almondz quarter ended june' 2011 preview - patience

Sanjeev PatkarDirector Research

[email protected]:+91 22 67526600July 07’ 2011

PatiencePatience is the state of endurance under difficult circumstances, which can mean persevering in the face of delay or provocation without acting on annoyance/anger in a negative way; or exhibiting forbearance when under strain, especially when faced with longer‐term difficulties.

Quarter ended June’ 2011 Preview

Automobiles• 2‐Ws continue to grow strongly, while PC growth tampers; and CV growth rate moderates• Raw material prices to remain soft in H2FY12• Our top picks are Maruti Suzuki & Bajaj Auto, while our top Sell is Hero Honda. On the Auto Ancillary side, we like Bosch and

Exide. Banks• Pvt Banks to report better core & net earnings YoY v/s. to its public peers with lower decline in NIMs, opex and also lower

credit cost.• Asset Quality deterioration (system driven NPA) and NIM compression are the key factors to watch amongst the PSB and

business momentum for Private Banks. • We prefer Banks like ‐ Pvt Bank ‐ ICBK, HDFC Bank, Axis Bank and Federal Bank. PNB, BoB, OBC and ALL Bank in PSB.Cement• All India demand growth continues to remain sluggish at 1.4% (Y‐o‐Y) and ‐6.5% (Q‐o‐Q) • Capacity pipeline remains healthy with incremental supply of 25‐30Mtpa expected over 9M• All India prices (gross retail) have fallen by an average of 3.5% (Q‐o‐Q) to Rs254/bag• Opex curve is on the rise‐diesel cost push of ~7%IT• Demand environment remains buoyant, with revenue visibility for FY12 intact, barring any major unseen macro shocks• Headwinds from wage hikes to impact operating margins and Profitability to be further dented by higher tax regime• Our top picks ‐ HCLT (tier‐1) and Hexaware (tier‐2)Infrastructure • Near term challenges including sluggish execution, interest costs, subdued order intake, working capital pressures – All in the

price….• Expect more favorable macro environment from 2HFY11. Also base effect will ensure better performance• We prefer Sadbhav Engineering, NCC, Patel Engineering and B L Kashyap.Power & Capital Goods• Power Utilities: Fuel Scarcity and Environmental Clearances hurting the new capacity addition • Capital goods: Execution to remain on track but rising cost curve and capital cost will cap profitabilityPharmaceuticals• Expect mixed bag results. We expect higher visibility in product launches supported by the favorable generic opportunities in

the medium term, wherein products worth ~USD30bn are set to go off‐patent over the next four years.• OPM and profitability to be impacted by the rise in employee cost (rise in field force), appreciating currency and higher tax

incidence due to increased MAT rate.

What to expect

Almondz Economic DiamondControlling Inflation and Currency – A priority to balance the Ecosystem

Monetary Plane

GDP Growth7.9‐8.2% in 2011‐12E• In 4QFY11, consumption demand

moderated. Higher inflation may moderate consumption demand further in FY12.

• Decline in infra order inflow, faltering GFCF are concerns.

• Higher commodity and energy prices may restrict growth.

Fiscal Deficit 5.1% by Mar‐12E• Higher subsidy and lower growth may raise the overall bill.• In FY12, the economy may face problems of funding the massive

deficit and GSec yield may spike to some extent

Inflation 6.3% by Mar‐12E7.5% avg. (for FY12E) • Key concern: supply crunch and higher

energy prices to keep inflation above RBI’s comfort zone at least in H1FY12

• The spill over affected the overall wage‐price dynamics

• We expect, incipient signs of inflation in developed economies to force policymakers to increase interest rates in the near term. This in turn may bring an end to the commodity super‐cycle. We do not expect further aggressive hikes by RBI this fiscal.

Interest rate• Is a balancing lever between growth

and inflation.• Expect another 25‐50 bps hike in

policy rates in FY12E.

Currency$=`45.5 by Mar‐12E• Higher oil price and lower capital inflow may lead to currency depreciation.

• Higher ECB/FCCB flows may restrict depreciation to some extent.

Fig 1. 4QFY11 GDP fell down to 7.8% Fig 1. 4QFY11 GDP fell down to 7.8% Fig 2. IP Index slid to 4.4%Fig 2. IP Index slid to 4.4%

Fig 3. Core sector growth slowed down Fig 3. Core sector growth slowed down Fig 4. Manufacturing PMI suggest sluggish growth aheadFig 4. Manufacturing PMI suggest sluggish growth ahead

Economy – confronting a slowdown

*Source : Bloomberg, CSO and Almondz Research

Fig 5. Core inflation climbed in May 2011Fig 5. Core inflation climbed in May 2011 Fig 6. WPI Inflation overshot the upper bandFig 6. WPI Inflation overshot the upper band

Fig 8. Manufactured product prices moving upwardFig 8. Manufactured product prices moving upwardFig 7. Higher oil price may drive inflation even higher Fig 7. Higher oil price may drive inflation even higher

*Source : Bloomberg, CSO, Office of Economic Adviser and Almondz Research

Inflation way above RBI’s comfort zone

Fig 11. SCB’s CD Vs. ID RatioFig 11. SCB’s CD Vs. ID Ratio

Fig 9. The deposit growth has reboundedFig 9. The deposit growth has rebounded Fig 10. SCB’s G‐Sec Investment started peaking upFig 10. SCB’s G‐Sec Investment started peaking up

Fig 12. Trend in inc. CD/ID ratioFig 12. Trend in inc. CD/ID ratio

*Source : Bloomberg, RBI and Almondz Research

Banking: Credit and Deposit of SCB’s

AUTOMOBILESJune Quarter FY12E Preview

Piyush [email protected]

Tel:+91 22 6752 6640

Ankit [email protected]

Tel:+91 22 6752 6655

Quarter ended Jun 2011: Sector Overview

Key Developments:2‐Ws continue to grow strongly, while PC growth tampers: Two wheeler industry continues to grow strongly (↑19% YoY), led by consumer demand and new launches. The top two players, viz. Hero Honda and Bajaj Auto continue to maintain leadership in the executive and premium segment respectively. However, the passenger cars industry growth rate slowed down (↑8% YoY), impacted by high base, high interest rates and high inflation, despite slew of new launches and higher incentives/discounts. Hero Honda, Bajaj Auto and TVS Motor are likely to report top line growth of 33%, 23% and 20% YoY in Q1FY12E, that of Maruti is expected to remain flat.CV growth rate moderates: CV growth rate have moderated during the quarter at 14% YoY, with 5% growth in M&HCV segment. We expect margin pressure for CV manufacturers in Q1.Auto Ancillary better placed: Most of auto ancillary companies are expected to report strong revenue growth, led by export business and domestic replacement markets. We expect Bosch, Bharat Forge and Exide Industries to report revenue growth of 19%, 38% and 16% respectively. Outlook: Short‐term headwinds: Higher interest rates, rising fuel prices and forex fluctuations are headwinds in the short term, while our medium‐term outlook is positive, given rising per capita income, improving export opportunities and easy availability of financing.Raw material prices to remain soft in H2FY12: We expect commodity prices to stabalize going forward, giving relief to auto manufacture in the second half of this year. However, the competition in two wheeler and four wheeler industry will keep margins under pressure.Selective stock picking: We prefer selective stock buying in the sector. Our top picks are Maruti Suzuki & Bajaj Auto, while our top Sell is Hero Honda. On the Auto Ancillary side, we like Bosch and Exide Industries.

Company Section

APOLLO TYRES:

Comments:• Net revenue is expected to grow by 41% YoY, largely driven by 30% volume growth with robust demand in replacement

markets. There is also a low base impact due to strike at Perambra plant previous year. • EBITDA margin would continue to exert pressure due to rubber procurement at higher prices, despite the company had

hiked tyre price by 4‐5%. Though in the last month the rubber prices have cooled off – the impact of which would start from Q2FY12 onwards. We estimate Q1FY12E EBITDA margin at 9.8% ‐ a 110bps YoY and a 200bps QoQ decline.

• EBITDA and PAT are likely to grow by 27% YoY and 34% YoY respectively. • We hold positive view on the company in the medium term – earnings growth driven by margin expansion.

Comments:• Ashok Leyland’s revenue is expected to grow 10% YoY, largely driven by realization growth and improvement in engine &

spare parts businesses. Volumes have declined 10% YoY and 29% QoQ to 19.3k units in Q1FY12E.• EBITDA margin is expected decline 660bps QoQ to 6.7%, due to lower volumes and higher input costs. • Our net profit estimates indicate a decline of 65% YoY and 86% QoQ.

ASHOK LEYLAND:

Bloomberg Code:AL IN Equity Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP:51.8 & MCAP:69.5 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 81.9/45 25,905 10.3 (32.3) 1,740 (26.1) (65.9) 6.7 433 (64.7) (85.5) 55 HOLD

Change (%) Change (%) Change (%)

Bloomberg Code:APTY IN Equity Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP:78.7 & MCAP:39.5 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 88.8/44 25,659 40.9 (6.0) 2,515 26.7 (21.7) 9.8 991 33.5 (48.5) 77 HOLD


Company Section

BAJAJ AUTO:

Comments:

• Bajaj Auto’s volume has grown 18%YoY ( 15% QoQ growth) to 1.1mn driven by 16% YoY growth (15% QoQ growth) in 2W and 30% YoY growth (16% QoQ growth) in 3W.

• Net sales are expected to grow 23% YoY (14% QoQ) to 47.8 bn largely driven by volumes growth & April price increases of 1.3%‐1.5%, both in domestic as well as export markets.

• EBITDA margin is expected to increase 80 bps YoY & 30 bps QoQ to 20.8%. PAT is expected to increase 29%YoY & 13% QoQ to 7.6 bn.

• Bajaj Auto is our top pick in two wheelers due to its ability to superior operating margins and significant valuation gaps with respect to Hero Honda.

Comments:• We expect Bosch’s top line to grow by 19% YoY, aided by exports as well as domestic business. However, the domestic

revenue is likely to decline sequentially due to slowdown in CV growth rate. • The EBITDA margin is expected to narrow down marginally by 10bps to 18.8% on a sequential basis.• The company’s net profit is expected to increase by 26% YoY, while decline by 4% QoQ.

BOSCH:

Bloomberg Code:BJAUT IN Equity Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP:1432 & MCAP:415 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 1665/1189 47,788 22.8 13.8 9,954 28.1 15.5 20.8 7,624 29.2 12.8 1,639 BUY


Bloomberg Code:BOS IN Equity Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP:6994 & MCAP:220 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 7250/4950 20,232 19.0 (3.0) 3,807 19.2 (3.4) 18.8 2,635 25.6 (4.0) 7,567 BUY


Company Section

BHARAT FORGE:

Comments:• Bharat Forge’s standalone revenue is likely to grow by 37% YoY to Rs8.4bn, driven by robust growth in exports. • EBITDA margin would expand by 40bps QoQ to 24.6%, due to higher operating leverage. However, on YoY basis, EBITDA

margin would decline by 60bps. Net earnings is expected to grow by 61% YoY to Rs1bn. • We are cautious on Bharat Forge due to its dependency on US and UK markets, where we expect automobile growth rates

to slow down considerably.

Comments:• Net sales will grow by 35% YoY, driven by replacement market demand and two‐wheeler market demand. The company was

also benefited by tyre price hikes during the year. • EBITDA margin is likely to improve sharply by 350bps QoQ to 5%, due to decline in rubber prices – a key raw material. • EBITDA and PAT are expected to increase by 27% YoY and 40% YoY to Rs520mn and Rs200mn respectively.

CEAT:

Bloomberg Code:BHFC IN Equity Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP:322 & MCAP:75.6 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 413/284 8,360 37.4 5.0 2,126 33.9 6.9 24.6 1,024 60.8 2.0 321 HOLD

Change (%) Change (%)Change (%)

Bloomberg Code:CEAT IN Equity Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP:108.8 & MCAP:3.72 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 195.4/85.6 10,378 34.4 6.1 520 26.9 256.3 5.0 200 44.4 NM 193 BUY


Company Section

EICHER MOTORS:

Comments:• We expect 30% YoY revenue growth driven by 38% growth in volumes, while 6% decline realization growth. The decline in

realisation is due to product mix – higher sales proportion of motorcycles. • We expect EBITDA margin to expand 20bps QoQ and 270bps YoY due to higher motorcycle sales, where Eicher enjoyes

better margins. • Our net profit estimates indicate an improvement of 30% YoY to Rs719mn.

Comments:• Exide’s revenues are expected to increase by 16% YoY due to stronger growth in the replacement battery markets. • EBITDA margin would expand by 110bps QoQ to 19.5%, aided by better product mix (higher sales from replacement

markets), reduction in lead prices and higher in‐house lead collection. • Q1FY12E net profits are expected to improve 6% YoY and 7% QoQ to Rs1.8bn .

EXIDE INDUSTRIES:

Bloomberg Code:ECH IN Equity Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP:1304 & MCAP:35.3 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 1450/924 13,490 29.9 (2.9) 1,605 87.7 (1.2) 11.9 719 30.3 (1.9) ‐ NR


Bloomberg Code:EXID IN Equity Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP:165.9 & MCAP:143Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 179.8/112 13,354 15.9 7.0 2,600 (1.2) 11.2 19.5 1,752 5.9 7.0 ‐ NR


Company Section

HERO HONDA:

Comments:

• Hero Honda has consistently maintained a monthly run‐rate of 0.5mn units in Q1FY12 there by increasing total volumes in Q1FY12 by 23.9% to1.53mn units. Domestic volumes jumped by 23.6% to 1.49mn led by the growth of22.9% and 34% in the motorcycle and scooter segments respectively.

• Sales are expected to increase 23% YoY (grew 14% QoQ) to Rs. 57 bn largely driven by volume growth and Mid april average price increase of Rs.700‐800 . As a result realization is expected to increase 6.6% YoY.

• EBITDA margin is expected decline 180 bps YoY to 12.2% translating into PAT growth of 13% YoY(10% QoQ) to Rs. 5.5 bn.

• Post split from Honda, Hero has many challenges like maintaining market share by revamping R&D, launching new products, developing export market and making huge investments four fourth pant . We remain cautious and re‐iterate our SELL call.

Comments:• M&M is expected to register 29% YoY growth, driven by 23% growth in volumes and 5% growth in realizations. The

realization increased due to product mix and price hikes effected ~2% in automotive segment & ~3% in farm equipment segment.

• EBITDA margin is expected to decline 190bps YoY to 15% due to higher commodity prices and product mix. Sequentially, we expect EBITDA margin to expand by 40bps to 13.1% due to higher proportion of tractor sales.

• Net profit is likely to grow at 8% YoY at Rs6.1bn.

Mahindra & Mahindra:

Bloomberg Code: HH IN Equity Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP:1866 & MCAP:372.5 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 2060/1378 57,038 32.8 5.8 6,975 15.8 6.9 12.2 5,536 12.6 10.4 1,474 SELL


Bloomberg Code:MM IN Equity Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP:715 & MCAP:445 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 826/550 66,399 28.7 (2.0) 8,698 12.2 0.9 13.1 6,067 7.9 0.0 776 HOLD


Company Section

Comments:

• MSIL’s volume has remain flat YoY( 18% QoQ decline) to 281526 units largely driven by 3.2% YoY growth (decline 20% QoQ) in domestic volumes and 23% YoY de‐growth in exports.

• Revenue is expected to decline .5% YoY( 19% QoQ) due to declined domestic volumes largely impacted by 13 day strike at manesar facility and maintenance shut‐down. Realization are expected to decline 1% QoQ irrespective of 1% price hike largely driven by huge discounts at dealers end.

• EBITDA is expected to decline 5.5 YoY (25% QoQ) to 7492 mn , with Operating Margin at 9.1% largely impacted by lower volumes and huge discounts/incentives. Net profit is expected to decline 14.5% YoY , 40% sequentially.

• Near term turbulence already priced in stock, we reiterate our BUY call on the stock.

MARUTI SUZUKI:Bloomberg Code:MSIL IN Equity Sales EBITDA

EBITDA Margin (%)

PATTarget Price

Reco

CMP:1165 & MCAP:337 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 1599/1087 80,070 (0.5) (18.8) 7,492 (5.5) (25.8) 9.1 3,981 (14.5) (39.7) 1,669 BUY


TATA MOTORS:

Comments:• We expect Tata Motors’ consolidated revenue to improve 22% YoY on the back of stronger volume growth in JLR business.

Standalone revenue growth is muted due to lower growth in passenger cars segment. • Consolidated EBITDA margin is expected to contract by 40bps YoY to 13.8%, on account of 200bps decline in standalone

business. We have estimated 16% EBITDA margin for JLR (a sequential improvement of 20bps) and that for standalone business at 9.1% (60bps QoQ improvement due to better product mix).

• We expect consolidated net profit for Q1FY12 at Rs25bn, driven largely by JLR operations.

Bloomberg Code:TTMT IN Equity Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP:1033 & MCAP:666 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 1381/749 331,035 22.4 (7.0) 45,842 18.9 2.5 13.8 25,483 25.5 3.6 1,315 BUY


Company Section

Comments:

• TVS motors maintained it’s volume growth of 16% YoY to 540k units. Domestic Motorcycle growth remain largely sluggish at 154k while export of motorcycles increase by 27.5% to 61K units . Scooters grew by 23% to 118k, mopeds grew by 20% to 192k. 3W’s sales stood at 11.4k mostly on exports demand.

• We expect sales to increase by 20% YoY (2% QoQ) to Rs. 16.7 bn largely due to volume growth and mid april price increase of 1.5%‐2% in order to push some cost pressure.

• Irrespective of double digit growth, realization is expected to 3% YoY(1% QoQ) largely because of poor product mix because of huge increase in exports. OPM margin is expected to decline 60 bps YoY (increase 10bps QoQ) , driving PAT to Rs. 4.7 bn growing 15%YoY(12% QoQ)

TVS MOTOR:Bloomberg Code:TVSL IN Equity Sales EBITDA

EBITDA Margin (%)

PATTarget Price

Reco

CMP:53.4 & MCAP:25.5 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 87/43.7 16,696 19.9 2.2 1,142 10.2 4.7 6.8 465 15.1 11.5 54 SELL


BANKING June Quarter FY12E Preview

Mangesh [email protected]:+91 22 67526642

Darpin [email protected]:+91 22 67526643

Shivraj [email protected]:+91 22 6752654

Quarter ended June 2011: Sector Overview

Key developments: Bank credit growth moderated to 20.9% YoY (in line with RBI expectation) due to arrest in Non‐food credit

growth by 20.5% YoY. Deposits growth showed improvement recording 18.3% YoY (as on 17th June 2011).RBI had raised policy rates 10 times since March, 2010 (twice in this fiscal), with Repo & Reverse Repo at 7.5%

6.5% respectively, in its bid to arrest inflation (9.06% for June month).Credit growth moderation has also led to CD/CP rates to come down from levels of 9.5% / 10.6% in March’ 11 to

9.1% / 9.5% in June’ 11.Step towards de‐regulation of saving deposit rate. RBI raised saving rate by 50bps to 4% with a view to

compensate a/c holder for stubbornly inflation.

June 2011:During the quarter ended June’11, we expect the aggregate NII to grow ~17.2% YoY with Pvt player putting up

good show in both in terms of Quality and Quantity.Rise in term deposits and also in saving rate Is likely to push banks overall cost of funds.Shifting towards system driven NPA (PSB), higher G‐Sec yields and change in provisioning norms is expected to

keep provisions at an elevated levelsSector net profit is expected to decline 1.6% YoY (ex SBI ‐ rise of 10.6%) largely on account of PSB banks profit

declining by 12.1% (ex SBI ‐ rise of 1.4%). Pvt. bank are expected to report strong growth of ~27%.Sequentially, PSB are expected to report stronger net earning growth of 31.2% (ex SBI ‐ decline of 1.8%) v/s.

decline of ~9% in Pvt Banks.

Outlook: We continue to maintain our stance positive stance on the sector (albeit some pressure in the near term), we recommend selective buying in the space and prefer Pvt players vis‐à‐vis PSB. Top picks: ICBK, HDBK, Axis and Federal Bank (Pvt. Banks) and PNB, BOB, OBC and ALL Bank in the PSB space.

6M CP‐ CD (%) rates movement…6M CP‐ CD (%) rates movement…

Credit Deposit Growth (%)Credit Deposit Growth (%)

*Source: RBI, Bloomberg, Almondz Research

G‐Sec (%) movement…G‐Sec (%) movement…

Yield CurveYield Curve

Industry trends…

77.27.47.67.88

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6M CD (%) 6M CP (%)

Company Section

ALLAHABAD BANK:

Bloomberg Code: ALBK IB Equity NII Change(%) PPP Change (%) NP Change (%)Target Price Reco

CMP: 198 & MCAP: 94.4 Bn Rs. Bn YoY QoQ Rs. Bn YoY QoQ Rs. Bn YoY QoQ

52 wk H/L: 271/ 162 10.3 21.7 (10.1) 8.5 20.7 9.1 4.0 14.7 54.5 274 BUY

Comments:• ALL Bank’s NII growth expected to be ~22%, with moderation in loan book and NIM compression. • Opex expected to decline QoQ, with lower Staff cost• Other provisions expected to almost double with change in the recent regulatory norms. • Net profit expected to grow at ~15%.• NIMs compression, slippages (Asset quality) are key factors to watch out for.

BANK OF BARODA:

Bloomberg Code: BOB IB Equity NII Change(%) PPP Change (%) NP Change (%)Target Price Reco


52 wk H/L: 1050/ 708 23.8 28.1 (9.0) 18.6 21.5 (4.6) 10.0 8.6 (22.7) 1095 Out Per

Comments:• NII growth expected to be ~28% driven by strong loan book coupled with marginally expansion in NIM (albeit lower QoQ –

with one‐offs included in Q4FY11).• Non‐interest income expected to higher, despite lower treasury gains (Q1FY11 – Rs 1.3bn).• Asset quality is expected to improve on QoQ basis, with huge deterioration in Q4FY11. However, on YoY basis, provisions

are expected to rise, • Net Profit expected to rise ~9% YoY.• Slippages a key factor to watch.

Company Section

BANK OF INDIA:

Bloomberg Code: BOI IB Equity NII Change(%) PPP Change (%) NP Change (%)Target Price Reco


52 wk H/L: 588/ 364 21.5 23.6 (6.8) 16.3 15.8 35.5 7.0 (3.4) 41.9 506 BUY

CANARA BANK:

Bloomberg Code: CKB IB Equity NII Change(%) PPP Change (%) NP Change (%)Target Price Reco


52 wk H/L: 844/ 458 19.5 12.7 (1.3) 16.1 8.3 (5.2) 9.0 (11.5) (0.3) 698 BUY

Comments:• Strong NII growth expected, with loan book growth in line with the industry.• BoI had a marginal positive ALM under the shorter term.• Provisions to remain higher with higher restructured assets and also volatility in asset quality.• Net profit is expected to decline ~3.4%.• Asset quality ( and slippages) has disappointed for the bank – thus it will remain a key factor to watch.

Comments:• Core earnings expected to grow by ~13% with higher than industry loan book growth. NIMs are expected to decline.• Non‐interest income to decline ~12%, owing to higher treasury gains in Q1FY11 (Rs 2.2bn).• Provisions expected to rise significantly YoY and remain largely flat QoQ.• Net profit expected to decline ~12%, albeit on a higher base (bank reported a growth of ~83% YoY in Q1FY11).

Company Section

INDIAN BANK:

Bloomberg Code: INBK IB Equity NII Change(%) PPP Change (%) NP Change (%)Target Price Reco


52 wk H/L: 316/ 197 10.8 16.3 (3.0) 8.4 0.5 (6.7) 4.1 10.5 (7.3) 275 Acc

Comments:• NII growth expected to be 16%, with moderate loan book growth and pressure on NIMs (in Q1FY11, NIMs stood at 3.7%)• Non Interest Income to decline on back of higher treasury gains in Q1FY11.• Asset quality pressure to be lower on YoY basis (bank shifted to system driven NPA in Q1FY11), lower the requirement of

other provisions.• Net profit to show growth of 10.5%.

JAMMU & KASHIMR BANK:

Bloomberg Code: J&KBK IB Equity NII Change(%) PPP Change (%) NP Change (%)Target Price Reco


52 wk H/L: 938/ 695 4.5 22.2 7.5 3.4 18.1 15.0 1.7 16.8 22.5 ‐ NR

Comments:• Core earnings expected to be healthy 22% on account of higher NIM of 3.5+% (3.72 in Q4FY11 and 3.68% in Q1FY11).• Non‐interest income to decline by ~5% due to lower treasury gains.• Asset quality to be largely stable• Net profit growth expected to grow by ~17% YoY.• Loan book growth & CD ratio would be the key factor.

Company Section

ORIENTAL BANK OF COMMERCE:

Bloomberg Code: OBC IB Equity NII Change(%) PPP Change (%) NP Change (%)Target Price Reco


52 wk H/L: 545/ 280 10.0 (5.3) (1.2) 8.2 (0.3) (2.7) 3.5 (4.1) 4.4 443 BUY

Comments:• NII growth to be lower due to higher‐base effect, pressure on NIMs (doesn’t have strong liability franchise)• Further the business growth is expected to be lower than the industry growth.• Net Profit to decline 4% with lower Core earnings and higher provisions.• Incremental slippages (thus higher credit cost) with shift to system driven NPA (loans below Rs 1mn) could lead to sharper

fall in net earnings. • Slippages, NIM compression and business momentum are key factors to watch.

PUNJAB NATIONAL BANK:

Bloomberg Code: PNB IB Equity NII Change(%) PPP Change (%) NP Change (%)Target Price Reco


52 wk H/L: 1395/ 971 30.0 14.8 (0.8) 23.7 13.0 (5.4) 11.0 3.0 (8.4) 1364 BUY

Comments:• We expect ~15% NII growth, with pressure on NIMs, despite a healthy business momentum.• Non Interest Income expected to decline on back of higher treasury gains in Q1FY11 of Rs 1.2bn• Opex expected to decline on QoQ basis.• Net profit growth expected to be mere 3% ‐ with higher provisions.• Asset quality has been deteriorating and will be the key factor to watch out for.

Company Section

STATE BANK OF INDIA:

Bloomberg Code: SBIN IB Equity NII Change(%) PPP Change (%) NP Change (%)Target Price Reco


52 wk H/L: 3515/ 2123 84.5 15.7 4.8 71.1 15.9 16.9 18.4 (36.7) # 2745 Acc

Comments:• NII growth of ~16% (on higher base) with loan book growth in‐line with industry. NIMs expected to improve QoQ (Q4FY11

included few one‐offs).• Non interest income expected to grow mere 9%, on back of higher proportion of other non core interest income in Q1FY11. • Other provisions are expected to be higher, with increase in credit cost to reach PCR of 70% and also to factor in the recent

changes in provision norms. • Asset Quality, NIMs and provisions will be the key factors to watch

UNION BANK OF INDIA:

Bloomberg Code: UNBK IB Equity NII Change(%) PPP Change (%) NP Change (%)Target Price Reco


52 wk H/L: 427/ 286 16.3 21.1 (4.9) 11.5 10.2 32.3 5.7 (5.7) (5.1) 370 BUY

Comments:• UBI’s core earning expected to grow 21% with higher business growth, however NIMs are expected to decline. • Asset Quality has been a worry for UBI and thus we expect the provisions to be on higher side (to double on QoQ basis). • Net profit expected to decline ~6% YoY.• NIM compression and Asset quality (slippages, recoveries and upgrades) a key factor to be watch.

Company Section

AXIS BANK:

Bloomberg Code: SBIN IB Equity NII Change(%) PPP Change (%) NP Change (%)Target Price Reco


52 wk H/L: 1608/ 1149 17.2 13.5 1.0 15.6 7.9 (14.1) 8.9 20.1 (12.8) 1611 BUY

Comments:• NII growth of ~13.5% with continued business growth momentum (albeit at slower pace). • NIMs to decline on YoY as well as on QoQ basis, despite having a better liability franchise.• Non interest income to grow ~18% on the back of higher contribution from core fee income, despite lower treasury gains

(~Rs 2bn in Q1FY11). • Asset Quality is expected to remain stable, thus reducing the requirement of provisions. • NIMs compression, business growth and slippages ‐ key factors watch

DCB:

Bloomberg Code: DEVB IN Equity NII Change(%) PPP Change (%) NP Change (%)Target Price Reco

CMP: 60 & MCAP: 13.8 Bn Rs Bn YoY QoQ Rs Bn YoY QoQ Rs. Bn YoY QoQ

52 wk H/L: 77/ 39 0.5 6.4 (8.3) 0.1 (35.7) (34.0) 0.1 LP (38.6) 73 BUY

Comments:• Core earning expected to grow at mere 6.4% with pressure on NIM and moderate loan book growth.• Asset quality to continue to improve and thus expect a decline in other provisions (decline by ~56%).• Bank expected to record net profit vis‐à‐vis Q1FY11 (albeit a decline on QoQ basis)

FEDERAL BANK:

Bloomberg Code: FB IN Equity NII Change(%) PPP Change (%) NP Change (%)Target Price Reco


52 wk H/L: 501/ 322 4.4 5.8 (2.3) 3.4 1.1 (3.2) 1.6 22.2 (6.3) 521 BUY

Comments:• We expect modest ~6% NII growth on back of higher base of Q1FY11; despite a pickup in the loan book. NIMs are expected

to decline from 4.2% in Q1FY11. • Non interest income to grow ~20% YoY, with rise in business volumes. • Provisions are expected to decline YoY, with improvement in asset quality. • Net Profit expected to rise 22% YoY.• Slippages and credit losses will be the key to watch

Company Section

HDFC BANK:

Bloomberg Code: HDFCB IN Equity NII Change(%) PPP Change (%) NP Change (%)Target Price Reco

CMP: 2545 & MCAP: 1184 Bn Rs. Bn YoY QoQ Rs. Bn YoY QoQ Rs. Bn YoY QoQ

52 wk H/L: 2557/ 1932 28.6 19.2 3.0 21.1 17.5 0.4 10.6 30.3 (5.1) 2703 BUY

Comments:• NII growth of 19% with moderate loan book growth (on higher base – loan book grew 41% in Q1FY11) and marginal NIM

compression.• Asset quality to remain a key highlight.• Net profit growth to be higher by ~30%

Company Section

ICICI BANK:

Bloomberg Code: ICICIBC IN Equity NII Change(%) PPP Change (%) NP Change (%)Target Price Reco


52 wk H/L: 1277/ 844 24.1 20.9 (4.1) 22.6 3.4 (1.9) 13.0 27.2 (10.2) 1351 BUY

Comments:• Core earning expected to grow at ~21% with the expected momentum in the business growth and marginal dip NIMs. • Opex to grow in tandem with the business growth.• Continued improvement in Asset quality to lead to lower provisions. However, with the recent change in provision norms,

other provisions are expected to rise on QoQ basis. • Subsequently, Net profit expected to grow ~27%.

INDUSIND BANK:

Bloomberg Code: IIB IN Equity NII Change(%) PPP Change (%) NP Change (%)Target Price Reco


52 wk H/L: 309/ 181 3.9 31.6 0.3 3.0 29.0 (0.2) 1.6 36.8 (5.6) 313 ACC

Comments:• Strong core earning growth of ~32% expected led by continued loan book growth momentum; despite a marginal drop in

NIMs• Non interest income also expected to continue its growth momentum.• Asset quality expected to be stable and thus have a lower credit cost. • Net profit growth to be 37%.

Company Section

SOUTH INDIAN BANK:

Bloomberg Code: SIB IB Equity NII Change(%) PPP Change (%) NP Change (%)Target Price Reco


52 wk H/L: 30/ 14 2.1 24.6 (5.9) 1.4 37.8 (6.1) 0.8 30.3 (6.9) 28.6 ACC

Comments:• Core earnings to grow ~ 25% on the back of lower base (bank reported ~10% rise in NII Q1FY11). • Business traction expected to continue with ~ 25% growth YoY and NIMs expected to be marginally lower.• Provisions are expected to rise, with the recent newer regulations • Asset Quality is expected to be stable.• PAT to jump 30% YoY.

YES BANK:

Bloomberg Code: YES IN Equity NII Change(%) PPP Change (%) NP Change (%)Target Price Reco


52 wk H/L: 388/ 234 3.5 32.6 (0.3) 3.3 34.5 (4.0) 2.0 28.1 (1.5) NR

Comments:• We expect strong ~33% NII growth on the continued business momentum • NIMs are expected to decline on back of lower CASA (%), despite better pricing power. • Net profit growth expected at 28%.• Asset quality expected to remain best and thus credit cost expected to remain lower.

Company Section

LIC HOUSING FINANCE:

Bloomberg Code: LICHF IN Equity NII Change(%) PPP Change (%) NP Change (%)Target Price Reco


52 wk H/L: 299/ 150 13.1 28.7 (9.9) 4.0 33.0 (11.6) 2.8 30.6 (12.0) 260 Neutral

Comments:• Business momentum expected to be strong with loan book growth of ~ 30%. • Core earnings to rise 29% YoY with NIM compression. • We have marginally increased provisions for the quarter, despite a higher PCR. • Net earnings are expected to rise 31% YoY.• Spreads, business growth and provisions key factors to watch

HDFC LIMITED:

Bloomberg Code: HDFC IN Equity NII Change(%) PPP Change (%) NP Change (%)Target Price Reco


52 wk H/L: 780/ 576 11.0 17.9 (19.7) 11.9 21.6 (24.6) 8.4 20.4 (26.8) 780 BUY

Comments:• Business growth of ~ 20% and spreads of 2.2% ‐ 2.3% are expected to drive NII by ~ 18% YoY. • Asset quality is expected to remain strong, thus not requiring higher provisions. • PAT to grow at ~20% YoY

Company Section

RURAL ELECTRIFICATION CORPORATION:

Bloomberg Code: RECL IN Equity NII Change(%) PPP Change (%) NP Change (%)Target Price Reco


52 wk H/L: 410/ 179 22.1 17.6 2.3 9.2 15.7 (3.0) 6.8 15.6 (3.0) 260 BUY

Comments:• Core earnings expected to grow ~ 13% YoY with marginal pressure on NIMs and loan book growth momentum continued at

~ 22‐24%• QoQ, the other operating income is expected to decline, as in Q4FY11,the co reported foreign exchange gain of RS 560mn. • Net profit is expected to grow at ~16%• Provisions (as a cushion), spread movement are things to watch

SHRIRAM TRANSPORT FINANCE:

Bloomberg Code: SHTF IB Equity NII Change(%) PPP Change (%) NP Change (%)Target Price Reco


52 wk H/L: 900/ 572 9.4 7.4 4.0 6.5 14.8 1.9 3.5 19.8 1.6 838 BUY

Comments:• Core earnings (including Securitization) is expected to jump ~18% YoY.• Loan book growth expected to ~ 20% and NIMs to be marginally under pressure (NIMs of ~ 8.25% InQ1FY11)• We have conservatively build‐in marginally higher provisions, despite higher PCR and stable asset quality.• PAT to grow ~20% YoY and 1.6% QoQ • Loan book growth, spread movement a key to watch

CementJune Quarter FY12E Preview

Parul [email protected]

Tel:+91 22 6752 6647

Manish [email protected]


• All India demand growth continues to remain sluggish at 1.4% (Y‐o‐Y) and ‐6.5% (Q‐o‐Q)i. This deceleration is attributable to ‘the logjam of Government aided infra projectsii. Sequential decline in volume growth is on account of the RAINS

• Capacity pipeline remains healthy with incremental supply of 25‐30Mtpa expected over 9M

• All India prices (gross retail) have fallen by an average of 3.5% (Q‐o‐Q) to Rs254/bagi. Within regions, the sharpest fall has been in the East at 13.8% (Q‐o‐Q) to Rs244/bag ii. North has seen a price erosion of 3.6% (Q‐o‐Q) to Rs247/bag while West has remained flatiii. Surprisingly, Southern prices have risen by 4.5% (Q‐o‐Q) to Rs264/bag‐despite having the

lowest utilization (~60% vs. Pan India average of 72%)

• Opex curve is on the rise‐diesel cost push of ~7%‐i. Diesel prices risen by 7.1% (Q‐o‐Q) pushing the manufacturing cost by Rs7.8/bag ii. Domestic coal prices have risen by 30% (Q‐o‐Q)

• Over the next 9M, we anticipate EBITDA/T to move in a narrow band of ~Rs750‐800/T implying that prices would have to get aligned to the latest (…higher) cost curve

Company Section

ACC Ltd:

Comments:• Volume growth for quarter was robust on Y‐o‐Y basis at 11.8% exceeding all India growth of 1.4%, largely due to base effect • On a sequential basis, ACC’s volume de‐growth at 4.5% (Q‐o‐Q) was marginally lower than all India average fall of 6.5%• Net sales realization per tonne(NSR) is estimated to fall by 2.4% (Q‐o‐Q) based on ACC’s geographic sales dispersion• EBITDA/T estimated at Rs804/T‐decline of Rs128/T (Q‐o‐Q)• EBITDA margins estimated to contract by 280bps (Q‐o‐Q) to 21.1%

Comments:• ACEM’s volume growth has broadly been in line with the industry growth‐at ‐6% (Q‐o‐Q) vs. ‐2.9% (Y‐o‐Y)• Estimate NSR to fall by 3% (Q‐o‐Q) based on ACEM’s geographic sales mix• EBITDA/T estimated at Rs942/T; fall of Rs168/T; OPM estimated to contract by 3.4% (Q‐o‐Q)

Ambuja Cement:

Bloomberg Code: ACC IN Equity Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP: 954 & MCAP: Rs179 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 1,142/801 22,627 9.7 (6.6) 4,783 (19.5) (17.5) 21.1 2,706 (24.6) (22.8) 1,125 Outperform


Bloomberg Code:ACEM IN Equity Sales EBITDAEBITDA

Margin (%)Net Profit

Target Price

Reco

CMP: 130 & MCAP: Rs198 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 166/107 20,190 (3.3) (9.2) 5,009 (22.2) (20.1) 24.8 3,000 (23.3) (26.4) 144 Performer


Company Section

UltraTech Cement:

Comments:• Volume growth at 4.9% (Y‐o‐Y) exceeds all India average of 1.9%; Q‐o‐Q basis toes the industry average de‐growth of ~7%• NSR/T estimated to fall by 1.9% (Q‐o‐Q) in line with its regional sales mix• EBITDA/T estimated at Rs955/T; fall of Rs93/T (Q‐o‐Q); OPM estimated to fall by 220bps (Q‐o‐Q) to 22%

Comments:• VSF absolute volumes to be lower than peak production of ~83,000 tonnes due to 28 days shut down of Nagda plant (MP)‐

on account of water shortage• VSF prices have fallen from their peak of Rs180/Kg to Rs147/kg over the past 3M due to the widening of pricing differential

between cotton (nearest substitute) and VSF• However, we expect this division to deliver robust margins at 32% on account of its lowest cost producer status

Grasim Industries (standalone):

Bloomberg Code: UTCEM IN Equity Sales EBITDAEBITDA


Target Price

Reco

CMP: 947 & MCAP: Rs259 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 1,174/820 42,318 na (7.1) 9,230 na (15.1) 21.8 4,608 na (36.6) 1,151 Buy


Bloomberg Code: GRASIM IN Equity Sales EBITDAEBITDA


Target Price

Reco

CMP: 2,519 & MCAP: Rs231 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 2,914/1,740 12,232 29.4 (14.2) 3,924 30.3 (15.1) 32.1 3,011 34.5 (23.9) 2,938 BUY


Company Section

Shree Cement:

Comments:• Robust volume growth of 3.9% (Q‐o‐Q) & 25.3% (Y‐o‐Y) at 2.99Mtpa • Consequently, we expect sharp fall in NSR/T of 7.5% (Q‐o‐Q). • Cement SBU EBITDA/T estimated at Rs787/T ; fall of Rs133/T. • Overall OPM estimated to contract by 120bps (Q‐o‐Q). • Higher depreciation @Rs2.4bn to impact profits

Comments:• Aggressive volume growth of 19.7% (Y‐o‐Y) and 28% (Q‐o‐Q) to 3.26Mtpa as against overall de‐growth in the South• Consequently, we expect ICEM’s NSR/T to fall by 8% (Q‐o‐Q) against the southern price gain 4.5% (Q‐o‐Q)• EBITDA/T estimated at Rs460/T; fall of Rs264/T (Q‐o‐Q)• Overall EBITDA margins to fall by 240bps (Q‐o‐Q) to 15.7%

India Cement:

Bloomberg Code: SRCM IN Equity Sales EBITDAEBITDA


Target Price

Reco

CMP: 1,718 & MCAP: Rs59.8Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 2,323/1,504 9,894 4.7 (7.7) 2,642 (8.8) (11.4) 26.7 65 (93.9) (93.5) 2,108 Buy


Bloomberg Code: ICEM IN Equity Sales EBITDAEBITDA


Target Price

Reco

CMP: 73 & MCAP: Rs22.4 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 143/81 9,489 7.5 (5.1) 1,487 45.5 (17.9) 15.7 519 42.1 (4.8) 113 Buy


Company Section

Madras Cement:

Comments:• Has shown maturity in managing volume growth, unlike its peer‐volume has declined 11.8% (Y‐o‐Y) and 1% (Q‐o‐Q)• Consequently, we expect its realization to remain flat. • EBITDA/T estimated at Rs880/T fall of Rs234/T. • Overall EBITDA margins estimated at 21.8%; fall of 1.93% (Q‐o‐Q)

Comments:• Volume growth moderate at 2.4% (Y‐o‐Y) and ‐2.0% (Q‐o‐Q)• Expect NSR/T to fall by 3% (Q‐o‐Q). • EBITDA/T estimated at Rs495/T , fall of Rs43/T (Q‐o‐Q)

Mangalam Cement:

Bloomberg Code: MGC IN Equity Sales EBITDAEBITDA


Target Price

Reco

CMP: 108 & MCAP: Rs 3.0Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 172/90 1,275 (3.9) (5.0) 214 (28.9) (9.8) 16.7 125 (38.9) (40.9) 162 Outperform


Bloomberg Code: MC IN Equity Sales EBITDAEBITDA


Target Price

Reco

CMP: 83 & MCAP: Rs9.7 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 134/76 6,784 0.1 2.9 1,610 (21.4) (5.5) 23.7 635 (42.7) (34.4) 131 Buy


Company Section

Heidelberg Cement:

Comments:• Aggressive volume growth of 24% (Y‐o‐Y) and 5.3% (Q‐o‐Q) higher than the industry average of 1.9% (Y‐o‐Y)• NSR/T estimated to fall by 4% (Q‐o‐Q). • EBITDA/T estimated at Rs458/T; fall of Rs38/T (Q‐o‐Q)

Comments:• Has shown restrain as sequentially volume has declined by 8%; however, Y‐o‐Y the growth is aggressive at 19.2% (base eff)• Estimate EBITDA/T of Rs839 • Overall OPM to fall by 6.7% (Q‐o‐Q) to 25.7%

Dalmia Cement (Bharat):

Bloomberg Code: HEIM IN Equity Sales EBITDAEBITDA


Target Price

Reco

CMP:39 & MCAP: Rs8.8Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 56/33 2,748 13.7 1.1 396 (0.3) (2.9) 14.4 248 (3.5) (4.5) 58 Buy


Bloomberg Code: DBEL IN Equity Sales EBITDAEBITDA


Target Price

Reco

CMP: 161 & MCAP: Rs13.0Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 2,35/106 4,069 na (0.3) 1,033 na (0.4) 0.3 476 na (0.3) 216 Buy


Company Section

OCL India:

Comments:• Sharp volume decline on a Q‐o‐Q basis at 14.4%, higher than the regional growth trend• NSR/T expected to fall at 3% (Q‐o‐Q) lower than the regional price fall of 13% • EBITDA margin to contract by 170bps (Q‐o‐Q) to 17.2%

Comments:• CPC EBITDA/T estimated at USD120/T with cement EBITDA/T at Rs750/T

Rain Commodities:

Bloomberg Code: RCOL IN Equity Sales EBITDAEBITDA


Target Price

Reco

CMP: 33 & MCAP: Rs11.7 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 42/26 11,226 0.8 0.2 2,775 1.6 0.6 0.2 1,665 2.4 0.3 53 Buy


Bloomberg Code: OSC IN Equity Sales EBITDAEBITDA

Margin (%)Ne t Profit

Target Price

Reco

CMP: 102 & MCAP: Rs5.8 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 150/87 3,545 (2 .6) (19.2) 608 (41.5) (26 .5) 17.2 125 (70.5) (63.2) 126 BUY


Company Section

Orient Paper & Industries:

Comments:• Volume growth remains flat (Q‐o‐Q); NSR/T growth to remain flat Q‐o‐Q. • EBITDA margin estimated to remain flat on Q‐o‐Q basis; expand by 2.2% (Y‐o‐Y)

Comments:• Expect sales volume of ~35,000 tonnes @avg. blended realization of Rs88,000/T• EBITDA margins to contract by 100bps (Q‐o‐Q) & 350bps (Y‐o‐Y) to 19.2%• Rising share of mining sales to keep margins within a narrow range

AIA Engineering:

Bloomberg Code: OPI IN Equity Sales EBITDAEBITDA


Target Price

Reco

CMP: 56 & MCAP: Rs10.8Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 69/45 4,839 9.6 (30.5) 913 27.2 (30.0) 18.9 481 40.6 (37.9) 72 Buy


Bloomberg Code: AIAE IN Equity Sales EBITDAEBITDA


Target Price

Reco

CMP: 368 & MCAP: Rs34.6 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 480/305 3,155 26.2 (12.1) 606 7.0 (16.4) 19.2 427 6.8 (17.9) 425 Performer


Company Section

Coal India:

Comments:• Expect sales volume of 104Mtpa (~ie 24% of FY12E off take) implying growth of 6.4% (Y‐o‐Y) and fall of 4.8% (Q‐o‐Q) due to

seasonal effect• Blended realization estimated at Rs1220/T (rise of 4.8% Q‐o‐Q)• Prices are expected to remain stable in near term• Employee wage revision is due in the month of July 2011 {CIL had already raised prices in Feb’2011 ahead of this due date}• Target off take for FY12E is 452Mtpa (scaled down from earlier target of 461Mtpa )

Bloomberg Code: CIL IN Equity Sales EBITDAEBITDA


Target Price

Reco

CMP: 392& MCAP: Rs2,463Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 422/289 132,352 10.8 (5.0) 41,847 18.2 16.7 31.6 36,188 19.0 48.0 432 Buy


Bloomberg Code: BCORP IN Equity Sales EBITDAEBITDA


Target Price

Reco

CMP: 337 & MCAP: Rs25.7 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 448/290 5,481 (4.7) (6.9) 1,114 (32.4) 29.5 20.3 787 (33.5) 24.8 408 BUY


Birla Corporation:

Comments:• Expect sales volume of 1.5Mtpa de‐growth of 6.8% (Q‐o‐Q) & 0.7% (Y‐o‐Y) which is in line with industry average• NSR/T growth estimated flat Q‐o‐Q• Overall EBITDA margins expected to expand by 5.7% (Q‐o‐Q) to 20.3%

INFORMATION TECHNOLOGYJune Quarter FY12E Preview

Niral [email protected]

Tel:+91 22 6752 6645


Demand environment: Demand continues to remain buoyant across the IT sector with USD revenue growth in Q1FY12 expected to be 3‐6% QoQ for tier‐1 Indian IT vendors. Volume growth in IT services is decent, average expected at around 5% QoQ. Cross‐currency movements will benefit topline.Operating margins are set to decline (between 150‐250bps) on account of wage hikes during Q1, which vary between 10‐12% for tier‐1 vendors and 12‐15% for tier‐2 IT companies.Although Infosys and TCS have given a guidance of 60,000 and 40000 freshers respectively, it could turn out to be conservative. Hiring targets could be gradually raised in FY12.Telecom continues to languish, while growth seen in BFSI, manufacturing, retail and utilities verticals over past few quarters, is expected to continue.PAT is expected to be further impacted by increase in tax rates due to end of the STPI tax holiday. We expect a 3.3% degrowth on average for our coverage universe, with HCLT expected to deliver the highest PAT growth at 6.9% QoQ, and Patni the lowest (‐29%QoQ).

Key areas to watch out forWhether budgeted spends for FY12 get delayed or not. Extent of actual dollars spent.Outlook on discretionary spending. Commentary on the current state of ERP spending.

Top PicksWe prefer HCL Tech among tier‐1 IT vendors, & Hexaware and Polaris in the mid‐cap IT space.

Company Section

INFOSYS:

Comments:• Strong QoQ revenue growth of 4.7% to USD1.677bn to be driven by volume growth of 5.6%.• Utilization (excl trainees) to remain flat at around 75% with net hiring expected at ~5000. • EBITDA margin to decline 230bps to 29.8% on account of wage hikes (10‐12% offshore, 2‐3% onsite). • USD revenue guidance for FY12 expected to be maintained at 18‐20%, while USD QoQ revenue growth guidance of 3‐5%

expected for Q2FY12. • Scope for increase in EPS guidance for FY12 remains with better operating margin delivery in Q1. • Telecom continues to be under stress, while BFSI, manufacturing & energy utilities will continue to deliver 3‐5%QoQ growth.

Comments:• Strong pickup in volume growth to 6% to drive sequential revenue growth of 6.6% to USD2.393bn• Utilization is expected to dip by 60bps to 81.7% (excl trainees) as hiring gathers steam. • EBITDA margin to decline by 210bps sequentially to 28.2% due to wage hikes • Net hiring of over 7000 expected • 4% sequential de‐growth in PAT expected.

TCS:

Bloomberg Code: TCS IB Equity Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP: 1183 & MCAP: 2315 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 1247/999 107,061 30.3 5.4 30,161 25.2 (1.9) 28.2 23,034 24.9 (4.1) 1,291 Buy


Bloomberg Code: INFO IB Equity Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP: 2954 & MCAP: 1688 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 3499/2652 75,045 21.1 3.5 22,329 13.8 (3.9) 29.8 17,654 18.6 (2.9) 3,150 Neutral


Company Section

WIPRO:

Comments:• IT Services QoQ revenue growth of 2% to USD1.428bn to come in above guidance, driven by volume growth of 2.1%• Utilization (excl trainees) to remain flat at around 76% as hiring picks up.• EBITDA margin to marginally decline by 10bps to 20.2% due to partial impact of wage hikes, effective 1st June. • USD revenue guidance for Q2FY12 expected to be 2.5‐3.5%.• PAT expected to decline by 1.2%QoQ to Rs13.6bn

Comments:• Revenue growth of 4.6% to USD956mn to be driven by volume growth to 4.3%• Utilization to expand by 120bps to 73.1% (excl trainees). • EBITDA margin to expand by 100bps sequentially to 18.3% inline with management’s guidance. • Gross hiring of about 7000 expected • PAT to grow 6.7% sequentially to Rs5bn with forex losses being wiped off.

HCL Technologies:

Bloomberg Code: WPRO IB Equity Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP: 425 & MCAP: 1037 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 497/381 84,071 16.9 1.6 16,942 6.4 1.1 20.2 13,587 3.1 (1.2) 475 Neutral


Bloomberg Code: HCLT IB Equity Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP: 503 & MCAP: 345 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 528/385 42,772 24.9 3.4 7,806 22.3 9.0 18.3 4,997 46.2 6.7 597 Buy


Company Section

PATNI:

Comments:• USD QoQ revenue growth expected to be 2.9% to USD196mn driven by volume growth of 2.6%• We expect utilization to increase by 70bps sequentially to 71%• EBITDA margin to be decline by 250 bps to 15.2% due to the wage hike impact. • Profit to decline sequentially by 29% to Rs1.14bn

Comments:• USD revenue growth of 3.3% to USD70.1mn to be driven by volume growth to 3.3%• Offshore utilization to remain flattish at about 70% as freshers keep getting added. • EBITDA margin to decrease by 250bps sequentially to 11.7% on account of wage hikes. • Auto electronics to lead the growth in manufacturing. • PAT to de‐grow 9% sequentially to Rs240mn, which is further impacted due to increase in tax rates to 25%.

KPIT Cummins:

Bloomberg Code: PATNI IB Equity Sales EBITDAEBITDA


Target Price

Reco

CMP: 341 & MCAP: 45 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 503/304 8,757 14.8 1.9 1,330 (7.7) (12.8) 15.2% 1,145 (22.0) (19.7) 472 Accumulate


Bloomberg Code: KPIT IB Equity Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP: 175 & MCAP: 11.9 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 184/125 3,138 52.2 1.8 366 7.9 (15.4) 11.7% 240 24.0 (8.8) 187 Outperform


Company Section

POLARIS:

Comments:• USD QoQ revenue growth expected to be 6.2% to USD103mn driven by 7% growth in products business• 3.3% QoQ growth expected in services business, which is purely volume driven.• Revenues from the IdenTrust acquisition of about Rs90mn to come in Q1FY12.• EBITDA margin to be decline by 90 bps (adjusted for one‐timers) to 11.9% due to wage hikes setting in from Q1. • Profit to decline sequentially by 14% to Rs440mn on an adjusted basis, impacted by increase in tax rates from 13% to 27%.

Comments:• USD revenue growth of 6.7% to USD50mn to be driven by volume growth of 6.8%• Utilization to dip by 40bps to 72.6% (excl trainees). • EBITDA margin to increase by 80bps sequentially to 18.7% with healthy topline growth offsetting the onsite wage hike given

this quarter. • PAT to de‐grow by 15% sequentially to Rs282mn with significant jump in tax rates from 5% in Q4FY11 to over 30%.

PERSISTENT SYSTEMS:

Bloomberg Code: POL IB Equity Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP: 187 & MCAP: 18.5 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 214/150 4,592 27.3 4.9 548 13.7 4.0 11.9 440 (5.7) (23.7) 247 Buy


Bloomberg Code: PSYS IB Equity Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP: 378 & MCAP: 16.5 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 468/335 2,244 23.9 5.4 420 22.1 10.3 18.7 282 (18.5) (15.0) 477 Buy


Company Section

HEXAWARE:

Comments:• USD revenue to grow 6.1%QoQ to USD75mn towards the upper end of guidance• Strong volume growth of 8% • Utilization of 73% expected, marginally higher than 72.7% in the previous quarter. • EBITDA margin to marginally decline by 10bps to 14.2% due to impact of offshore wage hike. • PAT de‐growth of 10%QoQ expected to Rs4.8bn.

Comments:• Revenue growth of 5.2% to USD34.8mn to be driven by 7.6% growth in Life sciences segment• Utilization to expand by 120bps to 73.1% (excl trainees). • EBITDA margin to expand by 250bps sequentially to 22.1%. Last quarter included some one‐timers impacting margins. • Amortization expense to increase significantly compared to Q4FY11. • PAT to de‐grow 5.5% sequentially to Rs193mn, impacted by higher amortization and tax rates jumping from 7% to 20%.

TAKE SOLUTIONS:

Bloomberg Code: HEXW IB Equity Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP: 75 & MCAP: 21.8 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 76/50 3,343 33.1 5.0 474 178.8 4.2 14.2 482 235.0 (10.2) 91 Buy


Bloomberg Code: TAKE IB Equity Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP: 40 & MCAP: 4.8 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 48/23 1,557 43.6 4.1 343 47.6 16.9 22.1 193 34.7 (5.5) 53 Buy


Company Section

CMC:

Comments:• Revenue growth to be 2% QoQ to Rs3bn to be driven by 15% growth in the iTeS business• While the system integration business would be sluggish due to seasonality, growth in customer services is expected to

gradually pick up (3.5%QoQ this quarter).• EBITDA margin to be flattish at 17.6% due to a seasonally weak. • Profit to decline sequentially by 6% to Rs412mn, impacted by increase in tax rates from 15% to 25%.

Comments:• USD revenue growth of 5% to USD58mn to be driven by volume growth of 7%• Utilization to dip marginally by 20bps to 82.8% (excl trainees).• EBITDA margin to decline by 150bps sequentially to 15.7% due to wage hikes of 13‐15% given during the quarter. • PAT to de‐grow by 13% sequentially to Rs262mn with jump in tax rates from 18% in Q4FY11 to 24%.

INFINITE COMPUTER:

Bloomberg Code: CMC IB Equity Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP: 1132 & MCAP: 34.3 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 2790/1004 3,001 22.4 2.0 529 (2.3) 1.4 17.6 412 (11.2) (6.1) 1,262 Buy


Bloomberg Code: ICS IB Equity Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP: 135 & MCAP: 5.9 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 223/120 2,561 32.2 3.3 401 26.0 (5.9) 15.7% 262 7.5 (13.4) 185 NR


InfrastructureJune Quarter FY12E Preview

Sundar Subramoney [email protected]

Tel:+91 22 67526646


Key development :We expect execution of companies in our universe to grow by a modest 12% during 1QFY12. The aggregate growth will get a boost from strong topline growth by Sadbhav Engineering and IRB.

We expect EBITDA for our universe to remain flat on account of 140 bps decline in EBITDA margins led by increase in labor and raw material cost. We expect net profit to de‐grow 24%. Net profit will be impacted by a sharp 33% increase in interest burden.

Order intake was subdued during 1QFY12. However, most companies in our universe have strong visibility with average book‐to‐bill of 3.2x as of end‐4Q FY11.

Outlook : While the near term challenges persists, we expect both execution and order intake to pick up from 2HFY12. Also, with pick up in execution and a more favorable macro environment, we expect the working capital situation also to ease from 2HFY12.

Our universe is trading at 2.4x FY13E earnings (after excluding L&A to subsidiaries and 1x investment book). We believe that all negatives are factored in the current price. Although we have moderated our estimates for FY12, we expect our universe to compound net profit at 28% during FY11‐FY13E.

Top picks:

Sadbhav Engineering, NCC, Patel Engineering, B L Kashyap

Company Section

AHLUWALIA CONTRACTS (ACIL): .

Comments:• ACIL’s revenue is expected to grow by a modest 3% YoY to Rs4 bn. Execution is likely to be under pressure due to 50%

exposure to developers. • We expect ACIL’s EBITDA to de‐grow 21% YoY to Rs365 mn. We expect a 275 bps decline in EBITDA Margins due to cost

pressures. • We expect net profit to de‐grow 30% YoY to Rs.170 mn on the back of 33% increase in interest cost. • ACIL’s order backlog stood at Rs34 bn at end 4QFY11, representing book‐to‐bill ratio of 2x. ACIL announced order intake of

Rs5.3 bn during 1QFY12.

B L KASHYAP & SONS (BLK):

Comments:• BLK’s revenue is expected to grow 18.9% YoY to Rs3.5 bn largely on the back robust order intake of Rs37.5 bn during FY11.• We expect BLK’s EBITDA to increase 10% YoY to Rs279 mn. We expect EBITDA margins at 7.8% during 1QFY12.• Net profit is expected to increase 1.3% YoY to Rs104 mn on the back of 33.7% rise in interest cost. • BLK’s a order backlog stood at Rs45 bn at end 4QFY11 representing a book‐to‐bill ratio of 2.9x. The company did not

announce any major order intake during 1QFY12.

Bloomberg Code: AHLU IN Sales EBITDAEBITDA


Target Price

Reco

CMP: 122 & MCAP:7.6Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 242.5/101 4052 3 ‐30 365 ‐21 18 9 170 ‐30 32 165 OP

Change (%) Change (%)Change (%)

Bloomberg Code: KASH IN Sales EBITDAEBITDA


Target Price

Reco

CMP: 19.75 & MCAP: 4.1 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 50 / 17.5 3567 19 ‐26 279 10 ‐6 8 104 1 ‐23 38 Buy


Company Section

CONSOLIDATED CONSTRUCTION CONSORTIUM (CCCL): .

Comments:• CCCL’s revenue is expected to grow 12.1% YoY to Rs5.7 bn. Growth will be impacted due to sluggish execution of

infrastructure orders. • We expect CCCL’s EBITDA to de‐grow at 18.7% YoY to Rs342 mn and EBITDA margins of 6% during 1QFY12.• Net profit is expected to de‐grow 44.9% YoY to Rs104 mn largely owing to execution of low margin legacy order book.• CCCL’s order backlog at Rs49.6 bn at end 4QFY11. While the company did not announce any major order inflow during

1QFY12, it indicated order inflow of Rs14.4 bn during 4QFY11 conference call totaling to an order backlog of Rs64 bn implying a book to bill of 3x.

GAMMON INDIA (Gammon):

Bloomberg Code: CCCL IN Sales EBITDAEBITDA


Target Price

Reco

CMP: 33 & MCAP: 6.1 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 97 / 27 5692 12 ‐11 342 ‐19 52 6 104 ‐45 580 51 Neutral


Bloomberg Code: GMON IB Sales EBITDAEBITDA


Target Price

Reco

CMP: 94 & MCAP: 12.9 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 235/ 73 14166 8 ‐19 1,105 3 LTP 8 199 ‐34 LTP NA Not Rated


Comments:• Gammon’s revenue is expected to grow 8.4% YoY to Rs14.2 bn.• We expect EBITDA to grow at 2.5% YoY to Rs1.1 bn. EBITDA Margins are expected to decline 45 bps to 7.8% on the back of

execution of low margin legacy orders.• Net profit is expected to de‐grow 34% YoY to Rs199 mn on the back of 50% increase in interest cost.• Gammon’s order backlog stood at Rs150 bn at end 4QFY11 representing a book‐to‐bill of 2.7x. Gammon did not announce

any major order inflow during 1QFY12.

Company Section

HINDUSTAN CONSTRUCTION COMPANY (HCC):

Comments:• HCC’s revenue is expected to grow 9.7% YoY to Rs10.9 bn. Captive road projects will boost execution.• Net profit is expected to de‐grow 74% YoY to Rs73 mn, dragged by 52% rise in interest burden.• HCC’s order backlog stood at Rs181 bn at end‐4QFY11, representing a book‐to‐bill ratio of 4.4x. HCC announce order intake

of Rs9.9 bn during 1QFY12.• Status quo continued in Lavasa during 1QFY12 also.

IRB INFRASTRUCTURE (IRB): .

Comments:• IRB is expected to record revenue of Rs6.3 bn up 23.4% YoY. We expect the construction revenue to grow by 37% YoY. Toll

revenue is expected to grow 3% YoY. • We expect IRB’s EBITDA to increase 7% YoY to Rs2.6 bn. EBITDA margin at 42.2% is expected to drop 649bps during 1QFY12

owing to 10% YoY increase in share of construction revenue to 67% during 1QFY12. • Net profit is expected to de‐grow 4.5% YoY to Rs1.1 bn on the back of lower operating margins.

Bloomberg Code: HCC IN Sales EBITDAEBITDA


Target Price

Reco

CMP: 33 & MCAP: 20 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 72 / 28 10920 10 ‐9 1,378 10 ‐17 13 73 ‐74 ‐68 41 UP


Bloomberg Code: IRB IN Sales EBITDAEBITDA


Target Price

Reco

CMP: 169 & MCAP: 56.1 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 313 / 145 6318 23 ‐18 2,666 7 ‐15 42 1123 ‐4 9 239 OP


Company Section

IVRCL INFRASTRUCTURES (IVRCL): .

Comments:• We expect IVRCL’s revenue at Rs12.2 bn during 1QFY12, representing 10.9% YoY growth. • We expect IVRCL’s EBITDA to increase 5% on a YoY basis to Rs1.1 bn. However we expect the margins to decline 49 bps to

8.6% during 1QFY12.• Net profit is expected to de‐grow 31% YoY to Rs194 mn due to a sharp 36.9% and 30% increase in depreciation and interest

cost respectively. • IVRCL’s order backlog stood at Rs217 bn as of end‐4QFY11, representing a book‐to‐bill ratio of 3.9x. IVRCL announced order

intake of Rs8.9 bn during 1QFY12.

MAN INFRACONSTRUCTION (MIL): .

Comments:• We expect MIL’s revenue at Rs1.7 bn during 1QFY12 representing a 18.2% YoY growth. • We expect MIL to report EBITDA margins of 15.5% implying a decline of 864 bps during 1QFY12.• We expect MIL to record net profit of Rs142 mn during 1QFY12 representing a de‐growth of 38% YoY growth. • MIL’s order backlog stands at Rs20 bn representing a book‐to‐bill ratio of 3.3x. The company announced order inflow of

Rs1.5 bn during 1QFY12.

Bloomberg Code: IVRC IN Sales EBITDAEBITDA


Target Price

Reco

CMP: 72 & MCAP: 19 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 194/ 60 12274 11 ‐40 1,058 5 ‐41 9 194 ‐31 ‐70 93 OP


Bloomberg Code: MINF IN Sales EBITDAEBITDA


Target Price

Reco

CMP: 125 & MCAP: 6.2 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 382 / 105 1728 18 8 268 ‐24 239 16 142 ‐38 111 120 Neutral


Company Section

NCC: .

PATEL ENGINEERING LTD (PEL):

Comments:• We expect NCC’s revenue at Rs12.2 bn during 1QFY12, representing 12.8% YoY growth. • We expect NCC’s EBITDA to increase 8.9% YoY at Rs1.2 bn. EBITDA margin is expected to decline by 33 bps to 9.4% during

1QFY12. • Adjusted Net profit is expected to de‐grow 33.3% YoY to Rs276 mn owing to a sharp 92.3% increase in interest burden. • NCC’s order backlog stood at Rs163 bn as of end‐4QFY11, representing a book‐to‐bill ratio of 3.2x. NCC announced order

intake of Rs7.2 bn during 1QFY12.

Bloomberg Code: NJCC IN Sales EBITDAEBITDA


Target Price

Reco

CMP: 83 & MCAP: 21.2 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 194 / 73 12253 13 ‐16 1,152 9 ‐12 9 276 ‐33 ‐23 132 Buy


Bloomberg Code: PEC IN Sales EBITDAEBITDA


Target Price

Reco

CMP: 153 & MCAP: 10.6 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 452/131 6945 ‐1 ‐56 868 ‐27 ‐33 13 227 ‐43 ‐37 242 Buy


Comments:• We expect PEL to record revenue of Rs6.9 bn down 1.1% YoY. Revenue growth will be impacted as there is still no visibility

on Pranahita / Kotli BHEL projects. • We expect PEL’s EBITDA to de‐grow 26.8% YoY to Rs868 mn. We expect EBITDA margins to decline 438 bps at 12.5% during

1QFY12 due to lower share of hydro projects in the overall revenue. • Adjusted net profit is expected to de‐grow 43.4% YoY to Rs227 mn. • PEL’s order backlog stood at Rs77 bn at end 4QFY11 representing a book‐to‐bill ratio of 2.2x. PEL did not announce any

order intake during 1QFY12.

Company Section

PETRON ENGINEERING CONSTRUCTION (Petron)

Comments:• Petron’s revenue is expected to grow 11.5% YoY to Rs1.2 bn during 1QFY12.• We expect Petron’s EBITDA to increase 9.3% YoY to Rs 121mn and EBITDA margin at 10.2% during 1QFY12. • We expect net profit to increase 15.3% YoY to Rs58 mn during 1QFY12. • Petron’s order backlog stood at Rs12 bn at end 4QFY11 representing a book‐to‐bill ratio of 2.4x. Petron did not announce

any order intake during 1QFY12.

SADBHAV ENGINEERING LTD (SEL): .

Comments:• SEL’s revenue is expected to grow 39% YoY to Rs5.9 bn largely driven by execution of captive BOT projects.• We expect SEL’s EBITDA to increase 24% YoY to Rs 630mn and EBITDA margin at 10.7% during 1QFY12.• We expect net profit to increase 23% YoY to Rs313 mn. • SEL’s order backlog stood at Rs69.7 bn at end 4QFY11 representing a book‐to‐bill ratio of 3.2x. SEL announced order intake

of Rs1.2 bn (SEL’s share in JV with GKC Projects) during 1QFY12.

Bloomberg Code: SADE IN Sales EBITDAEBITDA


Target Price

Reco

CMP: 142 & MCAP: 21 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 164 / 94 5892 39 ‐44 630 24 ‐31 11 313 23 ‐38 189 Buy


Bloomberg Code: PTEC IN Sales EBITDA

EBITDA Margin (%)

Net ProfitTarget Price

Reco

CMP: 351 & MCAP: 2.6 Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 489/253 1185 12 ‐38 121 9 ‐47 10 58 15 ‐57 NA Not Rated


Power and Capital GoodsJune Quarter FY12E Preview

Amit [email protected]

Tel:+91 22 6752 6648


Power Sector•On an all India basis, power generation grew by 8.38% on YoY basis to 146.5bu in April‐May 2011 backed by increase in private sector contribution by 19.2% during the period.•Average merchant power prices during the quarter was at Rs3.1 per unit, down 11.4% on QoQ basis and down 41.5% on YoY basis. We expect the rate to remain in the range of Rs3.1‐3.5 owing to the sluggish short term demand from the financially weak SEB’s and thereby preferring to back down.•For the April‐May2011, the base deficit is 7% with peak demand of 10.05%. •Rising fuel prices due to change in Indonesian coal policy and sluggish incremental production from CIL (CIL’s 51 blocks are currently under No‐GO zone awaiting environmental clearances), and delay in environmental clearances for the power projects remains key concerns for the sector in the near term.•Power deficit situation is expected to improve due to new capacity addition.

Capital goods Sector•We expect execution to remain on track for the companies and report revenue growth of 16‐18%, but operating and net profit margins would remain under pressure due to: increase in prices of key raw material (steel and copper) tough competition from domestic and foreign players; and increase in borrowing cost. •Order inflow for the transmission & distribution companies has seen good traction during the quarter on account of strong capex incurred by few SEB’s and overseas utilities. •Rising Interest rate scenario and liquidity tightening done by the central bank has slowed down the industrial capex for the short term.• In the medium to long term, we remain positive on the sector due to huge expansion of power generation capacity and industrial capex plans announced by manufacturing companies across sectors. Twelfth plan intends to add power generation capacity of 1,00,000 MW, which in turn would generate huge demand for power equipment.•NTPC’s bulk tendering of 11x660 mw BTG units and tender for 9x800 supercritical units would be the key tenders to watch out for in the coming quarter.

Company Section

BGR Energy Systems Ltd:

Comments:• We expect the revenue to decline by 11% to Rs8093mn on YoY basis and improve by 16.5% on QoQ basis.• We expect operating and net profit margin to remain stable at 11.4% and 6.1% respectively. • BGR has an order book of Rs79720mn which provides revenue visibility of 1.7x its FY11 revenue.• BGR has lowered and matched BHEL’s bid for the Rajasthan based Chhabra EPC project. BGR expects the order to be

finalized soon.• BGR has put in bids for tenders worth Rs200bn and has zeroed in for tenders worth Rs400bn.

Comments:• We expect sales to grow 15% YoY to Rs4389mn due to better execution from the product as well as the turnkey

project segment. We anticipate better contribution from the cables and transformers division during the quarter.• We expect EBIDTA to increase by 5.4% on YoY basis as margins will be under pressure on account of increase in raw

material prices and increase in cost of borrowing led by tight liquidity prevailing in the system.• Order back log for the company stands at Rs16500mn which provides revenue visibility for the next one year. • The company is in talks to acquire strategic stake in Utkal Galvanizers Limited (transmission tower players) which will

help the company to meet the pre qualification criteria in the transmission line segment.

Diamond Power Infrastructure Ltd:

Bloomberg Code: BGRL IN Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP: 467 & MCAP: 33266 mn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 871/402 8,093 (10.6) (44.5) 923 (11.1) (44.9) 11.4 497 (18.0) (49.5) 560 BUY


Bloomberg Code: DIPI IN Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP: 161 & MCAP: 5991 mn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 264/126 4,389 15.0 28.0 575 5.4 23.0 13.1 296 (5.3) 17.5 205 BUY


Company Section

Elecon Engineering Company Ltd:

Comments: • We expect revenue to grow 15% on YoY basis to Rs2843mn on account of better execution of the EPC projects.• Operating margin would remain stable at 15% as the company has been quite selective in picking orders with better margins

expansion in the transmission equipment .• The company has an order book of Rs13800mn which is expected to be executed in the next 12‐18 months.

Comments:• We expect gross generation to improve by 2% on YoY basis to 1271mn units during the quarter.• We expect revenue to improve by 53% to Rs3812mn as SLPP II has now stabilized and expect contribution of 37% to the

total generation during the quarter. We expect the Plant to function at 80% PLF. • On account of increased contribution from SLPP II we expect operating margins to improve by 800bps to 34% on YoY basis.• Tender for the new 2x300 mw lignite based power plant has been floated and bids accepted during the quarter.

GIPCL:

Bloomberg Code: GIP IN Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP: 79 & MCAP: 11960 mn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 127/72 3,812 53.0 22.0 1,258 101.0 1.6 34.0 522 24.7 (37.7) 107 BUY


Bloomberg Code: ELCN IN Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP: 73 & MCAP: 6965 mn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 104/59.3 2,843 15.0 (19.0) 426 15.0 (24.0) 15.0 150 12.0 (36.0) NR


Company Section

Jyoti Structures Ltd:

Comments:• We expects revenue to grow by 16% on YoY basis to Rs6545mn• We expect the margins to remain stable at 11.3% as the company has been selective in order bidding to ensure margin

protection • To tap American market, Jyoti Structures has set up a 100% subsidiary Jyoti Americas LLC in U.S and is planning to set up

plant of 54000 mt by November 2011 for a total capex of US $30mn. • The company has a strong order book worth Rs45000mn which it plans to execute over the next 18 months. • Jyoti Structures has issued 7% NCD worth Rs1208mn which will help to reduce the over all cost of borrowing.

Comments:• We expect revenue to increase by 17% on YoY basis to Rs9898mn and SAE towers would contribute ~9% to total sales in

the quarter.• Operating margin would improve 40 bps to 10.3% on account of higher margin SAE tower business contribution.• The company has an order book of Rs80000mn which is expected to be executed in the next 18 months• Newly ventured business segments of water and railways has started to show traction as it has recently won orders worth

Rs610mn.

KEC International Ltd:

Bloomberg Code: JYS IN Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP: 85 & MCAP: 6889 mn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 169/74 6,545 16.0 (9.3) 740 15.7 (12.0) 11.3 304 15.6 (13.0) NR


Bloomberg Code: KECI IN Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP: 83 & MCAP: 21391 mn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 123/70 9,898 17.0 (36.0) 1,015 20.0 (37.0) 10.3 367 39.0 (53.0) 107 BUY


PharmaceuticalsJune Quarter FY12E Preview

Rakesh [email protected]

Tel:+91 22 6752 6644

Quarter ended June 2011: Pharma Sector Overview

Key DevelopmentsHealthcare Index has shown resilience‐ outperformance of 9% vis‐à‐vis Sensex. Among the large caps Ranbaxy was the best performing with gains of 16%, followed by Sun Pharma 12% and Lupin 11%. In mid caps Aurobindo led the fall of ‐15% (impacted by USA FDA Import Alert), while Divi’s delivered 15% and Torrent 12%. CRAMs continues to be impacted by subdued spending from global Biotechs. Dishman languished further by ‐13% and Biocon remained subdued at +2%.

Revenue growth would be led by growth in domestic market (at ~17%+) and niche launches in overseas markets i.e. generics in regulated market and continuing improved performance in the EMS.

CRAMs to continue facing challenging environment due to lower spending by the global peers. Jubilant & Dishman have fallen by ~50% over the past 6M factoring the worse‐thus posing opportunity to accumulate.

OutlookWe expect higher visibility in product launches supported by the favorable generic opportunities in the medium term, wherein products worth ~USD30bn are set to go off‐patent over the next four years.OPM and profitability to be impacted by the rise in employee cost (rise in field force), appreciating currency and higher tax incidence due to increased MAT rate.Ramp up in sales from newer markets such as Japan would also benefit generics.Key areas to watch out for are:• Pro‐generic reforms in newer markets such as Russia and pick‐up of generics in Japan;• Market share swings in local market as domestic pharma companies try to consolidate their positions; • Outlook on small/large global Biotech company spending.

Top picks ‐ Large Caps – Cipla and Lupin; Mid & Small Caps – Unichem and Alembic.

Company Section

Unichem Laboratories:

Comments:• We expect resurrection in the domestic formulation sales and expect a total revenue growth of 11.6% in 1QFY12.• EBITDA margins at 22% translates into a de‐growth of ‐4.7% YoY.• PAT expectation is at Rs.324 mn translates into a de‐growth of ‐2.7% YoY.

Comments:• We expect a topline growth of 12.5% YoY• EBITDA margins will be robust at 36%, implying a growth of 7.5% YoY • PAT at Rs.1,561 represents a YoY growth of 11.8%

GlaxoSmithKline Pharmaceuticals:

Bloomberg Code: UL In Equity Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP: 163 & MCAP: 15 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 269/143 2,093 11.6 17.4 461 (4.5) 87.8 22.0 324 (2.7) 112.1 195 BUY


Bloomberg Code: GLXO IN Equity Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP: 2332 & MCAP: 198 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 2475 /1850 5,709 12.5 (6.4) 2,055 7.5 (5.7) 36.0 1,561 11.8 (21.6) 2,263 HOLD


Company Section

Elder Pharmaceuticals:

Comments:• ELDP is expected to deliver a topline growth of 57.0% YoY, led by:

• Robust growth in the domestic market; and• Consolidation of numbers from its new acquisitions in Bulgaria and UK.

• EBITDA margins for the quarter should be at 16.2%, likely to inch upwards over next 2 years.• Adj. PAT at Rs.168 mn implies YoY de‐growth of ‐4.9%.

Comments:• We expect top‐line growth of 11.1% YoY, driven by 14% YoY growth in the domestic market and 13% YoY growth in export

formulations in Q1FY12.• We have lowered our Technology/licensing income estimate for the 1QFY12 following managements muted guidance in the

last quarter. We estimate Rs356 mn for Q1FY12.• EBITDA growth will be impacted by lower other operating income and increased overheads; we expect this to stabilize at

21% in Q1FY12.• PAT at Rs2,390 mn will be impacted by lower other operating income and higher tax outflow; we expect PAT to stabilize at

14.5% in Q1FY12.

Cipla:

Bloomberg Code: ELDP IN Equity Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP: 387 & MCAP: 7.9 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 440 /309 3,054 57.0 0.7 494 30.7 (4.1) 16.2 168 (4.9) (9.4) 508 BUY


Bloomberg Code: CIPLA IN Equity Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP: 327 & MCAP: 263 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 380/286 16,447 11.1 (1.5) 3,354 (8.0) 11.0 20.8 2,390 (11.9) 11.7 417 BUY


Company Section

Lupin:

Comments:• LPC is expected to register top‐line growth of 13.2% YoY, led by:

• Overall growth across segments• We have assumed 19% YoY growth in the domestic market and USA sales to be flat.

• We expect EBITDA margins to stabilize at 20.1%.• PAT at Rs.2,211 implies YoY growth of 11.5%.

Comments:• Top‐line growth of 25% will be driven by:

• Improved performance of EU formulation sales. • EBITDA margins will be impacted due to the increased operating expenditure and decreasing dossier income.• PAT estimate of Rs.1,230 mn represents growth of 32% YoY.

Aurobindo:

Bloomberg Code: LPC IN Equity Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP: 461 & MCAP: 206 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 520/348 15,100 13.2 5.5 3,035 6.7 (0.5) 20.1 2,211 11.5 3.3 485 BUY


Bloomberg Code: ARBP IN Equity Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP: 171 & MCAP: 50 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 275/136 11,500 25.0 0.0 2,280 32.0 6.0 19.8 1,230 32.0 2.0 NR


Company Section

Cadila Healthcare:

Comments:• We expect improved performance in the domestic formulation sales and expect a total revenue growth of 22.0% in

1QFY12.• EBITDA margins at 22.2% translates into a de‐growth of 20.0% YoY.• PAT expectation is at Rs.1,969 mn translates into a growth of 22.0% YoY.

Comments:• We expect a topline growth of 17% YoY• EBITDA margins will be impacted by Taro integration, at 28.2% implies ‐24% YoY • PAT at Rs.4,129 represents a YoY de‐growth of ‐25%

Sun Pharmaceuticals:

Bloomberg Code: CDH IN Equity Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP: 933 & MCAP: 95.4 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 960/600 13,090 22.0 9.0 2,902 20.0 8.0 22.2 1,969 22.0 3.0 NR


Bloomberg Code: SUNP IN Equity Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP: 497 & MCAP: 256 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 511/338 16,390 17.0 11.5 4,620 (24.0) 4.5 28.2 4,129 (25.0) (5.0) NR


Company Section

IPCA:

Comments:• We expect a topline growth of 20.0% YoY in 1QFY12.• EBITDA margins at 19.9% translates into growth of 39% YoY.• PAT expectation is at Rs.590 mn translates into a growth of 45% YoY.

Comments:• We expect a modest topline growth of 5.5% YoY• EBITDA margins will stabilize at 17% a de‐growth of 16% YoY • PAT at Rs.220 represents a YoY de‐growth of 55%

Dishman Pharma:

Bloomberg Code: IPCA IN Equity Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP: 345 & MCAP: 43 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 351/255 4,970 20.0 0.3 990 39.0 3.5 19.9 590 45.0 (2.0) NR


Bloomberg Code: DISH IN Equity Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP: 92 & MCAP: 7 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 233/85 3,450 5.5 (34.0) 585 (16.0) (23.0) 17.0 220 (55.0) (47.0) NR


MIDCAPJune Quarter FY12E Preview

Ronald [email protected]

Tel:+91 22 6752 6650

Company Section

BAJAJ ELECTRICALS:

Comments: • We expect consumer durables and lighting segment to continue growth momentum during Q1FY12 driving net revenue

growth of 12%YoY for the quarter.• EBITDA margins for the quarter is likely to increase marginally by 20bps YoY to 8.6%. • Strong growth in consumer durable and lighting segment coupled with better margins in E&P division to drive net profit

growth of 15%YoY.

Comments:• The current buoyancy witnessed in advertisement is likely to drive net sales growth of 17%YoY for the quarter. Launch of

Jharkhand edition during Q3FY11 is likely to contribute from Q1FY12 onwards.• We expect margins to remain under pressure on the back of rising newsprint costs. EBITDA margin is likely to dip by 766bps

YoY to 30.4%.

DB CORP:

Bloomberg Code: BJE IN Equity Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP: 258 & MCAP: 25.5 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 347/190 5,418 12.0 (44.7) 468 14.7 (54.0) 8.6 259 15.0 (55.0) 298 Outperform


Bloomberg Code: DBCL IN Equity Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP: 233 & MCAP: 42.7 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 307/226 3,479 16.5 9.6 1,057 (7.0) 32.8 30.4 616 (11.4) 36.9 NA Not Rated


Company Section

DHANUKA AGRITECH:

Comments: • Better prospects of extended monsoon is likely to impact Dhanuka positively during the quarter. We expect net sales growth

of 17%YoY driven by good demand for herbicides.• We expect margins to be slightly under pressure on account of higher other expenditure during the quarter. • Higher revenue growth albeit marginal pressure on margins is likely to contribute to 9%YoY growth in net profit for the

quarter.

Comments:• We expect the growth momentum to continue in both fertilizer and chemical division driving net sales growth of 76%YoY for

Q1FY12 • We expect EBIT margins for both the divisions to remain in positive territory for the quarter.

GNFC:

Bloomberg Code: DAGRI IN Equity Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP: 92 & MCAP: 4.6 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 103/63 937 17.1 (26.3) 139 9.1 (29.6) 14.8 95 8.8 (30.3) 99 Outperform


Bloomberg Code: GNFC IN Equity Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP: 99 & MCAP: 15.4 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 146/88 6,467 75.8 (23.2) 848 (595) (32.3) 13.1 605 (367) (55.8) 156 Outperform


Company Section

JAGRAN PRAKASHAN:

Comments: • The current buoyancy witnessed in advertisement is likely to drive net sales growth of 10%YoY for the quarter.• Outdoor and event management divisions are expected to increase there revenue contribution. • We expect EBITDA margins to remain under pressure on account of higher newsprint costs for the quarter.

Comments:• Oberoi is expected to maintain good revenue growth of 67%YoY for the quarter.• We expect EBITDA margin to remain robust at 56% for the quarter.• The company’s sales performance in the Mumbai region during Q1FY12 will be the key highlight to watch out.

OBEROI REALTY:

Bloomberg Code: JAGP IN Equity Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP: 122 & MCAP: 38.4 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 148/105 2,969 10.0 5.0 760 (15.8) 6.4 25.6 447 (19.5) 6.3 NA Not Rated


Bloomberg Code: OBER IN Equity Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP: 245 & MCAP: 80.2 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 307/210 2,669 66.9 0.1 1,505 78.1 3.8 56.4 1,195 49.8 (12.5) 301 Outperform


Company Section

UFLEX:

Comments: • We expect Uflex to record net sales growth of 38%YoY but show negative growth sequentially due to lower blended

realisations from the packaging and plastic film business.• EBITDA margin for the quarter is likely to be lower sequentially owing to higher material cost. • Uflex is best placed as its all expansion plan is likely to complete in FY12 and it would see at least one year of high realisation

cycle.

Bloomberg Code: UFLX IN Equity Sales EBITDAEBITDA

Margin (%)PAT

Target Price

Reco

CMP: 213 & MCAP: 15.4 Bn Rs. Mn YoY QoQ Rs. Mn YoY QoQ Rs. Mn YoY QoQ52 wk H/L: 325/110 9,476 37.6 (3.9) 1,843 36.8 (37.1) 19.4 846 39.8 (53.3) 249 Outperform


Ahluwalia OutPerform 122 165 7.7 19.8 23.7 8.8 8.8 0.8 1.0 12.8 16.5 9.5 7.4 4.3 2.7 22.5 23.3 19.3 21.7 B L Kashyap Buy 20 38 4.1 18.3 21.9 7.4 7.4 0.6 0.7 2.8 3.6 7.1 5.6 6.5 4.4 9.8 11.2 9.2 10.1 CCCL Netural 33 51 6.1 23.9 27.5 7.3 8.0 0.6 0.9 3.5 5.1 9.4 6.5 5.4 4.4 10.0 12.9 9.6 11.2 Gamon India NR 94 NA 13.0 61.6 70.8 8.1 8.3 1.0 1.2 7.6 8.8 12.4 10.7 7.2 6.6 5.3 5.9 6.2 6.8 HCC UnderPerfor 33 41 20.0 47.9 56.5 12.7 12.6 0.6 0.9 0.9 1.5 35.7 22.4 9.7 8.9 3.6 5.7 5.5 6.1 IRB Infra OutPerform 169 239 56.2 30.1 40.7 43.1 37.4 4.7 4.5 14.2 13.6 11.9 12.4 8.2 8.2 9.1 6.8 10.1 8.8 IVRCL OutPerform 72 93 19.1 64.6 77.5 9.2 9.0 1.7 2.2 6.4 8.1 11.1 8.8 7.0 6.5 8.0 9.3 7.6 7.9 Man Infra Netural 125 120 6.2 7.2 8.6 15.5 15.0 0.6 0.7 12.0 13.8 10.5 9.1 5.0 4.4 11.4 12.5 13.2 14.2 NCC Buy 83 132 21.3 58.3 70.0 9.4 9.4 1.6 2.0 6.4 7.9 12.9 10.5 9.1 8.6 6.6 7.6 6.1 6.5 Patel Eng Buy 153 242 10.7 34.4 37.8 13.0 14.0 1.1 1.5 16.3 21.8 9.4 7.0 8.6 9.5 7.5 9.3 5.8 5.6 Petron NR 351 NA 2.6 6.2 7.8 11.5 11.5 0.4 0.5 51.8 66.7 6.8 5.3 3.6 2.6 27.3 26.8 23.0 23.6 Sadbhav Buy 142 189 21.3 28.7 34.5 10.7 10.7 1.5 1.9 8.7 12.8 16.4 11.1 8.6 7.0 22.2 22.3 16.3 16.1

INFRASTRUCTURE SECTOR

Company Name Reco CMP Target M CapRs. Bn FY12E FY13E FY12E FY13E FY12E FY13E FY12E FY13E FY12E FY13E FY12E FY13E FY12E FY13E FY12E FY13E

Apollo Tyres Hold 80 77 40 105 124 10.6 10.4 3.9 4.7 8.0 9.5 10.0 8.5 4.5 3.6 14.8 15.8 14.7 15.8 Ashok Leyland Hold 52 55 69 138 161 9.1 9.2 9.3 11.3 7.0 8.5 7.3 6.1 5.7 4.7 21.3 21.8 15.7 17.0 Bajaj Auto Buy 1426 1639 421 196 222 19.4 19.0 29.7 33.1 102.3 114.5 13.9 12.5 9.2 8.3 61.0 46.5 47.2 38.6 Bosch India Buy 6983 7567 220 80 95 19.8 19.6 10.7 13.0 341.0 410.0 20.5 17.0 10.2 8.1 23.5 32.0 68.9 77.0 Bharat Forge Hold 308 321 77 58 71 17.4 16.8 4.0 4.7 16.5 19.6 18.7 15.7 8.7 7.8 14.8 15.1 9.7 9.8 Ceat Buy 109 193 4 41 46 8.1 8.8 1.7 2.1 49.2 62.9 2.2 1.7 3.8 2.5 21.0 22.0 13.3 14.1 Eicher Motors* NR 1298 NA 36 52 61 8.9 10.4 2.3 3.6 65.1 86.1 19.9 15.1 3.3 2.5 17.7 23.9 18.8 24.2 Exide NR 162.5 NA 15 46 54 19.0 19.0 7.0 8.2 8.2 9.7 19.8 16.8 12.0 9.7 51.0 54.0 33.0 33.0 Hero Honda Sell 1897 1474 375 213 236 10.2 10.1 18.3 21.0 91.3 105.2 20.8 18.0 11.4 10.4 61.4 67.1 61.0 67.0 M&M Hold 717 776 446 267 301 13.4 13.4 26.4 30.0 53.0 62.0 13.5 11.6 10.2 8.4 23.0 21.4 19.0 18.0 Maruti Buy 1166 1669 342 391 451 10.5 10.9 27.0 33.0 92.5 114.0 12.6 10.2 7.6 6.3 17.2 17.9 16.7 17.4 Tata Motors Buy 1017 1315 671 1,360 1,470 10.4 9.3 93.0 90.0 146.0 141.0 7.0 7.2 4.2 4.0 44.0 30.0 28.2 25.0 TVS Sell 54 54 25 82 98 4.4 5.2 2.1 3.4 4.5 7.2 11.8 7.4 6.7 4.9 32.3 31.4 20.2 23.1

AUTOMOBILES SECTOR

PE (x) P/ BV (x) ROANW (%) ROAA (%)NII(Rs Bn) NIM (%) Net Profit (Rs. Bn) EPS (Rs)

ACC* OutPerform 964 1,125 179.0 97.1 118.8 21.7 26.8 13.2 21.4 70.1 114.1 13.7 8.4 6.7 3.8 17.1 24.1 16.1 23.2Ambuja* Performer 127 144 198.0 99.4 121.9 27.0 31.1 17.2 24.7 11.2 16.1 11.3 7.9 5.9 3.6 19.1 23.6 18.0 22.4UltraTech Buy 961 1,151 259.0 160.2 178.0 19.6 19.7 14.7 15.9 53.7 58.2 17.9 16.5 9.0 8.1 22.2 20.1 18.2 16.8Grasim Buy 2,214 2,938 231.0 222.7 252.0 25.1 25.4 30.1 37.0 271 347 8.2 6.4 4.1 2.9 16.4 17.8 13.8 15.3India Cement Buy 73 113 31.6 37.9 41.5 16.8 16.3 1.2 1.6 4.1 5.2 18.0 14.0 6.7 6.0 3.0 3.7 5.1 5.7Madras Cement Buy 83 131 9.7 27.5 29.6 24.7 23.7 2.2 2.4 9.2 10.3 9.1 8.1 5.8 5.0 11.3 11.3 6.6 7.1Shree Cement Buy 1,702 2,108 59.2 38.9 48.6 26.1 27.7 2.2 4.6 63.3 131.6 26.9 12.9 7.8 5.5 10.4 19.0 7.1 11.8OCL India Buy 101 126 5.8 15.9 18.1 21.4 21.4 1.2 1.6 20.5 28.4 4.9 3.6 3.1 2.7 12.4 15.5 9.6 12.6Heidelberg* Buy 38 58 9 11.2 23.0 17.6 28.5 0.9 6.0 4.1 26.4 9.6 1.5 7.0 1.3 10.3 52.4 10.7 44.1Mangalam CemeBuy 108 162 3 5.8 6.3 12.3 16.4 0.3 0.5 13.1 19.5 8.2 5.5 5.2 3.0 8.1 11.1 8.3 16.9Orient Paper Buy 56 72 11 21.3 23.8 15.5 16.8 1.5 1.6 7.9 8.4 7.0 6.6 4.4 6.4 15.7 14.6 16.5 14.2Dalmia Bharat Buy 161 216 13 25.4 29.6 18.5 22.0 0.5 1.7 6.2 21.6 26.3 7.6 6.7 4.8 ‐15.7 ‐75.6 7.5 11.9Rain Comm* Buy 33 53 12 52.2 55.2 21.0 18.9 5.5 5.3 15.4 14.8 2.1 2.2 2.6 2.4 24.6 19.4 13.8 12.6Century Textiles Buy 368 426 34.2 49.8 NA 14.8 NA 3.4 NA 36.1 NA 10.2 NA 9.0 NA 16.1 NA 7.6 NABirla Corp Buy 334 416 25.94 23.2 26.0 19 20 3.1 3.3 41 43 8.3 7.8 7.9 7.7 14.2 13.3 14.8 14.0AIA Engg Performer 370 425 34.6 12.9 16.2 24 22 2.2 2.4 23 26 15.2 13.5 10.2 8.8 18.8 18.0 24.9 23.8Coal India Hold 392 432 2,463 576.8 639.7 44 43 201.3 221.3 32 35 12.3 11.2 8.1 6.7 54.0 49.8 53.2 49.2

CEMENT SECTOR

Company NameReco CMP Target M CapRs. Bn FY12E FY13E FY12E FY13E FY12E FY13E FY12E FY13E FY12E FY13E FY12E FY13E FY12E FY13E FY12E FY13E

PE (x) EV/ EBITDA (x) ROANW (%) ROACE (%)Net Sales(Rs Bn) OPM (%) Net Profit (Rs. Bn) EPS (Rs)

Cipla Buy 327 417 262.6 69.7 81.6 24.7 26.0 13.4 17.7 16.7 22.1 19.6 14.8 15.3 11.8 14.9 15.4 16.2 16.0Lupin Buy 450 485 202.5 64.5 77.9 21.0 23.3 10.3 14.4 23.1 32.2 19.5 14.0 15.5 11.4 25.9 27.5 26.3 29.2GSK Pharma Buy 2,332 2263 198.2 27.5 31.6 36.6 36.6 7.7 8.8 90.5 103.6 25.8 22.5 17.7 15.2 34.3 35.9 57.1 61.9Elder Pharma Buy 386 508 0.1 13.5 16.0 16.6 17.5 0.8 1.4 42.4 65.9 9.1 5.9 3.6 2.8 15.0 20.5 14.3 18.2Unichem LaboratBuy 163 195 14.7 9.7 11.2 18.5 19.5 1.2 1.5 13.0 16.3 12.6 10.0 8.4 6.9 18.9 20.7 21.1 23.2

PHARMA SECTOR

BGR Energy systeBuy 467 560 34.0 54.0 64.2 11.4 11.1 3.5 4.0 48.6 56.0 9.6 8.3 6.4 5.6 28.7 27.0 24.7 24.8Diamond power Buy 161 205 6.1 17.6 21.0 13.2 13.1 1.3 1.5 34.2 41.2 4.7 3.9 3.8 3.3 18.8 18.6 23.4 23.0Elecon Engineeri NR 73 NA 7.0 13.9 16.1 14.8 14.6 0.7 0.8 7.9 8.6 9.2 8.4 6.4 6.2 17.5 17.9 19.5 19.8GIPCL Buy 79 107 12.0 14.2 15.1 33.1 33.1 1.4 1.7 9.1 11.5 8.7 6.9 4.3 4.0 9.1 10.4 10.7 12.4Jyoti Structures LNR 85 NA 7.2 27.8 32.9 11.3 11.1 1.3 1.4 11.9 13.5 7.1 6.3 3.7 3.2 16.8 16.2 23.9 23.7KEC InternationaBuy 83 107 21.4 54.0 64.0 10.5 10.6 2.5 3.1 9.7 11.9 8.6 7.0 6.0 5.1 21.0 20.0 23.4 25.3

POWER SECTOR


Infosys Neutral 2,954 3,150 1,687 325 386 31.3 31.1 78.9 90.0 138.1 157.5 21.4 18.8 15.4 13.0 26.7 26.0 36.6 36.1 TCS Buy 1,183 1,291 2,315 470 548 29.3 29.4 104.5 120.3 53.4 61.5 22.2 19.2 16.0 13.4 36.8 32.7 45.2 41.1 Wipro Neutral 425 475 1,037 354 399 20.8 20.8 59.2 65.1 24.0 26.4 17.7 16.1 13.0 11.1 22.7 21.2 22.9 22.4 HCLT Buy 503 597 344.5 193 231 18.2 18.4 22.1 26.9 31.6 38.5 15.9 13.1 9.8 8.1 24.1 24.3 26.7 28.6 Patni* Accumulate 341 494 45.0 36 43 17.1 18.5 5.5 6.1 40.5 44.9 8.4 7.6 3.8 3.3 15.6 15.2 14.0 16.2 Polaris Buy 187 247 18.5 19 23 14.1 14.1 2.2 2.5 21.7 24.7 8.6 7.6 4.7 3.5 19.3 18.7 15.9 15.4 KPIT Outperform 175 187 14.9 14 21 12.5 12.3 1.2 1.4 13.7 15.6 12.8 11.2 8.2 7.3 18.0 15.5 20.4 18.4 Persistent Buy 378 477 15.2 10 12 19.7 20.1 1.4 1.7 33.8 41.5 11.2 9.1 5.3 4.0 16.9 17.9 18.8 21.0 CMC Buy 1,132 1,262 34.3 13 16 19.6 20.9 2.0 2.6 66.2 87.0 17.1 13.0 12.2 9.6 29.2 31.0 29.3 31.2 Hexaware* Buy 75 91 21.8 14 17 14.2 14.8 2.0 2.3 6.9 7.6 11.0 9.9 8.6 6.6 19.7 19.4 23.5 23.1 Take Solutions Buy 40 53 4.8 7 8 22.4 22.3 0.8 1.0 7.0 8.2 5.7 4.9 3.7 2.9 29.0 26.9 24.6 25.0 Infinite NR 135 NA 5.9 11 13 17.3 17.6 1.3 1.6 29.9 37.1 4.5 3.6 2.6 1.6 27.8 27.6 32.6 33.4


IT SECTOR

* December Ending Company

Company NameReco CMP Target M CapRs. Bn FY12E FY13E FY12E FY13E FY12E FY13E FY12E FY13E FY12E FY13E FY12E FY13E FY12E FY13E FY12E FY13E

PE (x) EV/ EBITDA (x) ROANW (%) ROACE (%)Net Sales(Rs Bn) OPM (%) Net Profit (Rs. Bn) EPS (Rs)

Bajaj Electricals Buy 258 298 25.5 31.0 36.7 10.4 10.9 1.9 2.4 19.1 24.5 13.5 10.5 8.4 6.8 27.4 27.9 25.2 25.4 DB Corp NR 233 NA 42.7 14.5 16.6 31.0 31.0 2.7 3.1 14.6 16.9 15.9 13.8 9.6 8.4 29.1 27.6 24.0 23.0 Dhanuka Agritec Buy 92 99 4.6 5.9 6.9 14.8 14.801 0.6 0.7 12.4 14.5 7.4 6.3 5.9 5.1 31.8 29.0 26.4 25.0 GNFC Buy 99 156 15.4 35.9 40.8 16.0 16.8 3.5 2.9 22.8 18.6 4.3 5.3 4.3 3.6 14.6 10.8 10.4 8.2 Jagran PrakashanNR 122 NA 38.4 12.9 14.6 29.2 30.1 2.3 3.0 7.5 10.0 16.3 12.2 10.6 9.1 30.4 34.9 25.7 29.9 Oberoi Realty Buy 245 301 80.2 19.1 27.6 60.7 54.5 8.4 10.9 25.7 33.1 9.5 7.4 5.7 4.4 22.9 23.7 22.3 23.5 Uflex Buy 213 249 15.4 38.8 43.2 20.8 23.6 3.8 5.0 44.7 59.0 4.8 3.6 3.6 2.9 17.1 18.2 13.6 13.5

MID CAPS


All Bank Buy 198 274 94 13.0 17.5 2.9 2.9 25.5 27.5 37.5 47.8 5.3 4.1 1.0 0.9 21.4 22.8 1.1 1.1 Andhra NR 134 NA 75 14.9 21.2 3.4 3.4 22.9 23.8 27.8 34.4 4.8 3.9 1.0 0.8 22.0 22.9 1.3 1.3 BoB OutPerform 893 1,095 351 12.5 17.4 2.7 2.7 6.1 18.1 114.6 135.3 7.8 6.6 1.6 1.3 21.7 21.5 1.1 1.1 BoI Buy 413 506 226 22.6 16.9 2.8 2.7 30.4 26.9 59.3 75.2 7.0 5.5 1.2 1.0 18.8 19.9 0.8 0.9 Canara Buy 527 698 233 13.1 18.8 2.6 2.6 5.4 21.0 95.8 115.9 5.5 4.5 1.1 1.0 22.1 22.9 1.2 1.2 Corporation NR 521 NA 77 16.0 18.5 2.3 2.3 3.4 15.1 98.7 113.5 5.3 4.6 0.9 0.8 18.9 18.5 0.9 0.9 Dena Bank NR 89 NA 30 15.0 21.2 2.7 2.7 14.5 22.7 21.0 25.8 4.2 3.5 0.7 0.7 19.6 20.1 0.9 0.9 OBC Buy 339 443 99 9.4 13.1 2.8 2.7 9.9 16.6 56.6 66.0 6.0 5.1 0.9 0.8 16.6 17.1 0.9 0.9 PNB Buy 1126 1,364 357 15.0 18.9 3.6 3.6 18.7 23.2 166.1 204.6 6.8 5.5 1.5 1.2 25.4 25.5 1.3 1.3 SBI Accu 2443 2,745 1,551 8.4 15.3 3.0 3.0 38.9 25.0 180.9 226.1 13.5 10.8 2.1 1.8 16.6 18.3 0.9 0.9 UBI Buy 297 370 189 14.0 18.0 2.9 2.9 39.0 17.3 45.6 53.5 6.5 5.6 1.4 1.2 23.4 22.7 1.1 1.1 IDBI NR 134 NA 132 16.7 13.7 2.0 2.0 19.8 17.5 18.5 21.7 7.2 6.1 1.0 0.9 16.3 17.0 0.7 0.7 IOB NR 143 NA 89 19.7 17.0 2.8 2.8 28.2 25.7 22.2 27.9 6.4 5.1 1.0 0.8 15.8 17.6 0.7 0.8 Indian Accu 218 275 93 15.0 17.5 3.5 3.4 8.1 21.2 43.1 52.3 5.0 4.2 1.0 0.8 20.5 21.2 1.4 1.4 J&K Bank** NR 843 NA 41 15.3 19.6 3.5 3.6 17.4 23.1 148.7 183.1 5.7 4.6 1.0 0.9 19.2 20.3 1.3 1.4

Axis Buy 1311 1,611 538 18.2 19.1 3.2 3.2 19.9 22.8 98.7 120.9 13.3 10.8 2.4 2.1 19.7 20.6 1.5 1.5 Federal Buy 460 521 79 12.8 18.5 3.8 3.7 22.9 22.3 42.4 51.8 10.9 8.9 1.4 1.3 13.5 14.8 1.3 1.3 HDFC Bk Buy 2545 2,703 1,184 19.2 25.1 4.4 4.5 30.6 30.5 109.3 141.2 23.3 18.0 4.1 3.5 18.7 20.9 1.7 1.8 IndusInd Accu 289 313 137 25.8 24.0 3.7 3.7 34.4 22.8 16.7 20.5 17.3 14.1 2.9 2.5 17.8 18.9 1.5 1.5 SIB Accu 24 29 27 12.0 18.5 2.7 2.7 10.4 18.7 2.9 3.4 8.3 7.0 1.2 1.1 16.1 16.3 0.9 0.9 ICICI Bank Buy 1075 1,351 1,239 19.2 14.7 2.6 2.7 29.0 19.9 57.5 68.8 18.7 15.6 2.1 1.9 11.6 12.8 1.5 1.6 Karur ** NR 416 NA 49 20.8 22.6 3.2 3.2 18.6 22.0 42.1 51.4 9.9 8.1 2.0 1.7 21.4 22.6 1.6 1.5 Yes NR 298 NA 103 34.2 29.5 2.7 2.7 27.5 27.5 26.2 32.7 11.4 9.1 2.3 1.9 22.1 23.2 1.4 1.3 DCB Buy 60 73 14 14.1 18.5 2.9 2.8 169.3 40.1 2.5 3.6 23.7 16.9 1.7 1.5 8.0 9.3 0.7 0.8

LICHF Neutral 224 260 97 23.7 22.1 2.9 2.9 6.5 18.5 21.9 25.9 10.3 8.7 2.1 1.8 22.7 22.5 1.8 1.7 PFC Buy 197 226 23.7 21.7 3.7 3.7 21.9 21.8 23.1 28.2 8.5 7.0 1.3 1.1 17.0 16.4 2.8 2.7 REC Buy 203 260 201 17.0 20.2 4.1 4.1 14.6 19.0 29.8 35.5 6.8 5.7 1.4 1.2 21.5 22.1 3.2 3.1 STFC Buy 684 838 155 19.6 16.9 7.9 7.4 17.0 18.6 63.6 75.5 10.7 9.1 2.5 2.0 26.1 24.9 4.5 4.0 HDFC Buy 711 780 1,043 20.3 20.7 4.0 4.1 19.5 19.0 28.8 34.3 24.7 20.7 5.3 4.7 21.4 22.6 2.9 2.9


BANK & NBFC SECTORPSB

PVT

NBFC

** First cut estimate



76

Thank You

DisclaimerThis Document has been prepared by Almondz Global Securities Ltd. The information, analysis and estimates contained herein are based on Almondz’s assessment and have been obtained from sources believed to be reliable. This document is meant for the use of the intended recipient only. This document, at best, represents Almondz opinion and is meant for general information only. Almondz, its directors, officers or employees shall not in anyway be responsible for the contents stated herein. Almondz expressly disclaims any and all liabilities that may arise from information, errors or omissions in this connection. This document is not to be considered as an offer to sell or a solicitation to buy any securities. Almondz, its affiliates and their employees may from time to time hold positions in securities referred to herein. Almondz or its affiliates may from time to time solicit from or perform investment banking or other services for any company mentioned in this document.

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