Buy Tata Steel ; TP: INR575 :: Motilal Oswal

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


 Tata Steel's (TATA) consolidated adjusted PAT declined 75% QoQ to INR3.6b. Reported PAT of INR2.1b included a
forex loss of INR1.5b. A high effective 87% tax rate dragged down PAT.
 Tata Steel Europe (TSE) reported EBITDA of USD103m, in line with estimate. EBITDA per ton declined sharply by
USD46/ton to USD32/ton, squeezed by falling steel prices and higher coking coal costs. Tata Steel India's (TSI)
EBITDA per ton was USD380/t, which was a tad lower than estimate due to higher-than-expected other expenditure.
 Consolidated EBITDA was affected by the elimination of USD77m on losses of smaller subsidiaries and intercompany
transfer of raw material. Smaller subsidiaries (such as South Africa and Dhamra Port) will continue to contribute a
negative USD30m-40m to consolidated EBITDA for a few more quarters.
 Effective tax rate was high as some of the units still reported profit while there was a collective loss as a group of
subsidiaries. Going forward, effective consolidated tax rates will remain volatile depending on profitability of various
subsidiaries.
 TSE's margins will come under pressure due to weakening steel prices while raw material costs will be sticky for the
next six months, despite weakening iron ore and coking coal prices on the spot market.
 Despite weaker demand, TSI remains in sweet spot, due to the depreciation of the rupee against the US dollar and
iron-ore supply issues facing other Indian steel producers.
 We are cutting our FY12 EPS by 46% to model weaker performance of subsidiaries in 2QFY12 and in 2HFY12. We
cut FY13 EPS 15% to factor in lower volume guidance for Indian operations to 8.3mt against 9mt earlier. The stock
trades at a PE of 6.4x and EV/EBIDA of 4.7x FY13E. Maintain Buy.

BSE, Bulk deals, 15/11/2011

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

Deal Date	Scrip Code	Company	Client Name	Deal Type *	Quantity	Price **
15/11/2011	524760	Arvind Intl-$	DINESH CHANDRA BAJORIA	B	83819	13.48
15/11/2011	524760	Arvind Intl-$	ARVIND BAJORIA	B	100000	13.50
15/11/2011	524760	Arvind Intl-$	SUNDRM CONSULTANTS PRIVATE LIMITED	S	100000	13.50
15/11/2011	590122	ASHIKACR	GREENVIEW DISTRIBUTORS PRIVATE LIMITED	S	36500	49.61
15/11/2011	511664	BGIL Films	CNB FINWIZ LIMITED	B	125000	6.01
15/11/2011	511664	BGIL Films	INDER PAL	S	110000	6.03
15/11/2011	506027	Bhoruka Alum	SUKHY COMMERCIAL AND TRADING PRIVATE LIMITED	S	350334	2.55

NSE, Bulk deals, 15-NOV-2011

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

Date	Symbol	Security Name	Client Name	Buy / Sell	Quantity Traded	Trade Price / Wght. Avg. Price	Remarks
15-Nov-2011	ARVIND	Arvind Limited	PICTET & CIE A/C PICTET FUND MAURITIUS LTD.	SELL	13,34,000	93.64	-
15-Nov-2011	ARVIND	Arvind Limited	SWISS FINANCE CORPORATION (MAURITIUS) LIMITED	BUY	13,00,000	93.59	-
15-Nov-2011	KSOILS	K S Oils Limited	GOLDMAN SACHS INVESTMENTS MAURITIUS I LTD	SELL	25,37,089	7.16	-
15-Nov-2011	LOVABLE	Lovable Lingerie Ltd	CHANDARANA INTERMEDIARIES BROKERS P. LTD	BUY	1,09,565	382.90	-
15-Nov-2011	LOVABLE	Lovable Lingerie Ltd	CHANDARANA INTERMEDIARIES BROKERS P. LTD	SELL	1,09,565	382.58	-

Mahindra & Mahindra - "Volumes remain the key growth driver": LKP

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

Q2 FY12 disappoints slightly on forex losses at operating levels, robust growth at topline

M&M’s Q2 FY12 revenues were robust at Rs73bn, a growth of 38% yoy and 9% qoq on solid performance on volume front. Volumes in the quarter grew by 30% yoy, while the company gained market share in the FES segment to the tune of 2% recording their highest ever market share of 45%. On the UV side the company maintained its market share. Auto volumes have grown by 32% in the quarter, while FES volumes have grown by 26% in the quarter. M&M’s topline was not a concern in the quarter, however, forex losses due to adverse currency movement resulted in losses to the tune of Rs220mn thus affecting EBITDA margins which came in at 11.9%. Excluding this impact they were at 12.2%, still the lowest in the recent past. This was also due to unfavorable product mix, only partial passing off of raw material price hikes and high input costs. Adjusted PAT for the quarter came in at Rs7.6bn, a growth of 3% yoy and 26% qoq.

Surge in tractor sales, strong LCV sales and new SUV launch leads us to increase the volume estimates

Good monsoons, continuous increase in MSPs and government schemes of employment in rural India have all led to robust tractor sales in the first seven months of the financial year. YTD, tractors have grown by a huge 26% led by a spike in the month of October. Going forward, with January to March quarter being seasonally strong, we expect FES division to end this year with a 17% volume growth, in line with management’s upping of their growth target for this division (12-13% earlier). In FY 13, we expect FES to grow by 12%. With the recent launch of XUV 500, SUV segment will get a boost as the early response for the model has been warm. With continuous ramp up happening in its production, we expect to see a strong volume number in the ensuing quarters. Strong sales of Maximo Van and Genio cab has created a new segment for M&M, while in the pickup goods segment, Bolero and Genio pickups have garnered a market share of 71%, while the Maximo pick up has a market share close to 24%. Also on the 3 wheeler side, the company has surprised us by reporting increasing volumes month on month. Hence, we have increased our total auto growth to 16%/12% for FY12/13E.

Margins seem to have bottomed out, expect to move up on low RM costs and improved product mix

EBITDA margins in the quarter came at 12.2% excluding the impact of forex losses, which still were lower than expected and what the company has been reporting in the past. We believe this quarter has seen the bottoming out of margins and going forward with the impact of higher RM costs getting factored along with the recent price hikes (2-3% in auto sector and Rs 6000 in tractors) coupled with expected upcoming price hikes, margins will look better. With the high margin XUV 500 gaining momentum some impact of improving product mix will be felt though to a little extent as it will be a low volume business initially. Increase in high margin FES business as a % of total volumes of M&M will also lead to a rise in profitability. We forecast 13.1%/13.8% margins for the company in FY12/13E.

Outlook and Valuation

With higher expectations on the volume front and improvement expected on the margin front, we have raised our target price to Rs889, as we now value the core FY 13E earnings of Rs54 at 14x times  arriving at a value of Rs 753 from standalone business and Rs 136 from its various subsidiaries. We maintain our BUY rating on the stock with an upside of 13% from current levels.

15/11/11: Categories Turnover (Rs. crore) Clients NRI Proprietary Trade Data

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




Categories Turnover

(Rs. crore)
	Clients			NRI			Proprietary
Trade Date	Buy	Sales	Net	Buy	Sales	Net	Buy	Sales	Net
15/11/11	1,556.93	1,524.53	32.40	0.59	0.24	0.35	441.65	463.68	-22.03
14/11/11	1,555.71	1,574.87	-19.15	0.63	0.57	0.06	422.62	441.28	-18.66
11/11/11	1,713.80	1,760.93	-47.13	1.13	0.66	0.46	496.95	489.73	7.22
Nov , 11	14,372.23	14,300.79	71.44	7.57	6.02	1.55	4,081.61	4,112.46	-30.85
Since 1/1/11	427,590.48	432,249.68	-4,659.20	304.21	211.68	92.53	124,382.24	123,577.00	805.24

15/11/11: FII & DII Turnover (BSE + NSE) (Rs. crore)

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


FII & DII Turnover (BSE + NSE)

(Rs. crore)
	FII			DII
Trade Date	Buy	Sales	Net	Buy	Sales	Net
15/11/11	1,698.84	2,108.61	-409.77	989.22	783.26	205.96
14/11/11	2,542.99	2,221.37	321.62	862.44	871.74	-9.30
11/11/11	3,049.99	3,133.25	-83.26	1,045.76	1,158.94	-113.18
Nov , 11	18,793.04	17,833.50	959.54	7,393.18	8,727.84	-1,334.66
Since 1/1/11   *	538,191.90	555,209.59	-17,017.69	249,660.02	228,949.17	20,710.85

UBS : ITC - Cigarette segment trends remain good

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


UBS Investment Research
ITC
C igarette segment trends remain good
􀂄 Event: net cigarette revenue +16.4%, underlying volumes ~7.5%
We estimate Q2 FY12 cigarette volumes to have grown ~7.5%, while mix and
price increases contributed to ~8-9% of sales growth. EBIT margins in cigarettes
increased to 31.5% (29.9% in Q1 FY12). Cigarette business segmental profits grew
+18.6% YoY. We have built in a ~6.5% volume growth for FY12E.
􀂄 Impact: ITC’s Q2 FY12 revenues +18% YoY, EBITDA +17.8% YoY
Overall ITC revenues grew 18% YoY, with other FMCG +27.2%, agribusiness
+14.8%, and paperboards +10% YoY. Losses of the consumer business declined to
Rs559m vs. Rs669m in Q2 FY11, a reflection of the increasing profit focus in this
business. The hotel business profitability reflects the slowdown in discretionary
consumption, while the paperboard business posted 27.5% EBIT margins (highest
ever). Other income was +38.7%, PBT +21%, and PAT +21.5%.
􀂄 Action: reiterate Buy on ITC
We reiterate our Buy rating on ITC as we believe its cigarette volume growth and
price increases will drive overall growth in FY12. Declining losses in other FMCG
will also aid profitability growth. The key trigger for FY13 remains taxation
increases, unknown till Budget 2012; we have built in a ~10% increase in our
estimates.
􀂄 Valuation: Buy rating and price target of Rs240
We derive our price target from a DCF-based methodology and explicitly forecast
long-term valuation drivers using UBS’s VCAM tool (assuming a 10.5% WACC
and a 12% interim period growth rate). At our price target, ITC would trade at 25x
FY13E PE.

UBS: Sterlite Industries - Aluminium/forex loss drag Q2

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


UBS Investment Research
Sterlite Industries
A luminium/forex loss drag Q2
􀂄 Event: Results lower driven by forex losses; higher aluminium CoP
EBITDA of Rs24.2bn (-11%QoQ, +64%YoY) was lower than UBS-e/consensus of
Rs26.3bn/Rs26.6bn driven by a)notional forex loss of Rs0.6bn b)lower Aluminium
division (Balco) EBIT at Rs.08bn (lower by Rs1.5/1.2bn QoQ/YoY due to higher
alumina/carbon costs). Pre-ex PAT at Rs13.3bn (-11%QoQ, +30%YoY) was lower
than UBS-e/consensus of Rs14.4bn/Rs15.4bn due to 1) Lower EBITDA 2) Forex
loss of cRs4bn (below EBITDA) 3) Higher CoP at VAL (Sterlite owns 29.4% in
VAL) leading to loss of Rs8.2bn – Sterlite’s share is -Rs2.4bn (vs -Rs1.1bn in Q1)
􀂄 Impact: BALCO down, VAL a drag; Zinc drives earnings; Copper stable
1)Aluminium division (Balco) contributed 0% to overall EBIT surprising -vely.
Balco’s CoP increased to US$2,133/t (from US$1,981),2)Zinc division contributed
c81% of overall EBIT,3)Stable Copper div EBIT was Rs3.1bn (6% QoQ,
96%YoY, 15% to overall EBIT) with CoP of US$-3.7/lb (US$-2.9/lb in Q1), 4)
Loss at VAL is up mainly due to higher CoP (US$2,554/t vs US$2,300 in Q1).
􀂄 Action: Reiterate Buy on Sterlite, change in dividend policy positive
Sterlite announced interim dividend of Rs1/share & moved to % of profit sharing
payout method (like in HZL). We believe Sterlite is attractive at current levels
given triggers such as: 1) strong earnings momentum from existing operations 2)
consolidation of earnings from Anglo Zinc 3) attractive valuations.
􀂄 Valuation: Buy rating and price target of Rs215
We value Sterlite’s key businesses (copper, Zinc/HZL, Balco) on March 2013E
EV/EBITDA of 5.5x (average of last two cycles) and investments at book value.

Godrej Consumer - Q2FY12 - A mixed bag: Healthy top-line; PAT disappoints on weak domestic margins & forex losses ::JP Morgan

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


 Healthy sales growth; but PAT disappoints on weak domestic margins
and forex losses. GCPL reported Net Sales, EBITDA and PAT growth of
23%, 25% and -2% respectively during Q2FY12. Revenue growth trends
were healthy and ahead of expectations. However domestic business
margins disappointed led by weak gross margins (unfavorable product mix)
and higher promotional expenses. Forex loss of Rs165mn due to import
exposure for raw material (domestic) and MTM impact in overseas
subsidiaries on account of revaluation of intercompany loans led to PAT
disappointment.
 Domestic sales rise 24% y/y driven by 32%, 15% and 29% respective sales
growth for soaps, hair colors and household insecticide (HHI) during
Q2FY12. Volume growth stood at 19% (+ve surprise), ~7% (below
expectations) and 26% respectively for soaps, hair colors and HHI. Gross
margins (-310bp y/y) were adversely impacted by higher palm oil costs and
faster growth for low margin soaps segment. EBITDA grew 12% y/y
(margins declining 180bp y/y) and forex losses led to nearly flat PAT for
domestic operations during the qtr.
 Overseas operations: Good quarter. Overseas revenues registered LTL
growth of 19% (17% adjusted for currency impact) during the quarter.
Megasari posted healthy performance registering 27% sales growth (~20%
adjusted for currency) and EBITDA margins of 17%. Latin American
operations posted 13% sales growth (~18% adjusted for currency) and
EBITDA margins of 7.4%. Africa region reported revenue growth of 47%
with inclusion of Darling operations and margins of 26%.
 Management Call takeaways: 1) Increased rural penetration aided by
distribution synergies post merger of GHPL have supported strong
domestic sales growth for soaps and household insecticides, with GCPL
growing ahead of industry growth in both these segments 2) Domestic
hair color business for GCPL grew lower than industry growth during the
qtr given stiff competition, 3) Soap category may need more price hikes
given high palm oil prices, 4) Overseas operations should benefit from
sustained investments to grow top-line in all the geographies and in
Africa particularly from synergistic gains from Darling acquisition.

Hold HEG; Target : Rs 202 ::ICICI Securities

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


M u t e d   p e r f o r m a n c e …
HEG’s Q2FY12 PAT was below our expectation on the back of higher cost
of domestic inputs and adverse forex movement on working capital
borrowings. The topline came at | 319.2 crore (our estimate: | 289.3 crore),
which was 6.5% higher YoY and 14.2% higher QoQ. However, on the back
of higher input costs, the EBITDA margin declined 630 bps YoY and 200
bps QoQ to 13.8%. The subsequent EBITDA stood at | 44.2 crore (our
estimate: | 55.4 crore), which was  26.6% lower YoY and flattish QoQ.
During the quarter under review, there was forex loss to the tune of | 11.55
crore. As a result, ensuing reported PAT stood at | 13.5 crore (our estimate:
| 24.7 crore), which was 54.5% lower YoY and 31.5% QoQ.
ƒ Sharp decline in EBITDA margin
During the quarter under review, there was a sharp decline in the
EBITDA margin. The EBITDA margin declined 630 bps YoY and 200
bps QoQ to 13.8%. In Q2FY12, the import price of needle coke in US
dollar terms remained stable. However, the steep depreciation of the
rupee against US dollar has led to higher landed cost of needle coke in
Q2FY12. With crude oil prices remaining at elevated levels, prices of
domestic inputs such as binder pitch, furnace oil, etc. were also
notably higher during the quarter under review.

V a l u a t i o n
At the CMP of | 205, the stock is trading at FY13E P/E of 7.5x and FY13E
EV/EBITDA of 6.2x. We have valued  the stock at a 15% discount to the
global average of 6.5x CY12E EV/EBITDA, thus arriving at a target price of |
195. We have assigned a HOLD rating to the stock.

UBS : JSW Steel Q 2 better than expectations

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


UBS Investment Research
JSW Steel
Q 2 better than expectations
􀂄 Event: Volumes surprise on the upside, Operating expenses lower as well
JSW reported higher than expected Q2 PAT pre-ex of Rs4.9bn (-16%QoQ,
+9%YoY; UBS-e/consensus of Rs1.1bn/Rs2.5bn), and EBITDA of Rs12.9bn (-
7%QoQ, +39%YoY; UBS-e/consensus of Rs6.2bn/Rs10bn) driven by a) higher
volumes of 1.88 mt vs UBS-e of 1.56mt, while ASP was largely in line at
Rs40,516/t, b) lower than expected raw material cost of Rs26,250/t (+Rs1,532/t
QoQ) c) lower staff costs (lesser by Rs0.3bn over Q1FY12).
􀂄 Impact: EBITDA/t higher than expected; Iron cost higher by Rs800/t QoQ
EBITDA/t was Rs6,850/t (-15%QoQ, +17%YoY) higher than UBS-e of Rs3,977/t
(UBS-e for FY12 is Rs5,364/t). Though the production was impacted by c450kt in
the quarter due to mining ban, sales were higher due to a) inventory liquidation
from Q1 b) re-rolling volumes of 0.18mt for JSW ISPAT. JSW incurred higher
iron ore cost of cRs800/t in the quarter due to increased purchases from the market.
􀂄 Action: Stock price discounts the negatives, look beyond the current mess
The management has lowered FY12 sales guidance to 7.8mt vs 9mt earlier while
we forecast 6.9mt. 1H sales were 3.6mt. We believe a lot of the negative news is
already discounted by the current stock price. JSW is currently trading at attractive
valuations of FY13E EV/EBITDA / PB of 5x/0.7x. At an EV (FY12E) of
cUS$6bn, JSW is trading @40% discount to replacement value.
􀂄 Valuation: Maintain Buy with a PT of Rs700
We value JSW on 6x FY13E EV/EBITDA. We don’t value investment in Ispat.

Gas Authority of India Limited (GAIL) Steady 2QFY12 ::JP Morgan

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


GAIL reported 2Q profits of Rs10.9bn (up 19% y/y; 11% q/q) slightly
ahead of our and street estimates, with better than expected performance
from the petrochemical and LPG segments. Gas volumes were marginally
higher.
 Gas transmission volumes stable, margins lower: Gas transmission
volumes were stable q/q, at 119mmscmd. However, gas transmission
EBITDA was 10% lower sequentially. Gas trading volumes were also
stable, at 84mmscmd, with a similar 8% sequential drop in EBITDA.
GAIL brought in 4 LNG cargos during the quarter, and expects to bring
in a similar number for the December quarter as well.
 Petrochemicals stages smart recovery: Petchem volumes were at
129KMT for the quarter (up 47% q/q), with petchem EBITDA rising
56%. EBITDA/MT rose to ~$757 (from $726).
 LPG benefits from lower subsidy: LPG contribution rose with a lower
sequential subsidy, with EBITDA rising 49% sequentially.
 Subsidy as expected: Subsidies came in at Rs5.6 bn. The upstream
sector has borne ~33% of subsidies for the quarter.
 Project update: The Dabhol LNG terminal is expected to be
commissioned in the March quarter. GAIL continues to work on the
expansion of its pipeline network, and expects to exit FY12 with a
nameplate capacity of ~220mmscmd.
 Retain rating, estimates: Our estimates are subject to review following
further analysis and inputs from GAIL management conference call in
the coming days. As such, we retain our Overweight rating, and Mar-12
price target of Rs535.

Buy Motherson Sumi ; Target :Rs 196 ::ICICI Securities

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


F o r e x   p r o v i s i o n s   h i t   p r o f i t a b i l i t y …
Motherson Sumi (MSL) reported its  Q2FY12 results, which were below
our estimates. The consolidated topline came in line with our estimates at
| 2290.3 crore (I-direct estimate: | 2284.3 crore) reflecting a 19.5% YoY
growth. On a subsidiary level, Samvardhana Motherson Reflectec (SMR)
sustained its robust business performance with sales growth of ~22%
YoY at ~| 1265 crore. The adjusted  EBITDA  margin  came  in  at  8.9%,
higher than our estimate of 8.6%,  driven by an improved standalone
operational performance (up 270 bps  QoQ) at 15.6%. The raw material
cost as a proportion of net sales declined ~60 bps QoQ even as copper
prices remained firm (up ~27 bps QoQ). The reported PAT (post concern)
declined 72% YoY to | 24.2 crore due  to the impact of | 74.3 crore for
unrealised forex impact on loans and certain interest accrued on loans.
The adjusted PAT is, thus, at | 98.6 crore, which is above our estimate.
Highlights of the quarter
MSL posted a topline growth on standalone sales at | 774.5 crore (up
18.6% YoY) driven by rising content per car (~3.0%). SMR had strong
sales growth at ~22% YoY, which could have been bettered if not for
labour problems faced at Maruti. The consolidated EBITDA margins were
higher 64 bps sequentially at 8.9% on account of a robust operational
performance on a standalone basis. However, volatility in the rupee and
euro impacted profitability. The reported PAT (post concern) declined
72% YoY to | 24.2 crore due to total provision of | 61.4 crore for
unrealised forex loss on loans not due till FY13-14E. The profitability of
SMR was also hampered by slow ramp up in plants of Hungary and Brazil.
V a l u a t i o n
We have factored in lower capacity utilisation at new plants, slowdown in
automotive demand and accordingly pruned our estimates. However, we
believe MSL, a leading automotive modules and component supplier, is
currently trading at attractive valuations. At the CMP of | 177, the stock is
trading at 20.8x FY12E and 13.0x FY13E consolidated EPS. We have
valued the stock on an SOTP basis. The stake in SMR is valued at |
52/share while the remaining business is valued at | 143/share. We have a
BUY rating on MSL with a target price of | 196.

UBS: Union Bank - Still not out of the woods

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


UBS Investment Research
Union Bank
S till not out of the woods
􀂄 Event: Miss on Q2FY12 numbers
Union Bank reported Q2FY12 PAT of Rs 3.5 bn (up 16% Y/Y) which was below
our estimate of Rs 4.8 bn (consensus at Rs 5.2 bn) While revenue trends were in
line with expectations with NII growth of 8% Y/Y, the key surprise was a sharp
spike in NPL additions (5% of loans slipped in Q2) and a rise in restructured loans.
Restructured assets increased to 4.5% of loans (4% in Q1). Credit costs
consequently increased to 1.3% with provisioning coverage dropping to 60%. The
only silver lining was NIM improvement of 10 bps q/q despite high slippages.
􀂄 Impact: Cut earnings by 16%/9% in FY12/13
We take our FY12 earnings down by 16% in FY12 and 9% in FY13 on higher NPL
estimates and provisioning charges. With high slippages witnessed in H1 we
expect full year slippages of ~3%. We expect average RoA of 0.8% & RoE of 17%
during FY12-13 (5 year average RoA of 1.1% and RoE of 24%).
􀂄 Action: We stay Neutral despite low valuations
On our revised FY12 estimates, the stock trades at 0.9xbook and 5.6x earnings.
Despite low valuations we advise staying on sidelines as overhang persists on
account of possible higher restructuring risks (GTL restructuring, high Infra
exposure), low Tier-1 (8.5%) and falling provisioning coverage (at 60%). UNBK
results raise concerns on asset quality for PSU banks like BOI and PNB which also
have ~10% of loan book yet to be migrated to system based recognition.
􀂄 Valuation: Cut PT to 240 implying 1x March 12 book
Our residual income model based PT stands revised to Rs 240 (prior Rs 280).

Apollo Tyres - Europe business beneficial to some for sure":: LKP

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

Standalone business disappoints on higher RM costs and low replacement demand

Apollo Tyres (Apollo)’s standalone volumes for the quarter increased by 37% yoy mainly on the back of low volumes in Q2 FY11 due to strike at its Perambra plant. Standalone net sales grew by 57% yoy, but on qoq basis declined by 6%. This was mainly due to weak replacement demand and higher demand on low margin OEM PCR side. Higher raw material expenses as a % of sales (77.8%) was because the impact of falling natural rubber prices was offset by adverse currency movement, while prices of crude and its derivatives were still high. Also lower contribution from high margin replacement demand led to a margin fall as demand for it failed to recover. EBITDA margins came in at 6.8%, the lowest since Q3 FY09. Due to underperformance at the operating level, PAT came in at Rs221mn, down 50% qoq and 41% yoy.

Going forward, the impact of falling rubber prices will be seen Q3 and will improve in the ensuing quarters. The plantation of significant amount of natural rubber plantation in India and China done in 2005-06 will started yielding from 2012 (it takes 6-7 years for a rubber plant to get matured and start producing). This may reduce the demand supply gap, thus resulting in a further price fall. Replacement demand is expected to pick up on both TBR as well as PCR sides. There is no news on lifting up of ban on imported tyres, which will have no negative impact on volumes going forward in the domestic markets.

Consolidated business driven by Europe; South Africa subdued

On a consolidated basis, the performance was better as Europe made up for the underperformance in India and South Africa. Revenues grew by 47% yoy and 2% qoq. Volumes came in at 120,000 MT, a growth of 32% yoy. EBITDA margins came in at 8%, a decline of 50 bps qoq and 150 bps yoy on strong European margins. PAT came in at Rs781 mn a growth of 47% yoy.

Pre-buying of winter tyres in Q2 led to a solid performance from the European markets, as Vredestein BV reported revenue growth of 44% while EBIT margins came in at 10.6%, a growth of 260 bps yoy and 80 bps qoq. South Africa saw subdued demand on the auto replacement side and continued to post muted growth as topline grew by 7%, while at the bottomline the company continued to incur losses, though it was not quantified by the management. However, at the operating levels, margins were at 1%, against -2% in Q1 FY12 and -3% in Q2 FY11. Going forward, we expect sale of winter tyres to be strong seasonally as seen in Q3 and Q4, in which margins may go as high as 13-15%. South Africa is expected to continue its muted performance as lifting up of ban on imported tyres has made this market very competitive with strong influx of Chinese players.

Outlook and valuation

Apollo’s results were subdued considering the weak replacement demand in India and South Africa. Margins seemed to have bottomed out as we believe the impact of falling rubber prices will start showing from the ensuing quarters and may offset the negative impact of adverse currency movement if any. Recovery in replacement demand and increase in production from Chennai (250 MT per day at the end of Q2) will ensure strong volume growth, mainly in FY 13. Europe is expected to continue its outperformance with strong sale of winter tyres and expansion of distribution channels. However, on disappointing results in Q2 and delayed replacement demand, we have cut our estimates and target price. We now value the stock 8x times FY 13E EPS of Rs9.6 and arrive at a lower TP of Rs 77, while maintaining BUY on the stock, and an upside of 26%.

DLF : De-leveraging starting in earnest ::JP Morgan

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


DLF’s strategy of reducing debt via asset sales seems to be finally bearing
fruit. Efforts at reducing debt in 2010 were constrained by various PE buyouts
and DAL consolidation. Incrementally, the company did close to Rs 17B worth
of asset sales last Q and additionally a few large transactions (i.e. Aman) are
in the pipeline, as per news flow. Markets too seem to be rewarding such a
strategy with the stock outperforming the index post June-Q. Additionally,
focus on plotted sales along with recent mid income-launches in Bangalore
seems to suggest earnestness in efforts at monetizing MTM gains on land.
However, risks to this de-leveraging effort lie in a challenging macro
environment and potential payouts from ongoing litigations (especially on
prior period tax). The company’s current forward P/B of 1.5x is largely in line
with its average trading range of 1.4x over Sep-08-Mar 09 (post Lehman
levels), implying valuation offers comfort. With only Rs 48B of the total Rs
90-100B target achieved to date, we believe the gearing reduction trade is
still on.
 Cash flow impact of asset sales - While DLF’s development business has
been cash flow positive, an overall drain has come from 1] rising interest
costs (~50% of CF), 2] land contiguity capex and 3] rental asset build out,
which have constrained net generation to pay down debt. Asset and plotted
sales hereon can then help reduce that burden. Any additional reduction in
rates going ahead in F13, could be a bigger positive (50bps reduction in
rates could lead to almost a 6% increase in cash generation). We aren’t
excessively concerned over refinance this year, given the experience of
2008-09 (one of the few RE players to have open credit lines) and still has
one of the lowest debt costs in the industry (at least a 300-400bps premium
to peer group).
 Impact of Aman sale - if it goes through - As per ET, DLF has received
certain binding bids for a stake sale in Aman. Any disposal here, in our
view, would be accretive given the company was making losses on the same.
Additionally, DLF gets to keep a large prime asset in the heart of Delhi
(Lodhi Road). This, in our view, is a very valuable and marquee land parcel
which would likely more than make up for the holding cost of Aman.

Buy City Union Bank; Target : Rs 52 ::ICICI Securities

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


L o w   p r o v i s i o n s   b o o s t   p r o f i t a b i l i t y …
City Union Bank (CUB) reported PAT of | 77.5 crore beating our estimate
of | 68.6 crore, thereby registering 25.9% YoY growth. Provisions came in
low at | 8.8 crore (I-direct estimate: | 17.9 crore), which boosted PAT
growth. We expect the bank to continue its steady business growth while
maintaining its NIM and asset quality. Hence, we estimate PAT growth of
29.6% CAGR to | 361.3 crore over FY11-13E.
ƒ Business growth of 30% commendable…
CUB has reported stellar 30% YoY business growth with advances
growing 32% to | 10600 crore with deposits growing 28% to |
14722 crore. The management expects this trend to continue and is
aiming at 30% credit growth for FY12E.
ƒ NIM expected to remain in range of 3.4-3.5%…
NII was subdued at | 120 crore (our estimate: | 131.9 crore) as NIM
came in lower at 3.4% compared to 3.7% in Q2FY11. The fall in NIM
can be attributed to deposit repricing and decline in CASA. Term
deposits grew 31% YoY while CASA grew only by 17% causing a
176 bps YoY drop in the CASA ratio to 17.9%. This, coupled with
deposit repricing caused CoF to increase by 48 bps QoQ to 8.2%
while YoA inched up 23 bps to 10.2%. The management expects to
maintain NIM in 3.4-3.5% range, which we have built in our model.
ƒ Asset quality maintained but provisions low due to write-back…
Asset quality was stable as GNPA rose | 7 crore QoQ to | 124.8
crore with incremental slippage  of | 36 crore. The GNPA ratio
improved 4 bps QoQ to 1.18% but provisions were low at | 8.8
crore. Write-back of | 5.5 crore provision in investment depreciation
and | 4 crore write-back from  restructured accounts caused
provision to be low. The NNPA ratio came at 0.4% with healthy PCR
of 79%. We estimate GNPA at 1.1% and NNPA at 0.4% for FY13E.
V a l u a t i o n
CUB posted excellent return ratios in Q2FY12 with RoA of 1.9% & RoE of
28.6%. It is adequately  capitalised for growth with 13.3% CAR of which
Tier I constitutes 12.4%. Credit growth of 30% coupled with NIM of 3.5%
gives comfort of bright future. We estimate RoA of 1.6% and RoE of
21.6% & value CUB at 1.4x FY13E ABV maintaining target price at | 52

UBS: Grasim Industries Q 2FY12 conference call- Key takeaways

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


UBS Investment Research
Grasim Industries
Q 2FY12 conference call- Key takeaways
􀂄 VSF capacity utilization levels to remain high in H2 on improved demand
VSF volumes picked up in Q2, especially from September, driven by increased
demand/inventory re-stocking. Grasim expects VSF volumes to rise in H2 with
plants operating at full capacity (-1% y/y in H1, UBS-e +1% in FY12). Current
realizations are ~Rs130/kg and local prices are expected to remain steady. Margins
were impacted by increase in input costs, though pulp prices are softening. Grasim
is focusing on enhancing cost efficiencies.
􀂄 Expects 7-8% growth in cement demand in H2, driven by rural demand
It expects ~17mt of capacity additions in the industry in FY12 (~6mt added in Q2).
Star Cement increased its market share to 14.9% from 12.8%, in spite of de-growth
in UAE. However, pricing is under pressure in its markets and hence it continued
to achieve break-even at the EBITDA level. Imported coal costs have softened by
US$2-3/t and current cost is ~US$138/t. The company thinks coal linkages will be
difficult to get for the expansion projects and it will increase the usage of pet coke.
􀂄 Capacity expansion on track
Although only Rs15.5bn was spent in H1, the company is confident of achieving
its FY12 target of Rs64bn. Domjso capacity is being expanded from 210,000tons
to 255,000 tons and will be operational mid-next year. The performance of Domjso
was impacted by maintenance shut-down during the quarter, though operational
performance was in-line with expectations.
􀂄 Valuation: Buy rating
Grasim is our preferred pick in the sector. Our price target is based on SOTP -12m price target Rs2,600.00

Union Bank: Transition exercise completes; post-correction, play for recoveries: Kotak Sec,

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


Union Bank (UNBK)
Banks/Financial Institutions
Transition exercise completes; post-correction, play for recoveries. Union Bank’s
reported earnings were below our expectations primarily due to higher slippages. We
expect recoveries to pick up as the bank has completed the last leg of transition (to
system-based NPL recognition) which has driven high (3.5%) slippages from small-ticket
loans even as trends in core slippages will likely be weaker than expected. We revise our
earnings by 7-14% for FY2012-14E primarily to factor higher provisions and lower fees.
Maintain BUY with a TP of `340 (from `425 earlier).

Mutual Fund Talk :: Business Line

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

Since you do not track the market, mutual funds make for a better choice, though you must still track fund performance.

I am 32 years old. I am not familiar with mutual funds. I have been investing Rs 3000 a month in each of the following funds since July: HDFC Top 200, DSP Blackrock Micro Cap, and Fidelity Equity. I do not track mutual funds and the stock market. I have selected the above funds based on the advice of an agent. Can you tell me if these funds are good? I plan to stay invested in the market for at least five years, no matter how it behaves. Can I continue the same SIPs till 2017?

I am also planning to increase my SIPs by Rs 6,000 a month. Should I increase investments in the above funds or go for new ones? I get statements from these funds once a quarter. How do I get to know if the SIPs are performing well?

Mehul Pathak

The funds you hold are all good performers. However, the risk that you are willing to take, will to a large extent, determine what funds to choose. DSPBR Micro Cap, for instance, invests in companies in the small-cap market segment, which typically has a higher risk profile. Higher risks may mean higher returns or steep losses. However, mid-caps are known for perking up portfolio returns over the long term.

If you would like a mid-cap fund with lesser risk profile than DSPBR Micro Cap, go for IDFC Premier Equity. We would recommend this, since a five-year investment perspective may not be long enough for a mid-cap fund to recover and catch up on returns from a down cycle.

SPECIFIC GOALS

Retain the other two funds. From the additional money that you can spare, consider adding Rs 1,000 each in HDFC Top 200 and Fidelity Equity. The remaining Rs 4,000 can be invested in Quantum Long-Term Equity. We have recommended a less volatile and consistent performer. If you wish to assume risks, you can up your investment in IDFC Premier Equity instead of HDFC Top 200.

You can also consider working towards any specific goals and jack-up your savings if you feel a higher sum will be required. Simply use a future value calculator in an excel sheet or use an online calculator for this purpose.

Your monthly savings of Rs 15,000 for instance, if invested over the next five years would give Rs 12.9 lakh provided the funds deliver returns of 14 per cent annually. You can continue the SIPs, provided you track their performance and exit if there is a need. When would you have to exit? Lower returns than benchmark (given in the fact sheet) over a period of one year should worry you.

A review will also be warranted if the fund's returns are lower than peers by 5 percentage points or more. You can check for returns either in the fund's monthly fact-sheet or any of the websites that display or calculate returns for you.

TRACKING PERFORMANCE

Mutual fund is a relatively hassle-free route to buy in to equities as they do not require you to make active calls on individual stocks. Since you do not track the markets, mutual funds make for better choice.

Having said this, you may still have to track the performance of your funds. As often repeated, past performance does not guarantee future returns. Hence, you will have to track your funds to be able to weed out the poor performers.

For this, you will have to start reading up on market activity and learn to look at the fund performance. To start with, read up on the monthly fact-sheet that all mutual funds make available. If the same is not mailed to you, you can access them from the web sites of each of the fund houses.

The fact-sheet will provide you with a summary of what happened in the equity markets over the last month and the asset management company's outlook on markets. You will also find the portfolio of stocks held by each fund and the returns generated by the schemes against their respective benchmarks.

You can register with the mutual fund registrar CAMS or Karvy to receive or view in the web, statements of your returns regularly.

Also consider maintaining an online portfolio of your funds (search for mutual fund portfolio trackers) and keep track of performance once a quarter.

Buy Piramal Healthcare: Target 496 :: Anand Rathi

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

It is rare to rarest case when one gets the opportunity to buy a business at 17-18% discount of Net current assets value.  

     Piramal Healthcare                                                                           CMP    366                                                                   Target    496  

Company Description

Piramal Healthcare Limited, a primal group healthcare company established in 1988, engaged in manufacturing and Marketing of bulk drugs and formulations across the world. With the diversified portfolio across 14 therapeutics area, company was the fourth largest domestic healthcare company in FY10, before selling of its domestic formulations business to Abbott.

Company now has critical care and OTC division under its portfolio. Primal in FY11 bought I-pill the leading OC brand in India from Cipla.

Investment rationale

~ Market cap is below net current assets – Ample Margin of Safety

~ Growth of Existing Business

~ Financial Investment in Vodafone Essar Limited,

~ Management Capability

 Valuation    

We valued the Piramal Health care on the basis of liquidating value. Then assigned a % to each assets and liabilities and got the fair value of the company around Rs. 496 which is 36% upside from current price. We think story will shape up (cash deployment decision unfold) in future and hence we recommend to buy at CMP for atleast 18-24 months perspective

Divi’s Labs: Buy :: Business Line

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

Improving growth prospects, likely expansion in margins and negligible debt on books make the stock of Divi's Laboratories an attractive buy for the long term. An established player in the global pharmaceutical outsourcing market, Divi's seems to have come off well from the phase of inventory destocking by MNC pharma.

Pointing at clear signs of recovery is its improved performance in the first half of the current fiscal. At the current market price of Rs 739, the stock trades at about 19 times its likely FY12 per share earnings.

While this is at a slight premium to its peers, the company's financial parameters justify it. Thanks to its established working relationships with a number of the top 20 global innovator firms, Divi's is much better-positioned to grow its revenues and profits than most of its peers.

DIVERSIFIED PRESENCE

Having a diversified revenue basket and customer mix not only spreads the risk, it also opens up growth opportunities for the company.

Divi's derives a good part of its revenues from exports (93 per cent), predominantly from the regulated markets of North America and Europe (45 per cent and 30 per cent of FY11 sales, respectively). In addition, it has a diversified products range, with the largest product making up for 20 per cent of sales (in FY11); top five products made up over 52 per cent of sales last year.

Its customer base too is equally spread out, with the top five contributing to about 47 per cent of its revenues.

What's also encouraging is that, over the year, Divi's has seen a drastic rise in product launches. In FY-11 alone, it added 21 products to its product portfolio, of which eight were generic APIs and intermediates, while 13 were custom synthesis APIs and intermediates.

At the end of March 2011, Divi's had a pipeline totalling 41 Drug Master Files with the US FDA and Certificate of Suitability for 12 products with the European Directorate. Such a robust product pipeline promises to keep its growth momentum going.

GROWTH DRIVERS

Aside of its product pipeline, the company's growing presence in the carotenoids segment too presents a fairly big growth opportunity (market size estimated to be about $1 billion with 2-3 major players only). Though the revenue contribution from this business is not very significant now, the growth prospects make the business attractive. Further, commencement of operations at its new multi-purpose plant at Vizag too would aid growth.

Given that operations started in June 2011, meaningful contributions from the facility can be expected from FY12 onwards. That Divi's is planning to incur a capex of about Rs 175 crore for the year to address capacity shortfalls too reflects the improving business landscape.

RESULT HIGHLIGHTS

For the quarter ended Sep-2011, Divi's managed to grow its sales by about 43 per cent to Rs 366 crore. While a lower base would have helped here, sales growth was helped by a favourable product mix as well as the commissioning of the new SEZ plant at Vizag.

The company reported a decent growth in the Carotenoids business, what with its revenues going up by about 50 per cent to Rs 22 crore during the quarter (Rs 38 crore for the half year).

As a result, operating margins expanded by about 340 basis points to 37.8 per cent. For the coming quarters, margin can be expected to remain at similar levels, given the likely improvement in utilisation and steady up tick in contributions from the high-margin carotenoids segment.

Profit growth for the quarter, however, was capped at 45 per cent to Rs 106 crore, mainly due to a sharp rise in effective tax rate.

The tax outgo increased drastically as the tax exemption for its EOU (export-oriented unit) expired by March-2011; its older SEZ unit is in the 50 per cent tax exemption bracket. The new DSN SEZ unit, however, would be eligible for full exemption of export profits for five years from April 2011 onwards.

The management had earlier given a sales growth guidance of 25 per cent for the year.

Considering that the sales for the first half grew by over 40 per cent, the company seems well-placed to meet its growth target. Consolidation in the global pharma space and currency fluctuations, however, may pose a risk.