25 May 2011

Director’s Cut -- Weak USD translates to strong US earnings .:Macquarie Research

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Director’s Cut
Weak USD translates to strong US
earnings
 After reviewing results from the US reporting season, Bryan Raymond
concludes the US recovery still exceeds expectations. >> Read Report
 First quarter profits were 7% ahead of expectations, leading to analyst
upgrades that lifted the full year EPS growth forecast to 15%. The strong
earnings momentum in the US is reflected in the 2011 earnings revision ratio,
with net upgrades in all major sectors.
 After the earnings upgrades, the S&P500 is still on a forward PER of 12-13
times, which is well below the post-tech boom average of 14.7 times. Within
the US market, Bryan thinks the sectors offering value are Media, IT, Energy
and Banks, while Telco and Retail look expensive.
 With Richard Gibbs and our global economics team expecting the US
economy to maintain its upward momentum, driven by exports and business
investment, US results may continue to surprise the market.
 Given the expected strength of the US recovery, a key issue for investors is
when the Fed will lift interest rates. On this, Richard believes the Fed will hold
its balance sheet constant after QE2, before changing its tone on inflation and
growth toward year end, with the first rate hike forecast for early 2012.
>> Read Report
 With our above consensus view on US growth, and that China might reverse
course on monetary tightening in the second half, we see the pull-back in
commodity stocks as a buying opportunity.
 In today’s Commodities Comment, Jim Lennon and the global commodities
team say they are more bullish on iron ore. As we said yesterday, they also
see signs that copper has turned the corner, and now also see zinc and lead
as strong buys. >> Read Report
Highlight Reel
 Partly due to our upgraded iron ore price forecasts, Lee Bowers argues
fundamental valuation support remains strong for the big diversifieds, BHP
Billiton and Rio Tinto.
 Given our increasing confidence that the copper market has tightened,
Christina Lee believes it is time to buy Jiangxi Copper.
 Rakesh Arora argues investors should take advantage of weakness in
commodity prices to accumulate Jindal Steel & Power.
 Riaz Hyder was right, with XL Axiata included in the MSCI Indonesia Index,
as he anticipated, and now expected to outperform.


HDFC Stable core performance; high non‐core income boost earnings"" Prabhudas Lilladher,

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Healthy NII growth; spreads remain stable: HDFC reported PAT of Rs11.4bn, up
23.3% YoY and 28.2% QoQ, higher than our as well as street expectations on
account of Rs1.3bn profit from sale of investments (v/s Rs0.45bn in Q4FY10)
during the quarter. NII for the quarter at Rs13.0bn grew 15.5% YoY and 26.8%
QoQ on account of healthy 19.6% YoY and 7.4% QoQ loan growth coupled with
largely stable spreads on a QoQ basis. HDFC has increased its Retail Prime
Lending rate by ~125bps between period December 2010 and March 2011,
which helped the company to maintain its spreads. HDFC’s asset quality remains
the best in class as its gross non performing loans declined to 0.77% from 0.85%
in the previous quarter. Despite higher provisioning required towards the dual
rate home loans, the company still holds excess provisions to the tune of
~Rs3.1bn on its balance sheet.
�� Business growth remained healthy; loan mix shifts towards non‐retail
segment: Approvals and disbursals during the quarter grew by healthy 35% and
36% QoQ, respectively, although the YoY growth looks muted (due to high
base). Disbursals, during the quarter, in the non‐retail segment seem to be
higher as the mix of the outstanding loan book has slightly skewed towards the
corporate segment. Rising interest rates and property prices led to moderation
in the pace of growth of approvals and disbursals for full year FY11 to 24% and
20% respectively as against 29% and 25% YoY growth recorded during the nine
month period ended December 2010 respectively. Outstanding loan book grew
by 20% YoY, however, adjusting for Rs43.8bn worth loans sold during past 12‐
months the growth stood higher at 24% YoY


􀂄 Valuations and Outlook: Steep increase in interest rates, with no signs of
cooling off in the near term could likely impact HDFC both on spreads as well as
volume front. We believe withdrawal of teaser loans from banks and increase in
the savings bank rate augurs well for HDFC as it should likely ease the overall
competitive pressure. We observe that in the past few quarters the share of
non‐core income for HDFC has risen as the company regularly books profits on
its investment book (which could be for building provision cushion or for
maintaining better capital adequacy). However, for our valuation purposes we
have reduced non core earnings and dividends from subsidiaries to arrive at a
fair value for its core business. At CMP, the stock trades at 22.8x and 19.4x its
FY12E and FY13E core EPS. We maintain our ‘Accumulate’ rating with a 15‐
month forward SOTP target price of Rs790.

JPMorgan:: JSW Steel Neutral JSTL.BO, JSTL IN Higher volumes drive earnings beat; Capex ramped up significantly

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JSW Steel
Neutral
JSTL.BO, JSTL IN
Higher volumes drive earnings beat; Capex ramped
up significantly


• Result beat driven by higher volumes: JSW reported consolidated EBITDA at
Rs16.6bn (+64% q/q) v/s JPMe of Rs15.8bn and PAT of Rs7.2bn (+156%
q/q) v/s JPMe PAT of Rs6.6bn. The beat came mainly on account of higher
than expected steel volumes (Q4 sales volumes at 1.73MT, +9% q/q). While
JSW indicated the high volumes were driven by geographical re-jigging post
ISPAT acquisition, with JSW purchasing steel from ISPAT to cater to nearby
markets, we believe higher exports were also key, given exports (value)
increased 54% q/q and accounted for 16% of total revenues in Q4 v/s 13%
in Q3. Standalone EBITDA stood at $212/MT in line with our estimate of
$210/MT. Steel ASP increased 12% q/q (Rs4543/MT) and in our view was
also driven by the higher share of flats. Given the tough steel market with slow
demand, we find JSW's volume growth and ASP increase impressive. In our
view JSW has also benefited from the recent Karnataka iron ore situation (JSW
indicated blended iron ore cost of Rs2800/MT) given the ramp up of
beneficiation plants which have reduced the need to purchase lumps and instead
use lower-grade iron ore fines. The US operations had a PAT loss of $16mn for
the quarter (FY11 loss at $50mn). JSW in the analyst meet indicated that the
June quarter result would not see the full impact of the $330/MT contract,
as the previous quarter's coking coal contract would last until end May.
However, steel prices have declined from March levels and thus we believe
EBITDA/MT should decline from here.
• FY12 volumes guidance of 9MT, implying 48% y/y increase: With the
3.2MT BF slated for commissioning in Q1FY12E, JSW has given volume
guidance of 9MT, which includes some purchased steel from ISPAT, which we
estimate at ~0.5MT. JSW indicated that exports of HRC volumes would also
pick up, with import substitution and domestic demand driving the sales
increase. We believe this is an aggressive growth target, with new capacities
from Essar and TATA to hit the markets over the next 12 months. Our
current sales volumes estimate for FY12E for JSW is 8.2MT.
• Capex details on new project: JSW announced a 2MT brownfield expansion at
Vijaynagar with a capex of Rs27bn, which is expected to be commissioned by
Jun-2013. The expansion is through the EAF route (DRI-based). This is the
fourth large investment announced by the company recently (others being
Rs160bn West Bengal project in Oct-10, Ispat acquisition in Dec-10 and Rs40bn
CRM complex capex in Jan-11). JSW expects to incur capex of Rss80bn in
FY12E and expects total capex of Rs150bn over the next 3 quarters (including
JSW Bengal).
• Details on ISPAT: JSW did not give many details on the sharp q/q
improvement in EBITDA at ISPAT (NR), which reported Q4 EBITDA at
$105/MT. However JSW highlighted that ISPAT could see further cost
reduction as iron ore sourcing is done from Karnataka and power is purchased
from Jindal Stainless (NR). JSW did indicate that current gas availability issues
could possibly impact production in the very near term

JPMorgan:: Tata Power : 4q results aided by strong coal prices

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Tata Power
Overweight
TTPW.BO, TPWR IN
4q results aided by strong coal prices


• 4Q results in line barring lower taxes. TPWR reported consol PAT of
Rs6.6B up 15% yoy. EBITDA growth of 8% yoy was in line with
estimates, however PAT was ahead of expectations due to a lower tax
expense on account of MAT credit, higher tax free income and lower
deferred taxes. Coal realizations improved sharply, up 40% yoy to
$87.4/ton (JPM est. $86.7/ton for CY11), with the increase in
international coal prices coming through in the results. However
volumes declined by ~12% yoy to 14MT. Amongst TPWR's key
subsidiaries, NDPL’s PAT decreased by 57% yoy due to increase in
interest costs with fresh borrowing.
• Potential increase in fuel cost for Mundra. According to management
the Mundra UMPP could see a $25-30/ton (JPM est. $40/ton FOB)
increase in fuel cost if the Indonesian Govt sets a minimum floor price
for exports. The increase would be applicable to ~1/4th of total quantity
required. Mundra UMPP currently contributes Rs71 or ~5% to our
SOTP valuation. The increase in fuel cost by $25/ton would erode this
value completely while decreasing FY13/14 consol. estimates by 7-8%.
• Short term PPA signed for Maithon, more visibility on fuel supply.
TPWR has signed a 1 year PPA for 309MW with NDPL and BRPL (at
Rs3.45 for the former) thru March 2012 until sales under regulated rates
commences. Our FY12 estimate would increase by ~8% if the project is
commissioned on time and fuel is available. Maithon requires 5.1MT of
coal to operate at an 85% PLF and recover its fixed costs. FSA for the
first unit has been signed, while the LOA for Unit 2 will be converted
closer to commissioning. In addition ~1MT of coal supply has been
arranged from Tata Steel.
• Maintain OW and price target of Rs1,500. Recent newsflow on
restrictions on export pricing of Indonesian coal has resulted in stock
underperformance. This is a potential risk to our price target, if and when
the policy change comes through. However an increase in coal prices is
positive for coal mine valuations, while the early commissioning of
Maithon is also an upside catalyst

JPMorgan:: Prestige Estate :: Asset build-out - a drag on near-term profitability

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Prestige Estate Projects Limited
Overweight
PREG.BO, PEPL IN
Asset build-out - a drag on near-term profitability


• 4QFY11 results in brief – 1] Net income of Rs702M (+29% Q/Q) in line
with estimates. 2] Revenues of Rs 4.7B (JPMe Rs 4.2B +28% Q/Q) better
than estimates but EBITDA margin at 19% disappointed. This given high
contribution from low margin Shantiniketan project which is now out of the
books. 3] Consolidated FY11 PAT of Rs 1.7B lower than standalone PAT
of Rs2B given accounting losses from rental subsidiaries (high interest and
depreciation expense in initial years). 4] Year end net debt is Rs9.9B (Net
D/E 0.49x). 5] FY11 deliveries were impressive at 16.6msf.
• Key highlights of analyst call- 1] FY12 bookings target Rs 16B vs. FY11
at Rs 14B. 2] FY12 Rentals Rs 2.1b (vs. FY11 Rs 1.5b) largely backed by
leasing done in FY11 3] New launches of ~15 msf primarily in large mid
income projects in Bangalore/Chennai. 4] Currently has Rs 17.6B of
unrecognized revenues and has stock value (to be liquidated over 3 years) of
Rs 49B (net of const. costs). JPM View: Ability to achieve bookings
guidance hinges on ability to monetize ready to sell stock (Rs 3.5b) and
launch of two large projects. Though overall hiring/ wage growth in
IT/ITES sector is healthy, political issues in Karnataka could hinder launch
targets.
• PT Rs 165 – We revise our Mar-12 PT to Rs 165 (old Rs 180). Our new PT
is based on a SOTP which values 1] Development business at 10x stabilized
cash flow (based on Rs 15B bookings) ; 2] FY12 target rent of Rs 2.1B at
11% cap rate and 3] Asset build out of CISCO/Capita land assets to be
completed over 4-5 years. Our earnings for FY12 /13E see a sharper cut by
49%/42% respectively as we now moderate our bookings growth to 8% Y/Y
(to Rs 15B), moderate margins to 29% (though KF tower recognition could
possibly change the profile materially) and factor in start up losses in rental
business.
• Investment view: Macro RE environment in Bangalore on a medium term
(2-3 years) basis looks healthy. However, PEPL is unlikely to be a FCF
generator as its rental business is in a heavy capex mode. Valuations are
expensive relative to peer group, on our estimates; however, our earnings
CAGR of 45% despite the cut and high visibility on asset build makes us
retain OW.

Larsen & Toubro (L & T) Q4FY11 – Belying most concerns.:Macquarie Research

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Larsen & Toubro
Q4FY11 – Belying most concerns
Event
 L&T declared its 4QFY11 results with strong operating results. Revenues
were below expectations but compensated by margins. Highlight of the
earnings was order inflows in 4QFY11 (up 27% YoY) and guidance which was
better than expected on every count.
 We believe there are clear signs of some pick-up in the investment activity.
L&T is the best way to play the turnaround, given its diversification. Reiterate
L&T as our top pick, with a revised target price of Rs2,093 (from Rs2,215) due
to slightly lower revenues. We remain 8% ahead of consensus in earnings.
Impact
 Order inflow surprised in FY11, fair bit of confidence on FY12 guidance:
L&T reported Rs300bn of order inflows in 4QFY11 as against expectations of
Rs150-200bn. The company did not announce most of the orders due to client
confidentiality reasons. Guidance of 15-20% order inflow growth in FY12 after
delivering 15% growth in FY11 is encouraging. Order inflows in FY12 are
seen from gas-based power plants, road, oil and gas and fertilisers.
 Underlying margin performance robust, building lot of cushion for
margin pressure: L&T’s margin improved by 10bps to 15.2% in 4QFY11
despite non-cash charges like warranty provisioning for the Delhi T3 terminal
project and forex loss, totalling to Rs2.5bn. Management’s guidance of flat
margins (witn max 50-75bps decline) is conservative, in our view, as the
company has 70bps cushion from the reversal of these non-cash charges. We
are building in 20bps decline in margins in FY12 to 12.6%.
 We remain bullish on revenues and ahead of guidance: We are
forecasting 28% revenue growth in FY12 (ahead of L&T’s guidance of 25%)
as we believe that 30% growth in the order book in FY12, coupled with strong
execution in domestic E&C (30% of the order book), will drive this growth.
Earnings and target price revision
 We revise our earnings and target price marginally by 4-5%. Our revised
target price is Rs2,093 (from Rs2,215 earlier).
Price catalyst
 12-month price target: Rs2,093.00 based on a Sum of Parts methodology.
 Catalyst: pick-up in order inflow and execution
Action and recommendation
 Consensus needs to upgrade its estimates: Consensus’ bearish call on
margins has been proven wrong in FY11. We believe that enough room exists
for consensus to upgrade its FY12 EPS estimate of Rs72 upwards.
 Worst is behind us on investment cycle: Strong revenue growth and order
inflow pickup to us indicates that the worst of the investment cycle is over.
Strong activity in large scale orders is likely to pickup in 2HFY12.
 Stock trading at long term averages, maintain high conviction OP call:
L&T is available at a 30% discount to its long-term multiple of 21x. We retain it
as our top pick in the Indian large cap infrastructure space, as we remain
excited about its earnings growth.

IEA revises its global oil demand outlook lower .:Macquarie Research

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IEA revises its global oil demand
outlook lower
Energy Market Indices WoW Changes
⇒ S&P/TSX Energy Index: -2.2%
⇒ S&P 500 E&P Index: -1.0%
⇒ Oil Service Sector Index: +0.6%
⇒ UK FTSE Oil & Gas Producers Index: -3.8%
⇒ Asia Pacific Oil & Gas Producers Index: 0%
Weekly Market Recap
WTI oil futures recovered last Friday to US$99.65/bbl (up 2.5% WoW) in the face of
bearish demand indicators last week. The IEA revised its 2011 global oil demand
growth forecast lower to +1.3mmbbl/d (down 190mbbl/d) on the IMF’s weaker
economic outlook for the OECD. Estimated oil product demand is 89.2mmbbl/d for
this year. On Wednesday, the DOE showed storage builds for crude oil of
+3.8mmbbl (vs. +1.5mmbbl consensus) and gasoline of +1.3mmbbl (vs. draw of
0.8mmbbl consensus). Also, the People’s Bank of China raised its banks’ reserve
requirement ratio to combat inflation after the rate was reported at 5.3% in April.
Concerns that the Mississippi River Valley flooding will disrupt US refineries lifted oil
prices late in the week.
In Europe, we initiated coverage on Cove Energy (COV LN) with an Outperform
rating and a 150p target price. Our analysis implies Cove is trading at a 30%
discount to Core NAV. We also published an E&P sector report, titled Searching for
Upside, that provided our estimates adjusted for FY2010 and drilling results to-date.
It was a busy week on the news front. On the Integrated side, BP took steps forward
in trying to resolve the dispute with AAR regarding BP's Arctic Alliance with Rosneft.
The share swap agreement with Rosneft is due to expire on Monday. BG reported
disappointing 1Q11 results due primarily to a miss in production volumes (9% below
our estimate) and guided to modest growth in 2011. OMV reported a 1Q11 net
income 4% below consensus and 6% below our estimate, and guided down 2011
production volumes. Repsol reported robust 1Q11 earnings (19% ahead of
consensus) driven by strong divisional results in LNG, YPF and Downstream.
On the E&P side, DNO reported first signs of export payments in Kurdistan as well
as 1Q11 results showing strong production, but lower than expected net income.
Hardy announced that it expects to drill a third exploration well by the end of 2Q11
on the D9 Block and a fourth exploration well is expected by the end of 2011 (two
exploration wells to-date in the D9 have been unsuccessful). Tullow reported
production in line with expectations and announced that its Uganda farm-in
completion is still a few weeks away. Max Petroleum announced that the ASK-1 well
in the Asanketken prospect on Block E has not yet reached TD due to mechanical
problems and that it started drilling the NARS-1 exploration well at Narmundanak
South on Block E.

Jaiprakash Associates - Take aim, don’t shoot .:Macquarie Research

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Jaiprakash Associates
Take aim, don’t shoot
Event
 JPA has reported its 4QFY11 results. Operating profit was below our
expectations due to pressure in margins in the construction business and
lower than expected improvement in profitability in the cement business. .
 We reduce our target price marginally to Rs91 (from Rs92) to factor in the
reduced valuation of JP Infratech (JPIN, Rs55, TP: Rs63, Neutral, Covered by
Unmesh Sharma) due to price-target cut by our property team. Retain Neutral.

Gammon India – No near-term relief in sight ::RBS

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Gammon reported EBITDA losses for 4QFY11 due to sharp cost overruns on fixed-price
contracts for subsidiary GIPL. With these contracts still forming a large part of coming quarter
sales and no turnaround in sight for European subsidiaries, we maintain Sell on cuts to our EPS
and target price.

Bajaj Auto:: Good 4Q but headwinds ahead ::CLSA

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Good 4Q but headwinds ahead
Bajaj’s 4Q results were strong with EBITDA margins above 20% for the 7th
quarter in a row. However, we see headwinds ahead in the form of slowing
2W industry growth, input cost pressures and a potential removal of export
incentives. Slipping market-share in motorcycles is another cause for concern
and we are unsure of the prospects of the ‘Boxer 150CC’ to be launched soon.
On the positive side, 3W exports remain strong. More medium term, we worry
about the impact on Bajaj from a more aggressive HMSI in the domestic
market and from Hero Honda in export markets. Stock has come off but we
see Bajaj in fair valuation territory at best. Maintain U-PF.
Strong 4Q results; commendable margins
Excl one-time items, Bajaj’s 4Q net profit at Rs6.8bn grew 27% YoY and was 3%
above estimates. EBITDA margins expanded 20 bps QoQ to 20.5% (7th quarter of
~20% margins) boosted by a 50 bps QoQ fall in RM/Sales. Reported net profit
was much higher at Rs14.0bn due to a one-time gain - early payment of sales tax
deferral loan to the government. Bajaj also took a one-time impairment charge of
Rs1bn for its Indonesian subsidiary, which is still loss-making.
Volume growth and margins to moderate in FY12
With car and CV growth having already slipped sharply, we believe that 2Ws will
be the next to fall, though expect a smaller moderation here due to the lower
sensitivity of 2Ws to interest rates (just a third of 2W sales are financed).
Management said that 1QFY12 growth has been boosted by a bunched-up
marriage season and that there could be some moderation 2Q onwards. Bajaj is
still targeting an aggressive total sales of 4.55m units in FY12 (19% growth); we
estimate a lower 11% growth to 4.23mn. In addition, the full impact of higher
steel and base metal prices will be felt in 1QFY12 and the price hikes taken over
Apr-May are not sufficient to offset the same. Bajaj also said that they will have to
choose between export volumes and margins if the DEPB benefits are removed
but indicated a preference for defending the latter.
Our bigger concern is rising competition FY13 onwards; maintain U-PF
By FY13, HMSI will have more capacity, and in all likelihood, will launch several
new bikes, some of which will compete with Bajaj. Hero Honda (HH) could also
turn more aggressive as it would not want to be seen as losing market share post
the split with Honda to maintain dealer/vendor morale. Over FY13-14, HH will also
target the same export markets that Bajaj currently rules. All this adds up to a
more challenging competitive environment for Bajaj post FY12, which we believe
will and is having an impact on multiples. We fine-tune our FY12-13 EPS upwards
by 1-3% factoring in higher 3W volumes but maintain U-PF.

Buy HT Media:: 4QFY11 Results ::CLSA

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4QFY11 Results
We upgrade HT Media earnings by 3-5% led by a continued robust
advertising environment, positive surprise in 4QFY11 results,
encouraging trends from the readership survey and stable newsprint
prices. The publisher’s English newspapers registered ad growth of 21%
YoY while the Hindi editions saw a 20% YoY rise. We project an average
13% advertising and 17% earnings growth for FY12-13 despite the
challenge of high newsprint prices and the stock now trades at 15x
forward earnings. Maintain OPF
Robust ad-environment, stable newsprint prices
HT Media’s 4QFY11 revenue of Rs4.7bn, up 26%YoY, was 3% ahead of our
estimates, led by a surprise in English print ad-growth of 21%YoY and Hindi
ad-growth at 19.5%YoY driven by both volume and improved realisation. In
FY11, HT raised ad rates across its Hindustan Times (English) and Hindustan
(Hindi) editions by 15-35% and the year ad-growth has been 22%YoY. While
circulation revenues although flat QoQ were up 9%YoY in 4QFY11 with cover
price increase and consolidated Ebitda margin were flat at 18.6% with raw
material costs too flat at 35% of revenues. For FY11 HT Ebitda margins are
up 72bps to 18.8% and the profits are up 33%YoY about 7% ahead of
estimates. HT quarter internet revenue increased 78%QoQ to Rs36.5m and
radio by 42%QoQ to Rs258m - Ebitda was Rs65m with a four-city presence.
Consolidating in Mumbai and in Hindi publications
During the year nearly five years after the launch of Mumbai edition HT’s
Hindustan Times overtook DNA to be the number two newspaper after Times
of India in the largest print media market in the country. Besides HT’s
business paper Mint continues to consolidate its number two position in
business daily segment and in April 2011 launched in Hyderabad taking the
total to ten editions. HT’s improved positioning in Mumbai alongside
leadership in Delhi and Hindi publication Hindustan becoming the second
largest newspaper, surging ahead of Dainik Bhaskar (as per management) on
basis of total readership will provide potential for upside to our forecast 13%
advertising growth in FY12-13CL.
Earnings upgrade; Maintain O-PF.
With a robust ad environment leading the positive surprise in quarter results
and the company consolidating market positioning, including in Mumbai for
Hindustan Times and Mint as well as strength of Hindustan, we upgrade HT’s
consolidated earnings by 3-5% for FY12-13CL. Although newsprint prices at
Rs32,000/tonne are still high and we remain negative on HT’s radio business,
the company may bid for more stations in upcoming phase III of licensing. HT
is net cash at Rs6bn and following our upgrade, we now project an average
17% earnings growth over FY12-13. With the stock trading at 15x forward
earnings, we maintain Outperform.

UBS :: Tata Power 4 Q FY11: positive results

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UBS Investment Research
Tata Power
4 Q FY11: positive results
􀂄 4Q FY11: Consolidated Sales up 6% YoY, PAT up 91% YoY
In 4Q FY11, Tata Power’s consolidated sales increased 6% YoY to Rs50.2bn. The
recurring PAT is Rs8.2bn, up 91% YoY. In FY11, the recurring PAT is up 52%
YoY to Rs20.9bn
􀂄 In 4Q FY11, Coal contributes 34% of revenues and 55% of PBIT
The segmental results indicate revenue growth in coal (14% YoY to Rs17.1bn) and
revenue in the power segment increased 3% YoY to Rs31.97bn. The profit from
power segment increased 16% YoY. Contribution from coal in overall profitability
is 55% in 4Q FY11.
􀂄 Conference call: Key highlights
Tata Power organised a conference call today evening. The key takeaways from
the call are; a) Maithan and Mundra projects are nearing commissioning, b) Haldia
plant realisation was Rs3 per unit and Mumbai plant realisation was at Rs5 per
unit.
􀂄 Valuation: Maintain Buy and PT of Rs1,600
Our SOTP based PT is contributed by, 1) Power (62%), 2) Stake in Bumi mines
(23%), 3) Investments (15%, after 20% conglomerate discount).

UBS:: Sintex Industries - Improved fundamentals ; target Rs240

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UBS Investment Research
Sintex Industries
I mproved fundamentals
􀂄 Beneficiary of non-cyclical social spending; custom moulding well positioned
Sintex Industries (SINT), a diversified industrial company, is a key beneficiary of
the government’s non-cyclical and growing social spending on education, low-cost
housing, healthcare and rural infrastructure in India. Its building products business
(50% of FY11 EBITDA) has scale advantages and its custom moulding business
(35% of FY11 EBITDA) looks well positioned to benefit from a recovery in the
industrial cycle, and synergies from its acquisitions and their scaling up.
􀂄 Balance sheet improvement; divestment of unrelated investment a positive
We think concerns over SINT’s capital discipline have been largely allayed by
sharply lower working capital in FY11, divestment of unrelated investments (oil
and gas), and management’s focus on the core business. Strong revenue growth
and the EBITDA margin in FY11 reflect execution capability. A growing
monolithic construction order book (22 months revenue of Rs29bn) provides
growth and margin visibility in the near term.
􀂄 We forecast a 19.8% EPS CAGR for FY11-13; attractive valuation
We believe SINT’s valuation—FY12E PE of 8.5x and EV/EBITDA of 6.4x—is
attractive, and forecast an EPS CAGR of 19.8% for FY11-13 and ROE of 21.1%
for FY12. We think an improving growth trajectory, a stronger balance sheet
(lower working capital, debt:equity at 0.3x in FY13E) and positive free cash flow
from FY11E should support to a re-rating of the stock.
􀂄 Valuation: initiate coverage with a Buy rating and price target of Rs240.00
We base our price target for SINT on a sum-of-the-parts methodology because of
the diversified nature of its business. Our price target implies an FY13E PE of
11.2x and EV/EBITDA of 6.9x.

Bharti Wal-Mart- Unlisted : to open 15 wholesale cash and carry stores by the end of CY 2011 ::CLSA

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Bharti Wal-Mart- Unlisted
Business description:
Wal-Mart and Bharti Enterprises formed a 50:50 JV to foray
into the wholesale cash and carry business under Bharti
Wal-Mart Private Limited
In addition, Bharti has also opened retail stores, the supply
chain for which is supported by Bharti Wal-Mart
Currently, Bharti has a total of 118 stores, including Easy
Day stores and Easy Day Market stores, in Punjab,
Haryana, UP, Rajasthan, among others.
Bharti plans to increase its store portfolio to about 140
stores by the year end; Bharti Wal-Mart has recently
opened its third cash and carry store
The company plans to open 15 wholesale cash and carry
stores by the end of CY 2011

Siemens India - Good show continues ::Macquarie Research

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Siemens India
Good show continues
Event
 Siemens India reported its 2QFY11 results (Sep-ending financial year) which
were ahead of our and street’s estimates. Revenues at Rs30.4bn were up
37% and PAT at Rs2.8bn was up 53%. Margins have started normalising at
11.5-12.5% levels. Order inflow pick up indicates activity level remains strong.
 We revise our earnings estimates for FY11-13 by 6-7% to factor in higher
revenue growth. We roll forward our target price to Sept-12 and revise our
target price from Rs717 to Rs842, retaining our Neutral rating.
Impact
 Stellar performance on revenue front driven primarily by power and
automation: Siemens delivered 73% YoY growth in the power segment,
within which T&D was the key driver for growth, followed by the Oil & Gas
sub-segment. Traction in revenues was due to execution of the Qatar T&D
and Torrent gas-based power plant order secured in FY10. Growth in the
automation division (34% growth) indicates some pickup in industrial
investment activity.
Revising our revenue estimates for FY11-13: We increase our revenue
forecasts for FY11-13 by 6-7% to factor in strong execution. We now
estimate 27% and 21% revenue growth in FY11 and FY12, respectively.
 Current margins are sustainable, factored in our numbers: Margins at
11.5-12% have normalised, as Siemens had made adequate provisions in
FY10. We have already built normalised margins of 12.4% into our numbers.
 Order inflow for short cycle projects picking up: Order inflow has started
picking up after a soft FY10. Order inflow at Rs33bn was up 47% YoY,
leading to 15% growth in the order book. Commentary from managements of
ABB (ABB IN, Rs864, UP, TP: Rs488), Thermax (TMX IN, Rs600, Not rated)
and Crompton Greaves (CRG IN, Rs244, OP, TP: Rs344) earlier this month
also indicated continued order inflows from short cycle projects.
Earnings and target price revision
 We increase our EPS estimates for FY11-13 by 6-7%. We roll forward our
target price basis to FY12 EPS and hence, increase it from Rs717 to Rs842.
Price catalyst
 12-month price target: Rs842.00 based on a PER methodology.
 Catalyst: further pickup in order inflows
Action and recommendation
 Earnings growth profile much superior in Siemens; we prefer it over
ABB India: Strong revenue growth cycle for Siemens is likely to play out in
FY11. With order inflows picking up, growth is likely to sustain well into FY12.
We prefer Siemens over ABB India, as it has a better earnings and revenue
growth profile and yet trades at much lower valuations of 22x FY12 EPS (ABB
is trading at 40x CY12 EPS).

Educomp Solutions :New directions in Smartclass :CLSA

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New directions in Smartclass
The most important takeaway from attending Educomp’s Smartclass
Business Development meet was its effort in de-commoditising the
Smartclass offering. The key components of Educomp’s “Shock and Awe”
strategy for Smartclass for FY12 are its own proprietary design hardware
(Digital Teaching System) and a refreshed content suite (Class
Transformation System). Also, Educomp intends to increase its
advertising spend and ramp-up its sales force to 550 from ~400
currently. These moves should help Educomp consolidate its market
leading position (90%+ share currently) in the Smartclass segment. We
are already factoring in an increase in annual classroom additions to
35,000 in FY12/13 from 29,000 in FY11.

BUY Jet Airways- High fuel cost mars 4Q results „Cut PO on higher ATF :: BofA Merrill Lynch,

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Jet Airways
   
High fuel cost mars 4Q results
„Cut PO on higher ATF assumptions; Retain Buy
We have cut our EBITDAR estimates by ~5% for FY12-13E to reflect higher average
ATF assumptions of +10%/5% over FY12E/13E. However we have raised our traffic
assumptions by 3%-5% over FY12E-13E on account of strong demand. We also
tweak our yield assumptions and load factors on account of higher fuel surcharge. We
have cut our PO to Rs650 (from Rs750) which is based on an unchanged target
multiple of 8x FY12E EV/EBITDAR on our lower EBITDAR estimate.

ITC::Still a strong puff:: Deutsche bank,

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Strong numbers, stable outlook
Revenue growth of 18% yoy, 25% earnings growth, 13.2% cigarette revenue
growth, 17.5% cigarette EBIT growth  and an INR 678m loss in FMCG were the
key highlights of ITC's Q4FY11 results. We maintain our EPS estimates for FY12 at
INR 8.4 per share (above consensus of INR 7.8 per share) and FY13 at INR 9.6 per
share (above consensus of INR 9.0 per share). Our target price of INR 210 remains
unchanged. We maintain Buy

Steel prices inching up? JP Morgan

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• Spot steel prices inching up, as higher cost raw materials start flowing
through…:  Over the last week spot HRC steel prices out of both CIS and
China moved up $20/MT. Admittedly these are offer prices and not
transaction prices, and hence it is difficult to say whether the price increases
will hold. However, from here steel mills should start seeing the impact of the
higher cost quarterly contracts of key inputs like coking coal and iron ore.
JSW in its analyst meet highlighted that the $330/MT coking coal would start
flowing through the P&L from end May. Rebar prices in some parts of
Europe (up from €510/MT in end April to €550/MT in mid May)  have also
moved up on higher scrap costs. A more sustainable steel price increase
would be dependent on apparent demand and whether steel buyers start restocking from current levels.
• …but stress in domestic steel markets continues in India: Indian steel mills
have not been able to take the mid month steel price increase. On the contrary,
we believe discounts have increased. What is surprising is that even after gas
issues potentially impacting Western India mills, we have not seen any
material improvement in sentiment. What could possibly help the situation is
if the mills extend their maintainence shutdowns, which normally are taken
during this time period.
• No impact so far from power situation on steel production in China, but
spot iron ore finally cooling off indicating potential steel production
decline: The daily steel production number for the first 10 days in early May
stood at 1.974MT implying no slowdown in production/impact from the talked
about seasonal power outages. However, spot iron ore prices have fallen to
$184/MT from peak levels of $190/MT indicating slowdown in Chinese
demand for iron ore as steel production potentially slows from here on the
seasonal power outages.
• Japan steel impact:  JPM Japan Steel analyst Akiro Kishimoto in his update
on ordinary steel orders in March in Japan highlights that construction sector
orders are up on reconstruction sector demand (11.7% m/m), offsetting the
decline in auto sector orders (-16% m/m) with total March ordinary steel
sector orders rising 0.3% m/m in March. While Akira expects a low level of
demand in April orders given the auto sector, he does not see a protracted
phase of weaker orders as OEM’s have brought forward production.
• Base metals- volatility continues, aluminum inventories increase 136KT:
Volatility continued across industrial metals with some upward movement.
Aluminum inventories increased by 136KT. However, JPM global metals
analyst Michael Jansen sees this number as ‘disappointing for enthusiasts of
the massive off warrant situation’.
• Coal remains in focus in India:The Indian government is focusing on the
coal situation given the production-demand mismatch.

India Cement - Key Takeaways From Post Result Management Calls :: Morgan Stanley Research,

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India Cement
Key Takeaways From Post
Result Management Calls
Quick Comment – Impact on our views: We attended
conference calls hosted by southern-based cement
companies (Sagar Cement and Rain Commodities – not
covered) after QE Mar-11 results. Key takeaways are:
1) Management commented that the trade-off between
market share vs. profitability is a positive for the industry.
Rain Commodities’ management commented that they
are focusing on profitability and not purely on market
share. Sagar management highlighted that that it
expects F12 cement capacity utilization of 65-70% (in
line with F11), implying flat volumes for F12.
This reflects that cement company managements are
focusing on profitable growth and not purely market
share. In our view, demand remains critical for the
industry, and in the next few month prices will be volatile
around demand, given seasonal factors. We believe that
the demand recovery (we expect demand to pick up in
F2H12) will support cement prices and drive positive
earnings momentum.
2) Demand remains muted in the state of Andhra
Pradesh (AP). Current demand in AP is driven by semi
urban / rural demand, while infrastructure is weak.
According to Sagar management, while there was some
expectation of a pick-up in government projects in AP
(low-cost housing projects), nothing has happened. It
believes that while the demand trend in AP remains
challenging, it should be better than the weak trend
observed in F11 (-15% YoY). Demand in other southern
states, Tamil Nadu and Karnataka, is better than in AP,
but below company expectations.
3) Pricing, however, remains strong – current cement
prices being marginally higher relative to the QE Mar-11
average. We expect this to be sustained until the
monsoon, after which it could be volatile on seasonality.
Our In-Line industry view is based on: 1) our view that
near term earnings will be muted, given moderation in
prices and rising costs (coal), and 2) rich valuations.

Trent- TRENT IN :Trent trading above 5yr avg EV/Sales:: CLSA

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Trent- TRENT IN (NR)
Business description:
Trent is one of India’s leading retailers and is a part of
the Tata group
It operates through 3 verticals over 77 stores
Westside (Department stores): 43 in 29 cities
Star Bazaar (Hypermarket stores): 10
Landmark (Books and gifts stores): 27
Fashion Yatra
It has two JVs –one with Inditex, to open Zara stores,
and another with Tesco, to open cash and carry stores
and also to be the supply chain and logistics partner
to Star India Bazaar
Annual report highlights
As of FY10, Trent’s floor space was at c.1.78m sf
We expect it to hit 3m sf of floor space by FY13
The management intends to scale up to 50 Star
Bazaar (Hypermarket stores) over the next three
years
The company will focus on increasing the private label
mix within Star Bazaar
The company expects store additions in FY11 to be
similar to what was seen in FY10
News and updates
Trent has reported Philip Auld as its CEO. Mr. Auld has
held senior positions with Asda and M&S before this
Trent plans to double the number of Star Bazaar outlets
to 20 in 2011
The company is planning to expand the Westside format
in tier II and III cities
Trent is experimenting with gourmet retailing in its
Westside format

Indian Pharma: US prospects paying ::CLSA

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US prospects paying
A volatile quarter for most of the pharma companies due to specific
opportunities either in this quarter or in the base causing sharp swings in
reported earnings growth. While Dr Reddy’s and Cadila showed strong
positive earnings growth, Ranbaxy had a sharp decline due to a high base
situation. Growth was weaker in domestic formulations segment for most
companies except Cadila. Operating margins were lower due to enhanced
marketing efforts or commissioning of new facilities except Cadila and Dr
Reddy’s where high margin opportunities drove margins higher. Dr
Reddy’s, Torrent and Cadila are our preferred picks based on better
growth in India and specific approvals in the US.
Earnings growth driven by US opportunities
q US business determined earnings trajectory for most of the Indian pharma
names for 4QFY11.
q While Dr Reddy’s and Cadila were strong beneficiaries, Ranbaxy earnings
declined sharply on YoY basis due to a high base in the US (Valtrex
contribution).
q Dr Reddy’s benefited from market share gains in Prevacid, Prilosec OTC and
recent launch of Allegra D24. We see three major product approvals (Allegra
D 24 OTC, Arixtra (fondaparinux) and Zyprexa) that would result in 5%+
upgrade for FY12.
q Cipla also saw earnings decline due to sale of i-pill brand contributing to onetime
profits same quarter last year.
q Most of the companies have been filing aggressively to build strong pipelines
and have been executing well on gaining market shares in their existing
products in the US market.
Weak quarter for domestic market
q 4QFY11 domestic formulations growth was weaker than usual as indicated by
IMS estimates earlier.
q Strong competitive pressure with price discounts being given by companies
like Cipla and GSK India to garner market share has been one of reasons for
slower growth.
q Another reason for slower net sales growth has been fading of tailwind from
excise duty reduction that is already getting in to the base.
q Domestic formulation is the most profitable segment. Considering low capital
requirements, companies with a relatively larger share of domestic
formulation revenues offer better visibility of profits and cash flows.
q Our preference for Cadila, Torrent and Sun Pharma stems from relatively high
exposure to domestic market and strong growth expectation going in to
FY12.
Valuations high; so is earning growth
q While valuations in Indian pharma sector have moved up substantially, they
are reasonable in context of the earnings growth that companies in the sector
are likely to deliver.
q We expect the US to be a strong driver of earnings growth over coming two
years specifically for companies with high exposure to that market namely Dr
Reddy’s, Ranbaxy, Sun Pharma, Lupin and Cadila.
q We see earning upgrades especially in the companies with strong pipeline in
the US market as those materialize in to launches.

Dr Reddy's Laboratories – 4Q: Mixed bag; Sell on rich valuations ::RBS

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4Q operating profits were in-line with 'core' PAT marginally ahead of our expectations. DRL's
ROCE in FY11 was 17.5% below its guidance of 18-22% and it also reduced its FY13 revenue
outlook by 10%. Despite aggressively factoring one-offs in the US into our model, we find
valuations unattractive. Maintain Sell

Shopper’s Stop- Hypercity hopes to break even in FY13 ::CLSA

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Shopper’s Stop- SHOP IN (U-PF)
Business description:
Shopper’s Stop operates India’s largest chain of department
stores under the Shopper’s Stop brand
It also has 5 specialty retail formats
Crossword: Books, gifts and music
Mothercare: Mother and baby care
MAC: Cosmetics, Arcelia
Home Stop: Home furnishings
Hypercity: Food, grocery and general merchandize
It has increased its stake in Hypercity and now owns 51%
Current retail space: 2.37m sf across over 100 stores and
another 0.98m sf in Hypercity (9 stores)
News and updates
Valuation below long term average but still high
Price: Rs374
Mkt Cap: US$680m
Avg T/O: US$0.3m
Shoppers Stop has raised garment prices to pass on
the excise duty hike
Hypercity hopes to break even in FY13
Hypercity is downsizing its extra-large 100,000 sq ft
stores by 15-20% and plans to launch stores in the
70-75k and 50-55k sq ft ranges
The company plans to add 24 stores in FY12
including 10 in Shoppers Stop, 8 in Crossword and 3-
4 in Hypercity. Six of these 24 are already open.