Exide Industries :FY13 annual report: Key takeaways: Credit Suisse

 We report key takeaways from Exide’s FY13 annual report.
Revenue growth was equally driven by automotive and industrials.
Replacement revenue grew 21% with Exide gaining market share,
but OEM revenue declined 7% in a difficult year.
 Profitability of both the smelting subsidiaries and insurance entity
improved significantly. There was no additional investment in any
subsidiary other than the buyout of remaining 50% stake in an
insurance entity that was funded by money raised via a QIP in FY10.
 While return ratios stabilised this year, they are still well below the
levels seen in prior years. This structural decline in ratios has led
to a justified de-rating in Exide’s multiples.
 The company expects the OEM segment to remain challenging in
FY14; replacement should continue to drive demand. The invertor
segment has been weak this year, given lower power cuts in the
summer months and now an early monsoon. There could be some
margin benefit from the price hikes taken earlier this year; lead prices
though have again started increasing due to the INR depreciation.

India Property -- Key Trends in Mumbai :: Morgan Stanley Research

India Property
EOTG 38: Key Trends in
Mumbai
What’s going on in the Mumbai property market
–Trend #1: To us, the price gaps between East and
West Mumbai (now narrowed to 10-20%) as well as
North and South (now narrowed to 100%) are bridging
(vs. historically sharp discounts). The recently opened
Purva Mukta Marg (14km Eastern Freeway – 15 minutes
drive from Chembur to CST/South Mumbai), along with
dispersion of office complexes to the north, should help
this trend further. Outer suburban prices remain buoyant
– Goregaon (Rs13k psf), Mulund (Rs11.5k psf), Dahisar
(Rs10k psf) and Thane (Rs9k psf).
Trend #2: We continue to hold our contrarian view of
supply drought in South Central Mumbai over the next
five years. This is already pushing up rentals in ready-tomove-
in apartments (3BHK are quoting at Rs130k pm to
Rs300k pm). Capital values should spike in the next two
years. The often-reported supply glut (15msf plus) is in
early stages of construction; it could take 5-7 years to
get completed (most are 60-80 storeys tall) and appears
to be 20-30% pre-sold (should get sold out in 4-5 years).
Trend #3: Take-up has been brisk for several new
launches over the last 6-9 months from reputed
developers, reasonably priced and well located. This is
underlined by the Phase II launches within 6-9 months of
Phase I at better prices – Crescent Bay (Parel), Blue
Moon (Worli), Emerals Isle (Powai) and Vasant Oasis
(Andheri). Panvel appears to be stagnant – IBREL’s
Green pre-launch of Phase II at Rs5000 psf.
What to do with the stocks: We believe that the
physical market is steady, macro backdrop is mixed, and
latent housing demand in India is significant. We like
reasonably valued stocks of companies that are
executing well on scaling up and have decent balance
sheets. They include Sobha, OBER, Prestige and
IBREL – especially after 25-35% correction. We remain
EW on DLF (earnings pain in F14, uncertain Aman
sales); GPL (subdued core earnings ex capitalized
interest cost) and JIL. OBER and GPL have upcoming
equity issuance in the next three months.

What is the limit of the deduction in my case? :: Business Line

I have a house in which I currently live with my family. I have taken a bank loan to purchase it. I have paid Rs. 142,000 during the FY 2012-13 towards housing loan interest. Further, my pre-construction interest is Rs. 1,10,000 and this is my first year of claiming the deduction for the interest. What is the limit of the deduction in my case?

- Ashish

As per section 24 of the Income-tax Act, 1961, the maximum allowable deduction of interest on housing loan, in case of a self occupied property is INR 150,000, subject to fulfillment of prescribed conditions. Accordingly, in your case you would be allowed to take a maximum deduction of INR 150,000 from your house property income, pertaining to interest payable by you on your housing loan including the pre-construction interest component.

My wife and I both share the payment of house rent amount every month. Can both of us claim deductions in our respective salaries?

- Kumar

As per the Income-tax law, House Rent Allowance (HRA) paid to an assessee by his employer to meet expenditure actually incurred on payment of rent in respect of residential accommodation occupied by the assessee, shall be exempt up to the prescribed limits. The following conditions have been attached for claiming this exemption:

(a) Residential accommodation occupied by the assessee is not owned by him; and

(b) assessee has actually incurred expenditure on payment of rent.

Hence, both of you can claim HRA exemption after considering the individual share of rent paid by each of you (up to the prescribed limits). There should be clear documentation with the landlord as to who is paying the rent & quantum thereof.

Asian Paints, Margin upside, but demand still uncertain : Nomura research,

Margin upside, but demand still uncertain
Margin uptick offset by INR
depreciation and subdued
demand environment; Neutral

BNP Paribas Equity Fund: Invest :: Business Line

Hindustan Zinc: Back to its Core : IIFL,

Back to its Core
HZL in its FY13 annual report has chalked out plans for its next phase of
expansion. HZL’s growth in the near term would come from raising its mined
metal output from the current capacity of 0.87mtpa to 1.2mtpa over the next
six years. The company continues to remain focussed on increasing in
reserves and resources, thereby keeping the mine life above 25 years at
current capacity. HZL has guided for 1mn tons of mined metal production for
FY14 on the back of higher contribution from Zawar mines. The company has
managed to receive all the approvals for the operations of Zawar and expects
it to increase production from 0.2mtpa to 1.2mtpa in FY14. Costs are
expected to improve as coal costs decrease and mined metal output
increases. HZL continues to be our top bet amongst the non‐ferrous
companies. We maintain our BUY recommendation on the stock with a
revised 9‐month price target of Rs130.
Mined metal output to jump in FY14E
HZL’s mined metal output was impacted in H1 FY13 due to the process of
transforming its largest mine, Rampura Agucha, from open cast to
underground. Output in H1 FY13 was lower by 5.3% yoy and was in line with
the management guidance of weak output in the first half. However, it
managed to ramp up its output in H2 FY13 by 14.1% yoy, offsetting the
decline in volumes in the first half. The management has now guided for
mined metal output to increase from 0.87mn tons in FY13 to 1mtpa in FY14
on the back of higher contribution from Zawar and Sindesar Khurd mines. We
believe that the guidance given by the management is aggressive and expect
output to jump to 0.92mn tons in FY14 and 0.95mn tons in FY15.
Cash costs to decline marginally in FY14E
HZL’s cost of production in Rupee terms was higher by 13.7% yoy in FY13 due
to purchase of external concentrate, increase in diesel prices and lower strip
ratio. We believe that costs would decline in FY14 on account of increase in
captive mined metal, lower coal costs and improvement in strip ratios. Power
costs per ton declined in FY13 and are expected to decline further in FY14 due
to lower international coal prices. Raw material cost too is expected to
decline 25% yoy due to lower external purchase of concentrate.

Ford EcoSport - the Brazil experience :: JPMorgan

 Ford launched the Ecosport in India at an aggressive price point of Rs.559,000
onwards, which positions the vehicle against entry sedans and compact SUV’s.
The ‘Ecosport’ has been a successful global model for Ford, with the vehicle
being launched in BRIC markets including Brazil, China and India. Our analyst
in Brazil Cassio Lucin highlights that the EcoSport has been a success there and
is also attracting passenger car buyers.
 The Brazilian experience: The new Ford EcoSport was launched in Brazil in
August 2012 (the car is built over the New Fiesta Platform). YTD 2013, Ford
has sold 27,000 units vs. 12,000 units y/y, although it is not comparable as it
was phasing out the older model. With the EcoSport, Ford has 40% market
share in this category (compact SUV), and a 2.5% market share on all passenger
vehicles sold in Brazil through 2013. This is a new category growing fast in
Brazil as the customers have developed a taste for compact SUV’s. The main
competitor for the EcoSport is the Renault Duster (also manufactured in Brazil).
 Ford EcoSport launched at an aggressive price point in India, inline with
entry sedans: Ford’s four meter SUV ‘EcoSport’ has been launched at a
competitive price of Rs.559,000 (1.5L petrol) and Rs. 669,000 (1.5L diesel) - the
pricing is at a sweet spot between premium hatchbacks/entry sedans and
compact SUVs. The model will compete with entry sedans such as the Maruti
Dzire as well as the compact SUV’s such as the Mahindra Quanto and Maruti
Ertiga, amongst others.
 In Brazil, Ford offers two engine options, 1.6 (115 hp) and a 2.0 (147 hp) both
Flex-Fuel engines and 4x2 wheel version. The car is 4.24 meters long and is
sold for roughly US$25,000. In India, the EcoSport will come with a 1.5L
diesel, 1.5L petrol & 1L petrol EcoBoost engine, it is sub 4meters in length (to
avail of tax incentives) and is priced at ~ $12,000 here.
 Our View: The EcoSport will compete with entry level sedans and compact
SUV’s. We re-iterate our UW stance on Maruti given that while Indian auto
sales are in the midst of a multi year slowdown, the competition is eyeing
Maruti’s sweet spot by launching products in the price range of Rs.600,000–
800,000. We are OW on Mahindra, given the revival in tractor sales over the
year.
Table 1: Ford EcoSport –India and Brazil variants
Brazil India
Type of Fuel Flex Fuel Petrol, diesel
Length 4.24m 4m
Engine Power 1.6L (115bhp); 2L (147bhp) 1.5L petrol (110bhp), 1.5L diesel (91bhp)
Pricing US$ 25,000 US$ 12,000
Source: J.P.Morgan, Company