14 May 2011

Semiconductors: Intel expands the opportunity for SSDs in PCs : Macquarie Research

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MacqTech Express
Semiconductors: Intel expands the
opportunity for SSDs in PCs
Event
 On 11 May, as anticipated in our report of 10 May, Intel unveiled its Z68
Express chipset for high-end PCs and its 20GB SSD 311 ("Larsen Creek").

Weak trend persists in HDFC, Videocon :: Business Line

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HDFC: The immediate outlook is negative for HDFC. The stock has registered its all-time high in September 2010 but has since been witnessing a sideways trend with downward bias.
It now finds an immediate resistance at Rs 725 while it finds support at Rs 586. Rs 536 offers a crucial support before that.
A close below Rs 450 would change the overall outlook to negative.
On the other hand, a conclusive close above Rs 785 would take the stock to a new high. In that event, it could go up to Rs 950-975 level.
F&O pointers: HDFC witnessed accumulation of short positions on Friday. The farther month (June) futures closed at a mild discount to the spot close of Rs 645.6.
Option trading presents a cautions view with negative bias.
While 660 put witnessed unwinding of open position, 640 put saw accumulation.
Calls also witnessed accumulation of open interest suggesting limited upside for HDFC.

Index Outlook: Market in a state of flux :: Business Line

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Sensex (18,531.3)
It was a dull and lacklustre week on the stock market with the Sensex ending almost flat after treading water for most part. The meltdown in commodity prices and the pending decision on fuel price hike influenced movement in the early part of the week. The results of the Assembly elections buoyed the sentiments on Friday as the trading fraternity decided that it has positive implications for the ruling UPA.
Volumes were very low in the early part of the week though it picked up towards the weekend. Surprisingly, FIIs were buying selectively in the early part of the week but they turned net sellers on Friday, the day the Sensex bounced 200 points. Open interest is edging higher towards Rs 1, 40,000 crore. The index put call ratio below 1 suggests that the mood is veering towards the positive with most bears closing their shorts at these levels.

Four farm stocks to own :: Business Line

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You're convinced that your portfolio can reap gains from companies manufacturing agricultural inputs, but which ones should you own? We sifted through the listed for companies with rock solid fundamentals- a diversified profile, limited debt, a return on net worth of about 20 per cent and operating profit margins of 15 per cent plus.

Coromandel International

With a portfolio spanning complex and phosphatic fertilisers, crop protection chemicals, micronutrients and recently rural retail, Coromandel is a preferred exposure for institutional investors seeking the agro theme. The stock has been through a rough patch recently owing to a drop in March quarter profits, which were impacted by lower trading volumes, high input costs and a plant shutdown. However, the business remains a good medium-term bet. The shift to a nutrient-based subsidy system has seen Coromandel improve its margins and upgrade its product mix. The recent upward revisions in subsidy for decontrolled fertilisers signals the shift to a more friendly policy stance. The company's backward integration into feedstock has provided a hedge against volatile prices. The stock (Rs 318) offers scope for gains at a price-earnings multiple of 13 times trailing 12-month earnings.

52 week Blockbuster - Prime Focus:: Business Line

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The stock of Prime Focus has been on fire with an 84 percent gain in the last one year as the company benefitted significantly from the revival in the movie industry over the last 18 months.
The company offers visual effects, post-production and digital asset management services among other offerings to several production houses overseas, who outsource the non-core work to studios in countries such as India.

Next-Gen ETFs: Why not offer investment solutions? :: Business Line

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ETFs constitute only a small proportion of the fund management industry in India. It is, however, heartening to note from the New Fund Offer filings on the SEBI Web site that the concept is gradually catching on. Axis Asset Management, for instance, has filed offer documents to launch ETFs on FMCG and metals indices. Such products offer low-cost exposure to a sector. But the question is: How can ETFs offer low-cost investment solutions to the mass-affluent investors?
Using the 4-box approach to active-passive management, this article explains how investors can use ETFs to create target portfolios. It also shows how asset management firms can position next generation (Next-Gen) ETFs as investment solutions rather than as investment products.

Oil companies to hike petrol price by Rs 5/litre wef midnight: Economic Times

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In the steepest hike ever, state- owned oil companies today increased petrol price by about Rs 5 per litre with effect from midnight tonight. 

The increase in petrol price, which the oil firms had been holding since January even though crude oil had touched a two-and-a-half-year high, came a day after election results of five state assemblies were announced. 

IndianOil, Bharat Petroleum and Hindustan Petroleum will hike rates between Rs 4.99 and Rs 5.01 per litre in Delhi with effect from midnight tonight. 

Petrol in Delhi currently costs Rs 58.37 per litre. The government had freed petrol price from government control in June but the state-owned oil firms had not raised prices on an 'informal' dictate from the oil ministry. 

"The hike needed to make domestic rates at par with international prices was Rs 9.50-10 per litre but oil companies choose to hike rates by just half of that," an industry official said. "Another hike in petrol price is on cards soon."

Infinite Computer Solutions - Strong operating performance, retain BUY:: Emkay

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Infinite Computer Solutions 
Strong operating performance, retain BUY


BUY

CMP: Rs 164                                        Target Price: Rs 250

n     Strong show with March’11rev at US$ 55 mn (+11.4% QoQ V/s est +6.7% QoQ). Mgns improved by ~40 bps QoQ to 17.1% despite decent headcount addition (up by ~338 QoQ to 4,806)
n     Revenue growth led by ramp ups on iYogi contract and messaging platform. IP leverage /IMS revenues up by ~27%/52% QoQ
n     Impressive client addition during the quarter. However are disappointed by the poor cash generation in the quarter (impacted largely by investments on the APDRP contract)
n     Cut FY12/13E EPS mgnlly by ~2.7%/2.3% to Rs 29.4/36.3 as we incorporate higher amortization charges. Remain positive given inexpensive valuations at ~5.6x/4.5x FY12/13 P/E

Ranbaxy Labs -Base business improves, Maintain Hold ::Emkay

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Ranbaxy Labs
Base business improves, Maintain Hold


HOLD

CMP: Rs 478                                        Target Price: Rs 412

n     Ranbaxy’s Q1CY11 results were in-line with expectations. Revenue de-grew 21% YoY to Rs22bn, EBITDA de-grew 64% to Rs4bn and APAT de-grew 57% to Rs3bn
n     Adjusted for FTF exclusivity, base business revenues and EBITDA grew 11% and 45% respectively
n     Base EBITDA margins expanded 333bps YoY and 837bps QoQ
n     Maintain hold rating with revised target price of Rs412 (20xbase business earnings + Rs87 Para-IV NPV)

Chambal Fertilisers Results below estimates- ACCUMULATE ::Emkay

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Chambal Fertilisers
Results below estimates


ACCUMULATE

CMP: Rs 81                                       Target Price: Rs 86

n     Q4FY11 results were below our estimates - Revenues grew  by 13% yoy to Rs 8.1 bn, EBITDA declined by 31% yoy to Rs 1.15 bn
n     Fertilizer segment disappointed with EBIT margins of 9% vs 17% last year. However, shipping margins improved to 20% as compared to 11.6% last year
n     EBITDA margin decreased to 14% of sales in Q4 as compared to 23% last year. However, margins to improve in FY12E because of lower trading
n     Maintain FY12E estimates & price target of Rs 86, based on 10x FY12E EPS (as against 15x to complex fertiliser players), maintain ACCUMULATE

KSK Energy - Fuel cost and aux consumption impact performance::Emkay

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KSK Energy
Fuel cost and aux consumption impact performance


HOLD

CMP: Rs112                                        Target Price: Rs110

n     Q411 conso. PAT of Rs377mn was below est. - mainly due to higher fuel cost (Rs3.4/unit vs our assumption of Rs2.9/unit) and aux consumption (21% vs our assumption of 13%)
n     We gather that recent SLC meeting has taken up coal supply issue of Wardha Warora but it is still not clear as to at what price (cost plus, MOU or linkage basis) and qty
n     MSEDCL took more power in Q4FY11 (Wardha PLF at 80%) but at lower price (Rs3.9/unit). From 1st May, Reliance infra is supposed to buy 260MW at Rs4.85/unit as per MERC order
n     Assuming supplies from CIL on linkage by Q212, we assume avg. fuel cost of Rs2.0/unit in FY12E for Wardha. Lower FY12E/FY13E EPS by 10%/6%; Maintain Hold - coal supply for Wardha/Mahanadi & Reliance infra contract remains key   

Adani Power Earnings downgrade continues; Downgrade to Reduce :Emkay

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Adani Power
Earnings downgrade continues; Downgrade to Reduce


REDUCE

CMP: Rs 110                                       Target Price: Rs 103

n     APL’s Q4 PAT of Rs1.74bn (up 77% yoy and 60% qoq) was below expectation due to higher deferred tax. Otherwise on Revenues/EBITDA/PBT level it is in line 
n     Highlights (1) fuel cost Rs0.95/unit, decline of 9% qoq/18% yoy, (2) aux. of 9%, lower qoq but higher than long-term guidance of 7% & (3) merchant realization Rs4.5/unit in Q411
n     Guiding for slight delay in comm. – 660MW unit II by July-Aug (earlier June) and indications that in Tiroda – might be only one unit in FY12E (earlier two units) – we adjust numbers
n     Valuations pricing cheaper fuel, aggressive execution/ operating parameters & early merchant. Not pricing MAT on SEZ & MCL coal price hike. Downgrade to Reduce

NTPC - It’s start of positive surprises; maintain positive view ::Emkay

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NTPC
It’s start of positive surprises; maintain positive view

ACCUMULATE

CMP: Rs 180                                        Target Price: Rs 204

n     Q411 APAT of Rs29.8bn is 19% higher than provisional number of Rs25.1bn & reported PAT (Rs27.8bn) is 11% higher. As expected, there is exceptional provision of Rs2.8bn.
n     Q4 highlights - (1) full tax grossing up in Q411 for FY11 leading to ~Rs5.5bn of additional PAT, (2) Rs4.2bn of previous yr sales, (3) negative deferred tax of Rs1.4bn and (4) current tax rate at 28.6% after adjusting for refund.
n     We believe this is just start of positive surprises. In FY12E company can surprise on (1) again full tax grossing up, (2) higher commercialization as it is the last year of 80IA, (3) higher coal availability from coal India. Maintain Accumulate 
n     To review earnings post concall. Key things to clear in concall (1) tax refund in Q4?, (2) AAD recognized as sales in FY11 - is it added in dep.?, (3) FY12E grossing up, (4) COD targets in FY12E & (5) captive blocks cancellation

ABB India -Turnaround visible, but too expensive :: Macquarie Research

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ABB India
Turnaround visible, but too expensive
Event
 ABB declared its 1QCY11 results, where revenues surprised on the upside
while earnings were short of expectations due to margin pressure. Revenues
at Rs17.8bn were up 22% and adjusted PAT at Rs576mn was down 7% YoY.
 We revise our target price to Rs488 (from Rs414 earlier) as we roll forward
our target price to CY12. While turnaround in terms of potential order inflow
growth and margin stabilisation is visible, unrealistic multiples of 41-45x 1-
year forward earnings are on hopes of delisting. We retain Underperform.

Shree Renuka Sugars-- Focus shifts to Brazil now :::: Macquarie Research

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Shree Renuka Sugars
Focus shifts to Brazil now
Event
 Shree Renuka reported 2Q’SY11 results. Reported profit was weak due to
decline in domestic sugar profits despite higher trading and cogeneration
profits. These numbers reflect primarily the domestic sugar and trading
businesses, as it was an inter-crop period in Brazil. We expect an earnings
boost from Brazilian operations from the current quarter. We reiterate our
Outperform with a revised TP of Rs80/share from Rs105.

JSW Steel --IS (on) PAT(h) :: Macquarie Research

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JSW Steel
IS (on) PAT(h)
Event
 Ispat (JSW’s 49% subsidiary) turns profitable: Ispat Industries reported its
3Q results with a profit of Rs702 mn, compared to accumulated losses of
Rs7.4bn that it registered in the first 6 months of the year. Against Street
expectation of turnaround after 1-2yrs, we view this excellent performance as
a key catalyst for JSW. We also believe that JSW is well on track for
delivering its best results in Q4, and have a few more catalysts to watch for.
JSW is our top pick among pure steel companies. Maintain Outperform.

Grasim Industries -Cling on to the fibre of success:: Macquarie Research

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Grasim Industries
Cling on to the fibre of success
Event
 Results well above estimates: Grasim reported FY 4Q/11 earnings well
above our estimates, largely driven by sharply higher VSF (viscose staple
fibre) prices. Grasim continues to focus on growth as it expands capacity in
VSF, cement as well as the chemical division. We like the diversified nature of
the business, which provides stability to profits against pure play cement in
the current environment. We have increased our earnings estimates and have
our raised target price from Rs2488 to Rs2696. Maintain Outperform.

Lupin ::Solid Year; Remains a Top Pick  Another solid year — Citi Research

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Lupin (LUPN.BO)
Solid Year; Remains a Top Pick
 Another solid year — Lupin stays steady on the growth path, with FY11 revenues &
adjusted net income up 20% & 27% respectively. All key markets clocked good growth
& margins have inched up despite a spike in R&D spend. We expect growth to remain
solid & some interesting product oppys in the US market to act as catalysts in 2HCY11.
The stock remains attractive at c17xFY11E EPS; maintain as a top sector pick.

Goldman Sachs;: FY11 net under-recovery more than expected; all eyes on FY12 now

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India: Energy
Equity Research
FY11 net under-recovery more than expected; all eyes on FY12 now
News
According to Economic Times (May 12), the Indian government today
approved an additional cash subsidy of Rs200bn to the oil marketing
companies (OMCs), bringing the total subsidy for the year to Rs410bn for
FY11. This is against the OMCs’ demand of Rs510bn in cash compensation
from the government. With gross FY11 under-recovery of Rs780bn and
one-third upstream contribution of Rs258bn, the net under-recovery of
OMCs come to about Rs112bn (about 14% of the gross under-recovery),
against our estimate of Rs80bn. We had expected the government to bear
Rs440bn of subsidy burden for FY11.

Lupin – In line 4Q; positive outlook continues:: RBS

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4Q11 interims were in line. While Lupin reported robust revenue growth in India, other EMs
and Japan, we were disappointed at its muted growth in US. Increase in R&D expense which
compressed margins could yield future licensing income, in our view. Maintain Buy on
favourable business mix and valuations.

Gammon India – EBITDA swung into losses: RBS

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Gammon reported 4QFY11 standalone EBITDA loss of Rs.530mn and a negative margin of
3% (4QFY10 profit: Rs.1.3bn), due to high raw material expenses. We await for the
management call for further clarification. Normalized loss for the quarter was Rs.738mn
versus RBS estimate of Rs.239mn profit. Sell.

Siemens India – Limited glow:: RBS

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Margins expanded 140bp in 2Q, although very high other operating income takes some
sheen off. The order book at the end of the quarter was robust. We remain cautious on
margins given historical volatility in the power business. Valuations look expensive. We prefer
Crompton Greaves in this space.

India Strategy – India ownership monitor:: RBS

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We estimate foreign institutional investors' (FII) equity holdings in India at US$219bn as of 31
March 2011, representing 15.1% of the market. This is up from 14.2% a year earlier but down
from 15.3% at the end of 2010. The qoq ownership decline reflects FII net sales of
US$657mn in the March quarter

Lupin – In line 4Q; positive outlook continues:: RBS

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Goldman Sachs: TOP PICKS: Being stock selective in a difficult macro environment; 5 Buy and 4 Sell ideas

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India
Equity Research
Being stock selective in a difficult macro environment; 5 Buy and 4 Sell ideas
GS forecasting 7.5% inflation in FY 2012
Our ECS team has increased their forecast for
inflation from 6.7% to 7.5% for FY12. In this note,
we explore how inflation has impacted corporate
profitability and valuations in previous cycles and
seek to identify companies that could be shielded
in a difficult macro environment.

UBS I:: GAIL (India) - Company visit — key takeaways 􀂄price target of Rs580

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UBS Investment Research
GAIL (India) Ltd.
C ompany visit — key takeaways
􀂄 GAIL management upbeat on future demand
We met with GAIL’s management to discuss gas sourcing and to get an update on
the status of its projects. The company is confident about the long-term outlook for
gas in the country, given its ease of use and economic benefits over alternatives.
Although we are still cautious on the attractiveness of imported LNG, GAIL
believes that the industrial sector has the ability to absorb as much gas as is
supplied.

UBS : Adani Enterprises - Robust performance in coal trading 􀂄 PT of Rs645

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UBS Investment Research
Adani Enterprises
R obust performance in coal trading
􀂄 Pre-ex PAT up 72% YoY to Rs8.6bn, operating profit increases 93% YoY
AEL reported Q4 revenues of Rs90.2bn (+9% y/y), operating profit of Rs14.8bn
(+93% y/y, UBS-e of Rs12.6bn) and pre-ex PAT of Rs8.6bn (+72% y/y).
Operating results were ahead of our and consensus estimates led by robust
performance of the coal (higher volumes and realizations) and agri (higher
margins) businesses. PAT was higher than our estimates (Rs5.1bn, consensus
estimate of Rs6.3bn) also due to lower tax outflow. Reported PAT at Rs9.3bn was
higher due to exceptional items pertaining primarily to Mundra Port.

Bharti Airtel- Geared Up for Growth ; Price Target Rs450.00:: Morgan Stanley Research,

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Bharti Airtel Limited
Geared Up for Growth
What's Changed
Price Target Rs410.00 to Rs450.00
EPS F2012, F2013E +3%, +6%
Investment conclusion: We reiterate our Overweight
call on Bharti and raise our price target by 10% to Rs450.
We highlight three key factors: 1) Bharti turns FCF
positive in F1Q12; 2) it is one of the fastest-growing
large cap telco companies; and 3) the valuation is
appealing, especially on a P/Cash EPS (net profits plus
depreciation) basis. We see three catalysts: 1) strong
quarterly results (we expect 6% sequential growth; 2)
traffic growth returning in Africa; and 3) reduced rate of
tariff decline in the domestic business and hence faster
revenue growth.
FCF positive from F1Q12: We estimate Bharti will turn
from being FCF negative of 45% in F2011 due to the
investments in Zain, 3G, and broadband license fee to
13% FCF positive in F2014. Net debt to EBITDA should
move from 3x to 1.1x during the same period.
One of the fastest-growing large-cap telcos: We
expect Bharti to have ~300mn subs by F2014 and
strong CAGR over F2011-14 of 12% in subs, 14% in
revenue, 19% in EBITDA, and 25% in profit.
Valuation appealing: Bharti trades at 14x F2013E
earnings and 6.2x EBITDA, about 10% above it Asian
peers. Cash flow (PAT+ Depreciation) is over 2.5x its
profit; hence its P/CEPS is 40% lower than its P/E at
5.8x, a 10% discount to Asian peers. Compared to the
Indian Sensex, Bharti trades at a premium 25% profit
growth and on a P/CEPS basis it is 30% cheaper against
the Sensex’s 8.4x (F2013).

Market Strategy- March 2011 ownership: More reasons to OW Autos, UW Industrials ::Credit Suisse

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India Market Strategy------------------------------------------------------------------------------------------
March 2011 ownership: More reasons to OW Autos, UW Industrials


● Institutional ownership of the Indian market (~800 stocks)
decreased by ~40 bp in the Mar 2011 quarter (Fig 1): this fall was
entirely in FII ownership (FII outflow of US$500 mn). Domestic
instt. and promoter holdings remained unchanged QoQ.
● Nearly half of FII’s portfolio is now in Financials & IT. Domestic
institutions continued with their preference for Staples, PSU banks
and industrials (significantly higher weights than for FII’s). The
OW on consumer discretionary fell to a multi-year low for both
FII’s and domestics: this supports our buy call on Autos (HH).
● Industrials are the only sector where both FIIs and domestic
institutions are OW (Fig 2): we recommend an UW on the sector
due to fundamental reasons – this also adds a technical
perspective to it. Both FIIs and domestic institutions cut weights in
Utilities.
● FIIs increased OW in financials by 120 bp QoQ: OW on private
banks is now at an all-time high (250 bp). Domestic instt. also
increased financial weights but via PSUs, and cut private banks.
Energy and IT services are the two sectors Underweighted by
both FII’s and domestic institutions. UW though declined QoQ; for
Energy partly also due to falling weights in benchmarks. We like
Wipro, Reliance and GAIL.

Adani Enterprises - Firing on all cylinders led by power; Coal margin top $10/tn 􀂄 BofA Merrill Lynch

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Adani Enterprises Ltd.
Firing on all cylinders led by
power; Coal margin top $10/tn
􀂄 4Q Cons. Rec. PAT +169%YoY; Raise EPS and PO; Buy
ADE 4Q Cons. Rec. PAT Rs9.3bn +169%YoY (+11% BofAMLe) on lower fuel
cost in power & finance costs, consolidation of port and coal margins @ $10/tn
+77%YoY. Key drivers of 4Q EBITDA growth were 42% by port, 36% by power
and 29% coal imports. We up FY12-13E EPS by ~4-5% to factor in 11-12%
higher coal volumes. We raise PO to Rs705 (Rs697) to factor in EPS hike and on
roll-forward despite hike in cost of equity by 25bps to factor-in rising 10-year bond.
Buy ADE on EPS CAGR of 50% over FY11-13E and catalysts: 1) 3x scale-up in
its IPP to 6.6GW by FY13E, 2) 1.9x revenues at MSEZ on doubling of port traffic
& pick-up in SEZ and 3) execution of 200mtpa coal mining contracts, makes ADE
one of the few large coal plays in India.

Jindal Saw- 4Q results weak; order book healthy:: Macquarie Research

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Jindal Saw Limited
4Q results weak; order book healthy
Event
􀂃 JSAW reported 4Q FY11 net sales and profit of Rs11.6bn and Rs802m,
respectively. Results were below our expectations due to a lower margin and
a marginal miss in volume. The blended EBITDA margin was Rs8,212/tonne
in 4Q. Reaffirm our Outperform recommendation, but cut our TP to Rs245.

Goldman Sachs:: Patni Computer Systems ::Patni acquisition completed; top executives replaced, Sell

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Patni Computer Systems Ltd. (PTNI.BO) Rs377.60
Negative News Equity Research
Patni acquisition completed; top executives replaced, reiterate Sell
News
In a press release yesterday, iGate announced completion of its acquisition
of Patni Computer Systems, with the buyout of the promoters (45.6%),
General Atlantic (17.4%) and a 20% mandatory tender offer to public
shareholders, which was fully subscribed — taking iGate’s stake to 83%.
iGate declared that both iGate and Patni will continue to exist as separate
listed entities and will work together, but on an independent basis, on an
integration exercise, in the best interests of their respective stakeholders.
The Board at Patni has been reconstituted with Jai Pathak appointed as
Chairman and Phaneesh Murthy as CEO of Patni. Jeya Kumar, CEO, has
stepped down and Surjeet Singh, CFO, will step down after 31st May 2011.

Lupin - In-line 4Q; Buy Now for 2012 Product Flow; OW :: Morgan Stanley Research

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Lupin Ltd.
In-line 4Q; Buy Now for 2012
Product Flow; OW
Quick Comment: By and large, Lupin reported an
in-line 4Q. Sales rose 17.6% yoy (up 3% qoq) driven by
developed and developing market dosage form exports.
Operating margin compressed 200bp to 20% (30bp qoq
expansion) on higher R&D spending (11 ANDA filings)
and start-up expenses at new Indore SEZ. This led to a
3% yoy rise in net profit to Rs2.27bn (Rs2.17bn
excluding US$6mn Salix payment, MSe – Rs2.12bn).
Future Outlook: Chairman DB Gupta noted that Lupin
is at an inflection point and is well placed to maintain
growth momentum. It is targeting US$3bn sales by
F2014 (US$1.3bn in F2011), which we believe could be
aspirational. Lupin continues to believe that it can
expand OPM 50-75bp p.a. for the foreseeable future.
Tax rate will likely rise meaningfully in F2012 on the
expiration of EOU benefits for Mandideep and Goa.
R&D will remain at 8.5% of sales, one of the highest in
rates in the group. F2012 capex will be the same as in
F2011 at US$100mn.

Goldman Sachs, - Grasim Industries ::Above expectations: Cement and VSF see margin recovery

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Grasim Industries (GRAS.BO)
Buy Equity Research
Above expectations: Cement and VSF see margin recovery
What surprised us
Grasim Industries reported 4QFY11 consolidated net income of Rs8.6bn (+32%
yoy, +72% qoq), about 30% ahead of our and Reuters consensus estimates. At
the operating level, 4QFY11 consolidated EBITDA came in at Rs16.5bn, about
12% ahead of our and consensus estimates, primarily due to better margins in
both cement and VSF businesses. Cement EBITDA margins were up 243bp
qoq to 24% on better pricing, resulting in pass-through of cost inflation. The
VSF business continued to report strong operating performance (EBITDA
margin of 34%) on robust pricing trends on the back of renewed demand and
surge in prices of competing fibres due to cotton shortage and rising costs of
all fibres. The company announced the acquisition of a one-third stake in the
Group JV, which acquired Swedish speciality pulp producer Domsjo Fabriker
AB, with an investment of Rs2.8bn to be funded from existing cash balance of
Rs36bn (on a stand-alone basis). This would enhance the captive availability of
pulp for the company post completion of ongoing brownfield expansions at
Harihar and Vilayat, in our view.

Goldman Sachs, -India March industrial production: Upside surprise

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The Industrial Production Index (IP) grew 7.3% yoy in March, above the revised 3.7% (from 3.6%) yoy
growth in February. The IP reading was significantly higher than the Bloomberg consensus expectation of 4% yoy
and our expectations of 3.6% yoy growth. Sequentially, IP rose 3.8% mom, s.a. in March after being weak in the
last four months. IP grew 7.8% yoy in FY11 compared to 10.5% yoy in FY10.
The Capital Goods Index recovered sharply. The lumpy Capital Goods Index accelerated to 25.9% mom, s.a.
after a 4.8% mom, s.a. decline in February. Consumer goods growth moderated to 7.7% yoy in March from 11%
yoy in the previous month, mainly due to a fall in the Consumer Durable Goods Index. However, consumer nondurables
kept its momentum and grew at 1.5% mom, s.a., after a 0.6% mom, s.a. increase in the previous month.