08 February 2011

Nomura: Strategy | INDIA: Margin pressures galore; TOP PICKS

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�� Action
Based on what we have seen in the 3Q FY11 (the December quarter), earnings
season so far, we maintain our view that FY12F consensus earnings growth is too
optimistic and downgrades have further to go. We stick to our cautious view on the
market, despite the recent market declines.
Anchor themes
Cost pressures remain a key risk to earnings and market momentum. Although topline
growth has kept pace with inflation in nominal terms, pressure on bottom-lines
from rising raw material prices, wages and interest costs are intensifying across
sectors.
Some 72 out of the 109 companies in our coverage universe have declared 3Q
FY11 results so far. Ex oil & gas and banks, net sales are up 24.3%, EBITDA is up
9.8% and PAT is up 6.8% y-y.

Stocks for action
Our top BUY calls are M&M and Pantaloon Retail as consumption and rural demand plays and TATA Steel  and CAIRN for their exposure to global commodity prices. Ambuja Cement and HPCL are our top REDUCE calls.


FII DERIVATIVES STATISTICS FOR 08-Feb-2011

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Trade Statistics for 08-Feb-2011
ProductNo. of
contracts
Turnover
(Rs. cr.) *
Put Call
Ratio
Index Futures61288815493.82-
Stock Futures54103713762.43-
Index Options289276179382.270.86
Stock Options1190443279.230.43
F&O Total4165730111917.740.84




FII DERIVATIVES STATISTICS FOR 08-Feb-2011

BUY
SELL
OPEN INTEREST AT THE END OF THE DAY

No. of contracts
Amt in Crores
No. of contracts
Amt in Crores
No. of contracts
Amt in Crores
INDEX FUTURES
70419
1884.62
88658
2369.60
500672
13258.59
INDEX OPTIONS
242503
6491.67
248409
6706.09
1928043
51206.50
STOCK FUTURES
72515
1867.05
65260
1658.98
1198050
28576.95
STOCK OPTIONS
15257
415.28
15596
423.14
21645
568.69





Total
93610.73


UBS: Asia Oil Explorer- Big jump in US gasoline inventories

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UBS Investment Research
Asia Oil Explorer
Big jump in US gasoline inventories
􀂄 US gasoline inventories at highest level since 1993
WTI crude oil prices fell 0.3%, ending last week at US$89.0/bbl, while Brent
prices rose 1.1%, ending last week at US$99.6/bbl. On Friday, however, oil prices
fell 2%. Easing concerns about Egypt, weak US payrolls data, and modest gains in
the US dollar contributed to the decline. According to the US Department of
Energy (DOE), for the week ended 28 January, crude inventories rose 2.6mbbls to
343.2mbbls versus Reuters’ consensus of a 2.7mbbls build. Gasoline inventories
rose 6.2mbbls to 236.2, its highest level since 1993.

Cement monthly–Feb 2011: January cement dispatches ~7% YoY: ICICI Securities

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Cement monthly–Feb 2011 ; January cement dispatches expected at ~7% YoY…
Cement majors post recovery in dispatches in January 2011
Total cement volume is expected to grow ~7% YoY in January 2011 as
six major companies, holding ~50% of total cement capacity, reported a
6% YoY increase in dispatches for the month. On a MoM basis, overall
volume of the six companies was higher by 6.4%. Positive growth during
the month came on the back of growth in cement demand from the
infrastructure segment as the extreme winter season is nearing its end
and availability of railway wagons to dispatch cement is on schedule.

Top Mid Cap Picks by Nomura: Consumption plays with a difference

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 Action
As India’s consumption boom broadens into smaller towns and rural areas, we
think companies like Raymond, Tube Investments of India, Redington India and
Pidilite Industries, which sell consumer durables and lifestyle products, will be frontline
beneficiaries. Unlike retail and F&B stocks, they look undervalued despite solid
business models, 20%-plus earnings CAGRs in FY10-13F and high return ratios.
 Catalysts
Continuing strong economic data will result in increased interest in alternative
consumption plays given high valuations for retail and F&B stocks.
Anchor themes
Rising incomes (across rural and urban India) and current underpenetration is likely
to result in strong growth for auto products, consumer durables, IT goods, apparel
retailing and IMFL over the next few years

Nomura: Tilaknagar Industries- Linked to discretionary spend

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Key findings
Tilaknagar Industries is the third-largest domestic player in the Indian India-made
foreign liquor (IMFL) industry and has increased revenues at a CAGR of 51% over
the past four years, well ahead of the industry 15% CAGR. The IMFL industry is a
direct beneficiary of growth in incomes and discretionary consumption, in our view.
The company has maintained higher margins and return ratios (ROE) than its peers
over the past two years, but trades at a steep discount to them based on FY10 P/E.

Nomura:: Buy Pidilite: target Rs180; Brand leverage backed by innovation

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 Action
Pidilite is a play on India’s current construction boom. The company’s brands such
as Fevicol and M-Seal are almost generic names in their categories. Pidilite has
been able to innovate and create new product categories, which have been driving
growth over the past few years. We initiate coverage with a BUY rating and a price
target of Rs180.
 Catalysts
We expect 20% revenue growth over the next three years, which along with current
undervaluation compared to peers is likely to lead stock outperformance.
Anchor themes
We expect the current construction boom in India to continue, leading to increased
spending on construction chemicals and adhesives. Spending on new construction
and on repair and maintenance and furniture picks up as discretionary spending
increases (which we believe is likely in India now).

FII & DII trading activity on NSE and BSE as on 08-Feb-2011

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FII trading activity on NSE and BSE on Capital Market Segment
The following is combined FII trading data across NSE and BSE collated on the basis of trades executed by FIIs on 08-Feb-2011.
FII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
CategoryDateBuy ValueSell ValueNet Value
FII08-Feb-20112966.063692.6-726.54

Domestic Institutional Investors trading activity on NSE and BSE on Capital Market Segment
The following is combined Domestic Institutional Investors trading data across NSE and BSE collated on the basis of trades executed by Banks, DFIs, Insurance, MFs and New Pension System on 08-Feb-2011.
DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
CategoryDateBuy ValueSell ValueNet Value
DII08-Feb-20111318.56869.59448.97
 

Nomura: Buy Tube Investments - target Rs184; light at the end of the tube

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 Action
Tube Investments of India has well-established businesses with dominant market
shares that leverage on auto consumption and a rising trend of discretionary
spending in the country. We initiate coverage of the stock with a BUY rating and a
price target of INR184, based on the company’s strong earnings momentum and
what we see as attractive valuations.
 Catalysts
The 20%-plus EPS CAGR we forecast over the next three years could well see the
stock outperform the broader market.
Anchor themes
The current auto boom in India is likely to continue, owing to under-penetration and
a likely increase in discretionary spending on automobiles.

Nomura: Buy Redington India; target Rs104; Distinctive supply-chain play

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 Action
Redington provides an end-to-end supply coverage chain, has an able and
conservative management team and a strong track-record of risk management. All
these make it a distinctive supply-chain specialist. We initiate coverage of
Redington with a BUY rating and price target of INR104, based on an expected
28% EPS CAGR and attractive valuations of 11x one-year forward P/E.
 Catalysts
The consumer goods business has doubled over the past one year and we expect
it to grow at 50-60% pa over the next few years.
Anchor themes
India has marked under-penetration of IT and consumer goods. This is likely to
change due to the growth of discretionary spending, which will lead to increased
spending on PCs, laptops, mobile phones and other consumer durables.

Nomura: BUY Raymond: upside: 55%; Target Rs470; Renewed focus on growth

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 Action
Raymond dominates the suit fabric segment (market share ~70%) in India and, in
our view, looks well positioned (after its recent restructuring) to grow business in its
core brands by opening new stores across the length and breadth of the country.
We initiate coverage with a BUY rating and price target of Rs470.
 Catalysts
Strong revenue growth driven by new store openings; margin expansion due to
re-structuring; and monetisation of real estate are potential catalysts for the stock.
Anchor themes
Discretionary spending by the Indian consumer is likely to be strong in coming
years, especially in the premium clothing segment. We look for this trend of
increased spending on luxuries to spread to the smaller cities and towns of India
(refer to our report, Playing India consumption, dated 8th July 2011).

Motherson Sumi Systems – 3QFY2011 Result Update -Angel Broking

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Motherson Sumi Systems – 3QFY2011 Result Update

Angel Broking recommends a Neutral on Motherson Sumi Systems.

For 3QFY2011, Motherson Sumi Systems (MSSL) reported better-than-expected
results with a substantial jump in its bottom line. Growth was largely led by strong
performance by the domestic markets and expansion in operating margins.
However, in view of the rising commodity cost pressures, we revise our earnings
estimates marginally downwards and recommend Neutral on the stock.

BSE, Bulk deals, 8/2/2011

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Scrip Code
Company
Client Name
Deal Type *
Quantity
Price **
521131
Anjani Fabrics
TARAPORWALA FAREDUN HOMI
B
100100
55.97
521131
Anjani Fabrics
PATEL KAPILABEN SOMABHAI
S
99181
55.56
526847
Ashirwad Steel
MGFSECURITIES LastName
B
104000
16.75
526847
Ashirwad Steel
M G F GROWTH RESEARCH AND INVESMART LIMITED
B
104002
14.10
526847
Ashirwad Steel
MGFSECURITIES LastName
S
104000
14.10
526847
Ashirwad Steel
M G F GROWTH RESEARCH AND INVESMART LIMITED
S
104002
16.73

NSE, Bulk deals, 08-Feb-2011

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Symbol
Security Name
Client Name
Buy / Sell
Quantity Traded
Wght. Avg. 
Price
ADSL
Allied Digital Services L
T ROWE PRICE INTL INC A/C T ROWE PRICE NEW ASIA FUND
SELL
5,39,730
95.05
ATLASCYCLE
Atlas Cycles (Haryana) Lt
B M TRADERS
BUY
16,727
234.50
ATLASCYCLE
Atlas Cycles (Haryana) Lt
B M TRADERS
SELL
17,002
234.47

Nifty has crucial support at 5370-5330 levels: ICICI Securities

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Previous Week Realty, Banking, Power, Capital goods stocks were the major losers for the week
 
 
Indian equities closed at the lowest point of the week for the fourth time in the last five weeks. It witnessed high volatility as Nifty traded in a 5556- 5370 range. Market faced major selling pressure on last trading day of the week on which it tanked more than 2%.
On a week-on-week basis, the Sensex was down by 387 points or
2.1%, to close at 18008 levels
The S&P CNX Nifty also closed in the red down by 117 points, or
2.1%, to close at 5395 for the week
Realty, Banking, Power, Capital goods stocks were the major losers,
with index heavyweights like ITC, Reliance Communication, Hero Honda, witnessed heavy selling pressure
Indian government revised its GDP estimates upwards to 8%
from 7.4%
On earnings data, NTPC delivered numbers in line with street
expectation while Hero Honda and Sun Pharma missed the street estimates
Amongst the key economic data released, annual food inflation rose
to 17.05% (previous week 15.57%) while fuel inflation rose to 11.61% (previous week 10.87%)
At the start of the week, positive economic data from US was negated by civil unrest in Egypt as traders resorted to risk aversion. ECB kept the rates unchanged at 1%. In economic news, the Institute for Supply Management - Chicago noted that the Chicago business barometer rose to 68.8 in January 2011 from 66.8 in December 2010 with a reading above 50 indicating growth.
 
WeeAhead : Nifty has crucial support in the range of 5370-5330 for the week
 
 
Nifty has tanked almost 500 points during last two weeks, which has resulted bearish sentiment among investors. Foreign funds have been net sellers in 4 out of last 5 trading sessions, while domestic funds are net buyers.
Among the key global data to watch for is ABC / Washington post
consumer confidence, Germany and UK industrial production data, Bank of England interest rate decision, US wholesale inventories
Nifty has crucial support in the range of 5370-5330 for the week
breaching below which the index can test 5150 levels
On the higher side, weeks high of 5556 is the immediate resistance
sustaining above which the next resistance comes around 5630 levels