRS settlement
with workers, Raymond has ~120 acres of prime land to monetize in Thane.
Company is currently exploring various options to monetise this land,
including complete sell or part-sell the land in phases. Going by the current
land rate in the area, land monetisation can generate Rs10-13bn of cash and
can wipe out its current net debt of ~Rs13bn fully.
Outlook
 Raymond is on a strong growth track and company’s recent initiatives are
driving the improvement in profitability. Adjusted for real estate business, core
textile business is currently trading at 7-8x FY12 PER and 4-5x EV/EBITDA,
based on Bloomberg consensus.

Small savings rates hiked; PPF limit raised to Rs 1 lakh ::Business Line

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

Interest rates on small savings have been hiked in the range of 4 per cent up to 8.6 per cent. The investment limit for Public Provident Fund (PPF) has also been increased by Rs 30,000 to Rs 1 lakh, as also the interest rate at 8.6 per cent from 8 per cent at present.

Announcing the new norms on Friday, the Finance Ministry said the new rates will be applicable from the date of notification which will be announced soon. From next year, the rates would be notified before April 1, it added.

The small saving schemes have been restructured on the basis of the recommendations of the Shyamala Gopinath Committee, which submitted its report in June.

The rate of interest on small savings schemes will be aligned with Government Securities rates of similar maturity, with a spread of 25 basis points with two exceptions. The spread on 10-year National Savings Certificates (new instrument) will be 50 basis points and on Senior Citizens Savings Scheme 100 basis points.

The maturity period for the post office Monthly Income Scheme (MIS) and National Savings Certificate (NSC) has been reduced to five years from six years at present.

AGENTS DISAPPOINTED

Although this is good news for small savers, collection agents are disappointed. According to an office memorandum issued by the Finance Ministry, payment of commission on PPF at the rate of 1 per cent and Senior Citizens Savings Scheme at the rate of 0.5 per cent will be discontinued.

Agency commission under all other schemes (except Mahila Pradhan Kshetriya Bachat Yojana) will be reduced by half, from the existing 1 per cent.

Sterlite Industries – 2Q12 Earnings miss expectations :: RBS

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


Sterlite's cons. 2Q12 ebitda of Rs24.8bn (+68%yoy and -10%qoq) was 13% below our estimates.
Crucial decisions with respect to starting new capacities add to uncertainty over profitability as
cost dynamics have undergone a drastic change in recent weeks. Maintain BUY

Grasim Industries – VSF business stabilises ::RBS

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


Recovery in VSF sales volumes and stabilisation in VSF prices were the key highlights of 2Q12.
EBITDA in VSF business was ahead by 28%. At its current valuation of 4.9x EV/EBITDA, the
stock offers best risk reward. Maintain Buy.


Strong VSF performance led to greater than expected EBITDA growth
􀀟 Consolidated net sales grew 27% yoy to Rs56.5bn in 2Q12, mainly due to strong growth in
the VSF and Cement businesses. Standalone net sales also grew at a robust 29% yoy to
Rs12bn in 2Q12 led by 27% growth in VSF and 60% growth in the Chemical business.
􀀟 Consolidated EBITDA at Rs9bn (5.5% ahead of our expectation of Rs8.5bn) in 2Q12 grew
25% yoy. EBITDA margin contracted substantially 1085bps qoq to 16% in 2Q12 from 27% in
1Q12, primarily affected by 756bps qoq rise in raw material cost to sales (25.7% in 2Q12) and
236bps rise in other expenses to sales (16.5% in 2Q12).

Power Grid - Positive data-points from Sep-q analyst meet ::JPMorgan

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


Mr. R.N. Nayak, CMD accompanied by senior management of PGCIL
addressed the analyst meet yesterday. The key takeaway was that the
momentum in capitalization seen in Sep-q has continued in the month of
October. So far in FY12, Rs51bn of transmission projects have been
commissioned. Of this ~Rs32.3bn was added to gross block in Sep-q and
~Rs10bn in October so far. Management did not give guidance on
capitalization but they seemed confident that the pick-up is likely to sustain.
We do not see any downside to our Rs98bn capitalization estimate in FY12.
For details on Sep-q results and our OW investment view on the stock see our
last note: "PAT adjusted for notional FX loss ahead of consensus, pick up in
capitalization on expected lines”
 Capex guidance for FY12 maintained. So far in FY12 PGCIL has
incurred Rs49bn of capex. Management is confident of a pick-up in balance
5months of the fiscal to achieve full-year target of Rs176bn and thus meet
11th Plan (FY08-12) target of Rs550bn. In our view, the capex guidance
appears challenging and we have maintained est. of Rs140bn capex in
FY12.
 Contract awards by PGCIL have gone up sharply in Oct-11: According
to management, so far in current fiscal Rs78.26bn of contract awards have
been completed, of which Rs36bn awards have been done in the current
month till date.
 Contract pipeline implies pick up in 2HFY12: As per management
Rs138bn of tenders are out. Bids have to be opened for Rs85bn of contracts
in next 45 days and awards are likely over next 3-4months. During 1HFY12
~64% of contracts were awarded to transmission tower EPC players or
conductor suppliers. In 2HFY12 besides a pick up in contract awards by
PGCIL we expect the share of awards to substation equipment suppliers to
play catch up.
 SEB debtors. According to management ~Rs5.33bn of receivables (of total
sundry debtors of Rs25.6bn) was over 60days normative payment cycle.
Management does not foresee default by any SEB and extensions to make
payment have been allowed to certain states post discussions in lieu of
PGCIL’s long standing relationship with such customers (SEBs). Investor
concerns had arisen from PGCIL's annual report disclosure on payment
delays (beyond 60days) in few pockets viz. Delhi, Daman & Diu and certain
North Eastern states.

Week of NOV 14: Pivotals: Reliance Industries, Tata Steel, Infosys, SBI :: Business Line

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

Reliance Industries (Rs 883.8)

Last week too, RIL traded in a narrow range between Rs 850 and Rs 900, initially testing the resistance at upper boundary and later bouncing up from Rs 850 on Friday. It added only Rs 4.3 last week. The stock is currently facing resistance at around Rs 900, a key resistance as well as its 200-day moving averages. Short-term traders can consider holding their long positions with stop-loss at Rs 847. Emphatic break through of Rs 900 will take the stock higher to Rs 920 or even to Rs 970 in the weeks ahead.

On the other hand, downward breach of Rs 847 can drag the stock lower to Rs 830. Subsequent supports are at Rs 809 and Rs 787. Medium-term trend in the stock is still down. Only a strong close above Rs 970 will reverse this trend. The stock has significant long-term support in the zone between Rs 700 and Rs 750.

State Bank of India (Rs 1,797.6)

Following the announcement of its September quarter results on November 9, the stock plunged steeply, breaching its 21- and 50-day moving averages. The stock lost 8.5 per cent in the previous week and is once again testing its long-term support band between Rs 1,700 and Rs 1,900. Short-term trend remains down as long as the stock trades below Rs 1,910 levels. Traders with short-term perspective can initiate fresh short position if the stock fails to move above Rs 1,860 while maintaining stop-loss at this level. The stock can decline and test support at Rs 1,710. However, strong move above Rs 1900 will lift the stock higher to Rs 2,000 and then to Rs 2,106. Medium-term trend continues to be down for the stock since this April peak of Rs 2,959. But the presence of long-term support in the band between Rs 1,700 and Rs 1,900 can cushion the stock in the ensuing sessions. Medium-term investors should trade with caution at current juncture. Conclusive breach of this support band can reinforce the downtrend and pull the stock down to Rs 1,715. Key resistance is in the range between Rs 2,500 and Rs 2,530.

Tata Steel (Rs 430)

The stock tumbled below its immediate support range between Rs 450 and Rs 454 and declined sharply and is testing next key support at around Rs 430. It has nosedived 8 per cent in the previous week. However, fresh long position is recommended only on a strong jump above the stocks significant resistance level of Rs 450. In that case the stock can climb higher to Rs 470 and Rs 490. Inability to move above Rs 450 will pull the stock down to Rs 419, Rs 410 and then to Rs 400. Therefore short-term perspective traders should tread with caution. The medium-term trend is down for the stock. Strong weekly close below the significant support zone between Rs 390 and Rs 400 will pave way for a decline to Rs 353 in the medium-term. However, a decisive break through of resistance at Rs 515 will alter the downtrend and take the stock upwards to Rs 553 or Rs 592.

Infosys (Rs 2,775.6)

Infosys slipped 1.9 per cent during last week. After testing its immediate support at Rs 2,730, it managed to rebound on Friday. Key supports for the stock are at Rs 2,730, Rs 2,700 and Rs 2,660. A reversal from Rs 2,700 will be cue for initiating long positions. Upside targets are Rs 2,850 and Rs 2,900. Short-term uptrend will be in threat if the stock dives below Rs 2,660 and it can decline to Rs 2,550 or to Rs 2,450 levels. The stock has significant medium-term resistance at around Rs 3,000, only a strong penetration of this level will lift the stock higher to Rs 3,500 in the upcoming months.

Sizzling Stocks: Glaxosmithkline Consumer Healthcare, Educomp Solutions :: Business Line

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

Glaxosmithkline Consumer Healthcare

Glaxosmithkline Consumer had been consolidating sideways between Rs 2,250 and Rs 2,500 from mid June until last week. It jumped 6.5 per cent in the previous week, emphatically breaking out of this sideways consolidation range. Moreover, the stock had advanced 5.5 per cent the week earlier, breaching its 21- and 50-day moving averages reinforcing the bullish momentum.

The stock is in an uptrend in all time frames. As the stock's daily relative strength index is entering into overbought levels we don't rule out a near-term corrective decline to Rs 2,500. Next supports for the stock are at Rs 2,315 and Rs 2,250. Key resistances are at Rs 2,700 and Rs 2,750.

Educomp Solutions (Rs 241.7)

The stock plummeted 10 per cent on Friday, after the company's announcement of poor September quarters results. It failed to move above its key resistance at around Rs 280 which it was testing from early October and declined steeply. The stock's recent decline penetrated its short-term up trend line that was in place since early September and a key support level at around Rs 250. It appears to have resumed its intermediate and long-term downtrend. The stock may decline and reach its immediate supports at Rs 210 and Rs 190 in the medium-term. Significant resistances are pegged at Rs 250, Rs 280 and Rs 300.

Stock Strategy: Consider going long on HCC, short on JP Associates :: Business Line

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

JP Associates (Rs 76): The long-term outlook remains negative for JP Associates. Only a close above Rs 132 will change the outlook to positive. In the short term, the stock is likely to move in a slightly broader range of Rs 87-62.5. The stock finds immediate support at Rs 70 and resistance at Rs 82.

F&O pointers: The JP Associates November futures added fresh short positions on Friday. Option trading indicates a negative bias, as puts witnessed unwinding of open interest positions. At the same time, calls added fresh positions.

Strategy: Traders could consider going short on JP Associates. The stop-loss can be placed at Rs 80 for an initial target of Rs 73 and then Rs 70. This strategy is for traders who can stomach high risk since JP Associates is a high beta stock, and will swing more than the benchmark index.

Traders could also consider (selling) writing 80 call on JP Associates. It closed on Friday at Rs 1.10. The maximum profit is the premium collected, while the loss could be unlimited if JP Associates moved sharply above Rs 80 at the time of expiry. Market lot is 4,000 shares a contract.

Hindustan Construction (Rs 28): The long-term outlook remained negative for Hindustan Construction Company (HCC). However, in the short-term, the stock could see some resilience. The stock now finds immediate resistance at Rs 34 and support at Rs 27.

F&O pointers: The Hindustan Construction Company November futures added fresh short positions on Friday. Despite that the stock is moving up. While option trading is not that active, cues available from it indicate that Rs 27.5 could act as a strong support (as that call witnessed unwinding of open interest positions).

Strategy: Traders could consider going long on Hindustan Construction, keeping the stop-loss at Rs 27.5 for an initial target of Rs 32. Trail the stop-loss so as to protect profit potential. In case JP Associates opens on a positive note on Monday, investors can keep the stop-loss at day's opening for the recommended target. Market lot is 8,000 shares a contract.

Note: Both the strategies are for traders who have a penchant for risk, as the market lot is high.

Follow-up: We had recommended a short on Tata Global Beverages and VIP Industries. The latter achieved our initial target. The strategy on Tata Global is still in the money. As mentioned in the last column, the stock is a slow mover. Traders could consider holding on to the position with the mentioned stop loss.

Crompton Greaves India -- Disappointment galore :Macquarie Research,

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


Crompton Greaves India
Disappointment galore
Event
 Expectations of revival were belied in CRG’s 2QFY12 results. India business
has started facing problems and issues in overseas businesses remain
unresolved. We reduce our earnings estimates by ~15% and our target price
from Rs158 to Rs117. Retain Underperform.
Impact
 Problem creeping into India business: CRG’s India power business had a
7% revenue decline (v/s 11% growth in 1QFY12). The consumer business
continues to struggle with low growth of 4% and the industrial segment slowed
down significantly to 9% in 2QFY12.
 No revival yet in overseas power systems: Contrary to expectations, the
liquidation of inventories in overseas power systems has not taken place,
resulting in an increase of Rs5.5bn (~50%) from FY11 levels. We note that the
standalone company has been extending loans and advances to its overseas
subsidiaries to help them meet their rising working capital needs.
 Margin revival unlikely to happen in a hurry: Competition continues to hurt
India’s power business (30% decline in transformer realisations since Jan’09).
Interestingly, the recently won 765kV substation order from Powergrid has
~8% margins. Slow growth in the consumer business (~3% in 1HFY12) will
continue to pressure margins.
 Management maintains FY12 guidance: Management maintains FY12
guidance of 10-12% revenue growth, with 8-10% EBITDA margin in the
consolidated entity. It also plans to reduce its effective tax rate from 25% in
FY11 to 15% in FY12E on an increase in R&D expenses from ~Rs1bn in
FY11 to ~Rs2.5bn.
o CRG paid Rs1bn of tax at overseas subsidiaries in 1HFY12 despite
Rs3bn of losses, indicating that there is no tax offset across
geographies. Even with 15% tax rate on higher R&D, FY12 tax
outgoings will be at least Rs1.9bn (which has been paid in 1HFY12).
 Downside risks to consensus estimates: We believe there is downside risk
to consensus EPS estimate of Rs11 in FY12, given that CRG clocked just
Rs3.8 EPS in 1HFY12. We reduce our FY12-13E EPS by 15-16%.
Earnings and target price revision
 We cut our FY12-13E EPS estimates by 15-16%, mainly due to cuts in
margins. We reduce our target price from Rs158 to Rs117 due to cut in EPS
and target multiple from 15x to 13x, as uncertainty persists on the company
meeting its guidance and the lower tax rate boosting its earnings.
Price catalyst
 12-month price target: Rs117.00 based on a PER methodology.
 Catalyst: rising competition in India power and late revival in overseas power
Action and recommendation
 Investor confidence unlikely to return in a hurry: Operating performance
for CRG needs to improve significantly for investor confidence to return to the
stock. We retain our Underperform and revise our TP to Rs117.

Sun TV Network: Average quarter in a challenging environment : Kotak Sec,

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


Sun TV Network (SUNTV)
Media
Average quarter in a challenging environment. Sun TV reported 2QFY12 EBIT of
Rs2.48 bn (+3% yoy), marginally below expectations, led by multiple pressure points
notably (1) weak advertising environment, (2) Arasu Cable (cable subscription declined
qoq) and (3) Supreme Court judgment (DTH subscription declined qoq). The news flow
remains adverse given CBI inquiry into (1) 2G scam and (2) BSNL telecom lines issue,
reflected in valuation of 11.5X FY2013E EPS (>20% discount to Zee). Retain BUY with
FY2013E FV of Rs400 (Rs440 previously); stress case FV of Rs350 (Rs360 previously) is
likely a better metric given the uncertainty (rising debtor levels are a red flag in 1HFY12)
supported by Rs6.25/share interim dividend (~4.6% 1HFY12 annualized yield).

Hindustan Oil Exploration Company (Rs 126.9): Buy :: Business Line

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

We recommend a buy in the stock of Hindustan Oil Exploration Company from a short-term perspective. It is evident from the charts of the company that after registering a 52-week low at Rs 99 on October 5, the stock found support at its significant long-term base zone between Rs 95 and Rs 100.

However, the stock changed its direction thereafter triggered by positive divergence in the daily as well as weekly relative strength index and daily moving average convergence divergence indicator. Since then, the stock has been on a short-term uptrend. On October 28, the stock broke through its immediate key resistance at Rs 115 by jumping seven per cent with good volumes.

Moreover, reinforcing the uptrend, its rose seven per cent accompanied by extraordinary volumes on Tuesday. It is trading well above its 21- and 50-day moving averages. The daily RSI has entered into the bullish zone from the neutral region and weekly RSI has entered into the neutral region from the bearish zone.

Daily MACD is moving in line with the stock price and is on the brink of entering into the positive territory implying upward momentum. We are bullish on the stock from a short-term perspective. We expect its up move to sustain until it touches our price target of Rs 131 or Rs 135 in the days ahead. Traders with short-term perspective can buy the stock with stop-loss at Rs 123.

THREE-YEAR BLOCKBUSTER: MAHINDRA & MAHINDRA :: Business Line

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

The reasons for the superior returns clocked by the M&M stock are threefold.

One, the company operates in the utility vehicle (UV) segment, which both in 2008 and now, has handled the slowdown better than passenger cars.

Two, it derives about 40 per cent of its revenues from the sale of tractors, which have been on a high due to good agricultural growth, increased rural incomes and improving farm mechanisation. Tractors also enjoy superior margins to UVs, thus providing scope for overall margins to be higher.

Three, in the segments it operates, the company's product mix straddles across a wide range. For instance, it has products such as the Bolero, the Yuvraj tractor and a host of small commercial vehicles such as Gio, Genio and Maxximo at the lower end, as well as products at the premium end. This has helped M&M keep the volumes ticking as well as improve realisations.

The stock has also been aided by timely launches (such as Xylo, SUV500) at attractive price points. Acquisition of Ssangyong Motors (2010), which would extend its UV offerings into the premium segment, too has kept investor interest in the stock going. Its entry into the electric vehicles space in 2010 through the acquisition of Reva, a technology for which there is huge long-term potential, has also helped.

52 week FLOP: KINGFISHER AIRLINES :: Business Line

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

Buffeted by heavy debt burden and steep increase in fuel cost, Kingfisher Airlines seems to have landed in financial quicksand. The flight cancellation imbroglio last week is the latest in the series of bad news faced by the company, and reflects the make-or-break situation it finds itself in.

Over the last few months, the airlines' auditors have questioned its ability to survive without additional funds, analysts have labelled it bankrupt, and the company's move to exit the low-fare segment has found few takers. Kingfisher Airlines has been struggling for a long time now and has continuously been in losses since inception in 2005. This is primarily due to the huge debt on its books, which prevented it from posting profits even during the better days of 2010 when crude oil prices were benign.

The company's debt recast early this calendar, which saw lenders pick 23 per cent stake, had raised hopes about Kingfisher's prospects. However, the sharp rise in the price of crude oil to above $100 a barrel queered the pitch. Also, capacity increases and irrational pricing in the sector prevented fare rise to sustainable levels, and have amplified the company's losses. Kingfisher may be in urgent need of a lifeline now, but it remains to be seen whether lenders, who have seen the value of their stake erode sharply, oblige.

DB Corp: Buy :: Business Line

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

As a strong play on the domestic consumption story, more so in the rapidly growing Tier- 2 cities and towns, DB Corp offers an attractive investment option over the medium-term.

Investors with a two-year horizon can buy the shares of the company, given the continuing sound pace of advertising revenues growth and improvement in circulation.

At Rs 216, the share trades at 15 times its likely per share earnings for FY13, which is lower than the valuation that the company has historically commanded and slightly below that of its peers such as Jagran Prakashan.

An expanding share of resilient regional advertising, leadership in circulation in key markets, and increase in ad rates to prop realisations are key positives for the company.

In FY11, DB Corp's revenues increased 19.1 percent to Rs 1250.8 crore, while net profits expanded 41.4 percent to Rs 258.5 crore.

The momentum on the revenue front has continued into the first half of the current fiscal with a 16.7 per cent rise. However, profits have fallen by over 25 per cent as a result of higher newsprint costs and increase in selling expenses due to edition launches.

GROWTH IN SMALLER CITIES

DB Corp operates several newspapers, the main one being Dainik Bhaskar which is circulated in 11 Sates with 36 editions.

It also publishes a Gujarati newspaper in Gujarat and Maharashtra as well as a Hindi business daily in six States. The total readership for its newspapers is 18.1 million.

Dainik Bhaskar, the second most read Hindi Newspaper in India, is among the top papers read in Madhya Pradesh, Rajasthan, Chandigarh, Punjab and Haryana.

In Gujarat too, its regional language newspaper is among the most read. All these States contribute to the operating profits of the company. Given that growth in Tier-2 and Tier-3 cities and towns is increasingly driving growth for several sectors, the company's strong penetration in these markets would enable it to cash in on the trend.

RETAIL ADVERTISING STRONG

DB Corp derives around 80 per cent of its revenues through advertising. Despite concerns of a slowing economy, the company has seen an 18 per cent growth in advertising revenues in the first half of this fiscal over the previous year, a reflection of its strong presence in growing markets.

The other key aspect is that DB Corp derives around 62 per cent of its advertising from regional or retail advertisers. This segment is generally quite resilient to any slowing macro indicators. Evidence to this fact is the growth that retail advertising had even in the troubled 2008-09 years.

Retail (or regional or local) advertising has grown 20 per cent for the company even in the recent September quarter, while national advertising grew in single digits.

Sectors such as education, automobiles and lifestyle continue to be strong for the company. Apart from advertising, circulation too has picked up for the company.

In the first half of FY12, circulation revenues have grown by 9.3 per cent, with double-digit growth in the recent quarter. The company may increase cover price in key markets such as Madhya Pradesh, which could prop revenues further. The other key trend at a macro level is that DB Corp could benefit regional newspapers such as Dainik Bhaskar.

The premium that English language newspapers used to command in advertisingvis-à-vis regional ones is shrinking.

From 12 times higher rates that English Newspapers commanded in 2003, the number has come down to 4.8 times in 2010, according to a recent FICCI KPMG report.

COST PRESSURES

With newsprint costs spiralling, DB Corp's raw material costs, as a percentage of revenues, rose from 30 to 35 per cent over the past three-four quarters. In the recent September quarter, DB Corp also had to contend with a steep depreciation of the rupee against the dollar to nearly Rs 50 a dollar levels.

Since the company imports 20-22 per cent of its newsprint, it had to contend with increased outflow on this count. Also, with foreign currency loans on in its books, the rupee volatility has also meant marked-to-market forex losses for the company, though it has been only around Rs 6 crore in the recent quarter.

Launch of five new editions in Maharashtra recently also led to increase in newsprint consumption.

DB Corp, however, anticipates newsprint prices to remain steady or even decline, going forward. Also, with no new launches planned over the next few quarters, costs too should be under control.