Bear Case Firmly in Play- India Banks:: Morgan Stanley Research,

Bear Case Firmly in Play

Banks have lagged index by 11% since first RBI action. Should we buy / sell now - there maybe rallies but we would sell these. Macro is unwinding; we believe next 3-4 quarters will see sharp spikes in impairments (slowing growth and higher rates). Sharp rate decline is the bull case.

Increased probability of bear case for Indian banks: Recent rate move is likely to lift defaults on loans over the next 6-12 months. Interest rates (3 month CP) are now up ~300bp over July, and with continued currency depreciation, are likely to stay elevated. With growth slowing, the pressure on profitability will go up. We have reduced our bear cases meaningfully and increased the probability of our bear case in our weightings.

Corporate leverage at decadal high: This has caused a sharp increase in impaired loans. Currency depreciation will also hurt given that corporate external debt is ~ US$225bn and about 50-60% is unhedged. Hence, pace of bad loan creation will jump (we expect impaired loans to increase to 12% by F2015 in our base case and 15.5% our in bear case from 9.2% currently).

Loan growth likely to fall to ~10%: Demand is likely to drop given slowing growth. As well, most big borrowers over the last 3-4 years are struggling with existing debt (and unable to borrow). SOE banks (75% of system) will likely struggle given lack of capital (net impaired loans at some larger banks are now more than equity).

We would stay away from corporate lenders: Given the likely increase in impaired loans, corporate lenders will likely struggle. Wholesale funded banks should also lag given the spike in funding costs. Our top picks remain HDFC Bank and HDFC. We would avoid Axis, SBI, and PNB.

Where we could be wrong: If growth picks up or interest rates come off, underlying fundamentals will improve. The stocks to own if macro improves would be Yes and IIB given leverage to rate and growth cycle.

Eight smart money moves to make before the age of 30 ::ET

They told you in school that the early bird got the worm. In college, the sermon was, well begun is half done. Just when you thought you had had enough of these preachy one-liners, ET Wealth has decided to goad you into action. Our message is simple: the investment decisions you make in the first 5-6 years of your career have the potential to transform your financial future. We list out eight smart money moves that investors should make before they turn 30.

There are obvious advantages of starting early. Most of us know that the longer we stay invested, the greater is the power of compounding. So, if you save Rs 5,000 a month in an option that earns 10% annually, your corpus at the end of 30 years would be a massive Rs 1.08 crore. 

Your principal investment of Rs 18 lakh grows six times. Now, here's the surprise. What you save in the first five years accounts for Rs 48 lakh (over 44%) of the corpus. The Rs 60,000 you put away in the first year alone grows to Rs 10.4 lakh, or 9.6% of the total amount. Miss these wonder years of compounding and your corpus would be much smaller at Rs 60 lakh.

How many investors realise this simple arithmetic? Not many, according to a study by Ameriprise India. The financial planning company spoke to nearly 700 upwardly mobile investors across six major cities in India and found that most of them had frittered away the early bird advantage. The investors in Mumbai understood the benefits of early investing best, with more than 80% of the respondents having started before they turned 26. In Delhi, on the other hand, only one out of four respondents woke up to this fact, while in Hyderabad, only one in five did.

India – RBI focuses on INR stability with a hope of easing ahead  Standard Chartered Research

India – RBI focuses on INR stability with a hope of
easing ahead
 RBI leaves policy rates unchanged; a dovish policy statement focuses on currency stability
 Reversal of liquidity-tightening measures and a return to monetary policy easing depends on INR stability
 Presses for urgent action to reduce C/A deficit as RBI’s measures cannot help INR on a sustained basis
 We shift to a Neutral duration stance on GoISecs, from Underweight, and adjust our rates forecasts

INR: Stability at any cost? • Barclays Capital

INR: Stability at any cost?
• Economics: Policymakers in India want to stabilise the INR. We evaluate a set of
potential options that policymakers could consider. Such measures, in our view,
include direct intervention in foreign exchange markets by the RBI, further
tightening of liquidity, and issuance of INR global bonds or FX-denominated
deposits for nonresident Indians.
• The Reserve Bank of India (RBI) has already acted aggressively, tightening liquidity
and hiking the upper end of the policy rate corridor, in an attempt to stem ongoing
INR weakening. The RBI's surprise tightening has been stark, but similar to that in
early-1998, soon after the Asian crisis.
• It seems that the RBI expects its actions to meaningfully reduce speculative
pressures on the INR. We, however, feel that the current steps will be relatively
ineffective to support the INR, if not counterproductive, unless followed quickly by
other policy initiatives. However, different measures will have different effects on
different asset classes in fixed income markets.
• FX: Recent measures by the RBI and policy uncertainties have increased upside risks
to our near-term USD/INR forecasts. For the medium term, we still expect INR
appreciation against USD, given that the INR is significantly cheap relative to history
and to its peers. We still expect USD/INR at 59 in 1 month, and 56 in 12 months,
• Rates: Even though a liquidity squeeze may stem INR weakness, the collateral
damage is to foreign bond flows, which the government has been cultivating for
many months. We think INR stability this week has more to do with external factors
than the adopted measures, giving markets a false sense of security. We expect a
long period of uncertainty. Should the external environment become supportive,
yields will grind lower, but will factor in a sizeable risk premium. Finally, available
policy options eliminate the tail risk.
• Credit: At current levels, bonds of Indian issuers are fairly priced. If they lag the
market by 15-20bp, we would recommend buying into the complex. Most courses of
policy action to stabilise the INR should have a positive spillover effects in the credit
market. From a curve perspective, the 2016s and 2017s offer attractive carry and
rolldown.

Kotak India Daily: Results - Godrej Consumer Products, Tata Power, Crompton Greaves, SpiceJet; Updates - PFC, Technology

Godrej Consumer Products: Valuations richer post 10% EPS reduction for FY2014/15E. REDUCE

l 1QFY14 margin miss and management's growth focus drive steep EPS cuts l Valuations reflecting the positive side of the story (growth) while ignoring the risky side (margins)

Tata Power: Coal remains weak

l Standalone performance remains stable, regulatory review boosts earnings l Coal reports dismal performance, start-up costs and currency depreciation impact Mundra l Maintain BUY with target price of Rs92

Crompton Greaves: Comforting quarter but a long way to go; domestic leads, overseas recover

l Ordering: Backlog improves on strong domestic ordering; overseas decline positive for margin l Domestic: Consumer continues on strong growth; power margin improves l Overseas: EBIT level loss attributed to Canada; incrementally expects better margins for key units l We retain estimates and ADD rating on reasonable prospects, attractive valuations l 1QFY14: Strong operational results on better-than-expected standalone margin (power, consumer)

SpiceJet: Outperforms

l Outperforms - led by higher contribution from the international business l 2QFY14 could be painful for the industry on account of Rupee depreciation l Terminating coverage on the stock; last rating was BUY with TP of Rs60

Company alerts

PFC: Valuations cheap, asset quality behavior crucial to reinstate investor confidence

l Scenario analysis for PFC's stock price l Other key risks to PFC's business model

Sector alerts

Technology: 1QFY14 review - the Rupee lends a hand

l 1QFY14 - industry delivers robust revenue growth, partly aided by seasonal pick-up l North America leads the way in growth l Pricing under pressure but offset by generous Rupee depreciation (once again) l Our top picks - Infosys, TCS and Mindtree

Technology: Cognizant - defying gravity

l Cognizant 2QCY13 - strong growth, revises full-year guidance up to 19% l Best stock to own in the sector l Positive read-through for Indian IT

India Pharmaceuticals: Mylan Analyst Day Highlights - Biocon, Natco, Strides :Morgan Stanley Research

 India Pharmaceuticals: Mylan Analyst Day Highlights - Biocon, Natco, Strides :Morgan Stanley Research

Quick Comment - Key takeaways from Mylan's Analyst Day, as relevant to Indian pharmaceutical industry, are summarized below.

Bio-similar partnership with Biocon (Overweight) for MAbs and insulin analogs - Mylan mentioned that it has been working with Biocon for the past five years and that the partnership is progressing well. Right from the beginning, it wanted to approach product development for the global launch (and not any specific continent). It expects to launch in non-US markets earlier than in the US. Presently, generic Herceptin is in Phase III clinical trials, and generic Glargine is likely to enter Phase III in 1H14 (dossier submission in 1H16).

Copaxone update - MYL continues to believe that it targets to launch its generic Copaxone in May 2014. It is tied up with Natco for manufacturing. Natco's facility has been inspected by FDA. It has engaged with opinion leaders and remains optimistic on the potential generic switch.

Agila acquisition - MYL remains confident of closing its Agila acquisition by 4Q13, not withstanding pending FDA queries and pending regulatory approvals. It is working with authorities to overcome these issues.

Morgan Stanley is acting as financial advisor to Mylan Inc. ("Mylan") in relation to the proposed acquisition of Agila Specialties Private Limited from Strides Arcolab Limited, as announced on 27 February 2013. Mylan has agreed to pay fees to Morgan Stanley for its financial services. Please refer to the notes at the end of the report.

Research updates from Brokerage Houses: Aug 7

Deutsche Bank downgrades Adani Port to Hold from Buy
TP reduced to Rs 129 from Rs 158

Deutsche Bank downgrades Essar Ports to Hold from Buy
TP reduced to Rs 67 from Rs 82

Deutsche bank maintains Hold on Adani Power
TP reduced to Rs 31 from Rs 44

Macquarie on Unitech
Maintains Buy
TP reduced to Rs 12 from Rs 15

Macquarie on Godrej Consumer
Maintains Outperform
TP increased to Rs 950 from Rs 850

CS on Godrej Consumer
Maintains Outperform
TP increased to Rs 900 from Rs 861

Macquarie on Crompton Greaves
Maintains Neutral
TP increased to Rs 90 from Rs 83

StanC on BHEL
Maintains  Outperform
TP reduced to Rs 182 from Rs 230

CS on ONGC
Upgrades to Outperform
From Neutral
TP maintained at Rs 345

UBS on RPower
Maintains Buy
TP reduced to Rs 90 from Rs 100

UBS on Coal India
Maintains Buy
TP reduced to Rs 410 from Rs 450

UBS on Nestle
Maintains Buy
TP reduced to Rs 6000 from Rs 6250

UBS on ABB
Maintains Sell
TP reduced to Rs 450 from Rs 500

UBS on Power Grid
Maintains Buy
TP reduced to Rs 135 from Rs 145

UBS on Crompton Greaves
Maintains Sell
TP reduced to Rs 70 from Rs 77

UBS on Thermax
Maintains Sell
TP increased to Rs 490 from Rs 450

Deutsche Bank on JP Power
Maintaisn Buy
TP reduced to Rs 20 from Rs 34

Deutsche Bank on IRB Infra
Downgrades to Hold from buy
TP reduced to Rs 69 from Rs 157

Deutsche Bank on India Cements
Downgrades to Hold from Buy
TP reduced to Rs 48 friom Rs 97

Deutsche Bank ON JSPL
Maintains Hold
 TP reduced to Rs 182 from Rs 210

Deustche Bank on JP Associates
 Maintains Sell
TP reduced to Rs 26 from Rs 38

Deutsche Bank on L&T
 maintains Buy
TP reduced to Rs 965 from Rs 1145

Barclays on ONGC
Upgrades to Overweight from Equalweight
TP maintained at Rs 350

JSW Steel - Balance Sheet concerns now take centre-stage ::Credit Suisse

● The surprise during the quarter was the increase in debt. With just
Rs10 bn of the Rs50 bn of planned capex incurred, debt increased
by Rs34 bn QoQ. The INR fall (translation on forex debt) and the
increase in inventory we believe were the primary drivers.
● This underscores two concerns: 1) a weak INR helps revenues
very visibly, but it hurts too, especially when foreign currency debt
is taken due to the natural hedge of all sales effectively being in
USD; 2) Despite lower-than-normal production, inventory rose –
the targeted clearance in 2Q we fear may impact realisations.
● With capex continuing and EBITDA anemic, the rising debt burden
is already reaching unsustainable levels, in our view. With capex
still continuing and the domestic steel market unlikely to recover
meaningfully, debt/EBITDA ratio can be 5x by end-FY14.
● 1Q P&L was unexciting: sales missed by 4% and EBITDA 15%
(we take half of the forex loss on coking coal contracts in material
costs: without this EBITDA was 12% ahead). We cut estimates by
80/54% for FY14/15, and cut TP to Rs330 from Rs400, after
reducing debt by 50% of CWIP (else TP would be Rs124 lower).

Jindal Steel & Power - The unthinkable now obvious: 5x Debt/EBITDA by FY14—end ::Credit Suisse

● JSPL’s consolidated net debt increased from Rs224 bn at endFY13 to Rs250 bn in 1Q. This was despite only Rs12 bn of the
Rs90 bn planned capex for FY14 getting spent in 1Q. JSPL
estimates end-FY14 debt at Rs300 bn, a level we had anticipated
for end-FY15. By FY14 end, JSPL will thus be 5x Debt/EBITDA.
● CPP disappointments continue, with JSPL for the first time stating
that power sales from Angul (810MW) were unviable without
captive coal. With contingency plans on for the DRI unit (i.e. no
Utkal B1), utilisations are likely to stay low for a while. Raigarh
technical and evacuation challenges continue.
● Tamnar I realisations may remain suppressed for longer than
earlier estimated, and Tamnar II utilisations may remain low for
several years. The 400MW 15-year PPA with TN SEB (we believe
at Rs4.7/kwh) is encouraging, but utilisation is the problem.
● As we cut our estimates for CPP, steel business and Tamnar II, our
FY14/15 EPS falls by 20%/6%, and target price reduces to Rs218/sh
(Figure 1). Maintain NEUTRAL. The buyback (details to be clear post
lender approvals) is likely to provide some support to the stock.

Madras Cements - Karvy

Profits decline on weak realization
Madras Cements’ 1QFY14 net sales, EBITDA & PAT declined 3%, 36% and
44% YoYto Rs9.6bn,Rs2bn andRs689mn respectively.
Sales volume grew 3% YoY & flat QoQ: Its sales volumes remained flat QoQ
and rose 3% YoY to 2.21mn MT. Higher YoY growth is attributed to the
ramp‐up in its capacity commissioned in FY13. Its cement NSR declined 3%
YoY and 1% QoQ to Rs4239 per MT (3% lower than vs our est). These
resulted in 3% YoYnet sales (~2% lowerthan estimated).
Lower realization dragged down profitability: Operating costs per MT rose
10% YoY (2% QoQ) in‐line with our estimates. Higher costs were driven by
fixed costs per MT which rose 20% YoY but moderated 1% QoQ.
Additionally, the company consumed its high cost linkage coal inventory (vs
pet coke) which resulted in higher raw materials & power/fuel costs.
However, pet coke usage is expected to rise in subsequent quarters. The
impact of higher fuel costs was moderated by lower logistics costs than
estimated. Subsequently, lower NSR resulted in EBITDA decline 36% YoY vs
our estimates of 18% decline. Higher capital charges further resulted in PAT
decline of 44% YoYto Rs689mn vs our est ofRs1.06bn.
Fundamentals intact: We have lowered our NSR growth est for FY14E to
0.4% vs 3.3% earlier to factor in the current weak pricing impact on overall
NSR. Subsequently, we have cut our EBITDA estimates for FY14‐15E by 7%/
4% respectively. We expect MCEM’s profitability to benefit from ramp‐up in
its cement & power capacity which should drive its 7% volume CAGR in
FY13‐15E and also stabilize its operating costs. Higher usage of pet coke
(~70% its fuel mix) would also boost its operational efficiency. With most of
its capex over, MCEM’s balance sheet de‐leveraging drive to gain pace –
leading to its net debt: equity reducing from 1.1x in FY13 to 0.6x by FY15.
Retain “BUY” with a lower TP of Rs256: We maintain our “BUY”
recommendation on the stock with a TP of Rs256 (earlier Rs300 at 7.5x)
valuing it at 7x its FY15E EBITDA (its long term average).

RAYMOND-Karvy

Textiles Improved while Apparel & Engineering
Dragged Profitability; Reiterate BUY
Raymond Q1FY14 revenue grew 4.3% YoY to Rs. 8,739mn, EBITDA
declined marginally by 1.4% YoY to Rs. 305mn while Adj. net loss widens
to Rs. 39.6 mn. Exceptional outflow against VRS payments was Rs. 101mn.
Reported netloss was Rs. 497mn against netloss of Rs. 350mn in Q1FY13.
Textile Segment: Raymond’s textile business grew 12.8% YoY to Rs. 3,825
mn in Q1FY14. Higher exports coupled with Makers & Combo packs aided
revenue growth. ‘Makers’ grew 40% YoY to Rs. 230 mn. Realizations growth
was at 4.5% while rest is attributable to volume. EBITDA margin improved
by 400bpsYoYto 9%, thus EBITDA grew 106% to Rs. 340 mn.
Branded Apparel: Branded Apparel sales declined 14% to Rs. 1,580 mn.
EBITDA margins were reported at  ‐6% compared with 3% in the
corresponding quarter. EBITDA losses stood atRs. 100mn compared to Rs. 50
mn in Q1FY13. The segment has significantly reduced its inventory to Rs.
200mn compared to Rs. 1,200 mn a year ago. We expect Branded Apparel to
become EBITDA positive in FY14 on account of low inventory and excise
duty removal benefits. Gross margins improved 250bps on excise benefits.
Denim & Cotton Shirting: Revenue from Denim and Cotton Shirting grew
4% each to Rs. 116 mn and Rs. 365 mn respectively. Denim EBITDA margin
remained flat at 12% YoY while Cotton Shirting margin declined by 300bps
to 11% in Q1FY14 on higherinput costs and lower exports.
Garmenting: Revenue from garmenting business grew 59% to Rs. 830 mn
driven by higher exports while EBITDA margin declined 500bps YoY to 9%
on account offorex loss (Rs. 97mn) booked on the orders for coming quarters.
However, FY14 looks promising with strong order‐book.
Engineering divisions: Tools & Hardware revenue grew 5% YoY to Rs. 940
mn while EBITDA margin declined 400bps to 9% while Auto Component
division revenue grew 3% to Rs. 650 mn with 500bps margin contraction on
challenging auto industry.
Outlook & Valuation: We revise down expected EBITDA & net income on
slower margin recovery amid challenging apparel & engineering business. At
CMP of Rs.205, the stock trades at 6.3x and 4.7x of FY15E EPS and
EV/EBITDA respectively. We reiterate our “BUY” recommendation and
revise down our target price by 18% to Rs. 316 based on 6.0x FY15E
EV/EBITDA, having a potential upside of 55%.

Kajaria Ceramics - Strong revenue growth offsets margin pressure ::Credit Suisse

● In-line 1Q results: Kajaria's Jun-13 consolidated revenue rose a
strong 23% YoY, driven by 18% volume growth. EBITDA margins
were compressed on higher fuel prices due to the INR
depreciation. Net income was in line with expectations.
● Demand growth is strong despite the weak overall environment:
Revenue growth picked up in 1Q to 23% YoY and the
management appears comfortable with its earlier expectations of
a 20% growth for FY14. Revenue is being driven by increased
contribution from its joint ventures.
● Cost pressures exist: EBITDA margins compressed by about 100
bp YoY due to a depreciating INR. The pressure on this front
could be higher in 2Q given the full impact of the INR depreciation
then. Increasing contribution from JVs offset this to some extent—
the company also seems undecided on price hikes.
● Revenue growth should remain strong and valuations are
attractive: We expect Kajaria to gain market share given its strong
brand, distribution network and increasing capacity in southern
India. Valuations remain attractive in our view

Ipca Labs - Karvy

Revenues Outperform, Margins Lower due to
higher R & D
Revenues increased by 26.9%YoY to Rs8,056mn compared to Rs6,344mn in
Q1FY13. Operating margins are down by 110bps to 21.2% as against 22.3%
in Q1FY13 due to higher R & D expenses. Net Profit increased by 67%YoY
to Rs718mn in Q1FY14 in line with our expectation of Rs 702mn.
Revenue Details: Ipca’s Export formulation grew by 46.9% YoY to
Rs.3300mn higher than our expectations of Rs2,945mn. However, Domestic
formulation business increased by 12 % YoY to Rs2504mn in line with our
expectation of Rs2511mn. In Exports formulations, Branded promotion
revenues grew by 62%YoY to Rs730mn. Institutional business grew by
40%YoY to Rs839mn while Generic Business showed growth of 47%YoY to
Rs1,730mn. In APIs, Exports increased by 17%YoY to Rs1,666mn while
Domestic grew by 16%YoY to Rs456mn.
Margins Contract: Companyʹs EBITDA Margins stood at 21.2% (our
estimates 22.5%) in Q1FY14 lower than 22.3% reported in Q1FY13. Margins
were lower on account of high material cost due to product‐mix and higher R
& D expenses due to clinical trials conducted for a 505(b)2 product.
Companyʹs net profit stood at Rs718mn in Q1FY14, in line with our estimate
ofRs. 702mn.
Outlook and Valuation: We decrease our revenues by 0.4% to Rs34.7bn for
FY14E and by 1 % to Rs 41.6 bn for FY 15E mainly on account of downgrade
in Export API business. We marginally downgrade EBIDTA margins but our
EPS downgrade is 3.1 % for FY14E to Rs37.8 and by 1.1% for FY15E to Rs45.8.
We reduce our price target by 1 % to Rs687 based on 15x FY15E. Due to
limited upside (3%) we maintain our SELL recommendation on the stock.

GMDC - Q1FY14 Result Update - Centrum

Lignite production issues continue
GMDC lignite production issues kept volumes subdued at ~2.43MT (down by
~28% YoY) and resulted in a sharp drop in revenues/EBITDA by ~26%/36%
YoY. EBITDA at Rs1.7bn was marginally lower (vs. est. Rs1.76bn) and margin
stood at 46.3%, lower by 430bps QoQ due to lower lignite volumes and
mining revenue. We have cut our volume and realization estimates for
FY14E/15E due to production issues at Tadkeshwar and Bhavnagar mines
and delay in merchant price hike. We cut our valuation multiple to 4x FY15E
EV/EBITDA and reduce the target price to Rs138. Maintain Buy.
Lignite volumes remain dismal and fall by ~28% YoY: Lignite volumes stood
at 2.43 MT, down by ~28% YoY. The volume trajectory was down across all the
mines but sharp drop was again seen mainly from Bhavnagar and Tadkeshwar
(both down 41% YoY) on account of issues related to production at mining sites
and scarcity of land for dumping overburden. Bauxite volumes were dismal at
60kt, down from 200kt YoY.
Negative EBIT from power operations reduces due to higher wind power
generation: The thermal power plant operated at ~22% PLF (as 1 unit of 125MW
was shut for overhauling) and generated only 122mn units whereas wind power
PLF was high at ~30% resulting in ~80mn units. EBIT loss from power division
reduced to ~Rs2mn due to higher wind power generation. Thermal power
operations at Akrimota saw low PLF again due to the transfer of operations to
KEPCO and shutdowns for overhauling.
EBITDA margin drops further: EBITDA margin stood at 46.3%, lower by 430bps
QoQ due to sharp drop in profitability from both mining and power businesses.

HCL Technologies Focus list stock Revenue momentum and margin improvement continues ::Credit Suisse

● The revenue momentum continues…: HCLT reported another
strong quarter of 3.1% USD (3.9% cc), once again driven by
infrastructure management services (+9% QoQ). Software
services have been muted for a year now but may pick up with
some uptick in discretionary spending. Full report.
● … and so does margin improvement: EBIT margins were up 140
bp QoQ driven by the INR depreciation and some operational
improvements. Margins for FY13 were up 380 bp YoY and
management expects stability in margins going ahead.
● Based on these results, we are revising up our FY14/FY15
estimates again by 5%/6% and our target price from Rs950 to
Rs1,100 (24-month forward P/E of 15x).
● Some upward earnings revisions and multiple re-rating can be stock
price drivers: While the stock is up 25%+ over the past three
months and 80%+ over the past year, we believe there is possibility
of some more earnings upgrades. Additionally, with such consistent
performance and the recent INR weakness, there is a case for
some multiple expansion. HCLT is a CS NJA Focus List stock.

Kotak India Daily: Strategy - GameChanger Perspectives; Results; Results, Change in Reco; Updates

Strategy

Strategy: Puzzling PDS off-take

l TPDS covers around a third of Indian households; Food Security will up it to two-thirds l TPDS off-take is now 51 mn tons; far higher than the 30 mn tons requirement l Decentralized procurement show meaningful delta; counts as TPDS off-take l If TPDS consumes 51 mn tons, what estimate should we build for Food Security ordinance?

Daily Alerts

Results

Coal India: Mixed bag

l Lower e-auction realizations offset by savings in employee and OBR costs l Volume growth rather muted, e-auction prices suppress overall realizations l Maintain BUY with a revised target price of Rs370

IDEA: We raise estimates, target price; dilution concerns overdone. BUY

l First things first - is the potential equity dilution a cause for concern? l Business in solid shape; reiterate BUY

Bharat Heavy Electricals: Weak quarter, bad patch may continue

l Very weak numbers - revenue down 24% yoy, margins (4.5%); PAT halves l Backlog falls on weak inflows, cancellation; cites potential 15 GW visibility for FY2014 l We revise estimates; reiterate SELL with a target price of Rs140

Godrej Consumer Products: Profitability elusive, yet again

l 1QFY14: Strong domestic show continues, IBD margins drop l Higher A&SP in domestic business, volatile IBD margins hurt profits l We retain our REDUCE rating, will revisit numbers after the concall

Reliance Communications: Fundamentals stressed despite RPM increase; retain SELL

l Business turnaround looks difficult l Cut consolidated estimates and retain SELL rating

Grasim Industries: When it rains, it pours

l Weak operating performance across segments - VSF and cement; lower taxes save the day l Sharp realization decline in both VSF and chemicals leads to 25-30% decline in operating profits l Maintain ADD rating with TP of Rs3,000

GlaxoSmithkline Consumer: Good quarter but not good enough to justify the rich valuations

l Marginally below estimates, margin contraction continues (partially hit by one-offs) l Domestic revenues up 18%; 7% volume growth, 10% price-led growth l We retain SELL while raising our TP to Rs3,900 (from Rs3,500 earlier)

Sun TV Network: Steady core business, priced in

l Ad rate hike key driver; market share losses, IPL franchise, cost inflation are risks l We retain REDUCE with 12-month forward fair value of Rs440 (Rs400 previously); limited upside

Siemens: All industrials sector bets seem to be off; Siemens just another cog

l Weak results across all segments: EBITDA margin nil, net loss Rs488 mn l Provisioning continues (may be recovered on contract completion) l Weak outlook; focus on internal cost cuts as low volumes, pricing, delays, volatility bite l We revise estimates; SELL on expensive valuations even on optimistic estimates (build significant recovery)

Cummins India: Weak domestic can possibly accentuate; hopeful on exports, but elusive so far

l Domestic: Cyclical weakness may persist; structural correction in deficit demand has just started l Exports: Weak global demand scenario overshadows upside risk from LHP scale-up l Margin downside can come with pricing weakness; inadequate capex compensation sours l Revise estimates on sharp cuts to sales and margin assumptions; retain REDUCE

Canara Bank: Margin pressure likely to continue

l Growth focus continues; maintain REDUCE l Loan impairment ratios remain high; high pipeline of restructured loans

J&K Bank: Fresh impairments remain high

l Weak performance on loan impairment continues; maintain REDUCE l Fresh restructuring high; NPL trend stable

Bajaj Corp.: Good quarter; reiterate BUY

l Another solid quarter in challenging macro, volumes surprise positively (aided by promotions) l OPM flat despite higher GMs owing to higher A&SP l Other key highlights from the result

Results, Change in Reco

PFC: Earnings on track, upgrade on inexpensive valuations

l Core earnings growth up 33% yoy, PAT up 23% yoy l Revision in estimates; upgrade on inexpensive valuations

Divi's Laboratories: Risk-reward turns favorable, recovery may still take time

l Weak quarter, on expected lines l Additional units to be commissioned in 2HFY14 - recovery expected in FY2015 l Upgrade to ADD (from REDUCE) with TP at Rs1,040 (from Rs1,060 earlier)

Oriental Bank of Commerce: The devil is in the price

l Impairment ratios stable - trend similar to previous years in 1Q l Recent correction gives comfort and management actions positive; upgrade to ADD l NIM shows a marginal improvement to 2.9% qoq; expect pressure in the short term

Company alerts

Sterlite Industries: Performance contingent on smooth transition in zinc businesses

l Zinc India - 2014 to mark transition to underground mining, open pit ore to fall 22% l Zinc India - lower ore mining at open cast results in higher strip ratio, maintains cost guidance l Zinc International - volumes may decline 40% in next 2-3 years unless Gamsberg commences

Glenmark Pharmaceuticals: Limited comfort on earnings quality

l Emerging markets deliver; US recovery expected in 2QFY14 l No change to guidance l Maintain cautious view with unchanged TP at Rs535

Jubilant Foodworks: SSG decelerates further; recovery optimism could be tested

l 1QFY14 - growth decelerates top to bottom l Aggressive store expansion continued l We like the long-term potential but valuations keep us from turning positive on the stock

MCX India: When it rains, it pours

l What is NSEL and what happened to it over the past two weeks?