Buy Reliance Industries - Gasoline spreads correct, but INR depreciation to provide support: Edelweiss

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Reliance Industries (RIL IN, INR 810, Buy)

Product spreads have corrected sharply of late, driven by gasoline spreads in particular. While this may impact refining margins in the second half of the year, we still see RIL’s GRMs for the full year not falling below USD 9/bbl. Also, the depreciation in INR will aid RIL’s earnings given that its businesses are USD denominated. Our sensitivity analysis of RIL’s EPS to lower refining margins and lower INR suggests a not more than 0‐3% risk to FY12 and FY13 earnings. We maintain our ‘BUY’ rating on the stock with a target price of INR 1,148.

Refining margins correct, driven by gasoline

Complex refining margins have seen a sharp correction recently, falling by nearly USD 3/bbl compared to Q2FY12. Restarting of refineries in Singapore and weaker than expected Asian gasoline demand growth have been the drivers behind this. Diesel demand remains strong though, rising by about USD 3/bbl compared to Q2FY12.

RIL’s margins will not fall as much

RIL’s GRMs have averaged USD 10.2/bbl in the first half of the year. Our proprietary model to predict RIL’s margins indicates that complex refining margins have come off by USD 3/bbl. Having said that, we believe the recent fall in margins is not a strict indicator of quarterly margins. Moreover, RIL being a diesel‐heavy refiner (~45% diesel output w/w) is impacted to a lesser extent compared to other global refiners.

INR depreciation will also provide cushion to RIL’s earnings

All of RIL’s business segments (E&P, refining and petrochemicals) are USD denominated. Our sensitivity analysis indicates that a 1% fall in INR will lead to a 1.5% rise in FY12 and FY13 EPS. We see low risk to RIL’s FY12/13 consensus earnings and  stress case GRMs may lead to a not more than 0-3% cut in FY12 and FY13 EPS. We maintain our BUY rating on the stock with a target price of INR1,148. At INR 810, the stock is trading at 11.3x FY12 earnings and 10.5x FY13 earnings.

Sintex Industries: Removing from CL-Buy on underperformance; maintain Buy:: Goldman Sachs

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ACTION
Removed from Asia Pacific Conviction Buy List

Sintex Industries (SNTX.BO)
Equity Research
Removing from CL-Buy on underperformance; maintain Buy

What happened
We are removing Sintex Industries (SNTX.BO) from our Conviction Buy list
following the stock’s underperformance since being added to the list.
Since being added to the Conviction List on Sept 6 2011, the shares are
down 34% vs. our coverage down 15% and a flat BSE Sensex. Over the
past 12 months, SNTX has declined 56.4% vs. a 16.9% decrease in BSE
Sensex. We attribute this underperformance primarily to market concerns
on the company’s $225mn FCCB debt and its 20% revenue exposure to the
EU through its foreign custom molding subsidiaries.

Current view
We maintain our Buy rating on SNTX and continue to expect good
execution and revenue growth in its domestic monolithic and pre-fabs
segments. We believe the concerns relating to the FCCB debt are
overdone, as so far only US$110mn has been utilized by the company and
the payment for this is due only in Mar 2013. SNTX also has strong cash
balances and ST investments of Rs9bn (US$178mn), and we expect it to
generate FCF of around Rs2.8bn (US$56mn) over FY12E-13E, adequately
covering any repayment liabilities.
Exposure to EU demand is a concern, given current macro circumstances,
and we cut our contribution from the geography to flat growth (against 7%
growth vs. 12% growth guidance from the company). We also adjust
downward our margins for the same segment, building some loss of
operating leverage, resulting in a total EPS adjustment of -3% to -6% for
FY12E-14E and our P/E-based 12-month TP falling to Rs200 (from Rs214).
Sintex trades at 4.8X FY13E P/E vs. 5-year median 12-m fwd P/E of 10.9X,
attractive valuations in our view, with our forecast of a normalized 20%
EPS CAGR and high ROEs for the next two years. This implies a 98%
upside relative to 30% avg. upside potential for our coverage.
Key risks: 1) execution delays; 2) forex movement; 3) diversification.

INVESTMENT LIST MEMBERSHIP
Asia Pacific Buy List
Coverage View: Neutral

BSE, Bulk deals, 17/11/2011

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Deal Date	Scrip Code	Company	Client Name	Deal Type *	Quantity	Price **
17/11/2011	590059	APL APOLLO	KOTAK MAHINDRA (INTERNATIONAL) LIMITED	B	225000	154.77
17/11/2011	511672	Clarus Finance	TARADEVI RATANLAL BAFNA	B	150100	37.64
17/11/2011	511672	Clarus Finance	SHREE THIRUMALAI MARKETING & INVESTMENTS LTD	B	150000	38.21
17/11/2011	530843	Cupid-$	MOONCITY MERCHANDISE PVT.LTD	B	50844	5.01
17/11/2011	531270	Dazzel Conf	PREMIER EXIM SERVICES PRIVATE LIMITED	B	1063549	2.99
17/11/2011	531270	Dazzel Conf	RAJNIKANT MAGANLAL MEHTA	S	937716	2.99
17/11/2011	531695	Dhvanil Chem	BINAL TARANGKUMAR SHAH	B	36000	27.16
17/11/2011	533090	EXCEL INFO	NEW HORIZON EQUITY ADVISORS PRIVATE LIMITED	B	410000	10.24
17/11/2011	533333	Fineotex Chem	AMITABH HARIVANSH RAI BACHCHAN	B	80000	149.24

FII DERIVATIVES STATISTICS FOR 17-Nov-2011

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FII DERIVATIVES STATISTICS FOR 17-Nov-2011
	BUY		SELL		OPEN INTEREST AT THE END OF THE DAY
	No. of contracts	Amt in Crores	No. of contracts	Amt in Crores	No. of contracts	Amt in Crores
INDEX FUTURES	129580	3203.99	173710	4280.00	658131	15997.94	-1076.00
INDEX OPTIONS	888355	22220.11	859147	21584.34	1883020	46459.05	635.77
STOCK FUTURES	164164	3690.15	154853	3490.00	1265151	28657.55	200.16
STOCK OPTIONS	24478	567.49	24324	566.61	42597	987.54	0.88

17/11/11: Categories Turnover (Rs. crore) Clients NRI Proprietary Trade Data

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Categories Turnover

(Rs. crore)
	Clients			NRI			Proprietary
Trade Date	Buy	Sales	Net	Buy	Sales	Net	Buy	Sales	Net
17/11/11	1,460.60	1,404.85	55.75	0.46	0.28	0.18	445.49	492.16	-46.67
16/11/11	1,736.18	1,675.12	61.06	0.77	0.34	0.43	522.61	505.22	17.39
15/11/11	1,556.93	1,524.53	32.40	0.59	0.24	0.35	441.65	463.68	-22.03
Nov , 11	17,569.01	17,380.77	188.25	8.80	6.64	2.16	5,049.71	5,109.83	-60.13
Since 1/1/11	430,787.26	435,329.65	-4,542.39	305.44	212.30	93.14	125,350.34	124,574.37	775.96

NSE, Bulk deals, 17-Nov-2011

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Date	Symbol	Security Name	Client Name	Buy / Sell	Quantity Traded	Trade Price / Wght. Avg. Price	Remarks
17-Nov-2011	FLEXITUFF	Flexituff Inter Limited	HARSH STOCK PORTFOLIO PRIVATE LIMITED	SELL	1,25,000	257.00	-
17-Nov-2011	FLEXITUFF	Flexituff Inter Limited	JAROLI VINCOM PVT LTD	BUY	2,00,000	257.11	-
17-Nov-2011	INDOTHAI	Indo Thai Sec Ltd	CETKA CONSULTANCY BUREAU (TULSIDAS LAXMAN NAKRANI)	SELL	56,200	12.97	-
17-Nov-2011	ONELIFECAP	Onelife Cap Advisors Ltd	CHANDARANA INTERMEDIARIES BROKERS P. LTD	BUY	90,086	273.18	-
17-Nov-2011	ONELIFECAP	Onelife Cap Advisors Ltd	CHANDARANA INTERMEDIARIES BROKERS P. LTD	SELL	90,086	273.45	-
17-Nov-2011	ONELIFECAP	Onelife Cap Advisors Ltd	MARFATIA NISHIL SURENDRA	BUY	77,706	272.57	-
17-Nov-2011	ONELIFECAP	Onelife Cap Advisors Ltd	MARFATIA NISHIL SURENDRA	SELL	77,706	276.42	-
17-Nov-2011	PRAKASHCON	Prakash Constrowell Ltd	ASHROJ CREDIT INDIA PRIVATE LIMITED	BUY	79,137	220.57	-
17-Nov-2011	PRAKASHCON	Prakash Constrowell Ltd	ASHROJ CREDIT INDIA PRIVATE LIMITED	SELL	99,137	226.08	-
17-Nov-2011	PRAKASHCON	Prakash Constrowell Ltd	CHANDARANA INTERMEDIARIES BROKERS P. LTD	BUY	98,709	223.97	-
17-Nov-2011	PRAKASHCON	Prakash Constrowell Ltd	CHANDARANA INTERMEDIARIES BROKERS P. LTD	SELL	98,709	223.40	-
17-Nov-2011	PRAKASHCON	Prakash Constrowell Ltd	GKN SECURITIES	BUY	71,062	224.52	-
17-Nov-2011	PRAKASHCON	Prakash Constrowell Ltd	GKN SECURITIES	SELL	71,062	223.49	-
17-Nov-2011	PRAKASHCON	Prakash Constrowell Ltd	OVERALL FINANCIAL CONSULTANT PVT LTD	BUY	66,740	219.60	-
17-Nov-2011	PRAKASHCON	Prakash Constrowell Ltd	OVERALL FINANCIAL CONSULTANT PVT LTD	SELL	99,740	222.96	-
17-Nov-2011	SUDAR	Sudar Garments Ltd	INDIA SECURITIES BROKING PRIVATE LIMITED	BUY	1,41,000	67.00	-
17-Nov-2011	SUZLON	Suzlon Energy Limited	GOLDMAN SACHS (INDIA) SECURITIES PRIVATE LIMITED	BUY	128,23,853	27.15	-
17-Nov-2011	SUZLON	Suzlon Energy Limited	GOLDMAN SACHS (INDIA) SECURITIES PRIVATE LIMITED	SELL	38,39,853	26.79	-
17-Nov-2011	SUZLON	Suzlon Energy Limited	GOLDMAN SACHS INVESTMENTS MAURITIUS I LTD	BUY	240,00,000	27.15	-
17-Nov-2011	SUZLON	Suzlon Energy Limited	GOLDMAN SACHS INVESTMENTS MAURITIUS I LTD	SELL	1,94,000	27.64	-
17-Nov-2011	SUZLON	Suzlon Energy Limited	SAMANVAYA HOLDINGS PRIVATE LIMITED	SELL	370,00,000	27.15	-

17/11/11; FII & DII Turnover (BSE + NSE) (Rs. crore)

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FII & DII Turnover (BSE + NSE)

(Rs. crore)
	FII			DII
Trade Date	Buy	Sales	Net	Buy	Sales	Net
17/11/11	1,943.27	2,138.47	-195.20	1,149.83	778.24	371.59
16/11/11	1,743.78	2,232.67	-488.89	1,374.11	1,096.32	277.79
15/11/11	1,698.84	2,108.61	-409.77	989.22	783.26	205.96
Nov , 11	22,480.09	22,204.64	275.45	9,917.13	10,602.40	-685.27
Since 1/1/11   *	541,878.95	559,580.73	-17,701.78	252,183.97	230,823.73	21,360.24

Freight Forward - Nov 2011 ::ICICI Securities

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S h i p p i n g   M o n t h l y   R e p o r t   –   N o v e m b e r   2 0 1 1
• The Baltic Dry Index (BDI) increased by 3% to 1965 in October
2011 due to a 0.4%, 12%, and 2% rise in Capesize, Panamax and
Supramax index, respectively. Freight rates rose in the first half of
October for Capesize vessels as Australian iron ore exports
remained at high levels to substitute lower exports from India to
China owing to the monsoon season. We expect freight rates for
Capesize to remain soft while  panamax vessel freight rates will
firm up with the gradual up-tick in Indian iron ore exports to China
• The Dirty Tanker Index rose by 11% to 773 while the Clean Tanker
Index remained flat with a marginal increase from 725 to 728 level
in October 2011. VLCC freight rates remained in the negative
territory while day rates for Suezmax and Aframax rose by 376%
and 368%, albeit on an abnormally low base
• LPG freight rates displayed a weak trend in October 2011 with
rates for larger vessels declining sharply. VLGCs day rates
registered a decline of 5% while LGC rates declined by 6%. MGC
freight rates declined in the range of 2-3%
• Utilisation levels for drill ships, semi-subs and jack-ups displayed a
mixed trend. Utilisation levels for drill ships, semi-subs and jackup rigs was reported at 82%, 87% and 81% in October 2011 as
against 82%, 88% and 80% in September 2011.
Outlook
Dry bulkers
In the near term, dry bulk freight rates are expected to remain weak owing
to expected weakness in rates of Capesize vessels owing to lower
demand due to high level of Chinese iron ore inventory. Over the longer
term,  excess  supply  of  tonnage  would  keep  tabs  on  the  up  move  in  the
freight rates.
Tankers
Crude oil tanker freight rates are expected to remain subdued owing to
the oversupply of tonnage, which would handicap the market. Even if
some demand emerges in the near term, the tonnage available is likely to
weigh on the charter rates and keep them subdued. Some positive
momentum is likely for VLCCs while Suezmax day rates are expected to
remain rangebound with a positive bias.
LPG carriers
LPG freight rates are expected to remain weak particularly for VLGC and
LGC while MGC freight rates are expected to remain flattish. Smaller
vessels could face downward pressure in freight rates owing to a large
proportion of vessels being added to the global fleet in 2011.
Offshore vessels
Utilisation levels for offshore vessels are expected to increase while
charter rates are expected to remain range-bound with a positive bias in
November 2011. High capex spend by major global oil exploration/drilling
companies is likely to lead to higher utilisation levels for offshore vessels.

India may allow foreign retail investors to trade equities ::ET

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India is considering allowing foreign retail and small investors to trade local equities, a finance ministry official with direct knowledge of the matter said on Thursday, a move that could bolster fund flows into Indian shares.

A qualified foreign investor (QFI) is an individual, group or association resident in a foreign country that adheres to anti-money laundering and anti-terrorist financing guidelines.

India currently allows wealthy foreign investors with a minimum net worth of $50 million and registered as a sub-account of a foreign institutional investor (FII) to invest directly in local equities.

"We are looking at allowing QFIs to invest in equities without capping such an investment," said the finance ministry official, who declined to be named.

The official said all such investors who meet "know your customer" ( KYC) requirements are likely to be allowed to directly invest in Indian shares.

The move is seen as positive for Indian stocks, which are down nearly 20 per cent in 2011. Foreign portfolio investors have bought equities worth about $663 million so far this year, sharply down from the $29 billion they invested in 2010.

"The move is extremely good. It will help attract foreign fund flows into the Indian market," said Ambareesh Baliga, chief operating officer at brokerage firm Way2Wealth.

"However, in the current market, with so much of global uncertainty, the move will have little impact," he said.

The BSE Sensex dropped 1.9 per cent on Thursday to post its lowest close in six weeks, as investors cut their exposure to risky assets amid concerns about the impact of high interest rates and slowing economic growth on corporate earnings.

The benchmark index fell for the sixth straight session in its longest losing streak in more than three months.

In August, India allowed foreign investors to buy up to a cumulative $10 billion in domestic equity funds, opening the door wider to capital flows into Asia's third-largest economy.

Buy Transport Corporation of India; Target :Rs 102 ::ICICI Securities

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S l u g g i  s h   r e v e n u e   g r o w t h   d r a g s   d o w n   p r o f i t s …
Transport Corporation of India’s (TCI) results for Q2FY12 were below our
estimates. Net sales for Q2FY12 stood at | 453 crore, which was higher
by 2.5% YoY against our estimates of | 501.5 crore. The freight business,
which contributes to 43.5% of the company’s topline reported a 2% YoY
decline and stood at | 197.2 crore. The XPS and SCS divisions recorded
slower YoY revenue growth of 4% and 8.6%, respectively, while their net
sales stood at | 122 crore and |107 crore, respectively. The EBITDA
margins remained stable at 8.1%  in Q2FY12. The company’s PAT of |
13.8 crore declined 5.1% YoY on  account of 33.8% YoY increase in
interest cost, which was | 8.7 crore for Q2FY12.
ƒ Slowdown in growth rate from SCS division
The supply chain solution (SCS) division reported slower growth
during Q2FY12 on account of lower volumes in the auto segment
(auto sector contributes 75% of SCS’ revenue). Revenues from this
division increased 8.6% YoY against 58.7% in FY11.
ƒ Sluggish performance of freight division
The freight division reported a sluggish performance during
Q2FY12. The revenue from this division stood at to | 197.2 crore
while the EBIT margin from this division was maintained at 2.4%.
V a l u a t i o n
In Q2FY12, TCI reported lower growth on the back of a slowdown in the
manufacturing sector. We have revised our revenue and profit growth
target for TCI lower mainly on account of slower growth in the XPS and
SCS divisions. However, we believe these high margin businesses would
have increased contribution in revenues, going forward. At the CMP of |
73, the stock is trading at 9.3x its FY12E EPS of | 7.8 and 8.6x its FY13E
EPS of | 8.5. We have valued the stock at 12x FY13E EPS and arrived at a
target price of | 102.

Hold Jyothy Laboratories; Target :Rs 136 ::ICICI Securities

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M a r g i n s   s u f f e r   a   s i g n i f i c a n t   b l o w …
Jyothy Laboratories (JLL) in Q2FY12 reported a moderate growth of 6.8%
in its revenues that stood at | 154.6 crore against | 144.8 crore in
Q2FY11. Margins for the quarter slid  significantly by ~578 bps to 5.0%
from 10.8% in Q2FY11. The pressure on margins was on account of
higher raw material costs and  employee expenses. Raw material
expenses in Q2FY12 jumped to 58.1% of net sales compared to 52.9% in
the corresponding quarter last year. Employee expenses were higher by
~135 bps and stood at 13.4% during the quarter. In spite of higher sales,
a sharp decline in the EBITDA pulled down the earnings of the company
to | 12.5 crore against | 15.4 crore in Q2FY11. The company reported
other income of | 14.8 crore during  the quarter on account of interest
income charged from Henkel India for the loan granted to it by JLL.
ƒ Segmental performance
JLL has reported an increase in sales in soaps & detergents and
homecare segments, by 7.2% to  | 97.0 crore and 5.1% to | 57.5
crore, respectively. However, the earnings in both segments
remained subdued. The reported profit before interest and tax (PBIT)
in soaps & detergents stood lower at | 15.7 crore in Q2FY12 from |
16.8 crore in Q2FY11. The homecare segment reported a PBIT loss
of | 6.6 crore in Q2FY12 against a profit of | 4.0 crore in Q2FY11.
V a l u a t i o n
At the CMP, the stock is trading at 20.4x and 19.8x its FY12E and FY13E
EPS of | 7 and | 7.2, respectively. The company has taken price increases
(~7%) across all its SKUs from October, 2011 onwards. They believe this
would help them to ward off the impact of inflationary cost pressures.
However,  we  remain  wary  of  the  volume  growth  that  could  be  impacted.
With the company’s sales growth remaining moderate and its inability to
maintain margins, we remain cautious on the stock. We value the stock at
19x its FY13E EPS, assigning it a target price of | 136 with a HOLD rating.

Buy Bharat Forge; Target : Rs 320 ::ICICI Securities

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S  t  r o  n g   p e  r  f o r  m a  n c  e   c  o  n t  i n u e  s …
Bharat Forge (BFL) reported a strong set of numbers with the net sales for
Q2FY12 coming above our estimates at | 881.5 crore (I-direct estimate: |
854.4 crore), up 25.9% YoY and 6.3% QoQ with higher tonnage sales
(~17% YoY rise) at 53,740. Export revenues increased significantly
~13.3% QoQ at ~|432 crore as higher non-auto sales and machining mix
improving sales and blended realisations. The domestic market sales
have witnessed lesser traction owing to inventory correction in Q2FY12
from OEM side and expect better traction, going ahead. The company
posted EBITDA margin of 23.7% (I-direct estimate: 24.0%) with a slight
increase in other expenses (up~7% QoQ). The overseas subsidiaries’
EBITDA margins improved at 5.9% (up 30 bps QoQ) as the FAW-China JV
improved productivity. The PAT came in above our estimates at | 106.4
crore (I-direct estimate: | 93.9 crore) a jump of 56.1% YoY as other
income came in higher by ~| 7 crore owing to income on hedges.
Highlights of the quarter
BFL has seen a commendable performance with de-risking of business
model towards non-auto helping reap better revenues visibility in
uncertain times. The tonnage sales have touched 53,740, which is growth
of ~17% YoY with non-auto sales touching the earlier set target of ~40%
contribution to standalone sales.  Non-auto sales have been driven
through four verticals of oil& gas, marine, rail & construction segment
both in all markets. In the auto segment, BFL has witnessed a slight
moderation in domestic sales, which is expected to improve in H2FY12. In
overseas markets, it remains the market leader in engine-chassis
components which due to strong replacement demand is performing
well. BFL expects first deliveries of NTPC bulk tender to happen from
Q2FY13E onwards.
V a l u a t i o n
We have accounted for a moderate up-tick in domestic M&HCV segment
and continue to remain positive on strong non-auto growth. At CMP of |
293, the stock is trading 13.3x FY13E consolidated EPS. Using SOTP, we
have valued the standalone business at 14.0x FY13 EPS at | 293/share,
subsidiaries and Alstom JV combined at | 27/share.Our target price of |
320 implies an upside potential of 13%. We maintain BUY rating on BFL

Idea Cellular - Weak quarter ::Macquarie Research,

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Idea Cellular
Weak quarter
Event
􀂃 Idea reported weak 2QFY12 results today. EBITDA was 4% shy of our
estimate and 2% short of street estimates. Net profit was more than 40%
below our forecast, primarily due to a forex loss related to foreign currency
debt. We still see no reason to chase the stock at an FY12E PER of 39x.
Impact
􀂃 Weak headline results: Top line (Rs46.1bn) was broadly in line with the
street and our forecast. EBITDA however missed forecasts as strong ARPM
was offset by weakness in MOU, pay hikes and loss in new service area. Net
profit missed our estimate by over 40% and consensus by over 30%. Higher
interest cost was one key reason. Management clarified that there was a
Rs313m forex loss on accounts payables. We had expected this to be lower
due to hedging. D&A was also 2% higher due to aggressive 3G roll out.
􀂃 Mixed metrics – overall negative: ARPM (42.7p) was up 4% QoQ (our
forecast was 2% growth) - driven by higher contribution from VAS, roaming
revenue and revised promotional tariffs. This was the second consecutive
sequential increase after nine quarters of decline. MOU fell 2.2% QoQ - the
first ever sequential decline. After three quarters of 6-10% QoQ rise, we had
expected MOU growth to slow to 3% QoQ due to seasonal factors. We think
this was also probably due to a high proportion of rural subscribers.
􀂃 3QFY12 should see some recovery: The seasonally weak quarter is now
behind us. The bulk of D&A and interest costs related to 3G roll-out are now
being recognised. Macquarie’s India economist, Tanvee Gupta Jain, also
does not forecast the current pace of Indian rupee depreciation to persist.
Earnings and target price revision
􀂃 We roll forward the 2Q results and cut our FY12 PAT estimate by 12%. Our
FY13E and FY14E forecasts and target price are unchanged.
Price catalyst
􀂃 12-month price target: Rs66.00 based on a Sum of Parts methodology.
􀂃 Catalyst: News on operating metrics (ARPM/ tariffs/ 3G), spectrum act.
Action and recommendation
􀂃 Maintain Underperform rating: Idea has missed estimates this quarter after
delivering two good quarters. Meanwhile, Idea continues to trade (39x FY12E
PER and 21x FY13E PER) at a premium to industry peers (Bharti trades at
22x FY12E and 13x FY13E PER) driven by M&A expectations. We maintain
our view that Idea will instead emerge as a consolidator when M&A /
spectrum regulations turn supportive.
􀂃 Idea is a pure play in the sector with a strong business model and operations.
At some stage, we believe Idea may be an interesting play on the sector.
However, we will wait for clarity on spectrum pricing and valuation premium to
shrink. Switch to Bharti (BHARTI IN, Rs378, Outperform, TP: Rs483), our
preferred (and cheaper) way to play the sector.