News Round-up 􀁠 Kotak Sec : June 6, 2011

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Economy News
4 After remaining above the 8% mark for almost 18 months, inflation
would moderate to 7.93% by the end of July, Institute of Economic
Growth (IEG) has said in its forecast. (BS)
4 The European Union has sought concessions for its banks if they are
asked to migrate to the wholly-owned subsidiary model proposed by the
Reserve Bank of India. (ET)
4 The government expects to achieve additional power generation capacity
of 16,000 MW in the remaining 10 months of the 11th five-year plan,
more than half of the total capacity added in the last four years. (ET)
4 Indian offshore companies are making substantial investments to acquire
vessels to tap the oil exploration and drilling services market in emerging
markets, led by Brazil, to scale up revenues in the coming years. (ET)
4 India's manufacturing sector growth during quarter ended March 31 this
year stood at 5.1 per cent, which is one-third of China's factory output of
15 per cent and also lower than the world average of 6.5 per cent,
according to a UN body report. (ET)
Corporate News
4 In a Rs 890 Mn deal, Hindustan Sanitaryware and Industries Ltd
(HSIL), the ceramics major, has entered into a share purchase agreement
with Garden Polymers Pvt Ltd and its promoters, acquiring 60 per cent
stake in the company. The balance 40 per cent is being bought over by
the promoters of HSIL on the same terms. (BS)
4 Gujarat Mineral Development Corporation (GMDC) is looking to add
value to its mineral products with private partnerships. It sells raw
bauxite and plans to set up a project for value addition in bauxite
products at Kutch. (BS)
4 Negotiations between workers of Maruti Suzuki's plant in Manesar in
Haryana who struck work on Sunday and the management are expected
to begin again on Monday. The 2,500 workers are demanding recognition
of a new union - Maruti Suzuki Employees Union (MSEU) - independent of
the union at Maruti's Gurgoan plant. They are also demanding retention
of contract labourers for the two units coming up inside the complex. (BS)
4 The Rs 8000 Mn Elder Pharmaceuticals Limited plans to launch almost
three dozen new products in the coming 30 months, a top company
official said. (ET)
4 Lanco Infratech and GMR Group, two major private power producers,
have sought clarity from the government on natural gas supplies to the
new plants from Reliance Industries' (RIL) D-6 block in Krishna-Godavari
basin. (ET)
4 IT services firm Mahindra Satyam has sought additional time for setting
up an IT/ITES SEZ at Hitec City in Madhapur here. The Union Ministry of
Commerce had already given two extensions for the SEZ and the validity
of the last extension is up to June 19. (BS)
4 Rural Electrification Corporation (REC) is planning to raise up to $1.75
billion, equivalent to nearly 79 Bn crore, through a combination of foreign
currency convertible bonds (FCCBs) and external commercial borrowings
by November this year. (ET


News Round-up
􀁠 Banks, MFIs reach debt recast deal. MFI promoters agree to pledge 100%
shareholding; banks refuse to give fresh loans to the sector. About USD 1.42 bn
loans have been prevented from becoming non-performing assets. (BSTD-Sat)
􀁠 In a major haul of the FDI norms in the content distribution space, the government
has put 49% of the foreign investments in the direct-to-home (DTH) sector on the
automatic route while increasing the overall cap to 74%. (FNLE)
􀁠 To meet the additional credit requirements in a market plagued by high interest rates
and lowersales, Tata Motors (TTMT IN) has infused an additional USD 167 mn into its
wholly-owned Tata Motors Finance by expanding the equity base from USD 444 mn
to USD 611 mn. (FNLE)
􀁠 RIL (RIL IN) to be free of debt this year. (BSTD-Sat)
􀁠 HDIL (HDIL IN) has indicated it would clock 0.7-1 million sq ft if transfer of
development right (TDR) sales for 2011-12, a drop of 20% compared to last year.
(BSTD-Sat)
􀁠 IDFC (IDFC IN) and Khazanah will form a joint venture company to develop road
projects in India. Khazanah will hold 80.1% stake in the proposed JV and IDFC the
balance. Both would also invest in convertible instruments issued by the JV. (BSTDSat)
􀁠 The Steel Authority of India Ltd (SAIL IN) will set up four pellet plants over the next
two-to -three years to utilise fines generated by its mines. (THBL SAT)
􀁠 REC (RECL IN) to raise $1.75 bn Via Foreign Currency Bonds. (ECNT)
􀁠 M&M (MM IN) asks suppliers to Focus on cost cuts, On-time Delivery. (ECNT)
􀁠 Ashok Leyland (AL IN) sales drop 12% in May. (BSTD-Sat)
􀁠 Raheja group may exit Crossword. Big retailers Tata, Reliance, Birla seen as potential
suitors. (BSTD)
􀁠 GMDC (GMDC IN) is looking to add value to its mineral products with private
partnerships. It sells raw bauxite and plans to set up a project for value addition in
bauxite products at Kutch. (BSTD)
􀁠 Hindustan Sanitaryware takes 60% in Garden Polymers. Deal worth USD 20 mn, to
buy rest of stake, too; aims at growing subsidiary 40% yearly for next 5 years. (BSTD)
Source: ECNT= Economic Times, BSTD = Business Standard, FNLE = Financial Express, THBL = Business Line.

Sun Pharmaceuticals: Weak quarter operationally, FY2012E guidance solid:: Kotak Securities

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Sun Pharmaceuticals (SUNP)
Pharmaceuticals
Weak quarter operationally, FY2012E guidance solid. PAT at Rs4.4 bn was 16%
higher than our estimate due to (1) higher other income and (2) lower tax. However,
EBITDA margin at 30% was 200 bps lower than our estimate due to higher other
expenses (on account of Caraco) and flat qoq. SUN provides strong FY2012E sales
growth guidance of 28-30% implying strong growth in US business excluding
Taro/Taxotere. We leave our FY2012E estimate largely intact, lower FY2013E by 6%.
Retain ADD with PT rolled forward to Rs515 (was Rs480), 23X FY2013E EPS.

Tata Communications: 4QFY11 - revenues disappoint; one-offs aid margins and PAT:: Kotak Securities

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Tata Communications (TCOM)
Telecom
4QFY11 – revenues disappoint; one-offs aid margins and PAT. TCOM reported
another subdued quarter with a revenue growth of 2% qoq and cost-reversal-led 130
bps qoq expansion in OPM at the consolidated level. In any case, core business
fundamentals have little relevance for the stock – it forms just about 25% of our SOTP
valuation with surplus land and TTSL stake contributing the rest. We lower our TTSL
valuation estimate and cut TP on TCOM to Rs205 from Rs225. Reiterate REDUCE.

Accumulate SHREE CEMENTS: target RS.1908:: Kotak Sec

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


SHREE CEMENTS
RECOMMENDATION: ACCUMULATE
TARGET PRICE: RS.1908
FY12E P/CEPS: 6.5X
q Company's revenues for Q4FY11 and full year FY11 were inline with our
estimates led by improvement in cement realizations as well as sale of
power. Revenues reported a growth of 13% YoY for Q4FY11 but declined
by 3% YoY for FY11.
q Operating margins witnessed a sequential improvement led by cement
price hikes but are lower than last year due to steep increase in overall
costs. However, margins were better than our estimates.
q Net profit growth was impacted by higher depreciation and interest
charges but was boosted by tax credit.
q We marginally tweak our estimates to factor in lower cement volumes,
higher power sales as well as higher depreciation charges. Depreciation
charges would increase going forward due to commissioning of power
plants during FY12. Operating margins during FY12 would be impacted
downwards due to lower margins in the power division.
q At current market price of Rs 1877, stock is trading at 6.5x P/CEPS and
5.9x EV/EBITDA for FY12. We value the company based on the average of
6.5x P/CEPS and 6x EV/EBITDA and arrive at a revised price target of
Rs.1908 (Rs 1948 earlier) on FY12 estimates. We continue to maintain
ACCUMULATE on the stock.

Kotak Sec, State Bank of India: Building confidence; challenges remain

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


State Bank of India (SBIN)
Banks/Financial Institutions
Building confidence; challenges remain. Our recent discussion with the
management at the conference/analyst meet focused on asset quality and margins
outlook—areas which the bank disappointed in the previous quarter. While we draw
some comfort on asset quality, we believe that 3.5% margin guidance appears
stretched considering the adjusted exit margins of 3.3% in 4QFY11. Near-term
earnings, especially 1QFY12, may be under stress due to revised provisions. However,
we expect much better trends in profitability over the next few quarters on the back of
lower provisions. We have revised our earnings downwards by about 2-6% in FY2012-
13E to factor higher provisions for investment book and tax rate. The stock trades at
1.3X FY2013E (adjusted) book. Maintain BUY.

Fund Talk: What to do with Mutual Fund Investments: Business Line

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��

 

This is the first time I am investing money in mutual fund through the SIP mode. I have SIPs of Rs 2000 per month in each fund for 10 years. I want Rs 40 lakh after 10 years to own a home and car. Will it be possible to achieve the target amount with the current SIPs in the funds mentioned below? HDFC Top 200, Birla Sun Life Dividend Yield Plus, DSP BlackRock Top 100, IDFC Premier Equity and HDFC Prudence.

Brajesh K Mishra

Hyderabad

We hope you have taken in to account the possibility of property appreciation as well as inflation effects when you set your goals. This is a crucial part of setting a target. Hoping you have done this calculation, Rs 40 lakh in 10 years would be a tad difficult, assuming that at least two of your funds can manage a 20 per cent annual return and the rest generate at least 15 per cent. It is better to be conservative in one's return expectations and enjoy unexpected gains, if any, later! At the above rate of return, your current saving will generate only Rs 25.5 lakh at the end of nine years.

INCREASE SAVINGS

We do not wish to drag the process of reaching your goal till the tenth year as we feel it is wise to get out of equities a year or even two before your goal by sweeping money in to safer avenues. Any market mishap nearer to your goal may otherwise send your goals for a toss. Hence, at a 15 per cent annual return you would be required to up your SIP by another Rs 4,000 per month from next year (for eight years) and another Rs 5000 the year after that (for another seven years). This would help reach your target. If you can spare these sums immediately it is even better. 

We would like to make some minor rejigs to your portfolio. Hold on to HDFC Top 200 and exit DSPBR Top 100. While the latter is a good fund, it would suffice to have one large-cap fund in your portfolio. Instead move to UTI Opportunities. The fund would be more dynamic in terms of spotting and benefiting from sector or market trends. Continue SIPs in the rest of the funds.

When you add the two new SIPs in the next couple of years, you can consider investing in HDFC Equity and increase exposure to IDFC Premier Equity as well as Birla Sun Life Dividend Yield Plus.

If you have any surplus beyond this, you can look at investing in Benchmark's CNX 500 index fund. However, do not attempt this in the last three or so years before your goal. Invest only if it is possible in the next three years. Also remember that while SIPs may be long term in nature, review of performance or switching to better funds when returns lag benchmark for over a year is very important. 

*****

I am investing Rs 22, 000 a month in the following mutual funds by way of SIP. I plan to continue this investment for the next five years for my son's education. I am finding it difficult to keep track of the funds. Kindly let me know which SIPs to continue and which to exit. Tata Infrastructure, Reliance Equity Opportunities, DSPBR Equity, Birla Sun Life Top 100, Reliance Growth, SBI MSFU, Reliance Regular Savings Equity, Sundaram Select Midcap, DSPBR T.I.G.E.R, HDFC Equity, ICICI Pru Discovery, Birla Sun Life Frontline Equity, Birla Sun Life Midcap and DSPBR Top 100.

Vijay K Kamat

You will not only need a compact portfolio but a set of steady performers given that you do not have too long a time left to reach your goals. Given the volatile nature of the market and your entry in to some of the funds in 2010 closer to market peak, it may be wise to stick to funds that provide some downside protection and return at least 12-15 per cent per annum.

Such returns would help build a corpus of Rs 13.5-14.4 lakh at the end of four years. If your portfolio struggles to deliver this return in the next 2-3 years, you would have little choice but to up your savings. After four years when you reach the required corpus whichever is early, consider using a systematic transfer plan to shift the money to safer short-term debt funds or move to one-year bank deposits. The funds you hold can be trimmed but have to be periodically reviewed nevertheless. You can use any of the free online tools available to load your investment details as a one-time job. It would help you keep track of your funds' performance. 

COMPACT SIZE

Moving to your portfolio, we would not risk any SIPs in theme funds such as infrastructure as they require active tracking and profit booking. We therefore suggest you stop SIPs in Tata Infrastructure and DSP BR T.I.G.E.R. Shift these to UTI Opportunities. Also switch from Reliance Equity Opportunities to the UTI fund. Shift the money in Birla Sun Life Top 100 to Birla Sun Life Dividend Yield Plus and holdings in Birla Sun Life Frontline Equity to DSPBR Top 100.

Returns of large-cap funds would be capped given their restricted investment universe. Holding one of them would do. You have not mentioned the name of your SBI fund; exit it nevertheless. Also sell Reliance Growth and Reliance Regular Savings Equity, which have been laggards for sometime.

Instead, start SIPs in HDFC Equity. Switch from DSP BR Equity to HDFC Equity, as the latter is a superior performer. Retain ICICI Pru Discovery. Exit Sundaram Select Midcap and Birla Sun Life Midcap and instead start SIPs in HDFC Midcap Opportunities. This will reduce your 14 funds to six, weed out underperformers and remove duplication.

Mahindra & Mahindra: Higher input costs impacted operating margins:: Kotak Securities

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Mahindra & Mahindra (MM)
Automobiles
Higher input costs impacted operating margins. 4QFY11 profit of Rs6.06 bn was
13% below our estimates driven by higher raw material expenses, rise in staff and other
expenses. Sharp rise in steel and rubber prices and delay in price increase impacted
gross margins. We downgrade the stock to ADD (from BUY) as we revise our earnings
downwards to factor in withdrawal of VAT refund benefit outside Maharashtra and
higher-than-expected increase in input costs.

Kotak Sec, Petronet LNG: LNG from Gazprom, positive for sentiment but not for earnings, valuations

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Petronet LNG (PLNG)
Energy
LNG from Gazprom, positive for sentiment but not for earnings, valuations.
PLNG has entered into an initial pact with Gazprom for supply of 2.5 mtpa of LNG for
25 years. We view this development as positive as it reduces the uncertainty relating to
the sourcing of gas for PLNG’s terminals at Dahej and Kochi. The terms of the deal are
yet to be worked out between the companies. However, we do not see any upside to
our earnings estimates or valuations for PLNG given our assumption of full utilization at
PLNG’s Dahej and Kochi terminals. We continue to have concerns regarding the
acceptance of high-priced LNG in the domestic market by price-sensitive consumers like
power and fertilizers.

Hindalco: Execution issues crop up:: Kotak Securities

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Hindalco Industries (HNDL)
Metals & Mining
Execution issues crop up. Hindalco reported consolidated net income of Rs24.6 bn for
FY2011, which was lower than our estimate. Consolidated EBITDA of Rs80 bn was also
lower than our estimate. More important, the company announced cost escalations and
pushed back commissioning date of greenfield projects by further six months.
Effectively, the volume growth theme is pushed back to FY2014E. The Hindalco stock
may have downside protection from the steady and growing Novelis business though
the upside catalyst has to wait for improvement in execution.

Kotak Sec, Sintex Industries: On-the-ground checks raise concerns on monolithic construction

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Sintex (SINT)
Others
On-the-ground checks raise concerns on monolithic construction. We recently met
officials of the Uttar Pradesh Housing Board. Our meeting has led us to believe that (1)
the monolithic construction technique is not a competitive advantage as all the
competing contractors use the same (as per the tender), (2) the perception that other
construction companies would take time to scale up the learning curve is incorrect, and
(3) it is actually plain simple construction. We maintain SELL with a target price of Rs170
(10X FY2013E EPS; adjusted for impact of FCCB).

Goldman Sachs:: Sell Punj Lloyd - Headwinds continue, risk-reward still unfavorable

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Sell
Punj Lloyd (PUJL.BO)
Return Potential:  (11%)   Equity Research
Headwinds continue, risk-reward still unfavorable: reiterate Sell
Source of opportunity
We reiterate our Sell rating on Punj on continuing near-term headwinds to
growth given 1) minimal contribution to FY12E revenues from Libya orders
(16% of order backlog); 2) longer execution-cycle infrastructure orders are
roughly 40% of order book, suggesting that an execution uptick is still
some time away; and 3) we see risk of further write-offs on the back of
incremental Rs12bn auditor qualification on Libya projects in 4QFY11.
Though we increase our FY12-13E EBITDA margin estimates by 60-80 bps,
high debt (1.3X net debt/equity for FY12E) and low interest coverage (1X
for FY11) mean that the positive impact on net profits is limited.
Catalyst
We see the following negative catalysts for Punj: 1) weak order inflow
trend continuing in FY12; 2) further deterioration in execution and
receivables cycle; and 3) lower-than-expected FY12 margins. We lower our
FY12/13 revenue estimates by 14%/18% as we build in slower-thanexpected order inflows as well as execution over this period. This, coupled
with high interest expenses, leads to a 71%/35% cut to our FY12/13 EPS
estimates. We also introduce our FY14 EPS estimate of Rs 8.62.
Valuation
We revise our valuation methodology to P/B from P/E given limited visibility on
earnings growth over the next 12 months. Our new 12-month target price is Rs
57 (from Rs 62), based on 0.63X FY12E BVPS, close to its  5-yr trough P/B. Punj’s
Indian construction peers trade at FY12E P/B of 1.5X with an average FY12E ROE
of 8% vs the 2% ROE that we expect for Punj in FY12E. We reiterate our Sell
rating as we see higher relative upside elsewhere in our coverage universe.
Key risks
Risks to our target price include faster-than-expected improvement in
execution and receivables collection; a pickup in order inflow activity from
the Middle East; and stronger-than-expected margin improvement in FY12.
INVESTMENT LIST MEMBERSHIP
Asia Pacific Sell List
 
 
Coverage View:  Neutral

Oil India: Higher subsidy impacts 4QFY11 results:: Kotak Securities

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Oil India (OINL)
Energy
Higher subsidy impacts 4QFY11 results. OIL reported weak 4QFY11 EBITDA at `9.4
bn (-29% qoq, +33% yoy), versus our `9.8 bn estimate led by government’s decision to
increase the share of gross under-recoveries for upstream companies to 38.7% for
FY2011. However, we maintain our ADD rating on the stock noting 19% potential
upside to our revised 12-month target price of `1,515 (`1,540 previously). We find
OIL’s current valuations attractive with the stock trading at 9X FY2012E EPS and 2.9X
FY2012E EV/EBITDA. Key downside risk stems from higher-than-expected subsidy loss.

Havells India - BUY : Target RS.455 :Kotak Sec

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


HAVELLS INDIA LTD (HIL)
RECOMMENDATION: BUY
TARGET PRICE: RS.455
FY12E P/E: 15X
q HIL reported decent set of nos. for Q4FY11. Numbers are slightly above
our expectations on revenue front and net profit front.
q Robust growth in domestic business across all verticals and meaningful
recovery in Sylvania helped margin expansion at consolidated level. Exceptional
income of EUR 5.4 mn in the quarter enhanced Sylvania performance.
q Company has changed its accounting policy with effect from Q4FY11. It
has decided to report net revenue after deducting for sales discounts,
incentives and rebates.
q On normalized basis, domestic business has reported margin pressure
mainly on account of higher input prices and increased employee expenses.
q Management has concluded successful restructuring at Sylvania. It is
likely to report consistency in performance going ahead. Management
expects to maintain Sylvania's margins at FY11 levels.
q Company is adequately positioned to benefit from the growth in consumer
durable space in the domestic market.
q We maintain BUY rating on the company's stock with a one year DCF
based price target of Rs.455 (Rs 450 ealier).

Kotak Sec, Automobiles: Momentum slowing down

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Automobiles
India
Momentum slowing down. Auto volumes in May 2011 were a mixed bag indicating a
slowdown in passenger car volumes while utility vehicle and Hero Honda two-wheeler
volumes remained quite strong. Tata Motors’ domestic MHCV volumes picked up
slightly (12% yoy) in May. Passenger car volumes picked up sequentially in May as
companies increased discounts to lift consumer sentiment. We see near-term pressure
on volumes to continue in passenger cars till the festive season.

Kotak Sec, Biocon: Fidaxomicin: Implications of approval for Biocon

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Biocon (BIOS)
Pharmaceuticals
Fidaxomicin: Implications of approval for Biocon. Optimer received FDA approval
for Dificid (Fidaxomicin) on May 27, 2011. Biocon is the exclusive API supplier for Dificid
for US. Optimer has guided for an August launch; we believe Biocon will start supplying
commercial quantities from 1QFY12E. We await the launch and subsequent build-up in
sales—it is still early to build this prospect into our forecasts. We refrain from building in
explicit forecasts but highlight that this (1) will be a high-margin opportunity for Biocon
as this is an innovative drug with premium pricing and (2) holds the potential to be a
US$50 mn opportunity in sales or EPS of Rs3.4 for Biocon (at Dificid’s peak sales
estimate of US$500 mn). Maintain BUY with a price target of Rs480 (18X FY2013E core
EPS).

How India's growth story differs from China's :: Business Line

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��

Analysis of data on gross domestic product (GDP) — the value of all goods and services produced in a country's territory over a given period — usually looks at the income or ‘supply' side. This essentially refers to the composition of GDP in terms of individual sectors (agriculture, industry and services and, within these, sub-sectors such as manufacturing or construction) and their respective growth rates.

The market value of production in each sector (say, agriculture) translates into income for agents in that particular value chain (farmers, traders or truckers in this case).

But the other way of analysing GDP is to consider the expenditure or ‘demand' side. This factors in the total spending in a country — whether in the form of consumption by private households (C) and government (G) or as investment (I) in new plant and machinery by corporates.

In addition, there are goods and services produced domestically, but consumed outside the country (manifesting as exports or E), which have to be netted out from those produced overseas, but consumed within (manifesting as imports or M). The sum of all these expenditures (C+G+I+E-M) would add up to the value of what is produced in the country. In other words, its GDP.

The expenditure approach to GDP yields interesting insights into the workings of an economy. These include what are the drivers of its growth: Is it coming mainly from consumption or, alternatively, from demand for steel and cement due to building of new roads, airports and rail corridors? These, in turn, influence the very composition of GDP, besides the nature and sustainability of growth in that economy.

TWO WORLDS

A useful way to understand the implications of the expenditure approach is through a comparison of India and China.

The Central Statistics Office's latest national income estimates for 2010-11 show the share of consumption in India's GDP at 68.7 per cent, of which 57.2 per cent was from C and 11.5 per cent from G. On the other hand, gross fixed capital formation or I accounted for 29.5 per cent, while E-M contributed minus 3.2 per cent (a result of the country's imports of goods and services, both for consumption as well as investment, exceeding its exports). The balance five per cent comprised inventories and assorted residual items.

It is quite the other way in China, where only 48 per cent of its GDP in 2009 — the latest year for which data is available — originated from consumption, including 35.1 per cent from C and 12.9 per cent from G.

The corresponding contribution of I stood as high as 45.4 per cent, with net exports (E-M) adding another 4.4 per cent, taking their combined share in GDP to almost half (against slightly over a quarter for India). The above numbers reveal two very different economies — one, that is significantly based on consumption and the other, that is largely investment and exports-driven.

The contrast becomes sharper if one looks at just private final consumption expenditure or C, where the relative ratio to GDP for India is more than 1.6 times that of China.

The Charts plot these ratios — including for G and I — for both countries over the last three decades. What emerges is a pattern, where the two economies have both recorded rising investment rates alongside a decline in the share of consumption.

The difference, though, is in the magnitudes. India's current investment rate is less than two-thirds of China — which explains why it produced some 67 million tonnes (mt) of crude steel and 220 mt of cement in 2010, compared with the latter's 627 mt and 1,800 mt.

CONSUME OR INVEST

China's economic model has basically involved suppression of consumption, especially in rural areas that account for hardly 24 per cent of private final consumption expenditure despite housing roughly 53 per cent of the population.

Sustained low wages (relative to productivity), financial repression (leading to households receiving, and firms benefiting from, below-equilibrium interest rates) and an undervalued currency (boosting profits from exports) have helped generate higher retained earnings for corporates to deploy into fixed investments.

These differences in the expenditure structure of GDP also show up in the way the two economies responded to the recent global meltdown. China saw its net exports-to-GDP ratio more than halve from 8.8 per cent between 2007 and 2009.

It offset this, however, by raising the investment rate from 39.1 per cent to 45.4 per cent.

India did otherwise by stimulating consumption through excise rate cuts and implementation of the Sixth Pay Commission's report, among other things. So, the overall consumption rate rose two percentage points, which effectively neutralised the decline in investment rate during this period.

The result: Neither of the two economies suffered the pangs of recession that others went through and are continuing to experience.

Goldman Sachs:: Reliance Communications : Below expectations despite 133% qoq increase in Global revenues

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Reliance Communications (RLCM.BO)
Neutral  Equity Research
Below expectations despite 133% qoq increase in Global revenues
What surprised us
RCOM reported 4QFY11 rev/EBITDA that were 55%/146% above our (and
54%/148% above Bloomberg consensus estimates) mainly due to 133%
qoq increase in Global rev. Adjusted for the one-off rev,  total rev and
EBITDA were +4.8%/-6.0% vs. our estimates. Net profit was 20% below our
(and 30% below consensus) est. mainly due to higher than estimated net
int. expense and income tax. Positives: 1) Cellular rev was up 3.3% qoq
(up 3.8% qoq for Bharti) and was 1.9% ahead of our est. RPM was stable at
Rs0.44; 2) Broadband rev was up 11.7%qoq (+10.5% vs. our est.) largely
due to 11% qoq increase in ARPL (Avg rev per line). 3) Mgmt guided a 65%
yoy decline in FY12 capex at Rs15 bn, implying 5% capex/FY12E sales.
Negatives: 1) Adjusted for Global, EBITDA margin was down 370 bps qoq
and missed our est. by 330 bps largely due to higher network opex.
Cellular and broadband margins fell 160 bps/400 bps qoq; 2) Tax expense
in 4Q was Rs1.7 bn vs. our estimate of Rs835 mn. 3) Net interest expense
in 4Q at Rs2.2bn (up 72% qoq) was higher than our estimate of Rs1.1 bn
due to higher than est. 3G related int. expenses and high cost of debt in
our view. Mgmt classified the IRU (Indefeasible Right of Use) income for
network capacity as license income and as a result, revenue was higher by
Rs25.5 bn (and net profit was down by Rs 470 mn) in 4Q.
What to do with the stock
We model-in weaker than expected 4Q results, and higher opex/interest
expenses/tax rate. As a result, we lower our FY12E/13E/14E EPS by
12.7%/16.9%/17.6%. Accordingly, our 12m SOTP-based TP decreases by 17%
to Rs95. We reiterate our Neutral rating on RCOM. Higher-than-expected
data uptake/ regulatory overhang are upside/downside risks.

GAIL management optimistic (as always) at the annual investor meet in Mumbai : Credit Suisse

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


● GAIL held its annual investors meet in Mumbai on Thursday. We
highlight the key takeaways in this note.
● GAIL expects gas transmission volumes to average 135 mmscmd
in FY12 (118 in FY11, 120 in 4Q FY11, and a target of 118 set in
the MoU with the government). If volumes grow linearly, FY12 exit
rates will have to be c.150 mmscmd. Alternatively, GAIL volumes
must hit 135 mmscmd fairly soon. None of it seems likely.
● We think a large part of this near-term optimism is based on GAIL
using the ‘official’ estimate of KG D6 production—80 mmscmd by
March 2012. This is unlikely, as RIL and DGH have only recently
begun talking about steps needed to grow volumes. GAIL is also
perhaps counting on volumes from the Dabhol LNG, new
domestic fields and LNG.
● While each of these volume drivers is individually likely, they may
not happen in FY12. GAIL capex forecasts (US$6.3 bn over the
next three years) continue to include projects we do not
incorporate yet. We will review our model as the FY11 annual
report publishes.

India Cements: Prices in South improve-though ICEM does not benefit:: Kotak Securities

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


India Cements (ICEM)
Cement
Prices in South improve—though ICEM does not benefit. India Cement’s (ICEM)
operating results met estimates—as the miss on realizations was offset by higher
dispatches. We are surprised by ICEM’s inability to capitalize on the 4% qoq
improvement in cement prices in South—despite no shift in overall sales mix. We
maintain our cautious stance with a revised target price of Rs92/share (Rs100
previously).

Goldman Sachs:: Tata Communications - Below expectations on revenue; turnaround not in sight

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Tata Communications (TATA.BO)
Sell  Equity Research
Below expectations on revenue; turnaround not in sight yet
What surprised us
We reiterate our Sell rating on Tata Communications (TCOM) and its ADR
after the company reported 4QFY11 revenue that was 3.4%/1.2% below
GS/Bloomberg consensus estimates. However, EBITDA was 11.5%/18.6%
above GS/consensus estimates largely due to lower network expenses.
Reported PAT for the quarter was a loss of Rs1.6bn vs. GS/consensus loss
estimate of Rs2.6bn/Rs2.4bn largely due to higher EBITDA and lower net
interest expense. Positives: 1) EBITDA margin improved 130bp qoq and was
160bp ahead of our estimate as network expense declined 1.5% qoq (6.0%
below our estimate); 2) Net interest expense declined 36% qoq and was 40%
below our estimate due to lower cost of debt, in our view; and 3) Neotel’s
implied EBITDA margin improved 480bp yoy to -28.6% in FY11, indicating
improvement in operations. Negatives: 1) Total revenue missed our
estimate largely due to enterprise data and wholesale voice revenue that
were 4.6%/2.3% below GS estimates; 2) Voice tariffs continued to decline
yoy and net RPM reduced 23% in FY11 to US$0.46 (vs. US$0.60 in FY10); 3)
TCOM reported severance costs of Rs460mn and wrote-off fixed assets
worth Rs251.5mn, increasing 4QFY11 net loss by 25%.
What to do with the stock
We lower our FY12E-FY13E revenue by 2.1%/2.6% to account for weakerthan-expected 4QFY11 revenue. We also factor in lower operating expense,
and as a result our loss per share decreases to Rs15.96/Rs13.40 (from
Rs27.59/Rs15.86). Our 12m SOTP-based TP, however, reduces by 9% to
Rs200 (ADR: US$8.91) to reflect higher capex (based on TCOM’s stated 3-
year capex plan). We introduce FY14E EPS and roll forward our core
business DCF value by 3m. Risk: Resolution of surplus land issue.

Goldman Sachs:: Housing Development & Infrastructure- In line with expectations: Positive operating cash flows in 2HFY11

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Housing Development & Infrastructure
Buy  Equity Research
In line with expectations: Positive operating cash flows in 2HFY11
What surprised us
HDIL reported 4QFY11 PAT of Rs1.97bn (vs. GSe of Rs1.8bn) and sales of
Rs5.2 bn, up 8% and 21% yoy, respectively. EBITDA margin of 49%
decreased by 973 bp qoq due to lower TDR realizations of Rs2,600/sq ft.
HDIL reported TDR sales of 0.9 mn sq ft and land sales of Rs3bn in Andheri.
Highlights of results, conference call, and management guidance: 1)
TDR sales of about 1mn sq ft per quarter in FY12 at an average realization of
Rs2,500/sq ft; 2) Debt reduction of 20%-25% by March 2012 (we are
assuming a 10% reduction); 3) HDIL generated positive cash flow from
operations through increased sales in 2HFY11; 4) Management maintained
its policy of recognizing revenues only when a project is completed for FY12.
Consequently, HDIL stated it could see revenue recognized from four
projects in FY12, as these projects are completed; 5) Launch of projects in
Panvel, Shahad, and Boisar is likely in the near term. We believe that
launched/forthcoming projects indicate a cumulative sales value of Rs144bn
and cash flow potential of Rs90bn vs. the current EV of Rs96bn (Exhibit 2).
What to do with the stock
We raise our FY12E/FY13E EPS by 19%/14% to reflect the transfer of
revenues to FY12E from FY11 due to delayed receipts from land sales. We
also introduce FY14E EPS. We increase our 12-month RNAV-based target
price to Rs216 from Rs211 to factor in higher achieved prices in launched
properties. Our TP is set at a 30% discount (unchanged) to our FY2012E
NAV of Rs337. We maintain our Buy rating on HDIL. The stock looks
attractively valued trading at FY2013E P/B of 0.6X vs. the sector average of
1.2X. Key risks include execution delays inherent in slum rehabilitation
projects, sharp correction in prices in Mumbai.

Goldman Sachs:: Lanco Infratech - Below expectations on higher eliminations and lower EPC margins

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Lanco Infratech (LAIN.BO)
Buy  Equity Research
Below expectations on higher eliminations and lower EPC margins
What surprised us
Lanco Infratech reported FY11 PAT of Rs4.4bn, below GSe of Rs5.6bn and
Bloomberg consensus of Rs6.5bn, primarily due to 1) higher eliminations, as
EPC revenue recognition for subsidiaries was higher than we had expected; 2)
lower EPC margins (7% vs. GSe 13%) as revenues for Vidharbha and Babandh
were not recognized due to non-achievement of critical milestones. However,
performance of the power division was in line with our estimates. 4QFY11
merchant tariffs were Rs4.3/kwh-4.7/kwh for Amarkantak and Kondapalli II
power projects, and management guided for FY12 merchant realizations to be
around Rs4/kwh, with 1QFY12 realizations of about Rs5.5/kwh.
On power projects under construction, Lanco indicated that 1) Anpara Unit
1 (600MW) will be commissioned by 2QFY12; 2) Kondapalli III (742MW)
will become operational during 2HFY12; however, no visibility on gas yet;
and; 3) Udupi Unit 2 likely to be commissioned by 3QFY12. We expect
Lanco to have installed capacity of about 4000MW by FY12E.
What to do with the stock
We retain CL-Buy on Lanco with 12-m SOTP-based TP of Rs54, implying
potential upside of 62%. We believe the stock price is not reflecting the value
of 4GW of projects under development and about 50% of the value of its
construction business. We believe further visibility on commissioning of
projects will be the key for re-rating of the stock. We lower our FY12E/13E
EPS by 1%-3% to reflect higher expenses, and wait for further visibility on
EPC revenue mix over the next two quarters. The stock is trading at a 36%
discount on FY12E P/E and P/B relative to peers. Key risk: Higher-thanexpected decline in merchant tariffs and delays in projects.

UBS :: Lanco Infratech - Strong momentum in key segments

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


UBS Investment Research
Lanco Infratech
Strong momentum in key segments  
 
„ A strong buying opportunity?
Lanco’s share price has fallen 47% YTD (from Rs63 to Rs34). The key reasons
behind the correction were concern on security of coal linkages, merchant tariff
weakness and change in deprecation policy in Q3 results, in our view. We believe
that at this price, the risk reward is now extremely favourable and that this is a
good opportunity to buy on a 12 month view.
„ FY11 results indicate strong business momentum in Power segment
Power is the core business for Lanco and we think the company has made good
progress in this segment: 1) Merchant realisations were good in FY11 (Kondapalli
II at Rs4.25 and Amarkantak I at Rs4.57 per unit); 2) In FY11, Udupi (1,200 MW),
Anpara (600 MW), and Kondapalli (133 MW, Steam turbine) were synchronised;
3) Lanco purchased Griffin mines in Australia, which provide increased fuel
security; and 4) good progress on 4,700MW of new projects (Rs33bn equity
already invested).
„ Robust outlook for EPC and construction business
Engineering, procurement and construction (EPC) is critical to achieve on-time
completion of power projects and we think the outlook for this business is strong:
1) EBITDA margin of 15% in FY11, which we think is sustainable; 2) Order book
as on 31 March 2011 is Rs302bn (~5x FY11 revenues); 3) Good momentum on
external orders e.g. 1200 MW EPC order from Moser Baer, 1980 MW BoP order
from Mahagenco.
„ Valuation: maintain Buy rating and price target of Rs70
We derive our price target using a sum-of-the-parts methodology. We value Lanco
as a conglomerate, with power contributing 68% of valuation and EPC 23%

Goldman Sachs:: Housing Development & Infrastructure:: Clarity on airport slum rehabilitation project to improve valuations

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Housing Development & Infrastructure
Buy  Equity Research
Clarity on airport slum rehabilitation project to improve valuations
What's changed
According to management, the MMRDA has commenced shifting of
eligible slum dwellers from MIAL slums to the Kurla Premier compound
and allotment letters for flats has been issued to eligible slum dwellers by
MMRDA.  HDIL is in the process of constructing more than 20,000 units at
the site. We highlight there had been limited clarity on the same since the
change in political leadership in Maharashtra in November 2010.
Implications
In our view, commencement of the shifting will likely result in multiple benefits
as clarity emerges on: (1) TDR (transfer of development rights) generation
beyond FY12E. HDIL management has stated that they can generate TDRs to
maintain a quarterly run-rate of around 1 mn sqft/quarter in FY12E; (2) approvals
for further phases of the project; and (3) approval process in Mumbai, which has
been slow over the past six months. We estimate FY12E-based NAV from this
project at Rs97/share. As clarity improves and we observe continued progress,
we would expect a 50% discount to NAV (which we have modeled for this
project) against a 30% discount for other projects of HDIL.  
Valuation
We maintain our 12-month RNAV-based target price of Rs216, which reflects
30% discount to FY2012E for projects other than MIAL, which we value at a 50%
discount. We maintain our Buy rating on HDIL. The stock looks attractively
valued, trading at FY2013E P/B of 0.6X vs. the sector average of 1.2X. Total
visible value of cash flows is Rs125 bn, or post tax around Rs105 bn, against
present EV + net customer advances of Rs110 bn.  Total accrued value broken
into various buckets is: 1) Launched properties (Rs38 bn or Rs86/share), (2)
Forthcoming projects (Rs57 bn or Rs128/share), and (3) commercial properties
(Rs31 bn or Rs70/share).
Key risks
Execution delays inherent in slum rehabilitation projects, sharp correction
in prices in Mumbai.
INVESTMENT LIST MEMBERSHIP
Asia Pacific Buy List
 
 
Coverage View:  Attractive

Goldman Sachs:: Removed Max India from Asia Pacific Conviction Buy List

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Removed from Asia Pacific Conviction Buy List
Max India (MAXI.BO)
Equity Research
Life insurance gaining traction, but down to Neutral on valuations
What happened
We downgrade Max India, post the recent outperformance, to Neutral from
Buy (on CL), given: (1) relatively lower upside potential (13%) vs. other Buyrated stocks under our coverage (25%-30%), (2) lack of near-term catalysts as
we expect premium growth in Max New York Life (MNYL, about 90% of our
SOTP value) to remain subdued in 1HFY12 and improvement in persistency/
cost ratios to accrue gradually. We expect calculated NBAP margins to
decline to 12% in FY12E (from 13% in FY11) reflecting higher share of
traditional policies. Since we added it to Buy (on CL) on March 18, 2011, the
stock is up 16.8% vs. a 3.5% rise in Sensex (past 12 m +2.9% vs. +9.2%).
Current view
We revise our consolidated FY12E/FY13E EPS by -1%/+8.4% post 4Q results
to reflect lower expenses and maintain our 12-m SOTP-based TP at Rs190.
We believe MNYL is gaining traction on volumes, but FY11 PBT was 14%
below GSe on consolidation of branches and employee rationalisation.
Life insurance (MNYL): Buoyed by higher commissions and benefiting from
the recent Axis Bank tie-up (70% of branches now sell insurance), MNYL has
reported 19.6% FY11 premium growth (in line with GSe), with market share in
retail APE improving to 3.4% from 2.9% in FY10. Further, we expect the focus
to remain on traditional and regular products. Despite one-off write-down in
FY11 of Rs1.21 bn, we think cost-cutting measures are still to yield results.
Others: (1) Health Insurance – remains in investment mode (expanding
footprint, products) with accumulated FY11 loss of Rs1.6 bn and capital
invested of Rs2.9 bn. (2) Standalone (incl. specialty films) reported
higher losses than GSe in FY11 due to lower investment income. (3)
Healthcare – ramp up continued with beds rising to 926 in FY11 vs. 721 in
FY10. EBITDA margin is improving on operating leverage as hospitals
move towards steady state.
Key risks: Upside: Better cost ratios, higher volumes; Downside: Tight
regulations on traditional policies, lower persistency impacting margins.
INVESTMENT LIST MEMBERSHIP
Neutral
 
 
Coverage View:  Neutral

Goldman Sachs:: SBI management continues to clear the air

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


SBI management continues to clear the air
News
SBI hosted a follow-on analyst meeting today, wherein the top management
addressed concerns post 4QFY11. Key highlights: (1) SBI reiterated its FY12
NIM guidance at 3.5% (vs. 3.3% in FY11) by increasing the tenure of loans to
existing borrowers, maintaining high CASA (at 48.7%). (2) Focus on asset
quality: SBI conceded the need to strengthen its systems and has appointed a
MD with sole responsibility. The target gross NPA in FY12 is c.2.75% (vs. 3.28%
in FY11) on the back of higher recoveries and lower slippages, as SBI believes
the bulk of the pain has been taken. However, SBI flagged more cases of moral
hazard post the debt-waiver in Agri loans (FY11 NPLs at 6.37% vs. 3.66% in
FY10). (3) Pension liability: SBI stated that it has no unfunded pension liability
deficit (c.Rs110bn provided in 4QFY11, 17% of FY11 net worth). We believe the
pension liability provisions will remain a long-term issue for PSU banks unless
they start factoring in the wage hike effected once every five years in their
actuarial calculation (next wage hike will be effective from 1 November 2012).
Additionally, it is not clear if there is any risk of improved life expectancy, as
banks might be using the old LIC mortality tables (last updated 1994-96). (4)
High tax rate of 44.7% in FY11 was due to Rs47.5bn of provisions pertaining
to standard assets/superannuation, disallowed for tax purposes. Normalized
tax rate indicated at  37%. (5) Other data shared: (a) Exposure to power sector
of Rs300bn (4% of total loans), of which Rs50-60bn was to state electricity
boards; (b) airline exposure of Rs45bn (0.6%); (c) 2G telecom exposure: Rs23bn
(0.3%), of which Rs15bn pertains to companies under investigation.
Analysis
We had upgraded the stock to Neutral (from Sell) post the 4QFY11 results, as
valuations had corrected significantly and in our view management is taking
corrective measures. Today’s discussions help alleviate concerns, but we believe
execution would inspire confidence gradually.
Implications
We retain  our Neutral and 12-m SOTP TP of Rs2,650 (1.47xFY12 standalone P/BV), with 15% upside vs 25%-30% for our Buy-rated stocks.
INVESTMENT LIST MEMBERSHIP
Neutral
 
 
Coverage View:  Neutral

6/6/11: Economic and Political News 􀂄 Key events:: Angel Broking,

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Economic and Political News
􀂄 GoM on coal to meet on June 16 to address green hurdles
􀂄 EGoM to make its stand clear on KG gas supply cut before HC
􀂄 EGoM meeting on gas allocation called off
􀂄 Government allows tax relief for infra funding companies

Corporate News
􀂄 Hindustan Dorr-Oliver bags US$85mn EPC contract
􀂄 PTC India Financial okays `500cr debt to three power companies
􀂄 Ashok Leyland’s sales down 12% in May
􀂄 Jubilant Life Sciences gets USFDA nod for CNS drug
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint

Events for the day
Geojit BNP Results

Gujarat State Petronet - Analyst meet takeaways - Management banking on LNG supplies:: Deutsche bank

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Gujarat State Petronet
Hold
Analyst meet takeaways - Management banking on LNG supplies


We attended GSPL's analyst meet. Key takeaways from the same include:
** Volume growth: Management has guided for gas transmission volume
to grow by 10mmscmd to 45mmscmd in the next two years, but was silent
on where will the growth come from. We believe that management's guidance is unlikely to be met given that RIL's gas production is not expected
to increase from current levels of c50mmscd for the next 2 years.
** Pipeline tariff: GSPL has filed its tariff with the regulator PNGRB which
the management said is much higher than the average tariff of INR790/'000
scm earned by it in FY11. It does not expect the tariff determined by PNGRB
to be lower than that earned in FY11. We have assumed a tariff of
INR800/'000 scm for GSPL going ahead.
** Capex: Management has guided for a capex of INR60-70bn each year
for the next three years on expanding its pipeline network in Gujarat. GSPL
plans to expand its pipeline network to 2400km by FY12-end from 1900km
in FY11.
** Cross-country pipelines: GSPL has received Letter of Intent (LOI) from
PNGRB for laying three cross-country pipelines of c4000km. GSPL will have
52% stake in the consortium with IOC (26%), BPCL (11%) and HPCL (11%)
being the other partners.  GSPL has to finish laying of these pipelines in 36
months or in FY15. Management has guided for a capex of INR122bn for
these pipeline with a likely debt/equity of 70:30. Management expects Equity IRR to be more than 15% for these projects and has guided for levelised
tariff of INR29.92/ 32.64/ 8.95 per mmbtu for Mallavaram-Bhilwara/
Mehsana-Bhatinda/ Bhatinda-Jammu pipelines respectively.
** Gas sourcing for new pipelines: Management has guided for the new
cross-country pipelines to operate at 40% utilisation rate in the first two
years of operation i.e. FY15 and FY16 and at 50% for FY17. It expects gas
supplies for these initial quantities to be met from GSPC's Deen Dayal block
(10mmscmd), greenfield Mundra (5mmtpa) and Pipavav (3mmtpa) LNG terminals, and expansion in Dahej and Hazira LNG terminals. We believe there
is a downside risk to management's guidance on gas supplies.
We rate GSPL a Hold with INR110 TP as we expect gas supplies in India
(including imports) to grow at only a 4% CAGR over FY11-13. This will adversely impact the utilisation of GSPL's expanded pipeline network and we
expect its RoEs to fall from 28% in FY11 to 20% in FY13 as a result of this.

RIL’s 37th AGM – Key Takeaways from Mukesh Ambani : Angel Broking

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


RIL’s 37th AGM – Key Takeaways
Mukesh Ambani at the 37th Annual General Meeting (AGM) highlighted the strength of the
company’s financial position and expects the company to be debt free by the end of the
current financial year. As of March 31, 2011, RIL had cash and cash equivalent of
`42,393cr and debt of `67,397cr. Mr. Ambani expects the next growth driver for the
company to be the retail and broadband services businesses and will consider partnering
with world leaders to enter other new business avenues, besides making investments in its
extant business.
Following are the highlights of the AGM:-
On the retail front, Mr. Ambani highlighted the position of Reliance Retail as the largest
food retailer in India and expects it to be an undisputed leader in India. He sees, Reliance
Retail to be the pivot of all the company's consumer-facing businesses. Thus, the company
plans to aggressively invest in the retail business and intends to soon launch cash and
carry format stores.
On the broadband front, Mr. Ambani sees transformational potential in the broadband
wireless business and expects it to be the next big leap in digitalisation. Currently, RIL is
engaged in conceptualising digital products and plans to build a national broadband
infrastructure.
On the extant business, Mr. Ambani highlighted that the company plans to increase
polyester capacity to 3.6mmtpa; whereas on the petrochemical side, it is setting up
1.5mmtpa gas cracker at Jamnagar refinery. On the E&P business, Mr. Ambani
highlighted the RIL-BP partnership as unprecedented and transformational and said that
efforts are underway to comprehend the complexity of KG-D6 reservoirs. Thus, the
company plans to ramp up KG-D6 gas production in a sustainable manner.
We continue to remain positive on the growth prospects of RIL, with the refining and
petrochemical businesses currently doing well, although there are some concerns on the
KG basin gas output. Nevertheless, we believe RIL’s deal with BP is a positive one, as the
combined expertise of both the parties will result in optimisation of producing blocks and
enhancement of resources in exploratory blocks. On the valuations front, the stock is
currently trading at 12.1x FY2013E EPS of `77.2. We maintain our Buy rating on RIL with a
target price of `1,189.

Banks/Financial Institutions: Key takeaways from KIE's 3rd BFSI Conclave:: Kotak Securities

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Banks/Financial Institutions
BFSI CONCLAVE 2011
Key takeaways from KIE’s 3rd BFSI Conclave. We hosted 32 companies over two days
of intense interactions with institutional investors. Companies in the financial space
appear to be watching with caution macro indicators of high inflation and rising rates,
even as they are optimistic of sustaining ~20% loan growth with somewhat moderate
margins. Managements remain positive on asset quality despite headwinds and expect
FY2012E to be a good year on this front. Managements do not expect defaults, not
even in the infrastructure sector that is rife with challenges (especially Power).
Corporate strategists would like to see greater government will and execution of
strategies that will address India’s current challenges.

GE, Crompton Greaves may be eyeing TRIL stake :: Angel Broking

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


GE, Crompton Greaves may be eyeing TRIL stake
The promoters of Transformers & Rectifiers India (TRIL) are believed to be talking to
prospective buyers to sell a part or majority of their stake in the company. The promoters,
the Mamtora family, own about 77% stake in the company, which manufactures a wide
range of transformers. GE and Crompton Greaves are tipped to be potential buyers
interested in buying a stake in TRIL. The company had reported net profit of `40cr on
revenue of `541cr for the year ended March 2011. GE has already acquired a majority
stake in Chennai-based InfoTech Transformers (ITT) through GE Prolec. According to news
reports, GE may consider selling its stake in ITT and buy TRIL’s stake. GE Prolec plans to
make India a supply base for Middle East, Africa and the rest of Asian markets. We believe
this likely consolidation would be beneficial for the Indian transformers industry due to the
present overcapacity scenario. We maintain Buy on Crompton Greaves with a target price
of `300.

Bharat Heavy Electricals - Ansaldo Out - Doosan In @ NTPC bulk tender „:: BofA Merrill Lynch

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Bharat Heavy Electricals
   
Ansaldo Out - Doosan In @
NTPC bulk tender
„Survival of the fittest in NTPC 9x800MW Tender; Buy BHEL
NTPC bulk tender saw 5 bids each in Boiler, where only 2 bidders can win orders
and TG, where 3 bidders can win including BHEL. In boilers, Doosan was the new
entrant, while Ansaldo exited on its rift with NTPC, sealing its fortunes. We see
intense competition among non-BHEL bidders as fortunes of Doosan and
Thermax in boiler and BGR in B&TG, will be sealed based on their ability to win
orders here. Bids now go for technical qualifications. BHEL could win orders for
minimum 4 / max 5 B&TG worth Rs88-110bn (12-15% of FY12E Inflows). Buy
BHEL on visibility of 22% EPS CAGR over FY11-13E with a backlog at 3.4x
FY12E sales and improved competitiveness, trading at 11.6x our FY13E.
7.8GW order likely by 3QFY12; BHEL could win ~3.2-4GW
NTPC likely to award 800MW bulk order worth Rs180bn - for its 3x800MW Kudgi,
2x800MW Lara, 2x800MW Darlipalli and 2x800MW Gajmara power projects, by
3QFY12. If BHEL is lowest bidder (L1), it could get orders for 5 (Boiler) / 5 (TG)
x800MW but if it is L2/L3, as per the tender, it would still win orders for 4 (Boiler) /
4 (TG) sets at L1 price. This would add visibility of 12-15% of FY12E order
Inflows. Boiler tender received bids from - BHEL, Doosan, BGR-Hitachi (BGRH),
L&T-MHI and Thermax-Babcock (TBW). Turbine-Generator (TG) tender was bid
by - BHEL, BGRH, L&T-MHI, Bharat Forge-Alstom (BFA) and JSW-Toshiba.
40% of orders in 4Q despite cloudy skies; Backlog & margin up
BHEL booked 40% of its FY11 inflows in 4Q despite slippage of Rs125bn (21% of
inflows) to FY12E. This validates our thesis (read BHEL) of acceleration in inflows
during 4QFY11 (Table 2 & 4) despite weak sentiments towards capex, based on
our on-ground research. This helped BHEL grow backlog 14%YoY despite market
concerns of rising competition, weak SEB finances and coal shortages impacting
the same. In the 6th year of Chinese competition, BHEL’s FY11 EBITDA margins
expanded 197bps on 199bps fall in employee, which was commendable

Market Outlook June 6, 2011; Angel Broking, India Research

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Dealer’s Diary
The market edged higher at the onset of the trading session. The key
benchmark indices trimmed gains after hitting three-week highs in morning
trade. A bout of volatility was witnessed as the key benchmark indices cut gains,
soon after regaining strength in mid-morning trade as a private survey showed
that the services sector’s activity slowed in May 2011. The market slipped into
the red in afternoon trade. Volatility continued in late trade, as the market
trimmed losses after sliding to a fresh intraday low. The market continued to
remain depressed and closed down with the Sensex and Nifty losing 0.6% each.
The mid-cap and small-cap indices also closed down 0.3% and 0.1%,
respectively. Among the front runners, RCOM, L&T, M&M, Reliance Infra and
Maruti Suzuki gained 1–4% while HDFC, Hindalco, JP Associates, Tata Motors
and RIL lost 2–3%. Among mid caps Eclerx Services, Manappuram Gen,
Kirloskar Oil Engines, Sunteck Realty and Pfizer gained 5–7%, while Sterling
Intl., Monsanto India, Jyothy Lab, HCC and Simplex Infra lost 3–10%.

Derivative Report India Research June 06, 2011: Angel Broking

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Comments
 The Nifty futures’ open interest increased by 2.14% while
Minifty futures’ open interest increased by 1.29% as
market closed at 5516.75 levels.
 The Nifty June future closed at a premium of 6.75 points,
against a premium of 8.10 points in the last trading
session, while the July future closed at a premium of
17.25 points.
 The Implied Volatility of at the money options decreased
from 16.00% to 15.75%.
 The PCR-OI decreased from 1.39 points to 1.31 points.
 The total OI of the market is `1,20,301cr and the stock
futures OI is `32,254cr.
 Few liquid stocks where CoC is positive are TV-18,
GTLINFRA, ABIRLANUVO, NAGARFERT and MTNL.

Goldman Sachs:: NIFTY snaps four week losing streak to gain almost 1% wow despite softening activity

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Most sectors ended in the green wow led by CNXFMCG Index (+3%) and CNXINFR Index (+2.8%)  
 June 01, 2011. as of the close of nd domestic outflows of US$ 40 mn seen,  Strong foreign inflows of US$ 788 mn a 
7.8% yoy vs. consensus expectations of 8.1% yoy. Q1 GDP growth came in worse than expected at  
4QFY11 earnings continue to be weak with 42% of CNX500 companies reporting below expectations  
Overview
Indian equity markets ended up 0.7% wow in a week
that witnessed disappointing macro data releases.
Jan-Mar real GDP growth came in at 7.8% vs. the
revised 8.3% yoy (from 8.2%) growth in Oct-Dec 2010,
confirming weakening activity. For FY11, GDP grew
8.5% yoy vs. 8.0% yoy in FY10. Activity likely peaked
in the first half of FY11 and our Economics team
expects it to slow further in FY12 to 7.5%. PMI too
showed slowing activity at 57.5 for May vs 58 for
April. In April, exports grew 34.4% (vs. 43.9% in Mar),
while imports grew 14.1% (vs. 17.3% in Mar).
NIFTY price performance
NIFTY rose 0.7% last week, down 10.1% ytd
 GS Global ECS Research.  , Datastream , Source: NSE
Foreign and domestic flows
FIIs have sold US$ 81 mn ytd, while DIIs bought
US$ 3.2 bn ytd as of the close of June 01, 2011  
Earnings sentiment and relative valuation
MSCI India Telcos saw the weakest EPS sentiment
(-28%) wow after Reliance Communication
reported below expectations
Commodities
Nat. Gas (+5%) outperformed wow, while Crude
Oil pulled back 2% as MCX Commodities ended
flat wow.
Macro events
Macro data: IP (June 10)
Focus
Monsoon Monitor

UBS Asia Utilities -„ Remove Lanco from Most Preferred

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


UBS Investment Research
Asia Utilities
Alpha Preferences
 
„ Remove Lanco from Most Preferred
We included Lanco as most preferred as we expected strong merchant power tariff
driven by power shortage and Lanco to benefit along with it as it executed on its
power plant build-out plans. However, slowing economic growth, higher financing
cost and ongoing uncertainty over coal availability have become headwinds to the
sector and have reduced our conviction level on the call. Therefore, we are
removing it from the Most Preferred list, but the stock remains Buy rated and our
SOTP-derived price target is unchanged at Rs70.0.
„ Remove Adani Power from Least Preferred
We remove Adani Power from Least Preferred as it has declined 12% YTD. We
still maintain Sell rating on the stock. Although we like the company for its strong
execution, we think the current valuation does not fully factor the risk of lower
merchant tariff and no fuel escalation in PPAs.
„ Our Most and Least preferred
Our current Most preferred list contains China Gas, Datang Corp Renewable
Power, and KEPCO. China Resources Gas and China Longyuan remain on our
Least preferred.

Buy EVEREST KANTO CYLINDERS:: Target Rs 103; Kotak Sec

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


EVEREST KANTO CYLINDERS LTD (EKC)

RECOMMENDATION: BUY
TARGET PRICE: RS.103
CONS. FY12E P/E: 11.8X
q EKC has reported good set of Q4FY11 results which are above our estimates
on strong revenue and excellent margins.
q US and China operations report reduction in losses.
q Volumes up 34% YoY to 2.72 lakh cylinders for Q4 FY11.
q Due to 21% upside potential from current levels we continue to recommend
BUY on EKC with unchanged DCF based price target of Rs.103.
q Concerns - The company has FCCB outstanding USD 35 mn convertible at
Rs 271 per share and redeemable at 142% of the principal amount.

Buy EVEREST KANTO CYLINDERS:: Target Rs 103; Kotak Sec

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


EVEREST KANTO CYLINDERS LTD (EKC)

RECOMMENDATION: BUY
TARGET PRICE: RS.103
CONS. FY12E P/E: 11.8X
q EKC has reported good set of Q4FY11 results which are above our estimates
on strong revenue and excellent margins.
q US and China operations report reduction in losses.
q Volumes up 34% YoY to 2.72 lakh cylinders for Q4 FY11.
q Due to 21% upside potential from current levels we continue to recommend
BUY on EKC with unchanged DCF based price target of Rs.103.
q Concerns - The company has FCCB outstanding USD 35 mn convertible at
Rs 271 per share and redeemable at 142% of the principal amount.

IFCI research, Watch Nifty: 6 June 2011

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��

Watch Nifty

Ø  Nifty was unable to get past 5600 though it made an attempt to touch 5600 once again. As maintained by us, Nifty has formidable resistance around 5600-5650 and unless this level is crossed, Nifty can move down. However, if it were to re-test these levels again it could prove successful in moving up.

Ø  For 06/06, Nifty's resistances are likely around 5600, 5650.

Attractive FD schemes from popular Companies with "double digit return".

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��

Attractive FD schemes from popular Companies with "double digit return".

 

1.  HDFC Platinum Deposits

     -------------------------

Engaged in Housing Finance.  Consistent profit making and Dividend paying Company. PAT for 2009/10 of Rs.2,826 Crs. & Dividend of 360%.  "FAAA" rating by CRISIL & "MAAA" by ICRA.   9.75% interest for 15 months & 33 months Deposits. 0.25% additional interest for Senior Citizens.

2.  Mahindra Finance Samruddhi 

     ------------------------------

Largest Company of our Country in non-banking finance companies with a history of 20 years. Consistent profit making and Dividend paying Company. PAT for 2009/10 of Rs.342 Crs. & Dividend of 75%. "FAAA/stable" rating by CRISIL.   10.50% interest for a 3 years Deposit giving an yield of around 11.64%. 0.25% additional interest for Senior Citizens.

3.  Shriram Transport Unnati

      --------------------------

Largest Company of our Country in Commercial Vehicle Finance with a history of 30 years. Consistent Profit making & Dividend paying Company.   PAT for 2009/10 of Rs.873 Crs. & Dividend of 60%. "FAA+/stable" rating by CRISIL & "MAA+/stable" by ICRA.   10.75% interest for a 3 years Deposit giving an yield of around 12%.