NTPC – 2QFY2011 Result Update- Accumulate:: Angel Broking

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During 2QFY2011, NTPC’s adjusted net profit declined by 17.8% yoy to
`1,845cr, which was in line with our estimates. During the quarter, bottom-line
performance was affected by under recovery of fixed costs in new plants, lower
other income due to lower interest rates and reduction in tax saving bonds.
We maintain Accumulate on the stock with a Target Price of `230.

Top-line growth at 20.5% yoy: NTPC posted robust top-line growth of 20.5% yoy
to `13,350cr in 2QFY2011, primarily driven by higher realisations as Energy Sent
Out (ESO) grew by modest 3.5%, despite the 1,480MW capacity addition since
2QFY2010. Power generation during the quarter was affected by fuel supply
issues, maintenance-related shutdown and backdown of plants due to monsoons.
OPM fell by 748bp yoy to 25.3% due to higher fuel costs and other expenses.
NTPC’s reported net profit was down by 2% yoy to `2,107cr. During the quarter,
the company benefitted from extraordinary income of `1,763cr due to the
write-back of depreciation and advance against depreciation (AAD)
recognised as prior-period sale, which boosted its bottom line. However, the
company also made a provision of `1,263cr with respect to sundry debtors,
which impacted its bottom line.

Valuation: At the CMP of `199, the stock is trading at P/BV of 2.4x FY2011E and
2.2x FY2012E and at EV/MW of `4.35cr on FY2012E estimates. Considering its
regulated business model, with an assured return on equity (RoE) and strong cash
flow visibility, we have assigned EV/MW of `5.25cr and P/BV of 2.3x on FY2012E
estimates to arrive at a Target Price of `230. We maintain Accumulate on
the stock.

Voltas Q2FY11 performance is line with our estimates:: Keynote

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Key highlights of Q2-FY11 results of Voltas

Voltas Q2FY11 performance is line with our estimates

Standalone profit after tax grew by 21.42% to `97.97Cr against `80.64Cr on y-o-y basis. Standalone Net Sales rose by 7.37% to `1069Cr in Q2FY11 as against `995.63Cr on y-o-y basis. Consolidated PAT (after minority Interest) of Voltas grew by 2% to `92.41Cr from`90.33Cr on y-o-y basis.  Consolidated Sales decline by 2% to `1069Cr from `1089Cr on y-o-y basis. However, on half yearly basis, the turnover registered growth of 7% to Rs 2467cr from`2314Cr on y-o-y basis. During Q2FY11 company has earned exceptional income of `18Cr on account of disposal of part of the surplus property.

Moderate growth in Engineering Product & Services

Engineering business has registered growth of 8% on y-o-y basis to `127Cr as against `117Cr on account of revival in textile sector which has contributed ~ 30% to the revenue of the segment. Sale of equipment has increased by 35% on account of higher activity in construction and mining sector on y-o-y basis. Segment has witnessed an EBIT growth of 106 bps as increased contribution from commissioning business. The operating management is cautiously optimistic about the segment on account of fluctuating IIP numbers, particularly in the capital goods sector, low credit off-take and increase in interest rates.

Subdued performance in Electro-Mechanical Projects & Services (EMP)

EMP business revenue declined by 8% y-o-y to `707Cr from `769Cr on account of factors that are non-operational/non-recurring in nature. EMP contribution to company’s top line was reduced from 71% to 66% y-o-y mainly due to slow movements of jobs in Domestic Projects business and change in internal policy for compulsory division projects especially those relating to airports. Going forward, we believe the company’s EMP business is set to grow by ~12% in FY11E on account of existing order book in South East Asia, Middle East and India. Company is banking on overall growth in Infrastructure sector such as mass transportation, Hotel, Hospitals, MEP projects, etc.

UCP business

UCP business has registered growth of 18% on y-o-y basis to `228Cr as against `193Cr while its PAT has increased by 52% on y-o-y basis with increased EBIT margin. The company has increased its distribution channel by over 300 additional outlets. Going forward, we believe UCP business is set to grow by 25-30% on account of domestic consumption as there is increase in per capita income and rate of urbanization.

Current Order book

Company’s current order book stands at `4975Cr, out of which international order book stands at `3430Cr while remaining constitutes domestic’s order book worth `1545Cr which will drive company’s future earnings. Company has won order for three hospitals in the domestics market. 

Concerns

Any negative growth in IIP numbers will curtail company’s domestic growth rate in engineering segment. In UCP segment company faces stiff competition from Korean players as well as domestic players. Rupee appreciation will impact export revenue for the company. Also increased competition from local player for EMP projects in international market.

Outlook & Valuation

AT CMP `242 stock trades at 19.5x FY11E EPS and 16.4x FY12E EPS, and EV/EBITDA of 13.71x and 11.36x for FY11E and FY12E respectively. We have positive outlook on the company based on its strength towards project execution, technical expertise and innovation of new products.

NIIT: Training in demand :: Centrum

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NIIT: Training in demand


NIIT’s Q2FY11 results were in line with our estimates.
The pick-up in volumes in Corporate Learning Solutions
bodes well for the growth outlook of the company. We
reiterate our Hold rating but increase our target price to
Rs74 (from Rs69), implying a P/E of 11.2x FY12E
earnings to factor in improvement in EBITDA growth
(18% CAGR over FY10-13E) and return on equity to
18%.
􀂁 Results in line with expectation: Both sales and
profits were in line with expectations. Within segments,
Corporate Learning Solution (CLS) and Individual
Learning Solution (ILS) compensated for the weak
performance of School Learning Solution (SLS).
􀂁 Growth in volumes and order flow for CLS segment
bodes well: The CLS segment reported 10.6% growth
in sales and 32bp expansion in EBITDA margin to 8.2%
in Q2FY11. Pending order book shows improvement of
10.8% YoY to US$92mn (57% executable over 12
months). The management has guided on
improvement in volume growth above 6% for FY11E.
􀂁 Marginally change our earnings to adjust for
growth in Corporate Learning Solution: We have
tweaked our revenue growth assumptions to factor in
lower revenue in SLS and higher growth in CLS as well
as effective tax rate which results in descrease in net
profit by 6.5% in FY12E.
􀂁 Reiterate Hold; Increase target price to Rs74: We
revise our fair value to Rs74 (from Rs69 per share) to
factor in the increase in net profit for FY12E and revival
of growth prospects of ILS and CLS. We have not
changed our rating to Buy as we are concerned over
the global economic environment (50% of revenue
comes from outside India).

Near term direction may be determined by the Q2FY11 earnings :: ICICI Sec

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Near term direction may be determined by the Q2FY11 earnings
	The response to the recent Coal India IPO also has been indicating the confidence of the participants in the markets. The near term direction however may be determined by the Q2FY11 earnings of major companies. Any disappointment may trigger some profit booking at the higher levels but that is likely to be short lived and the dips should be used as an opportunity to get into the markets preferring stocks based on cheaper valuation.
		On the result front, in the next week some major banks, metals and
		FMCG companies are due to post their Q2FY11 numbers, which would be closely watched by the markets
		Last week some major companies, viz., ACC, Ambuja Cements and
		Wipro disappointed the street on the earnings front while other biggies like L&T and TCS beat market expectations substantially on the higher side
		Some global events would also be vital at this juncture to get cues
		about the market direction in the short-term. Among these, UK and US Q3 GDP data would be such important events to watch out for in the coming week
		With the overall undertone still remaining positive for the broader
		market, the Nifty is likely to trade in a broad range of 5900- 6200 in the short to medium term

Bajaj Electricals – 2QFY2011 Result Update :Neutral : Angel Broking

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Bajaj Electricals posted top-line of `588cr, which was in line with our estimates.
However, there was disappointment on the margins front, with OPM falling to
7.6% compared to 10.7% in 2QFY2010 and our expectation of 9.5%. The main
reason for the fall in OPM was subdued margins in the engineering and projects
(E&P) division. Interest costs rose to `7.6cr for the quarter. Net profit for the
quarter declined 19.8% yoy to `23.4cr (`29.2cr) on the back of lower margins
and higher interest costs. We remain Neutral on the stock.

OPM remains subdued on lower E&P margins: Sales for the quarter increased
mainly on the back of a strong 32.1% growth in the consumer durables business.
However, margins fell to 7.6% vis-à-vis 10.7% in 2QFY2010. This was mainly on
account of low EBIT margin of 3.1% in the E&P division. The main reason for the
decline in E&P division margin was that most of the projects were at the execution
and completion stage, when the project margins are the lowest. However, going
ahead, margins are set to improve with the execution portion expected to decline.

Outlook and Valuation: We are positive on the company’s business prospects,
owing to the healthy order book of `1,150cr in the E&P division and strong
growth in consumer durables. We expect sales to post a CAGR of 20.6% over
FY2010-12 to `3,241cr. As a result of the fall in margins in 2QFY2011, we have
revised downwards our margin estimates for FY2011 and FY2012 to 10.2% and
10.6% from 10.6% and 10.7%, respectively. We expect PAT to log a CAGR of
36.1% to `207cr over FY2010-12. At the CMP, the stock is trading at 17.7x and
13.9x FY2011E and FY2012E EPS. We maintain our Neutral view on the stock.

The next Emerging Market bubble? :: UBS

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The next Emerging Market bubble?


Growth concerns and debt deflation fears in the West still loom large despite the
imposition of super loose monetary policy and ample fiscal stimulus. Moreover,
policy makers are fast running out of options in their battle to reflate and boost
growth. The Fed has hinted at further unconventional monetary policy – ‘QE2.’
The BoE may well follow after announcing public sector spending cuts.
Elsewhere, the BoJ has stepped up its FX purchases. All in all, these policies are
intended to hold down both currency and interest rates for longer.
This is a game changer for emerging markets and many GEM policy makers
will understandably be worried about speculative capital inflows and their
impact on domestic assets, currency and the wider economy in general. Indeed,
Brazil and Thailand have already imposed some form of capital controls to deter
hot foreign money. This is not the first time this has happened. Our colleagues in
FICC (Bhanu Baweja) and Economics (Jon Anderson) have already covered the
topic of capital controls in detail1.
In this note, we look back to the occasions when the Fed eased policy rates
aggressively and the consequences for GEM equities, currencies and valuations
in order to draw parallels with the current circumstances. We also highlight a list
of opportunities to play this theme. Our main conclusions are as follows:
􀁑 During Fed easing, GEM equities perform the best after the trough in
Fed funds rate. Using data since 1990, this has been the case in all three
occasions of prolonged easing of monetary policy by the Fed: 1991-1994,
2001-2004 and 2008 to date.
􀁑 2010 shares many characteristics with both 1993 and 2003. The Fed
eased to kick start growth, but arguably 2010 is more like 2003. Valuations
today better reflect 2003 levels, likewise commodity prices are on the rise.
GEM balance sheets are strong and currencies undervalued. Although we
recognise that global growth today is more fragile, another round of Fed
easing should be very positive for GEM assets.
􀁑 Opportunity knocks. Within emerging markets we highlight exposure
through Brazil, China, Russia, South Africa, and ASEAN countries.
Likewise, within sectors we advocate overweight positions in Pharma,
Energy, Banks, Household Personal Care and Food, Beverage and
Tobacco. For stock pickers we highlight our UBS GEM Select most
preferred list.
􀁑 No major positioning risk. The much talked about wall of capital inflows
has yet to arrive; rather we see just a reversal of the outflows since 2008.
Furthermore, GEM equities are still fundamentally undervalued trading on a
P/E of 11.4 times versus our fair value estimate of 15 times. In addition,
Global investors are still some 7% underweight GEM equities within their
benchmark

Forthcoming Results : October 29, 2010

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29-Oct-10
Company	Company	Company	Company	Company
Aarti Drugs	DCM	James Hotels	Nidhi Granites	SJVN
ABB	Deccan Brngs	JBF Inds	Nirlon	SKM Egg Products
Abhinav Cap	Delta Corp	Jet Air India	Nirma	SKS Logistics
ACI Infocom	Delta Mag	JK Paper	Niyati Inds	Sobhagya Merc
ACIL Cot Inds	Devinsu Trad	JL Morison	Northern Proj	Sona Koyo
ADF Foods	Dhoot Indl Fin	JMC Projects	NPR Finance	Sonal Adhsv
Adinath Exim	DIAMONPOWER	Kalptaru Pap	NRB Bearings	SPEL Semi
Advent Comp	Duncans Inds	Kamper Concast	Oasis Sec	Sree Rayal Histreng
Allsoft Corp	Easun Reyrolle	Kanika Info	Oregon Comm	SRHHL Inds
Alna Trading	Ecoboard Inds	Kansai Nerolac	Oswal Yarns	Sri Ganapathy
Alpa Lab	EIH Associated	Kanumanek Trad	Pacific Cotspin	Sri Nachammai
Amarjothi Spin	Eltrol	Keltech Ener	Padam Cotton	Stelco Strips
AMD Inds	EMA India	Kesar Enter	Pan Electronics	Sterling Grnty
Amit Spinning	Emkay Glob Fin	Keynote Corp	Panoramic Univ	Sterling Strp
Ankush Finstock	Empire Inds	Khaitan Chem	Paper Products	Stocknet Intl
Anna Infra	Euro Ceramics	Khatau Exim	Paramount Comm	Subex
Arora Fibres	Excel Inds	Kinetic Engr	Parsharti Inv	Sungold Cap
ARROW TEX	Federal Bank	KLRF	Patspin India	Suniti Comm
Ashapura Mine	FGP	KPIT Cummins	Petron Engr	Surat Textile
Ashirwad Steel	Foods & Inns	KPR Mill	Pioneer Agro	Suryavanshi Spin
Asia HR Tech	Forbes & Co	Krebs Bio	Pithampur Steel	SVA India
Asian Elect	Gangotri Tex	KZ Leasing	Pitti Laminations	Switching Tech
Asian Fert	GDL Leasing	Lambodhara Tex	Pondy Oxides	SYMPHONY
Asian Star	GHCL	Lancor Hold	Pratibha Inds	Syndicate Bank
Asutosh Enter	Gillette India	Laser Diamonds	Punctual Trad	TajGVK Hotels
Atlas Copco	Godawari Power	Le Waterina Resorts	Puravankara Proj	Take Solutions
Atlas Cycle	GOGIA CAP	Leena Consl	Pushpsons Inds	Tamboli Cap
Atul	Goodricke Group	LORDSHOTL	Quantum Digital	Tantia Constr
Bala Tech Global	Gowra Leasing	Mackinnon Mack	Quintegra Sol	Tata Chemicals
Balaji Dist	Graphite India	Madhucon Proj	Radhe Dev	Temptation Food
Ballarpur Inds	Graviss Hospitality	Madhusudan Sec	Radico Khaitan	Tide Water
Basant Agro	Gravity India	Magna Electo	Rainbow Denim	Times Guaranty
Basil Infra	Great Eastern Sh	Maha Rashtra	Rama Petro	Tirupati Sarjan
Beeyu Overseas	Grindwell Nor	Maharashtra Seam	Rap Media	Tivoli Constr
Bhagwati Auto	GSL Securities	Mahindra & Mahindra	RAS Resorts	Tonira Pharma
Bhagwati Oxy	GTN Textiles	Mangalam Timb	Ratnamani Metal	Transwarranty Fin
Bharat Elect	Gujarat Fluo	Manugraph India	Repro India	Trijal Inds
Bharat Fert	Gujarat Pipavav	Mardia Samyoung	Riba Textiles	TTK Prestige
BHEL	Gujarat Sidh	MCS	RJ Shah	Twin Roses Trad
Bhilwara Tex	Gyan Developers	Meghmani Org	Roto Pumps	UB Engineering
BIDL	Hardcastle & Waud	Melstar Info	Ruttonsha Intl	Uco Bank
Bilcare	Harleystreet	Mercury Trade	S Kumar Nation	Ugar Sugar
Birla Capital	Harsh Polymers	Morarka Fin	Sagar Systech	Uni Abex Alloy
BKV Inds	Haryana Leather	Morgan Inds	SAI JEEV	Uniroyal Inds
BLB	Hero Honda	Moser Baer	Sainik Finance	UP Hotels
Blue Blend India	Hilton Metal	Motherson Sumi	Salona Cotspin	Upsurge Invest
Blue Chip Tex	Hindustan Const	Mrugesh Trad	Sandesh	Varun Merc
Blue Star	Hira Ferro	Mukesh Babu Fin	Santaram Spin	VBC Ferro
BN Rathi	Hitachi Home	Muller & Phipps	Santosh Fine	Vidarbha Iron
BNK Cap Markets	ICICI Bank	Multiplus Hold	Sarda Papers	Vikram Thermo
BNR Udyog	Ikab Securities	Mysore Paper	Satyam Silk	Vimta Labs
BRAND HOUSE	India Glycols	Nagarjuna Fert	Scanpoint Geomatics	Vintron Info
Brand Rlty	India Nippon	Nagpur Power	Scindia Steam	Vipul Dye Chem
Cambridge Sol	Indian Hume	Narang Inds	Sequent Scientific	Visa Steel
Camphor & Allied	INDIAN MET	Narbada Gems	Serve All Ent	Vishvprabha Trd
Can Fin Homes	Indo Asian Fin	National Fert	Shah Foods	Voltamp Trans
Capital Trust	Indo City Info	National Plyw	Shakti Metdor	Warren Tea
Century Ply	Indokem	Nava Bharat Vent	Shakti Pumps	WELCORP
Chhattisgarh Inds	Informed Tech	Neelkanth Rock	Shipping Corp	Wellwin Inds
Chitradurga Spin	Infotrek Sys	NEPC Agro	Shivalik Bimet	Welspun India
CHL	INTEGRA IND	NEPC India	Shoppers Stop	Welspun Invest
Chokhani Bsns	Integrated Fin Serv	NEPC Paper	Shukra Bullions	Western India Ship
Chokhani Glob	Intellivate Cap	NEPC Textiles	Shukra Jewel	Wisec Global
Chokhani Intl	Intense Tech	Nestle India	SI Capital	Zenith Health
Chokhani Sec	IOB	Nettlinx	Siddha Ventures	Zicom Elect
Choksi Imaging	Ishwarshakti Hold	Networth Stock	Sika Interplant	Zodiac JRD MKJ
Cinemax India	ITC	Neuland Lab	Silverline Tech	Zuari Forex
Computech Intl	J Kumar Infra	Nexxoft Info	Sir Shadi Lal	Zylog Systems
DALMIASUG	Jagran Prakashan	NG Inds	Siyaram Silk