24 February 2011

Microstrategy E vs P -Here there be monsters…and treasure :Macquarie Research,

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Microstrategy E vs P
Here there be monsters…and treasure
Reporting season prompts mixed earnings revisions
 Results meeting expectations: Approximately 40% of companies in the
MSCI Asia ex-Japan index have reported results so far. At an aggregate level,
December is shaping up in line with expectations – 23% of companies have
beaten analyst expectations by more than 5%, while 26% have missed.

Credit Suisse, India Property - Prices continue to inch upwards, volumes yet to recover meaningfully

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India Property Sector ------------------------------------------------------------------------------------------
Prices continue to inch upwards, volumes yet to recover meaningfully


● All-India ex-Noida volumes saw seasonal pickup in 4QCY10 with
13% QoQ increase, but were still 29% below pre-crisis levels.
Average prices continued to inch upwards with all-India ex-Noida
prices rising 6% QoQ and 15% YoY in 4QCY10.
● Volumes in MMR continued to slow down 6% QoQ and 34% YoY
in 4Q10. Average prices continued to rise further to Rs9,401/sq ft,
up 25% QoQ and 59% YoY. Average inventory remained low at
nine months of demand in MMR as of Dec-10, compared to eight
months as of Sep-10.
● Over-heating in the South and Central Mumbai property market
continued and was evident as 32% of volumes in MMR in
4QCY10 were absorbed at Rs10,000/sq ft and above, compared
to 19% in 3QCY10 and only 10% in 4QCY09.
● Disappointment on pre-sales volumes for developers could
continue in FY12, if developers’ focus on the premium segment
and unwillingness to cut prices continues. In our view, a 10-30%
property price correction across major cities, especially MMR, is
imminent and necessary to propel volumes once again.

Kotak Sec, Industrials: PGCIL orders lacking traction; tower okay but equipment drastically low

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Industrials
India
PGCIL orders lacking traction; tower okay but equipment drastically low. We
study ordering trends including segment-wise market share trends. PGCIL ordering
remains weak, particularly in equipment and subs., though tower orders grew yoy in
YTD-FY2011. Seasonality, January orders (Rs12 bn vs Rs7.5 bn last year) bode well for
4QFY11E. Comp’n in tower stabilizes in FY2011 vs FY2010 though only partially (SPIC
JVs bag sizable share). PGCIL probably drives less than 1/3rd of business but is focused
upon for data availability (state data broadly unavailable). Positive on CRG on diversified
base. Highlight 42% order de-growth for ABB India in 4Q, cut earnings estimates.

Buy Amtek Auto - Better times ahead:: Anand Rathi

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Amtek Auto
Better times ahead; maintain Buy
We expect Amtek Auto to benefit from sustained auto demand
locally and the nascent global recovery, along with market-share
gains overseas. Its completed organizational restructuring and
near completion of its non-auto capex are added positives. We
trim our target price from `254 to `225, while maintaining a Buy.

Kotak Sec, :: Castrol India: Results disappoint with no volume growth and contracting margins

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Castrol India (CSTRL)
Energy
Results disappoint with no volume growth and contracting margins. Castrol
reported 4QCY10 net income of `1.06 bn (-9.4% qoq, +7.4% yoy), significantly below
our expected `1.35 bn. The negative variance reflects (1) lower-than-expected volumes
at 53.8 mn liters versus our expected 56.9 mn liters and (2) higher-than-expected
advertising costs and other expenditure. We maintain our SELL rating on Castrol noting
the stock is trading at 20.2X CY2011E EPS and 12% above our revised 12-month target
price of `370 (`390 previously).

Anand Rathi, ::Budget FY12 – A Preview - Passive fiscal consolidation to continue

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Budget FY12 – A Preview
Passive fiscal consolidation to continue
Overall expectations from the budget are modestly positive for
almost all sectors except Autos. Despite concerns regarding
likely increase in fiscal deficit in FY12, we expect cash balance
transfer from FY11 to FY12 to improve the fiscal situation
substantially.

Buy Setco Automotive-- M&HCV clutch leader; :: Anand Rathi

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Setco Automotive
M&HCV clutch leader; initiate with a Buy
We initiate coverage on Setco Automotive, the leader in
M&HCV clutches, with a Buy and a target of `182. Setco’s
unique business model, expansion and upswing in vehicle
volumes would lead to 29% earnings CAGR over FY11-13e.

Macquarie Research:: Asia oil and petrochemicals- Refining margin kept its strength

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Asia oil and petrochemicals
Refining margin kept its strength
Refining and Petrochemicals update
 GRMs pulled back slightly but remained healthy. Singapore Gross
Refining margin retreated by 2.3% WoW to US$7.4/bbl last week, but
remained well above our regional analyst’s 2011 forecast of US$6.1/bbl. The
margin resilience was mainly supported by solid middle distillate margin,
which could be attributed to constructive US DOE data showing a 3.1mb/d
reduction in middle distillates inventory. Meanwhile, gasoline spread was
slightly weaker with US gasoline inventory increase a modest 0.2mb/d.

Credit Suisse, Ranbaxy-- Base business continues to be weak; No update provided on Paonta and Dewas

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Ranbaxy--------------------------------------------------------------------- Maintain UNDERPERFORM
Base business continues to be weak; No update provided on Paonta and Dewas


● Ranbaxy results were below expectations. No clarity was provided
about the resolution at Paonta and Dewas and the base business
margin sequentially declined from 7-8% in Sep 2010 to 6%.
Overall, Ranbaxy reported loss due to several one-off expenses.
● Base margins were impacted by the full roll out of project Viraat
though sales in India declined 14% QoQ. Sequential improvement
in margins is critical for the stock as Ranbaxy gets valued at
normalised margins of 13% plus.
● Margins on Aricept were weak as price erosion is already at 70%!
Such steep cuts are not the norm during the exclusivity period
even within authorised generics. Valtrex continues to offer
meaningful opportunity where Ranbaxy still retaining 30% market
share. The US business was healthy at US$75 mn in 4QC10.
● Ranbaxy’s CY11 sales guidance of US$1.87 bn includes upside
from Aricept. Excluding Aricept and Valtrex, the base business
growth is at 21% with most growth coming from Nexium APIs. Our
estimates for CY10-12 are reduced by double digits due to the
loss reported in 4Q10 and weak sales guidance.

Buy Amara Raja Batteries Short-term concerns, positive potential;:: Anand Rathi

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Amara Raja Batteries
Short-term concerns, positive potential; maintain Buy
We expect the structural soundness of Amara Raja Batteries’
business to play out over the long term and, hence, help it outperform
its peers. Even though short-term concerns persist
regarding the rise in commodity prices and lower industrial
demand, we yet maintain our Buy recommendation.

Indian Utilities: Tepid, Bumpy & A Lot Less Crowded - Reducing RPWR Target to INR100: Bernstein Research

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Indian Utilities: Tepid, Bumpy & A Lot Less Crowded -
Reducing RPWR Target to INR100; Maintain Underperform


Highlights
The slowdown in Indian power consumption growth and declining merchant prices over the last year has
two broad implications for utilities: raising money to build new power stations will be more difficult and
political pressure to fix the "broken" distribution sector will increase. The first factor will play out
immediately; the second, over time. This places a premium on incumbency and a low cost structure. Among
the stocks we cover, the beneficiary should be NTPC. Implications for Reliance Power are less attractive.
 India continues to suffer from a shortage of electricity. The low level of power consumption growth
and declining merchant prices reflect problems with the distribution sector more than a deceleration in
underlying demand growth. In any case, power consumption was up 4.3% in 2010; installed capacity was
up 8.0%; and merchant pricing is trending down. The good old days for the IPPs may now be over.
 NTPC is the lowest cost provider of electricity in India. It is also the largest operator in India and has
almost all of its capacity locked up in long-term power purchase agreements with a regulated return on
equity of 15.5%. If power consumption growth in India is slowing (for whatever reason), NTPC stands to
benefit as (i) reduced investment in the sector will reduce competition for fuel and dispatch; (ii) the
company's regulated business is largely insensitive to merchant pricing.
 We are maintaining our target price on NTPC at INR190. NTPC is currently trading at the lower end of
its long term average on a P/E or P/B basis. If the company is able to adjust its tax expense this quarter
so as to escape MAT liability, earnings growth for FY2011 should be INR11.24, up 6.1% Y/Y.
 Reliance Power is stuck between a rock and a hard place. The company is rapidly developing its
projects yet – in our view - does not have the cash to execute its expansion plan into 2012 without
additional equity. Any sign that Reliance Power is slowing its development of new projects will be
interpreted as either a lack of confidence in the domestic power market or internal concern about the
company's finances (both clear negatives). In our view, the company is likely to raise more cash before
the end of 2011 – and, in some ways, the sooner the better given the deteriorating negotiation position
that a declining cash balance creates. However, the first half of 2011 looks like an unattractive time for
Indian companies generally and Reliance Power in particular to seek new equity.
 We are lowering our target price for Reliance Power to INR100. The lowered valuation reflects the
deteriorating pricing environment and the limited range of options: Reliance Power cannot suspend
construction to preserve cash without a negative response from investors. Conversely, given the long-lead
times, the company cannot accelerate construction to bring earnings forward

ABB: High exit costs continue to impact results; sedate inflows lower visibility: Kotak Sec

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ABB (ABB)
Industrials
High exit costs continue to impact results; sedate inflows lower visibility. Another
disappointing quarter saw net PAT decline 94% yoy (revenues broadly in line). The PAT
decline was primarily due to provisions for high exit costs from rural electrification
projects. However, margins are likely remain weak even after adjusting for these
provisions. Order inflows also remained sedate, declining by 42% yoy and leading to
lower revenue visibility. We reiterate our REDUCE rating with a target price of Rs660.

Macquarie Research:: Buy Strides Arcolab --Specialist: Sterile injectable play

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Strides Arcolab
Specialist: Sterile injectable play
Event
 We initiate coverage on Strides (STR IN) with an Outperform rating and a
target price of Rs485, implying upside potential of 28%. We like STR for its
strength in sterile injectable manufacturing. STR has increased its injectable
capacity by around 5x and is now poised for growth, in our view.

BUY Banco Products, India Temporary dip, bright prospects; :: Anand Rathi

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Banco Products, India
Temporary dip, bright prospects; initiate with Buy
Banco Products, India, is a leading manufacturer of radiators
and primed to benefit from steady auto growth at home as well
as better demand globally. Strong ties with OEMs, de-risked
business and inexpensive valuations make the stock attractive.
We initiate with a Buy and a target of `103.

The Visible Hand - Who adjusts? Macquarie Research,

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The Visible Hand
Who adjusts?
Event
 G20 finance ministers and central bankers met in Paris.
Impact
 While the official G20 statement received the most attention, more interesting
were the contributions to the Financial Stability Review produced by the
French central bank.
 These articles explored the issue of global imbalances and what needs to be
done.
 Despite divergent views, the weight of the analyses points to China and other
surplus countries having to adjust their savings ratios. The necessary policy
changes to achieve this adjustment will be one of the key influences on global
markets over coming years.
Analysis
 The Banque de France released its latest Financial Stability Review to
coincide with the G20 meeting in Paris. This Review was unusual because it
consisted of a series of articles written by central bankers around the world.
Global imbalances and financial instability were the themes explored by the
central bankers and the analyses shed some light onto the likely path of
adjustment.
 Unsurprisingly there is a lot of finger pointing with most central bankers
accusing policymakers in other countries of implementing inappropriate
policies. So any adjustment has to be made elsewhere. Yet it is still possible
to detect the most likely pattern of adjustments.
 Perhaps the strongest point of agreement is that it is savings rather than
investment that is the key issue. The article by the Reserve Bank of Australia
summed this up very neatly by showing how excess savings in both China
and the wider Asian region has ballooned over the past decade. Investment
has been strong in China, but not strong enough to offset surging savings. For
the rest of Asia, investment has not been as strong as it was before the crisis
of 1997/98. But that was probably unsustainable and savings are just too high
for this sustainable level of investment.

IL&FS Investment Managers - Conference call transcript

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Analyst Call to discuss Q3F11 & 9MF11 performance, along with a detailed scan of the business environment.
February 11, 2011
Dr Archana Hingorani, CEO, IIML: Good afternoon everybody. I hope by now all of you would have seen the third quarter and the nine months ended December 2010 results. As you can see, the results are flat at Rs 50.77 crore of consolidated PAT for the nine months. This is essentially because the funds under management from the older categories have been falling. But, we have had SCB as a new fund coming. However, we also have change in Forex which has impacted us negatively in this year as compared to the last year. We had significant gains last year. All of that put together, we have our net performance which is on par with last year. In addition we also had a merger with Saffron, which has now been incorporated into the results.
I now want to touch upon the business operations of the company. We have three verticals – growth private equity, infrastructure and real estate. On the growth side, we have two funds that are active i.e. the Leverage India Fund and the Tara III Fund. Leverage India Fund is on exit mode. In fact, some of the fees reduction that are happening under revenue line are on account of exit from that fund. Tara III has been fully invested. We are almost done with growth private equity in terms of investment and if you see in the portfolio it’s performing quite well. The fundamentals of most of the investments in the Tara and Leverage India Funds portfolio continue to do as per our expectations.

Steel production shuffles upwards :Macquarie Research,

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Commodities Comment
Steel production shuffles upwards
 We review January’s crude steel production data, which highlights further
reacceleration of YoY growth outside of China.
Latest news
 Precious metals were the big winners on Monday trading, as worries over the
multiple disruptions in the Middle East and North Africa pushed investment
towards safe havens. Silver was again the big winner, up 4.7% on the day to
$33.4/oz. Copper fell again to $9,814/t while nickel rose to $29,281/t as the
market digested the disruptions announced at the end of last week
 Flash PMIs for the Euro area were again very strong, rising to 59.0 from 57.3
in February. The Eurozone PMI is now at the highest level since June 2000,
with the increase resulting from a broad-based improvement in new orders,
output, new export orders and employment. The German PMI rose to the
highest level in the series history at 64.9, while the French PMI also improved
to 55.3 from 54.9. All this suggests that manufacturing activity in Europe
remains vibrant.
 Eramet, the French-based mining and metals company, gave an upbeat
presentation to analysts in London yesterday, outlining capital expenditure
projects totally €9bn out to 2020 including projects in manganese, nickel,
superalloys, lithium, titanium, aluminium forgings and rare earths. In nickel,
Eramet says it is on course to give approval to its 35ktpa Weda Bay nickel
project in Indonesia (phase 1) by the end of 2012. It stated that it is using a
long run nickel price assumption "in excess of" $10/lb, believing that most
analysts have under-estimated rising capital and operating costs in the
industry and also the large depletion of existing nickel ore bodies likely over
the next 10 years or so. It expects no growth in Chinese nickel pig iron
production this year (from 159kt last year) due to lack of growth in ore
supplies from Indonesia.
 Extract Resources announced that it is in discussions with Rio Tinto over the
potential joint development of the Husab uranium project with the
neighbouring Rössing uranium mine in Namibia, as well as being in
discussions with Kalahari over simplifying the shareholding structure of
Extract. Environmental approval was granted by the Namibian Ministry of
Environment and Tourism in January 2011. Next steps will include the
publication of a definitive feasibility study for the project, which is scheduled
for commissioning in 2014. Husab is the fifth largest uranium-only deposit in
the world and an open-pit mine and conventional acid leach process plant
could see it producing ~5,8000tUpa or 15mlbs U308pa.
 Just released data by Cochilco shows that Chilean molybdenum production
totalled 82m lbs in 2010, up 6.5% YoY. Codelco produced 47.8m lbs, up
0.6% YoY, while Antofagasta reported a 12.4% YoY rise to 19.3m lbs and
Collahuasi's output rose 76.1% YoY to 9.9m lbs.
 The ILZSG released zinc and lead data for December 2010 on Monday. The
data suggest that the refined lead market was in surplus of 62,000t in the
world ex-China in 2010, while the zinc market in the world ex-China was
458,000t in 2010. ILZSG assumes apparent demand = consumption for
China, so using this data gives misleading conclusions given large swings in
stocks in China year to year.

Credit Suisse, : Buy Unitech: Leasing activity remains lacklustre at Unitech Corporate Parks

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Unitech -------------------------------------------------------------------------- Maintain OUTPERFORM
Leasing activity remains lacklustre at Unitech Corporate Parks


● 4.0 mn sq. ft (18.7% of UCP’s total portfolio of 21.4 mn sq. ft) was
leased or committed for lease as of Feb-11, implying that 0.7 mn
sq. ft was leased during Oct '10–Feb '11. 0.5 mn sq. ft was leased
in N2 (Noida) project. YTD FY11 leasing stands at 1.6 mn sq. ft.
● Out of 4 mn sq. ft, 2.7 mn sq. ft is presently rent yielding compared
to 2.2 mn sq ft as of Sep-10. The total completed area as of Feb-11
stood at 3.7 mn sq. ft compared to 3.5 mn sq. ft as of Sep-10, with
N2 project witnessing additional 0.2 mn sq. ft of completion.
● Management expects the current lease commitments of 4.0 mn
sq. ft to be fully rent yielding by 3Q 2013. The total expected
annual rental income from these committed lease stands at
£29 mn, implying average monthly rentals of Rs44 per sq. ft.
● Management indicated that rentals in Gurgaon (G1) are expected
to remain under pressure in medium term due to project’s
proximity to oversupply areas. Demand in Greater Noida (N3)
remains subdued due to remoteness from CBD. Overall, leasing
activity has improved lately but oversupply concerns remain.

Kotak Sec, Nestle India: Impressive 4Q; margins surprise positively

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Nestle India (NEST)
Consumer products
Impressive 4Q; margins surprise positively. Domestic sales growth of 26% led by
~17% volume growth is impressive. Gross margins expansion of 60 bps is likely due to
price increases ahead of input cost inflation (similar trends were seen in FY2008 as
well). While we continue to believe that Maggi faces product substitution risk (from
Knorr, Foodles and Yippie), the spate of new launches in Maggi indicates that
competition seems to have triggered higher activity levels in the industry, led by the
market leader. We note that this can potentially help Maggi maintain its current growth
rates by increasing the consumption points. Stock trades at 33X FY2012E; REDUCE.

Kotak Sec, :: HDFC: Business as usual; operating environment remains challenging

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HDFC (HDFC)
Banks/Financial Institutions
Business as usual; operating environment remains challenging. HDFC’s
management remains positive on maintaining stable business performance despite
general fears of a slowdown and margin pressures. Notwithstanding a high base and
pressure in select markets, overall demand remains strong for long-term growth.
However, we expect some near-term pressure on spreads due to high funding costs
coupled with moderating retail loan growth. Currently, the business

India Consumer 3QFY11 – Revenue growth intact; margins lower :: Anand Rathi

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India Consumer
3QFY11 – Revenue growth intact; margins lower
Our consumer universe posted a 14% yoy net profit growth on a
21% yoy rise in revenue. Volumes drove revenue growth despite
limited price-led growth. EBITDA margins were lower due to an
increase in raw material costs, and higher taxes resulted in lower
net profit growth.

Gujarat Pipavav Port: Positive PAT led by strong volumes, margin expansion, low interest costs: Kotak Sec

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Gujarat Pipavav Port (GPPV)
Infrastructure
PAT positive thanks to strong volumes, margin expansion, low interest costs.
GPPL reported strong 4QCY10 revenue growth of 26% yoy led by strong container
volume growth (up 29%) and higher average realizations (up 18%). EBITDA margins
expanded to 44% (versus 29% in 4QCY09) led by operating leverage and absence of
PRCL provisions. Strong revenue growth, margin expansion and lower interest cost
(post debt repayment) led to GPPL’s first quarter of positive net profit (of Rs111 mn).

Kotak Sec, Economy: New CPI series: A move towards a unified retail price measure

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Economy
Inflation
New CPI series: A move towards a unified retail price measure. The CSO published
a new CPI series starting January 2011 for All-India, State and Union Territories. The
new series, with an upgraded base year of 2010, aims to capture the retail price level
on an aggregate basis as well as separately at the urban and rural level. With this, CSO
has overcome the oft cited criticism – the lack of a single measure of inflation at the
household level. However, the new series is unlikely to assume relevance for policy
formation immediately as there is no historical data available for comparison purposes.
Nonetheless, the move towards a single CPI data, as is the norm in other countries, is a
step in the right direction.

Technology: Cognizant - management discussion notes:: Kotak Sec,

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Technology
India
Cognizant – management discussion notes. Reaffirming our positive thesis on the
demand environment for the sector, CTSH management indicated – (1) strong demand
undercurrent for IT offshoring led by broader and deeper penetration of the global
delivery model, (2) Tier-I companies better-positioned than Tier-IIs on growth, and
(3) still tight though manageable supply-side situation. Our positive stance on the sector
and Tier-I bias stays. Infosys and TCS remain top picks.

GlaxoSmithkline Pharmaceuticals: PAT falls short of estimates : Kotak Sec,

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GlaxoSmithkline Pharmaceuticals (GLXO)
Pharmaceuticals
PAT falls short of estimates due to lower sales growth and margin. 2010 PAT was
4% lower than estimates due to lower sales growth at 12.8%—flat yoy versus our
estimate of 14%—and lower margin, down 300 bps yoy to 35.3% due to the sales
force expansion. We maintain our 2011E sales growth estimate at 15.6% as we expect
a pick-up in pharma sales growth to 16% in 2011E from 14% in 2010 and maintain
our 2011E EPS estimate at Rs79.5. We maintain our REDUCE rating with a price target
of Rs2,000 due to stretched valuations (stock ex cash/share trading at 28X 2011E) . We
value Glaxo at (1) business value/share of Rs1,720 (25X 2011E EPS ex interest income)
and (2) cash/share of Rs274.

Power - coal risk out weighs merchant risk; Edelweiss

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Impact from lower coal supplies higher than lower merchant sales
In view of Coal India (CIL) recently revising down its volume growth guidance to ~3%, we have analysed the impact of coal supply shortfall on power projects. Our analysis reveals 20% lower coal supply impacts NPV ~33%, which is greater than the ~12% impact of 20% lower merchant sales. Hence, we believe if a power developer is unable to generate power within the bid fuel cost levels, the earnings impact is higher, since the generator in addition to losing on merchant sales will also recover less fixed costs.

Energy: It's not just about a few oil companies: Kotak Sec

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Energy
India
It’s not just about a few oil companies. The rapid escalation of political unrest in the
MENA region exposes India’s energy sector, CAD and FD to grave risks. With the only
practical solution of price increases largely unavailable due to the government’s political
constraints and high inflation, it would be a challenge for India to extricate itself from
the huge negative impact of high oil prices. Stock ratings are largely academic currently;
OIL and ONGC are the only investible ideas now but even they may face challenges.

Banks/Financial Institutions: Banking on the big picture: 3 reasons why: Kotak Sec

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Banks/Financial Institutions
India
Banking on the big picture: 3 reasons why. Our positive view of Indian banks looks
beyond near-term concerns to focus on earnings growth of 20% CAGR over FY2011-
13E resulting from (1) strong GDP growth that will drive loan growth and lower
slippages, (2) reasonable pricing power on account of liquidity conditions and
(3) improving operating leverage. We like banks with a strong retail liability franchise
and reasonable valuations. Our top picks are Axis Bank, ICICI Bank, PNB, Union Bank
and Federal Bank.

Kotak Sec:: Ranbaxy Laboratories: Low exclusivity revenues and exceptionals hit 4Q PAT

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Ranbaxy Laboratories (RBXY)
Pharmaceuticals
Low exclusivity revenues and exceptionals hit 4Q PAT. Ranbaxy reported a loss of
Rs973 mn in 4QCY10 due to (1) low Aricept sales, (2) poor margin of 11%,
(3) exceptional costs and (4) lower interest income. CY2011E sales growth guidance of
US$1.87 bn implies base business growth of 18% in dollar terms. We think this is
achievable. However, despite factoring in significant recovery in base business sales and
margin at current levels, the stock, excluding FTF pipeline value, is trading at 25X 2011E
base business EPS. Maintain SELL with a target price of Rs365 (was Rs340).

Anand Rathi, ::RIL-BP deal: Eases concerns on RIL’s E&P business

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Reliance Industries
RIL-BP deal: Eases concerns on RIL’s E&P business
The BP deal fairly values RIL’s E&P portfolio and would help to
restore confidence on its E&P business. RIL under-performed by
16% last year due to concerns on its KG D6 ramp-up and slow
progress in its other E&P assets; we expect a reversal in the underperformance.

Anand Rathi, ::India Pharmaceuticals Conference - Key takeaways

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India Pharmaceuticals Conference
Key takeaways
The Anand Rathi Institutional Equities ‘India Pharmaceuticals
Conference’, held in Mumbai on 17-18 Feb ’11, featured eleven
listed companies, and one unlisted. Companies participating
represented a diverse spectrum–from the larger and wellestablished
leaders to emerging ones.

Budget 2011-12 Preview- Motilal Oswal Financial Services

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"One-off performance" or "One of performance"?
Low expectations amidst macroeconomic headwinds
Union Budget 2011-12 comes against the backdrop of high inflation, tight liquidity, high interest
rate, industrial slowdown, delayed reforms and negative market sentiment. Thus, expectations
from the budget are, in general, muted. The positive is that FY11 fiscal deficit target of 5.5% of
GDP will be over-achieved. But without one-off revenue sources like 3G, meeting the FY12
fiscal deficit target of 4.8% is a challenge [our estimate 5%; gross (net) market borrowing of
Rs4.7t (Rs4t)]. Clarity on reforms such as DTC, GST and oil/fertilizer subsidy is the key watchout.

Report on ABB 4QCY10 by Motilal Oswal

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ABB (ABB IN; Mkt Cap USD3.3b, CMP Rs698, Neutral)

ABB India's 4QCY10 performance was impacted by provisions for exit costs on rural electrification projects, increased competition &execution headwinds.

-     Rural electrification contributes Rs700m to the order book v/s Rs2b in June 2010.

-     ABB India has indigenized a 765kV transformer and circuit breaker and it plans to set up its own manufacturing facilities, which will make it more competitive.

-     Renewable energy, in which the company is a global leader, is becoming an interesting opportunity in India, the company said.

-     ABB India is strengthening its design capability and expanding its product portfolio with a view to attracting more outsourcing.

-     We are cutting CY11 earnings estimates and expect CY11 EPS of Rs18.5/share and CY12 at EPS of Rs24.7/share (up 33%). Maintain Neutral with a price target of Rs594 (downside of 15%). Order intake in 4QCY10 was Rs14b (down 41% YoY and down 31% QoQ). The management indicated that several projects had been scrapped.

 

Buy Bharat Forge -Ph-1 complete, ph-2 of re-rating on the anvil; :: Anand Rathi

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Bharat Forge
Ph-1 complete, ph-2 of re-rating on the anvil; Buy
We expect Bharat Forge, with its diversified business model and
domestic market leadership, to register 49.1% consolidated profit
CAGR over FY11-13e, given our view that the CV industry would
see steady growth over FY11-13e and good overseas demand. We
re-iterate our Buy with a target price of `396 (from `317).

Buy NRB Bearings -The leader in needle roller bearings :: Anand Rathi

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NRB Bearings
The leader in needle roller bearings; initiate at Buy
We initiate coverage on NRB, the leading manufacturer of
needle bearings in India, with a Buy rating and a target of `68.
The huge rise in number of vehicles in India, NRB’s sharper
focus on exports and the replacement market, and its expansion
are likely to lead to a 29% earnings CAGR over FY11-13e.

Buy Gabriel India- A leading shock-absorber manufacturer; :: Anand Rathi

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Gabriel India
A leading shock-absorber manufacturer; initiate with Buy
We initiate coverage on Gabriel, with a Buy recommendation
and a target of `62. Gabriel is one of the leading manufacturers
of shock absorbers and likely to see a 42% earnings CAGR over
FY11-13e supported by a strong brand catering to stable demand,
its location advantage and expansion.

Britannia Industries - Key takeaways from analyst meet :: Anand Rathi

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Britannia Industries
Key takeaways from analyst meet
Britannia’s management talked about the vast opportunities in
packaged foods in India. It also indicated that the company is
poised for strong growth in coming years but was cautious on
margins because of higher raw material prices and intensifying
competition.

Buy Ranbaxy Laboratories -Disappointment due to lower share in Aricept; Anand Rathi

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Ranbaxy Laboratories
Disappointment due to lower share in Aricept; maintain Buy
Ranbaxy’s 4QCY10 results belied our estimates mainly due to
the lower-than-expected market share in Aricept (para IV). Its
revenue dropped 6.5% yoy, to `21bn (vs our estimated `22.5bn).
EBITDA margin declined 720bps yoy to 11%, which along with
higher depreciation resulted in a 73% fall in adjusted profit.

Sudar Garments, IPO, FINAL subscription details; Minimal QIB interest

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SUDAR GARMENTS LIMITED


Total Issue Size9088000
Total Bids Received14111172
Total Bids Received at Cut-off Price6745761
No. of times issue is subscribed1.55
Sr.No.CategoryNo.of shares offered/reservedNo. of shares bid forNo. of times of total meant for the category
1Qualified Institutional Buyers (QIBs)45440007774380.17
1(a)Foreign Institutional Investors (FIIs)777438
1(b)Domestic Financial Institutions(Banks/ Financial Institutions(FIs)/ Insurance Companies)0
1(c)Mutual Funds0
1(d)Others0
2Non Institutional Investors136320060975184.47
2(a)Corporates2499093
2(b)Individuals (Other than RIIs)3339225
2(c)Others259200
3Retail Individual Investors (RIIs)318080072362162.27
3(a)Cut Off6745761
3(b)Price Bids490455

Updated as on 24 February 2011 at 1730 hrs

Acropetal Technologies, IPO, Final Subscription -1.28x

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ACROPETAL TECHNOLOGIES LIMITED





Total Issue Size19318181
Total Bids Received24816240
Total Bids Received at Cut-off Price7482120
No. of times issue is subscribed1.28


Sr.No.CategoryNo.of shares offered/reservedNo. of shares bid forNo. of times of total meant for the category
1Qualified Institutional Buyers (QIBs)9659091108630001.12
1(a)Foreign Institutional Investors (FIIs)10658520
1(b)Domestic Financial Institutions(Banks/ Financial Institutions(FIs)/ Insurance Companies)0
1(c)Mutual Funds0
1(d)Others204480
2Non Institutional Investors289772757875402.00
2(a)Corporates4219920
2(b)Individuals (Other than RIIs)1171980
2(c)Others395640
3Retail Individual Investors (RIIs)676136381657001.21
3(a)Cut Off7482120
3(b)Price Bids683580

Updated as on 24 February 2011 at 1730 hrs

Buy Motherson Sumi Systems Good performance to continue; Anand Rathi

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Motherson Sumi Systems
Good performance to continue; Buy
Motherson Sumi Systems is expected to continue on its steady
growth path, boosted by robust domestic demand and new order
implementation at Samvardhana Motherson Reflectec in FY12
and subsequent operating leverage from FY13. We re-iterate our
Buy on the stock, with a target price of `221.

India Auto Components -Overseas sales – Paving growth : Anand Rathi

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India Auto Components
Overseas sales – Paving growth
The Indian auto components sector is primed to benefit from
recovery in overseas sales and continuing growth in the domestic
auto sector. Streamlining of costs and improving productivity
have led to healthier financials; also, diversification in non-auto
segment and wider exports coverage are new revenue drivers.

FII DERIVATIVES STATISTICS FOR 24-Feb-2011

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FII DERIVATIVES STATISTICS FOR 24-Feb-2011 
 BUYSELLOPEN INTEREST AT THE END OF THE DAY 
 No. of contractsAmt in CroresNo. of contractsAmt in CroresNo. of contractsAmt in Crores 
INDEX FUTURES2975677953.463163648450.0847191812435.71-496.62
INDEX OPTIONS44145811766.6859331315840.62145589438309.67-4073.94
STOCK FUTURES2983107103.753081677389.33105645524853.80-285.59
STOCK OPTIONS9571261.338332229.039918249.8132.30
      Total-4823.84

 
 


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