08 January 2012

Equity Strategy - January 2012:: CSEC Research

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



Selling pressure intensifies in lower rung stocks

December saw the markets continuing its downward journey. The BSE Sensex closed lower by about 4% while the S&P CNX Nifty closed with a loss of 208 points at 4,624.3. Selling pressure intensified in lower rung stocks with the BSE Midcap and BSE Smallcap indices losing ~9% each. Volatility in the Sensex continued to remain at elevated levels, the index moved in a 1,900 points band as against more than 2,100 points in October and November. Volatility was also high in the the midcap and smallcap spaces.A surprise coordinated by the Federal Reserve and a few other central banks to keep credit flowing amid the worsening debt crisis in Europe helped fuel a rally in the equity markets. However, this rally was short lived as industrial production numbers spooked the markets.

Rate reversal on the cards

Lower yields in G-Secs and lower rates on overnight swaps indicate that debt markets are discounting peaking of interest rates. With food inflation moderating, growth is likely to take centre stage in the foreseeable future.  After two fiscals of strong growth, the current fiscal (FY12) has been a challenging one. September results were below expectations, while the sales growth along expected lines. Foreign exchange impact took center stage in the September quarter. Frontline IT stocks (Infosys, TCS and Wipro) have gone though earnings upgrades in the recent weeks, while Bharthi Airtel, Reliance and ONGC have been downgraded.  At 15,800, the Sensex is trading at ~15X FY13 earnings estimates. The weakened rupee and upgrades are likely to augur well for frontline IT stocks. Lower commodity prices are likely to have positive impact on FMCG stocks. Stocks in this space, however, have gone through only a moderate correction. Investors would be better off sticking to large and midcap stocks in the FMCG space. Considering risk aversion in the debt markets; stocks with high-leverage, typically infrastructure, shipping and real estate need to be given a go-by. Bogged by asset quality concerns and capital adequacy concerns under Basell III the financial space has gone through a sharp correction. These appear to be overdone, at current levels midcap and large cap banking stocks appear attractive.

Regards, 
CSEC  Research  

 

SREI Infrastructure Finance Ltd - Long Term Infra Bonds

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



read more ...

Rallis India - Domestic market under pressure - Downgrade to HOLD::Emkay

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


¾ Rallis’ higher dependency on domestic agrochem markets
(70% of revenues) will lead to moderation in earnings in near
term due to declining farm incomes & shrinking farm
profitability
¾ During FY08-11, Rallis witnessed revenue / PAT CAGR of 17%/
43%, respectively. However near term growth to moderate at
Revenue / PAT CAGR of 21% / 15% during FY11-13E
¾ Potential ramp up in recently acquired seed business coupled
with Dahej plant (catering to exports) is likely to contribute
to revenue growth in long term
¾ Downgrade FY12/13E EPS estimates by 12.8%/22% to Rs 7/8.5
and lower target multiple to 14x from 18x. Downgrade to Hold
from BUY with target price of Rs 120 (previous Rs 197)
Higher dependency on domestic markets might lead to moderation in
earnings in the short term
Rallis is largely domestic agrochemical focus company with revenue contribution of
~70% from domestic markets and balance from exports. Higher agrochemical
consumption with growing preference for branded products has helped Rallis to report
revenue CAGR (FY08-11) of 17% while improved product portfolio driving EBITDA
margins resulted into PAT CAGR of 43%. We believe pressure on farmers’ profitability
is likely to squeeze affordability for agrochemicals and put pressure on company’s
earnings in the near future.
Ramp up of seed business and Dahej plant to support long term growth
Acquisition of seed company - Metahelix has helped Rallis to capture the opportunity in
fast growing seeds market. Rallis is confident of boosting its revenues from Metahelix
from Rs ~1 bn at present to Rs 4-5 bn over next 3-4 years on back of its strong brand
equity and distribution network. Company’s Dahej plant (largely to cater exports market)
was commissioned in Q1FY12 and it is currently operating at 40-50% capacity
utilization. Planned ramp up at Dahej plant to 100% by end of FY13 is also likely to
support revenue growth for the company.
Reduce earnings and target price, downgrade to HOLD
Due to increasing pressure on domestic farm incomes and shrinking farm profitability,
we have cut our FY12/13 EPS estimates by 12.8%/22% to Rs 7.0/8.5, respectively in
anticipation of increasing pressure on margins and growth in near term. Rallis witnessed
significant re-rating in FY11 to P/E of 14x from 8 x in FY08-10 driven by higher earnings
growth and improved return ratios (RoE 27%). However with recent moderation in
earnings we have trimmed our target multiple to 14x from 18x. Subsequently we reduce
our target price from Rs 197 to Rs 120 and downgrade the stock from BUY to HOLD.

Economy: Santa’s year-end present – borrowing shock :: Kotak Securities

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


Economy
Fiscal Policy
Santa’s year-end present—borrowing shock. Speculation on additional borrowing
ended as the government announced on Friday that it would borrow Rs400 bn more on
dated securities in 4QFY12E. Further, as per the 4QFY12 T-bills calendar concurrently
released, gross T-bills issuances are pegged at Rs1,520 bn, which amounts to Rs650 bn
of net issuances in the quarter. We continue to estimate GFD/GDP at 5.7% in FY2012E.
A part of the higher borrowing in 4QFY12E is also to allow the government to carry
forward cash into FY2013E. This higher borrowing will put an upward pressure on
domestic bond yields and OMOs are likely to continue to prevent disorderly movement.
We expect the yield on the 10-year GSec to rise to 8.80% in the coming weeks with
further upside dependent upon the quantum and success of OMO auctions.

Coromandel International:: Proxy complex fertiliser play - Downgrade to Hold:: Emkay

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


¾ Coromandel being proxy to complex fertiliser is likely to
witness challenges due to pressure on complex fertiliser
demand and may see margin pressure
¾ Non subsidy business (agrochemicals, specialty fertilisers,
retail etc) which contributes 14% to revenues and 27% to
profits to also see margin pressure with slowdown in growth
¾ However, synergy from Sabero acquisition & TIFERT
commissioning in Q1FY13 remain future growth drivers
¾ Reduce FY12/13 est by 14.3% / 23.7% to Rs 22.6 / 24.7,
respectively and downgrade the stock from BUY to HOLD
with revised price target of Rs 286
Coromandel being proxy to complex fertiliser may witness pressure on
volume growth and margins
Coromandel Int’l is a leading player in the decontrolled fertilizer space with installed
capacity of 2.3mn mt of NPK (market share of 23%) & 0.8mn mt of DAP (market share
of 6%). Growing demand for complex fertiliser with farmers’ increasing awareness of
complex fertilizers has enabled the company to record topline CAGR of 25% and PAT
CAGR of 17% over FY08-11. However moderation in demand growth may hamper
complex fertilisers offtake and can put pressure on margins in near future due to
increased competition to maintain market share.
Coromandel’s non-subsidy business (which includes agrochemicals, retailing etc&
contributed ~14% to revenues and ~27% to EBITDA in FY11) with domestic market
focus might as well be impacted as farmers reduce their consumption of agri inputs.
However, synergies from Sabero Organics & TIFERT commissioning to
facilitate growth
Acquisition of Sabero Organics, a leading agrochemical player in technicals
manufacturing, should facilitate growth for Coromandel’s agro chemicals business.
Improved capacity utilization from 30-35% at present and integration of Sabero’s
diversified product portfolio of active ingredients (AI’s) with Coromandel’s strong
distribution network will help the company to support revenues, though the contribution
will remain marginal in percentage terms. Coromandel’s joint venture - TIFERT to
produce phos acid is expected to be commissioned by Q1FY13 and will increase
availability of phosphoric acid for Coromandel’s plants enabling the company to
increase the production of decontrolled fertilizers.
Reduce estimates and target price, Downgrade from BUY to HOLD
Foreseeing the challenges in near term on company’s earnings, we have reduced our
EPS estimates by 14%/24% to Rs 22.6/24.7 for FY12/13 respectively. Coromandel has
witnessed re-rating in multiples (post the introduction of NBS in April’10) with its PE
multiple expanding to 13x in FY11 compared to average of 5x during FY06-10.
However, in the current scenario, we have trimmed our target multiple to 11x from 13.5x
and revised our target price to Rs 286 (previous Rs 435) which also includes Rs 15 for
9% bonus debentures announced by the company and subsequently downgrade the
stock from BUY to HOLD. Strong balance sheet (cash positive) and RoE of 30% remain
key strengths of the company.

United Phosphorus - Global growth remains buoyant:: Emkay

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


¾ UPL’s diversified geographical presence provide cushion
against slowing domestic rural growth. Buoyant growth in
key global markets to ensure growth for UPL
¾ Recent acquisition in Latin American markets has
strengthened its RoW presence whose contribution has
increased to 39% of total revenues from 33% earlier
¾ H2FY12 is likely to witness strong growth since Q4 is a
seasonally strong quarter for North America & Europe. DVA
contribution & seasonally strong Q3 for RoW to boost growth
¾ Stock has underperformed at 6.5x 1 yr fwd earnings
compared to average of 13x enjoyed historically. Expect
valuation gap to bridge, maintain Buy with target of Rs 215
Diversified geographical spread should help UPL to beat demand
pressure in Indian agrochemical markets
UPL’s diversified geographical presence (India-25%, North America-18%, Europe-7% &
Rest of World (RoW) -39% of revenues in FY12) enables the company to reap benefits
from varied geographies with different demand profiles. While domestic agrochemical
market is under pressure due to moderating rural growth, Europe and North America
remain on track. North American pipeline remains strong and company is likely to
witness organic volume growth in excess of 15% during the current year. Since, Q4 is a
seasonally strong quarter in these geographies we are likely to witness strong growth in
these regions in H2FY12. UPL’s recent acquisition in Latin American markets has also
strengthened its Rest of World (RoW) presence whose contribution has increased to
39% of total revenues from 33% earlier. RoW operations remain strong with growth
being driven primarily from Latin American countries.
Pressure on domestic market and debt on balance sheets poses risk to
company’s earnings
Though UPL is a diversified global players but its revenue share from India markets has
increased to 22% in FY10 to 24% in FY12E. With pressure on domestic agrochemical
demand, company’s domestic revenues may come under pressure. However its global
revenues / profits are likely to gain from currency depreciation. UPL also has significant
debt of Rs 32 bn, where it may see some M-T-M loss in near term. However UPL
continue to hold has cash of ~ Rs 1 bn to support the funding of any acquisition
opportunity in future.
Earnings might surprise in H2FY12, maintain Buy
UPL’s expanding global footprint has enabled the company to record topline CAGR of
17% and APAT CAGR of 23% over FY08-11. Historically, UPL has commanded a PE
multiple of 6x-20x with an average of 13x during FY06-11 however multiples have
currently fallen to 6.5x due to concerns on growth in global markets, high debt and
impact of currency depreciation. We believe that concerns are overdone with stock
trading at 50% discount to its historical average P/E multiple and earnings are likely to
surprise in H2FY12 driven by strong growth in North American & Latin American
markets. We maintain Buy with target price of Rs 215.

Chambal Fertilisers: Urea business to remain buoyant:: Emkay

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


¾ Moderation in rural growth & shrinking farm profitability is
unlikely to impact domestic urea players. Any decline in urea
consumption will reduce urea imports
¾ Chambal is likely to benefit from incremental production
above cutoff which qualifies for IPP linked subsidy. Rupee
depreciation would further augment earnings
¾ However, unrelated diversification in shipping, textiles & IT is
a drag to profitability. We have modeled for losses in shipping
& textiles in FY12; IT business poses risk to earnings
¾ Chambal has traded in the PE band of 6-17x with an average
of 9.5x. Valuations remain comfortable at 8.5x fwd estimates.
Maintain Accumulate with target of Rs 98
Urea players unlikely to be hit in the current scenario; rupee depreciation
to benefit IPP linked production
Chambal Fertilisers is one of the leading players in the domestic urea space comprising
of 1.85mn mt of installed capacity with 8% domestic market share (by capacity). As
discussed above in the report any moderation in demand growth is unlikely to have any
impact on domestic urea production hence keeping the company’s earnings intact.
Chambal being a proxy to urea players, since 80% of profits is contributed by urea, is
likely to witness stable earnings. On the contrary it may surprise on positive side due to
benefit from rupee depreciation having favourable impact on IPP linked production.
However, unrelated diversification in shipping, textiles & IT is a drag
Chambal’s unrelated diversification in shipping, textiles & IT business is a drag to the
company’s profitability and has always weighed on investors’ sentiments. Out of
Chambal’s six vessels, only 1 vessel is currently under long term contract while the
remaining 5 ships are operating on spot rates. Textiles business is also under pressure
due to decline in cotton prices resulting into inventory losses. We believe shipping &
textiles are likely to remain laggard in the current scenario and have modeled for losses
in both these segments for FY12. IT business is also likely to post losses in FY12
creating further pressure on bottomline.
Valuations remain comfortable; Earnings might surprise in Q4 due to
higher IPP linked production;
Historically, Chambal Fertilisers has traded in the PE band of 6x-17x with an average of
9.5x during FY06-11 based on 1 year forward earnings estimates. Valuations remain
comfortable in the current scenario with the stock quoting at 8.5x currently. Earnings are
likely to surprise in Q4 due to higher IPP linked production coupled with incremental
gain from rupee depreciation. Further, any positive news flow related to implementation
of NBS in urea is likely to be a positive trigger. However continued pressure on
company’s other businesses (textiles, shipping and IT) and huge debt Rs 25bn on
balance sheet leading to M-t-M loss are key concerns. We maintain our Accumulate
rating on the stock with price target of Rs 98.

Top 5 mutual funds to watch out for in 2012 ::Fundsupermart

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


The top five recommended ELSS based on Fundsupermart.com's in-house research methodology.
As per Section 80C of Income Tax Act 1961, individuals are allowed to invest up to Rs 100,000 in tax saving instruments, which will be deductible from their gross total income. Investing in tax saving mutual funds or equity linked saving schemes (ELSS) offers not only tax benefits but also an opportunity to create wealth.
Equity linked saving schemes are equity-oriented mutual funds with a lock-in period of three years. Dividends received from ELSS funds are also tax exempt. The low lock-in period and the potential to generate market-linked returns make them a tax saving favourite.
We highlight our recommended tax saving funds.
Disclaimer: This article is for information purpose only. This article and information do not constitute a distribution, an endorsement, an investment advice, an offer to buy or sell or the solicitation of an offer to buy or sell any securities/schemes or any other financial products /investment products mentioned in this article or an attempt to influence the opinion or behavior of the investors /recipients.
Any use of the information /any investment and investment related decisions of the investors/recipients are at their sole discretion and risk. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Opinions expressed herein are subject to change without notice.

Metals & Mining India Government increases export duty on iron ore: Good for JSW, not so for Sesa. ::Kotak Sec

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


Metals & Mining
India
Government increases export duty on iron ore: Good for JSW, not so for Sesa.
Indian Government increased export duty to 30% for all grades of iron ore from 20%
earlier. This will impact Sesa’s FY2013E EBITDA by 15.5% and earnings by 9.7% in
FY2013E. We lower our fair value on the stock by 7.9% to Rs175. We believe the
increase in export duty will eventually benefit JSW Steel and other steel companies
without captive mines. In the near term though, supply constraints in the iron ore
market will restrict upside. We maintain our Cautious view and recommend selective
exposure to the sector through stocks such as Tata Steel and Sterlite/ HZ that have
become attractive and are trading close to distressed valuations.

Agri Sector Update :Prefer Chambal over Coromandel & UPL over Rallis :: Emkay

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


¾ Decline in food grain prices (refer to our report on Rural
steroid is ebbing) have affected farmers’ profitability and is
likely to put pressure on agri input consumption
¾ We believe that complex fertiliser players will be affected
more than the urea players while in agro chemicals domestic
players will face severe impact than exports based players
¾ We prefer Chambal fertiliser (urea base player) over
Coromandel (complex fertiliser base) and United Phosphorous
(Agrochem exports) over Rallis India (domestic focus)
¾ Downgrade earnings and target price for Rallis India and
Coromandel, maintain for Chambal and United Phosphorous
Complex fertiliser based players to be affected more than urea, Prefer
Chambal fertiliser over Coromandel
Growth moderation in agri input consumption may have adverse impact on fertiliser
consumption also (as witnessed in FY03, kindly refer to chart on next page). However
domestic urea production is unlikely to be affected due to drop in demand (if any) since
imports contribute ~23% total urea consumption and any reduction in demand is likely to
reduce imports while keeping the domestic production intact. Complex fertilisers have
been brought under NBS and companies have increased prices significantly to pass on
higher input cost. However contraction in fertiliser demand may put pressure on
complex fertiliser manufacturers and squeeze companies’ margins. As a result we
prefer urea based players like Chambal Fertiliser over complex fertiliser players like
Coromandel International.
Agrochemicals - export based players to benefit while domestic players
may see demand pressure, prefer UPL over Rallis
Projecting a weak demand environment for agri input, we expect pesticide consumption
to come under pressure and companies may also see contraction in margins. Exports
oriented players may benefit from buoyant global demand environment and currency
depreciation. Under the current circumstances, we prefer United Phosphorous which is
largely a global player since India account for <25% of total revenues and profits over
Rallis India (where exports contribution is ~30%).
Earnings and valuations to take a hit, downgrade Coromandel & Rallis
Affected by weak demand outlook and margin pressure in near future, we are reducing
our earnings estimates for Coromandel and Rallis and subsequently downgrade these
stocks from BUY to Hold. Though strong balance sheet (cash surplus) and higher RoE
(28%+) are key strengths of these companies but we expect earnings multiple to
contract owing to deceleration in earnings growth. Also we expect that the premium
multiple which these stocks were enjoying over the peers is likely to come down.

hEDGE ::January view: New Year, New Hope:: Edelweiss

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


hEDGE
The alternative insights monthly

January view: New Year, New Hope


Leverage at low levels
Uptick in valuation dispersion indicator
What to expect in 2012 from India?
IT: Moderating growth
Auto: Weakness spreads
Flashback CY11
CY11 started with Nifty at 6130 and optimism at its peak. Industry’s Nifty targets
for the year were 7K+ and USD/INR was at 44. We all know by now how CY11
actually panned out. An ailing global economy along with a cluster of domestic
concerns (inflation, high rates, reforms backlog, slowdown and falling currency)
ensured that the year was one of the worst (if not the worst). Indian equity market
capitalization is down ~24% in CY11. Flight to safety and a weakening balance of
trade have bludgeoned the currency to all time low versus the greenback—INR has
depreciated ~16.75% to the USD in CY11. GDP growth fell to a 2-year low of ~6.9%
YoY in Q2FY12 (against 7.7% in Q1FY12). Moreover, most observers, taking into
consideration the ongoing global slowdown and domestic concerns, have resorted
to earnings downgrades across companies. The pessimism in the year was at the
extreme with 9 out of 12 months closing in the red, which is the highest negative
monthly closing in Nifty’s history. Such pessimism was seen before in CY95 and
CY01 with 8 months closing in the red. CY12 is beginning with Nifty at 4625 and
optimism at ebb.
Gilt funds had a good run last year. Barring the blip towards the end, gold for the
most part was one of the most sought after asset classes. The performance of
equities is better summed up in our earlier lines. We start CY12 with the world
economy at the crossroads. Emerging markets (EMs) will look to put growth back
on the track. Days of monetary easing in EMs are likely to be back.

Lupin: Lupin closer to launching generic Tricor :: Kotak Securities

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


Lupin (LPC)
Pharmaceuticals
Lupin closer to launching generic Tricor. Lupin’s final US FDA approval for generic
Tricor (US$1.3 bn) and its settlement with the innovator clears the way for its launch of
generic Tricor on a mutually-agreed date (undisclosed). However, the competitive
scenario has changed with (1) Teva’s (first-to-file holder) surprise declaration that it does
not expect Tricor approval in 2012 and (2) Impax battling an FDA warning letter. This
may well become a 2-3 player market rather than a 5-6 player market in 2012. We
factor in a July 2012 launch, sales of US$40 mn for Lupin from Tricor in FY2013 and
potential for upside. Retain ADD, with a target price of Rs545.

Banks/Financial Institutions: Basel 3 transition ought to be smooth :: Kotak Securities

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


Banks/Financial Institutions
India
Basel 3 transition ought to be smooth. We believe Indian banks are well positioned
to move towards Basel 3 guidelines, and the banks are expected to make the transition
by March 2017, ahead of international timelines. Banks would need to keep 11.5% as
overall CAR with tier-1 capital at 9.5%. Focus is on maintaining a higher share (8%) in
the form of common equity. Capital to fund growth, higher core-equity and CAR
requirements are likely to moderate banks’ RoEs from current levels.

AUTO INDUSTRY VOLUME UPDATE - DECEMBER 2011 :: Kotak Securities

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


AUTO INDUSTRY VOLUME UPDATE - DECEMBER 2011
Trends in the monthly auto volumes reported by the OE's for the month of
December 2011 remained mixed. In the passenger car segment, players
having higher proportion of diesel car sales reported growth while petrol
car sales continue to suffer on account of weak demand. M&HCV sales
remained impacted on account of slowdown in industrial activity in the
economy. However LCVs continued to grow at a robust pace. 2W sales
started feeling the pressure of economic slowdown. Among the companies,
TAMO and M&M posted strong numbers whereas Bajaj Auto and TVS Motors
reported weak dispatch figures. Going ahead we expect LCV and diesel car
segment to outperform other segments within the auto industry.

Bank Nifty hovering above key base level :: Business Line

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



Graphite India (Rs 75.8): BUY :: Business Line

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




We recommend a buy in the stock of Graphite India from a short-term perspective. It is seen from the charts of the stock that after retracing to Fibonacci retracement level of 50 per cent of its prior up move, it found support around Rs 65 in December 2011. This level is also a significant long-term base level.
The stock, thereafter, started to move higher triggered by prolonged positive divergence in daily moving average convergence divergence indicator and weekly relative strength index. On Thursday, the stock emphatically broke through its medium-term downtrend-line by surging 6.7 per cent with good volume. This up move has also breached its 21- and 50-day moving averages decisively.
The daily RSI has entered into the bullish zone and weekly RSI has entered into the neutral region from the bearish zone. After signalling a buy, the daily MACD is on the brink of entering into the positive terrain. Both daily and weekly price rate of change indicators are featuring in the positive area indicating buying interest.
Our short-term outlook on the stock is bullish. We anticipate it to move higher and reach our price target of Rs 78.5 or Rs 81 in the approaching trading sessions. Traders with short-term perspective can consider buying the stock with stop-loss at Rs 73.5.

Reduce TV18 BROADCAST ::TARGET PRICE: RS.39: Kotak Securities - Private Client Research

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


TV18 BROADCAST
PRICE: RS.36 RECOMMENDATION: REDUCE
TARGET PRICE: RS.39 FY12E P/E: 38.2X
q Continued Cheers for a debt-free TV18: With 7.5% gains in yesterday's trade,
TV18 Broadcast Ltd. (TV18) now trades within striking distance of our fair value
estimate (Rs 39). We believe the benefits from likelihood of a stronger balance
sheet are well priced in at this stage, and upsides are limited. Upsides are also
well-capped by the upper band of the impending rights issue (Rs 40). At CMP,
TV18 Broadcast stock prices in almost near-perfect valuations for the resultant
entity (as per our assumptions and estimates).
q Margin of safety low: Our fair value estimate has provided for 2.5x EV/ Sales
for TV18 (current operations), and 2.0x EV/ Sales for (assumed sales of) acquired
entities. The valuations we have ascribed to TV18 Broadcast (current operations)
are clearly higher than what the market has thought them worth, in the near
past. Further, we believe there may be downsides to our assumptions of sales of
the acquired entities. Lastly, there may be downside to our assumptions on the
extent of dilution (our present calculations account for dilution at the highest permissible
price). As such, the, margin of safety is somewhat low, considering upside
of 8% .
q Downgrade to REDUCE: We downgrade the TV18 stock to REDUCE on the
back of significantly weaker risk-reward profile than our preferred stocks in our
media coverage universe. We would be sellers into rallies, and would reconsider
our recommendation on obtaining greater clarity on financials of acquired entities,
or upon 10%-15% decline in the stock price.
q Valuation and Risks: We continue to see fair value of TV18 Broadcast at Rs 39/
share. Upside risks to our recommendation/ price target arises from changes in
deal structure/ rights issues, stronger than expected financials/ operations of
TV18 current operations/ disclosed financials of ETV acquired channels.
Computation of fair value post the announced transactions
(Rs mn) FY12E
Sales, TV18 Broadcast, Existing Operations (pre-announcement) 12,646
Valuation Used - EV/ Sales (FY12E) 2.5
Value of Operations 31614
Fair market capitalization (Net of net debt Rs.6700 mn) 24914
Shares Outstanding (current structure) 362
Fair Value/ Share (before announcements made yesterday) 69
Post - Rights Issue
Shares Issued (assuming price of Rs 40, amont Rs 27 Bn) 675
Total Shares Outstanding (post dilution) 1037
Value of Operations 31614
Fair Market Capitalization (adding net cash Rs.20.3 bn from rights issue) 51914
Fair Value/ Share (post rights issue, before ETV transactions) 50
Post Acquisition of ETV channels
Fair Value of Operations (TV18 present operations) 31614
Sales, ETV Total (not provided, assumed) 7000
Sales, ETV stake bought out by TV18 (assumed at 60% of total ETV sales ) 4200
Fair EV/ Sales, Acquired Stakes of Channels 2
Fair Value, Acquired Entities 8400
Fair Values, Operations Post restructuring (equals fair market cap) 40014
Shares outstanding post rights issue 1037
Fair Market Capitalization (post acquisition of ETV channels, post rights issue) 40014
Fair Value/ Share. Post restructuring (Target price) 39
Source: Kotak Securities - Private Client Research

Economy: Balance of payments on a knife-edge :: Kotak Securities

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


Economy
Balance of Payments
Balance of payments on a knife-edge. With a deteriorating CAD and a weakening
capital account balance, India’s overall balance in 2QFY12 stood at US$0.3 bn only. The
CAD/GDP fell to 3.7% from 3.5% in 1QFY12. The capital account balance saw a drop
to US$18.4 bn from US$22.7 bn in 1QFY12 with the foreign investment flow slowing
down to US$3.2 bn from US$10.5 bn in 1QFY12. This deterioration in the overall
balance of payments is in line with our expectations of a negative balance for FY2012E
signaling dollar sales by the RBI in the forex market

Cement: 3QFY12E - seasonal improvement not reflective of underlying risks :: Kotak Securities

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


Cement
India
3QFY12E—seasonal improvement not reflective of underlying risks. Cement
companies under our coverage are likely to report improved profitability, supported by
higher realizations. However, the quarterly earnings do not fully reflect potential risks to
pricing discipline from (1) regulatory intervention, (2) potentially weak demand and
(3) continued capacity overhang, besides cost pressure from domestic and imported
fuel. We maintain a cautious stance with ACC and Ambuja being our top Sell ideas.

Hits and misses of 2010-11 :: Business Line

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




As we kicked off our annual exercise taking stock of Investment World's equity recommendations, we knew it wouldn't make a pretty picture. In every way, 2011 was a year of nasty surprises. The economy went from a brisk trot to a slow amble, global markets collapsed. Corporate profits were bludgeoned by new risks every month — regulatory activism, inflation, interest rates and a weak rupee. The broad market index CNX 500 has collapsed by 24 per cent in the last one year. But we decided to brave the brickbats and go ahead with the exercise.

TAKING STOCK

To assess how our recommendations fared, we took into account all of our 380 secondary market, IPO, rights and open offer calls (based on fundamentals) given from January 1, 2010, to June 30, 2011. Recommendations made in the last six months have been excluded, as they wouldn't have had time to pay off. Here's what the exercise threw up.

18 PER CENT DOWN

The bad news first. The stocks that we asked investors to buy have lost 18 per cent in value in aggregate. That is, an investor who put money on every one of our buy recommendations since January 2010 would today be left with Rs 82 for every Rs 100 invested. But our ‘buys' fared no worse than the broad market. Investments made on the same dates in the CNX 500 index lost 18 per cent in value too. That's not a bad show considering that nearly 25 per cent of the stocks in the listed universe have shed 50 per cent plus in this market meltdown.
Some of our biggest laggards were Allied Digital, Lanco Infratech, Dishman Pharma and realty plays such as HDIL and Unitech. These companies took an unexpected hit to their prospects from regulatory changes, governance issues or de-rating by the markets.
In these cases, investors will be better off exiting and moving their money into alternatives, preferably blue-chips.
On most of our other buy calls, however, we remain positive. Investors should hold on as returns are bound to improve with a stock market revival, which we expect in 2012.

68 GAINERS

The dismal statistics above mask our successes. A total of 68 stocks we rated as buys managed a positive return for their investors in a falling market. These came from a wide range of sectors — FMCG, textiles, pharma, auto components and banks.
There were even a few multi-baggers. Sun Pharma (207 per cent gain), Page Industries (185 per cent), Lumax Industries (118 per cent) recommended in mid-2010 more than doubled from those levels. Seventeen stocks managed a 50 per cent-plus gain.
Many of our successful calls came from our early optimism on consumer plays such as Page Industries (185 per cent), Hindustan Unilever (up 68 per cent), V Guard (93 per cent) or Kewal Kiran Clothing (78 per cent).

SELECTIVE ON IPOS

The IPO market was a minefield for investors this year. Institutions gave it a wide berth and new listings saw wild price swings, thanks to price manipulation.
We navigated this segment quite well. The ‘avoid' calls on IPOs saved investors from losing a packet. IPO stocks such as Aqua Logistics, Bajaj Corp, Bhartiya Global, Cantabil Retail languish 85-96 per cent below their offer prices today. Selective buys Coal India, Mandhana Industries and Lovable Lingerie clicked to deliver gains to investors.

MORE SELL CALLS

Having learnt lessons from the previous bull market, we also flagged more opportunities for investors to sell stocks and lock into gains. After the ‘sell' rating, these stocks have lost an aggregate 31 per cent in value since, dropping much more than the market. Recommendations to exit ARSS Infrastructure (down 90 per cent from the ‘sell' price), Kingfisher Airlines (down 72 per cent), Spicejet (down 79 per cent) were our notable calls.

LESSONS LEARNT

While we may have bettered the markets on an aggregate basis, investors will have suffered some pain. We sure aren't happy about that. We take away two lessons from the experience.
One, it is best to stay away from companies with governance issues, no matter how cheap their stock looks. Two, while identifying new stocks to buy, follow up old recommendations at more frequent intervals. Through this, we hope to reduce the divergence between our best and worst performers in 2012, hopefully delivering a better experience to our readers.
Overall though, we would like to reiterate that equities remain the best bet for investors with the patience to wait out phases like the current one. Yes, direct equity investing is turning more risky and calls for a closer monitoring. That's why we have been advocating that investors shouldn't hold an equities-only portfolio. Instead they should work to an asset allocation plan, which combines stocks with safer avenues.
Apart from our stock market calls, we've handed out plenty of advice on mutual funds, fixed deposits, bonds, gold and insurance last year. Expect much more from us on these investment avenues in 2012, apart from stock market advice.

Sizzling Stocks: Hindustan Copper; RCF :: Business Line

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

Hindustan Copper (Rs 291.7)


Hindustan Copper skyrocketed 56 per cent accompanied by extraordinary volume in the previous week. While trending higher, the stock emphatically broke through its key resistance at Rs 250 and also its 200-day moving average. Moreover, in the last week, the stock has conclusively penetrated its long-term down trend-line that was in place since its January 2010 peak of Rs 656. Strong move above Rs 300 will take the stock higher to Rs 350 or to Rs 400 in the medium-term.
Nevertheless, it currently faces resistance at Rs 300. The stock's daily indicators and oscillator have reached over brought levels, signalling that the stock can witness a corrective decline to Rs 270 or Rs 250 the near-term. Next support for the stock is at Rs 200.
RCF (Rs 65.5)
Rashtriya Chemicals and Fertilizers zoomed almost 42 per cent in the previous week, backed with heavy volume. The stock has been trending higher from its 52-week low of Rs 42 registered on December 20. However, it is facing significant long-term resistance in the band between Rs 70 and Rs 73. An emphatic jump above this resistance will alter the trend upwards and pave the way for the stock to rally to Rs 80 and to Rs 88 levels in the medium-term.
Inability to exceed the above mentioned resistance band will drag the stock down to Rs 61 and then to Rs 55. Next key support below Rs 55 is at Rs 50.

Sensex: Going more global :: Business Line

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


In the last ten years, the weight of commodity businesses in the Sensex has dropped from 28.6 per cent to 18.9 per cent. This has diminished the index's exposure to speculative price movements of commodities in the last few years.
Two big commodity sectors that lost their influence in the Sensex are oil and cement. In oil, the old index constituents — Hindustan Petroleum and Castrol India — are not a part of the index now. Reliance Industries and Reliance Petroleum put together had a weight of 18.9 per cent in 2002 but now RIL (RPL has merged with RIL) enjoys a weight of only 9.9 per cent.
The weight of non-commodity sectors in the Sensex has risen to 81 per cent from 71.4 per cent in the same period.

PLUS POINT

This is a plus for the index as it has meant fewer swings in the profits of Sensex companies or their stock prices. In the last five years, global commodity prices have gone from boom to bust and boom again.
Automobile, banking, power and information technology are sectors to have seen a substantial increase in influence in the Sensex over the years.
These sectors tend to deliver steadier profits than commodity companies.
While the commodity influences on the Sensex may be waning, is it less prone to global influences than in 2002? Not quite.
While the weight given to oil companies has declined, that given to metals (5.5 per cent versus 3.9 per cent) and information technology (18 per cent versus 13.9 per cent) sectors has increased. As all these sectors are impacted by global factors, the global influence has only risen.
In 2002, Sensex companies earned 11 per cent of their sales in foreign exchange. Now forex earnings bring in as much as 18 per cent of the total. That explains why the rupee has become such a big factor influencing the markets.

QUERY Answered: Satyam, Hindalco, Gitanjali, Praj, Index, Suzlon, Ador, Shalimar, Century:: Business Line

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




I am in possession of Satyam Computer bought at Rs 71 . What is the outlook for this stock? Should I continue to hold this?
T.V.K. Sankaran
Satyam Computer (Rs 67.5): When we consider the long-term chart of Satyam, it is appropriate to ignore the March 2008 peak of Rs 544, and instead restrict our analysis to the period after January 2009, when the scam was revealed.
The stock has key medium-term support at 54 and it is attempting to hold above it since November 2010. Investors can hold the stock as long as this support holds. Breach of this level can see the stock heading lower to Rs 34 or even the January 2009 low of Rs 11.
Medium-term resistance will be at Rs 101 and Rs 128. Long-term view will turn positive only on a close above Rs 128.
Subsequent target is Rs 189.
Please give me your views on Gitanjali Gems and Praj Industries.
Chandrashekhar R
Gitanjali Gems (Rs 308.6): Gitanjali Gems is struggling with the resistance zone between Rs 390 and Rs 400. It recorded a sharp reversal from here in November 2010 and again recently in October 2011.
This level needs to be surpassed before the stock moves to its all-time high of Rs 480. The medium-term downtrend that is in place since the October peak has supports at Rs 300 and Rs 245.
If the stock stabilises above the first support, it can move on to Rs 442 or Rs 531 over the long-term. Stop-loss for investors can be at Rs 246. Next long-term support is between Rs 150 and Rs 170.
Praj Industries (Rs 77.8): Praj Industries suffered a deep loss of over 80 per cent in the 2008 decline, and the recovery in 2009 could not help the stock retrace even one third of this decline.
The stock is moving sideways with a downward bias since the June 2009 peak of Rs 122. It spent the entire 2011 moving between Rs 62 and Rs 96.
Investors can hold the stock with stop at Rs 60. Slide below this level can result in the stock re-testing the March 2009 trough at Rs 45. Resistances for the medium-term will be at Rs 100 and Rs 125.
The zone between Rs 125 and Rs 130 is a key long-term resistance and investors can divest their holdings if the stock fails to cross this hurdle.
Long-term targets if the stock moves above Rs 130 are Rs 160 and Rs 186.

Choosing the right home loan lender :: Business Line

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


Even seemingly minor differences in interest rates can translate into big sums for the borrower.Check if flexibility in loan terms involves additional cost, and whether it is reasonable.
Buying a house is not easy. First you have to find a house; then you have to see if you can afford it and, if you can, you have to find the right loan agency.
Borrowers today are often spoilt for choice. So here are some important hints for lender-selection.

FINE PRINT

Borrowers should read the draft home loan agreement including the fine print carefully, and get doubts clarified before signing on the dotted line. After all, a loan which finances the single biggest investment for many deserves intensive due diligence.

INTEREST RATE

Even seemingly minor differences in interest rates can translate into big sums for the borrower. A loan of Rs 30 lakh for 20 years at 10.5 per cent annually would entail an equated monthly instalment (EMI) of Rs 29,951.
Change the rate to 11 per cent and the monthly instalment increases by more than Rs 1,000 to Rs 30,966. Over the tenure of the loan, the excess amount paid by the borrower would be a substantial Rs 2, 43,421. It follows that borrowers should scout for lenders offering competitive rates of interest.
Fixed rate loans invariably are costlier than floating rate ones. This is because of the certainty fixed rate loans give in terms of stable monthly outgo. Borrowers should consider whether or not they are willing to pay a premium for the benefit of a stable EMI. Many fixed rate loans, these days, are fixed only for a certain period or subject to certain limits.
Borrowers should also check whether and when the fixed rate is liable to change. In floating rate loans, borrowers should ascertain how lenders compute the effective rate of interest and whether it is reasonable.
Banks these days use their base rates (which vary with time) as the benchmark and add a mark-up to arrive at the effective rate. HFCs generally have their own benchmark rates (which change at regular intervals) and apply a spread (a pre-determined difference) to arrive at the effective rate. Borrowers should also check whether the lender offers the option to switch between fixed rate and floating rate loans and vice-versa. Flexibility in this regard and competitive charges would add to the lender's score.

PROCESSING FEES

Besides the rate of interest, borrowers should also consider the processing fees levied by lenders.
Processing fees could vary between 0.5 to 1 per cent of the loan value, or could be a flat amount. In most cases, processing fees are collected by the lender upfront at the time of loan application and are non-refundable.
The lower the processing fees, the better it is for the borrower. Some lenders also offer value-added services such as helping borrowers in their home-search process. Borrowers should check whether charges for such services are reasonable.

LOAN-TO-VALUE

Lenders restrict the home loan amount to a certain percentage of the property value. For instance, in the case of a property costing Rs 40 lakh, if the loan-to-value is 80 per cent, the bank or HFC will lend up to Rs 32 lakh.
The balance amount (Rs 8 lakh) will have to be paid by the buyer to the builder. In many cases, lenders require the borrowers to pay the balance amount as a down-payment to the builder before the home loan is sanctioned.
Lenders who offer a higher loan-to-value may be preferable, since this will reduce the amount borrowers need to arrange.

RESET PERIOD

In case of floating rate loans, borrowers should check the lender's reset period. This refers to the periodicity at which lenders review interest rates and change them, if necessary. These days, many lenders reset rates on a quarterly basis.
A longer reset period works to the advantage of borrowers when interest rates are on the rise.
However, on the flipside, when rates fall, the borrower will have to wait longer before the benefit is passed on by the lender. In this context, borrowers should also check about the track record of lenders in passing on benefits of reduced rates.
Besides, they should enquire whether lenders treat their existing and new customers on par. It is often seen that many lenders, to attract new customers offer them better terms than to existing borrowers.
Lenders who do not discriminate would score higher.
Borrowers should also check how lenders calculate interest on the loans - daily, monthly or annual reducing balance basis. The shorter this basis, the better it is for the borrower.

PREPAYMENT PENALTIES

Borrowers would do well to check with lenders their policy on prepayment penalties, which could be around 2 to 3 per cent of the amount being prepaid. With a lot of nudging from the regulators, many HFCs and banks have done away with prepayment charges, at least on floating rate loans. Lenders who waive off prepayment charges would stand on a better footing than those who don't.

REPAYMENT OPTIONS

Lenders who offer flexibility in repayment options depending on borrower requirements would score brownie points.
For instance, features such as allowing EMI to commence even before construction is completed, and structuring EMI such that they are lower in the initial period and increase in the future with a rise in the borrower's income, could suit specific needs of home buyers.
However, borrowers should check whether the flexibility involves any additional cost, and whether it is reasonable.

PENALTY ON DEFAULT

In the event of a borrower defaulting on payment on the home loan, the consequences could be heavy. Penal interest itself could range from 18 per cent to 24 per cent per annum. Lenders with less stringent terms and conditions relating to default, and a lower penal rate of interest would score better.

How to invest in PPF? :: Business Line

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


Any financial advisor would definitely recommend an investment in PPF (Public Provident Fund) as one of the means to build long-term wealth. You can make investments in this scheme every year (in a maximum of twelve instalments) right from Rs 500 upto Rs 1 lakh. You can make investments either in your name or on behalf of a minor. While the tenure of the PPF account is fixed at 15 years, you can extend it for a further block of five years too. From 2012, interest on the PPF account will be notified by the government at the beginning of every year (April 1). PPF investments are eligible for deduction under Section 80C of the Income-Tax Act. Here's the lowdown on how you can open a PPF account.

POST-OFFICES AND BANKS

Along with instruments such as the MIS and NSC, PPF is part of the small savings scheme run by the post office. Hence, one of the options is to maintain your PPF account in the nearest post-office. Opening the account involves filling up a simple two-page application form and the tendering of cash/cheque for the initial subscription. Your passport size photograph, PAN and address proof are the basic requirements.
In case the PAN is not available, an attested copy of the ration card, voter identity card or passport can be submitted. If you are opening an account on behalf of your minor son or daughter, a copy of his/her birth certificate may also be needed. When you open the account, you will be given a passbook. The passbook needs to be updated for every investment you make and for the interest you receive. You will also get a receipt for every deposit you make which can be shown as a proof of tax-saving investment at your office. This will help reduce the TDS outgo from your salary. Besides post-offices, most public sector banks also help you open PPF accounts with them. The account opening and documentation requirements here are largely the same.

ONLINE INVESTMENTS

With almost every investment option, be it stocks, mutual funds, fixed deposits or bonds, available at the click of the mouse, can PPF investments be made online too? Well, you cannot if you have an account with the post-office.
But some banks permit online transfers. For example, if you have your PPF account with SBI and your salary/savings account with ICICI Bank, you can log into net banking and add the SBI PPF account as a payee/beneficiary for transfer from your ICICI account. Similarly, money from your Citibank savings account can be transferred to your State Bank of Mysore PPF account.
Moreover, if you have a savings account and the PPF account with the same bank, these two can be linked. In this case, you need not add the PPF account as a third-party beneficiary. You can directly transfer money. Also, you can view the credits to the PPF account online just like how you see your bank statements.
So, if you have savings/PPF account with other private/public sector banks, do a quick check with your banker. In case the bank does not allow online transfers, you can transfer your account to a bank that does. A post-office PPF account too can be transferred to a bank.