29 September 2012

Alok Industries: Ongoing dilution saga… :: ICICI Securities, report


Ongoing dilution saga…
Alok Industries’ (Alok) Board has approved a rights issue amounting to
| 551 crore. It has also withdrawn the earlier cleared proposals of equity
issuances & preferential allotment and warrant allocation to promoters.
We look at this as a negative for the company considering the past
dilution history. In the race to enhance capacities, the company has had
to leverage extensively and also had to  resort  to  equity  dilution  in  the
past. However, this has not worked too well for shareholders who have
not received anything significant, either in the form of dividends or share
price appreciation. Based on our estimate of a rights issue price of | 12,
we expect a ~30% haircut in the EPS. Also, the delay in closure of deals
on the real estate front has worsened the situation for the company. In
the past few years, the company has had to time and again resort to
equity dilution. Considering these factors, we downgrade Alok Industries
from HOLD to SELL with a revised a target price of | 8.

JBF Industries: RM availability & capex mode worry us: ICICI Securities, report


RM availability & capex mode worry us…
We visited JBF Industries’ (JBF) Sarigam and Silvassa plants. At the
Sarigam facility, the company manufactures PET chips (both textile and
bottle grade) and manufactures polyester and specialty yarn at the
Silvassa plant. The industry is facing purified terephthalic acid (PTA)
availability issues as all suppliers have taken an unplanned shutdown of
their plant for various reasons. Due  to this, the company is forced to
operate its plant at lower utilisation rates of ~70% as against the normal
utilisation rates of 85-90%. The company has consistently had some or
the other issues, which remain an overhang on valuations. While the
company is now in the process of getting rid of the derivative losses
burden, issues relating to raw material availability have popped up. Also,
the high capex mode that the company is currently in will dent return
ratios in the near term. While the long term picture looks favourable, we
remain concerned about the near term worries. Considering the current
up move in the stock, we downgrade the stock from HOLD to SELL.

PVR Limited: Treat for movie patrons… : ICICI Securities, report


Treat for movie patrons…
Q2FY13 has been an exceptional quarter for movie patrons on the back of
blockbuster Ek Tha Tiger. Also, Raaz 3, Barfi, Bol Bachchan and Cocktail
have chipped in with significant contributions to the box office. Our
interaction with the management suggested that Q2FY13 was comparable
to Q2FY12 when  occupancy levels  had increased to a whopping 36%.
Also, Q3FY13 is expected to bring patrons  in large numbers to
multiplexes owing to the festive season and a slew of big starrer movies
to be released like Talaash, Jab Tak Hain Jaan, Dabangg 2, Son of Sardar,
Race 2 and Khiladi 786. We have revised our estimates for PVR to factor
in a  better-than-expected  Q2FY13 and  festive driven Q3FY13. Our  EPS
estimates for FY13 and FY14 stand  at | 15.8 and | 20.0 against our
previous estimates of | 13.9 and | 18.8. Consequently, we have upgraded
the stock from HOLD to BUY with a revised target of | 220.

Bharat Electronics, Motherson Sumi, Apollo Tyres: reports by Kotak Securities


Bharat Electronics: Execution, margins and cash utilization remain unclear;
retain REDUCE

Motherson Sumi Systems: Peguform turning around faster than expected

Apollo Tyres: Why are Apollo's reported debtor days lower than peers?

Hold Escorts Ltd; Target : | 69 :: ICICI Securities, report


Amalgamation gets final court approval….
The High Court of Punjab & Haryana has approved the amalgamation of
Escorts Construction Equipment Ltd (ECEL), Escotrac Finance &
Investments (Escotrac) Pvt Ltd and Escorts Finance and Investments and
Leasing Pvt Ltd (EFILL) with Escorts Ltd. The equity shareholders and
unsecured creditors have already approved the scheme of arrangement
of the merger

Power Sector Update :: ICICI Securities, report

Transmission & Distribution Sector :: ICICI Securities, report

Banking Sector Update :: ICICI Securities, report

Energy: Wait, maybe a long one::Kotak Sec,


Energy: Wait, maybe a long one
` Under-recoveries to remain high for FY2013-14E
` Lower earnings in the current year despite assuming nil subsidy losses
` Revised earnings estimates for downstream companies
` Inexpensive multiples should be seen in the light of lower ROEs and uncertainty
on subsidy burden


Godrej Consumer Products: Revamping the core business, while expanding inorganically:: Kotak Sec,



Godrej Consumer Products: Revamping the core business, while expanding
inorganically
` Core domestic business - new and improved!
` Soaps business in a new avatar; timely relaunch of deodorants portfolio
` Relaunch of hair colour portfolio yielded mixed results; efforts on to revamp it
` Phase II of Darling acquisition announced; synergy benefits are an upside risk


Industrials: Telecom: reports by Kotak Securities


Sector
Industrials: Feedback indicates weak business; Government action offers some
hope

Telecom: RCOM raises base tariffs; significant or irrelevant?

Tata Motors, Ranbaxy, Sun TV: reports by Kotak Securities


Tata Motors: JLR to be key beneficiary of SUV boom

Ranbaxy Laboratories: Generic Diovan approval delayed

Sun TV Network: FY2012 annual report analysis: A painful transition

L and T Finance, SBI, : reports by Kotak Securities


L&T Finance Holdings: Diversified play on the Indian financial sector

State Bank of India: Await more constructive changes

Speciality Restaurants: A menu full of offerings :: Kotak Securities


Speciality Restaurants: A menu full of offerings
` Nascent business with strong growth potential; 10% potential upside. ADD
` SRL: A pioneer with first-mover advantage
` Expansion-driven sales growth
` Key risks: Heavy dependence on a single brand, food inflation, failure of
new restaurants

Utilities: SEBs: After restructuring, larger challenges :: Kotak Securities


Utilities: SEBs: After restructuring, larger challenges
` Restructuring to address immediate cash crunch, political will key to longterm sustainability
` Fuel availability and unviable sale arrangements pose earnings risks
` We maintain a conservative stance despite recent tariff hikes and policy
impetus
` The paradox of fixing tariffs and Government ownership

Telecom: Just how wide is the operational gap between the top-3 and the rest? :: Kotak Securities


Telecom: Just how wide is the operational gap between the top-3 and the
rest?
` The best (placed) versus the rest - a few numbers

Banks/Financial Institutions: Banks' earnings to slow, retail NBFCs well placed :: Kotak Securities


Banks/Financial Institutions: Banks' earnings to slow, retail NBFCs well
placed
` Earnings growth to slow to 14% yoy; opportunity to book profits
` NIM to remain under pressure; wholesale fund entities well placed
` Outlook on loan impairment negative; credit costs to stay high
` NBFCs: Loan growth to stay strong, margins stable

Strategy: Redemptions worth US$1.3 bn expected in the next three months :: Kotak Securities


Strategy: Redemptions worth US$1.3 bn expected in the next three months
` FCCB activity - previous and upcoming
` FCCB universe - Tulip Telecom corrects ~50% last month

BHEL, Banks, Strategy :: Kotak Sec,


Company
Bharat Heavy Electricals: System healthier; long wait for big fresh capacity to
be conceptualized
Sector
Banks/Financial Institutions: SEB restructuring: Implementation crucial
Strategy
Strategy: Lest we forget


Voltas: Valuations turn unattractive :: Kotak Sec,


Voltas: Valuations turn unattractive; receding earnings outlook prompts
downgrade
` EMP (domestic and international) business scenario further worsens
` UCP leadership position strengthened; but industry growth sedate
` Valuation argument loses sheen with outperformance; downgrade to
REDUCE


Dr Reddy's Laboratories: Prepared for the journey ahead ::Kotak Sec,


Dr Reddy's Laboratories: Prepared for the journey ahead
` Balanced portfolio to deliver 16% revenue CAGR for 2013-15E
` Stable financial performance: 11% upside. Upgrade to ADD
` Diverse research efforts provide long-term visibility
` Key risks: Approval delays, competition, price controls


Economy: Postponing the inevitable :: Kotak Sec,


Economy: Postponing the inevitable
` No escaping fiscal slippages
` Borrowing calendar gives space for the market to absorb more
` Greater reliance on T-Bills may lower long-term yields
` 10-year yield likely to be 8.10-8.12%; OMOs can be pushed back until
December


Pharmaceuticals: Largely on expected lines ::Kotak Sec,


Pharmaceuticals: Largely on expected lines
` GoM announces final drug pricing policy: Combinations stay out
` Reference price to be fixed on the basis of weighted average; market share cutoff at 1%
` Market reaction may be mixed; we think it removes a significant overhang for
the sector
` Initial working suggests 3-5% negative earnings impact for domestic companies
` Limited clarity on implementation; await further details


Coal India: Modified FSA notified: Lax on penalties, pooling finds no place :: Kotak Sec,


Coal India: Modified FSA notified: Lax on penalties, pooling finds no place
` Recalibrated penalties diluted by deemed delivery clauses
` Pooling of coal prices finds no mention, procurer will have to pay price of
imports
` We maintain a positive stance with a target price of Rs390