02 November 2010

Colgate-Palmolive: Q2FY11 results inline:: Nomura

Bookmark and Share
Visit http://indiaer.blogspot.com/ for complete details �� ��


􀁾 Action
We are moving our target price higher as we roll forward by six months. Q2FY11
results were largely in line with expectations, although competitive intensity
continues to remain high in the core oral care category. With stock trading at 24.2x
FY12F EPS, and the EPS growth outlook muted, we maintain our REDUCE call.
􀁡Catalysts
Significant reduction in competitive intensity in the oral care category could lead to
earnings upgrades, but we see that as unlikely in the medium term.
Anchor themes
Colgate-Palmolive remains the incumbent market leader in the oral care category in
India with more than 50% share across various segments. Company has strong
brand equity, but with competition expected to intensify going forward, we would
prefer other names in FMCG at current levels.


STEEL AUTHORITY OF INDIA Margins disappoint:: Edelweiss

Bookmark and Share
Visit http://indiaer.blogspot.com/ for complete details �� ��


􀂃 Revenues 10% above expectations driven by volumes
Steel Authority of India’s (SAIL) reported revenues of INR 106 bn (~11% above
our estimates) were up 5.6% Y-o-Y and 17.4% Q-o-Q. Revenue growth, largely
driven by higher sales volumes of 3 mt for the quarter, beat our assumption of
~2.7 mt. SAIL witnessed volume growth of 29.3% Q-o-Q. Realisation, at INR
35.3k/t, came slightly below our estimates of INR 35.8k/t. This could be due to
value-added proportion dipping from 39% to 36% Q-o-Q.
􀂃 EBITDA in line with estimates; EBITDA/t disappoints
SAIL reported EBITDA of INR 14.9 bn, down ~37.6% Y-o-Y and 14.2% Q-o-Q.
The same was ~6.4% lower than our estimates of INR 15.9 bn, as cost/t was
slightly higher than our estimates (INR 30.4k/t against our assumption of INR
29.8k/t). Benchmark hard coking coal prices for the quarter stood at USD 225/t
against USD 200/t in Q1FY11 and USD 128/t in Q2FY10. EBITDA/t stood at ~INR
5k/t, much lower than our expectation of INR 6k/t. Overall, lower reported
EBITDA also caused net profit to decline to INR 10.9 bn (down 34.5% Y-o-Y and
7.4% Q-o-Q) and was in line with our estimates of INR 11.1 bn.
􀂃 Expansion projects: IISCO delayed by one more quarter
Trial runs are currently on at the 175 ktpa Salem steel plant, and SAIL expects
the plant to be commissioned during Q3FY11. The 2 mtpa IISCO steel plant is
delayed further by a quarter and is now expected to be commissioned by
December 2011. Volumes during H2FY11 will be better than H1FY11 due to
seasonal demand increase and inventory liquidation. Our assumption for FY11
and FY12 stands at 12.5 mt and 13.5 mt, respectively.
􀂃 Outlook and valuations: Volume growth back ended; maintain ‘BUY’
In the near term, steel prices are likely to come under pressure due to seasonal
weakness in the developed world, slow demand in China and rupee appreciation.
However, on a one-year basis, we continue to expect margin expansion for steel
players in FY12 over FY11.
We remain optimistic on SAIL’s long-term volume growth story emanating from
the ongoing modernisation-cum-expansion projects, which will also reduce semis
mix from 5% currently to nil, reducing costs. However, most of this volume
growth will be back ended and will reflect in FY13 and furthermore in FY14.
While we retain our estimates and ‘BUY/Sector Performer’ recommendation
on SAIL with a fair valuation of INR 239/share, our top picks in the steel sector
are Tata Steel and JSW Steel.

SAIL- F2Q11 Results: Below Expectations; OW:: Morgan Stanley

Bookmark and Share
Visit http://indiaer.blogspot.com/ for complete details �� ��


Steel Authority Of India
F2Q11 Results: Below
Expectations; Stay OW


Quick Comment – Impact on our views: We maintain
our constructive stance on SAIL since: 1) we expect a
stronger F2H11 in terms of volumes and prices; and 2)
SAIL’s expansion plans should get increasing
recognition from investors over the next three to four
quarters as we come closer to commissioning of the new
plants.
What's new: SAIL reported F2Q11 PAT of Rs10.9bn,
up 68% YoY and down 7% QoQ. EBITDA at Rs16.9bn
was 17% below estimates, largely due to lower-thanexpected
sales volume.
What we did not like:
Sales volume of 3.03mt, although up 32% QoQ, was 4%
lower than our estimate of 3.17mt. We believe SAIL will
liquidate is inventory in F2H11 with the strong demand
pick-up post monsoons.
EBITDA/ton stood at Rs5,593, down 6% YoY and 37%
QoQ, largely due to 9% sequentially lower realizations.
What we liked:
Raw material cost per ton increased by just 6% QoQ
despite higher coking coal cost this quarter.
Other expenditure per ton at Rs2,451 decreased 25%
QoQ and is now back to a eight-year average level of
~Rs2,250.
Fixed assets increased by 14% from March 2010 to
September 2010, which implies that the expansion plans
are on track. SAIL should start commissioning its 2mt
expansion project at its IISCO site by F2H12.
Cash balance stood at Rs145bn as of September 30,
2010, 15% of the market cap.

Oil and Natural Gas Corp.- Tepid quarter:: Macquarie

Bookmark and Share
Visit http://indiaer.blogspot.com/ for complete details �� ��


Oil and Natural Gas Corp.
Tepid quarter
Event
 ONGC announced a bottom line of Rs53.8bn, growth of 5.9% YoY. The
operational earnings were in line with expectations, but subsidies were lower
than estimated. Because a mild recovery in overall crude production (driven
by JV output) was the only bright spot in an otherwise unremarkable quarter,
we maintain our Underperform rating on ONGC and trim our TP to Rs1,176
from Rs1,182.
Impact
 JV crude production continues to grow; nominated crude, gas decline:
ONGC’s nominated crude production fell by 1.6% YoY to 6.15MMT, but this
was more than offset by a continuing increase in JV production, which grew
by 84% YoY to 0.7MMT. Nominated gas output declined by 1.1% to 5.8BCM.
 Mild increase in crude prices offset by rupee appreciation: While Brent
prices fell by 1.9% QoQ to US$77.4/bbl, this was totally offset by rupee
depreciation. ONGC’s gross realization of US$79.2/bbl was 3% above Brent.
 Full impact of APM gas price hike, petro-fuel price hike comes through:
This was the first quarter in which the full effects of progressive deregulation
were felt, with the APM gas hike adding an extra Rs17.6bn to revenues and
with auto-fuel price reforms reducing ONGC’s subsidy discount.
 Subsidy of Rs30.2bn; net crude realizations of US$63/bbl up 30% QoQ:
Upstream firms had been directed to pay one-third of gross industry underrecoveries,
which media reports put at ~Rs10bn. ONGC has given discounts
of Rs30.2bn, which implies a share of 84% of total upstream subsidies,
roughly in line with past trends. Crude realizations have therefore been
reduced by US$16.5/bbl to reach US$62.8/bbl.
 Management – ONGC won’t take hit for Cairn India’s share of royalty:
ONGC’s management announced that it had been assured by the GoI that it
would be appropriately reimbursed for the share of royalties that it is paying
on behalf of Cairn India in the Rajasthan block, where ONGC is a 30%
partner.
Earnings and target price revision
 We have trimmed our FY11–13E PAT by 2–5%. We have consequently
revised our target price to Rs1,176 from Rs1,182.
Price catalyst
 12-month price target: Rs1,176.00 based on a DCF methodology.
 Catalyst: Clarity on subsidy sharing; announcement of public offer dates.
Action and recommendation
 Switch to Oil India: Oil India (OINL IN, Rs1,413.2, OP, TP: Rs1,796) has
lower finding costs (US$2.8/bbl vs US$3.8/bbl for ONGC). Further, its growing
crude output (5% CAGR for past three years vs 1% decline for ONGC) and
better reserve-replacement ratio (three-yr average of 179% vs 147% for
ONGC) make it a better investment opportunity, in our view.

HERO HONDA - Margins skid on higher RM costs:: Edelweiss

Bookmark and Share
Visit http://indiaer.blogspot.com/ for complete details �� ��


HERO HONDA MOTORS LTD
Margins skid on higher RM costs



􀂃 Net profit, at INR 5 bn, below our estimate
Hero Honda Motors’ (HH) Q2FY11 net profit, at INR 5.0 bn (down 15% Y-o-Y and
up 3% Q-o-Q), was 11% below our and market expectations. The variance was
on account of higher-than-expected increase in raw material costs.
􀂃 EBITDA margins continues to disappoint, down 60bps Q-o-Q
While net sales, at INR 45.5 bn (up 12% Y-o-Y and 6% Q-o-Q), led by volume
growth (up 9% Y-o-Y, 4% Q-o-Q), were in line with estimates, EBITDA margins
disappointed at 13.4% (down 500bps Y-o-Y and 60bps Q-o-Q).
The key deviation was in the raw material costs which were up 150bps Q-o-Q,
after having risen 400bps in Q1FY11. This increase is particularly surprising
given the higher realizations per vehicle (up 1.5% Q-o-Q) inspite of a stable
product mix. We note that all other automobile OEMs have reported a sequential
decline in raw material costs to sales.
􀂃 Hero and Honda to split?
Unconfirmed media reports consistently seem to indicate that the Hero Group is
likely to acquire Honda’s 26% stake in the joint venture. We would view this
development as a negative as the company could be severely hampered by the
lack of new technology in introducing new products (please refer to our note,
Honda to offload stake?, dated July 26, 2010).
􀂃 Outlook and valuations: Uncertainty prevails; maintain ‘BUY’
On the back of subdued Q2FY11 performance, we revise our earnings down
2.5% each for FY11E and FY12E. Our new estimates take into account a 100bps
reduction in EBITDA margins to 14.5% and 14.7%, respectively for FY11E and
FY12E.
On our revised estimates, the stock is trading at ~14.5x FY12E EPS. While we
continue to maintain our ‘BUY/ Sector Outperformer’ recommendation/rating
with a target price of INR 2,000 (16x FY12E EPS) on the stock in view of its core
strengths, we remain cautious on account of the potential corporate action. In
the automobile OEM space we prefer a shift to Mahindra & Mahindra (M&M) on
account of its strong domestic business with limited competition, and reasonable
valuations.

Forthcoming results: 3-Nov-10

Bookmark and Share
Visit http://indiaer.blogspot.com/ for complete details �� ��


Company Name
Meeting Date
Purpose
RAIN COMMODITIES LIMITED
3-Nov-10
Un-audited Financial Results
AUSOM ENTERPRISE LIMITED
3-Nov-10
Results/Others
THE LAKSHMI MILLS COMPANY LIMITED
3-Nov-10
Un-audited Financial Results
WILLIAMSON MAGOR & COMPANY LIMITED
3-Nov-10
Un-audited Financial Results
SURYA PHARMACEUTICAL LIMITED
3-Nov-10
Un-audited Financial Results
MAHANAGAR TELEPHONE NIGAM LIMITED
3-Nov-10
Un-audited Financial Results
GABRIEL INDIA LIMITED
3-Nov-10
Board meeting Rescheduled
MSP STEEL & POWER LIMITED
3-Nov-10
Raising of Funds
MCLEOD RUSSEL INDIA LIMITED
3-Nov-10
Un-audited Financial Results
POLAR INDUSTRIES LIMITED
3-Nov-10
Un-audited Financial Results
WHEELS INDIA LIMITED
3-Nov-10
Un-audited Financial Results
ENTERTAINMENT NETWORK (INDIA) LIMITED
3-Nov-10
Un-audited Financial Results
KEC INTERNATIONAL LIMITED
3-Nov-10
Un-audited Financial Results
PIONEER EMBROIDERIES LIMITED
3-Nov-10
Un-audited Financial Results
GLOBAL VECTRA HELICORP LIMITED
3-Nov-10
Un-audited Financial Results
RESURGERE MINES & MINERALS INDIA LIMITED
3-Nov-10
Un-audited Financial Results
VESUVIUS INDIA LIMITED
3-Nov-10
Un-audited Financial Results
LAKSHMI VILAS BANK LIMITED
3-Nov-10
Un-audited Financial Results
TRIGYN TECHNOLOGIES LIMITED
3-Nov-10
Un-audited Financial Results
TELEDATA INFORMATICS LIMITED
3-Nov-10
Un-audited Financial Results
TATA SPONGE IRON LIMITED
3-Nov-10
Audited Financial Results
SHASUN CHEMICALS AND DRUGS LIMITED
3-Nov-10
Un-audited Financial Results
RAINBOW PAPERS LIMITED
3-Nov-10
Results/Others
ZODIAC CLOTHING COMPANY LIMITED
3-Nov-10
Un-audited Financial Results
ORIENTAL BANK OF COMMERCE
3-Nov-10
Un-audited Financial Results
AARVEE DENIMS & EXPORTS LIMITED
3-Nov-10
Results/Others
SAKTHI FINANCE LIMITED
3-Nov-10
Un-audited Financial Results
AUROBINDO PHARMA LIMITED
3-Nov-10
Results/Dividend
AUROBINDO PHARMA LIMITED
3-Nov-10
Un-audited Financial Results
TTK HEALTHCARE LIMITED
3-Nov-10
Un-audited Financial Results
KOTHARI PETROCHEMICALS LIMITED
3-Nov-10
Un-audited Financial Results
NITIN FIRE PROTECTION INDUSTRIES LIMITED
3-Nov-10
Results/Others
SUNDARAM CLAYTON LIMITED
3-Nov-10
Un-audited Financial Results
HB STOCKHOLDINGS LIMITED
3-Nov-10
Un-audited Financial Results
GTL LIMITED
3-Nov-10
Un-audited Financial Results
CESC LIMITED
3-Nov-10
Board meeting Rescheduled
GAIL (INDIA) LIMITED
3-Nov-10
Un-audited Financial Results
HINDUSTAN COMPOSITES LIMITED
3-Nov-10
Un-audited Financial Results
FIRST LEASING COMPANY OF INDIA LIMITED
3-Nov-10
Un-audited Financial Results
BIMETAL BEARINGS LIMITED
3-Nov-10
Un-audited Financial Results


Coal India, Gravita, Power Grid IPO: Gray Market Premium Price: 2nd Nov, 2010

Bookmark and Share
Visit http://indiaer.blogspot.com/ for complete details �� ��



Company Name
Offer Price
Premium
(Rs.)
(Rs.)
Coal India
245 
(Upper Band)
30 to 34
+  5% discount for retail
Gravita India
120 to 125
12 to 14
Power Grid FPO
80 to 90 (rumor)
4 to 6

Adjustment of Futures and Options contracts in the security ZEEL:: NSE

Bookmark and Share
Visit http://indiaer.blogspot.com/ for complete details �� ��


In pursuance of SEBI guidelines for adjustments to futures and options contracts on
announcement of corporate action, the members are informed of the following:
Zee Entertainment Enterprises Limited has informed the Exchange that November
12, 2010 has been fixed as record date for the purpose of determination of members
of the Company, who would be eligible for issuance of Bonus Equity Share in the
ratio of 1(one) Equity share of Re.1 each for 1 (one) Equity Share of Re.1 each held
in the Company.
Symbol : ZEEL
Bonus issue ratio : 1:1
Ex-date : November 11, 2010
Adjustment factor:
Adjustment factor for Bonus issue of A: B is defined as (A+B)/B. In the case of
ZEEL, the adjustment factor is (1+1)/1 = 2, since the bonus issue ratio is 1:1.
Adjustments for Options Contracts:
1. Strike Price: The adjusted strike price shall be arrived at by dividing the old
strike price by the adjustment factor.
2. Market Lot: The adjusted market lot shall be arrived at by multiplying the old
market lot by the adjustment factor. The revised market lot would be 2000.
Adjustments for Futures Contracts:
1. Futures price: The adjusted futures price shall be arrived at by dividing the old
futures price by the adjustment factor
2. Market Lot: The adjusted market lot shall be arrived at by multiplying the old
market lot by the adjustment factor. The revised market lot would be 2000.

Punj Lloyd Slow But Sure, HOLD :: Emkay

Bookmark and Share
Visit http://indiaer.blogspot.com/ for complete details �� ��


Punj Lloyd
Slow But Sure, Maintain HOLD


HOLD

CMP: Rs 125                                       Target Price: Rs 132

n     Punj Lloyds performance exceeds expectations – APAT at Rs239 mn versus expectation of Rs182 mn
n     Reports impressive Ebidta margins of 9.2%- highest in last 8 quarters- despite UK 1.2 mn provision in Simon Carves
n     Revenues of Rs1.7 bn booked on Libya project – progress underway but remains below expectations
n     Confident on current order backlog and negates repetition of past concerns – retain FY12E estimates and Maintain HOLD rating with price target of Rs132/Share