30 March 2011

Met SBI: High comfort on asset quality, margins; Buy 􀂄BofA Merrill Lynch

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State Bank of India
Met SBI: High comfort on asset
quality, margins; Reiterate Buy
􀂄 Met SBI: asset quality comfort high; limited risks to margins
We recently met with SBI. According to SBI, asset quality should improve and will
see higher recoveries going ahead. We are still estimating for ~Rs150bn of fresh
slippages (gross) in FY12 vs. estimated +Rs165bn in FY11. Moreover, SBI
indicated that it will likely maintain its +3.4% margins (as on 9MFY11) for FY11,
although could see qoq decline by +10-12bps from +3.6% in 3QFY11. SBI also
believes that upside to rate is limited to +50-75bps from hereon. Further, SBI is
guiding for +19-20% loan growth in FY12 driven by infra. SME and mortgage.
Pension hit: ~Rs90bn, but earnings can still grow at +32%
SBI’s additional pension liability could rise to Rs90bn (vs. Rs65bn factored-in our
est.), but SBI may likely amortize over 5 years. This implies an additional hit of
~Rs5bn/year. However, earnings even after factoring in the additional pension hit
could still grow +32-33% earnings growth in FY12E-13E.
4Q11 earnings: +45-50% yoy; Risk-return attractive, Buy
We estimate 4Q earnings growth of +45-50% yoy driven by +30% yoy topline
growth (NII) and muted, yoy, operating costs owing to one-off’s in 4QFY10. We
are still building in +30% qoq credit costs (although flat yoy), as SBI could provide
excess for catch-up to achieve 70% cover. Risk-return attractive with RoEs
estimated at +20% (Bk Biz.) and stock trading at 1.6x FY12E adj. BV. Further, it is
most leveraged to improving macros and rate cycle. Reiterate Buy and PO.


Price objective basis & risk
SBI (SBINF / SBKFF)
Our PO on SBI is Rs3400, as with earnings growth is forecast at +35/30% in
FY12/13, RoE rising to +20% (Bk Biz.) and trading at 1.6x FY12 adj. BV. Further,
it is most leveraged to improving macros and rate cycle. Non-banks biz. add
another Rs269/share. Our PO is benchmarked to Gordon modle theory where we
assume RoE of 20pct and CoE OF 14% and assign a +50% premium to
theoritical multiples owing to its large liability franchise and dominant position in
the market (+23pct market share at group level). On a PE basis, the stock is
trading at 7.8x FY12E if we adjust the share price for the subsidiary value. Risks
are a sharp rise in NPLs and a hike in interest rates.

Market-wide OI (D-1 Days): Market-wide rollover 63%; Nifty rollovers 59% : Edelweiss

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On the D-1, ~63% of the market wide futures positions have been rolled over to the
April series which is higher than ~58% rollovers seen on D-1 of February expiry.
Future market holds an OI of ~INR 588bn as compared to ~INR 538bn on D-1 of
February expiry. From yesterday’s levels of ~75bps, the roll cost levels in the stock
futures (cost to the long rollers) expanded to ~80bps.
Nifty has rolled ~59% of the positions into the next series, which is higher when
compared to D-1 of February expiry (~47%). Nifty roll cost expanded further in
today’s session. From yesterday’s levels of ~28-30 points it went up to ~35 points
today. Nifty holds an OI of ~703,738 contracts (INR 204bn) as against an OI of
~596,400 contracts seen on D-1 of February (INR 162bn). Around 48,200 contracts
got rolled while 27,722 contracts were added in the near month.

BUY Diamond Power Infrastructure -Continued momentum in order intake, Kotak Sec,

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DIAMOND POWER INFRASTRUCTURE LTD
 RECOMMENDATION: BUY
TARGET PRICE: RS.264
FY12E P/E: 4.4X
q Order booking in the current quarter has been strong in conductors but
the EPC segment has been a laggard. Management believes that prices
quoted by competitors are unremunerative and in view of this it has preferred
to be conservative in order booking.
q The company's transmission tower plant has started commercial production.
However, it does not have any external orders and currently it is
doing job-work for captive orders. The company is discussing tower supply
orders with customers. EHV cables plant is expected to get commissioned
in May 2011.
q In view of the delay in new production facilities (EHV cables and Transmission
Towers), we have revised our earnings estimates downwards.
Consequently, our DCF based target price stands revised to Rs 264 (Rs 319
earlier). Maintain BUY.
Continued momentum in order intake
Order intake from state as well as private utilities has been healthy during the quarter.
Amidst concerns that order intake is slowing down, the company has won orders
worth over Rs 2.6 bn in the current quarter. In addition to this, the company is expecting
Rs 1.0 bn order for 3600 kms for which it has already received Letter Of
Intent. This order is expected before the end of current fiscal. In the distribution conductor
side, the company has been selected by TNEB for supply of 36500 kms of
distribution conductor worth Rs 750 mn.

FII & DII trading activity on NSE and BSE as on 30-Mar-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 30-Mar-2011.
FII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
CategoryDateBuy ValueSell ValueNet Value
FII30-Mar-20112802.22062.59739.61
 
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 30-Mar-2011.
DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
CategoryDateBuy ValueSell ValueNet Value
DII30-Mar-20111291.971907.31-615.34
 

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30 March 2011. News Round-up : Kotak Sec,

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Economy News
4 PSU banks are set to report a spurt in bad loans beginning next month
when they shift to a new technology platform. The platform
automatically processes and updates transactions, helping identify NPAs
on a daily basis. (ET)
4 NSE will launch CNX SmallCap Index with effect from March 30, 2011. The
Bombay Stock Exchange had introduced a similar index called BSE
Smallcap Index in 2005. (BL)
4 India’s core infrastructure industries grew 6.8% in February from a year
ago, raising prospects of overall industrial growth in the quarter ending
March. (ET)
4 Swan Telecom and Loop Telecom were used as fronts by the ADA Group
and Essar Telecom, respectively, to get 2G spectrum illegally during the
tenure of former telecom minister A Raja, CBI has told the Supreme
Court. (BS)
4 Under pressure from Railway Minister Mamata Banerjee and concerned
over rising inflation, the government has once again deferred a decision
on levying service tax on transport of goods by rail to July 1. This is the
fourth time that the government is postponing a decision on service tax
on rail freight which was to be implemented from April 1, 2010. (BS)
Corporate News
4 US-based paper and packaging company International Paper (IP) said it
would acquire the control of Andhra Pradesh Paper Mills (APPM) for
$361 million (Rs.16.24 bn) to become the first global company with a
direct presence in India's fast-growing paper industry. (BS)
4 Essar Energy has signed an agreement with Shell to buy its Stanlow
refinery in UK for $350 million. The transaction should be completed in
the second half of 2011. (ET)
4 NDTV and the Indian arm of Rupert Murdoch's STAR signed an
agreement under which the latter will be the sole and exclusive
representative of NDTV 24x7, NDTV India and NDTV Profit. In addition to
the frontline sales, STAR India will also be responsible for commercial
back-office management such as traffic, scheduling, billing and
collections. (BS)
4 The Reserve Bank of India (RBI) has questioned the valuation and
structure of the high-profile deal cut by private lender Axis Bank last
November to buy Enam Securities at a transaction worth Rs.20.67bn. (ET)
4 Hyderabad-based Aurobindo Pharma is going in for large-scale
automation of its manufacturing processes as part of a corrective action
plan to reduce manual intervention. The company had embarked on the
corrective after the US Food and Drug Administration issued an import
alert last month for detention of its Cephalosporin products produced at
its facility here. (BS)
4 Offshore drilling contractor Aban Offshore said its subsidiary Sinvest AS
will sell its entire 50 per cent stake in Venture Drilling AS to Norway's
Petrolia ASA for $34 million (about Rs.1520 mn). Aban Offshore, through
arm Aban Singapore Pte, had bought a stake in Norwegian company
Sinvest in 2006. (BL)
4 Kirloskar Oil Engines has entered into a licence agreement with
Daihatsu Diesel Manufacturing Company, Japan for manufacture of
diesel engines in range of 610 KW to 2,560 KW to cater to the
commercial marine market segment. (BL)
4 Andhra Bank said the government has infused Rs.11.7bn into the bank
as part of recapitalization package. The shareholders of the bank had
earlier approved issuance of over 74.5 mn shares at a price of Rs.157.28 a
share on preferential basis. (BS)


􀁠 FDI down by 30% in February to USD 1.2 bn. (THBL)
􀁠 Core sector grows 6.8% in February. (BSTD)
􀁠 ONGC (ONGC IN) awaits green nod to drill five blocks off Tamil Nadu. (FNLE)
􀁠 Cairn India (CAIR IN) will complete the first full year of producing oil from its
Rajasthan block with a net profit of around USD 1.46bn on March 31 & has projected
it to jump by 34% next fiscal year. (ECNT)
􀁠 RBI has questioned the valuation & structure of the high profile deal cut by Axis Bank
(AXSB IN) last November to buy Eman Securities. (ECNT)
􀁠 Private equity firm L Capital is likely to pick up a minority stake in Gitanjali Gems Ltd
(GITG IN) for an estimated amount between USD 100-125 mn. (BSTD)
􀁠 Aban Offshore Ltd (ABAN IN) will set its 50% stake in Venture Drilling AS (VDAS),
which the company owns through its step down subsidiary, Sinvest AS. VDAS is a
50:50 joint venture between Sinvest and Norway-based Petrolia ASA. The
consideration for selling the subsidiary is around USD 34 mn. (BSTD)
􀁠 Aurobindo Pharma (ARBP IN) is going in for large-scale automation of its
manufacturing processes as part of a corrective action plan to reduce manual
intervention. (BSTD)
􀁠 SKS Microfinance (SKSM IN) said it had securitised micro-finance loans worth USD
136 mn with some banks and a non-banking finance corporation. The transactions
will improve the company's liquidity and allow it to opt out of a debt recast
programme suggested by its lenders. (BSTD)
􀁠 Tata Tele (TTLS IN) to sell shares worth USD 667 mn to build network.
Foreign partner NTTDoCoMo will buy shares to maintain 26% stake in firm. (FNLE)
􀁠 McNally Bharat (MCNA IN) gets USD 26 mn order from Neyveli Lignite. (FNLE)
􀁠 International Paper to buy 53.5% in Andhra Pradesh Paper Mill (APPM IN) for USD
257 mn. (THBL)
􀁠 Ashok Leyland (AL IN) enters LCV segment with Dost. 1.25-tonne payload; price to be
announced closer to launch. (THBL)
􀁠 Essar Energy signs pact with Shell for Stanlow refinery. Essar to pay USD 350 mn in
cash. (THBL)
􀁠 Lanco Infratech (LANCI IN) has raised debt of USD 1.22bn from a consortium of
financiers led by Power Finance Corp. (POWF IN) to finance its upcoming 1320MW
power generation unit in Chhattisgarh. (ECNT)
Source: ECNT= Economic Times, BSTD = Business Standard, FNLE = Financial Express, THBL = Business Line.

30-Mar-2011, NSE, Bulk deals,

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Symbol
Security Name
Client Name
Buy / Sell
Quantity Traded
Wght. Avg. 
Price
ACROPETAL
Acropetal Tech Ltd
AJAY
BUY
2,71,867
61.67
ACROPETAL
Acropetal Tech Ltd
AJAY
SELL
2,71,867
61.76
ACROPETAL
Acropetal Tech Ltd
ALEXURE SECURITIES PVT LTD
BUY
4,90,000
68.20
ACROPETAL
Acropetal Tech Ltd
AMRUT SECURITIES LIMITED
BUY
2,57,897
62.90
ACROPETAL
Acropetal Tech Ltd
AMRUT SECURITIES LIMITED
SELL
2,57,897
64.66
ACROPETAL
Acropetal Tech Ltd
BASMATI SECURITIES PVT LTD
BUY
3,00,000
68.20
ACROPETAL
Acropetal Tech Ltd
BASMATI SECURITIES PVT LTD
SELL
1,80,000
58.12

30/3/2011, BSE, Bulk deals,

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Scrip Code
Company
Client Name
Deal Type *
Quantity
Price **
531897
Accentia Tech-$
INFINA FINANCE PRIVATE LIMITED
B
75000
97.63
531897
Accentia Tech-$
SHARAD SHAH
S
100000
98.00
533330
ACROPET TEC
DIRVA TRADE IMPEX PVT LTD
B
347901
61.98
533330
ACROPET TEC
NEW HORIZON EQUITY ADVISORS PRIVATE LIMITED
B
250000
59.99
533330
ACROPET TEC
FINANCECORP CAPITAL INDIA PRIVATE LIMITED
B
217900
64.08

FII DERIVATIVES STATISTICS FOR 30-Mar-2011

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FII DERIVATIVES STATISTICS FOR 30-Mar-2011 
 BUYSELLOPEN INTEREST AT THE END OF THE DAY 
 No. of contractsAmt in CroresNo. of contractsAmt in CroresNo. of contractsAmt in Crores 
INDEX FUTURES1841755355.391580594586.6066743119428.99768.79
INDEX OPTIONS3411449827.643106028938.89204556358998.13888.75
STOCK FUTURES2549646682.702645736975.15125582432521.17-292.44
STOCK OPTIONS5519164.346659196.01413531139.29-31.67
      Total1333.43
 
 


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