India Equity Insights A good start but more needs to be done ::HSBC Research

India Equity Insights
A good start but more needs to be done
 A flurry of policy announcements sparked a rerating in Indian
stocks, with foreign institutional flows surging in September
 We raise our Sensex targets to 18,700 (from 18,000) for CY12 and
20,000 (from 19,000) for CY13 on improved sentiment, but remain
underweight India in a regional context due to the rich valuation
 Our three key themes for the final quarter are: resilient
earnings, domestic consumption and domestic investment

FII DERIVATIVES STATISTICS FOR 16-Nov-2012

FII DERIVATIVES STATISTICS FOR 16-Nov-2012
	BUY		SELL		OPEN INTEREST AT THE END OF THE DAY
	No. of contracts	Amt in Crores	No. of contracts	Amt in Crores	No. of contracts	Amt in Crores
INDEX FUTURES	37104	1026.439	64647	1752.258	338053	8207.348	-725.818
INDEX OPTIONS	521977	14596.59	467350	13107.92	1869440	52132.53	1488.675
STOCK FUTURES	58171	1608.5	49219	1330.788	1095512	29386.5	277.7126
STOCK OPTIONS	66604	1820.257	70855	1940.405	99180	2671.153	-120.148
						Total	920.4213

 

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FII & DII trading activity on NSE and BSE 16-11-2012

Category		Buy	Sell	Net
		Value	Value	Value
FII		2992.05	2482.34	509.71
DII		919.18	1293.9	-374.72

 

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Tata Motors (CMP Rs272, BUY):: BRICS

Tata Motors (CMP Rs272, BUY)
YTDFY13 JLR sales up 21% yoy

Tata  Motors’  JLR  sales  (wholesale)  for  October  2012  were lower that
estimated  at  27,897  units,  up  7%  yoy (up 5% mom). Land Rover sales of
24,558  units  —  up  17%  yoy (up 4% mom) — partially offset the impact of
decline  of  37% yoy (up 19% mom) in Jaguar sales to 3,339 units on overall
sales.

Monthly volume in line with expectation: Over the last three years, average
sales  in  Q3 have contributed ~27% of JLR’s annual volume, as against ~31%
in  Q4.  Based  on  this  trend  as a guideline, JLR’s monthly sales can be
estimated  to be ~31,500 units in Q3. JLR’s sales for October 2012 improved
mom, but were lower than the estimated run-rate for the quarter.

Maintenance shutdown and model change impact sales

   US - JLR’s sales down 20% yoy

   UK – JLR posts slower than average growth in luxury cars; up 15% yoy

   Russia – JLR's sales growth slows down to 22% yoy

Daring Derivatives [For November 16, 2012] Sharekhan

Daring Derivatives [For November 16, 2012] Sharekhan www.sharekhan.com

Summary of Contents   DARING DERIVATIVES Derivatives Summary The Nifty (November) futures' premium has increased from 13.75 points to 18.15 points. The total open interest in the market was Rs147,054 crore and Rs566 crore was reduced in the open interest. The Nifty call options added 20.10 lakh shares in open interest, whereas the Nifty put options underwent reduction by 13.28 lakh shares in open interest. Click here to read report: Daring Derivatives

Meaningful Minutes - November 16th 2012: Kotak Sec

Economic Data: Three things to note on inflation, factory outputDuring the Diwali festivities, the Indian government announced two sets of key economic data. If you are a stock market investor, you will often read pundits speaking about the slow economic growth and the rising inflation. The two data releases are used by the Reserve Bank of India as indicators for setting borrowing and lending rates. Money could become expensive or cheap based on the trend in these two indicators. Here are three things to note from the week’s key data releases: 1) Industrial output weak: India’s industrial output, represented by the index of industrial output or IIP, fell by 0.4 per cent in September 2012 after rising 2.3 per cent in August 2012. The Reserve Bank of India plots the monthly data on a graph. It will note that the industrial output weakened in September 2012. While mining and electricity sectors reported a growth, the manufacturing sector reported a fall. The manufacturing sector accounts for 76 per cent of the index. Hence, a fall in the manufacturing sector growth is a point of concern. 2) Slow recovery likely: An important aspect of this data release is the outlook for growth. Analysts do not expect a sharp spurt in manufacturing or mining or in electricity generation. A key trend to observe could be a revival in India’s investment cycle. This means businesses deploying capital for growth and expansion of capacity. Credit Suisse, a foreign brokerage, believes that India could take three to four years to revive the investment cycle. Credit Lyonnais, another influential foreign brokerage, expects the creation of the National Investment Board as a significant development. “The idea is that the NIB will be an expediting body which will have the power to overrule ministers and fast track approvals of big-ticket investment projects,” says the brokerage in a note. This means a lot depends on policy initiatives taken by the government in the future. 3) Wholesale prices ease: Wholesale price inflation or WPI, a key inflation indicator, rose an annual 7.45 per cent. This is the slowest pace of growth since February 2012. In September 2012, it was 7.8 per cent. The Reserve Bank of India plots the trajectory or the path of this data point each month. RBI has clearly stated that it is not comfortable with the inflation rate hovering around the 7.5 per cent mark. The Reserve Bank of India’s main priority is to fight the inflation in the economy. If inflation remains high, it eats into the growth of an economy. RBI is unlikely to lower borrowing rates if it feels that inflation is likely to remain high. .

The detailed government press release on WPI inflation. The release gives in detail the break-up of the index and factors that contribute to the index. Read More    The economic worries due to a slowdown in India were indicated by the IIP and trade data. Read More

9.75%The consumer price inflation or CPI for October 2012 stood at 9.75 per cent against September 2012 figure of 9.73 per cent. This means, for people like you and me, prices continue to rise. All over the world, the main index of inflation is the consumer price inflation index. In India, RBI follows the wholesale price inflation index trajectory. If it were to follow the CPI, it would take longer to cut key interest rates.

Strong margin improvement Dishman Pharma :: Centrum

Strong margin improvement
Dishman Pharma & Chemicals (DPCL) results for Q2FY13 were lower than our
expectations. The company reported 12%YoY growth in revenues, 580bps
improvement in EBIDTA margin and strong growth in net profit. The
company’s EBIDTA margin improved due to the 830bps YoY reduction in
material cost. The company has resumed the supply of Eprosartan Mesylate
(EM) API to Abbott in Q2FY13. DPCL has commenced generic API business to
reduce quarterly fluctuation in revenues. We have revised our EPS estimates
upwards by 11% and 12% for FY13 and FY14 respectively. We have a Buy
rating for the scrip with a revised target price of Rs113 (based on 7x FY14E
EPS).
Moderate revenue growth: DPCL reported 12%YoY growth in revenues from Rs2.65bn
to Rs2.97bn. The CRAMS segment (65% of revenues) grew by 12%YoY from Rs1.69bn to
Rs1.88bn. The others segment (35% of revenues) was flat at Rs1.00bn. The PBIT margin
of CRAMS improved from 5.5% to 11.9%YoY whereas for the others segment it
improved from 15.3% to 24.2%YoY.
Excellent margin improvement: DPCL’s EBIDTA margin improved by 580bpsYoY from
16.4% to 22.2% due to the decline in material cost. Material cost declined by 830bps
from 37.5% to 29.2% of revenues due to higher growth of CRAMS. Personnel expenses
increased by 220bpsYoY from 26.3% to 28.5% due to the new recruitments for the
generic API business.

Emami -Q2FY13 – Sales in line, but EBITDA below:: Nomura

Are results above or below expectations?
Results were largely in-line with Street expectations and marginally
below our expectations at the EBITDA level.
Key numbers
 Net sales grew 18% y-y and were largely in line with our and Street
expectations.
 Domestic business grew 22%, which is fairly robust.
 Exports (13% of revenues) were largely flat y-y and so was CSD (4%
of the revenues).
 Brand-wise revenue growth details:
 Cooling oil: +14% y-y
 Boroplus: + 53% y-y
 Balms: + 10% y-y
 Fair & handsome: + 26% y-y
 Gross margin expanded 50bps to 58.6%. This was largely in line with
what we were expecting.
 However, A&P/sales: up 50bps y-y to 17.9%. This was a surprise;
however, we don't quite view this as a negative.
 EBITDA: At INR896mn was 5% below our estimates and in-line with
Street expectations.
 EBITDA margin: at 24.8% contracted 180bps y-y primarily due to
higher employee cost & advertising spends.
 PAT: at INR612mn was up 7% y-y and in line with Street expectations,
but below ours on account of a higher tax rate.

Go for a small investment portfolio:: Business Line

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Sustainable growth Elder Pharma’s (EPL) :: Centrum

Sustainable growth
Elder Pharma’s (EPL) results for Q2FY13 were in line with our
expectations. The company reported 22%YoY growth in revenues,
140bps decline in EBIDTA margin and 26%YoY growth in net profit.
The sales growth of domestic operations was 19%YoY whereas that of
overseas subsidiaries was 30%YoY. The merger of Elder Healthcare
(EHL) with EPL had no major impact on the overall performance of
EPL. We do not expect major negative impact from the new pharma
policy on the company. We have a Buy rating for the scrip with a
target price of Rs429 (based on 7x FY14E EPS of Rs61.2) with an
upside of 43.8%.
Good sales growth: EPL reported 22%YoY growth in revenues from Rs3.32bn
to Rs4.05bn. The domestic business (75% revenues) grew by 19%YoY from
Rs2.53bn to Rs3.02bn. The overseas subsidiaries NeutraHealth, UK and
Biomeda, Bulgaria (25% of revenues) collectively reported 30%YoY growth
from Rs784mn to Rs1,022mn.
Margin under pressure: EPL’s EBIDTA margin declined by 140bpsYoY from
16.6% to 15.2% due to the sharp rise in the material cost. Material cost grew
by 360bps from 50.0% to 53.6% of revenues due to the rise in imported raw
material cost with rupee depreciation. Personnel cost declined by 80bps YoY
from 14.1% to 13.3% due to strong sales growth. Other expenses declined by
140bps from 19.3% to 17.9%.

Strong traction in JLR continues; Maintain Buy for Tata Motors :: Centrum

Strong traction in JLR continues; Maintain Buy
The overall results for Tata Motors (TAMO) for 2QFY13 reflected the same trend of the
past few quarters. The standalone operating performance continued to remain under
pressure with EBITDA margins at 5.2%, the lowest in the last 14 quarters, impacted by
elevated marketing spends and pricing pressure in the M&HCV business. The
management expects standalone margins to remain under pressure. JLR performance
in turn was significantly ahead of our expectations with EBITDA margins at 14.8%
driven by significant savings in RMC costs ( RMC per unit was lower by 5% QoQ) due to
favorable F/X environment despite drop of 2.6% in ASP QoQ ( Impacted due to overall
model-mix and also on account of higher contribution from low end Evoque variants ).
Geographic mix continues to remain favorable led by growth in China. We believe that
the recent launch of the New Range Rover coupled with planned launches of Range
Rover Sport and F-Type reflects a strong product line up that will aid strong volume
growth for JLR going forward. Also management indicated about higher profitability
for New Range Rover due to common platform sharing with Range Rover sport. We
continue to remain positive on the stock and maintain our Buy rating with target price
of Rs.307.
Strong traction in JLR continues; standalone disappoints: JLR reported revenues of
£3.3bn, EBITDA of £486mn and PAT of £305mn. Despite lower ASPs (down 2.6% QoQ
lead by model mix), significant savings in RMC due to favorable foreign exchange
environment and favorable geographical mix helped JLR deliver strong operating
performance. Standalone operating margins continued to remain under pressure at
5.2% (one of the lowest in the past 14 quarters).
Con call takeaways: 1) Given the high marketing and publicity initiatives for its PV
portfolio, domestic margins are likely to remain under pressure 2) Volume growth in
LCV/SCV segment will remain strong, but M&HCV outlook remains challenging 3) JLR
management is optimistic on volume traction driven by strong product line up 4)
Reaffirms annual capex guidance of £1.5bn largely to be funded through internal
accruals 6.) Guided capex of Rs.30bn for the standalone entity over the next 4-5years,
25-30% to be utilized towards R&D and 5) Pegs net automotive debt/equity at 0.29x on
a consolidated basis and 0.77x on a standalone basis 6) Tax shield at JLR UK is over £2bn
– tax rate is likely to remain in the range of 25-29% and for the standalone 18-20% for
FY13E.

How a home saver loan can help you:: Business Line

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Strong results GSK-CH :: Centrum

Strong results
GSK-CH posted Q3CY12 results ahead of our expectations with topline
growth at 15.2% YoY on the back of 6% growth in domestic volume,
35% in the non-MFD segment, 3% in exports and 8% decline in CSD
sales. Gross margin expanded by 62bps which helped boost operating
profit by 75bps to 19.9%. Higher business auxiliary income too
boosted PAT which was up by 25%YoY. Maintain BUY.
Q3CY13 results ahead of expectations: Net sales for the company was ahead of
expectations with 15.2% revenue growth at Rs8577mn led by 6% growth in
volume and 9% in price. Exports grew marginally by 3%. Operating profit was up
by 19.7% at Rs1706mn on the back of gross margin expansion. Auxiliary income
was up by 24% YoY to Rs280mn. PAT was up by 25% and 10% above our estimates
at Rs1286mn.
MFD portfolio growing strong: Domestic MFD portfolio grew by 6% in volume
on the back of 16% (4.5% vol) in Horlicks and 22% (8.5% vol) in Boost sales. The
company increased prices by 5.5% in mid-June across products which helped in
value growth. CSD segment continues to be under pressure with 8% decline in
revenues which had 1.5% negative volume impact. It continues to invest in North,
West India and rural markets for future growth and the current distribution outlets
stand at 7.5lakhs. Sachet sales grew by 45% and formed 5% of total sales and
drove rural growth. Management believes that the premium segment which
accounts for 10% of the industry is growing at a faster clip and the company will
consider entering this segment at a later stage.

Q2 result in line; business under pressure -- Bharti Airtel :: Centrum

Q2 result in line; business under pressure
While Bharti Airtel’s (Bharti) Q2FY13 reported result was better than our
estimates, operating financial performance was in line. The company recognized
revenues of Rs5.9 bn based on a TDSAT order which related to the previous period
and this inflated PBT. Net profit was down 40% QoQ to Rs7.2bn due to higher
interest and tax expenses. We revise our estimates downwards to capture the slow
net adds and 1HFY13 financial performance. We believe the business would
remain under pressure till there is visible improvement in revenue per minute and
regulatory pressures are addressed. Accordingly, we downgrade our rating to
Neutral and the target price to Rs253 (from Rs288) considering 1) declining
minutes of usage Q2 and 2) the absence of near term triggers as there is no near
term visibility on tariff hike and regulatory pressure in 2HFY13.
Q2 performance in line with expectations: Adjusting to prior period revenue
recognition of Rs5.9bn, net sales were in line with our estimates at Rs196.9bn;
operating margin was a tad better than our estimate. Operating margin improved
by of ~75bp QoQ to 30.9% after adjusting to one-offs. However, net profit declined
by 40% on higher interest and tax outgo.
Africa business too sees margin coming back in Q2: Revenue was up 2.8% QoQ
to US$1.1bn (growth of 5.1% QoQ to Rs60.5bn due to exchange benefit).
Operating profit margin bounced back during the quarter by 120bps to 27.1%
during Q2. Subscriber net add run rate went up this quarter to 2.8mn and minutes
of usage (MoU) grew by 20.3% QoQ.
Minutes of usage (MoU) growth slipping: Subscriber declined by of 1.4mn in
Q2FY13 after consistent addition for long. Bharti has adopted an aggressive
approach to gain market share since Q1. Minutes of usage declined by 1.3% QoQ
to 265bn min on the back of decline in subs during the quarter.

Well above expectations, maintain buy Godawari Power :: Centrum

Well above expectations, maintain buy
Godawari Power & Ispat (GPIL) reported much better operational performance than our
expectations with net sales at ~Rs6bn, up by ~39% YoY on account of higher iron ore
mining output (up ~102% YoY) leading to higher sales volumes in pellets (up 61% YoY
at Chhattisgarh), billets (up 54% YoY) and HB wires (up ~42% YoY). Realizations
remained lower by 4-6% QoQ across products and EBITDA stood at Rs746mn (margin of
~12.5%, up by 20bps YoY). PAT jumped 100% YoY to reach Rs213mn. We were
impressed with GPIL’s strong volumes from pellet plants and captive iron ore mines for
third successive quarter and also higher overall steel output in an otherwise seasonally
weak Q2. We expect GPIL to maintain its strong operational performance in H2 with
pick up in iron ore mining output and revise our volume and earnings estimates
upwards marginally for FY13E/14E. Maintain Buy.
Volumes remain strong in seasonally weak quarter: GPIL showed strong volume in a
seasonally weak quarter on the back of operational improvements, higher mining
output during H1 and flexible product mix advantage. Iron ore production went up by
~102% YoY to reach 1.3 lakh tonne. Chhattisgarh pellet plant maintained its strong
operational performance and utilization was above 100%. Pellet sales volume went up
61% YoY as GPIL went for lower sponge iron production to benefit from higher pellet
sales which have higher margin. Billet sales increased on the back of higher production
and HB wire sales remained strong. Power sales were also higher QoQ at 16.6mn units.
Realizations showed a drop of 4-6% QoQ as steel prices weakened in the domestic
markets after the global price fall.
EBITDA improves impressively; margin weakens on account of seasonality and
price fall: Riding on higher iron ore and pellet production, EBITDA went up by 41.7%
YoY to Rs746mn. Margin stood at 12.5%, a drop of 570bps QoQ on account of lower
realizations and lower overall mining volumes during the monsoon quarter.

SGX Nifty: 5,632.00 -7.00; Markets to open DOWN today

SGX Nifty: 5,632.00 -7.00;  8:35 AM India time
Nov 16, 2012
Singapore Exchange
Markets to open DOWN today