14 April 2012

Tata Steel - Juice still left: Prabhudas Lilladher

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􀂄 Domestic earnings to grow in double digit despite headwinds on margins:
Domestic operations would face multiple headwinds in FY13 on account of
sharp fall in iron ore and coking coal prices, high competitve intensity in flat
products and reduced integration on coking coal. However, thanks to 17%
volume growth attributed to partial benefit of 2.8mtpa brownfield expansion,
FY13 EBITDA would manage to grow by 11% despite 5% decline in EBITDA per
tonne at Rs16,564. EBITDA would further grow by 19% in FY14, driven by 17%
volumes growth and scale benefits.
􀂄 Current hike in Europe prices driven by restocking; underlying real demand
remains weak: European steel prices rose by ~US$69/t (YTD), attributed
primarily to restocking, firm global prices and unreasonable fall in prices during
Q4CY11. However, the underlying real demand continues to remain weak. Based
on Eurofer’s recent estimates, region’s real demand is expected to fall by 1% in
CY12 on the backdrop of weakness in construction, shipyard and tubes sector.
􀂄 Europe ops set to gain from correction in input prices: Given the lower input
prices, operation would benefit by reduction in CoP by US$90-100/tonne and
working capital release by US$200m in FY13. Operations would further gain by
closure of loss-making long product manufacturing units in UK and cost savings
associated with rebuild of inefficient BF in Port Talbot in FY13.
􀂄 Maintain ‘Accumulate’ with TP of Rs495: Despite sharp run-up in the stock
price, stock continues to offer an attractive opportunity given the distress
valuations of European operations at EV/tonne of US$200, strong domestic
operations and increased raw material self-sufficiency from current 33% to 50%
in iron ore and 18% to 23% in coking coal (by FY13 end). We reiterate our
‘Accumulate’ rating with TP of Rs495; EV/EBITDA of 6.3x FY13E domestic
earnings and 5x rest of operations.

Steel Authority of India (SAIL) Execution and valuation overhang still continues : Prabhudas Lilladher

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􀂄 Volume growth slipping due to continuous project delays: SAIL continues to
disappoint on the execution of its expansion projects. It announced a delay of 6
months in commissioning of its most advanced 2mtpa expansion at IISCO with
revised schedule of March-2013; 15 months behind the original schedule. Along
with IISCO, company guided a quarter’s delay at 2mtpa expansion at Rourkela
unit (RSP) with revised schedule of FY13 end. Management had guided for
incremental volumes of 1m and 2m tonnes in FY13 and FY14, respectively.
However, we believe that guidance runs at a significant downside risk, given the
high probability of further delays and poor track-record on ramp-up of facilities.
􀂄 Wage revision concerns overdone: The overall wage increase for nonexecutives
(effective January 1, 2012) like the last agreement, looks unlikely this
time, given the depressed earnings and leveraged balance sheet. In addition to
that, the increase in wage bill last time was exacerbated by sharp increase in
superannuation benefits and perquisites from ~18% to 30% and ~20% to 46% of
revised basic pay (BP), respectively. We expect an overall increase of 25%
(effective hike ~34% in last revision) in wages for non-executives (~50% of total
wage bill) amounting to ~Rs10bn on annualised basis.
􀂄 Valuation in discomfort zone even on normalised earnings: Assuming 100%
utilisation on the expanded capacity (20mtpa) and normalised EBITDA per tonne
of Rs7000/tonne in FY14, stock trades at EV/EBITDA of 5x FY14E. Valuations look
expensive in the light of the fact that expansions would attain peak capacity
utilisations only by the mid/end of FY15. We maintain our ‘Reduce’ rating with
TP of Rs103.

JSW Steel -Weakness expected due to shortage of iron ore : Prabhudas Lilladher

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􀂄 Existing iron ore inventory sufficient for just 2 months’ production: Iron ore
availability turned precarious in Karnataka over the last one month due to
exhaustion of ore stocks, sharp grade slippage and production issues at NMDC.
The iron ore volumes sold under auction dipped from an average of 3m
tonnes/month to 1.2m during February 2012. With this backdrop, JSTL has an
inventory of ~4m tonnes, sufficient to sustain two month’s production. We
believe that utilisations could fall below 75%, provided operations are not
restored at the closed mines as the remaining stocks of 6m tonnes would last till
June 2012.
􀂄 Smooth restoration of B‐category mines holds the key: Central Empowered
Committee (CEC) recommended instant restoration of operations at 19 mines
(excluding NMDC’s two operational mines) classified under Category-A with
production potential of 5mtpa (12mtpa including NMDC’s 7mtpa). CEC has also
recommended for limiting the total mining in the state at 30mtpa. This suggests
production of ~18mtpa from 72 mines under Category-B. However, we see high
risks to production from these mines, given the stringent conditions laid out by
CEC regarding R&R obligations. Nevertheless, we assume 85% utilisation in FY13.
􀂄 Turnaround in JSW‐Ispat still far away: We expect the entity to post loss of Rs6-
6.5bn in FY13 as well as FY14 on the backdrop of compressed utilisation levels at
75% due to shortage of natural gas (NG), highly leveraged balance sheet with
debt of Rs70bn and weak realisations attributed to over-supply in the flats.
􀂄 Valuation and outlook: We maintain our negative outlook on the stock, with the
underlying earnings risk associated with availability of iron ore and expensive
valuations given the abnormal exposure to acceptances (shown in current
liabilities) unlike its peers, TATA and SAIL. We value the stock at Rs745,
EV/EBITDA of 5.5x FY13E.

Jindal Steel & Power -Expensive valuations drive the downgrade : Prabhudas Lilladher

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􀂄 Fuel security assured for 2400MW with PMOs recent directives on FSAs: The
new FSAs will assure coal availability for a period of 20 (earlier 5) years at 80%
(earlier 50%) of the requirement. The enhanced domestic coal availability would
marginalize Jindal Power’s dependence on supplies expected from captive mines
in Mozambique and Indonesia for its upcoming 2400MW power plant (expected
during H2FY14) in Chhattisgarh with all-round profitability improvement.
􀂄 Mining lease for Utkal B1 coal mine struck: Grant of mining lease for Utkal B-1
coal mine (capacity of 6mtpa) is struck due to Govt. of Odisha’s demand for 33%
of the power generated from washery rejects at free of cost. Otherwise, the
company has secured all other clearances and also acquired ~75% of the
required land. The mine would feed steel plant’s entire coal requirement, while
would meet 50% of power plant’s requirement. Hence, the activity on the coal
mine would stand as the most crucial milestone for profitability of JSPL’s
810MW (135MWX6) and 1.6mtpa steel plant at Angul, Odisha. We expect 1.5m
tonnes of coal production from these mines in FY14.
􀂄 Production from overseas coal assets still far away: On the backdrop of average
quality of Indonesian coal mines, increased regulatory intervention and logistics
bottlenecks in Mozambique, we don’t expect any meaningful contribution from
overseas coal assets in the next couple of years.
􀂄 Downgrade to Reduce with TP of Rs625: Given the sharp run-up in the stock
price and expensive valuations, we downgrade our rating on the stock from
‘BUY’ to ‘Reduce’ with TP of Rs625. However, we continue to like JSPL’s strong
structural play on resources and attractive returns profile.

Steel -Restocking‐driven recovery, underlying demand remains weak : Prabhudas Lilladher

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􀂄 Surge in European steel prices driven by restocking: European steel prices rose
by ~US$69/t (YTD CY12), attributed primarily to restocking, firm global prices
and unreasonable fall in prices during Q4CY11. However, real demand continues
to remain subdued. Based on Eurofer (European steel association), real steel
consumption fell by ~0.4% YoY in Q4CY11, while apparent consumption saw a
sharper fall at ~4% YoY, owing to accelerated destocking. The association
expects continued weakness in real consumption in the next 2-3 quarters, given
the dearth of new orders and tepid investment climate. The region also runs a
risk of peaked-out net exports of ~1.5m tonnes, highest in the past seven years.
We remain highly cautious on European steel prices, given the sluggish domestic
demand outlook and high dependence on volatile exports market.
􀂄 China witnessing protracted demand slowdown: Demand environment
continues to remain challenging in China on the backdrop of 1) tight liquidity
gauged by lowest ever growth in money supply (MS) in the past 10 years during
the month of January @ 12% YoY 2) weak demand across the major consuming
sectors during December; vehicle sales (down 26% YoY), real estate (down 22-
23%) and machinery (down 8%) and 3) sharp deceleration in Fixed asset
investment (flat YoY in December), the major driver of China’s steel demand.
We expect short-term recovery in demand and prices from the current trough
levels on the back of liquidity easing. However, we don’t expect rally in prices to
sustain for long given elevated stock levels and weak demand outlook.
􀂄 US, the only bright spot: Thanks to strong liquidity (MS↑10%), accelerated
expansion in investment (Gross private investment↑10%) and consumer
demand, US apparent consumption grew by 8% in January to 8.8m tonnes;
almost near its pre-crisis levels. We expect demand to remain firm in the coming
months as suggested by all leading indicators. However, the wide price
differential between US and other regional prices would pose a major or the
only risk to the domestic prices in the near term.
􀂄 Reiterate Accumulate on Tata; downgrade JSPL to Reduce: We remain positive
on Tata given the underlying distress valuations of European operations
(EV/tonne of US$200), strong domestic operations and increased raw material
self-sufficiency. We downgrade JSPL from ‘BUY’ to ‘Reduce’ on account of
expensive valuations. JSTL remains our least preferred stock in the space,
backed by underlying risk associated with shortage of iron ore and expensive
valuations given the abnormal exposure to acceptances. Maintain ‘Reduce’ on
SAIL given the expensive valuations and below average project execution.

Telecom : Q4FY12 Result Preview: ICICI Securities, PDF Link

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http://www.icicidirect.com/mailimages/ICICIdirect_ConsolidatedResultPreview_Q4FY12E.pdf



Telecom
ƒ Subscriber addition rises
After falling for quite some time, subscriber additions have risen in the
first two months of Q4FY12 at 17.9 million as compared to 11.4 million
in Q2FY12. However, it remains well below the number of Q4FY12 at
39.9 million. We expect the industry to add 25.4 million subscribers in
Q4FY12 as compared to 20.4 million in Q3FY12 and 59.9 million in
Q4FY11. The rise in net adds was on the back of reintroduction of
attractive offers by operators after the SC order of  cancellation of 122
licenses. We expect 2.7% QoQ revenue growth for telecom service
providers on the back of 2.4% subscriber growth.
ƒ Traffic growth to remain stable; ARPMs may not expand
Total traffic growth across our telecom coverage universe is expected to
remain stable in Q4FY12. We expect 2.1% QoQ domestic volume
growth for our telecom universe coverage in Q4FY12 to 451 billion
minutes as against 2.2% growth in  Q3FY12.  ARPM  across  players  is
expected to remain more or less stable in Q4FY12 as the upward
pressure on ARPM on the back of the recent price hike taken by telecom
operators and higher 3G uptake would be offset by the downward
pressure owing to reintroduction of lucrative offers by the operators. We
expect ARPMs to stay in the range of 44-46 paisa.
ƒ EBITDA margin to expand
EBITDA margins are expected to expand across operators, except
RCom, in Q4FY12 QoQ. This was due to lower marketing costs than
Q3FY11, which was a festive season with a few one-time sporting
events wherein operators were aggressive with ads. However, higher
subscriber acquisition costs due to higher subscriber added will limit the
margin expansion.
ƒ 122 licenses cancelled - creates further uncertainty
The recent SC ruling of cancelling 122 licenses, which were awarded on
or after January 2008, has brought further uncertainty to the fate of
these operators. While STel and DB Etisalat have already declared their
intention of quitting the business, other operators have been going
aggressive to counter churn and acquire subscribers. However, the SC
has heard petitions of operators whose licenses stand cancelled, along
with the government and results are awaited.

Tea : Q4FY12 Result Preview: ICICI Securities, PDF Link


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http://www.icicidirect.com/mailimages/ICICIdirect_ConsolidatedResultPreview_Q4FY12E.pdf

Tea
ƒ Domestic realisations to improve in coming year, CY12
Tea production in India in CY11 stood at 988.3 million kg (mkg)
(expected: ~1000 mkg) against 966.4  mkg in CY10, an increase of
almost 2.3%. Consumption during the period increased at a higher rate
of ~3.5%. With the dry weather in February-March 2012, domestic
production is expected to marginally decline in 2012. Simultaneously,
production in Kenya is likely to remain similar to 2011 levels. We believe
export demand for Indian tea would increase in 2012 and would push
Indian tea prices by ~10-12%. In the January-March quarter, we expect
tea companies to post higher losses due to wage increase in Assam and
West Bengal by ~| 7/kg, which is substantially higher than regular
increase of | 2.5-3.5/kg

Sugar ƒ : Q4FY12 Result Preview: ICICI Securities, PDF Link


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http://www.icicidirect.com/mailimages/ICICIdirect_ConsolidatedResultPreview_Q4FY12E.pdf

Sugar
ƒ Domestic sugar production to be lower in coming season (SY13)
India’s sugar production in SY12, up to March 31, has been 23.2 million
tonnes (MT) (higher by ~13% against corresponding period last year).
Output in Maharashtra  was up 11.1% to 8.1 MT while production in
Uttar Pradesh stood at 6.6 MT, up 12.7%. India’s total production for
SY12 is expected to be ~26 MT against 24.2 MT in SY11. Despite 3 MT
of exports allowance the year, inventory levels have remained high at
~6.8 MT. High production, increasing inventory levels and stable
consumption have resulted in subdued sugar prices at ~28-29/kg. With
the glut in the system, sugarcane arrears have increased drastically to
~| 9,900 crore by March 2012. We believe rising arrears would result in
a decline in area under cane acreage in SY13. Going ahead, with a fall in
production, we believe sugar prices would improve to ~| 32/kg in SY13.
ƒ Global surplus to shrink
With the expected fall in Indian production and flat output in South
Central Brazil (31.2 MT in SY12)  next year, world sugar surplus is
expected to shrink to ~5 MT from ~10 MT in 2011-12. We believe
global sugar prices would remain firm at 24-25 cents/lb and any dip in
production in other exporting countries (Thailand and Australia) could
lead to even higher global prices, going forward.

Shipping/Offshore/Shipbuilding ƒ : Q4FY12 Result Preview: ICICI Securities, PDF Link


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http://www.icicidirect.com/mailimages/ICICIdirect_ConsolidatedResultPreview_Q4FY12E.pdf

Shipping/Offshore/Shipbuilding
ƒ Dry bulk freight rates decline due to oversupply, lower demand
The Baltic Dry Index (BDI) average for Q4FY12 at 880 was 46% lower
than in Q3FY12. Of the constituents of BDI, the quarterly average for the
Baltic Capesize Index (BCI) declined by 51% QoQ to 1612 while the
quarterly average for Baltic Panamax index and Baltic Supramax index
declined 45% and 41% to 1019 and  835, respectively. Oversupply
across categories, high Chinese iron ore inventory and lower demand
from China negatively impacted the demand for dry bulk carriers.
Hence, this resulted in a severe decline in freight rates. Indian shipping
companies normally have a healthy long term charter to spot ratio.
However, in the current scenario, companies are averse to entering into
long term contracts and prefer the spot market as freight rates are much
below their historic yearly averages and locking the vessels for a longer
period at current freight rates does not appear lucrative.
ƒ Tanker freight rates remain range bound
The Baltic Dirty Tanker Index (BDTI) average for Q4FY12 at 812 was 1%
higher than in Q3FY12 while the Baltic Clean Index average for Q4FY12
at 687 was 5.9% lower than Q3FY12.  In the near term, tanker freight
rates could see a positive momentum owing to escalating tension
between European nations and Iran. However, over the longer term,
crude oil tanker freight rates are expected to remain subdued owing to
the oversupply of tonnage with 11% of present fleet expected to be
delivered in 2012, which would handicap the market.
ƒ Q4FY12E performance (QoQ basis)
We expect Q4FY12E revenues of the I-Direct shipping universe to
remain flattish with QoQ growth of 0.9% to | 5267 crore due to
continued depressed freight rates across various vessel categories. Due
to sustained low rates and high fleet age, Q3FY12 had seen a substantial
sale of old vessels while the net fleet size has reduced in spite of some
new vessel inductions among companies under I-Direct coverage. On
the EBITDA margin front, we expect a marginal improvement from
27.2% in Q3FY12 to 27.7% in Q4FY12E owing to the induction of high
margin offshore vessels. We expect the I-Direct shipping universe to
register 40% QoQ decline in net profit to | 200.1 crore, owing to lower
extraordinary income from profit on sale of vessels. On the stock wise
profitability front, we expect positive growth in profitability of Aban,
ABG Shipyard and Pipavav Defence. In contrast, we expect lower profits
for GE Shipping, Mercator with SCI to report a loss due to lower
extraordinary income.

Real Estate ƒ : Q4FY12 Result Preview: ICICI Securities, PDF Link


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http://www.icicidirect.com/mailimages/ICICIdirect_ConsolidatedResultPreview_Q4FY12E.pdf

Real Estate
ƒ Mumbai volumes remain subdued; Bengaluru resilient so far…
Volume offtake in the Mumbai region has remained subdued on account
of rising unaffordability at the given price levels. However, the
Bengaluru market continues to be resilient led by end user demand.
Consequently, we expect Oberoi and Orbit Corp to report muted presales volume in Q4FY12. On the other hand, Sobha Developers, which is
a key Bengaluru based player, would continue to report strong pre-sales
volume during the quarter.
ƒ Regulatory changes to expedite clearance process …
In terms of regulations, we believe regulatory changes for fungible FSI
and changes in Maharashtra Ownership Flats (Amendment) Rules
(MOFA) and municipal commissioner initiative are a positive in the long
run for the Mumbai real estate market. Though this step should increase
project cost for developers in the short run, this would eventually result
in expedition of project clearance. We believe this should lead to higher
sales volume led by better supply albeit at corrected prices.
ƒ Coverage universe topline to grow at 6.5% YoY in Q4FY12E
We expect muted topline growth of 6.5% YoY for our real estate
coverage universe. While Orbit is expected to report YoY growth of
63.5% mainly on account of a lower base in Q4FY11, we expect topline
growth of 8.5% YoY for Sobha Developers. However, we expect Oberoi
to report a YoY decline of 10.2% in revenues mainly because Oberoi
Esquire is now expected to reach the revenue recognition threshold in
FY13.

April 2012 -Freight Forward :ICICI Securities, PDF link

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http://content.icicidirect.com/mailimages/ICICIdirect_FreightForward_April2012.pdf


S h i p p i n g   M o n t h l y   Re p o r t   –   A p r i l   2 0 1 2
• BDI continued its recovery after the crash in January 2012. In
March 2012, it recorded gains for the second consecutive
month with an MoM increase of 25% to 934. Panamax and
Supramax indices rose on an MoM basis by 26% and 45%,
respectively, and led to the rise in BDI in spite of BCI
declining by 8%. Increase in  shipments of minor bulks and
coal within the Pacific Basin has resulted in higher demand
for smaller vessels like Panamax, Supramax and Handysize
while lower iron ore export from Brazil to Asia has resulted
in lower demand for Capesize vessels leading to weakness in
Capesize freight rates

hEDGE The alternative insights monthly: April view: New fiscal; new hopes :Edelweiss

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April view: New fiscal; new hopes
Leverage at 32-month low; FIIs unwind F&O ahead of GAAR issue
Market volume shows initial signs of drop as P-Note activity halts
FII derivative positions shrink, index futures OI at 5-year low
Sensex drivers in FY13; bet on rate cycle reversal
Annual policy review; RBI holds the trigger, rate cut at the door
INR conundrum: CAD at 4.3% of GDP; Brent adds to the woes
Leverage at 32-month low; FIIs unwind F&O ahead of GAAR issue
March was full of important events such as the LTRO, state elections, RBI policy
announcement, union budget and GAAR. Nifty moved in a broad range of 10% to end
with a monthly drop of just 1.66%. Also, the dark clouds of FII selling P-note positions
have dispersed, at least for the moment. Though there are some initial signs of drop in
market volumes, this could be owing to the long weekend just gone by. However, lack
of P-Note activity may impact market volumes going forward. Derivative markets
witnessed strong deleveraging with FII Open Interest (OI) in derivative market dropping
~43.4%. We believe with the kind of light derivative market that we have currently had,
coupled with the resilience shown by Nifty at the 200 DMA, markets should remain
bullish in April. Important levels to watch out are 5380/5630 on the upside and
5250/5150 on the downside.
The March derivative expiry witnessed substantial unwinding by FIIs on the F&O
position. Uncertainty surrounding the P-Note issue was clearly at play during the expiry
week. The reduction in open positions going into the April series clearly showed the
reluctance on the part of investors to take incremental exposure. The 32-month low
value of market wide futures open interest at ~INR376bn was amidst relatively less
rollover at ~67%. The FII Index futures open interest at the start of April series was the
lowest since March, 2007.

Retail : Q4FY12 Result Preview: ICICI Securities, PDF Link


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http://www.icicidirect.com/mailimages/ICICIdirect_ConsolidatedResultPreview_Q4FY12E.pdf

Retail
ƒ Sales remain subdued barring promotional offers
Our retail coverage universe is expected to report a YoY topline growth
of 13.3% during Q4FY12E. Despite heavy promotional offers and a
preponed discount season, sales remained subdued other than in
January (when promotional offers were made). Pantaloon Retail (PRIL)
also witnessed a lukewarm response to the Exchange Mela during
February 18 – April 8, 2012.
ƒ Operating margins to be affected due to heavy discounts
We expect margin pressure on the back of high discounts offered. While
PRIL has crawled back to the 9% operating margin level in the preceding
quarter,  we  expect  margins  to  retrace  back  to  8.5%  levels.  Similarly,
Shoppers Stop is also expected to report an operating margin of ~4.5%
due to the prevailing losses of HyperCity and also due to the discounts
offered. However, Titan Industries is likely to witnesses a YoY expansion
in operating margin to 8.8% (6.0% in Q4FY11) as the company had
taken a one-time hit due to the bonus provision made for employees.
ƒ Space addition takes a breather
With the slowdown in demand, retailers have also slowed down the
space addition marginally. PRIL is expected to add 0.35 million sq ft of
space taking the total operational space to 16.6 million sq ft. Shoppers
Stop is expected to add 0.13 million sq ft thereby taking the total space
to 4.4 million sq ft. Revenue per sq ft is likely to remain subdued as
newer stores will take time to stabilise. We expect revenue per sq ft of |
1,785 and | 1,619 for PRIL and Shoppers Stop, respectively.

Metals & Mining: Strong quarter likely for steel companies :: Kotak Securities PDF link

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http://www.kotaksecurities.com/pdf/indiadaily/indiadaily09042012.pdf


Metals & Mining: Strong quarter likely for steel companies
` Higher realizations and input costs decline to drive steel companies'
performance in 4QFY12
` Strengthening commodity prices to drive quarterly EBITDA growth for nonferrous companies
` Gains on unhedged forex exposure to provide further cushion to net
income
` Select stocks remain attractive; Tata Steel and HZ remain our preferred
picks

Pharmaceuticals : Q4FY12 Result Preview: ICICI Securities, PDF Link


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http://www.icicidirect.com/mailimages/ICICIdirect_ConsolidatedResultPreview_Q4FY12E.pdf

Pharmaceuticals
ƒ Consolidated topline to grow at ~15% YoY
The pharma companies under the I-Direct coverage are expected to
post steady growth of ~15% to | 12642 crore on the back of new niche
product launches and a favourable rupee (~11% YoY) movement.
Excluding Biocon’s Axicorp divestment (| 232 crore) and Strides’ Ascent
divestments (~| 175 crore) in Q4FY11, the like to like growth is
expected to be ~20%. Companies like Glenmark, Lupin and Sun are
expected to register healthy growth in sales driven by incremental
launches in the US and emerging markets. Divi’s Labs and Jubilant are
also expected to register good numbers on account of a revival in
CRAMS.  Cadila  is  expected  to  post  lower  sales  growth  on  account  of
slowdown in consumer business. Similarly, Aurobindo is also expected
to post lower growth due to lesser product launches in the US market.
ƒ EBITDA to grow ~40% YoY
We expect the EBIDTA of the coverage universe to witness robust
growth of ~40% YoY to | 3042 crore due to factors like 1) weeding out
of one-time provisions in Q4FY11, 2) possible write-back of MTM
provisions by players like Glenmark and 3) sharp improvement in
profitability of Taro (Sun).
ƒ Net profit to post robust growth of 29% YoY  
We expect the net profit of the coverage universe to post robust growth
of ~29% YoY to | 2193 crore on the back of 1) higher EBITDA and 2)
partial reversal of MTM losses, which was booked in Q3FY12.

HINDUSTAN UNILEVER Beauty stores pact with RIL: Edelweiss

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Hindustan Unilever (HUL) has tied up with Reliance Industries (RIL) to set
up beauty stores within Reliance Hypermarkets. The former has been,
over the past few years, aggressively tapping new retail formats and
outlets to improve distribution, enhance brand visibility and gain direct
access to end consumers via Lakme salons (~150), Swirl ice‐cream parlors
(200+) and BRU World café (8). The current tie up will ensure high
visibility to HUL’s premium products (Dove and Sunsilk). The stores will
begin operations in Mumbai in May and will be subsequently expanded
across India within three months. We believe this direct interface with
end consumers will boost the HUL brand positively and help the company
stay one step ahead of competition. Maintain ‘BUY’.
Tie up with Reliance a win win for both players
This will be win‐win for both HUL and RIL. The latter is currently one of the few well
funded retailers in India as most other players are facing severe debt burdens and are
cutting back on expansion. The tie up will help HUL tap a sharp scale up in retail
presence. Unilever has successfully undertaken such tie‐ups globally (alliance with
Carrefour in China).
HUL’s premium products to gain visibility
HUL will also have product display counters for specific products (Dove, Sunsilk etc).
Stores will have an innovative concept of assisted selling under which specialists in skin
care, hair care and ayurveda (trained mostly by HUL) will help consumers make the
right choices while buying products. While 50% of the products in stores will be
Unilever's, offerings from other companies, which fit the bill, will also be stocked.
Outlook and valuations: Positive; maintain ‘BUY’
We believe such direct interface with end consumers will boost the brand positively
and help HUL stay one step ahead of competition. The company has still not seen any
significant signs of slowdown/downtrading and has been effecting regular price hikes.
The stock is trading at 28.8x and 24.6x FY13E and FY14E EPS, respectively. We
recommend ‘BUY’ with ‘Sector Outperformer’ on relative return basis.

Oil and Gas : Q4FY12 Result Preview: ICICI Securities, PDF Link


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Oil and Gas
ƒ Brent crude oil prices increase 8% QoQ to US$118.7/barrel
Despite a weaker global economy, average Brent crude oil prices
remained at a higher level, mainly on account of tensions between the
West and Iran. Average Brent crude oil prices increased 12.6% YoY
from US$ 105.4/bbl in Q4FY11 to US$118.7/bbl in Q4FY12. Overall, for
the quarter, higher average oil prices and rupee depreciation would
increase realisations and profitability of the private exploration and
production (E&P) companies.
ƒ Gross under-recoveries for Q4FY12E at ~| 42,400 crore
A weak rupee, high Brent crude oil prices and limited scope of price
deregulation would increase the estimated gross crude oil underrecoveries from | 31,230 crore in Q4FY11 to | 42,400 crore in Q4FY12E.
We have modelled upstream companies share of subsidy burden at
40.6% in Q4FY12E. We expect downstream companies to receive
| 7,150 crore in Q4FY12E. We estimate upstream and government to
bear subsidy burden of | 17,214 crore (40.6% share) and | 32,330 crore
(76.3% share), respectively in Q4FY12. We expect downstream
companies to receive | 7,150 crore (-16.9% share) in Q4FY12E. Hence,
we believe oil marketing companies (HPCL, BPCL and IOC) to report
profit in the Q4FY12.
ƒ Gross refining margin decline QoQ
Singapore GRMs have declined QoQ from $8/barrel in Q3FY12 to
$7.7/barrel in Q4FY12 mainly on account of a drop in distillate crack
spreads. This is negative for refiners like RIL, Essar Oil, CPCL and MRPL.
ƒ Lower domestic gas volumes to be replaced by higher priced LNG
The decline in gas production from the Reliance KG-D6 basin from ~38
mmscmd in Q3FY12 to ~34 mmscmd in Q4FY12E has led to higher
import of costlier priced LNG from global markets. Hence, large gas
transportation companies would report muted volumes YoY. City gas
distribution (CGD) companies would report lower profitability growth
QoQ on account of a weak rupee and high LNG prices.

Logistics : Q4FY12 Result Preview: ICICI Securities, PDF Link


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Logistics
ƒ Muted growth in volumes at major ports
Overall volumes at 12 major ports during the first 11 months of FY12
registered a decline of -0.7% YoY to 510.8 million tonnes (MMT) while
container volumes have increased by 3.3% YoY to 7.09 million TEUs.
Volumes at major ports during the first two months of Q4FY12 exhibited
a decline of 5.6% YoY and stood at 92.6 million tonnes (MMT) while
container volumes for the same period declined 1.6% YoY and stood at
1.25 million TEUs.
ƒ EBITDA margin to increase marginally
We expect EBITDA for the I-direct coverage universe to increase 16.7%
YoY to | 566.5 crore mainly on account of higher realisations. EBITDA
margins are expected to increase by 70 bps YoY at 20.3%. We expect
PAT for the I-direct coverage universe to increase 10.6% YoY to | 354.8
crore.

Infosys holds back pay hikes, for now (ET)

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Infosys, the IT bellwether, delivered a shocker on Friday when it announced to its shareholders that there would not be any increment for the time being for its 149,000 employees.

Infosys failed to meet its own growth guidance for the just concluded quarter and has given a lower-than-expected growth projection for fiscal 2013. "This is the time to focus only on business. All stakeholders ask for one thing and that is growth. In the current environment, leadership has to focus only on growth.

Today morning after our management council meet we announced that there will be no hikes, of course, employees will understand," said Nandita Gurjar, head of HR. Infosys said markets are volatile and this would not be the right time for wage increase.

"We will give a raise when we have more comfort on business," said V Balakrishnan, CFO of the firm. Last year, the firm had given an increment of 10-12%.

The recruitment and hiring experts, however, refuse to buy this assurance especially when another IT firm, albeit a smaller size, iGate-Patni that has also announced its results on Friday, decided to give a 10% raise to its employees. "It is time these companies start serving their employees and not their shareholders," said S Kandula, HR Head, iGate-Patni.

Despite the assurance that better business would mean a call for salary increase in the year ahead, a poor business forecast at the same time does not reflect well for the IT giant's employer brand tag. Infosys expects to grow at 8-10% in the coming fiscal, compared to 23% of Cognizant, the only other IT firm that has given growth guidance for the current fiscal.

"Infosys is conservative with its salary and this move may result in attrition," said Kunal Banerji, CEO of executive search firm Absolute HR International.

This is not the first time that the company has announced zero increments. In 2008, Infosys had announced zero increments but, in the middle of the year gave a 10% raise to all.

"This is against the trend since things are definitely better than what they were in 2008 and may impact middle and small IT firms who look at Infosys as a trendsetter," said the head of Human Capital Services of one of the largest consulting firms who did not wish to be named.


Infosys has a gross hiring target of 35,000 for the year. The company will give out 16,000 promotions this year, as against around 18,000 last year.

Window dressing: Banks raise Rs 2 lakh crore in 6 days (ET)

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Commercial banks in the country raised a record Rs 2 lakh crore as deposits in the last six days of March, managing to achieve an annual growth of 17.4% and reaching the Reserve Bank's comfort zone. This is reckoned to be the largest window-dressing effort to shore up the deposit figures. Banks raised a total of Rs 61.12 lakh crore as on March 30, up Rs 2 lakh crore since March 23. Banks succeeded in raising huge amounts in a short span as many large banks, including the country's largest, State Bank of India, raised deposit rates, particularly for shorter tenor products in the last few days, despite the Reserve Bank signalling rates may ease. Besides, banks were also selling certificates of deposits, or CDs, at high rates. Rates on three-month CDs were around 10% in the last week of March. Even though the rates were marginally lower than in the previous weeks, they were still reckoned to be high. Besides, banks have been raising rates and have also created special tenors like 91-day deposits and 100-day deposits, which offered 9% to 10%. It is common for banks to go for an overdrive to raise deposits to shore up their balance sheets towards the last few days of a fiscal, but this time round the amount raised is higher than usual. This is because deposits had slowed down in the second half of the fiscal. In fact, as on March 23, with just six days remaining for the fiscal to end, deposits growth stood at only 13.4%, compared to the central bank's comfort level of 17% for the year. Bank loans rose by Rs 93,160 crore in the last six days of the previous fiscal to touch Rs 47 lakh crore as on March 30. The extent of windowdressing has, however, been lower as banks were seeing credit pickup throughout the last quarter of FY'12.

Apollo Tyres: Structural tailwinds - Part 2 :: Kotak Securities PDF link


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Apollo Tyres: Structural tailwinds - Part 2
` Benefits of rising non-truck revenues - reduced working capital; higher
profitability
` Non-truck tire (car tires specifically) business is the future of the industry;
truck tire is the past
` Companies need to improve product quality to gain from the trend; losers
will be marginalized

Sugar Sector: Q2SY12 Result Preview: Centrum

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Profits to remain under pressure
We expect the profitability of sugar companies to remain
under pressure impacted by higher sugarcane costs. The Uttar
Pradesh government increased the SAP (State Advised Price)
for Sugarcane to Rs240/quintal for SY12 against Rs205/quintal
in SY11. Though, we expect Triveni Engineering and Bajaj
Hindusthan to report profits in the quarter, we believe that
these companies will incur losses in SY12E. In the quarter, we
expect Shree Renuka Sugars to report losses mainly due to
higher depreciation costs and interest expenses. Average
sugar price (M grade Mumbai) during the quarter declined
0.9% QoQ to Rs30.4/kg. Going forward, we believe that the
increase in sugar production to 25.5mt in SY12E against
24.2mt in SY11 will lead to an increase in inventory levels,
which in turn, will put pressure on domestic sugar prices
leading to subdued profitability of companies. Though, we
have a Buy rating on Shree Renuka Sugar (after assigning
benefits of potential hive off of the power business in Brazil)
and Triveni Engineering considering historic valuations and
its 21.8% stake in Triveni Turbine Ltd, the stocks could be
under pressure in the near-term because of pressure on
domestic realizations. We maintain Sell rating on Bajaj
Hindusthan. The triggers for upside would be a) building up of
cane arrears in this crushing season b) higher than expected
sugar price and c) decline in area under sugarcane cultivation
for next crushing season.
􀂁 Sugar price declines on a sequential basis: Sugar price (M
grade Mumbai) during the quarter declined 0.9% QoQ to
Rs30.4/kg (up 5.9% YoY). Current sugar price (M grade Mumbai) is
at Rs30.7/kg. Going forward, we believe that sugar price will be
under pressure due to higher estimated sugar production in
SY12E.
􀂁 Export of 2mt allowed during the quarter: The government
allowed 2mt of sugar exports under OGL (Open General License)
quota in this quarter, which will help the companies generate
additional profits.
􀂁 Increase in global sugar price on a sequential basis: Global
sugar price increased 5.4% QoQ to US$628 during the quarter.
On a YoY basis, global sugar price declined by 7.1% YoY. The
sequential improvement in global price was driven by the
expectation that the Brazilian sugar production will be under
pressure in the next year.
􀂁 Valuations attractive though near-term challenges persist:
We have a Buy rating on Shree Renuka Sugar (after assigning
benefits of potential hive off of the power business in Brazil) and
Triveni Engineering considering historic valuations and its 21.8%
stake in Triveni Turbine Ltd. However, these stocks could be
under pressure in the near-term because of our expectation of
pressure on domestic realization considering higher sugar
production in SY12E. We maintain Sell rating on Bajaj
Hindusthan. The triggers for upside would be a) building up of
cane arrears in this crushing season b) higher than expected
sugar price and c) decline in area under sugarcane cultivation for
next crushing season.

Metals & Mining ƒ : Q4FY12 Result Preview: ICICI Securities, PDF Link


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Metals & Mining
ƒ EBITDA/tonne to improve marginally QoQ
On a QoQ basis, we expect steel companies within our coverage
universe to report an improved operational performance for Q4FY12E
on the back of an up-tick in domestic demand. After a lacklustre first half
of FY12, there has been an improvement in the demand scenario.
Domestic steel demand has increased ~5.2% during the first 11 months
of FY12 wherein demand growth in the first two months of Q4FY12 is
~8.8%. Furthermore there has been a marginal increase in steel prices
QoQ while prices of raw materials have also seen a declining trend
sequentially. As a result, for Q4FY12E, we expect EBITDA/tonne of
major steel companies to increase in the range of ~ | 96 to | 541/tonne
QoQ (for standalone operations). For Q4FY12E, we expect the
EBITDA/tonne of Tata Steel’s Indian operations to be ~| 16759/tonne (|
16218/tonne in Q3FY12) while the EBITDA/tonne of JSW Steel is
expected to be ~| 6661/tonne (|  6565/tonne in Q3FY12) and SAIL’s
EBITDA/tonne is expected to  be ~ | 6187/tonne (| 6049/tonne in
Q3FY12).
ƒ Base metal prices improve sequentially QoQ but are lower YoY
Sequentially, on a QoQ basis, there has been an increase in base metal
prices on the LME. During the quarter under review, average base
metals prices were higher in the range of ~4-11% QoQ but lower ~13-
20% YoY. Quarterly average prices of aluminium during Q4FY12 were ~
US$2181/tonne, higher by 4.1% QoQ but lower by ~13.0% YoY.
Similarly, quarterly average prices of copper during the quarter under
review were at ~ US$8327/tonne, higher by 10.9% QoQ but lower by
13.6% YoY. Zinc was at ~ US$2028/tonne, higher by 6.4% QoQ but
lower 15.3% YoY and Lead was at ~ US$2092/tonne, higher by 5.0%
QoQ but lower by 19.6% YoY.
ƒ EBITDA margins to increase QoQ
In Q4FY12E, we expect the EBITDA of the I-direct coverage universe to
increase by 21.3% QoQ. EBITDA margins are also likely to increase by
270 bps QoQ to 16.3%. Some companies in our coverage universe had
one-off adjustments in Q3FY12 and Q4FY11 (below the EBITDA level).
As a result, the PAT on a YoY as well as QoQ basis is not comparable.

Construction & Infrastructure ƒ : Q4FY12 Result Preview: ICICI Securities, PDF Link


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Construction & Infrastructure
ƒ Road segment contributes to bulk of order inflows
Highways awarding saw major movement in Q4FY12 with NHAI
achieving total awarding of ~7957 km (including  1466 km awarded
through state agencies) vs. its targeted ~7300 km. Additionally, bids for
~ 425 km have been received and are currently under evaluation.
The companies under our coverage that have bagged road orders in
Q4FY12 are IVRCL (L1 in two BOT projects – 166 km Patiala Sangrur
section worth | 1586 crore and 121 km Gundugulanu Rajahmundry
section worth | 1617 crore), Unity (two BOT project - 69 km Punjab
Haryana Border Jind section of NH-71 worth | 510 crore and Suratgarh-
Sriganganagar Section worth | 330 crore) and Sadbhav (L1 in two BOT
projects – 83 km Gomati ka Chauraha - Udaipur section worth | 1280
crore and 111 km Solapur-Bijapur section worth | 1220 crore).
In terms of order inflows from other segments, Simplex witnessed order
flows worth | 4000-4500 crore (including L1 of 1600 crore), followed by
IVRCL, which received orders worth | 878 crore and Supreme, which
reported order inflows of | 619 crore (including L1 of | 274 crore).

ASHOK LEYLAND -- : ACCUMULATE TARGET PRICE: RS.33 :: Kotak Securities PDF link


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ASHOK LEYLAND (ALL)
PRICE: RS.31 RECOMMENDATION: ACCUMULATE
TARGET  PRICE: RS.33 FY13E P/E: 9.3X
 We expect the M&HCV demand to gradually pick up in FY13. Expected
improvement in domestic economy and reduction in interest rates will
kick start recovery in this segment.
 After underperforming in FY12, we expect ALL to outperform the industry volumes in FY13. South India had relatively poor demand off-take in
FY12 and any improvement there will be major positive for the volumes.
 We are increasing our volume estimates to factor in volumes from their
new LCV (Dost) and also raising our M&HCV volume growth rate assumption. Based on revision on revenue and margin estimates, our net
profit estimates stands revised upward by 6.3% to Rs5,190mn for FY12
and by 24% to Rs8,840mn for FY13.
 On the back of increase in our earnings estimate we revise our target
price upward to Rs33 (Rs27 earlier) and upgrade the stock from REDUCE
to ACCUMULATE.
M&HCV demand expected to improve gradually
 In FY12, the M&HCV goods segment is expected to grow by 10% despite various macro headwinds.
 In the current slowdown, the segment did not witness any sharp de-growth in
volumes which otherwise has been the case in previous downturns.  Freight rates
have been relatively stable in recent past despite weak macro indicators.
 Expected improvement in economic activities in the medium term will provide
some boost to the sector in FY13.
 Recent hike in freight rates by the railways is a positive for the sector. Road
transport segment stands to benefit from the sharp hike in freight rates announced by the Indian Railways. Alternatively, this will give transport operators
the levy to raise freight rates.
 Interest rates are expected to come down in phased manner over the medium to
long term which will play a positive role towards demand recovery.
ALL expected to outperform in FY13
 ALL's M&HCV volume growth in FY12 has been flat as against expected 10%
growth in industry volumes.
 Weak demand in the southern region remained one of the prime reasons for the
company's underperformance in FY12. Company's volumes in Southern market
were impacted by 1.Ban on mining activity 2.Elections and 3.Overall sluggish
demand. Improvement in the Southern market will be a major positive for the
company volumes.
 ALL's volumes in FY12 were also impacted by production/logistic issues at the
company's Uttaranchal plant.
 With expected recovery in the medium term and low FY12 base, we expect ALL
to outperform the industry growth rate in FY13 and improve its market share.

Telecom: Presidential reference - a new twist in the '2G spectrum allocation' tale? :: Kotak Securities PDF link



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Telecom: Presidential reference - a new twist in the '2G spectrum allocation'
tale?
` Union Cabinet has approved a presidential reference on 2G spectrum
allocation, per press reports
` Government's actions post SC judgment only increase the policy
uncertainty

Buying and selling through stock exchanges ::Business Line

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With top fund houses offering select schemes for investments through the stock exchanges, (30 through NSE and 29 through BSE), you have an easier way to transact in mutual funds. Here's a look at what the exchanges offer.

ELECTRONIC PLATFORMS

The electronic platform offered by NSE is called Mutual Fund Service System, which is widely known as MFSS. It is an online order collection system used for purchasing and selling mutual funds from orders received from investors through the brokers.
Separately, the platform offered by Bombay Stock Exchange is called as BSE StAR MF. The platform was launched on December 4, 2009.

ADVANTAGES OF INVESTING

Saves time: With access to fund houses on the exchanges, investors needn't make time or to take the pain of going to the nearest fund house. Mutual fund transactions are only a click away.
Less paperwork: There is no major paperwork required to transact mutual funds online. All the paperwork is electronically done and they can be easily stored. The platform is very easy, convenient, and user-friendly.
No additional KYC : When investing, a single KYC can be used for investing into various types of funds from a single or different fund houses.
Easy availability of terminals: There are a large number of share trading terminals spread across the country. A person who wants to invest in mutual funds can open an account with any of the registered brokers of NSE and BSE.
Single view of portfolio: Investors can get all the relevant information pertaining to shares and mutual funds under the one platform.
Fees and charges: While the Securities and Exchange Board of India doesn't impose any regulatory restrictions on the fees charged by the trading members for MFSS services, members can charge brokerage fees from investors inclusive of service tax.
Typically, the trading member or broker doesn't charge any fees for opening a demat account with them. However, they do charge a nominal fee on a yearly basis, as account maintenance charges which vary from Rs 500-Rs 1000.
As per the new circular released by the Securities and Exchange Board of India (dated August 22, 2011), for investments more than Rs 10,000, existing investors have to shell out Rs 100 per subscription, whereas a new investor has to put in Rs 150 for investments. There would be no transaction charges below Rs 10,000. In case of Systematic Investment Plans amounting to more than Rs 10,000, the transaction charges have to be recovered in a maximum of 3-4 successful instalments.

TRANSACTION PROCEDURE

You can approach a trading member or broker of BSE or NSE with whom you have a demat account. Although a demat account is not mandatory for investing in MFs through stock exchanges, it has its own advantages.
You can submit all documents along with the payment options, and thereafter start purchasing and redeeming mutual funds. You need to open a separate bank account in order to start the transactions.
Documents required: PAN Card, KYC compliance form, address proof, proof of payment option, or payment gateway, are the common documents which are needed for carrying out transactions of mutual funds through stock exchanges.
Transaction timings: You can enter the orders from 9 am to 3 pm (both the exchanges). After, 3 pm you can get to know the status of your order, and the value at which the units of the mutual funds will get credited and debited in the account.
Challenges: Want of transparency in commission disclosure amongst brokers, and high brokerage fees that some brokers charge while opening a demat account, are hindrances here.
(The author is General Manager, Fundsupermart.com)

Economy: Beyond the data issues growth remains weak :: Kotak Securities PDF link


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Economy
Industrial Production
Beyond the data issues growth remains weak. Rather than the February IIP growth
of 4.1%, the highlight of the IIP release was the massive revision of January IIP to 1.1%
from 6.8%. Anyway the IIP was not the key determinant in RBI’s monetary policy
decisions due to the intrinsic volatile nature of the series. With the data issues coming
to the fore, this IIP series could attract even lesser weight from the RBI. That said, IIP
outturn indicated continued weakness in the industrial sector with moderations in both
the capital and the consumer sides of the story. We expect a 25 bps cut in repo rate
from the RBI on April 17 given the need to see some pick-up in the investment cycle as
well as provide a boost to sentiments

Hospitals ƒ : Q4FY12 Result Preview: ICICI Securities, PDF Link


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http://www.icicidirect.com/mailimages/ICICIdirect_ConsolidatedResultPreview_Q4FY12E.pdf

Hospitals
ƒ Revenues to grow 96% YoY
We expect hospital sales under the I-Direct coverage to grow 96% YoY
to ~| 2036 crore mainly due to Fortis Healthcare’s consolidation of its
international business and Super Religare labs. Excluding these, the
base business is expected to grow by 23% YoY. Overall, we expect
average revenue per occupied bed to go up by 7.8% YoY.
ƒ EBITDA margins to improve 20 bps YoY
EBITDA margins are likely to improve 20 bps to 14.4%. EBITDA margins
of Apollo Hospital are likely to increase by 70 bps to 16%. Overall
EBITDA is expected to increase  99% to ~| 294 crore on the back
consolidation of the international business by Fortis.
ƒ Net profit to decline ~18% YoY
The net profit of our coverage is expected to decline by 18% to | 62.6
crore on the back of higher interest cost and depreciation at Fortis
Healthcare. We expect Fortis’ profits to decline by 74% YoY due to
increase in interest and depreciation. Apollo Hospitals is expected to
report net profit growth of 16% YoY.

Economy News  April 14 :: Kotak Securities

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Economy News
 Industrial production growth slowed to 4.1% in February compared to
6.7% expansion in the previous year-ago month. The government also
sharply revised the January production number to 1.1% growth from the
previously reported 6.8% expansion and attributed it "incorrect
reporting" of sugar production data for January (ET).
 The government has approved the adoption of ad-valorem regime for
charging royalty on coal and lignite at 14% and 6% respectively (ET).
Corporate News
 Suzlon Energy,  which urgently needs to repay $569 million to
bondholders by October,has begun talks with key banks for raising
money. Suzlon is believed to have sounded out some banks such as SBI,
Bank of India, Bank of Baroda, Central Bank, Canara Bank and IDBI for a
term loan of $700 million in FY13 (ET).
 Trafigura,the worlds third-largest independent oil trader, will invest Rs6.5
bn for a 24% stake in a refinery being set up by  Nagarjuna Oil
Corporation. Additionally, Trafigura will invest Rs6 bn to build storage
facilities and associated infrastructure (ET).
 Adani Ports and Essar Ports are in the race to build the Rs 36 bn mega
container terminal at Chennai Port (BS).
 Neyveli Lignite Corporation (NLC) has said that the power projects
worth 6,500 Mw are under formulation stage. These include a 2,000 Mw
coal-based power plant at Uttar Pradesh, which will be developed along
with Uttar Pradesh Rajya Vidhyut Utpadan Nigam (BS).
 ABB  has won a contract worth Rs 750 mn from Delhi Metro Rail
Corporation (DMRC) to provide power solutions for a planned metro rail
network for Jaipur. The turnkey project includes design, supply,
installation and commissioning of essential power infrastructure (BS).
 Bharat Heavy Electricals Limited Corporate R&D division at Hyderabad
has clocked a value of in-house developments at Rs 95.1bn for the year
2011-12, which is 19 per cent of the company's total turnover and up 22
per cent over last year (BL).
 Hyderabad   Airport operated by GMR Infrastructure limited
subsidiary, expects slightly lower passenger numbers this year because of
the local challenges being faced by domestic airlines (BS).
 IDBI Bank plans to mobilise up to $1 billion in 2012-13 from overseas
markets via syndicated loans and by issuing bonds. Last year, it had raised
about $720 million (BL).
 Mahindra & Mahindra  has said to be exploring opportunities in the
unconventional space powering new vehicles, such as sports utility
vehicles (SUV) and mini cars. It would be working on concepts such as full
hybrids, battery-powered powertrains, bio-diesel, fuel-cells and
hydrogen-powered engines (BS).
 Shree Ganesh Jewellery House Ltd (SGJHL)  has forayed into solar
power by setting up a 25 mega watt plant in Gujarat at an investment of
Rs 4 bn (BL).
 Suzlon Group-subsidiary REpower UK said it has signed a contract to
supply turbines to a wind farm for Renerco's Cotton Farm in
Cambridgeshire, England. This is the second contract REpower has signed
with Renerco in the past four months, according to which eight REpower
MM92 machines will be installed (BS).
 Mangalore refinery and petrochemicals limited (MRPL) has shut
down phase II and III units following shortage of raw water supply after
the District Administration directed MRPL to stop pumping water from
Sarapady weir (BL).

Buy ADANI PORTS AND SPECIAL ECONOMIC ZONE : TARGET PRICE: RS.166: Kotak Securities PDF link


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http://www.kotaksecurities.com/pdf/dmb/MorningInsight11042012.pdf


ADANI PORTS AND SPECIAL ECONOMIC ZONE (ADSEZ)
PRICE: RS.132 RECOMMENDATION: BUY
TARGET  PRICE: RS.166 FY13E P/E: 17.5X
Adani Ports and Special Economic Zone (ADSEZ) has refinanced the ~USD2bn
bridge loan taken for the Abbot Point port terminal at lower than expected
terms. Plus the company has been issued Letter of Intent (LoI) for a 20 MT
bulk terminal at Kandla port. We believe these positives are being
overshadowed by negative news flow/perception at the group level. ADSEZ
has fallen by 21% in the last three months versus 8% fall in the broader
market (Nifty). This is again despite strong operational performance of the
company. Now the stock trades at attractive valuation of 17.5x FY13E P/E
considering PAT CAGR of 30% over FY11 to FY13E and over 25% RoE. Three
year average historical one year forward P/E for ADSEZ is 22x. In case of EV/
EBIDTA multiple, it trades at ~13 times FY13E, which we believe is
marginally undervalued in context of the healthy operating margin of ~65%
with strong operational cash flows of ~ Rs 32 bn over FY11 to FY13E and
healthy free cash flow of ~Rs 24 bn over FY11 to FY13E. Average historical
one year forward EV/EBIDTA for ADSEZ for the last 3 years is 15x. We
reiterate BUY with a price target of Rs 166.
Abbot Point bridge loan refinancing complete
The Abbot Point Terminal AUD1.8 bn acquisition, which was funded by a USD2bn
bridge loan, has been refinanced by a combination of asset backed loan and a holding company term borrowing at competitive rates of Bank-Bill Reference Rate
(BBSW) +250bps and 3m LIBOR + 330bps respectively. The repayment is back
ended, in line with volume scale up which would be 50mtpa terminal by FY15
thereby ensuring repayments aligned with project cash flows.
Project pipeline in line with 200 MT target by 2020
ADSEZ was recently issued LOI by the Kandla Port Trust to develop a 20 mtpa dry
bulk terminal at investment of Rs10bn on BOOT basis for 30 years. Further, the company is also in race for the Rs 37bn Chennai Port's 4mn TEU mega container terminal project. It is also scaling up capacity at its flagship port, Mundra, by incurring
capex of Rs 12 bn (over the next 2 years) buoyed by higher demand for coal imports
and containersation volumes.
The ongoing Central Bureau of Investigation (CBI) investigation
at the group level having overhang on the stock
The alleged involvement of the Adani Group in export of the illegally mined iron ore
from Karnataka has caused decline in the share prices of Adani Group including
ADSEZ. The matter will come up for hearing in due course of time. Till then we believe, the share price of Adani group shares would remain under pressure.
Earlier Adani Port was also indicted for destruction of mangroves
In October 2011, a bench of the Gujarat High Court (HC) had ordered the Adani
Group to halt development within 300 meter of the coastal area of Adani Port &
Special Economic Zone (ADSEZ) in Kutch. ADSEZ was blamed for destruction of
mangroves, which in the long run can prove fatal for the environment of the region.
All construction and development work in the area has been stopped till further order by the HC. Management indicated that the halting of the development work by
the HC pertains to a very small portion of the SEZ and won't impact the day to day
operations and financial performance of the company.

Hotels ƒ : Q4FY12 Result Preview: ICICI Securities, PDF Link


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http://www.icicidirect.com/mailimages/ICICIdirect_ConsolidatedResultPreview_Q4FY12E.pdf

Hotels
ƒ Revenue growth to remain moderate at ~6% YoY in Q4FY12E
Despite this being a peak season for the hotel industry, major hotel
players under our coverage are expected to report a moderate growth
of ~5-6% YoY in topline during Q4FY12E. Addition of new room supply
over the years with moderate room demand during the quarter
suppressed average room rate (ARR) growth to the tune of ~3-4% YoY
while occupancy is expected to  be ~75% YoY (up ~200 bps YoY)
mainly backed by growth in leisure destinations.
ƒ EBITDA margin to remain flat YoY
EBITDA is expected to grow by a mere 4% YoY on account of a
moderate rise in operating cost. We expect the I-direct hotel universe
operating cost to increase ~5% YoY (marginally lower than sales
growth). Major hoteliers like Indian Hotels are expected to report
EBITDA margins of 34% (down ~ 139 bps YoY) while EIH is expected to
report EBITDA margin of 31% (up ~190 bps YoY), respectively,
benefiting mainly from their geographical mix.
ƒ Net profit to decline 8% YoY led by sharp fall in EIH’s profitability
Companies under the I-direct coverage are expected to report net profit
of ~| 163 crore in Q4FY12E, (down ~8% YoY) due to higher interest
and depreciation cost. Under our coverage, we expect net profit of
Indian Hotels to remain flat YoY while EIH’s net profit is expected to
decline 26% YoY to | 50 core mainly due to a sharp decline in other
income during Q4FY12E. Small hotel players like Royal Orchid are
expected to report net profit growth of ~2% YoY while Kamat Hotels is
expected to report a net profit of about | 0.2 crore against a loss of | 1.4
crore reported in during Q4FY11.
ƒ Leisure and select business destinations to drive growth in Q4
Leisure destinations such as Agra,  Goa,  Jaipur  and  Kerala  witnessed
occupancy growth of ~300 bps YoY to 80% from 77% during Q4FY12,
mainly on account of the holiday season. Among business destinations,
South Mumbai, NCR and Kolkata also witnessed occupancy growth up
to ~300 bps YoY to 78% from 75% during Q4FY12 driven by an
increase in MICE (meeting, incentives, conferencing, and exhibitions)
activities

Reliance Industries: Price looks fine, but challenges persist :: Kotak Securities PDF link

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http://www.kotaksecurities.com/pdf/indiadaily/indiadaily09042012.pdf


Reliance Industries: Price looks fine, but challenges persist
` Conflicting signals on use of cash; ongoing buy-back program positive,
others look negative
` Confusing news about the E&P segment
` Core chemicals and refining businesses continue to struggle
` Cut FY2013-14E earnings by 1-2%; retain REDUCE rating with a revised TP
of Rs800

FMCG : Q4FY12 Result Preview: ICICI Securities, PDF Link


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http://www.icicidirect.com/mailimages/ICICIdirect_ConsolidatedResultPreview_Q4FY12E.pdf

FMCG
ƒ Topline growth intact but dominated by prices rather than volumes
Sales growth for FMCG companies is expected to remain healthy.
However, it would be driven by an increase in prices with volume
growth remaining subdued. Due to relentless increase in commodity
prices in 2011, companies witnessed a slowdown in volume growth
from double digits to single digits. The industry witnessed ~8% volume
growth in 2011 compared to 12% in 2010. Hence, with the full impact of
price increases taken in 2011 being visible in Q4FY12 and hardly much
increase in this quarter, we expect topline growth across the industry to
be largely price led.
ƒ Higher taxes announced in Budget for FY13
The Government of India in its FY13 Budget increased excise duty by
2% (from 10% to 12%) and introduced an ad valorem tax on cigarettes
(of more than 65 mm length) of 10% to existing specific rates. The ad
valorem duty would be chargeable on 50% of retail sales price declared
on the pack. We believe the increase in excise duty will impact
companies like HUL, Nestle, Colgate and Asian Paints, for having
relatively highest share of production in the non-excise free zones.
Hence, a calibrated price increase to pass on this impact by companies
is  expected  in  the  coming  quarter.  We  also  expect  cigarette  leader  ITC
to pass on the burden of higher duties to consumers by increasing
prices by ~8% in FY13E.
ƒ Margins to sustain despite cost pressures
With raw material (RM) costs continuing to pressurise margins, FMCG
companies were constrained to take  a second round of price hikes in
2012 after taking hikes across all products in 2011 and minor (~3%) hike
in the first half of 2012 (due to excise duty hike by 2%). Increase in
prices of raw materials on a QoQ basis, mentha oil (used in cooling hair
oils) up by 28.3%, pthalic anhydride (RM used by paint companies) up
by 12.3%, barley (key input for malted beverages) up by 3.3% and palm
oil (expected to rise further due to supply constraints) already up by 6%
would compel companies like Godrej Consumer, HUL, Marico, Dabur,
GSK Consumer, Nestle and Asian Paints to pass on the impact to
consumers in the coming quarter also.

IIP – February 2012 Data ‘revision’ or data ‘confusion’? :: IDFC Sec

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IIP came in at 4.1% yoy in February 2012, significantly lower than our estimate of 7%. More importantly, the number for
the previous month has been revised downwards to 1.1% yoy from the provisional data of 6.8% yoy reported earlier.
This raises questions on the quality of IIP data and, in turn, the efficacy of these high-frequency indicators in
determining short-term growth trends. With the revised numbers, IIP growth has shrunk by 1.7% mom (without
adjusting for seasonality) in February 2012 as against a contraction of 1.2% last month due to tepid growth in consumer
goods (down 0.2% yoy). Growth of the mining segment recovered marginally to 2.1% yoy after contracting for the last
six months. Manufacturing growth came in at 4% yoy (1.4% yoy last month), with almost 18 of the 22 industry groups
clocking positive growth. Electricity growth was strong, at 8% yoy, in line with the Core 8 industries data. With growing
skepticism on the quality of IIP data, we expect the central bank to use it in conjunction with other monthly indicators
like Core 8 industries data, PMI indices, export growth, etc. While other indicators are suggesting a marginal
improvement in economic growth momentum in Q4FY12, PMI indices suggest that growth is again beginning to falter
(HSBC Manufacturing PMI in March 2012 was lower, at 54.7, as against 56.6 in February 2012). We maintain that
downside risks to FY13 GDP growth remain and hence expect the policy stance of the RBI to become more
accommodative hereon. So, we expect the central bank to embark on a monetary-easing cycle with a 25bp rate cut in
April 2012.
Event:
IIP growth for February 2012 came in at 4.1% yoy, below our expectation due to tepid growth in consumer goods.
Growth in consumer goods contracted by 0.2% yoy due to 6.7% yoy contraction in consumer durables. Further, growth
in consumer non-durables moderated to 5.1% yoy as against 11% yoy (revised downwards from 42% yoy reported
earlier) in January 2012. On other use-based indices, while growth of basic goods came in at a robust 7.5% yoy, the
trend in intermediate goods (down 0.6% yoy) suggests further weakness in IIP growth going ahead. Capital goods grew
by 10.6% yoy as against a contraction of 1.7% yoy in January 2012 due to a favorable base.
Growth of mining segment came in at 2.1% yoy in February 2012 after contracting for the last six months.
Manufacturing growth came in at 4% yoy (1.4% yoy last month), with almost 18 of the 22 industry groups clocking
positive growth. Electricity growth continues to be strong, at 8% yoy, in line with the Core 8 industries data.
IIP growth for January 2012 was revised downwards to 1.1% yoy from 6.8% yoy reported earlier. The revision was
attributed to a correction in the production data of sugar (revised to 5.8m tonnes from 13.4m tonnes reported earlier).

Textiles; Others : Q4FY12 Result Preview: ICICI Securities, PDF Link

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http://www.icicidirect.com/mailimages/ICICIdirect_ConsolidatedResultPreview_Q4FY12E.pdf


Textiles
ƒ Cotton players likely to perform better than man-made segment
We expect our coverage universe to report a topline growth of 13.5%
YoY and 9.9% QoQ. Multiple factors like depreciating rupee (YoY),
seasonality impact and higher promotional offers are likely to aid this
growth. Cotton prices dipped 4.3%  sequentially from an average of |
103.6/kg in December 2011 to | 99.2/kg as on March 2012. Cotton yarn
prices also rose by 15.6% QoQ to  | 192/kg as compared to polyester
oriented yarn (POY), which grew by a mere 2.8% QoQ to | 112/kg.
In our coverage universe, we expect Alok Industries and Vardhman
Textiles to report healthy revenue growth on the back of higher yarn
prices. Innerwear companies like Page Industries, Lovable Lingerie and
Rupa & Company are expected to grow in excess of 20%.
ƒ Benefit of lower cotton prices; but dent of higher ad spends
With cotton prices correcting ~35% YoY, the companies are likely to
benefit from lower input costs. Accordingly, the operating margins of
Alok Industries, Bombay Rayon and  Vardhman Textiles are likely to
witness operating margin expansion. However, players like Kewal Kiran
Clothing and Lovable Lingerie, have increased their advertising
expenses and the same is likely to weigh on the operating efficiency. On
the other hand, Page Industries and Rupa & Company are expected to
witness operating margin expansion due to higher share of premium
products.    
ƒ One-off gains could be a positive surprise
On account of high volatility in rupee levels during the year, the
companies had to provide for MTM losses. However, with the rupee
appreciating as compared to Q3FY12, some companies are expected to
benefit significantly from the write-back of such provisions.
ƒ Man-made fibre players: Hit by lower demand, higher input prices
The ratio of cotton yarn price to POY has come down from a high of
2.1x in April 2011 to 1.7x in March 2012. While demand for cotton yarn
has been on the rise, polyester players continue to witness inventory
pile-up due to lower demand. On the other hand, prices of PTA and
MEG  (key  raw  materials)  have  remained  high  while  that  of  polyester
chips and POY are down by 5-6% YoY. This signals further pressure on
the operating margin, going forward.