08 May 2011

Refining margin firm but petrochem margins continue to fall::Macquarie Research,

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Refining margin firm but petrochem
margins continue to fall
Refining and petrochemicals update
 GRMs robust; Petchem margins dip: Singapore complex GRM was
maintained at US$8.6/bbl, up 2% WoW, which leaves QTD GRM at
US$8.8/bbl (+115% YoY, +18% QoQ). Due to strength in feedstock prices
(naphtha), petrochem margins dipped 2~8% WoW across the board. MEG
prices/margins continue to fall as polyester inventory levels in China are high
while buyers remain sidelined, according to local news flows.

United Spirits Q4FY11 - Marginally below estimates on higher input cost push::JPMorgan

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United Spirits Limited
Overweight
UNSP.BO, UNSP IN
Q4FY11 - Marginally below estimates on higher input
cost push

 • Earnings marginally below expectations. United Spirits reported Sales,
EBITDA and PAT growth of 28%, 17% and 36% y/y respectively during
Q4FY11. Higher than expected input costs (GM declined 170bp y/y) led to
3% earnings miss.

Indiabulls Real Estate 4Q11 hits a speed-breaker. Value case still intact::JPMorgan

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Indiabulls Real Estate
Overweight
INRL.BO, IBREL IN
4Q11 hits a speed-breaker. Value case still intact

• 4Q below expectations – IBREL reported 4Q FY11 PAT of Rs 236MM
sharply below estimates and 3Q (Rs 784MM). This was primarily on
account of: 1) Demerger of Indiabulls Wholesales (PAT impact Rs
234MM), 2) Higher interest expense of Rs 465MM on P&L, 3) Higher
power business operating losses ( Rs 100MM), and 3) Lower margins
and a higher tax rate (50%). Revenues during the Q went up by an
impressive 40% Q/Q; however margins on this were lower at 21% (vs.
32% last Q adj. for power losses). We are awaiting a clarification from
the company on this. Because of the below estimate 4Q results, full year
FY11 PAT at Rs 1.6B was lower than our estimate of Rs 2.3B.

IDFC : Limited upside, maintain Neutral ::JPMorgan

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IDFC
Neutral
IDFC.BO, IDFC IN
Limited upside, maintain Neutral


• We maintain Neutral on IDFC as we see little upside: The 4Q FY11
profit miss illustrates our fears about loan and fee growth. Margin
recovery is at least a couple of quarters away, in our view, and the large
power exposure continues to be an overhang for otherwise robust asset
quality. We believe the apparently undemanding 1.7x FY12E book
masks structural ROE pressures.

While TATA converges, sharp variance in COAL and HNDL holdings continue:: JPmorgan

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While TATA converges, sharp
variance in COAL and HNDL holdings continue


• FII buying of COAL continues, but no sell down of other metal holdings
seen to fund COAL: FII holding of COAL has increased to 6.1% as of March-
11 up from 5.5% in Dec-10 and 3.3% in Sept-10. DII holding of COAL has
broadly remained constant at 1.7%. As of March-11, institutional holding of
COAL has increased to 78%. However, the funding of COAL (at CMP value of
FII holding would be $3.2bn) seems to be new allocation and there has been no
sharp sell down seen in other Indian mining equities.

Apr 2011: High Inflation drag on 4Q earnings and investor sentiment.

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Apr 2011: High Inflation drag on 4Q earnings and
investor sentiment.


• MSCI India (US$) lost 2% over the month and underperformed the
MSCI Emerging markets index (up 2%). Consumer Discretionary,
Consumer Staples and Health Care companies were relative out
performers, while Telecom, IT Services and Industrials underperformed.
• March inflation significantly higher-than-expected. WPI inflation for
March accelerated to 9%, led by higher non-food manufacturing
inflation. Energy prices surged as Coal India hiked prices by c30% over
the month. Food prices moderated sequentially, but still remain
uncomfortably high at 9.5% oya.
• February IP moderated further. February IP grew at a weaker-thanexpected
3.6% oya. The trend of robust growth in Consumer Durables
and disappointing performance by the Capital goods segment continued.
• FIIs buyers; DIIs turned sellers. FIIs remained buyers over the month
and invested US$ 1,618 mn into India equities. DII turned marginal net
sellers over the month with Insurance companies and domestic mutual
funds having sold US$ 51 mn and US$ 6 mn respectively over the
month.
• 4Q FY11 earnings indicate rising margin pressures. Almost half of
the large cap companies have reported their 4Q FY11 earnings. A notable
trend is that of healthy volume growth but rising margin pressure across
sectors.
• Other key developments over the month:
􀂾 INR appreciated by a marginal 0.8% vs. the US$
􀂾 10 year benchmark treasury yield increased 15 bps to
8.13%

India Equity Strategy : Tracking Institutional Ownership:: JPMorgan

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• Special focus – Quarterly changes in institutional ownership. Latest data
released for the March quarter indicates that despite marginal selling,
aggregate holdings of FIIs in Indian equities continues to be around
historically high levels of 15%. DIIs, led by insurance companies turned
buyers over the quarter taking their aggregate ownership of Indian equities up
by 70 bps to 9.0%.

Siemens: Parent Mar-q results: India inflows and growth healthy :: JPMorgan

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Siemens India
Overweight
SIEM.BO, SIEM IN
Parent Mar-q results: India inflows and growth healthy


• Positive cues for India from Siemens AG results: Parent reported
India order inflows of Euro810mn, up 58% YoY in Mar-q. India
revenues grew 19% YoY excluding currency translation, (20% YoY in
Euro terms) to Euro550mn.

Macquarie Research, Oil & Gas Atlas Strong start to 1Q11 results

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Oil & Gas Atlas
Strong start to 1Q11 results
Energy Market Indices WoW Changes
⇒ S&P/TSX Energy Index: +0.8%
⇒ S&P 500 E&P Index: +3.2%
⇒ Oil Service Sector Index: -0.9%
⇒ UK FTSE Oil & Gas Producers Index: +4.6%
⇒ Asia Pacific Oil & Gas Producers Index: -0.5%

Sesa Goa :: Better iron-ore outlook :, CLSA,

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Better iron-ore outlook
CLSA has upgraded CY11-15 iron-ore price forecasts by 12-30% based on
strong demand in China/OECD countries and a weaker supply outlook. This
results in a sharp 45-56% upgrade to our FY12-13 EPS estimates for Sesa
Goa. Sesa’s FY12 volume growth will be strong as the Karnataka export ban
has been lifted. However, volume growth post FY12 will require mining
clearances, which continue to see delays. Our new target price of Rs270 gives
Sesa the benefit of doubt on mining approvals and reserve accretion. We
remain negative but upgrade Sesa one notch to U-PF from SELL.

Hero Honda -Shrinking margins provide dim outlook :: Macquarie Research

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Hero Honda
Shrinking margins provide dim outlook
Event
 Hero Honda reported disappointing 4Q results with net sales of Rs53.5bn (↑
31% YoY) and net profit of Rs5bn (↓16% YoY). Net profit was impacted by a
526bp decline in EBITDA margin. We believe margin pressure is unlikely to
ease in the near term given raw material inflation. Reiterate Underperform.

Central banks building bullion reserves :: :: Macquarie Research

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Central banks building bullion
reserves
Feature article
 We review the role of central banks’ participation in the gold market in light of
the recent large purchase of 100t of gold by the Central Bank of Mexico in
February/March. Further accumulation of gold by central banks seems likely,
although it is worth considering the changing motivations for accumulating
foreign exchange reserves.

Kotak Mahindra Bank - Recoveries boost profits:: Macquarie Research

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Kotak Mahindra Bank
Recoveries boost profits
Event
 Kotak nos above our estimates due to provision writeback: Kotak
reported 4Q11 net profit of Rs4.9bn - 20% above our estimates due to
provision writeback (higher recoveries). Maintain Outperform.

Captive coal block de-allocation negative for NTPC:: Credit Suisse,

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India Utilities Sector----------------------------------------------------- Maintain MARKET WEIGHT
Captive coal block de-allocation negative for NTPC

● The Ministry of Coal has decided to de-allocate 14 captive coal
blocks and one captive lignite block on account of the slow
progress in the implementation of these mines by its developers.
● Among listed companies, five NTPC coal blocks and one lignite
block of KSK has been de-allocated. Of this, KSK’s lignite block
was small and, as per the company, it was uneconomical to
develop it (was not part of our estimates either). However, this
would be negative for NTPC as it stands to lose five of the eight
captive mines allocated (two de-allocated mines were in a JV
where NTPC held a 50% stake).

India Market Strategy -Hold those shorts for a while:: Credit Suisse,

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India Market Strategy ------------------------------------------------------------------------------------------
Hold those shorts for a while


● We believe Indian equities may see a near-term bounce: 1) ~90%
of ~150 investors we met recently were negative; 2) as commodity
prices unwind due to concerns on global growth, and interest
rates remain low, India may continue to see inflows; and 3) even if
slower, relative growth in India would look good.
● The sectors that may do well in this short-lived rally could be very
different from our long-term picks – investors may show a
preference for beneficiaries of (expected) lower rates, domestic
growth, and domestic asset inflation: real-estate, banks, etc.
● In our view, this positive trend should not last too long: 1) India is
slowing for reasons more than inflation, and in a while those
concerns will re-emerge; 2) Only a small part of inflation is
imported, and India's inflation was high even before global
commodities started spiking; and 3) core is already entrenched.
● Growth slowdown in our view is driven by: 1) structural inflation;
2 stuttering reforms; and 3) poor governance in some states.
● For the medium term, a number of stocks in India could see 15-
20% CAGR returns over three years – see note for list.
A tactical covering of shorts?
We believe Indian equities may see a near-term bounce:
● Most of the ~150 investors we have met over the past 1.5 months
were negative on the Indian market – while even these investors
mostly assumed that the growth slowdown was near-term (we
think it will last for longer), this is tactically positive. The ~10% of
the investors who were bullish felt that on a relative basis among
emerging markets, India still had strong fundamentals.
● Of the medium-term risks to growth (and we think there are
many – as discussed later in this note), inflation is only one part, in
our view, and a relatively small part of the inflation is imported. But
perception seems to be that global commodity prices are the
biggest issue. Plus, the RBI has already flagged that 1H inflation
will be high, and growth low – this is now likely priced in as well.
● So far, all commentary on the sell-off in commodities talks of rising
global growth concerns (and a stronger dollar). The old arguments
of a goldilocks environment for the Indian stock market will likely
come back in vogue – low inflation/deflation globally and low
interest rates (the ECB held rates yesterday and signalled no rate
rise in the next meeting too). The commodity sell-off may have
been overdone given some technical stops were breached in the
last trading session, but the global growth concerns are clear.
● In such cases, more money is likely to flow into India (even 7%
GDP growth is good relatively, especially if economies globally are
slowing), and falling global prices would create the perception that
India is in a great position.
● The sectors that may do well in this short-lived rally could be very
different from our long-term picks – in this bounce, investors may
prefer beneficiaries of lower rates, domestic growth, and domestic
asset inflation: real-estate, banks, autos, PSU oil refiners, etc.

Cognizant: Off the Tracks, or Temporary Setback? Bernstein Research,

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Highlights
This piece evaluates Cognizant's Q1:11 earnings report, concluding that Cognizant should be a sound buyon-
the-dip opportunity.
We're revising our CY11 EPS (to $2.82 from $2.84) and CY12 EPS (to $3.52 from $3.55) due to the
following factors: slightly lower revenue growth assumption for CY11, modestly higher non-GAAP
operating margin (due to upside reported in Q1:11), increased assumption for stock compensation expense,
and modest increase in tax rate. Also, we are slightly revising our CTSH target price of $88.00 (vs. prior of
$88.75), derived by applying a 25.0x multiple (unchanged) to our new CY12 EPS estimate of $3.52.
We are disappointed that Cognizant's Q1:11 revenue was below our expectation (i.e., achieved sequential
revenue growth of 4.6%, only in line with consensus and below buy-side expectation of 5.5-7.0%). But we
see six reasons that CTSH's stock should represent a good buy-on-the-dip opportunity:
 First, growth drag from Europe should not be lasting: We think Cognizant's less-than-stellar sequential
growth in Q1:11 was due to ramp-downs in post-merger-integration business in the UK. Looking
forward, we think this headwind is prone to subside between now and Q3:11, plus it seems that a strong
pipeline of deals are closing in Europe and should contribute to deal ramp-ups between now and Q3:11.
Meanwhile, it's clear that growth and demand trends in the US remain healthy.
 Second, we think Q2:11 (Cognizant's seasonally strongest quarter for sequential growth) is prone to
bring revenue upside: Cognizant's sequential growth guidance for Q2:11 calls for "at least" 5.7% (vs.
consensus of 4.9%), and we think this guidance could prove to be conservative, especially given that
Q2:11 should receive a boost from currency and potentially from pricing. Note that pricing improved
sequentially in Q1:11 by 2%, as new pricing terms likely kicked into gear during Q1:11, with some
incremental potential for continuation into Q2:11, in our view.
 Third, we do not think offshore demand is "broken": Investors are asking whether offshore demand is
running into meaningful barriers. We think INFY's weak recent growth results are largely attributable to


company-specific issues (e.g., leadership transition, transition challenges in trying to move up the food
chain), and CTSH's Q1:11 disappointment (vs. high expectations) was largely due to a growth drag from
merger-integration deal ramp-downs. We assert that the "structural" issue involved is that the offshore
market began its growth rebound quite early in the recovery cycle – i.e., in September 2009 – and is no
longer seeing incremental growth boosts now that we've moved into a later-cycle demand phase. Still,
offshore demand is quite healthy, and we think expectations for CTSH to achieve north of 30% revenue
growth in 2011 remain quite feasible (we are now forecasting 32.8% revenue growth for 2011). As an
additional encouraging data point (Exhibit 9), Cognizant's sequential headcount growth has been between
7% and 9% in each of the past three quarters.
 Fourth, Cognizant should be helped disproportionately by transformational services demand: Because
of CTSH's distinctive onshore client relationship capabilities and industry vertical focus (as explained in
our past research), we underscore that CTSH should benefit more than other Indian firms in this latercycle
demand phase (which we maintain is lined with strong demand for transformational services, as
opposed to the fast-payback deals that dominated earlier in the recovery cycle).
 Fifth, Cognizant's share-gaining prowess (which we think is being extended) is underestimated in
consensus numbers: As shown in our prior research, Cognizant's Y/Y revenue growth results exceeded
the tier-1 Indian firms (TCS, Infosys, and Wipro) as a group by an average of 17.1 percentage points
during 2003 to 2010. Yet, according to consensus estimates, Cognizant's revenue growth is expected to
beat these tier-1 Indian firms by only 5.1 percentage points in 2011, and Cognizant's consensus Y/Y
revenue growth for Q4:11 is only in line with that of the tier-1 Indian firms as a group. We strongly
think Cognizant is likely to achieve materially above-peer growth, thus beating consensus.

Nirmal Bang: “BUY” Ajanta Pharma - target price of Rs. 318

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Ajanta Pharma Limited (APL) reported results better than our
expectations
Stellar Performance: During the year, the company reported
highest sales growth of 23.8% in net sales in last six years at Rs
504.9 cr. It was 5% higher than our expectation also. PAT grew by
49.1% to Rs 50.7 cr as against our expectation of Rs 44.2 cr. PAT
margins have improved 170 bps in FY11.

Cadila Healthcare 4Q FY11: Strong results led by substantial performance in JV:: Standard Chartered Research,

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 Strong results led by substantial outperformance in
Hospira JV.
 Revenue growth 13% higher than estimates with
incremental qoq sales of Rs1bn in Hospira JV due to
generic docetaxel.
 Ex one-time bonuses, net profit growth of 37% despite
higher material costs due to adverse mix and cost
pressures in Zydus Wellness.
 Increase estimates 4-6%; Hospira JV sales to be lower
in 1Q FY12 due to anticipated aggressive new launches
in docetaxel.
 Maintain OUTPERFORM and PT of Rs925.

Buy United Phosphorus Strong volume growth, conservative FY12 guidance; target Rs 212:: Prabhudas Lilladher,

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United Phosphorus
Strong volume growth, conservative FY12 guidance

􀂄 Strong volume growth and lower tax outgo resulted in better‐than‐expected
Q4FY11 result: United Phosphorus’ (UPL’s) net sales grew by 22.6% YoY to
Rs18.6bn (our expectation was Rs16.2bn), mainly on account of strong volume
growth of 20% YoY. Further, it was supported by 4% and 1% by price and
exchange effect, respectively during the quarter. After showing negative pricing
growth for the last seven consecutive quarters, UPL has witnessed positive (4%)
pricing growth during Q4FY11. It was mainly due to passing the higher raw
material cost to the customers. All the geographies, except Europe, have shown
strong performance on YoY basis during Q4FY11. Company has acquired Rice CO
LLC and Dupont Mancozeb business during FY11 that has contributed ~11% to
overall sales growth. UPL’s EBITDA margins have increased by 20bps YoY to
19.8%. Adjusted PAT grew by 8.4% YoY to Rs2.3bn (our expectation Rs2bn).
Better‐than‐expected PAT was mainly on account of lower tax rate of 2.2% (v/s
18% expected) and exchange gain of Rs340m (included in finance cost).

Buy Allahabad Bank - target rs 283; Decent core performance; slippages spike up ::Prabhudas Lilladher,

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􀂄 Healthy core operating performance, higher provisions dent bottomline:
Allahabad Bank (ALBK) reported PAT of Rs2.58bn, up 14.7% YoY, but down
sharply by 38.0% QoQ, lower than our as well as street estimates on account of
higher pension provisions made during the quarter. Net Interest Income (NII) for
the quarter grew strongly by 55.0% YoY and 9.5% QoQ to Rs11.5bn, driven by
strong advances growth (30.6% YoY and 8.9% QoQ), coupled with a 5bps QoQ
improvement in NIM to 3.49%. The improvement in margin could be traced
down to a 13bps QoQ increase in yields on advances (driven by 125bps PLR hike
since mid December 2010), outpacing the 6bps QoQ increase in the cost of
funds. Deposits grew by 24.4% YoY and 9.0% QoQ. CASA ratio improved
marginally to 33.5% v/s 33.2% in Q3FY11 on account of a healthy 9.8% QoQ
increase in CASA deposits. Non‐interest income grew by 82.2% QoQ on the back
of strong traction witnessed in the core fee income (up 40.8% YoY and 72.4%
QoQ). Staff expenses increased by 88.5% QoQ on account of Rs3.6bn worth
provisions towards pension liabilities. ALBK’s pension liability for the serving and
retired employees came in at Rs7.1bn and Rs2.5bn, respectively. Loan‐loss
provisions increased by 88.6% QoQ on account of a steep increase in slippages
during the quarter.

Maharashtra Seamless (MHS IN) Going international  4QFY11: UPGRADE :: HSBC research

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Maharashtra Seamless (MHS IN)
Going international
 4QFY11 profits surprised us on the upside owing to higher
sales and inventory gains
 We like the company’s new strategy of focusing on Latin
American and Canadian markets; we believe free cash will
be a boon in a rising interest rate scenario
 We raise our price target to INR450 (from INR430) and
upgrade our rating to Overweight (from Neutral)

Eicher Motors0 Q1 surprise purely operational 􀂄 BofA Merrill Lynch,

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Eicher Motors
Q1 surprise purely operational
􀂄 Raise forecasts and PO
Q1 CY11 profit at Rs 733mn was significantly ahead of expectations. While net
sales were largely in line at Rs 13.9bn (up 34%), EBITDA grew 35% at Rs 1.6bn,
25% ahead of estimates. We have upgraded our EPS forecasts by 17%-22% over
CY11-12E to reflect this unexpected beat, even while factoring moderation in
demand trends. Raise PO by 15% to Rs 1,725.
We expect double-digit margins to be sustained
EBITDA margins rose 290bps yoy to 11.7%, compared to our est of 9.1%, (1) better
mix, in favour of Eicher models instead of Volvo trucks, (2) improved profitability of
two wheelers, reflected in standalone margins at 13.1% (up 480bps qoq), and
(3) benefit of cost cutting initiatives. This has been the second successive quarter of
significant surprise, highlighting the underestimation of benefits of business which is
scaling up. We therefore raise assumptions by ~250bps/year
Demand outlook strong across segments
Despite macro-headwinds, we largely maintain segmental assumptions over
CY11-13E. In Commercial Vehicles, we forecast 13% sales CAGR, thanks to
strong franchise in light vehicles (10% CAGR), and more significantly, new
launches in higher tonnage trucks. In two wheelers, freeing of capacity should
drive 20% sales CAGR.
Preferred mid cap pick
Eicher Motors distinguishes itself from peers, thanks to identifiable growth drivers
such as (1) domestic trucks, where it is gaining acceptance from operators, and is
therefore likely to gain share, (2) two wheelers, due to niche positioning in
premium bikes, (3) export of engines to meet Volvo's global requirements. Also,
cash surplus is equivalent to Rs 401/share or 35% of market capitalization.

Goldman Sachs:: Bharti Airtel : Steady momentum in India, Upbeat on Africa outlook; Reit. CL-Buy

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Bharti Airtel (BRTI.BO)
Buy Equity Research
Steady momentum in India, Upbeat on Africa outlook; Reit. CL-Buy
What's changed
We reiterate our Buy rating on Bharti after its 4Q con-call. Key takeaways:
1) Mgmt believes pricing power may return in India cellular market and
believes that should arrest the EBITDA margin decline; 2) Mgmt stated that
tariff readjustments are complete in Africa and expects cost per minute to
reduce in coming quarters as outsourcing contracts are now in place.
Mgmt stated that MOU/sub for Africa declined 4.2% qoq as there was a
regulatory intervention in DRC. Adjusted for that MOU/sub was up 3.5%
qoq; 3) Bharti believes in next 12 months almost all of its 6 loss making
African markets may turn profitable; 4) Bharti increased its FY12 capex
guidance for Africa from around US$ 850 mn to US$1-1.2 bn as it expects
higher traffic. Mgmt expects to spend US$ 1.5 bn/US$ 400 mn on capex in
India and tower business; 5) Bharti believes LTE rollout and 3G launch will
help in the uptake of broadband penetration in India; 6) Mgmt stated that
impact of MNP is limited as the proportion of subs base porting/
renegotiating tariffs is relatively small.

Credit Suisse, Cipla -Guidance is conservative or weak? renewed focus on Indian market is positive

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Cipla --------------------------------------------------------------------------------------Maintain NEUTRAL
Guidance is conservative or weak? renewed focus on Indian market is positive


● 4Q11 was a weak quarter except for domestic growth returning to
industry average. FY12 guidance for both sales growth and
margin is uninspiring.
● Guidance of top-line growth of 10-12% with domestic growth of
14-15% implies exports would grow at just 11%. This further
indicates that Indore SEZ (expected to contribute 10% of top-line)
includes sales that shifted from other facilities. Margin guidance of
18-20% (vs 18% in 4Q11) assumes Indore SEZ turning profitable
and domestic and other export margins remaining stable. Indore
SEZ breaking even can add 120 bp to margins.
● We liked Cipla’s renewed focus on the domestic market with entry
into newer chronic therapies (oncology, neuro and psychiatry) and
field force expansion to increase geographic reach. This would
ensure Cipla grows in line with the industry average.
● We maintain NEUTRAL and would turn more constructive when
export growth exceeds 12% and margin is over 21%. FY12 EPS
reduces by 4% as margin guidance is weaker than expected.

Fund Talk:: Business Line

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I have Rs 3 lakh in mutual funds. This consists of Rs 1.5 lakh in HDFC MIP Long Term and balance in HDFC Top 200 and HDFC Prudence. Last year when market was high, I sold units in HDFC 200 and HDFC Prudence and diverted the proceeds to HDFC MIP. Since then I have been confused over the market condition. I have a 15-year horizon.  I want to start investments again. Please guide me as to which funds to invest in and the amount of SIP. I am looking at a target Rs 1.5 crore in 15 years.  I am 33 years now. How will I know when to stop investments when market condition is bad? Or should I forget about it until I near my goal.
Bala
Bangalore
Booking profits when markets are exuberant is a prudent strategy. However, stopping investments when the markets become volatile is not a good move, especially when you are investing through the SIP route. Remember that it is the market dips that allow you to truly buy at lower NAVs, thus reducing the average cost of your fund holding. SIPs need to be stopped only if you feel your fund is a prolonged underperformer or has an altered mandate that does not suit you or if you face a sudden cash crunch.
Moving to your portfolio, you need not hold 50 per cent of your money in debt-oriented funds, given your age and target. You have not mentioned how much you can spare as surplus for investing in SIP. Hence we recommend a couple of options that will help achieve the target of Rs 1.5 crore.
If you are able to invest Rs 10,000 in funds that will yield an annual return of 15 per cent per annum (we shall name these core funds) and Rs 6,500 per month in more aggressive funds (henceforth called satellite funds) that would return 20 per cent per annum then you can achieve your target of Rs 1.5 crore in 15 years. If this monthly saving appears too high, the other option is to postpone your target to 20 years instead of 15. In this case you can invest Rs 6,000 a month in moderate risk funds and Rs 2,000 each month in funds with a higher risk-high return quotient.

CORE FUNDS

The Rs 1.5-lakh parked in HDFC MIP Long Term can be shifted to equities. This sum will last for another 15 months for your Rs 10,000 per-month SIP. Post this you should be able to afford this sum as surplus every month. The rest of the Rs 1.5 lakh in the HDFC funds can be continued. This will generate over Rs 12 lakh in 15 years.
We believe funds such as HDFC Top 200 as well as HDFC Prudence can comfortably return 15 per cent per annum over the long term. HDFC Top 200 has generated 25 per cent returns over the last 15 years, while HDFC Prudence has managed about 20 per cent return since its inception in 1994. However, given that markets have become more mature over the last decade, expectations have to be toned down.
Use a systematic transfer plan from HDFC MIP Long Term to invest Rs 8,000 (or Rs 4,800 if you go for the second option) equally between the above two funds. The remaining sum allocated for core portfolio can be invested in Quantum Long Term Equity Fund. This fund has a large-cap bias and a value approach. You may see some underperformance compared with other top diversified funds during prolonged market rallies. Do not be deterred by this as downside protection is a must given your target.

SATELLITE PORTFOLIO

Moving to your satellite portfolio, you can consider adding IDFC Premier Equity and ICICI Pru Discovery to this. If you can systematically buy every month from the market add Benchmark's Nifty Junior ETF. Otherwise stick to the first two funds. Note that first-mentioned mid and small-cap focussed funds will see volatile periods. However, they ought to deliver at least 20 per cent return over your holding period, to compensate for the risks undertaken.
Review their performance every year; any underperformance of benchmark over several quarters need not be tolerated. Also adopt an active profit-booking strategy in these funds when you witness years of exceptional returns such as the ones seen in 2007 and 2009. Nifty Junior being an ETF will not have any SIP option. You have to buy them yourself in the market every month. As for your fear of when to exit the market, do not stop investing at any point even if you witness market turbulence. Instead, sweep the profits to safer options such as HDFC MIP Long Term or, better still, fixed deposits of banks or good quality corporate deposits during such times.
If you see your portfolio cross your target well-ahead of your 15-year time horizon, gradually transfer the same to safer avenues as any sudden crash in markets in the year of your goal can drastically pull down your corpus

Recovering from asset quality setback… Bank of India (BoI) :: ICICI Securities

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Recovering from asset quality setback…
Bank of India (BoI) seems to be in the last phase of its asset quality cycle
with total slippages declining 30% YoY, total reductions improving 79%
YoY and total provision for NPA declining 40% YoY in FY11 (refer Exhibit
9). Even though Q4FY11 slippages are high at | 999 crore, we believe a
turnaround could be in the offing from H2FY12E, with higher recoveries
and upgradations reducing GNPA from 2.2% to 2% by FY13E. We see
20% CAGR in business boosting PAT at 28% CAGR over FY11-13E.

Goldman Sachs:: NBFCs facing structural challenges, banks to benefit long term\

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NBFCs facing structural challenges, banks to benefit long term
RBI tightens policy around NBFCs
Over the last several weeks the RBI has tightened its policies over the NBFCs
as it has: (1) increased CAR to 15% from 12%, (2) disallowed banks from
classifying loans given to NBFCs as priority sector loans (PSL), (3) introduced
standard asset provisioning, (4) issued draft guidelines requiring NBFCs to
hold assets for one year before securitizing. Given the above trajectory, we
expect the draft guidelines to be implemented. In addition, the RBI has set up a
working group to provide the definition and classification of NBFCs,
addressing regulatory gaps and regulatory arbitrage.

Dismal performance… HEG Q4FY11 :: ICICI Securities,

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Dismal performance…
HEG reported its Q4FY11 results that came lower than our estimates.
Revenues for the quarter stood at | 282 crore, down ~ 16% YoY and
~9% QoQ as against our expectation of | 340 crore. The de-growth in
topline can be attributed to lower realisations in both segments (graphite
and power) coupled with lower sales volumes, due to lower utilisation,
which for the quarter stood at ~82% as compared to our expectation of
90%. The EBITDA contracted ~22% YoY and ~16% QoQ due to lower
realisations and higher cost pressure (increase in staff cost, other
expense and power & fuel). Despite a decline in the interest cost (by
~15% YoY), the PAT fell ~13% YoY and ~10% QoQ to | 34.4 crore
against our expectation | 43 crore. In CY10, global steel demand grew
12%. However, going forward, in CY11 steel production is expected to
grow at a slower pace of ~5%. In CY10, steel production through the EAF
route has been close to 2007 levels and is expected to rise further, going
ahead, implying higher demand for graphite electrodes. On the cost front,
needle coke contract price negotiations have settled at slightly lower
prices compared to CY10. However, rising domestic input costs would
put margins under pressure.

Nokia cloud shadows Android focus… Sasken reported Q4FY11 :: ICICI Securities,

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Nokia cloud shadows Android focus…
Sasken reported Q4FY11 numbers last week, which were generally below
our expectations. However, what surprised us was Nokia’s recent
announcement to partner with Accenture for Symbian development.
Though Sasken continues to work with Nokia on S40 platform (50% of
Nokia revenues), we did a worst-case-scenario analysis to analyse the
impact of the loss of Nokia revenues, were Nokia to completely exit from
Sasken. Our analysis suggests Sasken’s revenue could decline 18% to |
446 crore while its EPS could decline to | 16.4 in FY12. Applying the
existing one-year forward multiple of 4.7x suggests a potential downside
of ~8%. However, we believe any sell-off from such an event presents
attractive entry points for a variety of reasons including attractive
valuations, 15% FCF yield and existing buy-back.

Business growth strong, margins decline… South Indian Bank (SIB) :: ICICI Securities,

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Business growth strong, margins decline…
South Indian Bank (SIB) maintained its strong growth momentum with
both deposits (10% QoQ) and advances (8% QoQ) surging 29% YoY.
Deposits growth was bolstered by a strong growth in term deposits of
32% YoY and 11% QoQ to | 23317 crore while CASA stood at 22%. The
bank is expected to remain in a steady growth phase and deliver 22%
CAGR over FY11-13E to | 48734 crore. Over this period, we see a similar
21% CAGR in PAT to | 428 crore.

Performance expected to pick up momentum… Essar Shipping :: ICICI Securities,

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Performance expected to pick up momentum…
Essar Shipping Ports and Logistics Ltd (Essar Shipping) reported mildly
disappointing results with a 3.8% QoQ drop in topline due to the subdued
performance of the ocean transport, oilfield services and port businesses.
During the quarter, the company added 12 MTPA of capacity at Vadinar
(wet cargo) whose capacity has now increased to 58 MTPA. Along with
Hazira (30 MTPA dry cargo), the combined port capacity has increased to
88 MTPA, which will be further ramped up to 158 MTPA over the next
two years. We also expect earnings from the oilfield services business to
improve as the company is likely to deploy its semi submersible rig at
charter rates in excess of $2,50,000 per day.

Pharma -Good start to earnings season… :: ICICI Securities,

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Good start to earnings season…
In April, the quarterly earning season started on a positive note. Three
companies (from the Pharma Pill coverage) namely Strides Arcolab,
Biocon and Indoco declared their quarterly numbers. While Strides and
Indoco’s results were almost in line, Biocon’s numbers were a bit muted
on account of slower growth at German Subsidiary Axicorp. No wonder,
Biocon decided to offload its entire stake in Axicorp as it would have
affected the overall profitability, going ahead. Strides received the long
awaited USFDA approval for its new oncology facility in Bangalore after
acquiring approval for its new non-sterile facility in the same premises.
In this month, we also saw two small but significant deals struck by
MNCs with Indian leaders for different geographies. While Merck Inc,
through its subsidiary MSD, entered into a JV with Sun Pharma to market
branded generics in emerging markets, Abbott entered into a licensing
agreement with Lupin for eight patents on cholesterol-lowering drug
Fenofibrate. On the litigation front, a US district court rejected Mylan’s
plea against the USFDA and Ranbaxy over cholesterol-lowering Lipitor,
making Ranbaxy’s path clear for the launch.

From pro-growth to anti inflation- coming hard at all ends… :: ICICI Securities,

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From pro-growth to anti inflation- coming hard at all
ends…
Key policy measures announced
• RBI policy has shifted to a single rate regime
• Operating target of policy to be weighted average call money rate
• The RBI has hiked the repo rate by 50 bps to 7.25% with
immediate effect and reverse repo rate by 50 bps to 6.25%
• RBI has kept the bank rate and CRR unchanged at 6.0%
• It has upped the savings bank rate to 4.0% from 3.5% with
immediate effect
• RBI has started a marginal standing facility for banks at 8.25%
Projections for FY12
• GDP growth in 7.4-8.5% range
• Inflation at 6.0% with an upward bias
• Money supply growth at 16%
• Credit growth of 19%, deposit growth at 17%

Sailing in rough weather… SAIL’s Q4Y11 results :: ICICI Securities,

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Sailing in rough weather…
SAIL’s Q4Y11 results came below our estimates. Sales came in at |
12,166 crore against the expected | 13021 crore (marginal decline of
~0.5% YoY and ~7.5% QoQ). This was mainly on the back of lower sales
volumes of 3.14 million tonnes (MT), which was down ~7.6% YoY and
~4.8% QoQ. EBITDA margins remained under pressure (down ~ 610 bps
YoY whereas sequentially they improved ~340 bps). This was due to
higher raw material costs, largely contributed by coking coal prices that
increased ~73% YoY, followed by an increase in staff cost and higher
royalty on iron ore. Net profit stood at | 1507 crore as against our
expectation of | 1728 crore. The PAT margin improved ~260 bps QoQ
whereas it declined ~470 bps as compared to the similar period last year.
We believe higher coking coal prices will continue to weigh on the
operating performance of the company, going forward. Also, we expect
volumes to remain muted especially from the flat segment (which
contributes 60% to total sales volume) where demand slowdown is
expected. We have revised our target price to | 161 per share taking into
consideration the above-mentioned factors.

Interest cost remains a concern… Bajaj Hindusthan in Q1SY11:: ICICI Securities,

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Interest cost remains a concern…
Bajaj Hindusthan reported its Q1SY11 results that were above our
expectations. Net sales surged ~140% to | 1475.7 crore against | 615.4
crore in Q1SY10 led by higher sales volume though realisations
witnessed a dip. The company’s raw material costs during the quarter
increased considerably to 73% of sales (| 1077.4 crore) compared to
53% (| 324.1 crore) in Q1SY10, consequently pulling down margins to
18.2% from 34.8% in Q1SY10. Further, the company’s interest cost in
Q1SY11 increased to | 106.9 crore (~134% rise) against | 45.6 crore in
Q1SY10. Therefore, in spite of higher sales the exceptional increase in
costs dragged the bottomline by ~32% to | 57.9 crore.

Negatives seem to be priced in… Oriental Bank of Commerce’s (OBC):: ICICI Securities,

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Negatives seem to be priced in…
Oriental Bank of Commerce’s (OBC) business grew below industry level at
15% YoY with NII growth tapering sequentially. NIM for FY11 was healthy
at 3.18%. However, Q4FY11 margins declined 12 bps QoQ to 2.98% due
to a sharp jump in the CoD. We expect NIM of ~2.8% in FY12E with a 50
bps hike in savings rate impacting NIM by ~10 bps. The asset quality
deteriorated sequentially as the bank migrated 97% of its loans to system
based NPA recognition. This led to NPA provisions increasing 121% QoQ,
thus denting profits. PAT was below expectations at | 334 crore (18%
QoQ dip) for Q4FY11 and | 1503 crore for FY11. We are lowering our PAT
guidance for FY12E to | 1745 crore on account of higher CoD lowering NII
growth and higher provisions. We estimate 20% CAGR in PAT due to
20% CAGR in business over FY11-13E.

Poor operating performance... OnMobile Global in Q4FY11 :: ICICI Securities,

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Poor operating performance...
OnMobile Global’s performance in Q4FY11 was below our estimate with
the company reporting topline growth of 8.5% YoY and de-growth of
10.3% QoQ at | 133.3 crore against our expectation of | 154.6 crore.
Revenue growth was adversely impacted by a change in contractual
scope involving content management responsibilities in one of the
major customers. EBITDA margin for the quarter at 23.0% was up a
healthy 520 bps YoY and 41 bps QoQ. EBITDA grew by an impressive
40.1% YoY while it de grew by 8.7% QoQ to | 30.7 crore. PAT stood at
| 26.9 crore aided by one-time gain of | 23.5 crore on account of sale of
investment in an associate company.

Quarter in line but for higher slippages… Dena Bank ::ICICI Securities

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Quarter in line but for higher slippages…
Dena Bank was starving for capital infusion from GoI. It received | 539
crore, which increases the near term growth visibility for the bank. We
have factored in 23% CAGR in the business mix over FY11-13E to |
1,63,849 crore. For Q4FY11, the bank reported NII of | 471 crore and PAT
of | 157 crore, in line with our estimates. Fresh slippages remained high
in Q4FY11 at | 270 crore (on account of two major accounts) against |
202 crore in Q4FY11 and | 105 crore in Q3FY11. We expect 21% CAGR in
PAT over FY11-13E to | 893 crore.

Subdued performance… Marico ::ICICI Securities

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Subdued performance…
Marico reported a subdued set of numbers for Q4FY11. During the
quarter, the company’s topline grew ~24% YoY to | 747.3 crore led by
~5% volume growth and ~19% value growth. The spiralling raw material
costs continued to strain the margins that dipped considerably by ~350
bps and stood at 10.5% in comparison to 14.1% in Q4FY10. However, in
spite of a dip in EBITDA, the bottomline of the company grew by ~| 20
crore and stood at | 71.6 crore. This was led by the inclusion of the sale
proceeds from the sale of Sweekar (exceptional item) and certain onetime
adjustments accounted for during the quarter.

Departmental stores continue to perform well… Shoppers Stop ::ICICI Securities

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Departmental stores continue to perform well…
Shoppers Stop Ltd’s (SSL) Q4FY11 revenues were lower than our
estimates due to lower than expected space addition and lower revenue
per square feet. Consolidated EBITDA came in lower at 4.7% in Q4FY11
due to lower gross margins on account of a change in the product mix.
SSL reported a PAT of | 7.7 crore (lower than our estimated | 18.6 crore)
on the back of higher than estimated HyperCity losses. However,
HyperCity has turned positive at the store level in Q4FY11 though it still
posted a marginal loss on a full year basis. In FY11, SSL’s topline, EBITDA
and PAT increased by 54%, 20% and 20%, respectively, to | 2,323.2
crore, | 131.0 crore and | 43.2 crore, respectively. SSL plans to open 24
stores in FY12E of which it has already opened six in April 2011. We
believe that the expansion of retail space and better performance from
HyperCity, going forward, augur well for Shoppers Stop.

Another dull quarter… Sterlite Technologies ::ICICI Securities

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Another dull quarter…
Sterlite Technologies reported another set of dull numbers, mainly led by
the disappointment in the power segment (execution of low margin
orders dented overall EBITDA accompanied by a sequential decline in
telecom segment margins). Revenues grew 3% YoY ahead of our
expectations. EBITDA margins continued to disappoint at 7.2% (I-direct
estimate of 12.9%) mainly led by low margin orders executed in the
power segment and a sequential decline in telecom segment margins.
The same impacted the PAT adversely as it de-grew 86% YoY and 40%
QoQ. Going ahead, we believe that recent orders wins will pull back the
revenue growth and margins of the company in FY12E.

Increase in realisation drives margins… Heidelberg Cement ::ICICI Securities

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Increase in realisation drives margins…
Heidelberg Cement reported net sales of | 272 crore (up 44% QoQ) in line
with our estimate of | 264 crore. Reported EBITDA and PAT of | 41 crore
(down 33% YoY, LTP QoQ) and | 26 crore (down 35% YoY, LTP QoQ)
were ahead of our respective estimates of | 20 crore and | 8 crore on
account of lower than expected input costs, primarily due to savings in
others cost. The EBITDA per tonne improved significantly to | 498 per
tonne as against loss of | 91 per tone in Q4CY10. The company plans to
increase its capacity to 6 MTPA by setting up 3 MTPA of grinding units.
This is expected to drive sales volume growth at 26% CAGR (CY10-12E).

Interest expenses hurt bottomline… HCC’ Q4FY11 results::ICICI Securities

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Interest expenses hurt bottomline…
HCC’ Q4FY11 results were largely in line with our expectation. While it
reported a healthy EBITDA margin at 13.8%, the interest outgo increased
2x YoY to | 90 crore. HCC’s order book stands at | 18,127 crore, 4.4x
FY11 revenues. Though the earnings of the construction business are
expected to remain under pressure in the near term on account of slower
revenue growth and rising interest expenses, we anticipate HCC’ stock
performance is likely to be driven by clarity on the Lavasa project. We
recommend HOLD on the stock with a price target of | 38.

Profitability in line but volumes below estimates… Gujarat Gas ::ICICI Securities

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Profitability in line but volumes below estimates…
Gujarat Gas’ revenues for Q1CY11 increased 29% YoY to | 529.1 crore,
marginally below our estimates, mainly on account of lower than
expected gas sales volumes (303 mmscm) for the quarter. EBITDA
margins declined 440 bps YoY to 20.6% on account of higher proportion
of costlier spot LNG purchase by the company. However, the EBITDA per
scm increased by | 0.1 per scm YoY to | 3.6 per scm in Q1CY11. The net
profit for Q1CY11 increased 16.9% YoY to | 72.3 crore on higher margins
per scm. Gujarat Gas has also signed agreements with BG India for the
purchase of RLNG till December 2013. This has improved the visibility in
terms of maintaining the current volumes, going forward. However, we
have reduced our volume estimates to 3.5 mmscmd (1279.3 mmscm) and
3.9 mmscmd (1423 mmscm) in CY11E and CY12E, respectively, to factor
in lower volume growth at higher LNG prices. The gross margins would
continue to remain strong as the company has been able to pass on
higher LNG costs to customers. We estimate CAGR of 23% and 18% in
revenues and net profits, respectively, over CY10-12E. We recommend a
HOLD rating on the stock with a price target of | 387.

Losing sheen: Quarter full of one-offs… Bank of Baroda ::ICICI Securities

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Losing sheen: Quarter full of one-offs…
Bank of Baroda’s (BoB) strong core business performance was marred by
deteriorating asset quality and higher provision for retirement benefits.
BoB reported strong business growth of 28% YoY (domestic CASA
protected at 34.4%), NII growth of 50% YoY and NIM of 3.45% in Q4FY11.
However, the impact of a 56% YoY jump in opex and 100% jump in
provisions was subdued due to one-off addition of interest on income tax
refund (| 253 crore) and lower tax provisions (benefit of ~| 50 crore) due
to the tax refund. NII, adjusted for this one-off, was in line with our
estimate at | 2361 crore (35% jump YoY). For FY11, NII grew 48% YoY
boosting PAT by 39% YoY to | 4242 crore. We are cautious on the asset
quality front as its impeccable track record of asset quality has been
affected by GNPA increasing 31% YoY to | 3153 crore. We expect CAGR
of 21% in the business mix to boost PAT at 23% CAGR over FY11-13E.

sesa goa- Higher realisations lead to better performance… , ICICI Securities,

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Higher realisations lead to better performance…
Sesa Goa’s Q4FY11 results came above our estimates. Net sales grew
~50% YoY to | 3623 crore against our estimate of | 3147 crore. Robust
topline growth was mainly driven by strong growth in sales volumes (up
~2% YoY and ~40% QoQ), which stood at 7.53 million (wet metric
tonnes) tonnes. Overall realisations also improved to | 4679/t (up ~52%
YoY and ~20% QoQ). EBITDA grew ~42% YoY and ~72% YoY to ~|
2122 crore mainly on account of higher realisations. PAT also improved
~20% YoY to ~| 1461 crore, lower than our estimates at | 1497 crore.
Going forward, the company is confident of increasing its sales volume as
the ban on iron ore exports by Karnataka has been lifted. However,
exports have not yet begun as permit for the same is pending. The
company’s strong focus on exploration activities at its operations in Goa
and Karnataka have led to significant reserves and resources accretion
with a net addition of 32 MT during the year.

Patni,--Wait and watch… ICICI Securities,

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Wait and watch…
Patni Computers reported its Q1CY11 numbers that were ahead of our
estimates helped by one-time revenue recognitions from milestone
achievements. Though the company signed four deals with total contract
value (TCV) size of US$20-30 million, ramp ups continue to be slow and
could take two or three quarters for material revenue contribution.
Further, the management commentary suggests discretionary spending
continues to be low for Patni’s portfolio. Finally, though it expects to save
US$25-30 million in the second year following the transaction, near term
visibility on cost savings remain feeble. We maintain our HOLD rating but
reduce the price target to | 440 (| 465 earlier).

Bajaj Hindusthan :: 2QSY11 results --CLSA

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2QSY11 results
Bajaj Hindusthan’s 2QSY11 standalone net profit came above estimate at
Rs729mn. With Bajaj selling 72% of its estimated annual sugar sales
whereas a much higher proportion of its fixed costs have not yet been
booked, 1H is likely to be much better than 2H in SY11. The board’s
decision to look at a rights issue of upto Rs20bn will further exacerbate
the already dismal ROEs earned by the company. We maintain our U-PF
rating and target price of Rs80/sh on the stock based on 0.65x P/book.

Shoppers Stop :: 4QFY11: in line results --, CLSA,

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4QFY11: in line results
Shoppers Stop’s 4QFY11 results were in line with same store sales growth of
14% leading revenue growth of 22%. Ebitda margins increased 90bps yoy
while a higher tax rate dragged back net profit growth to 21%. Overall Ebitda
and PAT were in line with our estimates. Hypercity saw losses flat sequentially
at Rs184m. Cost driven price hikes in apparel have caused volume growth to
moderate whilst Shoppers Stop has accelerated its store expansion program.
Whilst we remain convinced of Shoppers Stop’s quality as a retailer, we see it
as being priced to perfection and retain our UNDERPERFORM stance.

Exide Industries: Conference call update : CLSA

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Conference call update
Exide’s management team reiterated an optimistic outlook for FY12 in the
conference call yesterday, highlighting a recovery in industrial margins
in4QFY11, a likely normalisation in the auto product mix from an on-track
capacity expansion plan and 20%+ volume growth for FY12 alongside
margins of 19-20%. Whilst performance should continue to improve, we
see continuing risks to the 19-20% margin target. Retain O-PF.