Hold Bank of India; Target : Rs 400::ICICI Securities

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M a r g i n s   a n d   a s s e t   q u a l i t y   g o   f o r   a   t o s s …
Bank of India (BoI) has been facing flak for a long time as it grappled with
asset quality issues and one-off in  retirement benefits in FY11. Q1FY12
saw margins plummeting 70 bps YoY to 2.19% as YoA improved only 51
bps YoY to 8.89% vs. a 122 bps YoY hike in CoF to 6%. Moreover,
business de-growth of 1.4% QoQ and interest income reversal of | 170
crore also impacted margins. Asset quality concerns persisted as
migration to system based NPA and agri NPA led to slippages of | 1684
crore.  This  pushed  up GNPA  by  20% QoQ  to  |  5791  crore.  BoI  is  in  for  a
rough ride given the slowdown in credit growth, pressure on margins and
asset quality troubles. It has guided  for NIM of 2.5% for FY12E, which is
the lowest among peer PSBs. We have lowered our credit growth to 19%
YoY from 20.3% YoY and revised net profits by 4.6% YoY for FY12E.
ƒ Margins plummet; lower NII and higher provision hit profits…
NIM slipped 70 bps YoY to 2.19% as YoA improved only 51 bps YoY
to 8.89% as against a 122 bps YoY hike in CoF to 6%. Higher
slippages to NPA also led to declassification of interest income to
the tune of | 170 crore. PAT was  lower than expectation at | 517
crore as NII declined 20% QoQ and higher slippages pushed up
provisions by 19% QoQ. We expect NIM of 2.5-2.6% and expect
higher credit costs to subdue PAT growth at 15% YoY for FY12E.
ƒ Slippages high, asset quality woes to continue…
We expected the bank to be in the last phase of the asset quality
cycle and anticipated a trend reversal in H2FY12E. Slippages were
high at | 1684 crore as agri loans of ~| 600 crore, infra account of
~| 500 crore and accounts with balances exceeding | 5 lakh were
shifted to system based NPA recognition. The management expects
slippages to remain high in Q2FY12E as remaining 10% of loan book
still needs to be shifted. GNPA shot up 20% QoQ and NNPA
increased 38% QoQ to | 5791 crore and | 2690 crore, respectively.
We expect GNPA @ 2.1% and NNPA @ 1.1% by FY13E.
V a l u a t i o n
RoA and RoE have deteriorated from 1% and 20.4% in Q1FY11 to 0.59%
and 13.13% in Q1FY12. Since the Tier-I ratio is low at 8.02% the bank
may go in for capital raising leading to RoE dilution. We expect
headwinds on NIM and asset quality  front to remain. Hence, we reduce
our target multiple to 1.3x FY13E ABV and value the bank at | 400.

Idea Cellular-- Upgrade?! Naah… Not yet! ::Macquarie Research,

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Idea Cellular
Upgrade?! Naah… Not yet!
Event
 Idea reported decent 1QFY12 results today. EBITDA was 4% ahead of our
estimates (we were 5% ahead of the street). The industry has also seen tariff
increases in the last few weeks, which caused the impressive rally in telecom
stocks. We upgrade earnings estimates and target price but still see no
reason to chase the stock at an FY12E PER of 36x. Maintain Underperform.
Impact
 Good results on key operating parameters: Top line (Rs45.2bn was exactly
in line with our forecast. Meanwhile EBITDA surprised positively- the key
operating highlight that investors had their eye on. Importantly, churn stood at
9.6x (versus 10.7x QoQ). ARPM was up ~1% QoQ (versus our expectation of
a ~0.5% decline)- the first sequential increase after nine quarters.
 ARPM upgrades due to tariff adjustments: Idea is responding to recent
tariff increases by Bharti with similar moves. We expect headline (on-net) tariff
increases, lower trade margins and tactical withdrawal of discounted
packages to drive ARPM growth. We now expect ARPMs to remain flat
(+/- 0.5p) in the next couple of quarters. We then expect them to rise gradually
and end up around 7% higher at the end of eight quarters from now. It is likely
to take that long for the full impact to be felt as pre-paid subscribers recharge
plans over the next four quarters. In addition, the hikes are likely to be rolled
out and absorbed at a slower rate into geographies with lower income levels.
Earnings and target price revision
 We have increased our earnings estimates for FY12, FY13 and FY14 by
5.9%, 11.3% and 10.7% respectively. This is based on the factors discussedoffset by a higher tax rate. Our target price has increased from Rs52 to Rs66
as a result.
Price catalyst
 12-month price target: Rs66.00 based on a Sum of Parts methodology.
 Catalyst: News on operating metrics (ARPM/ tariffs/ 3G), new telecom policy
Action and recommendation
 Maintain Underperform rating: Idea has delivered two consecutive decent
quarters now. Tariff increases in the industry are also encouraging. However,
Idea continues to trade (36x FY12E PER and 21.4x FY13E PER) at a
premium to industry peers (Bharti trades at 22x FY12E and 16x FY13E PER)
driven by M&A expectations. We maintain our view that Idea will instead
emerge as a consolidator when M&A / spectrum regulations turn supportive.
 Idea is a pure play in the sector with a strong business model and operations.
At some stage, we believe Idea may be an interesting play on the sector. We
wait for clarity on the telecom policy (notably M&A rules) and the valuation
premium to shrink before we reconsider our position. Switch to Bharti, our
preferred (and cheaper) way to play the sector.

Hold Shoppers Stop; Target :Rs 383::ICICI Securities

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Shoppers Stop


D e p a r tm e n t a l   s t o r e s   g o i n g   s t r o n g ,   H y p e r C i t y   t o
c a t c h   u p…
Shoppers Stop Ltd’s (SSL) Q1FY12 results were a mixed bag. While
revenues and space addition were  in line with our estimates, the
operating  and  bottomline performance disappointed the Street. SSL
reported a topline of | 593.3 crore (I-direct estimate: | 606.5 crore) up
66.7% YoY backed by space addition of 0.28 million sq ft (I-direct
estimate: 0.21 million sq ft) and inclusion of HyperCity’s numbers.
However, incremental expenses due to store additions, operating loss of
HyperCity (| 12.9 crore) and increased raw material costs weighed on the
operating efficiency. The company  reported a consolidated EBITDA
margin of 2.3% in Q1FY12 vs. 7.1% in Q1FY11. Higher interest and
depreciation outgo further weighed on the bottomline leading to a loss of
| 1.5 crore during the quarter. During Q1FY12, SSL added 16 of the 24
stores planned in FY12E. While the management has guided that space
addition will be in line with the target, it may take longer to achieve
breakeven of the new HyperCity stores added.
ƒ Highlights of the quarter
In Q1FY12, SSL added 0.28 million sq ft taking its total retail area to
3.6 million sq ft. During Q1FY12, SSL added three departmental, five
Crossword, one Home Stop, six MAC and one HyperCity store. Due
to multiple factors like price hikes, raw material inflation (YoY),
Indian Premier League falling fully during the quarter (last season it
was divided over Q4FY10 and Q1FY11) SSL witnessed a muted like
to like (LTL) sales growth of 7% (lower than 21% in Q1FY11).
V a l u a t i o n
While we continue to remain positive on the future prospects of the
company considering robust space addition, turnaround of HyperCity and
improvement in operating margin due to changed business model, we
believe the recent run up in the stock discounts the same. At the CMP,
SSL is trading at 50.0x FY12E EPS of | 8.3 and 30.3x FY13E EPS of | 13.7.
We have valued the stock at 0.8x  EV/sales (on FY13E sales of | 3,833
crore) and it is currently trading at an EV/sales multiple of 1.1x and 0.9x
FY12E and FY13E sales, respectively. We have a HOLD rating on SSL.

Hindustan Unilever - 1QF12: Overall In-line; 8.3% Volume growth Dissapointing::Morgan Stanley Research,

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Hindustan Unilever
1QF12: Overall In-line; 8.3%
Volume growth Dissapointing
Quick Comment – Stay UW: HUL's Q1 performance
demonstrates the twin impact of continuing high
intensity of competitive activity and severe input
pressures eventually on volumes in the HPC space in
India. We expect the stock to trade weakly on the back
of these results. The key disappointment for the market
will likely be reported 8.3% domestic volume growth for
the quarter – below our expectation of 11% growth.
However, price rise of ~6.7% is above our 5% estimate.
1QF12 – In-line Results: HUL’s revenues, EBITDA and
adjusted PAT grew by 14.8%, 10.9% and 12.4%,
respectively, compared to our expectations of 16%,
12.7% and 12.4% and consensus expectation for net
profit growth of 13.6%. EBIT margins across business
segments (excluding PP and water) were 50-150bps
lower than our expectations. However, overall margins
are largely in-line with estimates given the large swing in
profitability of the water business. Sharp price increases
notwithstanding, margins in the soaps and detergent
segment (9.2%) continue to be depressed. Interestingly,
excluding ad-spend, operating margins fell 470bps YoY.
Key Highlights of the Results: (1) Domestic FMCG
revenue growth of 14.8% driven by a combination of
15.4% growth in HPC and 14.9% growth in foods. Net
revenues for HUL grew by 14.8% driven by volume
growth of 8.3% in domestic consumer business.
(2) Overall gross margins are declined by 480bps YoY,
however, operating profit margin declined by 50bps
cushioned by nearly 420bps decrease in advertisement
and promotion expenses.
(3) Foods business reported a revenue growth of 14.9%
driven by beverage growth of 13.1% and processed food
growth of 17.8% (versus our expectation of 20%).
(4) PP revenues grew by 19.4% (albeit off a low base).
Margins at 25.3% were inline with our expectation.
(6) Total business capital employed has reduced from
Rs4.1bn in Q4F11 to Rs2.5bn, in 1QF12.

ITC - All round performance ::Standard Chartered Research,

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 ITC’s 1Q FY12 results were above our expectations −
Net sales, EBITDA and net profit rose 19.7%, 20.7%
and 24.5%, respectively.
 Cigarettes posted robust volume and PBIT growth of
~8% and 21%, respectively.
 Non-cigarette business’ net sales grew 22% yoy with
PBIT growth of 34%. Sales growth across businesses
was strong, except in hotels.
 The substantial increase of 83% in other income helped
ITC post higher-than-expected profit of Rs13.3bn.
 We believe all positives are priced-in at current FY12E
P/E of 27x. Maintain IN-LINE with revised PT of Rs210.


Robust volume and PBIT growth in cigarettes. ITC posted
strong cigarette volume growth of 8% on the back of a low-base
(4-5% decline in 1Q FY11) and no change in excise duties in
the Feb ’11 budget. PBIT growth was also strong at 20.8%, as
against street estimate of high-teens growth. Margin expanded
200bps yoy to 29.9%.
Non-cigarettes business does well – Key highlights
 Non-cigarettes business maintains growth trajectory with
net sales & PBIT growth of 22% and 34%, respectively.
 Other FMCG business sales growth was robust at 19.4%
yoy. However, losses increased sequentially to Rs763m.
 Higher trading volume and improved realisation in soya,
wheat and coffee resulted in agri-business sales and
PBIT growth of 25.8% and 21.1%, respectively.  
 Hotels net sales growth was moderate at 12% but
control on operational costs led to 33% PBIT growth.
 Paper & paperboards surprised positively with net sales
growth of 20.9% and PBIT growth of 20.4%.
Higher other income boosts PAT. Apart from healthy
business profits, higher other income and operating income (up
83% compared with our expectation of 30% increase) aided
strong adjusted net profit growth of 24.5% yoy.
Positives priced-in. Maintain IN-LINE. We recently
downgraded ITC to IN-LINE as we believe the stock is fully
priced at FY12 P/E of 27x. Concerns like mid-term increase in
excise, possibility of VAT increase in other southern states and
taxation overhang of FY13 will limit outperformance in the near
term, in our view. Also, note that Tamil Nadu VAT hikes are not
yet passed through to consumers and can impact FY12
margins. We roll forward to Jun ’13 EPS with a revised price
target of Rs210 (earlier Rs198) based on forward P/E of 23x.
Re-iterate IN-LINE.

Welspun Corp Ltd OW: Earnings miss ok; missing orders worrying  HSBC Research,

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Welspun Corp Ltd
OW: Earnings miss ok; missing orders worrying
 1QFY12 reported earnings were lower than our and consensus
estimates but declining order book worrying
 We expect near term under performance but see signs of
revival in global pipe market in next six months
 We maintain our long term bullish outlook and reiterate our
Overweight rating with INR265 target price


1QFY12 earnings were 15% below our and consensus estimates but we don’t worry on
that count Welspun reported net profit of INR1.2bn (flat qoq and decline of 38% yoy) largely
because of lower sales. The company attributes lower sales to the delay in shipment of 30,000
tonnes of pipes and some shutdown in plant. As in the previous quarter, the margins from the
plate mill remain weak and the company is now guiding for weakness for one more quarter.
Order book decline is worrisome. The order book declined 7% qoq in value terms and 12%
qoq on volume terms, with the pipe order book reaching its lowest level seen in at least the last
five quarters. If we exclude the inventory to be shipped, the pipe order book would have
declined by 16%, which to us is worrying. We expect the stock to remain weak in the near
term in absence of any notable increase in order book.
However, Global E&P market is showing signs of revival and pipe market likely to
follow, albeit with a lag.  Global rig count is now reaching close to its 2008 highs,
indicating heightened E&P activity and there is a renewed interest in exploration activity
in the Gulf of Mexico. Our Middle East research team also points to increasing E&P and
infrastructure activity in Middle East. Both these regions are expected to be the main
drivers of growth in E&P spend and are in the process of giving orders for EPC
(Engineering, Procurement and Construction) and FEED (Front End Engineering Design).
We believe orders for pipes follow once EPC and FEED orders are given and hence we
expect to see a rise in order book for pipe manufacturers by end-2011. Welspun should
benefit as it has plants in these high activity regions.
Valuation and risk. We remain positive on the outlook for pipe demand and capacity
expansion projects. Given the cyclical nature of order inflows, we value the company on PE.
We believe its fundamentals deserve a multiple of 9x and above, reflecting a 17% average
ROE and 10% long-term earnings growth. But taking into account the higher risk perception,
we value it based on a PE of 7x on FY13e EPS of INR37.7. This generates a rounded target
price of INR265 and an OW rating. Our biggest concern on stock remains corporate
governance and the overhang of the SEBI order. A 10% increase in pipes EBITDA/tonne can
increase our earnings estimates by 15%.


Key takeaway from conference call
 The company’s share of EBITDA from Leighton was INR180m with the JV contributing INR130bn
to profit before tax. Leighton currently has INR50bn of order book.
 The pipe business continues to make INR11,000/t of EBITDA and plates business continues to
remain weak contributing INR3,000/t of EBITDA. The company expects margins to improve from
the current levels with the quarters ahead.
 The company is optimistic on the resurgence of the market and expects strong orders from Saudi Arabia
and United States. The order book from its US and Saudi Arabia mill is already about nine months of
sales. However, Africa and Latin American markets continue to remain weak in the near future.


 Welspun Maxsteel, which was recently acquired but yet to be consolidated in the business is
generating EBITDA of INR550m and company expects to go ahead with its plan of setting up a
greenfield steel plant after getting all environmental approvals.
 Consolidated Net debt at end of June 2011 – INR22,610m.
Investment view
WLCO stock underperformed the market by 41% over the past 12 months, largely due to a decline in orders
and corporate governance issues. We believe that its focus on the export market, capacity expansion, and
benefits from backward integration with a plate mill, a stronger management team, and entry into engineering,
procurement, and construction (EPC) projects will enable it to achieve an earnings CAGR of 14% over FY11-
14. We expected the stock to languish in the first half of the year on corporate governance issues, but
performance should improve in the second half with order book growth helping to allay investor concerns.
Valuation
We expect WLCO to record a 14% CAGR on sales volume from FY11-14 primarily on the back of
350,000 tonnes of new capacity coming on stream in FY12, 300,000 tonnes of new capacity in Saudi
Arabia, and 100,000 tonnes of HSAW in mid-FY11.
Given the cyclical nature of order inflows, we value the company using a PE methodology. In the past
five years, Welspun stock has traded at a one-year forward PE of between 5x and 35x, depending on how
“hot” the E&P capex cycle was. We believe that Welspun’s fundamentals deserve a multiple of 9x and
above, reflecting 17% average ROE and 10% long-term earnings growth. However, reflecting the
increased cost of capital to 16%, we value the company on a PE of 7x on FY13e EPS of INR37.7. This
generates our 12-month target price of INR265.
Under our research model, for stocks without a volatility indicator, the Neutral band is 5ppt above and below
our hurdle rate for Indian stocks of 11%, or 6-16% around the current share price. Our INR265 target price
implies a potential return, including dividend yield, of 54.4%, which is above the Neutral band; thus, we
reiterate our Overweight on Welspun shares.
Risks and sensitivities
The biggest concern for investors, in our opinion, is corporate governance. We believe the stock will
continue to languish for some time and could underperform further if the Securities and Exchange Board
of India (SEBI) subjects the major shareholders to any penalties; the market regulator is investigating the
company in connection with alleged price-rigging. However, longer-term, we expect the robustness of the
core business to take precedence for investors.
Sensitivities: Our earning estimates and target price are sensitive to volume growth and margins trends. We
calculate that a 10% increase in LSAW pipe volumes would increase net profit by 4%. A 10% increase in
HSAW pipe volumes would increase net profit by 7%. A 10% increase in ERW pipe volumes would
increase net profit by 1%. A 10% increase in plate volumes would increase net profit by 3%. And a 10%
increase in blended pipes EBITDA/tonne would increase net profit by 15%.

Steel Authority of India Is it worth making steel? ::Macquarie Research,

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Steel Authority of India
Is it worth making steel?
Event
 SAIL reported 1Q FY12 results which were well below our estimate. We
have reduced our estimates by 14% to account for higher costs and slightly
lower production. We maintain our Neutral rating but reduce our target price to
Rs126 from Rs150. We believe delaying its expansion and overhang of equity
dilution can delay the re-rating.
Impact
 Weak Q1 results: Net Sales at Rs108bn is up 20% YoY, as sales volume
increased though production volumes remained flat. However, raw material
costs at $368/t were up 12% YoY and EBITDA at Rs11.9bn is down 31%
YoY. PAT at Rs8.38bn was down 29% YoY, due to an increase in interest
expense and depreciation. This profit level was actually 1% lower than
Rs8.43bn reported in 3QFY09, at the height of the financial crisis.
 Margins still have downside risks: It reported EBITDA per ton of US$94/t in
Q1 FY12. We are estimating US$124/t for FY12, which seems to be on the
higher side given the sharp increase in coking coal costs and inability for SAIL
to reduce costs. We are building in some improvement in SAIL’s product mix
to enhance realisation, however at this point, SAIL could see further downside
if steel prices do not move up sharply.
 Consensus to also see downgrades: Street is estimating Rs13.7/share of
EPS for FY12 versus our new estimate of Rs12.6/share. We believe that
lower volumes during the year and pressure on margins will result in
downgrades of SAIL’s estimates.
 Expansions might get delayed: SAIL management has been quoted in the
media suggesting steel production for FY12 at 12.6mnt. They are expecting to
commission two blast furnaces in Rourkela by January 2012 and trial runs at
the Burnpur plant will commence by the year-end (3mt). This can increase
capacity next year and will help volumes increase. However, for FY12, volume
growth remains muted and we are reducing our assumptions.
Earnings and target price revision
 We are reducing our FY12 estimates by 14% on the back of lower volume
estimates and lower margins. We also reduce TP to Rs126/share.
Price catalyst
 12-month price target: Rs126.00 based on a PER methodology.
 Catalyst: Announcement of FPO timeline
Action and recommendation
 Maintain Neutral: SAIL currently looks fairly valued at 10x PER on FY12E,
with subdued earnings. The stock also has an overhang of the upcoming
equity issuance which will increase the free float by 66%. We believe it is a bit
too early to play the volume expansion story here.

Jindal Steel and Power - 1Q results: below expectation ::BofA Merrill Lynch,

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Jindal Steel and Power Limited
   
1Q results: below expectation
„1Q results: power & steel profits disappoint, Underperform
Consol. PAT declined 7%QoQ to Rs9.2bn vs. Rs11.4bn est. This was led by 1)
lower JPL PAT; 2) lower standalone PAT due to lower steel vols., captive power
sales & higher interest costs. Merchant power tariff continues to decline exerting
pressure on power profits. Captive power ramp up has been slow & other projects
are delayed. Visibility on Godda / Dumka projects, already in our valuation is low
& may lead to downside risks. Domestic steel outlook has moderated. Valuations
at 9.2x FY12e EBITDA & close to NPV appears full. Hence Underperform.
JPL disappoint on lower power tariff
JPL PAT was Rs4.5bn (-9%QoQ), 13% below our est. as tariff declined 9%QoQ
to Rs3.76/kwh due to weaker power fundamentals. Avg. PLF was 99% (4QFY11
101%). JSPL guided to merchant tariff of Rs3.8-4.25/kwh in FY12. JPL plans to
shut down 2 units (250MW each) in during the seasonally weak Sept Q.
Standalone PAT down 18%QoQ to Rs4.7bn, 15% below est.
Steel shipments was 0.46mt (-14%QoQ) vs. production of 0.61mt. Inventories
increased 0.15mt QoQ to 0.3mt. Pellet sales were robust at 0.35mt (54%QoQ.)
Captive power units declined 7%QoQ in 1Q. Avg. PLF at new units (2x135MW)
remains low at ~50%. Power from new captive power units is being consumed
internally to produce steel. This is not adding to profits currently as shipments lag
production and incremental volumes is adding to inventories.
Key takeaways from management call
In 1Q, Shadeed Steel volumes were 0.3mt (~75% utilization) & PAT was
US$8mn. Mgmt expects to sell 2.25mt of pellets in FY12 (50% domestic). It
expects to complete remaining 7x135MW captive power expansion in FY12.
Tamnar II Phase I (1200MW) construction is expected to start soon after the pre
conditions are met. JSPL has also started shipments from Bolivia iron ore mines.

IDFC- Lowering estimates and priced target ::Standard Chartered Research,

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 IDFC announced weak earnings for 1Q FY12 with
substantial slowdown in approvals and disbursements
and continued pressure on fee income.
 Management revised loan growth guidance down to a
low 15% yoy against 30-35% earlier. Also, management
mentioned that growth will be back ended.
 On the back of two weak quarters of earnings and lower
guidance, we lower our EPS by 5% for FY12E and 4%
for FY13E. We lower our price target to Rs125 from
Rs142 as we lower earnings and target multiple to 1.2x
from 1.4x. We also downgrade to UNDERPERFORM.


We lower our earnings forecasts. We lower our EPS by
5% for FY12E and 4% for FY13E backed by two weak
quarters of earnings and lower guidance by management.
We expect net profit to grow 13% yoy but EPS growth to
slow to 3% due to the dilution last year.
Weak macro to weigh on earnings. Aggressive tightening
by the RBI, slowdown in government approval for project
loans and concerns on lending to the power sector have
coincided with IDFC’s huge capital raising. At the time of its
equity issue in Aug ’10, IDFC had guided to a balance sheet
growth of 30-35% pa over the next 3-4 years. However, the
guidance has now been lowered due to economic
pressures. This will continue to put pressure on IDFC’s
leverage, which means that RoE will remain subdued for
longer. In addition, spreads will remain volatile. While
spreads were resilient in 1Q FY12 given the qoq decline in
wholesale rates, we believe borrowing costs will rise again
in 2Q FY12 given the higher-than-expected tightening by
the RBI. Asset quality risks especially for loans to the power
sector for IDFC will also linger given issues of fuel linkage
and losses made by SEBs. IDFC has an exposure of 44%
to the power sector. We also expect pressure on fees to
sustain as we do not see any increase in private equity
AUMs in FY12E and we see volatility in investment banking
fees.
Lower price target: We lower our price target to Rs125
from Rs142 as we lower earnings and our target multiple to
1.2x from 1.4x. The multiple appears lower than other
financials but given the weak economic cycle, earnings
pressure and subdued RoE, we believe the multiple is
justified. We downgrade our rating to UNDERPERFORM
from IN-LINE.

Hold Sasken Technology; Target : rs 134::ICICI Securities

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O v e r w h e l m e d   b y   N o k i a   u n c e r t a i n t i e s …
Sasken reported its Q1FY12 revenues/earnings, which were modestly
ahead of our estimates. For a change, revenues grew 1.2% QoQ to | 130
crore vs. our | 122.7 crore estimate. The company reported profit after
tax of | 10.7 crore vs. our | 10.6 crore estimate. However, EBITDA margin
was below our estimates due to higher onsite revenue contribution and
increased sales & marketing investments. Though the company continues
to fine tune its operating metrics, Nokia uncertainties continue to
overwhelm valuations and would take precedence. Consequently, we are
reducing our estimates and price target. We maintain our HOLD rating.
ƒ Earning summary
Sasken reported sequential revenue growth of 1.2% led in part by
higher onsite contribution of 33% vs. 31% in Q4FY11. The
consolidated EBITDA margin was at 12.4% vs. 13.3% in Q4FY11
while services and products EBITDA margins were 12.1% and
27.1% vs. 13.1% and 35.8%, respectively. Top 5 customer
contribution was flat sequentially at ~55.8% while active customers
increased by two to 129. The company has bought back ~21.62 lakh
(~7% of equity) shares at an  average price of | 159.3 and has
completely exhausted its buyback limit of | 34.43 crore.
ƒ Q2FY11 should be impacted by wage hikes
Sasken has announced wage hikes effective from July 1. Quantum
of wage hikes stands at 11-12% offshore and 5% onsite. Sasken
continues to operate at sub 70% utilisation including trainees and
could be one of the levers to improve operating margins.
V a l u a t i o n
Though Sasken is trading at compelling multiples of  5x its FY11 diluted
EPS of | 25.8, 0.6x on Mcap/FY11 sales and provides an  attractive FCF
and dividend  yield  of ~15%  and ~5%, respectively, Nokia  uncertainties
prevail. Consequently, we have lowered our price target to | 134 vs. | 170
earlier. We have valued Sasken's core IT business ex-cash at 4.4x its
FY12E EPS estimate of |14.2 (4.96x earlier) plus cash/share of | ~71 to
arrive at our price target of | 134.

Idea Cellular - Robust 1Q but cautious undertone :: BofA Merrill Lynch,

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Idea Cellular Ltd.
   
Robust 1Q but cautious
undertone
„1Q FY12 EBITDA beats expectations led by higher margins
Idea’s consolidated 1Q FY12 EBITDA grew 35% YoY & 15% QoQ. EBITDA was
12% above our expectations due to higher than expected margins. Margins
improved both YoY & QoQ. A key surprise was the sooner-than-expected rise in
revenue per minute (+1% QoQ) owing to lower promotions. SG&A expenses also
fell sharply (-11% QoQ) likely due to lower advertising & lower subscriber adds.
Margins could rise a tad further; EBITDA up, EPS unchanged
We expect EBITDA margins to improve a tad further through the rest of FY12
owing to recent 20% hike in on-net tariffs and cut in dealer commissions on new
subscriber additions. Factoring the 1Q margin surprise, we have hiked FY12-13E
EBITDA by ~9%; this is the primary driver of our 5% PO increase to Rs100/sh.
EPS estimates for FY12-13 are largely unchanged due to offset from higher
taxes, in line with 1Q FY12, post expiry of tax-holiday for key circles.
Long-term risk-reward appears unexciting; stay Neutral
Despite our positive earnings outlook for Idea, we are Neutral on the stock as
valuation upside seems limited and tariff hikes seem unlikely to sustain beyond 2-
3 quarters unless the industry consolidates. In addition to regulatory concerns, we
worry that competition may resurface and traffic growth for Idea may slow. Note,
Idea’s 1Q FY12 traffic growth lagged average subscriber growth in contrast with
the 1Q trend of the last two years when traffic growth was relatively stronger.
Idea mgt. cautions on tariff impact; confirms low 3G uptake
On its results call, top mgt. cautioned about exuberance over tariff hikes as impact
on revenue market share & traffic growth will be key to sustainability of tariffs. On
3G, the Co said only 20-25% of its 3G sign-ups use the services on a daily basis

ITC - Dairy foray imminent ::UBS

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UBS Investment Research
ITC 
Dairy foray imminent 
  
„ Event: ITC Chairman speech hinted at dairy sector entry
ITC Chairman Mr. YC Deveshwar in his AGM speech mentioned that as part of
the company’s sustainability programme, ITC’s Animal Husbandry Programme
has reached ~0.5m milch animals, leading to an increase in milk yields. He
mentioned that this effort could form part of ITC’s FMCG sector businesses, in
effect hinting at dairy product launches in the near future.
„ Impact: expansion in the scope of the consumer business
ITC’s food business (65% of other FMCG) made ~Rs29bn in revenues in FY11.
We expect this segment to get a major thrust as ITC enters the milk/milk products
business. India is the largest producer of milk globally. The Gujarat Co-operative
Milk Marketing Federation (GCMMF) estimates the milk market size to be
~US$60bn; the organized branded component is ~20% of the total.
„ Action: focus on building share and launching quality products
In each of the consumer businesses that ITC has entered, it has systematically
targeted the main body of the market and not confined itself to a premium niche. It
has targeted a leadership position or top-three position within five years of launch,
making sizeable businesses with sustainable models around each segment. We
believe ITC is creating a foundation for its consumer business and will transform
into a consumer conglomerate.
„ Valuation: ITC is our top pick
We derive our price target from a DCF-based methodology and explicitly forecast
long-term valuation drivers using UBS’s VCAM tool. We assume a WACC of
11%, an interim growth rate of 13.5%, and a terminal growth rate of 5%.


Q ITC
ITC is the leading cigarette manufacturer in India with a 67% share of the
market by volume and 83% by value.  ITC has identified tobacco and
paperboard, hotels and agribusiness as its core businesses.
Q Statement of Risk
We believe higher excise duty is the key risk to ITC’s earnings growth and
valuation. A steady increase in excise duty would adversely affect the long-term
growth trend and lead to lower purchases by smokers.

Getting more from your savings account:: Business Line,

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Banks are now offering value additions to the simple savings account. Here's how you can make the most of them.

From a basic no-frills account to a pampered premium account and smart deposit linked accounts, savings bank accounts come in different packages to suit every possible need. A careful look at the various options would help you make the most of your investment in the humble savings (SB) account too!

Frills attached

To bring the financially excluded into the banking fold, almost every bank offers a ‘no-frills account' to customers. Zero minimum balance, relaxation in KYC norms, lower or no fee/charges, restrictions on the number of withdrawals and the maximum amount that can be invested (Rs 50,000), limited availability of ATM and Internet banking transactions are some of the common features. Given the limitations, you might not want to opt for this type of account. Well, take a look at the many ways in which banks have added value to the ‘no frills' offer.

IDBI Bank's ‘Sabka account', for example, gives you a debit card and cheque book and allows phone, internet and SMS banking on this ‘no-frills' account. You can also earn higher rates of interest by investing as little as Rs 100 in a recurring deposit from the savings account every month. Besides, if you can provide the necessary documents to fulfill KYC, then, the restriction of Rs 50,000 will not apply. If your annual income is less than Rs 50,000 and you don't have any other bank account, you can consider HDFC Bank's ‘no-frills' offer too.

While facilities like electronic transfer of funds and utility bill payments are available, whether you meet KYC rules or not, fulfilling KYC enables you to avail a safe deposit locker and sweep facilities too!

So, a ‘no-frills' account is a worthy option for students and dependents who have limited sources of income and restricted banking requirements. That way, you will not be constrained by any minimum balance non-maintenance charges, which can sometimes run into hundreds of rupees. However, going by the curbs, it would make sense to move over to a regular savings account once your needs multiply.

Save more, get more

Even while opening a regular savings account, an informed choice would help you get the maximum benefits. In Kotak Bank, for instance, you can choose from five SB options – Classic, Nova, Edge, Pro and Ace. ‘Classic' account holders can send demand drafts or cheques for collection to all places where the bank has branches, for free.

You will also be assigned a dedicated relationship manager. If you can keep an average quarterly balance (AQB) of Rs 20,000 under the ‘Pro' account, you can avail a gold debit card with higher limits and free cash/instrument pick-up and delivery facility. This service is not extended to ‘Edge' account holders (AQB: Rs 10,000). SBI has a ‘Savings Plus' and ‘Savings Premium' account, at affordable minimum balance mandates. Under Bank of Baroda's ‘Super Savings' account, if you can maintain an AQB of Rs 20,000, you get free collection and immediate credit of outstation cheques up to Rs 25,000 and no DD charges in addition.

So, take a look at your banking habits. See what kind of transactions you often make and how much you are charged. If you are crediting your salary into this account, chances are that you would hoard much more than what a basic SB account warrants. Besides, the minimum balance is mostly only a quarterly average and not a daily limit.

If you find your account flush with funds, ask your banker for an upgrade. That way, you will enjoy more services free of cost or at a concessional rate and can get higher spending limits on your debit card. Also, most of these value-adding accounts qualify for ‘sweep' facility, which will help you maximise returns. Remember that a savings account currently earns an interest of only 4 per cent while 3-5 year term deposits are available at over 9 per cent.

Sweep it up

Under the ‘sweep' option, SBI ‘Savings Plus' account holders, for instance, can transfer any amount that accumulates beyond Rs 5,000 to a term deposit of 1-5 years duration. Available as an automated facility, this surplus swept-in, will earn interest as applicable to term deposits. Karur Vysya Bank's ‘Rainbow savings account' not only offers to sweep into short-term deposits, but also provides free accident insurance (death) cover of one lakh rupees. What if you need the money back urgently?

To ensure liquidity, all banks offer a reverse sweep too. Under ICICI Bank's Money Multiplier feature, for instance, all linked FDs will be enabled for automatic reverse sweep in multiples of Rs 5,000 on a LIFO basis, when the balance in the SB account falls below Rs 10,000.

The remaining amount will continue to earn interest at FD rates. Many banks offer this option for salary account holders too

Sun Pharmaceuticals --1Q earnings conf call takeaway :: Macquarie Research,

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Sun Pharmaceuticals
1Q earnings conf call takeaway
Event
 Sun hosted its 1QFY12 earnings call today after reporting sales of Rs16.4bn,
EBITDA margin of 33.8% and adjusted PAT of Rs 4.7bn. Sun maintained its
guidance of strong 28-30% growth for FY12. We maintain our OP rating and
raise our TP to Rs560 (from Rs500 earlier).
Impact
 Taro margins strong in 1HCY11: Taro’s EBITDA margin at ~ 35% (up
significantly from 24% in 4QCY10) is one of the key reasons for the strong
performance. Sun expects ramp-up in R&D expenditure going forward. Also,
given the limited competition in the space where Taro operates, new
entrants are expected going forward, negatively impacting sales and/or
pricing in future quarters. Our FY12 EBITDA margin estimate for Taro is now
~32.5% (earlier ~31%).
 US key to growth: 1) Docetaxel and Sumatriptan auto-injector were launched
in 1QFY12 and ramp-up is in line with expectations. 2) Prandin: Caraco is still
awaiting FDA approval (likely after the manufacturing issues are resolved at
Caraco). Sun is satisfied with progress on Caraco FDA issues and believes it
would be in a position to provide more colour in 2Q12.
 Domestic Formulations (DF): DF contributed 38% to the top line and grew at
12% YoY to Rs6.4bn in 1QFY12. Excluding third party business (which has
been discontinued ~Rs 290m in 1QFY11), underlying growth is 18% YoY.
Secondary sales growth for Sun for 1QFY12 was ~20% vs. 14% for the
industry (ORG-IMS). Sun Pharma holds 4.4% share in the India pharma
market. Sun’s DF reported sales are now VAT adjusted.
 Call highlights: A) Sun maintains its guidance for 28-30% sales growth for
FY12; B) Sun indicated that the mention of competitive pressure on Taro was
just a cautionary statement and might not have a significant impact on
margins in the near term; C) Sun expects India business to grow at 16-18% in
FY12; D) better clarity to emerge on the progress of remediation in Caraco by
end-2Q FY12; E) Current cash position: US$1bn; Capex guidance for FY12:
US$100m.
Earnings and target price revision
 We raise our FY12E and FY13E EPS to Rs21/25.4 (from Rs20.7/24) on account
of higher Taro earnings. We now value Sun at Rs560, as we roll forward our
target price on 22x FY13E earnings (from 24x FY12 earnings earlier).
Price catalyst
 12-month price target: Rs560.00 based on a Sum of Parts methodology.
 Catalyst: Sustaining the turnaround in Taro. 2) Niche launches in US
Action and recommendation
 Sun is trading at ~24.6x FY12E EPS. Given its robust business model,
execution record, strong B/S, and earnings momentum, the valuation
premium will be sustained in our view. In particular, we recommend
adding Sun on any weakness.


Conference call highlights
 Guidance: Management maintains its guidance for 28-30% growth for FY12. Discontinued India
(third party business) business and the VAT adjustment (not included in sales) are factored into
the guidance.
 Taro: Management indicated that the competitive pressure on Taro (mentioned in the Taro press
release) was just a cautionary statement and might not have a significant impact on margins
going forward. Future quarters will not have tax benefits (since these are exhausted) and R&D
expenses will go up from current levels. US business represents ~78% of the topline.
 India Domestic Formulation: Sun launched two inlicensed products from Merck (sitagliptin and
sitagliptin plus metformin) and Sun expects the India business (mostly chronic therapies) to grow
at 16-18% in FY12.
 Caraco: Management believes that by the end of 2QFY12, Sun would have better clarity to
comment on the progress of remediation. Management is satisfied with the remediation progress
until now. Sandoz launched Taxotere in July-11. Prandin approval depends on facility
resumption and the litigation.
 Other Highlights:  Current cash position: US$1b; Capex guidance for FY12: US$100m

Idea Cellular - RPM uptick in 1Q + operating leverage; raising price target ::Standard Chartered Research,

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Idea Cellular
RPM uptick in 1Q + operating leverage; raising price target


 We raise PT to Rs106, incorporating core business at
Rs99 on Mar-12 DCF + Indus stake at Rs15 less the
potential regulatory cost from NTP ’11 at Rs(8)/share
 EBITDA up 13%/7% for FY12-13E driven by higher
RPMs (+1p/+2p resp.). Earning upgrades limited by
higher deferred tax assumptions for FY12/13E
 1Q results were better than expected as RPM uptick of
1% qoq and lower sub acquisition cost resulted in
EBITDA margin uplift of 270bps (adjusted for one-offs)
 Maintain OUTPERFORM.


Most leveraged to RPM uptick. We assume RPM of
42/43/44p for FY12-14E vs. 41p/41p for FY12/13E earlier,
on account of the displayed intention of the industry to up
tariffs. Though we assume slightly lower margins to factor in
3G rollout, fuel inflation and higher SG&A, the EBITDA
estimates for FY12-13E are up by 13%/7%. EPS upgrade is
relatively muted at 23/0.4% on account of deferred tax (as in
1Q). Idea is more leveraged to RPM uptick given low
EBITDA/min (9p vs. Bharti’s 14p) and operating leverage.
Meaningful upside despite impending regulatory costs.
Our new Mar-12 target of Rs106 (Rs88 earlier) comprises
(1) Mar-12 DCF of core business at Rs99 (Rs76 on Mar-11
earlier), (2) Indus stake valued at Rs15 (Rs12) and (3)
potential net impact from NTP ’11 from excess spectrum +
renewal charges-license fee savings at Rs(8)/share.
Regulatory cost could be lower if the government decides to
adopt a more market-based approach. Besides, additional
burden on new players would provide a further boost to tariff
uptick.  
1Q results – Higher RPM, lower SG&A and operating
leverage. Most of the surprise was in RPM – which went up
1% qoq vs. expectation of 1% decline. Mins growth was in
line at 6.5%. Despite higher network opex (7,000 3G sites +
2G), lower SG&A led to 270bps margin uplift, signifying
operating leverage. PAT at Rs1.5bn came in higher than
expected despite higher depreciation (3G) and interest cost
(3G capitalisation + higher net debt). Net debt was up to
Rs104bn (up from Rs92bn in the previous quarter).  
Risks: (1) Higher regulatory costs, (2) lack of follow up tariff
hikes from new entrants and (3) negative impact of higher
tariffs on traffic growth poses downside risks.

Buy Info Edge Target : | 830 ::ICICI Securities

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Info Edge

B e t t e r - t h a n - e x p e c t e d   r e s u l t s …
Info Edge reported its Q1FY12 results that were better than our
expectations. The topline of the company stood at | 86.7 crore against
our expectation of | 81.0 crore, growing 5.9% QoQ and 31.5% YoY. The
EBITDA for the quarter stood at | 31.6 crore against our estimate of | 27.1
crore, posting a growth of 9.8% QoQ and 54.7% YoY. The EBITDA margin
improved 547 bps YoY and 131 bps QoQ to 36.5%, primarily due to
robust revenue growth backed by high operating leverage. The company
reported PAT of | 25.6 crore, growing 48.3% YoY but de-growing 4.8%
QoQ.
ƒ Highlights for the quarter
The recruitment business grew 27.7% YoY while other businesses
posted handsome revenue growth of 50.5% YoY. The portal
99acres.com turned profitable in Q1FY12. The management has
indicated towards higher ad spends in the segment, going forward.
Overall EBITDA losses in other businesses were higher at | 2.7 crore
against | 0.9 crore in Q4FY11 and | 2.5 crore in Q1FY11.
Jeevansathi posted YoY revenue growth of 27%.
V a l u a t i o n
The company reported yet another strong quarter with handsome growth
in recruitment revenues. The management indicated that the long-term
environment looks positive and it would continue to invest in promotional
activities and brand building exercise in other verticals. At the CMP of |
753, the stock is trading at 38.2x  FY12E EPS of | 19.7 and 28.3x FY13E
EPS of | 26.6. We have valued the stock using DCF methodology at | 830.
Our target price discounts FY13E EPS by 31.2x and implies an upside of
10%. We have upgraded the stock from HOLD to BUY.

Buy BGR Energy; Target : Rs 471 ::ICICI Securities

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BGR Energy

D r y   s p e l l   f o r   o r d e r   i n f l o w s   c o n t i n u e s …
BGR Energy (BGR) declared an in line set of results for Q1FY12. Revenues
declined ~19% YoY, which were in  line with our estimates. The only
silver lining was better than expected EBITDA margins of 13.1% vs. our
estimate of 11.2%. Expansion in EBITDA margins was owing to higher
share of BoP revenues at 40% in the overall revenues. Also, high working
capital requirement and higher borrowing costs led to 55% rise in interest
costs. Hence, PAT for Q1FY12 stood at | 50 crore, which was better than
our estimates as expansion in margins, to some extent, cushioned the
decline in revenues. Going ahead, we believe a delay in project awards in
the power sector has put FY13E revenue profile at huge risk for BGR.
ƒ FY13E revenue visibility highly dependent on new project awards
Order backlog of | 7500 crore with a book to bill ratio of 1.6x, poses
significant  risk  to  growth  in  FY13E  revenues.  The  management  has
guided for 15% revenue growth in FY12E on the current order backlog.
However, a delay in project awards will put a question mark on growth in
FY13E. BGR has bid for projects worth ~| 20,000 crore and expects some
of them to get finalised by Q2/Q3FY12E. The company expects to execute
significant portion of BoP projects in FY12E. We estimate revenue CAGR
of 11% over FY11-13E.
ƒ EBIDTA margins to inch up on high BoP project execution
EBITDA margins at 13.2% were a key positive surprise for BGR in Q1FY12
on the back of higher share of BoP project revenues. The management
has increased the margin guidance to 12-13% in FY12 as it expects to
execute significant BoP revenues. Similarly, we have revised our margin
estimates to 12.2% in FY12E and 11.3% in FY13E.
V a l u a t i o n
The dry spell of order inflows over the last few years has led to a huge
underperformance in BGR’s stock price. We have revised our earnings
forecast in FY12 and FY13 to factor in higher interest costs and increase in
margins for FY12. We value BGR at 10x on FY13EPS (target reduced from
| 511 to | 471). However, at the same time, note that any significant order
win will lead to a violent re-rating of earnings and P/E multiples.

Goldman Sachs:: Sun Pharmaceutical - In line with expectations: Maintain 24% sales growth for FY12E; Sell

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EARNINGS REVIEW
Sun Pharmaceutical Industries (SUN.BO)
Sell  Equity Research
In line with expectations: Maintain 24% sales growth for FY12E; Sell
What surprised us
Sun Pharma posted 1QFY12 revenues of Rs16.4 bn (+17% yoy) and EBIT of
Rs4.8 bn (-16% yoy), in line with our estimates but 5%/11% below
Bloomberg consensus. Net income at Rs5 bn was 2%/3% above
GSe/Consensus on lower tax rates (2.5%). Domestic formulations growth
slowed down (+7% yoy), due to termination of a domestic manufacturing
contract. EBIT margins compressed by 1,160 bp yoy to 29.5% (200 bp
below Consensus) due to lack of one-off product opportunities and
increased costs from Taro.
What to do with the stock
We reiterate Sell with a 12-m Director’s Cut-based TP of Rs327, implying 37%
potential downside. 1QFY12 sales imply a run rate of about Rs19.2 bn for the
rest of the three quarters at 8% sequential growth, to achieve Sun’s guidance
of 28%-30% sales growth. We believe that this could be challenging to achieve
and maintain our forecast of 24% FY12E sales growth: (1) in the absence of
major product opportunities in US in FY12 unlike FY11, (2) lower domestic
growth (18% for FY12E vs. 30% in FY11) and (3) increasing competition for
Sun’s Taxotere – we expect limited market share for Sun’s double vial
injection (refer to our note titled Dissecting Sun’s growth prospects; Sell Sun
and Cipla (on CL), dated June 7, 2011. Sun is trading at 26.2X FY12E P/E, at
56%/53% premium to the sector and vs. its 8-yr historical average. We believe
the premium is unjustified considering the 15% EPS CAGR over FY11-FY14E,
which is in line with the sector’s EPS CAGR. Risk: Resolution of FDA issue for
Caraco, re-launch of Eloxatin, favorable verdicts in ongoing litigations.

Buy Axis Bank; Target : Rs 1633 ::ICICI Securities

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A   s l o w   q u a r t e r ,   e x p e c t   p i c k - u p   a h e a d …
Axis Bank’s Q1FY11 results indicate that profitability is still healthy despite
rising costs pressurising margins and a 5% QoQ contraction in business.
PAT of | 942 crore was in line with our estimate of | 966 crore with NII up
14% YoY at | 1724 crore and fee income growing 42% YoY to | 1057
crore. Lower provision costs protected the bottomline  as asset quality
continued to remain healthy with GNPA decreasing by 1.6% QoQ to |
1573 crore. Even though interest rates are expected to stay high, the bank
has  guided  for  NIM  of  3.25-3.5%  in  FY12E.  We  expect  a  23%  CAGR  in
total business to boost PAT by a CAGR of 24% over FY11-13E.
ƒ Dull first quarter: Business contracts 5% QoQ
Deposits declined 3% QoQ to  | 183597 crore as term deposits
declined by 2.1%. Current account (CA) saw a sequential outflow of
14.6% (corporates generally park funds in CA at fiscal year end,
which flows out in the next quarter) leading to CASA moderating by
56 bps to 40.5%. Advances slipped by 7.4% QoQ to | 131900 crore
due to scheduled loan repayments of 3G loans and short-term agri
loans. The bank aims to increase the share of SME and retail loans
from the current levels of 15% and 20%, going forward. We
estimate credit growth of 23% YoY in FY12E.
ƒ NIM decline lower than expected...
NIM contracted 16 bps QoQ to 3.28% even as CoF jumped 57 bps
QoQ to 6.1% (including higher  costs for savings accounts) and
CASA declined from 41.1% to 40.5% in Q1FY12. The management
has guided for NIM stabilising between 3.25% and 3.5%, going
forward. We see NIM of 3.2-3.3% for FY13E.
ƒ Asset quality remains healthy…
Asset quality continues to be stable with GNPA ratio at 1.06% and
NNPA ratio at 0.31% with PCR strong at 90%. Incremental slippages
of | 290 crore were offset by recoveries and upgradations and
recoveries of | 92 crore and write-offs of | 230 crore. We expect
GNPA and NNPA at 1.0% and 0.3%, respectively, by FY13E.
V a l u a t i o n
The bank has been prudent in pruning its balance sheet in order to
protect its profitability. Strong fee  income growth, healthy asset quality
and lower credit costs are added positives. Return ratios continue to be
strong with RoA of 1.6% and RoE of 20.3%. Hence, we maintain our
target price of | 1633 (valued at 2.5x FY13E ABV)

Lupin -- Expectedly Modest Quarter, OW for 2012-13 Pipeline ::Morgan Stanley Research,

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Lupin Ltd.
Expectedly Modest Quarter,
OW for 2012-13 Pipeline
Quick comment – modest quarter: LPC reported 18%
yoy growth in sales, to Rs15.4 bln. OPM compressed 250
bps yoy to 18.8%, leading to a 7% yoy rise in net profits to
Rs2.1 bln (our estimate was Rs2.18 bln). We note price
erosion in Lotrel, Indore SEZ overheads, cost pressures
in solvents/energy, increase in field force and planned
shutdown. Lupin views this as a temporary lapse in a
multi-year margin expansion story (50-75 bps p.a.).
Key highlights from the call:
• F12 outlook: LPC targets 20-25% overall sales
growth, domestic business to grow at 20%, Japan to
grow at 15%, 8-10 product launches in the US, R&D
expenditure to be 7-8% of sales, tax rate to be
14-15% and capex of about US$100 mln.
• Branded business: It seeks to switch Suprax
suspension prescription to drops after approval,
sometime in F2H12. Allernaze launch possible in
F4Q12. It is realigning PED sales force to focus on
primary care too (Suprax tab/Antara).
• Others: Indore SEZ to be at full capacity utilization
in the next 24 months.  Company expects no
material impact from the product recalls in April’11
(perindopril and lisinopril) in the US.  
Thick product flow: Possible key product launches
over the ensuing few quarters include – Fortamet ER
(currently evaluating ‘at risk’ launch options); Femcon
Fe (F3Q12 launch on 181 day as an AG, after Teva’s
exclusivity); 3-4 OC products in F3Q12, Geodon
co-exclusivity in F4Q12; Combivir (after Teva’s
exclusivity, expects low competition); Tramadol ER
($100 mln market, low competition); Solodyne (3
strengths - $200 mln market, low competition); and
Tricor (sometime after generic launch in July’12).  
Retain OW: We position LPC as a multi-year growth
story driven by depth in its US pipeline, profitable RoW
expansion, and early signs of IPR buildup (NDDS deal
with Salix/Medicis). LPC’s aspirational F14 sales target
is $3 bln ($1.3 bln in F11).

Jagran Prakashan - Weak quarter, priced in „Cut earnings to factor muted 1Q ad growth ::BofA Merrill Lynch,

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Jagran Prakashan Ltd.
   
Weak quarter, priced in
„Cut earnings to factor muted 1Q ad growth
Post disappointing 1Q we cut FY12E/ FY13E earnings by ~7% each to factor cut
in ad growth assumptions and impact from higher news print cost. Cut PO to
Rs145. While we roll forward earnings to FY13E, reduce valuation multiple to 10x
EV/EBITDA to factor challenging ad environment.  Stock trades at 9x EV/EBITDA
at lower end of valuation band of 8-12x, with FCF yield of 6% which is attractive.
Muted ad growth
Jagran reported muted 8% yoy growth in ad revs for standalone business vs. 13%
BofAMLe. This compares with 15% yoy growth reported by Hindustan Media and
20% yoy growth reported by DB Corp. Management attributed muted growth to
slowdown in national ad revs, slower growth in education sector and delay in deal
closures given sharp pricing cuts demanded by advertisers.
2H revival likely
While 1Q revenue was soft, management expects to achieve 14%-15% yoy
growth in ad revs vs. 18% guided earlier driven by spillover of education ad revs
to 2Q, successful closure of deals delayed in 1Q and likely higher revenue from
UP elections due in 4th  quarter. Also 2H likely to be better given onset of festive
season. Our assumptions bake in 13% yoy growth in ad for standalone entity.
Reduce margin assumption for FY12
1Q EBITDA margins stood at 27% vs. 28% BofAMLe and was impacted by muted
ad growth and higher newsprint cost. Post 1Q we cut FY12E/FY13E margin
assumption by ~100bps each.

Sparkle is in brands - Titan Industries : Hold ::Business Line,

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In the light of high valuations and a possible squeeze in demand, investors can avoid buying into the stock at current levels.

The stock of Titan Industries has charted a steady journey upward, undeterred by market gyrations. The company's marketing push, its focus on diamond jewellery paying off, and the purchasing power of the Indian consumer, have led to strong earnings growth.

However, positive consumer sentiment is likely to be dampened by inflation eating into discretionary spends and spiralling prices of gold and diamond putting off purchases.

At Rs 228, the stock of Titan Industries trades at a trailing 12-month valuation of 41 times. Investors can retain their holdings in the stock. The company's advantage lies in its nationwide retail reach, and quality brands in a fragmented market. That said, in the light of high valuations and a possible squeeze in demand in the coming quarters, investors are advised against buying into the stock at the current levels.

WIDE MARKET PRESENCE

Titan has a host of factors in its favour. It has strong national brands in its three key segments — jewellery, watches and eyewear. With brands straddling multiple price points, Titan addresses all consumer brackets from low-end to premium. Branded markets, whether in watches or jewellery, are yet nascent in India, and Titan's brands are among the few national ones.

It also has licensed international brands. The company has an edge over budding branded jewellers with its far-flung retail footprint, using a combination of dealers and exclusive stores. Owned stores number 696, up from the 624 in January and dealer presence is in over 10,000 outlets. In addition, Titan watches are sold overseas as well, in growth markets such as Vietnam and South Africa. Funding expansion will not be a hurdle in the current situation of tight liquidity, with its low debt:equity of 0.08 times and strong cash flows.

Titan also expanded the watch manufacturing capacities and modernised units in FY-11. It is taking steps towards tying up directly with suppliers (sightholder status) for long-term diamond supply, besides buying more of rough diamonds to process them in-house to help control costs.

JEWELLERY DEMAND PRESSURES

But even as Titan is in a better position than most peers to manage growth, a few factors suggest a cautionary approach. The share of jewellery in revenues jumped to 75 per cent in FY-11 from 68 per cent in FY-08 at the expense of watches.

The share rose further to 80 per cent in the June '11 quarter. The jewellery segment is further split between diamond and gold jewellery. In both segments, Titan has strong national brands.

For the past year, Titan stepped up focus on diamond jewellery to counter demand pressures from rising gold prices. Diamond jewellery accounted for over 25 per cent of sales. But diamonds are mirroring gold in a relentless uptick in prices — polished diamond prices have increased over 15 per cent from January alone and have more than doubled in the past 18 months. The shift away from gold could, therefore, not work as well as it did in the past.

Another niggling factor is the susceptibility of the middle-class consumer to rising inflation, leaving lesser room for discretionary spends. Titan's mass-market offering, GoldPlus, showed a volume decline of 14 per cent in FY-11.

In the premium segment, Tanishq faces competition from other national brands, such as Nakshatra, Orra and Asmi, and foreign brands as well. To remain competitive across segments, the management has indicated, in its annual report, that it is willing to sacrifice margins.

For instance, it has upped the exchange rate for diamond jewellery. Besides, jewellery sales could be dampened by the requirement of producing the PAN card for transactions of over Rs 5 lakh. The management also reported a decline in footfalls in jewellery and watches segments. A decreasing share of watches could pressure margins. Watches typically give operating margins of 13-15 per cent while jewellery offers 6-8 per cent. The eyewear and precision engineering segment, which make up 4 per cent of revenues, are yet to turn profitable.

STRONG EARNINGS GROWTH

Revenues have grown at a compounded annual rate of 30 per cent over the past three years to Rs 6,673 crore in FY-11. Net profits grew 41 per cent to Rs 434 crore in the same period.

Operating margins for FY-11 improved a shade to 8.9 per cent from the 8.3 per cent in FY-10. Input costs, as a proportion to sales, increased 2 percentage points to 73 per cent in FY-11. In the last fiscal alone, cost of sourcing polished diamonds ballooned 90 per cent. However, controls in cost heads of manufacturing helped maintain margins. A decline of 68 per cent and 42 per cent in interest and depreciation resulted in net profit margins improving to 6.1 per cent in FY-11 against the 5 per cent in FY-10.

The June '11 quarter saw a further rise in raw material costs, with proportion to sales rising to 75 per cent. The company reduced advertising burden to maintain margins at 9 per cent, but with competition abounding and strategies to push sales in the face of subdued demand, promotion costs may see some rise.

MphasiS to acquire US-based Wyde:: Angel Broking,

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MphasiS to acquire US-based Wyde
MphasiS has signed a definite agreement to acquire 100% equity of US-based insurance
software provider Wyde Corporation in an all-cash deal (as of April 2011, MphasiS had
cash of US$422mn). Wyde is an insurance administration solution provider company and
the creator of insurance platform Wynsure. It caters to all the segments of the insurance
industry – Life and Annuity (L&A), Disability, Health and Property and Casualty (P&C). The
company did not disclose the consideration amount, however generally product companies
are acquired at 2.5–4x sales.
Wyde has annual sales of US$30mn (broad revenue break up – 60% from L&A and 40%
from P&C) with EBITDA margin of 18%. PAT margin of the company is also in the range of
17-18% as it gets aided by other income generated from US$22mn cash in its accounts. It
is a debt-free company. Wyde has 25 clients – 14 in the US, 2 in Canada and 9 in France,
with 50% of its revenue coming from the top five clients. Post acquisition, Wyde, which has
over 200 employees, would operate as a product business of MphasiS. This will aid the
non-linear revenue of MphasiS. The stock is currently under review, though the broad
estimates of the company remain almost unchanged given the relatively small size of the
company acquired.

1QFY2012 Result Reviews- Sun TV; GSK Consumer , Indraprastha Gas ::Angel Broking,

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1QFY2012 Result Reviews
Sun TV
Sun TV reported a dismal performance for 1QFY2011. The top line grew by 3.1% yoy and
declined 1.4% qoq to `454cr. Operating margins declined by 111bp yoy due to high other
expenditure and staff costs. The earnings for the quarter grew by 9.8% yoy to `187cr. The
stock is currently under review.

GSK Consumer – 2QCY2011
GSK Consumer reported its 2QCY2011 results. The company’s net sales came in at
`653cr (`537cr), growth of 21.6% yoy. Gross margin declined by 295bp yoy. OPM
declined by 155bp yoy on account of high raw-material cost inflation and high ad spends.
Employee expense decreased by 56bp yoy and other expenses came down by 222bp yoy.
Tax rate declined by 71bp yoy. The company reported earnings growth of ~15% yoy to
`82.5cr for the quarter. We maintain Reduce on the stock with a target price of under
review.

Indraprastha Gas
Indraprastha Gas reported robust set of numbers for 1QFY2012. Net sales grew by 59.9%
yoy to `536cr. However, raw-material costs increased by 80.0% yoy to `301cr. Hence,
EBITDA grew by only 47.1% yoy to `158cr in 1QFY2012. EBITDA margin slipped by
258bp yoy to 29.5% in 1QFY2012. Further, interest expense stood at `9cr in 1QFY2012
compared to nil in 1QFY2011. Hence, net profit decreased by 39.6% yoy to `80cr.
We maintain our Neutral view on the stock.

Hold Jet Airways; Target : Rs 520::ICICI Securities

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P r e s e n t   l o o k s   t e n s e ,   w a i t f o r   g o o d   e n t r y   l e v e l …
Jet Airways (JAL) reported consolidated revenues of | 3970.4 crore,
marginally lower than our expectations (I-direct estimate: | 4011.2 crore)
due to higher-than-expected drop in yields in the LCC segment (JetLite).
However, international operations  that accounted for 57% of total
revenues outperformed with revenues growing 21.7% YoY due to strong
demand. On the other hand, domestic  segments (i.e. including JetLite)
recorded lower revenue growth of  16.6% YoY due to a 10.4% drop in
JetLite’s yields (LCC segment). On the cost front, fuel rates continued to
remain high and rose sharply by over 39% YoY. This, in turn, dented
operating margins. It declined by 1132 bps to a mere 0.9%. However, a
reduction in interest costs (down 22.8% YoY) and exceptional income of |
118 crore as contribution receivable from lessor towards maintenance
helped the company to reduce its losses. As a result, JAL reported a net
loss of | 128.5 crore as against I-direct’s estimated loss of | 335.8 crore.
ƒ Domestic yield remains under pressure due to competition
During the quarter, yields for the domestic segment, especially low
cost segment (LCC), remained under pressure partly due to
competitive pricing strategy adopted by major competitors and
partly due to increase in the supply (ASKM). As a result, JetLite’s
yield declined by 10.4% YoY.
ƒ Soaring fuel prices dent operating margins
Fuel prices for the quarter rose by over 39% YoY and 12% QoQ.
The absolute difference in fuel costs for the Jet group as compared
to the same period last year was | 655.8 crore.
V a l u a t i o n s
We expect 16% revenue CAGR during FY11-13E as demand would
continue to outpace supply growth on healthy pax traffic. The BKC land
deal and aircraft sale and leaseback transactions are key things on the
company’s radar to reduce its debt burden. Further, we believe any
potential fall in oil prices will improve JAL’s profitability significantly.
However, over the medium term, the company may continue to witness
pressure in domestic yields due to the lean season and competitive
pricing environment. At the CMP of  | 476, the stock is trading at 11.2x
and 6.7x its FY12E and FY13E EV/EBITDA, respectively (i.e. 10% discount
to  its  comparable  peer  matrix).  We  have  assigned  a  HOLD rating to the
stock with a target price of | 520 (i.e. at 7.0x FY13E EBITDA).

Sun Pharmaceutical -Growth guidance maintained despite lower sales ::Standard Chartered Research,

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Sun Pharmaceutical
Growth guidance maintained despite lower sales


 Mixed results: lower costs aid margin (33.5%, up from
30.3% in Q4 FY11) offsetting lower sales
 20% yoy net sales growth led by Taro; ex-Taro sales
declined 18% yoy against estimated 8% decline.
 Management reiterates revenue guidance of 28-30%
(we estimate 25%) for FY12; growth is challenging, in
our view.
 We marginally lower FY12/13 revenue growth estimates
and revise EPS by +2% for FY12 and -5% for FY13.
 Maintain IN-LINE with PT of Rs490 (Rs475 earlier).


Mixed results. Sun’s Q1 FY12 results were mixed, with
higher margins offsetting lower sales. Net sales (net of VAT)
grew 20% yoy to Rs16.6bn against our estimate of
Rs17.6bn. Lower fixed costs aided margins with EBITDA of
Rs5.5bn (33.5% margin, 11% yoy decline) versus our
estimate of Rs5.4bn. Net profit was in line, at Rs5bn, with
lower taxes (due to tax credits in Taro) offsetting higher
minorities outlay.
Ex-Taro sales declines 18%. Ex-Taro, organic sales
declined 18% yoy on a net basis, against our estimate of
8%. However, domestic formulations were impacted by
Rs290m of discontinued contract manufacturing operations,
not in our estimate. We also estimate that ex-Taro US
business (after adjusting for oxaliplatin sales of Q1 FY11)
have grown, primarily led by new products including generic
docetaxel and sumatriptan injectibles during the quarter.
Moreover, we estimate ROW sales having grown 130% yoy
during the quarter, aided by a low base of Q1 FY11
operations due to inventory adjustments.
Guidance reiterated but will be challenging.
Management reiterated guidance of 28-30% net sales
growth in FY12 (including Taro), which would be
challenging, in our view. We have marginally revised
downward our revenue expectation by 1-2% for FY12/13,
with implied growth of 25% in FY12 and organic growth of
15% in FY12 (against 20% earlier), changing our reported
EPS by 2% and -5% for FY12/13, respectively.
Maintain IN-LINE. We maintain IN-LINE rating with a
revised SOTP of Rs490 (Rs475 earlier). Current valuations
leave little room for execution risks on Taro, which we
believe is vulnerable to competition due to product
concentration and weak pipeline.

Corporation Bank -1Q: Operating profit weak; but risk-return still attractive; Buy::BofA Merrill Lynch,

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Corporation Bank
   
1Q: Operating profit weak; but
risk-return still attractive; Buy
„Cut PO / Earnings; but risk-return still very attractive
We cut our PO to Rs650 factoring in a +8/11% earnings cut for FY12/13 (growth
of ~14/20% yoy). FY12/13 earnings cut to factor in margin pressure / loan growth
cut. But we maintain Buy, as risk-return remains very attractive with stock trading
at 1.0x FY12 book / 0.8x FY13 book, with RoEs of still +21/22%. We believe Corp.
Bk can re-rate to at least 1.1x FY13 book, which is still a +30% discount to
Gordon theory multiples. We believe the discount may remain owing to weak
liability franchise and low stock liquidity (Govt. & LIC own ~84% of stock).
1Q: 14% beat owing to tax write-back; PPOP miss by +17%
Corp Bk’s 1Q earning came in at Rs3.5bn, a 5% yoy growth and a 14% higher
than est. driven by a) lower provisions owing to a write-back and b) lower tax rate
due to one-time write-back of tax provision of Rs630mn. Excluding tax write-back,
banks earnings declined by ~14% yoy. Moreover, PPOP earnings were +17%
below estimates owing to a) 10% miss on topline and b) 13% miss on other
income. Topline grew <2% yoy owing to a sharp rise in funding costs leading to
margin decline by +50bps yoy (38bps qoq) to 2.1% and also a sharp deceleration
in loan growth (to <22% yoy vs. +37% in FY11). Fees also disappointed; growth
only 3% yoy. CASA also slipped to 21% (+300bps yoy and 500bps qoq).
Asset quality holds-up well; remains manageable
Corp Bank’s slippages have held-up at Rs1.5bn (vs. Rs1.7bn in 4QFY11 and
Rs2.2bn in 1QFY11). But headline gross NPLs increased qoq by 7% (at 1.1%)
and net increased by 3% qoq (at 0.5%), but provision cover still at ~75%. We still
estimate FY12 slippages at Rs9.3bn (vs. Rs8.1bn in FY11).


Price objective basis & risk
Corporation Bank (XCRRF)
We believe risk-return at Corporation Bank remains very attractive with the stock
trading at 1.0x FY12 book and 0.8x FY13 book, with RoEs of still +21/22%. Our
PO of Rs650 is based on our belief that Corp. Bk can re-rate to at least 1.1x FY13
book, which is still a +30% discount to Gordon theory multiples. We believe the
discount may remain owing to weak liability franchise and low stock liquidity
(Govt. & LIC own 84% of stock). Our PO is pegged on P/B metric (Gordon model)
where we estimate over +22pct RoEs (FY12E) and assume 14pct CoE, implying
a theoretical multiple of approx. 1.6x. But, our PO is at a c.30% discount to
Gordon multiples owing to low stock liquidity. Risks are margin compression
owing to mismatch between lending and deposit cuts. Low CASA deposit
franchise may lead to a spike in funding costs and hurt margins in rising rate
environment.

Bank of Baroda F1Q12: Lower Provisions Offset Weaker NII ::Morgan Stanley Research,

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Bank of Baroda
F1Q12: Lower Provisions
Offset Weaker NII
Quick Comment: BOB reported profits of Rs 10.3 bn
(-20% QoQ, +20% YoY) for QE Jun-11. PBT
(excluding extra-ordinaries) was 5% ahead of our
estimates. Lower provisions were partially offset by
weaker NII.
We believe that revenue growth at SOE Banks will
continue to be weak owing to sustained margin
pressure. Further, given the increase in lending
rates the potential for fresh asset quality issues
emerging later in the year remains a potential risk.
Across all metrics, BOB is trading significantly
above long-term averages (9.4x F12e P/E, 1.4x F12e
PBV). Hence, we maintain UW.
The key highlights from the results include:
Adj. global NIM moved lower by 25 bps QoQ to
2.87%: Domestic NIM moved lower by 31 bps QoQ to
3.39%. Adj. NII was down 3% QoQ / up 24% YoY. The
reason for the sharp underlying compression is funding
cost pressures –: a) Upward repricing of domestic term
deposits (which on our computations have moved up to
8.2% from 7.3% in QE Mar-11), and b) Saving a/c
interest rate increase from 3.5% to 4%.
Further, margins would have gotten support from free
funds effect from equity issuance received from the
government towards end-March. If we adjust for this,
global NIMs would be down ~30-35 bps QoQ.
Loans were up 2% QoQ, 25% YoY. Deposits were up
2% QoQ, 23% YoY. Domestic CASA/deposits moved 45
bps lower QoQ to 33.9%. Domestic loans were flat QoQ,
+24% YoY. International loans were up 8% QoQ, 28%
YoY.